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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 21, 1998
ANKER COAL GROUP, INC.
(Exact Name Of Registrant As Specified in Its Charter)
Delaware 333-39643 52-1990183
(State or other jurisdiction
of incorporation or organization) (Commission File (I.R.S. Employer
Number) Identification No.)
2708 Cranberry Square 26508
Morgantown, West Virginia (Zip Code)
(Address Of Principal Executive Offices)
Registrant's telephone number, including area code: (304) 594-1616
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ANKER COAL GROUP, INC.
FORM 8-K
TABLE OF CONTENTS
ITEM 5. OTHER EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. . . . . . . . . . . . . . . . . . .1
SIGNATURE PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
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ITEM 5. OTHER EVENTS
LOAN AND SECURITY AGREEMENT
On November 21, 1998, certain subsidiaries of Anker Coal Group, Inc.
(the "Company") entered into a Loan and Security Agreement (the "Loan
Agreement") with Foothill Capital Corporation ("Foothill") as administrative
agent. The Loan Agreement has a term of 4 years and provides for a $15 million
term loan facility and a $40 million revolving credit facility. A portion of the
loan proceeds was used to retire the Company's existing credit facility with
The Chase Manhattan Bank and others.
The term loan provides for repayment based upon a seven-year amortization
schedule and is payable in 46 installments of principal in the amount of
$178,571 and a final installment equal to the unpaid balance of principal and
accrued interest. The term loan shall bear interest at a per annum rate of two
and one-half percentage points (2 1/2%) above the prime rate announced by
Norwest Bank Minnesota, N.A. Availability under the revolving credit facility is
based on 85% of eligible accounts receivable created in the ordinary course of
business and 65% of eligible inventory which is held for sale in the ordinary
course of business, less certain reserves. The revolving credit facility shall
bear interest at a per annum rate of one percentage point (1%) above the prime
rate announced by Norwest Bank Minnesota, N.A.
The Company is subject to certain financial covenants relating to
minimum cash flow and maximum capital expenditures.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
(10.16) Loan and Security Agreement dated as of November 21, 1998 among
certain subsidiaries of Anker Coal Group, Inc., Foothill Capital Corporation and
others.
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANKER COAL GROUP, INC.
/s/ Michael Matesic
--------------------------
Michael Matesic
Treasurer and Chief Financial Officer
Date: December 10, 1998
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
(10.16) Loan and Security Agreement dated as of November 21, 1998
among certain subsidiaries of Anker Coal Group, Inc., Foothill
Capital Corporation and others.
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Final: November 23, 1998 6:00pm
LOAN AND SECURITY AGREEMENT
by and among
CERTAIN SUBSIDIARIES OF
ANKER COAL GROUP, INC.
as Borrowers
and
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as the Lenders,
and
FOOTHILL CAPITAL CORPORATION
as Agent
Dated as of November 21, 1998
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TABLE OF CONTENTS
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Page(s)
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1. DEFINITIONS AND CONSTRUCTION........................................................................... 1
1.1 Definitions................................................................................... 1
1.2 Accounting Terms.............................................................................. 29
1.3 Code.......................................................................................... 29
1.4 Construction.................................................................................. 29
1.5 Schedules and Exhibits........................................................................ 30
2. LOAN AND TERMS OF PAYMENT.............................................................................. 30
2.1 Revolving Advances............................................................................ 30
2.2 Letter of Credit Subfacility.................................................................. 37
2.3 Term Loan Facility............................................................................ 41
2.4 Payments...................................................................................... 44
2.5 Overadvances.................................................................................. 46
2.6 Interest and Letter of Credit Fees: Rates, Payments, and Calculations........................ 46
2.7 Collection of Accounts........................................................................ 50
2.8 Crediting Payments; Application of Collections................................................ 51
2.9 Designated Account............................................................................ 51
2.10 Maintenance of Loan Account; Statements of Obligations........................................ 52
2.11 Fees.......................................................................................... 52
3. CONDITIONS; TERM OF AGREEMENT.......................................................................... 53
3.1 Conditions Precedent to the Initial Advance, Term Loan, and Letter of
Credit........................................................................................ 53
3.2 Conditions Precedent to all Advances and all Letters of Credit................................ 56
3.3 Condition Subsequent.......................................................................... 57
3.4 Term.......................................................................................... 57
3.5 Effect of Termination......................................................................... 57
3.6 Early Termination by Borrowers................................................................ 58
3.7 Termination Upon Event of Default............................................................. 58
4. CREATION OF SECURITY INTEREST.......................................................................... 58
4.1 Grant of Security Interest.................................................................... 58
4.2 Negotiable Collateral......................................................................... 59
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral........................ 59
4.4 Delivery of Additional Documentation Required................................................. 59
4.5 Power of Attorney............................................................................. 60
4.6 Right to Inspect.............................................................................. 60
4.7 Control Agreements............................................................................ 60
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5. REPRESENTATIONS AND WARRANTIES......................................................................... 61
5.1 No Encumbrances............................................................................... 61
5.2 Eligible Accounts............................................................................. 61
5.3 Eligible Inventory............................................................................ 61
5.4 Equipment..................................................................................... 61
5.5 Location of Inventory and Equipment........................................................... 61
5.6 Inventory Records............................................................................. 62
5.7 Location of Chief Executive Office; FEIN...................................................... 62
5.8 Due Organization and Qualification; Subsidiaries.............................................. 62
5.9 Due Authorization; No Conflict................................................................ 63
5.10 Litigation.................................................................................... 64
5.11 No Material Adverse Change. .................................................................. 64
5.12 No Fraudulent Transfer. ...................................................................... 64
5.13 Employee Benefits............................................................................. 64
5.14 Environmental Condition....................................................................... 65
5.15 Brokerage Fees................................................................................ 66
5.16 Permits and other Intellectual Property....................................................... 66
5.17 Real Property................................................................................. 67
6. AFFIRMATIVE COVENANTS.................................................................................. 67
6.1 Accounting System............................................................................. 67
6.2 Collateral Reporting.......................................................................... 67
6.3 Financial Statements, Reports, Certificates................................................... 68
6.4 Tax Returns................................................................................... 69
6.5 Guarantor Reports............................................................................. 69
6.6 Returns....................................................................................... 69
6.7 Title to Equipment............................................................................ 70
6.8 Maintenance of Equipment...................................................................... 70
6.9 Taxes......................................................................................... 70
6.10 Insurance..................................................................................... 70
6.11 No Setoffs or Counterclaims................................................................... 72
6.12 Location of Inventory and Equipment........................................................... 72
6.13 Compliance with Laws; Notice of Non-Compliance.................................................72
6.14 Employee Benefits............................................................................. 73
6.15 Leases........................................................................................ 74
6.16 Broker Commissions............................................................................ 74
6.17 Permit Blocks................................................................................. 74
7. NEGATIVE COVENANTS..................................................................................... 75
7.1 Indebtedness.................................................................................. 75
7.2 Liens......................................................................................... 76
7.3 Restrictions on Fundamental Changes........................................................... 76
7.4 Disposal of Assets............................................................................ 76
7.5 Change Name................................................................................... 76
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7.6 Guarantee..................................................................................... 77
7.7 Nature of Business............................................................................ 77
7.8 Prepayments and Amendments.................................................................... 77
7.9 Change of Control............................................................................. 77
7.10 Consignments.................................................................................. 77
7.11 Distributions................................................................................. 77
7.12 Accounting Methods............................................................................ 78
7.13 Investments; Loans............................................................................ 78
7.14 Transactions with Affiliates.................................................................. 81
7.15 Suspension.................................................................................... 81
7.16 Compensation.................................................................................. 81
7.17 Use of Proceeds............................................................................... 81
7.18 Change in Location of Chief Executive Office; Inventory and Equipment
with Bailees.................................................................................. 81
7.19 No Prohibited Transactions Under ERISA........................................................ 82
7.20 Financial Covenants........................................................................... 82
7.21 Capital Expenditures.......................................................................... 83
7.22 Securities Accounts........................................................................... 83
8. EVENTS OF DEFAULT...................................................................................... 83
9. THE LENDER GROUP'S RIGHTS AND REMEDIES................................................................. 86
9.1 Rights and Remedies........................................................................... 86
9.2 Remedies Cumulative........................................................................... 88
10. TAXES AND EXPENSES..................................................................................... 88
11. WAIVERS; INDEMNIFICATION............................................................................... 89
11.1 Demand; Protest; etc.......................................................................... 89
11.2 The Lender Group's Liability for Collateral................................................... 89
11.3 Indemnification............................................................................... 89
11.4 Counterclaims................................................................................. 89
12. NOTICES................................................................................................ 89
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER............................................................. 90
14. DESTRUCTION OF BORROWERS' DOCUMENTS.................................................................... 91
15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS............................................................. 92
15.1 Assignments and Participations................................................................ 92
15.2 Successors.................................................................................... 94
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16. AMENDMENTS; WAIVERS.................................................................................... 94
16.1 Amendments and Waivers........................................................................ 94
16.2 No Waivers; Cumulative Remedies............................................................... 95
17. AGENT; THE LENDER GROUP................................................................................ 96
17.1 Appointment and Authorization of Agent........................................................ 96
17.2 Delegation of Duties.......................................................................... 97
17.3 Liability of Agent............................................................................ 97
17.4 Reliance by Agent............................................................................. 97
17.5 Notice of Default or Event of Default......................................................... 98
17.6 Credit Decision............................................................................... 98
17.7 Costs and Expenses; Indemnification........................................................... 99
17.8 Agent in Individual Capacity.................................................................. 99
17.9 Successor Agent...............................................................................100
17.10 Withholding Tax...............................................................................100
17.11 Collateral Matters............................................................................101
17.12 Restrictions on Actions by Lenders; Sharing of Payments.......................................102
17.13 Agency for Perfection.........................................................................103
17.14 Payments by Agent to the Lenders..............................................................103
17.15 Concerning the Collateral and Related Loan Documents..........................................103
17.16 Field Audits and Examination Reports; Confidentiality; Disclaimers by
Lenders; Other Reports and Information........................................................104
17.17 Several Obligations; No Liability.............................................................105
18. GENERAL PROVISIONS.....................................................................................105
18.1 Effectiveness.................................................................................105
18.2 Section Headings..............................................................................106
18.3 Interpretation................................................................................106
18.4 Severability of Provisions....................................................................106
18.5 Amendments in Writing.........................................................................106
18.6 Counterparts; Telefacsimile Execution.........................................................106
18.7 Revival and Reinstatement of Obligations......................................................106
18.8 Integration...................................................................................106
18.9 Appointment of Borrowers' Agent...............................................................107
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SCHEDULES AND EXHIBITS
Schedule C-1 Commitments
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule R-2 Permitted Disposition Real Property
Schedule 5.8 Subsidiaries
Schedule 5.10 Litigation
Schedule 5.13 ERISA Benefit Plans
Schedule 5.14 Environmental Matters
Schedule 5.16 Intellectual Property, Permits, Licenses
and Bonding Arrangements
Schedule 6.12 Location of Inventory and Equipment
Schedule 7.1 Permitted Other Indebtedness
Schedule 7.13 Existing Investments
Exhibit A-1 Form of Assignment and Acceptance
Exhibit C-1 Form of Compliance Certificate
Exhibit S-1 Form of Solvency Certificate
Exhibit 2.6 Form of Eurodollar Notice
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT"), is entered into as
of November 21, 1998, among the financial institutions listed on the signature
pages hereof (such financial institutions, together with their respective
successors and assigns, are referred to hereinafter each individually as a
"Lender" and collectively as the "Lenders"), FOOTHILL CAPITAL CORPORATION, a
California corporation, as agent for the Lenders ("Agent"), with a place of
business located at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles,
California 90025-3333 and ANKER ENERGY CORPORATION, a Delaware corporation,
MARINE COAL SALES COMPANY, a Delaware corporation, ANKER WEST VIRGINIA MINING
COMPANY, INC., a West Virginia corporation, PATRIOT MINING COMPANY, INC., a West
Virginia corporation, JULIANA MINING COMPANY, INC., a West Virginia corporation,
VINDEX ENERGY CORPORATION, a West Virginia corporation, and ANKER VIRGINIA
MINING COMPANY, INC., a Virginia corporation, each with its chief executive
office located at 2708 Cranberry Square, Morgantown, West Virginia 26505 (each
sometimes hereinafter referred to individually as "Borrower" and collectively as
"Borrowers") and ANKER COAL GROUP, INC., a Delaware corporation, in its capacity
as Borrowers' Agent (as hereinafter defined).
W I T N E S S E T H:
WHEREAS, Borrowers have requested that Lenders enter into certain
financing arrangements with Borrowers pursuant to which Lenders may make loans
and provide other financial accommodations to Borrowers; and
WHEREAS, Lenders are willing to make such loans and provide such other
financial accommodations on the terms and conditions set forth herein and in the
other Loan Documents (as hereinafter defined);
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:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following
terms shall have the following definitions:
"Account Debtor" means any Person who is or who may
become obligated under, with respect to, or on account of, an Account.
"Accounts" means all currently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrowers arising out of the sale or
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lease of goods or the rendition of services by Borrowers, irrespective of
whether earned by performance, and any and all credit insurance, guaranties, or
security therefor.
"Adjusted Eurodollar Rate" means, for any Interest
Period, the rate per annum (rounded upwards, if necessary, to the next 1/16 of
1%) determined pursuant to the following formula:
Adjusted = Eurodollar Rate
Eurodollar Rate --------------------
1-Reserve Percentage
"Advances" has the meaning set forth in Section
2.1(a).
"Affiliate" means, as applied to any Person, any
other Person who directly or indirectly controls, is controlled by, is under
common control with or is a director or officer of such Person. For purposes of
this definition, "control" means the possession, directly or indirectly, of the
power to vote 10% or more of the securities having ordinary voting power for the
election of directors or the direct or indirect power to direct the management
and policies of a Person.
"Agent" means Foothill, solely in its capacity as
agent for the Lenders, and shall include any successor agent.
"Agent Account" has the meaning set forth in Section
2.7.
"Agent Advances" has the meaning set forth in Section
2.1(g).
"Agent's Liens" has the meaning set forth in Section
4.1.
"Agent-Related Persons" means Agent and any successor
agent, together with their respective Affiliates, and the officers, directors,
employees, counsel, agents, and attorneys-in-fact of such Persons and their
Affiliates.
"Agreement" has the meaning set forth in the preamble
hereto.
"Anker Energy" means Anker Energy Corporation, a
Delaware corporation, and a Borrower hereunder.
"Anker Virginia" means Anker Virginia Mining Company,
Inc., a Virginia corporation and a Borrower hereunder.
"Anker West Virginia" means Anker West Virginia
Mining Company, Inc., a West Virginia corporation and a Borrower hereunder.
"Assignee" has the meaning set forth in Section 15.1.
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"Assignment and Acceptance" has the meaning set forth
in Section 15.1 and shall be in the form of Exhibit A-1 attached hereto.
"Authorized Person" means any officer or other
employee of Borrowers' Agent or of Borrowers.
"AVS" has the meaning set forth in Section 5.16(b).
"Availability" means, as to each Borrower, the amount
that such Borrower is entitled to borrow as Advances under Section 2.1, such
amount being the difference derived when (a) the sum of the principal amount of
Advances (including Agent Advances and Foothill Loans) then outstanding to such
Borrower (including any amounts that the Lender Group may have paid for the
account of such Borrower pursuant to any of the Loan Documents and that have not
been reimbursed by such Borrower) is subtracted from (b) the lesser of (i) the
Maximum Revolving Amount, less the aggregate principal amount of Advances
(including Agent Advances and Foothill Loans) then outstanding to all other
Borrowers, less the then outstanding Letter of Credit Usage of all Borrowers, or
(ii) the Borrowing Base for such Borrower less the Letter of Credit Usage for
such Borrower.
"Average Unused Portion of Maximum Revolving Amount"
means, as of any date of determination, (a) the Maximum Revolving Amount, less
(b) the sum of (i) the average Daily Balance of Advances that were outstanding
during the immediately preceding month, plus (ii) the average Daily Balance of
the Letter of Credit Usage during the immediately preceding month.
"Bankruptcy Code" means the United States Bankruptcy
Code (11 U.S.C. Section 101 et seq.), as amended, and any successor statute.
"Beckley Smokeless Equipment Reserve" shall mean a
reserve in the amount of $1,400,000 established by Agent reducing the amount of
Advances and Letters of Credit otherwise available to Borrowers, which Beckley
Smokeless Equipment Reserve shall be removed at the time the aggregate
outstanding principal amount of the Term Loan is reduced by the first $5,000,000
of net aggregate proceeds realized from the consummation of any Permitted Mine
Depositions in accordance with Section 2.3 of the Loan Agreement, unless
otherwise agreed to in advance by Agent.
"Benefit Plan" means a "defined benefit plan" (as
defined in Section 3(35) of ERISA) for which Borrowers, any Subsidiary of
Borrowers, or any ERISA Affiliate has been an "employer" (as defined in Section
3(5) of ERISA) within the past six years.
"Bonds" means reclamation, workers' compensation and
black lung, lease payment, coal supply, supersedeas appeal or other bonds at any
time issued by any bonding company for the benefit of Borrowers in the ordinary
course of the business of Borrowers
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consistent with current practices in effect on the date hereof including, but
not limited to, the Bonds set forth on Schedule 5.16.
"Books" means all of Borrowers' books and records
including: ledgers; records indicating, summarizing, or evidencing Borrowers'
properties or assets (including the Collateral) or liabilities; all information
relating to Borrowers' business operations or financial condition; and all
computer programs, disk or tape files, printouts, runs, or other computer
prepared information.
"Borrower" and "Borrowers" have the meaning set forth
in the preamble to this Agreement.
"Borrowers' Agent" means Parent, in its capacity as
agent for Borrowers hereunder, and any successor agent for Borrowers appointed
by Borrowers and approved in a writing signed by Agent.
"Borrowing" means a borrowing hereunder consisting of
Advances or Term Loans made on the same day by the Lenders to Borrowers, or by
Foothill in the case of a Foothill Loan, or by Agent in the case of an Agent
Advance.
"Borrowing Base" has the meaning set forth in Section
2.1(a).
"Business Day" means any day that is not a Saturday,
Sunday, or other day on which national banks are authorized or required to
close.
"Capital Expenditures" shall mean, for any Person,
all expenditures for any fixed assets or improvements, or for replacements,
substitutions or additions thereto, of such Person that under GAAP are
capitalized and not expensed in the year in which they are incurred.
"Change of Control" shall be deemed to have occurred
at such time as (a) a "person" or "group" (within the meaning of Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934), other than a Borrower,
Anker Group, Inc. or Parent, becomes the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of
more than 20% of the total voting power of all classes of stock then outstanding
of any Borrowers entitled to vote in the election of directors, other than in
connection with or to facilitate a Permitted Disposition or a Permitted
Supplemental Disposition, or (b) with respect to Parent, any of the following
shall have occurred: (i) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation permitted by the
Security Agreement executed and delivered by Parent to Agent), in one or a
series of related transactions, of all or substantially all of the assets of the
Parent and its Subsidiaries taken as a whole to any "person" (as such term is
used in Section 13(d)(3) of the Exchange Act), other than to the Permitted
Holders (as defined below), (ii) the adoption of a plan relating to the
liquidation or dissolution of the Parent, (iii) the consummation of any
transaction (including without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above), other
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than the Permitted Holders, becomes the "beneficial owner" (as such term is
defined in rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly, of 50% or more of the Voting Stock of Parent (measured by voting
power rather than number of shares), (iv) at any time during any period of 12
consecutive months, the individuals who at the beginning of any such 12-month
period were members of Parent's Board of Directors cease to constitute a
majority of the members of Parent's Board of Directors, unless such new members
of Parent's Board of Directors were appointed by P. Bruce Sparks to fill
Director vacancies on Parent's Board of Directors or were appointed by any
individuals who were members of such Board of Directors at the time such
vacancies occurred, or (v) Parent consolidates with, or merges with or into, any
Person, other than the Permitted Holders, or any Person other than the Permitted
Holders, consolidates with, or merges with or into Parent, in any such event
pursuant to a transaction in which the outstanding voting Stock of the Parent is
converted into or exchanged for cash, securities or other property, other than
any such transaction where the voting Stock of Parent outstanding immediately
prior to such transaction is converted into or exchanged for voting Stock (other
than Disqualified Stock (as defined below)) of the surviving or transferee
Person constituting a majority of the outstanding shares of such voting Stock of
such surviving or transferee person (immediately after giving effect to such
issuance). For the purpose of this definition (x) "Permitted Holders shall mean
First Reserve Corporation, Anker Holding B.V., the estate of John J. Faltis and
such decedent's heirs and legatees, P. Bruce Sparks and any of their respective
Affiliates and (y) "Disqualified Stock" shall mean any Stock that, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the Termination Date.
"Closing Date" means the date of the first to occur
of the making of the initial Advance, or the issuance of the initial Letter of
Credit, or the funding of the Term Loan.
"Code" means the New York Uniform Commercial Code.
"Collateral" means all of Borrowers' right, title,
and interest in and to each of the following:
(a) the Accounts,
(b) the Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Negotiable Collateral,
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(g) the Investment Property (including, without
limitation, all Stock in Subsidiaries),
(h) the Real Property Collateral,
(i) any money, or other assets of Borrowers that now
or hereafter come into the possession, custody, or control of any member of the
Lender Group, and
(j) 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 agreement, any other non-assignable agreement and leasehold interest
entered into, or non-assignable Permit held, by any Borrower with, or issued by,
any Person who is not an Affiliate of such Borrower, 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, such Borrower'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 Agent, for the benefit of the Lender Group, shall attach solely to
the proceeds of such Non-assignable Property and Borrowers' 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 such Borrower, pursuant to a final
judgment or decree of any court of competent jurisdiction, then such
Non-assignable Property shall in all events constitute part of the Collateral.
"Collateral Access Agreement" means a landlord waiver
or consent, lessor subordination agreement, mortgagee waiver or consent, bailee
letter, or a similar acknowledgement 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 Agent.
"Collections" means all cash, checks, notes,
instruments, and other items of payment (including, insurance proceeds, proceeds
of cash sales, rental proceeds, and tax refunds).
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"Commitment" means, at any time with respect to a
Lender, the principal amount set forth beside such Lender's name under the
heading "Commitment" on Schedule C-1 attached hereto or on the signature page of
the Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 15.1, as such Commitment
may be adjusted from time to time in accordance with the provisions of Section
15.1, and "Commitments" means, collectively, the aggregate amount of the
commitments of all of the Lenders.
"Compliance Certificate" means a certificate
substantially in the form of Exhibit C-1 and delivered by the chief accounting
officer of Parent to Agent.
"Consolidated Net Income" means, as to any Person,
for any period, the net income (loss) of such Person and its Subsidiaries
determined on a consolidated basis in accordance with GAAP for such period. For
the purposes of this definition, (i) net income excludes any gain or loss
together with any related Provision for Taxes for such gain or loss realized
upon the sale or other disposition of any assets that are not sold in the
ordinary course of business (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or of any capital stock of a Person
or subsidiary of a Person and any net income realized as a result of changes in
accounting principles or the application thereof to any Person, or any other
extraordinary gain or loss, and (ii) the term "Provision for Taxes" shall mean
an amount equal to all taxes imposed on or measured by net income, whether
Federal, State, county or local, and whether foreign or domestic, that are paid
or payable by any Person in respect of any period in accordance with GAAP.
"Continuing Guaranty" means, collectively, the
Continuing Guaranty executed and delivered on the Closing Date by, respectively,
each of the Guarantors and the Borrowers in favor of Agent, in form and
substance satisfactory to Agent.
"Control Agreement" means a control agreement, in
form and substance reasonably satisfactory to Agent, between Borrowers, Agent,
and the applicable securities intermediary with respect to the applicable
Securities Account and related Investment Property.
"Daily Balance" means the amount of an Obligation
owed at the end of a given day.
"Default" means an event, condition, or default that,
with the giving of notice, the passage of time, or both, would be an Event of
Default.
"Defaulting Lender" means any Lender that fails to
make any Advance or Term Loan that it is required to make hereunder on any
Funding Date and that has not cured such failure by making such Advance or Term
Loan within one (1) Business Day after written demand upon it by Agent to do so.
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"Defaulting Lenders Rate" means the Reference Rate
for the first 3 days from and after the date the relevant payment is due and,
thereafter, at the lowest interest rate then applicable to Advances.
"Designated Account" means account number 1367023 of
Borrowers' Agent maintained with Borrowers' Agent's Designated Account Bank, or
such other deposit account of Borrowers' Agent (located within the United
States) which has been designated, in writing and from time to time, by
Borrowers' Agent to Agent.
"Designated Account Bank" means Mellon Bank, N.A.,
whose office is located at Three Mellon Bank Center, Pittsburgh, Pennsylvania
15259-0003, and whose ABA number is 04300261.
"Dilution" means, in each case based upon the
experience of the immediately prior 90 days, the result of dividing the Dollar
amount of (a) bad debt write-downs, discounts, advertising, returns, promotions,
credits, or other dilution with respect to all of Borrowers' Accounts, by (b)
Borrowers' Collections (excluding extraordinary items) plus the Dollar amount of
clause (a).
"Dilution Reserve" means, as of any date of
determination, an amount sufficient to reduce the advance rate against Eligible
Accounts hereunder by one percentage point for each percentage point by which
Dilution is in excess of 5%.
"Disbursement Letter" means an instructional letter
executed and delivered by Borrowers' Agent regarding the extensions of credit to
be made on the Closing Date, the form and substance of which shall be
satisfactory to Agent.
"Dollars or $" means United States dollars.
"EBITDA" means, as to any Person, with respect to any
period, an amount equal to: (a) the Consolidated Net Income of such Person and
its Subsidiaries for such period, plus (b) depreciation, depletion and
amortization and other non-cash charges for such period, except for write-downs
of Accounts, Inventory and Equipment (to the extent deducted in the computation
of Consolidated Net Income), all in accordance with GAAP, plus (c) interest
expense for such period (to the extent deducted in the computation of
Consolidated Net Income), plus (d) charges for Federal, State and local and
foreign income taxes.
"Early Termination Premium" has the meaning set forth
in Section 3.6.
"Eligible Accounts" means those Accounts created by
Borrowers in the ordinary course of business, that arise out of Borrowers' sale
of goods or rendition of services, that comply with each and all of the
representations and warranties respecting Accounts made by Borrowers to Agent in
the Loan Documents, and that are and at all times continue to meet the general
standards of eligibility which may be fixed and revised from time to time by
Agent in
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<PAGE> 15
Agent's reasonable credit judgment. Without in any manner limiting the
foregoing, Eligible Accounts shall not include the following:
(a) Accounts that the Account Debtor has failed to
pay within 90 days of invoice date or within sixty (60) days after the due date
therefor set forth in the invoices evidencing such Accounts or Accounts with
selling terms of more than 60 days;
(b) Accounts evidencing Estimated Billings that are
not billed within fifteen (15) days after shipment of the goods by rail or that
are not billed within thirty (30) days after shipment of the goods by barge, the
sale of which goods gave rise to such Estimated Billings;
(c) Accounts owed by an Account Debtor or its
Affiliates where 50% or more of all Accounts owed by that Account Debtor (or its
Affiliates) are deemed ineligible under clause (a) above;
(d) Accounts with respect to which the Account Debtor
is an employee, Affiliate, or agent of Borrowers other than Accounts owing from
third party sales agents or brokers of coal produced by Borrowers;
(e) Accounts with respect to which goods are placed
on consignment, guaranteed sale, sale or return, sale on approval (which for
purposes hereof, does not include rejection of goods by customers in the
ordinary course of business due to alleged quality and/or weight deficiencies in
such goods), bill and hold, or other terms by reason of which the payment by the
Account Debtor is conditional;
(f) Accounts that are not payable in Dollars or with
respect to which the Account Debtor: (i) does not maintain its chief executive
office in the United States, or (ii) is not organized under the laws of the
United States or any State thereof, or (iii) is the government of any foreign
country or sovereign state, or of any state, province, municipality, or other
political subdivision thereof, or of any department, agency, public corporation,
or other instrumentality thereof, except that, notwithstanding the foregoing,
Accounts owing by Account Debtors that maintain their chief executive office in
Canada and/or are organized under the federal laws of Canada or any Province
thereof (collectively, "Canadian Accounts") shall only constitute Eligible
Accounts to the extent such Accounts evidence obligations owing to Borrowers in
an aggregate amount not to exceed $500,000 at any time outstanding and shall not
constitute Eligible Accounts to the extent such Accounts evidence obligations
owing to Borrowers at any time in excess of such amount, unless (i) in each case
(other than with respect to Canadian Accounts) (A) the Account is supported by
an irrevocable letter of credit satisfactory to Agent (as to form, substance,
and issuer or domestic confirming bank) that has been delivered to Agent and is
directly drawable by Agent, or (B) the Account is covered by credit insurance in
form and amount, and by an insurer, satisfactory to Agent, and (ii) solely in
the case of the Canadian Accounts, promptly upon Agent's request, Borrowers
shall have executed and/or delivered, or caused to be executed and/or delivered,
for the benefit of Lenders, all such documents,
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<PAGE> 16
instruments and agreements as Agent shall determine are necessary or desirable
to perfect the Agent's Lien upon the Canadian Accounts in accordance with
applicable Legal Requirements of the Province of Canada in which such Account
Debtors' respective chief executive offices are from time to time located;
(g) Accounts with respect to which the Account Debtor
is either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of Accounts with respect to which
Borrowers have complied, to the satisfaction of Agent, with the Assignment of
Claims Act, 31 U.S.C. Section 3727), or (ii) any State of the United States
(exclusive, however, of Accounts owed by any State that does not have a
statutory counterpart to the Assignment of Claims Act);
(h) Accounts with respect to which the Account Debtor
is a creditor of Borrowers, has or has asserted a right of setoff, has disputed
its liability, or has made any claim with respect to the Account, but only to
the extent of that portion of the Account with respect to which such Account
Debtor asserts a setoff right, liability or claim, except for such Accounts
owing from such Account Debtor in respect of which Borrowers have delivered to
Agent a non-offset letter executed by the Account Debtors thereunder in favor of
Agent, in form and substance satisfactory to Agent;
(i) Accounts (i) owing by an Affiliate of AES
Corporation evidencing total obligations collectively owing to Borrowers by such
Account Debtors in excess of 25% of all Eligible Accounts, (ii) owing by
Courtney Foos and/or Potomac Electric Power Company evidencing total obligations
collectively owing to Borrowers by such Account Debtors in excess of 25% of all
Eligible Accounts and (iii) with respect to all other Account Debtors, Accounts
owing by such Account Debtors evidencing total obligations owing to Borrowers in
excess of 10% of all Eligible Accounts, in all cases to the extent of the
obligations owing by such Account Debtors in excess of such applicable
percentages;
(j) Accounts with respect to which the Account Debtor
is the subject of any Insolvency Proceeding, or becomes insolvent, or goes out
of business;
(k) Accounts the collection of which Agent, in its
reasonable credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition;
(l) Accounts with respect to which the goods giving
rise to such Account have not been shipped to the Account Debtor, the services
giving rise to such Account have not been performed and accepted by the Account
Debtor, or the Account otherwise does not represent a final sale;
(m) Accounts with respect to which the Account Debtor
is located in the states of New Jersey, Minnesota, Indiana, or West Virginia (or
any other state that requires a creditor to file a Business Activity Report or
similar document in order to bring suit or otherwise enforce its remedies
against such Account Debtor in the courts or through any judicial process
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<PAGE> 17
of such state), unless the Borrower to whom such Accounts are owing is doing
business as a foreign corporation in any such states and has qualified to do
business in New Jersey, Minnesota, Indiana, West Virginia, or such other states
in which such Borrower is doing business as a foreign corporation, or has filed
a Notice of Business Activities Report with the applicable division of taxation,
the department of revenue, or with such other state offices, as appropriate, for
the then-current year, or is exempt from such filing requirement;
(n) Accounts that represent progress payments or
other advance billings that are due prior to the completion of performance by
Borrowers of the subject contract for goods or services; and
(o) Accounts that evidence rebates owing to Borrowers
by shippers or carriers based on the volume of Inventory shipped by Borrowers
with such shippers or carriers.
"Eligible Inventory" means finished goods Inventory
consisting of coal which has been extracted from the Real Property, is in a coal
stockpile and is held for sale in the ordinary course of Borrowers' business,
that is located at or in-transit between Borrowers' premises identified on
Schedule E-1, that complies with each and all of the representations and
warranties respecting Inventory made by Borrowers to the Lender Group in the
Loan Documents, and that is and at all times continues to meet the general
standards of eligibility which may be fixed and revised from time to time by
Agent in Agent's reasonable credit judgment. The amount to be so included in
Eligible Inventory of each Borrower shall be based upon its Value. Without in
any manner limiting the foregoing, an item of Inventory shall not be included in
Eligible Inventory if:
(a) it is not owned solely by a Borrower or a
Borrower does not have good, valid, and marketable title thereto;
(b) it is not located at, or is not in transit to or
between, one of the locations set forth on Schedule E-1;
(c) it is located at one of the locations set forth
in Schedule E-1, but the Inventory flowing through any such location during any
calendar month has an aggregate book value of less than $250,000 or an average
book value during such month less than $150,000 at any time;
(d) it is located at the premises of third parties,
including a warehouse or other storage facility or a storage area at a mine site
that is leased by a Borrower, and is not subject to a Collateral Access
Agreement executed by the mortgagee, lessor, the warehouseman, or other third
party, as the case may be, and segregated or otherwise separately identifiable
from goods of others, if any, stored on the premises;
(e) it is not subject to a valid and perfected first
priority security interest in favor of Agent for the benefit of the Lender
Group;
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<PAGE> 18
(f) it consists of goods returned or rejected by a
Borrower's customers or goods in transit;
(g) it is obsolete or slow moving, Inventory subject
to a Lien in favor of any third Person that is not otherwise permitted under
this Agreement, bill and hold goods or Inventory acquired on consignment, or
from and after February 1, 1999, it is off-quality coal (i.e., being coal
located in a certain Inventory stockpile located in Webster County, West
Virginia, containing as of November 17, 1998 approximately 18,500 tons of coal)
owned by Juliana Mining Company, Inc.; and
(h) it is coal which has not been mined in accordance
with Legal Requirements in all material respects or at any mine or site which is
not being operated in accordance with and as required by, in all material
respects, any consent order or agreement with a Governmental Authority, any
applicable permits or applicable Legal Requirements.
"Eligible Transferee" means: (a) a commercial bank
organized under the laws of the United States, or any state thereof, and having
total assets in excess of $100,000,000; (b) a commercial bank organized under
the laws of any other country which is a member of the Organization for Economic
Cooperation and Development or a political subdivision of any such country, and
having total assets in excess of $100,000,000; provided that such bank is acting
through a branch or agency located in the United States; (c) a finance company,
insurance company or other financial institution or fund that is engaged in
making, purchasing or otherwise investing in commercial loans in the ordinary
course of its business and having total assets in excess of $50,000,000; (d) any
Affiliate (other than individuals) of a pre-existing Lender and (e) Congress
Financial Corporation, Sunrock Capital Corp., GMAC and LaSalle Business Credit,
Inc.; provided, however, that so long as no Event of Default has occurred and is
continuing, any Person described in clause (a) through (d) above, inclusive,
must be approved by Borrowers, which approval shall not be unreasonably
withheld.
"Equipment" means all of Borrowers' present and
hereafter acquired machinery, machine tools, motors, equipment, furniture,
furnishings, loading facilities, tipples, processing plants and like structures,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, goods
(other than consumer goods, farm products, or Inventory), wherever located,
including, (a) any interest of Borrowers in any of the foregoing, and (b) all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing.
"Equipment Reserve" shall mean a reserve established
by Agent in the amount of $1,800,000 reducing the amount of Advances and Letters
of Credit otherwise available to Borrowers, which Equipment Reserve shall be (a)
released by Lenders upon the good faith determination by Agent that no Equipment
(other than the Equipment covered by the Beckley Smokeless Equipment Reserve)
listed on the appraisal prepared by John T. Boyd Company, dated November, 1998
(the "Boyd Appraisal"), is the subject of a Permitted Lien, (which occurs by
virtue of subpart (d) of the definition of "Permitted Liens") or (b) reduced to
an amount equal
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to the auction value of the Equipment as scheduled in the Boyd Appraisal based
upon the good faith determination by the Agent that any item of Equipment listed
in the Boyd Appraisal is also the subject of a Permitted Lien as set forth in
subsection (a) above and each of Borrowers and the Agent agree to use their good
faith efforts to make such determination within a commercially reasonable time.
"ERISA" means the Employee Retirement Income Security
Act of 1974, 29 U.S.C. Sections 1000 et seq., amendments thereto, successor
statutes, and regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject
to ERISA whose employees are treated as employed by the same employer as the
employees of Borrowers under IRC Section 414(b), (b) any trade or business
subject to ERISA whose employees are treated as employed by the same employer as
the employees of Borrowers under IRC Section 414(c), (c) solely for purposes of
Section 302 of ERISA and Section 412 of the IRC, any organization subject to
ERISA that is a member of an affiliated service group of which Borrowers are
members under IRC Section 414(m), or (d) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any party subject to ERISA that is a party to
an arrangement with Borrowers and whose employees are aggregated with the
employees of Borrowers under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with
respect to any Benefit Plan or Multiemployer Plan, (b) the withdrawal of
Borrowers, any of its Subsidiaries or ERISA Affiliates from a Benefit Plan
during a plan year in which it was a "substantial employer" (as defined in
Section 4001(a)(2) of ERISA), (c) the providing of notice of intent to terminate
a Benefit Plan in a distress termination (as described in Section 4041(c) of
ERISA), (d) the institution by the PBGC of proceedings to terminate a Benefit
Plan or Multiemployer Plan, (e) any event or condition (i) that provides a basis
under Section 4042(a)(1), (2), or (3) of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan or Multiemployer Plan,
or (ii) that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA, (f) the partial or complete withdrawal within the
meaning of Sections 4203 and 4205 of ERISA, of Borrowers, any of their
Subsidiaries or ERISA Affiliates from a Multiemployer Plan, or (g) providing any
security to any Plan under Section 401(a)(29) of the IRC by Borrowers or their
Subsidiaries or any of their ERISA Affiliates.
"Estimated Billings" means Accounts that are subject
to adjustment as a result of information (reporting a variance with respect to
the quality and/or weight of such Inventory as originally described in
Borrowers' billing records with respect thereto or in any invoice(s) evidencing
same) delivered by a shipper, carrier and/or customer to Borrowers concerning
the quality and/or weight of Inventory subsequent to Borrowers' shipment of such
Inventory, the sale of which gave rise to such Accounts.
"Eurodollar Deadline" has the meaning set forth in
Section 2.6(a)(iii) hereof.
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"Eurodollar Option" has the meaning set forth in
Section 2.6(a)(ii) hereof.
"Event of Default" has the meaning set forth in
Section 8.
"Excess Availability" means, as to each Borrower, the
amount that such Borrower is entitled to borrow as Advances under Section 2.1,
such amount being the difference derived when (a) the sum of the principal
amount of Advances (including Agent Advances and Foothill Loans) then
outstanding to such Borrower (including any amounts that the Lender Group may
have paid for the account of such Borrower pursuant to any of the Loan Documents
and that have not been reimbursed by such Borrower) is subtracted from (b) the
lesser of (i) the Maximum Revolving Amount, less the aggregate principal amount
of Advances (including Agent Advances and Foothill Loans) then outstanding to
all other Borrowers, less the then outstanding Letter of Credit Usage of all
Borrowers, or (ii) the Borrowing Base for such Borrower less the Letter of
Credit Usage for such Borrower, less the aggregate amount of accounts payable
owing by such Borrower that are more than sixty (60) days past due.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and any successor statute thereto.
"Existing Lenders" means collectively, all of the
"Banks" party to and as defined in that certain Amended and Restated Credit
Agreement, dated as of September 22, 1997, by and among Parent, the "Subsidiary
Guarantors" party thereto and as defined therein, and The Chase Manhattan Bank,
as agent for the Banks.
"FEIN" means Federal Employer Identification Number.
"Foothill" means Foothill Capital Corporation, a
California corporation.
"Foothill Loans" has the meaning set forth in Section
2.1(f).
"Funding Date" means the date on which a Borrowing
occurs.
"Funding Losses" has the meaning set forth in Section
2.6(a)(iii) hereof.
"GAAP" means generally accepted accounting principles
as in effect from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrowers' 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
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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.
"Governing Documents" means, with respect to any
Person, the certificate or articles of incorporation, by-laws, or other
organizational or governing documents of such Person.
"Governmental Authority" means any nation or
government, any state, province, or other political subdivision thereof, any
central bank (or similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through Stock or capital ownership or otherwise, by any of
the foregoing.
"Guarantor Collateral" has the meaning set forth in
Section 17.11(a).
"Guarantors" means, individually and collectively,
jointly and severally, the Parent and Anker Group, Inc., a Delaware corporation,
Simba Group, Inc., a Delaware corporation, Anker Power Services, Inc., a West
Virginia corporation, Bronco Mining Company, Inc., a West Virginia corporation,
Vantrans, Inc., a West Virginia corporation, King Knob Coal Co., Inc, a West
Virginia corporation, Heather Glen Resources, Inc., a West Virginia corporation,
Hawthorne Coal Company, Inc. a West Virginia corporation, Upshur Property, Inc,
a West Virginia corporation, Melrose Coal Company, Inc., a West Virginia
corporation, and New Allegheny Land Holding Co., a West Virginia corporation,
and any other Subsidiary of Parent that shall now or hereafter guarantee the
payment and performance of the Obligations to the Lender Group.
"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.
"Heather Glen" means Heather Glen Resources, Inc., a
West Virginia corporation and a Guarantor of the Obligations.
"Hillman Acquisition" shall mean the acquisition of
approximately 210,000,000 tons of coal reserves located in Taylor County, West
Virginia, from the Hillman Coal Company.
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"Hillman Sale-Leaseback" shall mean the sale and
leaseback of the approximately 210,000,000 tons of coal reserves acquired in the
Hillman Acquisition.
"Indebtedness" means: (a) all obligations of a Person
for borrowed money, (b) all obligations of a Person evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations of a Person in respect of letters of credit, bankers acceptances,
interest rate swaps, or other financial products, (c) all obligations of a
Person under capital leases, (d) all obligations or liabilities of others
secured by a Lien on any property or asset of a Person, irrespective of whether
such obligation or liability is assumed, and (e) any obligation of a Person
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or sold with recourse to such Person) any indebtedness, lease,
dividend, letter of credit, or other obligation of any other Person.
"Indemnified Liabilities" has the meaning set forth
in Section 11.3.
"Indemnified Person" has the meaning set forth in
Section 11.3.
"Insolvency Proceeding" means any proceeding
commenced by or against any Person under any provision of the Bankruptcy Code or
under any other bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.
"Intercompany Loans" means short-term intercompany
loans in the ordinary course of business by Anker Energy or by Marine to another
Borrower or Guarantor that are permitted pursuant to Section 7.13.
"Interest Period" means, with respect to that portion
of the Advances bearing interest based on the Adjusted Eurodollar Rate, a period
of 30, 60 or 90 days duration, as elected by Borrowers' Agent in accordance with
the terms of this Agreement; provided, however, that: (a) if any Interest Period
would otherwise end on a day which shall not be a Business Day in London, such
Interest Period shall be extended to the next succeeding Business Day in London,
subject to clauses (c)-(e) below; (b) interest shall accrue from and including
the first day of each Interest Period to, but excluding, the day on which any
Interest Period expires; (c) any Interest Period which would otherwise end on a
day which is not a Business Day in London shall be extended to the next
succeeding Business Day in London unless such Business Day in London falls in
another calendar month, in which case such Interest Period shall end on the next
preceding Business Day in London; (d) with respect to an Interest Period which
begins on the last Business Day in London of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the end
of such Interest Period), the Interest Period shall end on the last Business Day
in London of the calendar month which is one, two or three months after the date
on which the Interest Period began, as applicable, and (e) Borrowers' Agent may
not elect an Interest Period which will end after the Maturity Date.
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"Intellectual Property" has the meaning ascribed
thereto in Section 5.16.
"Interest Rate Protection Agreement" shall mean, for
any Person, an interest rate swap, cap or collar agreement or similar
arrangement between such Person and one or more financial institutions providing
for the transfer or mitigation of interest risks either generally or under
specific contingencies.
"Inventory" means all 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 Borrowers 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
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
Borrowers and all right, title and interest therein and thereto; and further
including, without limitation, all coal in which Borrowers have any interest
which has been extracted from the Real Property, is in a coal stockpile and is
held for sale by Borrowers in the ordinary course of business, together with all
other present and future goods held for sale by Borrowers in the ordinary course
of business, wherever located.
"Inventory Reserves" means reserves (determined from
time to time by Agent in its discretion) for (a) the estimated costs relating to
unpaid freight charges, warehousing or storage charges, taxes, duties, and other
similar unpaid costs associated with the acquisition of Eligible Inventory by
Borrowers, plus (b) the estimated reclamation claims of unpaid sellers of
Inventory sold to Borrowers that arise under the Code and/or the Bankruptcy
Code, plus (c) adverse facts and circumstances relating to the Inventory as
determined by Agent based upon any audit of Borrowers and/or Guarantors
conducted by Agent or based upon the physical survey or ground inspection of
Inventory delivered to Agent pursuant to Section 6.2(i).
"Investment Property" means "investment property" as
that term is defined in Section 9-115 of the Code.
"IRC" means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
"L/C" has the meaning set forth in Section 2.2(a).
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"L/C Guaranty" has the meaning set forth in Section
2.2(a).
"Legal Requirements" means all applicable
international, foreign, federal, state, and local laws, judgments, decrees,
orders, statutes, ordinances, rules, regulations, or Permits.
"Lender" and "Lenders" have the respective meanings
set forth in the preamble to this Agreement, and shall include any other Person
made a party to this Agreement in accordance with the provisions of Section 15.1
hereof.
"Lender Group" means, individually and collectively,
each of the individual Lenders and Agent.
"Lender Group Expenses" means all: reasonable costs
or expenses (including taxes, and insurance premiums) required to be paid by
Borrowers under any of the Loan Documents that are paid or incurred by the
Lender Group; reasonable fees or charges paid or incurred by the Lender Group in
connection with the Lender Group's transactions with Borrowers, including, fees
or charges for photocopying, notarization, couriers and messengers,
telecommunication, public record searches (including tax lien, litigation, and
UCC (or equivalent) searches and including searches with the patent and
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, appraisal (including periodic Personal Property
Collateral or Real Property Collateral (appraisals as permitted pursuant to
Section 2.11(c), and environmental audits; costs and expenses incurred by Agent
in the disbursement of funds to Borrowers (by wire transfer or otherwise);
charges paid or incurred by Agent resulting from the dishonor of checks; costs
and expenses paid or incurred by the Lender Group to correct any default or
enforce any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Personal Property Collateral or the Real
Property Collateral, or any portion thereof, irrespective of whether a sale is
consummated; costs and expenses paid or incurred by Agent in examining the
Books; costs and expenses of third party claims or any other suit paid or
incurred by the Lender Group in enforcing or defending the Loan Documents or in
connection with the transactions contemplated by the Loan Documents or the
Lender Group's relationship with Borrowers (or any of their Subsidiaries party
to one or more Loan Documents); and the Lender Group's reasonable attorneys fees
and expenses incurred in advising, structuring, drafting, reviewing,
administering, amending, terminating, enforcing (including attorneys fees and
expenses incurred in connection with a "workout," a "restructuring," or an
Insolvency Proceeding concerning Borrowers), defending, or concerning the Loan
Documents, irrespective of whether suit is brought.
"Lender-Related Persons" means, with respect to any
Lender, such Lender, together with such Lender's Affiliates, and the officers,
directors, employees, counsel, agents, and attorneys-in-fact of such Lender and
such Lender's Affiliates.
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"Letter of Credit" means an L/C or an L/C Guaranty,
as the context requires.
"Letter of Credit Usage" means the sum of (a) the
undrawn amount of Letters of Credit, plus (b) the amount of unreimbursed
drawings under Letters of Credit.
"Lien" means any interest in property securing an
obligation owed to, or a claim by, any Person other than the owner of the
property, whether such interest shall be based on the common law, statute, or
contract, whether such interest shall be recorded or perfected, and whether such
interest shall be contingent upon the occurrence of some future event or events
or the existence of some future circumstance or circumstances, including the
lien or security interest arising from a mortgage, deed of trust, encumbrance,
pledge, hypothecation, assignment, deposit arrangement, security agreement,
adverse claim or charge, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting Real
Property.
"Loan Account" has the meaning set forth in Section
2.10.
"Loan Documents" means this Agreement, the Continuing
Guaranty of the Obligations by each of the Guarantors and the Borrowers in favor
of Agent, for the benefit of the Lender Group, the Security Agreements, the
Pledge Agreement, the Disbursement Letter, the Letters of Credit, the Lockbox
Agreements, the Mortgages, any note or notes executed by Borrowers and payable
to the Lender Group, and any other agreement entered into, now or in the future,
in connection with this Agreement.
"Loans" means, collectively, all Advances, the Term
Loan, and any and all other payment Obligations at any time charged by the Agent
to the Loan Account in accordance with the terms of the Loan Documents.
"Lockbox Account" shall mean a depositary account
established pursuant to one of the Lockbox Agreements.
"Lockbox Agreements" means those certain Lockbox
Operating Procedural Agreements and those certain Depository Account Agreements,
in form and substance satisfactory to Agent, each of which is among Borrowers
and/or Borrowers' Agent, Agent, and one of the Lockbox Banks.
"Lockbox Banks" means Mellon Bank, N.A., or such
other bank or banks as may be agreed upon between Agent and Borrowers and/or
Borrowers' Agent from time to time.
"Lockboxes" has the meaning set forth in Section 2.7.
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"Marine" means Marine Coal Sales Company, a Delaware
corporation, and a Borrower hereunder.
"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 Borrowers and/or
Guarantors, other than as a result of the consummation of Permitted Dispositions
and Permitted Supplemental Dispositions; (b) the material impairment of
Borrowers' and/or Guarantors' ability to perform their obligations under the
Loan Documents to which they are a party or of the Lender Group to enforce the
Obligations or realize upon the Collateral or the Guarantor Collateral
(including, without limitation, any action, proceeding or investigation by any
Governmental Authority with respect to (x) Borrowers and/or Guarantors, (y) any
Real Property at which Borrowers or Guarantors operate a coal mine or (z) any
Permits, that in any case have resulted in or will result in, in Agent's
judgment, a material impairment of Agent's ability to have access to or gain
possession of any of the Equipment), (c) a material adverse effect on the value
of the Collateral or the Guarantor Collateral or the amount that the Lender
Group would be likely to receive (after giving consideration to delays in
payment and costs of enforcement) in the liquidation of the Collateral or
Guarantor Collateral, other than as a result of the consummation of Permitted
Dispositions and Permitted Supplemental Dispositions, or (d) a material
impairment of the priority of the Agent's Liens with respect to the Collateral
or Guarantor Collateral.
"Material Properties" means (a) those tracts or
parcels of land containing coal reserves which are either owned by or leased to
any of the following Subsidiaries (the "Relevant Companies") and which are
either currently being actively mined (and for which active mining is not
expected by Parent to be completed before December 31, 2002) or are part of
Parent's five-year or ten-year mining plans for Parent and its Subsidiaries:
Anker Energy, Juliana Mining Company, Inc., Patriot, Anker West Virginia and
Vindex; and (b) those tracts or parcels of land either owned by or leased to any
Relevant Companies as reflected in the five-year and ten-year mining plans for
Parent and its Subsidiaries.
"Maturity Date" means, at the time of selection of an
Interest Period, the last day of the then current term of this Agreement.
"Maximum Amount" means, on any date of determination,
the sum of (a) the Maximum Revolving Amount and (b) the outstanding principal
balance of the Term Loan that is then permitted to remain unpaid in accordance
with the amortization schedule therefor set forth in Section 2.3(a).
"Maximum Revolving Amount" means $40,000,000.
"Maximum Term Loan Amount" means $15,000,000.
"Mortgages" means one or more mortgages, deeds of
trust, or deeds to secure debt, executed by Borrowers and Guarantors in favor of
Agent, the form and substance
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of which shall be satisfactory to Agent, that encumber the Real Property
Collateral and the related improvements thereto.
"Multiemployer Plan" means a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) to which Borrowers, any of their
Subsidiaries, or any ERISA Affiliate has contributed, or was obligated to
contribute, within the past six years.
"Negotiable Collateral" means all of a Person's
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.
"Net Advance Request" means an amount equal to the
difference between (a) the aggregate amount of Advances requested by Borrowers
to be made by Lenders on any Funding Date and (b) the Collections received by
Agent on such Funding Date.
"New Allegheny" means New Allegheny Land Holding
Company, Inc., a West Virginia corporation and a Guarantor of the Obligations.
"Non-assignable Property" has the meaning set forth
in the definition of Collateral set forth in this Section 1.
"Obligations" means all loans, Advances, Term Loans,
debts, principal, interest (including any interest that, but for the provisions
of the Bankruptcy Code, would have accrued), contingent reimbursement
obligations under any outstanding Letters of Credit, premiums (including Early
Termination Premiums), liabilities (including all amounts charged to Borrowers'
Loan Account pursuant hereto), obligations, fees, charges, costs, or Lender
Group Expenses (including any fees or expenses that, but for the provisions of
the Bankruptcy Code, would have accrued), guaranties, covenants, and duties
owing by Borrowers to the Lender Group of any kind and description (whether
pursuant to or evidenced by the Loan Documents or pursuant to any other
agreement between the Lender Group and Borrowers, and irrespective of whether
for the payment of money), whether direct or indirect, absolute or contingent,
due or to become due, now existing or hereafter arising, and further including
all interest not paid when due and all Lender Group Expenses that Borrowers are
required to pay or reimburse by the Loan Documents, by law, or otherwise.
"OLV" means, with respect to any Collateral, the
orderly liquidation value thereof, as determined by Lender pursuant to an
appraisal, and performed by an appraiser, satisfactory to Lender, net of
estimated liquidation expenses with respect to such Collateral, as determined by
Lender.
"Overadvance" has the meaning set forth in Section
2.5.
"Parent" means Anker Coal Group, Inc., a Delaware
corporation, and its successors and assigns.
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"Patriot" means Patriot Mining Company, a West
Virginia corporation and a Borrower hereunder.
"Participant" has the meaning set forth in Section
15.1(e).
"Pay-Off Letter" means a letter, in form and
substance reasonably satisfactory to Agent, from Existing Lenders respecting the
amount necessary to repay in full all of the obligations of Borrowers owing to
Existing Lenders and obtain a termination or release of all of the Liens
existing in favor of Existing Lenders in and to the properties or assets of
Borrowers and Guarantors.
"PBGC" means the Pension Benefit Guaranty Corporation
as defined in Title IV of ERISA, or any successor thereto.
"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.
"Permitted Disposition" means any sale, assignment,
transfer or other disposition of any property (whether now owned or hereafter
acquired) by any of Borrowers or Guarantors to any Person consisting of any of
the following: (a) any sale, assignment, transfer, exchanges or other
disposition of any Inventory sold or disposed of in the ordinary course of
business and on ordinary business terms, (b) the sale or other disposition of
obsolete, worn-out or other nonproductive Real Property and/or Equipment to the
extent that such property has a value not exceeding for all such Real Property
and all such Equipment, respectively, (i) $1,000,000 in the aggregate prior to
the first anniversary of the Closing Date and (ii) $500,000 in the aggregate for
each year thereafter during the term of this Agreement, (c) the sale or other
disposition by Simba Group, Inc. of Stock in any Subsidiary of Simba Group,
Inc., (d) the Hillman Sale-Leaseback, provided that the Hillman Sale-Leaseback
occurs prior to December 31, 1999, (e) the trade-in or other disposition of
Equipment which is replaced by Borrowers or Guarantors (as the case may be) with
similar Equipment ("Replacement Equipment), provided, that, (i) the Replacement
Equipment has a value equal to or greater than the value of the Equipment that
it replaces, (ii) Agent shall have a perfected Lien for the benefit of the
Lender Group in the Replacement Equipment, subject only to Permitted Liens, and
(iii) the Equipment disposed of and/or traded in by Borrowers in each year of
the term of this Agreement shall in no event have an auction value exceeding
$1,000,000, in the aggregate, (f) the sale or other disposition of Equipment
within one hundred eighty (180) days after the expiration of the operating,
finance or capital lease pursuant to which Borrowers or Guarantors leased such
Equipment, (g) any Permitted Mine Disposition and (h) the Real Property
described on Schedule R-2.
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"Permitted Investments" shall mean: (a) direct
obligations of the United States of America, or of any agency thereof, or
obligations guaranteed as to principal and interest by the United States of
America, or of any agency thereof, in either case maturing not more than 90 days
from the date of acquisition thereof; (b) certificates of deposit issued by any
bank or trust company, or by a branch or an agency of any foreign bank,
organized or licensed under the laws of the United States of America or any
state thereof and having capital, surplus and undivided profits of at least
$500,000,000, maturing not more than 90 days from the date of acquisition
thereof; (c) eurodollar time deposits with any bank or trust company organized
under the laws of the United States of America or any state thereof and having
capital, surplus and undivided profits of at least $500,000,000, maturing not
more than 90 days from the date made; (d) commercial paper rated A-1 or better
or P-1 by Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. ("S&P"), or Moody's Investors Services, Inc. ("Moody's"),
respectively, maturing not more than 90 days from the date of acquisition
thereof; in each case so long as the same (x) provide for the payment of
principal and interest (and not principal or interest alone) and (y) are not
subject to any contingency regarding the payment of principal or interest; (e)
investments in repurchase agreements (or reverse repurchase agreements) covering
other Permitted Investments with financial institutions who are elected primary
government securities dealers by the Federal Reserve Board or whose securities
are rated AA- or better by S&P or Aa or better by Moody's; and (f) money-market
funds or money-market mutual funds which (i) seek to maintain a constant net
asset value, (ii) maintain fund assets under management having an aggregate
market value of at least $500,000,000, and (iii) invest primarily in Investments
referred to in clauses (a) through (e) above.
"Permitted Liens" means (a) Liens held by Agent for
the benefit of the Lender Group, (b) Liens for unpaid taxes that either (i) are
not yet due and payable or (ii) are the subject of Permitted Protests, (c) Liens
set forth on Schedule P-1, (d) (i) the interests of lessors under operating
leases, and (ii) purchase money Liens of lessors under capital leases to the
extent that the acquisition or lease of the underlying asset is permitted under
Section 7.21 and so long as the Lien only attaches to the asset purchased or
acquired and only secures the purchase price of the asset, (e) Liens arising by
operation of law in favor of warehousemen, landlords, carriers, mechanics,
materialmen, laborers, or suppliers, incurred in the ordinary course of business
of Borrowers and not in connection with the borrowing of money, and which Liens
either (i) are for sums not yet due and payable, or (ii) are the subject of
Permitted Protests, (f) Liens arising from deposits made in connection with
obtaining worker's compensation, black lung, West Virginia Pneumoconiosis Fund,
or other unemployment insurance, (g) Liens or deposits to secure performance of
bids, tenders, or leases (to the extent permitted under this Agreement),
incurred in the ordinary course of business of Borrowers and not in connection
with the borrowing of money, (h) Liens arising by reason of security for surety,
reclamation or appeal bonds or statutory obligations and other obligations of a
like nature in the ordinary course of business of Borrowers, (i) Liens of or
resulting from any judgment or award that reasonably could not be expected to
result in a Material Adverse Change and as to which the time for the appeal or
petition for rehearing of which has not yet expired, or in respect of which
Borrowers are in good faith prosecuting an appeal or proceeding for a review and
in respect of which a stay of execution pending such appeal or proceeding for
review has been secured, (j) with respect to
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any Real Property, whether now owned or hereafter acquired, easements, rights of
way, zoning and similar covenants and restrictions, and similar encumbrances
that customarily exist on properties of Persons engaged in similar activities
and similarly situated and that in any event do not materially interfere with or
impair the use or operation of the Collateral by Borrowers or the value of any
of the Agent's Liens thereon or therein for the benefit of the Lender Group, or
materially interfere with the ordinary conduct of the business of Borrowers, (k)
Liens on property of any Person that becomes a Subsidiary of the Parent and/or
Borrowers after the Closing Date, provided that such Liens are in existence at
the time such Person becomes such a Subsidiary and were not created in
anticipation thereof; (l) Liens upon Real Property and/or personal property
acquired after the Closing Date (by purchase, construction, lease or otherwise)
by any Borrower or any Subsidiary of Parent and/or any Borrower, each of which
Liens was created solely for the purpose of securing Indebtedness or royalty
obligations representing, or incurred to finance, refinance or refund, the cost
(including the cost of construction or lease) of such Real Property or personal
property; provided, however, that the Permitted Liens described in clauses (k)
and (l) of this definition shall at no time secure Indebtedness in excess of an
aggregate amount of $5,000,000 at any time outstanding, for all Borrowers and
Guarantors; and (m) Liens granted in the Collateral to secure the Refinanced
Senior Note Indebtedness permitted pursuant to Section 7.1(d) that are
subordinated in right and priority to the Liens granted therein to Agent for the
benefit of the Lender Group, as provided for in and subject to the terms and
conditions of the Refinanced Senior Note Intercreditor Agreement.
"Permitted Mine Disposition" means any sale,
assignment, transfer or other disposition by Borrowers or Guarantors to any
Person of all of their right, title and interest in and to the Real Property
Collateral and other Collateral now or hereafter comprising the following Real
Property and other Collateral owned or leased by Borrowers or Guarantors,
provided, that, Borrowers' Agent shall have delivered fourteen (14) days' prior
notice thereof to Agent, together with a description of the proposed
disposition, the proposed use of any proceeds thereof (which shall be consistent
with the terms of Section 2.3(a)), and such other documents and information as
Agent shall reasonably request: (a) the Beckley Smokeless Division owned by
Anker West Virginia located in Raleigh County, West Virginia, (b) the Mt. Storm
Division owned by Anker West Virginia located in Garrett County, West Virginia,
and Grant County, West Virginia, (c) the Collateral owned by Vindex Energy
Corporation and New Allegheny located in Grant County, West Virginia, (d) the
Bayhill Coal Reserve owned by Anker West Virginia located in Raleigh County,
West Virginia, (e) the Big Creek Coal Reserve owned by Anker Virginia located in
Tazwell County, Virginia, (f) the Hillman Acquisition owned by Simba in Taylor
County, West Virginia, (h) the Rail and River Terminal, including the Granville
and Rosedale docking facilities, owned by Patriot located in Monogalia County,
West Virginia, (i) the AES Warrior Run Coal Sales Contract dated July 22, 1993
between Anker Energy and AES Warrior Run, Inc., and (j) the AES Beaver Valley
Coal Sales Contract dated January 2, 1997 between Anker Energy and BV Partners.
"Permitted Protest" means the right of Borrowers to
protest any Lien (other than any such Lien that secures the 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
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respect to such obligation is established on the books of Borrowers in an amount
that is reasonably satisfactory to Agent, (b) any such protest is instituted and
diligently prosecuted by Borrowers in good faith, and (c) 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 Agent's Liens in and to the
Collateral.
"Permitted Supplemental Disposition" means any sale,
assignment, transfer or other disposition (collectively, "Sale") by Borrowers or
Guarantors to any Person, other than a Permitted Disposition, of all of their
right, title and interest in and to the following Collateral: (a) any mine site
or other Real Property Collateral owned or leased by Borrowers or Guarantors
and/or (b) any Equipment (including, without limitation, any coal preparation
plant located thereon), which Sale has been approved by the requisite Lenders
hereunder, in their sole discretion, as evidenced by a writing delivered by
Agent to Borrowers' Agent, based upon Borrowers' written plan delivered to Agent
describing the proposed Sale, including, without limitation, (i) a detailed
description of the Collateral that is the subject of the proposed Sale, (ii) the
purchase price and terms of payment therefor, (iii) a copy of any proposed
purchase and sale or similar agreement entered, or to be entered, into by
Borrowers or Guarantors to consummate the Sale, (iv) an internally prepared pro
forma balance sheet and income projections for Borrowers and Guarantors, after
giving effect to the proposed Sale, and (v) such other documents and information
relating to the proposed Sale as Agent shall reasonably request.
"Person" means and includes natural persons,
corporations, limited liability companies, limited partnerships, general
partnerships, limited liability partnerships, joint ventures, trusts, land
trusts, business trusts, or other organizations, irrespective of whether they
are legal entities, and governments and agencies and political subdivisions
thereof.
"Personal Property Collateral" means all Collateral
other than the Real Property Collateral.
"Plan" means any employee benefit plan, program, or
arrangement maintained or contributed to by Borrowers or with respect to which
they may incur liability.
"Pledge Agreements" mean, collectively, the Pledge
and Security Agreement executed and delivered on the Closing Date by,
respectively, the Parent, Anker West Virginia, Vindex, Vantrans and Heather
Glen, in favor of Agent, in form and substance satisfactory to Agent, pursuant
to which, among other things, Parent, Anker West Virginia Vindex, Vantrans and
Heather Glen shall each pledge to Agent, for the benefit of Lending Group, all
of the Stock of its Subsidiaries owned by it.
"Pro Rata Share" means, with respect to a Lender, a
fraction (expressed as a percentage), the numerator of which is the amount of
such Lender's Commitment and the denominator of which is the aggregate amount of
the Commitments.
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"Real Property" means any estates or interests in
real property or mineral rights now owned or hereafter acquired by Borrowers.
"Real Property Collateral" means the parcel or
parcels of real property and the related improvements thereto identified on
Schedule R-1, and any Real Property hereafter acquired by Borrowers and
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 Borrowers and 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 Borrowers and Guarantors more particularly
described in the Mortgages.
"Reference Rate" means the variable rate of interest,
per annum, most recently announced by Norwest Bank Minnesota, National
Association, or any successor thereto, as its "base rate," irrespective of
whether such announced rate is the best rate available from such financial
institution.
"Reference Rate Advances" means all Advances made
pursuant to this Agreement in respect of which interest is accruing at a rate
calculated in accordance with Section 2.6(a)(i) by reference to and based upon
the Reference Rate.
"Refinanced Senior Note Indebtedness" has the meaning
set forth in Section 7.1(d).
"Refinanced Senior Note Intercreditor Agreement" has
the meaning set forth in Section 7.1(d).
"Replacement Term Loan" has the meaning set forth in
Section 3.3(a).
"Replacement Term Loan Lender" has the meaning set
forth in Section 3.3(a).
"Reportable Event" means any of the events described
in Section 4043(c) of ERISA or the regulations thereunder other than a
Reportable Event as to which the provision of 30 days notice to the PBGC is
waived under applicable regulations.
"Required Lenders" means, at any time, Lenders whose
Pro Rata Shares aggregate 51% or more of the Commitments, or, if the Commitments
have been terminated irrevocably, 51% of the Obligations then outstanding.
"Reserve Percentage" means, on any day, the
percentage (expressed as a decimal) prescribed by the Board of Governors of the
Federal Reserve System (or any successor or any other banking authority to which
federal or state chartered banks are subject, including any
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board or governmental or administrative agency of the United States or any other
jurisdiction to which banks are subject), for determining the reserve
requirement (including without limitation any basic, supplemental, marginal or
emergency reserves) which is or would be applicable to deposits of United States
Dollars in a non-United States or an international banking office of a bank used
to fund a loan subject to an Adjusted Eurodollar Rate or any loan made with the
proceeds of such deposit. The Adjusted Eurodollar Rate shall be adjusted on and
as of the effective day of any change in the Reserve Percentage.
"Retiree Health Plan" means an "employee welfare
benefit plan" within the meaning of Section 3(1) of ERISA that provides benefits
to individuals after termination of their employment, other than as required by
Section 601 of ERISA.
"Revolving Facility Usage" means, as of any date of
determination, the sum of (a) the aggregate amount of Advances outstanding, plus
(b) the Letter of Credit Usage.
"SEC" means the United States Securities and Exchange
Commission and any successor Federal agency having similar powers.
"Securities Account" means a "securities account" as
that term is defined in Section 8-501 of the Code.
"Security Agreement" means, individually and
collectively, the General Security Agreement separately executed and delivered
on the Closing Date by each Guarantor in favor of Foothill, in form and
substance satisfactory to Agent, for the benefit of Lending Group, pursuant to
which, among other things, such Guarantor shall grant to Agent, for the benefit
of Lending Group, a first priority Lien on all of its Guarantor Collateral more
particularly described therein.
"Senior Notes" means, collectively, the senior
unsecured 9-3/4% notes due 2007 in an aggregate principal amount of $125,000,000
issued by Parent pursuant to the Senior Notes Indenture.
"Senior Notes Indenture" means the Indenture dated as
of September 25, 1997 executed among Parent, as Issuer, various guarantors
(including Borrowers) signatory thereto and Marine Midland Bank, as Trustee.
"Settlement" has the meaning set forth in Section
2.1(h)(i).
"Settlement Date" has the meaning set forth in
Section 2.1(h)(i).
"Simba" means Simba Group, Inc., a Delaware
corporation, and a Guarantor of the Obligations.
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"Solvency Certificate" means a certificate executed
and delivered to Agent in the form of Exhibit S-1 attached hereto by the
President, Treasurer, or Chief Financial Officer of Parent and of each Borrower,
certifying to Agent and Lenders that, as of the date of such certificate, except
as otherwise set forth therein, Parent and each Borrower (as applicable) is
Solvent, accompanied by an internally prepared consolidated and consolidating
balance sheet in support of such certification.
"Solvent" means, with respect to any Person on a
particular date, that on such date (a) at fair valuations, all of the properties
and assets of such Person are greater than the sum of the debts, including
contingent liabilities, of such Person, (b) the present fair salable value of
the properties and assets of such Person is not less than the amount that will
be required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person's ability to pay as such debts mature, and (e)
such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person's properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. Solely for the purposes of determining whether each Borrower is
Solvent, the aggregate amount of Obligations in respect of which each Borrower
is jointly and severally liable to the Lender Group hereunder shall be allocated
to each Borrower based upon the sum of (i) the amount of the Loans made and
Letter of Credit Usage incurred exclusively to or for such Borrower's account,
as evidenced by the weekly borrowing base certificate delivered by Borrowers to
Agent pursuant to Section 6.2(d), plus (ii) a portion of the aggregate amount of
Loans made and Letter of Credit Usage incurred by or for the account of such
Borrower as a Guarantor of the Obligations due the Lenders by each other
Borrower and Guarantor (the "Guaranteed Portion"), based upon Borrowers' good
faith estimate of the Guaranteed Portion of the Obligations with respect to
which such Borrower shall be liable, allocated by Borrowers so that in any event
the total of sums for each Borrower do not exceed for any Borrower such
Borrower's net worth, as evidenced by the Solvency Certificate. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that reasonably can
be expected to become an actual or matured liability.
"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).
"Subsidiary" of a Person means a corporation,
partnership, limited liability company, or other entity in which that Person
directly or indirectly owns or controls the shares of Stock or other ownership
interests having ordinary voting power to elect a majority of the
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board of directors (or appoint other comparable managers) of such corporation,
partnership, limited liability company, or other entity.
"Termination Date" has the meaning set forth in
Section 3.4.
"Term Loan" has the meaning set forth in Section 2.3.
"Term Note" has the meaning set forth in Section 2.3.
"Value" means, with respect to Inventory, the lower
of cost or market value thereof, as determined in accordance with Borrowers'
past business practices.
"Vantrans" means Vantrans, Inc., a West Virginia
corporation and a Guarantor of the Obligations.
"Vindex" means Vindex Energy Corporation, a West
Virginia corporation and a Borrower hereunder.
"Voidable Transfer" has the meaning set forth in
Section 15.8.
1.2 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used herein, the
term "financial statements" shall include the notes and schedules thereto.
Whenever the term "Borrowers" is used in respect of a financial covenant or a
related definition, it shall be understood to mean Borrowers on a consolidated
basis unless the context clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in
the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.
1.4 CONSTRUCTION. Unless the context of this Agreement or any
other Loan Document clearly requires otherwise, references to the plural include
the singular, references to the singular include the plural, the term
"including" is not limiting, and the term "or" has, except where otherwise
indicated, the inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement
or any other Loan Document refer to this Agreement or any other Loan Documents,
as the case may be, as a whole and not to any particular provision of this
Agreement or such other Loan Document, as the case may be. An Event of Default
shall "continue" or be "continuing" until such Event of Default has been waived
in writing by Agent. Section, subsection, clause, schedule, and exhibit
references herein are to this Agreement unless otherwise specified. Any
reference in this Agreement or in the Loan Documents to this Agreement or any of
the Loan Documents shall include all alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions, joinders, and
supplements, thereto and thereof, as applicable.
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1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVING ADVANCES.
(a) Subject to the terms and conditions of this
Agreement and during the term of this Agreement, each Lender agrees to make
advances ("Advances") to Borrowers' Agent on behalf of Borrowers in an amount at
any one time outstanding not to exceed such Lender's Pro Rata Share of an amount
equal to the lesser of (i) the Maximum Revolving Amount less the then existing
Letter of Credit Usage, or (ii) the aggregate Borrowing Base for all Borrowers
less (A) the aggregate amount of the then existing Letter of Credit Usage for
all Borrowers, less (B) the aggregate amount of the Inventory Reserves with
respect to all Borrowers. For purposes of this Agreement, "Borrowing Base", as
of any date of determination, shall mean for each Borrower the result of:
(x) the lowest of (i) 85% of Eligible
Accounts of such Borrower, but not to exceed the aggregate
amount of $15,000,000 in the case of Eligible Accounts
evidencing Borrowers' Estimated Billings, less the amount, if
any, of the Dilution Reserve established by Agent with respect
to such Borrower, and (ii) an amount equal to such Borrower's
Collections with respect to Accounts for the immediately
preceding 45 day period, plus
(y) the lowest of (i) $7,000,000, less the
then outstanding aggregate amount of Advances to all other
Borrowers with respect to their Eligible Inventory, (ii) 65%
of the Value of Eligible Inventory of such Borrower, (iii) 30%
of the amount of credit availability created for all Borrowers
by clause (x) above, and (iv) 80% of that percentage of Value
that was utilized by the appraiser that prepared the Inventory
appraisal most recently delivered to Agent, in order for such
appraiser to establish OLV of such Inventory, multiplied by
the Value of Eligible Inventory of such Borrower, minus
(z) the Beckley Smokeless Equipment Reserve,
plus the Equipment Reserve, plus the aggregate amount of
reserves, if any, established by Agent under Section 2.1(b).
The Lenders shall have no obligation to make further Advances hereunder to the
extent they would cause the outstanding Revolving Facility Usage to exceed the
Maximum Revolving Amount.
Amounts borrowed pursuant to this Section 2.1 may be (i) repaid and, subject to
the terms and conditions of this Agreement, reborrowed at any time during the
term of this Agreement, and (ii)
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re-advanced by Anker Energy or Marine to other Borrowers and/or to Guarantors if
and to the extent permitted by Section 7.13.
(b) Advance Rate Adjustments and Reserves; Inventory
Reappraisals.
(i) Anything to the contrary in Section
2.1(a) above notwithstanding, without limiting any other rights and remedies of
Agent or Lenders hereunder or under the other Loan Documents, all Advances and
Letters of Credit otherwise available to Borrowers shall be subject to Agent's
continuing right in its discretion, without declaring an Event of Default, to
establish reserves reducing the amounts of Advances and Letters of Credit
otherwise available to Borrowers and to increase and decrease such reserves from
time to time, if and to the extent that, in Agent's judgment, exercised in good
faith, such reserves are necessary to protect Agent and/or Lenders against
possible nonpayment for any reason by Account Debtors or possible nonpayment of
any of the Obligations, or to protect the priority of Agent's Liens in the
Collateral (exclusive of Permitted Liens therein), or in respect of any state of
facts which constitutes a Default or an Event of Default hereunder or for any
other reason, including, without limitation, an occurrence of a Material Adverse
Change, or if Agent determines that it is at any time unable to gain access to
any of Borrowers' Equipment, or if Agent has not received Collateral Access
Agreements from lessors of Real Property where Inventory and/or Equipment is
located (provided, that, the reserve established by Agent in such event shall
not exceed, for each such leased location, an amount equal to the aggregate
rental, royalty and other sums due and payable to the lessor with respect to
which lessor could assert a Lien pursuant to state law ("Lease Payments") at
such locations where Equipment or Inventory are located that are past due, as
determined by Agent, and provided, further, that Agent shall not establish such
reserve with respect to any portion of such past due Lease Payments if and to
the extent Borrowers have challenged their liability therefor pursuant to a
Permitted Protest, unless the lessor who has asserted a claim with respect to
such past due Lease Payments has taken any action or commenced an action, of any
kind or nature, to assert, perfect or enforce a Lien to secure such past due
Lease Payments) or if any Borrower is in material violation of or not in
material compliance with any Legal Requirements of any Governmental Authority;
and
(ii) Subject to Section 2.11(c), Agent shall
have the right to have the Inventory reappraised by a qualified appraiser
selected by Agent from time to time after the Closing Date for the purpose of
redetermining the OLV of the Inventory. In the absence of the occurrence and
continuation of an Event of Default, such appraisals shall occur no more often
than twice during each twelve-month period following the Closing Date.
(c) Procedure for Borrowing. Each Borrowing shall be
made upon Borrowers' Agent's irrevocable request therefor delivered to Agent
(which notice must be received by Agent no later than 10:00 a.m. (California
time) on the requested Funding Date if the Net Advance Request is for $5,000,000
or less, or no later than 10:00 a.m. (California time) on the Business Day
immediately preceding the requested Funding Date if the Net Advance Request is
for more than $5,000,000, specifying (i) the amount of the Borrowing, (ii) the
requested Funding Date, which shall be a Business Day; and (iii) whether
Borrowers are
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exercising the Eurodollar Option, provided, however, that, notwithstanding
anything to the contrary contained herein, each Borrowing of an Adjusted
Eurodollar Rate Advance shall be made in accordance with and shall be subject to
the provisions of Sections 2.6(a)(ii) through Sections 2.6(a)(vi), inclusive.
(d) Agent's Election. Promptly after receipt of a
request for a Net Requested Advance pursuant to Section 2.1(c) in excess of
$5,000,000, Agent shall elect, in its discretion, (i) to have the terms of
Section 2.1(e) apply to such requested Borrowing, or (ii) to request Foothill to
make a Foothill Loan pursuant to the terms of Section 2.1(f) in the amount of
the requested Borrowing. Any Net Requested Advance of $5,000,000 or less shall
be made as a Foothill Loan pursuant to Section 2.1(f).
(e) Making of Advances.
(i) In the event that Agent shall elect to
have the terms of this Section 2.1(e) apply to a requested Borrowing as
described in Section 2.1(d), then promptly after receipt of a request for a
Borrowing pursuant to Section 2.1(c), Agent shall notify the Lenders, not later
than 1:00 p.m. (California time) on the Business Day immediately preceding the
Funding Date applicable to a Reference Rate Advance or, as applicable, two (2)
Business Days preceding the Funding Date applicable to an Adjusted Eurodollar
Rate Advance by telecopy, telephone, or other similar form of transmission, of
the requested Borrowing. Each Lender shall make the amount of such Lender's Pro
Rata Share of the requested Borrowing available to Agent in immediately
available funds, to such account of Agent as Agent may designate, not later than
12:00 p.m. (California time) on the Funding Date applicable thereto. After
Agent's receipt of the proceeds of such Advances, upon satisfaction of the
applicable conditions precedent set forth in Section 3 hereof, Agent shall make
the proceeds of such Advances available to Borrowers' Agent not later than 1:00
p.m. (California time) on the applicable Funding Date by transferring same day
funds equal to the proceeds of such Advances received by Agent to Borrowers'
Agents' Designated Account; provided, however, that, subject to the provisions
of Section 2.1(k), Agent shall not request any Lender to make, and no Lender
shall have the obligation to make, any Advance if Agent shall have received
written notice from any Lender, or otherwise has actual knowledge, that (1) one
or more of the applicable conditions precedent set forth in Section 3 will not
be satisfied on the requested Funding Date for the applicable Borrowing unless
such condition has been waived, or (2) the requested Borrowing would exceed the
Availability on such Funding Date of the Borrower that requested such Borrowing.
(ii) Unless Agent receives notice from a
Lender on or prior to the Closing Date or, with respect to any Borrowing after
the Closing Date, at least one (1) Business Day prior to the date of such
Borrowing, that such Lender will not make available as and when required
hereunder to Agent for the account of Borrowers the amount of that Lender's Pro
Rata Share of the Borrowing, Agent shall assume that each Lender has made or
will make such amount available to Agent in immediately available funds on the
Funding Date and Agent may (but shall not be so required), in reliance upon such
assumption, make available to Borrowers on such date a corresponding amount. If
and to the extent any Lender shall not have
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made its full amount of its Pro Rata Share of such Borrowing available to Agent
in immediately available funds and Agent in such circumstances has made
available to Borrowers the Defaulting Lender's Pro Rata Share thereof, the
Defaulting Lender shall on the Business Day following such Funding Date make
such amount available to Agent, together with interest at the Defaulting Lenders
Rate for each day during such period. A notice submitted by Agent to any
Defaulting Lender with respect to amounts owing under this subsection shall be
conclusive, absent manifest error. If such amount is so made available, such
payment to Agent shall constitute such Defaulting Lender's Advance on the date
of Borrowing for all purposes of this Agreement. If the Defaulting Lender's Pro
Rata Share of a Borrowing is not made available to Agent on the Business Day
following the Funding Date, Agent will notify Borrowers of such failure to fund
and, upon demand by Agent, Borrowers shall re-pay to Agent for Agent's account
the Defaulting Lender's Pro Rata Share of such Borrowing, together with interest
thereon for each day elapsed since the date of such Borrowing, at a rate per
annum equal to the interest rate applicable at the time to the Advances
composing such Borrowing. The failure of any Defaulting Lender to make any
Advance on any Funding Date shall not relieve any other Lender of any obligation
hereunder to make an Advance on such Funding Date, but no Lender shall be
responsible for the failure of any Defaulting Lender to make the Advance to be
made by such other Lender on any Funding Date.
(iii) Agent shall not be obligated to
transfer to a Defaulting Lender any payments made by Borrowers to Agent for the
Defaulting Lender's benefit; nor shall a Defaulting Lender be entitled to the
sharing of any payments hereunder. Amounts payable to a Defaulting Lender shall
instead be paid to or retained by Agent. Agent may hold and, in its discretion,
re-lend to Borrowers the amount of all such payments received or retained by
them for the account of such Defaulting Lender. Solely for the purposes of
voting or consenting to matters with respect to the Loan Documents and
determining Pro Rata Shares, such Defaulting Lender shall be deemed not to be a
"Lender" and such Lender's Commitment shall be deemed to be zero (-0-). This
section shall remain effective with respect to such Defaulting Lender until (x)
the Obligations under this Agreement shall have been declared or shall have
become immediately due and payable or (y) the requisite non-Defaulting Lenders
and Agent shall have waived such Defaulting Lender's default in writing. The
operation of this section shall not be construed to increase or otherwise affect
the Commitment of any Lender, or relieve or excuse the performance by Borrowers
of their duties and obligations hereunder.
(f) Making of Foothill Loans.
(i) In the event Agent shall elect, with the
consent of Foothill as a Lender, to have the terms of this Section 2.1(f) apply
to a requested Borrowing in excess of $5,000,000 as described in Section 2.1(d),
or in the event of any requested Borrowing of $5,000,000 or less, Foothill as a
Lender shall make an Advance in the amount of such Borrowing (any such Advance
made solely by Foothill as a Lender pursuant to this Section 2.1(f) being
referred to as a "Foothill Loan" and such Advances being referred to
collectively as "Foothill Loans") available to Borrowers on the Funding Date
applicable thereto by transferring same day funds to Borrowers' Agents'
Designated Account. Each Foothill Loan is an Advance hereunder
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and shall be subject to all the terms and conditions applicable to other
Advances, except that all payments thereon shall be payable to Foothill as a
Lender solely for its own account (and for the account of the holder of any
participation interest with respect to such Advance). Subject to the provisions
of Section 2.1(k), Agent shall not request Foothill as a Lender to make, and
Foothill as a Lender shall not make, any Foothill Loan if Agent shall have
received written notice from any Lender, or otherwise has actual knowledge, that
(I) one or more of the applicable conditions precedent set forth in Section 3
will not be satisfied on the requested Funding Date for the applicable Borrowing
unless such condition has been waived, or (II) the requested Borrowing would
exceed the Availability of Borrowers on such Funding Date. Foothill as a Lender
shall not otherwise be required to determine whether the applicable conditions
precedent set forth in Section 3 have been satisfied on the Funding Date
applicable thereto prior to making any Foothill Loan.
(ii) The Foothill Loans shall be secured by
the Collateral and shall constitute Advances and Obligations hereunder, and
shall bear interest at the rate applicable from time to time to Advances
pursuant to Section 2.6 hereof.
(g) Agent Advances.
(i) Subject to the limitations set forth in
the proviso contained in this Section 2.1(g), Agent hereby is authorized by
Borrowers and the Lenders, from time to time in Agent's sole discretion, (1)
after the occurrence and during the continuance of a Default or an Event of
Default, or (2) at any time that any of the other applicable conditions
precedent set forth in Section 3.2 have not been satisfied, to make Advances to
Borrowers on behalf of the Lenders that Agent, in its reasonable business
judgment, deems necessary or desirable (A) to preserve or protect the
Collateral, or any portion thereof, (B) to enhance the likelihood of repayment
of the Obligations, or (C) to pay any other amount which is due and payable and
is chargeable to Borrowers pursuant to the terms of this Agreement, including
Lender Group Expenses and the costs, fees, and expenses described in Section 10
(any of the Advances described in this Section 2.1(g) being hereinafter referred
to as "Agent Advances"); provided, that (x) Agent shall not make any Agent
Advances to Borrowers without the consent of the Required Lenders if the Amount
thereof would exceed $5,500,000 in the aggregate at any one time, and (y) the
Required Lenders may at any time revoke Agent's authorization contained in this
Section 2.1(g) to make Agent Advances, any such revocation to be in writing and
to become effective upon Agent's receipt thereof.
(ii) Agent Advances shall be repayable on
demand and secured by the Collateral, shall constitute Advances and Obligations
hereunder, and shall bear interest at the rate applicable from time to time to
the Advances pursuant to Section 2.6 hereof.
(h) Settlement. It is agreed that each Lender's
funded portion of the Advances is intended by the Lenders to equal, at all
times, such Lender's Pro Rata Share of the outstanding Advances. Such agreement
notwithstanding, Agent, Foothill, and the other Lenders agree (which agreement
shall not be for the benefit of or enforceable by Borrowers) that in order
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to facilitate the administration of this Agreement and the other Loan Documents,
settlement among them as to the Advances, the Foothill Loans, and the Agent
Advances shall take place on a periodic basis in accordance with the following
provisions:
(i) Agent shall request settlement
("Settlement") with the Lenders on a weekly basis, or on a more frequent basis
if so determined by Agent, (1) on behalf of Foothill, with respect to each
outstanding Foothill Loan, (2) for itself, with respect to each Agent Advance,
and (3) with respect to Collections received, as to each by notifying the
Lenders by telecopy, telephone, or other similar form of transmission, of such
requested Settlement, no later than 11:00 a.m. (California time) on the Business
Day immediately prior to the date of such requested Settlement (the date of such
requested Settlement being the "Settlement Date"). Such notice of a Settlement
Date shall include a summary statement of the amount of outstanding Advances,
Foothill Loans, and Agent Advances for the period since the prior Settlement
Date, the amount of repayments received in such period, and the amounts
allocated to each Lender of the interest, fees, and other charges for such
period. Subject to the terms and conditions contained herein (including Section
2.1(e)(iii)): (y) if a Lender's funded balance of the Advances, Foothill Loans,
and Agent Advances exceeds such Lender's Pro Rata Share of the Advances,
Foothill Loans, and Agent Advances as of a Settlement Date, then Agent shall by
no later than 12:00 p.m (California time) on the Settlement Date transfer in
immediately available funds to the account of such Lender as such Lender may
designate, an amount such that each such Lender shall, upon receipt of such
amount, have as of the Settlement Date, its Pro Rata Share of the Advances,
Foothill Loans, and Agent Advances; and (z) if a Lender's funded balance of the
Advances, Foothill Loans, and Agent Advances is less than such Lender's Pro Rata
Share of the Advances, Foothill Loans, and Agent Advances as of a Settlement
Date, such Lender shall no later than 12:00 p.m. (California time) on the
Settlement Date transfer in immediately available funds to such account of Agent
as Agent may designate, an amount such that each such Lender shall, upon
transfer of such amount, have as of the Settlement Date, its Pro Rata Share of
the Advances, Foothill Loans, and Agent Advances. Such amounts made available to
Agent under clause (z) of the immediately preceding sentence shall be applied
against the amounts of the applicable Foothill Loan or Agent Advance and,
together with the portion of such Foothill Loan or Agent Advance representing
Foothill's Pro Rata Share thereof, shall constitute Advances of such Lenders. If
any such amount is not made available to Agent by any Lender on the Settlement
Date applicable thereto to the extent required by the terms hereof, Agent shall
be entitled to recover for its account such amount on demand from such Lender
together with interest thereon at the Defaulting Lenders Rate.
(ii) In determining whether a Lender's
funded balance of the Advances, Foothill Loans, and Agent Advances is less than,
equal to, or greater than such Lender's Pro Rata Share of the Advances, Foothill
Loans, and Agent Advances as of a Settlement Date, Agent shall, as part of the
relevant Settlement, apply to such balance the portion of payments actually
received in good funds by Agent or Foothill with respect to principal, interest,
and fees payable by Borrowers and allocable to the Lenders hereunder, and
proceeds of Collateral. To the extent that a net amount is owed to any such
Lender after such application,
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such net amount shall be distributed by Agent or Foothill to that Lender as part
of the next Settlement.
(iii) Between Settlement Dates, Agent, to
the extent no Agent Advances or Foothill Loans are outstanding, may pay over to
Foothill any payments received by Agent, that in accordance with the terms of
this Agreement would be applied to the reduction of the Advances, for
application to Foothill's Pro Rata Share of the Advances. If, as of any
Settlement Date, Collections received since the then immediately preceding
Settlement Date have been applied to Foothill's Pro Rata Share of the Advances
other than to Foothill Loans or Agent Advances, as provided for in the previous
sentence, Foothill shall pay to Agent for the accounts of the Lenders, and Agent
shall pay to the Lenders, to be applied to the outstanding Advances of such
Lenders, an amount such that each Lender shall, upon receipt of such amount,
have, as of such Settlement Date, its Pro Rata Share of the Advances. During the
period between Settlement Dates, Foothill with respect to Foothill Loans, Agent
with respect to Agent Advances, and each Lender with respect to the Advances
other than Foothill Loans and Agent Advances, shall be entitled to interest at
the applicable rate or rates payable under this Agreement on the daily amount of
funds employed by Foothill, Agent, or the Lenders, as applicable.
(i) Notation. Agent shall record on its books the
principal amount of the Advances owing to each Lender, including the Foothill
Loans owing to Foothill, and Agent Advances owing to Agent, and the interests
therein of each Lender, from time to time. In addition, each Lender is
authorized, at such Lender's option, to note the date and amount of each payment
or prepayment of principal of such Lender's Advances in its books and records,
including computer records, such books and records constituting rebuttably
presumptive evidence, absent manifest error, of the accuracy of the information
contained therein.
(j) Lenders' Failure to Perform. All Advances (other
than Foothill Loans and Agent Advances) shall be made by the Lenders
simultaneously and in accordance with their Pro Rata Shares. It is understood
that (i) no Lender shall be responsible for any failure by any Defaulting Lender
to perform its obligation to make any Advances hereunder, nor shall any
Commitment of any Lender be increased or decreased as a result of any failure by
any Defaulting Lender to perform its obligation to make any Advances hereunder,
and (ii) no failure by any Defaulting Lender to perform its obligation to make
any Advances hereunder shall excuse any other Lender from its obligation to make
any Advances hereunder.
(k) Optional Overadvances. Any contrary provision of
this Agreement notwithstanding, if the condition for borrowing under Section
3.2(d) cannot be fulfilled, the Lenders nonetheless hereby authorize Agent or
Foothill, as applicable, and Agent or Foothill, as applicable, may, but is not
obligated to, knowingly and intentionally continue to make Advances (including
Foothill Loans) to a Borrower such failure of condition notwithstanding, so long
as, at any time, (i) the outstanding Revolving Facility Usage of all Borrowers
does not exceed the aggregate Borrowing Base for all Borrowers by more than five
percent (5%) and (ii) the outstanding Revolving Facility Usage for all Borrowers
(except for and excluding amounts charged to the Loan Account for interest,
fees, or Lender Group Expenses) does not exceed the
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Maximum Revolving Amount. The foregoing provisions are for the sole and
exclusive benefit of Agent, Foothill, and the Lenders and are not intended to
benefit Borrowers in any way. The Advances and Foothill Loans, as applicable,
that are made pursuant to this Section 2.1(k) shall be subject to the same terms
and conditions as any other Advance or Foothill Loan, as applicable, except that
the rate of interest applicable thereto shall be the rates set forth in Section
2.6(c) hereof without regard to the presence or absence of a Default or Event of
Default; provided, that the Required Lenders may, at any time during the
continuance of an Event of Default or if Borrowers fail to satisfy any other
material lending condition, revoke Agent's authorization contained in this
Section 2.1(k) to make Overadvances (except for and excluding amounts charged to
the Loan Account for interest, fees, or Lender Group Expenses), any such
revocation to be in writing and to become effective upon Agent's receipt
thereof.
In the event Agent obtains actual knowledge that
Revolving Facility Usage exceeds the amount permitted by the preceding
paragraph, regardless of the amount of or reason for such excess, Agent shall
notify Lenders as soon as practicable (and prior to making any (or any further)
intentional Overadvances (except for and excluding amounts charged to the Loan
Account for interest, fees, or Lender Group Expenses) unless Agent determines
that prior notice would result in imminent harm to the Collateral or its value),
and the Lenders thereupon shall, together with Agent, jointly determine the
terms of arrangements that shall be implemented with Borrowers intended to
reduce, within a reasonable time, the outstanding principal amount of the
Advances to Borrowers to an amount permitted by the preceding paragraph. In the
event any Lender disagrees over the terms of reduction and/or repayment of any
Overadvance, the terms of reduction and/or repayment thereof shall be
implemented according to the determination of the Required Lenders.
Each Lender shall be obligated to settle with Agent
as provided in Section 2.1(h) for the amount of such Lender's Pro Rata Share of
any unintentional Overadvances by Agent reported to such Lender, any intentional
Overadvances made as permitted under this Section 2.1(k), and any Overadvances
resulting from the charging to the Loan Account of interest, fees, or Lender
Group Expenses.
(l) Effect of Bankruptcy. If a case is commenced by
or against Borrowers under the U.S. Bankruptcy Code, or other statute providing
for debtor relief, then, unless otherwise agreed by all Lenders, the Lender
Group shall not make additional loans or provide additional financial
accommodations under the Loan Documents to Borrowers as debtor or
debtor-in-possession, or to any trustee for Borrowers, nor consent to the use of
cash collateral (provided that the Loan Account shall continue to be charged, to
the fullest extent permitted by law, for accruing interest, fees, and Lender
Group Expenses).
2.2 LETTER OF CREDIT SUBFACILITY.
(a) Agreement to Cause Issuance; Amounts; Outside
Expiration Date. Subject to the terms and conditions of this Agreement, Agent
agrees to issue letters of credit for the account of each Borrowers (each, an
"L/C") or to issue guarantees of payment (each such
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guaranty, an "L/C Guaranty") with respect to letters of credit issued by an
issuing bank for the account of such Borrower. Agent shall have no obligation to
issue a Letter of Credit if any of the following would result:
(i) the aggregate amount of all undrawn and
unreimbursed Letters of Credit and all other types of Letter
of Credit Usage issued for the account of all Borrowers would
exceed the Borrowing Base for all Borrowers less the amount of
outstanding Loans (other than the Term Loan) to all Borrowers
less the aggregate amount of Inventory Reserves and reserves
established under Section 2.1(b) with respect to such
Borrower; or
(ii) the aggregate amount of all Letter of
Credit Usage for all Borrowers would exceed the lower of: (x)
the Maximum Revolving Amount less the amount of outstanding
Loans (other than the Term Loan) to all Borrowers less the
aggregate amount of Inventory Reserves and reserves
established under Section 2.1(b) with respect to all
Borrowers; or (y) $5,000,000; or
(iii) the sum of the outstanding Loans
(other than the Term Loan) plus the outstanding Letter of
Credit Usage for all Borrowers would exceed the Maximum
Revolving Amount.
Borrowers expressly understand and agree that Agent shall have no obligation to
arrange for the issuance by issuing banks of the letters of credit that are to
be the subject of L/C Guarantees. Borrowers and the Lender Group acknowledge and
agree that certain of the letters of credit that are to be the subject of L/C
Guarantees may be outstanding on the Closing Date. Each Letter of Credit shall
have an expiry date no later than 60 days prior to the date on which this
Agreement is scheduled to terminate under Section 3.4 (without regard to any
potential renewal term) and all such Letters of Credit shall be in form and
substance acceptable to Agent in its sole discretion. If the Lender Group is
obligated to advance funds under a Letter of Credit, Borrowers immediately shall
reimburse such amount to Agent and, in the absence of such reimbursement, the
amount so advanced immediately and automatically shall be deemed to be an
Advance hereunder and, thereafter, shall bear interest at the rate then
applicable to Reference Rate Advances under Section 2.6.
(b) Indemnification. Borrowers hereby agree to
indemnify, save, defend, and hold the Lender Group harmless from any loss, cost,
expense, or liability, including payments made by the Lender Group, expenses,
and reasonable attorneys fees incurred by the Lender Group arising out of or in
connection with any Letter of Credit, unless caused by the gross negligence or
willful misconduct of the Lender Group. Borrowers agree to be bound by the
issuing bank's regulations and interpretations of any Letters of Credit
guarantied by the Lender Group and opened to or for any Borrower's account or by
Agent's interpretations of any L/C issued by the Lender Group to or for any
Borrower's account, even though this interpretation may be different from such
Borrower's own, and Borrowers understand and agree that the Lender Group shall
not be liable for any error, negligence, or mistake, whether of omission or
commission, in following
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Borrowers' instructions or those contained in the Letter of Credit or any
modifications, amendments, or supplements thereto, unless caused by the gross
negligence or willful misconduct of the Lender Group. Borrowers understand that
the L/C Guarantees may require the Lender Group to indemnify the issuing bank
for certain costs or liabilities arising out of claims by Borrowers against such
issuing bank. Borrowers hereby agree to indemnify, save, defend, and hold the
Lender Group harmless with respect to any loss, cost, expense (including
reasonable attorneys fees), or liability incurred by the Lender Group under any
L/C Guaranty as a result of the Lender Group's indemnification of any such
issuing bank, unless caused by the gross negligence or willful misconduct of the
Lender Group.
(c) Supporting Materials. Borrowers hereby authorize
and direct any bank that issues a letter of credit guaranteed by the Lender
Group to deliver to Agent all instruments, documents, and other writings and
property received by the issuing bank pursuant to such letter of credit, and to
accept and rely upon Agent's instructions and agreements with respect to all
matters arising in connection with such letter of credit and the related
application. Borrowers may or may not be the "applicant" or "account party" with
respect to such letter of credit.
(d) Compensation for Letters of Credit. Any and all
charges, commissions, fees, and costs incurred by Agent relating to the letters
of credit guaranteed by the Lender Group shall be considered Lender Group
Expenses for purposes of this Agreement and immediately shall be reimbursable
immediately by Borrowers to Agent.
(e) Cash Collateral. Immediately upon the termination
of this Agreement, Borrowers agree to either (i) provide cash collateral to be
held by Agent in an amount equal to 105% of the maximum aggregate amount of the
Lender Group's obligations under all outstanding Letters of Credit, or (ii)
cause to be delivered to Agent releases of all of the Lender Group's obligations
under outstanding Letters of Credit. At Agent's discretion, any proceeds of
Collateral (including, without limitation, Collections) received by Agent after
the occurrence and during the continuation of an Event of Default may be held as
the cash collateral required by this Section 2.2(e).
(f) Increased Costs. If by reason of (i) any change
in any applicable law, treaty, rule, or regulation or any change in the
interpretation or application by any governmental authority of any such
applicable law, treaty, rule, or regulation, or (ii) compliance by the issuing
bank or Agent with any direction, request, or requirement (irrespective of
whether having the force of law) of any governmental authority or monetary
authority including, without limitation, Regulation D of the Board of Governors
of the Federal Reserve System as from time to time in effect (and any successor
thereto):
(i) any reserve, deposit, or similar
requirement is or shall be imposed or modified in respect of any Letters of
Credit issued hereunder, or
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(ii) there shall be imposed on the issuing
bank or any other condition regarding any letter of credit, or Letter of Credit,
as applicable, issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to the issuing bank or the Lender Group of issuing, making, guaranteeing, or
maintaining any letter of credit, or Letter of Credit, as applicable, or to
reduce the amount receivable in respect thereof by such issuing bank or the
Lender Group, then, and in any such case, the Lender Group may, at any time
within a reasonable period after the additional cost is incurred or the amount
received is reduced, notify Borrowers, and Borrowers shall pay on demand such
amounts as the issuing bank or Agent may specify to be necessary to compensate
the issuing bank or the Lender Group for such additional cost or reduced
receipt, together with interest on such amount from the date of such demand
until payment in full thereof at the rate set forth in Section 2.6(a)(i) or
(c)(i), as applicable. The determination by the issuing bank or Agent, as the
case may be, of any amount due pursuant to this Section 2.2(f), as set forth in
a certificate setting forth the calculation thereof in reasonable detail, shall,
in the absence of manifest or demonstrable error, be final and conclusive and
binding on all of the parties hereto.
(g) Participations.
(i) Purchase of Participations. Immediately
upon issuance of any Letter of Credit in accordance with this Section 2.2, each
Lender shall be deemed to have irrevocably and unconditionally purchased and
received without recourse or warranty, an undivided interest and participation
in the L/C Guaranty or other credit support or enhancement provided through
Agent to such issuer in connection with the issuance of such Letter of Credit,
equal to such Lender's Pro Rata Share of the face amount of such Letter of
Credit (including, without limitation, all obligations of Borrowers with respect
thereto, and any security therefor or guaranty pertaining thereto).
(ii) Documentation. Upon the request of any
Lender, Agent shall furnish to such Lender copies of any Letter of Credit,
reimbursement agreements executed in connection therewith, application for any
Letter of Credit, L/C Guaranty or other credit support or enhancement provided
through Agent in connection with the issuance of any Letter of Credit, and such
other documentation as may reasonably be requested by such Lender.
(iii) Obligations Irrevocable. The
obligations of each Lender to make payments to Agent with respect to any Letter
of Credit or with respect to any L/C Guaranty or other credit support or
enhancement provided through Agent with respect to a Letter of Credit, and the
obligations of Borrowers to make payments to Agent, for the account of the
Lenders, shall be irrevocable, not subject to any qualification or exception
whatsoever, including any of the following circumstances:
(A) any lack of validity or
enforceability of this Agreement or any of the other Loan Documents;
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(B) the existence of any claim,
setoff, defense or other right which Borrowers may have at any time against a
beneficiary named in a Letter of Credit or any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), any Lender,
Agent, the issuer of such Letter of Credit, or any other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transactions between Borrowers or any other Person and the beneficiary named in
any Letter of Credit);
(C) any draft, certificate or any
other document presented under the Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(D) the surrender or impairment of
any security for the performance or observance of any of the terms of any of the
Loan Documents; or
(E) the occurrence of any Default or
Event of Default.
(h) Recovery or Avoidance of Payments. In the event
any payment by or on behalf of Borrowers received by Agent with respect to any
Letter of Credit (or any guaranty by Borrowers or reimbursement obligation of
Borrowers relating thereto) and distributed by the Agent to the Lenders on
account of their respective participations therein, is thereafter set aside,
avoided or recovered from Agent in connection with any receivership, liquidation
or bankruptcy proceeding commenced by or against any Borrowers, any Guarantor or
any other Person, the Lenders shall, upon demand by Agent, pay to Agent their
respective Pro Rata Shares of such amount set aside, avoided or recovered,
together with interest at the rate required to be paid by Agent upon the amount
required to be repaid by it.
2.3 TERM LOAN FACILITY.
(a) Term Loans. Subject to the terms and conditions
of this Agreement, each Lender agrees to make a term loan (collectively, the
"Term Loan") to Borrowers in an aggregate principal amount not to exceed such
Lender's Pro Rata Share of the Maximum Term Loan Amount. The Term Loan shall be
evidenced by a Term Promissory Note ("Term Note") executed and delivered on the
Closing Date by Borrowers in favor of the Agent, providing for the repayment of
the Term Loan based upon a seven-year amortization schedule in forty-eight (48)
installments of principal, with the first forty-seven (47) installments being in
the amount of $178,571 and the forty-eighth and final installment being in the
amount of the then unpaid principal balance of the Term Loan, together with all
accrued and unpaid interest thereon.
Each such installment shall be due and payable on the
first day of each month commencing on the first day of the first month following
the Closing Date and continuing on the first day of each succeeding month until
and including the date on which the unpaid balance of the Term Loan is paid in
full. The outstanding principal balance and all accrued and unpaid interest
under the Term Loan shall be due and payable upon the termination of this
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Agreement, whether by its terms, by prepayment, by acceleration, or otherwise.
All amounts outstanding under the Term Loan shall constitute Obligations.
Notwithstanding anything to the contrary contained in
this Section 2.3(a) or otherwise in this Agreement:
(i) the proceeds of all Permitted
Dispositions (exclusive of the proceeds of Permitted Mine Dispositions) shall be
remitted to and applied by the Agent to the payment of the outstanding Loans
(other than the Term Loan);
(ii) the first $5,000,000 of net aggregate
proceeds realized by Borrowers and Guarantors from the consummation of any
Permitted Mine Dispositions (the "Allocated Mine Proceeds") shall be remitted to
and applied by the Agent as a mandatory prepayment, without penalty, to the
above-described regularly scheduled principal installments not yet due and
payable with respect to the Term Loan, in the inverse order of their maturity;
and
(iii) the proceeds of all Permitted
Dispositions, other than proceeds of Permitted Mine Dispositions which are
required to be applied to a pre-payment of the Term Loan pursuant to clause (ii)
immediately above, shall be remitted to Agent for application to and payment of
the then outstanding Loans (other than the Term Loan) and may be thereafter re-
borrowed by Borrowers, subject to and on the terms and conditions set forth in
this Agreement, and may be used by Borrowers, at their option, provided no
Default or Event of Default then exists, (A) for Capital Expenditures permitted
by this Agreement, (B) to prepay, without penalty, the above-described regularly
scheduled installments of principal with respect to the Term Loan not yet due
and payable, in the inverse order of their maturity, (C) to make an Intercompany
Loan to Parent (if and to the extent permitted by Section 7.13) for the purpose
of enabling Parent to pay Indebtedness owing under the Senior Notes or, if
applicable, the Refinanced Senior Note Indebtedness, and/or (D) for general
working capital purposes; and
(iv) the proceeds of Permitted Supplemental
Dispositions shall, at the election of the Required Lenders, in an amount (if
any) for each Permitted Supplemental Disposition as shall be designated by the
Required Lenders, be remitted to and applied by Agent as a mandatory prepayment,
without penalty, to the above-described regularly scheduled principal
installments due and payable with respect to the Term Loan, in the inverse order
of their maturity. If, however, the Required Lenders so elect to require that
Borrowers deliver the proceeds of any Permitted Supplemental Dispositions to
Agent for application to prepayment of the Term Loan, then, and solely in such
event, Borrowers shall have the right at any time thereafter, upon 30 days prior
written notice to the Agent, to prepay the then unpaid principal balance of the
Term Loan in full out of the proceeds of the refinancing of the Term Loan (the
"Replacement Term Loan") provided by another lender (the "Replacement Term Loan
Lender"), provided that all of the following conditions precedent are satisfied
in full, as determined by the Agent:
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(A) The Replacement Term Loan shall have a
maturity date that is after the Termination Date;
(B) The Replacement Term Loan shall be
secured solely by (and the Agent shall deliver UCC-3 and Mortgage partial
releases releasing the Lien of the Lender Group solely with respect to) all of
Borrowers' and Guarantors' then owned and thereafter acquired Real Property and
Equipment, except that the Lender Group shall retain a first and only Lien upon
certain Equipment consisting of "Yellow Iron" (i.e., construction or other
mobile Equipment) and having an auction value of at least $3,500,000, as then
mutually agreed upon by Agent and Borrowers' Agent, and located at such Real
Property Collateral as shall be mutually agreed upon between Agent and
Borrowers' Agent (such collateral for the Replacement Term Loan being hereafter
referred to as the "Replacement Term Loan Collateral");
(C) Borrowers shall have delivered to the
Agent copies of all documents, instruments and agreements that Borrowers and
Guarantors propose to execute and deliver with and in favor of the Replacement
Term Loan Lender, which shall contain terms and conditions that are not
inconsistent with any of the terms and provisions of this Section 2.3(a);
(D) The Replacement Term Loan Lender shall
have entered into and executed with the Agent, for the benefit of the Lender
Group, an Intercreditor Agreement, in form and substance satisfactory to Agent;
and
(E) No Default or Event of Default shall
exist at the time Borrowers propose to enter into the Replacement Term Loan.
(b) Procedure for Borrowing. The Term Loan Borrowing
shall be made upon Borrowers' Agent's irrevocable request therefor delivered to
Agent (which notice must be received by Agent no later than 10:00 a.m.
(California time) on the Business Day immediately preceding the requested
Funding Date) specifying (i) the amount of the Borrowing; and (ii) the requested
Funding Date, which shall be a Business Day.
(c) Making the Term Loan.
(i) [Intentionally Omitted]
(ii) Unless Agent receives notice from a
Lender prior to the Closing Date that such Lender will not make available as and
when required hereunder to Agent for the account of Borrowers the amount of that
Lender's Pro Rata Share of the Term Loan Borrowing, Agent shall assume that each
Lender has made or will make such amount available to Agent in immediately
available funds on the Funding Date and Agent may (but shall not be so
required), in reliance upon such assumption, make available to Borrowers on such
date a corresponding amount. If and to the extent any Lender shall not have made
its full amount available to Agent in immediately available funds and Agent in
such circumstances has made
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available to Borrowers such amount, that Defaulting Lender shall on the Business
Day following such Funding Date make such amount available to Agent, together
with interest at the Defaulting Lenders Rate for each day during such period. A
notice submitted by Agent to any Defaulting Lender with respect to amounts owing
under this subsection shall be conclusive, absent manifest error. If such amount
is so made available, such payment to Agent shall constitute such Lender's Term
Loan on the date of Borrowing for all purposes of this Agreement. If such amount
is not made available to Agent on the Business Day following the Funding Date,
Agent will notify Borrowers of such failure to fund and, upon demand by Agent,
Borrowers shall pay such amount to Agent for Agent's account, together with
interest thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to the Term
Loan composing such Borrowing.
(iii) Agent shall not be obligated to
transfer to a Defaulting Lender any payments made by Borrowers to Agent for the
Defaulting Lender's benefit; nor shall a Defaulting Lender be entitled to the
sharing of any payments hereunder. Amounts payable to a Defaulting Lender shall
instead be paid to or retained by Agent. Agent may hold and, in its discretion,
re-lend to Borrowers the amount of all such payments received or retained by it
for the account of such Defaulting Lender. Solely for the purposes of voting or
consenting to matters with respect to the Loan Documents and determining Pro
Rata Shares, such Defaulting Lender shall be deemed not to be a "Lender" and
such Lender's Commitment shall be deemed to be zero (-0-). This section shall
remain effective with respect to such Lender until (x) the Obligations under
this Agreement shall have been declared or shall have become immediately due and
payable or (y) the requisite non-Defaulting Lenders, Agent, and Borrower shall
have waived such Lender's default in writing. The operation of this section
shall not be construed to increase or otherwise affect the Commitment of any
Lender, or relieve or excuse the performance by Borrowers of its duties and
obligations hereunder.
(d) Lenders' Failure to Perform. The Term Loan shall
be made by the Lenders simultaneously and in accordance with their Pro Rata
Shares. It is understood that (i) no Lender shall be responsible for any failure
by any Defaulting Lender to perform its obligation to make its Pro Rata Share of
the Term Loan hereunder, nor shall any Commitment of any Lender be increased or
decreased as a result of any failure by any Defaulting Lender to perform its
obligation to make its Pro Rata Share of the Term Loan hereunder, and (ii) no
failure by a Defaulting Lender to perform its obligation to make its Pro Rata
Share of the Term Loan hereunder shall excuse any other Lender from its
obligation to make its Pro Rata Share of the Term Loan hereunder.
2.4 PAYMENTS.
(a) Payments by Borrowers.
(i) All payments to be made by Borrowers
shall be made without set-off, recoupment, deduction, or counterclaim, except as
otherwise required by law. Except as otherwise expressly provided herein, all
payments by Borrowers shall be made to Agent
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for the account of the Lenders at Agent's address set forth in Section 12, and
shall be made in immediately available funds, no later than 11:00 a.m.
(California time) on the date specified herein. Any payment received by Agent
later than 11:00 a.m. (California time), at the option of Agent, shall be deemed
to have been received on the following Business Day and any applicable interest
or fee shall continue to accrue until such following Business Day.
(ii) Whenever any payment is due on a day
other than a Business Day, such payment shall be made on the following Business
Day, and such extension of time shall in such case be included in the
computation of interest or fees, as the case may be.
(iii) Unless Agent receives notice from
Borrowers prior to the date on which any payment is due to the Lenders that
Borrowers will not make such payment in full as and when required, Agent shall
assume that Borrowers have made such payment in full to Agent on such date in
immediately available funds and Agent may (but shall not be so required), in
reliance upon such assumption, distribute to each Lender on such due date an
amount equal to the amount then due such Lender. If and to the extent Borrowers
have not made such payment in full to Agent, each Lender shall repay to Agent on
demand such amount distributed to such Lender, together with interest thereon at
the Reference Rate for each day from the date such amount is distributed to such
Lender until the date repaid.
(b) Apportionment, Application, and Reversal of
Payments. Except as otherwise provided with respect to Defaulting Lenders,
aggregate principal and interest payments shall be apportioned ratably among the
Lenders (according to the unpaid principal balance of the Advances or the Term
Loan to which such payments relate held by each Lender) and payments of the fees
(other than fees designated for Agent's sole and separate account) shall, as
applicable, be apportioned ratably among the Lenders. All payments shall be
remitted to Agent and all such payments not relating to principal or interest of
specific Advances or the Term Loan, or not constituting payment of specific
fees, and all proceeds of Accounts or other Collateral received by Agent, shall
be applied, first, to pay any fees, or expense reimbursements then due to Agent
from Borrowers; second, to pay any fees or expense reimbursements then due to
the Lenders from Borrowers; third, to pay interest due in respect of all Loans
(including Foothill Loans and Agent Advances) and the Term Loan; fourth, to pay
or prepay principal of Foothill Loans and Agent Advances (other than the Term
Loan); fifth, ratably to pay principal of the Loans (other than Foothill Loans,
Agent Advances and the Term Loan); sixth, solely if an Event of Default then
exists, to repay the principal of the Term Loan; seventh, to be held by Agent as
cash collateral in accordance with Section 2.2(e) hereof with respect to
unreimbursed obligations in respect of Letters of Credit; and eighth, ratably to
pay any other Obligations due to Agent or any Lender by Borrowers; provided,
however, that if no Event of Default exists after payment in full of the
Obligations described in clauses first through fifth above, then, solely in such
event, any portion of such payments and such proceeds that have not been
otherwise applied to the payment of Obligations in accordance with this Section
2.4(b) shall be remitted to Borrowers' Agent for the account of Borrowers.
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2.5 OVERADVANCES. If, at any time or for any reason, the
amount of Obligations pursuant to Sections 2.1 and 2.2 is greater than either
the Dollar or percentage limitations set forth in Sections 2.1 or 2.2 (an
"Overadvance"), Borrowers immediately shall pay to Agent, in cash, the amount of
such excess, which amount shall be used by Agent to reduce the Obligations in
accordance with the priority set forth in Section 2.4(b).
2.6 INTEREST AND LETTER OF CREDIT FEES: RATES, PAYMENTS, AND
CALCULATIONS.
(a) Interest Rate.
(i) Except as provided in clause (ii) and
(vii) below, (A) all Loans (except for the Term Loan) shall bear interest at a
per annum rate of one percentage point (1%) above the Reference Rate and (B) the
Term Loan shall bear interest at a per annum rate of two and one-half percentage
points (2 1/2%) above the Reference Rate.
(ii) In lieu of having interest charged
based upon the Reference Rate, Borrowers shall have the option (the "Eurodollar
Option") to have interest on a portion of the Advances be charged based on the
Adjusted Eurodollar Rate. For purposes hereof, interest "based on the Adjusted
Eurodollar Rate" shall mean interest at the Adjusted Eurodollar Rate plus three
and three-quarters (3.75) percentage points per annum. Interest on that portion
of the Advances bearing interest based on the Adjusted Eurodollar Rate
("Adjusted Eurodollar Rate Advances") shall be payable on the last day of each
month and on the last day of each Interest Period and may, at Agent's option, be
charged directly to the appropriate Borrowers' Loan Account maintained by Agent.
Interest based on the Adjusted Eurodollar Rate shall be calculated for each
month (or portion thereof) based on the number of days elapsed and a year of 360
days. On and after the date of any Event of Default or termination or
non-renewal of this Agreement, interest on all outstanding Adjusted Eurodollar
Rate Advances shall accrue at a rate equal to two (2) percentage points per
annum in excess of the pre-default rate set forth above from the date of such
Event of Default or termination or non-renewal until the end of the Interest
Period, and all such interest accruing hereunder shall thereafter be payable on
demand. Upon expiration of the Interest Period, or earlier at Agent's option
following an Event of Default or termination or non-renewal of the Agreement,
and until Borrowers' subsequent permitted exercise, if any, of the Eurodollar
Option, all Advances shall accrue interest in accordance with Section 2.6(a)(i)
of this Agreement.
(iii) (x) Borrowers may, at any time prior
to an Event of Default or termination or non-renewal of this Agreement, exercise
the Eurodollar Option by Borrowers' Agent notifying Agent thereof prior to 12:00
p.m. (California time) at least three Business Days in London prior to the
commencement of the proposed Interest Period (the "Eurodollar Deadline"). Notice
of Borrower's election of the Eurodollar Option for a permitted portion of the
Advances and an Interest Period pursuant to this Section 2.6(a)(iii) shall be
made by delivery by Borrowers' Agent to Agent of a Eurodollar Notice in the form
of Exhibit 2.6 hereto via facsimile teletransmission received by Agent before
the Eurodollar Deadline, or by telephonic notice received by Agent before the
Eurodollar Deadline (to be confirmed by facsimile
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teletransmission to Agent of the Eurodollar Notice to be received by Agent prior
to 2:00 p.m. (California time) on the same day; provided, however, that
Borrowers' Agent's failure to deliver such confirming Eurodollar Notice shall
not affect the applicability of such rate if Borrowers' election is implemented
by Agent).
(y) Each Eurodollar Notice pursuant
to this Section 2.6(a)(iii) shall be irrevocable and binding on Borrowers. In
connection with the Adjusted Eurodollar Rate Advances, each Borrower shall
indemnify Agent and Lenders against a loss, cost or expense incurred by Agent
and Lenders as a result of any failure to fulfill on or before the date
specified in the Eurodollar Notice, the applicable conditions set forth herein
or the termination prior to the end of an Interest Period of the applicability
of interest based on the Adjusted Eurodollar Rate, as provided hereunder,
including, without limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired or committed to be acquired by Agent, each
Lender, or its Participants to fund the requested Adjusted Eurodollar Rate
Advances which, as a result of such failure, are not so employed on such date
(such losses, costs, and expenses, collectively "Funding Losses"), exclusive of
Funding Losses arising as a result of acceleration pursuant to Section
2.6(a)(iv)(y) or otherwise pursuant to this Agreement as a result of the
existence of an Event of Default.
(z) Borrowers shall only have five
Interest Periods in existence at any given time. Borrowers may only exercise the
Eurodollar Option for Adjusted Eurodollar Rate Advances of at least $1,000,000
and integral multiples of $500,000 in excess thereof.
(iv) (x) Borrowers may elect to prepay any
Adjusted Eurodollar Rate Advances only on the last day of the applicable
Interest Period, provided, that in the event of the prepayment of any such
Advances, including any automatic prepayment through required application by
Agent of proceeds of Accounts and other Collateral received by Agent,on a date
other than the last day of an Interest Period for any reason, exclusive of
acceleration pursuant to Section 2.6(a)(iv)(y) hereof or otherwise pursuant to
this Agreement, as a result of the existence of an Event of Default, each
Borrower shall indemnify Agent and Lenders for Funding Losses which may arise in
connection with such prepayment of such Borrower's Adjusted Eurodollar Rate
Advances. Notwithstanding anything to the contrary contained herein, if the
outstanding Advances are reduced below the balance of the outstanding Adjusted
Eurodollar Rate Advance by virtue of automatic prepayment from proceeds of
Accounts and other collateral, then Foothill will automatically make a Foothill
Loan to Borrowers so that the outstanding Advances will equal the outstanding
Adjusted Eurodollar Rate Advances so long as each Borrower has sufficient
borrowing Availability under the formulas set forth in this Agreement and
subject to the reserves and applicable sublimits thereunder.
(y) In the event that the aggregate
amount of Advances with respect to which all Borrowers have exercised the
Eurodollar Option exceeds the amount of Advances to all Borrowers actually
outstanding at any time, or in the event that the Adjusted
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Eurodollar Rate Advances shall at any time exceed the amounts of Advances under
the Agreement which Agent determines are available to all Borrowers under the
lending formulas and subject to reserves, the definitions of Maximum Revolving
Amount and applicable sublimits, all as set forth in this Agreement, then, in
addition to all other rights and remedies to Agent, Agent may, at its option,
require that such Adjusted Eurodollar Rate Advances to all Borrowers cease to
accrue based on the Adjusted Eurodollar Rate. In such event, the Adjusted
Eurodollar Rate Advances to Borrowers will bear interest as provided in Section
2.6(a)(i) of this Agreement, and each Borrower shall indemnify Agent and Lenders
for Funding Losses which may arise in connection with the termination of
applicability of interest based on the Adjusted Eurodollar Rate as to such
Borrowers.
(v) (x) The Adjusted Eurodollar Rate may be
automatically adjusted by Agent on a prospective basis to take into account the
additional or increased cost to Lenders of maintaining any necessary reserves
for Eurodollar deposits or increased costs due to change in applicable law
occurring subsequent to the commencement of the then applicable Interest Period,
including but not limited to changes in tax laws (except changes of general
applicability in corporate income tax laws) and changes in the reserve
requirements imposed by the Board of Governors of the Federal Reserve System (or
any successor), excluding the Reserve Percentage, that increase or would
increase the costs of funding loans bearing interest based on the Adjusted
Eurodollar Rate. Agent shall give Borrowers' Agent notice of such determination
and adjustment and Borrowers may, by notice delivered by Borrowers' Agent to
Agent: (iv) require Agent to furnish to Borrowers a statement setting forth the
basis for adjusting such Adjusted Eurodollar Rate and the method for determining
the amount of such adjustment; and/or (v) repay the Adjusted Eurodollar Rate
Advances, or portions thereof, with respect to which such adjustment is made, as
appropriate.
(y) In the event that any change in
circumstances or any law, regulation, treaty or directive, or any change therein
or the interpretation of application thereof, shall at any time after the date
hereof, in the reasonable opinion of Agent, make it unlawful or impractical for
any Lender to fund or maintain an Adjusted Eurodollar Loan or to continue such
funding or maintaining or to determine or change interest rates based on the
Adjusted Eurodollar Rate, Agent shall give notice of such circumstances to the
Borrowers' Agent or Borrowers and (A) in the case of any Adjusted Eurodollar
Rate Advances which are outstanding, the date specified in Agent's notice shall
be deemed to be the last day of the Interest Period of such Adjusted Eurodollar
Rate Advances, and interest upon the Adjusted Eurodollar Advances then
outstanding shall thereafter accrue as provided in Section 2.6(a)(i) of the
Agreement, and (B) Lenders shall not be obligated to permit Borrowers to elect
the Eurodollar Option as to any Advances until Agent determines that it would no
longer be unlawful or impractical to do so.
(vi) Notwithstanding anything to the
contrary contained herein, no Lender or any Participant is required to actually
acquire United States dollar deposits on the London Interbank Market to fund or
otherwise match fund any Advances as to which interest accrues based on the
Adjusted Eurodollar Rate. Provisions of Section 2.6(a)(iv) hereof shall
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apply as if each Lender and/or its Participants had match funded any Advances as
to which interest is accruing based on the Adjusted Eurodollar Rate by acquiring
United States dollar deposits in the London Interbank Market for each Interest
Period in the amount of the Adjusted Eurodollar Rate Loan. Funding Losses of
Lenders hereunder shall include the aggregate Funding Losses of each Lender and
its Participants in the Adjusted Eurodollar Rate Advances.
(vii) Reduction in Interest Rate:
Notwithstanding anything to the contrary contained herein above in this Section
2.6(a), if Borrowers achieve EBITDA in the amount set forth in the chart below
for the immediately preceding twelve (12) months, as measured upon the
expiration of, respectively, the first six (6) months of, and at the end of,
each of Borrowers' 1999 and 2000 fiscal years, as evidenced by financial
statements for Borrowers that have been prepared and audited by independent
certified public accountants acceptable to Agent with respect to fiscal year-end
financial statements and that are internally prepared and reviewed by such
accountants with respect to such interim financial statements, then, provided no
Default or Event of Default shall have occurred and be then continuing, the
interest rates described in Sections 2.6(a)(i) and 2.6(a)(ii) above shall be
reduced to the respective rates set forth below:
<TABLE>
<CAPTION>
MINIMUM RESULTING INTEREST RESULTING INTEREST
EBITDA FOR PRECEDING RATE FOR RATE FOR
12 MONTHS ADVANCES TERM LOAN
--------- -------- ---------
<S> <C> <C>
$22,000,001- Reference Rate + .75% Reference Rate + 2.25%
25,000,000 Adjusted
Eurodollar Rate + 3.50%
Greater than Reference Rate + .50% Reference Rate + 2.00%
$25,000,000 Adjusted
Eurodollar Rate + 3.25%
</TABLE>
(b) Letter of Credit Fee. Borrowers shall pay Agent a
fee (in addition to the charges, commissions, fees, and costs set forth in
Section 2.2(d)) equal to (2%) per annum times the amount of the undrawn Letters
of Credit (the "L/C Fee").
(c) Default Rate. Upon the occurrence and during the
continuation of an Event of Default, (i) all Loans (except for the Term Loan
shall bear interest at a per annum rate equal to three (3) percentage points
above the Reference Rate, (ii) the Term Loan shall bear interest at a rate equal
to four and one-half (4 1/2) percentage points above the Reference Rate, and
(iii) the Letter of Credit fee provided in Section 2.6(b) shall be increased to
four (4%) per annum times the amount of the undrawn Letters of Credit from and
after the occurrence of an Event of Default.
(d) Minimum Interest. In no event shall the rate of
interest chargeable under Section 2.6(a)(i) for any day be less than seven (7%)
percent per annum. To the extent that interest accrued hereunder at the rate set
forth in such section would be less than the
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<PAGE> 56
foregoing minimum daily rate, the interest rate chargeable hereunder for such
day automatically shall be deemed increased to the minimum rate.
(e) Payments.
Interest and Letter of Credit fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
during the term hereof. Borrowers hereby authorize Agent, at its option, without
prior notice to Borrowers, to charge such interest and Letter of Credit fees,
all Lender Group Expenses (as and when incurred), the charges, commissions,
fees, and costs provided for in Section 2.2(d) (as and when accrued or
incurred), the fees and charges provided for in Section 2.11 (as and when
accrued or incurred), and all installments or other payments due under the Term
Loan or any Loan Document to Borrowers' Loan Account, which amounts thereafter
shall accrue interest at the rate then applicable to Advances hereunder. Any
interest not paid when due shall be compounded and shall thereafter accrue
interest at the rate then applicable to Advances hereunder.
(f) Computation. The Reference Rate as of the date of
this Agreement is 7.75% per annum. In the event the Reference Rate is changed
from time to time hereafter, the rate of interest provided for in Section 2.6(a)
and Section 2.6(c)(i) and (ii) automatically and immediately shall be increased
or decreased by an amount equal to such change in the Reference Rate. All
interest and fees chargeable under the Loan Documents shall be computed on the
basis of a 360 day year for the actual number of days elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate.
In no event shall the interest rates payable under this Agreement, plus any
other amounts paid in connection herewith, exceed the highest rate permissible
under any law that a court of competent jurisdiction shall, in a final
determination, deem applicable. Borrowers and the Lender Group in executing and
delivering this Agreement, intend legally to agree upon the rate or rates of
interest and manner of payment stated within it; provided, however, that,
anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto as of the date of this Agreement, Borrowers are and shall
be liable only for the payment of such maximum as allowed by law, and payment
received from Borrowers in excess of such legal maximum, whenever received,
shall be applied to reduce the principal balance of the Obligations to the
extent of such excess.
2.7 COLLECTION OF ACCOUNTS. Borrowers shall at all times
maintain lockboxes (the "Lockboxes") and, immediately after the Closing Date,
(i) shall instruct all Account Debtors with respect to the Accounts, General
Intangibles, and Negotiable Collateral of Borrowers to remit all Collections in
respect thereof to such Lockboxes, and (ii) shall deposit all other Collections
received by Borrowers from any source immediately upon receipt in to the
Lockboxes. Borrowers, Agent, and the Lockbox Banks shall enter into the Lockbox
Agreements, which among other things shall provide for the opening of a Lockbox
Account for the deposit of Collections at a Lockbox Bank. Borrowers agree that
all Collections and other amounts received by Borrowers from any Account Debtor
or any other source immediately upon receipt
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shall be deposited into a Lockbox Account. No Lockbox Agreement or arrangement
contemplated thereby shall be modified by Borrowers without the prior written
consent of Agent. Upon the terms and subject to the conditions set forth in the
Lockbox Agreements, all amounts received in each Lockbox Account shall be wired
each Business Day into an account (the "Agent Account") maintained by Agent at a
depositary selected by Agent.
2.8 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS. The
receipt of any Collections by Agent (whether from transfers to Agent by the
Lockbox Banks pursuant to the Lockbox Agreements or otherwise) immediately shall
be applied (in accordance with the provisions of Section 2.4(b)) provisionally
to reduce the Obligations outstanding under Section 2.1, but shall not be
considered a payment on account unless such Collection item is a wire transfer
of immediately available federal funds and is made to the Agent Account or
unless and until such Collection item is honored when presented for payment.
From and after the Closing Date, Agent shall be entitled to charge Borrowers for
one (1) Business Day of `clearance' or `float' at the rate set forth in Section
2.6(a) or Section 2.6(c)(i), as applicable, on all Collections that are received
by Agent (regardless of whether forwarded by the Lockbox Banks to Agent, whether
provisionally applied to reduce the Obligations under Section 2.1, or
otherwise). This across-the-board one (1) Business Day clearance or float charge
on all Collections is acknowledged by the parties to constitute an integral
aspect of the pricing of the Lender Group's financing of Borrowers, and shall
apply irrespective of the characterization of whether receipts are owned by
Borrowers or Agent, and whether or not there are any outstanding Advances, the
effect of such clearance or float charge being the equivalent of charging one
(1) Business Day of interest on such Collections. Should any Collection item not
be honored when presented for payment, then Borrowers shall be deemed not to
have made such payment, and interest shall be recalculated accordingly. Anything
to the contrary contained herein notwithstanding, any Collection item shall be
deemed received by Agent only if it is received into the Agent Account on a
Business Day on or before 11:00 a.m. California time. If any Collection item is
received into the Agent Account on a non-Business Day or after 11:00 a.m.
California time on a Business Day, it shall be deemed to have been received by
Agent as of the opening of business on the immediately following Business Day.
Anything contained herein to the contrary notwithstanding, the economic benefit
of the one (1) Business Day clearance or float charge provided for in this
Section 2.8 is not for the ratable benefit of the Lenders, but instead shall be
for the sole and separate account of Agent.
2.9 DESIGNATED ACCOUNT. Agent, Foothill, and the Lenders are
authorized to make the Advances, the Term Loan, and the Letters of Credit under
this Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Person, or without instructions if pursuant to
Section 2.6(e). Borrowers' Agent agrees to establish and maintain the Designated
Account with the Designated Account Bank for the purpose of receiving the
proceeds of the Advances and the Term Loan requested by Borrowers' Agent and
made by Agent, Foothill or the Lenders hereunder. Unless otherwise agreed by
Agent and Borrowers, any Advance or the Term Loan requested by Borrowers' Agent
and made hereunder shall be made to the Designated Account. Borrowers and
Borrowers' Agent acknowledge, confirm and agree that notwithstanding that the
Designated Account may be held in the name of Borrowers' Agent,
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each Advance made by Agent, on behalf of Lenders, to the Designated Account
shall in all events be deemed and constitute an Advance made to the Borrower who
requested, or on whose behalf Borrowers' Agent requested, such Advance, and the
Term Loan made to the Designated Account shall in all events be deemed and
constitute a Term Loan made to all Borrowers.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS.
Agent shall maintain one or more accounts on its books in the name of Borrowers
(collectively, the "Loan Account") on which Borrowers will be charged with all
Advances and the Term Loan made by Agent, Foothill, or the Lenders to any
Borrower or for any Borrower's account, including, accrued interest, Lender
Group Expenses, and any other payment Obligations of Borrowers. In accordance
with Section 2.8, the Loan Account will be credited with all payments received
by Agent from Borrowers or for Borrowers' account, including all amounts
received in the Agent Account from any Lockbox Bank. Agent shall render
statements regarding the Loan Account to Borrowers' Agent, including principal,
interest, fees, and including an itemization of all charges and expenses
constituting Lender Group Expenses owing, and, absent manifest error, such
statements shall be conclusively presumed to be correct and accurate and
constitute an account stated between Borrowers and the Lender Group unless,
within 30 days after receipt thereof by Borrowers' Agent, Borrowers' Agent shall
deliver to Agent written objection thereto describing the error or errors
contained in any such statements. All Obligations shall be the joint and several
liability of each Borrower and all Borrowers notwithstanding the maintenance of
one or more separate Loan Accounts.
2.11 FEES. Borrowers shall pay to Agent for the ratable
benefit of the Lender Group (except as otherwise indicated) the following fees:
(a) Facility Fee. On the Closing Date, (i) the
balance of the facility fee due and payable pursuant to the commitment letter
executed on October 27, 1998 between Foothill and Borrowers' Agent, in the
amount of $200,000, and (ii) an additional facility fee with respect to the Term
Loan in the amount of $150,000, which shall be fully earned and payable on the
Closing Date.
(b) Unused Line Fee. On the first day of each month
during the term of this Agreement, an unused line fee in an amount equal to
three-eighths of one percent (0.375%) per annum times the Average Unused Portion
of the Maximum Revolving Amount (the "Unused Line Fee").
(c) Financial Examination, Documentation, and
Appraisal Fees. For the sole and separate account of Agent: Agent's customary
fee of $650 per day per examiner, plus Agent's out-of-pocket expenses for each
financial analysis and examination (i.e., audits) of Borrowers performed by
personnel employed by Agent; Agent's customary appraisal fee of $1,500 per day
per appraiser, plus Agent's out-of-pocket expenses for each appraisal of the
Collateral performed by personnel employed by Agent; and, the actual charges
paid or incurred by Agent if it elects to employ the services of one or more
third Persons to perform such financial analyses and examinations (i.e., audits)
of Borrowers or to appraise the Collateral;
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<PAGE> 59
provided, however, that prior to the occurrence of an Event of Default and
during its continuance, Foothill will conduct, at Borrowers' expense as
aforesaid, no more than four (4) such audits and no more than two (2) such
appraisals during each twelve-month period following the Closing Date; and
(d) Agency Fee. For the sole and separate account of
Agent, an agency fee payable in the amount of $5,000 each month, or part
thereof, during the term of this Agreement, payable in arrears on the first day
of the next succeeding month.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE, TERM LOAN,
AND LETTER OF CREDIT. The obligation of the Lender Group (or any member thereof)
to make the initial Advance and the Term Loan, or to issue the initial Letter of
Credit is subject to the fulfillment, to the satisfaction of Agent and its
counsel, of each of the following conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before
November 21, 1998;
(b) Agent shall have received evidence of the filing
of its financing statements and fixture filings;
(c) Agent shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
a. the Lockbox Agreement;
b. the Disbursement Letter;
c. the Term Note;
d. a Continuing Guaranty of the
Obligations to the Lender Group
separately executed by each Borrower
and Guarantor in favor of Agent;
e. the Security Agreements;
f. UCC-1 Financing Statements executed
by Borrowers and Guarantors, each as
debtor, in favor of Agent, for the
benefit of the Lender Group, as
secured party, for filing in such
jurisdictions as Agent shall
require;
g. the Pay-Off Letter, together with
UCC termination statements and other
documentation evidencing the
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termination by the Existing Lenders
of their Liens in and to the
properties and assets of Borrowers
and Guarantors;
h. the Mortgages;
i. the Pledge Agreements, together with
the original certificates issued to
each respective pledgor thereunder
evidencing the pledged securities
pledged to Agent pursuant thereto
and stock powers executed in blank
by each pledgor with respect
thereto;
j. all original promissory notes and
other instruments held by Borrowers
evidencing Intercompany Loans, duly
endorsed in favor of Agent, together
with a collateral assignment and
UCC-3 assignment of all Liens
securing same;
k. Certificates of title for all of
Borrowers and Guarantors' registered
motor vehicles;
(d) Agent shall have received a certificate from the
Secretary of Borrowers and of Guarantors attesting to the respective resolutions
of Borrowers' and Guarantors' Board of Directors authorizing its execution,
delivery, and performance of this Agreement and the other Loan Documents to
which Borrowers and Guarantors are a party and authorizing specific officers of
Borrowers and Guarantor to execute the same;
(e) Agent shall have received copies of Borrowers'
and Guarantors' Governing Documents, as amended, modified, or supplemented to
the Closing Date, certified by the Secretary of Borrowers and of Guarantors;
(f) Agent shall have received a certificate of status
with respect to Borrowers and Guarantors, dated within 45 days of the Closing
Date, such certificate to be issued by the appropriate officer of the respective
jurisdiction of organization of Borrowers and Guarantors, which certificate
shall indicate that Borrowers and Guarantors are in good standing in such
jurisdiction;
(g) Agent shall have received certificates of status
with respect to Borrowers and Guarantors, each dated within 45 days of the
Closing Date, such certificates to be issued by the appropriate officer of the
jurisdictions in which its failure to be duly qualified or licensed would
constitute a Material Adverse Change, which certificates shall indicate that
Borrowers and Guarantors are in good standing in such jurisdictions;
(h) Agent shall have received a certificate of
insurance, together with the endorsements thereto, as are required by Section
6.10, the form and substance of which shall be satisfactory to Agent and its
counsel;
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(i) Agent shall have received the Collateral Access
Agreement executed by the lessor of the Real Property at which the Beckley
Smokeless coal preparation plant is located;
(j) Agent shall have received an opinion of
Borrowers' and Guarantors' counsel in form and substance satisfactory to Agent
in its sole discretion;
(k) Solely with respect to the funding of the Term
Loan, Agent shall have received a current appraisal of Borrowers' Equipment
prepared by John T. Boyd Company, using a methodology, and which appraisal shall
be in all respects, satisfactory to Agent;
(l) As requested by Agent, review by Agent of all of
Borrowers' coal supply and brokerage agreements and leasehold agreements with
respect to Real Property Collateral, the results of which shall be satisfactory
to Agent in all respects;
(m) Agent's review of the Senior Notes and Senior
Notes Indenture, the results of which review shall be satisfactory to Agent in
its sole discretion;
(n) Agent shall have received (i) Borrowers' Sources
and Uses of Funds with respect to the proceeds of the initial Advances and of
the Term Loan made on the Closing Date, and (ii) Borrowers' business plan for
their 1999 fiscal year, together with such other related information as Agent
shall request, all of which shall be satisfactory to Agent;
(o) The Availability for all Borrowers under the
lending formulas provided for in Section 2.1(a) above, and within applicable
sublimits and after deducting all applicable reserves established by Agent
pursuant to Section 2.1(b) above, in each case as reasonably determined by Agent
after the application of the proceeds of the initial Advances, the issuance of
the initial Letters of Credit and the making of the Term Loan, and after payment
of all Agent Expenses incurred as of the Closing Date, and provided that
accounts payable and other Indebtedness of Borrowers are then at a level and in
a condition reasonably acceptable to Agent, shall not be less than $5,000,000 on
the Closing Date;
(p) Agent shall have received evidence reasonably
satisfactory to Agent that Borrowers have all material Permits and Bonds in full
force and effect that are required by applicable federal, state and/or local
laws and regulations, including, without limitation, applicable environmental
laws, in order for Borrowers to conduct their mining business as presently and
proposed to be conducted, and no material Permit shall be subject to any action
or proceeding, which, if adversely determined, will or could result in the
revocation thereof;
(q) Completion of a field survey of Borrowers and
Guarantors by Agent's examiners, the results of which must be acceptable to
Agent;
(r) Agent shall have received satisfactory reference
checks for key management of Parent, Borrowers and Guarantors;
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(s) [Intentionally Omitted]
(t) Agent shall have received appraisals reporting
the OLV of Borrowers' Inventory performed by John T. Boyd Company;
(u) Agent shall have received satisfactory evidence
that all tax returns required to be filed by Borrowers have been timely filed
and all taxes upon Borrowers or their properties, assets, income, and franchises
(including real property taxes and payroll taxes) have been paid, except such
taxes that are the subject of a Permitted Protest;
(v) no Material Adverse Change shall have occurred
with respect to Borrowers and Guarantors since the date of Agent's latest field
examination thereof; and
(w) all other documents and legal matters in
connection with the transactions contemplated by this Agreement shall have been
delivered, executed, or recorded and shall be in form and substance satisfactory
to Agent and its counsel;
Execution and delivery to the Agent by a Lender of a counterpart of this
Agreement shall be deemed confirmation by such Lender that (i) all conditions
precedent in this Section 3.1 have been fulfilled to the satisfaction of such
Lender and (ii) the decision of such Lender to execute and deliver to the Agent
an executed counterpart of this Agreement was made by such Lender independently
and without reliance on the Agent or any other Lender as to the satisfaction of
any condition precedent set forth in this Section 3.1.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND ALL LETTERS OF
CREDIT. The following shall be conditions precedent to all Advances and all
Letters of Credit hereunder:
(a) the representations and warranties contained in
this Agreement and the other Loan Documents shall be true and correct in all
respects on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);
(b) no Material Adverse Change shall have occurred;
(c) no Default or Event of Default shall have
occurred and be continuing on the date of such extension of credit, nor shall
either result from the making thereof;
(d) no injunction, writ, restraining order, or other
order of any nature prohibiting, directly or indirectly, the extending of such
credit to Borrowers hereunder shall have been issued and remain in force by any
Governmental Authority against Borrowers and/or Guarantors, Agent, the Lender
Group, or any of their Affiliates; and
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(e) with respect to all Borrowers, the amount of the
Revolving Facility Usage for all Borrowers, after giving effect to the requested
Advance or Letter of Credit, shall not exceed Borrowers' aggregate Availability.
The foregoing conditions precedent are not conditions to each Lender (i)
participating in or reimbursing Agent for such Lenders' Pro Rata Share of any
drawings under Letters of Credit as provided herein, or (ii) participating in or
reimbursing Foothill or the Agent for such Lenders' Pro Rata Share of any
Foothill Loan or Agent Advance as provided herein.
3.3 CONDITION SUBSEQUENT. As a condition subsequent to initial
closing hereunder, Borrowers shall perform or cause to be performed the
following (the failure by Borrowers to so perform or cause to be performed
constituting an Event of Default):
(a) within 30 days of the Closing Date, deliver to
Agent the certified copies of the policies of insurance, together with the
endorsements thereto, as are required by Section 6.10, the form and substance of
which shall be satisfactory to Agent and its counsel;
(b) concurrently with the acquisition (that is
permitted hereunder) of any interest in any Real Property by any Borrower or any
Guarantor, Borrowers shall execute and deliver, or cause such Guarantor to
execute and deliver, to Agent, for the benefit of the Lender Group, a Mortgage
upon such newly acquired interest in Real Property, subject only to Permitted
Liens; and
(c) within sixty (60) days of the Closing Date, a
Collateral Access Agreement from Chesapeake Bay Piers, the owner of the public
warehouse at which Borrowers store inventory located at 1501 East Patapsco
Avenue, Baltimore, Maryland (provided that failure of Borrowers to deliver such
Collateral Access Agreement shall not constitute an Event of Default but shall
cause any Inventory located at such location to not be Eligible Inventory).
3.4 TERM.
(a) This Agreement shall become effective upon the
execution and delivery hereof by Borrowers, Borrowers' Agent and the Lender
Group and shall continue in full force and effect for a term ending on the date
(the "Termination Date") that is four (4) years from the Closing Date, unless
sooner terminated pursuant to the terms hereof.
(b) The foregoing notwithstanding, the Lender Group
shall have the right to terminate its obligations under this Agreement
immediately and without notice upon the occurrence and during the continuation
of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrowers with respect to any outstanding Letters of Credit) immediately shall
become due and payable without notice or demand. No termination of this
Agreement, however, shall relieve or discharge Borrowers of
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Borrowers' duties, Obligations, or covenants hereunder or under the other Loan
Documents, and Agent's continuing security interests in the Collateral, for the
benefit of the Lender Group, shall remain in effect until all Obligations have
been fully and finally discharged and the Lender Group's obligations to provide
additional credit hereunder have been terminated.
3.6 EARLY TERMINATION BY BORROWERS. The provisions of Section
3.4 that provides for termination of this Agreement by Borrowers only on the
Termination Date thereof notwithstanding, Borrowers have the option, at any time
upon 45 days prior written notice to Agent, to terminate this Agreement by
paying to Agent, for the ratable benefit of the Lender Group, in cash, the
Obligations (including an amount equal to 105% of the undrawn amount of the
Letters of Credit), in full, together with a premium (the "Early Termination
Premium") equal to (a) three and one-half (3 1/2%) percent of the Maximum
Amount, as then in effect, if such termination occurs at any time prior to the
first anniversary of this Agreement, (b) two and one-half (2 1/2%) percent of
the Maximum Amount, as then in effect, if such termination occurs at any time
from and after the first anniversary of this Agreement through and including the
day immediately prior to the second anniversary of this Agreement, and (c) one
half (1/2%) percent of the Maximum Amount, as then in effect, if such
termination occurs at any time from and after the second anniversary of this
Agreement through and including the day immediately prior to the Termination
Date; provided, however, that no Early Termination Premium shall be due and
payable if this Agreement is terminated solely by reason of (x) replacement of
the financing arrangements provided to Borrowers hereunder pursuant to new
financing arrangements entered into between Borrowers and Norwest Bank
Minnesota, National Association, or its successors, or (y) Lenders not funding
"Term Loan B" to Borrowers within one hundred eighty (180) days after the
Closing Date (as such quoted term is defined in that certain Letter of Intent,
dated October 13, 1998, executed between Foothill and Borrowers' Agent).
3.7 TERMINATION UPON EVENT OF DEFAULT. If the Lender Group
terminates this Agreement upon the occurrence of an Event of Default, in view of
the impracticability and extreme difficulty of ascertaining actual damages and
by mutual agreement of the parties as to a reasonable calculation of the Lender
Group's lost profits as a result thereof, then notwithstanding anything to the
contrary set forth in Section 3.6, Borrowers shall pay to Agent, for the ratable
benefit of the Lender Group, upon the effective date of such termination, a
premium in an amount equal to the Early Termination Premium. The Early
Termination Premium shall be presumed to be the amount of damages sustained by
the Lender Group as the result of the early termination and Borrowers agree that
it is reasonable under the circumstances currently existing. The Early
Termination Premium provided for in this Section 3.7 shall be deemed included in
the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Each Borrower hereby grants to
Agent, for the benefit of the Lender Group, continuing Liens on all right,
title, and interest of Borrowers in and to all currently existing and hereafter
acquired or arising Personal Property Collateral and Real Property Collateral in
order to secure prompt repayment of any and all Obligations and in
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order to secure prompt performance by Borrowers of each of their covenants and
duties under the Loan Documents (the "Agent's Liens"). The Agent's Liens in and
to the Personal Property Collateral shall attach to all Personal Property
Collateral without further act on the part of the Lender Group or Borrowers.
Anything contained in this Agreement or any other Loan Document to the contrary
notwithstanding, except for the sale of Inventory to buyers in the ordinary
course of business, Permitted Dispositions, Permitted Supplemental Dispositions
and other sales, transfers and dispositions of assets permitted by Section 7.4,
Borrowers have no authority, express or implied, to dispose of any item or
portion of the Personal Property Collateral or the Real Property Collateral.
Subject to Section 2.4(b), the secured claims of the Lender Group secured by the
Collateral shall be of equal priority, and ratable according to the respective
Obligations due each member of the Lender Group.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
including, without limitation, Negotiable Collateral evidencing Intercompany
Loans, Borrowers promptly shall endorse and deliver physical possession of such
Negotiable Collateral to Agent.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND
NEGOTIABLE COLLATERAL. At any time from and after the occurrence and during the
continuance of an Event of Default, Agent or Agent's designee may (a) notify
customers or Account Debtors of Borrowers that the Accounts, General
Intangibles, or Negotiable Collateral have been assigned to Agent for the
benefit of the Lender Group, or that Agent, for the benefit of the Lender Group,
has a security interest therein and (b) collect the Accounts, General
Intangibles, and Negotiable Collateral directly and charge the collection costs
and expenses to the Loan Account. Borrowers agree that they will hold in trust
for the Lender Group, as the Lender Group's trustee, any Collections that it
receives and immediately will deliver said Collections to Agent in their
original form as received by Borrowers.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time
upon the request of Agent, Borrowers shall execute and deliver to Agent all
financing statements, collateral assignments, continuation financing statements,
fixture filings, security agreements, pledges, assignments, mortgages, leasehold
mortgages, deeds of trust, leasehold deeds of trust, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents that Agent
reasonably may request, in form satisfactory to Agent, to perfect and continue
perfected the Agent's Liens on the Collateral (whether now owned or hereafter
arising or acquired), and in order to consummate fully all of the transactions
contemplated hereby and under the other the Loan Documents. Notwithstanding the
foregoing, Borrowers shall not be in default of their Obligations under this
Section 4.4 if Borrowers are unable to obtain Collateral Access Agreements or
consents to assignments by Borrowers that may be requested by Agent from the
owners of Real Property at any time leased to Borrowers, provided Borrowers
shall have exercised their commercially reasonable efforts to obtain such
Collateral Access Agreement or consent.
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4.5 POWER OF ATTORNEY. Each Borrower hereby irrevocably makes,
constitutes, and appoints Agent (and any of Agent's officers, employees, or
agents designated by Agent) as such Borrower's true and lawful attorney, with
power to (a) if such Borrower refuses to, or fails, within ten (10) days after
Agent's written request therefor, to execute and deliver any of the documents
described in Section 4.4, sign the name of such Borrower on any of the documents
described in Section 4.4, provided, that, Agent may exercise such power at any
time, without any prior notice or request to Borrowers, if 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 Lender Group
therein, (b) at any time that an Event of Default has occurred and is
continuing, sign such Borrower's name on any invoice or bill of lading relating
to any Account, drafts against Account Debtors, schedules and assignments of
Accounts, verifications of Accounts, and notices to Account Debtors, (c) send
requests for verification of Accounts, (d) endorse such Borrower's name on any
Collection item that may come into the Lender Group's possession, (e) at any
time that an Event of Default has occurred and is continuing in connection with
which Agent has exercised its rights set forth in Section 9.1(a), notify the
post office authorities to change the address for delivery of such Borrower's
mail to an address designated by Agent, to receive and open all mail addressed
to such Borrower, and to retain copies of all mail relating to the Collateral
and forward all other mail to such Borrower, (f) at any time that an Event of
Default has occurred and is continuing, make, settle, and adjust all claims
under such Borrower's policies of insurance and make all determinations and
decisions with respect to such policies of insurance, and (g) at any time that
an Event of Default has occurred and is continuing, settle and adjust disputes
and claims respecting the Accounts directly with Account Debtors, for amounts
and upon terms that Agent determines to be reasonable, and Agent may cause to be
executed and delivered any documents and releases that Agent determines to be
necessary. The appointment of Agent as each Borrower's attorney, and each and
every one of Agent's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully and finally repaid and
performed and the Lender Groups' obligations to extend credit hereunder are
terminated.
4.6 RIGHT TO INSPECT. Agent (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter, at
reasonable times so long as no Event of Default has occurred and is continuing,
to inspect the Books and to check, test, and appraise the Collateral in order to
verify Borrowers' financial condition or the amount, quality, value, condition
of, or any other matter relating to, the Collateral.
4.7 CONTROL AGREEMENTS. Borrowers agree that they will not
transfer assets out of any Securities Accounts other than as permitted under
Section 7.22 and, if to another securities intermediary, unless each of
Borrower, 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 Borrowers without the prior written consent of Agent. Upon
the occurrence and during the continuance of a Default or Event of Default,
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 Agent Account.
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5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this
Agreement, Borrowers make the following representations and warranties to the
Lender Group which shall be true, correct, and complete in all respects as of
the date hereof, and shall be true, correct, and complete in all respects as of
the Closing Date, and at and as of the date of the making of each Advance or
Letter of Credit made thereafter, as though made on and as of the date of the
making of such Advance or Letter of Credit (except to the extent that such
representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:
5.1 NO ENCUMBRANCES. Borrowers have good and indefeasible
title to the Collateral, free and clear of Liens except for Permitted Liens.
5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide
existing obligations created by the sale and delivery of Inventory or the
rendition of services to Account Debtors in the ordinary course of Borrowers'
business, unconditionally owed to Borrowers without defenses, disputes, offsets,
counterclaims, or rights of return or cancellation (collectively, "Claims"). If
any Claims arise or are asserted with respect to the Eligible Accounts,
Borrowers shall not be deemed to have breached the representation and warranty
set forth in the first sentence of this Section 5.2, provided that Borrowers
advise Agent of all such Claims in the detailed calculation of each Borrower's
Borrowing Base next delivered to Agent pursuant to Section 6.2(d).
Notwithstanding the foregoing, at such time as an Account becomes subject to any
Claim, such Account shall only remain and be deemed an Eligible Account if and
to the extent so provided in the definition of Eligible Accounts set forth in
Section 1, and regardless of whether Borrowers shall have reported such Claim to
Agent in accordance with this Section 5.2 and Section 6.2(d). The property
giving rise to such Eligible Accounts has been delivered to the Account Debtor,
or to the Account Debtor's agent, for immediate shipment to and unconditional
acceptance by the Account Debtor. Borrowers have not received notice of actual
or imminent bankruptcy, insolvency, or material impairment of the financial
condition of any Account Debtor regarding any Eligible Account.
5.3 ELIGIBLE INVENTORY. All Eligible Inventory is of good and
merchantable quality, free from defects.
5.4 EQUIPMENT. All of the Equipment is used or held for use in
Borrowers' business and is fit for such purposes.
5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and
Equipment are not stored with a bailee, warehouseman, or similar party and are
located only at the locations identified on Schedule 6.12 or otherwise permitted
by Section 6.12.
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5.6 INVENTORY RECORDS. Borrowers keep correct and accurate
records itemizing and describing the kind, type, quality, and quantity of the
Inventory, and Borrowers' cost therefor.
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief
executive office of Borrowers are located at the address indicated in the
preamble to this Agreement. The FEIN for each Borrower is as follows:
<TABLE>
<S> <C>
(a) FEIN for Anker Energy: 51-0217205;
(b) FEIN for Marine Coal Sales Company: 13-337813;
(c) FEIN for Anker West Virginia Mining
Company, Inc.: 55-0699931
(d) FEIN for Patriot Mining Company, Inc.: 55-0550184
(e) FEIN for Juliana Mining Company, Inc.: 55-0568083
(f) FEIN for Vindex Energy Corporation: 55-0753903
(g) FEIN for Anker Virginia Mining
Company, Inc.: 54-1867395
</TABLE>
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each Borrower is duly organized and existing and
in good standing under the laws of the jurisdiction of its incorporation and
qualified and licensed to do business in, and in good standing in, any state
where the failure to be so licensed or qualified reasonably could be expected to
constitute a Material Adverse Change.
(b) Set forth on Schedule 5.8, is a complete and
accurate description of the authorized capital Stock of Borrowers, by class,
and, as of the Closing Date, a description of the number of shares of each such
class that are issued and outstanding and the number of such shares that are
held in each Borrower's treasury. All such outstanding shares have been validly
issued and, as of the Closing Date, are fully paid, nonassessable shares free of
contractual preemptive rights. The issuance and sale of all such shares have
been in compliance with all applicable federal and state securities laws. Other
than as described on Schedule 5.8, there are no subscriptions, options,
warrants, or calls relating to any shares of any Borrowers' capital Stock,
including any right of conversion or exchange under any outstanding security or
other instrument. Borrowers are not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital Stock or any security convertible into or exchangeable for any of its
capital Stock.
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(c) Set forth on Schedule 5.8, is a complete and
accurate list of Borrowers' direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their incorporation; (ii) the number of shares of each class of
common and preferred Stock authorized for each of such Subsidiaries; and (iii)
the number and the percentage of the outstanding shares of each such class owned
directly or indirectly by Borrowers. All of the outstanding capital Stock of
each such Subsidiary has been validly issued and is fully paid and
non-assessable.
(d) Except as set forth on Schedule 5.8, no capital
Stock (or any securities, instruments, warrants, options, purchase rights,
conversion or exchange rights, calls, commitments or claims of any character
convertible into or exercisable for capital Stock) of any direct or indirect
Subsidiary of Borrowers are subject to the issuance of any security, instrument,
warrant, option, purchase right, conversion or exchange right, call, commitment
or claim of any right, title, or interest therein or thereto.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by
Borrowers of this Agreement and the Loan Documents to which each is a party have
been duly authorized by all necessary corporate action.
(b) The execution, delivery, and performance by
Borrowers of this Agreement and the Loan Documents to which each is a party do
not and will not (i) violate any provision of federal, state, or local law or
regulation (including Regulations G, T, U, and X of the Federal Reserve Board)
applicable to Borrowers, the Governing Documents of Borrowers, or any order,
judgment, or decree of any court or other Governmental Authority binding on
Borrowers, (ii) conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under (A) the Senior Notes and the
Senior Note Indenture or (B) any other material contractual obligation or
material lease of Borrowers, which could reasonably be expected to result in a
Material Adverse Change, (iii) result in or require the creation or imposition
of any Lien of any nature whatsoever upon any properties or assets of Borrowers,
other than Permitted Liens, or (iv) require any approval of stockholders or any
approval or consent of any Person under any material contractual obligation of
Borrowers.
(c) Other than the taking of any action expressly
required under this Agreement and the Loan Documents, the execution, delivery,
and performance by Borrowers of this Agreement and the Loan Documents to which
Borrowers are a party do not and will not require any registration with,
consent, or approval of, or notice to, or other action with or by, any federal,
state, foreign, or other Governmental Authority or other Person, except for the
consent of certain third Persons, who are party to or have issued Non-assignable
Property, that is required in accordance with the terms of such Non-assignable
Property for Borrowers' valid granting of Liens or assignments of rights in such
Non-assignable Property.
(d) This Agreement and the Loan Documents to which
Borrowers are a party, and all other documents contemplated hereby and thereby,
when executed and delivered
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by Borrowers will be the legally valid and binding obligations of Borrowers,
enforceable against Borrowers in accordance with their respective terms, except
as enforcement may be limited by equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or limiting
creditors' rights generally.
(e) The Agent's Liens granted by Borrowers to Agent,
for the benefit of the Lender Group, in and to their respective properties and
assets pursuant to this Agreement and the other Loan Documents are validly
created, perfected, and first priority Liens, subject only to Permitted Liens.
5.10 LITIGATION. There are no actions, investigations or
proceedings pending by or against Borrowers or Guarantors or with respect to any
of their Permits before any court or administrative agency and Borrowers do not
have knowledge of any pending, threatened, or imminent litigation, governmental
investigations, or claims, complaints, actions, or prosecutions involving
Borrowers or any of their Permits or any Guarantor, including, without
limitation, information requests received with respect to any Real Property
Collateral, "Mandalidis" claims, and grand jury investigations pending against
any employees of Borrowers or Guarantors relating to the Mine Safety and Health
Act of 1977, except for: (a) ongoing collection matters in which Borrowers
and/or Guarantors are the plaintiff; (b) matters disclosed on Schedule 5.10; and
(c) matters arising after the date hereof that, if decided adversely to
Borrowers and/or Guarantors, would not result in a Material Adverse Change.
5.11 NO MATERIAL ADVERSE CHANGE. All financial statements
relating to Parent and its Subsidiaries that have been delivered by Borrowers to
the Lender Group have been prepared in accordance with GAAP (except, in the case
of unaudited financial statements, for the lack of footnotes and being subject
to year-end audit adjustments) and fairly present Borrowers' (or Guarantors', as
applicable) financial condition as of the date thereof and Borrowers' and
Guarantors' results of operations for the period then ended. There has not been
a Material Adverse Change with respect to Borrowers or Guarantors since the date
of the latest financial statements submitted to the Lender Group on or before
the Closing Date.
5.12 NO FRAUDULENT TRANSFER.
(a) Each Borrower is Solvent.
(b) No transfer of property is being made by any
Borrower and no obligation is being incurred by any Borrower in connection with
the transactions contemplated by this Agreement or the other Loan Documents with
the intent to hinder, delay, or defraud either present or future creditors of
Borrowers.
5.13 EMPLOYEE BENEFITS. None of Borrowers, any of their
Subsidiaries, or any of their ERISA Affiliates maintains or contributes to any
Benefit Plan, other than those listed on Schedule 5.13. Borrowers, each of their
Subsidiaries and each ERISA Affiliate have satisfied the minimum funding
standards of ERISA and the IRC with respect to each Benefit Plan to which
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it is obligated to contribute. No ERISA Event has occurred nor has any other
event occurred that may result in an ERISA Event that reasonably could be
expected to result in a Material Adverse Change. None of Borrowers or their
Subsidiaries, any ERISA Affiliate, or any fiduciary of any Plan is subject to
any direct or indirect liability with respect to any Plan under any applicable
law, treaty, rule, regulation, or agreement. None of Borrowers or their
Subsidiaries or any ERISA Affiliate is required to provide security to any Plan
under Section 401(a)(29) of the IRC.
5.14 ENVIRONMENTAL CONDITION.
(a) Except pursuant to applicable Permits, none of
Borrowers' or Guarantors' properties or assets has ever been used by Borrowers
or Guarantors or, to the best of Borrowers' knowledge, by previous owners or
operators in the disposal of, or to produce, store, handle, treat, release, or
transport, any Hazardous Materials. Except as set forth on Schedule 5.14, and
except for the discharge and treatment of acid mine drainage ("AMD"), none of
Borrowers' or Guarantors' properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection statute as a
Hazardous Materials disposal site, or a candidate for closure pursuant to any
environmental protection statute. Except as set forth on Schedule 5.14, no Lien
arising under any environmental protection statute has attached to any revenues
or to any real or personal property owned or operated by Borrowers or
Guarantors. Except as set forth on Schedule 5.14, none of Borrowers or
Guarantors is in receipt of a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by Borrowers or Guarantors resulting in
the releasing or disposing of Hazardous Materials into the environment in
violation of Borrowers' or Guarantors' Permits, which could reasonably be
expected to result in a Material Adverse Change.
(b) Except as set forth on Schedule 5.14, and other
than the discharge, disposal and treatment of AMD pursuant to appropriate
Permits, there does not exist any investigation, proceeding, complaint, order,
directive, claim, citation or notice by any Governmental Authority or any other
Person nor is any pending or, to the best of Borrower's knowledge, threatened,
with respect to (i) any noncompliance with or violation of any environmental
Legal Requirements by Borrowers or Guarantors in any material respect or (ii)
the release, spill or discharge, threatened or actual, of any Hazardous Material
or the generation, use, storage, treatment, transportation, manufacturer,
handling, production or disposal of any Hazardous Materials or any other
environmental, health or safety matter, which affects Borrowers or Guarantors or
their businesses, operations or assets or any properties at which Borrower or
Guarantors transported, stored or disposed of any Hazardous Materials in any
material respect; and which in the case of any of the foregoing could reasonably
be expected to result in a Material Adverse Change.
(c) Except as set forth on Schedule 5.14, Borrowers
and Guarantors do not have any material liability (contingent or otherwise other
than the costs associated with the treatment of AMD) in connection with a
release, spill or discharge, threatened or actual, of any Hazardous Materials or
the generation, use, storage, treatment, transportation, manufacture,
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handling, production or disposal of any Hazardous Materials or any violation, or
alleged violation, of any environmental Legal Requirements.
5.15 BROKERAGE FEES. No brokerage commission or finders fees
has or shall be incurred or payable by the Lender Group in connection with or as
a result of Borrowers' obtaining financing from the Lender Group under this
Agreement, and other than Durham Capital and 21st Funding Corporation, whose
fees and commissions will be paid in full by Borrowers on the Closing Date,
Borrowers have not utilized the services of any broker or finder in connection
with Borrowers' obtaining financing from the Lender Group under this Agreement.
5.16 PERMITS AND OTHER INTELLECTUAL PROPERTY.
(a) Except as set forth on Schedule 5.16, Borrowers own
or possess adequate licenses or other rights to use all Permits, patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, trade names, copyrights, trade secrets and know-how (collectively,
the "Intellectual Property") that are necessary for the operation of their
business as currently conducted, in all material respects. No claim is pending
or threatened to the effect that any Borrower infringes upon, or conflicts with,
the asserted rights of any other Person under any material Intellectual
Property, and to the best of Borrowers' knowledge there is no basis for any such
claim (whether pending or threatened). No claim is pending or threatened to the
effect that any such material Intellectual Property owned or licensed by
Borrowers, or in which Borrowers otherwise have the right to use is invalid or
unenforceable by Borrowers, and to the best of Borrowers' knowledge there is not
basis for any such claim (whether or not pending or threatened).
(b) In addition to, and not in limitation of the
representations and warranties set forth in Section 5.16(a), except as set forth
on Schedule 5.16, Borrowers have obtained all material Permits of any
Governmental Authority required for the lawful conduct of their business and are
in compliance in all material respects with the requirements of all applicable
Legal Requirements of any such Governmental Authority (including, but not
limited to, the West Virginia Department of Environmental Protection, West
Virginia Department for Surface Mining Reclamation and Enforcement, Federal Mine
and Safety and Health Administration, Federal Office of Surface Mining and
Reclamation, and the Federal Environmental Protection Agency) relating to their
business (including, without limitation, those set forth in or promulgated
pursuant to ERISA, the Occupational Safety and Health Act of 1970, as amended,
the Surface Mining Control and Reclamation Act of 1977, the Mine Safety and
Health Act of 1977, the Fair Labor Standards Act of 1938, as amended, and
environmental laws). Schedule 5.16 hereto sets forth all material Permits issued
to Borrowers as of the date hereof by any Federal, State or local Governmental
Authority and all Bonds that Borrowers are required to maintain in effect in
connection therewith. The Permits constitute all permits, licenses, approvals,
consents, certificates, orders or authorizations necessary for Borrowers to own
and operate their business as presently conducted or proposed to be conducted
where the failure to have such Permits would result in Material Adverse Change.
Except as described on Schedule 5.16, all of the Permits are valid and
subsisting and in full force and effect and there are no
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actions, claims or proceedings pending or threatened that seek the revocation,
cancellation, suspension or modification of any of the Permits. Without limiting
the foregoing, except as described on Schedule 5.16, no Borrower or Guarantor,
nor any officers, directors or partner of such Borrower or Guarantor, nor any
entity which "owns" or "control" or which is "owned" or "controlled" by
Borrowers, Guarantors, or any Affiliates of any of the foregoing is ineligible
to receive, renew, modify, amend or transfer a Permit as a result of violations
reported on the Applicant Violator System operated by the United States
Department of Interior and any related systems or procedures (the "AVS").
5.17 REAL PROPERTY. The schedules referenced in the Mortgages
for a legal description of the Real Property Collateral include legal
descriptions of, or references to, all fee and leasehold interests in Real
Property located in the states of West Virginia, Kentucky and Virginia owned by
Borrowers and Guarantors which constitute Material Properties.
6. AFFIRMATIVE COVENANTS.
Borrowers covenant and agree that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, and unless the Lender Group shall otherwise consent in writing,
Borrowers shall do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a standard and modern system
of accounting that enables Borrowers to produce financial statements in
accordance with GAAP, and maintain records pertaining to the Collateral that
contain information as from time to time may be requested by Agent. Borrowers
also shall keep a modern inventory reporting system that shows all additions,
sales, claims, returns, and allowances with respect to the Inventory.
6.2 COLLATERAL REPORTING. Provide Agent with the following
documents at the following times in form satisfactory to Agent as to each
Borrower: (a) on each Business Day a sales journal, collection journal, and
credit register since the last such schedule and a calculation of the Borrowing
Base as of such date, (b) on a monthly basis and, in any event, by no later than
the 15th day of each month during the term of this Agreement, (i) a Solvency
Certificate with respect to Parent (on a consolidated basis with its
Subsidiaries) and with respect to each of Borrowers, and (ii) a detailed aging,
by total, of the Accounts, together with a reconciliation to the detailed
calculation of the Borrowing Base previously provided to Agent, and (iii) a
detailed report identifying all then existing Estimated Billings, (c) on a
monthly basis and, in any event, by no later than the 15th day of each month
during the term of this Agreement, a report as to Borrowers' obligations owing
in respect of Real Property leases, licenses and royalty agreements, a summary
aging, by vendor, of Borrowers' accounts payable and any book overdraft, (d) on
a weekly basis, (i) Inventory reports specifying Borrowers' Value (which Value
shall be calculated based upon the Value in existence on the last day of the
immediately preceding month) of its Inventory by category, with additional
detail showing additions to and deletions from the Inventory, (ii) a detailed
calculation of each Borrower's Borrowing Base and (iii) a report of all then
outstanding Intercompany Loans by Anker Energy to all other Borrowers and to
Guarantors, (e) on request of the Agent, notice of all returns, disputes, or
claims, (f) upon request, copies of
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invoices in connection with the Accounts, customer statements, credit memos,
remittance advices and reports, deposit slips, shipping and delivery documents
in connection with the Accounts and for Inventory and Equipment acquired by
Borrowers, purchase orders and invoices, (g) on a quarterly basis, a detailed
list of Borrowers' customers, (h) on a monthly basis, a calculation of the
Dilution for the prior month; (i) on a quarterly basis, (i) a report as to
Borrowers' then existing Inventory based on a physical survey or ground
inspection of Borrowers' and Guarantors' Real Property prepared by a qualified
independent firm, and in form and substance, satisfactory to Agent, and (ii) a
report of the results of a search of the AVS as to Borrowers and Guarantors
conducted within 15 days preceding the end of each such quarter, (j) such other
reports as to the Collateral or the financial condition of Borrowers and/or
Guarantors as Agent may request from time to time. Original sales invoices
evidencing daily sales shall be mailed by Borrowers to each Account Debtor and,
from and after the occurrence and during the continuance of an Event of Default,
at Agent's direction, the invoices shall indicate on their face that the Account
has been assigned to the Lender Group and that all payments are to be made
directly to Agent for the benefit of the Lender Group.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to
Agent, with copies to each Lender: (a) as soon as available, but in any event
within 45 days after the end of each month during each of Borrowers' fiscal
years, a company prepared balance sheet, income statement, and statement of cash
flow covering Borrowers' operations during such period; and (b) as soon as
available, but in any event within 90 days after the end of each of Borrowers'
fiscal years, financial statements of Borrowers for each such fiscal year,
audited by independent certified public accountants reasonably acceptable to
Agent and certified, without any qualifications, by such accountants to have
been prepared in accordance with GAAP, together with a certificate of such
accountants addressed to Agent stating that, in connection with their audits,
nothing came to their attention that caused such accountants to believe that
Borrowers failed to comply with the terms, covenants, provisions or conditions
of Section 7.20 of this Agreement. Such audited financial statements shall
include a balance sheet, profit and loss statement, and statement of cash flow
and, if prepared, such accountants' letter to management. If any Borrower is a
parent company of one or more Subsidiaries, or Affiliates, or is a Subsidiary or
Affiliate of another company, then, in addition to the financial statements
referred to above, Borrowers agree to deliver financial statements prepared on a
consolidating basis so as to present Borrowers and each such related entity
separately, and on a consolidated basis.
Together with the above, Borrowers also shall deliver to
Agent, with copies to each Lender, Parent's Form 10-Q Quarterly Reports, Form
10-K Annual Reports, and Form 8-K Current Reports, and any other filings made by
Parent with the SEC, if any, as soon as the same are filed, or any other
information that is provided by Borrowers to their shareholders, and any other
report reasonably requested by the Lender Group relating to the financial
condition of Borrowers and/or Guarantors.
Each month, together with the financial statements
provided pursuant to Section 6.3(a), Borrowers shall deliver to Agent, with
copies to each Lender, a certificate signed by the chief financial officer of
Parent to the effect that: (i) all financial statements delivered or
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caused to be delivered to any one or more members of the Lender Group hereunder
have been prepared in accordance with GAAP (except, in the case of unaudited
financial statements, for the lack of footnotes and being subject to year-end
audit adjustments) and fairly present the financial condition of Borrowers, (ii)
the representations and warranties of Borrowers contained in this Agreement and
the other Loan Documents are true and correct in all material respects on and as
of the date of such certificate, as though made on and as of such date (except
to the extent that such representations and warranties relate solely to an
earlier date), (iii) for each month that also is the date on which a financial
covenant in Section 7.20 is to be tested, a Compliance Certificate demonstrating
in reasonable detail compliance at the end of such period with the applicable
financial covenants contained in Section 7.20, and (iv) on the date of delivery
of such certificate to Agent there does not exist any condition or event that
constitutes a Default or Event of Default (or, in the case of clauses (i), (ii),
or (iii), to the extent of any non-compliance, describing such non-compliance as
to which he or she may have knowledge and what action Borrowers have taken, are
taking, or propose to take with respect thereto).
Solely upon Agent's request after the occurrence and
during the continuance of an Event of Default, Borrowers shall have issued
written instructions to their independent certified public accountants
authorizing them to communicate with Agent and to release to Agent whatever
financial information concerning Borrowers that Agent may request. Borrowers
hereby irrevocably authorize and direct all auditors, accountants, or other
third parties to deliver to Agent, at Borrowers' expense, copies of Borrowers'
financial statements, papers related thereto, and other accounting records of
any nature in their possession, and to disclose to Agent any information they
may have regarding Borrowers' business affairs and financial conditions.
In addition to the financial statements required to be
delivered as set forth above, not later than 30 days prior to the end of each
fiscal year of Borrowers, Borrowers shall deliver to Agent financial projections
(including projected income statements, balance sheets and statements of cash
flow, all projected on a monthly basis for the succeeding fiscal year), in form
and substance reasonably satisfactory to Agent. All such financial projections
shall be reasonable, shall be prepared on a reasonable basis and in good faith,
and shall be based on assumptions believed by the Borrowers to be reasonable at
the time made and from the best information then available to the Borrowers.
6.4 TAX RETURNS. Upon request of the Agent, deliver to Agent
copies of each of Borrowers' consolidated future federal income tax returns, and
any amendments thereto, within 30 days of the filing thereof with the Internal
Revenue Service.
6.5 GUARANTOR REPORTS. Cause any guarantor of any of the
Obligations to deliver its annual financial statements at the time when
Borrowers provide their audited financial statements to Agent.
6.6 RETURNS. Cause returns and allowances, if any, as between
Borrowers and their Account Debtors to be on the same basis and in accordance
with the usual customary practices of Borrowers, as they exist at the time of
the execution and delivery of this Agreement.
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If, at a time when no Event of Default has occurred and is continuing, any
Account Debtor returns any Inventory to Borrowers, Borrowers promptly shall
determine the reason for such return and, if Borrowers accept such return, issue
a credit memorandum in the appropriate amount to such Account Debtor.
6.7 TITLE TO EQUIPMENT. Upon Agent's request, Borrowers
promptly shall deliver to Agent, properly endorsed, any and all evidences of
ownership of, certificates of title, or applications for title to any items of
Equipment.
6.8 MAINTENANCE OF EQUIPMENT. Maintain the Equipment in good
operating condition and repair (ordinary wear and tear excepted), and make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Other than those items
of Equipment that constitute fixtures on the Closing Date, Borrowers shall not
permit any item of Equipment to become a fixture to real estate or an accession
to other property, and such Equipment shall at all times remain personal
property, unless the item of Equipment is critical to the functioning, and
constitutes an integral part, of the Real Property at which it is located.
6.9 TAXES.
(a) Cause all assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against Borrowers or any of their property or assets to be paid in full, before
delinquency or before the expiration of any extension period, except to the
extent that the validity of such assessment or tax (other than payroll taxes or
taxes that are the subject of a United States federal tax lien) shall be the
subject of a Permitted Protest.
(b) Make due and timely payment or deposit of all such
federal, state, and local taxes, assessments, or contributions required of them
by law, and will execute and deliver to Agent, on demand, appropriate
certificates attesting to the payment thereof or deposit with respect thereto.
(c) Make timely payment or deposit of all tax payments and
withholding taxes required of them by applicable laws, including those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Agent with proof satisfactory to
Agent indicating that Borrowers have made such payments or deposits.
6.10 INSURANCE.
(a) At its expense, keep the Personal Property Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as are ordinarily insured against
by other owners in similar businesses. Borrowers also shall maintain business
interruption, public liability, product liability, and property damage
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insurance relating to Borrowers' ownership and use of the Personal Property
Collateral, as well as insurance against larceny, embezzlement, and criminal
misappropriation.
(b) At its expense, obtain and maintain (i) insurance of
the type necessary to insure the Improvements and Chattels (as such terms are
defined in the Mortgages), for the actual cash value thereof, against any loss
by fire, lightning, windstorm, hail, explosion, aircraft, smoke damage, vehicle
damage, earthquakes, elevator collision, and other risks from time to time
included under "extended coverage" policies, in such amounts as Agent may
require, but in any event in amounts sufficient to prevent Borrowers from
becoming a co-insurer under such policies, (ii) combined single limit bodily
injury and property damages insurance against any loss, liability, or damages
on, about, or relating to each parcel of Real Property Collateral, in an amount
of not less than the amount of such insurance in effect as of the Closing Date;
and (iii) insurance for such other risks as Agent may reasonably require.
Replacement costs, at Agent's option, may be redetermined by an insurance
appraiser, satisfactory to Agent, not more frequently than once every 12 months
at Borrowers' cost.
(c) All such policies of insurance shall be in such form,
with such companies, and in such amounts as may be reasonably satisfactory to
Agent. All insurance required herein shall be written by companies which have a
Best's rating of A for capital and X for financial stability. All hazard
insurance and such other insurance as Agent shall specify, shall contain, as
applicable, a lender's loss payable or mortgagee endorsement, or an equivalent
endorsement satisfactory to Agent, showing Agent as sole loss payee thereof, and
shall contain a waiver of warranties. Every policy of insurance referred to in
this Section 6.10 shall contain an agreement by the insurer that it will not
cancel such policy except after 30 days prior written notice to Agent and that
any loss payable thereunder shall be payable notwithstanding any act or
negligence of Borrowers or the Lender Group which might, absent such agreement,
result in a forfeiture of all or a part of such insurance payment and
notwithstanding (i) occupancy or use of the Real Property Collateral for
purposes more hazardous than permitted by the terms of such policy, (ii) any
foreclosure or other action or proceeding taken by the Lender Group pursuant to
the Mortgages upon the happening of an Event of Default, or (iii) any change in
title or ownership of the Real Property Collateral. Borrowers shall deliver to
Agent certified copies of such policies of insurance and evidence of the payment
of all premiums therefor.
(d) Original policies or certificates thereof satisfactory
to Agent evidencing such insurance shall be delivered to Agent at least 30 days
prior to the expiration of the existing or preceding policies. Borrowers shall
give Agent prompt notice of any loss covered by such insurance. Prior to the
occurrence of an Event of Default that is continuing, Agent shall have the
exclusive right to adjust all losses which exceed $500,000 payable under any
such insurance policies, in each case without any liability to Borrowers
whatsoever in respect of such adjustments. Prior to the occurrence of an Event
of Default that is continuing, any monies received as payment for any loss under
any insurance policy including the insurance policies mentioned above shall be
paid over to Borrowers, and at any time while an Event of Default exits, all
such monies received as payment for any such loss, shall be paid over to Agent
to be applied at the option of the Required Lenders either to the prepayment of
the Obligations without
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premium, in such order or manner as Agent may elect, or shall be disbursed to
Borrowers under stage payment terms satisfactory to Agent for application to the
cost of repairs, replacements, or restorations. All repairs, replacements, or
restorations shall be effected with reasonable promptness and shall be of a
value at least equal to the value of the items or property destroyed prior to
such damage or destruction. Upon the occurrence of an Event of Default, the
Lender Group shall have the right to apply all prepaid premiums to the payment
of the Obligations in such order or manner as Agent shall determine.
(e) Borrowers shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required to be
maintained under this Section 6.10, unless Agent is included thereon as named
insured with the loss payable to Agent under, as applicable, a lender's loss
payable or mortgagee endorsement or its local equivalent. Borrowers immediately
shall notify Agent whenever such separate insurance is taken out, specifying the
insurer thereunder and full particulars as to the policies evidencing the same,
and originals of such policies immediately shall be provided to Agent.
6.11 NO SETOFFS OR COUNTERCLAIMS. Make payments hereunder and
under the other Loan Documents by or on behalf of Borrowers without setoff or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any federal, state, or local taxes.
6.12 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory
and Equipment only at the locations identified on Schedule 6.12; provided,
however, that Borrowers may amend Schedule 6.12 so long as such amendment occurs
by written notice to Agent not less than 30 days prior to the date on which the
Inventory or Equipment is moved to such new location, so long as such new
location is within the continental United States, and so long as, at the time of
such written notification, Borrowers provide any financing statements or fixture
filings necessary or advisable to perfect and continue perfected the Agent's
Liens on such assets and also provides to Agent, upon request of Agent, a
Collateral Access Agreement with respect to any such Inventory or Equipment that
has been moved to a new location.
6.13 COMPLIANCE WITH LAWS; NOTICE OF NON-COMPLIANCE.
(a) Mine and produce all Inventory in accordance with and
otherwise 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
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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) Provide Agent on a monthly basis with a report of all
notices delivered by any Governmental Authority to Borrowers or Guarantors
alleging violation of or non-compliance with any Permits or any applicable laws,
rules, regulations or orders referred to in Section 6.13(a) that could
reasonably be expected to result in a Material Adverse Change and promptly after
Borrowers or Guarantors 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 Agent with a
written report thereof describing the foregoing and advising Agent of the
actions Borrowers 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 Borrowers in order to
avoid any material non-compliance with any Legal Requirements relating to the
use, disposal, treatment or generation of Hazardous Materials, Borrowers shall,
at the request of Agent and at Borrowers' expense: (i) cause an independent
environmental engineer reasonably acceptable to Agent to conduct such tests of
the site where Borrowers' non-compliance or alleged non-compliance with Legal
Requirements has occurred as to such non-compliance and prepare and deliver to
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 Agent a
supplemental report of such engineer whenever the scope of such non-compliance,
or Borrowers' response thereto or the estimated costs thereof, shall change in
any material respect.
6.14 EMPLOYEE BENEFITS.
(a) Cause to be delivered to Agent: (i) promptly, and in
any event within 10 Business Days after Borrowers or any of their Subsidiaries
knows or has reason to know that an ERISA Event has occurred that reasonably
could be expected to result in a Material Adverse Change, a written statement of
the chief financial officer of Borrowers describing such ERISA Event and any
action that is being taking with respect thereto by Borrowers, any such
Subsidiary or ERISA Affiliate, and any action taken or threatened by the IRS,
Department of Labor, or PBGC. Borrowers or any such Subsidiary, as applicable,
shall be deemed to know all facts known by the administrator of any Benefit Plan
of which it is the plan sponsor, (ii) promptly, and in any event within 3
Business Days after the filing thereof with the IRS, a copy of each funding
waiver request filed with respect to any Benefit Plan and all communications
received by Borrowers, any of their Subsidiaries or, to the knowledge of
Borrowers, any ERISA Affiliate with respect to such request, and (iii) promptly,
and in any event within 3 Business Days
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after receipt by Borrowers, any of their Subsidiaries or, to the knowledge of
Borrowers, any ERISA Affiliate, of the PBGC's intention to terminate a Benefit
Plan or to have a trustee appointed to administer a Benefit Plan, copies of each
such notice.
(b) Cause to be delivered to Agent, upon Agent's request,
each of the following: (i) a copy of each Plan (or, where any such plan is not
in writing, complete description thereof) (and if applicable, related trust
agreements or other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of Borrowers or their Subsidiaries;
(ii) the most recent determination letter issued by the IRS with respect to each
Benefit Plan; (iii) for the three most recent plan years, annual reports on Form
5500 Series required to be filed with any governmental agency for each Benefit
Plan; (iv) all actuarial reports prepared for the last three plan years for each
Benefit Plan; (v) a listing of all Multiemployer Plans, with the aggregate
amount of the most recent annual contributions required to be made by Borrowers
or any ERISA Affiliate to each such plan and copies of the collective bargaining
agreements requiring such contributions; (vi) any information that has been
provided to Borrowers or any ERISA Affiliate regarding withdrawal liability
under any Multiemployer Plan; and (vii) the aggregate amount of the most recent
annual payments made to former employees of Parent or its Subsidiaries under any
Retiree Health Plan.
6.15 LEASES. Pay when due all rents, royalties and other
amounts payable under any leases to which Borrowers are a party or by which
Borrowers' properties and assets are bound, unless such payments are the subject
of a Permitted Protest. To the extent that Borrowers fail timely to make payment
of such rents, royalties and other amounts payable when due under its leases,
Agent shall be entitled, in its discretion, to reserve an amount equal to such
unpaid amounts, as determined by Agent, against the Borrowing Base of all
Borrowers or of any of them.
6.16 BROKER COMMISSIONS. Pay any and all brokerage commission
or finders fees incurred or payable in connection with or as a result of
Borrowers' obtaining financing from the Lender Group under this Agreement.
6.17 PERMIT BLOCKS. If information in the AVS triggers a
permit or license block against Borrowers which has an adverse effect on (a)
Borrowers' mining operations, (b) Borrowers' ability to make payments hereunder
or under any of the Loan Documents, or (c) the value of any of the Collateral,
Borrowers' Agent shall immediately notify 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 Borrowers' operations and challenging the AVS ownership and
control link, in accordance with the procedures set forth in 30 CFR Section
773.25.
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7. NEGATIVE COVENANTS.
Borrowers covenant and agree that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrowers will not do any of the following without the Lender
Group's prior written consent delivered on behalf of the Lenders by the Agent:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, together
with Indebtedness to issuers of letters of credit that are the subject of L/C
Guarantees;
(b) Indebtedness set forth on Schedule 7.1, including,
without limitation, the Indebtedness owing under the Senior Notes;
(c) Indebtedness secured by Permitted Liens;
(d) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this Section 7.1 (and continuance or
renewal of any Permitted Liens associated therewith) so long as: (i) the terms
and conditions of such refinancings, renewals, or extensions do not materially
impair the prospects of repayment of the Obligations by Borrowers, (ii) the net
cash proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) except with respect to the refinancing of the
Indebtedness evidenced by the Senior Notes (as so refinanced, the "Refinanced
Senior Note Indebtedness"), such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to the Lender Group as those
applicable to the refinanced Indebtedness, and (v) solely with respect to the
Refinanced Senior Note Indebtedness, in addition to and not in limitation of the
foregoing, (A) the maturity of the Refinanced Senior Note Indebtedness shall not
occur prior to the Termination Date, (B) the proceeds of the Refinanced Senior
Note Indebtedness shall be used to repay and satisfy the Senior Notes in full or
in part, (C) to the extent the Refinancing Senior Note Indebtedness shall be
secured by Permitted Liens described in Section 7.2, the holders of the
Refinanced Senior Note Indebtedness ("Refinanced Senior Note Holders") shall
have entered into and executed with Agent an intercreditor agreement, in form
and substance satisfactory to Agent in its sole discretion (the "Refinanced
Senior Note Intercreditor Agreement"), which shall provide, among other things,
that the Liens granted by Borrowers and Guarantors to the Refinanced Senior Note
Holders in any Collateral shall be fully subordinated in right and priority to
the Liens now or hereafter granted therein to the Lender Group and the
Refinanced Senior Note Holders shall have no rights whatsoever to enforce their
Liens therein unless and until all Obligations owing to the Lender Group have
been indefeasibly paid in full, and (D) no Default or Event of Default shall
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exist on the date Borrowers and/or Guarantors propose to incur the Refinanced
Senior Note Indebtedness;
(e) Intercompany Loans permitted pursuant to Section 7.13,
provided that, such Indebtedness shall not be evidenced by any promissory note
or other instrument, unless the original of such note or other instrument is
pledged and delivered to Agent (with such endorsement thereof as Agent shall
require); and
(f) Indebtedness in respect of the Replacement Term Loan
permitted pursuant to Section 2.3(a).
7.2 LIENS. Create, incur, assume, or permit to exist, directly
or indirectly, any Lien on or with respect to any of the Collateral or any
income or profits therefrom, except for Permitted Liens (including Liens that
are replacements of Permitted Liens to the extent that the original Indebtedness
is refinanced under Section 7.1(d) and so long as the replacement Liens only
encumber those assets or property that secured the original Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES.
(a) Enter into any merger, consolidation, reorganization,
or recapitalization, or reclassify its capital Stock, except for the merger of
any one or more Borrowers into another Borrower or the consolidation of one or
more Borrowers upon no less than thirty (30) days prior written notice thereof
to Agent.
(b) Liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution).
(c) Convey, sell, assign, lease, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its property or assets, other than pursuant to a Permitted
Disposition or a Permitted Supplemental Disposition.
7.4 DISPOSAL OF ASSETS. Sell, lease, assign, transfer, or
otherwise dispose of any of Borrowers' properties or assets other than:
(a) Sales of Inventory to buyers in the ordinary course of
Borrowers' business as currently conducted;
(b) Permitted Dispositions; and
(c) Permitted Supplemental Dispositions approved in
writing by the Agent.
7.5 CHANGE NAME. Except upon thirty (30) days prior written
notice to the Agent, change any Borrower's name, FEIN, corporate structure
(within the meaning of Section 9-402(7) of the Code), or identity, or add any
new fictitious name.
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7.6 GUARANTEE. Guarantee or otherwise become in any way
liable with respect to the obligations of any third Person except (a) by
endorsement of instruments or items of payment for deposit to the account of
Borrowers or which are transmitted or turned over to Agent, and (b) as otherwise
permitted, and the guarantee by one or more Borrowers of any Indebtedness of
another Borrower or Guarantor otherwise permitted pursuant to Section 7.1.
7.7 NATURE OF BUSINESS. Make any change in the principal
nature of Borrowers' business, taken as a whole.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted by
Section 7.1(d) or a Permitted Disposition to the extent permitted by Section
2.3(a), prepay, redeem, retire, defease, purchase, or otherwise acquire any
Indebtedness owing to any third Person, other than the Obligations in accordance
with this Agreement, and
(b) Directly or indirectly, amend, modify, alter,
increase, or change any of the terms or conditions of any agreement, instrument,
document, indenture, or other writing evidencing or concerning Indebtedness
permitted under Sections 7.1(b), (c), or (d).
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 CONSIGNMENTS. Consign any Inventory or sell any Inventory
on bill and hold, sale or return, sale on approval, or other conditional terms
of sale other than a sale of Inventory on consignment having a Value not in
excess of $500,000 at any one time, except that, no such consigned Inventory
permitted herein shall constitute Eligible Inventory.
7.11 DISTRIBUTIONS. Make any distribution or declare or pay
any dividends (in cash or other property, other than capital Stock) on, or
purchase, acquire, redeem, or retire any of Borrowers' capital Stock, of any
class, whether now or hereafter outstanding, except for dividends declared out
of legally available funds therefor in connection with:
(a) Parent's payment of dividends in cash on Parent's
Class C Preferred Stock and Class D Preferred Stock in accordance with the terms
thereof as in effect on the date hereof;
(b) Parent's repurchase or redemption of its Stock from
the estate of John J. Faltis, deceased;
(c) In the event of the death of P. Bruce Sparks,
Parent's repurchase or redemption of his Stock from his estate, heirs or
legatees or any Person controlled by such decedent immediately prior to his
death, provided that the same is paid for solely with the proceeds of life
insurance in excess of the cash surrender value thereof immediately prior to
such
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decedent's death and the premiums for which were funded in the ordinary course
of business; and
(d) the repurchase by Parent, in an amount not to exceed
$3,000,000 in the aggregate after the Closing Date, of its common Stock issued
by Parent to employees of the Parent pursuant to the Anker Coal Group, Inc. 1997
Omnibus Stock Incentive Plan in accordance with the call and right of first
refusal rights set forth in (x) Article XI of the Anker Coal Group, Inc. 1997
Omnibus Stock Incentive Plan, (y) Article 5 of the Anker Coal Group, Inc. Stock
Option Grant Agreement and (z) Section 5 and Section 6 of the Anker Coal Group,
Inc. Restricted Stock Award Agreement, provided that no Default or Event of
Default would result therefrom;
provided that, (i) Borrowers' Agent shall give Agent thirty (30) days prior
notice of any such proposed dividend payment described in Section 7.11(b), (c)
and (d), including the amount of the proposed dividend and the proposed date for
payment thereof ("Dividend Payment Date"), (ii) no Default or Event of Default
shall exist on the Dividend Payment Date, (iii) other than with respect to a
dividend payment to be made pursuant to Section 7.11(a), Borrowers shall have
Excess Availability on the Dividend Payment Date, after giving effect to the
proposed dividend payments to be made on such Dividend Payment Date, in an
aggregate amount of at least $5,000,000, and (iv) the dividend payment described
in such notice thereof delivered to Agent must be paid (if permitted hereunder)
on or before seven (7) days after the Dividend Payment Date.
7.12 ACCOUNTING METHODS. Modify or change its method of
accounting or enter into, modify, or terminate any agreement currently existing,
or at any time hereafter entered into with any third party accounting firm or
service bureau for the preparation or storage of Borrowers' accounting records
without said accounting firm or service bureau agreeing to provide Agent
information regarding the Collateral or Borrowers' financial condition.
Borrowers waive the right to assert a confidential relationship, if any, it may
have with any accounting firm or service bureau in connection with any
information requested by Agent pursuant to or in accordance with this Agreement,
and agrees that Agent may contact directly any such accounting firm or service
bureau in order to obtain such information.
7.13 INVESTMENTS; LOANS. Directly or indirectly make any
investments, loans or advances or acquire, or incur any liabilities (including
contingent obligations) for or in connection with:
(a) the acquisition of the securities (whether debt or equity)
of, or other interests in, a Person;
(b) the acquisition of all or substantially all of the
properties or assets of a Person;
(c) loans, advances, capital contributions, or transfers of
property to a Person, except for:
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(i) investments outstanding on the Closing Date as set
forth on Schedule 7.13;
(ii) operating deposit accounts with banks, etc.;
(iii) Permitted Investments;
(iv) equity investments by the Parent and its
Subsidiaries in their Subsidiaries;
(v) Interest Rate Protection Agreements entered into as
bona fide hedges against fluctuations in interest rates applicable to
Indebtedness for the Parent and Borrowers and not for speculative purposes;
(vi) loans made in the ordinary course of business in an
aggregate amount not exceeding $3,000,000 at any one time outstanding;
(vii) Guarantees constituting agreements to perform
reclamation obligations of Borrowers and Guarantors and to reimburse or
indemnify the issuers of reclamation bonds covering reclamation obligations of
Borrowers and Guarantors for expenditures thereunder, provided that the
aggregate amount payable under all such Guarantees may not at any one time
exceed $2,500,000;
(viii) a contribution to Summit Energy Group, LLC
("Summit") of $500,000 made by Patriot Mining Company, Inc. prior to September
1, 1997 in the form of a prepaid advance minimum royalty on a lease that was
subleased to Summit, and loans to Summit in an aggregate principal amount not
exceeding $500,000 at any one time outstanding; and
(ix) Intercompany Loans made from time to time by Anker
Energy or Marine to any other Borrower in such amounts as Anker Energy or Marine
shall determine and Intercompany Loans to the following Guarantors in the
respective maximum aggregate amount during each fiscal year for each Guarantor
as set forth below, provided that, with respect to each proposed Intercompany
Loan and as a condition precedent thereto, (A) the Agent shall have received the
Solvency Certificates required pursuant to Section 6.2, which shall be
satisfactory to Agent, (B) both for the thirty (30) days immediately preceding
the date of the proposed Intercompany Loan and on the date thereof and after
giving effect thereto, (1) in the case of an Intercompany Loan proposed to be
made to Parent (other than with the proceeds of Permitted Dispositions and
Permitted Supplemental Dispositions) that will be used by Parent to prepay and
purchase all or any portion of the Senior Notes, Borrowers shall have Excess
Availability in an amount in excess of $10,000,000, and (2) in the case of all
other Intercompany Loans proposed to be made to Parent that will be used for any
other purpose and all Intercompany Loans proposed to be made to any other
Guarantor, Borrowers shall have Excess Availability in an amount in excess of
$5,000,000, and (C) no Default or Event of Default shall exist and be continuing
at the time the proposed Intercompany Loan is to be made:
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MAXIMUM INTERCOMPANY LOANS
GUARANTOR FOR EACH FISCAL YEAR
- --------- --------------------------
(1) Parent $12,250,000, plus the aggregate amount of
costs and expenses (including, without
limitation, federal, state and local
taxes) paid by Parent for its own account
and for the account of its Subsidiaries as
consolidated group expenses and the
aggregate amount of distributions
permitted to be made by Parent pursuant to
Section 7.11
(2) Simba Group, Inc. $500,000
(3) Hawthorne Coal Company Inc. $500,000
(4) Anker Power Services, Inc. $250,000
(5) Bronco Mining Company, Inc. $1,500,000
(6) King Knob Coal Co., Inc. $500,000
(7) Upshur Property, Inc. $1,500,000
(8) Melrose Coal Company, Inc. $500,000
(9) New Allegheny Land Holding Co. $250,000
Intercompany Loans shall be made (subject to the terms and conditions of this
clause (ix)) solely for the purpose of funding the working capital requirements
and for general corporate purposes in the ordinary course of business of the
borrower thereof and, without limiting the generality of the foregoing in the
case of Parent, for the purpose of funding the payment of interest accrued and
accruing on the Senior Notes or, if applicable, on the Refinanced Senior Note
Indebtedness, to prepay and purchase a portion of the Senior Notes and operating
expenses and taxes paid by Parent for its own account or for the account of
Borrowers and the other Guarantors as consolidated group expenses and
distributions permitted to be made by Parent pursuant to Section 7.11. For the
avoidance of doubt, notwithstanding anything to the contrary set forth in this
Agreement, if Borrowers request any Advance the proceeds of which shall be used
to make an Intercompany Loan to or for the account of Parent for the purpose of
prepayment and purchase of all or any portion of the Senior Notes, unless such
requested Advance constitutes a re-borrowing of proceeds of Permitted
Dispositions and/or Permitted Supplemental Dispositions that have been remitted
to Agent pursuant to Section 2.3(a)(iii) within ninety (90) days after the
consummation of the Permitted Disposition and/or Permitted Supplemental
Disposition, Borrowers must have Excess Availability in an amount equal to
$10,000,000 both for the thirty (30) days immediately preceding the date of such
Borrowing and after giving effect thereto.
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Notwithstanding the foregoing, Borrowers shall not make any of
the investments, loans or advances, or acquire or incur any of the liabilities
otherwise permitted pursuant to clauses (vii) and (viii) above, inclusive (each,
a "Proposed Transaction"), unless, in each case, Borrowers have Excess
Availability in an aggregate amount of not less than $5,000,000 both (x) for the
thirty (30) days immediately preceding the Proposed Transaction and (y) on the
date of consummation of the Proposed Transaction and after giving effect
thereto.
7.14 TRANSACTIONS WITH AFFILIATES. Directly or indirectly
enter into or permit to exist any material transaction with any Affiliate of
Borrowers, except for (a) sale of coal by certain Borrowers to other Borrowers
for the purpose of ultimate sale thereof to customers of Borrowers who are not
Affiliates of Borrowers, (b) Intercompany Loans otherwise permitted by Section
7.13, and (c) other transactions that are in the ordinary course of Borrowers'
business, upon fair and reasonable terms, that are fully disclosed to Agent, and
that are no less favorable to Borrowers than would be obtained in an arm's
length transaction with a non-Affiliate.
7.15 SUSPENSION. Suspend or go out of a substantial portion of
their business, taken as a whole, other than as a result of the consummation of
Permitted Dispositions and Permitted Supplemental Dispositions.
7.16 COMPENSATION. Increase the annual fee or per-meeting fees
paid to directors during any year by more than 15% over the prior year; pay or
accrue total cash compensation, during any year, to officers and senior
management employees in an aggregate amount in excess of 125% of that paid or
accrued in the prior year, plus such additional amounts as the Agent may approve
in connection with Parent's Employee Incentive Plan covering employees of
Borrowers.
7.17 USE OF PROCEEDS. Use the proceeds of the Advances and the
Term Loan made hereunder for any purpose other than (a) on the Closing Date, (i)
to repay in full the outstanding Indebtedness owing to the Existing Lenders, and
(ii) to pay transactional costs and expenses incurred in connection with this
Agreement, and (b) thereafter, consistent with the terms and conditions hereof,
for their working capital and their lawful general corporate purposes in the
ordinary course of their respective businesses and, (c) in the case of Anker
Energy and Marine, to make Intercompany Loans permitted by Section 7.13.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY
AND EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new
location without providing 30 days prior written notification thereof to Agent
and so long as, at the time of such written notification, Borrowers provide any
financing statements or fixture filings necessary to perfect and continue
perfected the Agent's Liens and also provides to Agent a Collateral Access
Agreement with respect to such new location. The Inventory and Equipment shall
not at any time now or hereafter be stored with a bailee, warehouseman, or
similar party without Agent's prior written consent or delivery to Agent of a
Collateral Access Agreement executed by such Person.
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7.19 NO PROHIBITED TRANSACTIONS UNDER ERISA. Directly or
indirectly:
(a) engage, or permit any Subsidiary of Borrowers to
engage, in any prohibited transaction which is reasonably likely to result in a
civil penalty or excise tax described in Sections 406 of ERISA or 4975 of the
IRC for which a statutory or class exemption is not available or a private
exemption has not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the IRC), whether or not waived;
(c) fail, or permit any Subsidiary of Borrowers to fail,
to pay timely required contributions or annual installments due with respect to
any waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of Borrowers to
terminate, any Benefit Plan where such event would result in any liability of
Borrowers, any of its Subsidiaries or any ERISA Affiliate under Title IV of
ERISA;
(e) fail, or permit any Subsidiary of Borrowers to fail,
to make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrowers to fail,
to pay any required installment or any other payment required under Section 412
of the IRC on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of Borrowers to
amend, a Plan resulting in an increase in current liability for the plan year
such that either of Borrowers, any Subsidiary of Borrowers or any ERISA
Affiliate is required to provide security to such Plan under Section 401(a)(29)
of the IRC; or
(h) withdraw, or permit any Subsidiary of Borrowers to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of Borrowers, any of its
Subsidiaries or any ERISA Affiliate in excess of $500,000.
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7.20 FINANCIAL COVENANTS. Fail to maintain:
(a) EBITDA. (i) EBITDA of at least the following amounts,
measured on a cumulative basis for that portion of Borrowers' fiscal year ending
on the respective dates set forth below:
3/31/99 $ 2,000,000
6/30/99 $ 5,000,000
9/30/99 $ 8,000,000
12/31/99 $12,000,000; and
(ii) Commencing with Borrowers' fiscal quarter ending
on March 31, 2000 and for each fiscal quarter thereafter, EBITDA of at least
$12,000,000 measured on a cumulative basis, as of the end of each of Borrowers'
fiscal quarters, for the Borrowers immediately preceding four (4) fiscal
quarters (including the fiscal quarter then ended).
7.21 CAPITAL EXPENDITURES. Make Capital Expenditures in any
fiscal year in excess of the sum of $12,000,000, plus the proceeds of Permitted
Dispositions and Permitted Supplemental Dispositions that Borrowers are not
otherwise required to apply to the prepayment of the Term Loan pursuant to
Section 2.3(a).
7.22 SECURITIES ACCOUNTS. Borrowers shall not establish or
maintain any Securities Account unless Agent shall have received a Control
Agreement, duly executed and in full force and effect, in respect of such
Securities Account. Borrowers agree that they 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, Borrowers may use such
assets to the extent permitted by this Agreement.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an
event of default (each, an "Event of Default") under this Agreement:
8.1 If Borrowers or Guarantors fail to pay when due and
payable or when declared due and payable, any portion of the Obligations
(whether of principal, interest (including any interest which, but for the
provisions of the Bankruptcy Code, would have accrued on such amounts), fees and
charges due the Lender Group, reimbursement of Lender Group Expenses, or other
amounts constituting Obligations); provided, however, that in the case of
Overadvances that are caused by the charging of interest, fees or Lender Group
Expenses to the Loan Account, such event shall not constitute an Event of
Default if, within five (5) Business Days of incurring any such Overadvance,
Borrowers repay in full, or otherwise eliminate, such Overadvance;
8.2 (a) If Borrowers or Guarantors fail to perform, keep, or
observe any term, provision, condition, covenant, or agreement contained in
Sections 6.2 (Collateral Reporting),
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Section 6.3 (Financial Statements, Reports, Certificates), Section 6.4 (Tax
Returns), Section 6.7 (Title to Equipment), Section 6.12 (Location of Inventory
and Equipment), Section 6.13 (Compliance with Laws), Section 6.14 (Employee
Benefits) or Section 6.15 (Leases) of this Agreement and such failure continues
for a period of five (5) Business Days; or
(b) If Borrowers or Guarantors fail or neglect to perform,
keep or observe (i) any term, provision, condition, covenant or agreement
contained in Section 6.1 (Accounting System) or Section 6.8 (Maintenance of
Equipment) of this Agreement, or (ii) any term, provision, covenant or agreement
of any of the Loan Documents (unless Borrowers' or Guarantors' failure to comply
with such terms, provisions, covenants or agreements would otherwise constitute
an Event of Default under any other provision of this Section 8, in which event
the other provisions of this Section 8 shall expressly govern), and such failure
continues for a period of fifteen (15) Business Days; or
(c) If Borrowers or Guarantors fail or neglect to perform,
keep or observe any other term, provision, condition, covenant or agreement
contained in this Agreement or in any of the other Loan Documents in each case
other than as otherwise specifically set forth in this Section 8;
8.3 If there occurs a Change of Control;
8.4 If any material portion of Borrowers' and/or Guarantors'
properties or assets is attached, seized, subjected to a writ or distress
warrant, or is levied upon, or comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by Borrowers;
8.6 If an Insolvency Proceeding is commenced against Borrowers
and/or Guarantors and any of the following events occur: (a) Borrowers and/or
Guarantors consent to the institution of the Insolvency Proceeding against them;
(b) the petition commencing the Insolvency Proceeding is not timely
controverted; (c) the petition commencing the Insolvency Proceeding is not
dismissed within 45 calendar days of the date of the filing thereof; provided,
however, that, during the pendency of such period, Agent, Foothill, and any
other member of the Lender Group shall be relieved of its obligation to extend
credit hereunder; (d) an interim trustee is appointed to take possession of all
or a substantial portion of the properties or assets of, or to operate all or
any substantial portion of the business of, Borrowers and/or Guarantors; or (e)
an order for relief shall have been issued or entered in respect thereof;
8.7 If any Permit is suspended or revoked such that Borrowers
and/or Guarantors are enjoined, restrained, or in any way prevented by court
order from continuing to conduct all or any material part of their business
affairs;
8.8 (a) If a notice of Lien, levy, or assessment is filed of
record with respect to any of Borrowers' properties or assets, in an amount,
individually, or in the aggregate, in
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excess of (x) $50,000 in the case of a Lien, levy or assessment in respect of
unpaid payroll taxes, and such notice of Lien, levy or assessment is not
released within fifteen (15) days after the filing thereof, and (y) $500,000 in
the case of any other Lien, levy or assessment, or any suspension or revocation
of any Permit is effected, by the United States Government, or any department,
agency, or instrumentality thereof, or by any state, county, municipal, or
governmental agency, or (b) if any taxes (other than payroll taxes) or debts
owing at any time hereafter to any one or more of such entities becomes a Lien,
whether choate or otherwise, upon any of Borrowers' properties or assets and the
same is not paid on the payment date thereof, unless bonded or stayed on appeal
within thirty (30) days after the occurrence thereof and such Lien is then the
subject of a Permitted Protest (provided, that, nothing contained herein shall
limit, impair or affect Agent's continuing right to establish and maintain
reserves with respect to any of the foregoing pursuant to Section 2.1(b));
8.9 If a judgment or other claim (other than in respect of
unpaid payroll taxes) becomes a Lien or encumbrance upon any material portion of
Borrowers' properties or assets in an amount, individually, or in the aggregate,
in excess of $500,000, unless bonded or stayed on appeal within thirty (30) days
after the occurrence thereof and such Lien or encumbrance is then the subject of
a Permitted Protest (provided, that, nothing contained herein shall limit,
impair or affect Agent's continuing right to establish and maintain reserves
with respect to any to any such Lien, levy or assessment pursuant to Section
2.1(b));
8.10 If there is a default under the Senior Notes and/or
Senior Notes Indenture or (if applicable) the Refinanced Senior Note Indenture
in any other material agreement involving a sum in excess of $500,000 to which
Borrowers or Guarantors are a party with one or more third Persons and such
default (a) occurs at the final maturity of the obligations thereunder, or (b)
results in a right by the holders of the Senior Notes and/or the Trustee under
the Indenture or by such other third Person(s), irrespective of whether
exercised, to accelerate the maturity of Borrowers' or Guarantors' obligations
thereunder;
8.11 If Borrowers or Guarantors or any other Affiliate make
any payment on account of Indebtedness that has been contractually subordinated
in right of payment to the payment of the Obligations, except to the extent such
payment is permitted by the terms of the subordination provisions applicable to
such Indebtedness;
8.12 If any material misstatement or misrepresentation exists
now or hereafter in any warranty, representation, statement, or report made to
the Lender Group by Borrowers' Agent or Borrowers or any officer, or director of
Borrowers' Agent or Borrowers, or if any such warranty or representation is
withdrawn; or
8.13 If the obligation of any Guarantor under its guaranty or
other third Person under any Loan Document is limited or terminated by operation
of law or by the Guarantor or other third Person thereunder, or any such
Guarantor or other third Person becomes the subject of an Insolvency Proceeding.
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9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default, the Required Lenders (at their election
but without notice of their election and without demand) may, except to the
extent otherwise expressly provided or required below, authorize and instruct
Agent to do any one or more of the following on behalf of the Lender Group (and
Agent, acting upon the instructions of the Required Lenders, shall do the same
on behalf of the Lender Group), all of which are authorized by Borrowers:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for
the benefit of Borrowers under this Agreement, under any of the Loan Documents,
or under any other agreement between Borrowers and the Lender Group;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of the Lender Group, but
without affecting Agent's rights and security interests, for the benefit of the
Lender Group, in the Personal Property Collateral or the Real Property
Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Agent considers advisable, and
in such cases, Agent will credit Borrowers' Loan Account with only the net
amounts received by Agent in payment of such disputed Accounts after deducting
all Lender Group Expenses incurred or expended in connection therewith;
(e) Cause Borrowers to hold all returned Inventory in
trust for the Lender Group, segregate all returned Inventory from all other
property of Borrowers or in Borrowers' possession and conspicuously label said
returned Inventory as the property of the Lender Group;
(f) Without notice to or demand upon Borrowers or any
guarantor, make such payments and do such acts as Agent considers necessary or
reasonable to protect its security interests in the Collateral. Borrowers agree
to assemble the Personal Property Collateral if Agent so requires, and to make
the Personal Property Collateral available to Agent as Agent may designate.
Borrowers authorize Agent to enter the premises where the Personal Property
Collateral is located, to take and maintain possession of the Personal Property
Collateral, or any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or Lien that in Agent's determination appears to conflict
with the Agent's Liens and to pay all expenses incurred in connection therewith.
With respect to any of Borrowers' owned or leased premises, Borrowers hereby
grant Agent a license to enter into possession of such premises and to occupy
the same, without charge, in order to exercise any of the Lender Group's rights
or remedies provided herein, at law, in equity, or otherwise;
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(g) Without notice to Borrowers (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9-505 of the Code),
set off and apply to the Obligations any and all (i) balances and deposits of
Borrowers held by the Lender Group (including any amounts received in the
Lockbox Accounts), or (ii) indebtedness at any time owing to or for the credit
or the account of Borrowers held by the Lender Group;
(h) Hold, as cash collateral, any and all balances and
deposits of Borrowers held by the Lender Group, and any amounts received in the
Lockbox Accounts, to secure the full and final repayment of all of the
Obligations;
(i) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Personal Property Collateral. Borrowers hereby grant to Agent a
license or other right to use, without charge, Borrowers' labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any property of a similar nature, as
it pertains to the Personal Property Collateral, in completing production of,
advertising for sale, and selling any Personal Property Collateral and
Borrowers' rights under all licenses and all franchise agreements shall inure to
the Lender Group's benefit;
(j) Sell the Personal Property Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
Borrowers' premises) as Agent determines is commercially reasonable. It is not
necessary that the Personal Property Collateral be present at any such sale;
(k) Agent shall give notice of the disposition of the
Personal Property Collateral as follows:
(i) Agent shall give Borrowers and each holder of a
security interest in the Personal Property Collateral who has filed with Agent a
written request for notice, a notice in writing of the time and place of public
sale, or, if the sale is a private sale or some other disposition other than a
public sale is to be made of the Personal Property Collateral, then the time on
or after which the private sale or other disposition is to be made;
(ii) The notice shall be personally delivered or
mailed, postage prepaid, to Borrowers as provided in Section 12, at least 5 days
before the date fixed for the sale, or at least 5 days before the date on or
after which the private sale or other disposition is to be made; no notice needs
to be given prior to the disposition of any portion of the Personal Property
Collateral that is perishable or threatens to decline speedily in value or that
is of a type customarily sold on a recognized market. Notice to Persons other
than Borrowers claiming an interest in the Personal Property Collateral shall be
sent to such addresses as they have furnished to Agent;
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(iii) If the sale is to be a public sale, Agent also
shall give notice of the time and place by publishing a notice one time at least
5 days before the date of the sale in a newspaper of general circulation in the
county in which the sale is to be held;
(l) Direct the Trustee holding the Mortgages to exercise
the power of sale contained in, and to foreclose upon, the Mortgages, or such of
the Mortgages as the Required Lenders shall designate;
(m) The Lender Group may credit bid and purchase at any
public sale;
(n) The Lender Group shall have all other rights and
remedies available to it at law or in equity pursuant to any other Loan
Documents; and
(o) Any deficiency that exists after disposition of the
Personal Property Collateral as provided above will be paid immediately by
Borrowers. Any excess will be returned, without interest and subject to the
rights of third Persons, by Agent to Borrowers.
9.2 REMEDIES CUMULATIVE. The rights and remedies of the Lender
Group under this Agreement, the other Loan Documents, all other agreements, the
Code and other applicable law shall be cumulative. The Lender Group shall have
all other rights and remedies not inconsistent herewith as provided under the
Code, by law, or in equity. No exercise by the Lender Group of one right or
remedy shall be deemed an election, and no waiver by the Lender Group of any
Event of Default shall be deemed a continuing waiver. No delay by the Lender
Group shall constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Borrowers fail to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties or assets,
royalties, rents or other amounts payable under such leases) due to third
Persons, or fails to make any deposits or furnish any required proof of payment
or deposit, all as required under the terms of this Agreement, then, to the
extent that Agent determines that such failure by Borrowers could result in a
Material Adverse Change, in its discretion and without prior notice to
Borrowers, Agent may do any or all of the following: (a) make payment of the
same or any part thereof; (b) set up such reserves in Borrowers' Loan Account as
Agent deems necessary to protect the Lender Group from the exposure created by
such failure; or (c) obtain and maintain insurance policies of the type
described in Section 6.10, and take any action with respect to such policies as
Agent deems prudent. Any such amounts paid by Agent shall constitute Lender
Group Expenses. Any such payments made by Agent shall not constitute an
agreement by the Lender Group to make similar payments in the future or a waiver
by the Lender Group of any Event of Default under this Agreement. Agent need not
inquire as to, or contest the validity of, any such expense, tax, or Lien and
the receipt of the usual official notice for the payment thereof shall be
conclusive evidence that the same was validly due and owing.
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11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Borrowers waive demand, protest,
notice of protest, notice of default or dishonor, notice of payment and
nonpayment, nonpayment at maturity, release, compromise, settlement, extension,
or renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by the Lender Group on which Borrowers may in any way be liable.
11.2 THE LENDER GROUP'S LIABILITY FOR COLLATERAL. Borrowers
hereby agree that: (a) so long as the Lender Group complies with its
obligations, if any, under Section 9-207 of the Code, the Lender Group shall not
in any way or manner be liable or responsible for: (i) the safekeeping of the
Collateral; (ii) any loss or damage thereto occurring or arising in any manner
or fashion from any cause; (iii) any diminution in the value thereof; or (iv)
any act or default of any carrier, warehouseman, bailee, forwarding agency, or
other Person; and (b) all risk of loss, damage, or destruction of the Collateral
shall be borne by Borrowers.
11.3 INDEMNIFICATION. Borrowers shall pay, indemnify, defend,
and hold the Agent-Related Persons, the Lender-Related Persons with respect to
each Lender, each Participant, and each of their respective officers, directors,
employees, counsel, agents, and attorneys-in-fact (each, an "Indemnified
Person") harmless (to the fullest extent permitted by law) from and against any
and all claims, demands, suits, actions, investigations, proceedings, and
damages, and all reasonable attorneys fees and disbursements and other costs and
expenses actually incurred in connection therewith (as and when they are
incurred and irrespective of whether suit is brought), at any time asserted
against, imposed upon, or incurred by any of them in connection with or as a
result of or related to the execution, delivery, enforcement, performance, and
administration of this Agreement and any other Loan Documents or the
transactions contemplated herein, and with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event
or circumstance in any manner related thereto (all the foregoing, collectively,
the "Indemnified Liabilities"). Borrowers shall have no obligation to any
Indemnified Person under this Section 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the other Obligations.
11.4 COUNTERCLAIMS. Borrowers waive the right to assert any
counterclaims (other than compulsory counterclaims) against the Lender Group in
connection with any action, cause of action or other proceeding commenced by the
Lender Group under, in connection with or in any manner related to this
Agreement or the other Loan Documents.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other Loan Document shall
be in writing and (except for
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financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by
registered or certified mail (postage prepaid, return receipt requested),
overnight courier, or telefacsimile to the relevant party at its address set
forth below:
If to Borrowers ANKER COAL GROUP, INC.
in care of Borrowers' 2708 Cranberry Square
Agent: Morgantown, West Virginia 26505
Attn: President and Chief Financial Officer
Fax No.(304) 594-369
With a courtesy copy KLETT LIEBER ROONEY & SCHORLING
to counsel to Parent One Oxford Centre
and its Subsidiaries: 40th Floor
Pittsburgh, Pennsylvania 15219-6498
Attn: Craig S. Heryford
Fax No. (412) 392-2128
If to Agent or
the Lender Group
in care of Agent: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
Fax No. (310)478-9788
The parties hereto may change the address at which
they are to receive notices hereunder, by notice in writing in the foregoing
manner given to all other parties. All notices or demands sent in accordance
with this Section 12, other than notices by the Lender Group in connection with
Sections 9-504 or 9-505 of the Code, shall be deemed received on the earlier of
the date of actual receipt or 3 days after the deposit thereof in the mail.
Borrowers acknowledge and agree that notices sent by the Lender Group in
connection with Sections 9-504 or 9-505 of the Code shall be deemed sent when
deposited in the mail or personally delivered, or, where permitted by law,
transmitted telefacsimile or other similar method set forth above. Failure of
Agent to deliver to counsel to Parent and its Subsidiaries above-named a copy of
any notice delivered hereunder by Agent to Borrowers' Agent, on behalf of
Borrowers, otherwise in accordance with Section 12 shall not in any manner
limit, impair or affect the effectiveness or validity of such notice delivered
to Borrowers' Agent.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER
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LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS
ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
TRIED AND LITIGATED ONLY IN THE SUPREME COURT OF THE STATE OF NEW YORK FOR THE
COUNTY OF NEW YORK OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT
OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT'S OPTION, IN THE COURTS OF
ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWERS, BORROWERS' AGENT AND THE
LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH
MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO
THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13.
BORROWERS, BORROWERS' AGENT AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. BORROWERS, BORROWERS' AGENT AND THE LENDER GROUP
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE
EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWERS' DOCUMENTS.
All documents, schedules, invoices, agings, or other
papers delivered to any one or more members of the Lender Group may be destroyed
or otherwise disposed of by such member of the Lender Group four (4) months
after they are delivered to or received by such member of the Lender Group,
unless Borrowers' Agent requests, in writing, the return of said documents,
schedules, or other papers and makes arrangements, at Borrowers' expense, for
their return.
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15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
15.1 ASSIGNMENTS AND PARTICIPATIONS.
(a) Any Lender may, with the written consent
of Agent, and, provided no Default or Event of Default then exists, with the
written approval of Borrowers' Agent on behalf of Borrowers, which approval
shall not be unreasonably withheld, assign and delegate to one or more assignees
(provided that no written consent of Agent shall be required in connection with
any assignment and delegation by a Lender to an Eligible Transferee) (each an
"Assignee") all, or any ratable part of all, of the Obligations, the Commitments
and the other rights and obligations of such Lender hereunder and under the
other Loan Documents, in a minimum amount of $5,000,000; provided, however, that
(i) Borrowers and Agent may continue to deal solely and directly with such
Lender in connection with the interest so assigned to an Assignee until (A)
written notice of such assignment, together with payment instructions, addresses
and related information with respect to the Assignee, shall have been given to
Borrowers' Agent and Agent by such Lender and the Assignee; (B) such Lender and
its Assignee shall have delivered to Borrowers' Agent and Agent an Assignment
and Acceptance ("Assignment and Acceptance") in form and substance satisfactory
to Agent; and (C) the assignor Lender or Assignee has paid to Agent for Agent's
sole and separate account a processing fee in the amount of $2,500. Anything
contained herein to the contrary notwithstanding, the consent of Agent shall not
be required (and payment of any fees shall not be required) if such assignment
is in connection with any merger, consolidation, sale, transfer, or other
disposition of all or any substantial portion of the business or loan portfolio
of such Lender, and (ii) notwithstanding the foregoing, no approval of Agent or
Borrowers shall be required in connection with a Lender's assignment of all of
its Pro Rata Share of the Obligations and its Commitment pursuant to such
Lender's transfer of all or a material portion of its commercial loan portfolio
to another lending institution, whether pursuant to a sale of assets to, or as a
result of a merger or consolidation with, another lending institution.
(b) From and after the date that Agent
notifies the assignor Lender that it has received an executed Assignment and
Acceptance and payment of the above-referenced processing fee, (i) the Assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents, and (ii) the assignor Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights (except
with respect to Section 11.3 hereof) and be released from its obligations under
this Agreement (and in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement and the other Loan Documents, such Lender shall cease to be a party
hereto and thereto), and such assignment shall effect a novation between
Borrowers and the Assignee.
(c) By executing and delivering an
Assignment and Acceptance, the assigning Lender thereunder and the Assignee
thereunder confirm to and agree with each other
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and the other parties hereto as follows: (1) other than as provided in such
Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other Loan Document furnished pursuant hereto;
(2) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrowers or
Guarantors or the performance or observance by Borrowers or Guarantors of any of
their obligations under this Agreement or any other Loan Document furnished
pursuant hereto; (3) such Assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (4) such Assignee will, independently and without
reliance upon Agent, such assigning Lender or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (5) such Assignee appoints and authorizes Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; and (6) such Assignee agrees that it will perform
in accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) Immediately upon each Assignee's making
its processing fee payment under the Assignment and Acceptance, this Agreement
shall be deemed to be amended to the extent, but only to the extent, necessary
to reflect the addition of the Assignee and the resulting adjustment of the
Commitments arising therefrom. The Commitment allocated to each Assignee shall
reduce such Commitments of the assigning Lender pro tanto.
(e) Any Lender may at any time, with the
written consent of Agent, sell to one or more commercial banks, financial
institutions, or other Persons not Affiliates of such Lender (a "Participant")
participating interests in the Obligations, the Commitment, and the other rights
and interests of that Lender (the "originating Lender") hereunder and under the
other Loan Documents (provided that no written consent of Agent shall be
required in connection with any sale of any such participating interests by a
Lender to an Eligible Transferee); provided, however, that (i) the originating
Lender's obligations under this Agreement shall remain unchanged, (ii) the
originating Lender shall remain solely responsible for the performance of such
obligations, (iii) Borrowers and Agent shall continue to deal solely and
directly with the originating Lender in connection with the originating Lender's
rights and obligations under this Agreement and the other Loan Documents, (iv)
no Lender shall transfer or grant any participating interest under which the
Participant has the sole and exclusive right to approve any amendment to, or any
consent or waiver with respect to, this Agreement or any other Loan Document,
except to the extent such amendment to, or consent or waiver with respect to
this Agreement or of any other Loan Document would (A) extend the final maturity
date of the Obligations hereunder in which such Participant is participating;
(B) reduce the interest rate applicable to the Obligations hereunder in which
such Participant is participating; (C) release all or a material portion of the
Collateral or guaranties (except to the extent expressly provided herein or in
any of the Loan
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Documents) supporting the Obligations hereunder in which such Participant is
participating; (D) postpone the payment of, or reduce the amount of, the
interest or fees payable to such Participant through such Lender; or (E) change
the amount or due dates of scheduled principal repayments or prepayments or
premiums; and (v) all amounts payable by Borrowers hereunder shall be determined
as if such Lender had not sold such participation; except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement. The rights of any Participant only shall be
derivative through the originating Lender with whom such Participant
participates and no Participant shall have any direct rights as to the other
Lenders, Agent, Borrowers, Borrowers' Agent, the Collections, the Collateral, or
otherwise in respect of the Obligations. No Participant shall have the right to
participate directly in the making of decisions by the Lenders among themselves.
(f) In connection with any such assignment
or participation or proposed assignment or participation, a Lender may disclose
all documents and information which it now or hereafter may have relating to
Borrowers or Borrowers' business.
(g) Any other provision in this Agreement
notwithstanding, any Lender may at any time create a security interest in, or
pledge, all or any portion of its rights under and interest in this Agreement in
favor of any Federal Reserve Bank in accordance with Regulation A of the Federal
Reserve Bank or U.S. Treasury Regulation 31 CFR Section 203.14, and such Federal
Reserve Bank may enforce such pledge or security interest in any manner
permitted under applicable law.
15.2 SUCCESSORS. This Agreement shall bind and inure to
the benefit of the respective successors and assigns of each of the parties;
provided, however, that Borrowers may not assign this Agreement or any rights or
duties hereunder without the Lenders' prior written consent and any prohibited
assignment shall be absolutely void ab initio. No consent to assignment by the
Lenders shall release Borrowers from its Obligations. A Lender may assign this
Agreement and the other Loan Documents and its rights and duties hereunder and
thereunder pursuant to Section 15.1 hereof and, except as expressly required
pursuant to Section 15.1 hereof, no consent or approval by Borrowers are
required in connection with any such assignment.
16. AMENDMENTS; WAIVERS.
16.1 AMENDMENTS AND WAIVERS. No amendment or waiver of
any provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by Borrowers therefrom, shall be effective unless the
same shall be in writing and signed by the Required Lenders (or by Agent at the
written request of the Required Lenders), Borrowers and Borrowers' Agent and
then any such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given; provided, however, that no such
waiver,
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amendment, or consent shall, unless in writing and signed by all the Lenders,
Borrowers and Borrowers' Agent and acknowledged by Agent, do any of the
following:
(a) increase or extend the Commitment of any
Lender;
(b) postpone or delay any date fixed by this
Agreement or any other Loan Document for any payment of principal, interest,
fees or other amounts due to the Lenders (or any of them) hereunder or under any
other Loan Document;
(c) reduce the principal of, or the rate of
interest specified herein on any Loan, or any fees or other amounts payable
hereunder or under any other Loan Document;
(d) change the percentage of the Commitments
that is required for the Lenders or any of them to take any action hereunder;
(e) amend this Section or any provision of
the Agreement providing for consent or other action by all Lenders;
(f) release Collateral other than as
permitted by Section 17.11;
(g) increase the sublimit for credit
available against Eligible Inventory (currently contained in clause (y) of
Section 2.1(a));
(h) change the definition of "Required
Lenders";
(i) release Borrowers from any Obligation
for the payment of money; or
(j) amend any of the provisions of Article
17.
and, provided further, however, that no amendment, waiver or consent shall,
unless in writing and signed by Agent, affect the rights or duties of Agent
under this Agreement or any other Loan Document; and, provided further, however,
that no amendment, waiver or consent shall, unless in writing and signed by
Foothill in its individual capacity as a Lender, affect the specific rights or
duties of Foothill in its individual capacity as a Lender (as contrasted with
rights or duties of Foothill as a member of the Lender Group) under this
Agreement or any other Loan Document. The foregoing notwithstanding, any
amendment, modification, waiver, consent, termination, or release of or with
respect to any provision of this Agreement or any other Loan Document that
relates only to the relationship of the Lender Group among themselves, and that
does not affect the rights or obligations of Borrowers, shall not require
consent by or the agreement of Borrowers or of Borrowers' Agent.
16.2 NO WAIVERS; CUMULATIVE REMEDIES. No failure by
Agent or any Lender to exercise any right, remedy, or option under this
Agreement, any other Loan Document, or any
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present or future supplement hereto or thereto, or in any other agreement
between or among Borrowers, Borrowers' Agent and Agent or any Lender, or delay
by Agent or any Lender in exercising the same, will operate as a waiver thereof.
No waiver by Agent or any Lender will be effective unless it is in writing, and
then only to the extent specifically stated. No waiver by Agent or the Lenders
on any occasion shall affect or diminish Agent's and each Lender's rights
thereafter to require strict performance by Borrowers of any provision of this
Agreement. Agent's and each Lender's rights under this Agreement and the other
Loan Documents will be cumulative and not exclusive of any other right or remedy
which Agent or any Lender may have.
17. AGENT; THE LENDER GROUP.
17.1 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender
hereby designates and appoints Foothill as its agent under this Agreement and
the other Loan Documents and each Lender hereby irrevocably authorizes Agent to
take such action on its behalf under the provisions of this Agreement and each
other Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto. Agent
agrees to act as such on the express conditions contained in this Article 17.
The provisions of this Article 17 are solely for the benefit of Agent and the
Lenders, and Borrowers shall have no rights as a third party beneficiary of any
of the provisions contained herein; provided, however, that certain of the
provisions of Section 17.10 hereof also shall be for the benefit of Borrowers.
Any provision to the contrary contained elsewhere in this Agreement or in any
other Loan Document notwithstanding, Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall Agent have
or be deemed to have any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise exist
against Agent; it being expressly understood and agreed that the use of the word
"Agent" is for convenience only, that Foothill is merely the representative of
the Lenders, and has only the contractual duties set forth herein. Except as
expressly otherwise provided in this Agreement, Agent shall have and may use its
sole discretion with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any actions which Agent
is expressly entitled to take or assert under or pursuant to this Agreement and
the other Loan Documents. Without limiting the generality of the foregoing, or
of any other provision of the Loan Documents that provides rights or powers to
Agent, Lenders agree that Agent shall have the sole and exclusive right on
behalf of the Lender Group to exercise the following powers as long as this
Agreement remains in effect: (a) maintain, in accordance with its customary
business practices, ledgers and records reflecting the status of the Advances,
the Letters of Credit, the Term Loan, the Collateral, the Collections, and
related matters; (b) execute or file any and all financing or similar statements
or notices, amendments, renewals, supplements, documents, instruments, proofs of
claim, notices and other written agreements with respect to the Loan Documents;
(c) make Advances, the Letters of Credit, and the Term Loan, for itself or on
behalf of Lenders as provided in the Loan Documents; (d) exclusively receive,
apply, and distribute the Collections as provided in the Loan Documents; (e)
open and maintain such bank accounts and lock boxes as Agent deems necessary and
appropriate in accordance with the Loan Documents
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for the foregoing purposes with respect to the Collateral and the Collections;
(f) perform, exercise, and enforce, exclusively on behalf of the Lender Group,
any and all other rights and remedies of the Lender Group with respect to
Borrowers, the Obligations, the Collateral, the Collections, or otherwise
related to any of same as provided in the Loan Documents; and (g) incur and pay
such Lender Group Expenses as Agent may deem necessary or appropriate for the
performance and fulfillment of its functions and powers pursuant to the Loan
Documents.
17.2 DELEGATION OF DUTIES. Except as otherwise provided
in this section, Agent may execute any of its duties under this Agreement or any
other Loan Document by or through agents, employees or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. Agent shall not be responsible for the negligence or misconduct of any
agent or attorney-in-fact that it selects as long as such selection was made in
compliance with this section and without gross negligence or willful misconduct.
17.3 LIABILITY OF AGENT. None of the Agent-Related
Persons shall (i) be liable for any action taken or omitted to be taken by any
of them under or in connection with this Agreement or any other Loan Document or
the transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or (ii) be responsible in any manner to any of the Lenders
for any recital, statement, representation or warranty made by Borrowers or any
Subsidiary or Affiliate of Borrowers, or any officer or director thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for any failure of
Borrowers or any other party to any Loan Document to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the properties, books or records of
Borrowers, Guarantors or any of their Subsidiaries or Affiliates.
17.4 RELIANCE BY AGENT. Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent, or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to Borrowers or counsel to any Lender), independent accountants and other
experts selected by Agent. Agent shall be fully justified in failing or refusing
to take any action under this Agreement or any other Loan Document unless it
shall first receive such advice or concurrence of the Lenders as it deems
appropriate and until such instructions are received, Agent shall act, or
refrain from acting, as it deems advisable. If Agent so requests, it shall first
be indemnified to its reasonable satisfaction by Lenders against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action. Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any other Loan
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Document in accordance with a request or consent of the Lenders and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all of the Lenders.
17.5 NOTICE OF DEFAULT OR EVENT OF DEFAULT. Agent shall
not be deemed to have knowledge or notice of the occurrence of any Default or
Event of Default, except with respect to defaults in the payment of principal,
interest, fees, and expenses required to be paid to Agent for the account of the
Lenders, except with respect to Events of Default of which Agent has actual
knowledge, unless Agent shall have received written notice from a Lender,
Borrowers or Borrowers' Agent referring to this Agreement, describing such
Default or Event of Default, and stating that such notice is a "notice of
default." Agent promptly will notify the Lenders of its receipt of any such
notice or of any Event of Default of which Agent has actual knowledge. If any
Lender obtains actual knowledge of any Event of Default, such Lender promptly
shall notify the other Lenders and Agent of such Event of Default. Each Lender
shall be solely responsible for giving any notices to its Participants, if any.
Subject to Section 17.4, Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Required Lenders in
accordance with Section 9; provided, however, that unless and until Agent has
received any such request, Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable.
17.6 CREDIT DECISION. Each Lender acknowledges that none
of the Agent-Related Persons has made any representation or warranty to it, and
that no act by Agent hereinafter taken, including any review of the affairs of
Borrowers, Guarantors and their Subsidiaries or Affiliates, shall be deemed to
constitute any representation or warranty by any Agent-Related Person to any
Lender. Each Lender represents to Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of Borrowers, Guarantors and any other
Person (other than the Lender Group) party to a Loan Document, and all
applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to Borrowers. Each Lender also represents that it will, independently and
without reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of Borrowers,
Guarantors and any other Person (other than the Lender Group) party to a Loan
Document. Except for notices, reports and other documents expressly herein
required to be furnished to the Lenders by Agent, Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of Borrowers, Guarantors and any other Person
party to a Loan Document that may come into the possession of any of the
Agent-Related Persons.
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17.7 COSTS AND EXPENSES; INDEMNIFICATION. Agent may incur and
pay Lender Group Expenses to the extent Agent deems reasonably necessary or
appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including without limiting the
generality of the foregoing, court costs, reasonable attorneys fees and
expenses, costs of collection by outside collection agencies and auctioneer fees
and costs of security guards or insurance premiums paid to maintain the
Collateral, whether or not Borrowers are obligated to reimburse Agent or Lenders
for such expenses pursuant to the Loan Agreement or otherwise. Agent is
authorized and directed to deduct and retain sufficient amounts from Collections
to reimburse Agent for such out-of-pocket costs and expenses prior to the
distribution of any amounts to Lenders. In the event Agent is not reimbursed for
such costs and expenses from Collections, each Lender hereby agrees that it is
and shall be obligated to pay to or reimburse Agent for the amount of such
Lender's Pro Rata Share thereof. Whether or not the transactions contemplated
hereby are consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of Borrowers
and without limiting the obligation of Borrowers to do so), according to their
Pro Rata Shares, from and against any and all Indemnified Liabilities; provided,
however, that no Lender shall be liable for the payment to the Agent-Related
Persons of any portion of such Indemnified Liabilities resulting solely from
such Person's gross negligence or willful misconduct. Without limitation of the
foregoing, each Lender shall reimburse Agent upon demand for its ratable share
of any costs or out-of-pocket expenses (including attorneys fees and expenses)
incurred by Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that Agent is
not reimbursed for such expenses by or on behalf of Borrowers. The undertaking
in this section shall survive the payment of all Obligations hereunder and the
resignation or replacement of Agent.
17.8 AGENT IN INDIVIDUAL CAPACITY. Foothill and its Affiliates
may make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with Borrowers,
Guarantors and their Subsidiaries and Affiliates and any other Person (other
than the Lender Group) party to any Loan Documents as though Foothill were not
Agent hereunder and without notice to or consent of the Lenders. The Lenders
acknowledge that, pursuant to such activities, Foothill or its Affiliates may
receive information regarding Borrowers, Guarantors or their Affiliates and any
other Person (other than the Lender Group) party to any Loan Documents that is
subject to confidentiality obligations in favor of Borrowers, Guarantors or such
other Person and that prohibit the disclosure of such information to the
Lenders, and the Lenders acknowledge that, in such circumstances (and in the
absence of a waiver of such confidentiality obligations, which waiver Agent will
use its reasonable best efforts to obtain), Agent shall be under no obligation
to provide such information to them. With respect to the Foothill Loans and
Agent Advances, Foothill shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
Agent, and the terms "Lender" and "Lenders" include Foothill in its individual
capacity.
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17.9 SUCCESSOR AGENT. Agent may resign as Agent upon 45 days
notice to the Lenders. If Agent resigns under this Agreement, the Required
Lenders shall appoint a successor Agent for the Lenders. If no successor Agent
is appointed prior to the effective date of the resignation of Agent, Agent may
appoint, after consulting with the Lenders, a successor Agent. If Agent has
materially breached or failed to perform any material provision of this
Agreement or of applicable law, the Required Lenders may agree in writing to
remove and replace Agent with a successor Agent from among the Lenders. In any
such event, upon the acceptance of its appointment as successor Agent hereunder,
such successor Agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor Agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 17 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement. If no successor Agent
has accepted appointment as Agent by the date which is 45 days following a
retiring Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of Agent hereunder until such time, if any, as the Lenders appoint a
successor Agent as provided for above.
17.10 WITHHOLDING TAX. (a) If any Lender is a "foreign
corporation, partnership or trust" within the meaning of the IRC and such Lender
claims exemption from, or a reduction of, U.S. withholding tax under Sections
1441 or 1442 of the IRC, such Lender agrees with and in favor of Agent and
Borrowers, to deliver to Agent and Borrowers' Agent:
(i) if such Lender claims an exemption from,
or a reduction of, withholding tax under a United States tax treaty, properly
completed IRS Forms 1001 and W-8 before the payment of any interest in the first
calendar year and before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this Agreement;
(ii) if such Lender claims that interest
paid under this Agreement is exempt from United States withholding tax because
it is effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form 4224 before the
payment of any interest is due in the first taxable year of such Lender and in
each succeeding taxable year of such Lender during which interest may be paid
under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be
required under the IRC or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.
Such Lender agrees promptly to notify Agent and Borrowers' Agent of any change
in circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction
of, withholding tax under a United States tax treaty by providing IRS Form 1001
and such Lender sells, assigns,
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grants a participation in, or otherwise transfers all or part of the Obligations
of Borrowers to such Lender, such Lender agrees to notify Agent of the
percentage amount in which it is no longer the beneficial owner of Obligations
of Borrowers owing to such Lender. To the extent of such percentage amount,
Agent will treat such Lender's IRS Form 1001 as no longer valid.
(c) If any Lender claiming exemption from United
States withholding tax by filing IRS Form 4224 with Agent sells, assigns, grants
a participation in, or otherwise transfers all or part of the Obligations of
Borrowers owing to such Lender, such Lender agrees to undertake sole
responsibility for complying with the withholding tax requirements imposed by
Sections 1441 and 1442 of the IRC.
(d) If any Lender is entitled to a reduction in the
applicable withholding tax, Agent may withhold from any interest payment to such
Lender an amount equivalent to the applicable withholding tax after taking into
account such reduction. If the forms or other documentation required by
subsection (a) of this Section are not delivered to Agent, then Agent may
withhold from any interest payment to such Lender not providing such forms or
other documentation an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of
the United States or other jurisdiction asserts a claim that Agent did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered, was not properly executed, or
because such Lender failed to notify Agent of a change in circumstances which
rendered the exemption from, or reduction of, withholding tax ineffective, or
for any other reason) such Lender shall indemnify Agent fully for all amounts
paid, directly or indirectly, by Agent as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction on the amounts
payable to Agent under this Section, together with all costs and expenses
(including attorneys fees and expenses). The obligation of the Lenders under
this subsection shall survive the payment of all Obligations and the resignation
or replacement of Agent.
17.11 COLLATERAL MATTERS.
(a) The Lenders hereby irrevocably authorize Agent,
at its option and in its sole discretion, to release any Lien on any Collateral
and on any "Collateral" of Guarantors (as such quoted term is defined in the
Security Agreements and referred to in this Agreement as "Guarantor Collateral")
(i) upon the termination of the Commitments and payment and satisfaction in full
by Borrowers of all Obligations; (ii) constituting property being sold or
disposed of if a release is required or desirable in connection therewith and if
Borrowers certify to Agent that the sale or disposition is permitted under
Section 7 of this Agreement or the other Loan Documents or is a Permitted
Disposition or Permitted Supplemental Disposition (and Agent may rely
conclusively on any such certificate, without further inquiry); (iii)
constituting property in which Borrowers or Guarantors (as applicable) owned no
interest at the time the security interest was granted or at any time
thereafter; or (iv) constituting property leased to Borrowers or Guarantors (as
applicable) under a lease that has expired or is terminated in a transaction
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permitted under this Agreement. Except as provided above, Agent will not execute
and deliver a release of any Lien on any Collateral or Guarantor Collateral
without the prior written authorization of (y) if the release is of all or
substantially all of the Collateral and/or Guarantor Collateral, of all of the
Lenders, or (z) otherwise, all of the Lenders. Upon request by Agent or
Borrowers at any time, the Lenders will confirm in writing Agent's authority to
release any such Liens on particular types or items of Collateral pursuant to
this Section 17.11; provided, however, that (1) Agent shall not be required to
execute any document necessary to evidence such release on terms that, in
Agent's opinion, would expose Agent to liability or create any obligation or
entail any consequence other than the release of such Lien without recourse,
representation, or warranty, and (2) such release shall not in any manner
discharge, affect, or impair the Obligations or any Liens (other than those
expressly being released) upon (or obligations of Borrowers and Guarantors in
respect of) all interests retained by Borrowers and Guarantors, including, the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral or Guarantor Collateral (as applicable).
(b) Agent shall have no obligation whatsoever to any
of the Lenders to assure that the Collateral or Guarantor Collateral exists or
is owned by Borrowers or Guarantors (as the case may be) or is cared for,
protected, or insured or has been encumbered, or that the Agent's Liens have
been properly or sufficiently or lawfully created, perfected, protected, or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent pursuant to any of the Loan Documents, it being understood
and agreed that in respect of the Collateral and Guarantor Collateral, or any
act, omission or event related thereto, subject to the terms and conditions
contained herein, Agent may act in any manner it may deem appropriate, in its
sole discretion given Agent's own interest in the Collateral and Guarantor
Collateral in its capacity as one of the Lenders and that Agent shall have no
other duty or liability whatsoever to any Lender as to any of the foregoing,
except as otherwise provided herein.
17.12 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.
(a) Each of the Lenders agrees that it shall not, without the express consent of
Agent, and that it shall, to the extent it is lawfully entitled to do so, upon
the request of Agent, set off against the Obligations, any amounts owing by such
Lender to Borrowers or Guarantors or any accounts of Borrowers or Guarantors now
or hereafter maintained with such Lender. Each of the Lenders further agrees
that it shall not, unless specifically requested to do so by Agent, take or
cause to be taken any action, including, the commencement of any legal or
equitable proceedings, to foreclose any Lien on, or otherwise enforce any
security interest in, any of the Collateral or Guarantor Collateral the purpose
of which is, or could be, to give such Lender any preference or priority against
the other Lenders with respect to the Collateral or Guarantor Collateral.
(b) Subject to Section 17.8, if, at any time or times
any Lender shall receive (i) by payment, foreclosure, setoff or otherwise, any
proceeds of Collateral or Guarantor Collateral or any payments with respect to
the Obligations arising under, or relating to, this Agreement or the other Loan
Documents, except for any such proceeds or payments received by
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such Lender from Agent pursuant to the terms of this Agreement, or (ii) payments
from Agent in excess of such Lender's ratable portion of all such distributions
by Agent, such Lender promptly shall (1) turn the same over to Agent, in kind,
and with such endorsements as may be required to negotiate the same to Agent, or
in same day funds, as applicable, for the account of all of the Lenders and for
application to the Obligations in accordance with the applicable provisions of
this Agreement, or (2) purchase, without recourse or warranty, an undivided
interest and participation in the Obligations owed to the other Lenders so that
such excess payment received shall be applied ratably as among the Lenders in
accordance with their Pro Rata Shares; provided, however, that if all or part of
such excess payment received by the purchasing party is thereafter recovered
from it, those purchases of participations shall be rescinded in whole or in
part, as applicable, and the applicable portion of the purchase price paid
therefor shall be returned to such purchasing party, but without interest except
to the extent that such purchasing party is required to pay interest in
connection with the recovery of the excess payment.
17.13 AGENCY FOR PERFECTION. Agent and each Lender hereby
appoints each other Lender as agent for the purpose of perfecting the Agent's
Liens in assets which, in accordance with Article 9 of the UCC can be perfected
only by possession. Should any Lender obtain possession of any such Collateral
or Guarantor Collateral, such Lender shall notify Agent thereof, and, promptly
upon Agent's request therefor shall deliver such Collateral or Guarantor
Collateral to Agent or in accordance with Agent's instructions.
17.14 PAYMENTS BY AGENT TO THE LENDERS. All payments to be
made by Agent to the Lenders shall be made by bank wire transfer or internal
transfer of immediately available funds to:
If to Foothill: The Chase Manhattan Bank
ABA # 021-000-021
Credit: Foothill Capital Corporation
Account No. 323-266193
Re: Anker Coal Group, Inc. and
Subsidiaries
or pursuant to such other wire transfer instructions as each party may designate
for itself by written notice to Agent. Concurrently with each such payment,
Agent shall identify whether such payment (or any portion thereof) represents
principal, premium or interest on revolving advances or otherwise.
17.15 CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS.
Each member of the Lender Group authorizes and directs Agent to enter into this
Agreement and the other Loan Documents relating to the Collateral and Guarantor
Collateral, for the benefit of the Lender Group. Each member of the Lender Group
agrees that any action taken by Agent or all Lenders, as applicable, in
accordance with the terms of this Agreement or the other Loan Documents relating
to the Collateral and Guarantor Collateral and the exercise by Agent or all
Lenders, as
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applicable, of their respective powers set forth therein or herein, together
with such other powers that are reasonably incidental thereto, shall be binding
upon all of the Lenders.
17.16 FIELD AUDITS AND EXAMINATION REPORTS; CONFIDENTIALITY;
DISCLAIMERS BY LENDERS; OTHER REPORTS AND INFORMATION. By signing this
Agreement, each Lender:
(a) is deemed to have requested that Agent furnish
such Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a "Report" and collectively, "Reports") prepared by
Agent, and Agent shall so furnish each Lender with such Reports;
(b) expressly agrees and acknowledges that neither
Foothill nor Agent (i) makes any representation or warranty as to the accuracy
of any Report, or (ii) shall be liable for any information contained in any
Report;
(c) expressly agrees and acknowledges that the
Reports are not comprehensive audits or examinations, that Agent or other party
performing any audit or examination will inspect only specific information
regarding Borrowers and Guarantors and will rely significantly upon Borrowers'
and Guarantors' books and records, as well as on representations of Borrowers'
personnel;
(d) agrees to keep all Reports and other material,
non-public information regarding Borrowers and its Subsidiaries and their
operations, assets, and existing and contemplated business plans in a
confidential manner; it being understood and agreed by Borrowers that in any
event such Lender may make disclosures (i) to counsel for and other advisors,
accountants, and auditors to such Lender, (ii) reasonably required by any bona
fide potential or actual Assignee, transferee, or Participant in connection with
any contemplated or actual assignment or transfer by such Lender of an interest
herein or any participation interest in such Lender's rights hereunder, (iii) of
information that has become public by disclosures made by Persons other than
such Lender, its Affiliates, assignees, transferees, or participants, or (iv) as
required or requested by any court, governmental or administrative agency,
pursuant to any subpoena or other legal process, or by any law, statute,
regulation, or court order; provided, however, that, unless prohibited by
applicable law, statute, regulation, or court order, such Lender shall notify
Borrowers' Agent of any request by any court, governmental or administrative
agency, or pursuant to any subpoena or other legal process for disclosure of any
such non-public material information concurrent with, or where practicable,
prior to the disclosure thereof; and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold Agent
and any such other Lender preparing a Report harmless from any action the
indemnifying Lender may take or conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or other credit accommodations
that the indemnifying Lender has made or may make to Borrowers, or the
indemnifying Lender's participation in, or the indemnifying Lender's purchase
of, a loan or loans of Borrowers; and (ii) to pay and protect, and indemnify,
defend and hold Agent and any
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such other Lender preparing a Report harmless from and against, the claims,
actions, proceedings, damages, costs, expenses and other amounts (including,
attorney costs) incurred by Agent and any such other Lender preparing a Report
as the direct or indirect result of any third parties who might obtain all or
part of any Report through the indemnifying Lender.
In addition to the foregoing: (x) Any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrowers to Agent that has not been contemporaneously
provided by Borrowers to such Lender, and, upon receipt of such request, Agent
shall provide a copy of same to such Lender promptly upon receipt thereof from
Borrowers; (y) To the extent that Agent is entitled, under any provision of the
Loan Documents, to request additional reports or information from Borrowers or
Guarantors, any Lender may, from time to time, reasonably request Agent to
exercise such right as specified in such Lender's notice to Agent, whereupon
Agent promptly shall request of Borrowers or Guarantors the additional reports
or information specified by such Lender, and, upon receipt thereof from
Borrowers or Guarantors, Agent promptly shall provide a copy of same to such
Lender; and (z) Any time that Agent renders to Borrowers a statement regarding
the Loan Account, Agent shall send a copy of such statement to each Lender.
17.17 SEVERAL OBLIGATIONS; NO LIABILITY. Notwithstanding that
certain of the Loan Documents now or hereafter may have been or will be executed
only by or in favor of Agent in its capacity as such, and not by or in favor of
the Lenders, any and all obligations on the part of Agent (if any) to make any
credit available hereunder shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Commitments, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any Lender any interest
in, or subject any Lender to any liability for, or in respect of, the business,
assets, profits, losses, or liabilities of any other Lender. Each Lender shall
be solely responsible for notifying its Participants of any matters relating to
the Loan Documents to the extent any such notice may be required, and no Lender
shall have any obligation, duty, or liability to any Participant of any other
Lender. Except as provided in Section 17.7, no member of the Lender Group shall
have any liability for the acts or any other member of the Lender Group. No
Lender shall be responsible to Borrowers, Guarantors or any other Person for any
failure by any other Lender to fulfill its obligations to make credit available
hereunder, nor to advance for it or on its behalf in connection with its
Commitment, nor to take any other action on its behalf hereunder or in
connection with the financing contemplated herein.
18. GENERAL PROVISIONS.
18.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrowers, Borrowers' Agent and each member of the
Lender Group whose signature is provided for on the signature pages hereof.
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18.2 SECTION HEADINGS. Headings and numbers have been set
forth herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each section applies equally to this entire
Agreement.
18.3 INTERPRETATION. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against the
Lender Group or Borrowers, whether under any rule of construction or otherwise.
On the contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used so
as to fairly accomplish the purposes and intentions of all parties hereto.
18.4 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
18.5 AMENDMENTS IN WRITING. This Agreement can only be amended
by a writing signed by Agent, the requisite Lenders, Borrowers' Agent and
Borrowers.
18.6 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may
be executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The forgoing shall apply to each other Loan Document mutatis
mutandis.
18.7 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the
incurrence or payment of the Obligations by Borrowers, Guarantors or any other
guarantor of the Obligations or the transfer by either or both of such parties
to the Lender Group of any property of either or both of such parties should for
any reason subsequently be declared to be void or voidable under any state or
federal law relating to creditors' rights, including provisions of the
Bankruptcy Code relating to fraudulent conveyances, preferences, and other
voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if the Lender Group is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that the Lender Group is required or elects to
repay or restore, and as to all reasonable costs, expenses, and attorneys fees
of the Lender Group related thereto, the liability of Borrowers, Guarantors or
such other guarantor automatically shall be revived, reinstated, and restored
and shall exist as though such Voidable Transfer had never been made.
18.8 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated
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hereby and shall not be contradicted or qualified by any other agreement, oral
or written, before the date hereof.
18.9 APPOINTMENT OF BORROWERS' AGENT.
(a) Each Borrower hereby irrevocably appoints Parent
as Borrowers' Agent hereunder, to act in such capacity as agent for such
Borrower hereunder. Each Borrower further irrevocably authorizes Borrowers'
Agent to take such action on such Borrower's behalf and to exercise such rights
and powers hereunder as are delegated to Borrowers' Agent by the terms hereof,
together with such rights and powers as are reasonably incidental thereto.
(b) Borrowers' Agent is hereby expressly and
irrevocably authorized by each Borrower, without hereby limiting any implied or
express authority, (i) to give and receive on behalf of Borrowers all notices
and other materials delivered or provided to be delivered by Agent or Lenders to
Borrowers or by Borrowers to Agent pursuant to the Loan Documents, (ii) to
request Advances, the Term Loan and Letters of Credit on behalf of Borrowers,
(iii) to receive on behalf of and to remit to Borrowers, the proceeds of
Advances and of the Term Loan, and (iv) to pay, on behalf of Borrowers, all
Obligations at any time due the Lender Group pursuant to the terms of this
Agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed.
BORROWERS:
ANKER ENERGY CORPORATION,
a Delaware corporation,
By: /s/ MICHAEL M. MATESIC
------------------------------
Title: TREASURER
MARINE COAL SALES COMPANY,
a Delaware corporation,
By: /s/ MICHAEL M. MATESIC
------------------------------
Title: TREASURER
ANKER WEST VIRGINIA MINING COMPANY, INC.,
a West Virginia corporation
By: /s/ MICHAEL M. MATESIC
------------------------------
Title: TREASURER
PATRIOT MINING COMPANY, INC.
a West Virginia corporation,
By: /s/ MICHAEL M. MATESIC
------------------------------
Title: TREASURER
JULIANA MINING COMPANY, INC.,
a West Virginia corporation,
By: /s/ MICHAEL M. MATESIC
------------------------------
Title: TREASURER
[SIGNATURES CONTINUED ON NEXT PAGE]
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[SIGNATURES CONTINUED FROM PRECEDING PAGE]
VINDEX ENERGY CORPORATION,
a West Virginia corporation
By: /s/ MICHAEL M. MATESIC
------------------------------
Title: TREASURER
ANKER VIRGINIA MINING COMPANY, INC.,
a Virginia corporation
By: /s/ MICHAEL M. MATESIC
------------------------------
Title: TREASURER
LENDERS:
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Agent and
as a Lender
By: /s/ RHONDA R. FOREMAN
------------------------------
Title: S.V.P.
BORROWERS' AGENT:
ANKER COAL GROUP, INC.,
as Borrowers' Agent
By: /s/ MICHAEL M. MATESIC
------------------------------
Title: TREASURER
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