Exhibit 10.2

 

GUARANTEE AND SECURITY AGREEMENT

 

dated as of

 

February 21, 2014

 

among

 

CLOUD PEAK ENERGY RESOURCES LLC

 

the U.S. GUARANTORS party hereto

 

and

 

PNC BANK, NATIONAL ASSOCIATION,
as Administrative Agent

 

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TABLE OF CONTENTS

 

SECTION 1.

Definitions

1

SECTION 2.

Guarantees by U.S. Guarantors

7

SECTION 3.

Grant of Transaction Liens

9

SECTION 4.

General Representations and Warranties

11

SECTION 5.

Further Assurances; General Covenants

13

SECTION 6.

As-Extracted Collateral

14

SECTION 7.

Recordable Intellectual Property

14

SECTION 8.

Investment Property

15

SECTION 9.

[Reserved]

15

SECTION 10.

Cash Collateral Accounts

15

SECTION 11.

Commercial Tort Claims

16

SECTION 12.

Transfer of Record Ownership

16

SECTION 13.

Right to Vote Securities

16

SECTION 14.

[Reserved]

16

SECTION 15.

Remedies upon Event of Default

17

SECTION 16.

Application of Proceeds

18

SECTION 17.

Fees and Expenses; Indemnification

19

SECTION 18.

Authority to Administer Collateral

19

SECTION 19.

Limitation on Duty in Respect of Collateral

19

SECTION 20.

General Provisions Concerning the Administrative Agent

20

SECTION 21.

Termination of Transaction Liens; Release of Collateral

20

SECTION 22.

Additional Guarantors and Grantors

21

SECTION 23.

Additional Secured Obligations

21

SECTION 24.

Notices

21

SECTION 25.

No Implied Waivers; Remedies Not Exclusive

21

SECTION 26.

Successors and Assigns

21

SECTION 27.

Amendments and Waivers

22

SECTION 28.

Choice of Law

22

SECTION 29.

Waiver of Jury Trial

22

SECTION 30.

Severability

22

SECTION 31.

Conflicts with Loan Documents

22

SECTION 32.

Entire Agreement

22

 

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SCHEDULES:

 

 

 

Schedule l

Equity Interests in Subsidiaries and Affiliates Owned by Original Grantors

Schedule 2

Other Investment Property Owned by Original Grantors

Schedule 3

Material Commercial Tort Claims

Schedule 4

Material Contracts with Governmental Authorities

Schedule 5

Locations of Equipment and Inventory

Schedule 6

Locations of active mine sites or preparation plants and As-Extracted Collateral

Schedule 7

Material Licenses

Schedule 8

Material Coal Supply Agreements

 

 

EXHIBITS:

 

 

 

Exhibit A

Security Agreement Supplement

Exhibit B

Copyright Security Agreement

Exhibit C

Patent Security Agreement

Exhibit D

Trademark Security Agreement

Exhibit E

Perfection Certificate

 

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GUARANTEE AND SECURITY AGREEMENT

 

THIS GUARANTEE AND SECURITY AGREEMENT dated as of February 21, 2014
(“Agreement”) among CLOUD PEAK ENERGY RESOURCES LLC, a Delaware limited
liability company, as U.S. Borrower, the U.S. GUARANTORS party hereto and PNC
BANK, NATIONAL ASSOCIATION, as Administrative Agent.

 

RECITALS:

 

The U.S. Borrower is entering into the Credit Agreement described in Section 1
hereof, pursuant to which the U.S. Borrower intends to borrow funds and obtain
letters of credit for the purposes set forth therein, and is willing to secure
its obligations under the Loan Documents and under certain Permitted Hedging
Agreements through security interests on its assets, all in the manner and to
the extent under this Agreement and the other Security Documents.  Pursuant to
the Credit Agreement described in Section 1 hereof, the U.S. Borrower may
designate after the date hereof certain Designated Foreign Borrowers (together
with the U.S. Borrower, collectively, the “Borrowers”).

 

The U.S. Borrower, U.S Guarantors and the Administrative Agent wish to enter
into this Agreement to provide the guarantee and granting of Liens provided for
herein.  The parties hereto intend that, other than as to Excluded Assets, the
security interest granted by the parties to this Agreement shall secure,
guarantee, support and otherwise benefit the Secured Obligations of the
Borrowers and the Grantors under the Credit Agreement and the other Loan
Documents.

 

Therefore, to induce the Lenders and the Issuing Banks to make loans or issue or
participate in letters of credit under the Credit Agreement, and to induce the
counterparties to Permitted Hedging Agreements to enter into or maintain them,
the Borrowers covenant that the foregoing obligations are secured and guaranteed
as described above and each guarantee thereof is secured by Liens on assets of
the relevant U.S. Guarantor as provided in the Security Documents.

 

SECTION 1.                         Definitions.

 

(a)                                 Terms Defined in Credit Agreement.  Terms
defined in the Credit Agreement and not otherwise defined in subsection (b) or
(c) of this Section have, as used herein, the respective meanings provided for
therein.  The rules of construction specified in Sections 1.03 and 1.04 of the
Credit Agreement also apply to this Agreement.

 

(b)                                 Terms Defined in UCC.  As used herein, each
of the following terms has the meaning specified in the UCC:

 

Term

 

UCC

 

 

 

Account

 

9-102

 

 

 

As-Extracted Collateral

 

9-102

 

 

 

Authenticate

 

9-102

 

 

 

Certificated Security

 

8-102

 

 

 

Chattel Paper

 

9-102

 

 

 

Commercial Tort Claim

 

9-102

 

 

 

Deposit Account

 

9-102

 

 

 

Document

 

9-102

 

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Entitlement Holder

 

8-102

 

 

 

Entitlement Order

 

8-102

 

 

 

Equipment

 

9-102

 

 

 

Financial Asset

 

8-102 & 103

 

 

 

Fixtures

 

9-102

 

 

 

General Intangibles

 

9-102

 

 

 

Instrument

 

9-102

 

 

 

Inventory

 

9-102

 

 

 

Investment Property

 

9-102

 

 

 

Letter-of-Credit Right

 

9-102

 

 

 

Record

 

9-102

 

 

 

Securities Intermediary

 

8-102

 

 

 

Security

 

8-102 & 103

 

 

 

Security Entitlement

 

8-102

 

 

 

Supporting Obligations

 

9-102

 

 

 

Uncertificated Security

 

8-102

 

(c)                                  Additional Definitions.  The following
additional terms, as used herein, have the following meanings:

 

“Bankruptcy Code” means the United States Bankruptcy Code, as amended, Title 11,
U.S. Code.

 

“Borrower Secured Obligations” means (i) all principal of all Loans and LC
Disbursement reimbursement obligations outstanding from time to time under the
Credit Agreement, all interest on such Loans and LC Disbursement reimbursement
obligations and all other amounts now or hereafter payable by the Borrowers
pursuant to the Loan Documents (including, in each case, Post-Petition
Interest), (ii) all obligations (if any) under Secured Hedging Agreements and
Secured Cash Management Agreements (including, in each case, Post-Petition
Interest), and (iii) all obligations of the U.S. Borrower under a Foreign
Guaranty, including Post-Petition Interest; provided, however, under no
circumstances shall Borrower Secured Obligations include any Excluded Swap
Obligation.

 

“Cash Distributions” means dividends, interest and other distributions and
payments (including proceeds of liquidation, sale or other disposition) made or
received in cash upon or with respect to any Collateral.

 

“Cash Management Services” shall mean (a) commercial credit cards, merchant card
services, purchase or debit cards, including non-card e-payables services,
(b) treasury management services (including controlled disbursement, overdraft
automatic clearing house fund transfer services, return items and interstate
depository

 

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network services) and (c) any other demand deposit or operating account
relationships or other cash management services, including under any Secured
Cash Management Agreements.

 

“Collateral” means all, property, whether now owned or hereafter acquired, on
which a Lien is granted or purports to be granted to the Administrative Agent
pursuant to the Security Documents.  When used with respect to a specific
Grantor, the term “Collateral” means all its property on which such a Lien is
granted or purports to be granted.

 

“Collateral Accounts” means the Cash Collateral Accounts.

 

“Contingent Secured Obligation” means, at any time, any Secured Obligation (or
portion thereof) that is contingent in nature at such time, including any
Secured Obligation that is:

 

(i)                                     an obligation to reimburse a bank for
drawings not yet made under a letter of credit issued by it;

 

(ii)                                  an obligation under a Hedging Agreement to
make payments that cannot be quantified at such time;

 

(iii)                               any other obligation (including any
guarantee) that is contingent in nature at such time; or

 

(iv)                              an obligation to provide collateral to secure
any of the foregoing types of obligations.

 

“Contracts” means all written contracts and agreements, including, but not
limited to, any coal supply agreements (including the coal supply agreements
listed on Schedule 8), equipment leases and transportation contracts, between
any Grantor and any other Person as the same may be amended, assigned, extended,
restated, supplemented, replaced or otherwise modified from time to time,
including (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
receive proceeds of any insurance, indemnity, warranty or guaranty with respect
thereto and (iii) all rights of any Grantor to damages arising thereunder.

 

“Control” has the meaning specified in UCC Section 8-106, 9-104, 9-105, 9-106 or
9-107, as may be applicable to the relevant Collateral.

 

“Copyright License” means any agreement granting to any Grantor, or pursuant to
which any Grantor grants to any other Person, any right to use, copy, reproduce,
distribute, prepare derivative works, display or publish any records or other
materials on which a Copyright is in existence or may come into existence.

 

“Copyrights” means all the following:  (i) all copyrights under the laws of the
United States or any other country (whether or not the underlying works of
authorship have been published), and all registrations and applications for the
foregoing including those set forth in Schedule 1 to any Copyright Security
Agreement, (ii) all renewals of any of the foregoing, (iii) all claims for, and
rights to sue for, past or future infringements of any of the foregoing, and
(iv) all income, royalties, damages and payments now or hereafter due or payable
with respect to any of the foregoing, including damages and payments for past or
future infringements thereof.

 

“Copyright Security Agreement” means a Copyright Security Agreement,
substantially in the form of Exhibit B (with any changes that the Administrative
Agent shall have approved), executed and delivered by a Grantor in favor of the
Administrative Agent for the benefit of the Secured Parties.

 

“Credit Agreement” means the Credit Agreement dated as of February 21, 2014 (as
may be amended, restated, extended, supplemented, or otherwise modified in
writing from time to time, the “Credit Agreement”) among Cloud Peak Energy
Resources LLC, the Lenders party thereto, the Issuing Banks party thereto, PNC
Bank, National Association, as Administrative Agent and Swingline Lender, and
PNC Capital Markets, LLC and Wells Fargo Securities, LLC, as Joint Lead
Arrangers and Joint Bookrunners.

 

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“Equity Interest” means (i) in the case of a corporation, any shares of its
capital stock, (ii) in the case of a limited liability company, any membership
interest therein, (iii) in the case of a partnership, any partnership interest
(whether general or limited) therein, (iv) in the case of any other business
entity, any participation or other interest in the equity or profits thereof,
(v) any warrant, option or other right to acquire any Equity Interest described
in this definition or (vi) any Security Entitlement in respect of any Equity
Interest described in this definition.

 

“General Intangibles” means all “general intangibles” as such term is defined in
Section 9-102 of the UCC and, in any event, including with respect to any
Grantor, all leases, licenses, permits, concessions, franchises and
authorizations issued or granted by Governmental Authorities 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, and all pending applications therefor filed by such
Grantor, as the same may from time to time be amended, supplemented, replaced or
otherwise modified, including (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 receive proceeds of any insurance, indemnity, warranty
or guaranty with respect thereto, and (iii) all rights of such Grantor to
damages arising thereunder.

 

“Grantors” means the U.S. Borrower and the U.S. Guarantors.

 

“Intellectual Property” means all intellectual property now owned or hereafter
acquired by any Grantor, including Patents, Copyrights, Licenses, Trademarks,
trade secrets and confidential or proprietary technical and business information
(including know-how).

 

“Intellectual Property Filing” means (i) with respect to any Patent, exclusive
Patent License, Trademark or exclusive Trademark License, the filing of the
applicable Patent Security Agreement or Trademark Security Agreement with the
United States Patent and Trademark Office, and (ii) with respect to any
Copyright or exclusive Copyright License, the filing of the applicable Copyright
Security Agreement with the United States Copyright Office, in each case
sufficient to record the Transaction Lien granted to the Administrative Agent in
such Recordable Intellectual Property.

 

“Intellectual Property Security Agreement” means a Copyright Security Agreement,
a Patent Security Agreement or a Trademark Security Agreement.

 

“License” means any Patent License, Trademark License, Copyright License or
other license or sublicense agreement relating to Intellectual Property to which
any Grantor is a party.

 

“Material Contract” means any Contract to which any Grantor is a party that is
material to Cloud Peak Energy Resources LLC and its subsidiaries, taken as a
whole, and in respect of which breach or non-performance, would reasonably be
expected to have a Material Adverse Effect.

 

“Mortgage” means a mortgage, deed of trust, assignment of leases and rents,
leasehold mortgage or other security document in form reasonably satisfactory to
the Administrative Agent (taking into account all relevant circumstances,
including customary industry practice for coal financings) in each case creating
a Lien (to the extent feasible) on real property (including any leasehold
interests in real property) and improvements thereto in favor of, the
Administrative Agent (or a sub-agent appointed pursuant to Section 20(b)) for
the benefit of the Secured Parties and with such changes in the form thereof as
the Administrative Agent shall reasonably request for the purpose of conforming
to local practice for similar instruments in the jurisdiction where such real
property is located.

 

“Non-Contingent Secured Obligation” means at any time any Secured Obligation (or
portion thereof) that is not a Contingent Secured Obligation at such time.

 

“Original Grantor” means any Grantor that grants a Lien on any of its assets
hereunder on the Effective Date.

 

“own” refers to the possession of sufficient rights in property to grant a
security interest therein as contemplated by UCC Section 9-203, and “acquire”
refers to the acquisition of any such rights.

 

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“Patent License” means any agreement granting to any Grantor, or pursuant to
which any Grantor grants to any other Person, any right with respect to any
Patent.

 

“Patents” means (i) all letters patent and design letters patent of the United
States or any other country and all applications therefor, including those set
forth in Schedule 1 to any Patent Security Agreement, (ii) all reissues,
divisions, continuations, continuations in part and extensions of any of the
foregoing, (iii) all claims for, and rights to sue for, past or future
infringements of any of the foregoing, and (iv) all income, royalties, damages
and payments now or hereafter due or payable with respect to any of the
foregoing, including damages and payments for past or future infringements
thereof.

 

“Patent Security Agreement” means a Patent Security Agreement, substantially in
the form of Exhibit C (with any changes that the Administrative Agent shall have
approved), executed and delivered by a Grantor in favor of the Administrative
Agent for the benefit of the Secured Parties.

 

“Perfection Certificate” means, with respect to any Grantor, a certificate
substantially in the form of Exhibit E (with any changes that the Administrative
Agent shall have approved), completed and supplemented with the schedules
contemplated thereby to the reasonable satisfaction of the Administrative Agent,
and signed by an officer of such Grantor.

 

“Permitted Liens” means (i) the Transaction Liens and (ii) any other Liens on
the Collateral permitted to be created or assumed or to exist pursuant to
Section 6.02 of the Credit Agreement.

 

“Personal Property Collateral” means all property included in the Collateral
except Real Property Collateral.

 

“Pledged,” when used in conjunction with any type of asset, means at any time an
asset of such type that is included (or that creates rights that are included)
in the Collateral at such time.  For example, “Pledged Equity Interest” means an
Equity Interest that is included in the Collateral at such time.

 

“Post-Petition Interest” means any interest, fees and other amounts that accrue
after the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of any one or more of the Grantors (or
would accrue but for the operation of applicable bankruptcy or insolvency laws),
whether or not such interest, fees and other amounts are allowed or allowable as
a claim in any such proceeding.

 

“Proceeds” means all proceeds of, and all other profits, products, rents or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or other realization upon, any
Collateral, including all claims of the relevant Grantor against third parties
for loss of, damage to or destruction of, or for proceeds payable under, or
unearned premiums with respect to, policies of insurance in respect of, any
Collateral, and any condemnation or requisition payments with respect to any
Collateral.

 

“Real Property Collateral” means all real property (including any leasehold
interests in real property) and fixed improvements thereto included in the
Collateral.

 

“Recordable Intellectual Property” means (i) any Patent registered with the
United States Patent and Trademark Office and any exclusive Patent License with
respect to a Patent so registered (excluding (x) licenses for commercial off the
shelf computer software that are generally available on nondiscriminatory
pricing terms and (y) nonexclusive licenses incidental to the purchase of
equipment that are generally available to others who purchase the same
equipment), (ii) any Trademark registered with the United States Patent and
Trademark Office, and any exclusive Trademark License with respect to a
Trademark so registered, (iii) any Copyright registered with the United States
Copyright Office and any exclusive Copyright License with respect to a Copyright
so registered (excluding (x) licenses for commercial off the shelf computer
software that are generally available on nondiscriminatory pricing terms and
(y) non-exclusive licenses incidental to the purchase of equipment that are
generally available to others who purchase the same equipment), and all rights
in or under any of the foregoing.

 

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“Release Conditions” means the following conditions for releasing all the
Secured Guarantees and terminating all the Transaction Liens:

 

(i)                                     all Commitments under the Credit
Agreement shall have expired or been terminated;

 

(ii)                                  all Non-Contingent Secured Obligations
shall have been paid in full;

 

(iii)                               no Contingent Secured Obligation with
respect to any Letter of Credit shall remain outstanding; provided that the
condition in this clause (iii) shall not apply to outstanding Letters of Credit
if the applicable Borrower has granted to the Administrative Agent, for the
benefit of the Lenders or to the Issuing Bank, as applicable, a security
interest in Cash Equivalents acceptable to the Issuing Bank and the Required
Lenders (or causes a bank acceptable to the Issuing Bank and the Required
Lenders to issue a letter of credit naming the Administrative Agent or to the
Issuing Bank, as applicable, as beneficiary or deposits cash collateral pursuant
to terms and conditions in the Credit Agreement) in an amount equal to 103% of
the LC Exposure (plus any accrued and unpaid interest thereon) as of the date of
such termination, on terms and conditions and pursuant to documentation
reasonably satisfactory to the Issuing Bank and, if applicable, the Required
Lenders; and

 

(iv)                              no Contingent Secured Obligation (other than
Contingent Secured Obligation with respect to any Letter of Credit) as to which
a written claim has been asserted on or prior to the date of such release shall
remain outstanding.

 

“Secured Agreement” when used with respect to any Secured Obligation, refers
collectively to each instrument, agreement or other document that sets forth
obligations of a Borrower, obligations of a guarantor and/or rights of the
holder with respect to such Secured Obligation.

 

“Secured Cash Management Agreement” shall mean any agreement relating to Cash
Management Services that is (i) between a Borrower or any Restricted Subsidiary
and a Person who was a Lender Party or an Affiliate of a Lender Party at the
time such agreement was entered into and (ii) designated by the U.S. Borrower as
an “Additional Secured Obligation” pursuant to Section 23.

 

“Secured Guarantee” means, with respect to each U.S. Guarantor, its guarantee of
the Borrower Secured Obligations under Section 2 hereof or Section 1 of a
Security Agreement Supplement.

 

“Secured Hedging Agreements” means a Permitted Hedging Agreement that is
(i) between a Credit Party and a Person who was a Lender Party or an Affiliate
of a Lender Party at the time such Permitted Hedging Agreement was entered into
and (ii) designated by the U.S. Borrower as an “Additional Secured Obligation”
pursuant to Section 23.

 

“Secured Obligations” means (i) in the case of a Borrower, the Borrower Secured
Obligations and (ii) in the case of each U.S. Guarantor, all of its obligations
under its Secured Guarantee and its Foreign Guaranty, including any
Post-Petition Interest, provided, however, under no circumstances shall Secured
Obligations of any Grantor include any Excluded Swap Obligation of such Grantor.

 

“Secured Parties” means the holders from time to time of the Secured
Obligations.

 

“Security Agreement Supplement” means a Security Agreement Supplement,
substantially in the form of Exhibit A, signed and delivered to the
Administrative Agent for the purpose of adding a Subsidiary as a party hereto
pursuant to Section 22 and/or adding additional property to the Collateral.

 

“Security Documents” means this Agreement, the Security Agreement Supplements,
the Mortgages, the Intellectual Property Security Agreements and all other
supplemental or additional security agreements, control agreements, mortgages or
similar instruments delivered pursuant to the Loan Documents.

 

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“Subsidiary Guarantor” means each Subsidiary listed on the signature pages of
this Agreement under the caption “Guarantors” and each Subsidiary that shall, at
any time after the date hereof, become a Guarantor pursuant to Section 22 of
this Agreement.

 

“Trademark License” means any agreement granting to any Grantor, or pursuant to
which any Grantor grants to any other Person, any right to use any Trademark.

 

“Trademarks” means:  (i) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service marks,
logos, brand names, and trade dress, (ii) the goodwill of the business
symbolized by or associated with each of the foregoing, (iii) all registrations
and applications to register any of the foregoing, including those set forth in
Schedule 1 to any Trademark Security Agreement, (iv) all renewals of any of the
foregoing, (v) all claims for, and rights to sue for, past or future
infringements of any of the foregoing, and (vi) all income, royalties, damages
and payments now or hereafter due or payable with respect to any of the
foregoing, including damages and payments for past or future infringements
thereof.

 

“Trademark Security Agreement” means a Trademark Security Agreement,
substantially in the form of Exhibit D, executed and delivered by a Grantor in
favor of the Administrative Agent for the benefit of the Secured Parties.

 

“Transaction Liens” means the Liens granted by the Grantors under the Security
Documents.

 

“UCC” means the Uniform Commercial Code as in effect from time to time in the
State of New York; provided that, if perfection or the effect of perfection or
non-perfection or the priority of any Transaction Lien on any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, “UCC” means the Uniform Commercial Code as in effect from time to
time in such other jurisdiction for purposes of the provisions hereof relating
to such perfection, effect of perfection or non-perfection or priority.

 

“U.S. Guarantors” means (a) each Domestic Subsidiary listed on the signature
pages hereof under the caption “U.S. Guarantors” and each Subsidiary that shall,
at any time after the date hereof, become a “U.S. Guarantor” pursuant to
Section 22, and (b) Holdings at the time it becomes a “U.S. Guarantor” pursuant
to Section 22.

 

SECTION 2.                         Guarantees by U.S. Guarantors.

 

(a)                                 Secured Guarantees.  Each U.S. Guarantor
unconditionally and irrevocably guarantees the full and punctual payment of each
Borrower Secured Obligation when due (whether at stated maturity, upon
acceleration or otherwise).  If a Borrower fails to pay any Borrower Secured
Obligation punctually when due, each U.S. Guarantor agrees that it will
forthwith on demand pay the amount not so paid at the place and in the manner
specified in the relevant Secured Agreement.

 

(b)                                 Secured Guarantees Unconditional.  The
obligations of each U.S. Guarantor under its Secured Guarantee shall be
unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released, discharged or otherwise affected by:

 

(i)                                     any extension, renewal, settlement,
compromise, waiver or release in respect of any obligation of the Borrowers, any
other U.S. Guarantor or any other Person under any Secured Agreement, by
operation of law or otherwise;

 

(ii)                                  any modification or amendment of or
supplement to any Secured Agreement;

 

(iii)                               any release, impairment, non-perfection or
invalidity of any direct or indirect security for any obligation of a Borrower,
any other U.S. Guarantor or any other Person under any Secured Agreement;

 

(iv)                              any change in the corporate existence,
structure or ownership of a Borrower, any other U.S. Guarantor or any other
Person or any of their respective subsidiaries, or any insolvency, bankruptcy,

 

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reorganization or other similar proceeding affecting a Borrower, any other U.S.
Guarantor or any other Person or any of their assets or any resulting release or
discharge of any obligation of a Borrower, any other U.S. Guarantor or any other
Person under any Secured Agreement;

 

(v)                                 the existence of any claim, set-off or other
right that such U.S. Guarantor may have at any time against a Borrower, any
other U.S. Guarantor, any Secured Party or any other Person, whether in
connection with the Loan Documents or any unrelated transactions, provided that
nothing herein shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;

 

(vi)                              any invalidity or unenforceability relating to
or against a Borrower, any other U.S. Guarantor or any other Person for any
reason of any Secured Agreement, or any provision of applicable law or
regulation purporting to prohibit the payment of any Secured Obligation by a
Borrower, any other U.S. Guarantor or any other Person; or

 

(vii)                           any other act or omission to act or delay of any
kind by a Borrower, any other U.S. Guarantor, any other party to any Secured
Agreement, any Secured Party or any other Person, or any other circumstance
whatsoever that might, but for the provisions of this clause (vii), constitute a
legal or equitable discharge of or defense to any obligation of any U.S.
Guarantor hereunder.

 

(c)                                  Release of Secured Guarantees.

 

(i)                                     All the Secured Guarantees will be
released when all the Release Conditions are satisfied.  If at any time any
payment of a Borrower Secured Obligation is rescinded or must be otherwise
restored or returned upon the insolvency or receivership of a Borrower or
otherwise, the Secured Guarantees shall be reinstated with respect thereto as
though such payment had been due but not made at such time.

 

(ii)                                  If all the capital stock of a U.S.
Guarantor or all the assets of a U.S. Guarantor are sold to a Person other than
Holdings, a Borrower or one of its Subsidiaries in a transaction permitted by
the Credit Agreement (any such sale, a “Sale of Guarantor”), such U.S. Guarantor
shall be automatically released from its Secured Guarantee and any and all
obligations thereunder.  Such release shall not require the consent of any
Secured Party (including the Administrative Agent), and the Administrative Agent
shall be fully protected in relying on a certificate of the U.S. Borrower as to
whether any particular sale constitutes a Sale of Guarantor.

 

(iii)                               In addition to any release permitted by
subsection (ii), the Administrative Agent may release any Secured Guarantee with
the prior written consent of the Required Lenders; provided that any release of
all or substantially all the Secured Guarantees shall require the consent of all
the Lenders.

 

(d)                                 Waiver by Guarantors.  Each U.S. Guarantor
irrevocably waives acceptance hereof, presentment, demand, protest and any
notice not provided for herein, as well as any requirement that at any time any
action be taken by any Person against any Borrower, any other U.S. Guarantor or
any other Person.

 

(e)                                  Subrogation.  A U.S. Guarantor that makes a
payment with respect to a Borrower Secured Obligation hereunder shall be
subrogated to the rights of the payee against the applicable Borrower with
respect to such payment; provided that no U.S. Guarantor shall enforce any
payment by way of subrogation against any Borrower, or by reason of contribution
against any other U.S. Guarantor of such Borrower Secured Obligation, until all
the Release Conditions have been satisfied.

 

(f)                                   Stay of Acceleration.  If acceleration of
the time for payment of any Secured Obligation by the Borrower is stayed by
reason of the insolvency or receivership of any Borrower or otherwise, all
Secured Obligations otherwise subject to acceleration under the terms of any
Secured Agreement shall nonetheless be payable by the U.S. Guarantors hereunder
forthwith on demand by the Administrative Agent.

 

(g)                                  Right of Set-Off.  If any Secured
Obligation is not paid promptly when due, each of the Secured Parties and their
respective Affiliates is authorized, to the fullest extent permitted by law, to
set off and apply any

 

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and all deposits (general or special, time or demand, provisional or final but
in no event any escrow accounts) at any time held and other obligations at any
time owing by such Secured Party or Affiliate to or for the credit or the
account of any U.S. Guarantor against the obligations of such U.S. Guarantor
under its Secured Guarantee, irrespective of whether or not such Secured Party
shall have made any demand thereunder and although such obligations may be
unmatured.  The rights of each Secured Party under this subsection are in
addition to all other rights and remedies (including other rights of set-off)
that such Secured Party may have.

 

(h)                                 Continuing Guarantee.  Each Secured
Guarantee is a continuing guarantee, shall be binding on the relevant U.S.
Guarantor and its successors and assigns, and shall be enforceable by the
Administrative Agent or the Secured Parties.  If all or part of any Secured
Party’s interest in any Secured Obligation is assigned or otherwise transferred,
the transferor’s rights under each Secured Guarantee, to the extent applicable
to the obligation so transferred, shall automatically be transferred with such
obligation subject to the limitations set forth in the definitions for “Secured
Hedging Agreements” and “Secured Cash Management Agreements”.

 

(i)                                     Limitation on Obligations of Subsidiary
Guarantor.  Anything contained in this Agreement to the contrary
notwithstanding, the obligations of each Subsidiary Guarantor hereunder shall be
limited to a maximum aggregate amount equal to the greatest amount that would
not render such Subsidiary Guarantor’s obligations hereunder subject to
avoidance as a fraudulent transfer or conveyance under Section 548 of the
Bankruptcy Code or any comparable provisions of applicable state law.

 

SECTION 3.                         Grant of Transaction Liens.

 

(a)                                 The U.S. Borrower and each U.S. Guarantor,
in each case in order to secure its Secured Obligations, grants to the
Administrative Agent for the benefit of the Secured Parties and hereby
reconfirms its grant to the Administrative Agent, for the benefit of the Secured
Parties of, a continuing security interest in all the following property of the
U.S. Borrower or such U.S. Guarantor, as the case may be, whether now owned or
existing or hereafter acquired or arising and regardless of where located:

 

(i)                                     all Accounts;

 

(ii)                                  all As-Extracted Collateral;

 

(iii)                               all Chattel Paper,

 

(iv)                              all cash and Deposit Accounts;

 

(v)                                 the Commercial Tort Claims described in
Schedule 3;

 

(vi)                              all Contracts;

 

(vii)                           all Documents;

 

(viii)                        all Equipment;

 

(ix)                              all Fixtures;

 

(x)                                 all General Intangibles;

 

(xi)                              all Instruments;

 

(xii)                           all Intellectual Property;

 

(xiii)                        all Inventory;

 

(xiv)                       all Investment Property;

 

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(xv)                          all Letter-of-Credit Rights;

 

(xvi)                       all books and records (including customer lists,
credit files, computer programs, printouts and other computer materials and
records) of such Grantor pertaining to any of its Collateral;

 

(xvii)                    such Grantor’s ownership interest in (1) its
Collateral Accounts, (2) all Financial Assets credited to its Collateral
Accounts from time to time and all Security Entitlements in respect thereof, and
(3) all cash held in its Collateral Accounts from time to time; and

 

(xviii)                 all Proceeds of the Collateral described in the
foregoing clauses (i) through (xvii);

 

provided that the following property is excluded from the foregoing security
interests:  (A) motor vehicles or any other property that is covered by a
certificate of title, the perfection of a security interest in which is excluded
from the Uniform Commercial Code in the relevant jurisdiction, (B) Equity
Interests in the Excluded Subsidiaries (other than Foreign Subsidiaries and
Disregarded Domestic Persons which the parties acknowledge are addressed in
clause (F) below) and Wyoming Quality Healthcare Coalition, (C) capital credits
relating to the membership interests of Cordero Mining LLC in the Tri-County
Electric Association, Inc, a Wyoming power cooperative; and Powder River Energy
Corporation, a Wyoming power cooperative, (D) interests in partnerships, joint
ventures and non-wholly-owned subsidiaries which cannot be pledged without the
consent of one or more third parties that are not Credit Parties, after giving
effect to the Uniform Commercial Code of any applicable jurisdiction and other
applicable law, (E) Equity Interests in Immaterial Subsidiaries, (F) solely with
respect to Secured Obligations of the U.S. Credit Parties, Equity Interests in
Foreign Subsidiaries or Disregarded Domestic Persons other than 66% of each
class of the voting Equity Interests and 100% of the non-voting Equity Interests
of such first-tier Foreign Subsidiaries and Disregarded Domestic Persons,
(G) margin stock, (H) properties to the extent a security interest therein would
result in material adverse tax consequences as reasonably determined by the U.S.
Borrower in consultation with the Administrative Agent, (I) all foreign
Intellectual Property, (J) any “intent-to-use” trademark applications prior to
the filing of a “Statement of Use” or “Amendment to Allege Use” with respect
thereto, to the extent, if any, that, and solely during the period, if any, in
which, the grant of a security interest therein would impair the validity or
enforceability of such intent-to-use trademark application under applicable
federal law, (K) properties that are subject to Liens that are referred to in
Section 6.02(v) or 6.02(xi) of the Credit Agreement so long as the beneficiary
of such Lien prohibits the Transaction Lien, (L) properties to the extent the
creation of a security interest therein is limited as provided in clause
(b)(i) below, and (M) properties to the extent that (but only to the extent
that, and only for so long as) the grant of a security interest therein is
prohibited by any applicable law or regulation, requires a consent, approval,
license or authorization not obtained of any Governmental Authority pursuant to
any applicable law or regulation, or is prohibited by, or constitutes a change
in control, breach or default under or results in the termination of or requires
any consent not obtained under, any contract, license, agreement, permit,
agreement, instrument or other document evidencing or giving rise to such
property or, in the case of any Investment Property, any applicable shareholder
or similar agreement, except to the extent that such law or regulation or the
term in such contract, license, permit, agreement, instrument or other document
or shareholder or similar agreement providing for such prohibition, change of
control, breach, default or termination or requiring such consent is ineffective
under applicable law (including without limitation Sections 9-406, 9-407, 9-408
and 9-409 of the UCC in any applicable jurisdiction, the Bankruptcy Code and any
similar state insolvency laws, or general principles of equity) to prevent the
creation or attachment of the security interests granted hereunder; and provided
further that the security interests granted hereunder shall include the right of
the applicable Grantor to receive all proceeds derived from or in connection
with the sale, assignment or transfer of the foregoing in items (A) through
(M) of the immediately preceding proviso but only to the extent that, and only
for so long as, such proceeds are not properties that would be excluded under
any of the foregoing clauses (A) through (M).  Each Grantor shall upon request
of the Administrative Agent use all commercially reasonable efforts to obtain
any such required consent that is reasonably obtainable, provided that it is
understood that (I) no such efforts shall be required with respect to (x) any
joint venture agreement with respect to a Person that is not a Restricted
Subsidiary, (y) any permit issued by, and any LBM, LBA or other coal lease
entered into or granted by, a Governmental Authority or (z) as in effect on the
Effective Date, any private coal lease or any coal purchase or coal supply
contract and that (II) use of “commercially reasonable efforts” to permit or
obtain consent to any such assignment with respect to any private coal lease or
any coal purchase or coal supply contract entered into after the Effective Date
shall not be deemed to require any Grantor to agree to commercial terms that, in
the aggregate, such Grantor determines in good faith are materially less
advantageous to such Grantor in relation to the overall terms of such
agreement.  Notwithstanding anything in

 

10

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this Agreement or any other Security Document to the contrary, (i) this
Agreement shall not, at any time, constitute a grant of a security interest in,
or an assignment of, and “Collateral” shall not include any Letter -of -Credit
Rights to the extent a Grantor is required by applicable law to apply the
proceeds of a drawing of such Letter of Credit for a specified purpose and
(ii) remedies with respect to Collateral as to which creation and perfection is
governed by a Mortgage but also included in the definition of Collateral under
this Agreement shall be governed by the provisions of the applicable Mortgage.

 

(b)                                 Notwithstanding the foregoing or anything
herein to the contrary, (i) the creation (other than by this Agreement) or
perfection of pledges of or security interests in particular assets will not be
required if, and for so long as, the cost and burden to such Grantor of creating
or perfecting such pledges or security interests in such assets is excessive in
view of the benefits to be obtained by the Secured Parties therefrom, as
reasonably determined by the U.S. Borrower and the Administrative Agent,
(ii) the creation (other than by this Agreement) or perfection of pledges of or
security interests in particular assets will not be required if, and for so long
as, the creation or perfection of such security interests would require a
foreign law governed security or pledge agreement (other than, after the
designation of a Designated Foreign Borrower, agreements required under the laws
of the jurisdiction of formation for such Designated Foreign Borrower), and
(iii) no Grantor shall be required (A) to take steps to perfect the security
interest in cash and cash equivalents, deposit, securities and commodities
accounts (including securities entitlements and related assets) (other than the
filing a financing statement under the Uniform Commercial Code of any applicable
jurisdiction to the extent such security interest can be perfected by such
filing), (B) to take steps to perfect the security interests granted hereunder
by indicating such security interest on the certificate of title for any motor
vehicle asset or other asset that is covered by a certificate of title, (C) to
take steps to perfect the security interest in Letter-of-Credit Rights (other
than the filing a financing statement under the Uniform Commercial Code of any
applicable jurisdiction to the extent such security interest can be perfected by
such filing), (D) to seek any consent with respect to the matters referred to in
the penultimate sentence of clause (a) above except on the conditions and
subject to the terms set forth in such sentence, (E) to take steps to perfect
the security interests granted hereunder in any commercial tort claims, or
(F) to take steps to perfect the security interests granted hereunder in any
property which perfection is achieved through any control agreement.

 

(c)                                  With respect to each right to payment or
performance included in the Collateral from time to time, the Transaction Lien
granted therein includes a continuing security interest in (i) any Supporting
Obligation that supports such payment or performance and (ii) any Lien that
(x) secures such right to payment or performance or (y) secures any such
Supporting Obligation.

 

(d)                                 The Transaction Liens are granted as
security only and shall not subject the Administrative Agent or any other
Secured Party to, or transfer or in any way affect or modify, any obligation or
liability of any Grantor with respect to any of the Collateral or any
transaction in connection therewith.

 

SECTION 4.                         General Representations and Warranties.  Each
Grantor represents and warrants that:

 

(a)                                 Such Grantor is duly organized, validly
existing and in good standing under the laws of the jurisdiction identified as
its jurisdiction of organization in its Perfection Certificate.

 

(b)                                 With respect to each Original Grantor,
Schedule 1 lists all Equity Interests in Subsidiaries and Affiliates owned by
such Grantor as of the Effective Date.

 

(c)                                  With respect to each Original Grantor,
Schedule 2 lists, as of the Effective Date, all Securities owned by such Grantor
(except Securities evidencing Equity Interests in Subsidiaries and Affiliates).

 

(d)                                 With respect to each Original Grantor,
Schedule 4 lists, as of the Effective Date, all Material Contracts with
Governmental Authorities to which such Original Grantor is a party other than
those described in the U.S. Borrower’s 10-K or 10-Q filings with the SEC.

 

(e)                                  As of the Effective Date, except for those
locations listed on Schedule 5 where (i) mining equipment may be, from time to
time, in the possession of a third party in order to be repaired or rebuilt or
(ii) coal inventory may be, from time to time, stored on a temporary basis prior
to being transported to customers, none of the

 

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Equipment or Inventory that is included in the Collateral is in the possession
of an issuer of a negotiable document (as defined in Section 7-104 of the New
York UCC) therefor or is otherwise in the possession of any bailee or
warehouseman.

 

(f)                                   With respect to each original Grantor,
Schedule 7 lists, as of the Effective Date, each Material Contract to which such
Original Grantor is party that is a License.

 

(g)                                  All Pledged Equity Interests owned by such
Grantor in its Subsidiaries are owned by it free and clear of any Lien other
than (i) any inchoate tax liens and (ii) Liens permitted under Section 6.02 of
the Credit Agreement.  All shares of capital stock included in such Pledged
Equity Interests (including shares of capital stock in respect of which such
Grantor owns a Security Entitlement) have been duly authorized and validly
issued and are fully paid and non-assessable.  None of such Pledged Equity
Interests is subject to any option to purchase or similar right of any Person. 
Such Grantor is not and will not become a party to or otherwise bound by any
agreement (except the Loan Documents and the Transaction Documents and except as
otherwise permitted under the Credit Agreement) which restricts in any manner
the rights of any present or future holder of any Pledged Equity Interest with
respect thereto.

 

(h)                                 Such Grantor has good and valid title to all
its Collateral that is material to its business, except where the failure to
have such title or interest does not or would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.  All the
Collateral is free and clear of any Lien other than Liens permitted under
Section 6.02 of the Credit Agreement.

 

(i)                                     No effective financing statement,
security agreement, mortgage or similar or equivalent document or instrument
covering all or part of the Collateral owned by such Grantor is on file or of
record in any jurisdiction in which such filing or recording would be effective
to perfect or record a Lien on such Collateral, except financing statements,
mortgages or other similar or equivalent documents with respect to Liens
permitted under Section 6.02 of the Credit Agreement.  As of the Effective Date,
no Collateral owned by such Grantor is in the possession or under the Control of
any other Person having a claim thereto or security interest therein, other than
in connection with a Lien permitted under Section 6.02 of the Credit Agreement.

 

(j)                                    The Transaction Liens on all Personal
Property Collateral owned by such Grantor (i) have been validly created,
(ii) will attach to each item of such Collateral on the Effective Date (or, if
such Grantor on a later date first obtains rights thereto or obtains a consent
or removes another applicable restriction on granting a security interest
thereon, then on such later date) and (iii) when so attached, will secure all of
such Grantor’s Secured Obligations.

 

(k)                                 Subject to the limitations set forth
therein, when the relevant Mortgages have been duly executed and delivered, the
Transaction Liens on all Real Property Collateral owned by such Grantor as of
the Effective Date will have been validly created and will secure all such
Grantor’s Secured Obligations.  When such Mortgages have been duly recorded,
such Transaction Liens will rank prior to all other Liens (except Liens
permitted under Section 6.02 of the Credit Agreement) on such Real Property
Collateral.

 

(l)                                     Such Grantor has delivered a Perfection
Certificate to the Administrative Agent.  With respect to each Original Grantor,
information set forth therein is correct and complete in all material respects
as of the Effective Date.

 

(m)                             UCC financing statements describing the
Collateral as “all personal property” have been filed in the offices in the
jurisdiction of formation specified in such Perfection Certificate and the
Transaction Liens constitute perfected security interests in the Personal
Property Collateral owned by such Grantor to the extent that a security interest
therein may be perfected by filing pursuant to the UCC, prior to all Liens and
rights of others therein except Liens permitted under Section 6.02 of the Credit
Agreement.  In addition to the filing of such UCC financing statements, the
applicable Intellectual Property Filings have been made with respect to such
Grantor’s Recordable Intellectual Property (including any future filings
required pursuant to Sections 5(a) and 7(a)) and the Transaction Liens
constitute perfected security interests in all right, title and interest of such
Grantor in its Recordable Intellectual Property to the extent that security
interests therein may be perfected by such filings, prior to all Liens and
rights of others therein except for Liens permitted under Section 6.02 of the
Credit Agreement.  Except

 

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for (i) the filing of such UCC financing statements, (ii) such Intellectual
Property Filings (iii) the due recordation of the Mortgages, (iv) notices of the
Transactions required under the Mining Permits (including to the Bureau of
Alcohol, Tobacco and Firearms) and Environmental Permits regarding a change in
control that were or will be given to the applicable Governmental Authority on
or prior to the date by which such notices were or are due, and (v) steps which
are, pursuant to Section 3(b) above, not required, no registration, recordation
or filing with any governmental body, agency or official is required in
connection with the execution or delivery of the Security Documents or is
necessary for the validity or enforceability thereof or for the perfection or
due recordation of the Transaction Liens.

 

(n)                                 Such Grantor has taken, and will continue to
take, all actions necessary under the UCC to perfect its interest in any
Accounts or Chattel Paper purchased or otherwise acquired by it, as against its
assignors and creditors of its assignors to the same extent as required for the
Liens granted on the Effective Date.

 

(o)                                 Such Grantor’s Collateral is insured as
required by the Credit Agreement.

 

(p)                                 All of such Grantor’s Inventory has or will
have been produced in compliance with the applicable material requirements of
the Fair Labor Standards Act, as amended.

 

SECTION 5.                         Further Assurances; General Covenants.  Each
Grantor covenants as follows:

 

(a)                                 Such Grantor will, from time to time, at the
U.S. Borrower’s expense, execute, deliver, file and record any statement,
assignment, instrument, document, agreement or other paper and take any other
action (including any Intellectual Property Filing) that from time to time may
be necessary or desirable, or that the Administrative Agent may request, in
order to:

 

(i)                                     create, preserve, perfect, confirm or
validate the Transaction Liens on such Grantor’s Collateral, subject, in each
case to the exceptions and exclusions in the Loan Documents and to the same
extent as required for the Liens granted on the Effective Date;

 

(ii)                                  in the case of Certificated Securities,
cause the Administrative Agent to have Control thereof;

 

(iii)                               enable the Administrative Agent and the
other Secured Parties to obtain the full benefits of the Security Documents; or

 

(iv)                              enable, to the extent possible, the
Administrative Agent to exercise and enforce any of its rights, powers and
remedies with respect to any of such Grantor’s Collateral, subject, in each case
to the exceptions and exclusions in the Loan Documents.

 

Such Grantor authorizes the Administrative Agent to execute and file such
financing statements or continuation statements in such jurisdictions with such
descriptions of collateral (including “all assets” or “all personal property” or
other words to that effect) and other information set forth therein as the
Administrative Agent may deem necessary or desirable for the purposes set forth
in the preceding sentence.  Each Grantor also ratifies its authorization for the
Administrative Agent to file in any such jurisdiction any initial financing
statements or amendments thereto if filed prior to the date hereof for the
purposes set forth in the preceding sentence.  The Administrative Agent is
further authorized to file with the United States Patent and Trademark Office or
United States Copyright Office (or any successor office or any similar office in
any other country) such documents as may be necessary or advisable for the
purpose of perfecting, confirming, continuing, enforcing or protecting the
security interests granted by each Grantor, without the signature of any
Grantor, and naming any Grantor or the Grantors as debtors and the
Administrative Agent as secured party.  The U.S. Borrower will pay the costs of,
or incidental to, any Intellectual Property Filings and any recording or filing
of any financing or continuation statements or other documents recorded or filed
pursuant hereto.

 

(b)                                 Such Grantor will not (i) change its name or
organizational form or structure or (ii) change its jurisdiction of
organization, unless at least 30 days (or such shorter time period acceptable to
the Administrative

 

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Agent) before it takes any such action it informs the Administrative Agent and
takes all steps reasonably requested by the Administrative Agent (at the U.S.
Borrower’s or such Grantor’s sole cost and expense) which are necessary to
maintain the perfection and status of the Transaction Liens.

 

(c)                                  Such Grantor will not sell, lease,
exchange, assign or otherwise Dispose of, or grant any option with respect to,
any of its Collateral; provided that such Grantor may do any of the foregoing
unless doing so would violate a covenant in the Credit Agreement.  Concurrently
with any sale, lease or other Disposition (except a Disposition to another
Grantor or a lease) permitted by the foregoing proviso, the Transaction Liens on
the assets sold or Disposed of (but not in any Proceeds arising from such sale
or Disposition) will cease immediately without any action by the Administrative
Agent or any other Secured Party.  The Administrative Agent will promptly, at
the U.S. Borrower’s expense, execute and deliver to the relevant Grantor such
documents as such Grantor shall reasonably request to evidence the fact that any
asset so sold or Disposed of is no longer subject to a Transaction Lien.

 

(d)                                 Such Grantor will, promptly upon request,
provide to the Administrative Agent all information and evidence concerning such
Grantor’s Collateral that the Administrative Agent may reasonably request from
time to time to enable it to enforce the provisions of the Security Documents.

 

SECTION 6.                         As-Extracted Collateral.  If any Grantor
acquires any interest in any preparation plant or any As-Extracted Collateral,
then, in each case, unless such preparation plant is included on Schedule 6
hereto, such Grantor will (i) provide notice thereof to the Administrative Agent
within 20 days of such acquisition, together with a supplement to Schedule 6
reflecting such acquisition, (ii) deliver to the Administrative Agent a fully
completed financing statement in appropriate form for filing covering such
As-Extracted Collateral (which financing statements shall include the name of
the record owner of the real estate if other than the Grantor and real estate
descriptions sufficient to enable the Administrative Agent to record the
financing statements in the appropriate real property records) and
(iii) reimburse the Administrative Agent for all related filing fees and any
recording or stamp taxes due in connection with such filings.

 

SECTION 7.                         Recordable Intellectual Property.  Each
Grantor covenants as follows:

 

(a)                                 On the Effective Date (in the case of an
Original Grantor) or such later date on which it signs and delivers its first
Security Agreement Supplement (in the case of any other Grantor), such Grantor
will sign and deliver to the Administrative Agent Intellectual Property Security
Agreements with respect to all Recordable Intellectual Property then owned by
it.  At the request of the Administrative Agent, Grantor will sign and deliver
to the Administrative Agent an appropriate Intellectual Property Security
Agreement covering any acquired material Recordable Intellectual Property for
which notice has been provided to the Administrative Agent in accordance with
Section 7(b)(i) hereof, and the provisions of this Agreement shall automatically
apply thereto.

 

(b)                                 Such Grantor will notify the Administrative
Agent (i) in accordance with Section 5.14(b) of the Credit Agreement if it
acquires any material Recordable Intellectual Property after the Effective Date,
and (ii) as soon as reasonably practicable if any material Recordable
Intellectual Property owned by such Grantor is abandoned or dedicated to the
public, or if there is any proceeding instituted in the United States Copyright
Office, the United States Patent and Trademark Office or any court, that
challenges such Grantor’s ownership of such material Recordable Intellectual
Property.  If any of such Grantor’s rights to any material Recordable
Intellectual Property are infringed, misappropriated or diluted by a third party
such that there is a Material Adverse Effect, such Grantor will notify the
Administrative Agent thereof as soon as is reasonably practicable.

 

(c)                                  Upon the occurrence and during the
continuance of an Event of Default upon the Administrative Agent’s request, each
Grantor shall use its best efforts to obtain all requisite consents or approvals
by the licensor of each Copyright License, Patent License or Trademark License
under which such Grantor is a licensee to effect the assignment of all such
Grantor’s right, title and interest thereunder to the Administrative Agent, for
the ratable benefit of the Secured Parties, or its designee.

 

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SECTION 8.                         Investment Property.  Each Grantor
represents, warrants and covenants as follows:

 

(a)                                 Certificated Securities.  On the Effective
Date (in the case of an Original Grantor) or the date on which it signs and
delivers its first Security Agreement Supplement (in the case of any other
Grantor), such Grantor will deliver to the Administrative Agent as Collateral
hereunder all certificates representing Pledged Certificated Securities then
owned by such Grantor.  Thereafter, whenever such Grantor acquires any other
certificate representing a Pledged Certificated Security, such Grantor will, as
promptly as practicable, deliver such certificate to the Administrative Agent as
Collateral hereunder.  The provisions of this subsection shall not apply to any
Excluded Assets.

 

(b)                                 [Reserved].

 

(c)                                  [Reserved].

 

(d)                                 [Reserved].

 

(e)                                  Perfection as to Certificated Securities. 
When such Grantor delivers the certificate representing any Pledged Certificated
Security owned by it to the Administrative Agent and complies with
Section 8(j) in connection with such delivery, (i) the Transaction Lien on such
Pledged Certificated Security will be perfected, subject to no prior Liens or
rights of others (other than Liens permitted under Section 6.02 of the Credit
Agreement), (ii) the Administrative Agent will have Control of such Pledged
Certificated Security and (iii) provided that the Administrative Agent does not
have notice of any adverse claim (within the meaning of UCC Section 8-105) to
such Pledged Certificated Security, the Administrative Agent will be a protected
purchaser (within the meaning of UCC Section 8-303) thereof.

 

(f)                                   [Reserved].

 

(g)                                  [Reserved].

 

(h)                                 [Reserved].

 

(i)                                     Agreement as to Applicable
Jurisdiction.  In respect of all Security Entitlements owned by such Grantor,
and all Securities Accounts to which the related Financial Assets are credited,
the Securities Intermediary’s jurisdiction (determined as provided in UCC
Section 8-110(e)) will at all times be located in the United States.  In respect
of all Commodity Contracts owned by such Grantor and all Commodity Accounts in
which such Commodity Contracts are carried, the Commodity Intermediary’s
jurisdiction (determined as provided in UCC Section 9-305(b)) will at all times
be located in the United States.

 

(j)                                    Delivery of Pledged Certificates.  All
Pledged Certificates, when delivered to the Administrative Agent, will be in
suitable form for transfer by delivery, or accompanied by duly executed
instruments of transfer or assignment in blank, with signatures appropriately
guaranteed, all in form and substance satisfactory to the Administrative Agent.

 

(k)                                 Certification of Limited Liability Company
and Partnership Interests.  Any limited liability company and any partnership
controlled by any Grantor shall either (a) not include in its operative
documents any provision that any Equity Interests in such limited liability
company or such partnership be a “security” as defined under Article 8 of the
Uniform Commercial Code, or (b) certificate any Equity Interests in any such
limited liability company or such partnership.  To the extent an interest in any
limited liability company or partnership controlled by any Grantor and pledged
hereunder is certificated or becomes certificated, each such certificate shall
be delivered to the Administrative Agent pursuant to Section 8(a) and such
Grantor shall fulfill all other requirements under Section 8 applicable in
respect thereof.

 

SECTION 9.                         [Reserved].

 

SECTION 10.                  Cash Collateral Accounts.  If and when required for
purposes hereof or of any other Loan Document, the Administrative Agent will
establish with respect to each Grantor an account (its “Cash Collateral
Account”), in the name and under the exclusive control of the Administrative
Agent, into which all amounts owned

 

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by such Grantor that are to be deposited therein pursuant to the Loan Documents
shall be deposited from time to time.  Funds held in any Cash Collateral Account
may, until withdrawn, be invested and reinvested in such Cash Equivalents as the
relevant Grantor shall request from time to time; provided that if an Event of
Default shall have occurred and be continuing, the Administrative Agent may
select such Cash Equivalents.  Subject to Section 16, withdrawal of funds on
deposit in any Cash Collateral Account shall be permitted if, as and when
expressly so provided in or in respect of the applicable provision of the Loan
Documents pursuant to which such Cash Collateral Account was required to be
established.

 

SECTION 11.                  Commercial Tort Claims.  Each Grantor represents,
warrants and covenants as follows:

 

(a)                                 In the case of an Original Grantor, Schedule
3 accurately describes, with the specificity required to satisfy Official
Comment 5 to UCC Section 9-108, each Material Commercial Tort Claim with respect
to which such Original Grantor is the claimant as of the Effective Date.  In the
case of any other Grantor, Schedule 3 to its first Security Agreement Supplement
will accurately describe, with the specificity required to satisfy said Official
Comment 5, each Material Commercial Tort Claim with respect to which such
Grantor is the claimant as of the date on which it signs and delivers such
Security Agreement Supplement.

 

SECTION 12.                  Transfer of Record Ownership.  At any time when an
Event of Default under Section 7(a) of the Credit Agreement shall have occurred
and be continuing, the Administrative Agent may (and to the extent that action
by it is required, the relevant Grantor, if directed to do so by the
Administrative Agent, will as promptly as practicable) cause each of the Pledged
Securities (or any portion thereof specified in such direction) to be
transferred of record into the name of the Administrative Agent or its nominee. 
Each Grantor will take any and all actions reasonably requested by the
Administrative Agent to facilitate compliance with this Section.  The
Administrative Agent will promptly give to the relevant Grantor copies of any
notices and other communications received by the Administrative Agent with
respect to Pledged Securities registered in the name of the Administrative Agent
or its nominee.

 

SECTION 13.                  Right to Vote Securities.

 

(a)                                 Unless an Event of Default shall have
occurred and be continuing and Administrative Agent has provided written notice
of its exercise of rights pursuant to Section 13(b) below, each Grantor will
have the right, from time to time, to vote and to give consents, ratifications
and waivers with respect to any Pledged Security owned by it and the Financial
Asset underlying any Pledged Security Entitlement owned by it, and the
Administrative Agent will, upon receiving a written request from such Grantor,
deliver to such Grantor or as specified in such request such proxies, powers of
attorney, consents, ratifications and waivers in respect of any such Pledged
Security that is registered in the name of the Administrative Agent or its
nominee or any such Pledged Security Entitlement as to which the Administrative
Agent or its nominee is the Entitlement Holder, in each case as shall be
specified in such request and be in form and substance satisfactory to the
Administrative Agent.

 

(b)                                 If an Event of Default shall have occurred
and be continuing, then with written notice to the U.S. Borrower, the
Administrative Agent will have the exclusive right to the extent permitted by
law (and, in the case of a Pledged partnership interest, whether general or
limited, or Pledged membership interest or similar interest in a limited
liability company, by the relevant partnership agreement, limited liability
company agreement, operating agreement or other governing document) to vote, to
give consents, ratifications and waivers and to take any other action with
respect to the Pledged Investment Property, the other Pledged Equity Interests
and the Financial Assets underlying the Pledged Security Entitlements, with the
same force and effect as if the Administrative Agent were the absolute and sole
owner thereof, and each Grantor will take all such action as the Administrative
Agent may reasonably request from time to time to give effect to such right.

 

SECTION 14.                  [Reserved].

 

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SECTION 15.                  Remedies upon Event of Default.

 

(a)                                 If an Event of Default shall have occurred
and be continuing, the Administrative Agent may exercise (or cause its
sub-agents to exercise) any or all of the remedies available to it (or to such
sub-agents) under the Security Documents.

 

(b)                                 Without limiting the generality of the
foregoing, if an Event of Default shall have occurred and be continuing, the
Administrative Agent may exercise on behalf of the Secured Parties all the
rights of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) with respect to any Personal
Property Collateral and, in addition, the Administrative Agent may, without
being required to give any notice, except as herein provided or as may be
required by mandatory provisions of law, sell or otherwise dispose of the
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange, broker’s board or at any of the Administrative Agent’s offices
or elsewhere, for cash, on credit or for future delivery, at such time or times
and at such price or prices and upon such other terms as the Administrative
Agent may deem commercially reasonable, irrespective of the impact of any such
sales on the market price of the Collateral.  To the maximum extent permitted by
applicable law, any Secured Party may be the purchaser of any or all of the
Collateral at any such sale and (with the consent of the Administrative Agent,
which may be withheld in its discretion) shall be entitled, for the purpose of
bidding and making settlement or payment of the purchase price for all or any
portion of the Collateral sold at any such public sale, to use and apply all of
any part of the Secured Obligations as a credit on account of the purchase price
of any Collateral payable at such sale.  Upon any such sale of Collateral by the
Administrative Agent (including pursuant to a power of sale granted by statute
or under a judicial proceeding), the receipt of the Administrative Agent or of
the officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid to
the Administrative Agent or such officer or be answerable in any way for the
misapplication thereof.  Each purchaser at any such sale shall hold the property
sold absolutely free from any claim, or right on the part of any Grantor, and
each Grantor hereby waives (to the extent permitted by law) all rights of
redemption, stay or appraisal that it now has or may at any time in the future
have under any rule of law or statute now existing or hereafter enacted.  The
Administrative Agent shall not be obliged to make any sale of Collateral
regardless of notice of sale having been given.  The Administrative Agent may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.  To the maximum extent
permitted by law, each Grantor hereby waives any claim against any Secured Party
arising because the price at which any Collateral may have been sold at such a
private sale was less than the price that might have been obtained at a public
sale, even if the Administrative Agent accepts the first offer received and does
not offer such Collateral to more than one offeree.  The Administrative Agent
may disclaim any warranty, as to title or as to any other matter, in connection
with such sale or other disposition, and its doing so shall not be considered
adversely to affect the commercial reasonableness of such sale or other
disposition.

 

(c)                                  Notice of any such sale or other
disposition shall be given to the relevant Grantor(s) as (and if) required by
Section 18.

 

(d)                                 For the purpose of enabling the
Administrative Agent to exercise rights and remedies under this Agreement at
such time as the Administrative Agent shall be lawfully entitled to exercise
such rights and remedies, each Grantor hereby grants to the Administrative Agent
an irrevocable license (exercisable without payment of royalty or other
compensation to the Grantors), to use, license or sublicense any of the
Collateral consisting of Intellectual Property now owned or hereafter acquired
by such Grantor, and including in such license access to all media in which any
of the licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof.  The use of such license
by the Administrative Agent may be exercised only upon the occurrence and during
the continuation of an Event of Default; provided, however, that any license,
sublicense or other transaction entered into by the Administrative Agent in
accordance herewith shall be binding upon each Grantor notwithstanding any
subsequent cure of an Event of Default.

 

(e)                                  The foregoing provisions of this
Section shall apply to Real Property Collateral only to the extent permitted by
applicable law and the provisions of any applicable Mortgage.

 

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SECTION 16.                  Application of Proceeds.

 

(a)                                 If an Event of Default shall have occurred
and be continuing, the Administrative Agent may apply (i) any cash held in the
Collateral Accounts and (ii) the proceeds of any sale or other disposition of
all or any part of the Collateral, in the following order of priorities:

 

first, to pay the expenses of such sale or other disposition, including
reasonable compensation to agents of and counsel for the Administrative Agent,
and all expenses, liabilities and advances incurred or made by the
Administrative Agent in connection with the Security Documents, and any other
amounts then due and payable to the Administrative Agent pursuant to Section 17
or pursuant to Section 9.03 of the Credit Agreement;

 

second, to pay (i) all Secured Obligations under the Loan Documents (including
without limitation principal of and interest on the Loans and all other amounts
owing thereunder) (or provide for the payment thereof pursuant to
Section 16(b)), (ii) all Secured Obligations under Secured Hedging Agreements,
and (iii) all other Secured Obligations, in each case pro rata in accordance
with their respective amounts, until payment in full of all such interest and
fees shall have been made (or so provided for); and

 

third, to pay to the relevant Grantor, or as a court of competent jurisdiction
may direct, any surplus then remaining from the proceeds of the Collateral owned
by it;

 

provided that Collateral owned by a Subsidiary Guarantor and any proceeds
thereof shall be applied pursuant to the foregoing clauses first, second and
third only to the extent permitted by the limitation in Section 2(i).  The
Administrative Agent may make such distributions hereunder in cash or in kind
or, on a ratable basis, in any combination thereof.

 

(b)                                 If at any time any portion of any monies
collected or received by the Administrative Agent would, but for the provisions
of this Section 16(b), be payable pursuant to Section 16(a) in respect of a
Contingent Secured Obligation, the Administrative Agent shall not apply any
monies to pay such Contingent Secured Obligation but instead shall request the
holder thereof, at least 10 days before each proposed distribution hereunder, to
notify the Administrative Agent as to the maximum amount of such Contingent
Secured Obligation if then ascertainable (e.g., in the case of a letter of
credit, the maximum amount available for subsequent drawings thereunder).  If
the holder of such Contingent Secured Obligation does not notify the
Administrative Agent of the maximum ascertainable amount thereof at least two
Business Days before such distribution, such holder will not be entitled to
share in such distribution.  If such holder does so notify the Administrative
Agent as to the maximum ascertainable amount thereof, the Administrative Agent
will allocate to such holder a portion of the monies to be distributed in such
distribution, calculated as if such Contingent Secured Obligation were
outstanding in such maximum ascertainable amount.  However, the Administrative
Agent will not apply such portion of such monies to pay such Contingent Secured
Obligation, but instead will hold such monies or invest such monies in Cash
Equivalents.  All such monies and Cash Equivalents and all proceeds thereof will
constitute Collateral hereunder, but will be subject to distribution in
accordance with this Section 16(b) rather than Section 16(a).  The
Administrative Agent will hold all such monies and Cash Equivalents and the net
proceeds thereof in trust’ until all or part of such Contingent Secured
Obligation becomes a Non-Contingent Secured Obligation, whereupon the
Administrative Agent at the request of the relevant Secured Party will apply the
amount so held in trust to pay such Non-Contingent Secured Obligation; provided
that if the other Secured Obligations theretofore paid pursuant to the same
clause of Section 16(a) (i.e., clause second or third) were not paid in full,
the Administrative Agent will apply the amount so held in trust to pay the same
percentage of such Non-Contingent Secured Obligation as the percentage of such
other Secured Obligations theretofore paid pursuant to the same clause of
Section 16(a).  If (i) the holder of such Contingent Secured Obligation shall
advise the Administrative Agent that no portion thereof remains in the category
of a Contingent Secured Obligation and (ii) the Administrative Agent still holds
any amount held in trust pursuant to this Section 16(b) in respect of such
Contingent Secured Obligation (after paying all amounts payable pursuant to the
preceding sentence with respect to any portions thereof that became
Non-Contingent Secured Obligations), such remaining amount will be applied by
the Administrative Agent in the order of priorities set forth in Section 16(a).

 

(c)                                  In making the payments and allocations
required by this Section, the Administrative Agent may rely upon information
supplied to it pursuant to Section 20(c).  All distributions made by the
Administrative Agent

 

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pursuant to this Section shall be final (except in the event of manifest error)
and the Administrative Agent shall have no duty to inquire as to the application
by any Secured Party of any amount distributed to it.

 

SECTION 17.                  Fees and Expenses; Indemnification.

 

(a)                                 The U.S. Borrower will forthwith upon demand
pay to the Administrative Agent, subject to the limitations provided in proviso
of Section 9.03(a) of the Credit Agreement, within ten (10) days after written
demand therefor, the amount of any and all reasonable out-of-pocket expenses,
including transfer taxes and reasonable fees and expenses of counsel and other
experts, that the Administrative Agent may incur in connection with (x) the
administration or enforcement of the Security Documents, including such expenses
as are incurred to preserve the value of the Collateral or the validity,
perfection, rank or value of any Transaction Lien, (y) the collection, sale or
other disposition of any Collateral or (z) the exercise by the Administrative
Agent of any of its rights or powers under the Security Documents.

 

(b)                                 If any transfer tax, documentary stamp tax
or other similar tax is payable in connection with any transfer or other
transaction provided for in the Security Documents, the U.S. Borrower will pay
such tax and provide any required tax stamps to the Administrative Agent or as
otherwise required by law.

 

(c)                                  The U.S. Borrower shall indemnify each of
the Secured Parties that are not Lender Parties, including any counterparties to
Secured Hedging Agreements, to the same extent as it shall indemnify the Lender
Parties pursuant to Section 9.03(b) of the Credit Agreement.

 

SECTION 18.                  Authority to Administer Collateral.  Each Grantor
irrevocably appoints the Administrative Agent its true and lawful attorney, with
full power of substitution, in the name of such Grantor, any Secured Party or
otherwise, for the sole use and benefit of the Secured Parties, but at the U.S.
Borrower’s expense, to the extent permitted by law to exercise, at any time and
from time to time while an Event of Default shall have occurred and be
continuing, all or any of the following powers with respect to all or any of
such Grantor’s Collateral:

 

(a)                                 to demand, sue for, collect, receive and
give acquittance for any and all monies due or to become due upon or by virtue
thereof,

 

(b)                                 to obtain and adjust insurance required to
be maintained by such Grantor pursuant to the Credit Agreement,

 

(c)                                  to settle, compromise, compound, prosecute
or defend any action or proceeding with respect thereto,

 

(d)                                 to sell, lease, license or otherwise Dispose
of the same or the proceeds or avails thereof, as fully and effectually as if
the Administrative Agent were the absolute owner thereof, and

 

(e)                                  to extend the time of payment of any or all
thereof and to make any allowance or other adjustment with reference thereto;

 

provided that, except in the case of Personal Property Collateral that is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, the Administrative Agent will give the relevant
Grantor at least ten days’ prior written notice of the time and place of any
public sale thereof or the time after which any private sale or other intended
disposition thereof will be made.  Any such notice shall (i) contain the
information specified in UCC Section 9-613, (ii) be Authenticated and (iii) be
sent to the parties required to be notified pursuant to UCC Section 9-611(c);
provided that, if the Administrative Agent fails to comply with this sentence in
any respect, its liability for such failure shall be limited to the liability
(if any) imposed on it as a matter of law under the UCC.

 

SECTION 19.                  Limitation on Duty in Respect of Collateral. 
Beyond the exercise of reasonable care in the custody and preservation thereof,
the Administrative Agent will have no duty as to any Collateral in its

 

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possession or control or in the possession or control of any sub-agent or bailee
or any income therefrom or as to the preservation of rights against prior
parties or any other rights pertaining thereto.  The Administrative Agent will
be deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession or control if such Collateral is accorded
treatment substantially equal to that which it accords its own property, and
will not be liable or responsible for any loss or damage to any Collateral, or
for any diminution in the value thereof, by reason of any act or omission of any
sub-agent or bailee selected by the Administrative Agent in good faith, except
to the extent that such liability arises from the Administrative Agent’s gross
negligence or willful misconduct.

 

SECTION 20.                  General Provisions Concerning the Administrative
Agent.

 

(a)                                 The provisions of Article 8 of the Credit
Agreement shall inure to the benefit of the Administrative Agent, and shall be
binding upon all Grantors and all Secured Parties, in connection with this
Agreement and the other Security Documents.  Without limiting the generality of
the foregoing, (i) the Administrative Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether an Event of Default has
occurred and is continuing, (ii) the Administrative Agent shall not have any
duty to take any discretionary action or exercise any discretionary powers,
except discretionary rights and powers expressly contemplated by the Security
Documents that the Administrative Agent is required in writing to exercise by
the Required Lenders (or such other number or percentage of the Lenders as shall
be necessary under the circumstances as provided in Section 9.02 of the Credit
Agreement), and (iii) except as expressly set forth in the Loan Documents, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for any failure to disclose, any information relating to any Grantor that
is communicated to or obtained by the bank serving as Administrative Agent or
any of its Affiliates in any capacity.  The Administrative Agent shall not be
responsible for the existence, genuineness or value of any Collateral or for the
validity, perfection, priority or enforceability of any Transaction Lien,
whether impaired by operation of law or by reason of any action or omission to
act on its part under the Security Documents.  The Administrative Agent shall be
deemed not to have knowledge of any Event of Default unless and until written
notice thereof is given to the Administrative Agent, the U.S. Borrower or a
Secured Party.

 

(b)                                 Sub-Agents and Related Parties.  The
Administrative Agent may perform any of its duties and exercise any of its
rights and powers through one or more sub-agents appointed by it.  The
Administrative Agent and any such sub-agent may perform any of its duties and
exercise any of its rights and powers through its Related Parties.  The
exculpatory provisions of Section 19 and this Section shall apply to any such
sub-agent and to the Related Parties of the Administrative Agent and any such
sub-agent.

 

(c)                                  Information as to Secured Obligations and
Actions by Secured Parties.  For all purposes of the Security Documents,
including determining the amounts of the Secured Obligations and whether a
Secured Obligation is a Contingent Secured Obligation or not, or whether any
action has been taken under any Secured Agreement, the Administrative Agent will
be entitled to rely on information from (i) its own records for information as
to the Lender Parties, their Secured Obligations and actions taken by them,
(ii) any Secured Party (or any trustee, agent or similar representative thereof)
for information as to its Secured Obligations and actions taken by it, to the
extent that the Administrative Agent has not obtained such information from its
own records, and (iii) the U.S. Borrower, to the extent that the Administrative
Agent has not obtained information from the foregoing sources.

 

(d)                                 Refusal to Act.  The Administrative Agent
may refuse to act on any notice, consent, direction or instruction from any
Secured Parties or any agent, trustee or similar representative thereof that, in
the Administrative Agent’s opinion, (i) is contrary to law or the provisions of
any Security Document, (ii) may expose the Administrative Agent to liability
(unless the Administrative Agent shall have been indemnified, to its reasonable
satisfaction, for such liability by the Secured Parties that gave such notice,
consent, direction or instruction) or (iii) is unduly prejudicial to Secured
Parties not joining in such notice, consent, direction or instruction.

 

SECTION 21.                  Termination of Transaction Liens; Release of
Collateral.

 

(a)                                 At the time the Secured Guarantee of a U.S.
Guarantor is released pursuant to Section 2(c), (i) the Transaction Liens
granted by such U.S. Guarantor automatically shall terminate and (ii) all
Transaction Liens on the Equity Interests of such U.S. Guarantor automatically
shall terminate.

 

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(b)                                 At the time (i) any Receivable and property
related to such Receivable is sold, pledged or otherwise Disposed of by the
Borrower or any Restricted Subsidiary to a Securitization Subsidiary in
connection with a transaction permitted by Section 6.05(f) of the Credit
Agreement the Transaction Liens on such Receivable and such related property
automatically shall terminate and (ii) any other properties or assets of the
U.S. Borrower or any U.S. Guarantor are Disposed of (other than pursuant to a
lease) in a transaction that is permitted under Section 6.05 of the Credit
Agreement, the Transaction Liens on the properties or assets so Disposed of
automatically shall terminate.

 

(c)                                  The Transaction Liens granted by the U.S.
Borrower and the U.S. Guarantors automatically shall terminate when all the
Release Conditions are satisfied.

 

(d)                                 At any time before the Transaction Liens
granted by the U.S. Borrower terminate, the Administrative Agent may, at the
written request of the U.S. Borrower, (i) release any Collateral (but not all or
substantially all the Collateral) with the prior written consent of the Required
Lenders, (ii) release all or substantially all the Collateral with the prior
written consent of all Lenders or (iii) release any Collateral pursuant to
Section 9.15 of the Credit Agreement.

 

(e)                                  Upon any termination of a Transaction Lien
or release of Collateral, the Administrative Agent will, at the expense of the
relevant Grantor, execute and deliver to such Grantor such documents as such
Grantor shall reasonably request to evidence the termination of such Transaction
Lien or the release of such Collateral, as the case may be.

 

(f)                                   To the extent that the Liens created by
the Existing Security Agreement would encumber any Excluded Assets, such assets
are automatically released from the Transaction Lien created by this Agreement. 
To the extent any actions were taken prior to the Effective Date to perfect the
Liens created by the Existing Security Agreement and which action would not be
required as provided under Section 3(b) above, the Administrative Agent shall,
at the request of the U.S. Borrower and at the sole cost and expense of the U.S.
Borrower, take such action to release such perfection.

 

SECTION 22.                  Additional Guarantors and Grantors.  Any Subsidiary
and Holdings may become a party hereto by signing and delivering to the
Administrative Agent a Security Agreement Supplement, whereupon such Subsidiary
(other than an Excluded Subsidiary), shall become a “U.S. Guarantor” and a
“Grantor” as defined herein.

 

SECTION 23.                  Additional Secured Obligations.  The U.S. Borrower
may from time to time designate its obligations under any Permitted Hedging
Agreement or Secured Cash Management Agreement as an additional Borrower Secured
Obligation for purposes hereof by delivering to the Administrative Agent a
certificate signed by a Financial Officer that (i) identifies such Hedging
Agreement or Secured Cash Management Agreement, as applicable, specifying the
name and address of the other party thereto, the notional principal amount
thereof, if applicable,  and the expiration date thereof, (ii) states that the
applicable Borrower’s obligations thereunder are designated as Borrower Secured
Obligations for purposes hereof and (iii) states with respect to any Hedging
Agreement that such Hedging Agreement is a Permitted Hedging Agreement under the
Credit Agreement.

 

SECTION 24.                  Notices.  Each notice, request or other
communication given to any party hereunder shall be given in accordance with
Section 9.01 of the Credit Agreement, and in the case of any such notice,
request or other communication to a Grantor other than the U.S. Borrower, shall
be given to it in care of the U.S. Borrower.

 

SECTION 25.                  No Implied Waivers; Remedies Not Exclusive.  No
failure by the Administrative Agent or any Secured Party to exercise, and no
delay in exercising and no course of dealing with respect to, any right or
remedy under any Security Document shall operate as a waiver thereof; nor shall
any single or partial exercise by the Administrative Agent or any Secured Party
of any right or remedy under any Loan Document preclude any other or further
exercise thereof or the exercise of any other right or remedy.  The rights and
remedies specified in the Loan Documents are cumulative and are not exclusive of
any other rights or remedies provided by law.

 

SECTION 26.                  Successors and Assigns.  The guarantees and Liens
provided for in this Agreement are for the benefit of the Administrative Agent
and the Secured Parties.  If all or any part of any Secured Party’s interest in

 

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any Secured Obligation is assigned or otherwise transferred, the transferor’s
rights hereunder, to the extent applicable to the obligation so transferred,
shall be automatically transferred with such obligation, subject to the
limitations set forth in the definitions for “Secured Hedging Agreements” and
“Secured Cash Management Agreements”.  This Agreement shall be binding on each
party hereto and their respective successors and assigns.

 

SECTION 27.                  Amendments and Waivers.  Neither this Agreement nor
any provision hereof may be waived, amended, modified or terminated except
pursuant to an agreement or agreements in writing entered into by the
Administrative Agent, with the consent of such Lenders as are required to
consent thereto under Section 9.02 of the Credit Agreement.  No such waiver,
amendment or modification shall be binding upon any Grantor, except with its
written consent.

 

SECTION 28.                  Choice of Law.  This Agreement shall be construed
in accordance with and governed by the laws of the State of New York, without
regard to conflicts of laws principles (other than Sections 5-1401 and 5-1402 of
the General Obligations Law of the State of New York) and except to the extent
that remedies provided by the laws of any jurisdiction other than the State of
New York are governed by the laws of such jurisdiction.

 

SECTION 29.                  Waiver of Jury Trial.  EACH PARTY HERETO 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 ANY SECURITY DOCUMENT OR ANY TRANSACTION CONTEMPLATED THEREBY
(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.

 

SECTION 30.                  Severability.  If any provision of any Security
Document is invalid or unenforceable in any jurisdiction, then, to the fullest
extent permitted by law, (i) the other provisions of the Security Documents
shall remain in full force and effect in such jurisdiction and the Secured
Parties in order to carry out the intentions of the parties thereto as nearly as
may be possible and (ii) the invalidity or unenforceability of such provision in
such jurisdiction shall not affect the validity or enforceability thereof in any
other jurisdiction.

 

SECTION 31.                  Conflicts with Loan Documents.  To the fullest
extent possible, the terms and provisions of this Agreement shall be read
together with the terms and provisions of each other Loan Document so that the
terms and provisions of this Agreement do not conflict with the terms and
provisions of any Loan Document; provided, however, notwithstanding the
foregoing, in the event that any of the terms or provisions of the Credit
Agreement conflict with any terms or provisions of any Loan Document, including
this Agreement, the terms or provisions of the Credit Agreement shall govern and
control for all purposes; provided further that (i) the inclusion in this
Agreement of terms and provisions as to rights or remedies in favor of the
Administrative Agent related to Collateral and not expressly addressed in the
Credit Agreement shall not be deemed to be in conflict with the Credit Agreement
and all such rights or remedies contained herein shall be given full force and
effect, and (ii) the inclusion in this Agreement of terms or provisions that are
less restrictive to the U.S. Borrower or any Subsidiary thereof shall not be
deemed to be in conflict with the Credit Agreement and all such terms and
provisions contained herein shall be given full force and effect.

 

SECTION 32.                  Entire Agreement.  This Agreement, the other Loan
Documents and any separate letter agreements with respect to fees payable to the
Administrative Agent constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.

 

22

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.

 

 

CLOUD PEAK ENERGY RESOURCES LLC, as U.S.

 

Borrower

 

 

 

By:

/s/ Michael Barrett

 

 

Name:

Michael Barrett

 

 

Title:

Executive Vice President and

 

 

 

Chief Financial Officer

 

 

 

 

 

ANTELOPE COAL LLC

 

ARROWHEAD I LLC

 

ARROWHEAD II LLC

 

ARROWHEAD III LLC

 

BIG METAL COAL CO. LLC

 

CABALLO ROJO LLC

 

CABALLO ROJO HOLDINGS LLC

 

CLOUD PEAK ENERGY SERVICES COMPANY

 

CLOUD PEAK ENERGY FINANCE CORP.

 

CLOUD PEAK ENERGY LOGISTICS LLC

 

CORDERO MINING LLC

 

CORDERO MINING HOLDINGS LLC

 

CORDERO OIL AND GAS LLC

 

KENNECOTT COAL SALES LLC

 

NERCO LLC

 

NERCO COAL LLC

 

NERCO COAL SALES LLC

 

PROSPECT LAND AND DEVELOPMENT LLC

 

RESOURCE DEVELOPMENT LLC

 

SEQUATCHIE VALLEY COAL CORPORATION

 

SPRING CREEK COAL LLC

 

WESTERN MINERALS LLC

 

YOUNGS CREEK HOLDINGS I LLC

 

YOUNGS CREEK HOLDINGS II LLC

 

YOUNGS CREEK MINING COMPANY, LLC,

 

as U.S. Guarantors

 

 

 

By:

/s/ Michael Barrett

 

 

Name:

Michael Barrett

 

 

Title:

Executive Vice President and

 

 

 

Chief Financial Officer

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.

 

 

PNC BANK, NATIONAL ASSOCIATION, as Administrative Agent

 

 

 

 

By:

/s/ James O’Brien

 

 

Name:

James O’Brien

 

 

Title:

Assistant Vice President

 

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