1
EXHIBIT 10.26
GENERAL SECURITY AGREEMENT
This General Security Agreement (the "Agreement"), dated October 1,
1999 is by ANKER COAL GROUP, INC., a Delaware corporation (the "Company") and
each of the entities listed on Schedule A hereto (each a "Guarantor" and
collectively, the "Guarantors"), in favor of The Bank of New York, as collateral
agent (in such capacity, "Collateral Agent"), under the indenture, dated as of
October 1, 1999, as such indenture may be amended or supplemented from time to
time (the "Indenture"), among the Company, the Guarantors and The Bank of New
York, as trustee (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has agreed to issue 14.25% Second Priority Senior
Secured Notes due 2007 (PIK through April 1, 2000) (the "Notes," as further
defined in the Indenture) of each series which may be issued from time to time
pursuant to the Indenture and secured by the Security Interest in the Collateral
granted by the Company and the Guarantors to or in favor of the Collateral
Agent; and
WHEREAS, pursuant to the terms of Article 5 of the Indenture, the
Security Interest in the Collateral is junior in priority to the Senior Security
Interest.
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in Article 1, Article 8 or
Article 9 of the Uniform Commercial Code shall have the meanings given therein
unless otherwise defined in this Agreement. All other capitalized terms not
otherwise defined herein shall have the meanings set forth in the Indenture. All
references to the plural herein shall also mean the singular and to the singular
shall also mean the plural unless the context otherwise requires. All references
to the Company, the Guarantors and the Collateral Agent pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. The
word "including" when used in this Agreement shall mean "including, without
limitation". An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 7.3. Any accounting
term used herein unless otherwise defined in this Agreement shall have the
meanings customarily given to such term in accordance with GAAP. For purposes of
this Agreement, the following terms shall have the respective meanings given to
them below:
2
1.1 "Accounts" means all currently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to the
Company and the Guarantors arising out of the sale or lease of goods or the
rendition of services by the Company and the Guarantors, irrespective of whether
earned by performance, and any and all credit insurance, guaranties, or security
therefor.
1.2 "AVS" means the Applicant Violator System operated by the United
States Department of Interior and any related systems or procedures.
1.3 "Books" means all of the Company's and the Guarantors' books and
records including: ledgers; records indicating, summarizing, or evidencing the
Company's and the Guarantors' properties or assets (including the Collateral) or
liabilities; all information relating to the Company's and the Guarantors'
business operations or financial condition; and all computer programs, disk or
tape files, printouts, runs, or other computer prepared information.
1.4 "Cash Collateral" means United States legal tender or Cash
Equivalents which have been deposited in or held under the Collateral Account.
1.5 "Cash Equivalents" means (i) United States dollars, (ii)
securities issued directly and fully guaranteed or insured by the full faith and
credit of the United States government or any agency or instrumentality thereof
having maturities of not more than six months from the date of acquisition,
(iii) certificates of deposit and eurodollar time deposits with maturities of
six months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any lender party to the Credit Facilities or with any domestic commercial
bank having capital and surplus in excess of $500 million and a Keefe Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (ii)
and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper having the
highest rating obtainable from Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P") and in each case maturing within six
months after the date of acquisition, (vi) investment funds investing
substantially all of their assets in securities of the types described in
clauses (i)-(v) above and (vii) readily marketable direct obligations issued by
any state of the United States of America or any political subdivision thereof
having one of the two highest rating categories obtainable from either Moody's
or S&P.
1.6 "Collateral" means all of the Company's and the Guarantors'
right, title, and interest in and to each of the following: (i) the Accounts,
(ii) the Books, (iii) the Equipment, (iv) the General Intangibles, (v) the
Inventory, (vi) the Negotiable Collateral, (vii) Cash Collateral, (viii) the
Investment Property (including, without limitation, all Stock in Subsidiaries),
(ix) the Real Property Collateral, (x) any money, or other assets of the Company
and the Guarantors that now or hereafter come into the possession, custody, or
control of the Collateral Agent, and (xi) the proceeds and products, whether
tangible or intangible, of any of the foregoing, including proceeds of insurance
covering any or all of the Collateral, and any and all Accounts, the Books,
Equipment, General Intangibles, Inventory, Negotiable Collateral, Real Property,
money, deposit accounts, or other tangible or intangible property resulting from
the sale, exchange, collection, or other disposition of any of the foregoing, or
any portion thereof or interest therein, and the proceeds thereof; provided,
however, that with respect to any coal supply agreement, coal brokerage
-2-
3
agreement, any other non-assignable agreement and leasehold interest entered
into, or non-assignable Permit held, by the Company or any of the Guarantors
with, or issued by, any Person who is not an Affiliate of the Company or any of
the Guarantors, if, and only if, (x) the valid grant of a Lien in or Mortgage
upon such agreement, interest or Permit is prohibited (or the consent of the
other party to such agreement or of the issuer of such Permit to any of the
foregoing is required) and such prohibition has not been or is not waived, or
such consent of the other party to such agreement or of the issuer of such
Permit has not been or is not obtained (each, a "Non-assignable Property"), and
(y) by the terms of such Non-assignable Property, the Company's or any of the
Guarantor's grant of a Lien therein would result in the right of the other
Person party to such agreement or of the issuer of such Permit to terminate such
Non-assignable Property, then the Liens granted pursuant to this Agreement to
the Collateral Agent, for the benefit of the Holders, shall attach solely to the
proceeds of such Non-assignable Property and the Company's and the Guarantors'
rights thereto including, without limitation, any and all Accounts arising under
or pursuant to such Non-assignable Property, except that, if the relevant
provisions contained in any Non-assignable Property that prohibit the valid
grant of a Lien therein or a Mortgage thereon or that require the consent of the
other party thereto to (as applicable) any of the foregoing are determined to be
unenforceable, invalid, or otherwise not binding upon the Company or any of the
Guarantors, pursuant to a final judgment or decree of any court or competent
jurisdiction, then such Non-assignable Property shall in all events constitute
part of the Collateral; provided that there shall be excluded from the
Collateral the Excluded Assets.
1.7 "Collateral Access Agreement" means a landlord waiver or consent,
lessor subordination agreement, mortgagee waiver or consent, bailee letter, or a
similar acknowledgment agreement of any warehouseman, processor, lessor,
licensor, consignee, or other Person in possession of, having a Lien upon, or
having rights or interests in the Equipment or Inventory, in each case, in form
and substance satisfactory to Collateral Agent.
1.8 "Collateral Account" means an account maintained with the
Collateral Agent at its corporate trust office into which all proceeds of
Collateral required to be delivered herein shall be deposited.
1.9 "Control Agreement" means a control agreement, in form and
substance reasonably satisfactory to Collateral Agent, between the Company or
the relevant Guarantor and the applicable securities intermediary with respect
to the applicable Securities Account and related Investment Property.
1.10 "Equipment" means all of the Company's and the Guarantors'
present and hereafter acquired machinery, machine tools, motors, equipment,
furniture, furnishings, loading facilities, tipples, processing plants and like
structures, fixtures, tools, parts, goods (other than consumer goods, farm
products, or Inventory), wherever located, including (a) any interest of the
Company and the Guarantors in any of the foregoing and, (b) all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing; provided, however, that Equipment shall
not include Mobile Equipment.
1.11 "Event of Default" shall have the meaning set forth in Section
6.1 hereof.
-3-
4
1.12 "Excluded Assets" means Mobile Equipment, cash and Cash
Equivalents (other than Cash Collateral or proceeds of Collateral) and the coal
reserves, fixtures, equipment and specified interests in Real Property listed on
Schedule B to the Indenture, including, without limitation, the improvements,
fixtures, structures, buildings, water treatment facilities and other
appurtenances situated thereon or thereunto belonging.
1.13 "General Intangibles" means all of the Company's and the
Guarantors' present and future general intangibles and other personal property
(including rights under coal supply contracts, coal brokerage agreements and
other contract rights, rights arising under common law, statutes, or
regulations, choses or things in action, goodwill, Permits, patents, trade
names, trademarks, servicemarks, copyrights, blueprints, drawings, purchase
orders, customer lists, monies due or recoverable from pension funds, route
lists, rights to payment and other rights under any royalty or licensing
agreements, infringement claims, computer programs, information contained on
computer disks or tapes, literature, reports, catalogs, deposit accounts,
insurance premium rebates, tax refunds, and tax refund claims), other than
goods, Accounts, and Negotiable Collateral.
1.14 "Hazardous Materials" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
1.15 "Holders" means a Person in whose name a Note (or portion of a
Note) is registered and "Holders" means Persons in whose names Notes are
registered.
1.16 "Indenture Obligations" means any principal, interest, penalties,
fees, indemnifications, reimbursements, damages and other liabilities payable to
the Collateral Agent, the Trustee or the Holders under the Indenture, the Notes
and any Security Documents.
1.17 "Inventory" means all the Company's and the Guarantors' present
and future inventory, wherever located, including, without limitation, all raw
materials, work-in-process, and finished and semi-finished inventory of any
kind, nature or description, wherever located, including, without limitation,
(i) all minerals in whatever form, and including, without limitation, coal, fly
ash, bottom ash or other ash, methane, sulfur, sulfur dioxide, and other
by-products resulting from the processing of the coal mined by the Company and
the Guarantors and other minerals and chemicals resulting from the mining or
processing of coal, (ii) cast iron fittings, paint, belts and hoses, bolts and
nuts, wire and wire products, welding supplies, tools, steel, rope, timber,
railroad, spikes, railroad car parts and railroad crane parts, baghouse parts,
pump parts, compressor parts, electrical parts, bearings, drills, bits and
accessories and other parts and supplies, (iii) all wrapping, packaging,
advertising and shipping materials, and (iv) any other personal property held
for sale, exchange or lease or furnished or to be furnished or used or consumed
in the business or in connection with the manufacturing, packaging, shipping,
advertising, selling or finishing of such
-4-
5
goods, inventory, merchandise and other personal property, and all names or
marks affixed to or to be affixed thereto for purposes of selling same by the
Company and the Guarantors and all right, title and interest therein and
thereto; and further including, without limitation, all coal in which the
Company and the Guarantors have any interest which has been extracted from the
Real Property, is in a coal stockpile and is held for sale by the Company and
the Guarantors in the ordinary course of business, together with all other
present and future goods held for sale by the Company and the Guarantors in the
ordinary course of business, wherever located.
1.18 "Investment Property" means "investment property" as that term is
defined in Section 9-115 of the New York Uniform Commercial Code, as may be in
effect from time to time.
1.19 "Material Adverse Change" means (a) a material adverse change in
the business, prospects, operations, results of operations, assets, liabilities
or condition (financial or otherwise) of the Company and the Guarantors, other
than as a result of the consummation of Asset Sales or other dispositions
permitted by the Indenture, (b) the material impairment of the Company's and
Guarantors' ability to perform their obligations under the Indenture or the
Security Documents to which they are a party or the Collateral Agent's ability
to realize upon the Collateral (including, without limitation, any action,
proceeding or investigation by any Governmental Authority with respect to (x)
the Company and/or the Guarantors, (y) any Real Property at which the Company or
the Guarantors operate a coal mine or (z) any Permits that have resulted in or
will result in, in Collateral Agent's judgment, a material impairment of
Collateral Agent's ability to have access to or gain possession of any of the
Equipment of the Company or any of the Guarantors, (c) a material adverse effect
on the value of the Collateral or the amount that the Collateral Agent would be
likely to receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of the Collateral, other than as a result of the
consummation of Asset Sales or other dispositions permitted by the Indenture, or
(d) a material impairment of the priority of the Collateral Agent's Liens with
respect to the Collateral.
1.20 "Mobile Equipment" means all equipment which is (a) mobile, and
(b) which is used or useful in connection with the coal mining, extraction,
development, construction or environmental remediation activities of the Company
or any Restricted Subsidiary and shall in any event include any of the
following, whether such equipment is on wheels, is track mounted or is skid
mounted: bulldozers, drills, pans, augers, high wall miners, continuous miners,
shuttle cars, roof bolters, mobile roof supporters, rock dusters, man trips,
scoops, backhoes, shovels, front end loaders, continuous haulage units,
underground locomotives, loaders, trailers, trucks, other motor vehicles and
other mining, construction, earthmoving or excavating equipment of a similar
nature.
1.21 "Mortgages" means one or more mortgages, deeds of trust, or deeds
to secure debt, executed by the Company and the Guarantors in favor of the
Collateral Agent, the form and substance of which shall be satisfactory to the
Collateral Agent, that encumber the Real Property Collateral and the related
improvements thereto, and shall specifically include, but is not limited to,
Amendments to Deeds of Trust.
1.22 "Negotiable Collateral" means all of the Company's and the
Guarantors' present and future letters of credit, notes, drafts, instruments,
Investment Property, documents, personal property leases (wherein such Person is
the lessor), chattel paper, and the Books relating to any of the foregoing.
-5-
6
1.23 "Obligor" shall mean any other guarantor, endorser, acceptor,
surety or other person liable on or with respect to the Indenture Obligations or
who is the owner of any property which is security for the Indenture
Obligations, other than the Company or the Guarantors.
1.24 "Permits" of a Person shall mean all rights, franchises, permits,
authorities, licenses, certificates of approval, consents, orders or
authorizations, including licenses and other authorizations issuable by a
Governmental Authority, which pursuant to applicable Legal Requirements are
necessary to permit such Person lawfully to conduct and operate its business as
currently conducted and to own and use its assets.
1.25 "Permitted Protest" means the right of the Company or any
Guarantor to protest any Lien other than any such Lien that secures the
Indenture Obligations, tax (other than payroll taxes or taxes that are the
subject of a United States federal tax lien), or rental payment, provided that
(a) a reserve with respect to such obligation is established on the books of the
Company or any Guarantor in an amount that is reasonably satisfactory to
Collateral Agent, (b) any such protest is instituted and diligently prosecuted
by the Company or any Guarantor in good faith, and (c) Collateral Agent is
satisfied that, while any such protest is pending, there will be no impairment
of the enforceability, validity, or priority of any of the Collateral Agent's
Liens in and to the Collateral.
1.26 "Real Property" means any estates or interests in real property
or mineral rights now owned or acquired in the future by the Company or any of
the Guarantors.
1.27 "Real Property Collateral" means the parcel or parcels of Real
Property and related improvements thereto identified on Schedule R-2 hereto, and
any Real Property hereafter acquired by the Company and the Guarantors,
including leasehold interests, together with all buildings, structures, fixtures
and other improvements relating thereto, and all metals and minerals which are
in, under, upon, or to be produced from such Real Property to the extent of the
rights of the Company and the Guarantors to the same, including all coal (but
only to the extent such metals and minerals have not been extracted from the
Real Property), wherever located, including, without limitation, the Real
Property and related assets of the Company and the Guarantors more particularly
described in the Mortgages; provided that Real Property Collateral shall not
include the Real Property interests listed in Schedule R-1 hereto or
Non-assignable Property; provided, further, that, subject to Section 4.12 of the
Indenture, the Real Property Collateral shall not include any Real Property
located in the State of Maryland that is not subject to the liens securing the
Senior Secured Indebtedness.
1.28 "Securities Account" means a "securities account" as that term is
defined in Section 8-501 of the Uniform Commercial Code.
1.29 "Stock" means all shares, options, warrants, interests,
participations, interests in limited liability companies or other equivalents
(regardless of how designated) of or in a corporation or equivalent entity,
whether voting or nonvoting, including common stock, preferred stock, or any
other "equity security" (as such term is defined in Rule 3a11-1 of the General
Rules and Regulations promulgated by the SEC under the Exchange Act).
-6-
7
SECTION 2. GRANT OF SECURITY INTEREST
2.1 Grant of Security Interest. To secure the prompt performance,
observance and indefeasible payment in full of all Indenture Obligations, the
Company and each of the Guarantors hereby grant to Collateral Agent, for the
benefit of the Holders, a continuing security interest in, a lien upon, and a
right of set off against all currently existing and hereafter acquired or
arising Collateral, which security interest is junior in priority to the Senior
Security Interest. The Indenture Obligations include both present advances and
future advances.
SECTION 3. COLLATERAL COVENANTS
3.1 Accounts Covenants. Subject to the provisions of Section 6.3
below,
(a) Collateral Agent shall have the right at any time or times,
in Collateral Agent's name or in the name of a nominee of Collateral Agent, to
verify the validity, amount or any other matter relating to any Account or other
Collateral, by mail, telephone, facsimile transmission or otherwise.
(b) The Company and each Guarantor shall deliver or cause to be
delivered to Collateral Agent, with appropriate endorsement and assignment, with
full recourse to the Company and the Guarantors, all Negotiable Collateral,
including Negotiable Collateral evidencing intercompany Indebtedness, which the
Company or the Guarantors now own or may at any time acquire immediately upon
the Company's or such Guarantors' receipt thereof.
(c) Collateral Agent may (but shall not be obligated to), (i)
at any time that an Event of Default has occurred and is continuing, notify any
or all account debtors that the Accounts have been assigned to Collateral Agent,
for the benefit of the Holders, and that Collateral Agent, for the benefit of
the Holders, has a security interest therein and Collateral Agent may direct any
or all accounts debtors to make payment of Accounts directly to Collateral
Agent, for the benefit of the Holders, and (ii) at any time that an Event of
Default has occurred and is continuing, (A) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Indenture Obligations, (B) demand, collect
or enforce payment of any Accounts or such other obligations, but without any
duty to do so, and Collateral Agent, the Trustee and the Holders shall not be
liable for their failure to collect or enforce the payment thereof and (iii) at
any time, take whatever other action Collateral Agent may deem necessary or
desirable for the protection of the Security Interest granted herein upon the
Accounts. At Collateral Agent's request, at any time that an Event of Default
has occurred and is continuing, all invoices and statements sent to any account
debtor shall state that the Accounts and such other obligations have been
assigned to Collateral Agent, for the benefit of the Holders, and are payable
directly and only to Collateral Agent, for the benefit of the Holders, and the
Company and each Guarantor shall deliver to Collateral Agent such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any Accounts as Collateral Agent may require. The
Company and each Guarantor agrees that it will hold in trust
-7-
8
for the Collateral Agent, the Trustee and the Holders, as trustee, any
collections that it receives and immediately deliver said collections to
Collateral Agent in their original form as received.
3.2 Inventory Covenants. With respect to the Inventory: (a) the
Company and each Guarantor shall at all times maintain Inventory records
reasonably satisfactory to Collateral Agent, keeping correct and accurate
records itemizing and describing the kind, type, quality and quantity of
Inventory, the Company and each Guarantor's cost therefor and daily withdrawals
therefrom and additions thereto; (b) the Company and each Guarantor shall not
remove any Inventory from the locations set forth or permitted herein, without
the prior written consent of Collateral Agent, except (i) for sales of Inventory
in the ordinary course of the Company's or any Guarantor's business, (ii) to
move Inventory directly from one location set forth or permitted herein to
another such location or (iii) in connection with and in order to facilitate the
consummation of Asset Sales or other dispositions permitted by the Indenture;
(c) the Company and each Guarantor shall produce, use, store and maintain the
Inventory, with all reasonable care and caution and in accordance with
applicable standards of any insurance and in material conformity with applicable
laws (including the requirements of the Federal Fair Labor Standards Act of
1938, as amended and all rules, regulations and orders related thereto); (d) the
Company and each Guarantor assumes all responsibility and liability arising from
or relating to the production, use, sale or other disposition of the Inventory;
(e) the Company and each Guarantor shall not sell Inventory to any customer on
approval, or any other basis which entitles the customer to return or may
obligate the Company or any Guarantor to repurchase such Inventory; (f) the
Company and each Guarantor shall keep the Inventory in good and marketable
condition; and (g) the Company and each Guarantor shall not, without prior
written notice to Collateral Agent, acquire or accept any Inventory on
consignment or approval.
3.3 Equipment Covenants. With respect to the Equipment: (a) the
Company and each Guarantor shall keep the Equipment in good operating condition
and repair (ordinary wear and tear excepted); (b) the Company and each Guarantor
shall use the Equipment with all reasonable care and caution and in accordance
with applicable standards of any insurance and in material conformity with all
applicable laws; (c) the Equipment is and shall be used in the Company's and
each Guarantor's business and not for personal, family, household or farming
use; (d) other than in connection with and in order to facilitate Asset Sales or
other dispositions permitted by the Indenture, the Company and each Guarantor
shall not remove any Equipment from the locations set forth or permitted herein,
except to the extent necessary to have any Equipment repaired or maintained in
the ordinary course of the business of the Company and each Guarantor or to move
Equipment directly from one location set forth or permitted herein to another
such location and except for the movement of motor vehicles used by or for the
benefit of the Company or any Guarantor in the ordinary course of business; (e)
the Equipment is now and shall remain personal property and the Company and each
Guarantor shall not permit any of the Equipment to be or become a part of or
affixed to Real Property and such Equipment shall at all times remain personal
property, unless the item of Equipment is critical to the functioning, or is an
integral part of, the Real Property at which is located; and (f) the Company and
each Guarantor assumes all responsibility and liability arising from the use of
the Equipment.
3.4 Power of Attorney. The Company and each Guarantor hereby
irrevocably designates and appoints Collateral Agent (and all persons designated
by Collateral Agent) as the Company's and each Guarantor's true and lawful
attorney-in-fact, and authorizes Collateral
-8-
9
Agent, in the Company's or any of the Guarantor's or Collateral Agent's name,
to: (a) at any time an Event of Default exists or has occurred and is continuing
in connection with which the Indenture Obligations have been declared to be
immediately due and payable pursuant to the Indenture, (i) demand payment on
Accounts or other proceeds of Inventory or other Collateral, (ii) enforce
payment of Accounts by legal proceedings or otherwise, (iii) exercise all of the
Company's and each Guarantor's rights and remedies to collect any Account or
other Collateral, (iv) sell or assign any Account upon such terms, for such
amount and at such time or times as the Collateral Agent deems advisable, (v)
settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account, (vii) prepare, file and sign the Company's or any of the
Guarantor's name on any proof of claim in bankruptcy or other similar document
against an account debtor, (viii) notify the post office authorities to change
the address for delivery of the Company's or any Guarantor's mail to an address
designated by Collateral Agent, and open all mail addressed to the Company or
any Guarantor and retain copies of all mail relating to the Collateral and
forward all other mail to the Company or any Guarantor, (ix) execute and record
all documents necessary to acknowledge, memorialize or effect cancellation of
the Security Interest created hereby, effective as of the termination of this
Agreement, and (x) do all acts and things which are necessary, in Collateral
Agent's determination, to fulfill the Company's and the Guarantors' obligations
under this Agreement, the Indenture and the other Security Documents and (b) at
any time to (i) take control in any manner of any item of payment or proceeds
thereof that may come into the Collateral Agent's or a Senior Secured Lender's
possession, (ii) have access to any lockbox or postal box into which the
Company's or any of the Guarantor's mail is deposited, (iii) endorse the
Company's or any Guarantor's name upon any items of payment or proceeds thereof
and deposit the same in the Collateral Agent's account for application to the
Indenture Obligations, (iv) endorse the Company's or any of the Guarantor's name
upon any chattel paper, document, instrument, invoice, or similar document or
agreement relating to any Account or any goods pertaining thereto or any other
Collateral that may come into the Collateral Agent's or a Senior Secured
Lender's possession, (v) send requests for verification of Accounts and notices
thereof to account debtors and (vi) within ten (10) days after Collateral
Agent's written request therefor, execute in the Company's or any Guarantor's
name and file any UCC financing statements or amendments thereto, provided,
that, Collateral Agent may exercise such power at any time, without any prior
notice or request to the Company or the Guarantors, if Collateral Agent
determines, in its discretion, that it must exercise such power in order to
maintain, protect and/or preserve any of the Collateral and/or the Liens of the
Indenture therein. The Company and each of the Guarantors hereby release
Collateral Agent and its officers, employees and designees from any liabilities
arising from any act or acts under this power of attorney and in furtherance
thereof, whether of omission or commission, except as a result of Collateral
Agent's own gross negligence or willful misconduct as determined pursuant to a
final non-appealable order of a court of competent jurisdiction. The appointment
of Collateral Agent as the Company's and the Guarantors' attorney, and each and
every one of Collateral Agent's rights and powers, being coupled with an
interest, is irrevocable until all of the Indenture Obligations have been fully
and finally repaid and performed.
3.5 Right to Cure. Collateral Agent may, at its option, to the extent
that Collateral Agent determines the Company's or the Guarantor's failure to pay
or perform any of the following could result in a Material Adverse Change and
subject to the right of the Company and each Guarantor to conduct Permitted
Protests, (a) cure any default by the Company or any Guarantor under any
agreement with a third party or pay or bond on appeal any judgment entered
-9-
10
against the Company or any Guarantor, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (c) pay any amount, incur any expense or perform any act
which, in Collateral Agent's judgment, is necessary or appropriate to preserve,
protect, insure or maintain the Collateral and the rights of the Trustee and the
Holders with respect thereto. Collateral Agent may add any amounts so expended
to the Indenture Obligations and charge the Company's and each Guarantor's
account therefor, such amounts to be repayable by the Company or such Guarantor
on demand. Collateral Agent shall be under no obligation to effect such cure,
payment or bonding and shall not, by doing so, be deemed to have assumed any
obligation or liability of the Company or any Guarantor. Any payment made or
other action taken by Collateral Agent under this Section shall be without
prejudice to any right to assert an Event of Default hereunder and to proceed
accordingly.
3.6 Access to Premises. From time to time as requested by Collateral
Agent, at the cost and expense of the Company and the Guarantors, (a) Collateral
Agent or its designee shall have complete access to all of the Company's and
each Guarantor's premises during normal business hours and after notice to the
Company or such Guarantor, or at any time and without notice to the Company or
such Guarantor if an Event of Default exists or has occurred and is continuing,
for the purposes of inspecting, verifying and auditing the Collateral and all of
the Books, and (b) Guarantor shall promptly furnish to Collateral Agent such
copies of such Books or extracts therefrom as Collateral Agent may reasonably
request, and (c) if an Event of Default exists or has occurred and is
continuing, use during normal business hours such of the Company's or the
Guarantors' personnel, equipment, supplies and premises as may be necessary for
the foregoing and for the collection of Accounts and realization of other
Collateral.
3.7 Securities Accounts. Neither the Company nor any Guarantor shall
establish or maintain any Securities Account unless Collateral Agent shall have
received a Control Agreement, duly executed and in full force and effect, in
respect of such Securities Account. Each of the Company and the Guarantors
agrees that it will not transfer assets out of any Securities Accounts;
provided, however, that so long as no Event of Default has occurred and is
continuing or would result therefrom, the Company and each Guarantor may use
such assets to the extent permitted by the Indenture.
3.8 Control Agreements. The Company and each Guarantor agree that
they will not transfer assets out of any Securities Accounts other than as
permitted under Section 3.7 and, if to another securities intermediary, unless
each of the Company or relevant Guarantor, as applicable, Collateral Agent, and
the substitute securities intermediary have entered into a Control Agreement. No
arrangement contemplated hereby or by any Control Agreement in respect of any
Securities Accounts or other investment property shall be modified by the
Company or any Guarantor without the prior written consent of Collateral Agent.
Upon the occurrence and during the continuance of an Event of Default,
Collateral Agent may notify any securities intermediary to liquidate or transfer
the applicable Securities Account or any related investment property maintained
or held thereby and remit the proceeds thereof to the Collateral Agent for the
benefit of the Holders.
-10-
11
SECTION 4. REPRESENTATIONS AND WARRANTIES
Each of the Company and the Guarantors hereby represents and warrants
to the Collateral Agent for the benefit of the Holders the following (which
shall survive the execution and delivery of this Agreement):
4.1 Corporate Existence, Power and Authority; Subsidiaries. Each of
the Company and the Guarantors is a corporation duly organized and in good
standing under the laws of its state of incorporation and is duly qualified as a
foreign corporation and in good standing in all states or other jurisdictions
where the nature and extent of the business transacted by it or the ownership of
assets makes such qualification necessary, except for those jurisdictions in
which the failure to so qualify could not reasonably be expected to result in a
Material Adverse Change. The execution, delivery and performance of this
Agreement, the Indenture and the other Security Documents and the transactions
contemplated hereunder and thereunder are all within the Company's and the
Guarantors' corporate powers, have been duly authorized and are not in
contravention of law or the terms of the Company's or any of the Guarantors'
certificates of incorporation, by-laws, or other organizational documentation,
or (a) the Notes and the Indenture or (b) any other material indenture,
agreement or undertaking to which the Company or any Guarantor is a party or by
which the Company or any Guarantor or its property are bound the breach of which
could reasonably be expected to result in a Material Adverse Change. This
Agreement, the Indenture and the other Security Documents constitute legal,
valid and binding obligations of the Company and the Guarantors enforceable in
accordance with their respective terms. Each of the Company and the Guarantors
does not have any Subsidiaries, except as set forth in Schedule 4.1 hereto.
4.2 Chief Executive Office; Collateral Locations. The chief executive
office of the Company and each Guarantor and the Books concerning Accounts are
located only at the addresses set forth below and the only other places of
business of the Company and each of the Guarantors and the only other locations
of Collateral, if any, are the addresses set forth in Schedule 4.2 hereto,
subject to the right of the Company and each Guarantor to establish new
locations in accordance with Section 5.2 below.
4.3 Priority of Liens; Title to Properties. The Security Interests
granted to Collateral Agent under this Agreement constitute valid and perfected
liens and security interests in and upon the Collateral subject in priority only
to Permitted Liens granted or incurred prior to the date hereof. Each of the
Company and the Guarantors has good and marketable title to all of its
properties and assets subject to no Liens of any kind, except those granted to
Collateral Agent, for the benefit of the Holders and Permitted Liens.
4.4 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement, the Indenture or any of the other
Security Documents shall survive the execution and delivery of this Agreement
and shall be conclusively presumed to have been relied on by the Holders
regardless of any investigation made or information possessed by the Holders.
The representations and warranties set forth herein shall be cumulative and in
addition to any other representations or warranties which the Company or any of
the Guarantors shall now or hereafter give, or cause to be given, to the
Holders.
-11-
12
SECTION 5. AFFIRMATIVE AND NEGATIVE COVENANTS
5.1 Notice of Name Change; Change of Jurisdiction. Each of the
Company and the Guarantors shall give Collateral Agent thirty (30) days prior
written notice of any proposed change in its corporate name or jurisdiction of
incorporation, which notice shall set forth the new name or jurisdiction and
each of the Company and the Guarantors shall deliver to Collateral Agent (a) a
copy of the amendment to the charter of the Company or such Guarantor providing
for the name change or change of jurisdiction certified by the Secretary of
State of the jurisdiction of incorporation of the Company or such Guarantor as
soon as it is available, and (b) such executed agreements, documents and
instruments as Collateral Agent may deem reasonably necessary or desirable to
protect the Collateral Agent's interests in the Collateral, including the UCC
financing statements.
5.2 New Collateral Locations. Each of the Company and the Guarantors
may open any new location within the continental United States provided each of
the Company and the Guarantors (a) gives Collateral Agent thirty (30) days prior
written notice of the intended opening of any such new location and (b) executes
and delivers, or causes to be executed and delivered, to Collateral Agent such
agreements, documents, and instruments as Collateral Agent may deem reasonably
necessary or desirable to protect the Collateral Agent's interests in the
Collateral at such location, including UCC financing statements and also
provides to Collateral Agent, upon request of Collateral Agent, a Collateral
Access Agreement with respect to any such Inventory or Equipment that has been
moved to a new location.
5.3 Compliance with Laws; Notice of Non-Compliance.
(a) Each of the Company and the Guarantors shall mine and
produce, and cause their respective Subsidiaries to mine and produce, all
Inventory in accordance with and otherwise comply, and cause their respective
Subsidiaries to comply, with the requirements of all Permits then in effect and
all applicable laws, rules, regulations, and orders of any Governmental
Authority, including the Surface Mining Control and Reclamation Act of 1977, 30
U.S.C. Section 1201 et seq. or the West Virginia counterpart thereto, the
Federal Mine Safety and Health Act of 1977, the Resource Conservation and
Recovery Act of 1976, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Superfund Amendments and
Reauthorization Act, the Water Pollution Control Act of 1972, the Solid Waste
Disposal Act, the Safe Drinking Water Act of 1974, the Toxic Substances Control
Act, as amended, the Clean Water Act, as amended, the Clean Air Act, as amended,
the Hazardous Materials Transportation Act, as amended, U.S. Department of
Transportation and Environmental Protection Agency regulations, and applicable
state counterparts to any of such laws and any common law or equitable doctrine
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Hazardous
Materials, the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not have and could not reasonably be
expected to result in a Material Adverse Change.
(b) Each of the Company and the Guarantors shall provide
Collateral Agent on a monthly basis with a report of all notices delivered by
any Governmental Authority to the
-12-
13
Company or any of the Guarantors or any of their respective Subsidiaries
alleging violation of or non-compliance with any Permits or any applicable laws,
rules, regulations or orders referred to in Section 5.3(a) that could reasonably
be expected to result in a Material Adverse Change and promptly after the
Company or any Guarantor or any of their respective Subsidiaries have received
notice from a Governmental Authority that a Permit has been or shall be revoked,
rescinded, suspended or amended in a manner that will result in a Material
Adverse Change, furnish Collateral Agent with a written report thereof
describing the foregoing and advising Collateral Agent of the actions the
Company, the Guarantors and/or their respective Subsidiaries are taking and
propose to take to remedy same.
(c) Without limiting the generality of the foregoing, whenever
there is material non-compliance with any Legal Requirements, or any condition
which requires any action by or on behalf of the Company, the Guarantors or any
of their respective Subsidiaries in order to avoid any material non-compliance
with any Legal Requirements relating to the use, disposal, treatment or
generation of Hazardous Materials, the Company and each of the Guarantors shall,
or shall cause the relevant Subsidiary, at the request of Collateral Agent and
at the Company's, such Guarantor's or such Subsidiary's (as applicable) expense:
(i) cause an independent environmental engineer reasonably acceptable to
Collateral Agent to conduct such tests of the site where such non-compliance or
alleged non-compliance with Legal Requirements has occurred as to such
non-compliance and prepare and deliver to Collateral Agent a report as to such
non-compliance setting forth the results of such tests, a proposed plan for
responding to any environmental problems described therein, and an estimate of
the costs thereof and (ii) provide to Collateral Agent a supplemental report of
such engineer whenever the scope of such non-compliance, or the Company's, such
Guarantor's or such Subsidiary's (as applicable) response thereto, or the
estimated costs thereof, shall change in any material respect.
5.4 Payment of Taxes and Claims. Each of the Company and the
Guarantors shall be liable for any tax or penalties imposed on the Collateral
Agent, the Trustee and the Holders as a result of the grant of the Security
Interest provided for herein and each of the Company and the Guarantors agrees
to indemnify and hold the Collateral Agent, the Trustee and the Holders harmless
with respect to the foregoing, and to repay to Collateral Agent on demand the
amount thereof, and until paid by the Company and the Guarantors such amount
shall be added and deemed part of the Indenture Obligations, provided, that,
nothing contained herein shall be construed to require the Company or any of the
Guarantors to pay any income or franchise taxes attributable to the income of
the Collateral Agent, the Trustee or the Holders from any amounts charged or
paid hereunder to Collateral Agent on behalf of the Collateral Agent, the
Trustee or the Holders. The foregoing indemnity shall survive the payment of the
Indenture Obligations and the termination of this Agreement.
5.5 Permit Block. If information in the AVS triggers a permit or
license block against the Company, any of the Guarantors or any of their
respective Subsidiaries which has an adverse effect on (a) the Company's or any
of the Guarantors' mining operations; (b) the Company's or any of the
Guarantors' ability to make payments hereunder under the Indenture or under any
of the Security Documents; or (c) the value of any of the Collateral, the
Company and the Guarantors shall immediately notify Collateral Agent and
promptly take and diligently pursue any and all actions which are necessary or
required to remove the permit or license block, including, but not limited to,
correcting any violations arising out of the operations of the
-13-
14
Company, any Guarantor or any of their respective Subsidiaries and challenging
the AVS ownership and control link, in accordance with the procedures set forth
in 30 CFR Section 773.25.
5.6 Costs and Expenses. The Company and the Guarantors shall pay to
Collateral Agent on demand all costs, reasonable expenses, filing fees and taxes
paid or payable in connection with the preparation, negotiation, execution,
delivery, recording, administration, collection, liquidation, enforcement and
defense of the Indenture Obligations, the rights of the Collateral Agent in the
Collateral, this Agreement, the Indenture and the other Security Documents and
all other documents related hereto or thereto, including any amendments,
supplements or consents which may hereafter be contemplated (whether or not
executed) or entered into in respect hereof and thereof, including: (a) all
costs and expenses of filing or recording (including Uniform Commercial Code
financing statement filing taxes and fees, documentary taxes, intangibles taxes
and mortgage recording taxes and fees, if applicable); (b) all insurance
premiums, appraisal fees and search fees; (c) costs and expenses of preserving
and protecting the Collateral; (d) costs and expenses paid or incurred in
connection with obtaining payment of the Indenture Obligations, enforcing the
Security Interests created by the Security Documents, selling or otherwise
realizing upon the Collateral, and otherwise enforcing the provisions of this
Agreement, the Indenture and the other Security Documents or defending any
claims made or threatened against the Collateral Agent, the Trustee or any
Holder arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters); and
(e) the fees and disbursements of counsel (including legal assistants) to
Collateral Agent and the Trustee in connection with any of the foregoing.
5.7 Further Assurances. At the request of Collateral Agent at any
time and from time to time, the Company and the Guarantors shall, at their
expense, at any time or times duly execute and deliver, or cause to be duly
executed and delivered, such further agreements, documents and instruments, and
do or cause to be done such further acts as may be necessary or proper to
evidence, perfect, maintain and enforce the Security Interests and the priority
thereof in the Collateral and to otherwise effectuate the provisions or purposes
of this Agreement, the Indenture or any of the other Security Documents. Where
permitted by law, if the Company or any of the Guarantors has failed to
undertake such action within ten (10) days of request, the Company and the
Guarantors hereby authorize Collateral Agent to execute and file one or more
Uniform Commercial Code financing statements with respect to the Collateral
signed on behalf and in the name of the Company and the Guarantors only by
Collateral Agent.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES
6.1 Events of Default. The occurrence or existence of any Event of
Default under the Indenture is referred to herein individually as an "Event of
Default", and collectively as "Events of Default".
6.2 Remedies. Subject to Section 6.3 hereof,
(a) At any time an Event of Default exists or has occurred and is
continuing, Collateral Agent, on behalf of the Trustee and the Holders, shall
have all rights and remedies
-14-
15
provided in this Agreement, the Indenture, the other Security Documents, the
Uniform Commercial Code and other applicable law, all of which rights and
remedies may be exercised without notice to or consent by the Company, the
Guarantors or any Obligor, except as such notice or consent is expressly
provided for hereunder or required by applicable law. All rights, remedies and
powers granted to Collateral Agent hereunder, under the Indenture, under any of
the other Security Documents, the Uniform Commercial Code or other applicable
law, are cumulative, not exclusive and enforceable, in Collateral Agent's
discretion, alternatively, successively, or concurrently on any one or more
occasions, and shall include, without limitation, the right to apply to a court
of equity for an injunction to restrain a breach or threatened breach by the
Company or any of the Guarantors of this Agreement, the Indenture or any of the
other Security Documents. The Trustee and the Holders may, at any time or times,
proceed directly against the Company or any of the Guarantors or any Obligor to
collect the Indenture Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, the Collateral Agent may,
except to the extent otherwise expressly provided or required in the Indenture,
do any one or more of the following on behalf of the Holders, all of which are
authorized by the Company and the Guarantors: (i) with or without judicial
process or the aid or assistance of others, enter upon any premises on or in
which any of the Collateral may be located and take possession of the Collateral
or complete processing, manufacturing and repair of all or any portion of the
Collateral, (ii) require the Company and the Guarantors, at the Company's and
the Guarantors' expense, to assemble and make available to Collateral Agent, any
part or all of the Collateral at any place and time designated by Collateral
Agent, (iii) collect, foreclose, receive, appropriate, setoff and realize upon
any and all Collateral, (iv) remove any or all of the Collateral from any
premises on or in which the same may be located for the purpose of effecting the
sale, foreclosure or other disposition thereof or for any other purpose, (v)
sell, lease, transfer, assign, deliver or otherwise dispose of any and all
Collateral (including entering into contracts with respect thereto, public or
private sales at any exchange, broker's board, at any office of Collateral Agent
or elsewhere) at such prices or terms as Collateral Agent may deem reasonable,
for cash, upon credit or for future delivery, with Collateral Agent having the
right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
the Company and the Guarantors, which right or equity of redemption is hereby
expressly waived and released by the Company and the Guarantors. If any of the
Collateral is sold or leased by Collateral Agent upon credit terms or for future
delivery, the Indenture Obligations shall not be reduced as a result thereof
until payment therefor is finally collected by Collateral Agent. If notice of
disposition of Collateral is required by law, five (5) days prior notice by
Collateral Agent to the Company and the Guarantors designating the time and
place of any public sale or the time after which any private sale or other
intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and the Company and the Guarantors waive any other
notice. In the event Collateral Agent institutes an action to recover any
Collateral or seek recovery of any Collateral by way of prejudgment remedy, the
Company and the Guarantors waive the posting of any bond which might otherwise
be required.
(c) Collateral Agent may apply the cash proceeds of Collateral
actually received by Collateral Agent from any sale, lease, foreclosure or other
disposition of the Collateral to payment of the Indenture Obligations, in whole
or in part and in such order and
-15-
16
manner as set forth in Article X of the Indenture, whether or not then due. The
Company and the Guarantors shall remain liable to the Collateral Agent, the
Trustee and the Holders for the payment of any deficiency and all costs and
expenses of collection or enforcement, including attorneys' fees and legal
expenses.
6.3 Application of Proceeds; Effect of Senior Security Interest. The
Collateral Agent, the Trustee and each Holder by accepting a Note,
(a) agrees that notwithstanding anything to the contrary
contained in any agreement of the Company or any Guarantor or otherwise, as more
fully set forth in the Intercreditor Agreement, the Senior Collateral Agent's
rights in and to the Collateral will be first and prior to the rights of the
Collateral Agent on behalf of the Holders in and to the Collateral, which rights
of the Collateral Agent are subject in all respects to the terms and conditions
of the Intercreditor Agreement including the rights of the Collateral Agent to
take actions pursuant to Section 3 or Section 6 hereof;
(b) confirms that, in accordance with the Intercreditor
Agreement, any Collateral or other property of any kind which is required to be
delivered to the Collateral Agent hereunder shall be deemed to have been
delivered if it shall have been delivered to the Senior Collateral Agent.
(c) agree that in the event the Foothill Loan Agreement is
substituted, replaced or refinanced with any credit facility as permitted by the
Indenture (a "Replacement Credit Facility"), the Trustee shall enter into an
intercreditor agreement with the issuer of any such Replacement Credit Facility
on terms which taken as a whole are not materially less favorable to the Holders
than the terms of the Foothill Intercreditor Agreement.
SECTION 7. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
7.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this
Agreement and any dispute arising out of the relationship between the parties
hereto, whether in contract, tort, equity or otherwise, shall be governed by the
laws of the State of New York.
(b) Each of the Company and the Guarantors irrevocably consents
and submits to the non-exclusive jurisdiction of the Supreme Court of the State
of New York in and for the County of New York and the United States District
Court for the Southern District of New York and waives any objection based on
venue or forum non conveniens with respect to any action instituted therein
arising under this Agreement, the Indenture or any of the other Security
Documents or in any way connected or related or incidental to the dealings of
the Company, the Guarantors and the Collateral Agent in respect of this
Agreement, the Indenture or the other Security Documents or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agrees that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Collateral Agent shall have the right to bring any
action or proceeding against
-16-
17
the Company and the Guarantors or their respective property in the courts of any
other jurisdiction which Collateral Agent deems necessary or appropriate in
order to realize on the Collateral or to otherwise enforce the Collateral
Agent's rights against the Company and the Guarantors or their property).
(c) Each of the Company and the Guarantors hereby waives personal
service of any and all process upon it and consents that all such service of
process may be made by certified mail (return receipt requested) directed to its
address set forth on the signature pages hereof and service so made shall be
deemed to be completed five (5) days after the same shall have been so deposited
in the U.S. mails, or, at Collateral Agent's option, by service upon the Company
and the Guarantors in any other manner provided under the rules of any such
courts. Within thirty (30) days after such service, the Company and the
Guarantors shall appear in answer to such process, failing which the Company and
the Guarantors shall be deemed in default and judgment may be entered by
Collateral Agent against the Company and the Guarantors for the amount of the
claim and other relief requested.
(d) THE COMPANY, THE GUARANTORS AND COLLATERAL AGENT HEREBY WAIVE
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i)
ARISING UNDER THIS AGREEMENT, OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE COMPANY, THE GUARANTORS AND COLLATERAL AGENT
IN RESPECT OF THIS AGREEMENT OR THE TRANSACTIONS RELATED HERETO IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY
OR OTHERWISE. THE COMPANY, THE GUARANTORS AND COLLATERAL AGENT EACH HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE COMPANY, THE GUARANTORS OR
COLLATERAL AGENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE COMPANY, THE GUARANTORS
AND COLLATERAL AGENT TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
7.2 Waiver of Notices. Each of the Company and the Guarantors hereby
expressly waives demand, presentment, protest and notice of protest and notice
of dishonor with respect to any and all instruments and commercial paper,
included in or evidencing any of the Indenture Obligations or the Collateral,
and any and all other demands and notices of any kind or nature whatsoever with
respect to the Indenture Obligations, the Collateral and this Agreement, except
such as are expressly provided for herein. No notice to or demand on the Company
or any of the Guarantors which Collateral Agent may elect to give shall entitle
the Company or any of the Guarantors to any other or further notice or demand in
the same, similar or other circumstances.
7.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Collateral Agent and in accordance with the amendment provisions of the
Indenture, and as to amendments, as also signed by an authorized officer of the
Company and the Guarantors. Collateral Agent shall not, by any act, delay,
omission or otherwise be deemed to have expressly or impliedly waived any of its
or the
-17-
18
Holders' rights, powers and/or remedies unless such waiver shall be in writing
and signed by an authorized officer of Collateral Agent. Any such waiver shall
be enforceable only to the extent specifically set forth therein. A waiver by
Collateral Agent of any right, power and/or remedy on any one occasion shall not
be construed as a bar to or waiver of any such right, power and/or remedy which
Collateral Agent, on behalf of the Holders, would otherwise have on any future
occasion, whether similar in kind or otherwise.
7.4 Waiver of Counterclaims. Each of the Company and the Guarantors
waives all rights to interpose any claims, deductions, setoffs or counterclaims
of any nature (other than compulsory counterclaims) in any action or proceeding
commenced by the Collateral Agent or the Holders with respect to this Agreement,
the Indenture Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
7.5 Indemnification. Each of the Company and the Guarantors shall
indemnify and hold the Collateral Agent and the Trustee, and each of their
respective directors, agents, employees and counsel, harmless from and against
any and all losses, claims, damages, liabilities, costs or expenses imposed on,
incurred by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, the Indenture, any other Security Documents,
or any undertaking or proceeding related to any of the transactions contemplated
hereby or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the reasonable fees and
expenses of counsel, unless arising from the gross negligence or willful
misconduct of the Collateral Agent or the Trustee, as determined pursuant to
final non-appealable judgment of a court of competent jurisdiction. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in
this Section may be unenforceable because it violates any law or public policy,
the Company and the Guarantors shall pay the maximum portion which it is
permitted to pay under applicable law to Collateral Agent on behalf of the
Collateral Agent and the Trustee in satisfaction of indemnified matters under
this Section. The foregoing indemnity shall survive the payment of the Indenture
Obligations, the termination of this Agreement and the satisfaction and
discharge of the Indenture.
SECTION 8. MISCELLANEOUS
8.1 Termination. This Agreement and the Security Interest hereunder
shall automatically terminate upon full and final payment and performance of all
Indenture Obligations or release of all Collateral in accordance with the
provisions of the Indenture. At such time, this Agreement shall no longer
constitute a lien upon or grant any Security Interest in any of the Collateral,
and the Collateral Agent shall, at the expense of the Company and the
Guarantors, deliver to the Company and the Guarantors written acknowledgment
thereof and cancellation of this Agreement in a form reasonably requested by the
Company and the Guarantors. Without limiting the generality of the foregoing,
the Security Interest hereunder shall not be terminated by the transfer of any
of the Collateral hereunder from the Collateral Agent to the Company and the
Guarantors, or any person designated by the Company and the Guarantors, for the
purpose of ultimate sale, exchange, presentation, collection, renewal or
registration of transfer or for any other purpose.
-18-
19
8.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Collateral Agent at its address at One State Street,
10th Floor, New York, New York 10004, Attention: Corporate Finance, and to the
Company and each Guarantor at their respective chief executive office set forth
below, or to such other address as each party may designate by written notice to
the others in accordance with this provision, and (b) deemed to have been given
or made: if delivered in person, immediately upon delivery; if by telex,
telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next business day, one (1) business day after
sending; and if by certified mail, return receipt requested, five (5) days after
mailing.
8.3 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
8.4 Successors. This Agreement, the Indenture and the other Security
Documents and any other document referred to herein or therein shall be binding
upon the Company and the Guarantors and their respective successors and assigns
and inure to the benefit of and be enforceable by Collateral Agent on behalf of
the Holders and their respective successors and assigns, except that neither the
Company nor any of the Guarantors may assign their rights under this Agreement,
the Indenture or the other Security Documents and any other document referred to
herein or therein without the prior written consent of Collateral Agent.
8.5 Entire Agreement. This Agreement, the Indenture and the other
Security Documents, any supplements hereto or thereto, and any instruments or
documents delivered or to be delivered in connection herewith or therewith
represents the entire agreement and understanding concerning the subject matter
hereof and thereof between the parties hereto, and supersede all other prior
agreements, understandings, negotiations and discussions, representations,
warranties, commitments, proposals, offers and contracts concerning the subject
matter hereof, whether oral or written. In the event of any inconsistency
between the terms of this Agreement and any schedule or exhibit hereto, the
terms of this Agreement shall govern.
-19-
20
IN WITNESS WHEREOF, the Company and each of the Guarantors have caused
these presents to be duly executed as of the day and year first above written.
THE COMPANY:
ANKER COAL GROUP, INC.
By: /s/ Bruce Sparks
--------------------------
Title: President
-----------------------
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
THE GUARANTORS:
ANKER GROUP, INC.
By: /s/ Bruce Sparks
--------------------------
Title: President
-----------------------
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
ANKER ENERGY CORPORATION
By: /s/ Bruce Sparks
--------------------------
Title: President
-----------------------
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
BRONCO MINING COMPANY, INC.
By: /s/ Bruce Sparks
--------------------------
Title: President
-----------------------
21
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
ANKER POWER SERVICES, INC.
By: /s/ B. Judd Hartman
--------------------------
Title: Secretary
----------------------
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
ANKER WEST VIRGINIA MINING
COMPANY
By: /s/ B. Judd Hartman
--------------------------
Title: Secretary
----------------------
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
JULIANA MINING COMPANY, INC.
By: /s/ B. Judd Hartman
--------------------------
Title: Secretary
----------------------
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
KING KNOB COAL CO., INC.
By: /s/ B. Judd Hartman
--------------------------
Title: Secretary
----------------------
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
VANTRANS, INC.
By: /s/ B. Judd Hartman
--------------------------
Title: Secretary
----------------------
22
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
MELROSE COAL COMPANY, INC.
By: /s/ B. Judd Hartman
--------------------------
Title: Secretary
----------------------
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
MARINE COAL SALES COMPANY
By: /s/ B. Judd Hartman
--------------------------
Title: Secretary
----------------------
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
HAWTHORNE COAL COMPANY, INC.
By: /s/ B. Judd Hartman
--------------------------
Title: Secretary
----------------------
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
UPSHUR PROPERTY, INC.
By: /s/ B. Judd Hartman
--------------------------
Title: Secretary
----------------------
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
HEATHER GLEN RESOURCES, INC.
By: /s/ B. Judd Hartman
--------------------------
Title: Secretary
----------------------
23
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
NEW ALLEGHENY LAND HOLDING
COMPANY, INC.
By: /s/ B. Judd Hartman
--------------------------
Title: Secretary
----------------------
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
PATRIOT MINING COMPANY, INC.
By: /s/ B. Judd Hartman
--------------------------
Title: Secretary
----------------------
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
VINDEX ENERGY CORPORATION
By: /s/ B. Judd Hartman
--------------------------
Title: Secretary
----------------------
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
ANKER VIRGINIA MINING COMPANY, INC.
By: /s/ B. Judd Hartman
--------------------------
Title: Secretary
----------------------
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
SIMBA GROUP, INC.
By: /s/ Bruce Sparks
--------------------------
Title: President
-----------------------
24
CHIEF EXECUTIVE OFFICE:
2708 Cranberry Square
------------------------------
Morgantown, WV 26508
------------------------------
25
SCHEDULE A
GUARANTORS
COMPANY STATE OF INCORPORATION
Anker Group, Inc. Delaware
Anker Energy Corporation Delaware
Bronco Mining Company, Inc. West Virginia
Anker Power Services, Inc. West Virginia
Anker West Virginia Mining Company, Inc. West Virginia
Juliana Mining Company, Inc. West Virginia
King Knob Coal Co., Inc. West Virginia
Vantrans, Inc. Delaware
Melrose Coal Company, Inc. West Virginia
Marine Coal Sales Company Delaware
Hawthorne Coal Company, Inc. West Virginia
Upshur Property, Inc. Delaware
Heather Glen Resources, Inc. West Virginia
New Allegheny Land Holding Company, Inc. West Virginia
Patriot Mining Company, Inc. West Virginia
Vindex Energy Corporation West Virginia
Anker Virginia Mining Company, Inc. Virginia
Simba Group, Inc. Delaware
26
SCHEDULE R-1
Excluded Real Property Interests
27
SCHEDULE R-2
Real Property
Reference is made to the legal descriptions attached to the Mortgages.
28
SCHEDULE 4.1
Subsidiaries
29
SCHEDULE 4.2
Chief Executive Office;
Collateral Locations