Exhibit 10.1

 

EXECUTION VERSION

 

RESTRUCTURING SUPPORT AGREEMENT

 

This restructuring support agreement (together with all exhibits, annexes, and
schedules hereto, in each case as may be amended, supplemented or otherwise
modified from time to time in accordance with the terms hereof, this
“Agreement”), dated as of July 15, 2015 is by and among: (i) Walter
Energy, Inc., a Delaware corporation (“Walter”), on behalf of itself and its
wholly-owned direct and indirect subsidiaries listed on Exhibit A attached
hereto (together with Walter, the “Company”), (ii) the undersigned holders of
First Lien Claims (as defined below) (the “Initial Holders”), and (iii) each
Joining Party (as defined below) (such Joining Parties, together with the
Initial Holders, the “Holder Parties”), in connection with (i) that certain
Credit Agreement dated as of April 1, 2011 (as amended, restated, amended and
restated, waived, supplemented or otherwise modified from time to time, the
“First Lien Credit Facility”), by and among Walter, as the U.S. borrower,
Western Coal Corp. and Walter Energy Canada Holdings, Inc., as the Canadian
borrowers, the lenders from time to time party thereto (such lenders, the “First
Lien Lenders”), and Morgan Stanley Senior Funding, Inc., as administrative agent
(in such capacity, the “First Lien Agent”) and (ii) that certain Indenture for
9.50% Senior Secured Notes due 2019 dated as of September 27, 2013 (as amended,
waived, supplemented or otherwise modified from time to time, the “First Lien
Indenture”), among Wilmington Trust, National Association (“Wilmington Trust”),
as successor trustee and collateral agent to Union Bank, N.A. (the “First Lien
Trustee”), Walter, as issuer, and certain subsidiaries of Walter, as guarantors,
pursuant to which Walter issued those certain 9.50% Senior Secured Notes to the
holders thereof (such holders, the “First Lien Noteholders” and together with
the First Lien Lenders, the First Lien Agent, the First Lien Trustee, the Second
Lien Noteholders (as defined below) and the Second Lien Trustee (as defined
below), the “Prepetition Secured Parties”).  Claims of the First Lien Lenders
under the First Lien Credit Facility are referred to herein collectively as the
“First Lien Lender Claims”, and claims of the First Lien Noteholders under the
First Lien Indenture are referred to herein collectively as the “First Lien
Noteholder Claims” (together with the First Lien Lender Claims, the “First Lien
Claims”).

 

The Company and each Holder Party are collectively referred to herein as the
“Parties” and each individually as a “Party.”  This Agreement shall become
effective, and each Party shall be bound by the terms of this Agreement, as of
the date the Company and each of the Initial Holders have executed and delivered
a signature page to this Agreement (such date, the “Execution Date”).

 

In consideration of the covenants and agreements contained herein, and for other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:

 

1.             Proposed Restructuring.

 

The Company and the Holder Parties have agreed to implement a restructuring for
the Company (the “Restructuring”) in accordance with, and subject to the terms
and conditions set forth in, this Agreement and the restructuring term sheet
attached hereto as Exhibit B (including any schedules, annexes and exhibits
attached thereto, each as may be modified in accordance with the terms hereof,
the “Restructuring Term Sheet”), which Restructuring Term Sheet is expressly
incorporated herein by reference and made part of this Agreement as if fully set
forth herein.  The Restructuring requires pursuing, on a parallel basis,
consummation of (i) a joint “pre-negotiated” chapter 11 plan of reorganization
which shall be consistent with the provisions of the Restructuring Term Sheet
(such plan, together with any exhibits, schedules, attachments or appendices
thereto, in each case as may be amended, supplemented or otherwise modified from
time to time in accordance with the terms herein and therein, the “Plan”), which
Plan shall be in form and substance acceptable to the Company and the Holder
Parties holding 55% or more in principal amount of the First Lien Claims held by
the Holder Parties as of the time of such determination; provided that such
Holder Parties holding 55% or more in

 

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principal amount include at least four (4) unaffiliated Holder Parties (the
“Majority Holders”), and provided further that with respect to any of
(X) approval of any provisions of the Restructuring Documents dealing with the
corporate governance of the Company from and after the effective date of the
Plan or of documents relating to the corporate governance of the purchaser from
and after the consummation of the 363 Sale, including but not limited to board
composition, affiliate and/or related party transaction limitations/protections,
voting rights, pre-emptive rights, tag-along/drag-along rights and transfer
restrictions or (Y) any financing(s) or funding(s) (whether debt or equity)
obtained or arranged for (in whole or in part) by the Company in the form of
debtor-in-possession or similar financing(s), or by the reorganized Company or
purchaser in the 363 Sale prior to, upon or in connection with the closing of a
Restructuring, then in any case of (X) or (Y) the Majority Holders shall include
55% or more in principal amount of the First Lien Claims held by the Holder
Parties as of the time of such determination and at least four (4) unaffiliated
Holder Parties (which must also include at least three (3) unaffiliated Holder
Parties who are Initial Holders), or (ii) if a Triggering Event (as defined
below) has occurred and written notice thereof has been delivered by the
Majority Holders in accordance with Section 13 hereof, and in the absence of an
unresolved Triggering Event Dispute (as defined below), the Company shall
abandon the Plan process and solely pursue a sale of substantially all of the
assets of the Company (collectively, the “Assets”) pursuant to sections 105, 363
and 365 of the Bankruptcy Code on the terms and conditions set forth in this
Agreement, the sale term sheet attached hereto as Exhibit C (the “Sale Term
Sheet”), which Sale Term Sheet is expressly incorporated herein by reference and
made part of this Agreement as if fully set forth herein, and otherwise
acceptable to the Company and the Majority Holders (the “363 Sale”), it being
understood that the Parties shall, prior to such event, pursue a 363 Sale in
accordance with this Agreement together with pursuing the Plan.  In order to
effectuate the Restructuring, the Company shall commence, in accordance with the
terms of this Agreement, voluntary “pre-negotiated” cases (the “Chapter 11
Cases”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy
Code”) in the United States Bankruptcy Court for the Northern District of
Alabama (the “Bankruptcy Court”).  The documents related to or otherwise
utilized to implement or effectuate the Restructuring (collectively, the
“Restructuring Documents”) shall include, among others:  (i) the Plan, the
related disclosure statement in form and substance acceptable to the Company and
the Majority Holders (such disclosure statement, together with any exhibits,
schedules, attachments or appendices thereto, in each case as may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms herein and therein, the “Disclosure Statement”), and any other documents
and/or agreements relating to the Plan and/or the Disclosure Statement,
including (A) a motion seeking approval of the Disclosure Statement, the
procedures for the solicitation of votes in connection with the Plan pursuant to
sections 1125 and 1126 of the Bankruptcy Code (the “Solicitation”), the forms of
ballots and notices and related relief (such motion, together with all exhibits,
appendices, supplements, and related documents, the “Disclosure Statement
Motion”), (B) a proposed order of the Bankruptcy Court approving the Disclosure
Statement Motion (together with all exhibits, appendices, supplements and
related documents, the “Disclosure Statement Order”), (C) a proposed order of
the Bankruptcy Court confirming the Plan pursuant to Bankruptcy Code section
1129 (together with all exhibits, appendices, supplements and related documents,
the “Confirmation Order”) and (D) any organizational and governance documents
for the reorganized Company, including without limitation, certificates of
incorporation, certificate of formation or certificate of limited partnership
(or equivalent organizational documents), bylaws, limited liability company
agreements, identity of proposed members of the reorganized Company’s board of
directors, limited partnership agreements (or equivalent governing documents)
and registration rights agreements (collectively, the “Governance Documents”);
(ii) a 3-year business plan for the Company (the “Business Plan”); (iii) a
motion seeking the assumption of this Agreement pursuant to section 365 of the
Bankruptcy Code authorizing, among other things, the payment of certain fees,
expenses and other amounts hereunder, and granting related relief (the “RSA
Assumption Motion”), and an order approving the RSA Assumption Motion (the “RSA
Order”); (iv) all documents in connection with the 363 Sale, including, without
limitation, the “stalking horse” asset purchase agreement (together with any
disclosure schedules, bills of sale, assumption agreements and any other
exhibits,

 

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documents or agreements attached thereto or delivered or executed in connection
therewith, the “Stalking Horse APA”) in connection with a credit bid by the
First Lien Agent (on behalf of the First Lien Lenders) and the First Lien
Trustee (on behalf of the First Lien Noteholders) for the purchase of the
Assets; (v) a motion (the “Sale Motion”) for entry of (X) an order (the “Bidding
Procedures Order”) (1) authorizing the Company’s entry into the Stalking Horse
APA, (2) approving bidding procedures to be used and bid protections to be
provided in connection with the 363 Sale, (3) setting the dates for the
submission of bids, the auction (if any) and the hearing on the approval of the
363 Sale and approving all notices related thereto, and (4) authorizing certain
procedures related to the assumption and assignment of executory contracts and
unexpired leases, and (Y) an order (the “Sale Order”) (1) authorizing the 363
Sale, (2) authorizing the assumption and assignment of certain related executory
contracts and unexpired leases, and (3) granting related relief; (vi) the
Bidding Procedures Order; (vii) the Sale Order; (viii) such other definitive
documentation relating to a recapitalization or restructuring of the Company as
is necessary or desirable to consummate the Restructuring; (ix) any
documentation relating to the use of cash collateral, including a motion seeking
authority to use cash collateral and an interim order (the “Interim Cash
Collateral Order”), in the form attached hereto as Exhibit D, and a final order
(the “Final Cash Collateral Order” and together with the Interim Cash Collateral
Order, the “Cash Collateral Orders”), approving same, which Cash Collateral
Orders shall, without limitation, provide the Prepetition Secured Parties
adequate protection for the use of their cash collateral as described in the
Interim Cash Collateral Order; and (x) any other agreements, instruments,
pleadings, orders and/or documents that are filed by debtors and debtors in
possession in the Chapter 11 Cases (including any exhibits, amendments,
modifications or supplements made from time to time thereto).  Each of the
Restructuring Documents shall be consistent in all respects with, and shall
contain, the terms and conditions set forth in this Agreement, and shall
otherwise be in form and substance acceptable to the Company and the Majority
Holders; provided, however, that notwithstanding the foregoing, the Governance
Documents shall be acceptable only to the Majority Holders.

 

2.             Representations of the Holder Parties and the Company.  Each of
the Holder Parties, severally and not jointly, and the Company (subject to
necessary Bankruptcy Court approval) hereby represents and warrants that, as of
the Execution Date, the following statements are true, correct and complete:

 

(a)           It has all requisite corporate, partnership, limited liability
company or similar authority to execute this Agreement and carry out the
transactions contemplated hereby and perform its obligations contemplated
hereunder; and the execution and delivery of this Agreement and the performance
of such Party’s obligations hereunder have been duly authorized by all necessary
corporate, partnership, limited liability company or other similar action on its
part.

 

(b)           The execution, delivery and performance by such Party of this
Agreement does not and shall not (i) violate (A) any provision of law, rule or
regulation applicable to it or (B) its charter or bylaws (or other similar
governing documents) or (ii) with respect to the Company only, conflict with,
result in a breach of or constitute a default under (with or without notice or
lapse of time or both) any contractual obligation to which it is a party or it
or its assets are bound, in each case, other than any such violation, conflict,
breach or default with respect to which a waiver has been obtained prior to the
Execution Date and which waiver has not been subsequently revoked.

 

(c)           This Agreement is the legally valid and binding obligation of such
Party, enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or limiting creditors’ rights generally or by
equitable principles relating to enforceability.

 

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(d)           The execution and delivery by such Party of this Agreement does
not require any authorization of, filing with, registration of or before,
consent from, approval of or other action by or notice to any federal, state or
other governmental authority or regulatory body, in each case, other than any
such authorization, filing, registration, consent, approval, action or notice
which has been obtained, provided, or otherwise satisfied prior to the Execution
Date and which authorization, filing, registration, consent, approval, action,
or notice has not been subsequently revoked.

 

(e)           If such Party is a Holder Party, such Holder Party (i) either
(A) is the sole legal and beneficial owner of (1) the First Lien Lender Claims,
(2) the First Lien Noteholder Claims, (3) the claims of the holders of those
certain 11.0%/12.0% Senior Secured Second Lien PIK Toggle Notes (the “Second
Lien Noteholders”) issued by Walter pursuant to that certain Indenture for
11.0%/12.0% Senior Secured Second Lien PIK Toggle Notes due 2019 dated as of
March 27, 2014 (the “Second Lien Indenture”) among Wilmington Trust, as trustee
and collateral agent (the “Second Lien Trustee”), Walter, as issuer, and certain
subsidiaries of Walter, as guarantors, (the “Second Lien Claims”), (4) the
claims of the holders of those certain 9.875% Senior Notes issued by Walter
pursuant to that certain Indenture for 9.875% Senior Notes due 2020 dated as of
November 21, 2012 among Union Bank, N.A. (“Union Bank”), as trustee, and certain
subsidiaries of Walter party thereto (the “9.875% Unsecured Claims”), and/or
(5) the claims of the holders of those certain 8.50% Senior Notes issued by
Walter pursuant to that certain Indenture for 8.50% Senior Notes due 2021 dated
as of March 27, 2013 (the “Unsecured Indenture” and, together with the First
Lien Credit Facility, the First Lien Indenture and the Second Lien Indenture,
the “Debt Documents”) among Union Bank, as trustee, and certain subsidiaries of
Walter party thereto (together with the 9.875% Unsecured Claims, the “Unsecured
Claims”), set forth below its name on the signature page hereof (or the Joinder
(as defined below)), in each case, free and clear of any and all claims, liens
and encumbrances (other than those imposed by securities laws applicable to
unregistered securities), or (B) has sole investment and voting discretion with
respect to such First Lien Claims, Second Lien Claims and/or Unsecured Claims in
respect to matters relating to the Restructuring contemplated by this Agreement
and has the power and authority to bind the beneficial owner(s) of such First
Lien Claims, Second Lien Claims and/or Unsecured Claims to the terms of this
Agreement and (ii) has full power and authority to act on behalf of, vote and
consent to matters concerning such First Lien Claims, Second Lien Claims and/or
Unsecured Claims in respect to matters relating to the Restructuring
contemplated by this Agreement and dispose of, convert, assign and transfer such
First Lien Claims, Second Lien Claims and/or Unsecured Claims (with respect to
each Holder Party, all of such First Lien Lender Claims, First Lien Noteholder
Claims, Second Lien Claims and/or Unsecured Claims under clauses (A) and (B) and
any additional First Lien Lender Claims, First Lien Noteholder Claims, Second
Lien Claims and/or Unsecured Claims it owns, has such control over from time to
time, or acquires after the Execution Date, collectively, its “Participating
Claims”).  Further, such Holder Party has made no prior written assignment,
sale, participation, grant, conveyance, or other transfer of, and has not
entered into any other written agreement to assign, sell, participate, grant,
convey or otherwise transfer, in whole or in part, any portion of its right,
title, or interests in such Participating Claims that are subject to this
Agreement, the terms of which written agreement are, as of the date hereof,
inconsistent with the representations and warranties of such Holder Party herein
or would render such Holder Party otherwise unable to comply with this Agreement
and perform its obligations hereunder.

 

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(f)            If such party is a Holder Party, such Holder Party (i) has such
knowledge and experience in financial and business matters of this type that it
is capable of evaluating the merits and risks of entering into this Agreement
and of making an informed investment decision, and has conducted an independent
review and analysis of the business and affairs of the Company that it considers
sufficient and reasonable for purposes of entering into this Agreement and
(ii) is an “accredited investor” (as defined by Rule 501 of the Securities Act
of 1933, as amended).

 

3.             Agreements of the Holder Parties

 

(a)           From the Execution Date until the date that is the earlier of
(i) the effective date of the Plan, (ii) the consummation of the 363 Sale and
(iii) the termination of this Agreement pursuant to Section 6 (such date, the
“End Date”) and subject to the terms and conditions hereof and except as the
Company and the Majority Holders may expressly release a Holder Party in writing
from any of the following obligations, each Holder Party:

 

(i)            hereby agrees, prior to the occurrence of a Triggering Event, not
to propose, file, support or vote for any restructuring, refinancing, workout,
plan of arrangement, plan of reorganization or other recapitalization
transaction for the Company other than the Restructuring;

 

(ii)           hereby agrees, prior to the occurrence of a Triggering Event, to
vote (when solicited to do so after receipt of a Disclosure Statement approved
by the Bankruptcy Court and by the applicable deadline for doing so) its
Participating Claims in favor of the Plan and not to change or withdraw such
votes;

 

(iii)          shall not, prior to the occurrence of a Triggering Event, object
to, or vote any of such Participating Claims to reject or impede, the Plan,
support directly or indirectly any such objection or impediment or otherwise
take any action or commence any proceeding to delay, impede, interfere or
oppose, or to seek any modification of the Plan or any Restructuring Documents;

 

(iv)          shall not, except to the extent expressly contemplated under this
Agreement, including, without limitation, by the Cash Collateral Orders, direct
the First Lien Agent, the First Lien Trustee, the Second Lien Trustee, or the
Collateral Agents to exercise any right or remedy for the enforcement,
collection, or recovery of any of the Participating Claims, and any other claims
against, or interests in, the Company;

 

(v)           hereby agrees to support the Sale Motion, entry into the Stalking
Horse APA, and to instruct the First Lien Agent and the First Lien Trustee, as
applicable, in connection with the applicable credit bid for the Assets in
connection with the 363 Sale; and

 

(vi)          without limiting the consent, approval or other rights contained
herein, hereby agrees, in its capacity as a holder of Participating Claims, to
(A) (1) support and complete the Restructuring and all other actions
contemplated in connection therewith and under the Restructuring Documents and
(2) exercise any and all necessary and appropriate rights in its capacity as a
holder of Participating Claims  in furtherance of the Restructuring and the
Restructuring Documents, and (3) use reasonable best efforts to obtain any and
all governmental, regulatory, and/or third-party approvals (including, as
applicable, Bankruptcy Court approvals) required for the Restructuring, if any,
(B) use reasonable best efforts to cause the milestones set forth in Section 6
to be satisfied so as

 

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to not allow a Support Termination Event (as defined below) to occur (provided
that such obligation shall continue after a Triggering Event with respect to
milestones related to the 363 Sale), and (C) not take any actions, or fail to
take any actions, where such taking or failing to take actions would be, in
either case, (i) inconsistent with this Agreement or the Restructuring Documents
or (ii) otherwise inconsistent with, or reasonably expected to prevent,
interfere with, delay or impede the implementation or consummation of, the
Restructuring.

 

Notwithstanding the foregoing, nothing in this Section 3(a) shall require any
Holder Party to (A) incur any expenses, liabilities or other obligations, or
agree to any commitments, undertakings, concessions, indemnities or other
arrangements that could result in expenses, liabilities or other obligations to
any Holder Party or (B) provide any information that it determines, in its
discretion, to be sensitive or confidential.

 

(b)           The Parties agree that this Agreement does not constitute a
commitment to, nor shall it obligate any of the Parties to, provide any new
financing or credit support.

 

(c)           Subject to Section 3(f), each Holder Party agrees that, from the
Execution Date until the End Date, it shall not sell, assign, grant, transfer,
convey, hypothecate or otherwise dispose of any Participating Claims, or any
option thereon or any right or interest (voting or otherwise) in any or all of
its Participating Claims, except to a party that (i) is a Holder Party;
provided, however, that any such Participating Claims shall automatically be
deemed to be subject to the terms of this Agreement, or (ii) executes and
delivers a Joinder (as defined below) to Akin Gump Strauss Hauer & Feld LLP
(“Akin Gump”) and the Company prior to the relevant sale, assignment, grant,
transfer, conveyance, hypothecation or other disposition.  With respect to any
transfers effectuated in accordance with clause (ii) above, (A) such transferee
shall be deemed to be a Holder Party for purposes of this Agreement, subject to
Section 3(e), and (B) the Company shall be deemed to have acknowledged such
transfer.

 

(d)           This Agreement shall in no way be construed to preclude any Holder
Party from acquiring additional Participating Claims; provided, however, that
any such additional Participating Claims shall automatically be deemed to be
subject to all of the terms of this Agreement and each such Holder Party agrees
that such additional Participating Claims shall be subject to this Agreement. 
Each Holder Party agrees to provide to Akin Gump and the Company notice in
accordance with Section 13 hereof of the acquisition of any additional
Participating Claims within three (3) business days of the consummation of the
transaction acquiring such additional Participating Claims.

 

(e)           Any person that receives or acquires a portion of the
Participating Claims pursuant to a sale, assignment, grant, transfer,
conveyance, hypothecation or other disposition of such Participating Claims by a
Holder Party hereby agrees to be bound by all of the terms of this Agreement (as
such terms may be amended from time to time in accordance with the terms hereof)
(any such person, together with each holder of Participating Claims that becomes
a Holder Party pursuant to Section 19, each a “Joining Party”) by executing and
delivering to Akin Gump and the Company a joinder in the form attached hereto as
Exhibit E (the “Joinder”).  The Joining Party shall thereafter be deemed to be a
“Holder Party” and a party for all purposes under this Agreement and all of the
First Lien Claims, Second Lien Claims and Unsecured Claims then held by such
Joining Party shall be deemed Participating Claims hereunder, and such Joining
Party shall have the consent or approval rights of, and be deemed to be, a
Holder Party for all purposes under this Agreement.  Each Joining Party shall
indicate, on the appropriate schedule annexed to its Joinder, the number and
amount of First Lien Lender Claims, First Lien

 

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Noteholder Claims, Second Lien Claims and/or Unsecured Claims held by such
Joining Party. With respect to the Participating Claims held by the Joining
Party upon consummation of the sale, assignment, grant, transfer, conveyance,
hypothecation or other disposition of such Participating Claims, the Joining
Party hereby makes the representations and warranties of the Holder Parties set
forth in Section 2 to the other Parties.

 

(f)            Notwithstanding anything herein to the contrary, (i) any Holder
Party may transfer any of its Participating Claims to an entity that is acting
in its capacity as a Qualified Marketmaker (as defined below) without the
requirement that the Qualified Marketmaker be or become a Holder Party;
provided, however, that the Qualified Marketmaker subsequently transfers all
right, title and interest in such Participating Claims to a transferee that is
or becomes a Holder Party as provided above, and the transfer documentation
between the transferring Holder Party and such Qualified Marketmaker shall
contain a requirement that provides as such; and (ii) to the extent any Holder
Party is acting in its capacity as a Qualified Marketmaker, it may transfer any
Participating Claims that it acquires from a holder of such Participating Claims
that is not a Holder Party without the requirement that the transferee be or
become a Holder Party. Notwithstanding the foregoing, if, at the time of the
proposed transfer of such Participating Claims to the Qualified Marketmaker,
such Participating Claims (x) may be voted on (1) the Plan or (2) any
dissolution, winding up, liquidation, reorganization, assignment for the benefit
of creditors, merger, transaction, consolidation, business combination, joint
venture, partnership, sale of assets, financing (debt or equity),
recapitalization, restructuring or similar transaction involving the Company,
other than the Plan or the 363 Sale (an “Alternative Transaction”), the proposed
transferor Holder Party must first vote such Participating Claims in accordance
with the requirements of Section 3(a), or (y) have not yet been and may not yet
be voted on the Plan or any Alternative Transaction and such Qualified
Marketmaker does not transfer such Participating Claims to a subsequent
transferee prior to the third (3rd) business day prior to the expiration of the
voting deadline (such date, the “Qualified Marketmaker Joinder Date”), such
Qualified Marketmaker shall be required to (and the transfer documentation to
the Qualified Marketmaker shall have provided that it shall), on the first
business day immediately following the Qualified Marketmaker Joinder Date,
become a Holder Party with respect to such Participating Claims in accordance
with the terms hereof (provided that the Qualified Marketmaker shall
automatically, and without further notice or action, no longer be a Holder Party
with respect to such Participating Claims at such time that the transferee of
such Participating Claims becomes a Holder Party with respect to such
Participating Claims).  For these purposes, “Qualified Marketmaker” means an
entity that (X) holds itself out to the market as standing ready in the ordinary
course of business to purchase from and sell to customers Participating Claims,
or enter with customers into long and/or short positions in First Lien Claims,
Second Lien Claims or Unsecured Claims, in its capacity as a dealer or market
maker in such First Lien Claims, Second Lien Claims or Unsecured Claims, and
(Y) is in fact regularly in the business of making a market in claims, interests
and/or securities of issuers or borrowers.

 

4.             Agreements, Representations and Warranties of the Company

 

(a)           Subject to the terms and conditions hereof and except as the
Majority Holders may expressly release the Company in writing from any of the
following obligations (which release may be withheld, conditioned or delayed by
the Majority Holders):

 

(i)            From the Execution Date until the End Date, the Company agrees
(A) to prepare or cause to be prepared the Restructuring Documents (including,
without limitation, all relevant motions, applications, orders, agreements and
other documents), each of which, for the avoidance of doubt, shall contain terms
and conditions consistent

 

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with this Agreement and shall otherwise be in form and substance acceptable to
the Company and the Majority Holders, except for the Governance Documents, which
shall be acceptable only to the Majority Holders, (B) to provide draft copies of
the Restructuring Documents, any documents filed in connection with recognition
or other proceedings, if any, filed in Canada (the “Canadian Proceedings”), and
all other pleadings and documents the Company intends to file with the
Bankruptcy Court, in each case, to Akin Gump as soon as reasonably practicable,
but in no event less than two (2) business days before such documents are to be
filed with the Bankruptcy Court; provided that each such pleading or document
shall be consistent in all respects with, and shall otherwise contain, the terms
and conditions set forth in this Agreement and such other terms and conditions
as are acceptable to the Company and the Majority Holders; and (C) without
limiting any approval rights set forth herein, consult in good faith with Akin
Gump regarding the form and substance of any of the foregoing documents in
advance of the filing, execution, distribution or use (as applicable) thereof.

 

(ii)           Without limiting the consent, approval or other rights contained
herein, the Company agrees to (A) (1) support and complete the Restructuring and
all other actions contemplated in connection therewith and under the
Restructuring Documents, (2) take any and all necessary and appropriate actions
in furtherance of the Restructuring and the Restructuring Documents and (3) use
reasonable best efforts to obtain any and all governmental, regulatory, and/or
third-party approvals (including, as applicable, Bankruptcy Court approvals)
required for the Restructuring, if any, (B) use reasonable best efforts to cause
the milestones set forth in Section 6 to be satisfied so as to not allow a
Support Termination Event to occur (provided that such obligation shall continue
after a Triggering Event with respect to milestones related to the 363 Sale),
and (C) not take any actions, or fail to take any actions, where such taking or
failing to take actions would be, in either case, (i) inconsistent with this
Agreement or the Restructuring Documents or (ii) otherwise inconsistent with, or
reasonably expected to prevent, interfere with, delay or impede the
implementation or consummation of, the Restructuring.

 

(iii)          Unless pursuant to a Fiduciary Action as set forth in Section 24
hereof, the Company shall (A) cease and cause to be terminated any ongoing
solicitation, discussions and negotiations with respect to any Alternative
Transaction, (B) not, directly or indirectly, seek, solicit, negotiate, support,
engage in or initiate discussions relating to, or enter into any agreements
relating to, any Alternative Transaction, and (C) not solicit or direct any
person or entity, including any of their representatives or members of the
Company’s board of directors (or equivalent) or any direct or indirect holders
of existing equity securities of the Company, to undertake any of the foregoing;
provided, however, that the Company’s activities to pursue the 363 Sale are not
a breach of this Section 4(a)(iii).

 

(iv)          The Company agrees to timely file a formal objection to any motion
filed with the Bankruptcy Court by any Person seeking the entry of an order
(A) directing the appointment of an examiner or a trustee, (B) converting any
Chapter 11 Case to a case under chapter 7 of the Bankruptcy Code other than as
contemplated by the Plan and the Restructuring or (C) dismissing any of the
Chapter 11 Cases.  For purposes of this Section 4(a), “Person” shall mean an
individual, a partnership, a joint venture, a limited liability company, a
corporation, a trust, an unincorporated organization, a group, a governmental or
regulatory authority, or any legal entity or association.

 

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(v)           The Company agrees to timely file a formal written response in
opposition to or take all appropriate actions to oppose (if circumstances do not
allow for the filing of a formal written response) any objection filed with the
Bankruptcy Court by any Person with respect to the entry of the Interim Cash
Collateral Order and/or the Final Cash Collateral Order.

 

(vi)          The Company agrees not to enter into any settlement, compromise or
agreement with any authorized representative of retirees or employees or a
retiree committee, unless such settlement, compromise or agreement is in form
and substance acceptable to the Company and the Majority Holders.

 

(vii)         The Company shall use reasonable best efforts to obtain entry of
the RSA Order, which order shall include a waiver or modification of the
automatic stay to provide any notices contemplated by and in accordance with
this Agreement, by the Bankruptcy Court as soon as practicable after July 15,
2015 (the “Petition Date”), but in no event later than 60 calendar days after
the Petition Date (which RSA Order, for avoidance of doubt, shall be in form and
substance acceptable to the Company and the Majority Holders).

 

(viii)        Within a reasonable period of time prior to taking any steps
towards commencing a sale, marketing, restructuring or similar process with
respect to the direct or indirect subsidiaries of Walter that are formed,
incorporated or otherwise domiciled in Canada (collectively, the “Canadian
Entities”), Walter shall cause to be appointed to the board of Walter Energy
Canada Holdings, Inc. an independent director mutually agreeable to the Company
and the Majority Holders (and, upon the request of such independent director,
Walter shall cause such independent director to be appointed to the board of any
other Canadian Entity so requested).

 

(ix)          The Company agrees to timely file a formal written response in
opposition to, and defend against, any objection filed with the Bankruptcy Court
by any Person with respect to the Sale Motion, the Bidding Procedures Order, the
Sale Order, and any related agreements and/or documents.

 

(b)           Regardless of whether the Restructuring is consummated, the
Company shall promptly pay in cash all documented fees, costs and expenses of
(i) Akin Gump, as lead counsel, Burr Forman LLP (“Burr Forman”), as Alabama
counsel, Cassels Brock & Blackwell LLP (“Cassels”), as Canadian counsel, and
Lazard Frères & Co. LLC, as financial advisor, to the Holder Parties (“Lazard”
and together with Akin Gump, Burr Forman and Cassels, the “Holder Parties’
Advisors”) and (ii) any consultants or other advisors retained by the Holder
Parties collectively (and not individually) (the parties described in this
section 4(b)(ii) collectively, the “Consultants”) in connection with the
Restructuring; provided that the Holder Parties shall provide notice to the
Company in accordance with Section 13 hereof prior to retaining any such
Consultants, in each case, in accordance with engagement letters (if any) of
such professional (including the Restructuring Fee as defined in Lazard’s
engagement letter), and in each case, without further order of, or application
to, the Bankruptcy Court or notice to any party other than as provided in the
Cash Collateral Order; provided further that no success fees shall be payable to
any Consultant.  In addition, regardless of whether the Restructuring is
consummated, the Company shall promptly reimburse each Holder Party in cash for
all documented out-of-pocket costs or expenses (without limiting the Company’s
obligations pursuant to the previous sentence, which out-of-pocket costs or
expenses shall not include any professional or advisor fees of such Holder
Party) incurred by such Holder Party in connection with this Agreement or the

 

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Restructuring.  Simultaneously with the execution of this Agreement, the Company
shall pay or reimburse, as applicable, all fees, costs and expenses of the
Holder Parties or the Holder Parties’ Advisors incurred at any time prior to the
Execution Date and described in the previous two sentences.

 

(c)           From the Execution Date until the End Date, the Company shall
(i) operate the business of the Company and its direct and indirect subsidiaries
in the ordinary course in a manner that is consistent with this Agreement, the
Business Plan, past practices, and use commercially reasonable efforts to
preserve intact the Company’s business organization and relationships with third
parties (including lessors, licensors, suppliers, distributors and customers)
and employees, (ii) keep the Holder Parties reasonably informed about the
operations of the Company and its direct and indirect subsidiaries,
(iii) subject to applicable non-disclosure agreements and the terms thereof,
provide the Holder Parties any information reasonably requested regarding the
Company or any of its direct and indirect subsidiaries and provide, and direct
the Company’s employees, officers, advisors and other representatives to
provide, to Akin Gump and Lazard, (A) reasonable access during normal business
hours to the Company’s books, records and facilities, subject to reasonable
safety precautions, and (B) reasonable access to the management and advisors of
the Company for the purposes of evaluating the Company’s assets, liabilities,
operations, businesses, finances, strategies, prospects and affairs,
(iv) promptly notify the Holder Parties of any governmental or third party
complaints, litigations, investigations or hearings (or communications
indicating that the same may be contemplated or threatened) and (v) use
commercially reasonable efforts to obtain any and all required governmental,
regulatory and/or third party approvals necessary or required for the
implementation or consummation of the Restructuring (including the Bankruptcy
Court’s approval of the relevant Restructuring Documents).

 

5.             363 Sale Triggering Events.  Upon the Majority Holders’ giving of
written notice of the occurrence of a Triggering Event (as defined below) to the
Company in accordance with Section 13 hereof, and in the absence of an
unresolved Triggering Event Dispute (as defined below), notwithstanding anything
to the contrary herein or in the Restructuring Documents, the Company shall
cease pursuing and shall withdraw the Plan (and the Holder Parties shall no
longer have any obligation to support the Plan) and instead exclusively use its
best efforts to pursue and consummate the 363 Sale if any one or more of the
following events occurs (each, a “Triggering Event”):

 

(a)           at 5:00 p.m. prevailing Central Time on July 15, 2015, unless the
Company shall have filed a motion seeking the appointment of a retiree committee
under section 1114 of the Bankruptcy Code (the “1114 Retiree Committee
Appointment Motion”), which motion shall be in form and substance acceptable to
the Company and the Majority Holders;

 

(b)           (i) at 5:00 p.m. prevailing Central Time on August 12, 2015,
unless the Company shall have made a proposal under sections 1113 and 1114 of
the Bankruptcy Code to the United Mine Workers of America (“UMWA”) or (ii) at
5:00 p.m. prevailing Central Time on August 26, 2015, unless the Company shall
have made a proposal under sections 1113 and 1114 of the Bankruptcy Code to the
United Steelworkers (“USW”), in each case, in form and substance acceptable to
the Majority Holders;

 

(c)           at 5:00 p.m. prevailing Central Time on August 12, 2015, unless
the hearing on the 1114 Retiree Committee Appointment Motion shall have
commenced in the Bankruptcy Court;

 

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(d)           at 5:00 p.m. prevailing Central Time on August 26, 2015, unless
the Company shall have filed the Plan (except the Plan supplements) and
Disclosure Statement (except exhibits), each consistent with the Restructuring
Term Sheet and in form and substance acceptable to the Company and the Majority
Holders, with the Bankruptcy Court;

 

(e)           at 5:00 p.m. prevailing Central Time on October 21, 2015, unless
the Company shall have filed with the Bankruptcy Court the exhibits to the
Disclosure Statement, including projections for the time period to be set forth
in the Business Plan, in form and substance acceptable to the Company and the
Majority Holders;

 

(f)            at 5:00 p.m. prevailing Central Time on October 28, 2015, unless
the Bankruptcy Court shall have entered the Disclosure Statement Order in form
and substance acceptable to the Company and the Majority Holders;

 

(g)           at 5:00 p.m. prevailing Central Time on October 21, 2015 unless
(i) a motion seeking approval of the Bankruptcy Court of an agreement between
the Pension Benefit Guaranty Corporation ( the “PBGC”) and the Company pursuant
to which the Company’s qualified single employer defined benefit pension plans
will be terminated, which agreement shall be in form and substance acceptable to
the Majority Holders, shall have been filed with the Bankruptcy Court, or
motions to terminate the Company’s qualified single employer defined benefit
pension plans have been filed by the Company with the Bankruptcy Court and
(ii) motions to terminate the Company’s excess and supplemental non-qualified
pension plans, in each case in form and substance acceptable to the Majority
Holders, have been filed by the Company with the Bankruptcy Court;

 

(h)           at 5:00 p.m. prevailing Central Time on October 21, 2015, unless
(i) motion(s) seeking the approval of the Bankruptcy Court of settlement(s) with
respect to the collective bargaining agreement(s) (the “Collective Bargaining
Agreement(s)”) entered into with the authorized representative(s) of the
respective UMWA and/or USW employees in form and substance acceptable to the
Company and the Majority Holders (each, a “Labor Settlement”) shall have been
filed or (ii) if no such motion(s) shall have been filed with the Bankruptcy
Court with respect to any such Labor Settlement(s), a motion(s) under section
1113 of the Bankruptcy Code (including a motion filed pursuant to section
1113(c) of the Bankruptcy Code (an “1113 Motion”) seeking the rejection of
certain Collective Bargaining Agreement(s) of the Company with the UMWA and the
USW), in each case in form and substance acceptable to the Company and the
Majority Holders and which can be combined with the motions required under
Section 5(i) below, shall have been filed by the Company with the Bankruptcy
Court;

 

(i)            at 5:00 p.m. prevailing Central Time on October 21, 2015, unless
(i) a motion seeking the approval of the Bankruptcy Court of the
settlement(s) with respect to a Retiree Group (as defined below) entered into
with the applicable authorized representative of the respective retirees or the
retiree committee, each in form and substance acceptable to the Company and the
Majority Holders (a “Retiree Settlement”) shall have been filed or (ii) if no
such motion shall have been filed with the Bankruptcy Court with respect to any
such Retiree Settlement, motions under section 1114 of the Bankruptcy Code, in
each case in form and substance acceptable to the Company and the Majority
Holders and which can be combined with the motions required under
Section 5(h) above, shall have been filed by the Company with the Bankruptcy
Court with respect to “retiree benefits” (as defined in section 1114 of the
Bankruptcy Code) affecting the Company being received by UMWA retirees, United
Steelworkers retirees, and non-union retirees (each, a “Retiree Group”);

 

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(j)            at 5:00 p.m. prevailing Central Time on November 4, 2015, unless
the Company shall have commenced the Solicitation;

 

(k)           at 5:00 p.m. prevailing Central Time on November 11, 2015, unless
(i) the hearings with respect to the motions filed pursuant to Section 5(h) and
Section 5(i) above shall have commenced in the Bankruptcy Court or (ii) if no
such hearings shall have commenced with respect to such motions, the Bankruptcy
Court shall have approved a Labor Settlement or Retiree Settlement, as
applicable;

 

(l)            at 5:00 p.m. prevailing Central Time on December 9, 2015, unless
the Bankruptcy Court shall have (i) entered an order approving each of the
motions filed pursuant to Section 5(h) and Section 5(i) above and granting
relief acceptable to the Company and to the Majority Holders or (ii) if no such
order shall have been entered with respect to any such motions, the Bankruptcy
Court shall have approved a Labor Settlement or Retiree Settlement, as
applicable;

 

(m)          at 5:00 p.m. prevailing Central Time on the date that is 21 days
after the date on which the orders described in clause (i) of Section 5(l) above
are entered by the Bankruptcy Court, unless the Company shall have
(i) implemented the relief granted by the Bankruptcy Court in such order or
(ii) entered into a settlement with the applicable parties with respect to any
Collective Bargaining Agreement or with the applicable Retiree Group, as
applicable, which settlement is approved by the Bankruptcy Court and is in form
and substance acceptable to the Company and the Majority Holders;

 

(n)           the occurrence of a strike, work slowdown or other concerted labor
activity that lasts for more than three (3) days and reduces production by over
100,000 tonnes, as measured against the Company’s mining plan;

 

(o)           if, as of the effective date of the Plan, the aggregate amount of
all allowed or projected Administrative and Priority Claims (as defined herein)
exceeds $10.0 million, which  projections the Company, in consultation with the
Holder Parties’ Advisors, shall reasonably formulate in advance of the
confirmation hearing in connection with the Plan.  For purposes hereof,
“Administrative and Priority Claims” means any non-ordinary course
administrative expense claims and non-ordinary course priority tax claims.  For
the avoidance of doubt, Administrative and Priority Claims do not include any
claims for fees and expenses of any professional, claims arising under sections
503(b)(9) or 507(b) of the Bankruptcy Code, post-petition operating expenses,
severance obligations and payments, ordinary course administrative and priority
tax claims, cure amounts related to assumed executory contracts, reclamation and
environmental obligations, Coal Act and Black Lung obligations, and employee and
retiree benefit obligations accrued in the ordinary course of business prior to
implementing relief under sections 1113 and 1114 of the Bankruptcy Code;

 

(p)           at 5:00 p.m. prevailing Central Time on January 13, 2016, unless
the Bankruptcy Court shall have entered the Confirmation Order in form and
substance acceptable to the Company and the Majority Holders; or

 

(q)           at 5:00 p.m. prevailing Central Time on February 3, 2016, unless
there shall have occurred a substantial consummation (as defined in section 1101
of the Bankruptcy Code) of the Plan.

 

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If the Company disputes, in writing, the occurrence of a Triggering Event within
one business day of receiving notice thereof (a “Triggering Event Dispute”) and
the Company and the Majority Holders are not able to resolve the Triggering
Event Dispute within one (1) business day thereafter, the Company may seek  an
expedited determination from the Bankruptcy Court regarding whether a Triggering
Event has occurred; provided that if no determination by the Bankruptcy Court
occurs within five (5) business days from the date on which the Majority Holders
provide written notice to the Company in accordance with Section 13 hereof that
a Triggering Event has occurred, then the Triggering Event shall have occurred
for purposes of this Agreement and there shall be no Triggering Event Dispute. 
In any hearing regarding a Triggering Event Dispute, the only issue that may be
raised by the Company, the Majority Holders or any other party shall be whether,
in fact, a Triggering Event has occurred.

 

6.             Termination of Obligations.  Following written notice to the
Company or the Holder Parties, as applicable, in accordance with Section 13
hereof, this Agreement may be terminated as follows and, except as otherwise
provided herein, all obligations of the Parties shall immediately terminate and
be of no further force and effect upon such termination (each such termination
event, a “Support Termination Event”):

 

(a)           by the mutual written consent of the Company and the Majority
Holders;

 

(b)           by the Majority Holders upon (x) a breach (other than an
immaterial breach) by the Company of any of the undertakings, representations,
warranties or covenants of the Company set forth in this Agreement, including
the Company’s obligations under Section 4, or (y) the failure by the Company to
act in a manner materially consistent with this Agreement, which breach or
failure to act remains uncured for a period of three (3) business days after the
receipt of written notice in accordance with Section 13 hereof of such breach
from the Majority Holders;

 

(c)           by the Company upon a breach (other than an immaterial breach) by
the Holder Parties of any of the undertakings, representations, warranties or
covenants of the Holder Parties set forth in this Agreement, which breach
remains uncured for a period of three (3) business days after the receipt of
written notice in accordance with Section 13 hereof of such breach from the
Company;

 

(d)           (i) by the Majority Holders, in the event a Fiduciary Action
occurs (whether or not notice of such is provided) or (ii) by the Company, if
the Company so elects, in connection with a Fiduciary Action upon two
(2) business days prior written notice to the Majority Holders in accordance
with Section 13 hereof ;

 

(e)           by the Majority Holders upon the occurrence of any of the
following events, unless such event is waived or the applicable deadline is
extended by the Majority Holders in writing (which waiver or extension may be
withheld, conditioned or delayed by the Majority Holders):

 

(i)            at 5:00 p.m. prevailing Central Time on July 15, 2015, unless the
Company shall have commenced the Chapter 11 Cases;

 

(ii)           on or prior to July 15, 2015 and concurrently with the filing of
the Chapter 11 Cases, unless the Company shall have filed a Cleansing Document
(as defined in the applicable confidentiality agreements by and between Walter
and certain of the Holder Parties), as required by such confidentiality
agreements;

 

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(iii)          at 5:00 p.m. prevailing Central Time on September 9, 2015, unless
the Company shall have filed with the Bankruptcy Court the Sale Motion;

 

(iv)          at 5:00 p.m. prevailing Central Time on September 30, 2015, unless
the Bankruptcy Court shall have entered the Bidding Procedures Order in form and
substance acceptable to the Company and the Majority Holders;

 

(v)           at 5:00 p.m. prevailing Central Time on February 3, 2016, unless
the Bankruptcy Court shall have entered a Confirmation Order in form and
substance acceptable to the Company and the Majority Holders that has become a
Final Order; provided that the foregoing shall not constitute a “Support
Termination Event” if prior to such time the Bankruptcy Court shall have entered
the Sale Order in form and substance acceptable to the Company and the Majority
Holders, which Sale Order provides that the successor clause contained in the
Collective Bargaining Agreements between the Company and the UMWA is not
enforceable against the purchaser of assets pursuant to the 363 Sale (or the
Bankruptcy Court otherwise grants relief to the Company under section 1113 of
the Bankruptcy Code and the Company implements such relief which eliminates the
successor clause contained in the Collective Bargaining Agreements between the
Company and the UMWA). “Final Order” means an order or judgment of the
Bankruptcy Court (or any other court of competent jurisdiction) entered by the
Clerk of the Bankruptcy Court (or such other court) on the docket in the Chapter
11 Cases (or the docket of such other court), which has not been modified,
amended, reversed, vacated or stayed and as to which (A) the time to appeal,
petition for certiorari, or move for a new trial, stay, reargument or rehearing
has expired and as to which no appeal, petition for certiorari or motion for new
trial, stay, reargument or rehearing shall then be pending or (B) if an appeal,
writ of certiorari, new trial, stay, reargument or rehearing thereof has been
sought, such order or judgment of the Bankruptcy Court (or other court of
competent jurisdiction) shall have been affirmed by the highest court to which
such order was appealed, or certiorari shall have been denied, or a new trial,
stay, reargument or rehearing shall have been denied or resulted in no
modification of such order, and the time to take any further appeal, petition
for certiorari or move for a new trial, stay, reargument or rehearing shall have
expired, as a result of which such order shall have become final in accordance
with Rule 8002 of the Federal Rules of Bankruptcy Procedure; provided that the
possibility that a motion under Rule 60 of the Federal Rules of Civil Procedure,
or any analogous rule under the Federal Rules of Bankruptcy Procedure, may be
filed relating to such order, shall not cause an order not to be a Final Order;

 

(vi)          at 5:00 p.m. prevailing Central Time on February 3, 2016, unless
(A) there shall have occurred a substantial consummation (as defined in section
1101 of the Bankruptcy Code) of the Plan or (B) a consummation of the 363 Sale;

 

(vii)         if the Company fails to obtain entry of the Interim Cash
Collateral Order and the Final Cash Collateral Order within 5 and 45 calendar
days, respectively, after the Petition Date, which Cash Collateral Orders, for
the avoidance of doubt, shall be in form and substance acceptable to the Company
and the Majority Holders, and shall provide as adequate protection, among other
things, cash interest payments to Holder Parties on account of First Lien Claims
in an amount equal to 80% of the contractual non-default rate on the First Lien
Claims and payment of fees and expenses of the Holder Parties’ Advisors and
certain other parties in accordance with the terms of the Cash Collateral
Orders;

 

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(viii)        if the Company fails to obtain entry of an RSA Order within 60
days after the Petition Date, which order shall include a waiver or modification
of the automatic stay to provide any notices contemplated by and in accordance
with this Agreement;

 

(ix)          upon the filing by the Company of any motion or other request for
relief seeking to (A) dismiss any of the Chapter 11 Cases, (B) convert any of
the Chapter 11 Cases to a case under chapter 7 of the Bankruptcy Code other than
as contemplated by the Restructuring, or (C) appoint a trustee or an examiner
pursuant to section 1104 of the Bankruptcy Code in any of the Chapter 11 Cases;

 

(x)           upon the entry of an order by the Bankruptcy Court (A) dismissing
any of the Chapter 11 Cases, (B) converting any of the Chapter 11 Cases to a
case under chapter 7 of the Bankruptcy Code other than as contemplated by the
Restructuring, (C) appointing a trustee or an examiner pursuant to section 1104
of the Bankruptcy Code in any of the Chapter 11 Cases, (D) terminating
exclusivity under section 1121 of the Bankruptcy Code, (E) making a finding of
fraud, dishonesty or misconduct by any executive, officer or director of the
Company, regarding or relating to the Company, or (F) vacating, amending,
terminating, extending or modifying the Cash Collateral Orders without the
consent of the Majority Holders;

 

(xi)          upon the Company’s withdrawal, waiver, amendment or modification,
or the filing of (or announced intention to file) a pleading seeking to
withdraw, waive, amend or modify, any term or condition of any of the
Restructuring Documents or any documents related thereto, including motions,
notices, exhibits, appendices and orders, in a manner not acceptable in form and
substance to the Majority Holders;

 

(xii)         the Company files, proposes or otherwise supports any plan of
liquidation, asset sale of all or substantially all of the Company’s assets or
plan of reorganization other than the Restructuring;

 

(xiii)        an order is entered by the Bankruptcy Court granting relief from
the automatic stay to the holder or holders of any security interest to permit
foreclosure (or the granting of a deed in lieu of foreclosure on the same) on
any of the Company’s assets (other than in respect of insurance proceeds or with
respect to assets having a fair market value of less than $1,000,000 in the
aggregate);

 

(xiv)        the issuance by any governmental authority, including any
regulatory authority or court of competent jurisdiction (including the
Bankruptcy Court), of any ruling or order denying any requisite approval of,
delaying, impeding or enjoining the confirmation or consummation of the Plan,
the 363 Sale or any other aspect of the Restructuring;

 

(xv)         the Company experiences any circumstance, change, effect, event,
occurrence, state of facts or development, either alone or in combination that
has had, or is reasonably likely to have a material adverse effect on the
financial condition, business, assets, prospects or operations of the Company
taken as a whole;

 

(xvi)        a failure by the Company to pay the fees and expenses set forth in
Section 4(b) of this Agreement;

 

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(xvii)       the entry of an order by any court of competent jurisdiction
invalidating, disallowing, subordinating, or limiting, in any respect, as
applicable, the enforceability, priority, or validity of the claims and liens of
the First Lien Lenders under the First Lien Credit Facility or the claims and
liens of the First Lien Noteholders under the First Lien Indenture as stipulated
to by the Company in the Interim Cash Collateral Order, if such claims and liens
have a fair market value in excess of $1,000,000 in the aggregate, without the
written consent of the Majority Holders;

 

(xviii)      the entry of an order by any court of competent jurisdiction
granting the relief sought in an involuntary proceeding against the Company
seeking bankruptcy, winding up, dissolution, liquidation, administration,
moratorium, reorganization or other relief in respect of the Company or the
Company’s debts, or of a substantial part of the Company’s assets, under any
federal, state or foreign bankruptcy, insolvency, administrative, receivership
or similar law now or hereafter in effect (provided that such involuntary
proceeding is not dismissed within a period of thirty (30) days after the filing
thereof);

 

(xix)        except in each case with respect to the Restructuring, if the
Company (A) voluntarily commences any case or files any petition seeking
bankruptcy, winding up, dissolution, liquidation, administration, moratorium,
reorganization or other relief under any federal, state or foreign bankruptcy,
insolvency, administrative receivership or similar law now or hereafter in
effect, except as provided for in this Agreement, (B) consents to the
institution of, or fails to contest in a timely and appropriate manner, any
involuntary proceeding or petition described above, (C) applies for or consents
to the appointment of a receiver, administrator, administrative receiver,
trustee, custodian, sequestrator, conservator or similar official for the
Company or for a substantial part of the Company’s assets, (D) files an answer
admitting the material allegations of a petition filed against it in any such
proceeding, (E) makes a general assignment or arrangement for the benefit of
creditors or (F) takes any corporate action for the purpose of authorizing any
of the foregoing;

 

(xx)         a “Termination Event” under and as defined in the Cash Collateral
Orders has occurred;

 

(xxi)        unless otherwise agreed to in writing by the Majority Holders, the
Canadian Entities (A) incur any new secured debt or any unsecured debt outside
of the ordinary course of business (other than as it relates to the Permitted
Non-Debtor Affiliate Payments (as such term is defined in the Interim Cash
Collateral Order)) or (B) commence, or become subject to, any restructuring or
insolvency proceeding in any jurisdiction; or

 

(xxii)       unless otherwise agreed to in writing by the Majority Holders,
commencement of a sale process or other actions in furtherance of a disposition
of any material assets of the Canadian Entities.

 

Upon the termination of this Agreement pursuant to this Section 6, this
Agreement shall forthwith become void and of no further force or effect, each
Party shall be released from its commitments, undertakings and agreements under
or related to this Agreement, and there shall be no liability or obligation on
the part of any Party; provided, however, that in no event shall any such
termination relieve a Party from (i) liability for its breach or non-performance
of its obligations hereunder prior to the date of such termination,
notwithstanding any termination of

 

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this Agreement by any other Party, and (ii) obligations under this Agreement
which expressly survive any such termination pursuant to Section 16; provided
further, however, that notwithstanding anything to the contrary herein, (i) the
right to terminate this Agreement under this Section 6 shall not be available to
any Party whose failure to fulfill any material obligation under this Agreement
has been the cause of, or resulted in, the occurrence of a Support Termination
Event and (ii) any Support Termination Event may be waived only in accordance
with this Agreement and the procedures established by Section 9, in which case
the Support Termination Event so waived shall be deemed not to have occurred,
this Agreement shall be deemed to continue in full force and effect, and the
rights and obligations of the Parties shall be restored, subject to any
modification set forth in such waiver.  Upon termination of this Agreement, any
and all consents, agreements, undertakings, tenders, waivers, forbearances and
votes delivered by a Holder Party prior to such termination shall be deemed, for
all purposes, to be null and void ab initio and shall not be considered or
otherwise used in any manner by the Company or any other party.  For the
avoidance of doubt, the automatic stay arising pursuant to section 362 of the
Bankruptcy Code shall be deemed waived or modified for purposes of providing
notice or exercising rights hereunder.

 

7.             Good Faith Cooperation; Further Assurances. The Parties shall
cooperate with each other in good faith and shall coordinate their activities
(to the extent practicable) in respect of all matters concerning the
implementation and consummation of the Restructuring.  Further, each of the
Parties shall take such action (including executing and delivering any other
agreements and making and filing any required regulatory filings) as may be
reasonably necessary or as may be required by order of the Bankruptcy Court, to
carry out the purposes and intent of this Agreement (provided, that nothing set
forth in this Section 7 shall require any Holder Party to provide any
information that it determines, in its discretion, to be sensitive or
confidential or to take any actions other than in its capacity as a holder of
Participating Claims).  Each of the Parties hereby covenants and agrees (a) to
negotiate in good faith and in a timely manner (giving effect to the milestones
set forth in Section 5 and Section 6) the Restructuring Documents (including,
without limitation, the Plan and Disclosure Statement, both consistent with the
Restructuring Term Sheet) and (b) subject to the satisfaction of the terms and
conditions set forth herein, to execute the Restructuring Documents.

 

8.             Remedies.  All remedies that are available at law or in equity,
including specific performance and injunctive or other equitable relief, to any
Party for a breach of this Agreement by another Party shall be available to the
non-breaching Party (for the avoidance of doubt, if there is a breach of the
Agreement by a Holder Party, money damages shall be an insufficient remedy to
the other Holder Parties or the Company and either the Company or the Holder
Parties can seek specific performance as against another Holder Party);
provided, however, that in connection with any remedy asserted in connection
with this Agreement, each Party agrees to waive any requirement for the securing
or posting of a bond in connection with any remedy.  All rights, powers and
remedies provided under this Agreement or otherwise available in respect hereof
at law or in equity shall be cumulative and not alternative, and the exercise of
any right, power or remedy thereof by any Party shall not preclude the
simultaneous or later exercise of any other such right, power or remedy by such
Party or any other Party.

 

9.             Amendments and Waivers.  This Agreement may be amended or waived
only upon written approval of both (a) the Company and (b) the Majority Holders;
provided, however, that in no event shall this Agreement be so amended or waived
with respect to any Holder Party in any manner that would adversely affect such
Holder Party’s legal rights under this Agreement in a disproportionate or
discriminatory manner (as compared to all other Holder Parties), without such
Holder Party’s prior written consent; provided, further, however, that the date
set forth in Section 6(e)(vi) shall not be extended past March 31, 2016 without
the prior written consent of Holder Parties holding at least 66.66% in principal
amount of the First Lien Claims held by the Holder Parties, and shall not be
extended past

 

17

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June 30, 2016 without the prior written consent of each Holder Party; and
provided  further that amendments to the definition of “Majority Holders”,
including the provisos therein, or to this Section 9, shall require the written
consent of each Holder Party.  Any amendment or waiver of any condition, term or
provision to this Agreement must be in writing.  Any amendment or waiver made in
compliance with this Section 9 shall be binding on all of the Parties,
regardless of whether a particular Party has executed or consented to such
amendment or waiver.

 

10.          Independent Analysis.  Each of the Holder Parties and the Company
hereby confirms that it has made its own decision to execute this Agreement
based upon its own independent assessment of documents and information available
to it, as it has deemed appropriate.

 

11.          Representation by Counsel.  Each Party acknowledges that it has had
the opportunity to be represented by counsel in connection with this Agreement
and the transactions contemplated by this Agreement.  Accordingly, any rule of
law or any legal decision that would provide any Party with a defense to the
enforcement of the terms of this Agreement against such Party based upon lack of
legal counsel, shall have no application and is expressly waived.

 

12.          Governing Law.  This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of New York, without giving
effect to the principles of conflict of laws that would require the application
of the law of any other jurisdiction.  By its execution and delivery of this
Agreement, each of the Parties hereby irrevocably and unconditionally agrees for
itself that any legal action, suit or proceeding against it with respect to any
matter under or arising out of or in connection with this Agreement or for
recognition or enforcement of any judgment rendered in any such action, suit or
proceeding, may be brought in either a state or federal court of competent
jurisdiction in the State and County of New York. By execution and delivery of
this Agreement, each of the Parties hereby irrevocably accepts and submits
itself to the nonexclusive jurisdiction of each such court, generally and
unconditionally, with respect to any such action, suit or proceeding. 
Notwithstanding the foregoing consent to jurisdiction in either a state or
federal court of competent jurisdiction in the State and County of New York,
upon the commencement of the Chapter 11 Cases, each of the Parties hereby agrees
that, if the Chapter 11 Cases are pending, the Bankruptcy Court shall have
exclusive jurisdiction over all matters arising out of or in connection with
this Agreement.  EACH PARTY UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING REFERRED TO ABOVE.

 

13.          Notices.  All notices, requests, demands, document deliveries and
other communications under this Agreement shall be in writing and shall be
deemed to have been duly given, provided or made (a) when delivered personally,
(b) when sent by electronic mail (“e-mail”) or facsimile, (c) one (1) business
day after deposit with an overnight courier service or (d) three (3) business
days after mailed by certified or registered mail, return receipt requested,
with postage prepaid to the Parties at the following addresses, facsimile
numbers or e-mail addresses (or at such other addresses, facsimile numbers or
e-mail addresses for a Party as shall be specified by like notice):

 

18

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If to the Company:

 

Walter Energy, Inc.
3000 Riverchase Galleria, Suite 1700
Birmingham, Alabama  35244
Facsimile:  (205) 776-7859
Email:  earl.doppelt@walterenergy.com
Attention:  Earl H. Doppelt, Esq.

 

with a copy to (which shall not constitute notice):

 

Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York  10019
Facsimile: (212) 757-3990
Attention:  Kelley A. Cornish, Esq. (kcornish@paulweiss.com)

 

and

 

Paul, Weiss, Rifkind, Wharton & Garrison LLP
2001 K Street, NW
Washington, DC  20006-1047
Facsimile:  (202) 223-7420
Attention:  Claudia R. Tobler, Esq. (ctobler@paulweiss.com)

 

If to the Holder Parties:  To each Holder Party at the addresses, facsimile
numbers or e-mail addresses set forth below the Holder Party’s signature page to
this Agreement (or to the signature page to a Joiner in the case of any Holder
that becomes a party hereto after the Execution Date)

 

with a copy to (which shall not constitute notice):

 

Akin Gump Strauss Hauer & Feld LLP
One Bryant Park
New York, New York  10036
Facsimile:  (212) 872-1002
Attention:  Ira Dizengoff, Esq. (idizengoff@akingump.com)

 

and

 

Akin Gump Strauss Hauer & Feld LLP
1333 New Hampshire Avenue, N.W.
Washington, DC 20036
Facsimile:  (202) 887-4288
Attention:  James Savin, Esq. (jsavin@akingump.com)

 

14.          Reservation of Rights.  Except as expressly provided in this
Agreement, nothing herein is intended to, or does, in any manner waive, limit,
impair or restrict (a) the ability of each Party to protect and preserve its
rights, remedies and interests, including the First Lien Claims, Second Lien
Claims, Unsecured Claims and any other claims against the Company or other
parties, or its full participation in any bankruptcy proceeding, including the
rights of a Holder Party under any applicable bankruptcy,

 

19

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insolvency, foreclosure or similar proceeding, in each case, so long as the
exercise of any such right does not breach such Holder Party’s obligations
hereunder; (b) the ability of a Holder Party to purchase, sell or enter into any
transactions in connection with the Participating Claims, subject to the terms
hereof; (c) any right of any Holder Party (i) under the Debt Documents, or which
constitutes a waiver or amendment of any provision of any Debt Document or
(ii) under any other applicable agreement, instrument or document that gives
rise to a Holder Party’s Participating Claims, or which constitutes a waiver or
amendment of any provision of any such agreement, instrument or document,
subject to the terms of Section 3(a) hereof; (d) the ability of a Holder Party
to consult with its advisors (including the Holder Parties’ Advisors), other
Holder Parties or the Company; or (e) the ability of a Holder Party to enforce
any right, remedy, condition, consent or approval requirement under this
Agreement or any of the Restructuring Documents.  Without limiting the foregoing
sentence in any way, after the termination of this Agreement pursuant to
Section 6, the Parties each fully reserve any and all of their respective
rights, remedies, claims and interests, subject to Section 6, in the case of any
claim for breach of this Agreement.  Further, nothing in this Agreement shall be
construed to prohibit any Party from appearing as a party-in-interest in any
matter to be adjudicated in the Chapter 11 Cases, so long as such appearance and
the positions advocated in connection therewith are consistent with this
Agreement and the Restructuring Documents and are not for the purpose of, and
could not reasonably be expected to have the effect of, hindering, delaying or
preventing the consummation of the Restructuring.

 

15.          Rule of Interpretation.  Notwithstanding anything contained herein
to the contrary, it is the intent of the Parties that all references to votes or
voting in this Agreement be interpreted to include votes or voting on a plan of
reorganization under the Bankruptcy Code.  Time is of the essence in the
performance of the obligations of each of the Parties.  The words “hereof,”
“herein” and “hereunder” and words of like import used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement.  References to any Articles, Sections, Exhibits and Schedules are to
such Articles, Sections, Exhibits and Schedules of this Agreement unless
otherwise specified. All Exhibits and Schedules annexed hereto or referred to
herein (including any exhibits, schedules or attachments thereto) are hereby
incorporated in and made a part of this Agreement as if set forth in full
herein.  Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular.  Whenever the words “include,”
“includes” or “including” are used in this Agreement, they shall be deemed to be
followed by the words “without limitation,” whether or not they are in fact
followed by those words or words of like import.  “Writing,” “written” and
comparable terms refer to printing, typing and other means of reproducing words
(including electronic media) in a visible form.  Any reference to “business day”
means any day, other than a Saturday, a Sunday or any other day on which banks
located in New York, New York are closed for business as a result of federal,
state or local holiday and any other reference to day means a calendar day.

 

16.          Survival.  Notwithstanding (a) any sale of the Participating Claims
in accordance with Section 3 or (b) the termination of this Agreement in
accordance with its terms, the agreements and obligations of the Parties in
Sections 4(b), 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23(a), 24, and 25
shall survive such sale and/or termination and shall continue in full force and
effect for the benefit of the Parties in accordance with the terms hereof;
provided however that the Company’s obligation to pay fees and expenses as set
forth in Section 4(b) shall survive only with respect to those documented fees
and expenses incurred through and including the date this Agreement is
terminated.

 

17.          Successors and Assigns; Severability; Several Obligations.  Subject
to Section 3, this Agreement is intended to bind and inure to the benefit of the
Parties and their respective permitted successors, assigns, heirs, executors,
estates, administrators and representatives.  The invalidity or unenforceability
at any time of any provision hereof in any jurisdiction shall not affect or
diminish in any way the continuing validity and enforceability of the remaining
provisions hereof or the continuing validity and enforceability of such
provision in any other jurisdiction.  The agreements, representations

 

20

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and obligations of the Holder Parties under this Agreement are, in all respects,
several and not joint and several.

 

18.          Third-Party Beneficiaries.  This Agreement is intended for the
benefit of the Parties and no other person or entity shall be a third party
beneficiary hereof or have any rights hereunder.

 

19.          Counterparts; Additional Holder Parties.  This Agreement may be
executed in several counterparts, each of which shall be deemed to be an
original, and all of which together shall be deemed to be one and the same
agreement.  Execution copies of this Agreement may be delivered by facsimile,
electronic mail or otherwise, each of which shall be deemed to be an original
for the purposes of this paragraph.  Any holder of First Lien Claims that is not
already an existing Holder Party may execute the Joinder and, in doing so, shall
become a Joining Party and shall thereafter be deemed to be a “Holder Party” and
a party for all purposes under this Agreement.

 

20.          Entire Agreement.  This Agreement and the Exhibits and Schedules
attached hereto, constitutes the entire agreement of the Parties with respect to
the subject matter hereof and supersedes all prior agreements (oral and written)
and all other prior negotiations between and among the Company and the Holder
Parties (and their respective advisors) with respect to the subject matter
hereof; provided, however, that the Parties acknowledge and agree that any
confidentiality agreements heretofore executed between the Company and any
Holder Party shall continue in full force and effect as provided therein.

 

21.          Headings.  The section headings of this Agreement are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Agreement and shall not affect the interpretation of this Agreement.

 

22.          Settlement Discussions.  This Agreement is part of a proposed
settlement of matters that could otherwise be the subject of litigation among
the Parties.  Nothing herein shall be deemed an admission of any kind.  Pursuant
to Federal Rule of Evidence 408, any applicable state rules of evidence and any
other applicable law, foreign or domestic, this Agreement and all negotiations
relating thereto shall not be admissible into evidence in any proceeding other
than to prove the existence of this Agreement or in a proceeding to enforce the
terms of this Agreement.

 

23.          Publicity.

 

(a)           The Company shall not (i) use the name of any Holder Party in any
communication (including a press release, pleading or other publicly available
document) (other than a communication with the legal, accounting, financial and
other advisors to the Company who are under obligations of confidentiality to
the Company with respect to such communication, and whose compliance with such
obligations the Company shall be responsible for) without such Holder Party’s
prior written consent or (ii) disclose to any person, other than legal,
accounting, financial and other advisors to the Company (who are under
obligations of confidentiality to the Company with respect to such disclosure,
and whose compliance with such obligations the Company shall be responsible
for), the principal amount or percentage of the Participating Claims held by any
Holder Party or any of its respective subsidiaries; provided, however, that the
Company shall be permitted to disclose at any time the aggregate principal
amount of, and aggregate percentage of, First Lien Claims, Second Lien Claims
and Unsecured Claims of the Participating Claims held by the Holder Parties as a
group.  Notwithstanding the foregoing, the Holder Parties hereby consent to the
disclosure by the Company in the Restructuring Documents or as otherwise
required by law or regulation, of the execution, terms and contents of this
Agreement, provided, however, that (i) if the Company determines that it is
required to attach a copy of this Agreement to any Restructuring Document or any
other filing or similar document relating to the transactions contemplated
hereby, it will redact any reference to a specific Holder Party and such Holder
Party’s holdings and (ii) if

 

21

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disclosure is required by applicable law, advance notice of the intent to
disclose shall be given by the disclosing Party to each Holder Party (who shall
have the right to seek a protective order prior to disclosure), it being agreed
that there is no requirement to include such information in any filing with the
Securities and Exchange Commission or any Canadian Securities Administrator.

 

(b)           Notwithstanding the foregoing, the Company will submit to Akin
Gump all press releases, public filings, public announcements or other
communications with any news media, in each case, to be made by the Company
relating to this Agreement or the transactions contemplated hereby and any
amendments thereof , and will take Akin Gump’s view with respect to such
communications into account.  The Company will submit to Akin Gump and Lazard in
advance all material mass written communications with customers, vendors and
employees (including representatives of employees) relating to the transactions
contemplated by this Agreement, and will take Akin Gump’s and Lazard’s views
with respect to such communications into account.  Nothing contained herein
shall be deemed to waive, amend or modify the terms of any confidentiality or
non-disclosure agreement between the Company and any Holder Party, including the
confidentiality and non-disclosure provisions contained in the Debt Documents.

 

24.          Fiduciary Duties; Relationship Among Holder Parties and the
Company.  Notwithstanding anything to the contrary herein, the duties and
obligations of the Holder Parties under this Agreement shall be several, not
joint.  Furthermore, nothing in this Agreement shall require the Company to take
any action, or to refrain from taking any action, to the extent that taking such
action or refraining from taking such action will, upon the advice of outside
counsel, constitute a breach of the Company’s board of directors’ fiduciary
obligations under applicable law (any such action, or refraining from action,
being a “Fiduciary Action”); provided, however, that (i) to the extent that
taking such action or refraining from taking such action absent this Section 24
could, or would be reasonably expected to, result in a breach of this Agreement,
the Company shall use commercially reasonable efforts to give the Holder Parties
not less than three (3) business days prior written notice of, and in any event
written notice contemporaneously with, in accordance with Section 13 hereof such
anticipated action or anticipated refraining from taking such action, (ii) the
Majority Holders may terminate this Agreement in accordance with Section 6(d),
and (iii) specific performance shall not be available as a remedy if this
Agreement is terminated in accordance with this Section 24.  None of the Holder
Parties shall have any fiduciary duty, any duty of trust or confidence in any
form, or other duties or responsibilities to each other, any First Lien Lender,
any First Lien Noteholder, the Company, or any of the Company’s creditors or
other stakeholders, including without limitation any holders of Second Lien
Claims or Unsecured Claims, and there are no commitments among or between the
Holder Parties.  It is understood and agreed that any Holder Party may trade in
any debt or equity securities of the Company without the consent of the Company
or any other Holder Party, subject to applicable securities laws and
Section 3(d) of this Agreement.  No prior history, pattern or practice of
sharing confidences among or between any of the Holder Parties and/or the
Company shall in any way affect or negate this understanding and agreement.

 

25.          No Solicitation.  This Agreement and transactions contemplated
herein are the product of negotiations among the Parties, together with their
respective representatives.  Notwithstanding anything herein to the contrary,
this Agreement is not, and shall not be deemed to be, a solicitation of votes
for the acceptance of the Plan or any plan of reorganization for the purposes of
sections 1125 and 1126 of the Bankruptcy Code or otherwise.  The Company will
not solicit acceptances of the Plan from any party until such party has been
provided with copies of a Disclosure Statement containing adequate information
as required by section 1125 of the Bankruptcy Code.

 

22

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26.          Conflicts Between this Agreement, the Restructuring Term Sheet, the
Sale Term Sheet and the Related Restructuring Documents.  In the event the terms
and conditions as set forth in the Restructuring Term Sheet or the Sale Term
Sheet and this Agreement are inconsistent, this Agreement shall control.  In the
event of any conflict among the terms and provisions of (a) the Plan, this
Agreement and/or the Restructuring Term Sheet, the terms and provisions of the
Plan shall control and (b) the Stalking Horse APA, this Agreement and/or the
Sale Term Sheet, the terms and provisions of the Stalking Horse APA shall
control.  Notwithstanding the foregoing, nothing contained in this Section 26
shall affect, in any way, the requirements set forth herein for the amendment of
this Agreement.

 

[Remainder of page intentionally left blank]

 

23

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their respective duly authorized officers, solely in their
respective capacity as officers of the undersigned and not in any other
capacity, as of the date first set forth above.

 

 

THE COMPANY:

 

 

 

WALTER ENERGY, INC.,

 

on behalf of itself and each of its direct and indirect subsidiaries set forth
on Exhibit A hereto

 

 

 

 

By:

/s/ Earl H. Doppelt

 

Name:

Earl H. Doppelt

 

Its:

Executive Vice President

 

 

General Counsel & Secretary

 

Signature Page to Restructuring Support Agreement

 

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EXHIBIT A

 

SUBSIDIARIES

 

Atlantic Development and Capital LLC

Atlantic Leaseco LLC

Blue Creek Coal Sales, Inc.

Blue Creek Energy, Inc.

J.W. Walter, Inc.

Jefferson Warrior Railroad Company, Inc.

Jim Walter Homes, LLC

Jim Walter Resources, Inc.

Maple Coal Co. LLC

Sloss-Sheffield Steel & Iron Company

SP Machine, Inc.

Taft Coal Sales & Associates, Inc.

Tuscaloosa Resources, Inc.

V Manufacturing Company

Walter Black Warrior Basin LLC

Walter Coke, Inc.

Walter Energy Holdings, LLC

Walter Exploration & Production LLC

Walter Home Improvement, Inc.

Walter Land Company

Walter Minerals, Inc.

Walter Natural Gas, LLC

 

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EXHIBIT B

 

RESTRUCTURING TERM SHEET

 

THIS TERM SHEET (THE “TERM SHEET”) IS FOR DISCUSSION PURPOSES ONLY AND IS NOT A
SOLICITATION OF ACCEPTANCES OR REJECTIONS WITH RESPECT TO A CHAPTER 11 PLAN OF
REORGANIZATION.  IT DOES NOT CONTAIN ALL OF THE TERMS OF A PROPOSED PLAN OF
REORGANIZATION.  THIS TERM SHEET SHALL NOT BE CONSTRUED AS (I) AN OFFER CAPABLE
OF ACCEPTANCE, (II) A BINDING AGREEMENT OF ANY KIND, (III) A COMMITMENT TO ENTER
INTO, OR OFFER TO ENTER INTO, ANY AGREEMENT OR (IV) AN AGREEMENT TO FILE ANY
CHAPTER 11 PLAN OF REORGANIZATION OR DISCLOSURE STATEMENT OR CONSUMMATE ANY
TRANSACTION OR TO VOTE FOR OR OTHERWISE SUPPORT ANY PLAN OF REORGANIZATION. 
THIS TERM SHEET IS A SETTLEMENT AND DOES NOT REFLECT THE VIEWS OF ANY PARTY AS
TO THE VALUATION OF THE DEBTORS OR OF THE COMPANY.

 

Does Not Contain All Material Terms

 

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

 

Walter Energy, Inc. et al.

Plan Term Sheet

 

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

 

July 15, 2015

 

This Term Sheet sets forth the principal terms of a proposed pre-negotiated
jointly administered chapter 11 plan (such plan, together with any exhibits,
schedules, attachments or appendices thereto, in each case as may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms of the Restructuring Support Agreement (as defined below), the “Plan”) of
Walter Energy, Inc. and certain of its subsidiaries, which is to be filed in
chapter 11 cases commenced in the United States Bankruptcy Court for the
Northern District of Alabama (the “Bankruptcy Court”).  This Term Sheet and the
Plan are components of a potential restructuring transaction described in a
restructuring support agreement (the “Restructuring Support Agreement”) entered
into by and among the Company and certain existing lenders or holders of
securities that are signatories thereto.  This Term Sheet shall be attached to,
and incorporated into, such Restructuring Support Agreement.  This Term Sheet is
neither a complete list of all the terms and conditions of the restructuring
transaction contemplated in the Restructuring Support Agreement, and shall not
constitute an offer to sell or buy, nor the solicitation of an offer to sell or
buy any of the securities referred to herein or the solicitation of acceptances
of a chapter 11 plan.  Any such offer or solicitation shall only be made in
compliance with all applicable laws.  Without limiting the generality of the
foregoing, this Term Sheet and the undertakings contemplated herein are subject
in all respects to the negotiation, execution and delivery of mutually
acceptable definitive documentation consistent herewith.  In the event of an
inconsistency between this Term Sheet and the definitive documentation, the
provisions of such definitive documentation shall govern.  This Term Sheet is
proffered in the nature of a settlement proposal in furtherance of settlement
discussions and is entitled to protection from any use or disclosure to any
party or person pursuant to Federal Rule of Evidence 408 and other rules of
similar import.

 

THIS TERM SHEET IS BEING PROVIDED AS PART OF A PROPOSED COMPREHENSIVE
RESTRUCTURING TRANSACTION, EACH ELEMENT OF WHICH IS

 

1

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CONSIDERATION FOR THE OTHER ELEMENTS AND AN INTEGRAL ASPECT OF THE PROPOSED
RESTRUCTURING.  THE STATEMENTS CONTAINED HEREIN ARE PROTCTED BY FRE 408, AND
NOTHING IN THIS TERM SHEET SHALL CONSTITUTE OR BE CONSTRUED AS AN ADMISSION OF
ANY FACT OR LIABILITY, A STIPULATION OR A WAIVER, AND EACH STATEMENT CONTAINED
HEREIN IS MADE WITHOUT PREJUDICE, WITH A FULL RESERVATION OF ALL RIGHTS,
REMEDIES, CLAIMS AND DEFENSES OF THE COMPANY AND CONSENTING FIRST LIEN
CREDITORS.

 

TERMS AND CONDITIONS OF THE PLAN

 

Defined Terms and Capital Structure

 

 

 

The Company and Filing Entities

 

Walter Energy, Inc. (“Walter Energy”), a Delaware company, and certain of its
wholly owned direct and indirect subsidiaries (collectively, the “Company”).

 

Walter Energy and its subsidiaries who file for relief under chapter 11 of
title 11 of the United States Code (the “Bankruptcy Code”) with the Bankruptcy
Court (such filings, the “Chapter 11 Cases”) are referred to herein as the
“Debtors.” The date on which the Chapter 11 Cases are commenced shall be the
“Petition Date.”

 

After the Effective Date (as defined below), Walter Energy shall be referred to
herein as “Reorganized Walter Energy” and the surviving Debtors that are
reorganized under the Plan shall be collectively referred to as the “Reorganized
Debtors.”

 

“Non-Debtor Subsidiary” means any direct or indirect wholly owned subsidiary of
Walter Energy or other interests owned by a Debtor that is not a Debtor in the
Chapter 11 Cases, including (a) Walter Energy’s non-U.S. subsidiaries; (b) Black
Warrior Methane Corp. and Black Warrior Transmission Corp.; and (c) Cardem
Insurance Co., Ltd.

 

Exhibit A identifies the Debtors and Non-Debtor Subsidiaries.

 

 

 

Current Capital Structure

 

The indebtedness of, and equity interests in, the Debtors are as follows:

 

(a)         Indebtedness under that certain senior secured first lien Credit
Agreement dated as of April 1, 2011 (as further amended, restated, amended and
restated, supplemented or otherwise modified from time to time, the “First Lien
Credit Agreement”) by and among Walter Energy, as U.S. borrower, Western Coal
Corp. and Walter Energy Canada Holdings, Inc., as Canadian borrowers, the
lenders from time to time parties thereto, and Morgan Stanley Senior
Funding, Inc. as administrative agent (in such capacity, the “Bank Agent”),
which provides for the

 

 

2

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issuance of:

 

(i)                                     revolving loan indebtedness (the
“Revolving Loans,” the claims related thereto, including any adequate protection
claims arising under the cash collateral orders entered by the Bankruptcy Court
(the “Cash Collateral Orders”), the “Revolving Loan Claims” and the lenders with
a commitment to provide Revolving Loans or with outstanding Revolving Loans, the
“Revolving Lenders”); and

 

(ii)           term loan indebtedness (the “First Lien Term Loan” and the claims
related thereto, including any adequate protection claims arising under the Cash
Collateral Orders, the “First Lien Term Loan Claims” and the lenders with
outstanding First Lien Term Loan, the “First Lien Term Loan Lenders”).

 

(b)         9.50% Senior Secured Notes due 2019 (the “First Lien Notes” and the
claims related thereto, including any adequate protection claims arising under
the Cash Collateral Orders, the “First Lien Note Claims” and the holders
thereof, the “First Lien Noteholders”) issued on September 27, 2013, March 27,
2014, and July 14, 2014, under that certain Indenture dated as of September 27,
2013 (as further amended, supplemented or otherwise modified from time to time,
the “First Lien Notes Indenture”) by and among Walter Energy, as issuer, the
guarantors from time to time parties thereto, and Wilmington Trust, National
Association, as successor trustee and collateral agent to Union Bank, N.A. (in
such capacity, the “First Lien Notes Indenture Trustee”).

 

(c)          11.0%/12.0% Senior Secured Second Lien PIK Toggle Notes due 2020
(the “Second Lien Notes” and the claims related thereto, including any adequate
protection Claims arising under the Cash Collateral Orders, the “Second Lien
Note Claims” and the holders thereof, the “Second Lien Noteholders”) issued
under the Indenture dated as of March 27, 2014 (as further amended, supplemented
or otherwise modified from time to time, the “Second Lien Notes Indenture”)
among Walter Energy, as issuer, the guarantors from time to time parties
thereto, and Wilmington Trust, National Association, as trustee and collateral
agent (in such capacity, the “Second Lien Notes Indenture Trustee”).

 

(d)         9.875% Senior Notes due 2020 (the “9.875% Unsecured Notes” and the
claims related thereto, the “9.875% Unsecured Notes Claims” and the holders

 

 

3

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thereof, the “9.875% Unsecured Noteholders”) issued under the Indenture dated as
of November 21, 2012 (as further amended, supplemented or otherwise modified
from time to time, the “9.875% Notes Indenture”) among Walter Energy, as issuer,
the guarantors from time to time parties thereto, and Wilmington Trust, National
Association, as successor trustee to Union Bank, N.A.

 

(e)          8.50% Senior Notes due 2021 (the “8.50% Unsecured Notes” and the
claims related thereto, the “8.50% Unsecured Notes Claims” and the holders
thereof, the “8.50% Unsecured Noteholders”) issued under the Indenture dated as
of March 27, 2013 (as further amended, supplemented or otherwise modified from
time to time, the “8.50% Notes Indenture”) among Walter Energy, as issuer, the
guarantors from time to time parties thereto, and Wilmington Trust, National
Association, as successor trustee to Union Bank, N.A.

 

(f)           The common stock and any other Interest (as defined below) of any
kind in Walter Energy and rights or options to acquire such Interests owned by
existing holders (the “Old Common Stock” and related claims, including any claim
arising from rescission of a purchase or sale of a security of or Interest in
Walter Energy (including Old Common Stock), for damages arising from the
purchase or sale of such a security or Interest, or for reimbursement,
contribution or indemnification allowed under section 502 of the Bankruptcy Code
on account of such a claim, and any other claim subject to subordination under
section 510(b) of the Bankruptcy Code, the “Old Common Stock Claims).

 

(g)          “Interest” means all rights (including unpaid dividends) arising
from any equity security within the meaning of section 101(16) of the Bankruptcy
Code or any other instrument evidencing an ownership interest in any of the
Debtors or Non-Debtor Subsidiaries, whether or not transferable, and any option,
warrant, or right, contractual or otherwise, to acquire, sell or subscribe for
any such interest.

 

The Revolving Loan Claims, First Lien Term Loan Claims and First Lien Note
Claims shall be referred to herein, collectively, as the “First Lien Debt
Claims.”

 

The First Lien Debt Claims and the Second Lien Note Claims shall be referred to
herein, collectively, as the “Secured Debt Claims.”

 

The 9.875% Unsecured Note Claims and the 8.50% Unsecured Note Claims shall be
referred to herein, collectively, as the

 

4

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“Unsecured Note Claims.”

 

 

 

Consenting First Lien Creditors

 

“Consenting Revolving Lenders” means those Revolving Lenders that are
signatories to the Restructuring Support Agreement, in their capacities as such.

 

“Consenting First Lien Term Loan Lenders” means those First Lien Term Loan
Lenders that are signatories to the Restructuring Support Agreement, in their
capacities as such.

 

“Consenting First Lien Noteholders” means those holders of First Lien Notes that
are signatories to the Restructuring Support Agreement, in their capacities as
such.

 

“Consenting First Lien Creditors” means, collectively, the Consenting Revolving
Lenders, the Consenting First Lien Term Loan Lenders and the Consenting First
Lien Noteholders.

 

 

 

Required Consenting First Lien Creditors

 

“Required Consenting First Lien Creditors” means Consenting First Lien Creditors
holding 55% or more in principal amount of the First Lien Debt Claims held by
the Consenting First Lien Creditors as of the time of such determination;
provided that such Consenting First Lien Creditors holding 55% or more in
principal amount include at least four (4) unaffiliated Consenting First Lien
Creditors and provided further that with respect to any of (X) approval of any
provisions of the Restructuring Documents (as defined in the Restructuring
Support Agreement) dealing with the corporate governance of the Company from and
after the effective date of the Plan or of documents relating to the corporate
governance of the purchaser from and after the consummation of the 363 Sale (as
defined in the Restructuring Support Agreement), including but not limited to
board composition, affiliate and/or related party transaction
limitations/protections, voting rights, pre-emptive rights, tag-along/drag-along
rights and transfer restrictions or (Y) any financing(s) or funding(s) (whether
debt or equity) obtained or arranged for (in whole or in part) by the Company in
the form of debtor-in-possession or similar financing(s), or by the reorganized
Company or purchaser in the 363 Sale prior to, upon or in connection with the
closing of a Restructuring (as defined in the Restructuring Support Agreement),
then in any case of (X) or (Y) the Required Consenting First Lien Creditors
shall include 55% or more in principal amount of the First Lien Debt Claims held
by the Consenting First Lien Creditors as of the time of such determination and
at least four (4) unaffiliated Consenting First Lien Creditors (which must also
include at least three (3) unaffiliated Consenting First Lien Creditors who are
Initial Holders (as defined in the Restructuring Support Agreement).

 

 

 

Effective Date

 

“Effective Date,” if any, of the Plan in the Chapter 11 Cases shall be the date
on which all the conditions to consummation of the Plan have been satisfied in
full or waived, and the Plan becomes effective. On the Effective Date, all
Debtors shall be reorganized

 

5

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pursuant to the Plan in accordance with and pursuant to the Bankruptcy Code.

 

 

 

Treatment of Claims and Interests

 

 

 

Unclassified Claims; Priority Tax Claims

 

(a)         Administrative Claims: Except with respect to administrative expense
claims that are professional fee claims or priority tax claims, and except to
the extent that a holder of an allowed administrative expense claim (including a
claim arising under section 503(b)(9) of the Bankruptcy Code that has not been
paid pursuant to a motion filed with the Bankruptcy Code) and the Debtors agree
to a less favorable treatment, each holder of an allowed administrative expense
claim shall be paid in full in cash on the later of the initial distribution
date under the Plan or the date such administrative expense claim is allowed,
and the date such allowed administrative claim becomes due and payable, or as
soon thereafter as is practicable; provided, however, that allowed
administrative expense claims that arise in the ordinary course of the Debtors’
business, including administrative claims arising from or with respect to the
sale of goods or services on or after the Petition Date, the Debtors’ executory
contracts and unexpired leases, and all administrative claims that are
Intercompany Claims (as defined below), shall be paid in the ordinary course of
business in accordance with the terms and subject to the conditions of any
agreements governing, instruments evidencing, or other documents relating to,
such transactions, without further action by the holders of such administrative
claims or further approval by the Bankruptcy Court.

 

(b)         Professional Fee Claims. All final requests for payment of
professional claims and requests for reimbursement of expenses of members of any
statutory committee must be filed no later than sixty (60) days after the
Effective Date. After notice and a hearing in accordance with the procedures
established by the Bankruptcy Code and prior orders of the Bankruptcy Court, the
allowed amounts of such professional claims and expenses shall be determined by
the Bankruptcy Court.

 

(c)          Priority Tax Claims. Except to the extent that a holder of an
allowed priority tax claim and the Debtors agree to a less favorable treatment,
each holder of an allowed priority tax claim shall receive, at the sole option
of the Reorganized Debtors either (i) cash in an amount equal to such allowed
priority tax claim on the later of the initial distribution date and the date
such claim becomes an allowed claim (or as soon thereafter as practical),
(ii) through equal annual installment payments in cash, of a total value, as of
the

 

6

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Effective Date, equal to the allowed amount of such claim, over a period ending
not later than five (5) years after the Petition Date, or (iii) treatment in a
manner not less favorable than the most favored non-priority unsecured claim
provided for by the Plan.

 

 

 

Revolving Loan Claims

 

Holders of Revolving Loan Claims, other than Revolving Loan Claims for unfunded
commitments relating to outstanding letters of credit that have not been drawn
as of the Effective Date, shall receive on the Effective Date in full and final
satisfaction of the Revolving Loan Claims their pro rata share of the new common
stock of reorganized Walter Energy (the “New Walter Energy Common Stock”) to be
distributed to holders of First Lien Debt Claims (the “First Lien Stock
Distribution”), which First Lien Stock Distribution shall constitute [   %] of
the Walter Energy Common Stock, subject to dilution resulting from additional
New Walter Energy Common Stock issued pursuant to the Management Incentive Plan
(as defined below). Holders of Revolving Loan Claims for unfunded commitments
relating to outstanding letters of credit that have not been drawn as of the
Effective Date shall have their Revolving Loan Claims either (x) reinstated in
their face amount as part of a letter of credit facility under the Exit
Financing, and the Revolving Loan Claim commitments related thereto shall be
canceled on the Effective Date, or (y) have the outstanding letters of credit
under the Revolving Loans as of the Effective Date replaced by letters of credit
issued under the Exit Financing or issued by a bank that is not part of the Exit
Financing by providing cash collateral to such bank from the Exit Financing and
the letters of credit issued under the First Lien Credit Agreement shall be
canceled.

 

 

 

First Lien Debt Claims (Other than Revolving Loan Claims)

 

Holders of First Lien Debt Claims (other than Revolving Loan Claims) shall
receive on the Effective Date in full and final satisfaction of the First Lien
Debt Claims (other than Revolving Loan Claims) their pro rata share of the First
Lien Stock Distribution.

 

 

 

Second Lien Note Claims

 

[Treatment TBD.]

 

In accordance with and pursuant to section 510(a) of the Bankruptcy Code and the
Intercreditor Agreement (defined below), all distributions to holders of Second
Lien Note Claims (including any deficiency claims on account thereof) shall be
made directly to holders of First Lien Debt Claims in accordance with and
subject to the Intercreditor Agreement until all First Lien Debt Claims are paid
in full, and only thereafter to holders of Second Lien Note Claims (and any such
deficiency claims).

 

“Intercreditor Agreement” means that certain Amended and

 

7

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Restated Intercreditor Agreement dated as of March 27, 2014 (as amended,
supplemented or otherwise modified from time to time) among Walter Energy, the
other grantors party thereto, Morgan Stanley Senior Funding, Inc., as First-Lien
Credit Agreement Collateral Agent and Authorized Representative for the Credit
Agreement Secured Parties, Union Bank, N.A., as Initial Additional Collateral
Agent and Initial Additional Authorized Representative for the Initial
Additional First-Lien Secured Parties, Wilmington Trust, National Association,
as Second-Lien Notes Collateral Agent and Second-Lien Notes Authorized
Representative for the Second-Lien Notes Secured Parties, and each Additional
Collateral Agent and Authorized Representative from time to time party thereto.

 

 

 

Other Secured Claims

 

To the extent that any other secured claim exists, except to the extent that a
holder of an allowed other secured claim agrees to less favorable treatment with
the Debtors, with the consent of the Required Consenting First Lien Creditors,
or the Reorganized Debtors, each holder of an allowed other secured claim shall
(i)  be reinstated and rendered unimpaired in accordance with section 1124(2) of
the Bankruptcy Code, notwithstanding any contractual provision or applicable
non-bankruptcy law that entitles the holder of an allowed other secured claim to
demand or to receive payment of such allowed other secured claim prior to the
stated maturity of such allowed other secured claim from and after the
occurrence of a default, (ii) receive cash in an amount equal to such allowed
other secured claim as determined in accordance with section 506(a) of the
Bankruptcy Code, on the later of the initial distribution date under the Plan
and thirty (30) days after the date such other secured claim is allowed (or as
soon thereafter as is practicable), or (iii)  receive the collateral securing
its allowed other secured claim on the later of the initial distribution date
under the Plan and the date such other secured claim becomes an allowed other
secured claim, or as soon thereafter as is practicable, in each case as
determined by the Debtors and consented to by the Required Consenting First Lien
Creditors.

 

 

 

Other Priority Claims

 

The allowed other priority claims of the Debtors shall be unimpaired. Except to
the extent that a holder of an allowed other priority claim and the Debtors
agree to less favorable treatment to such holder, each holder of an allowed
other priority claim shall be paid in full in cash on the later of the initial
distribution date under the Plan and thirty (30) days after the date when such
other priority claim is allowed; provided, however, that other priority claims
that arise in the ordinary course of the Debtors’ business and which are not due
and payable on or before the Effective Date shall be paid in the ordinary course
of

 

8

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

 

 

 

business in accordance with the terms thereof.

 

 

 

Unsecured Claims

 

[Treatment TBD]

 

Unsecured Claims shall include all general unsecured claims against the Debtors,
including, without limitation, (i) any deficiency claims on account of the
Secured Debt Claims; (ii) Unsecured Note Claims, (iii) if applicable, claims on
account of the Company’s withdrawal from the UMWA 1974 Multi-Employer Pension
Plan, (iv) if applicable, claims on account of modifying the Company’s OPEB
obligations, (v) any other unsecured labor-related claims and (vi) unsecured
trade claims.

 

 

 

Intercompany Claims and Intercompany Interests

 

“Intercompany Claims” means (a) any claim held by one of the Debtors against any
other Debtor or Non-Debtor Subsidiary, including, without limitation, (i) any
account reflecting intercompany book entries by such Debtor with respect to any
other Debtor or Non-Debtor Subsidiary, (ii) any claim not reflected in book
entries that is held by such Debtor, and (iii) any derivative claim asserted or
assertable by or on behalf of such Debtor against any other Debtor or Non-Debtor
Subsidiary; or (b) any claim held by any Non-Debtor Subsidiary against Walter
Energy or any other Debtor or other Non-Debtor Subsidiary, including, without
limitation, (i) any account reflecting intercompany book entries by such
Non-Debtor Subsidiary and the Debtor or Non-Debtor Subsidiary with respect to
any other Non-Debtor Subsidiary or Debtor or Non-Debtor Subsidiary, (ii) any
claim not reflected in book entries that is held by such Non-Debtor Subsidiary
or Debtor, and (iii) any derivative Claim asserted or assertable by or on behalf
of such Debtor or Non-Debtor Subsidiary against any other Debtor or Non-Debtor
Subsidiary.

 

“Intercompany Interest” means any Interest held by Walter Energy in any of the
other Debtors or Non-Debtor Subsidiaries, or held by any of the Debtors or
Non-Debtor Subsidiaries in any other Debtor or Non-Debtor Subsidiary, or other
investments in the form of Interests in non-debtor entities.

 

Except as otherwise provided for in the Plan or the Restructuring Support
Agreement, each Intercompany Claim and each Intercompany Interest shall, at the
option of the Reorganized Debtors, be either (i) reinstated, (ii) released,
waived, and discharged, (iii) treated as a dividend, or (iv) contributed to
capital or exchanged for equity of a subsidiary of Walter Energy.

 

 

 

Old Common Stock Claims and Old Common Stock

 

Holders of Old Common Stock Claims and Old Common Stock shall not receive any
distribution on account thereof, and such Old Common Stock Claims and Old Common
Stock shall be

 

9

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

 

 

 

discharged and canceled on the Effective Date.

 

 

 

Other Provisions of the Plan

 

 

 

 

 

Other Provisions

 

The Plan shall contain other terms and conditions as agreed to by the Debtors
and the Required Consenting First Lien Creditors.

 

 

 

Exit Financing

 

That certain financing arrangement to be entered into by the Reorganized Debtors
on the Effective Date, which shall be in form and substance acceptable to the
Debtors and the Required Consenting First Lien Creditors.

 

 

 

Executory Contracts and Unexpired Leases

 

To the extent necessary in connection with the Plan, the Debtors shall seek to
assume pursuant to, inter alia, section 365 of the Bankruptcy Code, those
executory contracts and unexpired leases that may be mutually agreed upon by the
Debtors and the Required Consenting First Lien Creditors.

 

The Reorganized Debtors shall indemnify any person who served or was employed by
the Debtors as one of the Debtors’ directors, officers or employees if that
person served or was employed in such capacity as of the Petition Date and as of
the Effective Date for any claims arising from and after the Petition Date to
the Effective Date; provided, however, that in no event shall any of the
Reorganized Debtors be obligated for amounts that have been determined by final
order to have resulted from gross negligence, willful misconduct, fraud
intentional tort or criminal conduct.

 

 

 

Tax Related Issues
(Structuring & Otherwise)

 

The Debtors shall work with the Consenting First Lien Creditors and shall use
good-faith efforts to structure the Plan to the maximum extent possible in a
tax-efficient and cost-effective manner for the benefit of the parties to the
Restructuring Support Agreement and the Reorganized Debtors.

 

 

 

Corporate Governance/Board Membership

 

Corporate governance shall be determined by the Required Consenting First Lien
Creditors. On the Effective Date, the members of the new board of Reorganized
Walter Energy (the “New Board”) will comprise those individuals selected by such
Required Consenting First Lien Creditors.

 

 

 

Management Incentive Plan and Other Employee Benefit Plans

 

Following the Effective Date, Reorganized Walter Energy shall reserve an
aggregate amount of up to 10% of the New Walter Energy Common Stock (on an
as-diluted basis) for distribution to certain employees (the “Management
Incentive Plan”). The terms of the Management Incentive Plan shall be determined
by the New Board. Treatment of other employee benefit plans [TBD].

 

10

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Conditions Precedent to Confirmation of the Plan

 

Confirmation of the Plan is subject to:

 

·                  The Bankruptcy Court having entered an order in form and
substance acceptable to the Debtors and the Required Consenting First Lien
Creditors, approving the Disclosure Statement (as defined in the Restructuring
Support Agreement) as containing adequate information within the meaning of
section 1125 of the Bankruptcy Code.

 

·                  The Plan and all documents contained in any Plan supplement,
including any exhibits, schedules, amendments, modifications or supplements
thereto, having been filed in substantially final form and in form and substance
acceptable to the Debtors and the Required Consenting First Lien Creditors;
provided, however, that the Corporate Governance Documents (as defined in the
Restructuring Support Agreement) shall be acceptable only to the Required
Consenting First Lien Creditors.

 

·                  The Bankruptcy Court having entered an order or orders with
respect to each Retiree Group (as defined below) approving (a) a settlement with
respect to each Retiree Group with the applicable authorized representative of
the respective retirees or the retiree committee, in form and substance
acceptable to the Debtors and the Required Consenting First Lien Creditors, or
(b) a motion under section 1114 of the Bankruptcy Code authorizing termination
of retiree benefits ( as defined in section 1114 of the Bankruptcy Code) being
received by United Mine Workers of America (“UMWA”) retirees, United
Steelworkers (“USW”) retirees, or non-union retirees (each, a “Retiree Group”),
in each case in form and substance acceptable to the Debtors and the Required
Consenting First Lien Creditors.

 

·                  The Bankruptcy Court having entered an order or orders
approving (a) a settlement with the authorized representative for the UMWA and
the USW, in form and substance acceptable to the Debtors and the Required
Consenting First Lien Creditors, with respect to the applicable Collective
Bargaining Agreement, or (b) a motion under section 1113 of the Bankruptcy Code
in form and substance acceptable to the Debtors and the Required Consenting
First Lien Creditors rejecting the Collective Bargaining Agreements with the
USWA and/or USW, as applicable, in each case in form and substance acceptable to
the Debtors and the Required

 

11

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Consenting First Lien Creditors.

 

 

 

Conditions Precedent to Consummation of the Plan

 

Unless waived in writing by the Debtors, on the one hand, and the Required
Consenting First Lien Creditors, on the other hand, the occurrence of the
Effective Date shall be subject to the satisfaction of such conditions precedent
agreed upon by the Required Consenting First Lien Creditors and the Debtors,
including, without limitation, the following:

 

·                  The Restructuring Support Agreement shall have been assumed
by the Debtors pursuant to an order of the Bankruptcy Court and shall not have
been terminated in accordance with its terms.

 

·                  Negotiation, execution and delivery of definitive
documentation with respect to the Plan and any Plan supplement documents, in a
form and substance acceptable to the Required Consenting First Lien Creditors
and the Debtors, and otherwise consistent with the terms and conditions
described in this Term Sheet or the Restructuring Support Agreement, as
applicable; provided, however, that the Corporate Governance Documents shall be
acceptable only to the Required Consenting First Lien Creditors.

 

·                  The Bankruptcy Court shall have entered the Confirmation
Order (as defined in the Restructuring Support Agreement) in form and substance
acceptable to the Debtors and the Required Consenting First Lien Creditors, and
the Confirmation Order shall be a Final Order.

 

·                  As of the effective date of the Plan, the aggregate amount of
all allowed or projected Administrative and Priority Claims (as defined in the
Restructuring Support Agreement) shall not exceed $10.0 million, which
projections the Company, in consultation with the Holder Parties’ Advisors (as
defined in the Restructuring Support Agreement), shall reasonably formulate in
advance of the confirmation hearing in connection with the Plan. For purposes
hereof, “Administrative and Priority Claims” means any non-ordinary course
administrative expense claims and non-ordinary course priority tax claims. For
the avoidance of doubt, Administrative and Priority Claims do not include any
claims for fees and expenses of any professional, claims arising under sections
503(b)(9) or 507(b) of the Bankruptcy Code, post-petition operating expenses,
severance obligations and payments, ordinary course administrative and priority
tax claims, cure amounts related to assumed executory contracts, reclamation and
environmental obligations, Coal Act and Black Lung

 

12

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obligations, and employee and retiree benefit obligations accrued in the
ordinary course of business prior to implementing relief under sections 1113 and
1114 of the Bankruptcy Code.

 

·                  On and simultaneously with the occurrence of the Effective
Date, the Debtors shall have closed on the Exit Financing, which Exist Financing
shall be in form and substance acceptable to the Debtors and the Required
Consenting First Lien Creditors.

 

 

 

Releases

 

To the fullest extent permitted by applicable law, the Plan shall contain
customary releases.

 

 

 

Exculpation and Injunctions

 

The Plan shall contain customary exculpation and injunction provisions.

 

 

 

Claims of the Debtors

 

The Reorganized Debtors shall retain all rights to commence and pursue any
causes of action, other than any causes of action released by the Debtors
pursuant to the release and exculpation provisions outlined in this Term Sheet
and the Restructuring Support Agreement.

 

 

 

Discharge of the Debtors

 

The Plan shall contain customary discharge provisions.

 

 

 

Cancellation of Notes, Instruments, Certificates, and Other Documents

 

On the Effective Date, except to the extent otherwise provided in this Term
Sheet or the Plan, all notes, instruments, certificates, and other documents
evidencing claims or interests, including the Credit Agreement, the First Lien
Notes Indenture, the Second Lien Notes Indenture, the 9.875% Notes Indenture and
the 8.50% Notes Indenture, shall be cancelled, and the obligations of the
Debtors thereunder or in any way related thereto shall be deemed satisfied in
full and discharged; provided, however, that any such agreement shall continue
in effect solely to allow holders of Claims to receive distributions under the
Plan, allow holders of claims to retain their respective rights and obligations
vis-à-vis other holders of claims pursuant to applicable governing documents,
and to preserve any charging liens of the indenture trustees under the
applicable indentures.

 

 

 

Issuance of New Securities; Execution of the Plan Restructuring Documents

 

On the Effective Date, the Reorganized Debtors shall issue and execute all
securities, notes, instruments, certificates, and other documents required to be
issued and executed in accordance with the Plan.

 

 

 

Miscellaneous

 

Surety Bonds. The Debtors shall maintain their existing surety and reclamation
bonds in place, as may be amended from time to time on commercially reasonable
terms and conditions. Except as otherwise provided in this Term Sheet, all
outstanding letters

 

13

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of credit that currently backstop the Debtors’ existing surety and reclamation
bonds shall be reinstated or replaced in their face amount under the Exit
Financing.

 

No Admission. Nothing in the Term Sheet is or shall be deemed to be an admission
of any kind.

 

14

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Exhibit A

 

Debtors

 

Non-Debtor Subsidiaries
(Canada)

 

Non-Debtor Subsidiaries
(U.K. and Other)

Walter Energy, Inc.

 

Walter Energy Canada Holdings, Inc.

 

Energybuild Group Limited

Atlantic Development and Capital, LLC

 

Walter Canadian Coal Partnership

 

Energybuild Holdings Ltd.

Atlantic Leaseco, LLC

 

Wolverine Coal ULC

 

Energybuild Opencast Ltd.

Blue Creek Coal Sales, Inc.

 

Wolverine Coal Partnership

 

Energybuild Mining Ltd.

Blue Creek Energy, Inc.

 

Brule Coal ULC

 

Energybuild Ltd.

J.W. Walter, Inc.

 

Brule Coal Partnership

 

Mineral Extraction and Handling Ltd.

Jefferson Warrior Railroad Company, Inc.

 

Cambrian Energybuild Holdings ULC

 

Black Warrior Methane Corp.

Jim Walter Homes, LLC

 

Willow Creek Coal ULC

 

Black Warrior Transmission Corp.

Jim Walter Resources, Inc.

 

Willow Creek Coal Partnership

 

Cardem Insurance Co. Ltd.

Maple Coal Co., LLC

 

Pine Valley Coal Ltd.

 

 

Sloss-Sheffield Steel & Iron Company

 

0541237 BC, Ltd.

 

 

SP Machine, Inc.

 

Belcourt Saxon Coal Ltd.

 

 

Taft Coal Sales & Associates, Inc.

 

Belcourt Saxon Coal Limited Partnership

 

 

Tuscaloosa Resources, Inc.

 

 

 

 

V Manufacturing Company

 

 

 

 

Walter Black Warrior Basin LLC

 

 

 

 

Walter Coke, Inc.

 

 

 

 

Walter Energy Holdings,

 

 

 

 

 

15

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LLC

 

 

 

 

Walter Exploration & Production LLC

 

 

 

 

Walter Home Improvement, Inc.

 

 

 

 

Walter Land Company

 

 

 

 

Walter Minerals, Inc.

 

 

 

 

Walter Natural Gas, LLC

 

 

 

 

 

16

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EXHIBIT C

 

SALE TERM SHEET

 

Summary of Principal Terms of Proposed Sale of Substantially

All of the Assets of Walter Energy, Inc. and Its Debtor Subsidiaries

 

The following summary of principal terms (this “Term Sheet”) provides an outline
of a proposed sale of substantially all of the assets of Walter Energy, Inc.
(“Walter Energy”) and its direct and indirect subsidiaries (collectively, the
“Company” or the “Seller”) that are debtors in chapter 11 cases (the “Chapter 11
Cases”) being commenced contemporaneously herewith, with such sale being
conducted pursuant to sections 105, 363(b), (f), (k) and (m), and 365 of title
11 of the United States Code (the “Bankruptcy Code”).(1)  This Term Sheet is a
summary of the agreed upon terms between the Company and the unaffiliated group
of lenders and noteholders (the “First Lien Committee”) under, respectively,
that certain (i) Credit Agreement dated as of April 1, 2011 by and among Walter
Energy, as the U.S. borrower, Western Coal Corp. and Walter Energy Canada
Holdings, Inc., as the Canadian borrowers, the lenders party thereto (each, a
“Lender” and collectively, the “Lenders”), and Morgan Stanley Senior
Funding, Inc., as administrative agent (the “First Lien Agent”) (as the same may
be and has been amended, amended and restated, supplemented, waived and/or
otherwise modified from time to time, the “Credit Agreement”) and (ii) Indenture
dated as of September 27, 2013 among Walter Energy and each of the guarantors
party thereto, and Wilmington Trust, National Association, as successor trustee
and collateral agent (the “First Lien Trustee”), relating to 9.500% Senior
Secured Notes Due 2019 (the “Indenture”), regarding a proposed sale transaction.

 

The terms and conditions described herein are part of a comprehensive proposal,
each element of which is consideration for the other elements and is an integral
aspect of such proposal.  This Term Sheet does not constitute an offer or a
legally binding obligation of the Company, the First Lien Committee, Purchaser
(as defined below), or any other party in interest, and no legally binding
obligation will exist unless and until definitive documents, including an asset
purchase agreement (as may be amended from time to time in accordance therewith,
the “Asset Purchase Agreement”), are executed by and among the appropriate
parties.  The transactions contemplated by this Term Sheet will be subject to
agreed upon conditions to be set forth in such definitive documents.  This Term
Sheet is proffered in the nature of a settlement proposal in furtherance of
settlement discussions and is entitled to protection from any use or disclosure
to any party or person pursuant to Federal Rule of Evidence 408 and any other
rule of similar import.  Capitalized terms herein not otherwise defined shall
have the meanings given them in that certain Restructuring Support Agreement
dated as of [·], 2015 among Walter Energy, certain members of the First Lien
Committee and certain other parties from time to time party thereto (the
“Restructuring Support Agreement”).

 

Transaction Overview

 

Seller

 

The Company.

 

 

 

Purchaser

 

A new Delaware limited liability company to be organized prior to the execution
of the Asset Purchase Agreement by the First Lien Committee, the First Lien
Agent and the First Lien Trustee (“Purchaser”) on behalf of all of the Lenders
under the Credit

 

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

(1)  Treatment of and consideration for the assets of foreign subsidiaries and
non-collateral assets TBD.

 

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

 

 

 

Agreement and noteholders under the Indenture. The Asset Purchase Agreement and
the related Sale Order (as defined below) shall permit the Purchaser to
designate one or more of its affiliates as a “purchaser” thereunder with respect
to any particular assets.

 

 

 

Sale

 

This Term Sheet describes a proposed sale by the Company of all of its right,
title, and interest in, to, and under the Purchased Assets (as defined below) to
Purchaser, free and clear of any and all pledges, options, charges, liabilities,
liens, claims, encumbrances, successor liability or security interests except
certain permitted liens to be agreed (if any) and the Assumed Liabilities (as
defined below), and the assumption by Purchaser of the Assumed Liabilities,
pursuant to sections 105, 363(b) (f), (m) and (k) and 365 of the Bankruptcy Code
(collectively, the “Sale”).

 

 

 

 

 

The Seller and Purchaser shall consummate the Sale as soon as practicable but in
any event no later than the second (2nd) business day (such date of consummation
being the “Closing Date”) after the conditions set forth in the Asset Purchase
Agreement have been satisfied or waived (other than those conditions which, by
their terms, are to be satisfied or waived at the closing (the “Closing”) of the
transactions under the Asset Purchase Agreement (but subject to the satisfaction
thereof at the Closing)).

 

 

 

Purchase Price

 

The aggregate consideration for the Purchased Assets shall consist of the
following (collectively, the “Purchase Price”): (i) cash (a) in an amount
sufficient to satisfy the reasonable and documented fees and expenses incurred
by estate professionals to the extent such fees and expenses (x) are accrued and
unpaid as of the Closing Date, (y) with respect to hourly or monthly
professional fees, have been authorized pursuant to the Approved Budget (as
defined in the Cash Collateral Orders) and the Cash Collateral Orders, and
(z) with respect to any transaction-based fees, have been approved by the
Bankruptcy Court, plus (b)  in the amount of $[TBD] to pay for any assets that
cannot be acquired through a credit bid,(2) plus (c) in the amount of $[TBD](3);
(ii) pursuant to section 363(k) of the Bankruptcy Code, a credit bid of the
obligations owed by the Company arising under the Credit Agreement and the
Indenture in an amount equal to $[TBD]; and (iii) assumption of the

 

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

(2)  See footnote 1 above.

(3)  Such amount shall be sufficient to pay, among other things, transfer taxes
due in connection with the Sale and accrued but unpaid professional fees of the
Steering Committee, in each case, that have not otherwise been assumed by the
Purchaser.

 

2

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Assumed Liabilities, including the payment of Cure Costs (as defined below).

 

 

 

Purchased Assets

 

“Purchased Assets” shall include all assets of the Company except the Excluded
Assets (as defined below), including without limitation: (i) all accounts
receivable and pre-paid expenses, (ii) all cash and cash equivalents, (iii) all
intellectual property rights, (iv) all of the Seller’s owned personal property,
equipment, fixtures, and other assets customarily considered ‘PP&E’ or any
rights under leases relating thereto to the extent such leases constitute
Assumed Contracts and [all stock, partnership, membership and other equity or
similar interests owned by the Company in any entity that is not a Seller],
(v) all deposits (excluding professional fee retainers) and prepaid or deferred
charges and expenses of the Seller, (vi) all right, title, and interest of the
Seller in each owned real property and under each real property lease which is
an Assumed Contract (as defined below), including mining leases, coal leases and
coal mining leases (including underground coal mining and gob gas leases), coal
land leases, coal degasification leases, all coal, mineral, oil and gas rights,
title and interests, together with all short form leases, memoranda and
amendments relating to the foregoing (and any present or future rights, title
and interests arising from or related to the foregoing), (vii) subject to agreed
exceptions, all of the documents that are used or useful in, held for use in or
intended to be used in, or that arise in any way out of, the business of the
Seller and all other business conducted by the Seller (the “Business”),
(viii) all Assumed Contracts, (ix) all third party property and casualty
insurance proceeds to the extent receivable by the Purchaser or the Seller in
respect of the Business or the Purchased Assets after the Closing Date, (x) all
general intangibles of the Seller, (xi) all goodwill associated with the
Purchased Assets, (xii) all claims, causes of action, and rights of recovery
related to the Purchased Assets, including against counterparties to the Assumed
Contracts, (xiii)  any permits, licenses, certificates or similar documents from
any governmental entity relating to the Purchased Assets or the Business,
(xiv) all coal inventory located on the Seller’s owned or leased real property
or belonging to the Seller, (xv) any claim, right, or interest in any credit,
refund, rebate, abatement or other recovery relating to the Purchased Assets or
the Business for taxes or otherwise, including those arising under the Assumed
Contracts (subject to agreed-upon offsets with respect to tax refunds or other
credits) and (xvi) any causes of action arising under chapter 5 of the
Bankruptcy Code, including against directors, officers and advisors of the
Seller (such causes of action against directors, officers and advisors or

 

3

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as otherwise agreed being “Specified Actions”), provided that the Specified
Actions will be waived effective as of the Closing Date.

 

 

 

Excluded Assets

 

The Purchased Assets shall not include the following: (i) minute books, stock
ledgers and organizational documents, (ii) contracts and leases of the Seller
that are not Assumed Contracts and any obligations related thereto, (iii) equity
securities of, or ownership in, the Seller, (iv) director and officer insurance
policies and claims thereunder, (v) all insurance policies of the Seller and
(vi) any other assets specified as such in the Asset Purchase Agreement
(collectively, the “Excluded Assets”).

 

 

 

Assumed Liabilities / Excluded Liabilities

 

“Assumed Liabilities” shall include only the following liabilities of the
Seller: (i) all liabilities of the Seller under the Assumed Contracts, including
amounts necessary to cure any defaults as a condition to assuming the Assumed
Contracts (the “Cure Costs”), (ii) post-petition trade payables related to the
Purchased Assets incurred in the ordinary course of the Seller’s Business during
the Chapter 11 Cases to the extent included in the Approved Budget (as defined
in the Cash Collateral Orders), (iii) all liabilities arising out of the
operation of the Purchased Assets for periods following the Closing Date,
including (a) workers’ compensation liabilities relating to any Employee of
Purchaser (as defined below) arising out of an event that occurs after the
Closing Date and (b) any and all Black Lung liabilities of any Employee of
Purchaser first occurring on or after the lapse of the statutory period
following the Closing Date for Purchaser to become a responsible operator to and
with respect to such Employee of Purchaser under the Black Lung Benefits Act or
under the Federal Coal Mine Health and Safety Act of 1969, (iii) any liabilities
related to benefits of Employees of Purchaser specifically agreed to be assumed
in writing by Purchaser (if any, the “Assumed Benefits”) and (iv) tax
liabilities relating to the Purchased Assets or the Business for a tax period
(or the portion thereof) beginning on the Closing Date and agreed-upon transfer,
deed and other similar taxes payable with respect to the Sale excluding, for the
avoidance of doubt, (x) all income tax or similar liabilities of the Seller for
any tax period, (y) agreed-upon transfer, deed and other similar taxes payable
with respect to the Sale and (z) any tax or similar liability related to the
Excluded Assets.

 

 

 

 

 

All pre-petition and post-petition liabilities of the Seller, other than Assumed
Liabilities, shall be “Excluded Liabilities”,

 

4

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including, without limitation:

 

 

 

 

 

·                  All claims or liabilities or other obligations with respect
to the employees of Seller (the “Employees of Seller”) or former employees, or
both (or their representatives) of Seller or any predecessor of Seller based on
any action or inaction occurring prior to or on the Closing Date, including
payroll, vacation, sick leave, unemployment benefits, retirement benefits,
pension benefits, employee stock option, equity compensation, employee stock
purchase, or profit sharing plans, health care and other welfare plans or
benefits (including COBRA), or any other employee plans or arrangements or
benefits or other compensation of any kind to any employee, and obligations of
any kind including any liability pursuant to the WARN Act;

 

 

 

 

 

·                  Any liability (whether arising before, on or after the
Closing Date) with respect to any Employee of Seller or former Employee of
Seller who is not hired by Purchaser. All employees of Seller who are hired by
Purchaser shall be referred to herein as “Employees of Purchaser”;

 

 

 

 

 

·                  Except as included in Assumed Liabilities, all Black Lung
liabilities and workers’ compensation liabilities related to the Purchased
Assets, including to and with respect to Employees of Purchaser and former
Employees of Seller who worked or who were employed at the Purchased Assets,
including, but not limited to, any such Black Lung liabilities and workers’
compensation liabilities of the Seller or any of Seller’s predecessors;

 

 

 

 

 

·                  Any liability or other obligations arising under, relating to
or with respect to any Employee Benefit Plan or any other employee benefit plan,
policy, program, agreement or arrangement at any time maintained, sponsored or
contributed to by Seller or any ERISA Affiliate, or with respect to which Seller
or any ERISA Affiliate has any liability, including with respect to any
underfunded pension liability to any employee benefit plan, the PBGC, IRS or
Department of Labor or otherwise;

 

 

 

 

 

·                  Any liability or other obligations arising under, relating to
or with respect to any multi-employer pension plan;

 

5

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·                  Except for the Assumed Benefits, any liabilities or other
obligations to any current or former Employee of Seller or any beneficiary
thereof, relating to any employee benefits or compensation arrangement; and

 

 

 

 

 

·                  Except for the Assumed Benefits, any liability or other
obligations under any employment, collective bargaining agreement or
arrangement, severance, retention or termination agreement or arrangement with
any employee, consultant or contractor (or its representatives) of Seller.

 

 

 

Assumed Contracts / Excluded Contracts

 

“Assumed Contracts” shall include the Seller’s contracts, supply agreements,
joint venture agreements, operating and joint operating agreements,
participation agreements, exploration agreements (including minerals and coalbed
gas exploration agreements), leases, and other written obligations to the extent
not previously rejected with the consent of Purchaser, in each case, as set
forth on a schedule to be attached to the Asset Purchase Agreement (the
“Contract Schedule”) [(excluding any such agreements under which Seller has or
could have operator liability)]; provided that Purchaser has the right at any
time before the earlier of (x) the date that is two (2) business days prior to
the Closing Date and (y) the date on which the Bankruptcy Code or Bankruptcy
Court otherwise would require a determination to assume or reject such contract
or lease to (i) amend the Contract Schedule to designate any other contract
which has not been rejected by the Seller to be an Assumed Contract, and (ii) to
remove from the Contract Schedule an Assumed Contract for any reason up to the
date of the Sale hearing.

 

 

 

 

 

Notwithstanding the foregoing, if an Assumed Contract is subject to a cure
dispute or other dispute as to the assumption or assignment of such Assumed
Contract that has not been resolved to the satisfaction of Purchaser by the
earlier of (x) and (y) above, then the (x) or (y) above shall be extended to the
earlier of (A) a resolution to such dispute or (B) 120 days following the
Closing Date (the “Extended Contract Period”). If before the Closing Date there
are contracts or leases that have not been designated as an Assumed Contract or
a contract, lease, or other obligation to be removed from the Contract Schedule
(an “Excluded Contract”), then the Seller shall not assume or reject any such
contract and lease, pursuant to section 365 of the Bankruptcy Code and any order
of the Bankruptcy Court, until the earlier of the date the Purchaser so directs
the Seller or the end of the Extended Contract Period. Purchaser shall be

 

6

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

 

 

 

responsible for any obligations or liabilities arising during any Extended
Contract Period related to any contract or lease that has not been assumed or
rejected as of the Closing Date as provided above. Purchaser shall not assume or
otherwise have any liability with respect to any Excluded Contract. For the
avoidance of doubt, all collective bargaining agreements (“CBAs”) to which the
Company is bound or a party shall be Excluded Contracts.

 

 

 

Seller Representations and Warranties in Asset Purchase Agreement

 

The Company will make customary representations and warranties in the context of
section 363 credit bid transactions (qualified by scheduled disclosures),
including, without limitation, representations and warranties concerning:
organization, subsidiaries, power and authority, noncontravention and consents,
financial statements, related party transactions, regulatory approvals,
litigation, regulatory investigations, material contracts, compliance with laws,
permits, environmental matters, employee and employee benefit matters, health
and safety matters, real property, intellectual property, taxes, no liability to
brokers and such other matters as Purchaser may reasonably request.

 

 

 

Purchaser Representations and Warranties

 

Purchaser will make customary representations and warranties in the context of
section 363 credit bid transactions, including without limitation
representations and warranties concerning: organization, power and authority,
noncontravention and consents and no liability to brokers and such other matters
as the Seller may reasonably request.

 

 

 

Seller Covenants

 

The Company will make customary and other negative and operating covenants in
the context of section 363 credit bid transactions (subject to agreed upon
exceptions), including without limitation covenants concerning: (i) conduct of
business; (ii) provision of financial and operating data, and reasonable access
to the Company’s senior personnel, facilities, books, contracts and records,
subject to agreed upon protections; (iii) reasonable best efforts to obtain
approval of the Bidding Procedures and the Sale Motion (each as defined below)
seeking the entry of orders in the Chapter 11 Cases in form and substance
acceptable to the Seller and the Purchaser, including the Sale Order and other
case-management undertakings (e.g., covenants and milestones substantially
similar to those set forth in the Restructuring Support Agreement) on or before
the relevant Sale Milestones (as defined below); (iv) the Company’s entry into
any material contract (definition to be agreed) or any renewal of a material
contract; (v) notice of certain agreed upon events; (vi) further assurances
regarding administration,

 

7

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accounts receivable and similar items; (vii) commercially reasonable efforts to
pay all post-petition accounts payable (subject to the Budget Covenant) and
collect all accounts receivable in the ordinary course of business and
(viii) such other covenants reasonably acceptable to the Seller as Purchaser may
reasonably request.

 

 

 

Purchaser Covenants

 

The Purchaser will be subject to agreed-upon covenants, including with respect
to (i) actions necessary to obtain regulatory approvals and the satisfaction of
applicable closing conditions and (ii) Assumed Benefits.

 

 

 

Tax Cooperation

 

The Seller and Purchaser shall agree to cooperate in good faith to structure the
Asset Purchase Agreement and related transactions in a tax efficient manner for
the Purchaser and the Seller, including with respect satisfying the requirements
of a “G reorganization” and transfer taxes.

 

 

 

Regulatory Approvals

 

Regulatory approvals may be required in connection with the Sale, including to
the extent applicable, under the HSR Act (the “Regulatory Approvals”). Purchaser
and Seller shall use reasonable best efforts to obtain the Regulatory Approvals.

 

 

 

Bidding Procedures

 

The Sale shall be conducted in accordance with bidding procedures (the “Bidding
Procedures”) in form and substance acceptable to the Seller and Purchaser, and
as approved by an order of the Bankruptcy Court (the “Bidding Procedures
Order”).(4)

 

 

 

Sale Milestones

 

·                  Subject in all respects to the Restructuring Support
Agreement, on or before [September 9, 2015] (the “Filing Deadline”), the Seller
shall have filed (i) the Sale Motion, including a proposed order (the “Sale
Order”) approving the Sale and providing for, among other things, the sale of
the Purchased Assets to the Purchaser free and clear of all liens, claims,
successor liability, security interests and other encumbrances (including
without limitation easements or similar restrictions, conditions, covenants,
exceptions or reservations) (except Assumed Liabilities) pursuant to section
363(f) of the Bankruptcy Code and “good faith”

 

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

(4)  For example, only bids that comply in all respects with the Bidding
Procedures shall be considered by the Seller (each such bid, a “Qualified
Bid”).  Moreover and for the avoidance of doubt, (i) Purchaser’s offer to
purchase the Purchased Assets pursuant to the Asset Purchase Agreement as
provided herein shall be a Qualified Bid for all purposes related to the Bidding
Procedures and (ii) in the event that any other Qualified Bid is submitted, the
Seller shall conduct an auction for the Purchased Assets (the “Auction”) and the
Seller, subject to Bankruptcy Court approval and any applicable consultation
rights with the First Lien Committee, shall select the highest or otherwise best
Qualified Bid (the “Winning Bid”).

 

8

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protections to the Purchaser pursuant to section 363(m) of the Bankruptcy Code
and (ii) appropriate supporting declarations, in each case, in form and
substance acceptable to the Seller and the Purchaser and which identifies
Purchaser as the stalking horse for the Purchased Assets.

 

 

 

 

 

·                  On or before [September 30, 2015], the Bankruptcy Court shall
have (i) held a hearing to consider approval of the Bidding Procedures and
(ii) entered the Bidding Procedures Order.

 

 

 

 

 

·                  Pursuant to the Bidding Procedures Order, any and all
Qualified Bids shall be submitted on or before [December 14, 2015] (the “Bid
Deadline”).

 

 

 

 

 

·                  If any other Qualified Bid is submitted prior to the Bid
Deadline, the Seller shall have commenced the Auction on or before [January 6,
2016].

 

 

 

 

 

·                  On or before [January 13, 2016], the Bankruptcy Court shall
have entered the Sale Order, which shall be in form and substance acceptable to
the Seller and Purchaser.

 

 

 

 

 

·                  The Closing Date shall have occurred by no later than
[February 3, 2016], with one 30 day extension, if the Regulatory Approvals have
not been obtained (the “End Date”).

 

 

 

 

 

·                  Each of the documents set forth above shall be consistent
with this Term Sheet and the Asset Purchase Agreement and shall otherwise be
acceptable to the Seller and the Purchaser.

 

 

 

Purchase Price Allocation

 

Within one hundred twenty (120) days after the Closing Date, the Purchaser shall
deliver to the Seller a schedule (the “Allocation Schedule”) allocating the
Purchase Price and any other items that are treated as additional purchase price
for tax purposes among the Purchased Assets. The Allocation Schedule shall be
reasonable and shall be prepared in accordance with Section 1060 of the Internal
Revenue Code of 1986, as amended, and the Treasury Regulations promulgated
thereunder.

 

 

 

Bidder Protections

 

The Bidding Procedures Order shall contain language, in form and substance
acceptable to the Seller and the Purchaser, approving the following provisions:

 

 

 

 

 

Break-Up Fee: The Seller will pay to Purchaser a break-up fee in cash equal to
3.00% of the value (excluding Assumed

 

9

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

 

 

 

Liabilities) of Purchaser’s offer to purchase the Purchased Assets pursuant to
the Asset Purchase Agreement immediately upon the earlier of (i) Bankruptcy
Court approval of the Winning Bid if a Qualified Bid other than Purchaser’s
offer to purchase the Purchased Assets pursuant to the Asset Purchase Agreement
is the Winning Bid, (ii) termination of the Asset Purchase Agreement if, as of
such termination, Seller (but not Purchaser) was in breach of any of its
representations, warranties, covenants or other agreements in the Asset Purchase
Agreement or (iii) if the Asset Purchase Agreement is terminated (other than as
set forth in clause (ii) above or as a result of the Purchaser’s breach of any
of its representations, warranties, covenants or other agreements in the Asset
Purchase Agreement), consummation by the Seller of a financing, sale,
restructuring or other similar transaction in respect of a substantial portion
of the Purchased Assets or the Business within nine (9) months of such
termination (the earlier of (i), (ii) and (iii) being a “Protection Event”).

 

 

 

 

 

Expense Reimbursement. The Company shall reimburse the Purchaser’s and the First
Lien Committee’s reasonable pre-Closing Date out-of-pocket costs, fees and
expenses (including reasonable legal, financial advisory, accounting and other
similar costs, fees and expenses) incurred in connection with the formation and
operation of Purchaser, this Term Sheet, the Asset Purchase Agreement, the Sale
and to the extent such out-of-pocket costs, fees and expenses are not otherwise
paid or reimbursed by the Company under the Cash Collateral Orders promptly upon
a Protection Event (collectively referred to as the “Expense Reimbursement”).

 

 

 

 

 

The full amount of the anticipated Expense Reimbursement shall be afforded super
priority administrative expense protection pursuant to sections 507 and
503(b) of the Bankruptcy Code.

 

 

 

Treatment of Senior Management

 

[TBD]

 

 

 

Closing Conditions

 

The Asset Purchase Agreement shall contain, among other conditions, the
following conditions to the obligation of the Seller and the Purchaser to
consummate the Sale, in each case, in addition to other conditions that may be
agreed upon by Purchaser and the Seller in the Asset Purchase Agreement:

 

 

 

 

 

·                  Entry of the Sale Order in form and substance, including with
respect to all findings of fact and conclusions of law,

 

10

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

 

 

 

acceptable to the Seller and the Purchaser and such Sale Order not being subject
to any stay or appeal;

 

 

 

 

 

·                  No injunctions or other order or similar ruling or
determination of any governmental authority preventing (or delaying beyond the
End Date) the consummation of the Sale;

 

 

 

 

 

·                  Lien releases and termination statements with respect to all
liens (other than permitted liens) on the Purchased Assets;

 

 

 

 

 

·                  The Company and the Purchaser, as applicable, shall have
received agreed upon Regulatory Approvals;

 

 

 

 

 

·                  Seller’s representations and warranties in the Asset Purchase
Agreement which do not contain materiality qualifiers will be accurate in all
material respects on and as of the Closing Date (except those representations
and warranties that address matters only as of a specified date, which shall be
true and correct in all material respects as of that specified date) and
Seller’s representations and warranties in the Asset Purchase Agreement which
contain materiality qualifiers will be accurate in all respects on and as of the
Closing Date (except those representations and warranties that address matters
only as of a specified date, which shall be true and correct in all respects as
of that specified date), in each case, except where the failure of such
representations and warranties to be true and correct would not have a material
adverse effect (as agreed upon and excluding, for the avoidance of doubt, any
reasonably anticipated effects of the Chapter 11 Cases);

 

 

 

 

 

·                  The representations and warranties of the Purchaser contained
in the Asset Purchase Agreement which are not subject to a materiality
qualification shall be true and correct in all material respects on and as of
the Closing Date (except for representations and warranties expressly stated to
relate to a specific date, in which case such representations and warranties
shall be true and correct in all material respects as of such date) and the
representations and warranties of the Purchaser which are subject to a
materiality qualification, shall be true and correct in all respects on and as
of the Closing Date (except for representations and warranties expressly stated
to relate to a specific date, in which case such representations and warranties
shall be true and correct as of such date), in each case, except where the
failure of such representations and warranties to be so true and correct would
not have, or be reasonably likely to have, in the aggregate, a material adverse
effect on the ability of

 

11

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Purchaser to consummate the transactions contemplated by the Asset Purchase
Agreement.

 

 

 

 

 

·                  No material breach of the Purchaser’s or the Seller’s
pre-closing or closing covenants in the Asset Purchase Agreement;

 

 

 

 

 

·                  Since the execution of the Asset Purchase Agreement, no
material adverse change (as agreed upon and excluding, for the avoidance of
doubt, any reasonably anticipated effects of the Chapter 11 Cases) to the
Purchased Assets or the Business shall have occurred; and

 

 

 

 

 

·                  The Bankruptcy Court determines that Seller can sell the
Purchased Assets free and clear of the successor clause in the UMWA CBAs, the
UMWA agrees to waive/remove the successor clause in the UMWA CBAs, or the
Bankruptcy Court grants a motion (the “Section 1113(c) Motion”) filed by the
applicable Seller pursuant to 1113(c) of the Bankruptcy Code authorizing the
applicable Seller to reject the UMWA CBAs.

 

 

 

Termination

 

The Asset Purchase Agreement will contain customary termination provisions,
including, but not limited to:

 

 

 

 

 

(i) by written agreement of each of the Seller and Purchaser;

 

 

 

 

 

(ii) at the written election of the Seller or the Purchaser if the closing does
not occur on or prior to the End Date; provided that the terminating party is
not in breach of any representation, warranty, covenant or other agreement in
the Asset Purchase Agreement so as to cause the conditions to closing not to be
satisfied;

 

 

 

 

 

(iii) by written notice from Purchaser:

 

 

 

 

 

(1)                                 upon a breach by the Seller of any
representation, warranty, covenant or agreement in the Asset Purchase Agreement
or the Sale Order, which breach (a) would cause any of the Purchaser’s
conditions to the closing not to be satisfied (provided that the Purchaser is
not itself then in breach) and (b) has not been cured within ten (10) business
days;

 

 

 

 

 

(2)                                 Other than as contemplated by the Sale
Motion, upon Seller taking steps in furtherance of a competing transaction or
the dismissal or conversion of any of the Chapter 11 Cases;

 

 

 

 

 

(3)                                 upon the appointment of a trustee or
examiner (except a fee examiner) pursuant to section 1104 of

 

12

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the Bankruptcy Code;

 

 

 

 

 

(4)                                 upon failure to meet Sale Milestones; or

 

 

 

 

 

(5)                                 if for any reason (other than as a result of
its own breach of the Asset Purchase Agreement) Purchaser is unable, pursuant to
section 363(k) of the Bankruptcy Code, to credit bid in payment of all or any
portion of the Purchase Price (other than the Assumed Liabilities and the cash
portion of the Purchase Price, as provided above); provided that the inability
to credit bid post-petition interest payable under Section 506(b) of the
Bankruptcy Code or any other amount not in excess of $1 million shall not give
rise to a termination right under this clause (iii)(5).

 

 

 

 

 

(iv) by written notice from the Seller upon a breach by the Purchaser of any
representation, warranty, covenant or agreement in the Asset Purchase Agreement,
which breach (a) would cause any of the Seller’s conditions to the closing not
to be satisfied (provided that the Seller is not itself then in breach) and
(b) has not been cured within ten (10) business days;

 

 

 

 

 

(v)  at the written election of either the Seller or the Purchaser:

 

 

 

 

 

(1)                                 upon the dismissal or conversion of any of
the Chapter 11 Cases;

 

 

 

 

 

(2)                                 if, at the end of the Auction, Purchaser is
not determined by Seller to be the bidder with the Winning Bid (or the back-up
bidder);

 

 

 

 

 

(3)                                 upon permanent denial of required Regulatory
Approvals;

 

 

 

 

 

(4)                                 upon the termination of the Restructuring
Support Agreement by the Majority Holders (as defined therein) in accordance
with its terms; or

 

 

 

 

 

(5)                                 upon any Termination Event (as defined in
the Cash Collateral Orders); or

 

 

 

 

 

(vi) at the written election of either the Seller or the Purchaser, if a court
of competent jurisdiction or other governmental authority has issued an order or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the consummation of the closing under the Asset Purchase Agreement
and such order or action has become final and non-appealable.

 

 

 

Releases

 

The Asset Purchase Agreement shall contain a full mutual release between and
among the Seller, the Purchaser, the First

 

13

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Lien Committee, the First Lien Agent, the First Lien Trustee and each of their
respective affiliates.

 

 

 

Confidentiality

 

This Term Sheet and all communications and information regarding the Sale
contemplated hereby, including the identity of the Purchaser, and the existence,
structure, terms, conditions and provisions proposed or discussed are provided
for the sole and exclusive benefit of the Company, and, except as consented to
by Purchaser in writing or as may be ordered by a court of competent
jurisdiction or as necessary in connection with the Section 1113(c) Motion and
any related negotiations and proceedings, may not be disclosed to or shared with
any person or entity other than the Company’s Board of Directors and those of
the Company’s officers, directors, employees, representatives and advisors that
are involved in the bankruptcy and sale process or otherwise on a “need to know”
basis and who maintain the confidentiality hereof until such time as the Sale
Motion (or the Restructuring Support Agreement) is filed with the Bankruptcy
Court.

 

 

 

Labor Matters

 

Prior to the Closing Date, the Purchaser shall set initial terms and conditions
of employment, including, without limitation, wages, benefits, job duties and
responsibilities and work assignment. The Purchaser shall determine which
Employees of Seller, if any, to offer employment after the Closing, in its sole
discretion. Only Employees of Seller who are offered and then accept such offer
of employment with the Purchaser based on the initial terms and conditions set
by the Purchaser will become an Employee of Purchaser after the Closing Date.
Notwithstanding the foregoing, nothing herein will, after the Closing Date,
impose on the Purchaser any obligation to retain any Employee of Purchaser in
its employment.

 

 

 

CBAs

 

Seller shall obtain the consent of the Purchaser before extending or renewing
(or permitting to be extended or renewed) the term of any CBA absent Seller’s
ability to terminate such CBA prior to the Closing Date. The Purchaser does not
accept or assume any CBAs between Seller and its employees, and expressly
declines to be bound by or accept the terms of any such CBAs. Other than the
Assumed Benefits, the Purchaser is not and shall not be obligated to, and does
not, accept or adopt any wage rates, employee benefits, employee policies or any
other terms and conditions of employment.

 

 

 

Definitive Agreements and Due

 

The Asset Purchase Agreement and such other definitive agreements for the
acquisition of the Purchased Assets as the parties mutually agree upon
(collectively, the “Definitive

 

14

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Diligence

 

Agreements”) shall memorialize this Term Sheet and contain such representations,
warranties, covenants, conditions, and indemnities as set forth herein or as the
parties shall mutually agree. The signing of the Definitive Agreements will be
subject to, among other things, the negotiation by the Seller and Purchaser of
acceptable terms and conditions for the Definitive Agreements as well as
additional legal, accounting, financial, tax, business and regulatory due
diligence. For the avoidance of doubt, this Term Sheet is non-binding and in the
event of any inconsistency between this Term Sheet and any Definitive Agreement,
such Definitive Agreement shall govern.

 

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EXHIBIT D

 

INTERIM CASH COLLATERAL ORDER

 

THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

 

 

)

 

In re:

)

Chapter 11

 

)

 

WALTER ENERGY, INC., et al.

)

Case No. 15-      (   )

 

)

 

 

Debtors.(1)

)

(Joint Administration Requested)

 

)

 

 

)

 

 

 

INTERIM ORDER (A) AUTHORIZING

POSTPETITION USE OF CASH COLLATERAL,

(B) GRANTING ADEQUATE PROTECTION TO PREPETITION

SECURED PARTIES, (C) SCHEDULING A FINAL HEARING PURSUANT

TO BANKRUPTCY RULE 4001(b) AND (D) GRANTING RELATED RELIEF

 

Upon the motion (the “Motion”)(2) dated July 15, 2015 of the above-captioned
debtors and debtors in possession (collectively, the “Debtors”), pursuant to
sections 105, 361, 362, 363, 507(b) and 552(b) of title 11 of the United States
Code (the “Bankruptcy Code”) and Federal Rules of Bankruptcy Procedure (the
“Bankruptcy Rules”) 2002, 4001, 6003, 6004 and 9014, seeking entry of this
interim order (this “Interim Order”) and a final order:

 

(I)                                   authorizing the Debtors, subject and
pursuant to the terms and conditions set forth in this Interim Order, to (a) use
the Cash Collateral (as defined herein), which Cash Collateral shall be used in
accordance with the

 

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(1)                                 The Debtors in these cases, along with the
last four digits of each Debtor’s federal tax identification number, are: Walter
Energy, Inc. (9953); Atlantic Development and Capital, LLC (8121); Atlantic
Leaseco LLC (5308); Blue Creek Coal Sales, Inc. (6986); Blue Creek Energy, Inc.
(0986); J.W. Walter, Inc. (0648); Jefferson Warrior Railroad Company, Inc.
(3200); Jim Walter Homes, LLC (4589); Jim Walter Resources, Inc. (1186); Maple
Coal Co. LLC (6791); Sloss-Sheffield Steel & Iron Company (4884); SP
Machine, Inc. (9945); Taft Coal Sales & Associates, Inc. (8731); Tuscaloosa
Resources, Inc. (4869); V Manufacturing Company (9790); Walter Black Warrior
Basin LLC (5973); Walter Coke, Inc. (9791); Walter Energy Holdings, LLC (1596);
Walter Exploration & Production LLC (5786); Walter Home Improvement, Inc.
(1633); Walter Land Company (7709); Walter Minerals, Inc. (9714); and Walter
Natural Gas, LLC (1198). The location of the Debtors’ corporate headquarters is
3000 Riverchase Galleria, Suite 1700, Birmingham, Alabama 35244-2359. 
Contemporaneously herewith, the Debtors have filed a motion requesting joint
administration of the Debtors’ bankruptcy cases.

 

(2)                                 Capitalized terms used but not otherwise
defined herein have the meanings ascribed to them in the Motion.

 

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Budget Covenant (as defined herein), including a budget acceptable in all
respects to the Steering Committee (as defined herein) and Administrative Agent
(as defined herein), each in their sole discretion, including any variances
therefrom and the financial covenants (as such budget may be extended, varied,
supplemented, or otherwise modified in accordance with the provisions of this
Interim Order or the Final Order (as defined herein), the “Approved Budget”) and
(b) provide adequate protection on account of the diminution in the value of the
Prepetition Collateral (as defined herein) as a consequence of the Debtors’ use,
sale or lease of the Prepetition Collateral, including any Cash Collateral (as
defined below), and/or the imposition of the automatic stay to the Prepetition
Secured Parties (as defined herein) who have been granted prepetition liens and
security interests under the following documents (collectively, the “Prepetition
Debt Documents”):

 

(a)                                 the Credit Agreement, dated as of April 1,
2011 (as amended, restated, amended and restated, waived, supplemented or
otherwise modified from time to time, the “Credit Agreement” and together with
all mortgage, security, pledge, guaranty and collateral agreements, including
the 1L Security Agreement (as defined below) and all other documentation
executed in connection with any of the foregoing, each as amended, restated,
amended and restated, waived, supplemented or otherwise modified from time to
time, the “First Lien Credit Documents”), among Walter Energy, Inc. (“Walter”),
as U.S. borrower, Western Coal Corp. and Walter Energy Canada Holdings, Inc., as
Canadian borrowers, the lenders from time to time party thereto (collectively,
the “First Lien Lenders”), and Morgan Stanley Senior Funding, Inc., as
administrative agent (in such capacity, the “Administrative Agent”);

 

(b)                                 the Indenture, dated as of September 27,
2013 (as amended, waived, supplemented or otherwise modified from time to time,
the “First Lien Indenture” and together with all mortgage, security, pledge,
guaranty and collateral agreements, including the 1L Notes Collateral Agreement
(as defined below) and all other documentation executed in connection with the
foregoing, each as amended, restated, amended and restated, waived, supplemented
or otherwise modified from time to time, the “First Lien Indenture Documents”
and together with the First Lien Credit Documents, the “First Lien Documents”),
among Walter, as issuer, certain of its subsidiaries, as guarantors, and
Wilmington Trust, National Association (as successor to Union Bank, N.A.), as
trustee (in such capacity, the “First Lien Trustee”) and collateral agent for
the noteholders from time to time of the 9.50% Senior Secured Notes due 2019
(collectively, the “First Lien Noteholders” and, together

 

2

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with the First Lien Trustee, the Administrative Agent and the First Lien
Lenders, the “First Lien Secured Parties”);

 

(c)                                  the Indenture, dated as of March 27, 2014
(as amended, waived, supplemented or otherwise modified from time to time, the
“Second Lien Indenture” and together with all mortgage, security, pledge,
guaranty and collateral agreements, including the 2L Collateral Agreement (as
defined below) and all other documentation executed in connection with the
foregoing, each as amended, restated, amended and restated, waived, supplemented
or otherwise modified from time to time, the “Second Lien Indenture Documents”),
among Walter, as issuer, certain of its subsidiaries, as guarantors, and
Wilmington Trust, National Association, as trustee (in such capacity, the
“Second Lien Trustee” and, together with the First Lien Trustee, the “Indenture
Trustees”) and collateral agent for the noteholders from time to time of the
11.0%/12.0% Senior Secured Second Lien PIK Toggle Notes due 2020 (collectively,
the “Second Lien Noteholders” and, together with the Second Lien Trustee and the
First Lien Secured Parties, collectively, the “Prepetition Secured Parties”);

 

(II)                              scheduling, pursuant to Bankruptcy Rule 4001,
an interim hearing (the “Interim Hearing”) on the Motion to be held before this
Court to consider entry of this Interim Order, which, among other things,
authorizes the Debtors’ use of Cash Collateral and grants adequate protection to
the Prepetition Secured Parties;

 

(III)                         subject to entry of the Final Order (as defined
herein) and to the extent set forth herein, waiving the Debtors’ right to
surcharge the Prepetition Collateral pursuant to Bankruptcy Code section 506(c);

 

(IV)                          modifying the automatic stay imposed by Bankruptcy
Code section 362 to the extent necessary to implement and effectuate the terms
of this Interim Order;

 

(V)                               scheduling, pursuant to Bankruptcy Rule 4001,
a final hearing (the “Final Hearing”) granting the relief requested in the
Motion on a final basis pursuant to the final order (the “Final Order”); and

 

(VI)                          waiving any applicable stay with respect to the
effectiveness and enforceability of this Interim Order (including a waiver
pursuant to Bankruptcy Rule 6004(h)).

 

The Interim Hearing having been held by this Court on July 15, 2015; and upon
the record made by the Debtors at the Interim Hearing (including the First Day
Declaration); and this

 

3

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Court having heard and resolved or overruled all objections to the interim
relief requested in the Motion; and it appearing that the interim relief
requested in the Motion is in the best interests of the Debtors, their estates
and creditors; and after due deliberation and consideration and sufficient cause
appearing therefor,

 

IT IS FOUND, DETERMINED, ORDERED AND ADJUDGED, that:

 

1.                                      The Motion.  The Motion is granted on an
interim basis as set forth herein.  Any objection to the Motion to the extent
not withdrawn or resolved is hereby overruled.

 

2.                                      Jurisdiction.  This Court has core
jurisdiction over the above-captioned chapter 11 cases (the “Chapter 11 Cases”)
commenced on July 15, 2015 (the “Petition Date”), this Motion, and the parties
and property affected hereby pursuant to 28 U.S.C. §§ 157(b) and 1334.  Venue is
proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409.

 

3.                                      Statutory Committees.  As of the date
hereof, no official committee of unsecured creditors (the “Creditors’
Committee”) or any other official committee has been appointed in the Chapter 11
Cases.

 

4.                                      Notice.  The Debtors have caused notice
of the Motion, the relief requested therein and the Interim Hearing to be served
on:  (a) the Office of the Bankruptcy Administrator for the Northern District of
Alabama (the “Bankruptcy Administrator”); (b) counsel to the Administrative
Agent; (c) counsel to the First Lien Trustee; (d) counsel to the Second Lien
Trustee; (d) counsel to a steering committee (the “Steering Committee”) of First
Lien Lenders and First Lien Noteholders; (e) the Internal Revenue Service;
(f) the Securities and Exchange Commission; (g) the U.S. Environmental
Protection Agency; (h) counsel to the United Mine Workers of America;
(i) counsel to the United Steel Workers; (j) the holders of the fifty (50)
largest unsecured claims against the Debtors, on a consolidated basis; and
(k) the United States

 

4

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Attorney for the Northern District of Alabama.  Under the circumstances, the
notice given by the Debtors of the Motion, the relief requested therein and of
the Interim Hearing constitutes due and sufficient notice thereof and complies
with Bankruptcy Rules 2002 and 4001(b) and (d).

 

5.                                      Debtors’ Stipulations.  Subject to the
rights granted to certain parties, other than the Debtors, to challenge the
Prepetition Secured Parties’ claims and liens before the termination of the
Challenge Period (as defined herein) as set forth below in paragraph 16, the
Debtors admit, stipulate, and agree that:

 

(a)                                 As of the Petition Date, all of the Debtors
(excluding Jefferson Warrior Railroad Company, Inc., Jim Walter Homes, LLC,
Walter Home Improvement, Inc., Blue Creek Energy, Inc., Sloss-Sheffield Steel &
Iron Company, SP Machine, Inc., and V Manufacturing Company) (collectively, the
“Obligated Debtors”) were unconditionally indebted and liable to the Prepetition
Secured Parties, without defense, counterclaim or offset of any kind, for the
following:

 

(i)            all debts, liabilities and obligations of every kind and nature
owed by the Obligated Debtors under the First Lien Credit Documents, including,
without limitation, the Loans (as defined in the Credit Agreement) made by the
First Lien Lenders to such Debtors in the outstanding aggregate principal amount
of $978,178,601.35 of term loans, and US$ 54,153,604.00 and C$24,070,494.00 (the
“Canadian LCs”) in outstanding letters of credit, plus accrued and unpaid
interest, fees (including any prepayment fees), expenses, penalties, premiums
and other obligations incurred in connection therewith, in each case in
accordance with the terms of the First Lien Credit Documents (collectively, the
“Credit Agreement Obligations”); the Credit Agreement Obligations are
unconditionally guaranteed by the U.S. Subsidiary Guarantors (as defined in the
Credit Agreement) and are secured by first priority security interests in and
liens on (the “Credit Agreement Liens”) substantially all of the assets of
Walter and the U.S. Subsidiary Guarantors, including Cash Collateral (as defined
herein) (the “Prepetition Collateral”), pursuant to and on the terms set forth
in (A) the U.S. Guaranty and Collateral Agreement, dated as of April 1, 2011 (as
amended, restated, supplemented or otherwise modified from time to time, the “1L
Security Agreement”), among

 

5

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

 

Walter, the U.S. Subsidiary Guarantors and Morgan Stanley Senior Funding, Inc.,
as collateral agent (in such capacity, the “Credit Agreement Collateral Agent”),
(B)  the Grant of Security Interest in United States Trademarks, dated as of
April 1, 2011, made by Walter to the Credit Agreement Collateral Agent, and
(C) such other mortgage, security, pledge, guaranty and collateral agreements
executed in connection with the Credit Agreement;

 

(ii)           all debts, liabilities and obligations of every kind and nature
owed by the Obligated Debtors under the First Lien Indenture Documents
(collectively, the “First Lien Indenture Obligations” and together with the
Credit Agreement Obligations, the “First Lien Obligations”), including, without
limitation, the Notes (as defined in the First Lien Indenture) issued to the
First Lien Noteholders in the outstanding aggregate principal amount of
$970,000,000 under the First Lien Indenture, plus accrued and unpaid interest,
fees, penalties, premium, expenses and other obligations incurred in connection
therewith, in each case in accordance with the terms of the First Lien Indenture
Documents; the First Lien Indenture Obligations are unconditionally guaranteed
by the same entities that have guaranteed the Credit Agreement Obligations and
secured, pari passu with the Credit Agreement Liens, by first priority security
interests in and liens on the Prepetition Collateral (collectively with the
Credit Agreement Liens, the “Prepetition First Priority Liens”), pursuant to and
in accordance with the terms of (A) the First-Lien Notes Collateral Agreement,
dated as of September 27, 2013 (as amended, restated, supplemented or otherwise
modified from time to time, the “1L Notes Collateral Agreement”), among Walter,
certain of its subsidiaries from time to time party thereto and Wilmington
Trust, National Association (as successor to Union Bank, N.A.), as collateral
agent (in such capacity, the “1L Notes Collateral Agent”), (B) the Grant of
Security Interest in United States Trademarks, dated as of September 27, 2013,
made by Walter to the 1L Notes Collateral Agent, and (C) such other mortgage,
security, pledge, guaranty and collateral agreements executed in connection with
the First Lien Indenture; and

 

(iii)          all debts, liabilities and obligations of every kind and nature
owed by the Obligated Debtors under the Second Lien Indenture Documents
(collectively, the “Second Lien Indenture Obligations” and together with the
First Lien Obligations, the “Prepetition Obligations”), including, without
limitation, the Notes (as defined in the Second Lien Indenture) issued to the
Second Lien Noteholders in the outstanding aggregate principal amount (including
interest that has been capitalized) of $360.5 million under the Second Lien
Indenture, plus accrued and unpaid interest, fees, penalties, premium, expenses
and other obligations incurred in connection therewith, in each case in

 

6

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accordance with the terms of the Second Lien Indenture Documents; the Second
Lien Indenture Obligations are unconditionally guaranteed by the same entities
that have guaranteed the First Lien Obligations and secured by second priority
security interests in and liens on the Prepetition Collateral (the “Prepetition
Second Priority Liens” and together with the Prepetition First Priority Liens,
the “Prepetition Liens”), pursuant to and in accordance with the terms of
(A) the Second-Lien Notes Collateral Agreement, dated as of March 27, 2014 (as
amended, restated, supplemented or otherwise modified from time to time, the “2L
Notes Collateral Agreement”), among Walter, certain of its subsidiaries from
time to time party thereto and Wilmington Trust, National Association, as
collateral agent (in such capacity, the “2L Notes Collateral Agent”), (B) the
Grant of Security Interest in United States Trademarks, dated as of March 27,
2014, made by Walter to the 2L Notes Collateral Agent, and (C) all other
mortgage, security, pledge, guaranty and collateral agreements executed in
connection with the Second Lien Indenture.

 

(b)                                 The Prepetition Obligations constitute the
legal, valid, binding, non-avoidable obligations of the Obligated Debtors.

 

(c)                                  The Prepetition Liens are valid, binding,
perfected, non-avoidable, and enforceable liens on and security interests in the
Prepetition Collateral, subject in each case, solely as among the Prepetition
Secured Parties, to the terms of the Intercreditor Agreement (as defined herein)
and, prior to giving effect to this Interim Order, those other liens explicitly
permitted by the applicable Prepetition Debt Documents (in each case, only to
the extent such permitted exceptions were valid, properly perfected,
non-avoidable liens senior in priority to the respective liens and security
interests of the Prepetition Secured Parties on the Petition Date) (the
“Permitted Priority Liens”), if any.

 

(d)                                 (i) No portion of the Prepetition
Obligations, the Prepetition Debt Documents, and the transactions contemplated
thereby is subject to contest, attack, objection, recoupment, defense, setoff,
counterclaim, avoidance, recharacterization, reclassification, reduction,
disallowance, recovery, disgorgement, attachment, “claim” (as defined in the

 

7

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Bankruptcy Code), impairment, subordination or other challenge pursuant to the
Bankruptcy Code or applicable nonbankruptcy law; (ii) the Debtors do not have
any claims, challenges, counterclaims, causes of action, defenses, recoupment,
disgorgement, or setoff rights related to the Prepetition Obligations or the
Prepetition Debt Documents, whether arising under the Bankruptcy Code or
applicable nonbankruptcy law, on or prior to the date hereof, against the
Prepetition Secured Parties and their respective affiliates, subsidiaries,
agents, officers, directors, employees, attorneys and advisors; and (iii) the
Debtors each irrevocably waive, for themselves, and their subsidiaries,
shareholders, and affiliates, any right to challenge or contest in any way the
perfection, validity, priority and enforceability of the Prepetition Liens or
the validity or enforceability of the Prepetition Obligations and the
Prepetition Debt Documents.  Any order entered by the Court in relation to the
establishment of a bar date for any claims (including without limitation
administrative expense claims) in any of the Chapter 11 Cases or any successor
cases shall not apply to the Prepetition Secured Parties.  The Prepetition
Obligations, Prepetition Liens, interests, rights, priorities and protections
granted to, or in favor of the Prepetition Secured Parties, as set forth in this
Interim Order and in the applicable Prepetition Debt Documents shall be deemed a
timely filed proof of claim on behalf of these Prepetition Secured Parties in
each of these Chapter 11 Cases, and none of the Prepetition Secured Parties
shall be required to file a proof of claim with respect thereto.

 

(e)                                  Each of the Debtors and the Debtors’
estates, on its own behalf and on behalf of its past, present and future
predecessors, successors, heirs, subsidiaries, and assigns (collectively, the
“Releasors”) shall, to the maximum extent permitted by applicable law,
unconditionally, irrevocably, fully and forever release, remise, acquit,
relinquish, irrevocably waive and discharge each of the Prepetition Secured
Parties and each of their respective former,

 

8

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current, or future officers, employees, directors, agents, representatives,
owners, members, partners, financial advisors, legal advisors, shareholders,
managers, consultants, accountants, attorneys, affiliates, and predecessors in
interest (collectively, the “Releasees”) of and from any and all claims,
demands, liabilities, responsibilities, disputes, remedies, causes of action,
indebtedness and obligations, rights, assertions, allegations, actions, suits,
controversies, proceedings, losses, damages, injuries, attorneys’ fees, costs,
expenses, or judgments of every type, whether known, unknown, asserted,
unasserted, suspected, unsuspected, accrued, unaccrued, fixed, contingent,
pending, or threatened including, without limitation, all legal and equitable
theories of recovery, arising under common law, statute or regulation or by
contract, of every nature and description that exist on the date hereof relating
to any of the Prepetition Debt Documents, or the transactions contemplated under
such documents, including, without limitation, (i) any so-called “lender
liability,” equitable subordination, equitable disallowance or
recharacterization claims or defenses, (ii) any and all claims and causes of
action arising under the Bankruptcy Code, and (iii) any and all claims and
causes of action regarding the validity, priority, perfection or avoidability of
the Prepetition Liens and the Prepetition Obligations.  The Debtors’
acknowledgments, stipulations, and releases shall be binding on the Debtors and
their respective representatives, successors and assigns and, only subject to
any action timely commenced by a Creditors’ Committee (to the extent appointed)
or any other party in interest, and in any case which is granted the requisite
standing before the expiration of the Challenge Period (as defined herein) as
provided in paragraph 16, on each of the Debtors’ estates, all creditors thereof
and each of their respective representatives, successors and assigns, including,
without limitation, any trustee or other representative appointed by the Court,
whether such

 

9

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trustee or representative is appointed in cases under chapter 11 or chapter 7 of
the Bankruptcy Code.

 

(f)                                   For purposes of this Interim Order, the
term “Cash Collateral” shall mean and include all “cash collateral” as defined
in section 363 of the Bankruptcy Code in which the Prepetition Secured Parties
have a perfected lien, security interest or other interest, in each case whether
existing on the Petition Date, arising pursuant to this Interim Order, or
otherwise.  The Debtors stipulate that any and all of the Debtors’ cash, cash
equivalents, negotiable instruments, investment property, securities, and any
amounts generated from the use, sale, lease or other disposition of the
Prepetition Collateral, in each case wherever located, constitute Cash
Collateral and Prepetition Collateral of the Prepetition Secured Parties.

 

(g)                                  As of the Petition Date, the Debtors have
not brought and are not aware of any claims, objections, challenges, causes of
action, including without limitation, avoidance claims under chapter 5 of the
Bankruptcy Code against the Prepetition Secured Parties arising out of or
related to the Prepetition Obligations.

 

(h)                                 To the Debtors’ knowledge, as of the
Petition Date, there were no other perfected liens on or security interests in
the Prepetition Collateral except for the Prepetition Liens and the Permitted
Priority Liens.

 

6.                                      Section 552(b).  Each of the Prepetition
Secured Parties shall be entitled to all of the rights and benefits of
Bankruptcy Code section 552(b).  Subject to, and effective upon entry of the
Final Order, the “equities of the case” exception under Bankruptcy Code section
552(b) shall not apply to the Prepetition Secured Parties with respect to
proceeds, products, or profits of any of the Prepetition Collateral.

 

10

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7.                                      Findings Regarding the Use of Cash
Collateral and Prepetition Collateral.

 

(a)                                 Good cause has been shown for the entry of
this Interim Order.

 

(b)                                 The Debtors have an immediate need to use
the Cash Collateral to permit, among other things, the orderly continuation of
their businesses, pay their operating expenses and preserve the going concern
value of the Debtors.

 

(c)                                  The preservation and maintenance of the
Debtors’ businesses and assets is necessary to maximize value.  Absent the
Debtors’ ability to use Cash Collateral in accordance with the terms hereof
(including, without limitation, the Budget Covenant), the continued operation of
the Debtors’ businesses would not be possible, and irreparable harm to the
Debtors, their estates, and their creditors would occur.  Authorization to use
the Cash Collateral is therefore (i) critical to the Debtors’ ability to
maximize the value of these chapter 11 estates, (ii) in the best interests of
the Debtors and their estates, and (iii) necessary to avoid immediate and
irreparable harm to the Debtors, their creditors, and their assets, businesses,
goodwill, reputation, and employees.

 

(d)                                 The terms of the use of the Cash Collateral
pursuant to this Interim Order are fair and reasonable, and reflect the Debtors’
exercise of prudent business judgment consistent with their fiduciary duties.

 

(e)                                  The Steering Committee, the Administrative
Agent, the Credit Agreement Collateral Agent, the First Lien Trustee, the Second
Lien Trustee, the 1L Notes Collateral Agent, and the 2L Notes Collateral Agent,
as applicable, have consented to (or, as applicable, has been directed to, or it
has been asserted that they are deemed to have, consented to pursuant to the
Intercreditor Agreement referred to below), conditioned upon the entry of this
Interim Order, the Debtors’ proposed use of Cash Collateral, on the terms and
conditions set forth in this Interim

 

11

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Order and in accordance with the Budget Covenant.  Pursuant and subject to the
terms of the Amended and Restated Intercreditor Agreement, dated as of March 27,
2014 (as amended, supplemented or otherwise modified from time to time, the
“Intercreditor Agreement”), among Walter, the other grantors from time to time
party thereto, the Credit Agreement Collateral Agent, the 1L Notes Collateral
Agent, the 2L Notes Collateral Agent, and each additional Collateral Agent (as
defined in the Intercreditor Agreement) and Authorized Representative (as
defined in the Intercreditor Agreement) from time to time party thereto, the 1L
Notes Collateral Agent, the First Lien Noteholders, the 2L Notes Collateral
Agent and the Second Lien Noteholders are precluded from objecting to the use of
Cash Collateral under certain circumstances, including if the Credit Agreement
Collateral Agent has consented thereto and the adequate protection provisions
set forth herein are adhered to.

 

(f)                                   The continued use of Cash Collateral has
been negotiated in good faith and at arms’ length among the Debtors, the
Steering Committee, the Credit Agreement Collateral Agent (on behalf of the
First Lien Lenders) and the Administrative Agent, as applicable, and, therefore,
the use of the Cash Collateral by the Debtors in accordance with the terms of
this Interim Order shall be deemed to have been extended, issued, or made in
“good faith”.

 

(g)                                  The Debtors and certain of the Prepetition
Secured Parties have entered into that certain Restructuring Support Agreement
(as amended from time to time in accordance therewith, the “RSA”), which
contains the parties’ agreements and undertakings with respect to the Debtors’
restructuring.

 

8.                                      Authorization of Use of Cash
Collateral.  Subject to the terms hereof and in accordance with the Budget
Covenant, the Debtors are hereby authorized to use the Cash Collateral during
the period from the Petition Date through and including the Termination Date

 

12

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for: (a) working capital requirements; (b) general corporate purposes;
(c) adequate protection payments to the Prepetition Secured Parties as
contemplated herein; and (d) the costs and expenses of administering these
Chapter 11 Cases (including payments benefiting from the Carve-Out) incurred in
the Chapter 11 Cases; provided that the Debtors shall not be authorized to use
Cash Collateral to pay fees or expenses (x) in excess of $50,000 per month (the
“Committee Monthly Cap”), on account of Professional Persons (as defined herein)
retained by any official committee appointed in these Chapter 11 Cases,
including any Creditors’ Committee, (y) in excess of $25,000 (the “Investigation
Budget”) for the Creditors’ Committee to investigate (but not prepare, initiate
or prosecute) Claims and Defenses (as defined herein) against the Prepetition
Secured Parties before the termination of the Challenge Period (as defined
herein), or (z) to initiate or prosecute proceedings or actions on account of
any Claims and Defenses against the Prepetition Secured Parties.  For the
avoidance of doubt and notwithstanding any other provision of this Interim
Order, other than the Investigation Budget (which may be used solely for the
purposes authorized in this paragraph 8), no Cash Collateral, Prepetition
Collateral, Collateral or any proceeds thereof, or any portion of the Carve-Out
may be used directly or indirectly by any Debtor, any official committee
appointed in the case, including the Creditors’ Committee, or any trustee
appointed in the Chapter 11 Cases or any successor case, or any other person,
party or entity to (i) investigate, object, contest, or raise any defense to the
validity, perfection, priority, extent, or enforceability of the Prepetition
Obligations, the Prepetition Liens or any action purporting to do any of the
foregoing; (ii) investigate, assert or prosecute any Claims and Defenses against
the Prepetition Secured Parties or their respective predecessors-in-interest,
agents, affiliates, representatives, attorneys, or advisors or any action
purporting to do the foregoing in respect of the Prepetition Obligations

 

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and/or the Prepetition Liens; (iii) prevent, hinder, or otherwise delay the
Prepetition Secured Parties’ enforcement, or realization on the Prepetition
Obligations, Cash Collateral, the Prepetition Liens, the Adequate Protection
Obligations, or the Adequate Protection Liens in accordance with the Interim
Order; (iv) seek to modify any of the rights granted to the Prepetition Secured
Parties hereunder (other than with the consents contemplated hereunder);
(v) apply to the Court for authority to approve superpriority claims or grant
liens (other than the Approved Liens (as defined below)) in the Collateral or
any portion thereof that are senior to, or on parity with, the Adequate
Protection Liens, Superpriority Claims or Prepetition Liens, unless all
Prepetition Obligations and claims under this Interim Order and the Final Order
have been refinanced or paid in full in cash (including the cash
collateralization of any letters of credit) or otherwise agreed to in writing by
the Administrative Agent and the Steering Committee, each in its sole
discretion; or (vi) seek to pay any amount on account of any claims arising
prior to the Petition Date unless such payments are agreed to in writing by the
Steering Committee in its sole discretion, are authorized in any “first day”
orders, or are otherwise included in the Approved Budget.

 

9.                                      Entitlement to Adequate Protection.  The
Prepetition Secured Parties are entitled to adequate protection of their
respective interests in the Prepetition Collateral (including, without
limitation, the Cash Collateral) on which the Prepetition Secured Parties hold
perfected security interests as of the Petition Date in an amount equal to the
aggregate postpetition diminution in value of the Prepetition Collateral,
including any Cash Collateral, from and after the Petition Date (such diminution
in value, the “Diminution in Value”), including, without limitation, to the
extent such diminution results from the sale, lease or use by the Debtors of the
Prepetition Collateral, the subordination of the Prepetition Liens to the
Carve-Out, or the

 

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imposition of the automatic stay pursuant to Bankruptcy Code section 362 (such
adequate protection, as set forth in paragraphs 10 and 11 below, the “Adequate
Protection Obligations”).

 

10.                               Adequate Protection Claims and Liens.

 

(a)                                 Adequate Protection for the First Lien
Secured Parties.  As adequate protection for the Diminution in Value of the
Prepetition Collateral, the First Lien Secured Parties are hereby granted the
following claims, liens, rights and benefits:

 

(i)                                     First Lien Superpriority Claim.  The
Adequate Protection Obligations due to the First Lien Secured Parties (the
“First Lien Adequate Protection Obligations”) shall constitute allowed joint and
several superpriority claims against each of the Debtors as provided in
Bankruptcy Code section 507(b) (collectively, the “First Lien Superpriority
Claim”), with priority over any and all administrative expenses and all other
claims against the Debtors, now existing or hereafter arising, of any kind
whatsoever, including, without limitation, all other administrative expenses of
the kind specified in Bankruptcy Code sections 503(b) and 507(b), and over any
and all other administrative expenses or other claims arising under any other
provision of the Bankruptcy Code, including, without limitation, Bankruptcy Code
sections 105, 326, 327, 328, 330, 331, 365, 503, 506, 507(a), 507(b), 546, 552,
726, 1113 or 1114, whether or not such expenses or claims may become secured by
a judgment lien or other nonconsensual lien, levy or attachment, subject and
subordinate only to the Carve-Out;

 

(ii)                                  First Lien Adequate Protection Liens. 
Subject to the Carve-Out, as security for the First Lien Adequate Protection
Obligations, effective as of the Petition Date and perfected without the
necessity of the execution by the Debtors (or recordation or other filing) of
security agreements, control agreements, pledge agreements, financing
statements, mortgages or other similar documents, or the possession or control
by the First Lien Secured Parties of any Postpetition Collateral (as defined
below), the following security interests and liens are hereby granted to the
First Lien Secured Parties (all such liens and security interests, the “First
Lien Adequate Protection Liens”):

 

(A)                               Pursuant to Bankruptcy Code sections
361(2) and 363(c)(2), a valid, binding, continuing, enforceable,
fully-perfected, non-avoidable additional and replacement first priority lien
on, and security interest in, all property (including any previously
unencumbered property), whether now owned or

 

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hereafter acquired or existing and wherever located, of each Debtor and each
Debtor’s “estate” (as created pursuant to Bankruptcy Code section 541(a)), of
any kind or nature whatsoever, real or personal, tangible or intangible, and now
existing or hereafter acquired or created, including, without limitation, all
cash, accounts, inventory, goods, contract rights, mineral rights, instruments,
documents, chattel paper, patents, trademarks, copyrights, and licenses
therefor, accounts receivable, receivables and receivables records, general
intangibles, payment intangibles, tax or other refunds, insurance proceeds,
letters of credit, owned real estate, real property leaseholds, fixtures,
deposit accounts, commercial tort claims, securities accounts, instruments,
investment property, letter-of-credit rights, supporting obligations, machinery
and equipment, real property, leases (and proceeds from the disposition
thereof), all of the issued and outstanding capital stock of each Debtor (other
than Walter), other equity or ownership interests held by a Debtor, including
equity interests in subsidiaries and non-wholly-owned subsidiaries, money,
investment property, and causes of action (including causes of action arising
under Bankruptcy Code section 549 and any related action under Bankruptcy Code
section 550) and, subject to entry of the Final Order, the proceeds of any
causes of action under Bankruptcy Code sections 502(d), 544, 545, 547, 548, 550
(except as provided above) or 553 or the proceeds of any other avoidance actions
under the Bankruptcy Code or applicable non-bankruptcy law (collectively, the
“Avoidance Actions”), Cash Collateral, and all cash and non-cash proceeds,
rents, products, substitutions, accessions, and profits of any of the collateral
described above, documents, vehicles, intellectual property, securities,
partnership or membership interests in limited liability companies and capital
stock, including, without limitation, the products, proceeds and supporting
obligations thereof, whether in existence on the Petition Date or thereafter
created, acquired, or arising and wherever located (all such property (including
the Junior Collateral (as defined herein)), other than the Prepetition
Collateral in existence immediately prior to the Petition Date, being
collectively referred to as, the “Postpetition Collateral” and collectively with
the Prepetition Collateral, the “Collateral”), which liens and security
interests shall be senior to any and all other liens and security interests
other than the Carve-Out and the Permitted Priority Liens, if any, and liens
granted to third parties on Cash Collateral to secure Approved Collateralized
Obligations (as defined below) (the “Approved Liens”).

 

(B)                               Subject to the Carve-Out, pursuant to
Bankruptcy Code sections 361(2) and 363(c)(2), a valid, binding, continuing,

 

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enforceable, fully-perfected non-avoidable junior priority replacement lien on,
and security interest in, all property, whether now owned or hereafter acquired
or existing and wherever located, of each Debtor and each Debtor’s “estate” (as
created pursuant to Bankruptcy Code section 541(a)), property of any kind or
nature whatsoever, real or personal, tangible or intangible, and now existing or
hereafter acquired or created, including, without limitation, all cash,
accounts, inventory, goods, contract rights, mineral rights, instruments,
documents, chattel paper, patents, trademarks, copyrights, and licenses
therefor, accounts receivable, receivables and receivables records, general
intangibles, payment intangibles, tax or other refunds, insurance proceeds,
letters of credit, contracts, owned real estate, real property leaseholds,
fixtures, deposit accounts, commercial tort claims, securities accounts,
instruments, investment property, letter-of-credit rights, supporting
obligations, machinery and equipment, real property, leases (and proceeds from
the disposition thereof), all of the issued and outstanding capital stock of
each Debtor (other than Walter), other equity or ownership interests held by a
Debtor, including equity interests in subsidiaries and non-wholly-owned
subsidiaries, money, investment property, causes of action, Cash Collateral, and
all cash and non-cash proceeds, rents, products, substitutions, accessions, and
profits of any of the collateral described above, documents, vehicles,
intellectual property, securities, partnership or membership interests in
limited liability companies and capital stock, including, without limitation,
the products, proceeds and supporting obligations thereof, whether now existing
or hereafter acquired, that is subject only to (x) the Permitted Priority Liens,
or (y) valid and non-avoidable liens in existence immediately prior to the
Petition Date that are perfected after the Petition Date to the extent permitted
by Bankruptcy Code section 546(b), which valid, perfected and unavoidable liens
are senior in priority to the security interests and liens in favor of the
Administrative Agent and the First Lien Trustee (the “Junior Collateral”).

 

(C)                               The Adequate Protection Liens shall not be
(1) subject or subordinate to, or pari passu with, (a) any lien or security
interest that is avoided and preserved for the benefit of the Debtors and their
estates under Bankruptcy Code section 551 or (b) any lien or security interest
arising on or after the Petition Date subject to the Carve-Out, or (2) except as
otherwise set forth in paragraphs 10(a)(ii)(A) and 10(a)(ii)(B) hereof,
subordinated to or made pari passu with any other lien, claim or security
interest under Bankruptcy Code sections 363 or 364 or otherwise.

 

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(iii)                               Carve-Out.  For purposes hereof, the
“Carve-Out” shall mean, following the Termination Date, the sum of:  (A) all
fees required to be paid to the clerk of the Court and the Bankruptcy
Administrator (without regard to the Carve-Out Trigger Notice (as defined
herein)); (B) reasonable fees and expenses up to $25,000 in the aggregate
incurred by a trustee appointed under Bankruptcy Code section 726(b) (without
regard to the Carve-Out Trigger Notice); (C) subject to the Committee Monthly
Cap with respect to Professional Fees incurred by Professional Persons retained
by the Creditors’ Committee or any other statutory committee appointed in the
Chapter 11 Cases, and subject to any Professional Fees permitted to be incurred
under the Investigation Budget, to the extent allowed, whether by interim order,
procedural order or otherwise, all accrued and unpaid reasonable fees, costs,
and expenses (the “Professional Fees”) incurred by persons or firms retained by
the Debtors, the Creditors’ Committee or any other statutory committee appointed
in the Chapter 11 Cases (if any) pursuant to Bankruptcy Code section 327, 328,
or 363 (collectively, the “Professional Persons”) at any time before or on the
day of delivery by the Administrative Agent or Steering Committee of a Carve-Out
Trigger Notice (the “Pre-Trigger Date Fees”); and (D) after the delivery by the
Administrative Agent or Steering Committee of the Carve-Out Trigger Notice (the
“Trigger Date”), to the extent allowed at any time, whether by interim order,
procedural order or otherwise, the payment of (1) all Professional Fees of
Professional Persons retained by the Debtors and (2) subject to the Committee
Monthly Cap, the payment of Professional Fees of Professional Persons incurred
by the Creditors’ Committee or any other statutory committee appointed in the
Chapter 11 Cases, not to exceed $5 million in the aggregate for clauses (1) and
(2) incurred after the Trigger Date (the amount set forth in this clause
(D) being the “Post-Carve Out Trigger Notice Cap”); provided that nothing herein
shall be construed to impair the ability of any party to object to the fees,
expenses, reimbursement or compensation described in clauses (C) or (D) above,
on any grounds.  On the day on which a Carve-Out Trigger Notice is given to the
Debtors, such Carve-Out Trigger Notice also shall constitute a demand to the
Debtors to utilize all cash on hand as of such date and any available cash
thereafter held by any Debtor to fund a reserve in an aggregate amount equal to
the accrued and unpaid Pre-Trigger Date Fees plus the Post-Carve Out Trigger
Notice Cap, and the Debtors shall deposit and hold any such amounts in a
segregated account at a financial institution selected by the Debtors for such
purpose and solely for the benefit of the Professional Persons entitled
thereto.  The reserved funds shall be released from time to time from the
segregated account to pay when due any Pre-Trigger Date Fees and any fees and
expenses incurred after Post-Carve Out Trigger Notice that are included in the
Post-Carve Out Trigger Notice Cap under

 

18

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clause (D) above.  Such account and amounts therein shall be free and clear of
all liens, claims and interests of any party other than the Professional Persons
entitled thereto.  Notwithstanding the foregoing, (X) the Carve-Out shall not
include, apply to or be available for any fees or expenses incurred by any party
in connection with (1) the investigation, preparation, initiation or prosecution
of any claims, causes of action, proceeding, adversary proceeding or other
litigation against any of the Prepetition Secured Parties (in such capacity),
including challenging the amount, validity, perfection, priority or
enforceability of or asserting any defense, counterclaim or offset to, the
Prepetition Obligations and the Prepetition Liens granted under the Prepetition
Debt Documents in favor of the Prepetition Secured Parties, including, without
limitation, for lender liability or pursuant to Bankruptcy Code section 105,
510, 544, 547, 548, 549, 550 or 552, applicable nonbankruptcy law or otherwise;
(2) attempts to modify any of the rights granted to the Prepetition Secured
Parties hereunder (other than with the consents contemplated hereunder);
(3) attempts to prevent, hinder or otherwise delay any of the Prepetition
Secured Parties’ enforcement or realization upon any Collateral in accordance
with the Prepetition Debt Documents and this Interim Order; or (4) paying any
amount on account of any claims arising before the Petition Date unless such
payments are approved by an order of this Court, in the Approved Budget or
otherwise consented to by the Steering Committee in its sole discretion, and
(Y) so long as the Carve-Out Trigger Notice shall not have been delivered, the
Carve-Out shall not be reduced by the payment of Professional Fees allowed at
any time by this Court.  Any claim incurred in connection with any of the
activities described above (other than as permitted in connection with the
Investigation Budget in an amount not exceeding such Investigation Budget) shall
not be allowed, treated or payable as an administrative expense claim for
purposes of section 1129(a)(9)(A) of Bankruptcy Code.  For purposes of the
foregoing, “Carve-Out Trigger Notice” shall mean a written notice delivered by
the Administrative Agent or the Steering Committee to the Debtors, Debtors’
counsel, the Bankruptcy Administrator, and counsel to the Creditors’ Committee
(if any), upon the occurrence and during the continuance of a Termination Event
(as defined below), stating that the Post-Carve Out Trigger Notice Cap has been
invoked.  For the avoidance of doubt and notwithstanding anything to the
contrary herein or in the Prepetition Debt Documents, the Carve-Out shall be
senior to all liens and claims arising out of the Prepetition Debt Documents,
including the Prepetition Liens, the Adequate Protection Liens, the
Superpriority Claims, and any and all other forms of adequate protection, liens
or claims securing or relating to the Prepetition Obligations.

 

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(b)           Adequate Protection for the Second Lien Trustee and Second Lien
Noteholders.  As adequate protection for the Diminution in Value of their liens
and interests in the Prepetition Collateral, the Second Lien Trustee and the
Second Lien Noteholders are hereby granted the following claims, liens, rights
and benefits:

 

(i)                                     Second Lien Superpriority Claims.  The
Adequate Protection Obligations due to the Second Lien Trustee and the Second
Lien Noteholders (the “Second Lien Adequate Protection Obligations”) shall
constitute joint and several superpriority claims against the Debtors as
provided in Bankruptcy Code section 507(b) (the “Second Lien Superpriority
Claim” and together with the First Lien Superpriority Claim, the “Superpriority
Claims”), subject and subordinate only to the Carve Out, the First Lien
Superpriority Claim and the First Lien Obligations.

 

(ii)                                  Second Lien Adequate Protection Liens.  As
security for the Second Lien Adequate Protection Obligations, effective as of
the Petition Date and perfected without the necessity of the execution by the
Debtors (or recordation or other filing) of security agreements, control
agreements, pledge agreements, financing statements, mortgages or other similar
documents, or the possession or control by the Second Lien Indenture Trustee of
any Postpetition Collateral, security interests and liens are hereby granted to
the Second Lien Indenture Trustee for the benefit of the Second Lien Noteholders
on the Postpetition Collateral, subject and subordinate only to the (A) the
Carve-Out, (B) the First Lien Adequate Protection Liens, (C) the liens and
security interests securing the First Lien Obligations, (D) the Permitted
Priority Liens, and (E) Approved Liens, and subject further to the Intercreditor
Agreement (all such liens and security interests, the “Second Lien Adequate
Protection Liens,” and collectively with the First Lien Adequate Protection
Liens, the “Adequate Protection Liens”).

 

11.          Additional Adequate Protection.  As additional adequate protection:

 

(a)           Payments:  The Debtors are authorized and directed to pay to the
Administrative Agent, for the ratable benefit of the First Lien Lenders
(including in respect of any unreimbursed drawings on letters of credit), and to
the First Lien Trustee, for the ratable benefit of the First Lien Noteholders,
any accrued, but unpaid interest due as of the Petition Date and postpetition
interest, in cash, pursuant to the terms of, the First Lien Credit Documents
(with

 

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the LIBO Rate under the First Lien Credit Documents fixed at 1.00% per annum for
purposes of such postpetition interest payments under the First Lien Credit
Documents) and the First Lien Indenture Documents, respectively, in each case
calculated based on 80% of the applicable contract non-default rate set forth
therein and due and payable on a monthly basis (with all payments of interest to
be without prejudice to the rights of the Administrative Agent and the First
Lien Trustee (and any party-in-interest’s right to object thereto) to assert a
claim for payment of additional interest at any other rates in accordance with
the applicable governing documents) but without prejudice to the right of any
party-in-interest with standing to do so to seek to recharacterize such payments
as principal; provided, any accrued, due but unpaid interest as of the Petition
Date shall be paid promptly upon entry of this Interim Order.

 

(b)           Agent/Indenture Trustee Fees and Expenses:  The Debtors shall
promptly pay, in cash, (x) all Letter of Credit Fees and Facing Fees (each as
defined in the Credit Agreement), and any annual administrative agent fees and
other fees set forth in Section 4.01(b) through (e) of the Credit Agreement
(including, in each case, all amounts set forth in Section 4.01(a) through
(e) of the Credit Agreement accrued with respect to periods on or prior to the
Petition Date) on the respective dates for the payment (or, in the case of all
amounts accrued as of the Petition Date, promptly upon entry of this Interim
Order) of all such fees as provided in the Credit Agreement, at the applicable
non-default rate provided for in the First Lien Credit Documents with respect to
such fees and (y) upon presentment of an applicable invoice to the Debtors (with
a copy of such invoice to be presented contemporaneously to both the Bankruptcy
Administrator and counsel for the Creditors’ Committee, if any), all reasonable,
actual, and documented (in customary detail, redacted for privilege and work
product) fees, costs and expenses incurred by each of the Administrative Agent
and the First Lien Trustee, including,

 

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without limitation, the fees, costs and expenses of one lead counsel, one local
counsel (if necessary) and, if needed, one Canadian counsel for each of the
Administrative Agent and the First Lien Trustee, in each case in accordance with
the applicable engagement letters (if any) and the Prepetition Debt Documents
and without further order of, or application to, the Court or notice to any
party other than as provided in this paragraph 11(b).

 

(c)           Steering Committee Fees and Expenses.  The Debtors shall promptly
pay in cash upon presentment of an applicable invoice to the Debtors (with a
copy of such invoice to be presented contemporaneously to both the Bankruptcy
Administrator and counsel for the Creditors’ Committee, if any), all reasonable,
actual, and documented (in customary detail, redacted for privilege and work
product) fees, costs and expenses of (i) Akin Gump Strauss Hauer & Feld LLP
(“Akin Gump”), as lead counsel, Burr Forman LLP (“Burr Forman”), as Alabama
counsel, Cassels Brock & Blackwell LLP (“Cassels”), as Canadian counsel, and
Lazard Frères & Co. LLC, as financial advisor, to the Steering Committee
(“Lazard” and together with Akin Gump, Burr Forman and Cassels, the “Steering
Committee Advisors”) and (ii) any consultants or other advisors retained by the
Steering Committee (and not by individual Steering Committee members) (the
parties described in this paragraph 11(c)(ii) collectively, the “Consultants”)
in connection with the Restructuring (as defined in the RSA); provided that the
Steering Committee shall provide notice to the Debtors prior to retaining any
such Consultants, in each case, in accordance with engagement letters (if any)
of such professional (including the Restructuring Fee as defined in Lazard’s
engagement letter), and in each case, without further order of, or application
to, the Court or notice to any party other than as provided in this paragraph
11(c); provided, however, that Lazard’s Restructuring Fee shall be subject to
the entry of the Final Order; provided further that no success fees shall be
payable to any Consultant.  In

 

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addition, the Debtors shall promptly reimburse each Steering Committee member in
cash for all reasonable and documented out-of-pocket costs and expenses (without
limiting the Debtors’ obligations pursuant to the previous sentence, which
out-of-pocket costs and expenses should not include any advisor and professional
fees for such individual Steering Committee member) incurred by such member in
connection with the Restructuring.

 

(d)           Credit Bidding.  The Administrative Agent (on behalf of the First
Lien Lenders), the First Lien Trustee (on behalf of the First Lien Noteholders)
and the Second Lien Trustee (on behalf of the Second Lien Noteholders) (but only
if any such credit bid provides, to the extent set forth in the Intercreditor
Agreement, for the payment in full and in cash of all Prepetition Obligations
owed to the First Lien Secured Parties and any amounts due and owing to the
First Lien Secured Parties under this Interim Order and the Final Order, and
provides for the cash collateralization of any letters of credit in accordance
with the First Lien Credit Documents and this Interim Order and the Final
Order), as applicable, shall have the right to credit bid (X) up to the full
amount of the remaining Prepetition Obligations under the First Lien Credit
Documents, First Lien Indenture Documents and the Second Lien Indenture
Documents, respectively and (Y) the First Lien Superpriority Claims, the Second
Lien Superpriority Claims, and any unpaid amounts due and owing under paragraph
11(a) through (c) hereof, as applicable, in the sale of any of the Collateral,
including, without limitation, (a) pursuant to Bankruptcy Code section 363,
(b) a plan of reorganization or a plan of liquidation under Bankruptcy Code
section 1129, or (c) a sale or disposition by a chapter 7 trustee for any Debtor
under Bankruptcy Code section 725.

 

(e)           Reporting and Budget Compliance.  The Debtors shall comply in all
respects with the provisions of this paragraph 11(e) (the “Budget Covenant”). 
The initial budget

 

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shall cover the 12-week period beginning the business week of the Petition Date
(the “Initial Budget Period”) and be in the form attached hereto as Exhibit A
(the “Initial Budget”).  On or before the last business day of the tenth week of
the Initial Budget Period, the Debtors shall deliver an updated budget (the
“Second Budget”) for the 12-week period following the Initial Budget Period (the
“Second Budget Period”).  On or before the last business day of the tenth week
of the Second Budget Period, the Debtors shall deliver an updated budget (the
“Third Budget” and, together with the Initial Budget and the Second Budget,
collectively, the “Budgets”) for the 12-week period following the Second Budget
Period (the “Third Budget Period”).  The Budgets shall be delivered to the
Steering Committee and the Administrative Agent, with a copy delivered to the
Creditors’ Committee; provided that, the Budgets may be shared on a confidential
basis with those Prepetition Secured Parties that have signed a confidentiality
agreement or are otherwise subject to confidentiality restrictions pursuant to
the Prepetition Debt Documents.  The Initial Budget will be the first budget
utilized for reporting and permitted variance purposes (the “Approved Budget”). 
The Second Budget and the Third Budget provided thereafter shall be of no force
and effect unless and until it is approved by the Steering Committee and the
Administrative Agent, each in its sole discretion.  The Steering Committee and
the Administrative Agent, each in its sole discretion, shall approve or reject
the Second Budget or the Third Budget within eleven (11) days after the last day
that delivery thereof is permitted as set forth above; provided that, each of
the Second Budget and the Third Budget shall be deemed approved upon the passage
of such eleven (11) day period with no objection raised by the Steering
Committee and the Administrative Agent.  Upon the approval by the Steering
Committee and the Administrative Agent, each of the Second Budget and the Third
Budget shall become the “Approved Budget” for the Second Budget Period and the
Third Budget

 

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Period, as applicable.  Every week (beginning with the first full week after the
Petition Date), on the fifth business day of such week, the Debtors shall
deliver to the Steering Committee Advisors, the advisors to the Administrative
Agent and the advisors to the Creditors’ Committee, a weekly variance report
from the previous week comparing the actual cash receipts and disbursements of
the Debtors with the receipts and disbursements in the Approved Budget (the
“Budget Variance Report”); provided that, the Budget Variance Report may be
shared with the Administrative Agent and the Steering Committee.  The Budget
Variance Report shall include, among other things, (a) details regarding amounts
paid under any order of the Court; (b) a detailed comparison, including
commentary, of each week’s performance against the Approved Budget; and (c) a
detailed comparison, including commentary, of aggregate performance since the
commencement of the Approved Budget against such Approved Budget.  The Debtors
shall not allow (x) (i) “Cumulative Net Cash Flow” for the relevant Testing
Period to have a negative variance of more than $20 million from the “Cumulative
Net Cash Flow” line item set forth in the Initial Budget and (ii) “Cumulative
Disbursements” for the relevant Testing Period to have a negative variance of
more than the greater of (a) $7.5 million and (b) 5% of “Cumulative
Disbursements” set forth in the Initial Budget for the relevant Testing Period
from the “Cumulative Disbursements” line item set forth in the Initial Budget,
(y) (i) “Cumulative Net Cash Flow” for the relevant Testing Period to have a
negative variance of more than $20 million from the “Cumulative Net Cash Flow”
line item set forth in the Second Budget and (ii) “Cumulative Disbursements” for
the relevant Testing Period to have a negative variance of more than the greater
of (a) $7.5 million and (b) 5% of “Cumulative Disbursements” set forth in the
Second Budget for the relevant Testing Period from the “Cumulative
Disbursements” line item set forth in the Second Budget and (z) (i) “Cumulative
Net Cash Flow” for the relevant Testing

 

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Period to have a negative variance of more than $20 million from the “Cumulative
Net Cash Flow” line item set forth in the Third Budget and (ii) “Cumulative
Disbursements” for the relevant Testing Period to have a negative variance of
more than the greater of (a) $7.5 million and (b) 5% of “Cumulative
Disbursements” set forth in the Third Budget for the relevant Testing Period
from the “Cumulative Disbursements” line item set forth in the Third Budget. 
For purposes of the Cumulative Net Cash Flow and Cumulative Disbursements
variance tests set forth above, (i) “Testing Period” shall mean (x) with respect
to clause (x) in the prior sentence, the first two week period of the Initial
Budget Period, and each cumulative period beginning with the beginning of the
Initial Budget Period and ending every two weeks after the first two week
period, (y) with respect to clause (y) in the prior sentence, the first two week
period of the Second Budget Period, and each cumulative period beginning with
the beginning of the Second Budget Period and ending every two weeks after the
first two week period, and (z) with respect to clause (z) in the prior sentence,
the first two week period of the Third Budget Period, and each cumulative period
beginning with the beginning of the Third Budget Period and ending every two
weeks after the first two week period and (ii) “Cumulative Net Cash Flow” and
“Cumulative Disbursements” shall not include, but shall otherwise be permitted
to be paid in accordance herewith, (w) adequate protection payments, (x) fees
and expenses of professionals retained outside the ordinary course of business,
(y) the Debtors’ use of the Cash Collateral to collateralize any new, replaced
or renewed letters of credit, surety bonds or workers’ compensation obligations,
in each case, that has been consented to by the Steering Committee in its sole
discretion (collectively, the “Approved Collateralized Obligations”) and (z) key
employee retention payments approved by both the Steering Committee and the
Court.  The Debtors shall not allow cumulative capital expenditures beginning
July 1, 2015, as calculated on

 

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a GAAP basis, to exceed the amounts set forth in the Debtors’ projected capital
expenditure budget attached as an exhibit to the Initial Budget by more than the
greater of (x) $5 million and (y) 20%.  Such capital expenditure variance shall
be tested as of the end of each calendar month, and the Debtors shall deliver to
the Steering Committee Advisors, the advisors to the Administrative Agent and
the advisors to the Creditors’ Committee a variance report calculating such
variance no later than 15 business days following the end of each calendar
month, beginning with July 2015.

 

(f)            Access to Records/Financial Reporting.  In addition to, and
without limiting, whatever rights of access the Prepetition Secured Parties have
under the Prepetition Debt Documents, upon reasonable notice, at reasonable
times and subject to appropriate confidentiality protections, the Debtors shall
permit representatives and agents of the Steering Committee and the
Administrative Agent (i) to have access to and inspect the Debtors’ properties,
subject to reasonable safety precautions, (ii) to examine the Debtors’ books and
records, and (iii) to discuss the Debtors’ affairs, finances and condition with
the Debtors’ officers and financial advisors.  In addition, the Debtors shall
provide to the Steering Committee Advisors and the advisors to the
Administrative Agent, on a monthly basis, reports setting forth (i) substantive
mine-by-mine details of the Debtors’ operating performance, including its
non-debtor subsidiaries and (ii) a detailed comparison, including commentary, of
the month’s actual operating performance against the projections, substantially
in form and substance consistent with the Company’s historical monthly reporting
to the Board of Directors, as modified to include summary mine-level operating
and financial data.

 

(g)           Executory Contracts and Unexpired Leases.  The Debtors will work
with the Steering Committee and its advisors to determine which executory
contracts and unexpired

 

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leases should be assumed or rejected by the Debtors.  The Debtors will provide
the Steering Committee and its advisors with all necessary information in order
to analyze such a decision.  Other than in connection with the 363 Sale (as
defined in the RSA) where the Purchaser (as defined in the Sale Term Sheet
attached as Exhibit C to the RSA) is not the winning bidder for the Assets (as
defined in the RSA), the Debtors shall not make any decision with regard to the
assumption or rejection of executory contracts and unexpired leases without
first obtaining the consent of the Steering Committee, which consent shall be in
its sole discretion.

 

(h)                                 Employee Incentive/Retention Plans.  The
Debtors shall not seek approval of any employee incentive or retention plans (or
any similar sort of retention or incentive program) without the prior written
consent of the Steering Committee, which consent shall be in its sole
discretion.

 

(i)                                     Other Covenants.

 

1.              The Debtors shall maintain their cash management arrangements in
a manner consistent in all material respects with that described in the Debtors’
motion for authority to maintain its existing cash management system.

 

2.              Except as expressly permitted under the RSA, the Sale Motion (as
defined in the RSA) or other “first day” pleadings, the Debtors shall not use,
sell or lease any material assets outside the ordinary course of business, or
seek authority of this Court to the extent required by Bankruptcy Code section
363, without obtaining the prior written consent of the Steering Committee,
which consent shall be in its sole discretion, and prior consultation with the
Administrative Agent and the First Lien Trustee at least five (5) business days
prior to the date on which the Debtors seek the Court’s authority for such use,
sale or lease.  Subject to paragraph 10(a)(iii) hereof and the rights of any
holder of a Permitted Priority Lien thereon, in the event of any such sale,
lease, transfer, license, or other disposition of property of the Debtors (other
than a disposition of all or substantially all of the Debtors’ assets) that
constitutes Collateral outside the ordinary course of business (to the extent
permitted by the Prepetition Debt Documents and this Interim Order) the Debtors
are authorized and directed, without further notice or order of this Court, to
immediately pay to the

 

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Administrative Agent or Indenture Trustees, as appropriate under the
Intercreditor Agreement, for the benefit of the applicable Prepetition Secured
Parties, 100% of the net cash proceeds resulting therefrom no later than the
second business day following receipt of such proceeds.  In the event of any
casualty, condemnation, or similar event with respect to property that
constitutes Collateral, the Debtors are authorized and directed to pay to the
Administrative Agent or Indenture Trustees, as appropriate under the
Intercreditor Agreement, for the benefit of the applicable Prepetition Secured
Parties, any insurance proceeds, condemnation award, or similar payment
(excluding any amounts on account of any D&O policies) in excess of $2,000,000
no later than the second business day following receipt of payment by the
Debtors unless the applicable Prepetition Secured Parties consent, each in their
sole discretion but subject to the Intercreditor Agreement, in writing, to the
funds being reinvested by the Debtors.

 

(j)                                    Restrictions on the Use of Collateral
with Respect to Foreign and Non-Debtor Affiliates.  The Debtors shall not
transfer or use any Collateral, including any Cash Collateral, to or for the
benefit of any direct or indirect foreign or non-debtor affiliate or subsidiary
of the Debtors, including, without limitation, in connection with any
professional fees and expenses incurred with respect to any restructuring of
such subsidiary or affiliate, provided that the Debtors shall be permitted to
make payments for the benefit of its foreign and non-debtor affiliates or
subsidiaries (i) as expressly provided in an Approved Budget or (ii) with the
prior consent of the Steering Committee, which consent shall be in its sole
discretion (“Permitted Non-Debtor Affiliate Payments”) and, other than with
respect to any payments made to or for the benefit of Black Warrior Methane
Corp. and Black Warrior Transmission Corp., any such Permitted Non-Debtor
Affiliate Payments shall be made pursuant to senior secured notes, which notes
shall be pledged to the First Lien Secured Parties.  For the avoidance of doubt,
in the event that any Permitted Non-Debtor Affiliate Payment is made to any one
or more Canadian Entity (as defined below), each such Canadian Entity shall
grant liens against all of its present and future property, assets and
undertaking, and all other Canadian Entities shall (i) guarantee

 

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repayment of such Permitted Non-Debtor Affiliate Payment and (ii) grant liens
against all of their respective present and future property, assets and
undertaking as security for such guarantee obligations, and each such Permitted
Non-Debtor Affiliate Payment and all of such guarantees and security shall be
assigned and pledged by the maker of such Permitted Non-Debtor Affiliate Payment
in favor of the First Lien Secured Parties, and in each such case, the form of
the note(s), security and guarantees shall be in form and substance satisfactory
to the Steering Committee in its sole discretion.

 

(k)                                 Right to Seek Additional Adequate
Protection.  This Interim Order is without prejudice to, and does not constitute
a waiver of, expressly or implicitly, the rights of the Prepetition Secured
Parties to request additional forms of adequate protection at any time or any
party-in-interest’s right to object thereto.  Any such request must be
consistent with the Intercreditor Agreement.

 

(l)                                     Independent Director of Canadian
Entities.  Within a reasonable period of time prior to taking any steps towards
commencing a sale, marketing, restructuring or similar process with respect to
the direct or indirect subsidiaries of Walter that are formed, incorporated or
otherwise domiciled in Canada (each, a “Canadian Entity” and collectively, the
“Canadian Entities”), Walter shall cause to be appointed to the board of Walter
Energy Canada Holdings, Inc. an independent director mutually agreeable to the
Debtors and the Steering Committee, or if the RSA is assumed, the Debtors and
the Majority Holders (as defined in the RSA) (and, upon the request of such
independent director, Walter shall cause such independent director to be
appointed to the board of any other Canadian Entity so requested).

 

12.                               Termination.  The Debtors’ right to use the
Cash Collateral pursuant to this Interim Order shall automatically terminate
(the date of any such termination, the

 

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“Termination Date”) without further notice or court proceeding on the earliest
to occur of (i) 45 days after the Petition Date (unless such period is extended
with the consent of the Steering Committee and the Administrative Agent, each in
its sole discretion), if the Final Order (provided that such Final Order has not
been reversed, vacated, stayed, unless such stay has been vacated, or appealed,
unless such appeal has been dismissed or otherwise finally resolved), which
Final Order shall be consistent with this Interim Order or otherwise acceptable
to the Steering Committee and the Administrative Agent, each in its sole
discretion, has not been entered by this Court on or before such date,
(ii) February 3, 2016 or such later date as may be agreed to by the Steering
Committee in writing in its sole discretion, (iii) the effective date of any
confirmed chapter 11 plan in any of the Chapter 11 Cases, (iv) the date of the
consummation of a sale or other disposition of all or substantially all of the
assets of the Debtors, and (v) the occurrence of any of the events set forth in
this paragraph 12(a) through (m) below, unless waived by the Administrative
Agent and the Steering Committee, each in its sole discretion (each of the
following events, a “Termination Event” and collectively, the “Termination
Events”):

 

(a)                                 the Debtors’ failure to:  (i) use the
Collateral, including without limitation Cash Collateral, in a manner consistent
with the Approved Budget, but subject to the Budget Covenant, and otherwise
comply in any respect with any provision of this Interim Order (including,
without limitation, the failure to make the payments identified in paragraphs
11(a), (b) and (c) when due in accordance with and under the terms hereof); or
(ii) comply with any other covenant or agreement specified in this Interim Order
(including any obligations to comply with the provisions of paragraph 11 or the
covenants and other obligations of the Debtors contained therein); in each case
where such failure shall have continued unremedied for five (5)

 

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business days following receipt of written notice by the Debtors from the
Administrative Agent or the Steering Committee of such failure;

 

(b)                                 (i) an application, motion or other pleading
shall have been filed by any Debtor seeking to amend, stay, supplement, vacate,
extend or modify in any manner this Interim Order; or (ii) an order shall have
been entered reversing, amending, supplementing, extending, staying, vacating,
or otherwise modifying in any manner this Interim Order, in each case, without
the prior written consent of the Steering Committee and the Administrative
Agent, each in its sole discretion;

 

(c)                                  the date any provision of this Interim
Order (or the Final Order, as applicable) shall for any reason cease to be valid
and binding or any Debtor shall so assert in any pleading filed in any court;

 

(d)                                 the date (i) any Chapter 11 Case shall be
dismissed or converted to a case under chapter 7 of the Bankruptcy Code or any
Debtor shall file a motion or other pleading seeking the dismissal or conversion
of any Chapter 11 Case pursuant to Bankruptcy Code section 1112 or otherwise
other than as expressly contemplated by the Restructuring (as defined in the
RSA); or (ii) a trustee, responsible officer, or an examiner (other than a fee
examiner) pursuant to Bankruptcy Code section 1104 is appointed or elected, as
applicable, in any Chapter 11 Case, any Debtor applies for, consents to, or
acquiesces in, any such appointment, or the Court shall have entered an order
providing for such appointment, in each case without the prior written consent
of the Steering Committee in its sole discretion;

 

(e)                                  the Court shall have entered an order
granting relief from the automatic stay to the holder or holders of any security
interest to permit foreclosure (or the granting of a

 

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deed in lieu of foreclosure of the like) on any of the Debtor’s assets (other
than in respect of insurance proceeds or with respect to assets having a fair
market value of less than $1,000,000);

 

(f)                                   any Debtor shall have filed a motion or
application for the approval of any superpriority claim or any lien in the
Chapter 11 Cases (other than such claim or lien granted or permitted pursuant to
this Interim Order), which is pari passu with or senior to any of the Adequate
Protection Liens, Superpriority Claims or Prepetition Liens, without the prior
consent of the Steering Committee and the Administrative Agent, each in its sole
discretion;

 

(g)                                  other than with respect to the Carve-Out
and the Approved Liens, any Debtor shall create or incur, or the Court enters an
order granting, any claim which is pari passu with or senior to any of the
Prepetition Liens or Prepetition Obligations or the Adequate Protection Liens
and Adequate Protection Obligations granted under this Interim Order;

 

(h)                                 unless otherwise agreed to in writing by the
Steering Committee in its sole discretion, the (i) consummation of a sale or
disposition of any material assets of the Debtors other than in the ordinary
course of business or as expressly provided for in the RSA, or (ii) termination
of the RSA;

 

(i)                                     commencement of any action, including
the filing of any pleading, by any Debtor, or direct or indirect non-debtor
affiliate or subsidiary of a Debtor, against any of the Prepetition Secured
Parties with respect to any of the Prepetition Obligations or Prepetition Liens
other than as expressly contemplated in the RSA;

 

(j)                                    unless otherwise agreed to in writing by
the Steering Committee in its sole discretion, the Canadian Entities commence,
or become subject to, any restructuring or insolvency proceeding in any
jurisdiction;

 

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(k)                                 unless otherwise agreed to in writing by the
Steering Committee in its sole discretion, commencement of a sale process or
other actions in furtherance of a disposition of any material assets of the
Canadian Entities;

 

(l)                                     unless otherwise agreed to in writing by
the Steering Committee in its sole discretion, incurrence of any new secured
debt or any unsecured debt, which unsecured debt is incurred outside of the
ordinary course of business (other than as it relates to the Permitted
Non-Debtor Affiliate Payments or cash collateralization of the Canadian LCs
using the cash on hand as of the Petition Date held by the Canadian Entities),
by any of the Canadian Entities; or

 

(m)                             unless the order approving the RSA Assumption
Motion (as defined in the RSA), which order includes a waiver or modification of
the automatic stay to provide any notices contemplated by and in accordance with
the RSA or this Interim Order, as applicable, has been entered by the Court
within sixty (60) days of the Petition Date.

 

13.                               Remedies Upon a Termination Event.  The
Debtors shall immediately provide notice to the Steering Committee, the
Administrative Agent and each of the Indenture Trustees (with a copy to counsel
for the Creditors’ Committee (if any) and the Bankruptcy Administrator), of the
occurrence of any Termination Event, at which time the Debtors’ ability to use
Cash Collateral hereunder shall terminate and the Adequate Protection
Obligations shall become due and payable.  Upon the occurrence of a Termination
Event and following the giving of not less than four (4) business days’ advance
written notice (the “Enforcement Notice”) to counsel to the Debtors, counsel to
the Creditors’ Committee (if any) and the Bankruptcy Administrator (the “Notice
Period”), the Prepetition Secured Parties (subject as among themselves to the
terms of the Intercreditor Agreement), may exercise any remedies available to
them under this Interim Order, the Prepetition Debt Documents and applicable
non-bankruptcy law, including but not

 

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limited to (a) set off and apply immediately any and all amounts in accounts
maintained by the Debtors against the Adequate Protection Obligations and
Prepetition Obligations owed to the Prepetition Secured Parties and otherwise
enforce rights against the Collateral for application towards the Adequate
Protection Obligations and Prepetition Obligations; (b) take any and all actions
necessary to take control of the Prepetition Collateral and/or the Collateral,
including any Cash Collateral; and (c) take any other actions or exercise any
other rights or remedies permitted under this Interim Order, the Prepetition
Debt Documents or applicable law to effect the repayment and satisfaction of the
Adequate Protection Obligations and Prepetition Obligations owed to the
Prepetition Secured Parties.  The rights and remedies of the Prepetition Secured
Parties specified herein are cumulative and not exclusive of any rights or
remedies that they may otherwise have.  The only permissible basis for the
Debtors, the Creditors’ Committee (if any), the Bankruptcy Administrator or any
other party to contest, challenge or object to an Enforcement Notice shall be
solely with respect to the validity of the Termination Event(s) giving rise to
such Enforcement Notice (i.e. whether such Termination Events validly occurred
and have not been cured or waived in accordance with this Interim Order).  The
automatic stay pursuant to Bankruptcy Code section 362 shall be automatically
terminated at the end of the Notice Period, without further notice or order of
the Court, unless the Prepetition Secured Parties elect otherwise in a written
notice to the Debtors, and the Prepetition Secured Parties shall be permitted to
exercise all rights and remedies, including with respect to the Collateral
(including, without limitation, any Cash Collateral), set forth in this Interim
Order, the Prepetition Debt Documents and the Intercreditor Agreement, and as
otherwise available at law without further order or application or motion to the
Court, and without restriction or restraint by any stay under Bankruptcy Code
sections 362 or 105 or otherwise.

 

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14.                               Perfection of Adequate Protection Liens.

 

(a)                                 The Administrative Agent, the Credit
Agreement Collateral Agent, the First Lien Trustee, the 1L Notes Collateral
Agent, the Second Lien Trustee and the 2L Notes Collateral Agent are each hereby
authorized, but not required, to file or record financing statements,
intellectual property filings, mortgages, notices of lien or similar instruments
in any jurisdiction in order to validate and perfect the liens and security
interests granted to it hereunder.  Whether or not the Administrative Agent, the
Credit Agreement Collateral Agent, the First Lien Trustee, the 1L Notes
Collateral Agent, the Second Lien Trustee or the 2L Notes Collateral Agent, each
in its respective sole discretion, chooses to file such financing statements,
intellectual property filings, mortgages, notices of lien or similar
instruments, such liens and security interests shall be deemed valid, perfected,
allowed, enforceable, non-avoidable and not subject to challenge, dispute,
subordination, contest, attack, objection, recoupment, defense, setoff,
counterclaim, avoidance, recharacterization, reclassification, reduction,
disallowance, recovery, disgorgement, attachment, “claim” (as defined in the
Bankruptcy Code), impairment, subordination (whether equitable, contractual or
otherwise) or other challenge of any kind pursuant to the Bankruptcy Code or
applicable nonbankruptcy law as of the date of entry of this Interim Order.  If
the Administrative Agent, the Credit Agreement Collateral Agent, the First Lien
Trustee, the 1L Notes Collateral Agent, the Second Lien Trustee or the 2L Notes
Collateral Agent determines to file any financing statements, notices of liens
or similar instruments, the Debtors will cooperate and assist in any such
filings as reasonably requested by the Administrative Agent, the Credit
Agreement Collateral Agent, the First Lien Trustee, the 1L Notes Collateral
Agent, the Second Lien Trustee or the 2L Notes Collateral Agent, as applicable,
and the automatic stay shall be modified to allow such filings.

 

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(b)                                 The Administrative Agent, the Credit
Agreement Collateral Agent, the First Lien Trustee, the 1L Notes Collateral
Agent, the Second Lien Trustee or the 2L Notes Collateral Agent, may, each in
its respective discretion, cause a certified copy of this Interim Order to be
filed with or recorded in filing or recording offices in addition to or in lieu
of such financing statements, mortgages, notices of lien or similar instruments,
and all filing offices are hereby authorized to accept such certified copy of
this Interim Order for filing and recording.

 

(c)                                  The Debtors shall execute and deliver to
the Administrative Agent, the Credit Agreement Collateral Agent, the First Lien
Trustee, the 1L Notes Collateral Agent, the Second Lien Trustee or the 2L Notes
Collateral Agent all such agreements, financing statements, instruments and
other documents as each such party may reasonably request to evidence, confirm,
validate or perfect the Adequate Protection Liens.

 

(d)                                 Notwithstanding anything to the contrary in
the Motion or this Interim Order, for purposes of this Interim Order, in no
event shall the Collateral include or the Adequate Protection Liens granted
under this Interim Order attach to, any lease, license, permit, contract, or
agreement (including any operating and joint venture agreements) or other
property right, to which any Debtor is a party, or any of such relevant Debtor’s
rights or interests thereunder, if and for so long as the grant of such security
interest would constitute or result in: (i) the abandonment, invalidation,
unenforceability, or other impairment of any right, title, or interest of any
Debtor therein, or (ii) a breach or termination pursuant to the terms of, or a
default under, any such lease, license, contract, agreement, or other property
right pursuant to any provision thereof, unless, in the case of each of clauses
(i) and (ii), the applicable provision is rendered ineffective by applicable
non-bankruptcy law or the Bankruptcy Code (such leases, licenses, contracts or
agreements, or other property rights are collectively referred to as the
“Specified

 

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Contracts”); provided that the foregoing shall not preclude any counterparty to
a Specified Contract from an opportunity to be heard in this Court on notice
with respect to whether applicable non-bankruptcy law or the Bankruptcy Code
renders such provision ineffective.  Notwithstanding the foregoing, the Adequate
Protection Liens shall in all events attach to all proceeds, products,
offspring, or profits from all sales, transfers, dispositions, or monetizations
of any and all Specified Contracts.

 

15.                               Preservation of Rights Granted Under this
Interim Order.

 

(a)                                 Notwithstanding any order dismissing any of
these Chapter 11 Cases under Bankruptcy Code section 1112 or otherwise entered
at any time, (i) the Superpriority Claims, the other administrative claims
granted pursuant to this Interim Order, the Carve-Out and the Adequate
Protection Liens shall continue in full force and effect and shall maintain
their priorities as provided in this Interim Order until all Adequate Protection
Obligations and the Carve Out shall have been paid and satisfied in full (and
such Superpriority Claims, the other administrative claims granted pursuant to
this Interim Order, the Carve Out and the Adequate Protection Liens shall,
notwithstanding such dismissal, remain binding on all parties in interest), and
(ii) this Court shall retain jurisdiction, notwithstanding such dismissal, for
the purposes of enforcing the claims, liens and security interests referred to
in clause (i) above.

 

(b)                                 If any or all of the provisions of this
Interim Order are hereafter reversed, modified, vacated or stayed, such
reversal, stay, modification or vacatur shall not affect:  (i) the validity,
priority or enforceability of any Adequate Protection Obligations incurred prior
to the date of the entry of an order granting such reversal, stay, modification
or vacatur (the “Reversal Order”); or (ii) the validity, priority or
enforceability of the Adequate Protection Liens securing such Adequate
Protection Obligations.  Notwithstanding any such reversal, stay, modification
or

 

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vacatur, any use of the Collateral (including the Cash Collateral) or any
Adequate Protection Obligations incurred by the Debtors hereunder, as the case
may be, prior to the date of the entry of the Reversal Order shall be governed
in all respects by the original provisions of this Interim Order, and (x) the
First Lien Secured Parties shall be entitled to all of the rights, remedies,
privileges and benefits granted in Bankruptcy Code section 363(m) with respect
to all uses of the Collateral (including the Cash Collateral) and such First
Lien Adequate Protection Obligations for periods prior to the date of the entry
of the Reversal Order and (y) subject to the Intercreditor Agreement, the Second
Lien Trustee and the Second Lien Noteholders shall be entitled to all of the
rights, remedies, privileges and benefits granted in Bankruptcy Code section
363(m) with respect to all uses of the Collateral (including the Cash
Collateral) (other than Collateral constituting setoff rights of the First Lien
Secured Parties) and all Second Lien Adequate Protection Obligations for periods
prior to the date of the entry of the Reversal Order.

 

(c)                                  Except as expressly provided in this
Interim Order, the Adequate Protection Obligations, the Superpriority Claims and
all other rights, claims, security interests and remedies of the Prepetition
Secured Parties granted by the provisions of this Interim Order shall survive,
and shall not be modified, impaired or discharged by the entry of an order
(i) converting any of these Chapter 11 Cases to cases under chapter 7 of the
Bankruptcy Code, dismissing any of these Chapter 11 Cases or by any other act or
omission or (ii) confirming a plan of reorganization in any of the Chapter 11
Cases, and, pursuant to section 1141(d)(4) of the Bankruptcy Code, the Debtors
have waived any discharge as to any remaining Adequate Protection Obligations;
provided that any plan of reorganization or liquidation approved in accordance
with the RSA, or otherwise with the consent of the Steering Committee in its
sole discretion, shall supersede and replace the terms of the Interim Order upon
its effectiveness in

 

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accordance therewith.  The terms and provisions of this Interim Order shall
continue in these Chapter 11 Cases, in any successor cases if these Chapter 11
Cases cease to be jointly administered, or in any superseding chapter 7 cases
under the Bankruptcy Code, and the Adequate Protection Liens, Superpriority
Claims, other administrative claims granted pursuant to this Interim Order, and
all other rights, claims, security interests and remedies of the Prepetition
Secured Parties granted by the provisions of this Interim Order shall continue
in full force and effect as provided herein.

 

16.                               Effect of Stipulations on Third Parties.  The
stipulations, releases and admissions contained in this Interim Order, including
in paragraph 5 hereof, shall be binding upon the Debtors and any successor
thereto in all circumstances.  The stipulations, releases and admissions
contained in this Interim Order, including in paragraph 5 hereof, shall be
binding upon all other parties in interest, including the Creditors’ Committee
(if any) or any chapter 7 or chapter 11 trustee appointed or elected for any of
the Debtors (a “Trustee”), unless and to the extent (a) the Creditors’ Committee
(if any) or any other party in interest other than any Debtor (including any
Trustee), in each case, after obtaining requisite standing, has duly filed an
adversary proceeding challenging in whole or part the validity, enforceability,
priority or extent of the Prepetition Obligations or the liens on the
Prepetition Collateral securing the Prepetition Obligations held by or on behalf
of the Prepetition Secured Parties or otherwise asserting or prosecuting any
Avoidance Actions, recharacterization, subordination, “lender liability”, or any
other claims, counterclaims or causes of action, objections, contests or
defenses (collectively, the “Claims and Defenses”) against the Prepetition
Secured Parties in connection with any matter related to the Prepetition
Obligations, or the Prepetition Collateral or the Prepetition Liens by no later
than the later of (i) in the case of any such adversary proceeding filed by a
party in interest

 

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with requisite standing other than the Creditors’ Committee, seventy-five (75)
days after the date of entry of the Interim Order, (ii) in the case of any such
adversary proceeding filed by the Creditors’ Committee (if any), sixty (60) days
after the appointment of the Creditors’ Committee (if any), and (iii) any such
later date agreed to in writing by the Steering Committee and the Administrative
Agent, First Lien Trustee or Second Lien Trustee, as applicable, each in its
sole discretion (the time period established by the later of the foregoing
clauses (i), (ii) and (iii), the “Challenge Period”), and (b) an order is
entered by a court of competent jurisdiction and becomes final and
non-appealable in favor of the plaintiff sustaining any such challenge or claim
in any such duly filed adversary proceeding.  If no such adversary proceeding is
timely filed prior to the expiration of the Challenge Period by the Creditors’
Committee or a party in interest, in any case which has been granted the
appropriate standing, without further order of this Court:  (x) the Prepetition
Obligations shall constitute allowed claims, not subject to counterclaim,
setoff, subordination, recharacterization, defense, avoidance, contest, attack,
objection, recoupment, reclassification, reduction, disallowance, recovery,
disgorgement, attachment, “claim” (as defined in the Bankruptcy Code),
impairment, subordination (whether equitable, contractual or otherwise) or other
challenge of any kind pursuant to the Bankruptcy Code or applicable
nonbankruptcy law, for all purposes in these Chapter 11 Cases and any subsequent
chapter 7 cases; and (y) the Prepetition Obligations, the Administrative
Agent’s, the First Lien Trustee’s and the Second Lien Trustee’s respective
Prepetition Liens on the Prepetition Collateral and the respective Prepetition
Secured Parties in such capacity shall not be subject to any other or further
challenge and any party in interest shall be forever enjoined and barred from
seeking to exercise the rights of the Debtors’ estates or taking any such
action, including any successor thereto (including any estate representative or
a Trustee, whether such Trustee is

 

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appointed or elected prior to or following the expiration of the Challenge
Period).  If any such adversary proceeding is timely filed by a party in
interest with appropriate standing prior to the expiration of the Challenge
Period, the stipulations and admissions contained in this Interim Order,
including in paragraph 5 hereof, shall nonetheless remain binding and preclusive
(as provided in the second sentence of this paragraph) on any Creditors’
Committee and any other Person (as defined in the Credit Agreement), including
any Trustee, except as to any such findings and admissions that were expressly
and successfully challenged in such adversary proceeding.  Nothing in this
Interim Order vests or confers on any Person, including a Creditors’ Committee
(if any) or Trustee, standing or authority to pursue any cause of action
belonging to the Debtors or their estates.

 

17.                               Reservation of Rights of the Prepetition
Secured Parties and the Steering Committee.

 

(a)                                 Notwithstanding any other provision in this
Interim Order to the contrary, this Interim Order is without prejudice to, and
does not constitute a waiver, expressly or implicitly, or relinquishment, of the
Prepetition Secured Parties’ or the Steering Committee’s respective rights with
respect to any person or entity, or with respect to any other collateral owned
or held by any person or entity.  The rights of the Prepetition Secured Parties
and the Steering Committee, respectively, are expressly reserved and entry of
this Interim Order shall be without prejudice to, and does not constitute a
waiver, expressly or implicitly, or relinquishment, of:

 

(i)                                     the Prepetition Secured Parties’ or the
Steering Committee’s respective rights to bring or be heard on any matter
brought before this Court;

 

(ii)                                  the Prepetition Secured Parties’ or the
Steering Committee’s respective rights under the Prepetition Debt Documents, the
Bankruptcy Code or applicable nonbankruptcy law, including, without limitation
the rights,

 

42

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if any, to (v) request modification of the automatic stay, (w) sell or foreclose
on any Collateral under applicable law, (x) request dismissal of any of the
Chapter 11 Cases, conversion of any of the Chapter 11 Cases to a case under
chapter 7, or appointment of a chapter 11 trustee, examiner or receiver,
(y) propose, subject to the provisions of Bankruptcy Code section 1121, a
chapter 11 plan; or (z) take any action specified in paragraph 11(k) above;

 

(iii)                               the Prepetition Secured Parties’ or the
Steering Committee’s respective rights to seek any other or supplemental relief
in respect of the Debtors;

 

(iv)                              the Administrative Agent’s and the First Lien
Trustee’s rights, and subject to the Intercreditor Agreement, the Second Lien
Trustee’s right, to seek modification of the grant of adequate protection
provided under this Interim Order so as to provide different or additional
adequate protection; or

 

(v)                                 any other respective rights, claims, or
privileges (whether legal, equitable, or otherwise) of the Prepetition Secured
Parties or the Steering Committee;

 

(b)                                 Nothing contained herein shall be deemed a
finding by the Court or an acknowledgement by the Prepetition Secured Parties or
the Steering Committee, respectively, that the adequate protection granted
herein does in fact adequately protect the Prepetition Secured Parties against
the Diminution in Value of their interests in the Prepetition Collateral.

 

18.                               Compliance with the Prepetition Debt Document
Covenants.  Unless otherwise agreed to by the Steering Committee in its sole
discretion, notwithstanding the Debtors’ additional reporting requirements and
obligations set forth in paragraph 11 hereof, the Debtors shall comply in all
respects with all of the reporting requirements set forth in Section 9.01
(except for clauses (d) and (e)) of the Credit Agreement.

 

19.                               Prepetition Intercreditor Agreements.  Nothing
in this Interim Order shall amend or otherwise modify the terms and
enforceability of the Intercreditor Agreement, which shall remain in full force
and effect. The rights of the Prepetition Secured Parties shall at all times
remain subject to the Intercreditor Agreement and any other applicable
intercreditor agreements.

 

43

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

 

20.                               506(c) Waiver.  Subject to the entry of a
Final Order, except to the extent of the Carve-Out, no costs or expenses of
administration of the Chapter 11 Cases, which have been or may be incurred in
any of the Chapter 11 Cases at any time shall be charged against or recovered
from any Prepetition Secured Party, any of the Prepetition Obligations, any of
their respective claims, or the Collateral pursuant to Bankruptcy Code sections
105(a) or 506(c), or otherwise, without the prior written consent of the
affected Administrative Agent, First Lien Trustee or Second Lien Trustee and the
Steering Committee, each in its sole discretion, and no such consent shall be
implied from any other action, inaction, or acquiescence by any of the
Prepetition Secured Parties or their respective representatives.

 

21.                               No Marshaling/Application of Proceeds.  The
Administrative Agent, the First Lien Trustee and the Second Lien Trustee, as
applicable, shall be entitled to apply the payments or proceeds of the
Collateral in accordance with this Interim Order and the provisions of the
Prepetition Debt Documents and the Intercreditor Agreement, and in no event
shall any of the Prepetition Secured Parties be subject to the equitable
doctrine of “marshaling” or any other similar doctrine with respect to any of
the Collateral or otherwise.

 

22.                               Limitation on Use of Collateral.  For the
avoidance of doubt, the Debtors shall not be allowed to use the Cash Collateral
to pay fees and expenses of any Professional Person retained by a Creditors’
Committee or any other statutory committee in excess of the Committee Monthly
Cap; provided that any unused amounts may be carried forward to a subsequent
month.

 

23.                               Binding Effect; Successors and Assigns.  The
provisions of this Interim Order, including all findings herein, shall be
binding upon all parties in interest in these Chapter 11 Cases, including the
Prepetition Secured Parties, any Creditors’ Committee, the Debtors and their
respective successors and assigns (including any Trustee hereinafter appointed
or elected

 

44

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for the estates of any of the Debtors, an examiner appointed pursuant to
Bankruptcy Code section 1104, or any other fiduciary appointed as a legal
representative of any of the Debtors or with respect to the property of the
estate of any of the Debtors) as provided herein.  The protections afforded to
the Prepetition Secured Parties under this Interim Order and any actions taken
pursuant thereto, shall survive the entry of an order dismissing any or all of
the Chapter 11 Cases or converting any or all of the Chapter 11 Cases into a
case(s) under chapter 7 of the Bankruptcy Code, and the Adequate Protection
Liens and the Superpriority Claims shall continue in the Chapter 11 Cases, in
any such successor case(s) or after any such dismissal.  Except as otherwise
provided herein, the Adequate Protection Liens and the Superpriority Claims
shall maintain their priorities as provided in this Interim Order and the Final
Order, and not be modified, altered or impaired in any way by any other
financing, extension of credit, incurrence of indebtedness, or any conversion of
any of the Chapter 11 Cases into a case(s) pursuant to chapter 7 of the
Bankruptcy Code or dismissal of any of the Chapter 11 Cases, or by any other act
or omission until the Prepetition Obligations are indefeasibly paid in full in
cash (and any letters of credit cash collateralized in accordance with the terms
of the First Lien Credit Documents).

 

24.                               Limitation of Liability.  In permitting the
use of the Cash Collateral or in exercising any rights or remedies as and when
permitted pursuant to this Interim Order, subject to entry of the Final Order,
the Prepetition Secured Parties shall not be deemed to be in control of the
operations of the Debtors or to be acting as a “responsible person” or “owner or
operator” with respect to the operation or management of the Debtors (as such
terms, or any similar terms, are used in the United States Comprehensive
Environmental Response, Compensation and Liability Act, 29 U.S.C. §§ 9601 et
seq. as amended, or any similar federal or state statute), nor shall they owe
any fiduciary duty to any of the Debtors, their creditors or estates, or shall

 

45

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constitute or be deemed to constitute a joint venture or partnership with any of
the Debtors.  Furthermore, nothing in this Interim Order shall in any way be
construed or interpreted to impose or allow the imposition upon the Prepetition
Secured Parties of any liability for any claims arising from the prepetition or
postpetition activities of any of the Debtors and their respective affiliates
(as defined in Bankruptcy Code section 101(2)).

 

25.                               No Modification of Interim Order.  Each Debtor
irrevocably waives any right to seek any amendment, modification or extension of
this Interim Order without the prior written consent of the Steering Committee
and the Administrative Agent, each in its sole discretion, and no such consent
shall be implied by any action, inaction or acquiescence of the Steering
Committee or the Administrative Agent.

 

26.                               Priorities Among Prepetition Secured Parties. 
Notwithstanding anything to the contrary herein or in any other order of this
Court, in determining the relative priorities and rights of the Prepetition
Secured Parties (including, without limitation, the relative priorities and
rights of the Prepetition Secured Parties with respect to the adequate
protection granted hereunder), such relative priorities and rights shall
continue to be governed by the Prepetition Debt Documents and the Intercreditor
Agreement.

 

27.                               Rights of Administrative Agent.  Nothing in
this Interim Order shall be construed to limit or affect the Administrative
Agent’s right to request instructions from the Required Lenders (as defined in
the Credit Agreement) in accordance with Section 12.04 of the Credit Agreement. 
It being understood that since the Steering Committee constitutes the Required
Lenders and can therefore direct the Administrative Agent in taking actions in
connection with the Credit Agreement, in any instance in this Interim Order
where the Administrative Agent is indicated as having given its consent, as the
Steering Committee has also given its consent in

 

46

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

 

such case, the Administrative Agent shall be deemed to have given its consent at
the direction of the Required Lenders.

 

28.                               No Waiver.  This Interim Order shall not be
construed in any way as a waiver or relinquishment of any rights that the
Prepetition Secured Parties may have to bring or be heard on any matter brought
before this Court.

 

29.                               Automatic Stay Modified.  The automatic stay
shall be modified or lifted to the extent necessary to allow the relevant
Prepetition Secured Parties or the Majority Holders, as applicable, to provide
any notices to the Debtors as contemplated by and in accordance with this
Interim Order or the RSA, as applicable.

 

30.                               Rights Preserved.  Notwithstanding anything
herein to the contrary, the entry of this Interim Order is without prejudice to,
and does not constitute a waiver of, expressly or implicitly the Prepetition
Secured Parties’ or the Steering Committee’s right to seek any other or
supplemental relief in respect of the Debtors, including the right to seek
additional adequate protection.

 

31.                               Effectiveness.  This Interim Order shall
constitute findings of fact and conclusions of law and shall take effect
immediately upon entry hereof, and there shall be no stay of execution of
effectiveness of this Interim Order.  To the extent that any finding of fact
shall be determined to be a conclusion of law it shall be so deemed and vice
versa.

 

32.                               Controlling Effects of Interim Order.  To the
extent of any conflict between or among (a) the Motion, any other order of this
Court, or any other agreements, on the one hand, and (b) the terms and
provisions of this Interim Order, on the other hand, unless such term or
provision herein is phrased in terms of “as defined in” or “as more fully
described in” or “as provided in” or words to that effect with respect to the
Prepetition Debt Documents, the terms

 

47

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

 

and provisions of this Interim Order shall govern. This Interim Order shall take
effect and be fully enforceable nunc pro tunc to the Petition Date immediately
upon entry hereof, notwithstanding the possible application Bankruptcy
Rules 6004(g), 7062, 9014, or otherwise, and the Clerk of this Court is hereby
directed to enter this Interim Order on this Court’s dockets in the Chapter 11
Cases.

 

33.                               Final Hearing.  The Final Hearing is scheduled
for        , 2015 at         .m., prevailing Central time, before this Court. 
The Debtors shall promptly mail or otherwise serve copies of this Interim Order
(which shall constitute adequate notice of the Final Hearing) to the parties
having been given notice of the Interim Hearing, and to any other party that has
filed a request for notices with this Court and to any Creditors’ Committee. 
Any party in interest objecting to the relief sought at the Final Hearing shall
serve and file written objections; which objections shall be served upon (a) the
Debtors, 3000 Riverchase Galleria, Suite 1700, Birmingham, AL 35244, Attn: Earl
Doppelt; (b) proposed counsel to the Debtors, Paul, Weiss, Rifkind, Wharton &
Garrison LLP, 1285 Avenue of the Americas, New York, NY 10019, Attn:  Kelley A.
Cornish and Stephen J. Shimshak; (c) proposed co-counsel to the Debtors, Bradley
Arant Boult Cummings LLP, One Federal Place, 1819 Fifth Avenue North,
Birmingham, AL 35203, Attn: Patrick Darby; (d) counsel to any statutory
committee appointed in these Chapter 11 Cases; (e) counsel to the Steering
Committee, Akin Gump Strauss Hauer & Feld LLP, One Bryant Park, New York, NY
10036, Attn: Ira S. Dizengoff and Kristine Manoukian, and Akin Gump Strauss
Hauer & Feld LLP, 1333 New Hampshire Ave, N.W., Washington, DC 20036, Attn:
James Savin; (f) co-counsel to the Steering Committee, Burr Forman LLP, 420
North 20th Street, Suite 3400, Birmingham, AL 35203, Attn: Michael L. Hall;
(g) counsel to the Administrative Agent and the Credit Agreement Collateral
Agent, White & Case LLP, 1155

 

48

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

 

Avenue of the Americas, New York, NY 10036, Attn: Scott Greissman and Elizabeth
Feld; (h) any co-counsel to the Administrative Agent and the Credit Agreement
Collateral Agent; (i) counsel to the First Lien Trustee and the 1L Notes
Collateral Agent, Ropes & Gray LLP, 1211 Avenue of the Americas, New York, NY
10036-8704, Attn: Mark R. Somerstein; (j) counsel to the Second Lien Trustee and
the 2L Notes Collateral Agent; (k) the Office of the Bankruptcy Administrator
for the Northern District of Alabama, 1800 5th Avenue North, Birmingham, AL
35203, Attn:  Jon Dudeck; (l) all persons and entities that have filed a request
for service of filings in these Chapter 11 Cases pursuant to Bankruptcy
Rule 2002; and (m) the United States Attorney for the Northern District of
Alabama, in each case to allow actual receipt by the foregoing no later than
       , 2015 at 4:00 p.m. (prevailing Central Time).

 

34.                               Jurisdiction.  This Court shall retain
jurisdiction to enforce the terms of this Interim Order and to adjudicate any
and all matters arising from or related to the interpretation or implementation
of this Interim Order.

 

Dated:        , 2015

 

 

United States Bankruptcy Judge

 

49

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

 

EXHIBIT A

 

Initial Budget

 

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

 

Confidential

Subject to Material Change

 

Walter Energy, Inc. and Domestic Subsidiaries

Cash Collateral Budget

(Amounts in USD)

 

 

 

1

 

2

 

3

 

4

 

5

 

6

 

7

 

8

 

9

 

10

 

11

 

12

 

Total

 

Actual / Forecast

 

Forecast

 

Forecast

 

Forecast

 

Forecast

 

Forecast

 

Forecast

 

Forecast

 

Forecast

 

Forecast

 

Forecast

 

Forecast

 

Forecast

 

for

 

Week Ending

 

7/18/15

 

7/25/15

 

8/1/15

 

8/8/15

 

8/15/15

 

8/22/15

 

8/29/15

 

9/5/15

 

9/12/15

 

9/19/15

 

9/26/15

 

10/3/15

 

12 Weeks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL NET CASH FLOW

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Receipts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales/AR Receipts

 

$

10,844,222

 

$

15,024,788

 

$

18,727,363

 

$

12,585,487

 

$

15,645,125

 

$

15,402,161

 

$

5,956,529

 

$

4,358,090

 

$

10,743,138

 

$

15,994,156

 

$

23,583,227

 

$

13,187,610

 

$

162,051,895

 

Other

 

200,000

 

575,000

 

970,000

 

3,000

 

300,000

 

575,000

 

190,000

 

1,008,272

 

—

 

106,250

 

200,000

 

980,000

 

5,107,522

 

Total Cash Receipts

 

11,044,222

 

15,599,788

 

19,697,363

 

12,588,487

 

15,945,125

 

15,977,161

 

6,146,529

 

5,366,362

 

10,743,138

 

16,100,406

 

23,783,227

 

14,167,610

 

167,159,417

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Disbursements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payroll, Benefits & Pension

 

(6,331,258

)

(5,695,298

)

(7,292,681

)

(5,722,640

)

(7,483,164

)

(3,345,640

)

(7,495,664

)

(3,905,289

)

(7,060,189

)

(6,297,764

)

(4,536,189

)

(6,797,764

)

(71,963,540

)

Leases, Taxes, Utilities, Fuel, Insurance

 

(1,394,453

)

(577,000

)

(1,227,145

)

(3,345,140

)

(2,295,615

)

(969,600

)

(587,753

)

(3,916,145

)

(696,809

)

(2,092,836

)

(959,000

)

(3,806,753

)

(21,868,249

)

Freight & Royalties

 

(6,125,550

)

(2,753,000

)

(2,534,071

)

(2,426,025

)

(5,384,014

)

(2,924,500

)

(2,542,221

)

(2,522,479

)

(2,495,560

)

(4,765,760

)

(2,850,935

)

(2,136,025

)

(39,460,140

)

Other Expenditures

 

(652,712

)

(13,482,552

)

(16,547,260

)

(9,315,901

)

(2,571,463

)

(2,504,010

)

(3,579,217

)

(2,660,096

)

(2,409,086

)

(2,967,733

)

(4,932,558

)

(6,422,468

)

(68,045,056

)

Total Disbursements(1)

 

(14,503,973

)

(22,507,850

)

(27,601,157

)

(20,809,706

)

(17,734,256

)

(9,743,750

)

(14,204,855

)

(13,004,009

)

(12,661,644

)

(16,124,093

)

(13,278,682

)

(19,163,010

)

(201,336,985

)

TOTAL NET CASH FLOW(2)

 

$

(3,459,751

)

$

(6,908,062

)

$

(7,903,794

)

$

(8,221,219

)

$

(1,789,131

)

$

6,233,411

 

$

(8,058,326

)

$

(7,637,648

)

$

(1,918,506

)

$

(23,687

)

$

10,504,544

 

$

(4,995,400

)

$

(34,177,568

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Collateral Budget Metrics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative Totals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Disbursements

 

(14,503,973

)

(37,011,822

)

(64,612,979

)

(85,422,685

)

(103,156,941

)

(112,900,691

)

(127,105,546

)

(140,109,556

)

(152,771,200

)

(168,895,293

)

(182,173,975

)

(201,336,985

)

 

 

Total Net Cash Flow

 

(3,459,751

)

(10,367,813

)

(18,271,607

)

(26,492,826

)

(28,281,957

)

(22,048,546

)

(30,106,872

)

(37,744,520

)

(39,663,026

)

(39,686,713

)

(29,182,168

)

(34,177,568

)

 

 

 

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

Notes:

(1) Although permitted pursuant to the terms of the Cash Collateral Order, the
figures above exclude (i) adequate protection payments, (ii) fees and expenses
of professionals retained outside the ordinary course of business, (iii) the
Debtors’ use of the Cash Collateral to collateralize any new, replaced or
renewed letters of credit, surety bonds or workers’ compensation obligations in
each case, that have been consented to by the Steering Committee in its sole
discretion and (iv) key employee retention payments approved by both the
Steering Committee and the Court that are approved to be paid pursuant to the
Approved Budget and the Cash Collateral Order.

(2)Budget assumes continuation of ordinary course transactions between the
Debtors and Non-Debtor Affiliates Black Warrior Methane and Black Warrior
Transmission.

 

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

 

Walter Energy - Domestic Capital Expenditures Budget

$ in 000s

 

 

 

2015

 

2016

 

 

 

 

 

Jul-15

 

Aug-15

 

Sep-15

 

Oct-15

 

Nov-15

 

Dec-15

 

Jan-16

 

Cumulative

 

Capital Expenditures

 

8,460

 

6,044

 

4,551

 

3,315

 

4,514

 

5,739

 

8,273

 

40,897

 

 

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

 

EXHIBIT E

 

JOINDER

 

The undersigned (“Transferee”) hereby acknowledges that it has read and
understands the Restructuring Support Agreement, dated as of [·] (the
“Agreement”), by and among Walter Energy, Inc. on behalf of itself and its
wholly-owned direct and indirect subsidiaries listed on Exhibit A to the
Agreement (collectively, the “Company”), and the holders of First Lien Claims
against the Company, and agrees to be bound by the terms and conditions thereof,
and shall be deemed a “Joining Party” and “Holder Party” under the terms of the
Agreement.  The Transferee hereby makes the representations and warranties of
the Holder Parties set forth in Section 2 of the Agreement to the other parties
thereto.  This Joinder shall be governed by, and construed in accordance with,
the internal laws of the State of New York, without giving effect to the
principles of conflict of laws that would require the application of the law of
any other jurisdiction.  Capitalized terms not otherwise defined in this Joinder
shall have the meanings assigned to such terms in the Agreement.

 

Date Executed:

 

 

 

 

TRANSFEREE

 

Name of Institution:

 

 

 

 

 

By:

 

 

Name:

 

 

Its:

 

 

Telephone:

 

 

Facsimile:

 

 

 

First Lien Lender Claims

 

$                        

 

First Lien Noteholder Claims

 

$                        

 

Second Lien Claims

 

$                        

 

Unsecured Claims

 

$                        

 

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

 

NOTICE ADDRESS:

 

e-mail: [                                          ]

 

with a copy to (which shall not constitute notice):

 

e-mail: [                                          ]

 

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