EXHIBIT 4.3
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SECURITY AGREEMENT
dated as of
December 29, 2005,
among
NATIONAL COAL CORP.
NATIONAL COAL CORPORATION,
NC TRANSPORTATION INC.
and
NC RAILROAD, INC.
and each other Subsidiary of National Coal Corp.
as may from time to time become a party hereto
as Grantors
and
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION
as Collateral Agent and Secured Party
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TABLE OF CONTENTS
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SECTION 1. DEFINITIONS..............................................2
1.1 Certain Defined Terms; New York UCC Definitions..............2
1.2 Rules of Interpretation......................................7
SECTION 2. SECURITY INTEREST........................................7
2.1 Grant of Security Interest...................................7
2.2 Security for Secured Obligations.............................9
2.3 Transfer of Collateral.......................................9
2.4 Bailees......................................................9
SECTION 3. REPRESENTATIONS AND WARRANTIES..........................10
3.1 Representations in Perfection Certificate...................10
3.2 Title; No Other Liens.......................................10
3.3 Perfected Second Priority Liens.............................10
3.4 Jurisdiction of Organization; Chief Executive Office........10
3.5 Inventory and Equipment.....................................11
3.6 Farm Products...............................................11
3.7 Investment Property.........................................11
3.8 Receivables.................................................11
3.9 Intellectual Property.......................................11
3.10 Deposit Accounts and Securities Accounts....................12
3.11 Benefit to each Subsidiary Grantor..........................12
3.12 Consents....................................................12
SECTION 4. COVENANTS...............................................13
4.1 Covenants in Indenture......................................13
4.2 Delivery of Instruments, Certificated Securities and
Chattel Paper...............................................13
4.3 Maintenance of Insurance....................................13
4.4 Payment of Obligations......................................14
4.5 Maintenance of Perfected Security Interest; Further
Documentation...............................................14
4.6 Changes in Locations, Name, etc.............................15
4.7 Notices.....................................................15
4.8 Investment Property.........................................15
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TABLE OF CONTENTS
(continued)
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4.9 Receivables.................................................17
4.10 Intellectual Property.......................................17
4.11 Deposit Accounts............................................19
4.12 New Accounts................................................19
4.13 Commercial Tort Claims......................................19
SECTION 5. REMEDIAL PROVISIONS.....................................19
5.1 Certain Matters Relating to Receivables.....................19
5.2 Communications with Obligors; Grantors Remain Liable........20
5.3 Pledged Stock...............................................21
5.4 Proceeds To Be Turned Over to Secured Party.................22
5.5 Application of Proceeds.....................................22
5.6 Code and Other Remedies.....................................23
5.7 Registration Rights.........................................24
5.8 Deficiency..................................................25
5.9 Non-Judicial Enforcement....................................25
SECTION 6. THE SECURED PARTY.......................................25
6.1 Secured Party's Appointment as Attorney-in-Fact, etc........25
6.2 Secured Party's Appointment as Agent........................27
6.3 Duty of the Secured Party...................................28
6.4 Execution of Financing Statements...........................29
6.5 Authority of the Secured Party..............................29
SECTION 7. SUBORDINATION OF INDEBTEDNESS...........................29
7.1 Subordination of All Subsidiary Grantor Claims..............29
7.2 Claims in Bankruptcy........................................29
7.3 Payments Held in Trust......................................30
7.4 Liens Subordinate...........................................30
7.5 Notation of Records.........................................30
SECTION 8. MISCELLANEOUS...........................................30
8.1 Amendments in Writing.......................................30
8.2 Notices.....................................................31
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TABLE OF CONTENTS
(continued)
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8.3 No Waiver by Course of Conduct; Cumulative Remedies.........31
8.4 Enforcement Expenses; Indemnification.......................31
8.5 Successors and Assigns......................................31
8.6 Set-Off.....................................................32
8.7 Counterparts................................................32
8.8 Severability................................................32
8.9 Section Headings............................................32
8.10 Integration.................................................32
8.11 GOVERNING LAW...............................................33
8.12 Submission To Jurisdiction; Waivers.........................33
8.13 Acknowledgements............................................33
8.14 WAIVER OF JURY TRIAL........................................34
8.15 Additional Grantors.........................................34
8.16 Releases....................................................34
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SCHEDULES
Schedule I Notice Addresses
ANNEXES
Annex I Form of Assumption Agreement for Additional Grantors
Annex II Form of Deposit Account Control Agreement
Annex III Form of Securities Account Control Agreement
Annex IV Form of Perfection Certificate
SECURITY AGREEMENT
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, UPON AND AFTER THE
OCCURRENCE OF THE FIRST LIEN CLOSING DATE (AS DEFINED BELOW), THE LIEN AND
SECURITY INTEREST GRANTED TO THE SECURED PARTY PURSUANT TO THIS AGREEMENT AND
THE EXERCISE OF ANY RIGHT OR REMEDY BY THE SECURED PARTY HEREUNDER WILL BE
SUBJECT TO THE PROVISIONS OF THE INTERCREDITOR AGREEMENT (AS DEFINED BELOW) IN
ACCORDANCE WITH THE TERMS THEREOF. DURING THE FIRST LIEN PERIOD, IN THE EVENT OF
ANY CONFLICT BETWEEN THE TERMS OF THE INTERCREDITOR AGREEMENT AND THIS
AGREEMENT, THE TERMS OF THE INTERCREDITOR AGREEMENT SHALL GOVERN.
THIS SECURITY AGREEMENT (this "AGREEMENT"), dated as of December 29,
2005, is made by NATIONAL COAL CORP., a Florida corporation, as grantor (the
"COMPANY"), each of the undersigned direct and indirect subsidiaries of the
Company (each of the undersigned subsidiaries being a "INITIAL SUBSIDIARY
GRANTOR" and, collectively, the "INITIAL SUBSIDIARY GRANTORS"), and each other
Person that may become an additional Grantor hereunder as provided in SECTION
8.15 hereof (any such Person, an "ADDITIONAL SUBSIDIARY GRANTOR" and,
collectively with the Initial Subsidiary Grantors, the "SUBSIDIARY GRANTORS";
the Subsidiary Grantors and the Company are collectively referred to herein as
the "GRANTORS"), in favor of ▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION, in its
capacity as trustee, as Collateral Agent for and representative of (in such
capacity, together with its successors and assigns, the "SECURED PARTY") the
Holders (as defined in the Indenture).
W I T N E S S E T H:
A. Pursuant to (i) that certain Indenture dated as of December
29, 2005 (as such Indenture may be amended, amended and restated, supplemented
or otherwise modified from time to time, the "INDENTURE") among the Secured
Party, as Trustee for the Holders (as therein defined) (in such capacity, the
"TRUSTEE"), the Company, as Issuer, and the Subsidiary Grantors, and (ii) the
Purchase Agreement dated as of December 22, 2005 among the Company, the
Subsidiary Grantors, and ▇▇▇▇▇▇▇▇▇ & Company, Inc., as Initial Purchaser, the
Company issued the Senior Secured Notes due 2010 (the "NOTES"). Capitalized
terms used in this Agreement without definition have the respective meanings
assigned such terms in the Indenture.
B. Upon the occurrence of the First Lien Closing Date (as defined
below) and until the occurrence of the Discharge of First Lien Obligations (as
defined in the Indenture), the Liens of the Collateral Agent for the benefit of
the Holders and the Trustee created hereby will be subordinated to the Credit
Facility Liens pursuant to an Intercreditor Agreement substantially in the form
of Exhibit H to the Indenture, among the First Lien Agent, the Secured Party, as
Trustee, the Company and the Subsidiary Grantors (as amended, amended and
restated, supplemented or otherwise modified from time to time, the
"INTERCREDITOR AGREEMENT").
NOW, THEREFORE, in consideration of the premises and in order to induce
(a) the Initial Purchaser and other Holders to acquire the Notes and (b) the
Trustee to enter into the Indenture, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, each
Grantor hereby agrees with the Secured Party as follows:
SECTION 1. DEFINITIONS.
1.1 CERTAIN DEFINED TERMS; NEW YORK UCC DEFINITIONS. For purposes
of this Agreement, the following terms shall have the respective meanings given
to them below. All capitalized terms used in this Agreement and not otherwise
defined herein shall have the meanings assigned to them in the Indenture, and
the following terms are used herein as defined in the New York UCC: Accounts,
Certificated Security, Chattel Paper, Commercial Tort Claims, Deposit Account,
Documents, Equipment, Farm Products, Goods, Instruments, Inventory, Letter of
Credit Rights, Securities Account, Securities Intermediary and Supporting
Obligations.
The following terms shall have the following meanings:
"ACCOUNT COLLATERAL" each Grantor's right, title and interest, whether
now existing or hereafter acquired or arising, in, to and under, each Deposit
Account and Securities Account (including any successor accounts to any such
accounts) and all amounts, investments and any other property (including, but
not limited to, Checks, securities, financial assets, investment property,
security entitlements and instruments) at any time deposited in or credited to
any such account and all security entitlements with respect thereto, including
all income or gain earned thereon and any Proceeds thereof.
"AGREEMENT" means this Security Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"BOOKS AND RECORDS" means all books, records and other written,
electronic or other documentation in whatever form maintained now or hereafter
by or for the Company in connection with, and relating to, the ownership of, or
evidencing or containing information relating to, the Collateral.
"CHECKS" means checks and other instruments and other payment
instructions deposited into any Deposit Account or Securities Account.
"COLLATERAL" has the meaning set forth in SECTION 2.1.
"COLLATERAL ACCOUNT" means any collateral account established by the
Secured Party as provided in SECTION 5.1 or 5.4.
"COMPUTER HARDWARE AND SOFTWARE" means all rights (including rights as
licensee and lessee) with respect to (i) computer and other electronic data
processing hardware, including all integrated computer systems, central
processing units, memory units, display terminals, printers, computer elements,
card readers, tape drives, hard and soft disc drives, cables, electrical supply
hardware, generators, power equalizers, accessories, peripheral devices and
other related computer hardware; (ii) all software and all software programs
designed for use on the computers and electronic data processing hardware
described in clause (i) above, including all operating system software,
utilities and application programs in any form (service code and object code in
magnetic tape, disc or hard copy format or any other listings whatsoever); (iii)
any firmware associated with any of the foregoing; (iv) any documentation for
hardware, software and firmware described in clauses (i), (ii) and (iii) above,
including flow charts, logic diagrams,
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manuals, specifications, training materials, charts and pseudo codes; and all
rights with respect thereto, including any and all licenses, options, warrants,
service contracts, program services, test rights, maintenance rights, support
rights, improvement rights, renewal rights and indemnifications, and any
substitutions, replacements, additions or model conversions of any of the
foregoing.
"CONTRACTS" means all contracts, agreements, instruments and indentures
in any form (including, without limitation, any interest rate protection
agreements, Hedging Agreements, licensing agreements and any partnership
agreements, joint venture agreements and limited liability company agreements),
and portions thereof, to which any Grantor is a party or under which any Grantor
or any property of any Grantor is subject, as the same may from time to time be
amended, supplemented, waived or otherwise modified, including, without
limitation, (i) all rights of any Grantor to receive moneys due and to become
due to it thereunder or in connection therewith, (ii) all rights of any Grantor
to damages arising thereunder, (iii) all rights of any Grantor to perform and to
exercise all remedies thereunder, (iv) any and all rights to receive and compel
performance under any or all Contracts and (v) any and all other rights,
interests and claims now existing or in the future arising in connection with
any or all Contracts.
"COPYRIGHT LICENSES" means any written agreement naming any Grantor as
licensor or licensee (including, without limitation, those listed in the
Perfection Certificate), granting any right under any Copyright, including,
without limitation, the grant of rights to manufacture, distribute, exploit and
sell materials derived from any Copyright.
"COPYRIGHTS" means (I) all copyrights arising under the laws of the
United States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished (including,
without limitation, those listed in the Perfection Certificate), all
registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, and (II) the right to obtain
all renewals thereof.
"DEPOSIT ACCOUNT CONTROL AGREEMENT" means a Deposit Account Control
Agreement, in substantially the form set forth on ANNEX II attached hereto or
otherwise reasonably acceptable to the Secured Party, by and among a Grantor,
the Secured Party and a depositary institution.
"DOMAIN NAMES" means all Internet domain names and associated URL
addresses in or to which any Grantor now or hereafter has any right, title or
interest.
"FILINGS" means the filing or recording of (i) the financing statements
as set forth in the Perfection Certificate by the Grantors or their agents, (ii)
this Agreement or a notice thereof with respect to Intellectual Property as set
forth in the Perfection Certificate and (iii) any filings after the date hereof
in any other jurisdiction as may be necessary under any requirement of law.
"FINANCING DOCUMENTS" means the Indenture, the Notes and the Security
Documents.
"FIRST LIEN AGENT" means the financial institution or other Person
acting as collateral agent for the holders of the First Lien Obligations in
connection with any Liens securing such First Lien Obligations.
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"FIRST LIEN CLOSING DATE" means the earliest date on which both of the
following shall have occurred: (a) the Company and/or one or more of its
Subsidiaries shall have entered into a First Lien Credit Facility that complies
with the terms and provisions of clause (1) of Section 4.09 of the Indenture and
(b) the execution and delivery of the Intercreditor Agreement by the First Lien
Agent, the Trustee, the Company and the Subsidiary Grantors.
"FIRST LIEN PERIOD" means the period commencing on (and including) the
First Lien Closing Date and ending on the occurrence of the Discharge of First
Lien Obligations.
"GENERAL INTANGIBLES" means all "general intangibles" as such term is
defined in Section 9-102(a)(42) of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, including, without
limitation, with respect to any Grantor, all contracts, agreements, instruments
and indentures in any form, and portions thereof, to which such Grantor is a
party or under which such Grantor has any right, title or interest or to which
such Grantor or any property of such Grantor is subject, as the same may from
time to time be amended, supplemented or otherwise modified, including, without
limitation, (I) all rights of such Grantor to receive moneys due and to become
due to it thereunder or in connection therewith, (II) all rights of such Grantor
to damages arising thereunder and (III) all rights of such Grantor to perform
and to exercise all remedies thereunder.
"INDENTURE" has the meaning set forth in the recitals hereto.
"INTELLECTUAL PROPERTY" means the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including,
without limitation, the Copyrights, the Copyright Licenses, the Domain Names,
the Patents, the Patent Licenses, the Trade Secrets, the Trade Secret Licenses,
the Trademarks and the Trademark Licenses and all rights to ▇▇▇ at law or equity
or otherwise recover for any and all past, present and future infringements,
misappropriations, dilutions or other impairments thereof and all income,
royalties, damages and other payments now and hereafter due and/or payable with
respect thereto (including, without limitation, payments under all licenses
entered into in connection therewith, and damages and payments for past, present
or future infringements, misappropriations, dilutions or other impairments
thereof).
"INTERCOMPANY NOTE" means any promissory note evidencing loans made by
any Grantor to the Company or any of its Subsidiaries.
"INTERCREDITOR AGREEMENT" has the meaning set forth in the recitals
hereto.
"INVESTMENT PROPERTY" means the collective reference to (A) all
"investment property" as such term is defined in Section 9-102(a)(49) of the New
York UCC and (B) whether or not constituting "investment property" as so
defined, all Pledged Notes and all Pledged Stock.
"ISSUERS" means the collective reference to each issuer of any
Investment Property.
"NEW YORK UCC" means the Uniform Commercial Code as from time to time
in effect in the State of New York.
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"NOTES" has the meaning set forth in the recitals hereto.
"PATENT LICENSE" means all agreements, whether written or oral,
providing for the grant by or to any Grantor of any right to manufacture, have
manufactured, use or sell or import any invention covered in whole or in part by
a Patent, including, without limitation, any of the foregoing referred to in the
Perfection Certificate.
"PATENTS" means (I) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions
thereof and all goodwill associated therewith, including, without limitation,
any of the foregoing referred to in the Perfection Certificate, (II) all
applications for letters patent of the United States or any other country and
all provisionals, divisions, continuations and continuations-in-part thereof,
including, without limitation, any of the foregoing referred to in the
Perfection Certificate, and (III) all rights to obtain any reissues or
extensions of the foregoing.
"PERFECTION CERTIFICATE" means a perfection certificate delivered by
the Company to the Secured Party on the date hereof, in substantially the form
set forth on ANNEX IV attached hereto.
"PLEDGED NOTES" means all promissory notes listed on the Perfection
Certificate, all Intercompany Notes at any time issued to any Grantor and all
other promissory notes issued to or held by any Grantor (other than promissory
notes issued in connection with extensions of trade credit by any Grantor in the
ordinary course of business).
"PLEDGED SECURITIES" means the Pledged Notes and the Pledged Stock.
"PLEDGED STOCK" means the Equity Interests listed on the Perfection
Certificate, together with any other shares, stock certificates, options,
interests or rights of any nature whatsoever in respect of the Equity Interests
of any Person that may be issued or granted to, or held by, any Grantor while
this Agreement is in effect.
"PROCEEDS" means all "proceeds" as such term is defined in Section
9-102(a)(64) of the New York UCC and, in any event, shall include, without
limitation, all dividends or other income from the Investment Property,
collections thereon or distributions or payments with respect thereto.
"RECEIVABLE" means any right to payment for goods sold or leased or for
services rendered, whether or not such right is evidenced by an Instrument or
Chattel Paper and whether or not it has been earned by performance (including,
without limitation, any Account).
"RELEASE DATE" means the earlier to occur of (i) the date upon which
the amounts due and owing under the Notes and all other Secured Obligations then
due and owing shall have been paid in full in cash, or (ii) as to any Subsidiary
Grantor the date upon which all the capital stock or substantially all the
assets of such Subsidiary Grantor shall have been sold or otherwise disposed of
in accordance with the terms of the Indenture.
"SECURED OBLIGATIONS" means all obligations and liabilities of every
nature of the Company and the Subsidiary Grantors or any other obligor thereof
(including, without limitation,
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the obligations under the guarantees by the Subsidiary Grantors and any other
obligor thereunder and the obligations under the Registration Rights Agreement,
but, with respect to the Registration Rights Agreement, only for Liquidated
Damages payable thereunder) now or hereafter existing under or arising out of or
in connection with the Indenture and the Notes, in each case together with all
extensions or renewals thereof, whether for principal, interest (including
without limitation interest that, but for the filing of a petition in bankruptcy
with respect to the Company or any other Grantor, would accrue on such
obligations, whether or not a claim is allowed against the Company or such
Grantor for such interest in the related bankruptcy proceeding), fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from the Secured Party, the Trustee
or any Holder as a preference, fraudulent transfer or otherwise, and all
obligations of every nature of the Grantors now or hereafter existing under this
Agreement.
"SECURITIES ACCOUNT CONTROL AGREEMENT" means a Securities Account
Control Agreement, in substantially the form set forth on ANNEX III attached
hereto or otherwise reasonably acceptable to the Secured Party, by and among a
Grantor, the Secured Party and a Securities Intermediary.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SUBSIDIARY GRANTOR CLAIMS" means indebtedness owing to a Grantor by
another Grantor.
"TRADE SECRETS" means all trade secrets, including, without limitation,
know-how, processes, formulae, compositions, designs, and confidential business
and technical information, and all rights of any kind whatsoever accruing
thereunder or pertaining thereto.
"TRADE SECRET LICENSES" means any agreement, whether written or oral,
providing for the grant by or to any Grantor of any right to use any Trade
Secret, including without limitation, any of the foregoing referred to in the
Perfection Certificate.
"TRADEMARK LICENSE" means any agreement, whether written or oral,
providing for the grant by or to any Grantor of any right to use any Trademark,
including, without limitation, any of the foregoing referred to in the
Perfection Certificate.
"TRADEMARKS" means (I) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, domain names, logos and other source or business identifiers, and all
goodwill associated therewith, now existing or hereafter adopted or acquired,
all registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, or otherwise, and all common-law
rights related thereto, including, without limitation, any of the foregoing
referred to in the Perfection Certificate, and (II) the right to obtain all
renewals thereof.
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1.2 RULES OF INTERPRETATION. As used herein, and any certificate
or other document made or delivered pursuant hereto:
(a) the words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation";
(b) the word "incur" shall be construed to mean incur,
create, issue, assume, become liable in respect of or suffer to exist
(and the words "incurred" and "incurrence" shall have correlative
meanings);
(c) the words "asset" and "property" shall be construed
to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, equity
interests, securities, vessels, equipment, revenues, accounts,
leasehold interests and contract rights;
(d) the words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and clause, subsection, Section, Schedule and Exhibit
references are to this Agreement unless otherwise specified;
(e) the meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms;
(f) the expressions "payment in full", "paid in full" and
any other similar terms or phrases when used herein with respect to the
Secured Obligations shall mean the payment in full, in immediately
available funds, of all the Secured Obligations;
(g) in any computation of periods of time from a
specified date to a later specified date, the word "from" means "from
and including" and the words "to" and "until" each means "to but
excluding" and the word "through" means "to and including";
(h) references to agreements or other contractual
obligations shall, unless otherwise specified, be deemed to refer to
such agreements or contractual obligations as amended, supplemented,
restated or otherwise modified from time to time (subject to any
applicable restrictions herein); and
(i) where the context requires, terms relating to the
Collateral or any part thereof, when used in relation to a Grantor,
shall refer to such Grantor's Collateral or the relevant part thereof;
SECTION 2. SECURITY INTEREST.
2.1 GRANT OF SECURITY INTEREST. Each Grantor hereby pledges,
assigns and transfers to the Secured Party, and hereby grants to the Secured
Party a security interest in, all of the following property now owned or at any
time hereafter acquired by such Grantor or in which such Grantor now has or at
any time in the future may acquire any right, title or interest (collectively,
the "COLLATERAL"):
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(a) all Accounts;
(b) all Account Collateral;
(c) all Books and Records;
(d) all Chattel Paper;
(e) all Commercial Tort Claims (including, without
limitation, those set forth in the Perfection Certificate);
(f) all Computer Hardware and Software;
(g) all Contracts;
(h) all Documents;
(i) all Equipment;
(j) all General Intangibles;
(k) all Goods;
(l) all Instruments;
(m) all Intellectual Property;
(n) all Inventory;
(o) all Investment Property;
(p) all Letter of Credit Rights;
(q) all plant fixtures, business fixtures and other
fixtures and storage and office facilities, and all accessions thereto
and products thereof;
(r) all other personal property to the extent not
otherwise described above; and
(s) to the extent not otherwise included, all Proceeds,
Supporting Obligations and products of any and all of the foregoing and
all collateral security and guarantees given by any Person with respect
to any of the foregoing.
Notwithstanding the foregoing, the Collateral shall expressly exclude
certificates of deposit and similar instruments, whether held on the date of
this Agreement or acquired in the future, used by the Company or any of its
Subsidiaries for the sole purpose of enabling the Company or any of its
Subsidiaries to purchase or post reclamation, surety, or similar bonds PROVIDED
that (i) the cash
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designated for the purchase of such certificates of deposits and similar
instruments shall be deposited in a specially designated account and shall
constitute Collateral while it is held in such an account, (ii) such cash shall
be released from the Collateral automatically upon its withdrawal from such
account for the purpose of the purchase of such certificates of deposits and
similar instruments for so long as such certificates of deposits and similar
instruments are issued in the name of the Company or such Subsidiary and (iii)
upon the termination or expiration, and release of such certificates of deposits
and similar instruments, such cash shall once again constitute Collateral.
Each item of Collateral listed in this SECTION 2.1 that is defined in
Articles 8 or 9 of the New York UCC and that is not otherwise defined herein
shall have the meaning set forth in the New York UCC, it being the intention of
the Grantors that the description of the Collateral set forth above be construed
to include the broadest possible range of assets, except for assets expressly
excluded pursuant to the immediately preceding paragraph.
2.2 SECURITY FOR SECURED OBLIGATIONS. This Agreement secures, and
the Collateral assigned by each Grantor is collateral security for, the prompt
payment or performance in full when due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including without
limitation the payment of amounts that would become due but for the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code), of all Secured
Obligations of such Grantor.
2.3 TRANSFER OF COLLATERAL. All certificates and instruments
representing or evidencing the Pledged Securities shall be delivered to and held
pursuant hereto by the Secured Party or a Person designated by the Secured Party
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, and accompanied
by any required transfer tax stamps to effect the pledge of the Pledged
Securities to the Secured Party; PROVIDED, HOWEVER, that upon the occurrence of
the First Lien Closing Date, the Secured Party shall deliver such certificates
and instruments to the First Lien Agent to the extent required pursuant to the
Intercreditor Agreement. Notwithstanding the preceding sentence, at the Secured
Party's discretion, all such Pledged Securities must be delivered or transferred
in such manner as to permit the Secured Party to be a "protected purchaser" to
the extent of its security interest as provided in Section 8-303 of the New York
UCC (if the Secured Party otherwise qualifies as a protected purchaser). During
the continuance of an Event of Default (but subject, after the occurrence of the
First Lien Closing Date, to the Intercreditor Agreement), the Secured Party
shall have the right, at any time in its discretion and without notice, to
transfer to or to register in the name of the Secured Party or any of its
nominees any or all of the Pledged Securities. In addition, during the
continuance of an Event of Default (but subject, after the occurrence of the
First Lien Closing Date, to the Intercreditor Agreement), the Secured Party
shall have the right at any time to exchange certificates or instruments
representing or evidencing Pledged Securities for certificates or instruments of
smaller or larger denominations.
2.4 BAILEES. Any Person (other than the Secured Party) at any time
and from time to time holding all or any portion of the Collateral shall be
deemed to, and shall, hold the Collateral as pledge holder and bailee and agent
for perfection for, the Secured Party. At any time and from time to time during
the continuance of an Event of Default, the Secured Party may give notice to
9
any such Person holding all or any portion of the Collateral that such Person is
holding the Collateral as the bailee of and agent for perfection for, and as
pledge holder for, the Secured Party, and request such Person's written
acknowledgment thereof. Without limiting the generality of the foregoing, during
the continuance of an Event of Default, each Grantor will join with the Secured
Party upon the Secured Party's request in notifying any Person who has
possession of any Collateral of the Secured Party's security interest therein
and requesting an acknowledgment from such Person that it is holding the
Collateral for the benefit of the Holders.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
To induce the Secured Party to enter into the Indenture and to induce
the Initial Purchaser to enter into the Purchase Agreement and purchase the
Notes thereunder, each Grantor hereby represents and warrants to the Secured
Party, the Initial Purchaser and each other Holder that:
3.1 REPRESENTATIONS IN PERFECTION CERTIFICATE. The representations
and warranties of such Grantor set forth in the Perfection Certificate as they
relate to such Grantor or to the Indenture or the Notes to which such Grantor is
a party, each of which is hereby incorporated herein by reference, are true and
correct, and the Secured Party and each Holder shall be entitled to rely on each
of them as if they were fully set forth herein.
3.2 TITLE; NO OTHER LIENS. Except for Permitted Liens, such
Grantor owns each item of the Collateral free and clear of any and all Liens or
claims of others. No financing statement or other public notice with respect to
all or any part of the Collateral is on file or of record in any public office,
except (i) such as have been filed in favor of the Secured Party, for the
ratable benefit of the Holders and the Trustee, pursuant to this Agreement and
(ii) as are permitted by the Indenture.
3.3 PERFECTED SECOND PRIORITY LIENS. Upon completion of the Filings and other
actions specified on the Perfection Certificate (which, in the case of all
Filings and other documents referred to on said Perfection Certificate, have
been delivered to the Secured Party in completed and duly executed form) (or, in
the case of (x) all Deposit Accounts, Securities Accounts and the Collateral
Account, the obtaining and maintenance of "control" (as described in the Code),
(y) in the case of Commercial Tort Claims, the taking of the actions required by
SECTION 4.13 herein and (z) in the case of Letter of Credit Rights, the taking
of the actions required by SECTION 4.5(C) hereof), the security interests
granted pursuant to this Agreement (1) will constitute valid perfected security
interests in all of the Collateral, to the extent that a security interest may
be perfected by Filings, in favor of the Secured Party, for the ratable benefit
of the Holders and the Trustee as collateral security for such Grantor's Secured
Obligations, enforceable in accordance with the terms hereof against all
creditors of such Grantor and any Persons purporting to purchase any Collateral
from such Grantor and are (2) prior to all other Liens on the Collateral in
existence on the date hereof except for (x) unrecorded Liens permitted by the
Indenture which have priority over the Liens on the Collateral by operation of
law and (y) Permitted Liens.
3.4 JURISDICTION OF ORGANIZATION; CHIEF EXECUTIVE OFFICE. On the
date hereof, such Grantor's jurisdiction of organization, identification number
from the jurisdiction of organization
10
(if any), and the location of such Grantor's chief executive office or sole
place of business or principal residence, as the case may be, are specified on
the Perfection Certificate.
3.5 INVENTORY AND EQUIPMENT. On the date hereof, the Inventory and
the Equipment (other than mobile goods) are kept at the locations listed on the
Perfection Certificate.
3.6 FARM PRODUCTS. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
3.7 INVESTMENT PROPERTY.
(a) The shares of Pledged Stock pledged by such Grantor
hereunder constitute all the issued and outstanding Equity Interests of
each Issuer owned by such Grantor.
(b) All the shares of the Pledged Stock have been duly
and validly issued and are fully paid and nonassessable.
(c) Such Grantor is the record and beneficial owner of,
and has good and marketable title to, the Investment Property pledged
by it hereunder, free of any and all Liens or options in favor of, or
claims of, any other Person, except the Liens created by this Agreement
and, during the First Lien Period, the Credit Facility Liens.
3.8 RECEIVABLES.
(a) No amount payable to such Grantor under or in
connection with any Receivable is evidenced by any Instrument or
Chattel Paper which has not been delivered to the Secured Party (or,
after the occurrence of the First Lien Closing Date, to the First Lien
Agent, as bailee and agent for perfection for the Secured Party under
the Intercreditor Agreement).
(b) None of the obligors on any Receivables is a
Governmental Authority.
(c) The amounts represented by such Grantor to the
Holders from time to time as owing to such Grantor in respect of the
Receivables will at such times be accurate in all material respects.
3.9 INTELLECTUAL PROPERTY.
(a) The Perfection Certificate lists all registrations
and applications for Intellectual Property and trade names (whether or
not subject to an application or registration) that are owned by such
Grantor in its own name on the date hereof.
(b) On the date hereof, all material Intellectual
Property owned or used by such Grantor is valid, subsisting, unexpired
and enforceable, has not been abandoned and does not infringe the
intellectual property rights of any other Person.
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(c) Except as set forth in the Perfection Certificate, on
the date hereof, none of the Intellectual Property owned or used by
such Grantor is the subject of any licensing or franchise agreement
pursuant to which such Grantor is the licensor or franchisor.
(d) No holding, decision or judgment has been rendered by
any Governmental Authority which would limit, cancel or question the
validity of, or such Grantor's rights in, any Intellectual Property in
any respect that could reasonably be expected to have a material
adverse effect.
(e) No action or proceeding is pending, or, to the
knowledge of such Grantor, threatened, on the date hereof (i) seeking
to limit, cancel or question the validity of any Intellectual Property
or such Grantor's ownership interest therein, or (ii) which, if
adversely determined, would have a material adverse effect on the value
of any Intellectual Property.
3.10 DEPOSIT ACCOUNTS AND SECURITIES ACCOUNTS. Each Grantor is the
record and beneficial owner of, and has good title to, the Deposit Accounts and
Securities Accounts pledged by it hereunder, free of any and all Liens or
options in favor or, or claims of, any other Person, except the Security
Interest created by this Agreement, rights of setoff of any depository bank or
securities intermediary and, during the First Lien Period, Credit Facility
Liens. As of the date hereof, all Deposit Accounts and Securities Accounts held
by a Grantor (other than those maintained with the Collateral Agent) are subject
to a Deposit Account Control Agreement and a Securities Account Control
Agreement, as applicable.
3.11 BENEFIT TO EACH SUBSIDIARY GRANTOR. The Company is a member of
an affiliated group of companies that includes each Subsidiary Grantor, and the
Company and the Subsidiary Grantors are engaged in related businesses. Each
Subsidiary Grantor is a Subsidiary of the Company and its obligations pursuant
to this Agreement reasonably may be expected to benefit, directly or indirectly,
it; and it has determined that this Agreement is necessary and convenient to the
conduct, promotion and attainment of the business of such Subsidiary Grantor and
the Company.
3.12 CONSENTS. Except as set forth in the Perfection Certificate,
no consent of any party (other than a Grantor) to any Copyright License, Patent
License, Trade Secret License or Trademark License constituting Collateral or
any obligor in respect of any material Account constituting Collateral or which
owes in the aggregate a material portion of all the Accounts constituting
Collateral is required, or purports to be required, to be obtained by or on
behalf of any Grantor in connection with the execution, delivery and performance
of this Agreement that has not been obtained. Each Copyright License, Patent
License, Trade Secret License, Trademark License and Account constituting
Collateral is in full force and effect and constitutes a valid and legally
enforceable obligation of the Grantor party thereto and (to the knowledge of
such Grantor) each other party thereto except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditor's rights generally and by general equitable
principles (whether enforcement is sought by proceedings in equity or at law)
and except to the extent the failure of any such Copyright License, Patent
License, Trade Secret License, Trademark License or Account constituting
Collateral to be in full force and effect or valid or legally enforceable could
not be reasonably expected, in the
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aggregate, to have a material adverse effect on the value of the Collateral.
Except as set forth on the Perfection Certificate, no consent or authorization
of, filing with or other act by or in respect of any Governmental Authority is
required in connection with the execution, delivery, performance, validity or
enforceability of any of the Copyright Licenses, Patent Licenses, Trade Secret
Licenses, Trademark Licenses and Accounts constituting Collateral by any party
thereto other than those which have been duly obtained, made or performed and
are in full force and effect and those the failure of which to make or obtain
could not be reasonably expected, in the aggregate, to have a material adverse
effect on the value of the Collateral. Except as set forth on the Perfection
Certificate, no Grantor nor (to the knowledge of any Grantor) any other party to
any Copyright License, Patent License, Trade Secret License or Trademark License
or Account constituting Collateral is in default in the performance or
observance of any of the terms thereof, except for such defaults as could not
reasonably be expected, in the aggregate, to have a material adverse effect on
the value of the Collateral.
SECTION 4. COVENANTS.
Each Grantor covenants and agrees with the Secured Party and the other
Holders that, from and after the date of this Agreement until the Release Date:
4.1 COVENANTS IN INDENTURE. In the case of each Grantor, such
Grantor shall take, or shall refrain from taking, as the case may be, each
action that is necessary to be taken or not taken, as the case may be, so that
no Default or Event of Default is caused by the failure to take such action or
to refrain from taking such action by such Grantor or any of its Subsidiaries.
4.2 DELIVERY OF INSTRUMENTS, CERTIFICATED SECURITIES AND CHATTEL
PAPER. If any amount payable under or in connection with any of the Collateral
shall be or become evidenced by any Instrument, Certificated Security or Chattel
Paper, such Instrument, Certificated Security or Chattel Paper shall be promptly
delivered to the Secured Party (or, after the occurrence of the First Lien
Closing Date and to the extent required by the Intercreditor Agreement, to First
Lien Agent, as bailee and agent for perfection for the Secured Party under the
Intercreditor Agreement), duly indorsed in a manner satisfactory to the Secured
Party, to be held as Collateral pursuant to this Agreement.
4.3 MAINTENANCE OF INSURANCE.
(a) Such Grantor will maintain, with financially sound
and reputable companies, insurance policies (i) insuring the Inventory,
the Equipment and all real property subject to a Mortgage against loss
by fire, explosion, theft and such other casualties as may be
reasonably satisfactory to the Secured Party and (ii) insuring such
Grantor, the Secured Party and the other Holders against liability for
personal injury and property damage relating to such Inventory and
Equipment, such policies to be in such form and amounts and having such
coverage as may be reasonably satisfactory to the Secured Party.
(b) All such insurance shall (i) provide that no
cancellation, material reduction in amount or material change in
coverage thereof shall be effective until at least 30 days after
receipt by the Secured Party of written notice thereof, (ii) name the
Secured
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Party as insured party and, subject, after the occurrence of the First
Lien Closing Date, to the Intercreditor Agreement, loss payee as its
interests may appear, (iii) if reasonably requested by the Secured
Party, include a breach of warranty clause and (iv) be reasonably
satisfactory in all other respects to the Secured Party.
(c) The Company shall deliver to the Secured Party a
report of a reputable insurance broker with respect to such insurance
substantially concurrently with each delivery of the Company's annual
financial statements pursuant to Section 4.03 of the Indenture and such
supplemental reports with respect thereto as the Secured Party may from
time to time reasonably request.
4.4 PAYMENT OF OBLIGATIONS. Such Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of such Grantor and
such proceedings could not reasonably be expected to result in the sale,
forfeiture or loss of any material portion of the Collateral or any interest
therein.
4.5 MAINTENANCE OF PERFECTED SECURITY INTEREST; FURTHER
DOCUMENTATION.
(a) Other than as permitted by this Agreement or the
Indenture, such Grantor shall maintain the security interest created by
this Agreement as a perfected security interest having at least the
priority described in SECTION 3.3 and shall defend such security
interest against the claims and demands of all Persons whomsoever
including without limitation, completing the Filings and filing any
financing or continuation statements under the Uniform Commercial Code
(or other similar laws) in effect in any jurisdiction with respect to
the security interests created hereby.
(b) Such Grantor will furnish to the Secured Party from
time to time statements and schedules further identifying and
describing the Collateral of such Grantor and such other reports in
connection therewith as the Secured Party may reasonably request, all
in reasonable detail.
(c) At any time and from time to time, upon the written
request of the Secured Party, and at the sole expense of such Grantor,
subject (after the occurrence of the First Lien Closing Date) to the
Intercreditor Agreement, such Grantor will promptly and duly execute
and deliver, and have recorded, such further instruments and documents
and take such further actions as the Secured Party may reasonably
request for the purpose of obtaining or preserving the full benefits of
this Agreement and of the rights and powers herein granted, including,
without limitation, (i) filing any financing or continuation statements
under the Uniform Commercial Code (or other similar laws) in effect in
any jurisdiction with respect to the security interests created hereby,
(ii) in the case of Investment Property, Letter-of-Credit Rights and
any other relevant Collateral,
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taking any actions reasonably necessary to enable the Secured Party to
obtain "control" (within the meaning of the applicable Uniform
Commercial Code) with respect thereto, and (iii) in the case of any
item of Equipment that is covered by a certificate of title under a
statute of any jurisdiction under the law of which indication of a
security interest on such certificate is required as a condition of
perfection thereof, at the request of the Secured Party (to the extent
not delivered after the First Lien Closing Date to the First Lien Agent
for the benefit of the holders of the First Lien Obligations and,
pursuant to the Intercreditor Agreement, the Holders), execute and file
with the registrar of motor vehicles or other appropriate authority in
such jurisdiction an application or other document requesting the
notation or other indication of the security interest created hereunder
on such certificate of title, and within 30 days after the end of each
calendar quarter, deliver to the Secured Party copies of all such
certificates of title issued during such calendar quarter indicating
the security interest created hereunder in the items of Equipment
covered thereby.
4.6 CHANGES IN LOCATIONS, NAME, ETC. Such Grantor will not, except
upon 15 days' prior written notice to the Secured Party and delivery to the
Secured Party of copies of all filed additional financing statements, and other
documents (in each case, properly executed) reasonably requested by the Secured
Party, to maintain the validity, perfection and priority of the security
interests provided for herein:
(a) change its jurisdiction of organization or the
location of its chief executive office or sole place of business from
that referred to in SECTION 3.4; or
(b) change its name.
4.7 NOTICES. Such Grantor will advise the Secured Party promptly,
in reasonable detail, of:
(a) any Lien (other than Permitted Liens) on any of the
Collateral which would adversely affect the ability of the Secured
Party to exercise any of its remedies hereunder; and
(b) the occurrence of any other event which could
reasonably be expected to have a material adverse effect on the
aggregate value of the Collateral or on the security interests created
hereby.
4.8 INVESTMENT PROPERTY.
(a) If such Grantor shall become entitled to receive or
shall receive any certificate (including, without limitation, any
certificate representing a dividend or a distribution in connection
with any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), option or
rights in respect of the Equity Interests of any Issuer, whether in
addition to, in substitution of, as a conversion of, or in exchange
for, any shares of the Pledged Stock, or otherwise in respect thereof,
such Grantor shall accept the same as the agent of the Secured Party
and the other Holders, hold the same in trust for the Secured Party and
the other Holders and deliver
15
the same forthwith to the Secured Party (or, after the occurrence of
the First Lien Closing Date and to the extent required by the
Intercreditor Agreement, to the First Lien Agent, as bailee and agent
for perfection for the Secured Party under the Intercreditor Agreement)
in the exact form received, duly indorsed by such Grantor to the
Secured Party (or to the First Lien Agent, as applicable), together
with an undated stock power covering such certificate duly executed in
blank by such Grantor and with signature guaranteed, to be held by the
Secured Party (or, during the First Lien Period, by the First Lien
Agent), subject to the terms hereof, as additional collateral security
for the Secured Obligations. Any sums paid upon or in respect of the
Investment Property upon the liquidation or dissolution of any Issuer
shall be paid over to the Secured Party (or, after the occurrence of
the First Lien Closing Date and to the extent required by the
Intercreditor Agreement, to the First Lien Agent, as bailee and agent
for perfection for the Secured Party under the Intercreditor Agreement)
to be held by it hereunder as additional collateral security for the
Secured Obligations, and in case any distribution of capital shall be
made on or in respect of the Investment Property or any property shall
be distributed upon or with respect to the Investment Property pursuant
to the recapitalization or reclassification of the capital of any
Issuer or pursuant to the reorganization thereof, the property so
distributed shall, unless otherwise subject to a perfected security
interest in favor of the Secured Party, be delivered to the Secured
Party (or, after the occurrence of the First Lien Closing Date and to
the extent required by the Intercreditor Agreement, to the First Lien
Agent, as bailee and agent for perfection for the Secured Party under
the Intercreditor Agreement) to be held by it hereunder as additional
collateral security for the Secured Obligations. If any sums of money
or property so paid or distributed in respect of the Investment
Property shall be received by such Grantor, such Grantor shall, until
such money or property is paid or delivered to the Secured Party (or to
the First Lien Agent, as applicable), hold such money or property in
trust for the Secured Party and the other Holders, segregated from
other funds of such Grantor, as additional collateral security for the
Secured Obligations.
(b) Without the prior written consent of the Secured
Party, such Grantor will not (i) vote to enable, or take any other
action to permit, any Issuer to issue any Equity Interests of any
nature or to issue any other securities convertible into or granting
the right to purchase or exchange for any Equity Interests of any
nature of any Issuer, (ii) sell, assign, transfer, exchange, or
otherwise dispose of, or grant any option with respect to, the
Investment Property or Proceeds thereof (except pursuant to a
transaction expressly permitted by the Indenture), (iii) create, incur
or permit to exist any Lien or option in favor of, or any claim of any
Person with respect to, any of the Investment Property or Proceeds
thereof, or any interest therein, except for the security interests
created by this Agreement or (iv) enter into any agreement or
undertaking that restricts the right or ability of such Grantor or the
Secured Party to sell, assign or transfer any of the Investment
Property or Proceeds thereof; provided, however, that after the
occurrence of the First Lien Closing Date, the rights of the Secured
Party under this CLAUSE (B) shall be subject to the terms of the
Intercreditor Agreement.
(c) In the case of each Grantor that is an Issuer, such
Issuer agrees that (i) it will be bound by the terms of this Agreement
relating to the Investment Property issued by it and will comply with
such terms insofar as such terms are applicable to it, (ii) it will
16
notify the Secured Party promptly in writing of the occurrence of any
of the events described in SECTION 4.8(A) with respect to the
Investment Property issued by it and (iii) the terms of SECTIONS 5.3(C)
and 5.7 shall apply to it, mutatis mutandis, with respect to all
actions that may be required of it pursuant to SECTION 5.3(C) or 5.7
with respect to the Investment Property issued by it.
4.9 RECEIVABLES.
(a) Other than in the ordinary course of business
consistent with its past practice, such Grantor will not, without prior
written consent from the Secured Party (such consent to be provided at
the Secured Party's sole discretion), (i) grant any extension of the
time of payment of any Receivable, (ii) compromise or settle any
Receivable for less than the full amount thereof, (iii) release, wholly
or partially, any Person liable for the payment of any Receivable, (iv)
allow any credit or discount whatsoever on any Receivable or (v) amend,
supplement or modify any Receivable in any manner that could adversely
affect the value thereof.
(b) Such Grantor will deliver to the Secured Party a copy
of each material demand, notice or document received by it that
questions or calls into doubt the validity or enforceability of more
than 5% of the aggregate amount of the then outstanding Receivables.
4.10 INTELLECTUAL PROPERTY.
(a) Except as otherwise permitted under the Indenture,
such Grantor (either itself or through licensees) will (i) continue to
use each material Trademark in order to maintain such Trademark in full
force free from any claim of abandonment for non-use, (ii) maintain as
in the past the quality of products and services offered under such
Trademark, (iii) use such Trademark with the appropriate notice of
registration and all other notices and legends required by applicable
law and (iv) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby such Trademark
may become invalidated or impaired in any way.
(b) Except as otherwise permitted under the Indenture,
such Grantor (either itself or through licensees) will not do any act,
or omit to do any act, whereby any material Patent owned or used by
such Grantor may become forfeited, abandoned or dedicated to the
public.
(c) Except as otherwise permitted under the Indenture,
such Grantor (either itself or through licensees) (i) will employ each
material Copyright and (ii) will not (and will not permit any licensee
or sublicensee thereof to) do any act or knowingly omit to do any act
whereby any material portion of the Copyrights may become invalidated
or otherwise impaired. Such Grantor will not (either itself or through
licensees) do any act whereby any material portion of the Copyrights
may fall into the public domain.
17
(d) Such Grantor (either itself or through licensees)
will not do any act that knowingly uses any material Intellectual
Property owned or used by such Grantor to infringe the intellectual
property rights of any other Person.
(e) Such Grantor will notify the Secured Party
immediately if it knows, or has reason to know, that any application or
registration relating to any material Intellectual Property may become
forfeited, abandoned or dedicated to the public, or of any adverse
determination or development (including, without limitation, the
institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United
States Copyright Office or any court or tribunal in any country)
regarding such Grantor's ownership of, or the validity of, any material
Intellectual Property or such Grantor's right to register the same or
to own and maintain the same.
(f) Whenever such Grantor, either by itself or through
any agent, employee, licensee or designee, shall file an application
for the registration of any Intellectual Property with the United
States Patent and Trademark Office, the United States Copyright Office
or any similar office or agency in any other country or any political
subdivision thereof, such Grantor shall report such filing to the
Secured Party within five Business Days after the last day of the
fiscal quarter in which such filing occurs and will notify the Secured
Party of any acquisition by such Grantor of any exclusive rights under
a material Copyright License, Patent License, Trade Secret License or
Trademark License within five Business Days after the last day of the
fiscal quarter in which such agreement shall have become effective.
Such Grantor shall execute and deliver, and have recorded, any and all
agreements, instruments, documents, and papers necessary to evidence
the Secured Party's and the other Holders' security interest in any
Copyright, Patent or Trademark and the goodwill and general intangibles
of such Grantor relating thereto or represented thereby; PROVIDED, if,
in the reasonable judgment of such Grantor, after due inquiry, so
evidencing such interest would result in the grant of a Trademark
registration or Copyright registration in the name of the Secured
Party, such Grantor shall give written notice to the Secured Party as
soon as reasonably practicable and the filing shall instead be
undertaken as soon as practicable but in no case later than immediately
following the grant of the applicable Trademark registration or
Copyright registration, as the case may be.
(g) Except as otherwise permitted under the Indenture,
such Grantor will take all reasonable and necessary steps, including,
without limitation, in any proceeding before the United States Patent
and Trademark Office, the United States Copyright Office or any similar
office or agency in any other country or any political subdivision
thereof, to maintain and pursue each application (and to obtain the
relevant registration) and to maintain each registration of the
material Intellectual Property, including, without limitation, filing
of applications for renewal, affidavits of use and affidavits of
incontestability.
(h) In the event that any material Intellectual Property
is infringed, misappropriated or diluted by a third party, such Grantor
shall (i) take such actions as such Grantor shall reasonably deem
appropriate under the circumstances to protect such
18
Intellectual Property and (ii) if such Intellectual Property is of
material economic value, promptly notify the Secured Party after it
learns thereof and ▇▇▇ for infringement, misappropriation or dilution,
to seek injunctive relief where appropriate and to seek to recover any
and all damages for such infringement, misappropriation or dilution.
(i) such Grantor will take all reasonable and necessary
steps to preserve and protect the secrecy of all material Trade Secrets
of such Grantor.
4.11 DEPOSIT ACCOUNTS. No Grantors shall deposit or in any way
transfer any money into any account listed in Schedule 11 of the Perfection
Certificate as an account used exclusively for payroll purposes, except to the
extent required to pay such Grantor's employees' wages, or as otherwise required
by law.
4.12 NEW ACCOUNTS. No Grantors shall open any new Deposit Account
or Security Account unless such account is subject to a Deposit Account Control
Agreement or Securities Account Control Agreement, as applicable, or such
Deposit Account or Securities Account is maintained with the Collateral Agent.
All such Deposit Account Control Agreements and Securities Account Control
Agreements shall be in substantially the same form as ANNEX II and ANNEX III, as
applicable, or in such other form as the Secured Party shall reasonably approve,
and the Grantors shall deliver true, correct and complete and fully executed
copies of the same to the Secured Party. This SECTION 4.12 will not apply to one
or more such new Deposit Accounts and Securities Accounts containing cash in the
amount of (or in the case of any Securities Accounts, Investment Property having
a fair market value of) no more than $25,000 in the aggregate with all other
such new Deposit Accounts and Securities Accounts.
4.13 COMMERCIAL TORT CLAIMS. If any Grantor shall at any time hold
or acquire, or otherwise become plaintiff or claimant in respect of, any
Commercial Tort Claim, such Grantor will (a) promptly notify the Secured Party
thereof, including a reasonably detailed description of such Commercial Tort
Claim, and (b) if in excess of $20,000, grant to the Secured Party a security
interest therein and in the Proceeds thereof, all upon the terms of this
Agreement, pursuant to one or more written supplements in form and substance
reasonably satisfactory to the Secured Party.
SECTION 5. REMEDIAL PROVISIONS
5.1 CERTAIN MATTERS RELATING TO RECEIVABLES.
(a) At any time and from time to time after the
occurrence and during the continuance of an Event of Default, the
Secured Party shall have the right to make test verifications of the
Receivables in any manner and through any medium that it reasonably
considers advisable, and each Grantor shall furnish all such assistance
and information as the Secured Party may require in connection with
such test verifications. At any time and from time to time after the
occurrence and during the continuance of an Event of Default, upon the
Secured Party's request, at the expense of the relevant Grantor, such
Grantor shall cause independent public accountants or others
satisfactory to the Secured Party to furnish to the Secured Party
reports showing reconciliations, aging and test verifications of, and
trial balances for, the Receivables.
19
(b) The Secured Party hereby authorizes each Grantor to
collect such Grantor's Receivables, and the Secured Party (subject,
after the occurrence of the First Lien Closing Date, to the
Intercreditor Agreement), may curtail or terminate said authority at
any time after the occurrence and during the continuance of an Event of
Default. If required by the Secured Party at any time after the
occurrence and during the continuance of an Event of Default, any
payments of Receivables, when collected by any Grantor, (i) shall be
forthwith (and, in any event, within two Business Days) deposited by
such Grantor in the exact form received, duly indorsed by such Grantor
to the Secured Party if required, in a Collateral Account maintained
under the sole dominion and control of the Secured Party (or, after the
occurrence of the First Lien Closing Date and to the extent required by
the Intercreditor Agreement, of the First Lien Agent, as bailee and
agent for perfection for the Secured Party under the Intercreditor
Agreement), subject to withdrawal by the Secured Party for the account
of the Holders only as provided in Section 5.5 and in accordance with
the Intercreditor Agreement (if applicable), and (ii) until so turned
over, shall be held by such Grantor in trust for the Secured Party and
the other Holders, segregated from other funds of such Grantor. Each
such deposit of Proceeds of Receivables shall be accompanied by a
report identifying in reasonable detail the nature and source of the
payments included in the deposit.
(c) During the continuance of a Default, at the Secured
Party's request, each Grantor shall deliver to the Secured Party all
original (or, during the First Lien Period, copies of original) and
other documents evidencing, and relating to, the agreements and
transactions which gave rise to the Receivables, including, without
limitation, all orders, invoices and shipping receipts.
5.2 COMMUNICATIONS WITH OBLIGORS; GRANTORS REMAIN LIABLE.
(a) At any time and from time to time after the
occurrence and during the continuance of an Event of Default, the
Secured Party in its own name or in the name of others may at any time
communicate with obligors under the Receivables to verify with them to
the Secured Party's satisfaction the existence, amount and terms of any
Receivables.
(b) Upon the written request of the Secured Party at any
time after the occurrence and during the continuance of an Event of
Default, each Grantor shall notify obligors on the Receivables that the
Receivables have been assigned to the Secured Party for the ratable
benefit of the Holders and that payments in respect thereof shall be
made directly to the Secured Party (subject, after the occurrence of
the First Lien Closing Date, to the Intercreditor Agreement).
(c) Anything herein to the contrary notwithstanding, each
Grantor shall remain liable under each of the Receivables to observe
and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any
agreement giving rise thereto. Neither the Secured Party nor any other
Holder shall have any obligation or liability under any Receivable (or
any agreement giving rise thereto), by reason of or arising out of this
Agreement or the receipt by the Secured Party or any other Holder of
any payment relating thereto, nor shall the Secured
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Party or any other Holder be obligated in any manner to perform any of
the obligations of any Grantor under or pursuant to any Receivable (or
any agreement giving rise thereto) to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by
it or as to the sufficiency of any performance by any party thereunder,
to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have
been assigned to it or to which it may be entitled at any time or
times.
5.3 PLEDGED STOCK.
(a) Unless an Event of Default shall have occurred and be
continuing and (unless any of the events described in Sections 6.01(9)
and (10) of the Indenture shall have occurred with respect to such
Grantor) the Secured Party shall have given written notice to the
relevant Grantor of the Secured Party's intent to exercise its
corresponding rights pursuant to SECTION 5.3(B), each Grantor shall be
permitted to receive all cash dividends paid in respect of the Pledged
Stock and all payments made in respect of the Pledged Notes, in each
case paid in the normal course of business of the relevant Issuer and
consistent with past practice, to the extent permitted in the
Indenture, and to exercise all voting and corporate or other
organizational rights with respect to the Investment Property;
PROVIDED, HOWEVER, that no vote shall be cast or corporate or other
organizational right exercised or other action taken that, in the
Secured Party's reasonable judgment, would impair the Collateral or
which would be inconsistent with or result in any violation of any
provision of the Indenture, this Agreement or any other Financing
Document.
(b) If an Event of Default shall occur and be continuing
and the Secured Party elects to exercise one of the following remedies
(unless any of the events described in paragraph 9 or 10 of Section
6.01 of the Indenture shall have occurred with respect to such
Grantor), the Secured Party shall give written notice of its intent to
exercise such rights to the relevant Grantor or Grantors, subject,
after the occurrence of the First Lien Closing Date, to the
Intercreditor Agreement, (i) the Secured Party shall have the right to
receive any and all cash dividends, distributions, payments or other
Proceeds paid in respect of the Investment Property and make
application thereof to the Secured Obligations in such order as the
Secured Party may determine, and (ii) any or all of the Investment
Property shall be registered in the name of the Secured Party or its
nominee, and the Secured Party or its nominee may thereafter exercise
(x) all voting, corporate and other rights pertaining to such
Investment Property at any meeting of shareholders (or other equivalent
body) of the relevant Issuer or Issuers or otherwise and (y) any and
all rights of conversion, exchange and subscription and any other
rights, privileges or options pertaining to such Investment Property as
if it were the absolute owner thereof (including, without limitation,
the right to exchange at its discretion any and all of the Investment
Property upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate or other
organizational structure of any Issuer, or upon the exercise by any
Grantor or the Secured Party of any right, privilege or option
pertaining to such Investment Property, and in connection therewith,
the right to deposit and deliver any and all of the Investment Property
with any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as the
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Secured Party may determine), all without liability except to account
for property actually received by it, but the Secured Party shall have
no duty to any Grantor to exercise any such right, privilege or option
and shall not be responsible for any failure to do so or delay in so
doing.
(c) Each Grantor hereby authorizes and instructs each
Issuer of any Investment Property pledged by such Grantor hereunder to
(i) comply with any instruction received by it from the Secured Party
in writing that (x) states that an Event of Default has occurred and is
continuing and (y) is otherwise in accordance with the terms of this
Agreement and, to the extent applicable, the Intercreditor Agreement,
without any other or further instructions from such Grantor, and each
Grantor agrees that each Issuer shall be fully protected in so
complying, and (ii) unless otherwise expressly permitted hereby, and
subject, after the occurrence of the First Lien Closing Date, to the
Intercreditor Agreement, pay any dividends or other payments with
respect to the Investment Property directly to the Secured Party.
(d) After the occurrence and during the continuation of
an Event of Default, if the Issuer of any Pledged Stock or Pledged
Notes is the subject of bankruptcy, insolvency, receivership,
custodianship or other proceedings under the supervision of any
Governmental Authority, then all rights of the Grantor in respect
thereof to exercise the voting and other consensual rights which such
Grantor would otherwise be entitled to exercise with respect to the
Pledged Stock or Pledged Notes issued by such Issuer shall cease, and
all such rights shall thereupon become vested in the Secured Party (or,
after the occurrence of the First Lien Closing Date and to the extent
required by the Intercreditor Agreement, in the First Lien Agent) who
shall thereupon have the sole right to exercise such voting and other
consensual rights, but the Secured Party shall have no duty to exercise
any such voting or other consensual rights and shall not be responsible
for any failure to do so or delay in so doing.
5.4 PROCEEDS TO BE TURNED OVER TO SECURED PARTY. In addition to
the rights of the Secured Party and the other Holders specified in SECTION 5.1
with respect to payments of Receivables and SECTION 5.3 with respect to payments
in respect of Investment Property, if an Event of Default shall occur and be
continuing, all Proceeds received by any Grantor consisting of cash, checks and
cash equivalents shall be held by such Grantor in trust for the Secured Party
and the other Holders, segregated from other funds of such Grantor, and shall,
forthwith upon receipt by such Grantor, be turned over to the Secured Party (or,
if required by the Intercreditor Agreement, to the First Lien Agent, as bailee
and agent for perfection for the Secured Party under the Intercreditor
Agreement) in the exact form received by such Grantor (duly indorsed by such
Grantor to the Secured Party, or to the First Lien Agent, as applicable, if
required). All Proceeds received by the Secured Party hereunder shall be held by
the Secured Party in a Collateral Account maintained under its sole dominion and
control. All Proceeds while held by the Secured Party in a Collateral Account
(or by such Grantor in trust for the Secured Party and the other Holders) shall
continue to be held as collateral security for all the obligations and shall not
constitute payment thereof until applied as provided in SECTION 5.5.
5.5 APPLICATION OF PROCEEDS. At any time that an Event of Default
shall have occurred and be continuing, subject to the Intercreditor Agreement,
the Secured Party may apply
22
all or any part of the Proceeds of any collection or sale of the Collateral, and
any Collateral consisting of cash, whether or not held in any Collateral
Account, in payment of the Secured Obligations in the following order:
(i) FIRST, to the payment of all reasonable
costs and expenses incurred by the Secured Party in connection
with this Agreement, the Indenture, any other Financing
Document or any of the Secured Obligations, including, without
limitation, all court costs and the reasonable fees and
expenses of its agents and legal counsel, and any other
reasonable costs or expenses incurred in connection with the
exercise by the Secured Party of any right or remedy under
this Agreement, the Indenture or any other Financing Document;
(ii) SECOND, to the ratable satisfaction of all
other Secured Obligations (with any amounts so payable in
respect of Secured Obligations under the Indenture paid to the
Secured Party for application in accordance with Section 3.02
of the Indenture); and
(iii) THIRD, to the relevant Grantor or its
successors or assigns, or to whomsoever may be lawfully
entitled to receive the same.
5.6 CODE AND OTHER REMEDIES.
(a) If an Event of Default shall occur and be continuing,
the Secured Party, on behalf of the Holders, may exercise, subject to
the Intercreditor Agreement, in addition to all other rights and
remedies granted to them in this Agreement, the Indenture and the other
Financing Documents and in any other instrument or agreement securing,
evidencing or relating to the Secured Obligations, all rights and
remedies of a secured party under the New York UCC or any other
applicable law or otherwise available at law or in equity. Without
limiting the generality of the foregoing, the Secured Party, without
demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law
referred to below) to or upon any Grantor or any other Person (all and
each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances, subject to the Intercreditor
Agreement, forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of
the foregoing), in one or more parcels at public or private sale or
sales, at any exchange, broker's board or office of the Secured Party
or any other Holder or elsewhere upon such terms and conditions as it
may deem advisable and at such prices as it may deem best, for cash or
on credit or for future delivery without assumption of any credit risk.
The Secured Party or any other Holder shall have the right upon any
such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of
the Collateral so sold, free of any right or equity of redemption in
any Grantor, which right or equity is hereby waived and released. Each
Grantor further agrees, at the Secured Party's request, to assemble the
Collateral and make it available to the Secured Party at places which
the Secured Party shall reasonably select, whether at such Grantor's
premises or elsewhere. Upon any such sale or transfer, the Secured
Party
23
shall have the right to deliver, assign and transfer to the purchaser
or transferee thereof the Collateral so sold or transferred. The
Secured Party shall apply the net proceeds of any action taken by it
pursuant to this SECTION 5.6, after deducting all reasonable costs and
expenses of every kind incurred in connection therewith or incidental
to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Secured Party and the
other Holders hereunder, including, without limitation, attorneys' fees
and disbursements, to the payment in whole or in part of the Secured
Obligations, in such order as the Secured Party may elect, and only
after such application and after the payment by the Secured Party of
any other amount required by any provision of law, including, without
limitation, Section 9-615(a)(3) of the New York UCC, need the Secured
Party account for the surplus, if any, to any Grantor. To the extent
permitted by applicable law, each Grantor waives all claims, damages
and demands it may acquire against the Secured Party or any other
Holder arising out of the exercise by them of any rights hereunder. If
any notice of a proposed sale or other disposition of Collateral shall
be required by law, such notice shall be deemed reasonable and proper
if given at least 10 days before such sale or other disposition.
(b) In the event that the Secured Party elects not to
sell the Collateral, the Secured Party retains its rights to dispose of
or utilize the Collateral or any part or parts thereof in any manner
authorized or permitted by law or in equity, and to apply the proceeds
of the same towards payment of the Secured Obligations. Each and every
method of disposition of the Collateral described in this Agreement
shall constitute disposition in a commercially reasonable manner.
(c) The Secured Party will not submit an "Notice of
Exclusive Control" under a Deposit Account Control Agreement or a
Securities Account Control Agreement, as applicable, unless an Event of
Default has occurred and is continuing.
(d) The Secured Party may appoint any Person as agent to
perform any act or acts necessary or incident to any sale or transfer
of the Collateral.
5.7 REGISTRATION RIGHTS.
(a) If the Secured Party shall determine to exercise its
right to sell any or all of the Pledged Stock pursuant to SECTION 5.6,
and if in the opinion of the Secured Party it is necessary or advisable
to have the Pledged Stock, or that portion thereof to be sold,
registered under the provisions of the Securities Act, the relevant
Grantor will cause the Issuer thereof to (i) execute and deliver, and
use its best efforts to cause the directors and officers of such Issuer
to execute and deliver, all such instruments and documents, and do or
cause to be done all such other acts as may be, in the opinion of the
Secured Party, necessary or advisable to register the Pledged Stock, or
that portion thereof to be sold, under the provisions of the Securities
Act, (ii) use its best efforts to cause the registration statement
relating thereto to become effective and to remain effective for a
period of one year from the date of the first public offering of the
Pledged Stock, or that portion thereof to be sold, and (iii) make all
amendments thereto and/or to the related prospectus which, in the
opinion of the Secured Party, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules
and regulations of the Securities and
24
Exchange Commission applicable thereto. Each Grantor agrees to cause
such Issuer to comply with the provisions of the securities or "Blue
Sky" laws of any and all jurisdictions which the Secured Party shall
designate and to make available to its security holders, as soon as
practicable, an earnings statement (which need not be audited) which
will satisfy the provisions of Section 11(a) of the Securities Act.
(b) Each Grantor recognizes that the Secured Party may be
unable to effect a public sale of any or all the Pledged Stock, by
reason of certain prohibitions contained in the Securities Act and
applicable state securities laws or otherwise, and may be compelled to
resort to one or more private sales thereof to a restricted group of
purchasers which will be obliged to agree, among other things, to
acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. Each Grantor
acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale
and, notwithstanding such circumstances, agrees that any such private
sale shall be deemed to have been made in a commercially reasonable
manner. The Secured Party shall be under no obligation to delay a sale
of any of the Pledged Stock for the period of time necessary to permit
the Issuer thereof to register such securities for public sale under
the Securities Act, or under applicable state securities laws, even if
such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or
cause to be done all such other acts as may be necessary to make such
sale or sales of all or any portion of the Pledged Stock pursuant to
this SECTION 5.7 valid and binding and in compliance with any and all
other applicable laws. Each Grantor further agrees that a breach of any
of the covenants contained in this SECTION 5.7 will cause irreparable
injury to the Secured Party and the other Holders, that the Secured
Party and the other Holders have no adequate remedy at law in respect
of such breach and, as a consequence, that each and every covenant
contained in this SECTION 5.7 shall be specifically enforceable against
such Grantor, and such Grantor hereby waives and agrees not to assert
any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred
under the Indenture.
5.8 DEFICIENCY. Each Grantor shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to pay its Secured Obligations and the fees and disbursements
of any attorneys employed by the Secured Party or any other Holder to collect
such deficiency.
5.9 NON-JUDICIAL ENFORCEMENT. The Secured Party may enforce its
rights hereunder without prior judicial process or judicial hearing, and to the
extent permitted by law, each Grantor expressly waives any and all legal rights
which might otherwise require the Secured Party to enforce its rights by
judicial process.
SECTION 6. THE SECURED PARTY
6.1 SECURED PARTY'S APPOINTMENT AS ATTORNEY-IN-FACT, ETC.
25
(a) Each Grantor hereby irrevocably constitutes and
appoints the Secured Party and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of such
Grantor and in the name of such Grantor or in its own name, for the
purpose of carrying out the terms of this Agreement, subject to the
Intercreditor Agreement, to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement, and, without
limiting the generality of the foregoing, each Grantor hereby gives the
Secured Party the power and right, on behalf of such Grantor, without
notice to or assent by such Grantor, subject to the Intercreditor
Agreement, to do any or all of the following:
(i) in the name of such Grantor or its own name,
or otherwise, take possession of and indorse and collect any
checks, drafts, notes, acceptances or other instruments for
the payment of moneys due under any Receivable or with respect
to any other Collateral and file any claim or take any other
action or proceeding in any court of law or equity or
otherwise deemed appropriate by the Secured Party for the
purpose of collecting any and all such moneys due under any
Receivable or with respect to any other Collateral whenever
payable;
(ii) in the case of any Intellectual Property,
execute and deliver, and have recorded, any and all
agreements, instruments, documents and papers as the Secured
Party may request to evidence the Secured Party's and the
other Holders' security interest in such Intellectual Property
and the goodwill and general intangibles of such Grantor
relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or
placed on or threatened against the Collateral, effect any
repairs or any insurance called for by the terms of this
Agreement and pay all or any part of the premiums therefor and
the costs thereof;
(iv) execute, in connection with any sale
provided for in SECTION 5.6 or 5.7, any indorsements,
assignments or other instruments of conveyance or transfer
with respect to the Collateral; and
(v) direct any party liable for any payment
under any of the Collateral to make payment of any and all
moneys due or to become due thereunder directly to the Secured
Party or as the Secured Party shall direct; ask or demand for,
collect, and receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any
time in respect of or arising out of any Collateral; sign and
indorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in
connection with any of the Collateral; commence and prosecute
any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or
any portion thereof and to enforce any other right in respect
of any Collateral; defend any suit, action or proceeding
brought against such Grantor with respect to any Collateral;
settle, compromise or adjust any such suit, action or
proceeding
26
and, in connection therewith, give such discharges or releases
as the Secured Party may deem appropriate; assign any
Copyright, Patent, Domain Name, Trade Secret or Trademark
(along with the goodwill of the business to which any such
Copyright, Patent, Domain Name, Trade Secret or Trademark
pertains), throughout the world for such term or terms, on
such conditions, and in such manner, as the Secured Party
shall in its sole discretion determine; and generally, sell,
transfer, pledge and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and
completely as though the Secured Party were the absolute owner
thereof for all purposes, and do, at the Secured Party's
option and such Grantor's expense, at any time, or from time
to time, all acts and things which the Secured Party deems
necessary to protect, preserve or realize upon the Collateral
and the Secured Party's and the other Holders' security
interests therein and to effect the intent of this Agreement,
all as fully and effectively as such Grantor might do.
(b) Anything in this SECTION 6.1 to the contrary
notwithstanding, the Secured Party agrees that it will not exercise any
rights under the power of attorney provided for in this SECTION 6.1
unless an Event of Default shall have occurred and be continuing.
(c) If any Grantor fails to perform or comply with any of
its agreements contained herein, the Secured Party, at its option, but
without any obligation so to do, may perform or comply, or otherwise
cause performance or compliance, with such agreement.
(d) The expenses of the Secured Party incurred in
connection with actions undertaken as provided in this SECTION 6.1,
together with interest thereon at a rate per annum equal to the highest
rate per annum at which interest would then be payable on past due
Notes under the Indenture, from the date of payment by the Secured
Party to the date reimbursed by the relevant Grantor, shall be payable
by such Grantor to the Secured Party on demand.
(e) Each Grantor hereby ratifies all that said attorneys
shall lawfully do or cause to be done by virtue hereof. All powers,
authorizations and agencies contained in this Agreement are coupled
with an interest and are irrevocable until this Agreement is terminated
and the security interests created hereby are released.
6.2 SECURED PARTY'S APPOINTMENT AS AGENT.
(a) The Secured Party has been appointed to act as
Secured Party hereunder by the Trustee and the Holders. The Secured
Party shall be obligated, and shall have the right hereunder, to make
demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking any action (including
without limitation the release or substitution of Collateral), solely
in accordance with this Agreement, the Intercreditor Agreement and the
Indenture; PROVIDED that Secured Party shall, subject to the terms of
the Intercreditor Agreement, exercise, or refrain from exercising, any
remedies provided for in SECTION 5.6 in accordance with the
instructions of Holders representing more than 50% of the aggregate
amount of the Secured Obligations.
27
(b) Unless the Trustee has appointed a co-Collateral
Agent under the terms of the Indenture, the Secured Party shall at all
times be the same Person that is the Trustee under the Indenture.
Written notice of resignation by the Trustee pursuant to subsection
7.08(b) of the Indenture shall also constitute notice of resignation as
the Secured Party under this Agreement; removal of the Trustee pursuant
to subsection 7.08(b) of the Indenture shall also constitute removal as
the Secured Party under this Agreement; and appointment of a successor
Trustee pursuant to subsection 7.08(a) of the Indenture shall also
constitute appointment of a successor Secured Party under this
Agreement. Upon the acceptance of any appointment as the Trustee under
subsection 7.08(a) of the Indenture by a successor Trustee, that
successor Trustee shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring or removed
Secured Party under this Agreement, and the retiring or removed Secured
Party under this Agreement shall promptly (i) transfer to such
successor Secured Party all sums, securities and other items of
Collateral held hereunder, together with all records and other
documents necessary or appropriate in connection with the performance
of the duties of the successor Secured Party under this Agreement, and
(ii) execute and deliver to such successor Secured Party such
amendments to financing statements, and take such other actions, as may
be necessary or appropriate in connection with the assignment to such
successor Secured Party of the security interests created hereunder,
whereupon such retiring or removed Secured Party shall be discharged
from its duties and obligations under this Agreement. After any
retiring or removed Trustee's resignation or removal hereunder as the
Secured Party, the provisions of this Agreement shall inure to its
benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Secured Party hereunder.
6.3 DUTY OF THE SECURED PARTY. The Secured Party's sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the New York UCC or otherwise, shall
be to deal with it in the same manner as the Secured Party deals with similar
property for its own account. None of the Secured Party, the Holders or any of
their respective officers, directors, employees or agents shall be liable for
failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of any Grantor or any other Person or to take
any other action whatsoever with regard to the Collateral or any part thereof.
The powers conferred on the Secured Party and the other Holders hereunder are
solely to protect the Secured Party's and the other Holders' interests in the
Collateral and shall not impose any duty upon the Secured Party or any other
Holder to exercise any such powers. The Secured Party and the other Holders
shall be accountable only for amounts that they actually receive as a result of
the exercise of such powers, and neither they nor any of their officers,
directors, employees or agents shall be responsible to any Grantor for any act
or failure to act hereunder, except for their own gross negligence or willful
misconduct. To the fullest extent permitted by applicable law, the Secured Party
shall be under no duty whatsoever to make or give any presentment, notice of
dishonor, protest, demand for performance, notice of non-performance, notice of
intent to accelerate, notice of acceleration, or other notice or demand in
connection with any Collateral or the Secured Obligations, or to take any steps
necessary to preserve any rights against any Grantor or other Person or
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
it has or is deemed to have knowledge of such matters. Each Grantor,
28
to the extent permitted by applicable law, waives any right of marshaling in
respect of any and all Collateral, and waives any right to require the Secured
Party or any other Holder to proceed against any Grantor or other Person,
exhaust any Collateral or enforce any other remedy which the Secured Party or
any other Holder now has or may hereafter have against each Grantor, any Grantor
or other Person.
6.4 EXECUTION OF FINANCING STATEMENTS. Pursuant to any applicable
law, each Grantor authorizes the Secured Party to file or record financing
statements and other filing or recording documents or instruments with respect
to the Collateral without the signature of such Grantor in such form and in such
offices as the Secured Party reasonably determines appropriate to perfect the
security interests of the Secured Party under this Agreement. Each Grantor
authorizes the Secured Party to use the collateral description "all assets" or
"all personal property" in any such financing statements. Each Grantor hereby
ratifies and authorizes the filing by the Secured Party of any financing
statement with respect to the Collateral made prior to the date hereof. Nothing
in this SECTION 6.4 shall relieve the Grantor from its obligation to make the
Filings or file any continuation statements.
6.5 AUTHORITY OF THE SECURED PARTY. Each Grantor acknowledges that
the rights and responsibilities of the Secured Party under this Agreement with
respect to any action taken by the Secured Party or the exercise or non-exercise
by the Secured Party of any option, voting right, request, judgment or other
right or remedy provided for herein or resulting or arising out of this
Agreement shall, as between the Secured Party and the other Holders, be governed
by the Indenture and by such other agreements with respect thereto as may exist
from time to time among them, but, as between the Secured Party and the
Grantors, the Secured Party shall be conclusively presumed to be acting as agent
for the Holders with full and valid authority so to act or refrain from acting,
and no Grantor shall be under any obligation, or entitlement, to make any
inquiry respecting such authority.
SECTION 7. SUBORDINATION OF INDEBTEDNESS
7.1 SUBORDINATION OF ALL SUBSIDIARY GRANTOR CLAIMS. As used
herein, the term "SUBSIDIARY GRANTOR CLAIMS" shall mean all debts and
obligations of the Company or any other Grantor to any Grantor, whether such
debts and obligations now exist or are hereafter incurred or arise, or whether
the obligation of the debtor thereon be direct, contingent, primary, secondary,
several, joint and several, or otherwise, and irrespective of whether such debts
or obligations be evidenced by note, contract, open account, or otherwise, and
irrespective of the Person or Persons in whose favor such debts or obligations
may, at their inception, have been, or may hereafter be created, or the manner
in which they have been or may hereafter be acquired by. After and during the
continuation of an Event of Default, no Grantor shall receive or collect,
directly or indirectly, from any obligor in respect thereof any amount upon the
Subsidiary Grantor Claims unless otherwise consented to by the Secured Party.
7.2 CLAIMS IN BANKRUPTCY. Subject to the Intercreditor Agreement,
in the event of receivership, bankruptcy, reorganization, arrangement, debtor's
relief or other insolvency proceedings involving any Grantor, the Secured Party
on behalf of itself and the other Holders shall have the right to prove their
claim in any proceeding, so as to establish their rights hereunder and receive
directly from the receiver, trustee or other court custodian, dividends and
payments that would otherwise be payable upon Subsidiary Grantor Claims. Each
Grantor hereby assigns such dividends and payments
29
to the Secured Party for the benefit of the Secured Party and the other Holders
for application against the Secured Obligations in the manner determined by the
Secured Party. Should the Secured Party or any other Holder receive, for
application upon the Secured Obligations, any such dividend or payment that is
otherwise payable to any Grantor, and that, as between such Grantor and the
applicable Secured Party or Holder, shall constitute a credit upon the
Subsidiary Grantor Claims, then upon payment in full of the Secured Obligations,
the intended recipient shall become subrogated to the rights of the Secured
Party and the other Holders to the extent that such payments to the Secured
Party and the other Holders on the Subsidiary Grantor Claims have contributed
toward the liquidation of the Secured Obligations, and such subrogation shall be
with respect to that proportion of the Secured Obligations that would have been
unpaid if the Secured Party and the other Holders had not received dividends or
payments upon the Subsidiary Grantor Claims.
7.3 PAYMENTS HELD IN TRUST. In the event that notwithstanding
SECTION 7.1 and SECTION 7.2 any Grantor should receive any funds, payments,
claims or distributions which are prohibited by such Sections, then it agrees:
(a) to hold in trust for the Secured Party and the other Holders an amount equal
to the amount of all funds, payments, claims or distributions so received, and
(b) that it shall have absolutely no dominion over the amount of such funds,
payments, claims or distributions except to pay them promptly to the Secured
Party (or, after the occurrence of the First Lien Closing Date and to the extent
required by the Intercreditor Agreement, to the First Lien Agent), for the
benefit of the Secured Party and the other Holders; and each Grantor covenants
promptly to pay the same to the Secured Party (or to the First Lien Agent, as
applicable).
7.4 LIENS SUBORDINATE. Each Grantor agrees that, until the Release
Date, any Liens securing payment of the Subsidiary Grantor Claims shall be and
remain inferior and subordinate to any Liens securing payment of the Secured
Obligations, regardless of whether such encumbrances in favor of such Grantor,
the Secured Party or other Holder presently exist or are hereafter created or
attach. Without the prior written consent of the Secured Party, no Grantor,
during the period in which any of the Secured Obligations are outstanding shall
(a) exercise or enforce any creditor's right it may have against any debtor in
respect of the Subsidiary Grantor Claims, or (b) foreclose, repossess, sequester
or otherwise take steps or institute any action or proceeding (judicial or
otherwise, including without limitation the commencement of or joinder in any
liquidation, bankruptcy, rearrangement, debtor's relief or insolvency
proceeding) to enforce any Lien held by it.
7.5 NOTATION OF RECORDS. All promissory notes and all accounts
receivable ledgers or other evidence of the Subsidiary Grantor Claims accepted
by or held by any Grantor shall contain a specific written notice thereon that
the indebtedness evidenced thereby is subordinated under the terms of this
Agreement.
SECTION 8. MISCELLANEOUS
8.1 AMENDMENTS IN WRITING. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Article 9 of the Indenture.
30
8.2 NOTICES. All notices, requests and demands to or upon the
Secured Party or any Grantor hereunder shall be effected in the manner provided
for in Section 13.02 of the Indenture; provided that any such notice, request or
demand to or upon any Subsidiary Grantor shall be addressed to such Subsidiary
Grantor at its notice address set forth on SCHEDULE I hereto.
8.3 NO WAIVER BY COURSE OF CONDUCT; CUMULATIVE REMEDIES. Neither
the Secured Party nor any other Holder shall by any act (except by a written
instrument pursuant to SECTION 8.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Secured Party or any other Holder, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Secured Party or any other Holder of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Secured Party or such other Holder would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
8.4 ENFORCEMENT EXPENSES; INDEMNIFICATION.
(a) Each Subsidiary Grantor agrees to pay or reimburse
each of the Secured Party and each other Holder for all its costs and
expenses incurred in enforcing or preserving any rights under this
Agreement and the other Financing Documents to which such Subsidiary
Grantor is a party, including, without limitation, the reasonable fees
and disbursements of counsel (including the allocated fees and expenses
of in-house counsel) to the Secured Party and each other Holder.
(b) Each Subsidiary Grantor agrees to pay, and to save
the Secured Party and the other Holders harmless from, any and all
liabilities with respect to, or resulting from any delay in paying, any
and all stamp, excise, sales or other taxes which may be payable or
determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Agreement.
(c) Each Subsidiary Grantor agrees to pay, and to save
the Secured Party and the other Holders harmless from, any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement to the extent the
Company would be required to do so pursuant to Section 7.07 of the
Indenture.
(d) The agreements in this SECTION 8.4 shall survive
repayment of the Secured Obligations and all other amounts payable
under the Indenture and the other Financing Documents and shall
survive, as to a Secured Party, the resignation or removal of such
Secured Party.
8.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the successors and assigns of each Grantor and shall inure to the benefit of the
Secured Party and the other
31
Holders and their successors and permitted assigns; provided that no Grantor may
assign, transfer or delegate any of its rights or obligations under this
Agreement without the prior written consent of the Secured Party.
8.6 SET-OFF. Each Grantor hereby irrevocably authorizes the
Secured Party and each other Holder at any time and from time to time while an
Event of Default shall have occurred and be continuing, subject to the
Intercreditor Agreement, without notice to such Grantor or any other Grantor,
any such notice being expressly waived by each Grantor, to set-off and
appropriate and apply any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by the Secured Party
or such Holder to or for the credit or the account of such Grantor, or any part
thereof in such amounts as the Secured Party or such Holder may elect, against
and on account of the obligations and liabilities of such Grantor to the Secured
Party or such Holder hereunder and claims of every nature and description of the
Secured Party or such Holder against such Grantor, in any currency, whether
arising hereunder, under the Indenture, any other Financing Document or
otherwise, as the Secured Party or such Holder may elect, whether or not the
Secured Party or any Holder has made any demand for payment and although such
obligations, liabilities and claims may be contingent or unmatured. The Secured
Party and each other Holder shall notify such Grantor promptly of any such
set-off and the application made by the Secured Party or such Holder of the
proceeds thereof, provided that the failure to give such notice shall not affect
the validity of such set-off and application. The rights of the Secured Party
and each other Holder under this SECTION 8.6 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Secured Party or such Holder may have.
8.7 COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
8.8 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.9 SECTION HEADINGS. The Section headings used in this Agreement
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
8.10 INTEGRATION. This Agreement, the Indenture and the other
Financing Documents represent the agreement of the Grantors, the Secured Party
and the other Holders with respect to the subject matter hereof and thereof, and
there are no promises, undertakings, representations or warranties by the
Secured Party or any Holder relative to subject matter hereof and thereof not
expressly set forth or referred to herein or in the Indenture or the other
Financing Documents.
32
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.12 SUBMISSION TO JURISDICTION; WAIVERS. Each Grantor hereby
irrevocably and unconditionally:
(a) submits, for itself and its property, to the
nonexclusive jurisdiction of the Supreme Court of the State of New York
sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to any
Financing Document, or for recognition or enforcement of any judgment,
and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may
be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such Grantor at its address referred to in SECTION 8.2 or
at such other address of which the Secured Party shall have been
notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to ▇▇▇ in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law,
any right it may have to claim or recover in any legal action or
proceeding any special, exemplary, punitive or consequential damages.
8.13 ACKNOWLEDGEMENTS. Each Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Financing
Documents to which it is a party;
(b) neither the Secured Party nor any other Holder has
any fiduciary relationship with or duty to any Grantor arising out of
or in connection with this Agreement or any of the other Financing
Documents, and the relationship between the Grantors, on the one hand,
and the Secured Party and Holders, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and
33
(c) no joint venture is created hereby or by the other
Financing Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Holders or among the Grantors and the
Holders.
8.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
8.15 ADDITIONAL GRANTORS. Each Subsidiary of the Company that is
required to become a party to this Agreement pursuant to Section 4.17 of the
Indenture shall become a Grantor for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of ANNEX I hereto.
8.16 RELEASES.
(a) After the Release Date, the Collateral shall be
released from the Liens created hereby, and this Agreement and all
obligations (other than those expressly stated to survive such
termination) of the Secured Party and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any
act by any party, and all rights to the Collateral shall revert to the
Grantors. At the request and sole expense of any Grantor following any
such termination, the Secured Party shall deliver to the such Grantor
any Collateral held by the Secured Party hereunder, and execute and
deliver to such Grantor such documents as such Grantor shall reasonably
request to evidence such termination.
(b) If any of the Collateral or any Mortgaged Property
(as defined in any Mortgage) shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Indenture,
then the Secured Party, at the request and sole expense of such
Grantor, shall execute and deliver to such Grantor, without any
representation or warranty by the Secured Party, all releases or other
documents reasonably necessary or desirable for the release of the
Liens created hereby on such Collateral or Mortgaged Property. At the
request and sole expense of the Company, a Subsidiary Grantor shall be
released from its obligations hereunder in the event that all the
Equity Interests of such Subsidiary Grantor shall be sold, transferred
or otherwise disposed of in a transaction permitted by the Indenture;
PROVIDED that the Company shall have delivered to the Secured Party, at
least ten Business Days prior to the date of the proposed release, a
written request for release identifying the relevant Subsidiary Grantor
and the terms of the sale or other disposition in reasonable detail,
including the price thereof and any expenses in connection therewith,
together with a certification by the Company stating that such
transaction is in compliance with the Indenture and the other Financing
Documents.
34
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
to be duly executed and delivered as of the date first above written.
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION,
as Secured Party
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President
NATIONAL COAL CORP.
By: /s/ ▇▇▇ ▇▇▇
-----------------------------------
Name: ▇▇▇ ▇▇▇
Title: CEO
NATIONAL COAL CORPORATION
By: /s/ ▇▇▇ ▇▇▇
-----------------------------------
Name: ▇▇▇ ▇▇▇
Title: CEO
NC TRANSPORTATION, INC.
By: /s/ ▇▇▇ ▇▇▇
-----------------------------------
Name: ▇▇▇ ▇▇▇
Title: CEO
NC RAILROAD, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
35
SCHEDULE I
NOTICE ADDRESSES OF GUARANTORS
To all Guarantors at:
National Coal Corp.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
With a copy to:
Mayer, Brown, ▇▇▇▇ & Maw LLP
▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Annex I to
SECURITY AGREEMENT
ASSUMPTION AGREEMENT, dated as of ___, 20[ ], made by ______________, a
______________ (the "ADDITIONAL GRANTOR"), in favor of ▇▇▇▇▇ Fargo Bank,
National Association, as the Secured Party under the Indenture referred to below
(together with its successors and assigns, the "SECURED PARTY").
All capitalized terms not defined herein shall have the meaning
ascribed to them in such Indenture.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, National Coal Corp. (the "COMPANY") and the Secured Party have
entered into the Indenture, dated as of [____________] [__], 2005 (as amended,
supplemented or otherwise modified from time to time, the "INDENTURE");
WHEREAS, in connection with the Indenture, the Company and certain of
its Subsidiaries (other than the Additional Grantor) have entered into the
Security Agreement, dated as of [____________] [__], 2005 (as amended,
supplemented or otherwise modified from time to time, the "SECURITY AGREEMENT")
in favor of the Secured Party and the other Holders;
WHEREAS, the Indenture requires the Additional Grantor to become a
party to the Security Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Security Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. SECURITY AGREEMENT. By executing and delivering this
Assumption Agreement, the Additional Grantor, as provided in Section 8.15 of the
Security Agreement, hereby becomes a party to the Security Agreement as a
Grantor thereunder with the same force and effect as if originally named therein
as a Grantor and, without limiting the generality of the foregoing, hereby
expressly assumes all obligations and liabilities of a Grantor thereunder. The
information set forth in ANNEX 1-A hereto is hereby added to the information set
forth in the Perfection Certificate. The Additional Grantor hereby represents
and warrants that each of the representations and warranties contained in
Section 3 of the Security Agreement is true and correct on and as the date
hereof (after giving effect to this Assumption Agreement) as if made on and as
of such date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:
-------------------------------
Name:
Title:
2
Annex II to
SECURITY AGREEMENT
DEPOSIT ACCOUNT CONTROL AGREEMENT, dated as of [__________, 200_],
between ▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION, as the Secured Party under the
Indenture referred to below (together with its successors and assigns, the
"SECURED PARTY"), [APPLICABLE GRANTOR] (the "DEPOSITOR") and [Name of Bank] (the
"BANK").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, [the Depositor][National Coal Corp.] and the Secured Party
have entered into the Indenture, dated as of [____________] [__], 2005 (as
amended, supplemented or otherwise modified from time to time, the "INDENTURE");
WHEREAS, in connection with the Indenture, the Depositor, [EACH OTHER
GRANTOR] have entered into the Security Agreement, dated as of [____________]
[__], 2005 (as amended, supplemented or otherwise modified from time to time,
the "SECURITY AGREEMENT") in favor of the Secured Party and the other Holders;
WHEREAS, pursuant to the Security Agreement, the Depositor granted to
the Secured Party and the other Holders, a security interest in certain
collateral, including but not limited to all right, title or interest of the
Depositor in deposit account number [_________] maintained by the Bank (the
"ACCOUNT"); and
WHEREAS, the Secured Party, the Depositor and the Bank have agreed to
execute and deliver this Deposit Account Control Agreement in order to perfect
the security interest of the Secured Party in the Account;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. THE ACCOUNT. All parties agree that the Account is a "deposit
account" within the meaning of Article 9 of the Uniform Commercial Code of the
State of New York (the "UCC"). The Bank has not and will not agree with any
third party to comply with instructions or other directions concerning the
Account or the disposition of funds in the Account originated by such third
party without the prior written consent of the Secured Party and the Depositor.
SECTION 2. SUBORDINATION OF SECURITY INTEREST. The Bank hereby
subordinates all security interests, encumbrances, claims and rights of setoff
it may have, now or in the future, against the Account or any funds in the
Account other than in connection with the payment of the Bank's customary fees
and charges pursuant to its agreement with the Depositor.
SECTION 3. CONTROL. The Bank will comply with instructions originated by
the Secured Party directing disposition of the funds in the Account without
further consent by the Depositor. The Bank may comply with instructions
directing the disposition of funds in the Account originated by the Depositor or
its authorized representatives until such time as the Secured Party delivers a
notice to the Bank that the Secured Party is thereby exercising exclusive
control over the Account. Such notice is referred to herein as the "Notice of
Exclusive Control." After the Bank receives a Notice of Exclusive Control, it
will cease complying with instructions concerning the Account or funds on
deposit therein originated by the Depositor or its representatives.
SECTION 4. STATEMENTS, CONFIRMATIONS AND NOTICES OF ADVERSE CLAIMS. The
Bank will send copies of all statements concerning the Account to each of the
Depositor and the Secured Party at the address set forth in SECTION 13 below.
Upon receipt of written notice of any lien, encumbrance or adverse claim against
the Account or any funds credited thereto, the Bank will make reasonable efforts
promptly to notify the Secured Party and the Depositor thereof.
SECTION 5. LIMITED RESPONSIBILITY OF THE BANK. Except for acting on the
Depositor's instructions in violation of SECTION 3 above, the Bank shall have no
responsibility or liability to the Secured Party for complying with instructions
concerning the Account from the Depositor or the Depositor's authorized
representatives which are received by the Bank before the Bank receives a Notice
of Exclusive Control. The Bank shall have no responsibility or liability to the
Depositor for complying with a Notice of Exclusive Control or complying with
instructions concerning the Account originated by the Secured Party, and shall
have no responsibility to investigate the appropriateness of any such
instruction or Notice of Exclusive Control, even if the Depositor notifies the
Bank that the Secured Party is not legally entitled to originate any such
instruction or Notice of Exclusive Control.
SECTION 6. INDEMNIFICATION OF THE BANK. The Depositor hereby agrees to
indemnify and hold harmless the Bank, its directors, officers, agents and
employees against any and all claims, causes of action, liabilities, lawsuits,
demands and damages, including without limitation, any and all court costs and
reasonable attorney's fees, in any way related to or arising out of or in
connection with this Agreement or any action taken or not taken pursuant hereto,
except to the extent caused by the Bank's gross negligence or willful
misconduct.
SECTION 7. OTHER AGREEMENTS. In the event of a conflict between this
Agreement and any other agreement between the Bank and the Depositor, the terms
of this Agreement will prevail; PROVIDED, HOWEVER, that this Agreement shall not
alter or affect any mandatory arbitration provision currently in effect between
the Bank and the Depositor pursuant to a separate agreement.
SECTION 8. TERMINATION. This Agreement shall continue in effect until the
Secured Party has notified the Bank in writing that this Agreement, or its
security interest in the Account, is terminated. Upon receipt of such notice the
obligations of the Bank hereunder with respect to the operation and maintenance
of the Account after the receipt of such notice shall terminate, the Secured
Party shall have no further right to originate instructions
2
concerning the Account and any previous Notice of Exclusive Control delivered by
the Secured Party shall be deemed to be of no further force and effect.
SECTION 9. COMPLETE AGREEMENT. This Agreement and the instructions and
notices required or permitted to be executed and delivered hereunder set forth
the entire agreement of the parties with respect to the subject matter hereof,
and, subject to SECTION 8 above, supersede any prior agreement and
contemporaneous oral agreements of the parties concerning its subject matter.
SECTION 10. AMENDMENTS. No amendment, modification or (except as otherwise
specified in SECTION 8 above) termination of this Agreement, nor any assignment
of any rights hereunder (except to the extent contemplated under SECTION 13
below), shall be binding on any party hereto unless it is in writing and is
signed by each of the parties hereto, and any attempt to so amend, modify,
terminate or assign except pursuant to such a writing shall be null and void. No
waiver of any rights hereunder shall be binding on any party hereto unless such
waiver is in writing and signed by the party against whom enforcement is sought.
SECTION 11. SEVERABILITY. If any term or provision set forth in this
Agreement shall be invalid or unenforceable, the remainder of this Agreement,
other than those provisions held invalid or unenforceable, shall be construed in
all respects as if such invalid or unenforceable term or provision were omitted.
SECTION 12. SUCCESSORS. The terms of this Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
corporate successors or heirs and personal representatives. This Agreement may
be assigned by the Secured Party to any successor of the Secured Party under its
security agreement with the Depositor, provided that written notice thereof is
given by the Secured Party to the Bank.
SECTION 13. NOTICES. All notices, requests and demands to or upon the
Secured Party or the Depositor shall be effected in the manner provided for in
Section 8.01 of the Indenture; PROVIDED that any such notice, request or demand
to or upon the Bank shall be addressed to the Bank at its notice address set
forth on SCHEDULE 1.
SECTION 14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which shall constitute one and the same instrument, and any
party hereto may execute this Agreement by signing and delivering one or more
counterparts.
SECTION 15. CHOICE OF LAW. This Agreement shall be governed by and
construed in accordance with the law of the State of [ ]. The parties agree that
New York is the "bank's jurisdiction" for purposes of the UCC.
3
SIGNATURES:
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION,
as Secured Party
By:______________________________________
Name:
Title:
By:______________________________________
Name:
Title:
[APPLICABLE GRANTOR]
By:______________________________________
Name:
Title:
[BANK]
By:______________________________________
Name:
Title:
4
SCHEDULE 1
NOTICE ADDRESS OF THE BANK
Annex III to
SECURITY AGREEMENT
FORM OF
SECURITIES ACCOUNT CONTROL AGREEMENT
SECURITIES ACCOUNT CONTROL AGREEMENT, dated as of [__________, 200_],
between ▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION, as the Secured Party under the
Indenture referred to below (together with its successors and assigns, the
"SECURED PARTY"), [APPLICABLE GRANTOR] (the "DEPOSITOR") and [Name of Bank] (the
"BANK").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, [the Depositor][National Coal Corp.] and the Secured Party
have entered into the Indenture, dated as of [____________] [__], 2005 (as
amended, supplemented or otherwise modified from time to time, the "INDENTURE");
WHEREAS, in connection with the Indenture, the Depositor, [EACH OTHER
GRANTOR] have entered into the Security Agreement, dated as of [____________]
[__], 2005 (as amended, supplemented or otherwise modified from time to time,
the "SECURITY AGREEMENT") in favor of the Secured Party and the other Holders;
WHEREAS, pursuant to the Security Agreement, the Depositor granted to
the Secured Party and the other Holders, a security interest in certain
collateral, including but not limited to all right, title or interest of the
Depositor in account number [_________] maintained by the Bank (the "ACCOUNT");
and
WHEREAS, the Secured Party, the Depositor and the Bank have agreed to
execute and deliver this Securities Account Control Agreement in order to
perfect the security interest of the Secured Party in the Account;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. THE ACCOUNT. The Bank hereby represents and warrants to the
Secured Party and the Depositor that (A) the Account has been established in the
name of the Depositor as recited above, and (B) except for the claims and
interest of the Secured Party and the Depositor in the Account (subject to any
claim in favor of the Bank permitted under SECTION 2), the Bank does not know of
any claim to or interest in the Account. All parties agree that the Account is a
"securities account" within the meaning of Article 8 of the Uniform Commercial
Code as in effect from time to time in the State of New York (the "UCC") and
that all property held by the Bank in the Account will be treated as financial
assets under the UCC.
SECTION 2. PRIORITY OF SECURITY INTEREST. The Bank hereby acknowledges
the security interest granted to the Secured Party by the Depositor. The Bank
hereby confirms that the Account is a cash account and that it will not advance
any margin or other credit to the Depositor nor hypothecate any securities
carried in the Account except in connection with the settlement of trading
activity permitted to be conducted by the Depositor hereunder. The Bank hereby
subordinates all liens, encumbrances, claims and rights of setoff it may have,
now or in the future, against the Account or any property carried in the Account
or any free credit balance in the Account other than in connection with
activities in which the Depositor is permitted to engage hereunder, including
the payment of the Bank's customary fees,
commissions and other charges pursuant to its agreement with the Depositor and
for payment or delivery of financial assets purchased or sold for or from the
Account.
SECTION 3. CONTROL. The Bank will comply with entitlement orders
originated by the Secured Party concerning the Account without further consent
by the Depositor. Except as otherwise provided in SECTION 4 below, the Bank
shall also comply with entitlement orders and other instructions concerning the
Account originated by the Depositor, or the Depositor's authorized
representatives, until such time as the Secured Party delivers a written notice
to the Bank that the Secured Party is thereby exercising exclusive control over
the Account. Such notice is referred to herein as the "Notice of Exclusive
Control." Until the Bank receives a Notice of Exclusive Control, the Bank may
distribute to the Depositor all interest and regular cash dividends on property
in the Account. After the Bank receives a Notice of Exclusive Control and has
had a reasonable opportunity to comply, it will cease complying with entitlement
orders or other instructions concerning the Account originated by the Depositor
or its representatives and cease distributing interest and dividends on property
in the Account to the Depositor. The Bank shall be entitled to rely upon any
entitlement order or Notice of Exclusive Control that it reasonably believes to
be from the Secured Party. Until it receives a Notice of Exclusive Control, the
Bank shall be entitled to continue to act on such instructions from the
Depositor as are delivered in form satisfactory to the Bank. The Bank has not
agreed and will not agree with any third party that the Bank will comply with
entitlement orders concerning the Account originated by such third party without
the prior written consent of the Secured Party and the Depositor.
SECTION 4. NO WITHDRAWALS. Notwithstanding the provisions of SECTION 3
above, the Bank shall not comply with any entitlement order from the Depositor
requiring a free delivery of any financial assets from the Account nor deliver
any such financial assets to the Depositor nor pay any free credit balance or
other amount owing from the Bank to the Depositor with respect to the Account,
except for the distribution of interest or dividends permitted under SECTION 3
above, without the prior written consent of the Secured Party.
SECTION 5. STATEMENTS, CONFIRMATIONS AND NOTICES OF ADVERSE CLAIMS. The
Bank will send copies of all statements and confirmations concerning the Account
to each of the Depositor and the Secured Party at the address set forth in
SECTION 14 below. Upon receipt of written notice of any lien, encumbrance or
adverse claim against the Account or in any financial asset carried therein, the
Bank will make reasonable efforts promptly to notify the Secured Party and the
Depositor thereof.
SECTION 6. LIMITED RESPONSIBILITY OF THE BANK. Except for permitting a
withdrawal or payment in violation of SECTIONS 3 or 4 above or advancing margin
or other credit to the Depositor in violation of SECTION 2 above, the Bank shall
have no responsibility or liability to the Secured Party for complying with
entitlement orders concerning the Account from the Depositor or the Depositor's
authorized representatives which are received by the Bank before the Bank
receives a Notice of Exclusive Control and has had reasonable opportunity to act
on it. The Bank shall have no responsibility or liability to the Depositor for
complying with a Notice of Exclusive Control or complying with entitlement
orders concerning the Account originated by the Secured Party, and shall have no
responsibility to investigate the appropriateness of any such entitlement order
or Notice of Exclusive Control, even if the Depositor notifies the Bank that the
Secured Party is not legally entitled to originate any such entitlement order or
Notice of Exclusive Control. This Agreement does not create any obligation or
duty of the Bank other than those expressly set forth herein.
SECTION 7. INDEMNIFICATION OF THE BANK. The Depositor hereby agrees to
indemnify and hold harmless the Bank, its directors, officers, agents and
employees against any and all claims, causes of action, liabilities, lawsuits,
demands and damages, including without limitation, any and all court costs and
reasonable attorney's fees, in any way related to or arising out of or in
connection with this
2
Agreement or any action taken or not taken pursuant hereto, except to the extent
caused by the Bank's gross negligence or willful misconduct.
SECTION 8. OTHER AGREEMENT. In the event of a conflict between this
Agreement and any other agreement between the Bank and the Depositor, the terms
of this Agreement will prevail; PROVIDED, HOWEVER, that this Agreement shall not
alter or affect any mandatory arbitration provision currently in effect between
the Bank and the Depositor pursuant to a separate agreement.
SECTION 9. TERMINATION. This Agreement shall continue in effect until
the Secured Party has notified the Bank in writing that this Agreement, or its
security interest in the Account, is terminated. Upon receipt of such notice the
obligations of the Bank under SECTIONS 2, 3, 4 and 5 above with respect to the
operation and maintenance of the Account after the receipt of such notice shall
terminate, the Secured Party shall have no further right to originate
entitlement orders concerning the Account and any previous Notice of Exclusive
Control delivered by the Secured Party shall be deemed to be of no further force
and effect.
SECTION 10. COMPLETE AGREEMENT. This Agreement and the instructions and
notices required or permitted to be executed and delivered hereunder set forth
the entire agreement of the parties with respect to the subject matter hereof,
and, subject to SECTION 8 above supersede any prior agreement and
contemporaneous oral agreements of the parties concerning its subject matter.
SECTION 11. AMENDMENTS. No amendment, modification or (except as
otherwise specified in SECTION 9 above) termination of this Agreement, nor any
assignment of any rights hereunder (except to the extent contemplated under
SECTION 13 below), shall be binding on any party hereto unless it is in writing
and is signed by each of the parties hereto, and any attempt to so amend,
modify, terminate or assign except pursuant to such a writing shall be null and
void. No waiver of any rights hereunder shall be binding on any party hereto
unless such waiver is in writing and signed by the party against whom
enforcement is sought.
SECTION 12. SEVERABILITY. If any term or provision set forth in this
Agreement shall be invalid or unenforceable, the remainder of this Agreement,
other than those provisions held invalid or unenforceable, shall be construed in
all respects as if such invalid or unenforceable term or provision were omitted.
SECTION 13. SUCCESSORS. The terms of this Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
corporate successors or heirs and personal representatives. This Agreement may
be assigned by the Secured Party to any successor of the Secured Party under its
security agreement with the Depositor, provided that written notice thereof is
given by the Secured Party to the Bank.
SECTION 14. NOTICES. All notices, requests and demands to or upon the
Secured Party or the Depositor shall be effected in the manner provided for in
Section 8.01 of the Indenture; PROVIDED that any such notice, request or demand
to or upon the Bank shall be addressed to the Bank at its notice address set
forth on SCHEDULE 1.
SECTION 15. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which shall constitute one and the same instrument, and
any party hereto may execute this Agreement by signing and delivering one or
more counterparts.
SECTION 16. CHOICE OF LAW. Regardless of any provision in any other
agreement relating to the Account, the parties hereto agree that, subject to
SECTION 8 of this Agreement, the establishment and maintenance of the Account,
and all interests, duties and obligations with respect to the Account, shall be
governed by the law of the State of New York.
3
SIGNATURES:
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION,
as Secured Party
By:______________________________________
Name:
Title:
[APPLICABLE GRANTOR]
By:______________________________________
Name:
Title:
[BANK]
By:______________________________________
Name:
Title:
4
SCHEDULE 1
NOTICE ADDRESS OF THE BANK
Annex IV to
SECURITY AGREEMENT
FORM OF
PERFECTION CERTIFICATE
Reference is made to that certain Indenture dated as of December 29,
2005 (as such Indenture may be amended, amended and restated, supplemented or
otherwise modified from time to time, the "INDENTURE") among ▇▇▇▇▇ FARGO BANK,
NATIONAL ASSOCIATION, as Trustee for the Holders (as therein defined) (in such
capacity, the "SECURED PARTY"), NATIONAL COAL CORP. (the "PARENT"), as Issuer,
and the Subsidiary Grantors (as therein defined). Capitalized terms used but not
defined herein have the meanings assigned in the Indenture or, if not defined
therein, in the Security Agreement dated as of December 29, 2005 made by the
Parent in favor of the Secured Party (as amended, supplemented or otherwise
modified from time to time, the "SECURITY AGREEMENT").
The undersigned, [the President] [a Vice President] of the Parent,
hereby certifies to the Secured Party as follows:
1. NAMES.
(a) The exact corporate name of each Grantor, as such name appears
in its certificate of incorporation, is as follows:
1. The Parent corporation is as follows:
National Coal Corp., a Florida corporation, whose principal office is
located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The Parent
corporation is not engaged in any business except as a holding company, which
owns 100% of the stock of National Coal Corporation.
2. The subsidiary corporations are as follows:
a. National Coal Corporation- incorporated in Tennessee
and also qualified to do business in Kentucky;
b. NC Transportation, Inc.- incorporated in Tennessee;
and
c. NC Railroad, Inc.- incorporated in Tennessee.
(b) Set forth below is each other corporate name each Grantor has
had in the past five years, together with the date of the relevant change:
---------------------------------------------------------------------------------------------
GRANTOR FORMER NAME DATE OF CHANGE
---------------------------------------------------------------------------------------------
National Coal Corp., a Florida The Southern Group, Inc. National Coal Corporation, the
corporation and parent of Tennessee corporation and wholly
National Coal Corporation. owned subsidiary of National Coal
Corp. (Fla) effected a reverse
merger with the Southern Group,
Inc. on April 22, 2003, see
Schedule 3.
---------------------------------------------------------------------------------------------
The other Grantors are wholly
owned subsidiaries of National
Coal Corporation (TN) and none
have had any changes.
---------------------------------------------------------------------------------------------
(c) Except as set forth in SCHEDULE 3 hereto, no Grantor has
changed its identity or corporate structure in any way within the past five
years. Changes in identity or corporate structure would include mergers,
consolidations and acquisitions, as well as any change in the form, nature or
jurisdiction of corporate organization. If any such change has occurred, include
in SCHEDULE 3 the information required by SECTIONS 1 and 2 of this certificate
as to each acquired or constituent party to a merger or consolidation.
(d) The following is a list of all other names (including trade
names or similar appellations) used by each Grantor or any of its divisions or
other business units in connection with the conduct of its business or the
ownership of its properties at any time during the past five years:
Each Grantor has used only its incorporated name.
(e) Set forth below is the organizational number of each Grantor
that is a registered organization:
--------------------------------------------------------------------------------
GRANTOR STATE/PROVINCE INCORPORATED ORGANIZATION NUMBER
--------------------------------------------------------------------------------
National Coal Corp. Florida P95000061770
--------------------------------------------------------------------------------
National Coal Corporation Tennessee 0440768
--------------------------------------------------------------------------------
NC Transportation, Inc. Tennessee 0478922
--------------------------------------------------------------------------------
NC Railroad, Inc. Tennessee 0507850
--------------------------------------------------------------------------------
2
(f) Set forth below is the Federal Taxpayer Identification Number
of each Grantor, if applicable:
--------------------------------------------------------------------------------
GRANTOR FEIN
--------------------------------------------------------------------------------
National Coal Corp. ▇▇-▇▇▇▇▇▇▇
--------------------------------------------------------------------------------
National Coal Corporation ▇▇-▇▇▇▇▇▇▇
--------------------------------------------------------------------------------
NC Transportation, Inc. ▇▇-▇▇▇▇▇▇▇
--------------------------------------------------------------------------------
NC Railroad, Inc. Applied For
--------------------------------------------------------------------------------
2. CURRENT LOCATIONS.
(a) The chief executive office of each Grantor is located at the
address set forth opposite its name below:
--------------------------------------------------------------------------------
GRANTOR CHIEF EXECUTIVE OFFICE
--------------------------------------------------------------------------------
National Coal Corp. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------
National Coal Corporation ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------
NC Transportation, Inc. ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------
NC Railroad, Inc. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------
(b) The jurisdiction of formation of each Grantor that is a
registered organization is set forth opposite its name below:
--------------------------------------------------------------------------------
GRANTOR JURISDICTION
--------------------------------------------------------------------------------
National Coal Corp. Florida
--------------------------------------------------------------------------------
National Coal Corporation Tennessee
--------------------------------------------------------------------------------
NC Transportation, Inc. Tennessee
--------------------------------------------------------------------------------
NC Railroad, Inc. Tennessee
--------------------------------------------------------------------------------
3
(c) Set forth below opposite the name of each Grantor are all the
locations where such Grantor maintains (or has at any time during the preceding
one year maintained) any Equipment or other Collateral, or any books and records
related thereto, and not identified above:
--------------------------------------------------------------------------------
GRANTOR LOCATION
--------------------------------------------------------------------------------
National Coal Corporation Anderson, Campbell, and ▇▇▇▇▇ Counties, Tennessee,
and ▇▇▇▇, ▇▇▇▇▇▇, and ▇▇▇▇▇▇ counties, Kentucky
--------------------------------------------------------------------------------
NC Transportation, Inc. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ Counties, Tennessee
--------------------------------------------------------------------------------
NC Railroad, Inc. None yet, but the assets will upon purchase be
located in ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ Counties,
Tennessee
--------------------------------------------------------------------------------
(d) Set forth below are all the places of business of each Grantor
not identified in paragraph (a), (b) or (c) above:
N/A
(e) Set forth below are the names and addresses of all Persons
other than the Grantors that have possession of any of the Collateral of any
Grantor:
--------------------------------------------------------------------------------
THIRD PARTY POSSESSING COLLATERAL ADDRESS OF THIRD PARTY
--------------------------------------------------------------------------------
▇▇ ▇▇▇▇▇ Special Opportunities Fund, L.P., ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ Floor,
as Administrative Agent ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------
3. SCHEDULE OF FILING. Attached hereto as SCHEDULE 4 is a schedule setting
forth, with respect to the UCC-1 financing statements to be filed in
respect of each Grantor in connection with the Security Agreement, each
filing and the filing office in which such filing is to be made.
4. STOCK OWNERSHIP AND OTHER EQUITY INTERESTS. Attached hereto as SCHEDULE
5 is a true and correct list of all the issued and outstanding stock,
partnership interests, limited liability company membership interests
or other equity interests of each Subsidiary of the Parent and the
record and beneficial owners of such stock, partnership interests,
membership interests or other equity interests. Also set forth on
SCHEDULE 5 is each equity investment of the Parent or any Subsidiary of
the Parent that represents 50% or less of the equity of the entity in
which such investment was made.
5. DEBT INSTRUMENTS. Attached hereto as SCHEDULE 6 is a true and correct
list of all instruments, including any promissory notes, and other
evidence of indebtedness held by the Parent and each of its
Subsidiaries, which are required to be pledged under the Security
Agreement, including all intercompany notes between the Parent and any
Subsidiary of the Parent and each such Subsidiary and any other such
Subsidiary.
6. ADVANCES. Attached hereto as SCHEDULE 7 is (a) a true and correct list
of all advances made by the Parent to any Subsidiary of the Parent or
made by any Subsidiary of the Parent to the Parent or to any other
Subsidiary (other than those identified on SCHEDULE 6), and (b) a true
and correct
4
list of all unpaid intercompany transfers of goods sold and delivered
by or to the Parent or any Subsidiary of the Parent.
7. MORTGAGE FILINGS. Attached hereto as SCHEDULE 8 is a schedule setting
forth, with respect to each parcel of real property owned by any
Grantor: (a) the exact name of the Person that owns such property as
such name appears in its certificate of incorporation or other
organizational document, (b) if different from the name identified
pursuant to CLAUSE (A), the exact name of the current record holder of
such property reflected in the records of the filing office for such
property identified pursuant to the following clause and (c) the filing
office in which a mortgage or deed of trust (as applicable) with
respect to such property must be filed or recorded in order for the
Secured Party to obtain a perfected mortgage lien thereon. No Grantor
other than National Coal Corporation has any interest or estate in any
lease or sublease of real property, and each lease and sublease of real
property held by National Coal Corporation is listed on either (i)
Schedule B to the Fee and Leasehold Mortgage, Assignment of Leases and
Subleases, Security Agreement, Fixture Filing and As-Extracted
Collateral Filing made by National Coal Corporation, as mortgagor, in
favor of ▇▇▇▇▇ Fargo Bank, N.A., as Collateral Agent and mortgagee,
dated as of December 29, 2005, to be recorded in the Counties of ▇▇▇▇,
▇▇▇▇▇▇ and ▇▇▇▇▇▇ in the State of Kentucky or (ii) Schedule B to the
Fee and Leasehold Deed of Trust, Assignment of Leases and Subleases,
Security Agreement, Fixture Filing and As-Extracted Collateral Filing
made by National Coal Corporation, as grantor, in favor of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, Esq., as Trustee, for the benefit of ▇▇▇▇▇ Fargo Bank, N.A.,
as Collateral Agent and beneficiary, dated as of December 29, 2005, to
be recorded in the counties of Anderson, Campbell, ▇▇▇▇▇ and ▇▇▇▇ in
the State of Tennessee.
8. INTELLECTUAL PROPERTY. Attached hereto as SCHEDULE 9(A) is a schedule
setting forth all of each Grantor's Patents, Patent Licenses,
Trademarks and Trademark Licenses, including the name of the registered
owner, the registration number and the expiration date of each Patent,
Patent License, Trademark and Trademark License owned by such Grantor.
Attached hereto as SCHEDULE 9(B) is a schedule setting forth all of
each Grantor's Copyrights and Copyright Licenses, including the name of
the registered owner, the registration number and the expiration date
of each Copyright or Copyright License owned by such Grantor.
9. COMMERCIAL TORT CLAIMS. Attached hereto as SCHEDULE 10 is a true and
correct list of commercial tort claims held by each Grantor, including
a brief description thereof.
10. DEPOSIT ACCOUNTS AND SECURITIES ACCOUNTS. Attached hereto as SCHEDULE
11 is (i) a true and correct list of each and every Deposit Account and
Securities Account owned by each Grantor and (ii) a true and correct
list of Deposit Accounts owned by each Grantor used exclusively for
payroll purposes.
11. DIRECTORS AND PERSONS CONTROLLING THE BUSINESS. Attached hereto as
SCHEDULE 12 is a true and correct list of each director or other person
(including shareholders or members) that controls each Grantor.
5
IN WITNESS WHEREOF, the undersigned have duly executed this certificate on this
__ day of December, 2005.
------------------------------
By:
Title:
------------------------------
By:
Title:
6
SCHEDULE 3
to Perfection Certificate
CHANGES IN IDENTITY OR CORPORATE STRUCTURE
The Southern Group International, Inc. was a Florida corporation. On
April 23, 2003 National Coal Corporation, a Tennessee corporation, effected a
reverse merger pursuant to which the original shareholders of Southern Group
International, Inc. received approximately 5.5 % of the shares of stock of the
merged company and the original shareholders of National Coal Corporation
received approximately 94,5% of the shares of stock of the merged company in
exchange for all of the stock they held in National Coal Corporation. National
Coal Corporation then became a wholly owned subsidiary of Southern Group
International, Inc. Southern Group International, Inc. changed its name to
National Coal Corp., a Florida corporation, on August 3, 2003.
SCHEDULE 4
to Perfection Certificate
UCC-1 FILINGS FOR INDENTURE
--------------------------------------------------------------------------------
DEBTOR SECURED PARTY JURISDICTION
--------------------------------------------------------------------------------
National Coal Corp. ▇▇▇▇▇ Fargo Bank, National Florida
Association, as Trustee
--------------------------------------------- ----------------------------------
National Coal Corporation ▇▇▇▇▇ Fargo Bank, National Tennessee
Association, as Trustee
--------------------------------------------- ----------------------------------
NC Transportation, Inc. ▇▇▇▇▇ Fargo Bank, National Tennessee
Association, as Trustee
--------------------------------------------- ----------------------------------
NC Railroad, Inc. ▇▇▇▇▇ Fargo Bank, National Tennessee
Association, as Trustee
--------------------------------------------- ----------------------------------
SCHEDULE 5
to Perfection Certificate
PLEDGED STOCK
--------------------------- ------------- -------------------- ------------------ -------------------
ISSUER NUMBER OF REGISTERED OWNER NUMBER AND CLASS PERCENTAGE OF ALL
CERTIFICATE OF INTEREST SUCH OUTSTANDING
INTERESTS
--------------------------- ------------- -------------------- ------------------ -------------------
National Coal Corporation 17 National Coal Corp. 20,000,000 100%
(presently held by Common
▇▇ ▇▇▇▇▇)
--------------------------- ------------- -------------------- ------------------ -------------------
NC Transportation, Inc. 1 National Coal 1000 100%
Corporation Common
(presently held by
▇▇ ▇▇▇▇▇)
--------------------------- ------------- -------------------- ------------------ -------------------
NC Railroad, Inc. 1 National Coal 1000 100%
Corporation Common
--------------------------- ------------- -------------------- ------------------ -------------------
SCHEDULE 6
to Perfection Certificate
DEBT INSTRUMENTS
None.
SCHEDULE 7
to Perfection Certificate
ADVANCES
National Coal Corporation made a contribution of capital to effect the
formation of NC Transportation, Inc. equal to the value of the trucks then
transferred from National Coal Corporation to NC Transportation, Inc.
National Coal Corporation will make a similar contribution of capital
to NC Railroad, Inc. to effect the purchase and upgrade of the rail line being
purchased form Norfolk Southern.
Both of the above described formations of the two subsidiary companies
have or are being made through contributions of capital, rather than loans, so
that there is not any claim of undercapitalization.
SCHEDULE 8
to Perfection Certificate
MORTGAGE FILINGS
---------------------- --------------------------- ------------------------------ ------------------------------------
OWNER CURRENT RECORD OWNER PROPERTY LOCATION FILING LOCATION
---------------------- --------------------------- ------------------------------ ------------------------------------
National Coal National Coal Corporation ▇▇▇▇ County, Tennessee ▇▇▇▇ County, Tennessee
Corporation
---------------------- --------------------------- ------------------------------ ------------------------------------
National Coal National Coal Corporation ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, and ▇▇▇▇▇
Corporation Counties, Tennessee Counties, Tennessee
---------------------- --------------------------- ------------------------------ ------------------------------------
National Coal National Coal Corporation ▇▇▇▇, ▇▇▇▇▇▇, and ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, and ▇▇▇▇▇▇ Counties,
Corporation Counties, Kentucky Kentucky
---------------------- --------------------------- ------------------------------ ------------------------------------
SCHEDULE 9(A)
to Perfection Certificate
U.S. PATENTS
None.
U.S. PATENT APPLICATIONS
None.
NON-U.S. PATENT APPLICATIONS
None.
U.S. TRADEMARK REGISTRATIONS
------------------------------- ---------------- -------------- -------------- -------------- ------------ -----------------
TRADEMARK FILING DATE APPL. NO. ISSUE DATE REG. NO. STATUS OWNER
------------------------------- ---------------- -------------- -------------- -------------- ------------ -----------------
NCC 8/4/03 5/20/04 2,835,601 Effective National Coal
Corporation
------------------------------- ---------------- -------------- -------------- -------------- ------------ -----------------
NCC 07/07/2003 Effective National Coal
(Tennessee Registration) Corporation
------------------------------- ---------------- -------------- -------------- -------------- ------------ -----------------
N 1/18/2005 78549105 Not Available Pending National Coal
Corporation
(Serial No.)
------------------------------- ---------------- -------------- -------------- -------------- ------------ -----------------
NON-U.S. TRADEMARK REGISTRATIONS
None.
COMMON LAW TRADEMARKS
None.
LICENSES
PART 1
Licenses/Sublicenses Of
Grantor As Licensor On Date Hereof
A. PATENTS
None.
B. TRADEMARKS
None.
PART 2
Licenses/Sublicenses Of
Grantor As Licensee On Date Hereof
A. PATENTS
None.
B. TRADEMARKS
None.
SCHEDULE 9(B)
to Perfection Certificate
U.S. COPYRIGHTS OWNED BY GRANTOR
None.
SCHEDULE 10
to Perfection Certificate
COMMERCIAL TORT CLAIMS
None.
SCHEDULE 11
to Perfection Certificate
DEPOSIT ACCOUNTS AND SECURITIES ACCOUNTS OF GRANTOR
--------------------------- ----------------------- ----------------------- ----------------------- ------------------
Grantor Depository Bank Type of Account Account Number Balance
--------------------------- ----------------------- ----------------------- ----------------------- ------------------
National Coal Corporation Bank of America Operating 0037 8677 7654 $203,836
--------------------------- ----------------------- ----------------------- ----------------------- ------------------
National Coal Corporation Bank of America Payroll 0037 8677 7625 $5,809
--------------------------- ----------------------- ----------------------- ----------------------- ------------------
National Coal Corporation First Volunteer Bank Mine Operating 305115782 $22,226
--------------------------- ----------------------- ----------------------- ----------------------- ------------------
NC Transportation, Inc. Bank of America Operating 0037 8354 5672 $953
--------------------------- ----------------------- ----------------------- ----------------------- ------------------
NC Transportation, Inc. Bank of America Payroll 0037 8354 5685 $6,736
--------------------------- ----------------------- ----------------------- ----------------------- ------------------
ACCOUNTS USED EXCLUSIVELY FOR PAYROLL PURPOSES
--------------------------- ----------------------- ----------------------- ----------------------- ------------------
Grantor Depository Bank Type of Account Account Number Balance
--------------------------- ----------------------- ----------------------- ----------------------- ------------------
National Coal Corporation Bank of America Payroll 0037 8677 7625 $5,809
--------------------------- ----------------------- ----------------------- ----------------------- ------------------
NC Transportation, Inc. Bank of America Payroll 0037 8354 5685 $6,736
--------------------------- ----------------------- ----------------------- ----------------------- ------------------
CDs held by ▇▇▇▇▇▇ County Bank, as security for the issuance of the
various letters of Credit issued for the benefit of the U.S. Office of Surface
Mining to insure that National Coal Corporation completes all reclamation of
disturbed surface areas where it conducts mining operations. See Attached
Schedule 11A.
National Coal Corporation has on deposit directly with the U.S. Office
of Surface Mining cash in the amount of $257,500.00 to secure the requirement
that National coal Corporation complete the reclamation of the surface
disturbance with respect Tennessee Mine # 2, Permit no. 3132.
SCHEDULE 12
to Perfection Certificate
DIRECTORS OR PERSONS CONTROLLING THE BUSINESS OF
COMPANY
DIRECTORS
▇▇▇ ▇. ▇▇▇, Chairman
T. ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
OFFICERS
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NAME TITLE
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▇▇▇ ▇. ▇▇▇ President and CEO
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T. ▇▇▇▇▇▇▇ ▇▇▇▇ CFO
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▇▇▇▇▇▇ ▇. ▇▇▇ Secretary
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇ VP and General Counsel
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SHAREHOLDERS
The shareholders holding 5% or more are as follows:
▇▇▇ ▇. ▇▇▇
▇▇▇▇▇, Inc., a Tennessee corporation owned 100% by ▇▇▇ ▇. ▇▇▇
Crestview Capital Master LLC All other shareholders own less that 5%.
NATIONAL COAL CORPORATION
DIRECTORS
▇▇▇ ▇. ▇▇▇, Chairman
T. ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
OFFICERS
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NAME TITLE
--------------------------------------------------------------------------------
▇▇▇ ▇. ▇▇▇ President and CEO
--------------------------------------------------------------------------------
T. ▇▇▇▇▇▇▇ ▇▇▇▇ CFO
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ COO
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▇▇▇▇▇▇ ▇. ▇▇▇ Secretary
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Senior VP and General Counsel
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SHAREHOLDERS
National Coal Corp. holds 100%
NC TRANSPORTATION, INC.
DIRECTORS
▇▇▇ ▇. ▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
OFFICERS
--------------------------------------------------------------------------------
NAME TITLE
--------------------------------------------------------------------------------
▇▇▇ ▇. ▇▇▇ President and CEO
--------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇ Secretary
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Senior VP and General Counsel
--------------------------------------------------------------------------------
SHAREHOLDERS
National Coal Corp. holds 100%
NC RAILROAD, INC.
DIRECTORS
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ Samples
▇. ▇▇▇
OFFICERS
--------------------------------------------------------------------------------
NAME TITLE
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▇▇▇▇▇▇ ▇▇▇▇▇▇ President
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▇▇▇▇ Samples Secretary
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SHAREHOLDERS
National Coal Corp. holds 100%