Exhibit 10.3
[EXECUTION COPY]
 
CREDIT AGREEMENT
dated as of October 22, 2010
among
SIGNAL PEAK ENERGY, LLC,
a Delaware limited liability company,
and
GLOBAL RAIL GROUP, LLC,
a Delaware limited liability company,
as Borrowers,
and
THE LENDERS PARTY HERETO,
and
COBANK, ACB and SOVEREIGN BANK,
as Co-Syndication Agents,
and
BANCO BILBAO VIZCAYA ARGENTARIA, S.A., NEW YORK BRANCH,
CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK and
U.S. BANK NATIONAL ASSOCIATION,
as Co-Documentation Agents,
and
UNION BANK, N.A.,
as Administrative Agent and Collateral Agent
 
UNION BANK, N.A.,
as Sole Lead Arranger and Sole Bookrunner

 

 

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TABLE OF CONTENTS

              Page  
 
       
ARTICLE I Definitions
       
 
       
SECTION 1.01. Defined Terms
    1  
SECTION 1.02. Classification of Loans and Borrowings
    16  
SECTION 1.03. Terms Generally
    16  
SECTION 1.04. Accounting Terms; GAAP
    16  
SECTION 1.05. Pro Forma Calculations
    17  
 
       
ARTICLE II The Credits
       
 
       
SECTION 2.01. Commitments
    17  
SECTION 2.02. Loans and Borrowings
    17  
SECTION 2.03. Request for Initial Borrowing
    18  
SECTION 2.04. Funding of Initial Borrowing
    18  
SECTION 2.05. Interest Elections
    19  
SECTION 2.06. Termination of Commitments
    20  
SECTION 2.07. Repayment of Loans; Evidence of Debt
    20  
SECTION 2.08. Prepayment of Loans
    21  
SECTION 2.09. Fees
    22  
SECTION 2.10. Interest
    22  
SECTION 2.11. Alternate Rate of Interest
    23  
SECTION 2.12. Increased Costs
    23  
SECTION 2.13. Break Funding Payments
    24  
SECTION 2.14. Taxes
    25  
SECTION 2.15. Payments Generally; Pro Rata Treatment; Sharing of Set-offs
    27  
SECTION 2.16. Mitigation Obligations; Replacement of Lenders
    28  
SECTION 2.17. Illegality
    29  
SECTION 2.18 Joint and Several Obligations; Subrogation Rights; Savings Clause
    29  
 
       
ARTICLE III Representations and Warranties
       
 
       
SECTION 3.01. Organization; Powers
    31  
SECTION 3.02. Authorization; Enforceability
    31  
SECTION 3.03. Governmental Approvals; No Conflicts
    31  
SECTION 3.04. Financial Condition; No Material Adverse Change
    32  
SECTION 3.05. Title to Properties, Etc
    32  
SECTION 3.06. Litigation
    33  
SECTION 3.07. Compliance with Laws and Agreements
    33  
SECTION 3.08. Margin Regulations
    33  
SECTION 3.09. Regulatory Status
    33  
SECTION 3.10. Taxes
    34  
SECTION 3.11. ERISA
    34  
SECTION 3.12. Security Documents
    34  
SECTION 3.13. Disclosure
    35  

 

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TABLE OF CONTENTS
(Continued)

              Page  
 
       
SECTION 3.14. Solvency
    35  
SECTION 3.15. Labor Matters
    35  
SECTION 3.16. Anti-Terrorism Laws
    35  
SECTION 3.17. No Subsidiaries
    36  
SECTION 3.18. Environmental Matters
    36  
SECTION 3.19. Insurance
    37  
SECTION 3.20. Hedging Agreements
    37  
SECTION 3.21. No Default or Event of Default
    37  
SECTION 3.22. Use of Proceeds
    37  
 
       
ARTICLE IV Conditions Precedent
       
 
       
SECTION 4.01. Effective Date
    38  
 
       
ARTICLE V Affirmative Covenants
       
 
       
SECTION 5.01. Financial Statements and Other Information
    40  
SECTION 5.02. Notices of Material Events
    41  
SECTION 5.03. Existence; Conduct of Business
    42  
SECTION 5.04. Payment of Obligations
    42  
SECTION 5.05. Maintenance of Properties; Insurance
    42  
SECTION 5.06. Books and Records; Inspection Rights
    43  
SECTION 5.07. Compliance with Laws
    43  
SECTION 5.08. Use of Proceeds
    43  
SECTION 5.09. Environmental Matters
    43  
SECTION 5.10. Further Assurances
    44  
SECTION 5.11. Subsidiaries
    44  
 
       
ARTICLE VI Negative Covenants
       
 
       
SECTION 6.01. Indebtedness
    44  
SECTION 6.02. Liens
    45  
SECTION 6.03. Fundamental Changes
    46  
SECTION 6.04. Investments, Loans, Advances and Acquisitions
    46  
SECTION 6.05. Asset Sales
    46  
SECTION 6.06. Sale and Leaseback Transactions
    47  
SECTION 6.07. Limitation on Hedge Agreements
    47  
SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness
    47  
SECTION 6.09. Transactions with Affiliates
    48  
SECTION 6.10. Restrictive Agreements
    48  
SECTION 6.11. Accounting Changes
    48  

 

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TABLE OF CONTENTS
(Continued)

              Page  
 
       
ARTICLE VII Events of Default
    49  
 
       
ARTICLE VIII The Agents
    51  
 
       
ARTICLE IX Miscellaneous
       
 
       
SECTION 9.01. Notices
    54  
SECTION 9.02. Waivers; Amendments
    55  
SECTION 9.03. Expenses; Indemnity; Damage Waiver
    56  
SECTION 9.04. Successors and Assigns
    57  
SECTION 9.05. Survival
    60  
SECTION 9.06. Counterparts; Integration; Effectiveness
    60  
SECTION 9.07. Severability
    60  
SECTION 9.08. Right of Setoff
    61  
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process
    61  
SECTION 9.10. WAIVER OF JURY TRIAL
    62  
SECTION 9.11. Headings
    62  
SECTION 9.12. Confidentiality
    62  
SECTION 9.13. Interest Rate Limitation
    63  
SECTION 9.14 Patriot Act Notice
    63  
 
       
SCHEDULES:
       
 
       
Schedule 2.01 — Commitments
       
Schedule 3.04 — Sales and Acquisitions
       
Schedule 3.05 — Properties
       
Schedule 3.06 — Litigation
       
Schedule 3.07 — Compliance with Laws
       
Schedule 3.19 — Insurance
       
Schedule 3.20 — Hedging Agreements
       
Schedule 6.02 — Existing Liens
       
 
       
EXHIBITS:
       
 
       
Exhibit A — Form of Assignment and Assumption
       
Exhibit B — Form of Pledge Agreement
       
Exhibit C — Form of Note
       
Exhibit D — Form of Guaranty
       
Exhibit E — Form of Borrowing Request
       

 

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CREDIT AGREEMENT
This CREDIT AGREEMENT, dated as of October 22, 2010, among SIGNAL PEAK ENERGY,
LLC, GLOBAL RAIL GROUP, LLC, the LENDERS party hereto and UNION BANK, N.A., as
Administrative Agent and as Collateral Agent.
The parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have
the meanings specified below:
“ABR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.
“ABR Default Rate” has the meaning assigned to such term in Section 2.10(c).
“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.
“Administrative Agent” means Union Bank, in its capacity as administrative agent
for the Lenders.
“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.
“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
“Agents” means, collectively, the Administrative Agent and the Collateral Agent.
“Agreement” means this Credit Agreement, dated as of October 22, 2010, by and
among the Borrowers, the Lenders party hereto, the Administrative Agent and the
Collateral Agent.
“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest
of (a) the Reference Rate in effect on such day, (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%, and (c) the then-applicable Adjusted
LIBO Rate for a Eurodollar Loan with an Interest Period of one month (assuming
that the first day of such Interest Period was the first day of the calendar
month in which such day occurs) plus 1% per annum. Any change in the Alternate
Base Rate due to a change in the Reference Rate or the Federal Funds Effective
Rate shall be effective from and including the effective date of such change in
the Reference Rate or the Federal Funds Effective Rate, respectively.

 

 

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“Anti-Terrorism Laws” has the meaning assigned to such term in Section 3.16(a).
“Applicable Percentage” means with respect to any Lender, the percentage of the
total Commitments represented by such Lender’s Commitment. If the Commitments
have terminated, the Applicable Percentage of each Lender shall equal the ratio
of (i) the aggregate outstanding principal amount of all Loans made by such
Lender to (ii) the aggregate outstanding principal amount of all Loans (or, if
the Loans have been repaid in full, the Applicable Percentages shall equal the
Applicable Percentages in effect immediately prior to such repayment).
“Applicable Margin” means, with respect to any Eurodollar Loan or ABR Loan, as
the case may be, the applicable per annum percentage set forth at the
appropriate intersection in the table shown below, based on the Rating as in
effect from time to time:

                                      LEVEL 2     LEVEL 3       LEVEL 1    
Ratings lower than Level 1     Ratings lower than BBB-       Ratings at least
BBB by     but at least BBB- by S&P     by S&P and Baa3 by   BASIS FOR PRICING  
S&P or Baa2 by Moody’s.     or Baa3 by Moody’s.     Moody’s.  
Applicable Margin for Eurodollar Loans
    2.00 %     2.25 %     3.00 %
Applicable Margin for ABR Loans
    1.00 %     1.25 %     2.00 %

For purposes of the foregoing, (i) if there is a difference of one level in
Ratings of S&P and Moody’s and the higher of such Ratings falls in Level 1 or
Level 2, then the higher Rating will be used to determine the Applicable Margin,
and (ii) if there is a difference of more than one level in Ratings of S&P and
Moody’s, the Rating that is one level above the lower of such Ratings will be
used to determine the Applicable Margin, unless the lower of such Ratings falls
in Level 3, in which case the lower of such Ratings will be used to determine
the Applicable Margin. If there is only one Rating, such Rating shall be used to
determine the Applicable Margin.
“Approved Fund” means any Fund that is administered or managed by (a) a Lender
or (b) an Affiliate of a Lender.
“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 9.04), and accepted by the Administrative Agent, in the form of
Exhibit A or any other form approved by the Administrative Agent.
“Board” means the Board of Governors of the Federal Reserve System of the United
States of America.
“Boich” means Boich Companies, LLC, a Delaware limited liability company.

 

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“Borrowers” means, collectively, SPE and RailCo, and each individually, a
“Borrower”.
“Borrowing” means Loans of the same Type, made, converted or continued on the
same date and, in the case of Eurodollar Loans, as to which a single Interest
Period is in effect.
“Borrowing Request” means a request by the Borrowers for the Initial Borrowing
in accordance with Section 2.03 and substantially in the form of Exhibit E.
“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in Los Angeles, California or New York City are
authorized or required by law to remain closed; provided that, when used in
connection with a Eurodollar Loan, the term “Business Day” shall also exclude
any day on which banks are not open for dealings in dollar deposits in the
London interbank market.
“Call Option” has the meaning assigned thereto in the Guaranty by and between
FirstEnergy and the Administrative Agent.
“Capital Lease” means any lease of real or personal property, the obligations
under which lease to pay rent or other amounts are required to be capitalized
under GAAP.
“Capital Lease Obligations” of any Person means the obligations of such Person
to pay rent or other amounts under any lease of (or other arrangement conveying
the right to use) real or personal Property, or a combination thereof, which
obligations are required to be classified and accounted for as Capital Leases,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
“Change in Law” means the occurrence, after the date of this Agreement, of any
of the following: (a) the adoption or taking effect of any law, rule, regulation
or treaty, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation or application thereof by any Governmental
Authority or (c) the making or issuance of any request, guideline or directive
(whether or not having the force of law) by any Governmental Authority, to the
extent that such request, guideline or directive sets forth any new or modified
policy, interpretation, request, guideline or directive as compared to any
applicable requests, guidelines or directives made or issued by such
Governmental Authority on or before the date of this Agreement.
“Charges” has the meaning assigned to such term in Section 9.13.
“Closing Distribution” has the meaning assigned to such term in Section 5.08.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Collateral” means all “Collateral”, as defined in any applicable Security
Document.
“Collateral Agent” means Union Bank, in its capacity as collateral agent for the
Lenders.

 

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“Commitment” means, with respect to each Lender, the commitment of such Lender
to make Loans hereunder, expressed as an amount representing the maximum
aggregate permitted amount of such Lender’s Exposure hereunder, as set forth on
Schedule 2.01. The aggregate amount of the Lenders’ Commitments is $350,000,000.
“Compliance Certificate” has the meaning assigned to such term in
Section 5.01(c).
“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.
“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.
“dollars” or “$” refers to lawful money of the United States of America.
“Effective Date” means the date on which the conditions specified in
Section 4.01 are satisfied (or waived in accordance with Section 9.02).
“Environmental Laws” means any and all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material, or to human health and safety, including, without limitation, the
Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 (“CERCLA”), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act of 1976, as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection laws.
“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), directly or indirectly resulting from or based upon
(a) violation of any Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous Materials,
(c) exposure to any Hazardous Materials, (d) the release or threatened release
of any Hazardous Materials into the environment or (e) any contract, agreement
or other consensual arrangement pursuant to which liability is assumed or
imposed with respect to any of the foregoing.
“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
equity interest.

 

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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.
“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with either Borrower, is treated as a single employer under
Section 414(b) or (c) of the Code or, solely for purposes of Section 302 and 303
of ERISA and Section 412 and 430 of the Code, is treated as a single employer
under Section 414 of the Code.
“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived); (b) a determination that
any Plan is in “at risk” status (within the meaning of Section 430 of the Code
or Section 303 of ERISA); (c) the filing pursuant to Section 412(c) of the Code
or Section 302(c) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (d) the incurrence by either Borrower or any
of its ERISA Affiliates of any liability under Title IV of ERISA with respect to
the termination of any Plan; (e) the receipt by either Borrower or any ERISA
Affiliate from the PBGC of any notice of its intent to institute proceedings to
terminate any Plan or to appoint a trustee to administer any Plan under
Section 4042 of ERISA or the providing of notice by a plan administrator of the
intent to terminate any Plan under Section 4041 of ERISA; (f) the incurrence by
either Borrower or any of its ERISA Affiliates of any liability with respect to
the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or
(g) the receipt by either Borrower or any ERISA Affiliate of any notice, or the
receipt by any Multiemployer Plan from either Borrower or any ERISA Affiliate of
any notice, concerning the imposition of Withdrawal Liability or a determination
that a Multiemployer Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA.
“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Adjusted LIBO Rate.
“Event of Default” has the meaning assigned to such term in Article VII.
“Excluded Taxes” means, with respect to the Administrative Agent, any Lender or
any other recipient of any payment to be made by or on account of any obligation
of either Borrower hereunder, (a) income or franchise taxes imposed on (or
measured by) its net income by the United States of America, or by the
jurisdiction under the laws of which such recipient is organized or in which its
principal office is located or, in the case of any Lender, in which its
applicable lending office is located or in which such Taxes would not be imposed
in the absence of activities by such Lender in such jurisdiction unrelated to
the transactions contemplated by the Loan Documents, (b) any branch profits
taxes imposed by the United States of America or any similar tax imposed by any
other jurisdiction in which such recipient is located, (c) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the Borrowers
under Section 2.16(b)), any withholding tax that is imposed on amounts payable
to such Foreign Lender, (d) any withholding Taxes attributable to a Lender’s or
the Administrative Agent’s failure or inability to comply with Section 2.14(d),
or to the extent the documentation provided pursuant to such Section does not
establish a complete exemption from withholding Taxes, other than, in each case
described in (c) or (d), as a result of a Change in Law that occurred after the
date that such Lender or the Administrative Agent became a party to this
Agreement and that (i) rendered such Lender or the Administrative Agent no
longer legally entitled to deliver the form or forms required pursuant to such
Section, (ii) rendered such Lender or the Administrative Agent ineligible for a
complete exemption from U.S. federal withholding or backup withholding Tax, or
(iii) rendered the information or the certifications made in such form or forms
untrue or inaccurate in a material respect.

 

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“Executive Order” has the meaning assigned to such term in Section 3.16(a).
“Exposure” means, with respect to any Lender at any time, the sum of the
aggregate outstanding principal amount of such Lender’s Loans at such time.
“Extraction Charge Agreement” means that certain Extraction Charge Agreement,
dated July 16, 2008, between SPE and WMB Marketing Ventures, LLC.
“Fair Value” means, with respect to any Property owned by either Borrower, the
fair market value thereof as determined from time to time by the members (or the
Board of Directors or any corresponding body, or a duly constituted committee
thereof) of such Borrower in good faith.
“Federal Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy”, as amended and any successor statute thereto.
“Federal Funds Effective Rate” means, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for such day for such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by it.
“Fee Letter” has the meaning assigned to that term in Section 2.09(a).
“FE Indebtedness” has the meaning assigned to the term “Indebtedness” set forth
in Section 1.01 of the FirstEnergy Credit Agreement as in effect on the date
hereof (and as such term may hereafter be amended from time to time, but only to
the extent that the effect of any such amendment on the Loan Documents has been
consented to in accordance with Section 9.02).
“Final Maturity Date” means the second anniversary of the Effective Date.
“Financial Officer” means, with respect to either Borrower, the chief financial
officer, principal accounting officer, treasurer or controller of such Borrower.
“FirstEnergy” means FirstEnergy Corp., an Ohio corporation.
“FirstEnergy Credit Agreement” has the meaning assigned to that term in the
Guaranty.

 

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“FirstEnergy Ventures” means FirstEnergy Ventures Corp., an Ohio corporation.
“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrowers are resident for tax
purposes. For purposes of this definition, the United States of America, each
State thereof and the District of Columbia shall be deemed to constitute a
single jurisdiction.
“Fund” means any Person (other than (i) a natural person and (ii) a hedge fund)
that is (or will be) engaged in making, purchasing, holding or otherwise
investing in commercial loans and similar extensions of credit in the ordinary
course of its business.
“GAAP” means generally accepted accounting principles in the United States of
America.
“Global Mining Group” means Global Mining Group, LLC, a Delaware limited
liability company.
“Governmental Authority” means the government of the United States of America or
any other nation, or of any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government (including any supra-national bodies such as the European Union, the
European Central Bank or NAFTA Binational Panel).
“Granting Lender” has the meaning assigned to such term in Section 9.04(h).
“Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the “primary obligor”) in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease Property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided, that the term “Guarantee” shall not include endorsements
for collection or deposit in the ordinary course of business. The term
“Guarantee” as a verb has a corresponding meaning.
“Guarantors” means, collectively, FirstEnergy, Global Mining Group, WMB and WMB
II.
“Guaranty” means the Guaranty Agreement in the form of Exhibit D, to be executed
and delivered by each Guarantor.

 

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“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, and infectious or medical wastes,
regulated pursuant to any Environmental Law.
“Hedging Agreement” means any commodity, interest rate or currency swap, cap,
floor, collar, forward agreement or other exchange or protection agreements or
any option with respect to any such transaction (including, without limitation,
commodity price swap agreements, forward agreements or contracts of sale which
provide for prepayment for deferred shipment or delivery of oil, gas or other
commodities).
“Indebtedness” means, for any Person, at any date of determination, without
duplication, all (i) secured or unsecured indebtedness of such Person for
borrowed money or obligations of such Person for the deferred purchase price of
property or services or obligations of such Person evidenced by notes, bonds,
debentures or other instruments, (ii) Capital Lease Obligations of such Person,
(iii) obligations secured by any Lien existing on any Property owned or held by
such Person, whether or not such Person has assumed or become liable for the
obligations secured thereby, (iv) obligations of such Person in respect of
letters of credit, bankers’ acceptances, surety bonds, performance bonds and
similar extensions of credit and obligations (other than any such obligation in
support of other Indebtedness already included in this definition), including,
without duplication of the foregoing, reimbursement obligations of such Person
in respect thereof, (v) obligations of such Person under any Hedging Agreements
(the amount of any such obligation to be the amount that is or would be payable
upon settlement, liquidation, termination or acceleration thereof, giving effect
to any netting agreements), and (vi) obligations of such Person under Guarantees
in respect of, and obligations of such Person otherwise to assure a creditor
against loss in respect of, indebtedness or obligations of others of the kinds
referred to in clauses (i) through (v) above. The Indebtedness of any Person
shall include the Indebtedness of any other entity (including any partnership in
which such Person is a general partner) to the extent such Person is liable
therefor as a result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.
“Indemnified Taxes” means Taxes other than Excluded Taxes.
“Indemnitee” has the meaning assigned to such term in Section 9.03(b).
“Information” has the meaning assigned to such term in Section 9.12.
“Initial Borrowing” has the meaning assigned to such term in Section 2.02(a).
“Interest Election Request” means a request by the Borrowers to convert or
continue a Borrowing in accordance with Section 2.05.
“Interest Payment Date” means (a) with respect to any ABR Loan, the last
Business Day of each March, June, September and December, and (b) with respect
to any Eurodollar Loan, the last day of the Interest Period applicable to the
Borrowing of which such Loan is a part and, in the case of a Eurodollar
Borrowing with an Interest Period of more than three months’ duration, each day
prior to the last day of such Interest Period that occurs at intervals of three
months’ duration after the first day of such Interest Period.

 

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“Interest Period” means, with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing (which initially shall be the date on
which such Borrowing is made and thereafter shall be the effective date of the
most recent conversion or continuation of such Borrowing) and ending on the
corresponding day of the week that is one, two or three weeks thereafter or on
the numerically corresponding day in the calendar month that is one, two, three
or six months thereafter, as the Borrowers may elect; provided, that (i) if any
such Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day and (ii) any
such Interest Period of one, two, three or six months that commences on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the last calendar month of such Interest Period) shall end
on the last Business Day of the last calendar month of such Interest Period.
“Lead Arranger” means Union Bank, as Sole Lead Arranger and Sole Bookrunner for
the credit facilities established by this Agreement.
“Lenders” means the Persons listed on Schedule 2.01 and any other Person that
shall have become a party hereto pursuant to an Assignment and Assumption in
accordance with Section 9.04, other than any such Person that ceases to be a
party hereto pursuant to an Assignment and Assumption.
“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate per annum determined by the Administrative Agent at
approximately 11:00 a.m., London time, on the date that is two Business Days
prior to the commencement of such Interest Period by reference to the British
Bankers’ Association Interest Settlement Rates for deposits in dollars (as set
forth by the Bloomberg Information Service or any successor thereto or any other
service selected by the Administrative Agent which has been nominated by the
British Bankers’ Association as an authorized information vendor for the purpose
of displaying such rates) for a period equal to such Interest Period; provided
that, to the extent that an interest rate is not ascertainable pursuant to the
foregoing provisions of this definition, the “LIBO Rate” with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate per annum at
which dollar deposits for loans of similar size to such Eurodollar Borrowing and
for a maturity comparable to such Interest Period would be offered to the
Administrative Agent in the London interbank market at approximately 12:00 noon,
London time, on the date that is two Business Days prior to the beginning of
such Interest Period.
“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of
such asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, Capital Lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.

 

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“Loan Documents” means this Agreement, each Note, the Fee Letter, each Security
Document, the Guaranty, each Specified Hedge Agreement, and all other
agreements, instruments and documents now or hereafter executed and/or delivered
pursuant hereto or thereto.
“Loan Parties” means the Borrowers and the Guarantors.
“Loans” means the loans made by the Lenders to the Borrowers pursuant to this
Agreement.
“MarketCo” means Global Coal Sales Group, LLC, a Delaware limited liability
company.
“Material Adverse Effect” means a material adverse effect on (a) the financial
condition, assets, operations or business of the Loan Parties taken as a whole,
(b) the ability of the Loan Parties to perform any of their material obligations
under any Loan Document or (c) the rights of or benefits available to any Agent
or the Lenders under any Loan Document.
“Material Indebtedness” means (a) Indebtedness (other than the Loans) of any
Loan Party (other than FirstEnergy) in an aggregate principal amount exceeding
$15,000,000 and (b) FE Indebtedness of FirstEnergy or any of its Significant
Subsidiaries in an aggregate principal amount exceeding $50,000,000.
“Maximum Rate” has the meaning assigned to such term in Section 9.13.
“Moody’s” means Moody’s Investors Service, Inc. or any successor thereto.
“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3)
of ERISA.
“Notes” means, collectively, the promissory notes delivered pursuant to Section
2.07(e), together with any and all renewals, extensions for any period,
increases, rearrangements, substitutions or modifications thereof.
“Obligations” means (a) the principal of and premium, if any, and interest
(including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Loans, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, and (b) all other monetary obligations, including fees, costs,
expenses and indemnities, whether primary, secondary, direct, contingent, fixed
or otherwise (including monetary obligations incurred during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of the Borrowers under this
Agreement and the other Loan Documents.
“Other Taxes” means any and all present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies arising from any
payment made under any Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, any Loan Document.

 

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“Participant” has the meaning assigned to such term in Section 9.04(e).
“Patriot Act” has the meaning assigned to such term in Section 9.14.
“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.
“Permitted Encumbrances” means:
(a) Liens imposed by law for taxes, assessments or other governmental charges
which are not yet due and payable or are being contested in compliance with
Section 5.04;
(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other
like Liens imposed by law, arising in the ordinary course of business and
securing obligations that are not overdue by more than 30 days or are being
contested in compliance with Section 5.04;
(c) pledges and deposits made in the ordinary course of business in compliance
with workers’ compensation, unemployment insurance and other social security
laws or regulations;
(d) deposits to secure the performance of bids, trade contracts, leases (other
than Capital Leases), statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case in the
ordinary course of business (but not incurred or made in connection with the
borrowing of money, the obtaining of advances or credit or the payment of the
deferred purchase price of Property);
(e) judgment liens in respect of judgments that do not constitute an Event of
Default under clause (j) of Article VII;
(f) leases or subleases granted to others, easements, rights-of-way,
restrictions and other similar charges or encumbrances, in each case incidental
to, and not interfering with, the ordinary conduct of the business of the
Borrowers, provided that such Liens do not, in the aggregate, materially detract
from the value of the Property subject to any such leases, subleases, easements,
rights-of-way, restrictions or other similar charges or encumbrances;
(g) Liens arising by virtue of any statutory or common law provision relating to
banker’s liens, rights of set-off or similar rights and remedies as to deposit
accounts or other funds maintained with a creditor depository institution;
(h) Liens existing on the Effective Date and described in Schedule 6.02; and
(i) Liens created pursuant to the Security Documents.

 

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“Permitted Investments” means:
(a) direct obligations of, or obligations the principal of and interest on which
are unconditionally guaranteed by, the United States of America (or by any
agency thereof to the extent such obligations are backed by the full faith and
credit of the United States of America), in each case maturing within 12 months
from the date of acquisition thereof;
(b) investments in commercial paper maturing within 12 months from the date of
acquisition thereof and having, at such date of acquisition, a credit rating of
at least A-1 or P-1 from S&P or Moody’s (or, if at any time neither S&P nor
Moody’s shall be rating such obligations, an equivalent rating from another
nationally recognized rating service);
(c) investments in certificates of deposit, banker’s acceptances and time
deposits maturing within 12 months from the date of acquisition thereof issued
or guaranteed by or placed with, and money market deposit accounts issued or
offered by, any domestic office of any commercial bank organized under the laws
of the United States of America or any State thereof which has a combined
capital and surplus and undivided profits of not less than $500,000,000;
(d) fully collateralized repurchase agreements with a term of not more than
30 days for securities described in clause (a), (b) or (c) above and entered
into with a financial institution satisfying the criteria described in clause
(c) above or a securities dealer of nationally recognized standing; and
(e) shares of investment companies that are registered under the Investment
Company Act of 1940 and invest solely in one or more of the types of securities
described in clauses (a) through (d) above.
“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Sections 412 and 430 of the
Code or Sections 302 and 303 of ERISA, and in respect of which either Borrower
or any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5)
of ERISA.
“Pledge Agreement” means the Pledge and Security Agreement in the form of
Exhibit B, to be executed and delivered by the Pledgors.
“Pledgors” means, collectively, FirstEnergy Ventures, WMB II and Global Mining
Group.
“Property” shall mean any interest in any kind of property or asset, whether
real, personal or mixed, moveable or immoveable, tangible or intangible,
including without limitation cash, securities, accounts and contract rights.

 

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“Qualified Counterparty” means, with respect to any Specified Hedge Agreement,
any counterparty thereto that, at the time such Specified Hedge Agreement was
entered into, was a Lender or an Affiliate of a Lender.
“RailCo” means Global Rail Group, LLC, a Delaware limited liability company.
“RailCo Credit Agreement” means that certain Credit Agreement, dated as of
November 17, 2008, among RailCo, the lenders from time to time party thereto,
and Union Bank (formerly known as Union Bank of California, N.A.), as
administrative agent and collateral agent.
“Rating” means a rating issued by S&P and/or Moody’s with respect to
FirstEnergy’s senior unsecured debt (without credit enhancement or a third
person guarantee); provided that if there is no such rating, “Rating” shall mean
the rating(s) one level below the rating assigned by S&P and/or Moody’s to
FirstEnergy’s senior secured debt.
“Reference Rate” means the variable rate of interest per annum established by
Union Bank from time to time as its “reference rate”. Such “reference rate” is
set by Union Bank as a general reference rate of interest, taking into account
such factors as Union Bank may deem appropriate, it being understood that many
of Union Bank’s commercial or other loans are priced in relation to such rate,
that it is not necessarily the lowest or best rate actually charged to any
customer and that Union Bank may make various commercial or other loans at rates
of interest having no relationship to such rate. For purposes of this Agreement,
each change in the Reference Rate shall be effective as of the opening of
business on the date announced as the effective date of any change in such
“reference rate”.
“Register” has the meaning assigned to such term in Section 9.04(c).
“Regulation D” means Regulation D of the Board.
“Regulation U” means Regulation U of the Board.
“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, trustees, officers, employees, agents
and advisors of such Person and such Person’s Affiliates.
“Required Lenders” means, at any time, Lenders having Exposures and unused
Commitments representing more than 50% of the sum of the total Exposures and
unused Commitments at such time; provided that if there are only two Lenders,
“Required Lenders” shall mean both such Lenders.
“Requirement of Law” means, as to any Person, the certificate of formation and
limited liability company agreement or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its Property or to
which such Person or any of its Property is subject.

 

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“Responsible Officer” means, with respect to any Loan Party, the chief executive
officer, president, chief financial officer, treasurer, assistant treasurer or
controller of such Loan Party. Any document delivered hereunder or under any
other Loan Document that is signed by a Responsible Officer of a Loan Party
shall be conclusively presumed to have been authorized by all necessary limited
liability company action on the part of such Loan Party and such Responsible
Officer shall be conclusively presumed to have acted on behalf of such Loan
Party.
“Restricted Payment” means (a) any payment or other distribution (whether in
cash, securities or other Property) in respect of any Equity Interest in either
Borrower (including any payment or other distribution to or on behalf of any
member of either Borrower in respect of taxes paid or payable by such member),
(b) any payments on account of the purchase, redemption, retirement or other
acquisition of any Equity Interest in either Borrower, or any warrants or
options therefor, whether in cash or in property or in obligations or
securities, (c) principal, interest and other amounts required or permitted to
be paid by either Borrower pursuant to the Subordinated Debt (including, without
limitation, any prepayment of the Subordinated Debt) or (d) any payment of
management fees, extraction fees (including any such fee payable under the
Extraction Charge Agreement), royalties or such other payments of similar
substance or effect by either Borrower to any of its Affiliates.
“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., or any successor thereto.
“Security Documents” means the Pledge Agreement and each of the other security
agreements, pledges, mortgages, assignments (collateral or otherwise) and
consents, if any, and each other security agreement or other instrument or
document executed and delivered pursuant to any of the foregoing documents, in
each case to secure any of the Obligations.
“Significant Subsidiaries” has the meaning assigned to such term in Section 1.01
of the FirstEnergy Credit Agreement as in effect on the date hereof (and as such
term may hereafter be amended from time to time, but only to the extent that the
effect of any such amendment on the Loan Documents has been consented to in
accordance with Section 9.02).
“Solvent” means, with respect to any Person, as of any date of determination,
that (a) the amount of the “present fair saleable value” of the assets of such
Person will, as of such date, exceed the amount of all “liabilities of such
Person, contingent or otherwise”, as of such date, as such quoted terms are
determined in accordance with applicable federal and state laws governing
determinations of the insolvency of debtors, (b) the present fair saleable value
of the assets of such Person will, as of such date, be greater than the amount
that will be required to pay the liability of such Person on its debts as such
debts become absolute and matured, (c) such Person will not have, as of such
date, an unreasonably small amount of capital with which to conduct its
business, and (d) such Person will be able to pay its debts as they mature. For
purposes of this definition, (i) “debt” means liability on a “claim”, and (ii)
“claim” means any (x) right to payment, whether or not such a right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an
equitable remedy for breach of performance if such breach gives rise to a right
to payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured
or unsecured.

 

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“SPC” has the meaning assigned to such term in Section 9.04(h).
“SPE” means Signal Peak Energy, LLC, a Delaware limited liability company.
“SPE Credit Agreement” means that certain Credit Agreement, dated as of
November 17, 2008, among SPE, the lenders from time to time party thereto, and
Union Bank (formerly known as Union Bank of California, N.A.), as administrative
agent and collateral agent.
“Specified Hedge Agreement” means any Hedging Agreement entered into by either
Borrower and any Qualified Counterparty.
“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board with respect to the Adjusted LIBO Rate, for
eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Board). Such reserve percentages shall include those imposed
pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute
eurocurrency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be available
from time to time to any Lender under such Regulation D or any comparable
regulation. The Statutory Reserve Rate shall be adjusted automatically on and as
of the effective date of any change in any reserve percentage.
“Subordinated Debt” has the meaning assigned to such term in Section 6.01(e).
“Subsidiary” means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other entity
the accounts of which would be consolidated with those of the parent in the
parent’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50%
of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held, or (b) that is, as of such date, otherwise
Controlled, by the parent or one or more Subsidiaries of the parent.
“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority
(including any interest, penalties or additions to tax imposed by such
Governmental Authority with respect thereto).
“Transactions” means the execution, delivery and performance by the Borrowers of
this Agreement and the other Loan Documents, the borrowing of Loans and the use
of the proceeds thereof.

 

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“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.
“Union Bank” means Union Bank, N.A., a national banking association.
“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.
“WMB” means WMB Loan Ventures, LLC, a Delaware limited liability company.
“WMB II” means WMB Loan Ventures II, LLC, a Delaware limited liability company
SECTION 1.02. Classification of Loans and Borrowings. For purposes of this
Agreement, Loans may be classified and referred to by Type (e.g., a “Eurodollar
Loan” or “ABR Loan”). Borrowings also may be classified and referred to by Type
(e.g., a “Eurodollar Borrowing” or “ABR Borrowing”).
SECTION 1.03. Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including” shall
be deemed to be followed by the phrase “without limitation”. The word “will”
shall be construed to have the same meaning and effect as the word “shall”.
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, and (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided that, if the
Borrowers notify the Administrative Agent that the Borrowers request an
amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the application thereof on the
operation of such provision (including the effects of the application or
discontinuance of the application of accounting for the effects of regulation to
all or any portion of either Borrower’s operations), or if the Administrative
Agent notifies the Borrowers that the Required Lenders request an amendment to
any provision hereof for such purpose, regardless of whether any such notice is
given before or after such change in GAAP or in the application thereof, then
such provision shall be interpreted on the basis of GAAP as in effect and
applied immediately before such change shall have become effective until such
notice shall have been withdrawn or such provision amended in accordance
herewith.

 

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SECTION 1.05. Pro Forma Calculations. All pro forma calculations permitted or
required to be made by the Borrowers pursuant to this Agreement shall
(a) include only those adjustments that would be permitted or required by
Regulation S-X under the Securities Act of 1933, as amended, and (b) be
certified to by a Financial Officer of each Borrower as having been prepared in
good faith based upon assumptions believed to be reasonable.
ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and conditions set forth in this
Agreement, each Lender severally agrees to make Loans to the Borrowers in a
single advance on the Effective Date in an aggregate principal amount up to but
not exceeding the amount of such Lender’s Commitment. Amounts repaid or prepaid
in respect of the Loans may not be reborrowed.
SECTION 2.02. Loans and Borrowings.
(a) The Loans shall be made in a single disbursement to the Borrowers on the
Effective Date as part of a single Borrowing (the “Initial Borrowing”)
consisting of Loans of the same Type made by the Lenders ratably in accordance
with their respective Commitments. The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder; provided that the Commitments of the Lenders are several and no
Lender shall be responsible for any other Lender’s failure to make Loans as
required.
(b) Each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans,
as the Borrowers may request in accordance herewith. Each Lender at its option
may make any Eurodollar Loan by causing any domestic or foreign branch or
Affiliate of such Lender to make such Loan; provided that any exercise of such
option shall not affect the obligation of the Borrowers to repay such Loan in
accordance with the terms of this Agreement.
(c) At the commencement of each Interest Period for any Eurodollar Borrowing,
such Borrowing shall be in an aggregate amount that is an integral multiple of
$1,000,000 and not less than $5,000,000. At the time that each ABR Borrowing is
made, such Borrowing shall be in an aggregate amount that is an integral
multiple of $500,000 and not less than $2,500,000. Borrowings of more than one
Type may be outstanding at the same time; provided that there shall not at any
time be more than a total of six (6) Eurodollar Borrowings outstanding.
(d) Notwithstanding the amount of the Loans borrowed by either Borrower, or
whether either Borrower has requested a Borrowing, the Borrowers shall be
jointly and severally liable for the repayment of the principal amount of each
Loan and all interest thereon, fees, expenses and other amounts payable
hereunder, in accordance with Section 2.18.

 

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(e) Notwithstanding any other provision of this Agreement, the Borrowers shall
not be entitled to request, or to elect to convert or continue, any Borrowing if
the Interest Period requested with respect thereto would end after the Final
Maturity Date.
SECTION 2.03. Request for Initial Borrowing. To request the Initial Borrowing,
the Borrowers shall notify the Administrative Agent of such request in writing,
pursuant to a written Borrowing Request signed by the Borrowers, (a) in the case
of a Eurodollar Borrowing, not later than 11:00 a.m., Los Angeles, California
time, two (2) Business Days before the date of such Borrowing (provided, that
the Borrowers shall have executed and delivered to the Administrative Agent,
together with such Borrowing Request, a breakage cost indemnity letter in form
and substance satisfactory to the Administrative Agent) or (b) in the case of an
ABR Borrowing, not later than 10:00 a.m., Los Angeles, California time, on the
date of such Borrowing. Such Borrowing Request shall be irrevocable and shall
specify the following information in compliance with Section 2.02:
(i) the aggregate amount of the Initial Borrowing (which amount shall not exceed
the aggregate amount of the Lenders’ Commitments), and the portion thereof to be
borrowed by each Borrower;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be
applicable thereto, which shall be a period contemplated by the definition of
the term “Interest Period”; and
(v) the location and number of each Borrower’s account(s) to which funds are to
be disbursed.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrowers shall be
deemed to have selected an Interest Period of one (1) month’s duration. Promptly
following receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender’s Loan to be made as part of the requested Borrowing.
SECTION 2.04. Funding of Initial Borrowing.
(a) Each Lender shall make each Loan to be made by it hereunder on the Effective
Date by wire transfer of immediately available funds by 11:00 a.m., Los Angeles,
California time, on the Effective Date to the account of the Administrative
Agent most recently designated by it for such purpose by notice to the Lenders.
The Administrative Agent will make such Loans available to the Borrowers by
promptly crediting the amounts so received, in like funds, to such account(s) of
the Borrowers designated in the Borrowing Request delivered pursuant to
Section 2.03.

 

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(b) Unless the Administrative Agent shall have received notice from a Lender
prior to the proposed date of the Initial Borrowing that such Lender will not
make available to the Administrative Agent such Lender’s share of the Initial
Borrowing, the Administrative Agent may in its sole discretion assume that such
Lender has made such share available on such date in accordance with paragraph
(a) of this Section and may, in reliance upon such assumption, make available to
the Borrowers a corresponding amount. In such event, if a Lender has not in fact
made its share of the Initial Borrowing available to the Administrative Agent,
then the applicable Lender and the Borrowers severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from and including the date such amount is made available
to the Borrowers to but excluding the date of payment to the Administrative
Agent, at (i) in the case of such Lender, the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation or (ii) in the case of the
Borrowers, the interest rate applicable to ABR Loans. If such Lender pays such
amount to the Administrative Agent, then such amount shall constitute such
Lender’s Loan included in the Initial Borrowing.
SECTION 2.05. Interest Elections.
(a) The Initial Borrowing shall initially be of the Type(s) specified in the
Borrowing Request delivered pursuant to Section 2.03 and, in the case of a
Eurodollar Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request. Thereafter, the Borrowers may elect to convert each Borrowing
to a different Type or to continue such Borrowing and, in the case of a
Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in
this Section. The Borrowers may elect different options with respect to
different portions of the affected Borrowing, in which case each such portion
shall be allocated ratably among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising each such portion shall be considered a
separate Borrowing.
(b) To make an election pursuant to this Section, the Borrowers shall notify the
Administrative Agent of such election by telephone (i) in the case of a
conversion to, or continuation of, a Eurodollar Borrowing, not later than
11:00 a.m., Los Angeles, California time, three (3) Business Days before the
date of such proposed conversion or continuation (as the case may be), or
(ii) in the case of a conversion to an ABR Borrowing, not later than 11:00 a.m.,
Los Angeles, California time, one (1) Business Day before the date of such
proposed conversion. Each such telephonic Interest Election Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Interest Election Request in a form approved
by the Administrative Agent and signed by the Borrowers.
(c) Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to clauses (iii) and (iv) below shall
be specified for each resulting Borrowing);

 

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(ii) the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period
to be applicable thereto after giving effect to such election, which shall be a
period contemplated by the definition of the term “Interest Period”.
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrowers shall be deemed to have
selected an Interest Period of one (1) month’s duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender’s portion of each resulting Borrowing.
(e) If the Borrowers fail to deliver a timely Interest Election Request with
respect to a Eurodollar Borrowing prior to the end of the Interest Period
applicable thereto, then, unless such Borrowing is repaid as provided herein, at
the end of such Interest Period such Borrowing shall be converted to an ABR
Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default
has occurred and is continuing (i) no outstanding Borrowing may be converted to
or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.
SECTION 2.06. Termination of Commitments. The Commitments of the Lenders shall
terminate in whole on the Effective Date immediately after the making of the
Loans pursuant to Section 2.01.
SECTION 2.07. Repayment of Loans; Evidence of Debt.
(a) The Borrowers, jointly and severally, hereby unconditionally promise to pay
to the Administrative Agent for the account of each Lender the then unpaid
principal amount of each Loan on the Final Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice an account
or accounts evidencing the indebtedness of the Borrowers to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder, the Type thereof and the Interest
Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrowers to each Lender hereunder
and (iii) the amount of any sum received by the Administrative Agent hereunder
for the account of the Lenders and each Lender’s share thereof.

 

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(d) The entries made in the accounts maintained pursuant to paragraph (b) or
(c) of this Section shall be prima facie evidence of the existence and amounts
of the obligations recorded therein; provided that the failure of any Lender or
the Administrative Agent to maintain such accounts or any error therein shall
not in any manner affect the obligation of the Borrowers to repay the Loans in
accordance with the terms of this Agreement.
(e) Any Lender may request that Loans be evidenced by a Note. In such event, the
Borrowers shall prepare, execute and deliver to such Lender a Note payable to
the order of such Lender (or, if requested by such Lender, to such Lender and
its registered assigns). Thereafter, the Loans evidenced by such Note(s) and
interest thereon shall at all times (including after assignment pursuant to
Section 9.04) be represented by one or more Notes in such form payable to the
order of the payee named therein (or, if any such Note is a registered note, to
such payee and its registered assigns).
SECTION 2.08. Prepayment of Loans.
(a) Subject to prior notice in accordance with paragraph (d) of this Section,
the Borrowers shall have the right at any time and from time to time to prepay
any Borrowing in whole or in part, without premium or penalty (subject, in the
case of any prepayment of a Eurodollar Borrowing, to Section 2.13).
(b) The Borrowers shall prepay the Loans if either Borrower conveys, sells,
leases, assigns, transfers or otherwise disposes of any of its Property other
than as permitted by Section 6.05 hereof in an amount equal to the greater of
(A) the Fair Value of the Property sold and (B) the consideration received by
such Borrower from such transaction; provided that no payment made pursuant to
this paragraph (b) need be made in an amount greater than the aggregate amount
of Loans outstanding.
(c) Prior to any optional prepayment of Borrowings hereunder, the Borrowers
shall select the Borrowing or Borrowings to be prepaid and shall specify such
selection in the notice of such prepayment pursuant to paragraph (d) of this
Section.
(d) The Borrowers shall notify the Administrative Agent by telephone (confirmed
by telecopy) of any optional prepayment hereunder (i) in the case of prepayment
of a Eurodollar Borrowing, not later than 11:00 a.m., Los Angeles, California
time, three (3) Business Days before the date of prepayment, or (ii) in the case
of prepayment of an ABR Borrowing, not later than 11:00 a.m., Los Angeles,
California time, on the date of prepayment. Each such notice shall be
irrevocable and shall specify the prepayment date and the principal amount of
each Borrowing or portion thereof to be prepaid. Promptly following receipt of
any such notice, the Administrative Agent shall advise the Lenders of the
contents thereof. Each partial prepayment of any Borrowing shall be in an
aggregate principal amount that is an integral multiple of $1,000,000 and not
less than $5,000,000. Each prepayment of a Borrowing shall be applied ratably to
the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by
accrued interest to the extent required by Section 2.10 and any amounts required
to be paid pursuant to Section 2.13 in connection with such prepayment.

 

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SECTION 2.09. Fees.
(a) The Borrowers jointly and severally agree to pay to the Lead Arranger and
each Agent, for their own account and for the account of the Lenders, as
applicable, such fees as are provided for in that certain letter agreement,
dated the date hereof, among the Borrowers and the Agents (the “Fee Letter”), in
each case, in the amounts and at the times specified therein.
(b) All fees payable hereunder shall be paid on the dates due, in immediately
available funds, to the Administrative Agent for distribution, in the case of
the up-front fees, to the Lenders entitled thereto. Fees paid shall be fully
earned upon payment and shall not be refundable under any circumstances.
SECTION 2.10. Interest.
(a) The Loans comprising each ABR Borrowing shall bear interest at the Alternate
Base Rate plus the Applicable Margin.
(b) The Loans comprising each Eurodollar Borrowing shall bear interest at the
Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the
Applicable Margin.
(c) Notwithstanding the foregoing, upon the occurrence and during the
continuance of an Event of Default, each Loan shall bear interest at a rate
equal to the higher of (i) 2.0% per annum in excess of the rate otherwise
applicable to such Loan, as provided in paragraph (a) or (b) above, as
applicable, or (ii) a per annum rate equal to the Alternate Base Rate plus the
Applicable Margin for ABR Loans plus 2.0% (such rate, the “ABR Default Rate”).
In addition, if any interest on any Loan, any fee or any other amount payable by
the Borrowers hereunder is not paid when due, whether at stated maturity, upon
acceleration or otherwise, such overdue amount shall bear interest, after as
well as before judgment, at a rate per annum equal to the ABR Default Rate.
(d) Accrued interest on each Loan shall be payable in arrears on each Interest
Payment Date for such Loan; provided that (i) interest accrued pursuant to
paragraph (c) of this Section shall be payable on demand, (ii) in the event of
any repayment or prepayment of any Loan, accrued interest on the principal
amount repaid or prepaid shall be payable on the date of such repayment or
prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior
to the end of the current Interest Period therefor, accrued interest on such
Loan shall be payable on the effective date of such conversion. The
Administrative Agent agrees to provide an invoice to the Borrowers for each
interest payment due on an Interest Payment Date (provided, that the failure to
provide any such invoice shall not in any manner affect the obligation of the
Borrowers to pay interest on each Loan in accordance with the terms of this
Agreement).
(e) All interest hereunder shall be computed on the basis of a year of 360 days,
except that interest computed by reference to the Alternate Base Rate at times
when the Alternate Base Rate is based on the Reference Rate shall be computed on
the basis of a year of 365 days (or 366 days in a leap year), and in each case
shall be payable for the actual number of days elapsed (including the first day
but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO
Rate or LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.

 

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SECTION 2.11. Alternate Rate of Interest. If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that adequate and reasonable means do not exist for
ascertaining the Adjusted LIBO Rate for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that the
Adjusted LIBO Rate for such Interest Period will not adequately and fairly
reflect the cost to such Lenders of making or maintaining their Loans included
in such Eurodollar Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrowers and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrowers and the Lenders that the
circumstances giving rise to such notice no longer exist, any Interest Election
Request that requests the conversion of any Borrowing to, or continuation of any
Borrowing as, a Eurodollar Borrowing shall be ineffective.
SECTION 2.12. Increased Costs.
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Lender or the Administrative Agent (except any such reserve
requirement reflected in the Adjusted LIBO Rate);
(ii) subject any Lender to any Tax of any kind whatsoever with respect to this
Agreement or any Eurodollar Loan made by it, or change the basis of taxation of
payments to such Lender in respect thereof (except for (A) Indemnified Taxes or
Other Taxes covered by Section 2.14 and (B) the imposition of, or any change in
the rate of, any Excluded Tax payable by such Lender); or
(iii) impose on any Lender, the Administrative Agent or the London interbank
market any other condition affecting this Agreement or Eurodollar Loans made by
such Lender;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender or the Administrative Agent hereunder in respect of
any Eurodollar Loan (whether of principal, interest or otherwise), then the
Borrowers will pay to such Lender or the Administrative Agent, as the case may
be, such additional amount or amounts as will compensate such Lender or the
Administrative Agent, as the case may be, for such additional costs incurred or
reduction suffered.

 

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(b) If any Lender determines that any Change in Law regarding capital
requirements has or would have the effect of reducing the rate of return on such
Lender’s capital or on the capital of such Lender’s holding company, if any, as
a consequence of this Agreement or the Loans made by such Lender, to a level
below that which such Lender or such Lender’s holding company could have
achieved but for such Change in Law (taking into consideration such Lender’s
policies and the policies of such Lender’s holding company with respect to
capital adequacy), then from time to time the Borrowers will pay to such Lender
such additional amount or amounts as will compensate such Lender or such
Lender’s holding company for any such reduction suffered.
(c) A certificate of a Lender setting forth the amount or amounts necessary to
compensate such Lender or its holding company, as the case may be, as specified
in paragraph (a) or (b) of this Section and containing a reasonable explanation
thereof (to the extent permitted by law), shall be delivered to the Borrowers
and shall be conclusive absent manifest error. The Borrowers jointly and
severally agree to pay such Lender the amount shown as due on any such
certificate within ten (10) Business Days after receipt thereof.
(d) No Lender shall be entitled to demand compensation or be compensated under
this Section to the extent that such compensation relates to any period of time
more than six (6) months prior to the date upon which such Lender first notified
the Borrowers of the occurrence of the event entitling such Lender to such
compensation (unless, and to the extent, that any such compensation so demanded
shall relate to the retroactive application of any event so notified to the
Borrowers).
SECTION 2.13. Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default),
(b) the conversion of any Eurodollar Loan other than on the last day of the
Interest Period applicable thereto, (c) the failure to borrow, convert, continue
or prepay any Loan on the date specified in any notice delivered pursuant
hereto, or (d) the assignment of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto as a result of a request by the
Borrowers pursuant to Section 2.16, then, in any such event, the Borrowers shall
compensate each Lender for the loss, cost and expense attributable to such
event. In the case of a Eurodollar Loan, such loss, cost or expense to any
applicable Lender shall be deemed to include an amount determined by such Lender
to be the excess, if any, of (i) the amount of interest which would have accrued
on the principal amount of such Loan had such event not occurred, at the
Adjusted LIBO Rate that would have been applicable to such Loan, for the period
from the date of such event to the last day of the then current Interest Period
therefor (or, in the case of a failure to borrow, convert or continue, for the
period that would have been the Interest Period for such Loan), over (ii) the
amount of interest which would accrue on such principal amount for such period
at the interest rate which such Lender would bid were it to bid, at the
commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the Eurodollar market. A certificate of any Lender
setting forth any amount or amounts that such Lender is entitled to receive
pursuant to this Section and containing a reasonably detailed calculation
thereof shall be delivered to the Borrowers and shall be conclusive absent
manifest error. The Borrowers shall pay such Lender the amount shown as due on
any such certificate within ten (10) Business Days after receipt thereof.

 

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SECTION 2.14. Taxes.
(a) Any and all payments by or on account of any obligation of either Borrower
hereunder or under any other Loan Document shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided that if
either Borrower shall be required to deduct any Indemnified Taxes or Other Taxes
from such payments, then (i) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent or
applicable Lender (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, (ii) such Borrower shall
make such deductions and (iii) such Borrower shall pay the full amount deducted
to the relevant Governmental Authority in accordance with applicable law;
provided, however, that the Borrowers shall not be required to increase any such
amounts payable to any Lender with respect to any Indemnified Taxes (i) that are
attributable to such Lender’s failure to comply with the requirements of
paragraph (d) of this Section, or (ii) that are United States withholding taxes
imposed on amounts payable to such Lender at the time such Lender becomes a
party to this Agreement, except to the extent such Lender’s assignor (if any)
was entitled, at the time of assignment, to receive additional amounts from the
Borrowers with respect to such Indemnified Taxes pursuant to this paragraph (a).
(b) The Borrowers jointly and severally agree to indemnify the Administrative
Agent and each Lender, within ten (10) Business Days after written demand
therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by
the Administrative Agent or such Lender, as the case may be, on or with respect
to any payment by or on account of any obligation of the Borrowers hereunder or
under any other Loan Document (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section)
and any penalties, interest and reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority.
A certificate as to the amount of such payment or liability delivered to the
Borrowers by a Lender, or by the Administrative Agent on its own behalf or on
behalf of a Lender, containing a reasonably detailed calculation thereof, shall
be conclusive absent manifest error.
(c) As soon as practicable after any payment of Indemnified Taxes or Other Taxes
by either Borrower to a Governmental Authority, such Borrower shall deliver to
the Administrative Agent the original or a certified copy of a receipt (if any)
issued by such Governmental Authority evidencing such payment, a copy of the
return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent and reasonably available to such
Borrower.

 

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(d) To the extent legally able to do so, each Lender shall deliver to the
Borrowers (with a copy to the Administrative Agent), on or prior to the date on
which such Lender becomes a Lender under this Agreement, promptly upon the
occurrence of any event that would result in the invalidity or obsolescence of
any information provided upon previously-provided documentation, and from time
to time thereafter as reasonably requested by the Borrowers or the
Administrative Agent, such properly completed and executed documentation
prescribed by the law of the United States, or as otherwise reasonably requested
by the Borrowers, as will permit such payments to be made without withholding.
Without limiting the generality of the foregoing:
(i) Each Foreign Lender shall, to the extent legally able to do so:
(A) on or prior to the date on which such Foreign Lender becomes a Lender under
this Agreement, deliver to the Borrowers and the Administrative Agent two copies
of either (1) in the case of a Foreign Lender claiming exemption from U.S.
federal withholding tax under Section 871(h) or 881(c) of the Code with respect
to payments of “portfolio interest”, United States Internal Revenue Service Form
W-8BEN (together with a certificate representing that such Foreign Lender is not
a bank for purposes of Section 881(c) of the Code, is not a 10-percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of either
Borrower and is not a controlled foreign corporation related to either Borrower
(within the meaning of Section 864(d)(4) of the Code)), or (2) Internal Revenue
Service Form W-8BEN or Form W-8ECI, in each case properly completed and duly
executed by such Foreign Lender claiming complete exemption from, or a reduced
rate of, U.S. federal withholding tax on payments by the Borrowers under this
Agreement; and
(B) deliver to the Borrowers and the Administrative Agent two further copies of
any such form or certification (or any applicable successor form) promptly upon
the obsolescence or invalidity of any form previously delivered by such Foreign
Lender and from time to time thereafter upon the reasonable request of the
Borrowers or the Administrative Agent.
(ii) Each Lender other than a Foreign Lender shall deliver to the Borrowers
(with a copy to the Administrative Agent) a duly executed and properly completed
copy of Internal Revenue Service Form W-9 (or applicable successor form)
establishing an exemption from United States federal backup withholding tax at
the following times: (x) on or prior to the date such Lender becomes a party to
this Agreement with respect to such Lender; (y) promptly upon the occurrence of
any event that would result in the invalidity or obsolescence of any
previously-provided form; and (z) from time to time thereafter upon the
reasonable request of the Borrowers or the Administrative Agent.
(e) In addition, the Borrowers shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(f) If any Lender or the Administrative Agent determines, in its reasonable
discretion, that is has received a refund of a Tax for which an additional
payment has been made by either Borrower pursuant to this Section 2.14, then
such Lender or the Administrative Agent, as the case may be, shall reimburse
such Borrower for such amount (but only to the extent of indemnity payments
made, or additional amounts paid, by such Borrower under this Section 2.14 with
respect to the Tax giving rise to such refund), net of all out-of-pocket
expenses of the Administrative Agent or such Lender and without interest (other
than any interest paid by the relevant Governmental Authority with respect to
such refund). This paragraph shall not be construed to require the
Administrative Agent or any Lender to make available its tax returns (or any
other information relating to its taxes which it deems confidential) to the
Borrowers or any other Person.

 

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SECTION 2.15. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
(a) The Borrowers shall make each payment required to be made by it hereunder or
under any other Loan Document (whether of principal, interest or fees, or of
amounts payable under Section 2.12, 2.13 or 2.14, or otherwise) prior to
10:00 a.m., Los Angeles, California time, on the date when due, in immediately
available funds, without set-off, counterclaim, recoupment or deduction of any
kind. Any amounts received after such time on any date shall be deemed to have
been received on the next succeeding Business Day for purposes of calculating
interest thereon. All such payments shall be made to the Administrative Agent at
its offices located at 445 South Figueroa Street, Los Angeles, California 90071
(or such other office as the Administrative Agent shall from time to time
designate to the Borrowers), except that payments pursuant to Sections 2.12,
2.13, 2.14 and 9.03 shall be made directly to the Persons entitled thereto and
payments pursuant to other Loan Documents shall be made to the Persons specified
therein. The Administrative Agent shall distribute any such payments received by
it for the account of any other Person to the appropriate recipient promptly
following receipt thereof. If any payment hereunder or under any other Loan
Document shall be due on a day that is not a Business Day, the date for payment
shall be extended to the next succeeding Business Day, and, in the case of any
payment accruing interest, such interest shall be payable for the period of such
extension. All payments under each Loan Document shall be made in dollars.
(b) If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, interest and fees
then due hereunder, such funds shall be applied (i) first, towards payment of
interest and fees then due hereunder, ratably among the parties entitled thereto
in accordance with the amounts of interest and fees then due to such parties,
and (ii) second, towards payment of principal then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of principal then
due to such parties.
(c) If any Lender shall, by exercising any right of set-off or counterclaim or
otherwise, obtain payment in respect of any principal of or interest on any of
its Loans resulting in such Lender receiving payment of a greater proportion of
the aggregate amount of its Loans and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value) participations in the Loans
of other Lenders to the extent necessary so that the benefit of all such
payments shall be shared by the Lenders ratably in accordance with the aggregate
amount of principal of and accrued interest on their respective Loans; provided
that (i) if any such participations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations shall be rescinded
and the purchase price restored to the extent of such recovery, without
interest, and (ii) the provisions of this paragraph shall not be construed to
apply to any payment made by either Borrower pursuant to and in accordance with
the express terms of this Agreement or any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its
Loans to any assignee or participant, other than to either Borrower or any
Affiliate thereof (as to which the provisions of this paragraph shall apply).
Each Borrower consents to the foregoing and agrees, to the extent it may
effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against such
Borrower rights of set-off and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of such Borrower in the amount
of such participation.

 

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(d) Unless the Administrative Agent shall have received notice from the
Borrowers prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders hereunder that the Borrowers will not make
such payment, the Administrative Agent may assume that the Borrowers have made
such payment on such date in accordance herewith and may, in reliance upon such
assumption, distribute to the Lenders the amount due. In such event, if the
Borrowers have not in fact made such payment, then each of the Lenders severally
agrees to repay to the Administrative Agent forthwith on demand the amount so
distributed to such Lender with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date of
payment to the Administrative Agent, at the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.04(b) or 2.15(c), then the Administrative Agent may, in
its discretion (notwithstanding any contrary provision hereof), apply any
amounts thereafter received by the Administrative Agent for the account of such
Lender to satisfy such Lender’s obligations under such Sections until all such
unsatisfied obligations are fully paid.
SECTION 2.16. Mitigation Obligations; Replacement of Lenders.
(a) If any Lender requests and is entitled to compensation under Section 2.12,
or if either Borrower is required to pay any additional amount to any Lender or
any Governmental Authority for the account of any Lender pursuant to
Section 2.14, then such Lender shall use reasonable efforts to designate a
different lending office for funding or booking its Loans hereunder or to assign
its rights and obligations hereunder to another of its offices, branches or
affiliates, if, in the judgment of such Lender, such designation or assignment
(i) would eliminate or reduce amounts payable pursuant to Section 2.12 or 2.14,
as the case may be, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender. The Borrowers jointly and severally hereby agree to pay all reasonable
costs and expenses incurred by any Lender in connection with any such
designation or assignment.
(b) If (i) any Lender requests and is entitled to compensation under
Section 2.12, (ii) either Borrower is required to pay any additional amount to
any Lender or any Governmental Authority for the account of any Lender pursuant
to Section 2.14, (iii) any Lender defaults in its obligation to fund Loans
hereunder, or (iv) any Lender has not consented to a proposed amendment, waiver
or modification under this Agreement that requires the consent of all Lenders
and which has been approved by the Required Lenders, then the Borrowers may, at
their sole expense and effort, upon notice to such Lender and the Administrative
Agent, require such Lender to assign and delegate, without recourse (in
accordance with and subject to the restrictions and consent requirements
contained in Section 9.04), all of its interests, rights and obligations under
this Agreement to an assignee that shall assume such obligations (which assignee
may be another Lender, if a Lender accepts such assignment); provided that
(A) no Event of Default has occurred and is continuing, (B) such Lender shall
have received payment of an amount equal to the outstanding principal of its
Loans, accrued interest thereon, accrued fees and all other amounts payable to
it hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrowers (in the case of all other amounts),
and (C) in the case of any such assignment resulting from a claim for
compensation under Section 2.12 or payments required to be made pursuant to
Section 2.14, such assignment will result in a reduction in such compensation or
payments. A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrowers to require such assignment
and delegation cease to apply.

 

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SECTION 2.17. Illegality. Notwithstanding any other provision of this Agreement,
if any Change in Law makes it unlawful, or any Governmental Authority asserts
that it is unlawful, for any Lender to perform its obligations hereunder to
make, continue or convert into Eurodollar Loans, then, on notice thereof and
demand therefor by such Lender to the Borrowers through the Administrative
Agent, (a) the obligation of such Lender to make, continue or convert into
Eurodollar Loans shall be suspended until the Administrative Agent notifies the
Borrowers that such Lender has determined that the circumstances causing such
suspension no longer exist, and (b) the Borrowers shall forthwith prepay in full
all Eurodollar Loans of such Lender then outstanding, together with accrued and
unpaid interest thereon, unless the Borrowers, within five (5) Business Days of
such notice and demand, convert all Eurodollar Loans of all Lenders then
outstanding into ABR Loans in accordance with the terms hereof.
SECTION 2.18. Joint and Several Obligations; Subrogation Rights; Savings Clause.
(a) Notwithstanding anything to the contrary set forth herein or in any other
Loan Document, the obligations of the Borrowers hereunder and under the other
Loan Documents are joint and several, regardless of which of the Borrowers
actually receives the proceeds of the Loans, or the manner in which the
Borrowers, the Administrative Agent or the Lenders account therefor in their
respective books and records. Neither the joint and several liability of a
Borrower for the obligations of the other Borrower, nor the Liens granted to the
Collateral Agent under the Security Documents by the Pledgors, shall be impaired
or released by: (a) the failure of any Agent or any Lender, any successor or
assign thereof or any holder of any Note to assert any claim or demand or to
exercise or enforce any right, power or remedy against either Borrower, any
other Person, the Collateral or otherwise, (b) any extension or renewal for any
period (whether or not longer than the original period) or exchange of any of
the obligations under the Loan Documents or the release or compromise of any
obligation of any nature of any Person with respect thereto, (c) the surrender,
release or exchange of all or any part of any Property (including, without
limitation, the Collateral) securing payment, performance and/or observance of
any of the obligations under the Loan Documents or the compromise or extension
or renewal for any period (whether or not longer than the original period) of
any obligations of any nature of any Person with respect to any such Property,
(d) any action or inaction on the part of any Agent or any Lender, or any other
event or condition with respect to either Borrower, which might otherwise
constitute a defense available to, or a discharge of, either Borrower or a
guarantor or surety of or for any or all of the obligations under the Loan
Documents, (e) any action or inaction by either Borrower under any Loan
Documents, (f) the avoidance or unenforceability of (i) any Lien granted to the
Collateral Agent under the Security Documents, (ii) any transfer made by or on
behalf of either Borrower for or on account of any obligation under the Loan
Documents or (iii) any obligation incurred under the Loan Documents, or (g) any
other act, matter or thing which would or might, in the absence of this
provision, operate to release, discharge or otherwise prejudicially affect the
obligations of either Borrower. Each Borrower waives all defenses based on
suretyship or impairment of collateral.

 

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(b) Each Borrower hereby unconditionally and irrevocably agrees not to exercise
any rights that it may now have or hereafter acquire against the other Borrower
or any Guarantor that arise from the existence, payment, performance or
enforcement of the Obligations under or in respect of this Agreement and the
other Loan Documents, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of any Agent or any Lender against such other
Borrower or any Guarantor, whether or not such claim, remedy or right arises in
equity or under contract, statute or common law, including, without limitation,
the right to take or receive from such other Borrower or any Guarantor, directly
or indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right, unless and until
all of the Obligations shall have been paid in full in cash. If any amount shall
be paid to a Borrower in violation of the immediately preceding sentence at any
time prior to the later of (i) the payment in full in cash of the Obligations,
and (ii) the termination of all Commitments in accordance with the terms hereof,
such amount shall be received and held in trust for the benefit of the Agents
and the Lenders, shall be segregated from other property and funds of such
Borrower and shall forthwith be paid or delivered to the Administrative Agent in
the same form as so received (with any necessary endorsement or assignment) to
be credited and applied to the Obligations, whether matured or unmatured, in
accordance with the terms of this Agreement and the other Loan Documents, or to
be held as collateral for any Obligations thereafter arising. Each Borrower
hereby acknowledges and agrees that the agreements set forth in this paragraph
(b) are intended to benefit the other Borrower, the Agents and the Lenders and
shall not limit or otherwise affect any Borrower’s liability hereunder or the
enforceability hereof.
(c) Each of the Borrowers, the Agents and the Lenders hereby confirms that it is
the intention of all such Persons that this Agreement and the Obligations of
each Borrower hereunder and under the other Loan Documents to which it is a
party not constitute a fraudulent transfer or fraudulent conveyance for purposes
of the Federal Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any other federal, state or foreign
bankruptcy, insolvency, receivership or similar law to the extent applicable to
this Agreement, the other Loan Documents and the Obligations of each Borrower
hereunder and thereunder. To effectuate the foregoing intention, the Agents, the
Lenders and the Borrowers hereby irrevocably agree that the Obligations of each
Borrower under this Agreement and the other Loan Documents to which it is a
party at any time shall be limited to the maximum amount as will result in such
Obligations of such Borrower not constituting a fraudulent transfer or
fraudulent conveyance.

 

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ARTICLE III
Representations and Warranties
Each Borrower represents and warrants to the Agents and the Lenders that:
SECTION 3.01. Organization; Powers. Such Borrower (a) is a limited liability
company duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, (b) has all requisite limited liability
company power and authority to carry on its business as now conducted or as
proposed to be conducted, (c) has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry on
its business as now conducted or as proposed to be conducted, except for those
which are not necessary during the term of this Agreement and are expected to be
obtained in the ordinary course of business by the time necessary, and
(d) except where the failure to do so, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect, is qualified
to do business, and is in good standing, in every jurisdiction in which the
nature of the business conducted by it makes such qualification necessary.
SECTION 3.02. Authorization; Enforceability. The Transactions are within such
Borrower’s limited liability company powers and have been duly authorized by all
necessary limited liability company action. Each of the Loan Documents to which
such Borrower is a party has been duly executed and delivered by such Borrower
and constitutes, and each other Loan Document to which such Borrower is to be a
party, when executed and delivered by such Borrower, will constitute, a legal,
valid and binding obligation of such Borrower, enforceable against such Borrower
in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.
SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority or any other Person, except such as have
been obtained or made and are in full force and effect, and except filings
necessary to perfect Liens created under the Loan Documents, (b) will not
violate any Requirement of Law, except where such violation (other than any such
violation of the certificate of formation, limited liability company agreement
or other organizational document or governing document of any of the Loan
Parties or any of the Pledgors) could not reasonably be expected to have a
Material Adverse Effect, (c) will not violate or result in a default under any
indenture, agreement or other instrument binding upon such Borrower or its
assets, or give rise to a right thereunder to require any payment to be made by
such Borrower, except where such violation, default or right to require payment
could not reasonably be expected to have a Material Adverse Effect, and (d) will
not result in the creation or imposition of any Lien on any of the revenues or
assets of such Borrower other than Liens permitted hereunder.

 

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SECTION 3.04. Financial Condition; No Material Adverse Change.
(a) The audited balance sheet and related statements of income, retained
earnings and cash flows of such Borrower as of and for the fiscal year ended
December 31, 2009 present fairly, in all material respects, the financial
position and results of operations and cash flows of such Borrower as of such
date and for such fiscal year in accordance with GAAP, as applied on a
consistent basis. The unaudited balance sheet and related statements of income,
retained earnings and cash flows of such Borrower as of and for the fiscal
quarterly period ended June 30, 2010 and the most recent financial statements
delivered by such Borrower pursuant to Section 5.01(a) or 5.01(b) present
fairly, in all material respects, the financial position and results of
operations and cash flows of such Borrower as of such dates and for such periods
in accordance with GAAP, as applied on a consistent basis, subject to year-end
audit adjustments and the absence of footnotes in the case of such June 30, 2010
financial information or the statements delivered pursuant to Section 5.01(b).
Such Borrower had not, at the date of the most recent balance sheet referred to
above, any Guarantee, contingent liability or liability for taxes, or any
long-term lease or unusual forward or long-term commitments, including any
interest rate or foreign currency swap or exchange transaction, which, taken as
a whole, were material to such Borrower, and which were not reflected in the
foregoing statements or in the notes thereto. Except as disclosed in
Schedule 3.04, during the period from June 30, 2010 to and including the
Effective Date there has been no sale, transfer or other disposition by such
Borrower of any part of its business or Property, and no purchase or other
acquisition of any business or Property (including any Equity Interests of any
other Person), which, in any case, is material in relation to the financial
condition of such Borrower taken as a whole at June 30, 2010.
(b) Since December 31, 2009, there has been no event or change in facts or
circumstances affecting such Borrower that individually or in the aggregate has
had or could reasonably be expected to have a Material Adverse Effect.
SECTION 3.05. Title to Properties, Etc. Except as disclosed in Schedule 3.05:
(a) Such Borrower has good, sufficient and clear title to, or valid leasehold
interests in, all Property material to its business, free and clear of all
adverse possession or abandonment claims and Liens, except Permitted
Encumbrances and other Liens permitted hereunder.
(b) All leases, rights of way, permits, licenses, franchises, and agreements
necessary for the conduct of the business of such Borrower and for the
Transactions are valid and subsisting and in full force and effect, and there
exists no default or event or circumstance which with the giving of notice or
the passage of time or both would give rise to a default under any such leases,
rights of way, permits, licenses, franchises or agreements, which would
adversely affect in any material respect the conduct of the business of such
Borrower, including the Transactions.
(c) The rights, Properties and other assets presently owned, leased or licensed
by such Borrower, including, without limitation, all easements and rights of
way, include all rights, Properties and other assets necessary to permit such
Borrower to conduct its business in all material respects in substantially the
same manner as its business has been conducted prior to the Effective Date.

 

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(d) All of the Properties of such Borrower which are reasonably necessary for
the operation of its business are in good working condition and are maintained
in accordance with Section 5.05(a).
(e) Such Borrower owns, or is licensed or permitted to use, all trademarks,
tradenames, copyrights, patents and other intellectual property material to its
business, and the use thereof by it does not infringe upon the rights of any
other Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.06. Litigation. Except as disclosed in Schedule 3.06, there are no
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of such Borrower, threatened
against such Borrower (a) as to which there is a reasonable possibility of an
adverse determination and that, if adversely determined, would, individually or
in the aggregate, result in a Material Adverse Effect, or (b) that involve any
of the Loan Documents or the Transactions.
SECTION 3.07. Compliance with Laws and Agreements. Except as disclosed in
Schedule 3.07 and not including Environmental Liabilities, which are addressed
in Section 3.18:
(a) Such Borrower has obtained all licenses, permits, franchises and other
governmental authorizations necessary for the ownership of its Properties and
the conduct of its business, including the Transactions, except where the
failure to obtain such licenses, permits, franchises or governmental
authorizations would not have (in the event such failure were asserted by any
Person through appropriate action) a Material Adverse Effect and, in each case,
except for those which are not necessary during the term of this Agreement and
which are expected to be obtained in the ordinary course of business by the time
necessary.
(b) Such Borrower is in compliance with all Requirements of Law, including the
Fair Labor Standards Act, the Americans with Disabilities Act, the Foreign
Corrupt Practices Act and Anti-Terrorism Laws, applicable to it or its Property
and all indentures, agreements and other instruments binding upon it or its
Property, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.08. Margin Regulations. No part of the proceeds of any Loans will be
used for “purchasing” or “carrying” any “margin stock” within the respective
meanings of each of the quoted terms under Regulation U as now and from time to
time hereafter in effect or for any purpose that violates the provisions of the
regulations of the Board. If requested by any Lender or the Administrative
Agent, each Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR
Form G-3 or FR Form U-1 referred to in Regulation U.
SECTION 3.09. Regulatory Status.
(a) Such Borrower is not an “investment company” or a company “controlled” by an
“investment company” as defined in, or subject to regulation under, the
Investment Company Act of 1940, as amended.

 

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(b) Such Borrower is not subject to regulation under any Requirement of Law
(other than Regulation X of the Board) which purports to restrict or regulate
its ability to borrow money or otherwise incur Indebtedness.
SECTION 3.10. Taxes. Such Borrower has filed all United States federal income
tax returns and all other material tax returns which are required to be filed by
it, or otherwise obtained appropriate extensions to file, and has paid all Taxes
shown as due on such returns or pursuant to any assessment received by such
Borrower, except such Taxes not yet due and payable or that are being contested
in good faith by appropriate proceedings and for which such Borrower has set
aside on its books adequate reserves in accordance with GAAP.
SECTION 3.11. ERISA. No ERISA Event has occurred or is reasonably expected to
occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed the fair
market value of the assets of such Plan by an amount that has resulted or could
reasonably be expected to result in a Material Adverse Effect. The present value
of all accumulated benefit obligations of all underfunded Plans (based on the
assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed the fair market value of the assets of all such
underfunded Plans by an amount that has resulted or could reasonably be expected
to result in a Material Adverse Effect.
SECTION 3.12. Security Documents.
(a) On the Effective Date, the provisions of the Security Documents are
effective to create, in favor of the Collateral Agent for the benefit of the
secured parties thereunder, legal, valid and enforceable Liens on or in all of
the Collateral subject thereto, and all necessary deliveries of property to the
Collateral Agent and all necessary recordings and filings have been made in all
necessary public offices so that the Liens created by such Security Documents
constitute perfected Liens on or in all rights, titles, estates and interests of
the applicable Loan Party in the Collateral covered thereby, prior and superior
to all other Liens, and all necessary consents to the creation and perfection of
such Liens have been obtained. No financing statement or other instrument or
recordation covering all or any part of the Collateral is on file in any
recording office which has not been terminated or released, except as may have
been filed in favor of the Collateral Agent.
(b) Such Borrower is not a party to any agreement or arrangement (other than any
Loan Document), or subject to any order, judgment, writ or decree, which either
restricts or purports to restrict its ability to grant Liens to other Persons on
or in respect of its Properties other than such restrictions which have been
waived or will have been waived, as of the date this representation is made, by
the party to such agreement who is entitled to waive such restriction.

 

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SECTION 3.13. Disclosure. Such Borrower has disclosed to the Administrative
Agent all agreements, instruments and corporate or other restrictions to which
it is subject, and all other matters known to it, that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
None of the reports, financial statements, certificates or other information
furnished by or on behalf of such Borrower to any Agent or Lender in connection
with the negotiation of this Agreement or any other Loan Document or delivered
hereunder (as modified or supplemented by, and taken together with, other
information so furnished) contained, as of the date of such report, financial
statement, certificate or other information so furnished, any material
misstatement of a fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to forward looking statements,
such Borrower represents only that such information represents such Borrower’s
best estimate of future performance and was prepared in good faith based upon
assumptions believed to be reasonable at the time, it being recognized by the
Agents and the Lenders that there can be no assurance that such expectations,
beliefs or projections will be achieved or accomplished and that such
projections are subject to an increasing degree of uncertainty as they relate to
later periods of time.
SECTION 3.14. Solvency. Both before and after giving effect to the Transactions,
the Borrowers, taken as a whole, are Solvent. Such Borrower has received fair
consideration and reasonably equivalent value for its respective obligations
under this Agreement and the other Loan Documents.
SECTION 3.15. Labor Matters. There are no strikes or other labor disputes
against such Borrower pending or, to the knowledge of such Borrower, threatened
that (individually or in the aggregate) could reasonably be expected to have a
Material Adverse Effect. Hours worked by and payment made to employees of such
Borrower have not been in violation of the Fair Labor Standards Act or any other
applicable Requirement of Law dealing with such matters that (individually or in
the aggregate) could reasonably be expected to have a Material Adverse Effect.
All payments due from such Borrower on account of employee health and welfare
insurance that (individually or in the aggregate) could reasonably be expected
to have a Material Adverse Effect if not paid have been paid or accrued as a
liability on the books of such Borrower.
SECTION 3.16. Anti-Terrorism Laws.
(a) Neither such Borrower nor, to the knowledge of such Borrower, any of its
Affiliates is in violation of any Requirement of Law relating to terrorism,
sanctions or money laundering (“Anti-Terrorism Laws”), including Executive Order
No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive
Order”), and the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law
107-56.
(b) Neither such Borrower nor, to the knowledge of such Borrower, any of its
Affiliates is any of the following:
(i) a Person that is listed in the annex to, or is otherwise subject to the
provisions of, the Executive Order;

 

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(ii) a Person owned or controlled by, or acting for or on behalf of, any Person
that is listed on the Annex to, or is otherwise subject to the provisions of,
the Executive Order;
(iii) a Person with whom such Borrower is prohibited from dealing or otherwise
engaging in any transaction by any Anti-Terrorism Law;
(iv) a Person who commits, threatens or conspires to commit or supports
“terrorism” as defined in the Executive Order; or
(v) a Person that is named as a “specially designated national or blocked
person” on the most current list published by the U.S. Treasury Department
Office of Foreign Assets Control at its official website or any replacement
website or other replacement official publication of such list.
(c) Neither such Borrower nor, to the knowledge of such Borrower, any of its
Affiliates (i) conducts any business or engages in making or receiving any
contribution of funds, goods or services to or for the benefit of any Person
described in clause (b)(i), (ii), (iii) or (v) above or, to the knowledge of
such Borrower, clause (b)(iv) above; (ii) deals in, or otherwise engages in any
transaction relating to, any Property or interest in Property blocked pursuant
to the Executive Order; or (iii) engages in or conspires to engage in any
transaction that evades or avoids, or has the purposes of evading or avoiding,
or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism
Law.
(d) No broker or other agent (other than the Lead Arranger in connection with
the syndication of the credit facilities established by this Agreement) is
acting for the benefit of such Borrower or any of its Affiliates, or, to the
knowledge of such Borrower, benefiting in any capacity, in each case in
connection with the Loan Documents.
SECTION 3.17. No Subsidiaries. Such Borrower has no Subsidiaries.
SECTION 3.18. Environmental Matters. Except as could not reasonably be expected
to have a Material Adverse Effect (or with respect to paragraphs (b) and
(c) below, where the failure to take such actions could not reasonably be
expected to have a Material Adverse Effect):
(a) Such Borrower is not subject to any existing, pending or, to its knowledge,
threatened action, suit, investigation, inquiry or proceeding by or before any
Governmental Authority, or to any remedial obligations under Environmental Laws;
(b) Such Borrower has obtained or filed, and is in compliance with the terms and
conditions of, all notices, permits, licenses and similar authorizations
required under applicable Environmental Laws;

 

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(c) (i) To the best knowledge of such Borrower, all Hazardous Materials, if any,
generated at any and all Property of such Borrower in the past have been
transported, treated and disposed of in accordance with Environmental Laws and
so as not to pose an imminent and substantial endangerment to public health or
welfare or the environment, (ii) to the best knowledge of such Borrower, all
such transport carriers and treatment and disposal facilities have been and are
operating in compliance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment, and (iii) any Hazardous Materials generated by the operation of its
Property have been transported, treated and disposed of in accordance with
Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment;
(d) Such Borrower (i) has complied with all Environmental Laws and obtained,
maintained and complied with all permits, licenses or other approvals required
under any Environmental Law, (ii) is not subject to any Environmental Liability,
(iii) has not received notice of any claim against it with respect to any
Environmental Liability or (iv) does not know of any basis for any Environmental
Liability on its part; and
(e) There has been no release or threatened release of Hazardous Materials on,
at, under or from any Property presently owned, leased, or operated by such
Borrower that has resulted in, or is reasonably likely to result in, liability
or obligations of such Borrower under any Environmental Laws.
SECTION 3.19. Insurance. Schedule 3.19 contains an accurate description of all
material policies of fire, liability, workers’ compensation and other forms of
insurance owned or held by such Borrower as of the Effective Date. All such
policies are in full force and effect, all premiums with respect thereto
covering all periods up to and including the Effective Date have been paid, and
no notice of cancellation or termination has been received with respect to any
such policy. Such policies are sufficient for compliance with all Requirements
of Law and of all material agreements to which such Borrower is a party; are
valid, outstanding and enforceable policies; provide adequate insurance coverage
for the assets and operations of such Borrower in at least such amounts and
against at least such risks (but including in any event public liability) as are
usually insured against in the same general area by companies engaged in the
same or a similar business; will remain in full force and effect through the
respective dates set forth in Schedule 3.19 without the payment of additional
premiums; and will not in any way be affected by, or terminate or lapse by
reason of, the transactions contemplated by this Agreement. Schedule 3.19
identifies all material risks, if any, which such Borrower has designated as
being self-insured.
SECTION 3.20. Hedging Agreements. Schedule 3.20 sets forth, as of the Effective
Date, a true and complete list of all Hedging Agreements of such Borrower, the
material terms thereof (including the type, term, effective date, termination
date and notional amounts or volumes), the net mark to market value thereof, all
credit support agreements relating thereto (including any margin required or
supplied), and the counterparty to each such agreement.
SECTION 3.21. No Default or Event of Default. No Default or Event of Default has
occurred and is continuing.
SECTION 3.22. Use of Proceeds. The proceeds of the Loans will be used in
accordance with Section 5.08.

 

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ARTICLE IV
Conditions Precedent
SECTION 4.01. Effective Date. The obligations of the Lenders under this
Agreement shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 9.02),
and upon such satisfaction or waiver, the Administrative Agent shall notify the
Borrowers in writing of the date that constitutes the Effective Date:
(a) The Administrative Agent (or its counsel) shall have received:
(i) from each party hereto either (A) a counterpart of this Agreement signed by
such party or (B) written evidence satisfactory to the Administrative Agent
(which may include telecopy transmission of a signed signature page of this
Agreement) that such party has signed a counterpart of this Agreement;
(ii) from the Borrowers either (A) the Notes signed by the Borrowers (to the
extent requested by any Lender pursuant to Section 2.07(e)) or (B) written
evidence satisfactory to the Administrative Agent (which may include telecopy
transmission of a signed signature page of the Notes) that the Borrowers have
signed such Notes;
(iii) from each party thereto either (A) a counterpart of the Guaranty signed by
such party or (B) written evidence satisfactory to the Administrative Agent
(which may include telecopy transmission of a signed signature page of the
Notes) that such party has signed a counterpart of the Guaranty;
(iv) a counterpart of the Pledge Agreement signed on behalf of each Pledgor,
together with (A) all documents, instruments and filings creating or perfecting
the Liens of the Pledge Agreement; (B) certificates (if any) representing the
Equity Interests of the Pledgors in the Borrowers, accompanied by instruments of
transfer and stock powers endorsed in blank; and (C) all other documents and
instruments required by law or reasonably requested by the Collateral Agent to
be filed, registered or recorded to create or perfect the Liens intended to be
created under the Pledge Agreement;
(v) (A) a favorable written opinion (addressed to each Agent and the Lenders and
dated the Effective Date) of Akin Gump Strauss Hauer & Feld, LLP, New York
counsel for the Loan Parties, in form and substance satisfactory to the Lenders,
(B) a favorable written opinion (addressed to each Agent and the Lenders and
dated the Effective Date) of Robert P. Reffner, Vice President, Legal for
FirstEnergy Service Company, in form and substance satisfactory to the Lenders,
and (C) a favorable written opinion (addressed to each Agent and the Lenders and
dated the Effective Date) of Calfee, Halter & Griswold LLP, counsel to certain
of the Loan Parties and Pledgors, in form and substance satisfactory to the
Lenders. The Borrowers hereby request such counsel to deliver such opinions;

 

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(vi) (A) certified copies of the resolutions of the board of directors (or other
equivalent body) of each Loan Party and (without duplication) each Pledgor
authorizing the execution, delivery and performance of each Loan Document to
which it is or is intended to be a party and any other matters with respect to
the Transactions and the Loan Documents (including, without limitation, evidence
of the consent of each Loan Party’s and (without limitation) each Pledgor’s
members or Board of Directors, as the case may be, to the Transactions and the
other Loan Documents, to the extent such consent is required pursuant to the
terms of such Person’s operating agreement or other formation and governing
documents), (B) certified copies of the organizational documents (including any
certificate of formation, certificate of incorporation, operating agreement, or
by-laws, as the case may be) of each Loan Party and each Pledgor and all
amendments thereto, (C) a certificate for each Loan Party and each Pledgor
certifying the name, incumbency and signature of each individual authorized to
execute the Loan Documents to which it is a party and the other documents or
certificates to be delivered pursuant hereto or thereto, on which each Agent may
conclusively rely until a revised certificate is similarly so delivered, and
(D) good standing certificates with respect to each Loan Party and each Pledgor
issued no earlier than ten (10) days prior to the Effective Date;
(vii) Uniform Commercial Code, tax and judgment lien searches as to FirstEnergy
Ventures in the State of Ohio, and as to the Borrowers, Global Mining Group and
WMB II in the State of Delaware;
(viii) satisfactory evidence that (A) all Indebtedness under the SPE Credit
Agreement and the RailCo Credit Agreement, together with all accrued interest,
fees, costs, expenses and other amounts payable by the Borrowers thereunder,
have been (or will be, contemporaneously with the making of the Loans on the
Effective Date) paid in full, (B) such agreements and all commitments thereunder
have been irrevocably terminated, and (C) all Liens securing payment of the
obligations thereunder have been terminated and released;
(ix) a Borrowing Request with respect to the Initial Borrowing; and
(x) such other statements, certificates, approvals, opinions, documents and
information with respect to the matters contemplated by this Agreement as the
Agents or any Lender may reasonably request.
(b) The representations and warranties of the Loan Parties and the Pledgors set
forth in this Agreement and the other Loan Documents shall be true and correct,
no Default or Event of Default shall have occurred and be continuing, and the
Administrative Agent shall have received a certificate, dated the Effective Date
and signed by a Financial Officer or the President or a Vice President of each
Borrower, confirming the same as of the Effective Date.
(c) Since June 30, 2010, there shall have been no material adverse change in the
financial condition, results of operations or business of either Borrower.
(d) The Administrative Agent and the Lenders shall have received all
documentation and other information required by bank regulatory authorities
under applicable “know your customer” and anti-money laundering rules and
regulations, including, without limitation, the Patriot Act.

 

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(e) The Administrative Agent and Lead Arranger shall have received all fees and
other amounts due and payable on or prior to the Effective Date, including all
up-front fees and, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses (including, without limitation, the reasonable fees and
expenses of counsel to the Administrative Agent and the Lead Arranger) required
to be reimbursed or paid by the Borrowers hereunder or under any other Loan
Document.
(f) All requisite Governmental Authorities and third parties, if any, shall have
approved or consented to this Agreement, the other Loan Documents and the
Transactions to the extent required (and the Administrative Agent shall have
received certified copies of all such approvals and consents, which shall be in
form and substance satisfactory to the Administrative Agent and the Lenders), no
stay of any applicable regulatory approval shall have been issued and there
shall be no litigation, governmental, administrative or judicial action, actual
or threatened, that could reasonably be expected to restrain, prevent or impose
burdensome conditions on this Agreement and the other Loan Documents or the
Transactions.
ARTICLE V
Affirmative Covenants
Until the Commitments have been terminated and the principal of and interest on
each Loan and all fees and other Obligations payable by the Borrowers hereunder
and under the other Loan Documents shall have been paid in full, each Borrower
covenants and agrees with the Administrative Agent and the Lenders that:
SECTION 5.01. Financial Statements and Other Information. Such Borrower will
furnish to the Administrative Agent (and the Administrative Agent will forward
such copies to the Lenders):
(a) as soon as available and in any event within one hundred and twenty
(120) days after the end of each fiscal year of such Borrower, audited
statements of income, retained earnings and cash flows of such Borrower for such
year and the related balance sheet as of the end of such year, setting forth in
each case in comparative form the corresponding figures for the preceding fiscal
year, and accompanied by an opinion of the accounting firm of
PricewaterhouseCoopers LLP or such other independent public accountants of
recognized regional or national standing selected by such Borrower and
reasonably acceptable to the Required Lenders, which opinion shall not contain
any qualification or exception as to the scope of such audit and shall state
that the financial statements fairly present in all material respects the
financial condition and results of operations of such Borrower as of the end of,
and for, such fiscal year and have been prepared in accordance with GAAP,
consistently applied (except where noted);

 

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(b) as soon as available and in any event within sixty (60) days after the end
of each of the first three (3) fiscal quarterly periods of each fiscal year of
such Borrower, unaudited statements of income, retained earnings and cash flows
of such Borrower for such period and for the period from the beginning of the
fiscal year to the end of such period, and the related balance sheets as of the
end of such period, setting forth in each case in comparative form the
corresponding figures as of the end of and for the corresponding period in the
preceding fiscal year, accompanied by a certificate of a Financial Officer of
such Borrower which certificate shall state that the financial statements fairly
present in all material respects the financial condition and results of
operations, as the case may be, of such Borrower in accordance with GAAP,
consistently applied (except where noted), as of the end of, and for, such
period (subject to normal year-end audit adjustments and the absence of
footnotes);
(c) concurrently with any delivery of financial statements of such Borrower
under clause (a) or (b) above, a certificate (a “Compliance Certificate”) of a
Financial Officer of such Borrower (i) certifying as to whether a Default has
occurred and is continuing, and in such event, specifying the details thereof
and any action taken or proposed to be taken with respect thereto, (ii) setting
forth either or each Rating for FirstEnergy as of the end of the respective
fiscal quarter or fiscal year, as applicable, and (iii) stating whether any
change in GAAP or in the application thereof not disclosed in any prior such
certificate has occurred since June 30, 2010 and, if any such change has
occurred, specifying the effect of such change on the financial statements
accompanying such certificate;
(d) promptly upon their becoming available, copies of any written notices from
any Governmental Authority of non-compliance by such Borrower with any material
decision of the applicable Governmental Authority, or with any other material
rules, regulations or orders of the applicable Governmental Authority, and any
written notices of any extraordinary audit or investigation by any applicable
Governmental Authority into the business, affairs or operations of such
Borrower; and
(e) promptly following any request therefor, such other information regarding
the operations, business affairs and financial condition of such Borrower
(including, without limitation, any Plan or Multiemployer Plan and any reports
or other information required to be filed under ERISA to the extent reasonably
available to such Borrower after such Borrower’s demand therefor), or compliance
with the terms of any Loan Document, as the Administrative Agent or any Lender
may reasonably request.
SECTION 5.02. Notices of Material Events. To the extent such Borrower becomes
aware of any of the following, such Borrower will furnish to the Administrative
Agent and each Lender written notice of the following, promptly (and in any
event within ten (10) Business Days) after the occurrence thereof:
(a) the occurrence of any Default or Event of Default not previously notified to
such Borrower by the Administrative Agent;
(b) the filing or commencement of any action, suit or proceeding by or before
any arbitrator or Governmental Authority against or affecting such Borrower or
any Affiliate thereof that, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect;

 

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(c) the occurrence of any ERISA Event that, alone or together with any other
ERISA Events that have occurred, could reasonably be expected to result in a
Material Adverse Effect; and
(d) any other development that results in, or could reasonably be expected to
result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the applicable Borrower
setting forth the details of the event or development requiring such notice and
any action taken or proposed to be taken with respect thereto.
SECTION 5.03. Existence; Conduct of Business. Such Borrower will do or cause to
be done all things necessary to preserve, renew and keep in full force and
effect its legal existence and all rights, licenses, permits, privileges,
franchises and government approvals and authorizations material to the conduct,
maintenance and operation of its Property and the conduct of its business,
except to the extent the failure to do so could not reasonably be expected to
result in a Material Adverse Effect.
SECTION 5.04. Payment of Obligations. Such Borrower will pay its obligations,
including Tax liabilities and assessments, before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) such Borrower has
set aside on its books adequate reserves with respect thereto to the extent
required by and otherwise in accordance with GAAP and (c) the failure to make
payment pending such contest could not reasonably be expected to result in a
Material Adverse Effect.
SECTION 5.05. Maintenance of Properties; Insurance. Such Borrower will:
(a) except where the failure to do so could not reasonably be expected to result
in a Material Adverse Effect, do all that is necessary to preserve and keep in
good repair, working order and efficiency all of its Properties including,
without limitation, all equipment, machinery and facilities, and from time to
time will make all the necessary repairs, renewals and replacements so that at
all times the state and condition of its Properties will be fully preserved and
maintained. Except where the failure to do so could not reasonably be expected
to result in a Material Adverse Effect, such Borrower will promptly: (i) pay and
discharge, or make reasonable and customary efforts to cause to be paid and
discharged, all rentals, royalties, expenses and indebtedness accruing under the
rights of way, licenses, leases or other agreements affecting or pertaining to
its Properties, (ii) perform or make reasonable and customary efforts to cause
to be performed, in accordance with industry standards, the obligations required
by each and all of the rights of way, deeds, leases, sub-leases, contracts and
agreements affecting its interests in its Properties, and (iii) do all other
things necessary to keep unimpaired, except for Liens permitted under Section
6.02, its rights with respect to its Properties and prevent any forfeiture
thereof or a default thereunder, except for any sale, lease, transfer or other
disposition thereof permitted by Section 6.05. Such Borrower will cause its
Properties to be operated in a careful and efficient manner in accordance in all
material respects with the practices of the industry and in compliance in all
material respects with all applicable contracts and agreements and all
Requirement of Laws; and

 

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(b) maintain, with financially sound and reputable insurance companies, or
through its own program of self-insurance, insurance in such amounts (with no
greater risk retention) and against such risks and with such self insurance as
are customarily maintained by companies of established reputations engaged in
the same or similar businesses operating in the same or similar locations. Such
Borrower will furnish to the Lenders, upon reasonable request of the
Administrative Agent, information in reasonable detail as to the insurance so
maintained.
SECTION 5.06. Books and Records; Inspection Rights. Such Borrower will keep
proper books of record and account in which entries are made of all dealings and
transactions in relation to its business and activities, all in accordance with
GAAP and with customary and prudent business practices. Such Borrower will
permit any representatives designated by an Agent or any Lender, upon reasonable
prior notice during ordinary business hours, to visit and inspect its
Properties, and, subject to contractual or statutory limitations regarding
confidential or proprietary information, to examine and make extracts from its
books and records, and to discuss its affairs, finances and condition with its
officers and independent accountants, as often as reasonably requested.
SECTION 5.07. Compliance with Laws. Such Borrower will comply with all laws,
rules, regulations and orders of any Governmental Authority applicable to it or
its Property (including, without limitation, ERISA and Environmental Laws),
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 5.08. Use of Proceeds. The proceeds of the Loans will be used only:
(a) for the repayment in full on the Effective Date of all Indebtedness and
other obligations of the Borrowers payable under the SPE Credit Agreement and
the RailCo Credit Agreement; and (b) for other general corporate purposes,
including the repayment on the Effective Date of any outstanding obligations of
SPE or RailCo to FirstEnergy or any of its Affiliates (such repayment, the
“Closing Distribution”). No part of the proceeds of any Loan will be used,
whether directly or indirectly, for any purpose that entails a violation of any
of the Regulations of the Board, including Regulations T, U and X.
SECTION 5.09. Environmental Matters. Such Borrower will:
(a) conduct and complete all investigations, studies, sampling and testing, and
all remedial, removal and other actions required under Environmental Laws,
except to the extent that the failure to take such actions could not reasonably
be expected to have a Material Adverse Effect, and promptly comply with all
lawful orders and directives of all Governmental Authorities respecting
Environmental Laws, except to the extent that the same are being contested in
good faith by appropriate proceedings and the pendency of such proceedings, or
failure to comply with such orders or directives, could not reasonably be
expected to have a Material Adverse Effect;

 

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(b) establish and implement such procedures as may be reasonably necessary to
continuously determine and assure that any failure of the following does not
have a Material Adverse Effect: (i) all Property of such Borrower and the
operations conducted thereon and other activities of such Borrower are in
compliance with and do not violate the requirements of any Environmental Laws,
(ii) such Borrower is in compliance with and maintains any and all licenses,
approvals, registrations or permits required by Environmental Laws, (iii) no
Hazardous Materials are disposed of or otherwise released on or to any Property
owned by such Borrower, except in compliance with Environmental Laws, and
(iv) no Hazardous Materials will be released on or to any such Property by such
Borrower in a quantity equal to or exceeding that quantity which requires
reporting pursuant to Section 103 of CERCLA; and
(c) promptly notify the Administrative Agent and the Lenders in writing of any
threatened action, investigation or inquiry by any Governmental Authority of
which such Borrower has knowledge in connection with any Environmental Laws,
excluding routine testing and corrective action, that might result in such
Borrower being liable for the payment or performance of obligations in an amount
that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect.
SECTION 5.10. Further Assurances. Such Borrower will execute any and all further
documents, agreements and instruments, and take all such further actions which
may be required under any applicable law, or which any Agent or the Required
Lenders may reasonably request, to effectuate the transactions contemplated by
the Loan Documents, or to correct any omissions or errors in any Loan Document,
all at the expense of the Borrowers.
SECTION 5.11. Subsidiaries. Such Borrower shall have no Subsidiaries.
ARTICLE VI
Negative Covenants
Until the Commitments have been terminated and the principal of and interest on
each Loan and all fees and other Obligations payable by the Borrowers hereunder
and under the other Loan Documents shall have been paid in full, each Borrower
covenants and agrees with the Administrative Agent and the Lenders that:
SECTION 6.01. Indebtedness. Such Borrower will not create, incur, assume or
permit to exist any Indebtedness, except:
(a) Indebtedness created under the Loan Documents;
(b) accounts payable (for the deferred purchase price of Property or services)
or other usual and customary payables from time to time incurred in the ordinary
course of business which, if greater than thirty (30) days past the due date,
are being contested in good faith by appropriate proceedings if reserves
adequate under GAAP shall have been established therefor;

 

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(c) (i) Indebtedness of such Borrower incurred to finance the acquisition,
construction or improvement of any fixed or capital assets, including Capital
Lease Obligations, and any Indebtedness assumed in connection with the
acquisition by such Borrower of any such assets or secured by a Lien on any such
assets prior to the acquisition thereof by such Borrower, provided that such
Indebtedness is incurred or assumed prior to or within ninety (90) days after
such acquisition or the completion of such construction or improvement, and
(ii) any extensions, renewals and replacements of any such Indebtedness that do
not increase the outstanding principal amount, or decrease the tenor, thereof;
(d) Indebtedness under Hedging Agreements permitted under Section 6.07; and
(e) (i) unsecured Indebtedness of such Borrower in favor of FirstEnergy;
(ii) unsecured Indebtedness of SPE to RailCo in an aggregate amount equal to or
less than (A) the toll payments charged by RailCo to SPE pursuant to the Tolling
Agreement, dated July 16, 2008, between SPE and RailCo, plus (B) the toll
payments charged by RailCo to FirstEnergy pursuant to the Toll Payment
Agreement, dated July 16, 2008, between FirstEnergy and RailCo, less (C) all
operating, maintenance, and capital expenses of RailCo, and, without
duplication, any amounts that RailCo is required to pay to service its
indebtedness; (iii) unsecured Indebtedness of SPE to MarketCo in an aggregate
amount equal to or less than (A) the price per ton received by MarketCo for the
sale of coal by SPE, less (B) the minimum price per ton agreed upon by MarketCo
and SPE for MarketCo’s sale of such coal; and (iv) other unsecured Indebtedness
of such Borrower in an aggregate amount not exceeding $15,000,000; in each case,
on terms and conditions acceptable to the Required Lenders and provided that
such Indebtedness shall be at all times subordinated in right of payment to the
Obligations pursuant to a subordination agreement in form and substance
acceptable to the Required Lenders (it being understood that, solely with
respect to Indebtedness of either Borrower in favor of FirstEnergy, the terms of
subordination set forth in Section 15 of the Guaranty are acceptable to the
Lenders) (collectively, “Subordinated Debt”).
SECTION 6.02. Liens. Such Borrower will not create, incur, assume or permit to
exist any Lien on any Property now owned or hereafter acquired by it, or assign
or sell any income or revenues or rights in respect of any thereof, except:
(a) Permitted Encumbrances;
(b) (i) Liens on fixed or capital assets acquired, constructed or improved by
such Borrower in an amount not exceeding, individually or in the aggregate,
$15,000,000, and (ii) Liens on moveable or non-fixed assets acquired by such
Borrower; provided, in each case, that (i) such Liens secure Indebtedness
permitted by Section 6.01(c), and (ii) such Liens shall not apply to Property of
such Borrower other than Property financed by such Indebtedness;
(c) Liens comprised by escrow arrangements entered into in connection with
assets sales, transfers or other dispositions permitted pursuant to
Section 6.05; and
(d) additional Liens on Property of such Borrower so long as the aggregate
principal amount of the obligations secured by such Liens does not exceed
$10,000,000.

 

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SECTION 6.03. Fundamental Changes.
(a) Such Borrower will not merge into or consolidate with any other Person, or
permit any other Person to merge into or consolidate with it, or sell, transfer,
lease or otherwise dispose of (in one transaction or in a series of
transactions) all or any substantial part of its assets, or liquidate or
dissolve.
(b) Such Borrower will not engage to any material extent in any business other
than businesses of the type conducted by such Borrower on the date of execution
of this Agreement and businesses reasonably related thereto.
SECTION 6.04. Investments, Loans, Advances and Acquisitions. Such Borrower will
not purchase, hold or acquire any Equity Interests, evidences of indebtedness or
other securities (including any option, warrant or other right to acquire any of
the foregoing) of, make or permit to exist any loans or advances to, or make or
permit to exist any investment or any other interest in, any other Person, or
purchase or otherwise acquire (in one transaction or a series of transactions)
any assets of any other Person constituting a business unit, except:
(a) Permitted Investments;
(b) investments received in connection with the bankruptcy or reorganization of,
or settlement of delinquent accounts and disputes with, customers and suppliers,
in each case in the ordinary course of business;
(c) extensions of trade credit in the ordinary course of business;
(d) investments permitted pursuant to Section 6.08;
(e) unsecured and subordinated loans by RailCo to SPE permitted pursuant to
Section 6.01(e)(ii); and
(f) acquisitions by SPE of coal reserves.
SECTION 6.05. Asset Sales. Such Borrower will not convey, sell, lease, assign,
transfer or otherwise dispose of any of its Property or business (including
leasehold interests), whether now owned or hereafter acquired, except:
(a) inventory and other Property in the ordinary course of business;
(b) dispositions of Property of such Borrower to the extent that such Property
is replaced by such Borrower within ninety (90) days after the date of such
disposition with Property (A) of substantially the same character and at least
equivalent quality, utility and useful life and (B) having a Fair Value equal to
or greater that the Fair Value of the disposed Property;
(c) dispositions of Property of such Borrower to the extent that,
contemporaneously with such disposition, such Property is exchanged by such
Borrower for other Property having a Fair Value equal to or greater that the
Fair Value of the disposed Property, as determined in the good faith judgment of
the members (or the Board of Directors, Managers or any corresponding body, or a
duly constituted committee thereof) of such Borrower (as applicable) and
certified in writing to the Administrative Agent by a Responsible Officer of
such Borrower; and

 

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(d) such Borrower may sell, transfer or otherwise dispose of other assets for
Fair Value in transactions not permitted under clauses (a), (b) or (c) above;
provided that (i) the aggregate consideration for all sales, transfers and
disposals by such Borrower pursuant to this clause (d) during any fiscal year of
such Borrower shall not exceed $1,000,000; (ii) with respect to any such sale,
transfer or disposition (or series of related sales, transfers or dispositions)
with an aggregate consideration in excess of $500,000, the members (or the
Manager, Managing Board or any corresponding body, or a duly constituted
committee thereof) of such Borrower shall have approved such sale, transfer or
disposition, as the case may be; and (iii) no Default is then existing and,
after giving effect to any such sale, transfer or disposition, as the case may
be, no Default shall have occurred and be continuing.
SECTION 6.06. Sale and Leaseback Transactions. Such Borrower will not enter into
any arrangement, directly or indirectly, whereby it shall sell, transfer or
otherwise dispose of any Property used or useful in its business, whether now
owned or hereafter acquired, and thereafter rent or lease such Property or other
Property that it intends to use for substantially the same purpose or purposes
as the Property sold or transferred, except for any such sale of any fixed or
capital assets that is made for Fair Value and is consummated within ninety
(90) days after such Borrower acquires or completes the construction of such
fixed or capital asset.
SECTION 6.07. Limitation on Hedging Agreements.
(a) Such Borrower will not enter into any Hedging Agreement other than Hedging
Agreements entered into in the ordinary course of business and not for
speculative purposes.
(b) Any Indebtedness incurred under any Specified Hedge Agreement shall be
treated as Indebtedness pari passu with all Indebtedness otherwise incurred
hereunder or under the other Loan Documents and shall be secured under the
Security Documents.
SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness. Such
Borrower will not declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment (other than the Closing Distribution), except
for:
(a) (i) payments of cash dividends or cash distributions to its members,
(ii) payments to a member of such Borrower to pay for consolidated, combined or
similar Federal, state or local taxes payable by such member and directly
attributable to (or arising as a result of) the operation of such Borrower,
(iii) payments of principal, interest or other amounts required or permitted to
be paid pursuant to the Subordinated Debt to the holders of the Subordinated
Debt (other than FirstEnergy) (provided, that such payments are permitted under
the subordination provisions applicable thereto), and (iv) payments of
management fees, extraction fees, royalties or such other payments of similar
substance or effect by such Borrower to Boich, First Energy, any Affiliates of
Boich or FirstEnergy, or any other Affiliates of such Borrower, in each case, so
long as both before and after giving effect to such payment, no Default has
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(b) payments of principal, interest or other amounts required or permitted to be
paid pursuant to Subordinated Debt incurred pursuant to Section 6.01(e)(i) to
FirstEnergy, so long as (A) both before and after giving effect to such payment,
no Default has occurred and is continuing, (B) such payments are permitted under
the subordination provisions applicable thereto and (C) the representations and
warranties of the Loan Parties and the Pledgors set forth in this Agreement and
the other Loan Documents shall be true and correct in all material respects on
and as of the date of such payment, both before and after giving effect to such
payment and to the application of the proceeds thereof, as though made on and as
of such date (except where such representations and warranties expressly relate
to an earlier date, in which case such representations and warranties shall have
been true and correct in all material respects as of such earlier date).
SECTION 6.09. Transactions with Affiliates. Such Borrower will not sell, lease
or otherwise transfer any Property to, or purchase, lease or otherwise acquire
any Property from, or otherwise engage in any other transactions with, any of
its Affiliates, except (a) at prices and on terms and conditions no less
favorable to such Borrower than could be obtained on an arm’s length basis from
unrelated third parties, (b) any Restricted Payment permitted by Section 6.08,
and (c) shared corporate or administrative services and staffing with
Affiliates, including accounting, legal, human resources and treasury
operations, provided on customary terms for similarly situated companies.
SECTION 6.10. Restrictive Agreements. Such Borrower will not, directly or
indirectly, create, assume, enter into, incur or permit to exist any contract,
agreement, understanding or other arrangement that prohibits, restricts or
imposes any condition upon the granting, conveying, creation, imposition or
maintenance of any Lien on any of its Property or which requires the consent of
or notice to other Persons in connection therewith; provided that the foregoing
shall not apply to restrictions and conditions imposed by law or by any Loan
Document.
SECTION 6.11. Accounting Changes. Such Borrower will not make any significant
change in accounting treatment or reporting practices except as required by
GAAP, or change its fiscal year.
SECTION 6.12. Compliance with ERISA. Such Borrower will not (a) enter into any
“prohibited transaction” (as defined in Section 4975 of the Code, and in ERISA)
involving any Plan that could reasonably be expected to result in a Material
Adverse Effect or (ii) allow or suffer to exist any other event or condition
known to such Borrower that results in any liability of such Borrower to the
PBGC that could reasonably be expected to result in a Material Adverse Effect
For purposes of this Section 6.12, “liability” shall not include termination
insurance premiums payable under Section 4007 of ERISA.

 

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ARTICLE VII
Events of Default
If any of the following events (“Events of Default”) shall occur:
(a) the Borrowers shall fail to make any payment of (i) principal of any Loan
when the same shall become due and payable, whether at the due date thereof or
at a date fixed for prepayment or otherwise, or (ii) interest on any Loan or any
other amount payable by either Borrower hereunder within five (5) days after the
same shall become due and payable, whether at the due date thereof or at a date
fixed for prepayment thereof or otherwise;
(b) any representation or warranty made or deemed made by or on behalf of any
Loan Party in or in connection with any Loan Document or any amendment or
modification hereof or waiver hereunder, or in any report, certificate,
financial statement or other document furnished pursuant to or in connection
with any Loan Document or any amendment or modification hereof or waiver
hereunder, shall prove to have been incorrect in any material respect when made
or deemed made;
(c) (i) any Borrower shall fail to observe or perform any covenant, condition or
agreement contained in (A) Section 5.01, and such failure shall continue
unremedied for a period of five (5) Business Days after such Borrower has
received written notice of such failure from the Administrative Agent or any
Lender, or (B) Section 5.02, 5.03 (as to the legal existence of such Borrower),
5.04, 5.08 or 5.11 or in Article VI, or (ii) any Loan Party (other than the
Borrowers) shall fail to perform the financial covenant (Debt to Capitalization
Ratio) or negative covenants contained, or incorporated by reference, in the
Guaranty;
(d) any Loan Party or any Pledgor shall fail to observe or perform any covenant,
condition or agreement contained in any Loan Document (other than those
specified in clause (a) or (c) of this Article), and such failure shall continue
unremedied for a period of 30 days after the earlier of (i) the date that any
Responsible Officer of such Loan Party or Pledgor, as the case may be, has
actual knowledge thereof or (ii) the date of notice thereof from the
Administrative Agent to the Borrowers (which notice will be given at the request
of any Lender);
(e) any Loan Party or any Significant Subsidiary of FirstEnergy shall fail to
make any payment (whether of principal or interest and regardless of amount) in
respect of any Material Indebtedness, when and as the same shall become due and
payable after giving effect to any applicable grace period;
(f) any event or condition occurs that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits (after
giving effect to any applicable notice requirement and/or grace period) the
holder or holders of any Material Indebtedness or any trustee or agent on its or
their behalf to cause any Material Indebtedness to become due, or to require the
prepayment, repurchase, redemption (other than pursuant to provisions permitting
the tendering of such Indebtedness from time to time for repurchase or
redemption without regard to the occurrence or non-occurrence of any event or
condition) or defeasance thereof, prior to its scheduled maturity; provided that
this clause (f) shall not apply to secured Indebtedness that becomes due as a
result of the voluntary sale or transfer of the Property securing such
Indebtedness;

 

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(g) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of any Loan Party or any Pledgor or the debts of any such Person, or of
a substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect,
or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for any Loan Party or for any Pledgor or for a
substantial part of such Person’s assets, and, in any such case, such proceeding
or petition shall continue undismissed for sixty (60) days or an order or decree
approving or ordering any of the foregoing shall be entered;
(h) any Loan Party or any Pledgor shall (i) voluntarily commence any proceeding
or file any petition seeking liquidation, reorganization or other relief under
any Federal, state or foreign bankruptcy, insolvency, receivership or similar
law now or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition described
in clause (g) of this Article, (iii) apply for or consent to the appointment of
a receiver, trustee, custodian, sequestrator, conservator or similar official
for itself or for a substantial part of its assets, (iv) file an answer
admitting the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors or
(vi) take any action for the purpose of effecting any of the foregoing;
(i) any Loan Party or any Pledgor shall become unable, admit in writing its
inability or fail generally to pay its debts as they become due;
(j) one or more judgments for the payment of money in an aggregate amount in
excess of (i) with respect to FirstEnergy of any of its Significant
Subsidiaries, $50,000,000, and (ii) with respect to any Loan Party (other than
FirstEnergy), $15,000,000, shall be rendered against any Loan Party, any Pledgor
or any Significant Subsidiary of FirstEnergy and the same shall remain
undischarged for a period of thirty (30) consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to attach or levy upon any assets of such Person to enforce
any such judgment;
(k) an ERISA Event shall have occurred that, when taken together with all other
ERISA Events that have occurred, has resulted or could reasonably be expected to
result in a Material Adverse Effect;
(l) any Lien purported to be created under any Security Document shall cease to
be, or shall be asserted by any Loan Party or any Pledgor not to be, a valid and
perfected first priority Lien on any Collateral subject thereto;
(m) any material provision of this Agreement or any other Loan Document to which
any Loan Party or any Pledgor is a party shall for any reason, except to the
extent permitted by the express terms hereof or thereof, cease to be valid and
binding on or enforceable against such Person or otherwise cease to be in full
force and effect, or any Loan Party, any Affiliate of a Loan Party, any Pledgor
or a Governmental Authority shall so assert in writing;

 

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(n) (i) FirstEnergy and Boich shall cease to own, directly or indirectly,
legally and beneficially, the majority of the Equity Interests of the Loan
Parties (other than FirstEnergy) and the Pledgors, or (ii) FirstEnergy and Boich
shall cease to control the management of any Loan Party (other than FirstEnergy)
or any Pledgor, or (iii) FirstEnergy reduces its current level of ownership,
direct or indirect, beneficial or otherwise, in any Loan Party (other than
FirstEnergy) or any Pledgor, in each case without prior approval by the Required
Lenders; or
(o) Any Change in Law shall occur that has the effect of making the Transactions
unauthorized, illegal or otherwise contrary to Requirement of Law with respect
to the Loan Parties;
then, and in every such event (other than an event with respect to either
Borrower described in clause (g) or (h) of this Article), and at any time
thereafter during the continuance of such event, the Administrative Agent may,
and at the request of the Required Lenders shall, by notice to the Borrowers,
take any or all of the following actions, at the same or different times:
(i) terminate the Commitments, and thereupon the Commitments shall terminate
immediately, and/or (ii) declare the Loans then outstanding to be due and
payable in whole (or in part, in which case any principal not so declared to be
due and payable may thereafter be declared to be due and payable), and thereupon
the principal of the Loans so declared to be due and payable, together with
accrued interest thereon and all fees and other obligations of the Borrowers
accrued hereunder, shall become due and payable immediately, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrowers and/or (iii) instruct the Collateral Agent, in
accordance with the terms of the Pledge Agreement, to exercise in respect of the
Collateral, in addition to the other rights and remedies provided for herein and
in the Security Documents or otherwise available to the Agents or the Lenders,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code in effect in the State of New York and in effect in any other
jurisdiction in which any Collateral is located at that time; and in case of any
event with respect to either Borrower described in clause (g) or (h) of this
Article, the Commitments shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of the Borrowers accrued hereunder, shall automatically become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrowers.
ARTICLE VIII
The Agents
Each of the Lenders hereby irrevocably appoints the Agents as their agents and
authorizes the Agents to take such actions on its behalf and to exercise such
powers as are delegated to the Agents by the terms of the Loan Documents,
together with such actions and powers as are reasonably incidental thereto. The
Required Lenders may at any time, with the consent of the Borrowers (which
consent shall not be unreasonably withheld or delayed, and shall not be required
if an Event of Default shall have occurred and be continuing), replace the
Administrative Agent (it being understood that any such replacement of the
Administrative Agent shall be a Person that serves as agent for other credit
facilities of a comparable size), provided that the Required Lenders may not
replace the Administrative Agent unless, after giving effect to such replacement
and each contemporaneous assignment, the Required Lenders or the Borrowers shall
have arranged in connection with such replacement that (i) neither the
Administrative Agent nor any of its Affiliates shall have outstanding any Loan
or Commitment or other obligation of any kind under this Agreement or any other
Loan Document, unless such Person shall consent otherwise, and (ii) each of the
Administrative Agent and its Affiliates shall have received any required payment
in full of all amounts owing to it under or in respect of this Agreement and
each other Loan Document. The Lenders may replace the Collateral Agent in
accordance with the provisions of the Security Documents.

 

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Any bank serving as an Agent hereunder shall have the same rights and powers in
its capacity as a Lender as any other Lender and may exercise the same as though
it were not an Agent, and such bank may accept deposits from, lend money to and
generally engage in any kind of business with the Borrowers or any of their
respective Affiliates as if it were not an Agent hereunder.
No Agent shall have any duties or obligations except those expressly set forth
in the Loan Documents. Without limiting the generality of the foregoing, (a) no
Agent shall be subject to any fiduciary or other implied duties, regardless of
whether a Default has occurred and is continuing, (b) no Agent shall have any
duty to take any discretionary action or exercise any discretionary powers,
except discretionary rights and powers expressly contemplated by the Loan
Documents that such Agent is required to exercise as directed 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 or in the Security
Documents), and (c) except as expressly set forth in the Loan Documents, no
Agent shall have any duty to disclose, and shall not be liable for the failure
to disclose, any information relating to either Borrower that is communicated to
or obtained by a bank serving as an Agent or any of its Affiliates in any
capacity. No Agent shall be liable for any action taken or not taken by it with
the consent or at the request of 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 or in the Security Documents) or in the absence of its
own gross negligence or willful misconduct as determined by non-appealable final
judgment of a court of competent jurisdiction. No Agent shall be deemed to have
knowledge of any Default unless and until written notice thereof is given to
such Agent by either Borrower or a Lender (or communicated by such Agent to any
Person), and no Agent shall be responsible for or have any duty to ascertain or
inquire into (i) any statement, warranty or representation made in or in
connection with any Loan Document, (ii) the contents of any certificate, report
or other document delivered hereunder or in connection with any Loan Document,
(iii) the performance or observance of any of the covenants, agreements or other
terms or conditions set forth in any Loan Document, (iv) the validity,
enforceability, effectiveness or genuineness of any Loan Document or any other
agreement, instrument or document, or (v) the satisfaction of any condition set
forth in Article IV or elsewhere in any Loan Document, other than to confirm
receipt of items expressly required to be delivered to any Agent.
Each Agent shall be entitled to rely upon, and shall not incur any liability for
relying upon, any notice, request, certificate, consent, statement, instrument,
document or other writing believed by it to be genuine and to have been signed
or sent by the proper Person. Each Agent also may rely upon any statement made
to it orally or by telephone and believed by it to be made by the proper Person,
and shall not incur any liability for relying thereon. Each Agent may consult
with legal counsel (who may be counsel for either Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.

 

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Each Agent may perform any and all its duties and exercise its rights and powers
by or through any one or more sub-agents appointed by such Agent. Each Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties. The exculpatory provisions
of the preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of such Agent and any such sub-agent, and shall apply to their
respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Agent.
Subject to the appointment and acceptance of a successor Administrative Agent as
provided in this paragraph, the Administrative Agent may resign at any time by
notifying the Lenders and the Borrowers. Upon any such resignation, the Required
Lenders shall have the right, subject to the approval of the Borrowers (such
approval not to be unreasonably withheld or delayed, and shall not be required
upon the occurrence and during the continuance of an Event of Default), to
appoint a successor. If no successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within thirty
(30) days after the retiring Administrative Agent gives notice of its
resignation, then the retiring Administrative Agent may, on behalf of the
Lenders and subject to the approval of the Borrowers (such approval not to be
unreasonably withheld or delayed, and shall not be required upon the occurrence
and during the continuance of an Event of Default), appoint a successor
Administrative Agent, which shall be any commercial bank organized under the
laws of the United States of America or any State thereof having a combined
capital and surplus and undivided profits of not less than $500,000,000. Upon
the acceptance of its appointment as the Administrative Agent hereunder by a
successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. The fees payable by the Borrowers to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrowers and such successor. After the
Administrative Agent’s resignation hereunder, the provisions of this Article and
Section 9.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it was
acting as the Administrative Agent. The Collateral Agent may resign in
accordance with the provisions of the Security Documents.
Each Lender acknowledges that it has, independently and without reliance upon
any Agent or any other Lender and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon any Agent or any other Lender and based on such documents
and information as it shall from time to time deem appropriate, continue to make
its own decisions in taking or not taking action under or based upon this
Agreement, any other Loan Document or any related agreement or any document
furnished hereunder or thereunder.
Anything herein to the contrary notwithstanding, no Co-Syndication Agent or
Co-Documentation Agent listed on the cover page hereof shall have any rights,
powers, duties or responsibilities under this Agreement or any of the other Loan
Documents, except in its capacity as a Lender hereunder.

 

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ARTICLE IX
Miscellaneous
SECTION 9.01. Notices.
(a) Except in the case of notices and other communications expressly permitted
to be given by telephone (and subject to paragraph (b) below), all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(i) if to any Borrower, to it at 100 Portal Drive, Roundup, Montana 59072,
Attention of Darrell Roland (Telephone No. 406-248-4267; Telecopy
No. 406-248-4270), with a copy to each of (A) FirstEnergy Corp., 76 South Main
Street, Akron, Ohio 44308, Attention: Treasurer (Telecopy No. 330-384-3772),
(B) FirstEnergy Corp., 76 South Main Street, Akron, Ohio 44308, Attention: Legal
(Telecopy No. 330-384-3875, and (C) Boich Companies, LLC, 41 South High Street,
Suite 3750-South, Columbus, Ohio 43215, Attention of Brian T. Murphy, Chief
Financial Officer (Telecopy No. 614-221-0117);
(ii) if to the Administrative Agent or the Collateral Agent, to Union Bank,
N.A., 445 South Figueroa Street, 15th Floor, Los Angeles, California 90071,
Attention of Kevin Zitar (Telecopy No. (213) 236-4096); and
(iii) if to any Lender, to it at its address (or telecopy number) set forth in
its Administrative Questionnaire.
(b) Notices and other communications to the Lenders hereunder may be delivered
or furnished by electronic communications pursuant to procedures approved by the
Administrative Agent and the Collateral Agent; provided that the foregoing shall
not apply to notices pursuant to Article II unless otherwise agreed by the
Administrative Agent and the applicable Lender. The Administrative Agent or the
Borrowers may, in their discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications.
(c) Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.

 

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SECTION 9.02. Waivers; Amendments.
(a) No failure or delay by any Agent or Lender in exercising any right or power
hereunder or under any other Loan Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Agents and the Lenders hereunder
and under the other Loan Documents are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any provision of
any Loan Document or consent to any departure by either Borrower therefrom shall
in any event be effective unless the same shall be permitted by paragraph (b) of
this Section, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Without limiting the
generality of the foregoing, the making of a Loan or a Borrowing shall not be
construed as a waiver of any Default, regardless of whether any Agent or any
Lender may have had notice or knowledge of such Default at the time.
(b) Neither this Agreement nor any other Loan Document nor any provision hereof
or thereof may be waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by the Loan Parties or Pledgors (as the case
may be) party thereto and the Required Lenders or by such Loan Parties or
Pledgors (as the case may be) and the Administrative Agent with the consent of
the Required Lenders; provided that no such agreement shall (i) increase the
Commitment of any Lender without the written consent of such Lender; (ii) reduce
the principal amount of any Loan or reduce the rate of interest thereon, or
reduce any fees payable hereunder (other than fees payable to the Agents and the
Lead Arranger pursuant to the Fee Letter), without the written consent of each
Lender affected thereby; (iii) postpone the scheduled date of payment of the
principal amount of any Loan, or any interest thereon, or reduce the amount of,
waive or excuse any such payment, or postpone the scheduled date of termination
of any Commitment, without the written consent of each Lender affected thereby;
(iv) change Section 2.15(b) or (c) in a manner that would alter the pro rata
sharing of payments required thereby, without the written consent of each
Lender; (v) change any of the provisions of this Section or the definition of
“Required Lenders” or any other provision of any Loan Document (other than the
Security Documents) specifying the number or percentage of Lenders required to
waive, amend or modify any rights hereunder or make any determination or grant
any consent hereunder, without the written consent of each Lender; (vi) change
any provisions of any Loan Document (other than the Security Documents) in a
manner that by its terms adversely affects the rights in respect of payments of
Lenders, without the written consent of each Lender; (vii) release any
Collateral or change any provision of any Security Document providing for the
release of Collateral, without the written consent of each Lender;
(viii) release all or any portion of any Guarantor’s obligations under the
Guaranty or change any provision of the Guaranty providing for the release or
termination of the Guaranty, without the written consent of each Lender; or
(ix) amend, modify or waive any condition precedent set forth in Section 4.01,
without the written consent of each Lender; provided further that (A) no such
agreement shall amend, modify or otherwise affect the rights or duties of any
Agent hereunder without the prior written consent of the affected Agent; and
(B) any waiver, amendment or modification of this Agreement that by its terms
affects the rights or duties under this Agreement of the Lenders may be effected
by an agreement or agreements in writing entered into by the Borrowers and the
requisite percentage in interest of the affected Lenders. Notwithstanding the
foregoing, any provision of this Agreement requiring the consent of a Lender
unwilling to provide such consent may be amended by an agreement in writing
entered into by the Borrowers, the Required Lenders and the Administrative Agent
if (1) by the terms of such agreement the Commitment of each such opposing
Lender shall terminate upon the effectiveness of such amendment and (2) at the
time such amendment becomes effective, each such opposing Lender receives
payment in full of the principal of and interest accrued on each Loan made by it
and all other amounts owing to it or accrued for its account under the Loan
Documents.

 

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SECTION 9.03. Expenses; Indemnity; Damage Waiver.
(a) The Borrowers jointly and severally agree to pay (i) all reasonable
out-of-pocket expenses incurred by the Agents (including due diligence expenses
and the reasonable fees, charges and disbursements of counsel for the Agents) in
connection with the preparation, negotiation, syndication, execution, delivery
and administration of the Loan Documents or any amendments, modifications or
waivers of the provisions thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), and (ii) all reasonable out-of-pocket
expenses incurred by the Agents, the Lead Arranger or any Lender, including the
reasonable fees, charges and disbursements of any counsel for any Agent, the
Lead Arranger or any Lender, in connection with the enforcement or protection of
their respective rights in connection with the Loan Documents whether or not the
Effective Date occurs, including their respective rights under this Section, or
in connection with the Loans made hereunder, including all such out-of-pocket
expenses incurred during any workout, restructuring or negotiations in respect
of such Loans.
(b) The Borrowers jointly and severally agree to indemnify each Agent, the Lead
Arranger and each Lender, and each Related Party of any of the foregoing Persons
(each such Person being called an “Indemnitee”), against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, costs,
liabilities, expenses (including the fees, charges and disbursements of any
counsel for any Indemnitee), incurred by or asserted against any Indemnitee
arising out of, in connection with, or as a result of (i) the execution or
delivery of any Loan Document or any agreement or instrument contemplated
hereby, the performance by the parties to the Loan Documents of their respective
obligations thereunder or the consummation of the Transactions or any other
transactions contemplated thereby, (ii) any Loan or the use of the proceeds
therefrom, (iii) any actual or alleged presence or release, or threatened
release, of Hazardous Materials on or from any Property owned or operated by
either Borrower, or any Environmental Liability related in any way to either
Borrower, or (iv) any actual or prospective claim, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract, tort or
any other theory and regardless of whether any Indemnitee is a party thereto;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
are determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted primarily from the gross negligence or willful
misconduct of such Indemnitee as determined by the final non-appealable judgment
of a court of competent jurisdiction.
(c) To the extent that the Borrowers fail to pay any amount required to be paid
by the Borrowers to any Agent under paragraph (a) or (b) of this Section, each
Lender severally agrees to pay to such Agent such Lender’s Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or indemnity
payment is sought) of such unpaid amount; provided that the unreimbursed expense
or indemnified loss, claim, damage, liability or related expense, as the case
may be, was incurred by or asserted against such Agent in its capacity as such.

 

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(d) TO THE EXTENT PERMITTED BY APPLICABLE LAW, NO BORROWER SHALL ASSERT, AND
EACH BORROWER HEREBY WAIVES, ANY CLAIM AGAINST ANY INDEMNITEE, ON ANY THEORY OF
LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED
TO DIRECT OR ACTUAL DAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT
OF, THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT
CONTEMPLATED HEREBY OR THEREBY, THE TRANSACTIONS, ANY LOAN OR THE USE OF THE
PROCEEDS THEREOF.
(e) All amounts due under this Section shall be payable within ten (10) Business
Days after delivery to the Borrowers of a reasonably detailed statement
therefor.
SECTION 9.04. Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that the Borrowers may not assign or otherwise transfer
any of their respective rights or obligations hereunder without the prior
written consent of each Lender (and any attempted assignment or transfer by
either Borrower without such consent shall be null and void). Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby and, to the extent expressly contemplated hereby, the Related
Parties of the Agents, the Lead Arranger and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.
(b) Any Lender may assign to one or more assignees all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it); provided that (i) except in
the case of an assignment to a Lender, an Affiliate of a Lender or an Approved
Fund of any Lender, the Administrative Agent must give its prior written consent
to such assignment (which consent shall not be unreasonably withheld), (ii)
except in the case of an assignment to a Lender, an Affiliate of a Lender or an
Approved Fund of any Lender, the Borrowers must give their prior written consent
to such assignment (which consent shall not be unreasonably withheld),
(iii) except in the case of an assignment to a Lender, an Affiliate of a Lender
or an Approved Fund of any Lender or an assignment of the entire remaining
amount of the assigning Lender’s Commitments and Loans, the aggregate amount of
the Commitments and Loans of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and Assumption with respect
to such assignment is delivered to the Administrative Agent) shall be in an
aggregate amount of not less than $5,000,000 unless each of the Borrowers and
the Administrative Agent otherwise consent, (iv) each partial assignment by a
Lender of its Commitment and Exposure shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations under
this Agreement in respect of its Commitment and Exposure, as the case may be,
(v) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500, and (vi) the assignee, if it shall not be a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire; and provided further that any consent of the Borrowers otherwise
required under this paragraph shall not be required if an Event of Default shall
have occurred and be continuing or if such assignment be made to FirstEnergy as
a result

 

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of its exercise of the Call Option. Subject to acceptance and recording thereof
pursuant to paragraph (d) of this Section, from and after the effective date
specified in each Assignment and Assumption the assignee thereunder shall be a
party hereto and, to the extent of the interest assigned by such Assignment and
Assumption, have the rights and obligations of a Lender under this Agreement,
and the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Assumption, be released from its obligations
under this Agreement (and, in the case of an Assignment and Assumption covering
all of the assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.12, 2.13, 2.14 and 9.03). Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an agent of the
Borrowers, shall maintain at one of its offices in California a copy of each
Assignment and Assumption delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitments of, and principal
amount of the Loans owing to, each Lender pursuant to the terms hereof from time
to time (the “Register”). The entries in the Register shall be conclusive, and
the Borrowers, the Administrative Agent and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrowers and
any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(d) Upon its receipt of a duly completed Assignment and Assumption executed by
an assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and
any written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and Assumption
and record the information contained therein in the Register. No assignment
shall be effective for purposes of this Agreement unless it has been recorded in
the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrowers or the Administrative
Agent, sell participations to one or more banks or other entities (a
“Participant”) in all or a portion of such Lender’s rights and obligations under
this Agreement (including all or a portion of its Commitment and the Loans owing
to it); provided that (i) such Lender’s obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations and (iii) the Borrowers,
the Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce the Loan Documents and to approve any amendment,
modification or waiver of any provision of the Loan Documents; provided that
such agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the first proviso to Section 9.02(b) or the Security Documents that
affects such Participant. Subject to paragraph (f) of this Section, each
Borrower agrees that each Participant shall be entitled to the benefits of
Sections 2.12, 2.13 and 2.14 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this Section.
To the extent permitted by law, each Participant also shall be entitled to the
benefits of Section 9.08 as though it were a Lender, provided such Participant
agrees to be subject to Section 2.15(c) as though it were a Lender.

 

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(f) A Participant shall not be entitled to receive any greater payment under
Section 2.12 or 2.14 than the applicable Lender would have been entitled to
receive with respect to the participation sold to such Participant, unless the
sale of the participation to such Participant is made with the Borrowers’ prior
written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 2.14 unless the
Borrowers are notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrowers, to comply with
Section 2.14(d) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement to secure obligations of such
Lender, including any pledge or assignment to secure obligations to a Federal
Reserve Bank, and this Section shall not apply to any such pledge or assignment
of a security interest; provided that no such pledge or assignment of a security
interest shall release a Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto. In
the case of any Lender that is a fund that invests in bank loans, such Lender
may, without the consent of the Borrowers or the Administrative Agent, assign or
pledge all or any portion of its rights under this Agreement, including the
Loans and Notes or any other instrument evidencing its rights as a Lender under
this Agreement, to any holder of, trustee for, or any other representative of
holders of, obligations owed or securities issued by such fund, as security for
such obligations or securities; provided that any foreclosure or similar action
by such trustee or representative shall be subject to the provisions of
Section 9.04(b) concerning assignments.
(h) Notwithstanding anything to the contrary contained herein, any Lender (a
“Granting Lender”) may grant to a special purpose funding vehicle (an “SPC”),
identified as such in writing from time to time by the Granting Lender to the
Administrative Agent and the Borrowers, the option to provide to the Borrowers
all or any part of any Loan that such Granting Lender would otherwise be
obligated to make to the Borrowers pursuant to this Agreement; provided that
(i) nothing herein shall constitute a commitment by any SPC to make any Loan and
(ii) if an SPC elects not to exercise such option or otherwise fails to provide
all or any part of such Loan, the Granting Lender shall be obligated to make
such Loan pursuant to the terms hereof. The making of a Loan by an SPC shall
utilize the Commitment of the Granting Lender to the same extent, and as if,
such Loan were made by such Granting Lender. Each party hereto hereby agrees
that no SPC shall be liable for any indemnity or similar payment obligation
under this Agreement (all liability for which shall remain with the Granting
Lender). In furtherance of the foregoing, each party hereto hereby agrees (which
agreement shall survive the termination of this Agreement) that, prior to the
date that is one year and one day after the payment in full of all outstanding
commercial paper or other senior indebtedness of any SPC, it will not institute
against, or join any other person in instituting against, such SPC in connection
with its activities as an SPC hereunder any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under the laws of the United
States or any State thereof. In addition,

 

59

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notwithstanding anything to the contrary in this Section 9.04, any SPC may
(i) with notice to, but without the prior written consent of, the Borrowers and
the Administrative Agent and without paying any processing fee therefor, assign
all or a portion of its interests in any Loans to the Granting Lender or to any
financial institutions (consented to by the Borrowers and the Administrative
Agent) providing liquidity and/or credit support to or for the account of such
SPC to support the funding or maintenance of Loans and (ii) disclose on a
confidential basis consistent with the provisions of Section 9.12 any non-public
information relating to its Loans to any rating agency, commercial paper dealer
or provider of any surety, guarantee or credit or liquidity enhancement to such
SPC. The provisions of this Section relating any SPC may not be amended without
the written consent of such SPC.
SECTION 9.05. Survival. All covenants, agreements, representations and
warranties made by the Borrowers in the Loan Documents and in the certificates
or other instruments delivered in connection with or pursuant to this Agreement
or any other Loan Document shall be considered to have been relied upon by the
other parties hereto and shall survive the execution and delivery of the Loan
Documents and the making of any Loans, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that any Agent or
Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid and so long as any Commitment has not
expired or terminated. The provisions of Sections 2.12, 2.13, 2.14 and 9.03 and
Article VIII shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the termination of the Commitments or the termination of this Agreement
or any provision hereof.
SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement, the other
Loan Documents and any separate letter agreements with respect to fees payable
to the Agents and the Lead Arranger 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. Except as provided in Section 4.01, this Agreement shall become
effective when it shall have been executed by the Agents and when the
Administrative Agent shall have received counterparts hereof which, when taken
together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy or other electronic
transmission shall be effective as delivery of a manually executed counterpart
of this Agreement.
SECTION 9.07. Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof, and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

 

60

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SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender is hereby authorized at any time and from time to time,
to the fullest extent permitted by law, upon any amount becoming due and payable
by the Borrowers hereunder (whether at the stated maturity, by acceleration or
otherwise), to set off and apply any and all deposits (general or special, time
or demand, provisional or final) at any time held and other obligations at any
time owing by such Lender to or for the credit or the account of either Borrower
against any of and all the obligations of the Borrowers now or hereafter
existing under this Agreement held by such Lender, irrespective of whether or
not such Lender shall have made any demand under this Agreement and although
such obligations may be unmatured. The rights of each Lender under this Section
are in addition to other rights and remedies (including other rights of setoff)
which such Lender may have.
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process.
(a) This Agreement shall be construed in accordance with and governed by the law
of the State of New York.
(b) Each of the Borrowers, the Agents and the Lenders hereby irrevocably and
unconditionally submits, for itself and its Property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to any Loan Document, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State court or, to the
extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement or any other Loan
Document shall affect any right that any Agent or Lender may otherwise have to
bring any action or proceeding relating to this Agreement or any other Loan
Document against one or both of the Borrowers or their respective Properties in
the courts of any other jurisdiction.
(c) Each of the Borrowers, the Agents and the Lenders hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
any other Loan Document in any court referred to in paragraph (b) of this
Section. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such suit, action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of process in
the manner provided for notices in Section 9.01. Nothing in this Agreement or
any other Loan Document will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.

 

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SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 9.11. Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 9.12. Confidentiality. Each of the Agents and the Lenders agrees to
maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its and its Affiliates’ directors, officers,
employees and agents, including accountants, auditors, legal counsel and other
advisors (it being understood that the Persons to whom such disclosure is made
will be informed of the confidential nature of such Information and instructed
to keep such Information confidential), (b) to the extent requested by any
regulatory authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
to this Agreement, (e) in connection with any suit, action or proceeding
relating to this Agreement or any other Loan Document or the enforcement of
rights hereunder, (f) subject to an agreement containing provisions
substantially the same as those of this Section, to (i) any permitted assignee
of or Participant in, or any prospective permitted assignee of or Participant
in, any of its rights or obligations under this Agreement or (ii) any actual or
prospective counterparty (or its advisors) to any swap or derivative transaction
relating to either Borrower and its obligations, (g) with the consent of the
Borrowers or (h) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section or (ii) becomes available to
any Agent or Lender on a nonconfidential basis from a source other than either
Borrower. For the purposes of this Section, “Information” means all information
received from either Borrower relating to a Borrower or its business, other than
any such information that is available to any Agent or Lender on a
nonconfidential basis prior to disclosure by either Borrower. Any Person
required to maintain the confidentiality of Information as provided in this
Section shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

 

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SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with
all fees, charges and other amounts which are treated as interest on such Loan
under applicable law (collectively the “Charges”), shall exceed the maximum
lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
SECTION 9.14. Patriot Act Notice. Each Lender and the Administrative Agent (for
itself and not on behalf of any other party) hereby notifies the Borrowers that,
pursuant to the requirements of the USA PATRIOT Act, Title III of Pub. L.
107-56, signed into law October 26, 2001 (the “Patriot Act”), it is required to
obtain, verify and record information that identifies each Borrower, which
information includes the name and address of each Borrower and other information
that will allow such Lender or the Administrative Agent, as applicable, to
identify each Borrower in accordance with the Patriot Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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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.

            SIGNAL PEAK ENERGY, LLC

    By:   /s/ Brian T. Murphy         Name:   Brian T. Murphy        Title:  
Secretary and Treasurer   

            GLOBAL RAIL GROUP, LLC
      By:   /s/ Brian T. Murphy         Name:   Brian T. Murphy        Title:  
Secretary and Treasurer   

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit
Agreement

 

S-1

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            UNION BANK, N.A., as Administrative Agent,
Collateral Agent and a Lender
      By:   /s/ Jeff Fesenmaier         Name:   Jeff Fesenmaier        Title:  
Vice President   

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit
Agreement

 

S-2

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              BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
NEW YORK BRANCH, as a Lender
              By:   /s/ Alex Mayral   /s/ Michael Oka      Name:  Alex Mayral  
Michael Oka     Title:  V. P.    Executive Director 

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit
Agreement

 

S-3

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            CIBC INC., as a Lender
      By:   /s/ Robert W. Casey, Jr.         Name:   Robert W. Casey, Jr.       
Title:   Executive Director   

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit
Agreement

 

S-4

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            COBANK, ACB, as a Lender
      By:   /s/ Josh Batchelder         Name:   Josh Batchelder        Title:  
Vice President   

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit
Agreement

 

S-5

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            COMERICA BANK, as a Lender
      By:   /s/ Brandon Welling         Name:   Brandon Welling        Title:  
Assistant Vice President   

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit
Agreement

 

S-6

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            CREDIT AGRICOLE CORPORATE AND
INVESTMENT BANK, as a Lender
      By:   /s/ Dixon Schultz         Name:   Dixon Schultz        Title:  
Director            By:   /s/ Sharada Manne         Name:   Sharada Manne       
Title:   Director   

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit
Agreement

 

S-7

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            FIFTH THIRD BANK, as a Lender
      By:   /s/ Martin H. McGinty         Name:   Martin H. McGinty       
Title:   Vice President   

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit
Agreement

 

S-8

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            FIRSTMERIT BANK, N.A., as a Lender
      By:   /s/ Robert G. Morlan         Name:   Robert G. Morlan       
Title:   Senior Vice President   

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit
Agreement

 

S-9

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            ROYAL BANK OF CANADA, as a Lender
      By:   /s/ Meredith Majesty         Name:   Meredith Majesty       
Title:   Authorized Signatory   

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit
Agreement

 

S-10

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            SOVEREIGN BANK, as a Lender
      By:   /s/ Robert D. Lanigan         Name:   Robert D. Lanigan       
Title:   Senior Vice President   

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit
Agreement

 

S-11

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            U.S. BANK NATIONAL ASSOCIATION, as a Lender
      By:   /s/ Eric J. Cosgrove         Name:   Eric J. Cosgrove       
Title:   Vice President   

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit
Agreement

 

S-12

--------------------------------------------------------------------------------

 

            RBC BANK (USA), as a Lender
      By:   /s/ Richard Marshall         Name:   Richard Marshall       
Title:   Market Executive — National Division   

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit
Agreement

 

S-13

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Schedule 2.01
Commitments

          Lender   Commitment Amount            
Union Bank, N.A.
  $ 55,000,000.00  
Sovereign Bank
  $ 52,500,000.00  
CoBank, ACB
  $ 52,500,000.00  
Credit Agricole Corporate and Investment Bank
  $ 30,000,000.00  
U.S. Bank National Association
  $ 30,000,000.00  
Banco Bilbao Vizcaya Argentaria, S.A. New York Branch
  $ 30,000,000.00  
CIBC Inc.
  $ 20,000,000.00  
Comerica Bank
  $ 20,000,000.00  
Fifth Third Bank
  $ 20,000,000.00  
Royal Bank of Canada
  $ 15,000,000.00  
RBC Bank (USA)
  $ 15,000,000.00  
FirstMerit Bank, N.A.
  $ 10,000,000.00  

 

 

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Schedule 3.04
Sales and Acquisitions
None.

 

 

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Schedule 3.05
Properties
None.

 

 

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Schedule 3.06
Litigation
1. Scion Energy Partners, LLC and Scion Capital Partners, LLC (collectively
“Scion”) v. Signal Peak Energy, LLC, et al., Delaware Court of Chancery, Civil
Action No. 3220-VCP; Montana Fourteenth Judicial District Court, Musselshell
County, Cause No. DV-08-105
On July 18, 2008, a joint venture owned by FirstEnergy Ventures Corp. and
affiliates of the Boich Group purchased an 80% interest in Signal Peak Energy,
LLC (“Signal Peak”), the owner of the Bull Mountain coal mine. The joint venture
has since acquired the remaining 20% interest. At the same time, Global Rail
Group LLC (“Global Rail”) purchased land for the purpose of building a rail line
and power line servicing the mine. The purchase agreements for the transactions
provide that the seller thereunder (the “Seller”) agrees to indemnify Signal
Peak, Global Rail and certain affiliates against losses arising out of the
following described claims asserted by Scion, provided however that the remedies
under the indemnity are limited to offsetting indemnified losses against
royalties payable by Signal Peak for coal from the mine, plus future payments
under the purchase price note delivered for the recent acquisition of the last
20% interest in Signal Peak. The Seller has acknowledged its obligation to
indemnify the joint venture entities and Signal Peak against the Scion claims,
and has assumed the defense of the Montana case and agreed to the retention by
Signal Peak and Global Rail of their own counsel to defend the Delaware case,
with the expense of defense being offset against the royalties as they accrue.
Scion filed a complaint in the Superior Court of the State of Delaware on
March 14, 2007 (which case was subsequently transferred to the Delaware Court of
Chancery on September 10, 2007) against various entities (the “Bull Mountain
Entities”) that were involved in the development and operation of the Bull
Mountain coal mine in Roundup, Montana. Scion’s complaint sought, among other
things: (i) money damages in the amount of approximately $18.5 million,
reflecting unpaid loans in the amount of $500,000, as well as various fees and
commissions; (ii) 25.5% of the equity in the Bull Mountain Entities and options
to purchase an additional 15%; and (iii) coal royalties totaling $0.48 per ton;
all allegedly owed for, inter alia, loans made by Scion and financial advisory
and brokerage services performed by Scion for the Bull Mountain Entities. Scion
further claims that its monetary damages are secured by a lien on “as extracted”
coal produced by the Bull Mountain mine. The complaint, as most recently
amended, claims that the transfer of the land purchased by Global Rail to the
predecessor in title was voidable as a fraudulent transfer to the predecessor
and also as against Global Rail and seeks to unwind such transfers or, in the
alternative, seeks damages in the amount of the value of the assets.
Scion’s claims arise from a series of agreements that Scion allegedly entered
into with BMP Investments, Inc. (Signal Peak’s predecessor entity) and the other
Bull Mountain Entities prior to the purchase by the FirstEnergy and Boich Group
joint venture. Certain former defendants in this case have confessed judgment in
exchange for a release of liability of the individual former promoters of the
Bull Mountain coal mine.

 

 

--------------------------------------------------------------------------------

 

After their motion to dismiss the Second Amended Complaint became moot upon the
filing of the Third Amended Complaint, the remaining defendants, including the
Borrowers, filed Answers to the Third Amended Complaint on September 29, 2009.
FirstEnergy and the Boich Group have been dismissed from the case without
prejudice, under a Tolling Agreement with the plaintiffs. Litigation counsel for
the Borrowers anticipates that discovery will not be completed until sometime in
2011, and expects that the defendants will move for partial summary judgment at
that time with respect to the claim for equity in Signal Peak.
Scion filed suit in November of 2008 in Musselshell County, Montana (the
location of the coal mine), seeking to foreclose on a claimed lien on mining
equipment, “as extracted” coal and other minerals, royalty interests and coal
leases . The Seller and the current owner of the reserves have acknowledged
their obligation to indemnify and defend Global Rail and Signal Peak in the
Montana action as well. Certain defendants in that action, including, inter
alia, Signal Peak, FirstEnergy Corp. and Global Rail, have filed an Amended
Motion to Dismiss, which is currently pending.
The Loan Parties and Pledgors believe that these claims in the Delaware and
Montana actions are without merit and are not reasonably likely to materially
impair their ability to pay and perform their Obligations under the Loan
Documents.

 

 

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Schedule 3.07
Compliance with Laws
None.

 

 

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Schedule 3.19
Insurance
[See Attached]

 

 

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Property & Casualty Summary
for
Signal Peak Energy LLC
100 Portal Drive
Roundup, MT 59072
(IMAGE) [c07138c0713801.gif]
Hoiness LaBar Insurance
A Member of Payne Financial Group, Inc.
Presented by:
Chris Hoiness, CPCU, CIC
Senior Vice President
Laurie Preitauer, AU, AIS, CPSR
Client Account Manager
Sandy Meyers
Service Account Manager
July 13, 2010
This document is not a legal interpretation or a complete description of the
coverage provided under the actual insurance policies. Please refer to the
actual policies for specific terms, conditions, limitations and exclusions that
will govern in the event of a loss. Specimen policies are available for review
prior to binding coverage.

 

 

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Table of Contents

         
Commercial Property Coverage
    3  
Commercial General Liability Coverage
    5  
Commercial Pollution Liability Coverage
    7  
Commercial Auto Coverage
    8  
Commercial Equipment Coverage
    10  
Commercial Umbrella Coverage
    16  
Commercial Excess Coverage
    19  

 

 

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Commercial Property Coverage

     
Policy Period:
  7/16/2010 — 7/16/2011
 
   
Insurance Company:
  Federal Insurance Company
 
   
Schedule of Named Insureds:
  An entity must be named to receive coverage under the policy
Signal Peak Energy LLC
Global Rail Group LLC

Schedule of Locations:
Loc. No. 1 — 100 Portal Drive Roundup MT 59072

      Bldg No.   Description
4
  Building #4-Shop
2
  Building #2-Office (house)
6
  Pipe-Personal Property of Others
7
  Office/Bathhouse
8
  Shop and Warehouse
9
  Coal Prep Plant

Loc. No. 3 — 16432 Van Sky Road — 7 miles E of Broadview Broadview MT 59015

      Bldg No.   Description
1
  Dwelling — Tenant Occupied

Location Provisions:
Location No.1 100 Portal Drive Roundup MT 59072

                              Bldg           Agreed             No.   Subject of
Insurance   Valuation   Amt.   Deductible     Limit  
2
  Building-Office (house)   Replacement Cost   Yes   $ 2,500     $ 118,000  
4
  Building-Shop   Replacement Cost   Yes   $ 2,500     $ 53,000  
7
  Building-Office/Bathhouse   Replacement Cost   Yes   $ 50,000     $ 1,500,000
 
7
  Business Personal Property   Replacement Cost   Yes   $ 50,000     $ 350,000  
8
  Building-Shop and Warehouse   Replacement Cost   Yes   $ 50,000     $ 800,000
 
8
  Business Personal Property   Replacement Cost   Yes   $ 50,000     $ 400,000  
9
  Building-Coal Prep Plant   Replacement Cost   Yes   $ 100,000     $ 65,850,000
 

Location No. 3 16432 Van Sky Road — 7 miles E of Broadview Broadview MT 59015

                              Bldg.           Agreed             No.   Subject
of Insurance   Valuation   Amt.   Deductible     Limit  
1
  Building — Dwelling   Replacement Cost   Yes   $ 5,000     $ 100,000  

 

Page 3

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Covered Causes of Loss:
  Special causes of loss subject to policy exclusions
 
   
Exclusions:
  Refer to policy for exclusions
 
   
Coverage Modifications:
  Refer to policy for specific information pertaining to these modifications

                  Description   Limit     Deductible(*)  
Earthquake
  $ 15,000,000     $ 100,000  
Flood
  $ 15,000,000     $ 100,000  
Personal Property Any Other Location
  $ 250,000     $ 25,000  
Transit Coverage-Personal Property
  $ 1,000,000     $ 50,000  
Blanket Business Income/Extra Expense — Above ground only
  $ 50,000,000     30 day waiting period
Business Income — Dependent Business Premises
  $ 25,000     $ 2,500  
Business Income — Fees
  $ 5,000     $ 2,500  
Business Income — Loss of Utilities
  $ 15,000     $ 2,500  
Business Income — Pollutant Cleanup or Removal
  $ 5,000     $ 2,500  
Business Income — Newly Acquired Premises
  $ 100,000     $ 2,500  
Blanket Limit includes-Accounts Receivable, Electronic Data Processing Property,
Valuable Papers, Extra Expense, Personal Property of Others & Employees,
Leasehold Interest — Undamaged Tenants’ Improvements & Betterments
  $ 100,000     $ 2,500  
Debris Removal
  $ 50,000     $ 2,500  
EDP Exhibition, Fair, Tradeshow
  $ 2,500     $ 2,500  
Personal Property Exhibition, Fair, Tradeshow
  $ 2,500     $ 2,500  
Fine Arts — Exhibition, Fair or Trade Show
  $ 2,500     $ 2,500  
Fine Arts
  $ 5,000     $ 2,500  
Fire Department Service Charge
  $ 25,000     $ 2,500  
Installation Any Job Site
  $ 1,000     $ 2,500  
Installation Coverage — In Transit
  $ 1,000     $ 2,500  
Accounts Receivable in Transit
  $ 10,000     $ 2,500  
EDP Property in Transit
  $ 10,000     $ 2,500  
Fine Arts in Transit
  $ 1,000     $ 2,500  
Valuable Papers in Transit
  $ 10,000     $ 2,500  
Inventory or Appraisals
  $ 5,000     $ 2,500  
Loss Prevention Expenses
  $ 5,000     $ 2,500  
Money And Securities On Premises
  $ 10,000     $ 2,500  
Money And Securities Off Premises
  $ 5,000     $ 2,500  
Trees, Shrubs & Plants or lawns — outdoor
  $ 25,000     $ 2,500  
Pollutant Cleanup and Removal
  $ 25,000     $ 2,500  
Exclusion — Building Under Construction
               
Newly Acquired or Constructed Building
  $ 1,000,000     $ 2,500  
Newly Acquired Personal Property
  $ 500,000     $ 2,500  
Newly Acquired Electronic Data Processing Equipment
  $ 250,000     $ 2,500  
Newly Acquired Electronic Data Processing Media
  $ 25,000     $ 2,500  
Newly Acquired Electronic Data Processing Media Duplicates
  $ 25,000     $ 2,500  
Newly Acquired Telephone Equipment
  $ 25,000     $ 2,500  
Newly Acquired Fine Arts
  $ 10,000     $ 2,500  
Personal Property Of Others-Pipe
  $ 60,000     $ 2,500  

      *  
The policy deductible applies unless a specific deductible is shown.

 

Page 4

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Commercial General Liability Coverage

     
Policy Period:
  7/16/2010 – 7/16/2011
 
   
Insurance Company:
  Federal Insurance Company
 
   
Schedule of Named Insureds:
  An entity must be named to receive coverage under the policy
Signal Peak Energy LLC
Global Rail Group LLC

Schedule of Locations:
Loc. No. 1 — 100 Portal Drive Roundup MT 59072

      Bldg No.   Description
4
  Building #4-Shop
2
  Building #2-Office (house)
7
  Office/Bathhouse
8
  Shop and Warehouse
9
  Coal Prep Plant

Loc. No. 3 — 16432 Van Sky Road — 7 miles E of Broadview Broadview MT 59015

      Bldg No.   Description
1
  Dwelling — Tenant Occupied

          Limits of Insurance  
 
       
General Aggregate
  $ 2,000,000  
 
       
Products/Completed Operations Aggregate
  $ 1,000,000  
 
       
Personal and Advertising Injury
  $ 1,000,000  
 
       
Each Occurrence
  $ 1,000,000  
 
       
Damage to Rented Premises
  $ 1,000,000  
 
       
Medical Expense
  $ 10,000  

     
Coverage Trigger:
  General Liability — Occurrence
 
  Employee Benefits — When Claim is Made

Deductible:

                  Coverage   Amount     Deductible Type   Deductible Basis
General Liability
  $ 5,000     Per Claim   Property Damage

     
Exclusions:
  Refer to policy for exclusions

 

Page 5

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Coverage Modifications:
  See policy for specific information pertaining to these modifications

                          Description   Occurrence     Aggregate     Deductible
 
Employee Benefits Liability-Retroactive Date 7/16/08
  $ 1,000,000     $ 1,000,000     $ 1,000  
Blanket Waiver of Subrogation — for ongoing operations only
                       
Exclusion-Subsidence
                       
Professional Liability Exclusion
                       
Exclusion-Asbestos, Silica & Similar Compounds Including Mixed Dust
                       
Who is Insured-Designated Person or Organization
                       
Personal And Advertising Injury — Aggregate
  $ 1,000,000                  
Non Accumulation of Limits of Insurance
                       
Additional Insured — lessor of leased equipment
                       
Notice of cancellation — 90 days other than 10 days for non-pay
                       
Employers Liability Total Exclusion
                       

     
Audit Basis:
  Annual

Schedule of Exposures and Rates:

                              Loc.   Class                   Last Year   No.  
Code   Class Description   Rating Basis   Exposure     Exposure  
1
  00160-01   Coal Mining — Surface   Raw Tons   If Any     If Any  
1
  00160-02   Coal Mining — Underground   Raw Tons     12,000,000      
11,500,000  
1
  00160-03   Clean Production Processing   Clean Ton     9,137,000      
9,660,000  
1
  00176-01   Employee Benefits Liability   Employees     225       154  
1
  91581   Contractors — Subcontracted Work (Not Buildings)   Cost of Work    
2,000,000     If Any  
3
  63010   Dwellings — One-Family (Lessor’s Risk Only)   Units     1       1  
1
  97223   Machinery or Equipment — NOC — Installation, Service, Repair   Payroll
  If Any     If Any  

 

Page 6

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Commercial Pollution Liability Coverage

     
Policy Period:
  7/16/2010 – 7/16/2011
 
   
Insurance Company:
  Federal Insurance Co.
 
   
Schedule of Named Insureds:
  An entity must be named to receive coverage under the policy
Signal Peak Energy LLC
Global Rail Group LLC

Schedule of Locations:
Loc No. 1 — 100 Portal Road Roundup MT 59072

          Limits of Insurance  
 
       
General Aggregate
  $ 1,000,000  
 
       
Each Pollution Incident
  $ 1,000,000  

Coverage Trigger:

              Coverage   Ded.     Deductible Type
Pollution Liability
  $ 10,000     When Claim is Made

     
Exclusions:
  Refer to policy for exclusions
 
   
Coverage Modifications:
  See policy for specific information pertaining to these modifications

          Description        
Exclusion — Asbestos
       
Exclusion — Biological Agents — Total
       
Exclusion — Water Operations
       
Retroactive Date: July 16, 2008
       
Cap on Certified Terrorism Losses
       

     
Audit Basis:
  Annual

 

Page 7

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Commercial Auto Coverage

     
Policy Period:
  7/16/2010 – 7/16/2011
 
   
Insurance Company:
  Federal Insurance Co.
 
   
Schedule of Named Insureds:
  An entity must be named to receive coverage under the policy
 
  Signal Peak Energy LLC
 
  Global Rail Group LLC

                      Covered       Coverage   Auto Symbol   Limits of Insurance
Liability
  1   $ 1,000,000     Each Accident
Medical Payment
  7   $ 5,000     Per Person
Uninsured Motorist
  7   $ 350,000     Per Accident
Underinsured Motorists
  7   $ 350,000     Per Accident
Physical Damage — Comprehensive
  7 8   Valuation:   ACV or Cost of Repair

      Deductible:   See attached schedule
Physical Damage — Collision
  7 8   Valuation:   ACV or Cost of Repair
 
      Deductible:   See attached schedule

Covered Auto Symbols

                                  1   2   3   4   5   6   7   8   9 Any
Auto   Owned Autos Only   Owned
Private
Passenger
Autos
Only   Owned
Autos
other than
Private
Passenger Autos
Only   Owned
Autos
Subject to No-
Fault   Owned
Autos
Subject to
Compulsory
Uninsured
Motorists
Laws   Specifically
Described
Autos Only   Hired
Autos
Only   Nonowned
Autos
Only

     
Exclusions:
  Refer to policy for exclusions
 
   
Coverage Modifications:
  See policy for specific information pertaining to these modifications

      Description    
Blanket Addtl Insd-by written contract for interest of lessor
   
Ninety Day Notice of Cancellation except 10 day for non-pay of premium
   
Fellow Employee Coverage
   
Blanket Waiver of Subrogation — required by contract only
   
Employees as Insureds
   

Hired Auto Physical Damage
Comprehensive Deductible: $1000
Collision Deductible: $1000

 

Page 8

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Schedule of Vehicles:

                                          Veh                           Comp.  
  Coll.   #   Year   Make   Model   Vehicle I.D. Number   City   St.   Ded.    
Ded.  
1
  2000   Chevrolet(Engr-Voice)   1500   1GCEK19T1YE148921   Billings   MT   $
1,000     $ 1,000  
2
  2006   GMC (DeMichiei)   Denali   1 GKET63M662142255   Billings   MT   $ 1,000
    $ 1,000  
3
  2005   GMC (Surface)   1500   1GTEK14T95Z260099   Billings   MT   $ 1,000    
$ 1,000  
4
  2005   GMC (Surface)   1500   1GTEK14T25Z309739   Billings   MT   $ 1,000    
$ 1,000  
5
  2005   GMC (Surface)   1500   1 GTEK14T45Z349031   Billings   MT   $ 1,000    
$ 1,000  
6
  2005   GMC (Surface)   1500   1GTEK14T05Z266843   Billings   MT   $ 1,000    
$ 1,000  
7
  2006   Chevrolet (Ochsner)   Trailblazer   1GNDT13S362196371   Billings   MT  
$ 1,000     $ 1,000  
8
  2006   Chevrolet (Viren)   Trailblazer   1GNDT13S762203905   Billings   MT   $
1,000     $ 1,000  
9
  1997   GMC (Engr)   Yukon   1GKEK13R9VJ710133   Billings   MT                
10
  2006   Chevrolet (Valentes)   Trailblazer   1GNDT13S062194402   Billings   MT
  $ 1,000     $ 1,000  
11
  2008   Chevrolet (Roland)   Suburban   3GNFK16328G101017   Billings   MT   $
1,000     $ 1,000  

Note: Comprehensive, specific perils and collision coverage apply only when a
deductible is shown on the vehicle
Schedule of Drivers:

                                          License No.   Driver Name   Date of
Birth     License Number   State
1
  Robert Ochsner     5/19/1953     0501919534119   MT
2
  Darrell H. Roland     4/27/1954     R453135298323   MD
3
  Edward A Viren     1/22/1957     106885254   WY
4
  John DeMichiei     2/21/1949     D520429585136   MD
5
  Bradley Allen Voise     2/21/1955     0202419554121   MT
6
  Magnus Lopes Valente     9/12/1963     IAA202601LGN   Int’l
7
  Byron Kinn     5/19/1968     0503119684119   MT

 

Page 9

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Commercial Equipment Coverage

     
Policy Period:
  7/16/2010 – 7/16/2011  
Insurance Company:
  Federal Insurance Company

                              Maximum Limit per   Description of Equipment  
Total Limit     Item  
Employee Tools & Clothing
  $ 10,000     $ 2,500  

Scheduled Equipment: Under Ground

                      Item                   No.   Year   Description   Serial #
  Limit  
1
  1997   CCHDR 13 Fletcher Roof Bolter (FA204)       $ 155,000  
2
      MSA Trickle Duster (FA215)       $ 7,000  
3
      MCI Section Power Center (FA210)   MMSE10140   $ 65,000  
4
      Joy Shuttle Car (FA205)   ET15862   $ 275,000  
5
      Joy Shuttle Car (FA206)   ET15195   $ 275,000  
6
      Section Power Center (FA213)   MMSE1040   $ 38,000  
7
      Wet Duster (FA218)   S115-S60T   $ 13,000  
8
      Water Pressure Station (FA233)   BYM 16-20   $ 6,000  
9
      Stamler Feeder Breaker (FA209)   BF14A4253   $ 22,000  
10
      Fletcher DDR Roof Bolter (FA203)   13830   $ 225,000  
11
      Joy Continuous Miner (FA201)   JM4882   $ 800,000  
12
      Power Center Pemco (FA212)       $ 59,000  
13
      Continuous Miner (FA202)   JM4276   $ 800,000  
14
      Biopak Self Res & Access (FA234)       $ 142,000  
15
      Mine Self Rescuer w/pouch (FA458)       $ 21,000  
16
      Slinger Duster (FA217)       $ 10,000  
17
      Bantam Dusters (2) (FA216)       $ 21,000  
18
      Joy Shuttle Car 10SC32 (FA381)   ET17736   $ 570,000  
19
      Wagner 3 1/2 yard scoop (FA388)       $ 266,000  
20
      Power Center 1500 KVA (FA403)   1PC-R   $ 102,000  
21
      Joy Feeder Breaker (FA452)   14200   $ 500,000  
22
      Section Fan CR-60 (FA454)   401-1   $ 75,000  
23
      Section Fan CR-60 (FA455)   401-2   $ 75,000  
24
      Power Center Section 1500 KVA (FA457)       $ 103,000  
25
      Power Center Belt 1500 KVA (FA460)       $ 100,000  
26
      Wagner 3 1/2 yard scoop (FA472)   LHD-1   $ 347,000  
27
      Getman LRD226 Tow Tractor (FA474)   7074   $ 340,000  
28
      Getman LRD226 Tow Tractor (FA475)   7085   $ 340,000  
29
      Getman Supply Tractor (FA476)   HH1005   $ 125,000  
30
      Getman Supply Tractor (FA477)   HH1006   $ 125,000  
31
      Genco Mantrip (FA401)   195   $ 28,000  
32
      Dodge Mantrip (FA451)   3D7ML467496537747   $ 25,000  
33
      Genco Mantrip (FA459)   213   $ 28,000  
34
      Cap Lamps (FA526)       $ 13,000  
35
      Continuous Miner JM6192 (FA527)   12CM12-11BX   $ 1,871,000  
36
      Atlas Copco Compressor (FA528)   GA250-125   $ 55,000  
37
      Fletcher Roof Bolter CCDDR-13 (FA531)   2008070   $ 685,000  
38
      Transformers 300 KVA (FA529)       $ 7,000  
39
      Slinger Duster (FA533)       $ 46,000  
40
      Scoop (FA832)   LS195   $ 517,000  
41
      Gator Mantrip (FA504)   WO4X2ED003586   $ 10,000  
42
      Dodge 3500 Mantrip (FA521)   3D7ML46719G554134   $ 25,000  

 

Page 10

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                      Item                   No.   Year   Description   Serial #
  Limit   43      
Dodge 3500 Mantrip (FA522)
  3D7ML46789G554132   $ 25,000   44      
Dodge 3500 Mantrip (FA523)
  3D7ML467X9G554133   $ 25,000   45      
Genco Mantrip (FA524)
  218   $ 36,000   46      
Dodge 3500 Mantrip (FA552)
  3D7ML467496537747   $ 33,000   47      
42” Conveyor System w/motor (FA386)
      $ 200,000   48      
60” Conveyor Belt 1410’ (FA402)
      $ 70,000   49      
60” Conveyor Belt 2160’ (FA456)
      $ 40,000   50      
Transformer fan 500 KVA (FA461)
      $ 14,000   51      
Joy Shuttle Car (FA559)
  ET17737   $ 575,000   52      
Rescue Chamber (FA582)
      $ 108,000   53      
Belt Structure 60” 1000(FA592)
      $ 49,000   54      
Shield Hauler (FA663)
      $ 116,000   55      
Dodge 3500 Mantrip (FA 556)
  3D7ML46789G554132   $ 31,000   56      
Dodge 3500 Mantrip (FA 557)
  3D7ML46719G554134   $ 31,000   57      
Dodge 3500 Mantrip (FA558)
  3D7ML467X9G554133   $ 31,000   58      
Dodge 3500 Mantrip (FA590)
  9G558926   $ 31,000   59      
Feeder Breaker (FA708)
      $ 557,000   60      
Mantrip (FA709)
      $ 26,000   61      
Mantrip (FA710)
      $ 52,000   62      
Mantrip (FA711)
      $ 52,000          
 
  Total   $ 11,414,000          
 
            Scheduled Equipment: Above Ground        
 
            Item                   No.   Year   Description   Serial #   Limit  
1   1983  
Cat 980G Front End Loader (FA253)
  AWH00597     369,000   2      
Cat Backhoe BLN01721 (FA252)
  420P1T     48,000   3      
Cat 980G Front End Loader (FA250)
  2KR04677     199,000   4      
Cat Road Grader (FA251)
  9DJ00659     385,000   5      
Telehandler (FA553)
  SLH00540     64,000   6      
Komatsu 40 Ton Truck (FA247)
  HD325-6A     292,000   7      
CAT Dozer D10T (FA385)
  RJG01548     1,100,000   8      
Coal Lab Equipment (FA462)
        151,000   9      
Coal Lab Equipment (FA506)
        5,000   10      
Skid Steer (FA277)
        25,000   11      
Truck Scale (FA280)
        47,000   12      
GPS System (FA304)
        44,000   13      
CAT D10T Dozer (FA574)
  RJG02055     1,175,000   14      
Yale Pneumatic Lift Truck (FA576)
        15,750   15      
Gehl Skid Loader (FA591)
        59,883   16      
Getman Motor Grader (FA594)
  7095     433,000   17      
Madison #2 Water Well pump & line (FA560/FA561)
        750,000   18      
Skid Loader (FA721)
        60,000   19      
50KV Powerline Upgrade (FA586)
        65,000   20      
1000 KVA Transformer (FA680)
        24,000   21      
1000 KVA Transformer (FA681)
        24,000   22      
1000 KVA Transformer (FA682)
        27,000   23      
200 KVA Transformer (FA683)
        37,000   24      
Main Substation (FA684)
        3,000,000   25      
Surface Switchgear (FA685)
        1,000,000   26      
Cat D8T Dozer (FA824)
  OKPZ01906     325,000   27      
Cat 815F Wheel Compactor (FA825)
  OBKL00992     199,500   28      
Cat 330DL Excavator (FA826)
  OMWP00339     153,500  

 

Page 11

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                      Item                   No.   Year   Description   Serial #
  Limit   29      
Madison Deep Water Well Pump/Pipe (FA272)
        500,000   30      
Cat 924G Wheel Loader (FA827)
  ODDA03664     72,500   31      
Main Mine Fan (FA387)
        350,000          
 
  Total   $ 11,000,133  

     
Exclusions:
  Refer to policy for exclusions      
Coverage Modifications:
  See policy for specific information pertaining to these modifications

              Description   Limit     Deductible
Rental Expense
  $ 25,000      
Scheduled Equipment-Aboveground-Deductible Per Occurrence
  $ 11,000,133     10% subject to $5,000
Min., $100,000 Max
Scheduled Equipment-Underground-Deductible Per Occurrence
  $ 11,414,000     10% subject to
$10,000 Min.,
Maximum Loss Limit $5,000,000
          $100,000 Max
Coverage-Direct Physical Loss
           
Mobile Equipment Aboveground of Others
  $ 100,000      
Rented/Leased Equipment Coverage
  $ 500,000      
Cap On Certified Terrorism Losses
           
Pull Back Warranty Endorsement
           

 

Page 12

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Commercial Umbrella Coverage

     
Policy Period:
  7/16/2010 — 7/16/2011 
 
   
Insurance Company:
  National Union Fire Ins Co of Pittsburgh
 
   
Schedule of Named Insureds:
  An entity must be named to receive coverage under the policy
Signal Peak Energy LLC
Global Rail Group LLC
 
   
Limits of Insurance:
  $5,000,000     Each Occurrence Limit
$5,000,000     General Aggregate Limit
 
   
Self-Insured Retention:
  $10,000 
 
   
Coverage Form:
  Follow Form Umbrella
 
   
Coverage Modifications:
  Refer to policy for specific information pertaining to these modifications

          Description   Limit  
Crisis Response Coverage Enhancement
  $ 250,000  
Excess Casualty Crisis Fund Limit of Insurance
  $ 50,000  
Professional Liability Exclusion
       
Cross Suits Exclusion
       
Employers’ Liability For Occupational Disease Exclusion
       
Silica Exclusion
       
Total Pollution Exclusion
       
Foreign Liability Exclusion
       
Products-Completed Operations Aggregate
  $ 5,000,000  
Act of Terrorism Self-Insured Retention
  $ 1,000,000  
Mining Limitation Endorsement
       
Fungus Exclusion
       
Lead Exclusion
       
Radioactive Matter Exclusion
       
Commercial Umbrella Liability Policy With CrisisResponse
       
Coverage Territory
       
Violation of Economic or Trade Sanctions Conditions Amendment
       
Duties in the Event of an Occurrence, Claim or Suit and Schedule A — Approved
Crisis Management Firms
       
Employee Benefits Liability Limitation (Claims-Made)
       
Employers’ Liability Limitation
       
Marine Liability Exclusion
       

     
Audit Basis:
  Annual

 

Page 16

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Umbrella Coverage — Schedule of Underlying Insurance
Commercial Auto Coverage:

                          Ins. Company   Effective Date     Expiration Date    
Limit  
Federal Insurance Co
    7/16/2010       7/16/2011     $ 1,000,000  

Employers Liability Coverage:

                                              Effective     Expiration     Each
Acc.     Disease Each         Ins. Company   Date     Date     Limit     Emp.
Limit     Disease Policy Limit  
Commerce & Industry
    7/16/2010       7/16/2011     $ 1,000,000     $ 1,000,000     $ 1,000,000  

General Liability Coverage:

                                                                             
Prod. /                   Effective             Gen. Agg.     Comp.     Per Occ.
    Per. / Adv.   Ins. Company   Date     Exp. Date     Limit     Ops Agg    
Limit     Limit  
Federal Insurance Co
    7/16/2010       7/16/2011     $ 2,000,000     $ 1,000,000     $ 1,000,000  
  $ 1,000,000  

Miscellaneous Coverages:

                                  Ins. Company   Effective Date     Exp. Date  
  Coverage     Limit  
Federal Insurance Co
    7/16/2010       7/16/2011     EBL   $ 1,000,000  
Travelers Cas & Sur.
    7/16/2010       7/16/2011     EBL   $ 3,000,000  

 

Page 17

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Commercial Excess Coverage

     
Policy Period:
  7/16/2010 — 7/16/2011 
 
   
Insurance Company:
  Lexington Insurance Company
 
   
Schedule of Named Insureds:
  An entity must be named to receive coverage under the policy
 
   
Limits of Insurance:
  $5,000,000     Each Occurrence Limit
$5,000,000     General Aggregate Limit
 
   
Self-Insured Retention:
   
 
   
Coverage Form:
  Umbrella
 
   
Coverage Modifications:
  Refer to policy for specific information pertaining to these modifications

          Description   Limit  
Terrorism Coverage Provided Under the Federal Terrorism Risk Insurance Act of
2002, USA (certified acts)
  $ 5,000,000  
Following Form — Excess Liability
       
Patrol Access Endorsement
       
Accident Insurance Endorsement
       
Amendment to Insuring Agreements
       
Defense Cost Payments (shall not reduce limits of liability)
       
Employment-Related Practices Exclusion
       
Minimum Earned Premium — $22,810
       
Occupational Disease Exclusion
       
Securities and Financial Interest Exclusion
       
Exclusion — Violation of Statutes in Connection With Sending, Transmitting or
Communicating Any Material or Information
       
Unimpaired Aggregate
       
War Exclusion
       

     
Audit Basis:
  Annual

 

Page 18

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Excess Coverage — Schedule of Underlying Insurance
Commercial Auto Coverage:

                          Ins. Company     Effective Date     Expiration Date  
  Limit  

Employers Liability Coverage:

                                          Ins.     Effective     Expiration    
Each Acc.     Disease Each Emp.     Disease Policy   Company     Date     Date  
  Limit     Limit     Limit  

General Liability Coverage:

                                                                               
  Prod. /               Ins.     Effective     Exp.     Gen. Agg     Comp    
Per Occ.     Per. / Adv.   Company     Date     Date     Limit     Ops Agg.    
Limit     Limit  

Miscellaneous Coverages:

                                  Ins. Company   Effective Date     Exp. Date  
  Coverage     Limit  
National Union Fire
    7/16/2009       7/16/2010     Commercial Umbrella   $ 5,000,000  

     
Audit Basts:
  Annual

 

Page 19

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Workers Compensation Coverage

     
Policy Period:
  7/16/2010 — 7/16/2011 
 
   
Insurance Company:
  New Hampshire Insurance Company
 
   
Schedule of Named Insureds:
  An entity must be named to receive coverage under the policy.
 
  Signal Peak Energy LLC
 
  Global Rail Group LLC
 
   
Workers’ Compensation Insurance:
  Statutory MT

                 
Employers’ Liability Insurance:
  Bodily Injury by Accident   $ 1,000,000     Each Accident
 
  Bodily Injury by Disease   $ 1,000,000     Each Employee
 
  Bodily Injury by Disease   $ 1,000,000     Policy Limit
 
                Employers’ Liability Exclusions:   Refer to policy for
exclusions
 
                Coverage Modifications:   See policy for specific information
pertaining to coverage and exclusions

          Description        
Federal Coal Mine Health & Safety Act Coverage
       
Voluntary Compensation & Employers Liability Coverage
       
Waiver of Subrogation — under any contract prior to occurrence of loss
       
Notification of Change In Ownership — must report within 90 days
       
Montana Intentional Injury Exclusion
       
Montana Safety Endorsement
       

     
Audit Basis:
  Annual

                      Rating: MT                                   Class      
Estimated     Expiring   Code   Classification   Payroll     Payroll   0158  
Coal Mining — Underground -Black Lung
  $ 16,800,000     $ 10,766,000   1016  
Coal Mining — Underground
  $ 16,800,000     $ 10,766,000   0156  
Coal Mine — Surface — Black Lung
    If Any       If Any   1005  
Coal Mining — Surface — & Drivers
    If Any       If Any   8601  
Architect or Engineer — Consulting
  $ 986,900     $ 1,225,000   8233  
Coal Merchant & Local Managers, Drivers
    If Any       If Any   8810  
Clerical Office Employees NOC
  $ 368,900     $ 1,819,600  

 

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Owner/Officer Coverage Elections:

          Name   Title/Relation   Included/Excluded
Darrell Roland
  Vice President   Included
John Demichiei
  Vice President   Included
Wayne Boich
  President/Director   Excluded
Brian T. Murphy
  Secretary/Treasurer   Excluded

 

Page 15

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Commercial Directors & Officers Coverage

     
Policy Period:
  7/16/2010 — 7/16/2011 
 
   
Insurance Company:
  Travelers Casualty & Surety Company of America
 
   
Schedule of Named Insureds:
  An entity must be named to receive coverage under the policy

Crime Coverage

                  Description   Ded.     Limit  
Employee Theft
  $ 10,000     $ 1,000,000  

Directors and Officers Coverage

                  Description   Ded.     Limit  
Aggregate Limit
  $ 25,000     $ 3,000,000  
Supplemental Personal indemnification Limit of Liability for Directors and
Officers
          $ 500,000  
Investigative Expense Limit
          $ 100,000  

Employment Practices Liability Coverage

                  Description   Ded.     Limit  
Aggregate Limit
  $ 10,000     $ 3,000,000  
Third Party EPL Sublimit
  $ 10,000     $ 3,000,000  

Fiduciary Liability Coverage

                  Description   Ded.     Limit  
Aggregate Limit
  $ 0     $ 1,000,000  

 

Page 13

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PROPERTY DAMAGE
AND BUSINESS INTERRUPTION POLICY

 

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SCHEDULE
ATTACHING TO AND FORMING PART OF POLICY NO: 753 / PL0901791

     
Insured:
  Signal Peak Energy LLC
 
   
Address:
  100 Portal Drive, Roundup, Montana 59072 6856
 
   
Period of Insurance:
  From: 1 November 2009
 
   
 
  To: 31 October 2010
 
   
 
  Both Days Inclusive Local Standard Time at the location of the property
insured
 
   
The Business:
  Coal Mine
 
   
Situation:
  Montana, United States of America
 
   
Premises:
  1) 127 PM Coal Road Roundup, Musselshell County, Montana 59072
 
   
 
  2) 100 Portal Drive, Roundup, Montana 59072 6856
 
   
Limits of Liability:
  USD 50,000,000 each and every occurrence Combined Single Limit Sections 1 and
2
 
   
Deductibles:
  USD 1,000,000 each and every occurrence in respect of Property Damage
 
   
 
  60 Days in respect of Business Interruption on Actual Daily Value basis (ADV)
 
   
Premium:
  USD 826,705.74 (being 35.5556% of USD 2,325,107) per annum
 
   
Indemnity Period:
  As defined herein
 
   
Dated in London:
  1 November 2009

 

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SECTION 1 — PROPERTY DAMAGE
The Indemnity
In the event of any physical loss, destruction or damage (hereinafter in
Section 1 referred to as “damage” with “damaged” having a corresponding meaning)
not otherwise excluded happening at the Situation occurring during the Period of
Insurance to the Property Insured described in Section 1, the Insurer(s) will,
subject to the provisions of the Policy including the limitation of the
Insurers’ liability, indemnify the Insured in accordance with the applicable
Basis of Settlement.
Subject to the liability of the Insurer(s) not being increased beyond the
Limit(s) of Liability already stated herein, the Insurer(s) will also indemnify
the Insured for:

(a)  
architects’, surveyors’, consulting engineers’, legal and other fees and clerks’
of work salaries for estimates, plans, specifications, quantities, tenders and
supervision necessarily incurred in reinstatement consequent upon damage to
Property Insured but not such costs, fees and salary for preparing any claim
hereunder;

(b)  
any fee, contribution, impost or other sum payable to any Government, Local
Government or other Statutory Authority; where payment of such fee,
contribution, impost or other sum payable is a condition precedent to the
obtaining of consent to reinstate any building(s) insured hereunder; provided
that the Insurer shall not be liable for payment of any fines and/or penalties
imposed upon the Insured by any such Authorities;

(c)  
costs and expenses necessarily and reasonably incurred for the purpose of
extinguishing fire at or in the vicinity of Property Insured or threatening to
involve such property, or for the purpose of preventing or diminishing imminent
damage to Property Insured by any other peril insured by this Policy, including
damage to gain access, and the costs of replenishment of fire protective
equipment (where such fire protective equipment is required by law to be
replaced with a different type of equipment; the cost of such different type of
equipment of similar capabilities as the equipment being replaced) and charges
incurred for the purpose of shutting off the supply of water or other substance
following accidental discharge from any fire protective equipment or otherwise
escaping from intended confines;

(d)  
costs and expenses necessarily and reasonably incurred for the temporary
protection and safety of Property Insured pending repair or replacement
consequent upon damage insured hereunder;

(e)  
cost of replacing locks and/or keys and/or combinations where, if as a result of
burglary, theft or any attempt thereat, the keys and/or combination are stolen
or if there are reasonable grounds to believe the keys may have been duplicated.
Also the costs of opening safes and/or strongrooms as a result of theft of keys
and/or combinations;

(f)  
costs and expenses necessarily and reasonably incurred in respect of:

  (i)  
the removal, storage and/or disposal of debris or the demolition, dismantling,
shoring up, propping, underpinning or other temporary repairs consequent upon
damage to Property Insured by this Policy and occasioned by a peril or event not
otherwise excluded;

  (ii)  
the Insured’s legal liability in respect of removal, storage and/or disposal of
debris, notwithstanding in relation to premises, roadways, services, railway or
waterways of others, consequent upon damage to the Property Insured by a peril
hereby insured against, for such costs together with the cost of cleaning
provided that such liability was not assumed by the Insured under an agreement
entered into after the commencement of the Period of Insurance or any renewal
thereof unless liability would have attached in the absence of such agreement.

Provided that the insurance under this section does not extend to any liability
that the Insured may incur as a consequence of pollution of any kind.

 

3

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  (iii)  
the demolition and removal of any property belonging to the Insured which is no
longer useful for the purpose it was intended, providing such demolition and
removal is necessary for the purpose of the reinstatement or replacement of
Property Insured under this section and is consequent upon damage to the
Property Insured by a peril hereby insured against.

For the purposes of this clause debris means the residue of damaged Property
Insured excluding any material which is itself a pollutant or contaminant and
which is deposited beyond the boundaries of the Situation.

(g)  
damage to personal property, tools and effects (including money and negotiable
instruments) belonging to directors, partners, proprietors and employees of the
Insured whilst such persons are engaged on the business of the Insured and
damage to property of welfare, sport and social clubs associated with the
Insured whilst at the Situation.
  (h)  
costs and expenses reasonably incurred to expedite repairs, replacement or
reinstatement consequent upon damage to Property Insured including, but not
limited to, express airfreight, additional overtime, night, weekend or public
holiday rates of pay incurred in connection with the repair or reinstatement of
Property Insured directly or indirectly arising from an event insured.
  (i)  
the cost of locating and repairing burst or leaking water tanks, apparatus or
pipes where a claim has been substantiated for loss or damage to the Property
Insured arising therefrom including the cost of restoring the premises;
  (j)  
costs and expenses incurred by the Insured in taking inventory (including
unpacking, repacking and restocking) to identify, quantify and value any
Property Insured physically lost, destroyed or damaged by any peril insured
against by this Section including examination of property not belonging to but
in the care, custody or control of the Insured;
  (k)  
reduction in value of components or parts of Property Insured if such is
consequent upon physical loss destruction or damage not otherwise excluded to
other components or parts of Property Insured;
  (l)  
cost of clearance of drains including expenses necessarily incurred in clearing
and/or repairing drains, gutters, sewers and the like, at or in the vicinity of
Property Insured.
     
for the purpose of this clause the cost of clearance means the residue of
damaged Property Insured excluding any material which is itself a pollutant or
contaminant and which is deposited beyond the boundaries of the Situation.

 

4

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Property Insured
Joy Longwall miner to include the 2009 Joy Longwall Mining System, Hydraulic
supports, 1250 Foot AFC, 7LS5 Shearer, including and not limited to shields,
belts, belt structures, belt drives, conveyors and all equipment that is part of
the Joy long wall mining operation. This property also extends to the
underground and above ground equipment to the first stacking tube only
Basis of Settlement

(a)  
On buildings, machinery, plant and all other property and contents (other than
those specified below); the cost of reinstatement, replacement or repair in
accordance with the provisions of the Reinstatement or Replacement and Extra
Cost of Reinstatement Memoranda as set out herein.
     
Provided that if the Insured elects to claim the indemnity value of any damaged
property, the Insurer(s) will pay to the Insured the value of such property at
the time of the happening of the damage or at its option reinstate, replace or
repair such property or any part thereof. In any event the Insurer(s) will pay
costs incurred by the Insured in accordance with the provisions of the Extra
Cost of Reinstatement Memorandum.
  (b)  
On raw materials, supplies and other merchandise not manufactured by the
Insured; the replacement cost at the time and the place of replacement or, if
such property is not replaced, the value thereof at the time and place of the
damage.
  (c)  
On materials in process of manufacture; the replacement value of the raw
materials and the value of labour and other overhead charges expended thereon or
apportioned thereto at the time and the place of the damage.
  (d)  
On finished goods; the replacement value of raw materials and the value of
labour and other overhead charges expended thereon or apportioned thereto before
any allowance for profit or the cost of restocking such goods, whichever is the
lesser.
  (e)  
On computer systems records, documents, manuscripts, securities, deeds,
specifications, plans, drawings, designs, business books and other records of
every description; the cost of reinstating, replacing, reproducing or restoring
same, including information contained therein or thereon but not for the value
to the Insured of the said information; or if such is not required, the current
replacement cost of materials as blank stationery or software and the like.
  (f)  
On patterns; models, moulds, dies or casts; the current cost of repair or
replacement (if actually replaced) otherwise the indemnity value to the Insured
of such property.
  (g)  
On glass; the cost of repairing or replacing the broken glass including:

  •  
temporary Shuttering and/or hiring of security service pending replacement of
broken glass;
    •  
signwriting or Ornamentation on glass;
    •  
replacement Burglar Alarm Tapes on glass;
    •  
removing and re-fixing of Window and Show Case Frames and Fittings;
    •  
heat Reflecting Material or process on glass.

(h)  
On directors’ and employees’ personal property, tools and effects and customers
and visitors’ personal effects; the current replacement cost at the time and
place of replacement
  (i)  
On empty premises awaiting demolition; the salvage value of the building
materials and/or landlords, fixtures and fittings.
  (j)  
On goods sold but not delivered for which the Insured is responsible and with
regard to which, under the conditions of sale, the sale contract is by reason of
the damage cancelled, either wholly or to the extent of the damage; the contract
price.
  (k)  
On mobile plant and machinery and mining equipment that is five (5) or more
years old at the time of loss or damage; replacement cash value.

 

5

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MEMORANDA TO SECTION 1 OF THE POLICY
Except to the extent that this Policy is hereby modified under the following
Memoranda the terms, conditions and limitations of this Policy shall apply.
Interest of Other Parties
The insurable interest of only those lessors, financiers, trustees, mortgagees,
owners and all other parties specifically noted in the records of the Insured
shall be automatically included without notification or specification; the
nature and extent of such interest to be disclosed in event of damage.
Where the insurance covers the interest of more than one party, any act of
neglect of an individual party will not prejudice the rights of the remaining
party/parties; provided the remaining party/parties shall, immediately on
becoming aware of any act of neglect whereby the risk of damage has increased,
give notice in writing to the lnsurer(s) and on demand pay such reasonable
additional premium as the Insurer(s) may require.
Branded Goods
Any salvage of branded goods and/or merchandise, the Insured’s own or held by
the Insured in trust or on commission, and/or goods sold but not delivered,
shall not be disposed of by sale without the consent of the Insured. If such
salvage is not disposed of by sale then the damage will be assessed at the value
agreed between the Insured and the Insurer(s) after brands, labels or names have
been removed by or on behalf of the Insured.
Declared Values
It is specifically understood and agreed that, with respect to the declared
values of Property Insured in accordance with the Basis of Settlement, such
declared values shall not include any allowance for Extra Cost of Reinstatement
and any of the cost and expenses referred to under clause (b) to (k) of The
Indemnity
Reinstatement or Replacement
(Applicable to buildings, machinery, plant and all other property and contents,
other than those specified in Items (b) to (i) under Basis of Settlement.)
The basis upon which the amount payable is to be calculated shall be the cost of
reinstatement of the property Damaged at the time of its reinstatement, subject
to the following Provisions and subject also to the terms, Conditions and Limit
of Liability or Sub-Limit(s) of Liability of this Policy.
For the purpose of the insurance under this Memorandum “reinstatement” shall
mean:

(a)  
Where property is lost or destroyed, in the case of a building, the rebuilding
thereof, or in the case of property other than a building, the replacement
thereof, by similar property, in either case in a condition equal to but not
better or more extensive that its condition when new.
  (b)  
Where property is Damaged, the repair of the damage and the restoration of the
Damaged portion of the property to a condition substantially the same as but not
better or more extensive than its condition when new.

Provisions

(i)  
The work of rebuilding, or replacing, or repairing or restoring, as the case may
be (which may be carried out upon any other site(s) and in any manner suitable
to the requirements of the Insured, but subject to the liability of the Insurer
not being thereby increased), must be commenced and carried out with reasonable
dispatch, failing which the Insurer(s) shall not be prejudiced by the said delay
and shall not be liable to make any payment for additional expenses incurred by
the said delay.
  (ii)  
When any Property Insured to which this memorandum applies is damaged in part
only, the liability of the Insurer(s) shall not exceed the sum representing the
cost which the Insurer(s) could have been called upon to pay for reinstatement
if such property had been wholly Damaged.

 

6

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(iii)  
The Insured may elect to reinstate or replace destroyed property with dissimilar
property, provided it is to be used for the purpose of The Business described in
the Schedule. If the Insured elects to reinstate or replace destroyed property
with dissimilar property, the Insurer(s) shall pay the lesser of:

  (a)  
the cost of the dissimilar property, or
    (b)  
an amount equal to the replacement cost which would have been payable if the
destroyed property had been reinstated or replaced with similar property in a
condition equal to but not better or more extensive than its condition when new.

(iv)  
No payment beyond the amount which would have been payable under this Policy if
this memorandum had not been incorporated herein shall be made until a sum equal
to the cost of reinstatement shall have been actually incurred; provided that
where the Insured reinstates or replaces any lost or destroyed property at a
cost which is less than the cost of reinstatement (as defined) but greater than
the value of such property at the time of the happening of its loss or
destruction, then the cost so incurred shall be deemed to be the cost of
reinstatement.
  (v)  
All other insurances covering the property effected by or on behalf of the
Insured shall be on a similar reinstatement basis.

Extra Cost of Reinstatement
(Applicable to buildings, machinery, plant and all other property and contents,
other than those specified in Items (b) to (i) under Basis of Settlement).
This Policy extends to include the extra cost of reinstatement including
demolition or dismantling of the Property Insured necessarily incurred to comply
with the requirements of any Act of Parliament or Regulation made thereunder or
any By-Law or Regulation or requirement of any Municipal or other Statutory
Authority, subject to the following provisions.
Provisions

(i)  
The work of reinstatement, (which may be carried out wholly or partially upon
another site, subject to the liability of the Insurer not being thereby
increased), must be commenced and carried out with reasonable dispatch, failing
which the lnsurer(s) shall not be prejudiced by the said delay and shall not be
liable to make any payment for additional expenses incurred by the said delay.
  (ii)  
The amount recoverable shall not include the additional cost incurred in
complying with any such Act, Regulation, By-Law or requirement with which the
Insured had been required to comply prior to the happening of the Damage.
  (iii)  
If the cost of reinstatement of the Damage directly caused by any of the perils
insured against is less than twenty five percent (25%) of what would have been
the cost of reinstatement of the Property Insured had such property been
destroyed the amount recoverable hereunder shall be limited to the extra cost
necessarily incurred in reinstating only that portion Damaged.

Output Replacement
If the interest insured under the Policy constitutes property which has a
measurable output and which is capable of replacement with a new item or items
which perform a similar function then such property shall be valued for
insurance purposes as follows, and values for the settlement of any loss
destruction or damage in respect thereof shall be on the same basis:

(a)  
If any damaged Property Insured is to be replaced by an item or items which have
the same or a lesser total output, then the insurable value thereof is the new
installed cost of such replacement item or items as would give the same total
output as the damaged property;
  (b)  
If any damaged Property Insured is to be replaced by an item or items which have
a greater total output and the replacement value is no greater than the value
insured of the property damaged then no deduction shall be made from any claim
due to improved output;
  (c)  
If any damaged Property Insured is to be replaced by an item or items which have
a greater total output and the replacement value is greater than the value
insured of the damaged property then the insurable value thereof is that
proportion of the new installed cost of the replacement item or items as the
output of the damages property bears to the output of the replacement item or
items. The difference between the insurable value as defined and the new
installed cost of the replacement item or items shall be borne by the insured;

 

7

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Provided that in any event where any damaged property is to be repaired the
Insurer(s) shall pay the cost of restoration of such damaged property to a
condition substantially the same as, but not better or more extensive than, its
condition when new and provided further that the liability of the Insurer(s)
shall not exceed the sum representing the cost which the Insurer(s) could have
been called upon to pay if such Property Insured had been wholly destroyed.
Floor Space Ratio Index (Plot Ratio)
In the event of the buildings being Damaged so as to constitute total loss or
constructive total loss and, as a result of the exercise of statutory powers
and/or authority by any Government Department, Local Government or any other
Statutory Authority, reinstatement of the building as before is prohibited and
reinstatement is only permissible subject to a reduced Floor Space Ratio Index:
The Insurer(s) agree(s) to pay in addition to the amount payable on
reinstatement of the building(s) the difference between:

(a)  
the actual cost of reinstatement incurred in accordance with the reduced floor
space ratio index and
  (b)  
the cost of reinstatement which would have been incurred had a reduced floor
space ratio index not been applicable.

In arriving at the amount payable under Item (a) above any payments made by the
Insurer shall include the extra cost of reinstatement including demolition or
dismantling of the Property Insured necessarily incurred to comply with the
requirements of any Act of Parliament or Regulation made thereunder or any
By-Law or Regulation of any Municipal or other Statutory Authority.
Any payment made for under Item (a) of this clause shall be made as soon as the
said difference is ascertained upon completion of the rebuilding works being
certified by the architect acting on behalf of the Insured in the reinstatement
of the building.
Sealing of Mine
This Policy includes but is not limited to all reasonable cost of sealing the
mine or part of the mine rendered necessary for the purpose or preventing or
diminishing imminent damage to property of a type not excluded by this Policy,
by any peril insured against by this Policy.
Acquired Companies
This Policy extends to include:

(a)  
property located anywhere in the World belonging to companies and other
organisations a controlling interest in which is acquired by the Insured during
the currency of this Policy; and
  (b)  
property located anywhere in the World for damage to which such companies or
other organisations are legally responsible or for which they have assumed
responsibility to insure prior to the occurrence of any damage;

subject to the Insured declaring details of such acquisitions within a
reasonable period following the date of acquisition. Provided the business of
the new acquisition shall be similar to The Business as stated in the Schedule.
For the purposes of this Memorandum a controlling interest shall in the case of
a company, mean the acquisition of shares carrying more than fifty per cent
(50%) of votes capable of being cast at a general meeting of ordinary
shareholders in such company.
Undamaged Foundations (aboveground property only)
Where any Property Insured is damaged but its foundations are not destroyed and
due to the requirement of any law or of any local government or statutory
authority reinstatement of the Property Insured has to be carried out upon
another site then the abandoned foundations will be considered as being
destroyed; PROVIDED THAT if the presence of the abandoned foundations increases
the resale value of the original building site then such increase in resale
value shall be regarded as salvage and the amount thereof shall be paid to the
Insurer(s) by the Insured upon completion of the sale of the site, or shall be
deducted from the final amount of any moneys payable by the Insurer(s) under
this Policy, whichever shall occur later.

 

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Abandoned Undamaged Portion of a Building Deemed Destroyed
If any building is damaged and due to the exercise of statutory powers or
delegated legislation or authority by any government department, local
government or other statutory authority, reinstatement of such building is
carried out upon another site, then the abandoned undamaged portion of such
building shall be deemed to have been destroyed; provided that if the presence
of such abandoned undamaged portion of the building increases the sale value of
the original site, the increase in sale value shall be regarded as salvage and
the amount thereof shall be payable to the lnsurer(s) by the insured upon
completion of any sale of the site or shall be deducted from the total amount
otherwise payable by the Insurer(s) under this Policy, whichever shall occur
later.
Provided this Memorandum shall only apply if more than 25% of the building as
measured by floor area, is damaged by a peril insured under this Policy.
Designation
For the purpose of ascertaining the classification under which any property is
insured, the Insurer(s) agree to accept the designation applied to such property
by the Insured in its records, provided that such property is not specifically
excluded by this Policy.
Customers Excise and Other Duties
This Policy extends to cover the Insured’s liability for customs, excise and
other duties that the Insured may become liable to pay in the event of loss,
destruction or damage to Property Insured.
Hired Property
Where the Insured enters into a lease or hiring agreement for property and the
terms of such lease or hiring agreement include a disclaimer clause in favour of
the lessor or the owner, then the insurance provided by the Policy shall not be
prejudiced by the Insured agreeing to such terms.
Customers’ Goods
This Policy extends to cover goods belonging to the Insured’s customers or
customers of others indemnified herein whilst at the premises described herein.

 

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SUB-SECTION 1 (a) MACHINERY BREAKDOWN
Insuring Clause
In the event of Loss or Damage as defined herein to the Property Insured by this
Section of the Policy directly and wholly attributable to Breakdown as defined
hereunder except as hereinafter excluded, such Loss or Damage occurring during
the Period of Insurance as stated in the Schedule, the Insurer agrees to
indemnify the Insured for such Loss or Damage in accordance with the terms and
conditions as hereinafter set forth.
Coverage
Breakdown shall mean sudden and unforeseen physical loss or physical damage
immediately necessitating repair or replacement before normal working can be
resumed resulting from:

(a)  
defects in material, design, construction, erection or assembly;
  (b)  
fortuitous working accidents such as vibration, maladjustment, weakening of
parts, molecular fatigue, centrifugal force, abnormal stresses, defective or
accidental lack of lubrication, water hammer or local overheating (except in the
case of boilers or similar plant when followed by explosion) and failure or
defects in protection devices;
  (c)  
excessive or insufficient electrical power, failure of insulation, short
circuits, open circuits or arcing or the effects of static electricity;
  (d)  
incompetence, lack of skill or negligent acts of employees or third parties;
  (e)  
falling impact, collision, collapse or similar Occurrences, obstruction or the
entry of foreign bodies;
  (f)  
Any other cause not hereinafter excluded.

 

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Excluded Risks within this Sub-Section 1 (a)
The Insurers shall not be liable for:

(a)  
Loss or Damage caused by fire, direct lightning, explosion, extinguishing of a
fire or subsequent demolition, aircraft and other aerial devices or articles
dropped therefrom, collapse of buildings, disappearance, theft or any attempt
thereat. Explosion shall not mean the bursting or disruption of turbines,
compressors, engine cylinders, hydraulic cylinders, flywheels or other parts
subject to centrifugal force, transformer switches or oil immersed switchgear;
nor shall it mean the disintegration, overpressure or rupture of pressure
vessels or boiler pressure parts;
  (b)  
Loss or Damage caused by earthquake, tsunami, volcanic eruption or other
convulsion of nature, subsidence, landslide, rockfall, avalanche, hurricane,
tornado, typhoon, cyclone, or other atmospheric phenomena, flood, inundation,
escape of water from water-containing apparatus or clearance of debris,
demolition or dismantling arising from these causes;

(c) (i)  
wastage of material, wearing away or wearing out of any part of any machinery
caused by or resulting from ordinary usage, rust, boiler scale or other
deposits, erosion, corrosion, cavitation or deterioration owing to chemical or
atmospheric conditions or otherwise, scratching of painted or polished surfaces;
    (ii)  
slowly developing deformation such as distortion, cracks, fractures, blisters,
laminations, flaws or grooving or the making good of defective tube joints or
other defective joints or seams unless such defects result in damage otherwise
insured under this Section 1 of the Policy;

(d)  
Loss or Damage caused by the imposition of abnormal conditions directly or
indirectly resulting from testing or intentional and sustained overloading.
Notwithstanding the provisions of this exclusion it is understood and agreed
that testing is covered during pre commissioning, start-up, and commissions of
construction and/or erection projects insured under Section 1 of this Policy;
  (e)  
Loss or Damage to foundations and/or masonry, exchangeable or replaceable parts
and attachments such as flexible drives or tools used for cutting, drilling,
grinding, polishing or similar purposes or moulds, patterns, pulverising and/or
crushing surfaces, screens and/or sieves, engraved cylinders, ropes, chains,
belts, elevator and/or conveyor bands, refractory linings, batteries, tyres,
connecting wire and/or cables, flexible pipes, jointing and/or packing material
and/or all other parts not made of metal (except the insulation of electrical
conductors), fuels, filter fillings, cooling media, lubricants, catalysts,
chemicals and/or other operating media and/or materials used in the course of
process;
  (f)  
loss of use of any machine or consequential loss of any nature whatsoever other
than as provided for under Section 2 in respect of Business Interruption;
  (g)  
Loss or Damage to boilers and/or pressure vessels due to or arising from flue
gas and/or chemical explosion;

 

11

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(h)  
Loss or Damage caused by the wilful act, wilful neglect, gross negligence or
wilful misconduct of the Insured or his representatives;

(i) (i)  
Loss or Damage to or loss of use of Property Insured directly or indirectly
caused by seepage or pollution;

  (ii)  
the cost of removing, nullifying or cleaning-up seeping, polluting or
contaminating substances;
       
other than as provided elsewhere under this Policy;

(j)  
Loss or Damage for which the manufacturer or supplier of the property is
responsible either by law or under contract. In the event of the said supplier
or manufacturer repudiating liability or not indemnifying the Insured within
30 days of the time the claim documents are in his possession whichever occurs
first the Insurers shall indemnify the Insured, subject to subrogation of their
rights, to the extent that such rights exist, against the manufacturer or
supplier for such loss or damage;
     
This exclusion shall not apply to loss or damage caused in the course of
reinstating or replacing an otherwise insured damage;
  (k)  
Loss or Damage due to any faults or defects known to the Insured at the time
this insurance was arranged and not disclosed to the Insurer;
  (l)  
The deliberate withholding from the Insured by the supply authority of supplies
of water, steam, gas, electricity, fuel or refrigerant as a result of a dispute
between the Insured and such authority unless resulting from a cause not
excluded hereby.
  (m)  
Testing And Commissioning Clause

It is hereby noted and agreed that this Insurance does not extend to cover
destruction or damage to property in course of construction or erection,
dismantling, revamp or undergoing testing or commissioning including mechanical
performance testing or any consequential loss resulting therefrom.
Acceptable of property hereon is subject to satisfactory completion of the
following procedures and otherwise to the terms and conditions of this Policy.

  i)  
The plant is mechanically complete
       
This requires all key items to be complete and that no temporary structures
(such as pipe supports) remain awaiting permanent fixture
    ii)  
Plant Testing and commissioning has been completed with the design/
construction/ erection contract performance levels having been satisfactory
achieved
    iii)  
Design performance criteria maintained by the entire plant in a stable and
controlled manner for a continuous ongoing period of one hundred and sixty eight
(168) hours
    iv)  
The Insured has accepted the plant without reservation or waiver of guarantee
conditions

It is further noted and agreed that these provisions do not apply to normal
routine maintenance activities and scheduled turnarounds
Cross Reference Clause
It is understood and agreed that losses excluded by this Sub-Section 1 (a) and
not otherwise excluded by Section 1 shall be deemed covered by Section 1.

 

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Special Conditions applicable to Sub-Section 1 (a)

1.  
Right of Inspection
     
The Insurers’ officials shall at all reasonable times have the right of access
to the Premises in which the machines are situated provided they comply with all
reasonable site access requirements.
  2.  
Due Diligence
     
It is agreed by the Insured that during the continuance of this Section 1
(a) the machine(s) shall be maintained in good working order and not wilfully
operated beyond safe limits and that Government or other regulations relating to
the condition, operated or inspection of machine(s) are observed. The Insured
agree to forward to the Insurers copies of such inspection reports whenever
required to do so by the Insurers within the Period of Insurance and any other
period provided herein for the bringing of a suit against the Insurers.
  3.  
Valuation and Adjustment of Losses
     
In case of Loss or Damage insured under this Section of the Policy, the basis of
indemnity unless otherwise endorsed hereon shall be the Replacement Cost.
     
“Replacement Cost” shall mean all expenses necessarily incurred to repair,
rebuild or replace with new materials of like kind and quality including
dismantling and re-erection charges incurred for the purpose of effecting
repair. Replacement Cost shall be determined as of the date of incurring such
expenditure.
     
In the event that any Property Insured is not repaired, rebuilt or replaced, the
basis of adjustment shall be calculated on the basis of the value of such
Property Insured immediately before the Occurrence of the Los or Damage insured
by this Section, with due allowance for depreciation by age, use and condition.
  4.  
Removal
     
Such insurance as is afforded under this Section of the Policy shall also apply
while the Property Insured is being removed because of imminent danger of Loss
or Damage.

 

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SECTION 2 — BUSINESS INTERRUPTION
Interest Insured
In the event of Property Insured used by the Insured at the Premises, or
Property Insured under any other Policy effected by or on behalf of the Insured,
being Damaged during the Period of Insurance by any cause or event not
hereinafter excluded and the Business carried on by the Insured being in
consequence thereof interrupted or interfered with, the Insurer will, subject to
the provisions of this Policy, pay to the Insured the amount of loss resulting
from such interruption or interference in accordance with the applicable Basis
of Settlement.
Provided that the Insurer will not be liable for any loss under this Section
unless the Insurer, or insurers by which such property is insured, shall have
paid for, or admitted liability in respect of such Damage, unless no such
payment shall have been made or liability shall not have been admitted therefore
solely owing to the operation of a provision in such insurance excluding
liability for loss below a specific amount.
Basis of Settlement
Item 1 — Gross Earnings
The insurance under this item is limited to loss of Gross Earnings due to
(a) Reduction in Turnover and (b) Increase in Cost of Working. The amount
payable as indemnity hereunder shall be:

(a)  
In respect of Reduction in Turnover:
     
The sum produced by applying the Rate of Gross Earnings to the amount by which
the Turnover during the Indemnity Period shall, in consequence of the Damage,
fall short of the Standard Turnover, less any non continuing Standing Charges.
  (b)  
In respect of Increase in Cost of Working:
     
The additional expenditure necessarily and reasonably incurred for the sole
purpose of avoiding or diminishing the reduction in Turnover and/or resuming or
maintaining Normal Operations which but for that expenditure would have taken
place during the Indemnity Period in consequence of the Damage, but not
exceeding the sum produced by applying the Rate of Gross Earnings to the amount
of the reduction thereby avoided.

less any sum saved during the Indemnity Period in respect of such of the charges
and expenses of the business payable out of the Gross Earnings as may cease or
be reduced in consequence of the damage.
In determining Turnover during the Indemnity Period, any amounts recovered under
Section 1 for finished products and/or merchandise shall be included as though
completed sales.
If during the Indemnity Period products shall be sold or services shall be
rendered elsewhere that at the premises of the business, either by the Insured
or by others on the Insured’s behalf, the money paid or payable in respect of
such sales or services shall be included in arriving at the Turnover during the
Indemnity Period. The Insured agrees to use any suitable property or service
owned or controlled by the insured or obtainable from other sources in order to
maintain Turnover and reduce the loss under this Policy.
In adjusting any loss, account shall be taken and an equitable allowance made if
any shortage in Turnover due to the Damage is postponed by reason of Turnover
being maintained (temporary or otherwise) from accumulated stocks of finished
products and/or merchandise.
Actual Daily Valuation is calculated at 1/365th of the annual business
interruption value of the site affected x the number of days specified

 

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Item 2 — Contractual Payments
The insurance under this item is in respect contractual fines and/or penalties
for breach of contract and the amount payable as indemnity hereunder shall be
such sum(s) as the Insured shall be legally liable to pay and shall pay in
discharge fines and/or penalties incurred in consequence of the Damage for
non-completion and/or late completion of orders and/or non-performance and/or
late performance or services and/or the inability to meet contract
specifications or resultant cancellation of orders.
Item 3 — Accounts Receivable
The Insurance under this item is limited to the loss sustained by the Insured in
respect of outstanding debit balances directly due to Damage to the Insured’s
books of account or other business books or records and the amount payable shall
be:

1.  
the difference between:

  (a)  
the outstanding debit balances, and
    (b)  
the total of the amounts received or traced in respect thereof.

2.  
the additional expenditure incurred in tracing and establishing customer’s debit
balances including collection expenses in excess of normal collection expenses
following the Damage.
  3.  
interest on any loan to offset impair collection pending repayment of such sums
made uncollectable by such Damage.

When Damage covered by this item has occurred but the Insured cannot more
accurately establish the outstanding debit balances as of the date of such
Damage, such amount shall be computed as follows;

  •  
The monthly average of outstanding debit balances represented by the Insured
shall be adjusted in accordance with the percentage increase or decrease in the
twelve months average of monthly sales of products and services that may have
occurred in the interim.
    •  
The monthly amount of outstanding debit balances thus established shall be
further adjusted in accordance with any demonstrable variance from the average
for the particular month in which the Damage occurred; due consideration also
being given to the normal fluctuations in the amount of outstanding debit
balances within the fiscal month involved.
    •  
There shall be deducted from the total amount of outstanding debit balances,
however established, the amount of such outstanding debit balances evidenced by
records not Damaged or otherwise established or collected by the Insured, and an
amount to allow for probable bad debts which would normally have been
uncollectable by the Insured.

 

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Definitions
The following terms, wherever used, in Section 2 shall mean:
Indemnity Period: The Period of Indemnity applying to Business Interruption is
as shown below:
the period:

  (a)  
starting from the time of physical loss or damage of the type insured against;
and
    (b)  
ending when with due diligence and dispatch the building and equipment could be:

  (i)  
repaired or replaced; and
    (ii)  
made ready for operations,

under the same or equivalent physical and operating conditions that existed
prior to the damage, irrespective of the date of expiration of this Policy.
Extended Period of Indemnity: This Policy will cover the Actual Loss Sustained
by the Insured due to consequential reduction in Gross Earnings:

  a.  
directly resulting from the interruption of business insured under this Policy;
    b.  
for such additional time as would be required with due diligence and dispatch to
restore the Insured’s business to the condition that would have existed had no
loss occurred;
    c.  
beginning on the date on which liability of Insurers for loss resulting from
interruption of business would end without this coverage, but
    d.  
in no event for more than 180 days from that date.

Standard Turnover: The turnover during that period in the twelve months
immediately before the date of the damage, which corresponds with the Indemnity
Period.
Standing Charges: Fixed and Continuing Expenses.
Turnover: The money (less discounts, if any allowed) paid or payable to the
Insured for goods sold and/or delivered or for services rendered in the course
of the Business, not to be limited by the day of expiration or cancellation of
this Policy.

 

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MEMORANDA APPLICABLE TO SECTION 2
Accumulated Stock
In adjusting any loss, account shall be taken and equitable allowance made if
any reduction in Turnover or Gross Earnings due to the Damage is postponed by
reason of the Turnover being temporarily maintained from accumulated stocks of
finished goods.
Books of Account
Any particulars or details contained in the Insured’s books of account or other
business books or documents which may be required by the Insurer for the purpose
of investigating or verifying any claim hereunder may be produced and certified
by the Insured’s auditors and their certificate shall be prima-facie evidence of
the particulars and details to which such certificate relates.
The words and expressions used herein shall have the meaning usually attached to
them in the books and accounts of the Insured unless otherwise defined in the
Policy.
Computer Installations
This Section is extended to include loss (not otherwise recoverable) resulting
from interruption to or interference with the Business occasioned by Damage
resulting from any of the perils hereby insured against to computer
installations, including ancillary equipment and data processing media, utilised
by the Insured provided that liability for such Damage would have been admitted
by the Insurer had such property been insured under a property damage Policy.
Contractual Commitments
This Section is extended to include loss sustained in respect of contractual
commitments and the amount payable as indemnity thereunder shall be such sums as
the Insured shall be legally liable to pay and shall pay under contracts for
purchases which cannot be utilised by the Insured in consequence of the Damage
less any sums received or receivable by the Insured in respect of such purchases
through any salvage handling operations or resale.
Departmental Clause
If the Business be conducted in departments the independent trading results of
which are ascertainable the provisions of Clauses (a) and (b) of Item No. 1 — of
Basis of Settlement (Section 2) — may at the option of the Insured apply
separately to each department affected by the Damage. Provided that the trading
results of all business units within the one Operating Group that are affected
by the Damage shall be taken into account for the purpose of adjusting a claim.
Where, for the purpose of avoiding or diminishing a reduction in Turnover or
Gross Earnings, goods or services are purchased from a party also insured under
this Policy, the reasonable full price of such goods or services shall be taken
into account for the purpose of adjusting a claim as though the goods or
services were purchased from a party not also insured by this Policy.
Deterioration of Undamaged Stock
This Section is extended to cover loss directly resulting from interruption to
or interference with the Business carried on by the Insured at the Premises
occasioned by the deterioration of otherwise undamaged stock caused by inability
to process or complete any process in consequence of Damage to property used by
the Insured at the Premises.
Such loss for the purpose of this Policy being deemed to be loss resulting from
Damage.

 

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Diminution in Value of Stock
This Section is extended to include loss sustained in respect of stocks and
materials-in-trade not directly affected by the Damage which:

1.  
would have been utilised by the Business or sold during the Indemnity Period had
the Damage not occurred, and
  2.  
cannot be utilised or sold before or, so far as can reasonably be foreseen,
after the expiration of the Indemnity Period; solely due to their obsolescence
resulting from changes in designs. The amount payable as indemnity hereunder
shall be the purchase (or manufactured) cost of such goods to the Insured less,
if the goods be sold for salvage, the net amount realised from any salvage sale.

Registered Vehicles and/or Trailers
Notwithstanding Property Exclusion 5 this Section extends to include loss
resulting from interruption of or interference with the Business occasioned by
Damage to registered vehicles and/or trailers whilst such vehicles or trailers
are at the Premises owned or occupied by the Insured; provided always that this
Policy does not cover loss resulting from physical loss, destruction of or
damage to such vehicles and/or trailers whilst they are being used on any public
highway or thoroughfare except as allowed by the terms of Property Exclusion 5.
Royalties Receivable
This Section is extended to include loss of royalties receivable (and the amount
payable as indemnity hereunder shall be the actual shortfall of royalties
receivable) during the Indemnity Period in consequence of Damage to property at
the premises of any company or organisation which pays such royalties to the
Insured, or at the premises of any manufacturer or distributor upon which any
such company or organisation is dependent.
Turnover or Gross Earnings Elsewhere After Damage
If during the Indemnity Period goods shall be sold or service shall be rendered
elsewhere than at the Premises for the benefit of the Business either by the
Insured or by others on the Insured’s behalf the money paid or payable in
respect of such sales or services shall be brought into account in arriving at
the Turnover or Gross Earnings during the Indemnity Period.
Turnover / Output Alternative
At the option of the Insured, the term Output may be substituted for the term
Turnover or Gross Earnings and, for the purpose of this Section, Output shall
mean the sale and/or invoice value of goods manufactured and/or processed by the
Insured in course of the Business at the Premises. Provided that only one such
term shall be operative in connection with any one occurrence involving Damage.
If the meaning set out above be used, the memorandum Turnover or Gross Earnings
Elsewhere After Damage shall be altered to read as follows:
If during the Indemnity Period goods shall be manufactured and/or processed
other than at the Premises for the benefit of the Business either by the Insured
or by others on the Insured’s behalf the sale and/or invoice value of the goods
so manufactured and/or processed shall be brought into account in arriving at
the Output during the Indemnity Period.
The memorandum Accumulated Stocks shall be altered to read as follows:
In adjusting any loss under this Section, account shall be taken and equitable
allowance made if any shortage in Output due to the Damage is postponed by
reason of the Output being temporarily maintained from accumulated stocks and/or
raw materials.

 

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EXCLUSIONS APPLICABLE TO ALL SECTIONS
Property Exclusions
This Policy does not cover physical loss, destruction of or damage to the
following property or loss under Section 1 resulting therefrom:

1.  
property in transit beyond the confines of any site or lease.
  2.  
money which shall mean coin and paper currency, cheques (including travellers
cheques), negotiable instruments, letters of credit, bills of exchange, postal
and money orders, stamps, credit cards, credit card sale vouchers and the
contents of franking machines
  3.  
jewellery or furs, (other than as personal property of directors, employees or
visitors) bullion, precious metals or precious stones other than as stock and/or
merchandise of the Business.
  4.  
any locomotive or rolling stock, watercraft or aircraft;
  5.  
vehicles or trailers registered or licensed to travel on a public road, provided
that this exclusion shall not apply to mobile plant and equipment and vehicles
or trailers not otherwise insured, whilst on any premises occupied or used by
the Insured;
  6.  
Livestock, animals, birds or fish;
  7.  
standing timber, growing crops and pastures;
  8.  
land, land values, improvements to or in land.
  9.  
underground workings and tunnels, underground excavations, highwalls, shafts,
declines, inclines, stopes, drifts, roadways, haul roads, access roads,
earthworks, open pits and any other open cut excavation, pitwalls, leach pads,
leachate solution, liners forming part of leach pads, precious metals in
solution,
  10.  
mobile plant, except for plant and equipment within open pits or underground
that is not otherwise excluded for which a value has been scheduled and declared
to Insurers;
  11.  
consumable property used in underground mines, including but not limited to
roof-bolts, rock bolts, rock dust, fuel, oil, lubricants, construction material
or supplies except that which has not been installed or put to its intended use;
  12.  
tailings dams and any structure used for containment of tailings and other
property situated thereon or therein;
  13.  
autoclaves as a result of gradually developing flaws, deformation, distortion,
cracks or partial fractures;
  14.  
loss or damage to refractory linings;
  15.  
loss or damage to underground property situated under unsupported roof or to
remotely controlled plant and machinery underground whilst operating in remote
mode.
  16.  
unmined minerals, coal deposits or ore;
  17.  
gold or precious metals in any form;
  18.  
property (other than coal and other raw materials) in the course of being or due
to it being processed.
  19.  
empty premises undergoing demolition.
  20.  
offshore oil and gas drilling and/or production rigs whilst offshore.
  21.  
docks, wharves and piers not forming part of any building.
  22.  
transmission and distribution towers, poles lines components, or equipment
beyond 300 metres of the Insured’s Premises.

 

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23.  
(a) property undergoing construction, and/or erection, and/or testing and/or
commissioning, provided that this exclusion shall not apply to normal mine
development or maintenance.

(b) empty premises undergoing demolition
  24.  
rehabilitation and/or restoration of mine workings
  25.  
property situated within the confines of, or forming part of, any open pits and
any other open cut excavation.
  26.  
property forming part of or situated within the confines of any underground mine
except that this exclusion shall not apply to longwall face equipment (as
defined herein)

Perils Exclusions
The Insurer(s) shall not be liable under Section 1 and/or Section 2 in respect
of:

1.  
physical loss, destruction of or damage to the Property Insured

  (a)  
directly or indirectly occasioned by or happening through or connected with war,
invasion, act of foreign enemy, hostilities (whether war be declared or not),
civil war, rebellion, revolution, insurrection, military or usurped power;
    (b)  
resulting from confiscation, nationalisation, requisition, or damage to property
by or under the order of any Government or Public or Local Authority.

   
Notwithstanding the provisions of Perils exclusion 1(b) the lnsurer(s) shall be
liable for loss, destruction of or damage to, or the cost of removal of, sound
property at the Insured’s Premises for the purpose of preventing or diminishing
imminent damage by, or inhibiting the spread of fire or under the order of any
Government or Public or Local Authority when such fire is not a result of any of
the excluded perils in the paragraph 1(a).

2. (a)  
physical loss, destruction of or damage to the Property Insured;

  (b)  
any legal liability of whatsoever nature, directly or indirectly caused by or
contributed to by or arising from:
       
ionising radiations or contamination by radioactivity from any nuclear waste or
from the combustion of nuclear fuel;

For the purpose of this exclusion only “combustion” shall include any
self-sustaining process of nuclear fission.
nuclear weapons materials.

3.  
physical loss, destruction or damage occasioned by or happening through:

  (a) (i)
loss of weight, evaporation; inherent vice; latent defect; the action of amp
atmosphere; natural variations in temperature; insects, vermin, rust, oxidation
or corrosion;

  (ii)  
contamination or pollution; changes in colour, flavour, texture or finish; the
action of smut or smoke from industrial operations, mildew, mould, wet and dry
rot or disease; unless such events result form a cause not specifically excluded
which originates beyond the premises owned, occupied or used by the Insured;

  (b)  
wear and tear, fading, scratching or marring, gradual deterioration or
developing flaws, normal upkeep or making good
    (c)  
error or omission in design, plan or specification or failure of such design;
    (d)  
normal settling, seepage, shrinkage or expansion in buildings or foundations,
walls, pavements, roads and other structural improvements, in regard to
underground operations only the mining condition known as creep and heave.

 

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  (e)  
faulty materials or faulty workmanship

Provided that this Exclusion 3(a) to (e) shall not apply to subsequent loss,
destruction of or damage to the Property Insured occasioned by a peril (not
otherwise excluded) resulting from any event or peril referred to in this
exclusion.

4.  
physical loss, destruction or damage occasioned by or happening through;

  (a)  
incorrect siting of buildings consequent upon

  (i)  
error in architectural design or specification,
    (ii)  
faulty workmanship,
    (iii)  
non compliance by the Insured (or anyone acting on behalf thereof) with the
necessary permits issued by Government, Public or Local Authorities.

  (b)  
demolitions ordered by Government or Public or Local Authorities due to failure
on the part of the Insured or their agents to obtain the necessary permits
required.
    (c)  
error or omission in design, plan or specification or failure of design.

5.  
physical loss, destruction of or damage occasioned by or happening through:

  (a)  
unexplained or inventory shortage or disappearance resulting from clerical or
accounting errors, or shortage in the supply or delivery of materials to or from
the Insured.

6.  
physical loss, destruction or damage occasioned by or happening through:

  (a) (i)
fraudulent or dishonest acts, fraudulent misappropriation, embezzlement,
forgery, counterfeiting data corruption, unauthorised amendment of data and
erasure by electronic or non-electronic means involving the Property Insured by
the Insured or any employee(s) of the Insured acting or in collusion with any
other person(s).

  (ii)  
access by any person(s) other than the Insured or the Insured’s employee(s) to
the Insured’s computer system via data communication media that terminate in the
Insured’s computer system,

provided that this exclusion shall not apply to theft consequent upon forcible
and violent entry upon premises or felonious concealment upon premises committed
by an employee of the Insured or theft of money whilst in transit;

  (b)  
(i) cessation of work whether total or partial

  (ii)  
cessation, interruption or retarding of any process or operation as a direct
result of strikes, labour disturbances or locked-out workers.

  (c)  
kidnapping, bomb threat, hoax, extortion or any attempt thereat

Provided that this Exclusion 6(a) to(c), shall not apply to subsequent loss,
destruction or damage to Property Insured occasioned by a peril (not otherwise
excluded) resulting from any event or peril referred to in this exclusion.

7.  
any legal liability of whatsoever nature other than as herein provided.

8.  
consequential loss of any kind including consequential loss due to delay, lack
of performance, loss of contract or depreciation in the value of land or stock,
except as herein provided in Section 2.
  9.  
physical loss, destruction or damage to property underground caused directly or
indirectly by water and/or other liquid matter other than damage solely and
exclusively caused by water entering the underground portion of a mine via
man-made surface level openings.
  10.  
physical loss, destruction or damage caused by subsidence and/or under-mining
in, adjacent to, or above any mine whether open cut or underground.

 

21

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11.  
physical loss, destruction or damage to property underground directly caused by
or arising out of the mining conditions known as “creep” or “heave”, but not
excluding resultant physical loss or damage by a peril not otherwise excluded.
     
For the purposes of the application of this exclusion:
     
“Creep” shall mean gradual deformation that results from the application of
stress resulting in forcing the pillars down into the floor of an underground
mine.
     
“Heave” shall mean gradual deformation of the floor of an underground mine.
  12.  
physical loss, destruction or damage to raise boring equipment whilst in “hole”
  13.  
physical loss destruction or damage caused by or resulting from the escape of
material from hydraulically backfilled stopes.
  14.  
all non-damage Business Interruption, advanced Business Interruption and
Contingent Business Interruption

 

22

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DEFINITIONS APPLICABLE TO ALL SECTIONS
For the purpose of this Policy, the following definitions will apply:

1.  
Accidental Damage

The term Accidental Damage shall mean:
Damage to the Property Insured (subject to the Exclusions Applicable to All
Sections) arising out of any one original source or cause other than fire,
lightning, thunderbolt, explosion, implosion or collapse, smoke and/or steam,
spontaneous fermentation or heating, spontaneous combustion, earthquake,
subterranean fire, volcanic eruption, subsidence, earth movement or collapse
resulting therefrom or landslip, impact by any waterborne craft, land vehicles
or animals, aircraft and/or other aerial devices and/or articles dropped or
falling therefrom, sonic boom, burglary, theft, the acts of persons taking part
in riots or civil commotions or of strikers or locked-out workers or of persons
taking part in labour disturbances or of malicious persons or the acts of any
lawfully constituted authority in connection with the foregoing acts or in
connection with any conflagration or other catastrophe, flood, water from or
action by the sea, tidal wave or high water, storm and/or tempest and/or
rainwater and/or hail water and/or other liquids or substances discharged,
overflowing or leaking from apparatus, appliances, pipes, sprinkler and/or any
other system at the Premises or elsewhere, Machinery Breakdown or any other
events or circumstances more specifically mentioned under any other Sub-Limit in
the Schedule.

2.  
Damage

The term Damage shall mean direct physical loss, destruction or direct physical
damage not specifically excluded by this Policy with the word Damaged having a
corresponding meaning.

 

23

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MEMORANDA APPLICABLE TO ALL SECTIONS
Except to the extent that this Policy is hereby modified under the following
Memoranda the terms, Conditions and Limitations of this Policy shall apply.
Amount of Policy not reduced by Loss
The insurance under each section and/or item of this Policy and the Indemnity
Period shall be automatically reinstated in the event of any loss in
consideration of the payment by the Insured of a pro-rata additional premium
calculated on the amount of the loss settlement at the rate(s) agreed for the
Period of Insurance.
Event
Only for the purpose of the application of any deductible: all loss destruction
or damage resulting from earthquake occurring during each period of 72
consecutive hours shall be considered as one event whether such earthquake is
continuous or sporadic in its sweep and/or scope and the loss, destruction or
damage was due to the same seismological conditions. Each event shall be deemed
to have commenced on the first happening of any such loss, destruction or damage
not within the period of any previous event.
Subrogation Waiver
The Insurer(s) agree(s) to waive any rights and remedies or relief to which
it/they may become entitled by subrogation against:

(a)  
any corporation or organisation (including its directors, officers, employees or
servants) owned or controlled by any Insured named herein or subsidiary to any
Insured named herein or any co-owner of the Property Insured hereunder;
  (b)  
any Insured named or described by this Policy (including its directors,
officers, employees or servants).

Adjustment Of Premium
1. Material Damage Section

a)  
The Insured shall at the commencement of the Period of Insurance and at each
subsequent Period of Insurance provide as soon as practicable to the Insurer(s)
a declaration which the Insured warrants is to the best of his knowledge and
belief the Replacement Cost or Indemnity Value at the time of all Insured
Property according to the basis on which the respective property is insured.
  b)  
The value of property as declared will form the basis of the premium for
Insurance under Section 1. The premium is provisional and shall be adjusted by
payment to the Insurers(s) of an additional premium or by allowance to the
Insured of a return premium as the case may be where during the Period of
Insurance there has been an abnormal fluctuation in value of the Insured
Property during the Period of Insurance.
     
For the purpose of this clause an abnormal fluctuation in value shall be any
fluctuation in excess of 10% of the Insured’s declaration of value of property
at the commencement of the Period of Insurance as compared to the lnsured(s)
declaration of value of property on expiry of the Period of Insurance.

 

24

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c)  
Such adjustment shall be made to the premium at the agreed rate applied to the
difference between the value of the Insured Property declared at the
commencement of the Period of Insurance and the value of Insured Property on the
day of the expiry of the Period of Insurance.

2. Business Interruption Section

a)  
The Insured shall at the commencement of the Period of Insurance and at each
subsequent Period of Insurance provide to the Insurer(s) a Declaration of the
estimated Gross Profit and Payroll under the terms of the Policy for that
period.
  b)  
The estimated Annual Gross Profit and Payroll as declared will form the basis of
the premium for Insurance under Section 2 and the premium produced shall be non
adjustable for the Period of Insurance.

Contractual Agreements
Where in the ordinary course of Business the Insured enters into an agreement
with another party and such agreement provides in substance that the Insured
shall indemnify and/or hold harmless and/or release from liability such other
party in respect of loss destruction or damage which may occur as a result of
any peril or eventuality insured against by the Policy, this insurance shall not
be prejudiced by the Insured agreeing to such provision.
Hazardous Goods
The storage of hazardous goods usual to trade and/or occupation is allowed.

 

25

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CONDITIONS APPLICABLE TO ALL SECTIONS

1.  
Misrepresentation And Non-Disclosure

If the Insured —

(a)  
failed to disclose any matter which the Insured was under a duty to disclose to
the Insurer(s); or

(b)  
made a misrepresentation to the Insurer(s) before this Policy was entered into

and if the Insurer(s) would not have entered into this Policy for the same
premium and on the same terms and Conditions expressed in this Policy but for
the failure to disclose or the misrepresentation, then —

(i)  
the liability of the Insurer(s) in respect of any claim will be reduced to an
amount to place the Insurer(s) in the same position in which the Insurer(s)
would have been placed if such nondisclosure had not occurred or such
misrepresentation had not been made; or

(ii)  
if the non-disclosure or misrepresentation was fraudulent, the lnsurer(s) may
avoid this Policy.

2.  
Alteration

The Insurance by the Policy shall not be prejudiced by:

(a)  
any act or omission unknown to or beyond the control of the Insured on the part
of any tenant occupying or using the premises;
  (b)  
structural alterations and/or repairs, limited to buildings, machinery and
plant;
  (c)  
any alteration of occupancy;

Provided that any such acts, omissions or alterations upon coming to the
knowledge of the Insured’s officer responsible for insurance, shall as soon as
practical notified to the Insurer(s) and, if agreed to by the Insurer(s) in
writing, an appropriate additional premium paid if required.

3.  
Sprinkler Installations

Applicable to owned premises or installations for which the Insured is
responsible
The Insured warrants that in such of the Premises as are protected or as are
required by law to be protected by an approved installation of automatic
sprinklers, automatic external alarm signal and automatic alarm signal connected
with a fire brigade station, in or on the Premises, due diligence shall be used
so that the same shall at all times be maintained in good working order.
Notice of all alterations and additions to the automatic sprinkler installation
shall be given by the Insured to the Insurer(s) as soon as reasonably
practicable.

4.  
Other Insurance

The Insured shall give written notice as soon as practicable to the Insurer(s)
of any other insurance or insurances effected covering the Property Insured.

5.  
Cancellation

(a)  
This Policy may be cancelled at any time at the request of the Insured, in which
case the Insurer(s) will retain the customary pro rata for the time this Policy
has been in force.

 

26

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(b)  
The Insurer(s) may also cancel this Policy by giving the Insured written notice
to that effect where —

  (i)  
the Insured or any person who was at any time the Insured failed to comply with
the duty of utmost good faith;
    (ii)  
the person who was the Insured at the time when this Policy was entered into
failed to comply with the duty of disclosure;
    (iii)  
the person who was the Insured at the time when this Policy was entered into
made a misrepresentation to the Insurer(s) during the negotiations for this
Policy but before it was entered into;
    (iv)  
the Insured or any person who was at any time the Insured failed to comply with
a provision of this Policy, including a provision with respect to the payment of
the Premium;
    (v)  
the Insured has made a fraudulent claim under this Policy or any other Policy of
insurance (whether with the Insurer(s) or some other insurer) that provided
insurance cover during any part of the period during which this Policy provides
insurance cover;
    (vi)  
the Insured failed to notify the Insurer(s) of any specific act or omission
where such notification is required under the terms of this Policy; or
    (vii)  
the Insured acted in contravention of or omitted to act in compliance with any
condition of this Policy which empowers the Insurer(s) to refuse to pay, or
reduce its/their liability in respect of, a claim in the event of such
contravention or omission.

(c)  
The Insurer(s) notice of cancellation takes effect at the earlier of the
following times:

  (i)  
the time when another Policy of insurance between the Insured and the Insurer(s)
or some other insurer, being a Policy that is intended by the Insured to replace
this Policy, is entered into; or
    (ii)  
10 business days after the day on which notice was given to the Insured.

In the event that the lnsurer(s) cancel(s) this Policy, the Insurer(s) will
repay to the Insured a rateable proportion of the Premium for the unexpired
Period of Insurance from the date of cancellation.

6.  
Notification Of Claims

On the happening of any loss, destruction or damage giving rise to a claim under
this Policy, the Insured shall forthwith give notice thereof in writing to the
Insurer(s) and shall as soon as reasonably practicable deliver to the Insurer(s)
a statement of claim in writing containing as particular an account as may be
reasonably practicable of the items of property lost, destroyed or damaged and
of the amount of loss, destruction or damage thereto, having regard to their
value at the time of the loss, destruction or damage, together with details of
any other insurances which may apply to the claim.
The Insured shall use due diligence and do and concur in doing all things
reasonably practicable to minimise any interruption of or interference with the
Business to avoid or diminish the loss and shall also deliver to the Insurer(s)
a statement in writing of any claim certified by the Insured’s auditor or
accountants, with all particulars and details reasonably practicable of the loss
and shall produce and furnish all books of account and other business books,
invoices, vouchers and all other documents, proofs, information, explanations
and other evidence and facilities as may reasonably be required to enable the
Insurer(s) to investigate and verify the claim together and such information or
documentation shall be verified on oath as required by the Insurer(s).
No claim under this Policy shall be payable unless the Insured has complied with
the terms of this condition.

7.  
Fraud

If the insured shall make any claim knowing the same to be false or fraudulent,
as regards amount or otherwise, this contract shall become void and all claim
hereunder shall be forfeited.

 

27

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8.  
Reinstatement

If the Insurer(s) elect(s) or become(s) bound to reinstate or replace any
property, the Insured shall at the Insured’s own expense produce and deliver to
the Insurer(s) all such plans, documents and information as the Insurer(s) may
reasonably require. The Insurer(s) shall not be bound to reinstate exactly or
completely, but only as circumstances permit and in reasonably sufficient manner
and shall not in any case be bound to expend more than the applicable Limit of
Liability.

9.  
Insurer(s) Rights

On the happening of any loss, destruction or damage in respect of which a claim
is or may be made under this Policy the Insurer(s) and every person authorised
by the Insurer(s) may, without thereby incurring any liability, and without
diminishing the right of the Insurer(s) to rely upon any Conditions of this
Policy, enter, take or keep possession of any building or premises where the
loss, destruction or damage has happened and may take possession of or require
to be delivered to the Insurer(s) any of the property hereby insured and may
keep possession of and deal with such property for all reasonable purposes and
in any reasonable manner.
This condition shall be evidence of the leave and licence of the Insured to the
Insurer(s) so to do. The Insured shall do all necessary within the Insured’s
control to ensure that the Insurer(s)’ requirements are met and that the
Insurer(s) is (are) not hindered or obstructed in undertaking anything
authorised by any provision of the Policy.
The Insured shall not be entitled to abandon any property to the Insurer(s)
whether taken possession of by the Insurer(s) or not.

10.  
Subrogation

Any person claiming under this Policy shall at the request and at the expense of
the Insurer(s) do and concur in doing and permit to be done all such acts and
things as may be necessary or reasonably required by the Insurer(s) for the
purpose of enforcing any rights and remedies, or of obtaining relief or
indemnity from other parties to which the Insurer(s) shall be or would become
entitled or subrogated upon the Insurer(s) paying for or making good any
destruction or damage under this Policy.
If the Insurer(s) make(s) any recovery as a result of such action, the Insured
may only recover from the Insurer(s) any amount by which the amount recovered by
the Insurer(s) exceeded the amount paid to the Insured by the Insurer(s) in
relation to the loss.

11.  
Precautions To Prevent Loss

The Insured shall take all reasonable precautions to prevent loss, destruction
or damage to the Property Insured by this Policy.

12.  
Termination Of Cover Under Section 2

Notwithstanding anything contained herein to the contrary, if during any period
in respect of which this Policy is in force:

a)  
the Insured ceases to carry on the Business or any part of the Business is
disposed of, permanently discontinued or the Insured’s interest in the Business
or such part thereof ceases otherwise than by death; or
  b)  
the Insured (being a corporation) is placed in liquidation (or provisional
liquidation), is placed under Official Management, enters into a Scheme of
Arrangement, has Receivers and/or Managers appointed over its assets or
undertaking(s); or
  c)  
the Insured (being a natural person) becomes a bankrupt or enters into a scheme
of arrangement or compromise or composition with creditors;

then the insurance cover provided under Section 2 of this Policy in respect of
such Business or Insured shall automatically and forthwith cease.

 

28

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In the event of the Indemnity Period having begun to run in respect of any claim
relating to such Business or part thereof, the Indemnity Period shall thereupon
be at an end, unless its continuance be admitted by memorandum signed for or on
behalf of the Insurer(s).

13.  
Observance Of Terms And Conditions

The due observance and fulfilment of these Conditions and the other terms of
this Policy by the Insured, insofar as the same are capable of being construed
as such, are conditions precedent to any liability of the Insurer(s) to make any
payment under this Policy.

14.  
Progress Payments

Provided that liability has been admitted progress payments on account of any
claim may be made to the Insured at such intervals and for such amounts as may
be agreed upon production of a report by the Loss Adjuster (if appointed)
provided such payment(s) shall be deducted from the amount finally determined
upon adjustment of the claim.

15.  
Headings

Headings have been included for ease of reference and it is understood and
agreed that the terms and Conditions of this Policy are not to be construed or
interpreted by reference to such headings.

16.  
Jurisdiction

This insurance shall be governed by the law of Montana, United States of
America. Each party agrees to submit to the jurisdiction of competent
jurisdiction within Montana, United States of America and to comply with all
requirements necessary to give such court jurisdiction. All matters arising
hereunder shall be determined in accordance with the law and the practice of
such court.

17.  
Reasonable Despatch

If, following physical loss or destruction of or damage to Property Insured, the
Insured considers that resumption of its business activity and/or the work of
reinstating or replacing or repairing the Property Insured poses a threat to
human life or safety or is otherwise contrary to the law of England and Wales,
and as a result the Insured delays commencement of all or part of the resumption
and/or all or part of the work of reinstatement or replacement or repairing,
then Insurer(s) agree that any such delay is beyond the control of the Insured
and that the Insured is acting with reasonable despatch and due diligence.

18.  
Inspection

Insurer(s), at all reasonable times during the Period of Insurance, shall be
permitted but not obligated to inspect the Property Insured by this Policy.
Neither Insurer(s) right to make inspections nor the making thereof nor any
report thereon shall constitute any undertaking, on behalf of or for the benefit
of the named Insured or others, to determine or warrant that such property is
safe or healthful.

19.  
Collection From Others

No loss or part of a loss shall be paid or made good hereunder to the extent the
Insured has collected such loss from others. However, such collection shall not
constitute a condition precedent to the right of the Insured to make any claim
or to receive any payment by Insurer(s) under and in accordance with this
Policy.

 

29

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20.  
Interest Of Other Parties

In addition to the indemnity provided to the Insured this Policy extends to
indemnify any other party having an interest in the Property Insured by virtue
of and in accordance with the terms of a mortgage, leasing, hiring, financial,
equity or renting agreement or any other form of agreement and it is agreed that
the receipts of any such parties for any claims settlements under this Policy in
relation to their respective interests shall be a full and sufficient discharge
to Insurer(s).
For the purpose of the indemnity by this extension, it is agreed that Insurer(s)
will waive all rights of subrogation which they may have or acquire against any
of the said parties in respect of such property and that any agreement that the
insured may have between any or all such parties will not affect the validity of
this extension.

21.  
Permission

Permission is given to cease operations and for any premises to be vacant or
unoccupied.

22.  
Service of Suit Clause (U.S.A.)

It is agreed that in the event of the failure of the Insurers hereon to pay any
amount claimed to be due hereunder, the Insurers hereon, at the request of the
Insured (or Reinsured), will submit to the jurisdiction of a Court of competent
jurisdiction within the United States. Nothing in this Clause constitutes or
should be understood to constitute a waiver of Insurers’ rights to commence an
action in any Court of competent jurisdiction in the United States, to remove an
action to a United States District Court, or to seek a transfer of a case to
another Court as permitted by the laws of the United States or of any State in
the United States. It is further agreed that service of process in such suit may
be made upon Mendes and Mount, 750 Seventh Avenue, New York, NY 10019-6829, and
that in any suit instituted against any one of them upon this contact, Insurers
will abide by the final decision of such Court or of any Appellate Court in the
event of an appeal.
The above-named are authorized and directed to accept service of process on
behalf of Insurers in any such suit and/or upon the request of the Insured (or
Reinsured) to give a written undertaking to the Insured (or Reinsured) that they
will enter a general appearance upon Insurers’ behalf in the event such a suit
shall be instituted.
Further, pursuant to any statute of any state, territory or district of the
United States which makes provision therefor, Insurers hereon hereby designate
the Superintendent, Commissioner or Director of Insurance or other officer
specified for that purpose in the statute, or his successor or successors in
office, as their true and lawful attorney upon whom may be served any lawful
process in any action, suit or proceeding instituted by or on behalf of the
Insured (or Reinsured) or any beneficiary hereunder arising out of this contract
of insurance (or reinsurance), and hereby designate the above-named as the
person to whom the said officer is authorized to mail such process or a true
copy thereof.
NMA 1998

(24/4/86)

 

30

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ENDORSEMENT NUMBER:
  One (1)
 
   
INSURED:
  Signal Peak Energy LLC
 
   
POLICY NUMBER:
  753 / PL0901791
 
   
EFFECTIVE DATE:
  1 November 2009

TERRORISM EXCLUSION ENDORSEMENT
Notwithstanding any provision to the contrary within this insurance or any
endorsement thereto it is agreed that this insurance excludes loss, damage, cost
or expense of whatsoever nature directly or indirectly caused by, resulting from
or in connection with any act of terrorism regardless of any other cause or
event contributing concurrently or in any other sequence to the loss.
For the purpose of this endorsement an act of terrorism means an act, including
but not limited to the use of force or violence and/or the threat thereof, of
any person or group(s) of persons, whether acting alone or on behalf of or in
connection with any organisation(s) or government(s), committed for political,
religious, ideological or similar purposes including the intention to influence
any government and/or to put the public or any section of the public, in fear.
This endorsement also excludes loss, damage, cost or expense of whatsoever
nature directly or indirectly caused by, resulting from or in connection with
any action taken in controlling, preventing, suppressing or in any way relating
to any act of terrorism.
If the Insurers allege that by reason of this exclusion, any loss, damage, cost
or expense is not covered by this insurance the burden of proving the contrary
shall be upon the Insured.
In the event any portion of this endorsement is found to be invalid or
unenforceable, the remainder shall remain in full force and effect.
NMA2920

08/10/2001

 

31

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ENDORSEMENT NUMBER:
  Two (2)
 
   
INSURED:
  Signal Peak Energy LLC
 
   
POLICY NUMBER:
  753 / PL0901791
 
   
EFFECTIVE DATE:
  1 November 2009

ELECTRONIC DATA ENDORSEMENT B

1.  
Electronic Data Exclusion
     
Notwithstanding any provision to the contrary within the Policy or any
endorsement thereto, it is understood and agreed as follows:-

  a)  
This Policy does not insure, loss, damage, destruction, distortion, erasure,
corruption or alteration of ELECTRONIC DATA from any cause whatsoever (including
but not limited to COMPUTER VIRUS) or loss of use, reduction in functionality,
cost, expense of whatsoever nature resulting therefrom, regardless of any other
cause or event contributing concurrently or in any other sequence to the loss.

ELECTRONIC DATA means facts, concepts and information converted to a form
useable for communications, interpretation or processing by electronic and
electromechanical data processing or electronically controlled equipment and
includes programmes, software, and other coded instructions for the processing
and manipulation of data or the direction and manipulation of such equipment.
COMPUTER VIRUS means a set of corrupting, harmful or otherwise unauthorised
instructions or code including a set of maliciously introduced unauthorised
instructions or code, programmatic or otherwise, that propagate themselves
through a computer system or network of whatsoever nature. COMPUTER VIRUS
includes but is not limited to ‘Trojan Horses’, ‘worms’ and ‘time or logic
bombs’.

  b)  
However, in the event that a peril listed below results from any of the matters
described in paragraph a) above, this Policy, subject to all its terms,
conditions and exclusions will cover physical damage occurring during the Policy
period to Property Insured by this Policy directly caused by such listed peril.

Listed Perils
Fire
Explosion

2.  
Electronic Data Processing Media Valuation

Notwithstanding any provision to the contrary within the Policy or any
endorsement thereto, it is understood and agreed as follows:-
Should electronic data processing media insured by this Policy suffer physical
loss or damage insured by this Policy, then the basis of valuation shall be the
cost of the blank media plus the costs of copying the ELECTRONIC DATA from
back-up or from originals of a previous generation. These costs will not include
research and engineering nor any costs of recreating, gathering or assembling
such ELECTRONIC DATA. If the media is not repaired, replaced or restored the
basis of valuation shall be the cost of the blank media. However this Policy
does not insure any amount pertaining to the value of such ELECTRONIC DATA to
the Insured or any other party, even if such ELECTRONIC DATA cannot be
recreated, gathered or assembled.
NMA 2915
25/01/2001

 

32

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ENDORSEMENT NUMBER:
  Three (3)
 
   
INSURED:
  Signal Peak Energy LLC
 
   
POLICY NUMBER:
  753 / PL0901791
 
   
EFFECTIVE DATE:
  1 November 2009

Notwithstanding any provision to the contrary within this insurance or any
endorsement thereto:
MICRO-ORGANISM EXCLUSION (MAP)
This Policy does not insure any loss, damage, claim, cost, expense or other sum
directly or indirectly arising out of or relating to:
mold, mildew, fungus, spores or other micro-organism of any type, nature, or
description, including but not limited to any substance whose presence poses an
actual or potential threat to human health.
This exclusion applies regardless whether there is:

  (i)  
any physical loss or damage to insured property;
    (ii)  
any insured peril or cause, whether or not contributing concurrently or in any
sequence;
    (iii)  
any loss of use, occupancy, or functionality; or
    (iv)  
any action required, including but not limited to repair, replacement, removal,
cleanup, abatement, disposal, relocation, or steps taken to address medical or
legal concerns.

This exclusion replaces and supersedes any provision in the Policy that provides
insurance, in whole or in part, for these matters.

 

33

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ENDORSEMENT NUMBER:
  Four (4)
 
   
INSURED:
  Signal Peak Energy LLC
 
   
POLICY NUMBER:
  753 / PL0901791
 
   
EFFECTIVE DATE:
  1 November 2009

ASBESTOS ENDORSEMENT (WEH)

A.  
This Policy only insures asbestos physically incorporated in an insured building
or structure, and then only that part of the asbestos which has been physically
damaged during the Period of Insurance by one of these Listed Perils:

Fire; Explosion; Lightning; Windstorm; Hail; Direct impact of vehicle, aircraft
or vessel; Riot or civil commotion; Vandalism or malicious mischief; or
accidental discharge of fire protective equipment.
This coverage is subject to all limitations in the Policy to which this
endorsement is attached and, in addition, to each of the following specific
limitations:

  1.  
The said building or structure must be insured under this Policy for damage by
that Listed Peril.
    2.  
The Listed Peril must be the immediate, sole cause of the damage to the
asbestos.
    3.  
The Insured must report to Insurers the existence and cost of the damage as soon
as practicable after the Listed Peril first damaged the asbestos. However this
Policy does not insure any such damage first reported to Insurers more than 12
(twelve) months after the expiration, or termination, of the Period of
Insurance.
    4.  
Insurance under this Policy in respect of asbestos shall not include any sum
relating to:

  (i)  
any faults in the design, manufacture or installation of the asbestos.
    (ii)  
asbestos not physically damaged by the Listed Peril including any governmental
or regulatory authority direction or request of whatsoever nature relating to
undamaged asbestos.

B.  
Except as forth in the foregoing Section A, this Policy does not insure asbestos
or any sum relating thereto.

 

34

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ENDORSEMENT NUMBER:
  Five (5)
 
   
INSURED:
  Signal Peak Energy LLC
 
   
POLICY NUMBER:
  753 / PL0901791
 
   
EFFECTIVE DATE:
  1 November 2009

BIOLOGICAL OR CHEMICAL MATERIALS EXCLUSION
It is agreed that this Policy excludes loss, damage, cost or expense of
whatsoever nature directly or indirectly caused by, resulting from or in
connection with the actual or threatened malicious use of pathogenic or
poisonous biological or chemical materials regardless of any other cause or
event contributing concurrently or in any other sequence thereto.
NMA2962

06/02/03

 

35

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ENDORSEMENT NUMBER:
  Six (6)
 
   
INSURED:
  Signal Peak Energy LLC
 
   
POLICY NUMBER:
  753 / PL0901791
 
   
EFFECTIVE DATE:
  1 November 2009

PRESERVATION OF PROPERTY (WEL)
In case of actual or imminent physical loss, destruction or damage of the type
insured against by this Policy, the expenses incurred by the Insured in taking
reasonable and necessary actions for the temporary protection and preservation
of Property Insured hereunder shall be added to the total physical loss,
destruction or damage otherwise recoverable under the Policy and be subject to
the applicable deductible without increase in the limit provisions contained in
this Policy.
The expenses so incurred shall be borne by the Insured and the Insurer(s)
proportionately to the extent of their respective interests. The Insurer(s)
portion of such expense shall be limited to the extent that such expenses reduce
loss which would otherwise be payable under this Policy and are subject to a
Sub-Limit of USD 5,000,000 subject to the deductible stated in the Schedule.

 

36

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ENDORSEMENT NUMBER:
  Seven (7)
 
   
INSURED:
  Signal Peak Energy LLC
 
   
POLICY NUMBER:
  753 / PL0901791
 
   
EFFECTIVE DATE:
  1 November 2009

ADDITIONAL LIMITATIONS AND CONDITIONS ENDORSEMENT (STANDARD)
THIS ENDORSEMENT CONTAINS PROVISIONS IN CLAUSES II, V AND VI THAT MAY LIMIT OR
PREVENT RECOVERY UNDER THIS POLICY FOR DEBRIS REMOVAL (AS PROVIDED IN CLAUSE II)
AND/OR RESULTING LOSS (AS PROVIDED IN CLAUSE V).
I. LAND, WATER AND AIR EXCLUSION CLAUSE
Notwithstanding any provision to the contrary within the Policy of which this
Endorsement forms part (or within any other Endorsement which forms part of this
Policy), this Policy does not insure land (including but not limited to land on
which the insured property is located), water or air, howsoever and wherever
occurring, or any interest or right therein. The foregoing exclusion shall not
apply to water which is contained in plumbing or firefighting installations in
the Insured’s buildings at the time of any damage insured by this Policy.
II. DEBRIS REMOVAL CLAUSE
Nothing contained in this Clause shall override any seepage and/or pollution
and/or contamination exclusion or any radioactive contamination exclusion or any
other exclusion applicable to this Policy. The inclusion of this Clause shall in
no event increase the Limit of Liability of Insurers under this Policy or any
other endorsement applicable to this Policy.
Any provision within this Policy (or within any other Endorsement which forms
part of this Policy) which insures debris removal is cancelled and replaced by
the following:

  1.  
In the event of direct physical damage to property, for which Insurers agree to
pay hereunder, or which but for the application of a deductible or underlying
amount they would agree to pay (hereinafter in this Clause referred to as
“Damage”), this Policy also insures, subject to the limitations below and method
of calculation in Clause VI of this Endorsement and to all the other terms and
conditions of the Policy, expense:

  (a)  
which is reasonably and necessarily incurred by the Insured in the removal, from
the premises of the Insured at which the Damage occurred, of debris which
results from the Damage; and

  (b)  
of which the Insured becomes aware and advises the amount to Insurers hereon
within one year of the commencement of the Damage;

provided however, that nothing in this Clause shall insure any expense provided
under Clause V of this Endorsement.

  2.  
The maximum amount of expense for removal of debris (subject to the limitations
of paragraph 1 above) that can be included in the method of calculation in
Clause VI of this Endorsement, shall be the greater of USD 500,000 (five hundred
thousand Dollars) or 10% (ten per cent) of the amount of the Damage from which
expense results.

 

37

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III. SEEPAGE AND/OR POLLUTION AND/OR CONTAMINATION EXCLUSION CLAUSE
Notwithstanding any provision to the contrary within the Policy of which this
Endorsement forms part (or within any other Endorsement which forms part of this
Policy), this Policy does not insure:

  1.  
any loss, damage, cost or expense; or

  2.  
any increase in insured loss, damage, cost or expense; or

  3.  
any loss, damage, cost, expense, fine, penalty or other sum which is incurred,
sustained or imposed by, or by the threat of, any judgement, order, direction,
instruction or request of, or any agreement with, any court, government agency,
any public, civil or military authority or any other person (and whether or not
as a result of public or private litigation);

which arises from any kind of seepage or any kind of pollution and/or
contamination, or threat thereof, whether or not caused by or resulting from a
peril insured, or from steps or measures taken in connection with the avoidance,
prevention, abatement, mitigation, remediation, clean-up or removal of such
seepage or pollution and/or contamination, or threat thereof.
The term “any kind of seepage or any kind of pollution and/or contamination” as
used in this Endorsement includes (but is not limited to):

  1.  
seepage of, or pollution and/or contamination by anything, including but not
limited to, any material designated as a “hazardous substance” by the United
States Environmental Protection Agency or as a “hazardous material” by the
United States Department of Transportation, or defined as a “toxic substance” by
the Canadian Environmental Protection Act for the purposes of part II of that
Act, or any substance designated or defined as toxic, dangerous, hazardous or
deleterious to persons or the environment under any other law, ordinance or
regulation; and

  2.  
the presence, existence, or release of anything which endangers or threatens to
endanger the health, safety or welfare of persons or the environment.

IV.  
LISTED PERILS RESULTING FROM SEEPAGE AND/OR POLLUTION AND/OR CONTAMINATION
CLAUSE

This Policy is amended as set forth below. All other terms and conditions of
this Policy remain unchanged and continue to apply with full force and effect.
Nothing contained in this Clause shall override any radioactive contamination
exclusion applicable to this Policy. If any of the perils listed below results
from seepage and/or pollution and/or contamination, then such resultant perils
shall not be excluded solely by the foregoing Seepage and/or Pollution and/or
Contamination Exclusion Clause.
Listed Perils
Fire,
Explosion.
Nothing in this Clause, however, shall extend this Policy to insure:

  1.  
loss, damage, cost, expense, fine or penalty, or other sum arising from any kind
of seepage or any kind of pollution and/or contamination that causes or results
from a listed peril; or
    2.  
loss or damage at any premises other than the premises where the listed peril
took place; or
    3.  
property and/or interests other than those insured by this Policy against the
listed perils.

 

38

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V.  
LIMITED SEEPAGE AND/OR POLLUTION AND/OR CONTAMINATION RESULTING FROM PHYSICAL
DAMAGE CAUSED BY LISTED PERILS CLAUSE

THIS CLAUSE IS VOID AND OF NO FORCE OR EFFECT UNLESS AN AMOUNT IS SPECIFIED IN
PARAGRAPH 2) BELOW.
This Policy is amended as set forth below. All other terms and conditions of
this Policy remain unchanged and continue to apply with full force and effect.
Nothing contained in this Clause shall override any radioactive contamination
exclusion or, except as set forth herein, the foregoing Seepage and/or Pollution
and/or Contamination Exclusion Clause. The inclusion of this Clause shall in no
event increase the Limit of Liability of Insurers under this Policy or any other
endorsement applicable to this Policy.

  1.  
If.

  (a)  
any of the perils listed below is the sole, immediate and direct cause of
physical damage to Property Insured by this Policy against such listed peril
(hereinafter in this Clause referred to as “Original Damage”); and

  (b)  
the Original Damage is the sole, immediate and direct cause of seepage onto,
and/or pollution and/or contamination of property which is:

  (i)  
at the same premises as the Original Damage; and
    (ii)  
insured by this Policy against the listed peril causing the Original Damage; and

  (c)  
said property is damaged thereby (hereinafter in this Clause referred to as
“Resulting Damage”);

then this Policy, subject to the following additional terms and limitations and
the method of calculation in Clause VI of this Endorsement, also insures:

  (d)  
the Resulting Damage; and

  (e)  
the reasonable and necessary expense incurred by the Insured for debris removal
and/or clean up which is:

  (i)  
limited to the same premises as the Original Damage; and
    (ii)  
made necessary solely by the Resulting Damage;
       
but which shall in no event include any expense of clean up or removal of land,
water or air,

(which Resulting Damage and expense of debris removal and/or clean up,
hereinafter in this Clause are referred to as “Resulting Loss”);
provided, however, that this Policy only insures the Resulting Loss where:

  (f)  
Insurers have agreed to pay for the Original Damage or, but for the operation of
a deductible or underlying amount, would have agreed to pay for the Original
Damage; and

  (g)  
within one year of the commencement of the listed peril which caused the
Original Damage, the Insured became aware and advised Insurers of the amount of:

  (i)  
the Resulting Loss; and

  (ii)  
any other interest to be claimed under this Policy as a result of the Resulting
Damage, whether physical damage, business interruption, extra expense or
otherwise.

Listed Perils
Fire,
Lightning,
Explosion.

 

39

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Nothing in this Clause, however, shall extend this Policy to cover any condition
that existed prior to the Original Damage nor to insure any loss, damage, cost,
expense, fine, penalty, or other sum which is incurred, sustained or imposed by,
or by the threat of, any judgement, order, direction, instruction or request of,
or any agreement with, any court, government agency, any public, civil or
military authority or any other person (and whether or not as a result of public
or private litigation) in connection with any kind of seepage or any kind of
pollution and/or contamination from any cause.

  2.  
The maximum amount for any Resulting Loss and any other interest claimed under
this Policy as a result of the Resulting Damage, whether physical damage,
business interruption, extra expense or otherwise, that can be included in the
method of calculation in Clause VI of this Endorsement is USD 500,000 (or the
equivalent in local currency).

VI. METHOD OF CALCULATION
In calculating the amount, if any, payable under this Policy for a claim
including expense of debris removal (as provided for and limited in Clause II of
this Endorsement) and/or Resulting Loss (as provided for and limited in Clause V
of this Endorsement), the amount of such expense of debris removal and/or such
Resulting Loss shall be added to:

  (a)  
the amount of the Damage (as defined in Clause II) or the amount of the Original
Damage (as defined in Clause V); and

  (b)  
all other amounts, if any, insured under this Policy as a result of the same
occurrence that Insurers hereon agree to pay or, but for the application of a
deductible or underlying amount, they would agree to pay;

then the resulting sum shall be the amount of which first all deductibles and
then any underlying amounts to which this Policy is subject shall be applied and
then balance, if any, shall be the amount payable, subject to all other
provisions of this Policy and to the applicable limit(s), Sub-Limit(s) and
aggregate limit(s).
21/2/91

NMA2415

 

40

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ENDORSEMENT NUMBER:
  Eight (8)
 
   
INSURED:
  Signal Peak Energy LLC
 
   
POLICY NUMBER:
  753/PL0901791
 
   
EFFECTIVE DATE:
  1 November 2009

ELECTRONIC DATE RECOGNITION EXCLUSION (LISTED PERILS)

1.  
This Policy does not cover any loss, damage, cost, claim or expense, whether
preventative, remedial or otherwise, directly or indirectly arising out of or
relating to:

  (a)  
the calculation, comparison, differentiation, sequencing or processing of data
involving the date change to the year 2000, or any other date change, including
leap year calculations, by any computer system, hardware, programme or software
and/or any microchip, integrated circuit or similar device in computer equipment
or non-computer equipment, whether the property of the insured or not; or

  (b)  
any change, alteration, or modification involving the date change to the year
2000, or any other date change, including leap year calculations, to any such
computer system, hardware, programme or software and/or any microchip,
integrated circuit or similar device in computer equipment or non-computer
equipment, whether the property of the insured or not.

This clause applies regardless of any other cause or event that contributes
concurrently or in any sequence to the loss, damage, cost, claim or expense.

2.  
However, in the event that a peril listed below results from 1.(a) or 1.(b)
above, this Policy, subject to all its other terms, conditions and exclusions,
will cover physical damage occurring during the policy period to Property
Insured by this Policy directly caused by such listed peril.

Listed Perils

Fire
Explosion

3.  
Notwithstanding Section 2 above, this Policy does not cover any costs and
expenses, whether preventative, remedial or otherwise, arising out of or
relating to change, alteration or modification of any computer system, hardware,
programme or software and/or any microchip, integrated circuit or similar device
in computer equipment or non-computer equipment, whether the property of the
insured or not.

16/7/98

NMA2808

 

41

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ENDORSEMENT NUMBER:
  Nine (9)
 
   
INSURED:
  Signal Peak Energy LLC
 
   
POLICY NUMBER:
  753 / PL0901791
 
   
EFFECTIVE DATE:
  1 November 2009

ZURICH TESTING AND COMMISSIONING CLAUSE
It is hereby noted and agreed that this Insurance does not extend to cover
destruction or damage to property in course of construction or erection,
dismantling, revamp or undergoing testing or commissioning including mechanical
performance testing or any consequential loss resulting therefrom.
Acceptance of Property hereon is subject to satisfactory completion of the
following procedures and otherwise subject to the terms and conditions of this
Policy.

  v)  
The plant is mechanically complete
       
This requires all key items to be complete and that no temporary structures
(such as pipe supports) remain awaiting permanent fixture

  vi)  
Plant Testing and commissioning has been completed with the design/
construction/ erection contract performance levels having been satisfactory
achieved

  vii)  
Design performance criteria maintained by the entire plant in a stable and
controlled manner for a continuous ongoing period of one hundred and sixty eight
(168) hours

  viii)  
The Insured has accepted the plant without reservation or waiver of guarantee
conditions

It is further noted and agreed that these provisions do not apply to normal
routine maintenance activities and scheduled turnarounds

 

42

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ENDORSEMENT NUMBER:
  Ten (10)
 
   
INSURED:
  Signal Peak Energy LLC
 
   
POLICY NUMBER:
  753 / PL0901791
 
   
EFFECTIVE DATE:
  1 November 2009

U.S. TERRORISM RISK INSURANCE ACT OF 2002 AS AMENDED
NOT PURCHASED CLAUSE
This Clause is issued in accordance with the terms and conditions of the “U.S.
Terrorism Risk Insurance Act of 2002” as amended as summarized in the disclosure
notice.
It is hereby noted that the Insurer(s) have made available coverage for “insured
losses” directly resulting from an “act of terrorism” as defined in the “U.S.
Terrorism Risk Insurance Act of 2002”, as amended (“TRIA”) and the Insured has
declined or not confirmed to purchase this coverage.
This Insurance therefore affords no coverage for losses directly resulting from
any “act of terrorism” as defined in TRIA except to the extent, if any,
otherwise provided by this Policy.
All other terms, conditions, insured coverage and exclusions of this Insurance
including applicable limits and deductibles remain unchanged and apply in full
force and effect to the coverage provided by this Insurance.
21/12/2007
LMA5092
Form approved by Lloyd’s Market Association

 

43

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SEVERAL LIABILITY NOTICE
The subscribing insurers’ obligations under contracts of insurance to which they
subscribe are several and not joint and are limited solely to the extent of
their individual subscriptions. The subscribing insurers are not responsible for
the subscription of any co-subscribing insurer who for any reason does not
satisfy all or part of its obligations.
08/94
LSW1001 (Insurance)
LINES CLAUSE
This Insurance, being signed for 35.5556% of 100% insures only that proportion
of any loss, whether total or partial, including but not limited to that
proportion of associated expenses, if any, to the extent and in the manner
provided in this Insurance.
The percentages signed in the Table are percentages of 100% of the amount(s) of
Insurance stated herein.
NMA2419

 

44

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RISK DETAILS

     
TYPE:
  All Risks of Direct Physical Loss or Damage including Machinery Breakdown and
Business Interruption Resulting Therefrom Insurance
 
   
INSURED:
  Signal Peak Energy LLC
 
   
MAILING ADDRESS:
  490 North 31st Street, Suite 308, Billings, Montana 59101
 
   
PERIOD:
  From: 1 November 2009
 
   
 
  To: 31 October 2010
 
   
 
  Both Days inclusive Local Standard Time at the location of the property
insured
 
   
INTEREST:
  Section 1 — Property Damage
 
   
 
  Joy Longwall miner to include the 2009 Joy Longwall Mining System, Hydraulic
supports, 1250 Foot AFC, 7LS5 Shearer, including and not limited to shields,
belts, belt structures, belt drives, conveyors and all equipment that is part of
the Joy long wall mining operation. This property also extends to the
underground and above ground equipment to the first stacking tube only
 
   
 
  Section 2 — Business Interruption
 
   
 
  Item 1 — Gross Earnings:
 
  (a) Reduction in Turnover
 
  (b) Increase in Cost of Working
 
  Item 2 — Contractual Payments
 
  Item 3 — Accounts Receivable
 
   
LIMITS OF LIABILITY:
  USD 50,000,000 each and every occurrence Combined Single Limit Sections 1 and
2
 
   
 
  In excess of Policy Deductibles

          Internal Use Only   hf2/sdr/21 September 2009/PL0901791     KH4      
 

 

 

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SUB-LIMITS:
   
 
   
DEDUCTIBLES:
  USD 1,000,000 each and every occurrence in respect of Property Damage
 
   
 
  60 Days in respect of Business Interruption Actual Daily Value basis (ADV)
 
   
MAXIMUM INDEMNITY PERIOD:
  12 Months
 
   
EXCLUSIONS:
 
a)    Land, land values, improvements to or in land,
 
   
 
 
b)    Property situated within the confines of, or forming part of, any open
pits and any other open cut excavation.
 
   
 
 
c)    Property forming part of or situated within the confines of any
underground mine except that this exclusion shall not apply to longwall face
equipment (as defined herein)
 
   
 
 
d)    Consumable property used in underground mines, including but not limited
to roof-bolts, rock bolts, rock dust, fuel, oil, lubricants, construction
materials or supplies except that which has not been installed or put to its
intended use
 
   
 
 
e)    Tailings dams and any structure used for containment of tailings and other
property situated thereon or therein.
 
   
 
 
f)    Autoclaves as a result of gradually developing flaws, deformation,
distortion, cracks or partial fractures, unless resultant damage is caused by an
event, occurrence or peril covered by this policy
 
   
 
 
g)    Loss or damage to refractory linings other than damage directly caused by
the sudden and unforeseen operation of an insured peril external to the furnace
 
   
 
 
h)    Loss or damage to underground property situated under unsupported roof or
to remotely controlled plant and machinery underground whilst operating in
remote mode.
 
   
 
 
i)    Unmined minerals, coal or ore
 
   
 
 
j)    Gold in any form
 
   
 
 
k)    Property in the course of construction &/or testing &/or commissioning
(Zurich Testing & Commissioning Clause to apply)

          Internal Use Only   hf2/sdr/21 September 2009/PL0901791     KH4      
 

 

 

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  Amended Peril Exclusions
 
   
 
 
a)    Excluding damage to underground property caused directly or directly by
water &/or other liquid matter other than damage solely caused by water entering
underground portion of mine via man-made surface level openings
 
   
 
 
b)    Excluding loss or damage caused by escape of material from hydraulically
backfilled stopes.
 
   
 
 
c)    Excluding creep and/or heave
 
   
 
 
d)    Excluding loss or damage caused by subsidence and/or undermining in,
adjacent to, or above any mine whether open cut or underground.
 
   
 
 
e)    Excluding loss or damage to raise boring equipment whilst in “hole
 
   
 
  And as per Policy attached
 
   
SITUATION:
  Montana, United States of America
 
   
CONDITIONS:
  As per attached Property Damage and Business Interruption Policy
LMA5062 Fraudulent Claim Clause to apply
NMA 1998 Service of Suit Clause
Testing and Commissioning Clause as attached
NMA 2915 Electronic Data Endorsement B
NMA 2920 Terrorism Exclusion Endorsement
NMA 2808 Electronic Date Recognition Exclusion (listed perils)
War & Civil War Exclusion as per policy wording
WEL Preservation of Property Clause Limited to USD 5m
Transmission & Distribution Lines Exclusion (300 metres)
MAP Micro-organism Exclusion
WEH Asbestos Exclusion
NMA 2962 Biological or Chemical Materials Exclusion
Property limited to Longwall Face Equipment Only and BI in respect of loss or
damage to such property
 
   
 
  Excluding Rehabilitation and/or restoration of mine workings
Excluding all non-damage Business Interruption and advanced Business
interruption
 
  Contingent Business Interruption excluded
 
   
 
  LSW 1001 to apply to policies
 
   
SUBJECTIVITIES:
  None

          Internal Use Only   hf2/sdr/21 September 2009/PL0901791     KH4      
 

 

 

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CHOICE OF LAW AND JURISDICTION:
  This insurance shall be governed by and construed in accordance with the law
of Montana, United States of America and each party agrees to submit to the
exclusive jurisdiction of the Courts of Montana, United States of America.
 
   
PREMIUM:
  USD                     (100%) per annum
 
   
PREMIUM PAYMENT TERMS:
  It is a condition of this contract of insurance that the premium due at
inception must be paid to and received by Insurers on or before 23:59 hours
Greenwich Mean Time on the 15 December 2009. If this condition is not complied
with, then this contract of insurance shall terminate on the above date with the
Insured hereby agreeing to pay premium calculated at not less than pro rata
temporis
 
   
 
  Where the premium is to be paid through a London Market Bureau, payment to
Insurers will be deemed to occur on the day of delivery of a premium advice note
to the Bureau or the date premium is released to Insurers via the de-linking
system. Where settlement is be to made to non bureau companies payment will be
deemed to be the date Lloyd & Partners Limited instruct their bankers to make
the appropriate settlement
 
   
FEES PAYABLE RESULTANT FROM
CONDITIONS / WARRANTIES/
SUBJECTIVITIES:
  None
 
   
TAX(ES) PAYABLE BY THE INSURED AND
ADMINISTERED BY INSURER(S):
  None
 
   
RECORDING, TRANSMITTING & STORING
INFORMATION:
  Where Lloyd & Partners Limited maintains risk and claim data / information /
documents Lloyd & Partners Limited may hold data / information / documents
electronically.

          Internal Use Only   hf2/sdr/21 September 2009/PL0901791     KH4      
 

 

 

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INSURER CONTRACT
DOCUMENTATION:
  XIS to sign Lloyd’s policy. Treat as fully claused wording. XIS to sign
Company policy. Treat as fully claused wording. Each Company which does not
subscribe to XIS to sign a follow Policy for their own participation, following
the terms and condition of the lead wording.
 
   
 
  Lloyd & Partners Limited will prepare/submit formal policies (and subsequent
policy endorsements, if any) to be signed (a) by Xchanging Ins-Sure Services on
behalf of Lloyd’s Insurers and Company Insurers for whom Xchanging Ins-Sure
Services are so authorised and (b) by each other subscribing Company Insurer
where required. Agree Sign As Seen-no Technical check required.
 
   
 
  Policy Preparation Service to be utilized wherever such service is available
or mandated.
 
   
 
  Xchanging Ins-Sure Services are authorised to sign direct and reinsurance
policy documents prior to premium payment in accordance with the Xchanging
Ins-Sure Services Early Document Scheme.
 
   
 
  All non-Xchanging Ins-Sure Services companies hereon hereby authorise the
first non-Xchanging Ins-Sure Services company to issue on their behalf, a
collective policy and all endorsements as may be required, without the
requirement to issue any authorisation.
 
   
FORM:
  LMA3044A in respect of Lloyd’s.
IS3 in respect of XIS Companies
Single Company Policy in respect of each non-XIS Company.
 
   
 
  Lloyd’s Insurers agree if required by Lloyd & Partners Limited to issue
Co-Insurance Policy NMA2074 (no further Insurer agreement required).
 
   
 
  NMA2419 Lines Clause if applicable

          Internal Use Only   hf2/sdr/21 September 2009/PL0901791     KH4      
 

 

 

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INFORMATION
Information made available to and seen by all subscribing Insurers hereon
includes the following:
The Insured’s business includes a coal mine.
Premises:
1) 127 PM Coal Road Roundup, Musselshell County, Montana 59072
2) 490 North 31st Street, Suite 308, Billings, Yellowstone County, Montana 59101

         
Values:
       
 
       
Joy Miner:
  USD 72,000,000  
Business Interruption:
  USD 113,000,000  

Lloyd & Partners Limited Presentation dated June 2009 seen, noted and agreed by
Insurers. Contents:

         
01. Acord Commercial Insurance Application
    16 pages  
 
       
02. Signal Peak Energy Property & Equipment List
    3 pages  
 
       
03. International Mining Industry Underwriters Risk Assessment Report Signal
Peak Energy Bull Mountain #1 Mine Date of Survey: May 7th to 8th 2009
    39 pages  

          Internal Use Only   hf2/sdr/21 September 2009/PL0901791     KH4      
 

 

 

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Schedule 3.20
Hedging Agreements
None.

 

 

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Schedule 6.02
Existing Liens
1. As part of the claims made by Scion in the matter referenced in more detail
on Schedule 3.06 hereto, Scion has asserted that, as security for certain
amounts alleged to be owed to Scion, it has a security interest in certain of
defendants’ (including Signal Peak’s) rights in respect of the mineral reserves
and related assets under that certain mineral deed of Bull Mountain Land Company
LLC originally recorded on June 6, 2001, in Book 375, Page 122, under Document
No. 204135 in the Records of the Clerk and Recorder of Mussellshell County,
Montana and Yellowstone County, Montana, and in coal and other minerals
extracted from that reserve, and mining equipment and royalty interests, and the
proceeds of the foregoing. The Borrowers and other defendants in these cases
dispute the existence, validity and enforceability of such purported security
interests and amounts alleged to be secured thereby. The reserves are currently
owned by Eastern Montana Minerals, Inc. which leases the mineral rights afforded
thereby to Signal Peak.
2. Ames Construction, Inc. (“Ames”) filed two liens against portions of the
property now owned by Bull Mountain Coal Mining, Inc. (n/k/a Signal Peak) and
Global Rail. The first Ames lien is a mortgage filed on December 1, 2003, in
both Yellowstone County (Inst. # 3266086) and Musselshell County (Inst. #
259112) securing the payment of an indebtedness of $1.172 million. The mortgage
relates to a $1.172 million letter of credit provided by Ames to the Montana
Department of Environmental Quality on behalf of a prior owner, BMP Investment,
Inc., as financial assurance for the issuance of a mining permit for the mine.
The Ames letter of credit has been replaced and different bonding is now
provided as financial assurance for the mining permit. The second Ames lien is a
construction lien filed in Musselshell County (Inst. #265441) in the amount of
$1.8 million in May 2007 regarding construction services performed by Ames for
prior owners. Neither of the two Ames liens were identified by First American
Title Insurance Company as affecting the title to the coal estate leased by
Signal Peak from Eastern Montana Minerals, Inc. Global Rail, Ames and Airlie
Group entities have entered into agreements providing a mechanism for, among
other things, the release of the two outstanding Ames liens which have not yet
been completed.

 

 

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EXHIBIT A
to the Credit Agreement
 
FORM OF
ASSIGNMENT AND ASSUMPTION AGREEMENT
dated as of [                     __], 20[__]
between
[NAME OF ASSIGNOR],
as Assignor
and
[NAME OF ASSIGNEE],
as Assignee
with respect to the
SIGNAL PEAK ENERGY, LLC, and
GLOBAL RAIL GROUP, LLC
CREDIT AGREEMENT,
dated as of October 22, 2010
 

 

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This ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Assignment and Assumption”) is
dated as of the Effective Date set forth below and is entered into by and
between [NAME OF ASSIGNOR] (the “Assignor”) and [NAME OF ASSIGNEE] (the
“Assignee”). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended,
amended and restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto
(the “Standard Terms and Conditions”) are hereby agreed to and incorporated
herein by reference and made a part of this Assignment and Assumption as if set
forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions and the Credit Agreement, as of the Effective Date set forth below,
(i) all of the Assignor’s rights and obligations in its capacity as a Lender
under the Credit Agreement and any other documents or instruments delivered
pursuant thereto to the extent related to the amount(s) identified below of all
of such outstanding rights and obligations of the Assignor under the Credit
Agreement and (ii) to the extent permitted to be assigned under applicable law,
all claims, suits, causes of action and any other rights of the Assignor (in its
capacity as a Lender) against any Person, whether known or unknown, arising
under or in connection with the Credit Agreement, any other documents or
instruments delivered pursuant thereto or the loan transactions governed thereby
or in any way based on or related to any of the foregoing, including, but not
limited to, contract claims, tort claims, malpractice claims, statutory claims
and all other claims at law or in equity related to the rights and obligations
sold and assigned pursuant to clause (i) above (the rights and obligations sold
and assigned by the Assignor to the Assignee pursuant to clauses (i) and
(ii) above being referred to herein, collectively, as the “Assigned Interest”).
Such sale and assignment is without recourse to the Assignor and, except as
expressly provided in this Assignment and Assumption, without representation or
warranty by the Assignor.

     
1. Assignor:
  [Name of Assignor]
 
   
2. Assignee:
  [Name of Assignee]
 
   
3. Borrowers:
  Signal Peak Energy, LLC and Global Rail Group, LLC
 
   
4. Administrative Agent:
  Union Bank, N.A., as the Administrative Agent under the Credit Agreement
 
   
5. Collateral Agent:
  Union Bank, N.A., as the Collateral Agent under the Credit Agreement

 

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6. Credit Agreement:
  Credit Agreement, dated as of October 22, 2010, among Signal Peak Energy, LLC,
Global Rail Group, LLC, the Lenders named therein and from time to time party
thereto, and Union Bank, N.A., in its capacities as the Administrative Agent and
as the Collateral Agent.
 
   
7. Assigned Interest: 1
   

          Amount of Amount of Commitment Assigned   Loans Assigned
$                    
  $                    

     
8. Effective Date:
  [                      _____], 20[_]

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 

      1  
Assignments must be made in the minimum amounts required by Section 9.04(b) of
the Credit Agreement.

 

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The terms set forth in this Assignment and Assumption are hereby agreed to:

            ASSIGNOR

[NAME OF ASSIGNOR]
      By:           Name:           Title:      

 

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                          ASSIGNEE    
 
                        [NAME OF ASSIGNEE]    
 
                   
 
  By:                              
 
      Name:            
 
      Title:            
 
                        Address for Notices:    
 
                             
 
                             
 
                             
 
                        Attention:                                   Telephone
No.:        
 
             
 
        Facsimile No.:        
 
             
 
   

 

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              [Consented to and Accepted by:    
 
            UNION BANK, N.A., as Administrative Agent    
 
           
By:
                     
 
  Name:        
 
  Title:        
 
            Consented to:    
 
            SIGNAL PEAK ENERGY, LLC    
 
           
By:
                     
 
  Name:        
 
  Title:        
 
            GLOBAL RAIL GROUP, LLC    
 
           
By:
                     
 
  Name:        
 
  Title:]2        

 

      2  
Insert if the consent of the Administrative Agent or the Borrowers is required
by Section 9.04(b) of the Credit Agreement.

 

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ANNEX 1
Credit Agreement, dated as of October 22, 2010, among Signal Peak Energy, LLC,
Global Rail Group, LLC, the Lenders named therein and from time to time party
thereto, and Union Bank, N.A., as the Administrative Agent and as the Collateral
Agent
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
1. Representations and Warranties.
1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal
and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is
free and clear of any lien, encumbrance or other adverse claim and (iii) it has
full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Loan Document, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Documents or any collateral thereunder, (iii) the financial condition of the
Borrowers, the Pledgors, any other Loan Parties, any of their respective
Affiliates or any other Person obligated in respect of any Loan Document or
(iv) the performance or observance by the Borrowers, the Pledgors, any other
Loan Parties, any of their respective Affiliates or any other Person of any of
their respective obligations under any Loan Document.
1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Lender under the Credit Agreement, (ii) it meets all the
requirements to be an assignee under Section 9.04(b) of the Credit Agreement
(subject to such consents, if any, as may be required under Section 9.04(b) of
the Credit Agreement), (iii) from and after the Effective Date, it shall be
bound by the provisions of the Credit Agreement as a Lender thereunder and, to
the extent of the Assigned Interest, shall have the obligations of a Lender
thereunder, (iv) it is sophisticated with respect to decisions to acquire assets
of the type represented by the Assigned Interest and either it, or the person
exercising discretion in making its decision to acquire the Assigned Interest,
is experienced in acquiring assets of such type, (v) it has received a copies of
the Credit Agreement and the other Loan Documents, and has received or has been
accorded the opportunity to receive copies of the most recent financial
statements delivered pursuant to Sections 5.01(a) and (b) of the Credit
Agreement, as applicable, and such other documents and information as it deems
appropriate to make its own credit analysis and decision to enter into this
Assignment and Assumption and to purchase the Assigned Interest, (vi) it has,
independently and without reliance upon the Administrative Agent, the Collateral
Agent or any Lender and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Assignment and Assumption and to purchase the Assigned Interest, and (vii) if it
is not incorporated in under the laws of the

 

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United States of America or a state thereof, attached to the Assignment and
Assumption is any documentation required to be delivered by it pursuant
Section 2.14 of the Credit Agreement, in each case, duly completed and executed
by the Assignee; (b) appoints and authorizes each of the Administrative Agent
and the Collateral Agent to take such action as agent on its behalf and to
exercise such powers under the Loan Documents as are delegated to the
Administrative Agent and the Collateral Agent by the terms thereof, together
with such powers as are reasonably incidental thereto; and (c) agrees that
(i) it will, independently and without reliance on the Administrative Agent, the
Collateral Agent or any Lender, and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Loan Documents, and (ii) it will
perform in accordance with their terms all of the obligations which by the terms
of the Loan Documents are required to be performed by it as a Lender.
2. Payments. From and after the Effective Date, the Administrative Agent and the
Collateral Agent shall make all payments in respect of the Assigned Interest
(including payments of principal, interest, fees and other amounts) to the
Assignor for amounts which have accrued to but excluding the Effective Date and
to the Assignee for amounts which have accrued from and after the Effective
Date.
3. General Provisions. This Assignment and Assumption shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns. This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument. Delivery of an
executed counterpart of a signature page of this Assignment and Assumption by
telecopy or other electronic communication shall be effective as delivery of a
manually executed counterpart of this Assignment and Assumption. This Assignment
and Assumption shall be governed by, and construed in accordance with, the law
of the State of New York.

 

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EXHIBIT B
to the Credit Agreement
FORM OF
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT, dated as of October 22, 2010 (as amended,
supplemented, restated or otherwise modified from time to time, this
“Agreement”), made by (a) FIRSTENERGY VENTURES CORP., an Ohio corporation
(“FirstEnergy Ventures”), (b) GLOBAL MINING GROUP, LLC, a Delaware limited
liability company (“Global Mining Group”), and (c) WMB LOAN VENTURES II, LLC, a
Delaware limited liability company (“WMB II”) (all such companies are herein
collectively referred to as the “Pledgors” and individually as a “Pledgor”), in
favor of UNION BANK, N.A., as collateral agent (in such capacity, together with
its successors and assigns in such capacity, the “Collateral Agent”) for the
Secured Parties (as hereinafter defined).
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, dated as of October 22, 2010, among
Signal Peak Energy, LLC, a Delaware limited liability company (“SPE”), Global
Rail Group, LLC, a Delaware limited liability company (“RailCo”, and together
with SPE being referred to herein, collectively, as the “Borrowers” and,
individually, as a “Borrower”), the Lenders named therein and from time to time
party thereto, Union Bank, N.A., as Administrative Agent, and the Collateral
Agent (as amended, amended and restated, supplemented or otherwise modified from
time to time, the “Credit Agreement”), the Lenders have extended commitments to
make Loans to the Borrowers subject to the terms and conditions set forth in the
Credit Agreement;
WHEREAS, in order to induce the Lenders to make the Loans to the Borrowers
pursuant to the Credit Agreement, the Pledgors agreed to execute and deliver
this Agreement;
WHEREAS, each Pledgor has duly authorized the execution, delivery and
performance of this Agreement and will receive direct and indirect benefits by
reason of the availability of the Commitments and the making of the Loans to the
Borrowers by the Lenders.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and in order to induce the Lenders to make the
Loans pursuant to and in accordance with the Credit Agreement, each Pledgor
hereby agrees with the Collateral Agent, for the benefit of the Secured Parties,
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms when used in this Agreement,
including its preamble and recitals, shall have the following meanings (such
definitions to be equally applicable to the singular and plural forms thereof):
“Agreement” has the meaning assigned to that term in the preamble hereto.
“Applicable UCC” has the meaning assigned to that term in Section 3.1.9(b).

 

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“Borrowers” has the meaning assigned to that term in the first recital hereto.
“Collateral” has the meaning assigned to that term in Section 2.1.
“Collateral Agent” has the meaning assigned to that term in the preamble hereto.
“Credit Agreement” has the meaning assigned to that term in the first recital
hereto.
“Distributions” means all dividends (including, without limitation, cash
dividends, dividends in the form of Equity Interests, other non-cash dividends
and liquidating dividends), limited liability company distributions and all
other distributions (whether similar or dissimilar to the foregoing) on or with
respect to any Pledged Interests or other Equity Interests constituting
Collateral.
“Equity Interests” means the limited liability company membership interests or
other equity ownership interests in an Issuing Company, and any warrants,
options or other rights entitling the holder thereof to purchase or acquire any
such equity interests.
“Equity Interest Holder” means any Person that may from time to time possess an
Equity Interest.
“Financing Statements” has the meaning assigned to that term in
Section 3.1.9(b).
“Issuing Companies” means (a) with respect to Global Mining Group, SPE, and
(b) with respect to FirstEnergy Ventures and WMB II, RailCo.
“LLC Agreements” means, (a) with respect to SPE, the Limited Liability Company
Agreement, dated as of July 16, 2008, by Global Mining Group (on its own behalf
and as assignee of Bull Mountain Coal Properties, Inc.), and (b) with respect to
RailCo, the Limited Liability Company Agreement, dated as of July 16, 2008, by
and among WMB II (as assignee of WMB Rail Ventures, LLC) and FirstEnergy
Ventures, in each case as amended, amended and restated, supplemented or
otherwise modified from time to time in accordance with the terms hereof and
thereof.
“Pledged Interests” means the Equity Interests of each Pledgor, including but
not limited to, the Equity Interests described on Attachment 1 hereto.
“Pledged Property” means the Pledged Interests and all other pledged Equity
Interests, all other securities, all assignments of any amounts due or to become
due with respect thereto and all other instruments received, receivable or
otherwise distributed in respect of or in exchange for the Pledged Interests or
any other pledged Equity Interests that are now being delivered by each Pledgor
to the Collateral Agent or may from time to time hereafter be delivered by each
Pledgor to the Collateral Agent for the purpose of being pledged under this
Agreement, and all proceeds of any of the foregoing.
“Pledgor” and “Pledgors” have the meaning assigned to those terms in the
preamble hereto.

 

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“Secured Obligations” has the meaning assigned to that term in Section 2.2.
“Secured Parties” means, collectively, (i) the Agents, (ii) the Lenders and
(iii) any Qualified Counterparty under a Specified Hedge Agreement.
“Securities Act” has the meaning assigned to that term in Section 6.2.
“Security Documents” means this Agreement and each of the other security
agreements, pledges, mortgages, assignments (collateral or otherwise) and
consents, if any, and each other security agreement or other instrument or
document executed and delivered pursuant to any of the foregoing documents, in
each case to secure any of the Secured Obligations.
“U.C.C.” means the Uniform Commercial Code as from time to time in effect in the
State of New York or, with respect to any Collateral located in any state other
than the State of New York, the Uniform Commercial Code as from time to time in
effect in such state.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein or
the context otherwise requires, terms used in this Agreement, including its
preamble and recitals, have the meanings provided in the Credit Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or the context
otherwise requires, terms for which meanings are provided in the U.C.C. are used
in this Agreement, including its preamble and recitals, with such meanings.
ARTICLE II
PLEDGE
SECTION 2.1. Grant of Security Interest. Each Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers and transfers to the
Collateral Agent for its benefit and the ratable benefit of each of the other
Secured Parties, and hereby grants to the Collateral Agent for its benefit and
the ratable benefit of each of the other Secured Parties a continuing security
interest in, all of such Pledgor’s right, title and interest in and to the
following property, whether now or hereafter existing or acquired (collectively,
the “Collateral”):
(a) the LLC Agreement of each Issuing Company to which such Pledgor is a party
and all Equity Interests of such Pledgor in such Issuing Company, including,
without limitation, (i) the Pledged Property, (ii) all rights of such Pledgor as
an Equity Interest Holder and all rights to receive Distributions, cash,
instruments and other property from time to time received, receivable or
otherwise distributed under or pursuant to each such LLC Agreement, (iii) all
rights of such Pledgor to receive proceeds of any insurance, indemnity, warranty
or guaranty with respect to each such LLC Agreement, (iv) all claims of such
Pledgor for damages arising out of or for breach of or default under each such
LLC Agreement, (v) the right of such Pledgor to terminate each such LLC
Agreement, to perform and exercise consensual or voting rights thereunder and to
compel performance and otherwise exercise all remedies thereunder, (vi) all
rights of such Pledgor, as an Equity Interest Holder, to all property and assets
of each Issuing Company (whether real property, inventory, equipment, contract
rights, accounts, receivables, general intangibles, securities, instruments,
chattel paper, documents, choses in action or otherwise), and (vii) certificates
or instruments evidencing an ownership or Equity Interest in each Issuing
Company or its assets;

 

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(b) all other securities, all assignments of any amounts due or to become due
with respect thereto, and all other instruments from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the items listed in clause (a) above;
(c) to the extent not included in the foregoing, all Distributions, interest,
and other payments and rights with respect to any of the items listed in clauses
(a) and (b) above; and
(d) to the extent not included in the foregoing, all proceeds of any and all of
the foregoing Collateral (including, without limitation, proceeds that
constitute property of the types described above).
SECTION 2.2. Security for Obligations. This Agreement secures the payment of all
Obligations and all other obligations of the Pledgors and the other Loan Parties
to each Secured Party now or hereafter existing under the Credit Agreement and
each other Loan Document (including, without limitation, this Agreement),
whether for principal, interest, fees, costs, expenses, indemnities or otherwise
(the Obligations and all such other obligations being referred to herein,
collectively, as the “Secured Obligations”). Without limiting the generality of
the foregoing, this Agreement secures the payment of all amounts that constitute
part of the Secured Obligations and would be owed by any Pledgor or any other
Loan Party under the Loan Documents but for the fact that they are unenforceable
or not allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving such Pledgor or any other Loan Party.
SECTION 2.3. Pledgors Remain Liable. Anything herein to the contrary
notwithstanding:
(a) each Pledgor shall remain liable under the contracts and agreements included
in the Collateral (including, without limitation, each LLC Agreement to which
such Pledgor is a party) to the extent set forth therein, and this Agreement
shall not relieve any Pledgor of any duties or obligations under such contracts
and agreements, which duties and obligations shall continue to the same extent
as if this Agreement had not been executed;
(b) each Pledgor shall pay when due all taxes, fees and assessments imposed on
or with respect to the Collateral, except to the extent the validity thereof is
being contested in good faith by appropriate proceedings for which adequate
reserves in accordance with GAAP have been set aside by such Pledgor and the
failure to make payment pending such contest could not reasonably be expected to
result in a Material Adverse Effect;
(c) the exercise by the Collateral Agent of any of its rights hereunder shall
not release any Pledgor from any of its duties or obligations under any such
contracts or agreements included in the Collateral; and

 

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(d) neither the Collateral Agent nor any other Secured Party shall have any
obligation or liability under any such contracts or agreements included in the
Collateral by reason of this Agreement, nor shall the Collateral Agent or any
other Secured Party be obligated to perform any of the obligations or duties of
any Pledgor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 2.4. Delivery of Pledged Property. All certificates or instruments, if
any, representing or evidencing any Collateral at any time shall be delivered to
and held by or on behalf of the Collateral Agent pursuant hereto, shall be in
suitable form for transfer by delivery, and shall be accompanied by all
necessary instruments of transfer or assignment, duly executed in blank and in
form and substance reasonably satisfactory to the Collateral Agent. The
Collateral Agent shall have the right, at any time upon the occurrence and
during the continuance of an Event of Default, in its discretion and without
notice to any Pledgor, to transfer to or to register in the name of the
Collateral Agent or any of its nominees any or all of the Collateral, subject
only to the revocable rights specified in Section 4.4. In addition, the
Collateral Agent shall have the right at any time to exchange certificates or
instruments representing or evidencing Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 2.5. Continuing Security Interest; Assignments, Etc. This Agreement
shall create a continuing security interest in the Collateral and shall:
(a) remain in full force and effect until the payment in full in cash of all
Secured Obligations, the termination of all Commitments and the termination or
expiration of all Specified Hedge Agreements;
(b) be binding upon each Pledgor and its successors, transferees and assigns;
and
(c) inure, together with the rights and remedies of the Collateral Agent
hereunder, to the benefit of the Collateral Agent and each other Secured Party.
Without limiting the generality of the foregoing clause (c), any Secured Party
may assign or otherwise transfer all or any portion of its Commitment, any Loan
held by it and/or its other rights and obligations under the Loan Documents to
any other Person, and such other Person shall thereupon become vested with all
rights and benefits in respect thereof granted to such Secured Party under any
Loan Document (including, without limitation, this Agreement) or otherwise,
subject, however, to the provisions of Section 9.04 of the Credit Agreement. No
Pledgor may transfer or assign all or any portion of its rights or obligations
under this Agreement without the prior written consent of all of the Secured
Parties. Upon the payment in full in cash of all Secured Obligations, the
termination of all Commitments and the termination or expiration of all
Specified Hedge Agreements, the security interest granted herein shall terminate
and all rights to the Collateral shall revert to the Pledgors. Upon any such
termination pursuant to the preceding sentence, the Collateral Agent will, at
each Pledgor’s sole expense, deliver to such Pledgor, without any
representations, warranties or recourse of any kind whatsoever, all certificates
and instruments representing or evidencing the Pledged Interests being released,
and execute and deliver to such Pledgor such documents as such Pledgor shall
reasonably request to evidence such termination.

 

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SECTION 2.6. Security Interest Absolute. All rights of the Collateral Agent and
the security interests granted to the Collateral Agent hereunder, and all
obligations of each Pledgor hereunder, shall be absolute and unconditional,
irrespective of:
(a) any lack of validity, legality or enforceability of the Credit Agreement,
any other Loan Document or any other agreement or instrument relating to any
thereof;
(b) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Secured Obligations, or any compromise, renewal,
extension, acceleration or release with respect thereto, or any other amendment
or waiver of or any consent to departure from the Credit Agreement or any other
Loan Document, including, without limitation, any increase in the Secured
Obligations resulting from the extension of additional credit to any of the
Borrowers or otherwise;
(c) any taking, addition, exchange, release, surrender, impairment or
non-perfection of any collateral, or any taking, release or amendment or waiver
of or consent to departure from any guaranty, for all or any of the Secured
Obligations;
(d) the failure of any Secured Party:
(i) to assert any claim or demand or to enforce any right or remedy against the
Borrowers, any other Loan Party or any other Person (including, without
limitation, any other guarantor) under the provisions of the Credit Agreement,
any other Loan Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor of, or
collateral securing, any of the Secured Obligations;
(e) any amendment to, rescission, waiver, or other modification of, or any
consent to departure from, any of the terms of the Credit Agreement or any other
Loan Document;
(f) any defense, claim, set-off, counterclaim or other right which may at any
time be available to or be asserted by any Borrower, any Pledgor or any other
Loan Party against any Secured Party or any other Person, whether in connection
with this Agreement, the transactions contemplated in any of the other Loan
Documents, or any unrelated transaction;
(g) any reduction, limitation, impairment or termination of the Secured
Obligations for any reason, including, without limitation, any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to (and
each Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality, nongenuineness, irregularity, compromise or unenforceability of, or
any other event or occurrence affecting, the Secured Obligations or otherwise;
(h) any manner of application of collateral, or proceeds thereof, to all or any
of the Secured Obligations, or any manner of sale or other disposition of any
collateral for all or any of the Secured Obligations or any other assets of any
of the Pledgors, the other Loan Parties or any of their respective Subsidiaries;

 

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(i) any change, restructuring or termination of the corporate structure or
existence of any Borrower, any Pledgor, any other Loan Party or any of their
respective Subsidiaries; or
(j) any other circumstance that might otherwise constitute a defense available
to, or a legal or equitable discharge of, any Pledgor or any other Loan Party.
SECTION 2.7. Subrogation. Each Pledgor hereby unconditionally and irrevocably
agrees not to exercise any claim or other rights which it may now or hereafter
acquire against any other Loan Party that arise from the existence, payment,
performance or enforcement of such Pledgor’s obligations under this Agreement or
any other Loan Document, including, without limitation, any right of
subrogation, reimbursement, assignment, exoneration, implied contract or
indemnification, any right to participate in any claim or remedy of any Secured
Party against any other Loan Party or any collateral that any Secured Party now
has or hereafter acquires, whether or not such claim, remedy or right arises in
equity, or under contract, statute or common law, including, without limitation,
the right to take or receive from any other Loan Party, directly or indirectly,
in cash or other property or by set-off or in any manner, payment or security on
account of such claim or other rights, until such time as the Secured
Obligations shall have been indefeasibly paid in full in cash, the Commitments
shall have been irrevocably terminated and all Specified Hedge Agreements shall
have terminated or expired. If any amount shall be paid to any Pledgor in
violation of the preceding sentence, such amount shall be deemed to have been
paid to such Pledgor for the benefit of, and held in trust for, the Secured
Parties, shall be segregated from other funds of such Pledgor, and shall
forthwith be paid to the Collateral Agent on behalf of the Secured Parties to be
credited and applied against the Secured Obligations, whether matured or
unmatured, in such order as the Collateral Agent may determine. Each Pledgor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated by the Credit Agreement and that the waiver
set forth in this Section is knowingly made in contemplation of such benefits.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties, Etc. Each Pledgor represents and
warrants unto each Secured Party, as at the date of each pledge and delivery
hereunder (including, without limitation, each pledge and delivery of Pledged
Interests) by such Pledgor to the Collateral Agent of any Collateral, as set
forth in this Article:
SECTION 3.1.1. Organization. Such Pledgor is a corporation or limited liability
company, as applicable, duly organized, validly existing and in good standing
under the laws of the state of its organization and is duly qualified to do
business in, and is in good standing in, all other jurisdictions where the
nature of its business or the nature of property owned or used by it makes such
qualification necessary (except where the failure to so qualify would not have a
Material Adverse Effect).

 

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SECTION 3.1.2. Due Authorization; Noncontravention; Etc. The execution, delivery
and performance by such Pledgor of this Agreement (a) are within such Pledgor’s
corporate or limited liability company powers, as applicable, (b) have been duly
authorized by all necessary action (corporate, limited liability company or
otherwise) and relate to its ordinary course of business, and (c) do not and
will not (i) except to the extent received prior to the date hereof, require any
consent or approval of the shareholders or members (as the case may be) of such
Pledgor, (ii) violate any provision of the organizational documents of such
Pledgor or of law, (iii) violate any legal restriction binding on or affecting
such Pledgor, (iv) result in a breach of, or constitute a default under, any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which such Pledgor is a party or by which it or its properties may
be bound or affected, or (v) result in or require the creation of any Lien
(other than pursuant to, or as permitted under, this Agreement and the other
Loan Documents) upon or with respect to any of the Collateral. This Agreement
has been duly executed and delivered by such Pledgor.
SECTION 3.1.3. Authorization, Approval, Etc. Except for the filing of the
Financing Statements and continuation statements to be filed in connection
therewith, and except for such consents, approvals or other action, or notices
that have been obtained or made and are in full force and effect, no consent of
any other Person and no authorization, approval, or other action by, and no
notice to or filing with, any Governmental Authority is required (a) for the
pledge and assignment by such Pledgor of the Collateral purported to be pledged
and assigned by it pursuant to this Agreement or for the execution, delivery, or
performance of this Agreement by such Pledgor, (b) for the perfection or
maintenance of the security interest created hereby (including, without
limitation, the first priority nature of such security interest), or (c) for the
exercise by the Collateral Agent of the voting or other rights provided for in
this Agreement or the remedies in respect of such Collateral pursuant to this
Agreement (except as may be required in connection with any disposition of any
portion of the Collateral by laws affecting the offering and sale of securities
generally).
SECTION 3.1.4. Validity, Etc. This Agreement constitutes the legal, valid and
binding obligation of such Pledgor, enforceable against such Pledgor in
accordance with its terms, subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar law affecting creditors’
rights generally, and subject to the effect of general principles of equity
(regardless of whether considered in a proceeding in equity or at law).
SECTION 3.1.5. No Proceedings. There is no pending or threatened action, suit,
investigation, litigation or proceeding against such Pledgor or any of its
properties before any court, governmental agency or arbitrator, that (a) could
reasonably be expected to have a Material Adverse Effect or (b) purports to
affect the legality, validity or enforceability of this Agreement or any other
Loan Document or the consummation of the transactions contemplated hereby.
SECTION 3.1.6. Ownership, No Liens, Etc. Such Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full right
and authority to pledge and assign), the Collateral purported to be pledged and
assigned by it hereunder, free and clear of any Lien, except for the security
interest created by this Agreement and any restrictions on transfer imposed by
any LLC Agreement to which it is a party. No effective financing statement or
other instrument similar in effect covering all or any part of the Collateral is
on file in any recording office, except as may have been filed in favor of the
Collateral Agent relating to this Agreement. Such Pledgor has no trade name.

 

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SECTION 3.1.7. LLC Agreements. Each LLC Agreement to which such Pledgor is a
party, true and complete copies of which has been furnished to the Collateral
Agent, has been duly authorized, executed and delivered by such Pledgor, has not
been amended or otherwise modified (except (i) for any such amendments or
modifications prior to the date hereof or (ii) to the extent otherwise permitted
hereunder), is in full force and effect and is the legal, valid and binding
obligation of, and enforceable against, such Pledgor in accordance with its
terms, subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors’ rights generally,
and subject to the effect of general principles of equity (regardless of whether
considered in a proceeding in equity or at law). There exists no default under
any such LLC Agreement by such Pledgor.
SECTION 3.1.8. Valid Security Interest. This Agreement creates a valid security
interest in the Collateral purported to be pledged and assigned by such Pledgor
hereunder securing the payment of the Secured Obligations.
SECTION 3.1.9. Perfection of Security Interest. (a) When the certificates or
instruments (if any) representing or evidencing Collateral shall be delivered
hereunder, and for so long as such certificates or instruments shall remain in
the possession of the Collateral Agent in the State of California, the security
interest in such Collateral created hereby shall be perfected under the Uniform
Commercial Code as in effect in the State of California, and such security
interest, as so perfected, will be first priority.
(b) Upon the filing of appropriate financing statements (the “Financing
Statements”) in each filing office listed in Attachment 1 hereto under the
Uniform Commercial Code as in effect in the state in which such filing office is
located (the “Applicable UCC”), the security interest in the Collateral
purported to be pledged and assigned by such Pledgor hereunder shall be
perfected under the Applicable UCC, and no further filings or other actions are
necessary to perfect such security interest. When such Financing Statements are
duly filed pursuant to the Applicable UCC, such security interest, as so
perfected, will be first priority.
(c) To the extent that any of the Pledged Interests purported to be pledged and
assigned by such Pledgor hereunder constitutes “uncertificated securities” (as
defined in the U.C.C.), such Pledgor has delivered to the Collateral Agent a
written agreement duly executed by the Issuing Company of such Pledged Interests
pursuant to which such Issuing Company has agreed to comply with instructions
originated by the Collateral Agent with respect to such Pledged Interests
without further consent by such Pledgor, as contemplated by Section 8-106(c)(2)
of the Uniform Commercial Code as in effect in such Issuing Company’s
jurisdiction (as determined pursuant to Section 8-110(d) of the U.C.C.). Neither
such Pledgor nor such Issuing Company has, directly or indirectly, granted
“control” (as defined in said Section 8-106(c)(2)) of any such Pledged Interests
to any Person other than the Collateral Agent.

 

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SECTION 3.1.10. Regulatory Status. Such Pledgor is not, and after the
consummation of the transactions contemplated by this Agreement and the other
Loan Documents will not be, an “investment company”, or an “affiliated person”
of, or “promoter” or “principal underwriter” for, an “investment company”
(within the meaning of the Investment Company Act of 1940, as amended). Such
Pledgor is not (i) subject to regulation under the Federal Power Act, as
amended, or (ii) subject to regulation under the applicable laws of any state
relating to public utilities and/or public service corporations (other than any
state law relating solely to taxation of such Pledgor).
SECTION 3.1.11. Principal Place of Business. The principal place of business and
chief executive office of such Pledgor and the office where such Pledgor keeps
its records concerning the Collateral is set forth under the name of such
Pledgor on the signature pages hereof.
SECTION 3.1.12. Solvency. Such Pledgor is, and upon the consummation of the
transactions contemplated under this Agreement and the other Loan Documents will
be, Solvent.
SECTION 3.1.13. Conditions to Effectiveness. There are no conditions precedent
to the effectiveness of this Agreement that have not been satisfied or waived.
SECTION 3.1.14. Independent Decision. Such Pledgor has, independently and
without reliance upon the Agents or any other Secured Party and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement.
ARTICLE IV
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, Etc. (a) No Pledgor will
sell, assign, transfer, pledge, or encumber in any manner the Collateral (except
in favor of the Collateral Agent). Each Pledgor will warrant and defend the
right and title herein granted unto the Collateral Agent in and to the
Collateral (and all right, title, and interest represented by the Collateral)
against the claims and demands of all Persons whomsoever. No Pledgor will permit
any Issuing Company to issue any Equity Interests (including, without
limitation, any non-voting Equity Interests or any Class B Units (as defined in
any LLC Agreement)) (i) to such Pledgor or any other Pledgor unless the same is
immediately delivered in pledge to the Collateral Agent hereunder or (ii) to any
other Person (other than a Pledgor).
(b) Each Pledgor agrees that from time to time, at the expense of such Pledgor,
it will promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or desirable, or that the
Collateral Agent may reasonably request, in order to perfect, protect, and
preserve the pledge, assignment, and security interest granted or purported to
be granted hereby or to enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, each Pledgor will (i) execute and file, with a
copy thereof to the Collateral Agent, such financing or continuation statements,
or amendments thereto, and such other instruments or notices, as may be
necessary or desirable, or as the Collateral Agent may reasonably request, in
order to perfect and preserve the assignment and security interest granted or
purported to be granted hereby; and (ii) mark conspicuously, at the request of
the Collateral Agent, each of its records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Collateral Agent, indicating
that all of its right, title, and interest in and to (A) each LLC Agreement to
which it is a party, and (B) all Pledged Interests purported to be pledged and
assigned by such Pledgor hereunder, have been assigned and are subject to the
security interest pursuant hereto.

 

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(c) Each Pledgor hereby further authorizes the Collateral Agent to file one or
more financing or continuation statements, and amendments thereto, relating to
all or any part of the Collateral without the signature of such Pledgor where
permitted by law. A photocopy or other reproduction of this Agreement or any
security agreement or financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.
(d) Each Pledgor will furnish to the Collateral Agent from time to time such
statements and schedules further identifying and describing the Collateral as
and such other reports in connection with the Collateral as the Collateral Agent
may reasonably request, all in reasonable detail.
SECTION 4.2. Certificated Securities, etc. Each Pledgor agrees that all
certificated securities constituting Collateral delivered by such Pledgor
pursuant to this Agreement will be accompanied by duly executed undated blank
stock powers or other equivalent instruments of transfer reasonably acceptable
to the Collateral Agent. Each Pledgor will, from time to time upon the request
of the Collateral Agent, promptly deliver to the Collateral Agent such stock
powers, instruments and similar documents, reasonably satisfactory in form and
substance to the Collateral Agent, with respect to the Collateral as the
Collateral Agent may reasonably request and will, from time to time upon the
request of the Collateral Agent after the occurrence and during the continuance
of any Event of Default, promptly transfer any Pledged Interests (including,
without limitation, any certificated securities constituting Collateral) into
the name of any nominee designated by the Collateral Agent.
SECTION 4.3. Continuous Pledge. Subject to Section 2.5, each Pledgor will, at
all times, keep pledged to the Collateral Agent pursuant hereto all Pledged
Interests and all other Equity Interests constituting Collateral, all
Distributions with respect thereto, and all other Collateral and other
securities, instruments, proceeds, and rights from time to time received by or
distributable to such Pledgor in respect of any Collateral.
SECTION 4.4. Voting Rights; Distributions, Etc. Each Pledgor agrees:
(a) after any Event of Default shall have occurred and be continuing and the
Collateral Agent has notified such Pledgor that all Distributions with respect
to the Pledged Interests otherwise payable to such Pledgor shall be paid to the
Collateral Agent for the benefit of the Secured Parties, promptly upon receipt
thereof by such Pledgor and without any further request therefor by the
Collateral Agent, to deliver (properly endorsed where required hereby or
requested by the Collateral Agent) to the Collateral Agent all Distributions,
interest, principal, other cash payments, and proceeds of the Collateral, all of
which shall be held by the Collateral Agent as additional Collateral for use in
accordance with Section 6.4; and

 

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(b) after any Event of Default shall have occurred and be continuing and the
Collateral Agent has notified such Pledgor of the Collateral Agent’s intention
to exercise its voting power under this Section 4.4(b):
(i) the Collateral Agent may exercise (to the exclusion of such Pledgor) the
voting power and all other incidental rights of ownership with respect to any
Pledged Interests or other Equity Interests constituting Collateral and such
Pledgor hereby grants the Collateral Agent an irrevocable proxy, exercisable
under such circumstances, to vote the Pledged Interests and such other
Collateral; and
(ii) such Pledgor shall promptly deliver to the Collateral Agent such additional
proxies and other documents as may be necessary to allow the Collateral Agent to
exercise such voting power.
All Distributions, interest, principal, cash payments, and proceeds which may at
any time and from time to time be held by any Pledgor but which such Pledgor is
then obligated to deliver to the Collateral Agent shall, until delivery to the
Collateral Agent, be held by each Pledgor separate and apart from its other
property in trust for the Collateral Agent. The Collateral Agent agrees that
unless an Event of Default shall have occurred and be continuing and the
Collateral Agent shall have given the notice referred to in Section 4.4(b), each
Pledgor shall have the exclusive voting power with respect to any Pledged
Interests pledged by such Pledgor hereunder and the Collateral Agent shall, upon
the written request of any Pledgor, promptly deliver such proxies and other
documents, if any, as shall be reasonably requested by such Pledgor which are
necessary to allow such Pledgor to exercise voting power with respect to any
such Pledged Interests; provided, however, that no vote shall be cast, or
consent, waiver, or ratification given, or action taken by any Pledgor that
would impair any Collateral or violate any provision of the Credit Agreement or
any other Loan Document (including, without limitation, this Agreement).
(c) Each Pledgor’s right to receive and retain any and all Distributions in
respect of the Collateral purported to be pledged and assigned by it hereunder
shall be further limited as follows:
(i) Distributions paid or payable other than in cash in respect of, and
instruments and other property received, receivable, or otherwise distributed in
respect of, or in exchange for, any such Collateral,
(ii) Distributions paid or payable in cash in respect of any such Collateral in
connection with a partial or total liquidation or dissolution, and distributions
paid or payable in violation of law or any LLC Agreement, and

 

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(iii) cash paid, payable, or otherwise distributed in redemption of, or in
exchange for, any Collateral,
shall be, and shall be forthwith delivered to the Collateral Agent to hold as,
Collateral and shall, if received by such Pledgor, be received in trust for the
benefit of the Collateral Agent, be segregated from the other property or funds
of such Pledgor, and be forthwith delivered to the Collateral Agent as
Collateral in the same form as so received (with any necessary indorsement or
assignment).
(d) Upon the occurrence and during the continuance of any Event of Default and
notice from the Collateral Agent to such Pledgor of the Collateral Agent’s
intention to exercise its rights under any provision of this Section 4.4:
(i) All rights of such Pledgor (A) to receive the Distributions which it would
otherwise be authorized to receive and retain and (B) to exercise or refrain
from exercising the voting and other consensual rights that it would otherwise
be entitled to exercise, in each case pursuant to this Section 4.4, shall cease,
and all such rights shall thereupon become vested in the Collateral Agent who
shall thereupon have the sole right to receive and hold on behalf of the Secured
Parties as Collateral such Distributions and to exercise or refrain from
exercising such voting and other consensual rights; and
(ii) all Distributions that are received by such Pledgor contrary to the
provisions of clause (i) above shall be received in trust for the benefit of the
Collateral Agent on behalf of the Secured Parties, shall be segregated from
other funds of such Pledgor, and shall be forthwith paid over to the Collateral
Agent as Collateral in the same form as so received (with any necessary
indorsement or assignment).
SECTION 4.5. Place of Perfection; Records. Each Pledgor shall keep its place of
business and chief executive office and the office where it keeps its records
concerning the Collateral, and the original copies of each LLC Agreement to
which it is a party and of all other documents that evidence the Collateral
(other than any Pledged Interests delivered to the Collateral Agent pursuant to
the terms of this Agreement) at the address for such Pledgor specified on the
signature pages hereof or, upon 30 days’ prior written notice to the Collateral
Agent, at such other location in a jurisdiction where all action required by
Section 4.1 to protect, preserve and maintain the lien and security interest
created hereby and the priority thereof shall have been taken with respect to
the Collateral. In addition, each Pledgor agrees that it shall not, at any time
after the date hereof, change its jurisdiction of organization except, upon not
less than 30 days’ prior written notice to the Collateral Agent, to such other
jurisdiction in the United States of America where all action required by
Section 4.1 to protect, preserve and maintain the lien and security interest
created hereby and the priority thereof shall have been taken with respect to
the Collateral. Each Pledgor will hold and preserve such records and will permit
representatives of the Collateral Agent and the other Secured Parties at any
time during normal business hours to inspect, copy and/or make abstracts from
such records.
SECTION 4.6. As to the LLC Agreements. (a) Each Pledgor shall at its expense
perform and observe in all material respects all the terms and provisions to be
performed or observed by it under each LLC Agreement to which it is a party,
maintain each such LLC Agreement in full force and effect, enforce each such LLC
Agreement in accordance with its terms, and take all such action to such end as
may from time to time be reasonably requested by the Collateral Agent.

 

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(b) Each Pledgor shall not:
(i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Collateral, or create or suffer to
exist any Lien upon or with respect to any of the Collateral, except (A) for the
pledge, assignment, and security interest created by this Agreement and (B) for
any restrictions on transfer imposed by any LLC Agreement to which it is a
party;
(ii) cancel or terminate any LLC Agreement to which it is a party or consent to
or accept any cancellation or termination thereof;
(iii) amend, modify or otherwise change any LLC Agreement to which it is a party
or give any consent, waiver or approval thereunder, except for such amendments,
modifications, changes, consents, waivers and approvals that, individually and
in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect and provided that a copy of any such amendment, modification,
change, consent, waiver or approval shall be provided to the Collateral Agent at
least ten (10) days prior to its execution;
(iv) upon the occurrence and during the continuance of an Event of Default,
amend, modify or otherwise change any LLC Agreement to which it is a party, or
give any consent, waiver or approval thereunder, except with the prior written
consent of the Required Lenders (such consent not to be unreasonably withheld);
(v) waive any material default under or material breach of any LLC Agreement to
which it is a party, except with the prior written consent of the Required
Lenders (such consent not to be unreasonably withheld); or
(vi) take any other action in connection with any LLC Agreement to which it is a
party that would impair the value of the interest or rights of such Pledgor
thereunder or that would impair the interest or rights of the Collateral Agent
or the other Secured Parties.
SECTION 4.7. Affiliate Transactions. No Pledgor will sell, lease or otherwise
transfer any Property to, or purchase, lease or otherwise acquire any Property
from, or otherwise engage in any other transactions with, any other Pledgor, any
Loan Party, or any of their respective Affiliates, except (a) at prices and on
terms and conditions no less favorable than could be obtained on an arm’s length
basis from unrelated third parties, (b) any Restricted Payment permitted by
Section 6.08 of the Credit Agreement, and (c) shared corporate or administrative
services and staffing with Affiliates, including accounting, legal, human
resources and treasury operations, provided on customary terms for similarly
situated companies; provided, that the foregoing shall not restrict or limit or
otherwise apply to any such transactions between or among FirstEnergy Ventures,
FirstEnergy and/or any Subsidiary of FirstEnergy (other than, for the avoidance
of doubt, any Borrower).

 

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ARTICLE V
THE COLLATERAL AGENT
SECTION 5.1. Duties of the Collateral Agent. (a) The Collateral Agent shall not
have any duties or obligations except those expressly set forth in this
Agreement or the other Loan Documents. Without limiting the generality of the
foregoing, (a) the Collateral Agent shall not be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing, (b) the Collateral Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated by this Agreement or the other Loan
Documents that the Collateral Agent is required to exercise in writing as
directed by the Required Lenders, and (c) except as expressly set forth in this
Agreement or the other Loan Documents, the Collateral Agent shall not have any
duty to disclose, and shall not be liable for the failure to disclose, any
information relating to the Borrowers that is communicated to or obtained by the
bank serving as the Collateral Agent or any of its Affiliates in any capacity.
The Collateral Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Required Lenders or in the absence of
its own gross negligence or willful misconduct as determined by the final,
non-appealable judgment of a court of competent jurisdiction. The Collateral
Agent shall be deemed not to have knowledge of any Default unless and until
written notice thereof is given to the Collateral Agent by a Borrower or a
Lender, and the Collateral Agent shall not be responsible for or have any duty
to ascertain or inquire into (i) any statement, warranty or representation made
in or in connection with any Loan Document, (ii) the contents of any
certificate, report or other document delivered hereunder or in connection with
any Loan Document, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth in any Loan Document, (iv) the
validity, enforceability, effectiveness or genuineness of any Loan Document or
any other agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article IV of the Credit Agreement or elsewhere in any
Loan Document, other than to confirm receipt of items expressly required to be
delivered to the Collateral Agent. The powers conferred on the Collateral Agent
hereunder are solely to protect its interest (on behalf of the Secured Parties)
in the Collateral and shall not impose any duty on it to exercise any such
powers.
(b) The Collateral Agent’s sole duty with respect to the custody, safekeeping
and physical preservation of the Collateral in its possession, under
Section 9-207 of the U.C.C. or otherwise, shall be to deal with it in the same
manner as the Collateral Agent deals with similar property for its own account.
Neither the Collateral Agent nor any of its Related Parties shall be liable for
failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of any Pledgor or any other Person or to take
any other action whatsoever with regard to the Collateral or any part thereof
(including (i) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Property, whether or not the Collateral Agent has or is deemed to have knowledge
of such matters, and (ii) the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral). The
Collateral Agent shall be accountable only for amounts that it actually receives
as a result of the exercise of such powers, and neither the Collateral Agent nor
any of its Related Parties shall be responsible to any Pledgor for any act or
failure to act hereunder, except to the extent that any such act or failure to
act is determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or willful
misconduct of the Collateral Agent or any such Related Parties.

 

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SECTION 5.2. Replacement of the Collateral Agent. The Required Lenders may at
any time, with the consent of the Borrowers (which consent shall not be
unreasonably withheld or delayed, and shall not be required if an Event of
Default shall have occurred and be continuing), replace the Collateral Agent (it
being understood that any such replacement Collateral Agent shall be a Person
that serves as agent for other credit facilities of a comparable size),
provided, that the Required Lenders may not replace the Collateral Agent unless,
after giving effect to such replacement and each contemporaneous assignment the
Required Lenders or the Borrowers shall have arranged in connection with such
replacement, (i) neither the Collateral Agent nor any of its Affiliates shall
have outstanding any Loan or Commitment or other obligation of any kind under
the Credit Agreement or any other Loan Document, and (ii) each of the Collateral
Agent and its Affiliates shall have received payment in full of all amounts
owing to it under or in respect of the Credit Agreement and each other Loan
Document.
SECTION 5.3. Resignation of the Collateral Agent. Subject to the appointment and
acceptance of a successor Collateral Agent as provided in this paragraph, the
Collateral Agent may resign at any time by notifying the Required Lenders and
the Borrowers. Upon any such resignation, the Required Lenders shall have the
right, subject to the approval of the Borrowers (such approval not to be
unreasonably withheld or delayed, and not to be required during the continuance
of an Event of Default), to appoint a successor. If no successor shall have been
so appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Collateral Agent gives notice of its
resignation, then the retiring Collateral Agent may, on behalf of the Lenders
and subject to the approval of the Borrowers (such approval not to be
unreasonably withheld or delayed, and not to be required during the continuance
of an Event of Default), appoint a successor Collateral Agent, which shall be
any commercial bank organized under the laws of the United States of America or
any State thereof having a combined capital and surplus and undivided profits of
not less than $500,000,000. Upon the acceptance of its appointment as the
Collateral Agent hereunder by a successor, such successor shall succeed to and
become vested with all the rights, powers, privileges and duties of the retiring
Collateral Agent, and the retiring Collateral Agent shall be discharged from its
duties and obligations hereunder and under each other Loan Document. The fees
payable by the Borrowers to a successor Collateral Agent shall be the same as
those payable to its predecessor unless otherwise agreed between the Borrowers
and such successor. After the Collateral Agent’s resignation hereunder, the
provisions of this Article V, Article VIII of the Credit Agreement and
Section 9.03 of the Credit Agreement shall continue in effect for the benefit of
such retiring Collateral Agent, its sub-agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them
while it was acting as the Collateral Agent.

 

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SECTION 5.4. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor hereby
irrevocably constitutes and appoints the Collateral Agent and any officer or
agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of such Pledgor and in the name of such Pledgor or in its own name, for
the purpose of carrying out the terms of this Agreement, to take, upon the
occurrence and during the continuance of any Event of Default, any and all
appropriate action and to execute any and all documents and instruments that may
be necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, each Pledgor hereby gives the
Collateral Agent the power and right, on behalf of such Pledgor, upon the
occurrence and during the continuance of an Event of Default, without notice to
or assent by such Pledgor, to do any or all of the following:
(a) in the name of such Pledgor or its own name, or otherwise, take possession
of and endorse and collect any checks, drafts, notes, acceptances or other
instruments for the payment of moneys due under or in respect of any Collateral
and file any claim or take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Collateral Agent for the purpose
of collecting any and all such moneys due under or in respect of any Collateral
whenever payable; and
(b) (i) direct any Person liable for any payment under any of the Collateral to
make payment of any and all moneys due or to become due thereunder directly to
the Collateral Agent or as the Collateral Agent shall direct; (ii) ask or demand
for, collect, and receive payment of and give receipt for, any and all moneys,
claims and other amounts due or to become due at any time in respect of or
arising out of any Collateral; (iii) receive, collect, sign and endorse any
drafts or other instruments, documents and chattel paper in connection with any
of the Collateral; (iv) commence and prosecute any suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other right in respect of
any Collateral; (v) defend any suit, action or proceeding brought against such
Pledgor with respect to any Collateral; (vi) settle, compromise or adjust any
such suit, action or proceeding and, in connection therewith, give such
discharges or releases as the Collateral Agent may deem appropriate; and
(vii) generally, sell, transfer, pledge and make any agreement with respect to
or otherwise deal with any of the Collateral as fully and completely as though
the Collateral Agent were the absolute owner thereof for all purposes, and do,
at the Collateral Agent’s option and such Pledgor’s expense, at any time, or
from time to time, all acts and things that the Collateral Agent deems necessary
to protect, preserve or realize upon the Collateral and the Secured Parties’
security interests therein and to effect the intent of this Agreement, all as
fully and effectively as such Pledgor might do.
Each Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.

 

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ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred and
be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the U.C.C.
(whether or not the U.C.C. applies to the affected Collateral) and also may,
without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon any Pledgor or any other Person (all and each of which
demands, defenses, advertisements and notices are hereby waived), sell, assign,
give option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing) in one
or more parcels at public or private sale, at any of the Collateral Agent’s
offices or elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Collateral Agent may deem commercially reasonable. The
Collateral Agent shall give at least ten (10) days’ prior notice to each Pledgor
of the time and place of any public sale or the time after which any private
sale is to be made, and each Pledgor agrees that such notice shall constitute
reasonable notification. The Collateral Agent shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. The
Collateral 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.
(b) The Collateral Agent may:
(i) transfer all or any part of the Collateral into the name of the Collateral
Agent or its nominee, with or without disclosing that such Collateral is subject
to the lien and security interest hereunder,
(ii) notify the parties obligated on any of the Collateral to make payment to
the Collateral Agent of any amount due or to become due thereunder,
(iii) enforce collection of any of the Collateral by suit or otherwise, and
surrender, release or exchange all or any part thereof, or compromise or extend
or renew for any period (whether or not longer than the original period) any
obligations of any nature of any Person with respect thereto,
(iv) endorse any checks, drafts, or other writings in each Pledgor’s name to
allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of each Pledgor) endorsements,
assignments, stock powers and other instruments of conveyance or transfer with
respect to all or any of the Collateral.
Each such purchaser of the Collateral shall hold the property sold absolutely
free from any claim or right on the part of any Pledgor, and to the extent
permitted by applicable law, the Pledgors hereby waive all rights of redemption,
stay, valuation and appraisal any Pledgor now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
SECTION 6.2. Securities Laws. If the Collateral Agent shall determine to
exercise its right to sell all or any of the Collateral pursuant to Section 6.1,
each Pledgor agrees that, upon request of the Collateral Agent, such Pledgor
will, at its own expense:

 

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(a) execute and deliver, and cause each of the Issuing Companies and their
respective directors, officers and Equity Interest Holders to execute and
deliver, all such instruments and documents, and do or cause to be done all such
other acts and things, as may be necessary or, in the opinion of the Collateral
Agent, advisable to register such Collateral under the provisions of the
Securities Act of 1933, as from time to time amended (the “Securities Act”), and
to cause the registration statement relating thereto to become effective and to
remain effective for such period as prospectuses are required by law to be
furnished, and to make all amendments and supplements thereto and to the related
prospectus which, in the opinion of the Collateral Agent, are necessary or
advisable, all in conformity with the requirements of the Securities Act and the
rules and regulations of the Securities and Exchange Commission applicable
thereto;
(b) use its best efforts to qualify the Collateral under the state securities or
“Blue Sky” laws and to obtain all necessary governmental approvals for the sale
of the Collateral, as requested by the Collateral Agent;
(c) cause each Issuing Company to make available to its security holders, as
soon as practicable, an earnings statement that will satisfy the provisions of
Section 11(a) of the Securities Act; and
(d) do or cause to be done all such other acts and things as may be necessary to
make such sale of the Collateral or any part thereof valid and binding and in
compliance with applicable law.
Each Pledgor further acknowledges the impossibility of ascertaining the amount
of damages that would be suffered by the Collateral Agent or the Secured Parties
by reason of the failure by such Pledgor to perform any of the covenants
contained in this Section and, consequently, to the extent permitted under
applicable law, agrees that, if such Pledgor shall fail to perform any of such
covenants, it shall pay, as liquidated damages and not as a penalty, an amount
equal to the value (as determined by the Collateral Agent) of the Collateral on
the date the Collateral Agent shall demand compliance with this Section.
SECTION 6.3. Compliance with Restrictions. Each Pledgor agrees that in any sale
of any of the Collateral whenever an Event of Default shall have occurred and be
continuing, the Collateral Agent is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including, without limitation, compliance with such procedures as may restrict
the number of prospective bidders and purchasers, require that such prospective
bidders and purchasers have certain qualifications, and restrict such
prospective bidders and purchasers to Persons who will represent and agree that
they are purchasing for their own account for investment and not with a view to
the distribution or resale of such Collateral), or in order to obtain any
required approval of the sale or of the purchaser by any governmental regulatory
authority or official, and each Pledgor further agrees that such compliance
shall not result in such sale being considered or deemed not to have been made
in a commercially reasonable manner, nor shall the Collateral Agent be liable or
accountable to any Pledgor for any discount allowed by reason of the fact that
such Collateral is sold in compliance with any such limitation or restriction.

 

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SECTION 6.4. Application of Proceeds. (a) Subject to Section 6.4(b) below, all
cash proceeds received by the Collateral Agent in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral
shall be applied (after payment of any amounts payable to the Collateral Agent
pursuant to Section 9.03 of the Credit Agreement and Section 6.5 below) in whole
or in part by the Collateral Agent for the ratable benefit of the Secured
Parties against all or any part of the Secured Obligations in such manner as the
Collateral Agent determines in its sole discretion. Any surplus of such cash or
cash proceeds held by the Collateral Agent and remaining after payment in full
of all the Secured Obligations, the termination of all Commitments and the
termination or expiration of all Specified Hedge Agreements, shall be paid over
to the Pledgors or to whomsoever may be lawfully entitled to receive such
surplus
(b) All payments received and amounts realized by the Collateral Agent under
this Agreement or any other Loan Document while an Event of Default with respect
to the payment of any amount due under any Loan Document, or any other Event of
Default which results in the acceleration of the Secured Obligations, shall have
occurred and be continuing, as well as all payments or amounts then held or
thereafter received by the Collateral Agent as part of the Collateral during the
continuation of such Event of Default, shall be applied by the Collateral Agent
in the following order of priority:
First, so much of such amounts as shall be required to reimburse the Collateral
Agent for the costs and expenses of retaking, holding and preparing the
Collateral for sale and the selling of the Collateral (including, without
limitation, advertising, selling and legal expenses and attorneys’ fees) and the
discharge of all assessments or Liens, if any, on the Collateral prior to the
Lien created by the Security Documents (except any taxes, assessments or Liens
subject to which such sale shall have been made), and to reimburse the Agents
for any fees, expenses or other losses incurred by the Agents in connection with
their duties and rights (to the extent not previously reimbursed) under the Loan
Documents, shall be distributed to the Agents ratably, without priority, in
accordance with the amount of such costs, expenses and losses to the Agents;
Second, so much of such amounts as shall be required to reimburse the Secured
Parties for amounts advanced by them or their predecessors in interest for
purposes of curing any such Event of Default or enforcing rights under any Loan
Document (to the extent not previously reimbursed) shall be distributed to the
Secured Parties ratably, without priority of one over the other, in accordance
with the total amount of such reimbursements then being made;
Third, so much of such amounts as shall be required to pay in full all fees due
to the Secured Parties pursuant to the Loan Documents (including, without
limitation, any Specified Hedge Agreements and the Fee Letter) shall be
distributed to the applicable Secured Parties without priority of one over the
other;
Fourth, so much of such amounts as shall be required to pay in full all accrued
interest payable to the Secured Parties in respect of the Loans, shall be
distributed ratably to each of the Secured Parties entitled to receive such
interest without order of priority;

 

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Fifth, so much of such amounts as shall be required (i) to pay or prepay in
full, ratably without priority of one over the other, the outstanding principal
amount of the Loans until the Loans are paid in full, and (ii) to pay or prepay
in full all payments due under any Specified Hedge Agreement to which a Secured
Party is a party, shall be distributed to the Secured Parties entitled to the
same; and in case such amounts shall be insufficient to pay in full all of the
foregoing amounts described in clauses (i) and (ii) above, then to the payment
thereof to each of the Secured Parties, ratably in proportion to its percentage
of the sum of all such foregoing amounts;
Sixth, so much of such amounts as shall be required to pay any Secured
Obligations not covered in clause First, Second, Third, Fourth, or Fifth above
shall be distributed to the Secured Parties entitled to the same, ratably,
without priority of one over the other; and,
Seventh, the balance, if any, of such amounts remaining thereafter shall be paid
to the Person lawfully entitled to receive the same or shall be paid to
whomsoever a court of competent jurisdiction may direct.
SECTION 6.5. Indemnity and Expenses. The Pledgors hereby agree, jointly and
severally, to indemnify and hold harmless the Collateral Agent, the other
Secured Parties and their respective Related Parties (each, an “Indemnified
Party”) from and against any and all claims, losses and liabilities arising out
of or resulting from this Agreement (including, without limitation, enforcement
of this Agreement), except to the extent that such claims, losses or liabilities
are determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnified Party. To the extent not paid by the Borrowers pursuant to
Section 9.03 of the Credit Agreement, upon demand, each Pledgor will pay to the
Collateral Agent the amount of any and all reasonable expenses, including the
reasonable fees and disbursements of its counsel and of any experts and agents,
which the Collateral Agent may incur in connection with:
(a) the administration of this Agreement, the Credit Agreement and each other
Loan Document;
(b) the custody, preservation, use, or operation of, or the sale of, collection
from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Collateral Agent
hereunder; or
(d) the failure by such Pledgor to perform or observe any of the provisions
hereof.
To the extent that any of the Pledgors fails to pay any amount required to be
paid by it to the Collateral Agent hereunder, each Lender severally agrees to
pay to the Administrative Agent such Lender’s Applicable Percentage (determined
as of the time that the applicable unreimbursed expense or indemnity payment is
sought) of such unpaid amount; provided that the unreimbursed expense or
indemnified loss, claim, damage, liability or related expense, as the case may
be, was incurred by or asserted against the Collateral Agent in its capacity as
such.

 

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ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Agreement is a Loan Document executed pursuant
to the Credit Agreement and shall (unless otherwise expressly indicated herein)
be construed, administered and applied in accordance with the terms and
provisions thereof.
SECTION 7.2. Amendments, etc.; Successors and Assigns.
(a) No amendment to or waiver of any provision of this Agreement nor consent to
any departure by any Pledgor herefrom shall in any event be effective unless the
same shall be in writing and signed by the Collateral Agent (acting upon the
instructions of the Required Lenders) and, in the case of any such amendment,
each Pledgor, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it is given.
(b) In addition to, and not in limitation of, Section 2.6, this Agreement shall
be binding upon each Pledgor and its successors, permitted transferees and
permitted assigns, and shall inure to the benefit of and be enforceable by the
Collateral Agent and each other Secured Party and their respective successors,
transferees and assigns.
SECTION 7.3. Protection of Collateral. The Collateral Agent may from time to
time, at its option and at the expense of the Pledgors, perform or cause the
performance of any act which any Pledgor agrees hereunder to perform and which
such Pledgor shall fail to perform after being requested in writing so to
perform (it being understood that no such request need be given after the
occurrence and during the continuance of any Event of Default), and the
Collateral Agent may from time to time take any other action that the Collateral
Agent deems necessary or appropriate for the maintenance, preservation or
protection of any of the Collateral or of its security interest therein.
SECTION 7.4. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, facsimile,
telex or cable communication) and mailed, telegraphed, telecopied, telexed,
cabled or delivered, if to any Pledgor, at its address designated as
corresponding to it on the signature pages hereof, and if to the Collateral
Agent, at its address specified in the Credit Agreement; or, as to each party,
at such other address as shall be designated by such party in a written notice
to the other parties. All such notices and communications shall, when mailed,
telegraphed, telecopied, telexed or cabled, be effective five days after being
deposited in the mails, or when delivered to the telegraph company, telecopied,
confirmed by telex answerback or delivered to the cable company, respectively,
except that notices and communications to the Collateral Agent shall not be
effective until received by the Collateral Agent.
SECTION 7.5. No Waiver; Remedies. No failure on the part of the Collateral Agent
or any other Secured Party to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The Collateral Agent and each other Secured
Party shall have all remedies available at law or equity, including, without
limitation, the remedy of specific performance for any breach of any provision
hereof. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law or equity.

 

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SECTION 7.6. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provisions in any other jurisdiction.
SECTION 7.7. Waiver of Jury Trial. EACH OF THE PLEDGORS AND THE COLLATERAL AGENT
HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR
ANY OTHER THEORY). EACH OF THE PLEDGORS AND THE COLLATERAL AGENT (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY TO ANY LOAN
DOCUMENT 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 TO THE LOAN DOCUMENTS HAVE BEEN
INDUCED TO ENTER INTO THE LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 7.8. Captions. Article and section captions used in this Agreement are
for convenience of reference only, and shall not affect the construction of this
Agreement.
SECTION 7.9. Counterparts. This Agreement may be executed by the parties hereto
in several counterparts, each of which shall be deemed to be an original and all
of which shall constitute together but one and the same agreement. Delivery of
an executed counterpart of a signature page to this Agreement by telecopier or
other electronic transmission shall be effective as delivery of an original
executed counterpart of this Guaranty.
SECTION 7.10. Governing Law, Entire Agreement, etc. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
New York, except to the extent that the validity or perfection of the security
interest hereunder, or remedies hereunder, in respect of any particular
Collateral are governed by the laws of a jurisdiction other than the State of
New York. This Agreement and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersede any prior agreements, written or oral, with respect thereto.

 

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SECTION 7.11. Submission to Jurisdiction.
(a) Each Pledgor hereby irrevocably and unconditionally submits, for itself and
its Property, to the nonexclusive jurisdiction of the Supreme Court of the State
of New York sitting in New York County and of the United States District Court
of the Southern District of New York, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement or any
of the other Loan Documents to which it is or is to be a party, or for
recognition or enforcement of any judgment, and each Pledgor hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State court or, to the
extent permitted by law, in such Federal court. Each Pledgor agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement or any other Loan Document shall
affect any right that the Collateral Agent or any other Secured Party may
otherwise have to bring any action or proceeding relating to this Agreement or
any other Loan Document against one or more of the Pledgors or their respective
Properties in the courts of any other jurisdiction.
(b) Each Pledgor hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or any other Loan Document to which it is
or is to be a party in any court referred to in paragraph (a) of this Section.
Each Pledgor hereby irrevocably waives, to the fullest extent permitted by law,
the defense of an inconvenient forum to the maintenance of such suit, action or
proceeding in any such court. Each Pledgor also irrevocably consents, to the
fullest extent permitted by law, to the service of any and all process in any
such suit, action or proceeding in the manner provided for notices in
Section 7.4. Nothing in this Agreement or any other Loan Document will affect
the right of the Collateral Agent or any other Secured Party to serve process in
any other manner permitted by law.
SECTION 7.12. Reinstatement. This Agreement and the obligations of the Pledgors
hereunder shall automatically be reinstated if and to the extent that for any
reason any payment made pursuant to this Agreement or any other Loan Document is
rescinded or must otherwise be restored or returned, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise with respect to any
Pledgor or any other Person or as a result of any settlement or compromise with
any Person (including any Pledgor) in respect of such payment.
SECTION 7.13. Consent and Acknowledgement. Each of the Pledgors hereby
acknowledges receiving copies of the Credit Agreement and the other Loan
Documents and consents to the terms and provisions thereof. In addition, each of
the Pledgors hereby consents to the extent required by any LLC Agreement or any
other organizational documents of the Issuing Companies to the pledge by each
Pledgor, pursuant to the terms hereof, of the Pledged Property and the other
Collateral and, upon the occurrence and during the continuance of an Event of
Default, to the transfer of such Pledged Property and other Collateral to the
Collateral Agent or its nominee and to the substitution of the Collateral Agent
or its nominee as the substituted Equity Interest Holder in any Issuing Company
with all rights, powers and duties of a member or other Equity Interest Holder
of such Issuing Company.
[Next page is the signature page]

 

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

            FIRSTENERGY VENTURES CORP.
      By:           Name:   James F. Pearson         Title:   Vice President and
Treasurer        Address:

76 South Main Street
Akron, Ohio 44308
Attention: Treasurer
Telephone No.: 330-384-5855
Facsimile No.: 330-384-3772           WMB LOAN VENTURES II, LLC
      By:           Name:   Wayne M. Boich         Title:   President       
Address:

41 South High Street, Suite 3750 — South
Columbus, Ohio 43215
Attention: Brian T. Murphy
Telephone No.: 614-221-0101
Facsimile No.: 614-221-0117
                       

[Pledge and Security Agreement Signature Page]

 

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            GLOBAL MINING GROUP, LLC
      By:           Name:   Wayne M. Boich         Title:   President       
Address:

41 South High Street, Suite 3750 — South
Columbus, Ohio 43215
Attention: Brian T. Murphy
Telephone No.: 614-221-0101
Facsimile No.: 614-221-0117
                       

[Pledge and Security Agreement Signature Page]

 

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Acknowledged and Accepted:

UNION BANK, N.A., as Collateral Agent

         
By:
   
 
Name:    
 
  Title:    

[Pledge and Security Agreement Signature Page]

 

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ATTACHMENT 1
to
Pledge and Security Agreement
Pledged Limited Liability Company Interests

                                      Type and                 Names of Other  
Percentage of             Title and Date of   Equity Interest   Equity Interests
  Certificate No. Pledgor   Issuing Company   LLC Agreement   Holders   Pledged
  (if any)
FirstEnergy Ventures Corp.
  Global Rail
Group, LLC   Limited Liability Company Agreement, dated as of July 16, 2008, by
and among WMB Loan Ventures II, LLC (as assignee of WMB Rail Ventures, LLC) and
FirstEnergy Ventures Corp.   WMB Loan
Ventures II,
LLC   50% of the Equity Interests, represented by Class A Units   N/A
 
                   
WMB Loan
Ventures II, LLC
  Global Rail
Group, LLC   Limited Liability Company Agreement, dated as of July 16, 2008, by
and among WMB Loan Ventures II, LLC (as assignee of WMB Rail Ventures, LLC) and
FirstEnergy Ventures Corp.   FirstEnergy Ventures Corp.   50% of the Equity
Interests, represented by Class A Units   N/A

[Attachment 1 to Pledge and Security Agreement]

 

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                                      Type and                 Names of Other  
Percentage of             Title and Date of   Equity Interest   Equity Interests
  Certificate No. Pledgor   Issuing Company   LLC Agreement   Holders   Pledged
  (if any)
Global Mining
Group, LLC
  Signal Peak
Energy, LLC   Limited Liability Company Agreement, dated as of July 16, 2008, by
Global Mining Group, LLC   None   100% of the Equity Interests, represented by
Units   N/A

[Attachment 1 to Pledge and Security Agreement]

 

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ATTACHMENT 2
to
Common Pledge and Security Agreement
Filing Offices for UCC Financing Statements

      Pledgor   Filing Offices
 
   
FirstEnergy Ventures Corp.
  Ohio Secretary of State
 
   
WMB Loan Ventures II, LLC
  Delaware Secretary of State
 
   
Global Mining Group, LLC
  Delaware Secretary of State

[Attachment 2 to Pledge and Security Agreement]

 

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EXHIBIT C
to the Credit Agreement
FORM OF PROMISSORY NOTE

     
$[_______]
  New York, New York
 
  [____ __], 20[_____]

FOR VALUE RECEIVED, the undersigned, SIGNAL PEAK ENERGY, LLC, a Delaware limited
liability company, and GLOBAL RAIL GROUP, LLC, a Delaware limited liability
company (together, the “Borrowers”), HEREBY JOINTLY AND SEVERALLY
UNCONDITIONALLY PROMISE TO PAY to the order of [NAME OF LENDER] (the “Lender”)
or its registered assigns, without offset or counterclaim, in lawful money of
the United States of America and in immediately available funds, the principal
amount of [_____] DOLLARS ($[_____]), or, if less, the aggregate outstanding
principal amount of all Loans made by the Lender to the Borrowers pursuant to
the Credit Agreement (as defined below). The principal amount hereof shall be
paid in the amounts and on the dates specified in the Credit Agreement. The
Borrowers further agree, jointly and severally, to pay interest in like money on
the unpaid principal amount hereof from time to time outstanding at the rates
and on the dates specified in the Credit Agreement. Capitalized terms used
herein and not otherwise defined herein shall have the respective meanings
assigned to such terms in the Credit Agreement.
Both principal and interest are payable to Union Bank, N.A., as Administrative
Agent, at its offices at 445 South Figueroa Street, Los Angeles, California
90071, in immediately available funds. Each Loan made by the Lender to a
Borrower pursuant to the Credit Agreement, and all payments made on account of
the principal amount thereof, shall be recorded by the Lender and, prior to any
transfer hereof, endorsed on the grid attached hereto which is part of this
Note, provided that the failure to so record any such Loan or any payment on
account thereof shall not affect the payment obligations of the Borrowers
hereunder or under the Credit Agreement.
This Note (a) is one of the Notes referred to in the Credit Agreement, dated as
of October 22, 2010 (as amended, amended and restated, supplemented or otherwise
modified from time to time, the “Credit Agreement”), among the Borrowers, the
Lender and the other Lenders named therein and from time to time party thereto,
and Union Bank, N.A., as Administrative Agent and as Collateral Agent, (b) is
subject to the provisions of the Credit Agreement, and (c) is subject to
optional and mandatory prepayment in whole or in part as provided in the Credit
Agreement. This Note is secured as provided in the Security Documents and is
entitled to the benefits of the Guaranty and the other Loan Documents. Reference
is hereby made to the Security Documents for a description of the assets in
which a security interest has been granted, the nature and extent of the
security, the terms and conditions upon which the security interest was granted
and the rights of the holder of this Note in respect thereof.

 

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Upon the occurrence of any one or more Events of Default, all principal and all
accrued interest then remaining unpaid on this Note shall become, or may be
declared to be, immediately due and payable, as provided in the Credit
Agreement.
All parties now and hereafter liable with respect to this Note, whether maker,
principal, surety, guarantor, endorser, or otherwise, hereby waive presentment,
demand, protest, and all other notices of any kind. No failure to exercise, and
no delay in exercising, any rights hereunder on the part of the holder hereof
shall operate as a waiver of such rights.
This Note may not be transferred except pursuant to and in accordance with the
terms and conditions of the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.

            SIGNAL PEAK ENERGY, LLC
      By:           Name:           Title:           GLOBAL RAIL GROUP, LLC
      By:           Name:           Title:      

 

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LOANS, MATURITIES AND PAYMENTS OF PRINCIPAL

                          Amount of   Maturity of   Principal Paid   Amount of
Unpaid   Notation Date   Loan   Loan   or Prepaid   Principal Balance   Made By
 
                   

 

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EXHIBIT D
to the Credit Agreement
FORM OF
GUARANTY AGREEMENT
This GUARANTY AGREEMENT, dated as of October 22, 2010 (this “Guaranty”), is made
by each of FIRSTENERGY CORP., an Ohio corporation (“FirstEnergy”), GLOBAL MINING
GROUP, LLC, a Delaware limited liability company (“Global Mining”), WMB LOAN
VENTURES, LLC, a Delaware limited liability company (“WMB”), and WMB LOAN
VENTURES II, LLC, a Delaware limited liability company (“WMB II”, and together
with FirstEnergy, Global Mining and WMB being referred to herein, collectively,
as the “Guarantors” and, individually, as a “Guarantor”), in favor of the
Lenders (as defined in the Credit Agreement referred to below) and UNION BANK,
N.A., as Administrative Agent (in such capacity, together with its successors
and assigns in such capacity, the “Administrative Agent”) and as Collateral
Agent (in such capacity, together with its successors and assigns in such
capacity, the “Collateral Agent”) for the Lenders (the Lenders, the
Administrative Agent and the Collateral Agent being referred to herein,
collectively, as the “Beneficiaries” and, individually, as a “Beneficiary”).
PRELIMINARY STATEMENTS
1. Signal Peak Energy, LLC, a Delaware limited liability company (“SPE”), and
Global Rail Group, LLC, a Delaware limited liability company (“RailCo”, and
together with SPE being referred to herein, collectively, as the “Borrowers”
and, individually, as a “Borrower”), are parties to a Credit Agreement, dated as
of October 22, 2010 (as amended, amended and restated, supplemented or otherwise
modified from time to time, the “Credit Agreement”; the capitalized terms
defined therein and not otherwise defined herein being used herein as therein
defined), with the Beneficiaries. Pursuant to the Credit Agreement, the Lenders
have agreed to make certain Loans available to the Borrowers on the terms and
conditions set forth therein.
2. The obligation of the Lenders to make Loans to the Borrowers pursuant to the
Credit Agreement is conditioned upon, among other things, the execution and
delivery of this Guaranty by each Guarantor.
3. Each of the Guarantors will derive substantial direct and indirect benefits
from the transactions contemplated by the Credit Agreement. Each Guarantor is
willing to guarantee the Obligations of the Borrowers under the Credit Agreement
and the other Loan Documents as hereinafter provided to obtain such benefits.

 

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NOW, THEREFORE, in consideration of the premises and in order to induce the
Lenders to make Loans under the Credit Agreement and to induce the Beneficiaries
to otherwise satisfy their obligations under the Credit Agreement, each
Guarantor hereby agrees as follows:
SECTION 1. Guaranty; Limitation of Liability.
(a) The Guarantors, jointly and severally, hereby absolutely, unconditionally
and irrevocably guarantee the punctual payment when due, whether at scheduled
maturity or on any date of a required prepayment or by acceleration, demand or
otherwise, of all Obligations of the Borrowers now or hereafter existing under
or in respect of the Credit Agreement and the other Loan Documents (including,
without limitation, any extensions, modifications, substitutions, amendments or
renewals of any or all of the foregoing Obligations), whether direct or
indirect, absolute or contingent, and whether for principal, interest,
reimbursement obligations, premiums, fees, indemnities, contract causes of
action, costs, expenses or otherwise, including, without limitation, the
obligation of the Borrowers to pay principal, interest, charges, expenses, fees,
attorneys’ fees and disbursements, indemnities and other amounts payable by the
Borrowers under any Loan Document (such Obligations, the “Guaranteed
Obligations”), and agrees to pay any and all expenses (including, without
limitation, fees and expenses of counsel) incurred by any Beneficiary in
enforcing any rights under this Guaranty. Without limiting the generality of the
foregoing, the Guarantors’ liability shall extend to all amounts that constitute
part of the Guaranteed Obligations and would be owed by the Borrowers to any
Beneficiary under or in respect of the Loan Documents but for the fact that they
are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving either Borrower.
(b) Each Guarantor and, by its acceptance of this Guaranty, each Beneficiary
hereby confirms that it is the intention of all such Persons that this Guaranty
and the Guaranteed Obligations of each Guarantor hereunder shall not constitute
a fraudulent transfer or fraudulent conveyance for purposes of the Federal
Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any other federal, state or foreign bankruptcy, insolvency,
receivership or similar law to the extent applicable to this Guaranty and the
Guaranteed Obligations. To effectuate the foregoing intention, the Beneficiaries
and each Guarantor hereby irrevocably agree that the Guaranteed Obligations at
any time as to each Guarantor shall be limited to the maximum amount as will
result in the Guaranteed Obligations not constituting a fraudulent transfer or
fraudulent conveyance as to such Guarantor.
SECTION 2. Guaranty Absolute.
The Guarantors, jointly and severally, guarantee that the Guaranteed Obligations
will be paid strictly in accordance with the terms of the Loan Documents,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of any Beneficiary with
respect thereto. The obligations of the Guarantors under or in respect of this
Guaranty are independent of the Guaranteed Obligations or any other obligations
of the Borrowers under or in respect of the Loan Documents, and a separate
action or actions may be brought and prosecuted against each Guarantor to
enforce this Guaranty, irrespective of whether any action is brought against
either Borrower or any other Guarantor or whether either Borrower or any other
Guarantor is joined in any such action or actions. The liability of the
Guarantors under this Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and each Guarantor hereby irrevocably waives any defenses it
may now have or hereafter acquire in any way relating to, any or all of the
following:
(a) any lack of validity or enforceability of any Loan Document or any agreement
or instrument relating thereto;

 

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(b) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Guaranteed Obligations or any other obligations of the
Borrowers under or in respect of the Loan Documents, or any other amendment or
waiver of or any consent to departure from any Loan Document, including, without
limitation, any increase in the Guaranteed Obligations resulting from the
extension of additional credit to the Borrowers or otherwise;
(c) any taking, exchange, release or non-perfection of any collateral, or any
taking, release or amendment or waiver of, or consent to departure from, any
other guaranty, for all or any of the Guaranteed Obligations;
(d) any manner of application of any collateral, or proceeds thereof, to all or
any of the Guaranteed Obligations, or any manner of sale or other disposition of
any collateral for all or any of the Guaranteed Obligations or any other assets
of either Borrower or any of its Affiliates;
(e) any change, restructuring or termination of the corporate structure or
existence of either Borrower or any of its Affiliates;
(f) any failure of any Beneficiary to disclose to the Guarantors any information
relating to the business, condition (financial or otherwise), operations,
performance, properties or prospects of either Borrower now or hereafter known
to such Beneficiary (each Guarantor waiving any duty on the part of
Beneficiaries to disclose such information);
(g) the failure of any other Person to execute or deliver this Guaranty or any
other guaranty or agreement or the release or reduction of liability of a
Guarantor or any other guarantor or surety with respect to the Guaranteed
Obligations; or
(h) any other circumstance (including, without limitation, any statute of
limitations) or any existence of or reliance on any representation by any
Beneficiary that might otherwise constitute a defense available to, or a
discharge of, a Guarantor or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by any Beneficiary or any other Person upon the
insolvency, bankruptcy or reorganization of a Guarantor, either Borrower or
otherwise, all as though such payment had not been made.
SECTION 3. Waivers and Acknowledgments.
(a) Each Guarantor hereby unconditionally and irrevocably waives promptness,
diligence, notice of acceptance, presentment, demand for performance, notice of
nonperformance, default, acceleration, protest or dishonor and any other notice
with respect to any of the Guaranteed Obligations and this Guaranty and any
requirement that any Beneficiary protect, secure, perfect or insure any Lien or
any property subject thereto or exhaust any right or take any action against the
Borrowers, any other Guarantor or any other Person or any collateral.

 

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(b) Each Guarantor hereby unconditionally and irrevocably waives any right to
revoke this Guaranty and acknowledges that this Guaranty is continuing in nature
and applies to all Guaranteed Obligations, whether existing now or in the
future.
(c) Each Guarantor hereby unconditionally and irrevocably waives (i) any defense
arising by reason of any claim or defense based upon an election of remedies by
any Beneficiary that in any manner impairs, reduces, releases or otherwise
adversely affects the subrogation, reimbursement, exoneration, contribution or
indemnification rights of such Guarantor or other rights of such Guarantor to
proceed against either Borrower, any other Guarantor or any other Person or any
collateral and (ii) any defense based on any right of set-off or counterclaim
against or in respect of the Guaranteed Obligations.
(d) Each Guarantor hereby unconditionally and irrevocably waives any duty on the
part of any Beneficiary to disclose to such Guarantor any matter, fact or thing
relating to the business, condition (financial or otherwise), operations,
performance, properties or prospects of either Borrower or any of its Affiliates
now or hereafter known by such Beneficiary.
(e) Each Guarantor acknowledges that it will receive substantial direct and
indirect benefits from the financing arrangements contemplated by the Loan
Documents and that the waivers set forth in Section 2 and this Section 3 are
knowingly made in contemplation of such benefits.
SECTION 4. Subrogation.
Each Guarantor hereby unconditionally and irrevocably agrees not to exercise any
rights that it may now have or hereafter acquire against either Borrower or any
other Guarantor that arise from the existence, payment, performance or
enforcement of the Guaranteed Obligations under or in respect of this Guaranty,
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution or indemnification and any right to participate in any
claim or remedy of any Beneficiary against either Borrower or any other
Guarantor, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, including, without limitation, the right to
take or receive from either Borrower or any other Guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right, unless and until
all of the Guaranteed Obligations and all other amounts payable under this
Guaranty shall have been paid in full in cash. If any amount shall be paid to a
Guarantor in violation of the immediately preceding sentence at any time prior
to the later of (a) the payment in full in cash of the Guaranteed Obligations
and all other amounts payable under this Guaranty, and (b) the termination of
all Commitments in accordance with the Credit Agreement, such amount shall be
received and held in trust for the benefit of the Beneficiaries, shall be
segregated from other property and funds of such Guarantor and shall forthwith
be paid or delivered to the Administrative Agent in the same form as so received
(with any necessary endorsement or assignment) to be credited and applied to

 

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the Guaranteed Obligations and all other amounts payable under this Guaranty,
whether matured or unmatured, in accordance with the terms of the Loan
Documents, or to be held as collateral for any Guaranteed Obligations or other
amounts payable under this Guaranty thereafter arising. If (i) a Guarantor shall
make payment to any Beneficiary of all or any part of the Guaranteed
Obligations, (ii) all of the Guaranteed Obligations and all other amounts
payable under this Guaranty shall have been paid in full in cash, and (iii) the
termination of all Commitments in accordance with the Credit Agreement shall
have occurred, the Beneficiaries will, at such Guarantor’s request and expense,
execute and deliver to such Guarantor appropriate documents, without recourse
and without representation or warranty, necessary to evidence the transfer by
subrogation to such Guarantor of an interest in the Guaranteed Obligations
resulting from such payment made by such Guarantor pursuant to this Guaranty.
SECTION 5. Payments Free and Clear of Taxes, Etc.
(a) Section 2.14 of the Credit Agreement is incorporated herein by reference as
if set forth at length in this Guaranty, mutatis mutandis, provided that each
reference to the term “Borrower” or “Borrowers” shall be deemed to be a
reference to the Guarantors; and each reference to the term “Administrative
Agent” shall be deemed to be a reference to the Agents, and provided further
that the obligations of the Guarantors to make payments in accordance with
Section 2.14 as incorporated by reference herein shall be joint and several.
(b) Without prejudice to the survival of any other agreement of a Guarantor
hereunder, the agreements and obligations of the Guarantors contained in this
Section 5 shall survive the payment in full or termination of the Guaranteed
Obligations.
SECTION 6. Representations and Warranties.
(a) FirstEnergy hereby makes for the benefit of the Beneficiaries all of the
representations and warranties of FirstEnergy contained in Section 4.01 (other
than subsections (j) and (k) thereof) of that certain Credit Agreement, dated as
of August 24, 2006, as amended by the Consent and Amendment, dated as of
November 2, 2007 (as so amended and as further amended, amended and restated,
supplemented or otherwise modified from time to time, the “FirstEnergy Credit
Agreement”), among FirstEnergy, FirstEnergy Solutions Corp., an Ohio
corporation, American Transmission Systems, Incorporated, an Ohio corporation,
Ohio Edison Company, an Ohio corporation, Pennsylvania Power Company, a
Pennsylvania corporation, The Cleveland Electric Illuminating Company, an Ohio
corporation, The Toledo Edison Company, an Ohio corporation, Jersey Central
Power & Light Company, a New Jersey corporation, Metropolitan Edison Company, a
Pennsylvania corporation, and Pennsylvania Electric Company, a Pennsylvania
corporation, as borrowers, the banks and other financial institutions named
therein, Citibank, N.A., as administrative agent, the fronting banks party
thereto from time to time and the swing line lenders party thereto from time to
time (in the form of such representations and warranties (and all defined terms
used therein) as they exist on the date of this Guaranty and as they may
hereafter be amended from time to time, but only to the extent that the
incorporation of any such amendments into this Guaranty has been consented to in
accordance with Section 10 hereof), which representations and warranties (and
all defined terms used therein) are incorporated herein by reference as if set
forth at length in this Guaranty, mutatis mutandis; provided that each reference
to the term “this Agreement” shall be deemed to be a reference to this Guaranty;
each reference to the term “Loan Documents” shall be deemed to be a reference to
this Guaranty and each other Loan Document to which FirstEnergy is a party, if
any; each reference to the term “Borrower” shall be deemed to be a reference to
FirstEnergy; and each reference to the term “Administrative Agent”, “Bank”,
“Fronting Bank” or “Lender” shall be deemed to be a reference to the
Beneficiaries.

 

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(b) Each Guarantor (other than FirstEnergy) hereby makes for the benefit of the
Beneficiaries all of the representations and warranties contained in Article III
of the Credit Agreement (other than Sections 3.04(a), 3.08, 3.12, 3.17, 3.19,
3.20, 3.21 and 3.22 thereof), which representations and warranties are
incorporated herein by reference as if set forth at length in this Guaranty,
mutatis mutandis; provided that each reference to the term “Borrower” or
“Borrowers” shall be deemed to be a reference to such Guarantor; and each
reference to the term “this Agreement” shall be deemed to be a reference to this
Guaranty.
(c) Each Guarantor hereby makes for the benefit of the Beneficiaries each of the
following additional representations and warranties:
(i) There are no conditions precedent to the effectiveness of this Guaranty that
have not been satisfied or waived.
(ii) Such Guarantor has, independently and without reliance upon any Beneficiary
and based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Guaranty and each other
Loan Document to which it is or is to be a party, and such Guarantor has
established adequate means of obtaining from the Borrowers on a continuing basis
information pertaining to, and is now and on a continuing basis will be
completely familiar with, the business, condition (financial or otherwise),
operations, performance, properties and prospects of the Borrowers.
SECTION 7. FirstEnergy Covenants.
(a) FirstEnergy Credit Agreement. So long as any Commitment is in effect or any
portion of the Guaranteed Obligations shall remain unpaid, FirstEnergy shall
observe and perform all of the covenants of FirstEnergy contained in Article V
(other than Sections 5.01(h) and 5.02 thereof) of the FirstEnergy Credit
Agreement (in the form of such covenants (and all defined terms used therein) as
they exist as of the date of this Guaranty and as they may hereafter be amended
from time to time, but only to the extent that the incorporation of any such
amendments into this Guaranty has been consented to in accordance with
Section 10), and all such covenants (and all defined terms used therein) are
hereby incorporated and made applicable by reference as if set forth at length
in this Guaranty, mutatis mutandis; provided that each reference to the term
“Loan Documents” shall be deemed to be a reference to this Guaranty and each
other Loan Document to which FirstEnergy is a party, if any; each reference to
the term “Borrower” shall be deemed to be a reference to FirstEnergy; each
reference to the term “Majority Lenders” shall be deemed to be a reference to
the Required Lenders; and each reference to the term “Administrative Agent”,
“Bank”, “Fronting Bank” or “Lender” shall be deemed to be a reference to the
Beneficiaries.

 

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(b) Debt to Capitalization Ratio. So long as any Commitment is in effect or any
portion of the Guaranteed Obligations shall remain unpaid, FirstEnergy shall
maintain a Debt to Capitalization Ratio of no more than 0.65 to 1.00 (determined
as of the last day of each fiscal quarter). As used in this subsection (b), the
term “Debt to Capitalization Ratio” shall have the meaning assigned to such term
in the FirstEnergy Credit Agreement (as such term, and all related defined
terms, exist as of the date of this Guaranty and as they may hereafter be
amended from time to time, but only to the extent that the incorporation of any
such amendments into this Guaranty has been consented to in accordance with
Section 10), and such term (and all related defined terms) are hereby
incorporated and made applicable by reference as if set forth at length in this
Guaranty, mutatis mutandis; provided that each reference to the term “Borrower”
shall be deemed to be a reference to FirstEnergy.
SECTION 8. Call Option.
In the event that the Administrative Agent provides an Acceleration Notice
pursuant to Section 9(a) hereof or otherwise requests payment from the
Guarantors of the outstanding amount of the Guaranteed Obligations due and
payable at such time, FirstEnergy shall either (in its sole discretion) (a) pay
to the Administrative Agent (for the benefit of the Beneficiaries), pursuant to
Section 9(b) hereof, all of the Guaranteed Obligations (to the extent due and
payable at such time and not paid by the Borrowers or the other Guarantors), in
immediately available funds, or (b) within five (5) Business Days after its
receipt of such Acceleration Notice or such request (as the case may be),
(i) purchase by assignment from the Lenders, in accordance with Section 9.04(b)
of the Credit Agreement, the outstanding principal amount of all Loans and all
other Guaranteed Obligations due and payable at such time (the “Call Option”)
and (ii) assume (pursuant to a resignation, assignment and assumption agreement
reasonably satisfactory to the Agents and FirstEnergy) all rights and
obligations of the Agents under the Loan Documents. If FirstEnergy exercises the
Call Option, the Lenders shall assign all of their rights and obligations under
the Credit Agreement to FirstEnergy in accordance with Section 9.04(b) thereof
(provided, that the Lenders shall have received payment from FirstEnergy, in
immediately available funds, of an amount equal to the outstanding amount of the
Guaranteed Obligations due and payable at such time).
SECTION 9. Notice of Defaults.
(a) The Administrative Agent hereby agrees to (i) provide written notice to
FirstEnergy and Boich promptly after the Administrative Agent obtains knowledge
of the occurrence of any Default, and (ii) provide written notice to the
Guarantors (an “Acceleration Notice”) promptly after the acceleration of the
outstanding principal amount of the Loans pursuant to Article VII of the Credit
Agreement.
(b) The Guarantors hereby agree, jointly and severally, within five (5) Business
Days after their receipt of an Acceleration Notice, to pay to the Administrative
Agent (for the benefit of the Beneficiaries) the outstanding amount of the
Guaranteed Obligations due and payable at such time and all other amounts due
and payable by the Guarantors under this Guaranty (except to the extent that
FirstEnergy exercises the Call Option and complies with its obligations in
connection therewith pursuant to Section 8).

 

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SECTION 10. Amendments, Etc.
No amendment or waiver of any provision of this Guaranty and no consent to any
departure by any Guarantor therefrom shall in any event be effective unless the
same shall be in writing and signed by the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all of the Beneficiaries, (a)
reduce or limit the obligations of any Guarantor hereunder, release any
Guarantor hereunder or otherwise limit any Guarantor’s liability with respect to
the Obligations owing to the Beneficiaries under or in respect of the Loan
Documents, (b) postpone any date fixed for payment hereunder or (c) change the
number of Beneficiaries or the percentage of (x) the Commitments, or (y) the
aggregate unpaid principal amount of the Loans that, in each case, shall be
required for the Beneficiaries or any of them to take any action hereunder; and
provided, further, that no amendment, waiver or consent shall, unless in writing
and signed by the Administrative Agent in addition to the Lenders required above
to take such action, affect the rights or duties of the Administrative Agent
under this Guaranty.
SECTION 11. Notices, Etc.
All notices and other communications provided for hereunder shall be in writing
and shall be delivered by hand or overnight courier service, mailed by certified
or registered mail or sent by telecopy, as follows: (i) if to a Guarantor,
addressed to it at the addresses listed below such Guarantor’s name on the
signature pages hereto; (ii) if to the Administrative Agent or any other
Beneficiary, at its address specified in Section 9.01 of the Credit Agreement;
or (iii) as to each party, at such other address as shall be designated by such
party in a written notice to each other party. All such notices and other
communications sent by hand or overnight courier service, or mailed by certified
or registered mail, shall be deemed to have been given when received; notices
sent by telecopier shall be deemed to have been given when sent (except that, if
not given during normal business hours for the recipient, shall be deemed to
have been given at the opening of business on the next business day for the
recipient). Delivery by telecopier or other electronic transmission of an
executed counterpart of a signature page to any amendment or waiver of any
provision of this Guaranty shall be effective as delivery of an original
executed counterpart thereof.
SECTION 12. No Waiver, Remedies.
No failure on the part of any Beneficiary to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.

 

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SECTION 13. Right of Set-off.
Upon the occurrence and during the continuance of any Event of Default, each
Beneficiary is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final, excluding, however,
any payroll accounts maintained by a Guarantor with such Beneficiary if and to
the extent that such Beneficiary shall have expressly waived its set-off rights
in writing in respect of such payroll account) at any time held and other
indebtedness at any time owing by such Beneficiary to or for the credit or the
account of such Guarantor against any and all of the obligations of such
Guarantor now or hereafter existing under this Guaranty, irrespective of whether
such Beneficiary shall have made any demand under this Guaranty or any other
Loan Document and although such obligations may be unmatured. Each Beneficiary
agrees promptly to notify such Guarantor after any such set-off and application;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Beneficiary under
this Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) that such Beneficiary may have.
SECTION 14. Indemnification.
(a) Without limitation of any other Guaranteed Obligations of a Guarantor or
remedies of the Beneficiaries under this Guaranty, the Guarantors shall, jointly
and severally, to the fullest extent permitted by law, indemnify, defend and
save and hold harmless each Beneficiary and each of its Affiliates and their
respective officers, directors, employees, agents and advisors (each, an
“Indemnified Party”) from and against, and shall pay on demand, any and all
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and expenses of counsel) that may be incurred by or
asserted or awarded against any Indemnified Party in connection with or as a
result of any failure of any Guaranteed Obligations to be the legal, valid and
binding obligations of either Borrower enforceable against such Borrower in
accordance with their terms.
(b) EACH GUARANTOR HEREBY ALSO AGREES THAT NONE OF THE INDEMNIFIED PARTIES SHALL
HAVE ANY LIABILITY (WHETHER DIRECT OR INDIRECT, IN CONTRACT, TORT OR OTHERWISE)
TO SUCH GUARANTOR OR ANY OF ITS RESPECTIVE AFFILIATES OR ANY OF THEIR RESPECTIVE
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND ADVISORS, AND SUCH GUARANTOR HEREBY
AGREES NOT TO ASSERT ANY CLAIM AGAINST ANY INDEMNIFIED PARTY ON ANY THEORY OF
LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN
CONNECTION WITH, ARISING OUT OF, OR OTHERWISE RELATING TO THIS GUARANTY, ANY OF
THE TRANSACTIONS CONTEMPLATED HEREIN OR THE ACTUAL OR PROPOSED USE OF THE
PROCEEDS OF THE LOANS CONSTITUTING GUARANTEED OBLIGATIONS.
(c) Without prejudice to the survival of any of the other agreements of any
Guarantor under this Guaranty or any of the other Loan Documents, the agreements
and obligations of such Guarantor contained in Section 1(a) (with respect to
enforcement expenses), the last sentence of Section 2, Section 5 and this
Section 14 shall survive the payment in full of the Guaranteed Obligations and
all of the other amounts payable under this Guaranty.

 

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SECTION 15. Subordination.
If any Default shall have occurred and be continuing, each Guarantor agrees to
subordinate any and all debts, liabilities and other obligations owed to such
Guarantor by either Borrower or any other Guarantor (the “Subordinated
Obligations”) to the Guaranteed Obligations to the extent and in the manner
hereinafter set forth in this Section 15:
(a) Prohibited Payments, Etc. Except during the continuance of a Default
(including the commencement and continuation of any proceeding under any Debtor
Relief Law (as hereinafter defined) relating to either Borrower or any other
Guarantor), each Guarantor may receive payments permitted under Section 6.08 of
the Credit Agreement from the Borrowers and regularly scheduled payments from
each other Guarantor on account of the Subordinated Obligations. After the
occurrence and during the continuance of any Default (including the commencement
and continuation of any proceeding under any Debtor Relief Law relating to
either Borrower or any other Guarantor), however, unless the Administrative
Agent otherwise agrees, no Guarantor shall demand, accept or take any action to
collect any payment on account of the Subordinated Obligations.
(b) Prior Payment of Guaranteed Obligations. In any proceeding under any Debtor
Relief Law relating to either Borrower or any other Guarantor, each Guarantor
agrees that the Beneficiaries shall be entitled to receive payment in full in
cash of all Guaranteed Obligations (including all interest and expenses accruing
after the commencement of a proceeding under any Debtor Relief Law, whether or
not constituting an allowed claim in such proceeding (“Post Petition Interest”))
before such Guarantor receives payment of any Subordinated Obligations.
(c) Turn-Over. After the occurrence and during the continuance of any Default
(including the commencement and continuation of any proceeding under any Debtor
Relief Law relating to either Borrower or any other Guarantor), each Guarantor
shall, if the Administrative Agent so requests, collect, enforce and receive
payments on account of the Subordinated Obligations as trustee for the
Beneficiaries and deliver such payments to the Administrative Agent on account
of the Guaranteed Obligations (including all Post Petition Interest), together
with any necessary endorsements or other instruments of transfer, but without
reducing or affecting in any manner the liability of such Guarantor under the
other provisions of this Guaranty.
(d) Administrative Agent Authorization. After the occurrence and during the
continuance of any Default (including the commencement and continuation of any
proceeding under any Debtor Relief Law relating to either Borrower or any
Guarantor), the Administrative Agent is authorized and empowered (but without
any obligation to so do), in its discretion, (i) in the name of any Guarantor,
to collect and enforce, and to submit claims in respect of, Subordinated
Obligations and to apply any amounts received thereon to the Guaranteed
Obligations (including any and all Post Petition Interest), and (ii) to require
each Guarantor (A) to collect and enforce, and to submit claims in respect of,
Subordinated Obligations and (B) to pay any amounts received on such obligations
to the Administrative Agent for application to the Guaranteed Obligations
(including any and all Post Petition Interest).
(e) Debtor Relief Laws. As used in this Section 15, the term “Debtor Relief
Laws” shall mean the Federal Bankruptcy Code and all other liquidation,
conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, or similar
debtor relief laws of the United States or other applicable jurisdictions from
time to time in effect and affecting the rights of creditors generally.

 

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SECTION 16. Continuing Guaranty; Assignments under the Credit Agreement.
This Guaranty is a continuing guaranty and shall (a) remain in full force and
effect until the later of (i) the payment in full in cash of the Guaranteed
Obligations and all other amounts payable under this Guaranty, and (ii) the date
of the termination of all Commitments in accordance with the Credit Agreement,
(b) be binding upon each Guarantor, its successors and assigns and (c) inure to
the benefit of and be enforceable by the Beneficiaries and their successors,
transferees and assigns. Without limiting the generality of clause (c) of the
immediately preceding sentence, any Lender may assign or otherwise transfer all
or any portion of its rights and obligations under the Credit Agreement
(including, without limitation, all or any portion of its Commitment, the Loans
owing to it and the Note or Notes held by it) to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Lender herein or otherwise, in each case as and to the
extent provided in Section 9.04 of the Credit Agreement. No Guarantor shall have
the right to assign or otherwise transfer its rights or obligations hereunder or
any interest herein without the prior written consent of the Beneficiaries (and
any attempted assignment or transfer by any Guarantor without such consent shall
be null and void).
SECTION 17. Execution in Counterparts.
This Guaranty and each amendment, waiver and consent with respect hereto may be
executed in any number of counterparts and by different parties thereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Guaranty by telecopier or other electronic transmission shall be effective as
delivery of an original executed counterpart of this Guaranty.
SECTION 18. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc.
(a) THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
(b) Each Guarantor hereby irrevocably and unconditionally submits, for itself
and its Property, to the nonexclusive jurisdiction of the Supreme Court of the
State of New York sitting in New York County and of the United States District
Court of the Southern District of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this Guaranty
or any of the other Loan Documents to which it is or is to be a party, or for
recognition or enforcement of any judgment, and each Guarantor hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such New York State court
or, to the extent permitted by law, in such Federal court. Each Guarantor agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Guaranty or any other Loan Document
shall affect any right that any Beneficiary may otherwise have to bring any
action or proceeding relating to this Guaranty or any other Loan Document
against one or more of the Guarantors or their respective Properties in the
courts of any other jurisdiction.

 

D-11

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(c) Each Guarantor hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Guaranty or any other Loan Document to which it is or
is to be a party in any court referred to in paragraph (b) of this Section. Each
Guarantor hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such suit, action or
proceeding in any such court. Each Guarantor also irrevocably consents, to the
fullest extent permitted by law, to the service of any and all process in any
such suit, action or proceeding in the manner provided for notices in
Section 11. Nothing in this Guaranty or any other Loan Document will affect the
right of any Beneficiary to serve process in any other manner permitted by law.
(d) EACH GUARANTOR AND EACH BENEFICIARY HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
GUARANTY, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH GUARANTOR
AND EACH BENEFICIARY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PARTY TO ANY LOAN DOCUMENT 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 TO THE LOAN
DOCUMENTS HAVE BEEN INDUCED TO ENTER INTO THE LOAN DOCUMENTS BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly executed
and delivered by its officer thereunto duly authorized as of the date first
above written.

            GUARANTORS

FIRSTENERGY CORP.
      By:           Name:   James F. Pearson         Title:   Vice President and
Treasurer   

         
 
  Address:   76 South Main Street
 
      Akron, Ohio 44308
 
  Telecopy No.   330-384-3772
 
  Attention:   James F. Pearson

            GLOBAL MINING GROUP, LLC
      By:           Name:   Wayne M. Boich         Title:   President   

         
 
  Address:   41 South High Street
 
      Suite 3750-South
 
      Columbus, Ohio 43215
 
  Telecopy No.   614-221-0117
 
  Attention:   Brian T. Murphy

Signature Page to Guaranty

 

D-13

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            WMB LOAN VENTURES, LLC
      By:           Name:           Title:      

         
 
  Address:   41 South High Street
 
      Suite 3750-South
 
      Columbus, Ohio 43215
 
  Telecopy No.   614-221-0117
 
  Attention:   Brian T. Murphy

            WMB LOAN VENTURES II, LLC
      By:           Name:           Title:      

         
 
  Address:   41 South High Street
 
      Suite 3750-South
 
      Columbus, Ohio 43215
 
  Telecopy No.   614-221-0117
 
  Attention:   Brian T. Murphy

Signature Page to Guaranty

 

D-14

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AGREED AND ACCEPTED:
UNION BANK, N.A., as Administrative Agent and
as Collateral Agent

         
By:
   
 
Name:    
 
  Title:    

Signature Page to Guaranty

 

D-15

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EXHIBIT E
to the Credit Agreement
FORM OF BORROWING REQUEST
[Date]
Union Bank, N.A., as Administrative
Agent for the Lenders party to the
Credit Agreement referred to below
Attention:                                        
Ladies and Gentlemen:
The undersigned, Signal Peak Energy, LLC, a Delaware limited liability company,
and Global Rail Group, LLC, a Delaware limited liability company (together, the
“Borrowers”), refer to the Credit Agreement, dated as of October 22, 2010 (the
“Credit Agreement”, the terms defined therein and not otherwise defined herein
being used herein as therein defined), among the Borrowers, the Lenders party
thereto, and Union Bank, N.A., as Administrative Agent and as Collateral Agent,
and hereby give you notice, irrevocably, pursuant to Section 2.03 of the Credit
Agreement that the undersigned hereby request a Borrowing under the Credit
Agreement, and in that connection sets forth below the information relating to
such Borrowing (the “Proposed Borrowing”) as required by Section 2.03 of the
Credit Agreement:
(i) The aggregate principal amount of the Proposed Borrowing is [$ 325,000,000].
(ii) The Business Day of the Proposed Borrowing is October [_____], 2010.
(iii) The Type of Loans comprising the Proposed Borrowing is [ABR Loans]
[Eurodollar Loans].
(iv) [The initial Interest Period for each Loan made as part of the Proposed
Borrowing is [one/two/three week(s)/one/two/three/six month(s).]1
(v) The proceeds of the Loans comprising the Proposed Borrowing should be
disbursed pursuant to the wire instructions set forth in Schedule 1 attached
hereto.
 

      1  
To be included for a Proposed Borrowing comprised of Eurodollar Loans only.

 

E-1

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            Very truly yours,

SIGNAL PEAK ENERGY, LLC
      By:           Name:           Title:           GLOBAL RAIL GROUP, LLC
      By:           Name:           Title:      

 

E-2

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SCHEDULE 1
Wire Instructions

 

E-3