EXHIBIT 10.2
NOTE PURCHASE AGREEMENT
NATIONAL COAL OF ALABAMA, INC.
as Company
TCW ASSET MANAGEMENT COMPANY,
as Administrative Agent
and
TCW ENERGY FUND XIV, L.P. AND CERTAIN OTHER INVESTORS,
as Holders
$60,000,000 Senior Secured Notes
Date: October 19, 2007
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TABLE OF CONTENTS
PAGE
----
ARTICLE I -
Definitions and References...................................1
Section 1.1.
Defined
Terms................................................1
Section 1.2.
Exhibits and
Schedules; Additional Definitions..............21
Section 1.3.
Amendment of
Defined Instruments............................21
Section 1.4.
References and
Titles.......................................21
Section 1.5.
Calculations and
Determinations.............................22
Section 1.6.
Joint
Preparation; Construction of Indemnities and
Releases....................................................22
ARTICLE II - Purchase
and Sale of Securities.............................22
Section 2.1.
Note
Purchase...............................................22
Section 2.2.
The
Notes...................................................22
Section 2.3.
Borrowing
Request...........................................23
Section 2.4.
Debt Service
Reserve Account................................23
Section 2.5.
Use of
Proceeds.............................................24
Section 2.6.
Interest Rates
and Fees; Payment Dates......................24
Section 2.7.
Collateral
Account..........................................25
Section 2.8.
Mandatory
Prepayments.......................................27
Section 2.9.
Optional
Prepayments........................................28
ARTICLE III - Payments to
Holders.........................................30
Section 3.1.
General
Procedures..........................................30
Section 3.2.
Payment of
Interest.........................................31
Section 3.3.
Place of
Payment............................................31
Section 3.4.
Capital
Reimbursement.......................................31
Section 3.5.
Reimbursable
Taxes..........................................31
ARTICLE IV - Conditions
Precedent to Lending.............................33
Section 4.1.
Closing Date
Conditions.....................................33
Section 4.2.
Additional
Conditions Precedent.............................37
Section 4.3.
Conditions
Precedent to Company's Obligations...............37
ARTICLE V -
Representations and Warranties of Company...................38
Section 5.1.
No
Default..................................................38
Section 5.2.
Organization and
Good Standing..............................38
Section 5.3.
Authorization...............................................38
Section 5.4.
No Conflicts or
Consents....................................38
Section 5.5.
Enforceable
Obligations.....................................39
Section 5.6.
Initial
Financial Statements................................39
Section 5.7.
Other
Obligations and Restrictions..........................39
Section 5.8.
Full
Disclosure.............................................39
Section 5.9.
Litigation..................................................40
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Section 5.10.
Labor Disputes and
Acts of God..............................40
Section 5.11.
ERISA Plans and
Liabilities.................................40
Section 5.12.
Environmental and
Other Laws................................40
Section 5.13.
Insurance...................................................41
Section 5.14.
Names and Places of
Business................................41
Section 5.15. Subsidiaries and Capital
Structure..........................42
Section 5.16.
Government
Regulation.......................................42
Section 5.17.
Solvency....................................................42
Section 5.18.
Title to Properties;
Licenses...............................43
Section 5.19.
Regulation
U................................................43
Section 5.20.
Leases and Contracts;
Performance of Obligations............43
Section 5.21.
Marketing
Arrangements......................................44
Section 5.22.
Right to Receive
Payment for Future Production..............44
Section 5.23.
Operation of Coal
Properties................................44
Section 5.24.
Ad Valorem and
Severance Taxes; Litigation..................45
Section 5.25.
Coal Act; Black Lung
Act....................................45
Section 5.26.
Acquisition.................................................45
Section 5.27.
Employment
Agreements.......................................45
Section 5.28.
Insider
Interests...........................................46
ARTICLE VI -
Representations and Warranties of Holders...................46
Section 6.1.
Organization of
Holders.....................................46
Section 6.2.
Authority of
Holders........................................46
Section 6.3.
Compliance with
Laws and Other Instruments..................46
Section 6.4.
Acquisition for
Holder's Account............................46
Section 6.5.
Notes Not
Registered........................................47
Section 6.6.
Accredited
Investor.........................................47
ARTICLE VII - Affirmative
Covenants.......................................47
Section 7.1.
Payment and
Performance.....................................47
Section 7.2.
Books, Financial
Statements and Reports.....................47
Section 7.3.
Other
Information and Inspections...........................49
Section 7.4.
Notice of
Material Events and Change of Address.............50
Section 7.5.
Maintenance of
Properties...................................50
Section 7.6.
Maintenance of
Existence and Qualifications.................51
Section 7.7.
Payment of Trade
Liabilities, Taxes, etc....................51
Section 7.8.
Insurance...................................................51
Section 7.9.
Performance on
Company's Behalf.............................52
Section 7.10.
Interest....................................................52
Section 7.11.
Compliance with
Agreements and Law..........................52
Section 7.12.
Board
Rights................................................52
Section 7.13.
Separateness
Covenants......................................52
Section 7.14.
Environmental Matters;
Environmental Reviews................53
Section 7.15.
Evidence of
Compliance......................................54
Section 7.16.
Bank Accounts;
Offset.......................................54
Section 7.17.
Guaranties of
Subsidiaries..................................55
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Section 7.18.
Agreement to Deliver
Security Documents.....................55
Section 7.19.
Production
Proceeds.........................................55
Section 7.20.
Leases and Contracts;
Performance of Obligations; Coal
Sales Contracts.............................................56
Section 7.21.
Approved Plan of
Development; Project Area..................56
Section 7.22.
Updates of Mortgage
and ORRI Conveyance.....................56
ARTICLE VIII - Negative
Covenants..........................................57
Section 8.1.
Indebtedness................................................57
Section 8.2.
Limitation on
Liens.........................................58
Section 8.3.
Limitation on
Hedging Contracts.............................58
Section 8.4.
Limitation on
Mergers, Issuances of Securities..............58
Section 8.5.
Limitation on
Dispositions of Property......................58
Section 8.6.
Limitation on
Dividends and Redemptions.....................58
Section 8.7.
Limitation on
Investments and New Businesses................59
Section 8.8.
Limitation on
Credit Extensions.............................59
Section 8.9.
Transactions
with Affiliates................................59
Section 8.10.
Prohibited
Contracts........................................59
Section 8.11.
Fixed Charge Coverage
Ratio.................................60
Section 8.12.
Current
Ratio...............................................60
Section 8.13.
Debt to EBITDA
Ratio........................................60
Section 8.14.
Minimum Production
Requirements.............................60
Section 8.15.
Restriction on
Leases.......................................60
Section 8.16.
Amendments to
Organizational Documents; Other Material
Agreements..................................................61
Section 8.17.
Acquisition
Documents.......................................61
ARTICLE IX - Events of
Default and Remedies..............................61
Section 9.1.
Events of
Default...........................................61
Section 9.2.
Remedies....................................................64
ARTICLE X -
Transferability of Securities...............................64
Section 10.1.
Restrictive
Legend..........................................64
ARTICLE XI -
Administrative Agent........................................64
Section 11.1.
Appointment and
Authority...................................64
Section 11.2.
Exculpation,
Administrative Agent's Reliance, Etc...........64
Section 11.3.
Credit
Decisions............................................66
Section 11.4.
Indemnification.............................................66
Section 11.5.
Rights as
Holder............................................66
Section 11.6.
Sharing of Set-Offs
and Other Payments......................67
Section 11.7.
Investments.................................................67
Section 11.8.
Benefit of Article
XI.......................................67
Section 11.9.
Resignation.................................................67
Section 11.10.
Notice of Default...........................................68
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Section 11.11.
Limitation of Duties and Fiduciary Relationship.............68
Section 11.12.
Limitation of Liability.....................................69
Section 11.13.
Reliance upon Documentation.................................69
Section 11.14.
Reliance by Company.........................................69
ARTICLE XII -
Miscellaneous...............................................69
Section 12.1.
Waivers and
Amendments; Acknowledgments.....................69
Section 12.2.
Survival of
Agreements; Cumulative Nature...................72
Section 12.3.
Notices.....................................................72
Section 12.4.
Payment of Expenses;
Indemnity..............................74
Section 12.5.
Joint and Several
Liability.................................75
Section 12.6.
Registration,
Transfer, Exchange, Substitution of Notes.....76
Section 12.7.
Confidentiality.............................................76
Section 12.8.
Governing Law;
Submission to Process........................78
Section 12.9.
Limitation on
Interest......................................78
Section 12.10.
Termination; Limited Survival...............................78
Section 12.11.
Severability................................................79
Section 12.12.
Counterparts; Fax...........................................79
Section 12.13.
Third Party Beneficiaries...................................79
Section 12.14.
USA PATRIOT Act Notice......................................79
Section 12.15.
Waiver of Jury Trial, Punitive Damages, etc.................80
SCHEDULES AND EXHIBITS:
Schedule 1
- Disclosure
Schedule
Schedule 2
- Security
Schedule
Schedule 3
- Insurance
Schedule
Schedule 4
- Holders
Schedule
Schedule 5
- Organizational
Structure
Schedule 6
- Approved Plan
of Development
Exhibit A - Promissory Note
Exhibit B - Borrowing Notice
Exhibit C - Prepayment Notice
Exhibit D - Certificate Accompanying
Financial Statements
Exhibit E-1 -
Opinion of
Company's Counsel
Exhibit E-2 -
Opinion of
Company's New York Counsel
Exhibit E-3 -
Opinion of
Company's Alabama Counsel
Exhibit F - Approval Letter
iv
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NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE
AGREEMENT is made as
of October 19, 2007,
by and
among:
National Coal of Alabama, Inc., an Alabama corporation
formerly known
as Mann Steel Products, Inc. ("COMPANY");
TCW Energy Fund XIV, L.P., a Delaware limited partnership ("FUND
XIV");
TCW Energy Fund XIV-A,
L.P., a Delaware
limited partnership ("FUND
XIV-A");
TCW Energy
Fund XIV (Cayman), L.P., a Cayman Islands limited
partnership ("FUND XIV CAYMAN," and together with Fund XIV, Fund
XIV-A and their
respective successors
and assigns, collectively referred to herein as the
"HOLDERS" and each shall be a "HOLDER"); and
TCW Asset Management Company ("TAMCO"), a California corporation, as
Administrative Agent
(together with its successors in such capacity, the
"ADMINISTRATIVE AGENT").
W I T N E S S E T H:
In consideration
of the mutual
covenants and agreements contained
herein, in
consideration
of the loans which may
hereafter be made by Holders,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto do hereby agree
as follows:
ARTICLE I - DEFINITIONS AND REFERENCES
Section 1.1. DEFINED
TERMS. As used in this Agreement, each of the
following terms has the meaning given to such term in this Section
1.1 or in the
sections and subsections referred to below:
"ACQUISITION" means the acquisition by Holdco of 100% of all the
Equity
Interests of the Company as contemplated by the Acquisition
Documents.
"ACQUISITION
DOCUMENTS"
collectively, the
Purchase Agreement, the
Demand Notes, and all other agreements, conveyances, or instruments
executed and
delivered by the
Sellers, Holdco or the Company in connection with the
Acquisition.
"ADMINISTRATIVE AGENT"
has the meaning given to such term in the
preamble hereto.
"AFFILIATE" means, as to any Person, each other Person that
directly or
indirectly (through
one or more
intermediaries
or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall be
deemed to be
"controlled by" any
other Person if such other Person possesses,
directly or indirectly, power
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(a) to
vote 25% or more of the securities or other equity
interests (on a fully
diluted basis) having ordinary voting power for the
election of directors,
the managing general partner or partners or the managing
member or members; or
(b) to
direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"AGGREGATE ADVANCE
AMOUNT" means, at the time in question, the
aggregate principal
amount of Loans advanced by Holders during the term of this
Agreement.
"AGREEMENT" means this Note Purchase Agreement.
"AMI VIOLATION" means the acquisition, directly or indirectly,
by any
Affiliate of Company,
of any interests or rights of the kinds described in the
definition of Coal Properties in the Project Area (other than the
acquisition or
lease by the Twin Pines Joint Venture of the two tracts of land
and the related
personal property required to operate its barge loading
operations).
"ANCF" (or "ADJUSTED NET CASH FLOW") means the positive remainder
of:
(a) Gross
Cash Revenues
determined on a Consolidated basis during
any ANCF Quarter (or other period of calculation, if applicable),
less
(b) actual
Consolidated
cash
payments
by Company and its
Subsidiaries during
such ANCF Quarter (or other period of calculation, if
applicable) for the following, without duplication:
(i) Existing royalties
and burdens on the Eligible Mortgaged
Properties, if any,
that constitute Permitted Liens (to the extent and
only to the
extent production receipts relating to the same are
included in Gross Cash Revenues);
(ii) Direct Taxes on the Eligible Mortgaged Properties;
(iii) ANCF Direct Mining Costs;
(iv) ANCF Variable Mining Costs;
(v) ANCF Overhead Costs;
(vi) Bonus Distributions paid in accordance with Section 8.6;
(vii)
distributions
paid to Holdco (and subsequently
distributed by Holdco
to the Parent) for the purpose of complying with
the Tax Sharing Agreement;
(viii) Interest
payments
on the Notes (and, without
duplication of any other amounts in this calculation, royalty payments
associated with the ORRI), and payments under Section 2.6(d);
and
(ix) ANCF Capital
Expenditures and any
Capital
Expenditures
that are considered maintenance capital expenditures.
2
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"ANCF CAPITAL
EXPENDITURES" means Capital Expenditures made by Company
or any of its Subsidiaries, to the extent the same either (a) have
been approved
by Required Holders at the time in question by means of an Approval
Letter, (b)
are made using proceeds of an asset sale or disposition
permitted hereunder or
using proceeds of a casualty event to the extent permitted
hereunder, or (c) are
included in the Approved Plan of Development, as then in effect (excluding in
all cases all capital expenditures paid for with proceeds of Loans
hereunder).
"ANCF DIRECT MINING COSTS" means (i) all costs and expenses
incurred in
connection with labor, blasting, equipment rental (to the extent
not included in
Interest Expense),
repairs and maintenance, fuel and lubrication, Coal
purchasing, wash plant
and loadout,
reclamation,
environmental compliance and
permitting to the
extent incurred
in the ordinary course of business (but
excluding Capital Expenditures) and (ii) any other costs and
expenses similar in
nature that have been
approved by Required
Holders at the time in
question by
means of an Approval Letter.
"ANCF OVERHEAD
COSTS" means (i) a
deemed cost equal to the Permitted
G&A Expense
Amounts, and (ii) other costs of Company to
the extent such other
costs have been approved as ANCF Overhead Costs by Required
Holders at the
time
in question by means of an Approval Letter.
"ANCF QUARTER" means,
with respect to a Quarterly Payment Date and the
calculation of ANCF,
the three calendar
month period ending on the last day of
the most recent
February, May, August
or November
immediately preceding
such
Quarterly Payment Date.
"ANCF VARIABLE
COSTS" means (i) the actual costs of gathering,
processing, and
transporting
Coal production from the Eligible Mortgaged
Properties from the
mining area to the
point of sale,
provided that all
such
costs are negotiated with, and paid to, third parties in arms-length
transactions on terms
which are reasonable
in the area of
operations for the
quality and quantity of such production for the time period
negotiated,
at the
time such prices are agreed to, (ii) other transportation or
marketing costs, to
the extent such other
transportation and
marketing costs have been approved by
Required Holders at
the time in question by means of an Approval Letter, and
(iii) all commissions and insurance expenses associated with the mining of
the
Coal produced.
"APPROVAL LETTER"
means a letter given by Administrative Agent on
behalf of Required Holders in the form of Exhibit F.
"APPROVED PLAN OF DEVELOPMENT" or "APOD" means Company's
written plan
of development with respect to budgeted capital expenditures
(including maximum
annual expenditures),
the acquisition of
equipment, the
incurrence of Capital
Leases with respect to
equipment,
and other development activities that is
described in Schedule 6, as amended and supplemented from time to time with the
consent of Required Holders; provided that no such consent shall be
required for
amendments,
modifications or supplements to the extent, but only to the
extent,
that any such
amendments,
modifications or
supplements
(a) either (i) are
administrative or
ministerial
in nature, or (ii) would make non-material
amendments to the timing for the completion of any such development
(other than
an amendment extending
the timing of the
substantial completion
of the APOD),
and (b) do not increase the aggregate permitted budgeted capital
expenditures of
Company and its Subsidiaries under such written plan.
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"BLACK LUNG ACT" means, collectively, the Black Lung Benefits
Revenue
Act of 1977, as
amended, and the Black
Lung Benefits
Reform Act of 1977,
as
amended.
"BONUS DISTRIBUTION" means for a Fiscal Year:
(a) if EBITDA for such Fiscal Year is equal to or less than
$16,000,000, an amount equal to $0;
(b) if EBITDA for such Fiscal Year is greater than $16,000,000 but
less
than or equal to
$20,000,000, an
amount equal to (i) $1.50 per ton of Coal
mined, processed
and sold by the Company during such Fiscal Year to
counterparties that
are not Affiliates of the Company which generated bona fide
accounts receivable
for the Company
arising in the ordinary course of business
during such Fiscal Year LESS (ii) $1,200,000; and
(c) if EBITDA for such
Fiscal Year is greater
than $20,000,000, an
amount equal to (i)
$2.00 per ton of Coal mined, processed and sold by the
Company during such Fiscal Year to counterparties that are not
Affiliates of the
Company which generated bona fide accounts receivable for the
Company arising in
the ordinary course of business during such Fiscal Year LESS (ii)
$1,200,000.
"BORROWING" means a
group of Loans made or to be made at the same time
by the Holders in accordance with their Percentage Shares.
"BORROWING NOTICE" means a written or telephonic request, or a written
confirmation, made by Company which meets the requirements of
Section 2.3.
"BUSINESS DAY" means a day, other than a Saturday or Sunday,
on which
commercial banks are open for business with the public in New York,
New York.
"CAPITAL EXPENDITURES"
means, for any period, with respect to any
Person, the aggregate
of all expenditures by such Person for the acquisition or
leasing (pursuant to a capital lease) of fixed or capital assets or
additions to
equipment (including
replacements,
capitalized repairs and improvements during
such period) which are required to be capitalized under GAAP on a balance sheet
of such Person.
"CAPITAL LEASE"
means a lease
with respect to which the lessee is
required concurrently
to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"CAPITAL LEASE
OBLIGATION"
means, with respect to any Person and a
Capital Lease,
the amount of the
obligation of such Person as the lessee under
such Capital Lease which should, in accordance with GAAP, appear as
a liability
on the balance sheet of such Person.
"CASH EQUIVALENTS" means Investments in:
4
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(a) marketable
obligations,
maturing
within twelve months after
acquisition thereof,
issued or unconditionally guaranteed by the United
States
of America or an
instrumentality or
agency thereof
and entitled to the full
faith and credit of the United States of America;
(b) demand deposits,
and time deposits (including certificates of
deposit) maturing
within twelve months from the date of deposit thereof, with
Sevier County Bank or
a domestic office of
any national or state bank or trust
company which is organized under the Laws of the United States of
America or any
state therein, which has capital and surplus of at least
$500,000,000, and whose
long term certificates
of deposit are rated at least Aa3 by Moody's or AA- by S
& P;
(c)
repurchase
obligations
with a term of not
more than 30 days
for
underlying securities
of the types described
in subsection
(a) above entered
into with any
commercial bank
meeting the
specifications of
subsection
(b)
above;
(d) open market
commercial
paper, maturing within 270 days after
acquisition thereof, which are rated at least P-2 by Moody's or A-2
by S&P;
(e) securities
with maturities of one year or less from the date
of
acquisition issued or
fully guaranteed by any state, commonwealth or territory
of the United States,
by any political
subdivision or taxing
authority of any
such state,
commonwealth
or territory or by any foreign government , the
securities of which
state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are
rated at least A
by S&P or P by Moody's;
(f) securities with
maturities of six
months or less from the date of
acquisition backed by
standby letters of
credit issued by any commercial bank
satisfying the requirements of clause (b) of this definition;
(g) Investments in
corporate bonds rated Aaa by Moody's or AAA by S&P;
and
(h) money market or other mutual funds substantially all of whose
assets comprise securities of the types described in subsections
(a) through (g)
above.
"CHANGE OF
CONTROL" means the occurrence of any of the following
events:
(a) any Person or two or more Persons acting as a group (other than
Warrant Owner or an
Affiliate of Warrant Owner) shall acquire beneficial
ownership (within
the meaning of Rule 13d-3 of the
Securities
and Exchange
Commission under the Securities Exchange Act of 1934, as amended,
and including
holding proxies to vote for the election of directors other than
proxies held by
Parent's management or their designees to be voted in favor of
Persons nominated
by Parent's Board of
Directors,
as applicable) of 50% or more of the Equity
Interests in Parent
entitled to vote for
members of the board of directors or
equivalent governing body of Parent (and taking into account all
such securities
that such Person or group has the right to
acquire pursuant to any option
right),
(b) one-third
or more of the
directors of Parent shall consist of
Persons not nominated
by Parent's Board of Directors, as applicable (not
including as Board
nominees any directors which the Board is obligated to
nominate pursuant to
shareholders
agreements,
voting trust
arrangements
or
similar arrangements),
5
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(c) Holdco shall cease
to directly own and
control 100% of the voting
and economic interest in the Equity Interest of the Company,
(d) Parent shall
cease to own and
control at least 100% of the voting
and economic interest in the Equity Interests in Holdco, or
(e) Company
shall cease to own and control 100% of the voting and
economic interest in the Equity Interests in each of its
Subsidiaries.
"CLOSING DATE" means the date on which all of the conditions
precedent
set forth in Section 4.1 shall have been satisfied or waived.
"CLOSING DATE
DISTRIBUTION"
means a Distribution in the amount of
$43,742,353.61 to be made on the Closing Date by the Company to
Holdco.
"CLOSING DATE
TRANSACTIONS"
means
(i) the consummation of the
transactions contemplated by the Acquisition Documents, (ii) the
issuance of the
Demand Notes by Holdco to the Sellers in consideration of the
acquisition of the
Company's Equity Interest pursuant to the Acquisition Documents, and (iii) the
payment of the Demand
Notes by Holdco from the proceeds of the Closing Date
Distribution and the capital contribution described in Section
3.01(i).
"COAL" means all of
the coal owned or leased by any Credit Party and
(a) located on, under,
or within, or (b)
produced and severed
from, the Coal
Properties owned or leased by any Credit Party.
"COAL ACT" means the Coal Industry Retiree Health Benefits Act of
1992,
as amended.
"COAL PROPERTIES"
means all of the following which are, at the time in
question, owned by any Credit Party: Coal and/or mineral leases,
Coal or mineral
properties, mineral
servitudes
and/or mineral rights
of any kind
(including,
without limitation,
mineral fee interests, lease interests, overriding royalty
and royalty interests, net profits interests, Coal payment
interests, production
payment interests and other types of mineral interests),
and all Coal
treating,
storage, processing and handling assets.
"COLLATERAl" means all
property of any kind which is subject to a Lien
in favor of Holders
(or in favor of
Administrative
Agent for the
benefit of
Holders) or which, under the terms of any Security Document,
is purported to be
subject to such a Lien.
"COLLATERAL ACCOUNT"
means an account established in the name of
Company with
Wachovia Bank as its primary operating account, or such other
deposit account as may
be established
by Company from time to time with the
prior written consent
of Administrative
Agent, which consent may be given or
withheld in its discretion.
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"COLLATERAL ACCOUNT
AGREEMENT"
means all documents or agreements
governing or evidencing the Collateral Account.
"COMMITMENT" means, as
to each Holder, its obligation to make Loans to
Company pursuant to Section 2.1 in an aggregate principal amount at
any one time
outstanding not to
exceed the amount set forth opposite such Holder's name on
the Holders
Schedule under the heading "Commitment" or in the Assignment
Agreement pursuant to
which such Holder becomes a party hereto, as applicable,
as such amount
may be adjusted from time to time in accordance with this
Agreement
"COMPANY" means National Coal of Alabama, Inc., an Alabama corporation
formerly known as Mann Steel Products, Inc.
"COMPANY CONFIDENTIAL
INFORMATION" has the
meaning given to such term
in Section 12.7(b).
"CONFIDENTIAL
INFORMATION" has the
meaning given to such term in
Section 12.7(a).
"CONSOLIDATED" refers to the consolidation of any Person, in
accordance
with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's Consolidated
financial statements, financial position, financial
condition,
liabilities, etc.
refer to the consolidated financial statements,
financial position,
financial condition,
liabilities, etc. of
such Person and
its properly consolidated subsidiaries. The above reference to GAAP
shall not be
deemed to cause matters described herein as being on a cash basis,
such as Gross
Cash Revenues or ANCF, to be changed to an accrual basis.
"CREDIT PARTIES" means Holdco, Company, and each Subsidiary of
Company.
"CURRENT RATIO"
means the ratio of Company's Consolidated current
assets to Company's Consolidated current liabilities as of the end of each
Fiscal Quarter. For
purposes of this Agreement, "Consolidated current assets"
and "Consolidated
current liabilities"
shall be determined in
accordance with
GAAP, except:
(a)
"Consolidated
current assets
will be calculated without
including any accounts
receivable or other
Indebtedness owed to Company or its
Subsidiaries by their Affiliates;
(b)
"Consolidated
current assets"
and "Consolidated current
liabilities" will be calculated without including any amounts
resulting from the
application of FASB Statement 133 and FASB Statement 143;
(c) accounts
receivable
more than 90 days delinquent shall be
excluded from "Consolidated current assets";
(d) any
cash or Cash
Equivalents
pledged as cash
collateral for
any Indebtedness (including without limitation any such cash or
Cash Equivalents
pledged in support of letters of credit or reclamation bonds) shall be excluded
from "Consolidated current assets";
7
<PAGE>
(e) any
Indebtedness
that is secured by
cash or Cash Equivalents
shall be excluded from "Consolidated current liabilities"; and
(f)
so
long as no Event of
Default or Default has occurred and is
continuing on the applicable test date or calculation date, current
liabilities
will be calculated
without including any current maturities of principal on the
Notes.
"DEBT SERVICE RESERVE ACCOUNT" means an account established in the
name
of Company with The Bank of New York Mellon, or such other deposit account as
may be established by
Company from time to time with the prior written consent
of Administrative
Agent, which consent may be given or withheld in its
discretion.
"DEBT SERVICE RESERVE
ACCOUNT AGREEMENT" means the Blocked Account
Agreement dated as of
October 19, 2007 among the Company, the Administrative
Agent and The Bank of New York Mellon, together with all other documents or
agreements governing or evidencing the Debt Service Reserve
Account.
"DEFAULT" means
any Event of Default and any default, event or
condition which would,
with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of
Default.
"DEFAULT RATE" means the rate per annum equal to two percent (2%)
above
the Fixed Rate,
provided that no
Default Rate charged by any Person shall ever
exceed the Highest Lawful Rate.
"DEMAND NOTES" mean the demand promissory notes dated as of October
19,
2007 made by
Holdco payable to the order of the Sellers in the original
aggregate principal amount of $45,443,254.61.
"DEMONSTRATED
RESERVES" of any
Person means the sum
of all Measured
Reserves of such Person plus such Person's Indicated Reserves.
"DEPOSIT ACCOUNT"
means a demand,
time, savings, passbook or like
account with a
bank, savings and loan association, credit union or like
organization, other
than an account
evidenced by a negotiable certificate of
deposit, and any other deposit account, as defined in the UCC.
"DIRECT TAXES" means any severance, ad valorem, or other direct taxes
on properties
owned by any Credit
Party or the
production
therefrom or the
proceeds of such
production; provided
that federal, state,
or local income or
franchise taxes shall in no event be considered Direct Taxes.
"DISCLOSURE SCHEDULE" means Schedule 1 hereto.
"DISTRIBUTION" means
(a) any dividend or other distribution made by a
Credit Party on or in
respect of any stock, partnership interest, or other
equity interest in
such Credit Party or any other Credit Party (including any
option or warrant to buy such an equity interest), or (b) any payment made by a
Credit Party to
purchase, redeem, acquire or retire any stock, partnership
interest, or other
equity interest in such Credit
Party or any other
Credit
Party (including any such option or warrant).
8
<PAGE>
"EBITDA" means, for any period, the Consolidated Net Income of
Company
during such
period, plus, to the extent reflected as a charge in the
Consolidated Net
Income of Company during such period, the sum of (a) all
interest expense during such period on Indebtedness (including amortization of
or writeoff of debt discount and debt issuance costs and
commissions,
discounts
and other fees and
charges associated with Indebtedness, and the interest
component of any deferred payment obligations and capital lease obligations)
plus (b) to the extent not included in interest expense under the preceding
clause (a), all royalty expense under the Royalty Agreement for such period,
plus (c) all income tax expense and franchise tax expense during such period
plus (d) all depreciation, amortization (including amortization of
good will and
other intangibles
but excluding debt
issuance costs already covered above) and
depletion, and (e) any
other non-cash charges
(including any provision for the
reduction in the carrying value of assets recorded in accordance
with GAAP and
including those resulting from the requirements of FASB 133 or 143),
minus, to
the extent included in
Consolidated
Net Income for such
period, all
non-cash
items of income or gain (including those resulting from the
requirements of FASB
133 or 143).
"ELIGIBLE MORTGAGED
PROPERTIES"
means, collectively, those Coal
Properties (a) that are owned by Company or any other Credit Party
and mortgaged
to Administrative Agent to secure the Obligations, (b) for which Administrative
Agent has received title opinions or other title
information
concerning
such
interests in form,
substance and
authorship
satisfactory
to Administrative
Agent, (c) that are
free and clear of all Liens other than Permitted Liens, and
(d) that are subject to an ORRI Conveyance.
"ENGINEERING REPORT"
means the Initial Engineering Report and each
engineering report
delivered pursuant to
Section 7.2, PROVIDED that, each such
report hereafter
delivered must (a) separately report on Demonstrated Reserves
(including details on
the amount of Measured
Reserves and Indicated
Reserves)
and Inferred
Reserves on a seam by seam basis and
including details on seam
thickness, recovery
percentages,
Coal volatility,
moisture content and
other
quality variables, (b)
contain information
and analysis comparable in scope to
that contained in the Initial Engineering Report, and (c) otherwise be in
form
and substance satisfactory to Administrative Agent.
"ENVIRONMENTAL LAWS" means any and all Laws relating to the
environment
or to emissions,
discharges,
releases or threatened
releases of
pollutants,
contaminants,
chemicals, or industrial, toxic or hazardous substances or
wastes
into the environment
including ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment,
storage,
disposal,
transport, or
handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
"EQUITY INTEREST" in a
Person means any share of capital stock issued
by such Person, any partnership, profits, capital, membership or other equity
interest in such Person, any option, warrant or any other right to
acquire any
share of capital stock or any partnership, profits, capital,
membership or other
equity interest in
such Person, and any
other voting security
issued by such
Person.
9
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974,
as
amended from time to time, and any successor statutes or statute,
together with
all rules and regulations promulgated with respect thereto.
"ERISA AFFILIATE"
means each Credit Party and all members of a
controlled group of
corporations and all
trades or businesses
(whether or not
incorporated) under
common control that,
together with such Credit Party, are
treated as a single employer under Section 414 of the Internal
Revenue Code.
"ERISA PLAN" means any employee pension benefit plan subject to Title
IV of ERISA maintained
by any ERISA Affiliate
with respect to which any Credit
Party has a fixed or contingent liability.
"EVENT OF DEFAULT" has the meaning given to such term in Section
9.1.
"FISCAL QUARTER"
means a three-month
period ending on March
31, June
30, September 30 or December 31 of any year.
"FISCAL YEAR" means a twelve-month period ending on December 31 of
any
year.
"FIXED CHARGES" means, with respect to the Company for any period,
the
sum of (a) Interest
Expense paid in respect of any
Indebtedness
during such
period plus (b) cash
taxes of the Company
and its Subsidiaries
to the extent
accrued or otherwise
payable with respect to such period plus (c) dividends or
other distributions paid to holders of the Equity Interest of the
Company during
such period plus (d) plus to the extent not included in Interest
Expense under
the preceding clause
(a), all royalty
expense under the Royalty Agreement for
such period.
"FIXED CHARGE COVERAGE RATIO" means, for any period, the ratio of the
following for
the Company and its Subsidiaries on a Consolidated basis
determined in
accordance
with GAAP:
(a) EBITDA for such
period less
Capital
Expenditures of the
Company and its
Subsidiaries
that are considered to be
maintenance capital
expenditures
not contemplated by the APOD to (b) Fixed
Charges for such period.
"FIXED RATE" means the rate of twelve percent (12%) per annum.
"GAAP" means
those generally accepted accounting principles and
practices which are
recognized as such by
the Financial
Accounting
Standards
Board (or any
generally recognized
successor)
and which,
in the case of the
Credit Parties and their Consolidated Subsidiaries, are applied for all periods
after the date
hereof in a manner
consistent
with the manner in which such
principles and practices were applied to the Initial Financial Statements. If
any change in any accounting principle or practice is required
by the Financial
Accounting Standards
Board (or any such
successor) in order for such principle
or practice
to continue as a generally accepted accounting principle or
practice, all reports
and financial
statements required hereunder with respect
to any Credit Party or
with respect to any
Credit Party and its
Consolidated
Subsidiaries may
be prepared in accordance with such change, but all
calculations and
determinations to be
made hereunder may be made in accordance
with such change
only after
notice of such change
is given to each Holder and
Company, Required
Holders and Administrative Agent agree to such change insofar
as it affects such calculations and determinations.
10
<PAGE>
"GOVERNMENTAL
AUTHORITY" means the
government of the United States of
America, any other nation or any political subdivision thereof,
whether state or
local, and any agency,
authority,
instrumentality,
regulatory
body, court,
central bank or
other entity exercising executive, legislative, judicial,
taxing, regulatory
or administrative powers or functions of or
pertaining to
government.
"GROSS CASH REVENUES"
means all cash
revenues and cash receipts of
Company and its
Subsidiaries on a
Consolidated
basis during any ANCF
Quarter
from any source or
activity (excluding only (a) funds received from Loans
hereunder, (b) funds
received from capital contributions made to Company,
including sales or issuance of new Equity Interests, and (c) funds belonging to
or received for the credit of third parties, such as royalty, working interest
or other interest
owners, that are received for transfer or payment to
such
third parties).
"GUARANTOR" means
each entity that now or hereafter executes and
delivers a guaranty to Administrative Agent as required herein,
including Holdco
and any Subsidiary of Company.
"HAZARDOUS
MATERIALS" means
any substances regulated under any
Environmental Law,
whether as pollutants,
contaminants,
or chemicals,
or as
industrial, toxic or hazardous substances or wastes, or
otherwise.
"HEDGING CONTRACT"
means (a) any
agreement providing for options,
swaps, floors,
caps, collars, forward sales or forward
purchases involving
interest rates,
commodities or commodity prices, explosives, fuel, equities,
currencies, bonds,
or indexes based on
any of the foregoing,
(b) any option,
futures or forward contract traded on an exchange, and (c) any other derivative
agreement or other similar agreement or arrangement.
"HIGHEST LAWFUL RATE" means, with respect to each Holder Party
to whom
Obligations are owed, the maximum nonusurious rate of interest that
such Holder
Party is permitted
under applicable
Law to contract
for, take, charge, or
receive with
respect to such
Obligations.
All determinations herein of the
Highest Lawful Rate,
or of any interest
rate determined by reference to the
Highest Lawful
Rate, shall be made separately for each Holder Party as
appropriate to assure
that the Note Documents are not construed to obligate any
Person to pay interest
to any Holder
Party at a rate in
excess of the Highest
Lawful Rate applicable to such Holder Party.
"HOLDCO" means NCC Corp., an Alabama corporation.
"HOLDER PARTIES" means Administrative Agent and all Holders.
"HOLDERS" has the meaning given to such term in the preamble
hereto.
"HOLDERS SCHEDULE" means Schedule 4 hereto.
"INDEBTEDNESS" of any
Person means Liabilities in any of the following
categories:
(a) Liabilities for borrowed money;
(b) Liabilities constituting an obligation to pay the deferred
purchase
price of property or services;
11
<PAGE>
(c) Liabilities
evidenced by a bond, debenture, note or similar
instrument;
(d) Liabilities
which (i) would under
GAAP be shown on such
Person's
balance sheet as a
liability, and (ii)
are payable more than one year from the
date of creation or incurrence thereof, but excluding (A) reserves
for taxes and
reserves for contingent obligations, and (B) Liabilities that generally
are not
required to be satisfied with cash or Cash Equivalents;
(e) Liabilities arising under Hedging Contracts;
(f) Capital Lease Obligations;
(g) Liabilities
arising
under conditional sales or other title
retention agreements;
(h) Liabilities
(for example, repurchase agreements, mandatorily
redeemable preferred
stock and sale/leaseback agreements) consisting of an
obligation to
purchase or redeem securities or other property, if such
Liabilities arise out
of or in connection with the sale or issuance of the same
or similar securities or property;
(i) Liabilities
with respect to
letters of credit or
applications or
reimbursement agreements therefore;
(j) Liabilities with respect to banker's acceptances;
(k) Liabilities with
respect to payments
received in consideration of
oil, gas or other minerals yet to be acquired or produced at the
time of payment
(including obligations under "take or pay" contracts to deliver
such minerals in
return for
payments already received and the undischarged balance of any
production payment
created by such
Person or for the
creation of which such
Person directly or indirectly received payment);
(l) Liabilities with
respect to other
obligations to deliver goods or
services in consideration of advance payments therefor;
(m) Liabilities owing under direct or indirect guaranties, or
otherwise
constituting
obligations to
purchase or acquire or to otherwise protect or
insure a creditor
against loss in respect, of Liabilities of the kind
referred
to in clauses (a)
through (l) above of any other Person (such as obligations
under working
capital maintenance agreement, agreement to keep-well, or
agreement to purchase Liabilities, assets, good, securities or services),
but
excluding endorsements
in the ordinary course of business of negotiable
instruments in the course of collection;
provided, however,
that the "Indebtedness" of any Person shall not
include Liabilities that were incurred by such Person on ordinary
trade terms to
vendors, suppliers,
or other Persons
providing goods and services for use by
such Person in the
ordinary course of its business, unless and until such
Liabilities are
outstanding
more than 90 days past
the original
invoice or
billing date therefor.
12
<PAGE>
"INDENTURE" means the
Indenture dated as of December 29, 2005 among
Parent, the
guarantors
named therein, and Wells Fargo Bank, National
Association, with respect to the Parent's 10.5% Senior Secured
Notes Due 2010.
"INDEPENDENT ENGINEER"
means Norwest Corporation or another nationally
or regionally
recognized
independent
engineering
company (other than C.W.
McGehee Engineering)
which may be
chosen by Company if acceptable to the
Administrative Agent in its reasonable discretion.
"INDICATED RESERVES"
means "Indicated Reserves" as defined in the
Glossary of Coal
Classification System
and Supplementary
Terms promulgated by
the U.S. Geological
Survey in effect at
the time in question
and as otherwise
amplified under the Coal Resource Classification System of the U.S. Geological
Survey in effect at such time.
"INFERRED RESERVES"
means "Inferred Reserves" as defined in the
Glossary of Coal
Classification System
and Supplementary
Terms promulgated by
the U.S. Geological
Survey in effect at
the time in question
and as otherwise
amplified under the Coal Resource Classification System of the U.S. Geological
Survey in effect at such time.
"INITIAL ENGINEERING
REPORT" means the reserve engineering report with
respect to Company's Coal Properties prepared as of April, 2007 by
C.W. McGehee,
a copy of which has been delivered to Administrative Agent.
"INITIAL FINANCIAL STATEMENTS" means (a) Company's audited
Consolidated
annual financial
statements as of
December 31, 2006, (b)
Company's
unaudited
Consolidated quarterly
financial statements as of June 30, 2007, and (c)
Company's unaudited
Consolidated monthly
financial statements for the calendar
month ended August 31, 2007.
"INSURANCE
SCHEDULE" means Schedule 3 attached hereto.
"INTEREST
EXPENSE" means,
for the Company and its Consolidated
Subsidiaries for any
period, total
interest, letter of
credit fees, and other
fees and expenses
incurred in connection with any Indebtedness for such period,
whether paid
or accrued, including, without limitation, all commissions,
discounts and other
fees and charges owed with respect to letters of credit and
bankers' acceptance
financing and net
costs under Hedging
Contracts covering
interest rates, all as determined in conformity with GAAP.
"INTERNAL REVENUE
CODE" means the United States Internal Revenue Code
of 1986, as amended
from time to time and
any successor
statute or
statutes,
together with all rules and regulations promulgated with respect
thereto.
"INVESTMENT" means any investment, made directly or indirectly, in
any
Person, whether by purchase or acquisition of Equity Interests,
Indebtedness or
other obligations
or securities or by extension of credit, loan, advance,
capital contribution
or otherwise and
whether made in cash, by the transfer of
property, or by any other means.
13
<PAGE>
"LAW" means any statute, law, regulation, ordinance, rule, treaty,
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental
restriction
of the United States
or any state or political
subdivision thereof or
of any foreign country
or any department,
province or
other political
subdivision
thereof. Any reference to a Law includes any
amendment or modification to such Law, and all regulations,
rulings, and other
Laws promulgated under such Law.
"LEASES" means any and
all leases, subleases,
tenancies,
concession
agreements, rental
agreements,
occupancy agreements, franchise agreements,
access
agreements and
any other agreements (including all amendments,
extensions,
replacements,
renewals,
modifications and/or guarantees thereof),
whether or not of record and whether now in existence or hereafter
entered into,
affecting the use or occupancy of all or any portion of any Real
Property.
"LIABILITIES" means,
as to any Person, all
indebtedness,
liabilities
and obligations
of such Person,
whether matured or unmatured, liquidated or
unliquidated, primary
or secondary,
direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant
to GAAP.
"LIEN" means,
with respect to any property or assets, any right or
interest therein of a
creditor to secure
Liabilities
owed to it or any
other
arrangement with
such creditor which provides for the payment of such
Liabilities out of such property or assets or which allows such
creditor to have
such Liabilities
satisfied out of such
property or assets prior to the general
creditors of any owner thereof, including any lien, mortgage,
security interest,
pledge, deposit,
production
payment, rights of a vendor under any title
retention or
conditional
sale agreement or lease substantially equivalent
thereto, tax lien,
mechanic's
or materialman's lien, or any other charge or
encumbrance for
security purposes, whether arising by Law or agreement or
otherwise, but
excluding any right of offset which arises without agreement in
the ordinary
course of business. "Lien" also means any filed financing
statement, any registration of a pledge (such as with a holder of
uncertificated
securities), or any
other arrangement or
action which would serve to perfect a
Lien described in the preceding sentence, regardless of whether such
financing
statement is filed,
such registration is made, or such arrangement or action is
undertaken before or after such Lien exists.
"LOAN" means any Loan
made by a Holder to Company pursuant to Section
2.1 and any PIK Loan borrowed pursuant to Section 2.8(e).
"MAKE-WHOLE AMOUNT", as well as certain other terms used in
determining
the Make-Whole Amount, have the meanings given to such terms in
Section 2.9(e).
"MANAGEMENT SERVICES AGREEMENT" means the Management Services
Agreement
dated as of October 19, 2007 between the Operating Company and the
Company.
"MATERIAL ADVERSE CHANGE" means a material and adverse change, from
the
state of affairs
existing on the Closing Date, to (a) Company's Consolidated
financial condition, (b) Company's Consolidated business,
assets (including
the
Coal Properties),
operations, properties
or prospects,
considered as a whole,
(c) Company's ability to timely pay the Obligations, or (d) the enforceability
of the material terms of any Note Documents.
14
<PAGE>
"MATERIAL CONTRACTS"
means (a) the Acquisition Documents, (b) the
agreements and instruments described in Section 5.8 of the
Disclosure Schedule,
and (c) any contract
or other arrangement to which Company or any of its
Subsidiaries is a
party (other
than the Note
Documents)
for which breach,
nonperformance, cancellation or failure to renew could reasonably
be expected to
have a Material Adverse Change.
"MATURITY DATE" means October 19, 2012.
"MEASURED RESERVES"
means "Measured Reserves" as defined in the
Glossary of Coal
Classification System
and Supplementary
Terms promulgated by
the U.S. Geological
Survey in effect at
the time in question
and as otherwise
amplified under the Coal Resource Classification System of the U.S. Geological
Survey in effect at such time.
"MINE" means any excavation or opening into the earth now and
hereafter
made from which Coal is or can be extracted on or from any of the Coal
Properties, together with all appurtenances, fixtures, structures,
improvements
and all tangible Property of whatsoever kind or nature in
connection therewith.
"MINING LAWS" means any and all applicable current and future federal,
state, local and
foreign statutes,
laws, regulations,
guidance, ordinances,
rules, judgments,
orders, decrees, permits, concessions, grants, franchises,
licenses, agreements
or other governmental restrictions or common law causes of
action relating to mining operations and activities. Mining Laws shall include,
but not be limited to, the Federal Coal Leasing Amendments Act, the Surface
Mining Control and Reclamation Act, all other land reclamation
and use statutes
and regulations, the Federal Coal Mine Health and Safety Act, the
Black Lung Act
and the Coal Act, each
as amended, and their
state and local
counterparts or
equivalents.
"MINING LEASE"
means a Lease
which provides a Person the right to
recover Coal from any Mine. Mining Leases which provide a Person the right to
construct and operate a preparation plant and related facilities on the surface
shall also be deemed to be a Prep Plant Lease.
"MINING PERMITS"
means any all permits, licenses, registrations,
notifications,
exemptions and
any other authorization required under any
applicable Mining Law or otherwise necessary to recover Coal from
any Mine being
operated by any Person.
"MOODY'S" means Moody's Investors Service, Inc., or its
successor.
"MORTGAGE" means each deed of trust or mortgage from time to time
given
by any Credit Party to
secure any of the
Obligations, as each
may be amended,
supplemented or otherwise modified from time to time.
"NET INCOME"
means, as to any Person or Persons for
any period, the
gross revenues
of such Person or Persons for such period, plus any cash
dividends or distributions actually received by such Person
or Persons from any
other business entity,
minus all expenses and
other proper charges
(including
taxes on income, to the extent imposed upon such Person or Persons
but excluding
charges for
accrued unpaid dividends on preferred stock of such Person or
Persons for such period), determined on a Consolidated
basis after
eliminating
earnings or losses attributable to outstanding minority interests,
but excluding
the net earnings of
any other business
entity in which such
Person or Persons
has an ownership interest and excluding extraordinary, unusual or non-recurring
items such as (a) any net non-cash gain or loss during such period
arising the
from sale, exchange,
retirement or other
disposition of capital assets and (b)
any write-up or write-down of assets.
15
<PAGE>
"NOTE" means a promissory note in the form of Exhibit A
evidencing one
or more Loans, as amended, supplemented or otherwise modified from
time to time.
"NOTE DOCUMENTS"
means this Agreement, the Notes, the Security
Documents, the Royalty
Agreement,
the ORRI Conveyances, the Warrants, the
Warrant Agreement,
the Registration Rights Agreement, the Post Closing
Agreement, the
Management
Services Agreement, and all other agreements,
certificates,
documents, instruments
and writings at any time delivered in
connection herewith
or therewith (exclusive of term sheets and commitment
letters).
"OBLIGATIONS" means
all Liabilities
from time to time owing by any
Credit Party to any
Holder Party (or any
third party
beneficiary of any
Note
Document) under or pursuant to any of the Note Documents.
"Obligation" means any
part of the Obligations.
"OBSERVER" has the meaning assigned to such term in Section
7.12.
"OPERATING
COMPANY" means
National
Coal Company, a Tennessee
corporation.
"ORRI" means an overriding royalty interest in Coal Properties
conveyed
to Royalty Owner pursuant to an ORRI Conveyance.
"ORRI CONVEYANCE"
means
each conveyance, assignment or similar
instrument executed by
a Credit Party in favor of Royalty Owner on the Closing
Date, and each additional conveyance, assignment or similar instrument,
if any,
executed by a Credit Party in favor of Royalty Owner pursuant to Section 7.22,
in each case conveying an overriding royalty interest in and to specified
Coal
Properties pursuant to the Royalty Agreement.
"PARENT" means National Coal Corp., a Florida corporation.
"PERCENTAGE SHARE"
means, with respect to
any Holder (a) when used in
Section 2.1 or
Section 2.2, in any Borrowing Notice or when no Loans are
outstanding hereunder,
the percentage set forth below such Holder's name on
Holders Schedule,
and (b) when used
otherwise,
the percentage obtained by
dividing (i) the sum of the unpaid principal balance of such Holder's Loans
at
the time in question,
by (ii) the sum of the aggregate unpaid principal balance
of all Loans at such time.
"PERMITTED G&A EXPENSE AMOUNT" means, with respect to an ANCF
Quarter,
an amount equal to (a) the monthly service fee paid by the Company to the
Operating Company pursuant to the Management Services Agreement
during such ANCF
Quarter (or such
higher or lower amount
as may be approved by
Administrative
Agent from time to time in its reasonable discretion), plus (b) an amount up to
$40,000 per month paid by the Company for general and overhead expenses of the
type described in the Management Services Agreement.
16
<PAGE>
"PERMITTED INVESTMENTS" means
(a)
Investments in Cash Equivalents;
(b) normal
and prudent extensions
of credit by the Credit Parties
to their customers
for buying
goods and services in the ordinary course of
business or to another
Credit Party in the ordinary course of business, which
extensions shall not
be for longer
periods than those extended by similar
businesses operated in a normal and prudent manner;
(c)
Investments by Holdco in the Company;
(d) A
Credit Party's guaranty of Liabilities of another Credit
Party to the extent such guaranty is not prohibited by this
Agreement;
(e) loans
and advances to employees of any Credit Party in the
ordinary course
of business (including, without limitation, for travel,
entertainment and
relocation
expenses) in an
aggregate amount for
all Credit
Parties not to exceed $25,000 at any one time outstanding;
(f)
Investments in certificates of deposit and similar instruments
with maturities of thirty-six months or less from the date of
acquisition with
Sevier County Bank
which are used, in each case, by a Credit Party for the sole
purpose of enabling the Credit Party to purchase or post
reclamation, surety, or
similar bonds, and any extensions or renewals thereof; and
(g)
Investments in certificates of deposit and similar instruments
with maturities of thirty-six months or less from the date of
acquisition with
any domestic
commercial
bank
having capital and surplus of at least
$500,000,000, and whose long term certificates of deposit are rated
at least Aa3
by Moody's or AA - by S & P, which are used, in each case, by a
Credit Party for
the sole purpose of enabling the Credit Party to lease equipment or to purchase
or post reclamation
surety, utility or similar bonds, and any extensions or
renewals thereof.
"PERMITTED LIENS" means:
(a) statutory
Liens for taxes,
assessments or other
governmental
charges or levies which are not yet delinquent or which are being
contested in
good faith by appropriate action and for which adequate
reserves are maintained
in accordance with GAAP;
(b)
landlords', operators',
carriers',
warehousemen's,
repairmen's, mechanics', materialmen's, or other like Liens
which do not secure
Indebtedness, in each
case only to the extent arising in the ordinary course of
business and only to the extent securing obligations which are not delinquent
for a period of more than 30 days or which are being contested in good faith by
appropriate
proceedings and for
which adequate
reserves are maintained in
accordance with GAAP;
(c) pledges
or deposits of cash or Cash Equivalents to secure
Indebtedness permitted pursuant to Section 8.1(f), which pledges or
deposits may
not exceed the amounts they are intended to secure;
(d) defects
and irregularities in
title to any property,
so long
as such defects and
irregularities neither
secure Indebtedness
nor materially
impair the value of such property or the use of such
property for the
purposes
for which such property is held;
17
<PAGE>
(e) deposits
of cash or securities
to secure the
performance of
bids, trade contracts, leases, statutory obligations surety and
appeal bonds and
other obligations,
of a like nature in
the ordinary course of business and not
constituting Indebtedness;
(e) Liens
under the Security Documents;
(f) Liens
that secure only
Indebtedness
allowed under Section
8.1(d) (plus
associated
interest,
prepayment
penalties,
fees
and
reimbursements),
provided that such Liens encumber only the personal
property
purchased with
the proceeds of such Indebtedness (plus accessions and
attachments to such
purchased assets) and
that the encumbered
assets are not
attached to any Eligible Mortgaged Properties in such a way that
removal of such
assets would damage any Eligible Mortgaged Property in any material
manner; and
(g) easements,
rights-of-way,
restrictions
and other similar
encumbrances incurred in the ordinary course of business that, in
the aggregate,
are not substantial in
amount and which do not in any case materially detract
from the value of Property subject thereto or materially interfere with the
ordinary conduct of the business of any Credit Party;
(h) Liens
existing on the
Closing Date and
described in
Section
8.2 of the Disclosure
Schedule (which liens shall be released on the
Closing
Date concurrent with the making of the Loan); and
(i) with
respect only to property subject to any particular
Security Document,
additional Liens burdening such property which are expressly
allowed by such Security Document.
"PERSON" means an individual, corporation, general partnership,
limited
partnership, limited
liability company, association, joint stock company, trust
or trustee thereof,
estate or executor thereof, Governmental Authority, or any
other legally recognizable entity.
"PIK ELECTION" as defined in Section 2.6.
"PIK LOAN" as defined in Section 2.6.
"POST CLOSING
AGREEMENT" means the Post Closing Agreement dated as of
October 19, 2007 between the Company and the Administrative
Agent.
"PREP PLANT LEASE"
means each Lease
entered into by Person in respect
of a preparation
plant and/or related Property or Real Property on which a
preparation plant is situated. Prep Plant Leases which also
provide such Person
with the right to recover Coal from a Mine shall
also be considered a Mining
Lease.
"PREPAYMENT PREMIUM"
means an amount
equal to (a) in the
case of any
prepayment of
principal of the Loans
occurring during the
period from the day
immediately following
the second anniversary of the Closing Date and continuing
through the third
anniversary of the
Closing Date as a result of an Event
of
Default (other
than an Event of
Default that
exists solely as a result of a
Change of Control of the type described in clauses (a) or (b) of
the definition
of "Change of Control") or an optional prepayment under Section 2.8, 12%
of the
principal amount being
prepaid, (b) in the
case of any prepayment of principal
18
<PAGE>
of the Loans occurring during the period from the day immediately
following the
third anniversary
of the Closing Date and continuing through the fourth
anniversary of the Closing Date as a result of either an Event of
Default (other
than an Event of Default that exists solely as a result of a Change of
Control
of the type described
in clauses
(a) or (b) of the
definition
of "Change of
Control") or an
optional prepayment
under Section 2.8, 5% of the principal
amount being prepaid;
and (c) in the case of any prepayment of principal of the
Loans occurring during the period from the day immediately
following the
fourth
anniversary of the Closing Date and continuing through the fifth anniversary
of
the Closing Date as a result of either an Event of Default
(other than an
Event
of Default
that exists solely as a result of a Change of
Control of the type
described in clauses (a) or (b) of the definition of "Change of Control")
or an
optional prepayment under Section 2.8, 2% of the principal amount
being prepaid.
"PROJECT AREA" means the State of Alabama.
"PROPERTY" means any
right, title or
interest in or to property or
assets of any kind
whatsoever, whether
real, personal or mixed and whether
tangible or
intangible
and including equity interests or other ownership
interests of any
Person and whether
now in existence or owned or hereafter
entered into or acquired, including, without limitation, all Real
Property.
"PURCHASE AGREEMENT"
means the Purchase Agreement dated as of June 18,
2007 among Holdco, the
Company and the Sellers, as amended by the Amendment to
Purchase Agreement
dated August 22, 2007, and the Second Amendment to Purchase
Agreement dated October 15, 2007.
"QUARTERLY PAYMENT
DATE" means the second
Business Day prior to the
last day of each March, June, September and December.
"REAL PROPERTY"
means, collectively, all right, title and interest
(including any
leasehold estate) in
and to any and all parcels of or interests
in real Property
owned, leased or operated by any Person, whether by lease,
license or
other means, together with, in each case, all easements,
hereditaments
and appurtenances
relating
thereto, all improvements and
appurtenant fixtures and equipment, all general intangibles and
contract rights
and other Property and rights incidental to the ownership, lease or operation
thereof.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement
dated as of October 19, 2007 among the Parent, the Holders (as assignees) and
certain other shareholders of the Parent.
"REGULATION D" means
Regulation
D of the Board of
Governors of the
Federal Reserve System as from time to time in effect.
"REQUIRED HOLDERS"
means Holders whose
aggregate Percentage Shares
exceed fifty percent (50.0%).
"RESTRICTED
NOTE" means
a Note which constitutes a "restricted
security" within the
meaning of Rule 144 of the General Rules and Regulations
promulgated under the Securities Act.
19
<PAGE>
"RESTRICTED
SUBSIDIARY" has
the meaning given such term in the
Indenture.
"ROYALTY AGREEMENT" means the Overriding Royalty Conveyance dated
as of
October 19, 2007 between the Company and the Royalty Owners.
"ROYALTY OWNER"
means each of TCW
Energy Fund XIV, L.P.,
TCW Energy
Fund XIV-A, L.P. and TCW Energy XIV Blocker (National Coal),
L.L.C., and each of
their respective successors and assigns.
"S & P" means
Standard & Poor's
Ratings Services
(a division of The
McGraw Hill Companies), or its successor.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY DOCUMENTS"
means the instruments listed in the Security
Schedule and all other security agreements, deeds of trust, mortgages,
chattel
mortgages, pledges, guaranties, financing statements, continuation statements,
extension agreements
and other agreements
or instruments now,
heretofore, or
hereafter delivered by
any Credit Party to
Administrative Agent
in connection
with this Agreement or any transaction contemplated hereby to secure or
guarantee the payment of any part of the Obligations or the performance of any
Credit Party's other duties and obligations under the Note
Documents.
"SECURITY SCHEDULE" means Schedule 2 hereto.
"SELLERS" means, collectively, Frank C. Mann, II and William T.
Mann.
"SUBSIDIARY" means,
with respect to any Person, any corporation,
association,
partnership, limited
liability company,
joint venture, or
other
business or corporate
entity, enterprise or
organization which is
directly or
indirectly (through
one or more
intermediaries)
controlled by or owned
fifty
percent or more by such Person.
"TAX SHARING
AGREEMENT" means the
Tax Sharing Agreement
dated as of
October 19, 2007 among the Parent, Holdco and the Company.
"TCW GOVERNING DOCUMENTS" has the meaning given to such term in
Section
11.11.
"TERMINATION EVENT"
means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Section
4043(c)(5) or (6) of
ERISA
or (ii) any other
reportable event
described in Section 4043(c) of ERISA other
than a reportable
event not subject to the provision for 30-day notice to the
Pension Benefit
Guaranty Corporation
pursuant to a waiver
by such corporation
under Section 4043(a) or 4043(b)(4) of ERISA, or (b) the withdrawal
of any ERISA
Affiliate from an
ERISA Plan during a plan year in which it was a "substantial
employer" as
defined in Section
4001(a)(2)
of ERISA, or (c) the filing of a
notice of intent to terminate any ERISA Plan or the treatment of
any ERISA Plan
amendment as
a termination under Section 4041(c) of ERISA, or (d) the
institution of
proceedings to
terminate any ERISA Plan by the Pension Benefit
Guaranty Corporation
under Section 4042 of ERISA, or (e) any other event or
condition which might
constitute
grounds under Section 4042 of ERISA for
the
termination of, or the appointment of a trustee to administer, any
ERISA Plan.
20
<PAGE>
"TWIN PINES JOINT VENTURE" means the joint venture between the Company
and Twin Pines
Coal Company formed to operate the barge loading facility
required to service the proposed Coal sales contract between the Company and
Alabama Power Co., a division of Southern Companies.
"UCC" means the Uniform Commercial Code (or any similar or
equivalent
legislation) as in effect in any applicable jurisdiction.
"UNRESTRICTED
SUBSIDIARY" has
the meaning given such term in the
Indenture.
"WARRANT AGREEMENT" means the Warrant Agreement dated as of October
19,
2007 among the Parent,
the Warrant Owners (as
assignees) and the other parties
named therein.
"WARRANT OWNER"
means each of TCW
Energy Fund XIV, L.P.,
TCW Energy
Fund XIV-A, L.P.
and TCW Energy
Fund XIV (Cayman), L.P., and each of their
respective successors and assigns.
"WARRANTS" means the
warrants to purchase
shares of Parent's
Common
Stock, issued by Parent to Holdco pursuant to the Warrant Agreement
and assigned
by Holdco to the Warrant Owners, together with all warrants issued upon
transfer, exchange or in replacement thereof.
Section 1.2.
EXHIBITS AND SCHEDULES; ADDITIONAL DEFINITIONS. All
Exhibits and
Schedules attached to this Agreement are a part hereof for all
purposes. Reference is
hereby made to the Security Schedule for the meaning of
certain terms defined therein and used but not defined herein,
which definitions
are incorporated herein by reference.
Section 1.3.
AMENDMENT OF DEFINED
INSTRUMENTS.
Unless the
context
otherwise requires or unless otherwise provided herein the terms
defined in this
Agreement which refer
to a particular
agreement, instrument
or document also
refer to and include all renewals, extensions, modifications, amendments and
restatements of such
agreement, instrument
or document, provided
that nothing
contained in this section shall be construed to authorize any such renewal,
extension, modification, amendment or restatement.
Section 1.4. REFERENCES AND TITLES. All references in this
Agreement to
Exhibits, Schedules,
articles, sections, subsections, definitions and other
subdivisions refer to the Exhibits, Schedules, articles, sections,
subsections,
definitions and other
subdivisions of this Agreement unless expressly provided
otherwise. Exhibits
and Schedules to any Note Document shall be deemed
incorporated by
reference in such Note
Document. References
to any document,
instrument, or
agreement (a) shall include all exhibits, schedules, and other
attachments thereto,
and (b) shall
include all documents, instruments, or
agreements issued or
executed in replacement thereof. Titles appearing at the
beginning of any subdivisions are for convenience only and do not
constitute any
part of such
subdivisions and shall
be disregarded in
construing the language
contained in such subdivisions. The words "this Agreement",
"this instrument",
"herein", "hereof",
"hereby", "hereunder"
and words of similar import refer to
this Agreement as a whole and not to any particular subdivision
unless expressly
so limited. The phrases "this section" and "this subsection" and
similar phrases
refer only to the sections or subsections hereof in which such phrases
occur.
The word "or" is not exclusive, and the word "including" (in its
various forms)
means "including
without limitation". References to a Person's
"discretion"
21
<PAGE>
means its sole and absolute discretion unless otherwise
specified.
Pronouns in
masculine, feminine
and neuter genders
shall be construed to include any other
gender, and words in
the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires. Accounting
terms have the
meanings assigned to
them by GAAP, as applied by the accounting entity to which
they refer. References
to "days" shall mean calendar days, unless the term
"Business Day" is used. Unless otherwise specified, references herein to any
particular Person also refer to its successors and permitted
assigns.
Section 1.5.
CALCULATIONS AND
DETERMINATIONS. All
calculations under
the Note Documents
of interest
chargeable
with respect to Loans and of fees
shall be made on the basis of actual days elapsed (including the first day but
excluding the last) and a year of 360 days. Each determination by a
Holder Party
of amounts to be paid under Article III or any other matters which are to be
determined hereunder
by a Holder Party shall, in the absence of manifest error,
be conclusive and binding. Unless otherwise expressly
provided herein or unless
Required Holders
otherwise consent all financial statements and reports
furnished to any Holder Party hereunder shall be prepared and all financial
computations and determinations pursuant hereto shall be made in
accordance with
GAAP.
Section 1.6.
JOINT PREPARATION; CONSTRUCTION OF INDEMNITIES AND
RELEASES. This
Agreement and the
other Note Documents
have been reviewed
and
negotiated by sophisticated parties with access to legal
counsel and no rule of
construction shall apply hereto or thereto which would require or
allow any Note
Document to be construed against any party because of its
role in drafting such
Note Document.
All indemnification and release provisions of this Agreement
shall be construed
broadly (and not narrowly) in favor of the Persons receiving
indemnification or being released.
ARTICLE II - PURCHASE AND SALE OF SECURITIES
Section 2.1. NOTE PURCHASE. Subject to the terms and conditions
hereof,
on the Closing
Date Company shall issue to Holders, and each Holder shall
purchase from Company (so long as all conditions precedent required
hereby shall
have then been
satisfied), a Note or
Notes in an aggregate
principal amount
equal to the such
Holder's Percentage
Share of the
Commitment on the
Closing
Date at which time Holders shall make an advance on the Notes in
accordance with
their respective Percentage Shares in the aggregate amount of
$60,000,000.
Section 2.2. THE
NOTES. The
obligation
of Company to repay to
each
Holder the aggregate
amount of all Loans
made by such Holder,
together with
interest accruing in connection therewith, shall be evidenced by
(a) in the case
of all Loans other than PIK Loans, a single Note made by Company
payable to the
order of such Holder in the form of Exhibit A-1 with appropriate
insertions, and
(b) in the case of PIK Loans, this Section 2.2; provided that, any
Holder may at
any time request that the Company execute and deliver a PIK Note in
the form of
the attached Exhibit
A-2, and the Company
shall provide such PIK
Note to such
Holder within three Business Days of such request. The amount of
principal owing
on any Holder's
Note at any given
time shall be the
aggregate amount of all
Loans
theretofore made
by such Holder minus all payments of principal
theretofore received
by such Holder on such
Note. Interest on each
Note shall
accrue and be due and
payable as provided
herein. Each Note shall be due and
payable as provided herein, and shall be due and payable in full on
the Maturity
Date. Company may not borrow, repay, and reborrow hereunder or
under the Notes.
22
<PAGE>
Section 2.3. BORROWING
REQUEST. Company must give to Administrative
Agent written or electronic notice (or telephonic notice promptly confirmed in
writing) of the
Borrowing of Loans to be advanced by Holders on the Closing
Date. Such notice constitutes a "BORROWING NOTICE" hereunder and
must:
(a) specify the aggregate amount of any such Borrowing of Loans and
the
date on which such Loans are to be advanced; and
(b) be received by Administrative Agent not later than 10:00 a.m.,
New
York, New York time, on the Business Day preceding the Closing
Date.
Each such written request or confirmation must be made in the form and
substance of
the "Borrowing Notice" attached hereto as Exhibit B, duly
completed. Each
such telephonic request shall be deemed a representation,
warranty,
acknowledgment and
agreement by Company
as to the matters which are
required to be set out in such written confirmation. Upon receipt of any such
Borrowing Notice,
Administrative Agent
shall give each Holder prompt notice of
the terms thereof. If all conditions precedent to such new Loans have
been met,
each Holder will on the date requested promptly remit to
Administrative Agent at
Administrative Agent's
office in Los
Angeles, California the amount of such
Holder's new Loan in
immediately
available funds, and upon receipt of such
funds, unless to its
actual knowledge any
conditions
precedent to such
Loans
have been neither met nor waived as provided herein, Administrative Agent shall
promptly make such Loans available to Company. The failure of any
Holder to make
any new Loan to be made by it hereunder shall not relieve any other
Holder of
its obligation
hereunder, if any, to
make its new Loan, but no Holder shall be
responsible for the
failure of any other Holder to make any new Loan to be made
by such other Holder.
Section 2.4. DEBT SERVICE RESERVE ACCOUNT.
(a)
ESTABLISHMENT OF
DEBT SERVICE RESERVE ACCOUNT; RULES FOR
APPLICATION.
(i) Company shall
establish and maintain at its expense
the
Debt Service
Reserve Account pursuant to the Debt Service Reserve
Account Agreement.
(ii) Company
shall on the Closing
Date and from time to time
thereafter deposit
or cause to be deposited into the Debt Service
Reserve Account funds
in an amount equal to that which is necessary to
cause the funds in such Debt Service Reserve Account to be equal to
six
months of interest ("REQUIRED AMOUNT") on the then outstanding
aggregate
principal amount
of the Notes as determined by the
Administrative Agent in its sole discretion; provided that, the
Company
may request in writing to the Administrative Agent on each Quarterly
Payment Date that any amounts contained in the Debt Service Reserve
Account in excess of
the Required
Amount be released from the Debt
Service Reserve Account within three (3) Business Days of such
request,
and, so long as no Default or Event of Default shall have occurred and
be continuing, the
Administrative Agent will release such excess funds
to the Company.
23
<PAGE>
(iii) After the
occurrence and during
the continuance of
an
Event of Default under any Note Document, Administrative Agent may, at
its option,
from time to time apply all sums in the Debt Service
Reserve Account to the reduction of outstanding principal, interest
and
other sums owed by Company to any Note Holder under the Notes or other
Note
Documents.
(b) FINAL
DISBURSEMENTS. Upon
the satisfaction in full of all amounts
owed by Company under the Note Documents, Administrative Agent shall have all
amounts remaining in the Debt Service Reserve Account disbursed to
Company.
(c) ACKNOWLEDGMENTS. Company hereby acknowledges that:
(i) It has granted and
assigned to Administrative Agent a
first priority, perfected security interest in the Debt Service
Reserve
Account, all funds
therein and all
proceeds thereof
pursuant to the
Debt Service Reserve Account Agreement; and
(ii) Company shall not
be permitted to withdraw, transfer or
disburse any funds
from the Debt Service
Reserve Account except in
accordance with the
terms hereof,
the Debt Service
Reserve Account
Agreement and each other Note Document.
(d) ATTORNEY-IN-FACT.
Company hereby appoints Administrative Agent its
attorney-in-fact, with full power of substitution, to execute and
file on behalf
of Company, any
financing statement,
continuation
statement or
instrument of
further assurance
to more effectively perfect, continue or confirm (i) the
provisions of this
Section 2.4 and of any
agreement entered into by Company,
Administrative Agent
and the depositary
bank administering the Debt Service
Reserve Account
and (ii) the
security interest granted in the Debt Service
Reserve Account.
This power, being coupled with an interest, shall be
irrevocable until all amounts due in connection with the Notes have
been paid in
full.
Section 2.5.
USE OF PROCEEDS. Company will use the proceeds of all
Loans (other than PIK Loans) as follows: (a) up to $43,742,353.61 to make the
Closing Date
Distribution
to Holdco in order to
allow the Holdco to repay the
Demand Notes,
(b) to repay Indebtedness existing on the Closing Date and
described in
Section 2.5 of the Disclosure Schedule, (c) to pay closing
expenses, costs and fees, (d) to cash collateralize reclamation bonds issued by
Indemnity National
Insurance Company for the account of the Company and its
Subsidiaries in
connection
with the Company's reclamation obligations and
further described in
Section 2.5 of the
Disclosure Schedule,
(e) to fund the
DSRA, and (f) to make other expenditures from time to time approved by
Administrative Agent.
PIK Loans shall only be used to pay a portion of the
interest owing hereunder pursuant to Section 2.6(d). In no event
shall the funds
from any Loan be used
directly or indirectly
by any Person (x) for
personal,
family, household or
agricultural
purposes, or (y) for the purpose,
whether
immediate, incidental
or ultimate,
of purchasing, acquiring or carrying any
"margin stock" (as such term is defined in Regulation U promulgated
by the Board
of Governors
of the Federal Reserve System) or to extend credit to others
directly or indirectly for the purpose of purchasing or carrying
any such margin
stock.
Section 2.6. INTEREST RATES AND FEES; PAYMENT DATES.
24
<PAGE>
(a) INTEREST RATES.
Subject to subsection
(b) below, each Loan
shall
bear interest on each day outstanding at the Fixed Rate compounded
quarterly on
each Quarterly Payment Date to the extent not paid.
(b) DEFAULT RATE.
If an Event of Default
shall have
occurred and be
continuing under
Section 9.1(a), (b), (j)(i), (j)(ii), or (j)(iii), all
outstanding Loans
shall bear interest at
the Default Rate until the first date
thereafter upon
which there shall be no Event of Default continuing. In
addition, if an Event
of Default shall have
occurred and be continuing (other
than under Section 9.1(a), (b), (j)(i), (j)(ii), or (j)(iii)),
Required Holders
may, by notice to Company, elect to have the outstanding
Loans bear interest at
the Default
Rate, and upon the giving of such
notice, such Loans shall bear
interest at the Default Rate until the earlier of (i) the first
date thereafter
upon which there shall be no Event of Default continuing and (ii) the date
upon
which Required Holders shall have rescinded such notice.
(c) UP-FRONT PAYMENT.
In consideration of each Holder's commitment to
make Loans,
Company will pay to Administrative Agent (or its designee or
designees) an up-front payment equal to 1.5% of the aggregate
Commitments on the
Closing Date (payable on the Closing Date). Payment of such payment shall be
by
wire transfer of immediately available funds or upon the
instruction of Company,
by deduction from the purchase price of the Notes.
(d) PIK LOANS. In lieu of paying interest due on the Loans
(including
all PIK Loans) on each Quarterly Payment Date in full in cash,
Company may elect
(a "PIK ELECTION")
to pay a portion of such interest in cash equal to the
Required Cash Interest and to borrow the remaining PIK Interest
from the Holders
in the form of PIK Loans in principal amount equal to such PIK
Interest. As used
herein, "REQUIRED CASH
INTEREST" means immediately available funds equal to the
amount of interest
which would be owing on such Quarterly Payment Date if the
interest rate on a
Holder's Loans since
the immediately
preceding Quarterly
Payment Date (or, for the first Quarterly Payment Date, since the Closing
Date)
had been a per annum rate equal to nine percent (9%), and "PIK
INTEREST" means
the remaining
then accrued
interest not paid by means of the
Required Cash
Interest. As used
herein "PIK LOAN" means an additional loan from a Holder to
Company, made without any wire transfer of funds to or from
Administrative Agent
or Company, that is
applied by such Holder on behalf of Company to pay such PIK
Interest. In order to
make a PIK Election
with respect to a Quarterly Payment
Date, Company must
give advance written
notice thereof in the
form of Exhibit
B-2 to Administrative
Agent (who will
notify each Holder) and deliver the
Required Cash Interest due to each Holder to Administrative Agent on or before
such Quarterly Payment Date. Upon delivery of such Required Cash
Interest, such
PIK Loan shall be deemed made by the Holders and received by Company.
Notwithstanding the foregoing provisions of this subsection,
however, during the
continuance of an Event of Default Company may not make any PIK
Election without
the consent of Required Holders.
Section 2.7. COLLATERAL ACCOUNT.
(a) ESTABLISHMENT OF COLLATERAL ACCOUNTS; RULES FOR
APPLICATION.
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(i) Company shall
establish and maintain at its expense
the
Collateral Account
pursuant to the
Collateral Account
Agreement and
such Collateral
Account shall function as the Company's primary
operating account.
(ii) Company shall
deposit or cause to be deposited into the
Collateral Account all
Gross Cash Revenues
from and after the Closing
Date through the date that the Obligations are repaid in full and all
Commitments hereunder have been terminated. In addition,
Company shall
deposit all funds into the Collateral Account from the Borrowing on
the
Closing Date that are not applied under the first sentence of Section
2.5.
(iii) Prior to its
receipt of a Notice of
Exclusive Control
(defined below),
Company may
transfer or disburse
amounts from such
Collateral Account in
the ordinary course of business. Administrative
Agent may at any time after the occurrence and continuance of an Event
of Default determine
to exercise exclusive
dominion and control
over
the Collateral Account, and, upon receipt of notice from
Administrative
Agent of such determination (a "NOTICE OF EXCLUSIVE CONTROL"),
Company
shall cease giving the instructions described in the preceding
sentence
to the administrator of the Collateral Account and only the
Administrative Agent
shall be permitted to give such instructions as
provided in the Collateral Account Agreement.
(iv) After the
occurrence and during
the continuance
of an
Event of Default under any Note Document, Administrative Agent may, at
its option, from time
to time apply all sums in the Collateral Account
to the reduction of outstanding principal, interest and other sums
owed
by Company on, the Notes or other Note Documents.
(v) Upon the satisfaction in full of all amounts owed by
Company under the Note Documents and the termination of all
commitments
and agreements of the
Administrative Agent
and the Holders associated
therewith, Administrative Agent shall have all amounts remaining in
the
Collateral Account disbursed to Company.
(b) NOTICE. Not later
than five Business
Days after the Closing
Date
and at all times thereafter, Company shall send a notice,
substantially in form
acceptable to
Administrative Agent,
to all existing
and/or new purchasers
of
Coal produced from the Eligible Mortgaged Properties, directing them to forward
all amounts payable to Company directly to the Collateral Account
at the mailing
address of the
depositary bank for
deposit into the
Collateral Account.
The
failure of such purchasers to comply with any such notice shall not
constitute a
Default hereunder
by any Credit Party, provided that (i) such purchaser's
failure to comply with
such notice is not
done at the request of
Company and
(ii) Company or Company's Affiliate shall forward all amounts
received from such
purchaser to the Collateral Account within one (1) Business
Day of Company's or
Company's Affiliate's receipt thereof.
(c) ACKNOWLEDGMENTS. Company hereby acknowledges that:
(i) It has granted and
assigned to Administrative Agent a
first priority,
perfected security
interest in the Collateral Account,
all funds therein and all proceeds thereof pursuant to the Collateral
Account Agreement; and
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(ii) Company
shall not be permitted
to withdraw, transfer
or
disburse any funds from the Collateral Account except in accordance
with the terms hereof,
the Collateral Account Agreement and each other
Note Document.
(d)
ATTORNEY-IN-FACT.
Company hereby appoints Administrative Agent its
attorney-in-fact, with full power of substitution, to execute and
file on behalf
of Company, any
financing statement,
continuation
statement or
instrument of
further assurance
to more effectively perfect, continue or confirm (i) the
provisions of this
Section 2.7 and of any
agreement entered into by Company,
Administrative Agent
and the depositary bank administering the Collateral
Account and (ii) the security interest granted in the Collateral
Accounts. This
power, being coupled
with an interest,
shall be irrevocable
until all amounts
due in connection with the Notes have been paid in full.
Section 2.8. MANDATORY PREPAYMENTS.
(a) On each Quarterly Payment Date beginning with the Quarterly
Payment
Date occurring in March, 2008 and on each Quarterly Payment Date
thereafter, to
and including
the Quarterly
Payment Date
immediately
preceding the
Maturity
Date, Company
shall make a principal payment in respect of the Notes in an
aggregate amount
equal to the Adjusted Net Cash Flow for the ANCF Quarter
applicable thereto;
PROVIDED that, in no event shall the Company be required to
make a payment that
results in the Company
having cash and Cash Equivalents
(exclusive of any cash
and Cash Equivalents
that have been
pledged to secure
other obligations
permitted hereby or
that otherwise
constitutes
"restricted
cash" permitted
hereby) of less than $2,000,000 (and the amount of any such
required payment shall be reduced accordingly to the extent
necessary to comply
with this proviso). If
any principal or interest amount payable under the Notes
remains outstanding at
the Maturity Date,
such amount will be
paid in full by
Company to the Holders in immediately available funds on the
Maturity Date.
(b) If the Required
Holders shall, in
their discretion,
approve the
sale of any Collateral
requested by Company (which sale was not otherwise
permitted by this
Agreement),
Company shall make a payment in respect of
the
Notes in an aggregate amount equal to the sales proceeds received
by Company net
only of reasonable
out-of-pocket costs of
such sale paid to
non-Affiliates of
Company, which payment
shall include the same prepayment premium described in
Section 2.9 for an optional prepayment of principal on the
Notes.
(c) If Company or any other Credit Party receives any casualty
insurance proceeds or
condemnation
proceeds in connection
with any assets of
Company or such other
Credit Party and (i) with respect to proceeds up to
$2,000,000 in any
fiscal year,
such proceeds are not utilized to repair or
replace such assets
within 180 days after
the date of such
casualty event or
condemnation event,
then immediately upon the expiration of such 180 day period
Company shall
prepay the Loans in an
amount equal to 100%
of such unutilized
excess, and (ii) with
respect to proceeds in excess of $2,000,000 in any fiscal
year (unless
the use of such
excess insurance or condemnation proceeds is
otherwise specifically
provided for in the APOD), Company shall repay the Notes
in an amount equal to
100% of such excess
immediately
upon receipt of such
proceeds; PROVIDED
that, notwithstanding the provisions of clause (i) above, if
an Event of Default has occurred and is continuing, Company shall repay the
Loans in an
amount equal to 100% of all casualty insurance proceeds and
condemnation proceeds not already utilized by the Company as of the
date of such
Event of Default, regardless of whether the aggregate amount of
such proceeds in
such fiscal year is less than $2,000,000.
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<PAGE>
Section 2.9. OPTIONAL PREPAYMENTS.
(a) Company may, at its option, upon notice as provided below,
prepay
at any time
on a Quarterly Payment Date all of the Notes at (i) if such
prepayment occurs on or before the second anniversary of the Closing Date,
100%
of the principal amount so prepaid plus the Make-Whole Amount
determined for the
prepayment date
with respect to such principal amount, and (ii) if such
prepayment occurs
after the second
anniversary of the Closing Date 100% of the
principal amount so prepaid plus the Prepayment Premium.
Company will give
each
Holder Party written
notice in the form of
the attached Exhibit C
of any such
optional prepayment
under this
Section 2.9 not less
than 30 days and not more
than 45 days prior to
the date fixed for such prepayment. Such notice shall
specify such date
(which shall be a
Business Day),
the aggregate principal
amount of the Notes to be prepaid on such date, and the interest to be paid on
the prepayment
date with respect to
such principal amount
being prepaid, and
shall be accompanied
by a certificate of an executive officer of Company as to
the estimated
Make-Whole Amount or Prepayment Premium, as applicable, due in
connection with such
prepayment (calculated
as if the date of such notice were
the date of the prepayment), setting forth the details of such
computation. Two
Business Days prior to
such prepayment,
Company shall deliver to each Holder
Party a certificate of an executive officer of Company specifying the
calculation of such Make-Whole Amount or Prepayment Premium,
as applicable,
as
of the specified prepayment date.
(b) Any scheduled
principal payment
under Section 2.8(a) hereof, any
principal prepayment made with Collateral insurance proceeds
pursuant to Section
2.8(c) hereof,
and any mandatory
prepayment
arising solely as a result of a
Change of Control of the type described in clauses (a) or (b) of
the definition
of such term,
shall in each
case be at par.
Any mandatory prepayment made
pursuant to Section
2.8(b) or as the result of an Event of Default (other than
an Event of Default that exists solely as a result of a Change of
Control of the
type described in
clauses (a) or (b) of the definition of "Change of
Control")
shall include the applicable Make-Whole Amount or Prepayment
Premium.
(c) In the case of each prepayment of Notes pursuant to this Section
2.9, the principal amount of each Note to be prepaid shall mature
and become due
and payable on the
date fixed for such
prepayment (which
shall be a
Business
Day), together with
interest on such principal amount accrued to such date
and
the applicable
Make-Whole
Amount or Prepayment
Premium. From and after such
date, unless
Company shall fail to
pay such principal
amount when so due
and
payable, together with the interest and Make-Whole Amount or
Prepayment Premium,
as aforesaid, interest
on such principal amount shall cease to accrue. Any Note
paid or prepaid in full shall be surrendered to Company and
cancelled and shall
not be reissued,
and no Note shall be
issued in lieu of any prepaid principal
amount of any Note.
(d) Any principal
prepaid pursuant to Section 2.9(a) or (c) hereof
shall be in addition to, and not in lieu of, all payments
otherwise required
to
be paid under
the Note Documents at the time of such prepayment. Any such
prepayments hereof
shall be applied first, to any Make-Whole Amount or
Prepayment Premium
payable under Section 2.9(a), second, to accrued but unpaid
28
<PAGE>
interest on the Notes,
and third, to
outstanding principal
on the Notes until
paid in full. No
prepayment on the Notes shall, until the Notes have been paid
in full, have the
effect of reducing the mandatory prepayments required under
Section 2.8.
(e) In determining any
Make-Whole Amount,
the following
terms shall
have the following meanings:
"MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount
equal to the excess,
if any, of the Discounted Value of the Remaining
Scheduled Payments
with respect to the
Called Principal of
such Note
over the amount of such Called Principal, provided that the Make-Whole
Amount shall in no event be less than zero.
"CALLED PRINCIPAL"
means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section
2.9(a)
or has become or is declared to be immediately due and payable
pursuant
to Section 9.1, as the context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining
Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date in accordance with
accepted
financial practice
and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable)
equal
to the Reinvestment Yield with respect to such Called
Principal.
"REINVESTMENT
YIELD" means,
with respect to the Called
Principal of any Note,
50 basis points
(one-half of one percent) over
the yield to maturity
implied by (i) the
yields reported as of
10:00
a.m. (New York City
time) on the second
Business Day
preceding the
Settlement Date with respect to such Called Principal, on the display
designated as "Page PX1" (or such other display as may replace Page
PX1
on Bloomberg Financial
Markets ("Bloomberg") or, if Page PX1 (or
its
successor screen on
Bloomberg) is
unavailable,
the Telerate
Access
Service screen which
corresponds most closely to Page PX1 for the most
recently issued
actively traded U.S. Treasury securities having a
maturity equal to the
Remaining Life of such Called Principal as of
such Settlement
Date, or (ii) if such yields are not
reported as of
such time or the yields reported as of such time are not
ascertainable
(including by way of
interpolation), the
Treasury Constant
Maturity
Series Yields
reported, for the
latest day for which such yields have
been so reported as of the second Business Day preceding the
Settlement
Date with respect to such Called Principal, in Federal Reserve
Statistical
Release H.15
(519)
(or any comparable successor
publication) for
actively traded U.S.
Treasury securities having a
constant maturity
equal to the Remaining
Average Life of such
Called
Principal as of such
Settlement
Date. Such implied yield will be
determined, if
necessary,
by (a) converting U.S. Treasury bill
quotations to bond
equivalent
yields in accordance with accepted
financial practice
and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with the maturity closest to
and
greater than such
Remaining Average Life
and (2) the actively
traded
U.S. Treasury security
with the maturity closest to and less than such
Remaining Average Life. The Reinvestment Yield shall be rounded to two
decimal places.
29
<PAGE>
"REMAINING LIFE" means, with respect to any Called
Principal,
the number of years
(calculated to the nearest one-twelfth year) that
will elapse between
the Settlement
Date with respect to such Called
Principal and the Maturity Date.
"REMAINING SCHEDULED
PAYMENTS" means, with respect to the
Called Principal of any Note, all payments of such Called Principal
and
interest (assuming no
amortization of the
Called Principal after
the
Settlement Date)
thereon that would be due after the Settlement Date
with respect to such
Called Principal if no payment of such Called
Principal were made prior to the Maturity Date; provided that, if such
Settlement Date is not a Quarterly Payment Date then the amount of
the
next succeeding
scheduled interest payment will be reduced by the
amount of interest
accrued to such
Settlement Date and required to be
paid on such Settlement Date pursuant to Section 2.9(a) or Section
9.1.
"SETTLEMENT DATE"
means, with respect to the Called Principal
of any Note, the date
on which such Called
Principal is to be prepaid
pursuant to
Section 2.9(a) or has become or is declared to be
immediately due and
payable pursuant
to Section
9.1, as the
context
requires.
ARTICLE III - PAYMENTS TO HOLDERS
Section 3.1. GENERAL
PROCEDURES. Company
will make each payment which
it owes under the Note Documents to Administrative Agent for the account of the
Person to whom such
payment is owed, in
lawful money of the
United States of
America, without
set-off, deduction or counterclaim, and in immediately
available funds. Each such payment must be received by
Administrative Agent
not
later than 12:00 p.m., New York, New York time, on the date such
payment becomes
due and payable. Any
payment received by
Administrative Agent
after such time
will be deemed to have been made on the next following Business Day. Should any
such payment
become due and
payable on a day other
than a Business Day,
the
maturity of such payment shall be extended to the next succeeding
Business Day,
and, in the case of a payment of principal or past due interest,
interest shall
accrue and be payable
thereon for the period of such extension as provided in
the Note Document
under which such
payment is due. When
Administrative
Agent
collects or receives money on account of the Obligations,
Administrative
Agent
shall distribute all money so collected or received, and each
Holder Party shall
apply all such money so distributed, as follows:
(a) first, for the
payment of all Obligations which are then due (and
if such money is insufficient to pay all such Obligations, first to any
reimbursements due
Administrative
Agent under Section
7.9 or 12.4 and then to
the partial
payment of all other
Obligations
then due in
proportion
to the
amounts thereof, or as Holder Parties shall otherwise agree);
(b) then for the
prepayment of amounts owing under the Note Documents
(other than principal of the Loans) if so specified by Company;
(c) then for the
prepayment of
principal of the Loans, together with
accrued and unpaid interest on the principal so prepaid; and
(d) last, for the payment or prepayment of any other
Obligations.
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<PAGE>
All payments applied to principal or interest on any Note shall be
applied first
to any interest then
due and payable, then
to principal then due
and payable,
and last to any prepayment of principal and interest in compliance
with Section
2.6. All distributions
of amounts
described in any of
subsections (b), (c) or
(d) above shall be made by Administrative Agent pro rata to each Holder
Party
then owed Obligations
described in such subsection in proportion to all amounts
owed to all Holder Parties which are described in such subsection;
provided that
if any Holder then owes payments to Administrative Agent under
Section 11.4, any
amounts otherwise
distributable
under this
section to such
Holder shall be
deemed to belong to Administrative Agent to the extent of such unpaid
payments,
and Administrative
Agent shall apply such
amounts to make such unpaid payments
rather than distribute such amounts to such Holder.
Section 3.2. PAYMENT
OF INTEREST. On
each Quarterly Payment Date,
Company shall pay the interest then accrued on the Loans in full in
immediately
available funds.
Section 3.3. PLACE OF PAYMENT. Payments becoming due and payable on
the
Notes and under the other Note Documents shall be made at
Administrative Agent's
offices located at 200 Park Avenue, Suite 2200, New York, New York
10166 or, at
the election of the Administrative Agent, by wire transfer to a
bank and account
located in
the State of New York specified by Administrative Agent.
Administrative Agent may at any time, by notice to Company,
change the place
of
payment of any such
payments so long as
such place of payment
shall be in the
State of New York.
Section 3.4. CAPITAL
REIMBURSEMENT. If
either (a) the introduction or
implementation after
the date hereof of or
the compliance
with or any change
after the date hereof in or in the interpretation of any Law regarding capital
adequacy, or (b) the
introduction or implementation after the date hereof of or
the compliance with
any request, directive
or guideline issued
after the date
hereof from any central bank or other Governmental Authority (whether or not
having the force of Law) regarding capital requirements has or would have the
effect of reducing the rate of return on any Holder Party's
capital, or on the
capital of any
corporation
controlling such
Holder Party, as a consequence of
the Loans made by such
Holder Party,
to a level
below that which such
Holder
Party or such
corporation could have
achieved but for such change (taking into
consideration such
Holder Party's policies and the policies of any such
corporation with
respect to capital
adequacy), then from
time to time Company
will pay to Administrative Agent for the benefit of such Holder
Party, within 10
days of demand therefore by such Holder Party, such additional
amount or amounts
which such Holder Party shall determine to be appropriate to compensate such
Holder Party for such reduction.
Section 3.5. REIMBURSABLE TAXES. Company covenants and agrees
that:
(a) Company will indemnify each Holder Party against and reimburse
each
Holder Party for all present and future income, stamp and other taxes,
levies,
costs and charges
whatsoever imposed,
assessed, levied or collected on or in
respect of this
Agreement or any Loans
(whether or not
legally or
correctly
imposed, assessed, levied or collected), excluding, however, (i) taxes imposed
on or measured by its overall net income, and franchise taxes imposed on it
(in
lieu of net income taxes), by the jurisdiction (or any political subdivision
thereof) under the
Laws of which it is organized or otherwise resides for tax
purposes or maintains the office, branch, or agency through which
it administers
31
<PAGE>
this Agreement, (ii)
with respect to each Holder Party, taxes imposed by reason
of any present or former connection between such Holder Party and the
jurisdiction imposing
such taxes, other than solely as a result of this
Agreement or any Note
or any transaction
contemplated
hereby, and (iii) any
United States withholding tax imposed on any payment by Company
pursuant to this
Agreement or under any
Loans, but not
excluding any portion of such tax that
exceeds the United States withholding tax which would have
been imposed on such
a payment to such Holder Party under the laws and
treaties in effect
when such
Holder Party first
becomes a party to
this Agreement
(all such non-excluded
taxes, levies,
costs and charges being collectively called "REIMBURSABLE
TAXES"). Such
indemnification shall
be on an after-tax basis and paid within 3
Business Days after a Holder Party makes demand therefor.
(b) All payments on account of the principal of, and interest on,
each
Holder Party's Loans and Note, and all other amounts payable by Company to any
Holder Party
hereunder, shall be
made in full without
set-off or counterclaim
and shall be made free and clear of and without deductions or withholdings of
any nature by reason
of any Reimbursable
Taxes, all of which will be for the
account of Company. In
the event of Company being compelled by Law to make any
such deduction or
withholding
from any payment to
any Holder Party,
Company
shall pay on the due date of such payment, by way of additional
interest, such
additional amounts as
are needed to cause the amount receivable by such Holder
Party after such
deduction or
withholding to equal the amount which would have
been receivable
in the absence of such
deduction or
withholding.
If Company
should make any deduction or withholding as aforesaid, Company shall within 60
days thereafter
forward to such Holder Party an official receipt or other
official document evidencing payment of such deduction or
withholding.
(c) Notwithstanding the foregoing provisions of this section,
Company
shall be entitled,
to the extent it is
required to do so by
Law, to deduct or
withhold (and not to make any indemnification or reimbursement for) income or
other similar taxes imposed by the United States of America from
interest, fees
or other amounts
payable hereunder for
the account of any Holder Party, other
than a Holder Party (i) who is a U.S. person for Federal income tax
purposes or
(ii) who has the Prescribed Forms on file with Administrative Agent
(with copies
provided to
Company) for the applicable year to the extent deduction or
withholding of such
taxes is not
required as a result of the filing of such
Prescribed Forms,
provided that if Company shall so deduct or withhold any such
taxes, it shall
provide a statement
to Administrative Agent and such Holder
Party, setting
forth the amount of
such taxes so deducted
or withheld, the
applicable rate and
any other information
or documentation
which such Holder
Party may reasonably
request for
assisting such Holder Party to obtain any
allowable credits or
deductions
for the taxes so
deducted or withheld
in the
jurisdiction or
jurisdictions in which
such Holder Party is subject to tax. As
used in this section,
"Prescribed
Forms" means such duly executed forms or
statements, and in
such number of
copies, which may, from time to time, be
prescribed by Law and which, pursuant to applicable provisions
of (x) an income
tax treaty between the
United States and the country of residence of the Holder
Party providing the forms or statements, (y) the Internal Revenue Code, or (z)
any applicable rules or regulations thereunder, permit Company to make
payments
hereunder for the
account of such Holder Party free of such deduction or
withholding of income or similar taxes.
32
<PAGE>
ARTICLE IV - CONDITIONS PRECEDENT TO LENDING
Section 4.1. CLOSING DATE CONDITIONS. The obligation of any Holder
to
make a Loan on the
Closing Date is
subject to the
satisfaction, or
waiver in
accordance with
Section 12.1,
of the following conditions on or before the
Closing Date:
(a) CLOSING DOCUMENTS.
Administrative Agent shall have received all of
the following,
duly executed and delivered and in form, substance and date
satisfactory to Adm
