Exhibit 10.1


 


EXECUTION COPY


 


CREDIT
AGREEMENT


 


Dated
as of December 20, 2006


 


among


 


BOWIE
RESOURCES, LLC,


 


as
Borrower,


 


THE
OTHER CREDIT PARTIES SIGNATORY HERETO,


 


as
Credit Parties,


 


THE
LENDERS SIGNATORY HERETO


 


FROM
TIME TO TIME,


 


as
Lenders,


 


and


 


GENERAL
ELECTRIC CAPITAL CORPORATION,


 


as
Administrative Agent and Lender


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  AMOUNT AND TERMS OF
  CREDIT

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  1.1

  	
   

  	
  Credit Facility

  	
  1

  
	
  1.2

  	
   

  	
  Reliance on Notices

  	
  2

  
	
  1.3

  	
   

  	
  Prepayments

  	
  2

  
	
  1.4

  	
   

  	
  Use of Proceeds

  	
  4

  
	
  1.5

  	
   

  	
  Interest and Applicable Margins

  	
  4

  
	
  1.6

  	
   

  	
  Cash Management Systems

  	
  6

  
	
  1.7

  	
   

  	
  Fees

  	
  6

  
	
  1.8

  	
   

  	
  Receipt of Payments

  	
  6

  



 


	
      1.9           Application
  and Allocation of Payments; Application and Disbursement of Funds Received in
  Collection Account

  	
  6

  



 


	
  1.10

  	
   

  	
  Loan Account and Accounting

  	
  7

  
	
  1.11

  	
   

  	
  Indemnity

  	
  8

  
	
  1.12

  	
   

  	
  Access

  	
  9

  
	
  1.13

  	
   

  	
  Taxes

  	
  10

  
	
  1.14

  	
   

  	
  Capital Adequacy; Increased
  Costs; Illegality

  	
  10

  
	
  1.15

  	
   

  	
  Single Loan

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  CONDITIONS
  PRECEDENT

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  2.1

  	
   

  	
  Conditions to the Initial Loans

  	
  12

  
	
  2.2

  	
   

  	
  Conditions to Delayed Draw Term
  Loan

  	
  16

  
	
  2.3

  	
   

  	
  Further Conditions to Each Term
  Loan

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  3.1

  	
   

  	
  Corporate Existence; Compliance
  with Law

  	
  18

  
	
  3.2

  	
   

  	
  Executive Offices, Collateral
  Locations, FEIN

  	
  18

  
	
  3.3

  	
   

  	
  Corporate Power, Authorization,
  Enforceable Obligations

  	
  18

  
	
  3.4

  	
   

  	
  Financial Statements and
  Projections

  	
  19

  
	
  3.5

  	
   

  	
  Material Adverse Effect

  	
  20

  
	
  3.6

  	
   

  	
  Ownership of Property; Liens

  	
  20

  
	
  3.7

  	
   

  	
  Labor Matters

  	
  21

  
	
  3.8

  	
   

  	
  Ventures, Subsidiaries and
  Affiliates; Outstanding Stock and Indebtedness

  	
  21

  
	
  3.9

  	
   

  	
  Government Regulation

  	
  21

  
	
  3.10

  	
   

  	
  Margin Regulations

  	
  21

  
	
  3.11

  	
   

  	
  Taxes

  	
  22

  
	
  3.12

  	
   

  	
  ERISA

  	
  22

  
	
  3.13

  	
   

  	
  No Litigation

  	
  23

  
	
  3.14

  	
   

  	
  Brokers

  	
  23

  
	
  3.15

  	
   

  	
  Intellectual Property

  	
  23

  
	
  3.16

  	
   

  	
  Full Disclosure

  	
  23

  



 

















 


	
  3.17

  	
   

  	
  Environmental Matters

  	
  24

  
	
  3.18

  	
   

  	
  Insurance

  	
  24

  
	
  3.19

  	
   

  	
  Deposit and Disbursement
  Accounts

  	
  25

  
	
  3.20

  	
   

  	
  Government Contracts

  	
  25

  
	
  3.21

  	
   

  	
  Customer and Trade Relations

  	
  25

  
	
  3.22

  	
   

  	
  Bonding; Licenses

  	
  25

  
	
  3.23

  	
   

  	
  Solvency

  	
  25

  
	
  3.24

  	
   

  	
  Bonding Collateral

  	
  25

  
	
  3.25

  	
   

  	
  Status of Guarantor

  	
  25

  
	
  3.26

  	
   

  	
  Liabilities

  	
  25

  
	
  3.27

  	
   

  	
  Collateral

  	
  26

  
	
  3.28

  	
   

  	
  Filings and Other Actions
  Relating to Collateral

  	
  26

  
	
  3.29

  	
   

  	
  BLM Leases

  	
  26

  
	
  3.30

  	
   

  	
  Applicant Violator System

  	
  26

  
	
  3.31

  	
   

  	
  Inventory

  	
  26

  
	
  3.32

  	
   

  	
  WSERC Agreement

  	
  26

  
	
  3.33

  	
   

  	
  Equipment

  	
  26

  
	
  3.34

  	
   

  	
  Bonds

  	
  26

  
	
  3.35

  	
   

  	
  Royalties

  	
  26

  
	
  3.36

  	
   

  	
  Permit Blocking

  	
  27

  
	
  3.37

  	
   

  	
  Material Contracts

  	
  27

  
	
  3.38

  	
   

  	
  Water Share Certificates

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  FINANCIAL
  STATEMENTS AND INFORMATION

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  4.1

  	
   

  	
  Reports and Notices

  	
  27

  
	
  4.2

  	
   

  	
  Communication with Accountants

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  AFFIRMATIVE
  COVENANTS

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  5.1

  	
   

  	
  Maintenance of Existence and
  Conduct of Business

  	
  27

  
	
  5.2

  	
   

  	
  Payment of Charges

  	
  28

  
	
  5.3

  	
   

  	
  Books and Records

  	
  28

  
	
  5.4

  	
   

  	
  Insurance; Damage to or
  Destruction of Collateral

  	
  28

  
	
  5.5

  	
   

  	
  Compliance with Laws

  	
  32

  
	
  5.6

  	
   

  	
  Supplemental Disclosure

  	
  32

  
	
  5.7

  	
   

  	
  Intellectual Property

  	
  32

  
	
  5.8

  	
   

  	
  Environmental Matters

  	
  32

  
	
  5.9

  	
   

  	
  Landlords’ Agreements, Mortgagee
  Agreements, Bailee Letters and Real Estate Purchases

  	
  33

  
	
  5.10

  	
   

  	
  Interest Rate Protection

  	
  34

  
	
  5.11

  	
   

  	
  Further Assurances

  	
  34

  
	
  5.12

  	
   

  	
  GAAP Reserves

  	
  34

  
	
  5.13

  	
   

  	
  Maintenance of Title;
  Maintenance of Liens

  	
  34

  
	
  5.14

  	
   

  	
  Collateral Assurances

  	
  34

  
	
  5.15

  	
   

  	
  Bonding

  	
  34

  
	
  5.16

  	
   

  	
  Annual Meeting

  	
  34

  



 


ii

















 


	
  5.17

  	
   

  	
  Maintenance of Properties

  	
  35

  
	
  5.18

  	
   

  	
  Future Subsidiaries

  	
  35

  
	
  5.19

  	
   

  	
  BLM Filings

  	
  35

  
	
  5.20

  	
   

  	
  BLM Lease Title Opinion

  	
  35

  
	
  5.21

  	
   

  	
  Permit Updates

  	
  35

  
	
  5.22

  	
   

  	
  Key Man Life Insurance

  	
  36

  
	
  5.23

  	
   

  	
  Material Contracts

  	
  36

  
	
  5.24

  	
   

  	
  Ditch Company Notices of
  Collateral Assignments

  	
  36

  
	
  5.25

  	
   

  	
  Water Share Certificates

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  NEGATIVE COVENANTS

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  6.1

  	
   

  	
  Mergers, Subsidiaries, Etc.

  	
  37

  
	
  6.2

  	
   

  	
  Investments; Loans and Advances

  	
  37

  
	
  6.3

  	
   

  	
  Indebtedness

  	
  37

  
	
  6.4

  	
   

  	
  Employee Loans and Affiliate
  Transactions

  	
  37

  
	
  6.5

  	
   

  	
  Capital Structure and Business

  	
  38

  
	
  6.6

  	
   

  	
  Guaranteed Indebtedness

  	
  38

  
	
  6.7

  	
   

  	
  Liens

  	
  38

  
	
  6.8

  	
   

  	
  Sale of Stock and Assets

  	
  39

  
	
  6.9

  	
   

  	
  ERISA

  	
  39

  
	
  6.10

  	
   

  	
  Financial Covenants

  	
  39

  
	
  6.11

  	
   

  	
  Hazardous Materials

  	
  39

  
	
  6.12

  	
   

  	
  Sale-Leasebacks

  	
  39

  
	
  6.13

  	
   

  	
  Restricted Payments

  	
  39

  
	
  6.14

  	
   

  	
  Change of Corporate Name, State
  of Incorporation or Location; Change of Fiscal Year

  	
  40

  
	
  6.15

  	
   

  	
  No Impairment of Intercompany
  Transfers

  	
  40

  
	
  6.16

  	
   

  	
  Changes Relating to Subordinated
  Debt ;Material Contracts

  	
  40

  
	
  6.17

  	
   

  	
  Managing Member

  	
  41

  
	
  6.18

  	
   

  	
  Key Employees

  	
  41

  
	
  6.19

  	
   

  	
  Accounting Changes

  	
  41

  
	
  6.20

  	
   

  	
  Bonding Collateral

  	
  41

  
	
  6.21

  	
   

  	
  Applicant Violator System

  	
  41

  
	
  6.22

  	
   

  	
  Tax Distributions

  	
  41

  
	
  6.23

  	
   

  	
  Synfuels

  	
  41

  
	
  6.24

  	
   

  	
  Use of Proceeds

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  TERM

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  7.1

  	
   

  	
  Termination

  	
  42

  
	
  7.2

  	
   

  	
  Survival of Obligations Upon
  Termination of Financing Arrangements

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  EVENTS OF DEFAULT;
  RIGHTS AND REMEDIES

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  8.1

  	
   

  	
  Events of Default

  	
  42

  
	
  8.2

  	
   

  	
  Remedies

  	
  44

  



 


iii

















 


	
  8.3

  	
   

  	
  Waivers by Credit Parties

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  ASSIGNMENT AND
  PARTICIPATIONS; APPOINTMENT OF AGENT

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  9.1

  	
   

  	
  Assignment and Participations

  	
  45

  
	
  9.2

  	
   

  	
  Appointment of Agent

  	
  47

  
	
  9.3

  	
   

  	
  Agent’s Reliance, Etc.

  	
  48

  
	
  9.4

  	
   

  	
  GE Capital and Affiliates

  	
  49

  
	
  9.5

  	
   

  	
  Lender Credit Decision

  	
  49

  
	
  9.6

  	
   

  	
  Indemnification

  	
  49

  
	
  9.7

  	
   

  	
  Successor Agent

  	
  50

  
	
  9.8

  	
   

  	
  Setoff and Sharing of Payments

  	
  50

  
	
  9.9

  	
   

  	
  Payments; Information; Actions
  in Concert

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  SUCCESSORS AND
  ASSIGNS

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  10.1

  	
   

  	
  Successors and Assigns

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  MISCELLANEOUS

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  11.1

  	
   

  	
  Complete Agreement; Modification
  of Agreement

  	
  52

  
	
  11.2

  	
   

  	
  Amendments and Waivers

  	
  52

  
	
  11.3

  	
   

  	
  Fees and Expenses

  	
  54

  
	
  11.4

  	
   

  	
  No Waiver

  	
  55

  
	
  11.5

  	
   

  	
  Remedies

  	
  55

  
	
  11.6

  	
   

  	
  Severability

  	
  55

  
	
  11.7

  	
   

  	
  Conflict of Terms

  	
  55

  
	
  11.8

  	
   

  	
  Confidentiality

  	
  56

  
	
  11.9

  	
   

  	
  GOVERNING LAW

  	
  56

  
	
  11.10

  	
   

  	
  Notices

  	
  57

  
	
  11.11

  	
   

  	
  Section Titles

  	
  58

  
	
  11.12

  	
   

  	
  Counterparts

  	
  58

  
	
  11.13

  	
   

  	
  WAIVER OF JURY TRIAL

  	
  58

  
	
  11.14

  	
   

  	
  Press Releases and Related
  Matters

  	
  58

  
	
  11.15

  	
   

  	
  Reinstatement

  	
  58

  
	
  11.16

  	
   

  	
  Advice of Counsel

  	
  59

  
	
  11.17

  	
   

  	
  No Strict Construction

  	
  59

  
	
  11.18

  	
   

  	
  Patriot Act Notice

  	
  59

  



 


iv

















 


INDEX OF APPENDICES


 


	
  Annex A (Recitals)

  	
   

  	
  -

  	
   

  	
  Definitions

  
	
  Annex B (Section 1.6)

  	
   

  	
  -

  	
   

  	
  Cash Management System

  
	
  Annex C (Section 2.1(a))

  	
   

  	
  -

  	
   

  	
  Closing Checklist

  
	
  Annex D (Section 4.1(a))

  	
   

  	
  -

  	
   

  	
  Financial Statements and Projections — Reporting

  
	
  Annex E (Section 6.10)

  	
   

  	
  -

  	
   

  	
  Financial Covenants

  
	
  Annex F (Section 9.9(a))

  	
   

  	
  -

  	
   

  	
  Lenders’ Wire Transfer Information

  
	
  Annex G (Section 11.10)

  	
   

  	
  -

  	
   

  	
  Notice Addresses

  
	
  Annex H (from Annex A

  	
   

  	
   

  	
   

  	
   

  
	
  Commitments definition)

  	
   

  	
  -

  	
   

  	
  Closing Date Term Loan Commitment

  
	
  Annex H-1 (from Annex A

  	
   

  	
   

  	
   

  	
   

  
	
  Commitments definition)

  	
   

  	
  -

  	
   

  	
  Delayed Draw Term Loan Commitment

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit 1.1(a)

  	
   

  	
  -

  	
   

  	
  Form of Term Note

  
	
  Exhibit 9.1(a)

  	
   

  	
  -

  	
   

  	
  Form of Assignment Agreement

  
	
  Exhibit A

  	
   

  	
  -

  	
   

  	
  Form of Collateral Assignment

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Disclosure Schedule 1.4

  	
   

  	
  -

  	
   

  	
  Sources and Uses; Funds Flow Memorandum

  
	
  Disclosure Schedule 2.1(cc)

  	
   

  	
  -

  	
   

  	
  Licensed Motor Vehicles

  
	
  Disclosure Schedule 3.1

  	
   

  	
  -

  	
   

  	
  Type of Entity; State of Organization

  
	
  Disclosure Schedule 3.1(d)

  	
   

  	
  -

  	
   

  	
  Permits

  
	
  Disclosure Schedule 3.2

  	
   

  	
  -

  	
   

  	
  Executive Offices, Collateral Locations, FEIN

  
	
  Disclosure Schedule 3.3

  	
   

  	
  -

  	
   

  	
  No Conflicts, No Default

  
	
  Disclosure Schedule 3.4(a)

  	
   

  	
  -

  	
   

  	
  Financial Statements

  
	
  Disclosure Schedule 3.4(b)

  	
   

  	
  -

  	
   

  	
  Pro Forma

  
	
  Disclosure Schedule 3.4(c)

  	
   

  	
  -

  	
   

  	
  Projections

  
	
  Disclosure Schedule 3.4(d)

  	
   

  	
  -

  	
   

  	
  Fair Salable Balance Sheet

  
	
  Disclosure Schedule 3.6

  	
   

  	
  -

  	
   

  	
  Real Estate and Leases

  
	
  Disclosure Schedule 3.7

  	
   

  	
  -

  	
   

  	
  Labor Matters

  
	
  Disclosure Schedule 3.8

  	
   

  	
  -

  	
   

  	
  Ventures, Subsidiaries and Affiliates; Outstanding Stock

  
	
  Disclosure Schedule 3.11

  	
   

  	
  -

  	
   

  	
  Tax Matters

  
	
  Disclosure Schedule 3.12

  	
   

  	
  -

  	
   

  	
  ERISA Plans

  
	
  Disclosure Schedule 3.13

  	
   

  	
  -

  	
   

  	
  Litigation

  
	
  Disclosure Schedule 3.14

  	
   

  	
  -

  	
   

  	
  Brokers

  
	
  Disclosure Schedule 3.15

  	
   

  	
  -

  	
   

  	
  Intellectual Property

  
	
  Disclosure Schedule 3.17

  	
   

  	
  -

  	
   

  	
  Hazardous Materials

  
	
  Disclosure Schedule 3.18

  	
   

  	
  -

  	
   

  	
  Insurance

  
	
  Disclosure Schedule 3.19

  	
   

  	
  -

  	
   

  	
  Deposit and Disbursement Accounts

  
	
  Disclosure Schedule 3.20

  	
   

  	
  -

  	
   

  	
  Government Contracts

  
	
  Disclosure Schedule 3.22

  	
   

  	
  -

  	
   

  	
  Bonds; Patent, Trademark Licenses

  
	
  Disclosure Schedule 3.24

  	
   

  	
  -

  	
   

  	
  Bonding Collateral

  
	
  Disclosure Schedule 3.37

  	
   

  	
  -

  	
   

  	
  Material Contracts

  
	
  Disclosure Schedule 3.38

  	
   

  	
  -

  	
   

  	
  Water Share Certificates

  
	
  Disclosure Schedule 5.1

  	
   

  	
  -

  	
   

  	
  Trade Names

  
	
  Disclosure Schedule 6.2

  	
   

  	
  -

  	
   

  	
  Closing Date Investments

  



 


v

















 


	
  Disclosure Schedule 6.3

  	
   

  	
  -

  	
   

  	
  Indebtedness

  
	
  Disclosure Schedule 6.4(a)

  	
   

  	
  -

  	
   

  	
  Transactions with Affiliates

  
	
  Disclosure Schedule 6.6

  	
   

  	
  -

  	
   

  	
  Guaranteed Indebtedness

  
	
  Disclosure Schedule 6.7

  	
   

  	
  -

  	
   

  	
  Existing Liens

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schedule 2

  	
   

  	
  -

  	
   

  	
  Existing ECR Shareholders

  



 


vi

















 


This CREDIT
AGREEMENT (this “Agreement”), dated as of December 20, 2006 among
BOWIE RESOURCES, LLC, a Delaware limited liability company (the “Borrower”);
the other Credit Parties signatory hereto; GENERAL ELECTRIC CAPITAL
CORPORATION, a Delaware corporation (in its individual capacity, “GE Capital”),
for itself, as Lender, and as Agent for Lenders and the other Lenders signatory
hereto from time to time.


 


RECITALS


 


WHEREAS,
Borrower has requested that Lenders extend (i) a term loan to Borrower on
the Funding Date for fifty million Dollars ($50,000,000) in the aggregate for
the purpose of refinancing certain indebtedness of Borrower and to provide (a) working
capital financing for Borrower, (b) funds for other general corporate
purposes of Borrower and (c) funds for other purposes permitted hereunder
and (ii) a delayed draw term loan to Borrower for ten million Dollars
($10,000,000) for the purpose of funding the Debt Service Reserve Account in an
amount sufficient to cause the amount on deposit in the Debt Service Reserve
Account to equal the Debt Service Reserve Amount and the making of a
distribution to the Borrower’s equity holders; and for these purposes, Lenders
are willing to make certain loans and other extensions of credit to Borrower of
up to such amounts upon the terms and conditions set forth herein; and


 


WHEREAS,
Borrower has agreed to secure all of its obligations under the Loan Documents
by granting to Agent, for the benefit of Agent and Lenders, a security interest
in and lien upon all of their existing and after-acquired personal and real
property; and


 


WHEREAS,
COLORADO HOLDING COMPANY, INC., a Delaware corporation (“CHC”) and BOWIE
RESOURCES MANAGEMENT PARTNER, LLC, a Nevada limited liability company (“BRMP”)
are willing to guarantee all of the obligations of Borrower to Agent and
Lenders under the Loan Documents and to pledge to Agent, for the benefit of
Agent and Lenders, all of the Stock of Borrower to secure such guaranty; and


 


WHEREAS, capitalized
terms used in this Agreement shall have the meanings ascribed to them in Annex
A and, for purposes of this Agreement and the other Loan Documents, the rules of
construction set forth in Annex A shall govern.  All Annexes, Disclosure Schedules, Exhibits
and other attachments (collectively, “Appendices”) hereto, or expressly
identified to this Agreement, are incorporated herein by reference, and taken
together with this Agreement, shall constitute but a single agreement.  These Recitals shall be construed as part of
the Agreement.


 


NOW,
THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
parties hereto agree as follows:


 


1.                                      AMOUNT AND TERMS OF CREDIT


 


1.1           Credit Facility.


 


(a)           Term Loan .


 


(i)            Subject to the terms
and conditions hereof, the Lender agrees to make (a) in a single draw on
the Funding Date a term loan (the “Closing Date Term Loan”) to 


 

















 


Borrower in the amount of the
Lender’s Closing Date Term Loan Commitment and (b) in a single draw on any
Business Day requested by the Borrower in writing to the Agent following the
Audited Financial Statements Approval Date, a delayed draw term loan (the “Delayed
Draw Term Loan”) which shall be part of the Term Loan hereunder, in the
amount of the Lender’s Delayed Draw Term Loan Commitment.  The obligations of each Lender hereunder
shall be several and not joint.  The Term
Loan shall be evidenced by promissory notes substantially in the form of Exhibit 1.1(a) (each
a “Term Note” and collectively the “Term Notes”), and, except as
provided in Section 1.10, the Borrower shall execute and deliver
the Term Notes to the applicable Lender. 
Each Term Note shall be dated the Funding Date, or in the case of the
Delayed Draw Term Loan, the date the Delayed Draw Term Loan is made. The Term
Notes shall represent the obligation of the Borrower to pay the Lender’s Term
Loan Commitment, together with interest thereon as prescribed in Section 1.5.  The aggregate principal amount of the Term
Loan advanced to the Borrower shall be the primary obligation of the Borrower.


 


(ii)           The Borrower shall
repay the aggregate Term Loan in monthly installments on the last day of each
Fiscal Month commencing July 31, 2007, as follows:


 


	
  Fiscal Months Ending During the Period:

  	
   

  	
  Installment

  Amounts

  	
   

  
	
  July 31, 2007 through and including
  December 31, 2007

  	
   

  	
  $

  	
  2,000,000.00

  	
   

  
	
  January 31, 2008 through and including
  the Commitment Termination Date

  	
   

  	
  $

  	
  1,000,000.00

  	
   

  



 


(iii)          Notwithstanding Section 1.1(a)(ii),
the aggregate outstanding principal balance of the Term Loan shall be due and
payable in full in immediately available funds on the Commitment Termination
Date, if not sooner paid in full.  No
payment with respect to the Term Loan may be reborrowed.


 


(iv)          Each payment of
principal with respect to the Term Loan shall be paid to Agent for the ratable
benefit of each Lender making the Term Loan, ratably in proportion to each such
Lender’s respective Term Loan Commitment.


 


1.2           Reliance on Notices.  Agent shall be entitled to rely upon, and
shall be fully protected in relying upon, any notice believed by Agent to be
genuine.  Agent may assume that each
Person executing and delivering any notice in accordance herewith was duly
authorized, unless the responsible individual acting thereon for Agent has
actual knowledge to the contrary.


 


1.3           Prepayments.


 


(a)           Voluntary Prepayments.  Borrower may at any time on at least five (5) days’
prior written notice to Agent (i) voluntarily prepay all or part of the
Term Loan; provided that (A) any such prepayments or reductions
shall be in a minimum amount of $1,000,000 and integral multiples of $250,000
in excess of such amount and (B) after giving effect to such reductions,
Borrower shall comply with Section 1.3(b)(iv).  Any voluntary prepayment must be accompanied
by payment of the Fee required by Section 1.7(b), if any, plus the
payment of any 


 


2

















 


LIBOR funding breakage costs in
accordance with Section 1.11(b). 
Any partial prepayments of the Term Loan made by Borrower shall be
applied, first, to any currently outstanding Obligations due and payable
pursuant to any of the Loan Documents; second, to prepay the scheduled
installments of the outstanding Term Loan in inverse order of maturity; and third,
the balance, if any, of any prepayments shall be distributed in accordance with
Section 5.1 of the Deposit and Disbursement Agreement.


 


(b)           Mandatory Prepayments.


 


(i)            Borrower shall make a
prepayment of the Term Loan no later than the Annual Distribution Date of any
Fiscal Year in an amount equal to the
Excess Coal Prepayment Amount for the prior Fiscal Year; provided that the
Borrower shall have no obligation to make such prepayment in respect of any
such prior Fiscal Year if, as of the end of such prior Fiscal Year (after
giving effect to any principal payments made on the last day of such prior
Fiscal Year by the Borrower in respect of the Obligations), the Principal
Reduction Date has not yet occurred.


 


(ii)           Immediately upon receipt
by any Credit Party of cash proceeds of any asset disposition, Borrower shall
prepay the Term Loan outstanding in an amount equal to all such proceeds, net
of (A) commissions and other reasonable and customary transaction costs,
fees and expenses properly attributable to such transaction and payable by
Borrower in connection therewith (in each case, paid to non-Affiliates), (B) transfer
taxes, and (C) amounts payable to holders of senior Liens on such asset
(to the extent such Liens constitute Permitted Encumbrances hereunder), if
any.  Any such prepayment shall be
applied in accordance with Section 1.3(c).  The following shall not be subject to
mandatory prepayment under this clause (ii): (1) proceeds of sales
of coal in the ordinary course of business; (2) asset disposition proceeds
of less than $250,000 in the aggregate in any Fiscal Year and (3) asset
disposition proceeds that are reinvested in Equipment, Fixtures or Real Estate
or repair, maintenance or improvement thereof within one hundred and eighty
(180) days following receipt thereof; provided that Borrower notifies Agent of
its intent to reinvest at the time such proceeds are received and when such
reinvestment occurs.


 


(iii)          If any Credit Party
issues Stock or incurs any Indebtedness, other than any Indebtedness permitted
pursuant to Section 6.3 hereof, no later than the Business Day
following the date of receipt of the proceeds thereof, Borrower shall prepay
the Term Loan outstanding in an amount equal to all such proceeds, net of
underwriting discounts and commissions and other reasonable costs paid to
non-Affiliates in connection therewith. 
Borrower and each Guarantor agree that any proceeds received by a
Guarantor following such issuance or incurrence shall be immediately
distributed to the Borrower (or to any other Guarantor for distribution to the
Borrower) by such Guarantors to be applied towards the prepayment of the Term
Loan.  Any such prepayment shall be
applied in accordance with Section 1.3(c).


 


(iv)          If, as of the last
Business Day of any Fiscal Month during the Cash Sweep Period, there shall be
Excess Cash, then the Borrower shall prepay the Obligations, on the last
Business Day of such Fiscal Month, in an amount equal to one hundred percent
(100%) of the Excess Cash as of such date. Any prepayments of Excess Cash paid
pursuant to this clause (iv) 


 


3

















 


shall be applied in accordance
with Section 1.3(c).  Each
such prepayment shall be accompanied by a certificate signed by the Authorized
Officers certifying the manner in which Excess Cash, the resulting prepayment,
and the method of allocation to Borrower’s Obligations were calculated, which
certificate shall be in form and substance reasonably satisfactory to Agent.


 


(c)           Application of Certain Mandatory
Prepayments.  Any prepayments made by Borrower pursuant to Sections
1.3(b)(i), (b)(ii), (b)(iii), (b)(iv) or 5.4 shall be applied as
follows: first, to any currently outstanding Obligations due and payable
pursuant to any of the Loan Documents; second, to prepay the scheduled
principal installments of the outstanding Term Loan in inverse order of
maturity, until such Term Loan has been prepaid in full; third, the
balance, if any, of any prepayment shall be distributed in accordance with Section 5.1
of the Deposit and Disbursement Agreement.


 


(d)           No Implied Consent.  Nothing in this Section 1.3 shall
be construed to constitute Agent’s or any Lender’s consent to any transaction
that is not  permitted by other
provisions of this Agreement or the other Loan Documents.


 


1.4           Use of Proceeds.


 


(a)           Borrower shall utilize the proceeds of the Closing Date Term
Loan solely for the Refinancing (and to pay any related transaction expenses),
for the financing of Borrower’s ordinary working capital and general corporate
needs, for repayment of certain accounts payable outstanding more than
forty-five (45) days, for the funding of the Capital Expenditure Reserve
Account, the Debt Service Reserve Account and the Closing Date Distribution.  Disclosure Schedule 1.4 contains a
description of Borrower’s sources and uses of funds as of the Funding Date,
including the Term Loan to be made on that date and includes the Funds Flow
Memo detailing how funds from each source are to be transferred to particular
uses.


 


(b)           Borrower shall utilize the proceeds of the Delayed Draw Term
Loan solely to (i) fund the Debt Service Reserve Account in an amount
sufficient to cause the amount on deposit in the Debt Service Reserve Account
to equal the Debt Service Reserve Amount, and (ii) to fund the Delayed
Draw Distribution.


 


1.5           Interest and Applicable Margins.


 


(a)           Except as otherwise provided in Section 1.5(d),
Borrower shall pay interest to Agent, for the ratable benefit of Lenders, in
arrears on each applicable Interest Payment Date, on the principal amount of
the Term Loan from time to time outstanding, at the applicable LIBOR Rate plus
the Applicable Term Loan LIBOR Margin per annum.  The Applicable Term Loan LIBOR Margin is
6.00% during the Audited Financial Statements Deficiency Period and 4.00%
thereafter.


 


(b)           If any payment on the Term Loan becomes due and payable on a
day other than a Business Day, the maturity thereof will be extended to the
next succeeding Business Day (except as set forth in the definition of LIBOR
Period) and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.


 


4














 


(c)           All computations of Fees calculated on a per annum basis and
interest shall be made by Agent on the basis of a 360-day year, in each case
for the actual number of days occurring in the period for which such interest
and Fees are payable.  The Index Rate is
a floating rate determined for each day. 
Each determination by Agent of an interest rate and Fees hereunder shall
be presumptive evidence of the correctness of such rates and Fees.


 


(d)           So long as an Event of Default has occurred and is
continuing under Section 8.1(a), (h) or (i) or so long as
any other Event of Default has occurred and is continuing and at the election
of Agent (or upon the written request of Requisite Lenders) confirmed by
written notice from Agent to Borrower, the interest rates applicable to the
Term Loan shall be increased by two percentage points (2%) per annum above the
then applicable Index Rate unless Agent or Requisite Lenders elect to impose a
smaller increase (the “Default Rate”), and all outstanding Obligations
shall bear interest at the Default Rate applicable to such Obligations.  Interest at the Default Rate shall accrue
from the initial date of such Event of Default until that Event of Default is
cured or waived and shall be payable upon demand.


 


(e)           Subject to the conditions precedent set forth in Section 2.3,
Borrower shall continue the Term Loan as a LIBOR Loan upon the expiration of
the applicable LIBOR Period and the succeeding LIBOR Period of that continued
Term Loan shall commence on the first day after the last day of the LIBOR
Period of the Term Loan to be continued. 
The Term Loan or group of Term Loans having the same proposed LIBOR
Period to be made or continued as a LIBOR Loan must be in a minimum amount of
$5,000,000 and integral multiples of $500,000 in excess of such amount.  Any election of a LIBOR Period must be made
by noon (New York time) on the third Business Day prior to the end of each
LIBOR Period with respect to any LIBOR Loans. 
If no election is received with respect to a LIBOR Loan by noon (New
York time) on the third Business Day prior to the end of the LIBOR Period with
respect thereto Borrower shall be deemed to have elected a one month LIBOR
Period; provided, that if a Default or an Event of Default has occurred and is
continuing or if the additional conditions precedent set forth in Section 2.3
shall not have been satisfied at the time of such election, that LIBOR Loan
shall be converted to an Index Rate Loan at the end of its LIBOR Period.  Borrower must make such election by notice to
Agent in writing, by telecopy or overnight courier.


 


(f)            Notwithstanding anything to the
contrary set forth in this Section 1.5, if a court of competent
jurisdiction determines in a final order that the rate of interest payable
hereunder exceeds the highest rate of interest permissible under law (the “Maximum
Lawful Rate”), then so long as the Maximum Lawful Rate would be so
exceeded, the rate of interest payable hereunder shall be equal to the Maximum
Lawful Rate; provided, however, that if at any time thereafter the rate
of interest payable hereunder is less than the Maximum Lawful Rate, Borrower
shall continue to pay interest hereunder at the Maximum Lawful Rate until such
time as the total interest received by Agent, on behalf of Lenders, is equal to
the total interest that would have been received had the interest rate payable
hereunder been (but for the operation of this paragraph) the interest rate
payable since the Funding Date as otherwise provided in this Agreement.  In no event shall the total interest received
by any Lender pursuant to the terms hereof exceed the amount that such Lender
could lawfully have received had the interest due hereunder been calculated for
the full term hereof at the Maximum Lawful Rate.


 


5

















 


1.6           Cash Management Systems.  On or prior to the Closing Date, Borrower
will establish and will maintain until the Termination Date, the cash
management systems described in Annex B and the Deposit and Disbursement
Agreement (the “Cash Management Systems”).


 


1.7           Fees.


 


(a)           Borrower shall pay to GE Capital, individually, the Fees
specified in the GE Commitment Letter.


 


(b)           If Borrower pays after acceleration or prepays all or any
portion of the Term Loan, whether voluntarily or involuntarily and whether
before or after acceleration of the Obligations, or if any of the Commitments
are otherwise terminated, Borrower shall pay to Agent, for the benefit of
Lenders as liquidated damages an amount equal to the Applicable Percentage (as
defined below) multiplied by the principal amount of the Term Loan paid after
acceleration or prepaid.  As used herein,
the term “Applicable Percentage” shall mean (x)  three percent (3%),
in  the case of a prepayment on or prior
to the first anniversary of the Closing Date, (y) two percent (2%), in the
case of a prepayment after the first anniversary of the Closing Date but on or
prior to the second anniversary thereof, and (z) one percent (1%), in the
case of a prepayment  after the second
anniversary of the Closing Date.  The
Credit Parties agree that the Applicable Percentages are a reasonable
calculation of Lenders’ lost profits in view of the difficulties and
impracticality of determining actual damages resulting from an early
termination of the Commitments.  Notwithstanding
the foregoing, no prepayment fee shall be payable by Borrower upon any
mandatory prepayment paid pursuant to Section 1.3(b)(i), (b)(ii), (b)(iii) or b(iv). 


 


1.8           Receipt of Payments.  Borrower shall make each payment under this
Agreement not later than 2:00 p.m. (New York time) on the day when due in
immediately available funds in Dollars to the Agent Account.  For purposes of computing interest and Fees
as of any date, all payments shall be deemed received on the first Business Day
following the Business Day on which immediately available funds therefor are
received in the Agent Account prior to 2:00 p.m. New York time.  Payments received after 2:00 p.m. New
York time on any Business Day or on a day that is not a Business Day shall be
deemed to have been received on the following Business Day.


 


1.9           Application and Allocation of
Payments; Application and Disbursement of Funds Received in Collection Account.


 


(a)           So long as no Event of Default has occurred and is
continuing, (i) payments matching specific scheduled payments then due
shall be applied to those scheduled payments; (ii) voluntary prepayments
shall be applied in accordance with the provisions of Section 1.3(a);
and (iii) mandatory prepayments shall be applied as set forth in Section 1.3(c).  All payments and prepayments applied to the
Term Loan shall be applied ratably to the portion thereof held by each Lender
as determined by its Pro Rata Share. 
As to all payments made when an Event of Default has occurred and is
continuing or following the Commitment Termination Date, Borrower hereby
irrevocably waives the right to direct the application of any and all payments
received from or on behalf of Borrower, and Borrower hereby irrevocably agrees
that Agent shall have the continuing exclusive right to apply any and all such
payments against the 


 


6

















 


Obligations of Borrower as
Agent may deem advisable notwithstanding any previous entry by Agent in the
Loan Account or any other books and records. 
In all circumstances, after acceleration or maturity of the Obligations,
all payments and proceeds of Collateral shall be applied to amounts then due
and payable in the following order: (1) to Fees and Agent’s Reimbursable
Expenses hereunder; (2) to interest on the Term Loan ratably in proportion
to the interest accrued as to each Loan; (3) to principal payments on the
Term Loan; and (4) to all other Obligations, including expenses of Lenders
to the extent reimbursable under Section 11.3.


 


(b)           So long as no Event of Default has occurred and is
continuing, collected funds received in the Collection Account shall be applied
and distributed pursuant to Section 5.1 of the Deposit and
Disbursement Agreement


 


(c)           (i) The Independent
Engineer, acting reasonably, shall determine on the Capital Expenditure Reserve
Initial Certification Date and once per each Fiscal Quarter thereafter, or, if
the Agent has a reasonable basis to believe that an Event of Default may occur
or has already occurred, at such other times as the Agent may reasonably
determine,  whether Projected EBITDA for a
Capital Expenditure Reserve Calculation Period is sufficient to cover projected
Capital Expenditures for the same Capital Expenditure Reserve Calculation
Period.  If the Independent Engineer determines
that Projected EBITDA is not sufficient to cover projected Capital Expenditures
for the applicable Capital Expenditure Reserve Calculation Period, the
Independent Engineer shall deliver to the Agent and the Borrower, no later than
ten Business Days following the receipt by the Agent of the quarterly financial
statements required to be delivered by the Borrower pursuant to clause (b) of
Annex D, a Capital Expenditure Deficiency Certificate.  If the Independent Engineer determines that
Projected EBITDA is sufficient to cover projected Capital Expenditures for the
applicable Capital Expenditure Reserve Calculation Period, the Independent
Engineer shall deliver to the Agent and the Borrower, no later than ten
Business Days following the receipt by the Agent of the quarterly financial
statements required to be delivered by the Borrower pursuant to clause (b) of
Annex D, a Capital Expenditure Sufficiency Certificate.  If the Independent Engineer has determined
that Projected EBITDA is not sufficient to cover projected Capital Expenditures
for the applicable Capital Expenditure Reserve Calculation Period, the
Independent Engineer shall calculate and include on any Capital Expenditure
Deficiency Certificate, the Capital Expenditure Reserve Deficiency Amount.  Notwithstanding anything to the contrary set
forth in this Section 1.9(c)(i), the Independent Engineer shall deliver
the Capital Expenditure Certificate in respect of its determination to be made
on the Capital Expenditure Reserve Initial Certification Date no later than the
Capital Expenditure Reserve Initial Certification Date. (ii) The Agent,
acting reasonably, shall determine once per Fiscal Quarter, or, if the Agent
has a reasonable basis to believe that an Event of Default may occur or has
already occurred, at such other times as the Agent may reasonably determine,
the Debt Service Reserve Amount. (iii) If the amount on deposit in either
of the Capital Expenditure Reserve Account or the Debt Service Reserve Account
is greater than the respective Capital Expenditure Reserve Minimum Balance or
Debt Service Reserve Amount, the Agent shall cause any such excess to be
transferred to the Collection Account.


 


1.10         Loan Account and Accounting.  Agent shall maintain a loan account (the “Loan
Account”) on its books to record the Term Loan, all payments made by
Borrower, and all other debits and credits as provided in this Agreement with
respect to the Term Loan or any other Obligations.  All entries in the Loan Account shall be made
in accordance with Agent’s 


 


7

















 


customary accounting practices
as in effect from time to time. The balance in the Loan Account, as recorded on
Agent’s most recent printout or other written statement, shall, absent manifest
error, be presumptive evidence of the amounts due and owing to Agent and
Lenders by Borrower; provided that any failure to so record or any error
in so recording shall not limit or otherwise affect Borrower’s duty to pay the
Obligations.  Agent shall render to
Borrower a monthly accounting of transactions with respect to the Term Loan
setting forth the balance of the Loan Account as to Borrower for the
immediately preceding month.  Unless
Borrower notifies Agent in writing of any objection to any such accounting
(specifically describing the basis for such objection), within thirty (30) days
after the date thereof, each and every such accounting shall be presumptive
evidence of all matters reflected therein. 
Only those items expressly objected to in such notice shall be deemed to
be disputed by Borrower.  Notwithstanding
any provision herein contained to the contrary, any Lender may elect (which
election may be revoked) to dispense with the issuance of Notes to that Lender
and may rely on the Loan Account as evidence of the amount of Obligations from
time to time owing to it.


 


1.11         Indemnity.


 


(a)           Each Credit Party that is a signatory hereto shall jointly
and severally indemnify and hold harmless each of Agent, Lenders and their
respective Affiliates, and each such Person’s respective officers, directors,
employees, attorneys, agents and representatives (each, an “Indemnified
Person”), from and against any and all suits, actions, proceedings, claims,
damages, losses, liabilities and reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees and disbursements and other costs of
investigation or defense, including those incurred upon any appeal) that may be
instituted or asserted against or incurred by any such Indemnified Person as
the result of credit having been extended, suspended or terminated under this
Agreement and the other Loan Documents and the administration of such credit,
and in connection with or arising out of the transactions contemplated
hereunder and thereunder and any actions or failures to act in connection
therewith, including any and all Environmental Liabilities and legal costs and
expenses arising out of or incurred in connection with disputes between or
among any parties to any of the Loan Documents (collectively, “Indemnified
Liabilities”); provided, that no such Credit Party shall be liable
for any indemnification to an Indemnified Person to the extent that any such
suit, action, proceeding, claim, damage, loss, liability or expense results
from that  Indemnified Person’s gross negligence
or willful misconduct.  NO INDEMNIFIED
PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT,
ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER
PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR SPECIAL, INDIRECT,
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A
RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN
DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.


 


(b)           To induce Lenders to provide the LIBOR Rate option on the
terms provided herein, if (i) any LIBOR Loans are repaid in whole or in
part prior to the last day of any applicable LIBOR Period (whether that
repayment is made pursuant to any provision of this Agreement or any other Loan
Document or occurs as a result of acceleration, by operation of law or
otherwise); (ii) Borrower shall default in payment when due of the
principal amount of or 


 


8

















 


interest on any LIBOR Loan; (iii) Borrower
shall refuse to accept any borrowing of, or shall request a termination of, any
borrowing of, conversion into or continuation of, LIBOR Loans after Borrower
has given notice requesting the same in accordance herewith; or (iv) Borrower
shall fail to make any prepayment of a LIBOR Loan after Borrower has given a
notice thereof in accordance herewith, then Borrower shall indemnify and hold
harmless each Lender from and against all losses, costs and expenses resulting
from or arising from any of the foregoing. 
Such indemnification shall include any loss (including loss of margin)
or expense arising from the reemployment of funds obtained by it or from fees
payable to terminate deposits from which such funds were obtained.  For the purpose of calculating amounts
payable to a Lender under this subsection, each Lender shall be deemed to have
actually funded its relevant LIBOR Loan through the purchase of a deposit
bearing interest at the LIBOR Rate in an amount equal to the amount of that
LIBOR Loan and having a maturity comparable to the relevant LIBOR Period; provided,
that each Lender may fund each of its LIBOR Loans in any manner it sees fit,
and the foregoing assumption shall be utilized only for the calculation of amounts
payable under this subsection.  This
covenant shall survive the termination of this Agreement and the payment of the
Notes and all other amounts payable hereunder. 
As promptly as practicable under the circumstances, each Lender shall
provide Borrower with its written calculation of all amounts payable pursuant
to this Section 1.11(b), and such calculation shall be binding on
the parties hereto unless Borrower shall object in writing within ten (10) Business
Days of receipt thereof, specifying the basis for such objection in detail.


 


1.12         Access.  Each Credit Party that is a party hereto
shall, during normal business hours, from time to time upon two (2) Business
Days’ prior notice as frequently as Agent reasonably determines to be
appropriate: (a) provide Agent and any of its officers, employees and
agents (including the Independent Engineer and any environmental consultant)
access to its properties, facilities, advisors, officers and employees of each
Credit Party and to the Collateral, (b) permit Agent, and any of its
officers, employees and agents (including the Independent Engineer and an
environmental consultant), to inspect, audit and make extracts from any Credit
Party’s books and records, and (c) permit Agent, and its officers,
employees and agents (including the Independent Engineer and an environmental
consultant), to inspect, review, evaluate and make test verifications and
counts of the Accounts, Inventory and other Collateral of any Credit
Party.  If an Event of Default has
occurred and is continuing, each such Credit Party shall provide such access to
Agent, the Independent Engineer, any environmental consultant and to each
Lender at all times and without advance notice. 
Furthermore, so long as any Event of Default has occurred and is continuing,
Borrower shall provide Agent and each Lender with access to their suppliers and
customers.  Each Credit Party shall make
available to Agent and its counsel reasonably promptly originals or copies of
all books and records that Agent may reasonably request.  Each Credit Party shall deliver any document
or instrument necessary for Agent, as it may from time to time reasonably
request, to obtain records from any service bureau or other Person that
maintains records for such Credit Party, and shall maintain duplicate records
or supporting documentation on media, including computer tapes and discs owned
by such Credit Party.  Agent will give
Lenders at least five (5) days’ prior written notice of regularly
scheduled audits.  Representatives of
other Lenders may accompany Agent’s representatives on regularly scheduled
audits at no charge to Borrower.  Each
Credit Party agrees to make its senior management available to the Agent and
Lenders once per Fiscal Year, and at such other times as may be reasonably
requested by the Agent and Lenders, in connection with any bank or Lender
meetings or meetings with prospective Lenders.


 


9

















 


1.13         Taxes.


 


(a)           Any and all payments by Borrower hereunder or under the
Notes shall be made, in accordance with this Section 1.13, free and
clear of and without deduction for any and all present or future Taxes.  If Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under the
Notes, (i) the sum payable shall be increased as much as shall be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 1.13)
Agent or Lenders, as applicable, receive an amount equal to the sum they would
have received had no such deductions been made, (ii) Borrower shall make
such deductions, and (iii) Borrower shall pay the full amount deducted to
the relevant taxing or other authority in accordance with applicable law.  Within thirty (30) days after the date of any
payment of Taxes, Borrower shall furnish to Agent the original or a certified
copy of a receipt evidencing payment thereof.


 


(b)           Each Credit Party that is a signatory hereto shall jointly
and severally indemnify and, within ten (10) days of demand therefore, pay
Agent and each Lender for the full amount of Taxes (including any Taxes imposed
by any jurisdiction on amounts payable under this Section 1.13)
paid by Agent or such Lender, as appropriate, and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or
not such Taxes were correctly or legally asserted.


 


(c)           Each Lender organized under the laws of a jurisdiction
outside the United States (a “Foreign Lender”) as to which payments to
be made under this Agreement or under the Notes are exempt from United States
withholding tax under an applicable statute or tax treaty shall provide to
Borrower and Agent a properly completed and executed IRS Form W-8ECI or Form W-8BEN
or other applicable form, certificate or document prescribed by the IRS or the
United States certifying as to such Foreign Lender’s entitlement to such
exemption (a “Certificate of Exemption”).  Any foreign Person that seeks to become a
Lender under this Agreement shall provide a Certificate of Exemption to
Borrower and Agent prior to becoming a Lender hereunder.  No foreign Person may become a Lender
hereunder if such Person fails to deliver a Certificate of Exemption in advance
of becoming a Lender.


 


1.14         Capital Adequacy; Increased
Costs; Illegality.


 


(a)           If any law, treaty, governmental (or quasi-governmental)
rule, regulation, guideline or order regarding capital adequacy, reserve
requirements or similar requirements or compliance by any Lender with any request
or directive regarding capital adequacy, reserve requirements or similar
requirements (whether or not having the force of law), in each case, adopted
after the Closing Date, from any central bank or other Governmental Authority
increases or would have the effect of increasing the amount of capital,
reserves or other funds required to be maintained by such Lender and thereby
reducing the rate of return on such Lender’s capital as a consequence of its
obligations hereunder, then Borrower shall from time to time upon demand by
such Lender (with a copy of such demand to Agent) pay to Agent, for the account
of such Lender, additional amounts sufficient to compensate such Lender for
such reduction.  A certificate, setting
forth in reasonable detail such Lender’s calculation of the amount of such
reduction and assumptions upon which such calculation was based, submitted by
such Lender to Borrower and to Agent shall be presumptive evidence of the
matters set forth therein.


 


10

















 


(b)           If, due to either (i) the introduction of or any change
in any law or regulation (or any change in the interpretation thereof) or (ii) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), in each case
adopted after the Closing Date, there shall be any increase in the cost to any
Lender of agreeing to make or making, funding or maintaining the Term Loan,
then Borrower shall from time to time, upon demand by such Lender (with a copy
of such demand to Agent), pay to Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for such increased
cost.  A certificate setting forth in
reasonable detail such Lender’s calculation of the amount of such reduction and
assumptions upon which such calculation was based, submitted to Borrower and to
Agent by such Lender, shall be presumptive evidence of the matters set forth
therein.  Each Lender agrees that, as
promptly as practicable after it becomes aware of any circumstances referred to
above which would result in any such increased cost, the affected Lender shall,
to the extent not inconsistent with such Lender’s internal policies of general
application, use reasonable commercial efforts to minimize costs and expenses
incurred by it and payable to it by Borrower pursuant to this Section 1.14(b).


 


(c)           Notwithstanding anything to the contrary contained herein,
if the introduction of or any change in any law or regulation (or any change in
the interpretation thereof) shall make it unlawful, or any central bank or
other Governmental Authority shall assert that it is unlawful, for any Lender
to agree to make or to make or to continue to fund or maintain any LIBOR Loan,
then, unless that Lender is able to make or to continue to fund or to maintain
such LIBOR Loan at another branch or office of that Lender without, in that
Lender’s reasonable opinion, materially adversely affecting it or its Term Loan
or the income obtained therefrom, on notice thereof and demand therefor by such
Lender to Borrower through Agent, (i) the obligation of such Lender to
agree to make or to make or to continue to fund or maintain LIBOR Loans shall
terminate and (ii) Borrower shall forthwith prepay in full all outstanding
LIBOR Loans owing by Borrower to such Lender, together with interest accrued
thereon, unless Borrower, within five (5) Business Days after the delivery
of such notice and demand, converts all LIBOR Loans into Index Rate Loans.


 


11

















 


(d)           Within thirty (30) days after receipt by Borrower of written
notice and demand from any Lender (an “Affected Lender”) for payment of
additional amounts or increased costs as provided in Sections 1.13(a), 1.14(a) or
1.14(b), Borrower may, at its option, notify Agent and such Affected Lender
of its intention to replace the Affected Lender.  So long as no Default or Event of Default has
occurred and is continuing, Borrower, with the consent of Agent, may obtain, at
Borrower’s expense, a replacement Lender (“Replacement Lender”) for the
Affected Lender, which Replacement Lender must be reasonably satisfactory to
Agent.  If Borrower obtains a Replacement
Lender within ninety (90) days following notice of their intention to do so, the
Affected Lender must sell and assign its Term Loan and Commitments to such
Replacement Lender for an amount equal to the principal balance of the Term
Loan held by the Affected Lender and all accrued interest and Fees with respect
thereto through the date of such sale and such assignment shall not require the
payment of an assignment fee to Agent; provided, that Borrower shall
have reimbursed such Affected Lender for the additional amounts or increased
costs that it is entitled to receive under this Agreement through the date of
such sale and assignment. 
Notwithstanding the foregoing, Borrower shall not have the right to
obtain a Replacement Lender if the Affected Lender rescinds its demand for
increased costs or additional amounts within 15 days following its receipt of
Borrower’s notice of intention to replace such Affected Lender.  Furthermore, if Borrower gives a notice of
intention to replace and does not so replace such Affected Lender within ninety
(90) days thereafter, Borrower’s rights under this Section 1.14(d) shall
terminate with respect to such Affected Lender and Borrower shall promptly pay
all increased costs or additional amounts demanded by such Affected Lender
pursuant to Sections 1.13(a), 1.14(a) and 1.14(b).


 


1.15         Single Loan.  The Term Loan to Borrower and all of the
other Obligations of Borrower arising under this Agreement and the other Loan
Documents shall constitute one general obligation of Borrower secured, until
the Termination Date, by all of the Collateral.


 


2.                                      CONDITIONS PRECEDENT


 


2.1           Conditions to the Initial Loans.  No Lender shall be obligated to make the
Closing Date Term Loan on the Funding Date, or to take, fulfill, or perform any
other action hereunder, until the following conditions have been satisfied or
provided for in a manner reasonably satisfactory to Agent and its counsel, or
waived in writing by Agent.


 


(a)           Credit Agreement; Loan Documents.  This Agreement or counterparts hereof shall
have been duly executed by, and delivered to, Borrower, each other Credit Party,
Agent and Lenders; and Agent shall have received such documents, instruments,
agreements and legal opinions (including a New York law enforceability opinion
from a law firm duly qualified to give such opinion) as Agent shall reasonably
request in connection with the transactions contemplated by this Agreement and
the other Loan Documents, including all those listed in the Closing Checklist
attached hereto as Annex C, each in form and substance reasonably
satisfactory to Agent.


 


(b)           Repayment of  Prior Lender Obligations; Satisfaction of
Outstanding L/Cs.  (i)  Agent shall have received a fully
executed original of a pay-off letter reasonably satisfactory to Agent
confirming that all Prior Lender Obligations will be repaid in full from the
proceeds of the Closing Date Term Loan and all Liens upon any of the property
of the Credit 


 


12

















 


Parties or any of their
Subsidiaries in favor of Prior Lender shall be terminated by Prior Lender
immediately upon such payment; and (ii) all letters of credit issued or
guaranteed by Prior Lender shall have been cash collateralized.


 


(c)           Approvals.  Agent shall have received (i) satisfactory
evidence that the Credit Parties have obtained all required Permits, consents
and approvals of all Persons including all requisite Governmental Authorities,
to the execution, delivery and performance of this Agreement and the other Loan
Documents, to the change in ownership structure of Bowie, to the continued
operation of the mines and the consummation of the Related Transactions and
such Permits, consents and approvals shall be in full force and effect as of
the Closing Date or (ii) an officer’s certificate in form and substance
reasonably satisfactory to Agent affirming that no such consents or approvals
are required.


 


(d)           Opening Cash Availability.  The Manager and chief financial
officer of the Borrower shall certify to the Agent that the Borrower has (i) no less
than $250,000 of immediately available cash on hand and (ii) after giving
effect to the payments made pursuant to Schedule A-1 of the Funds Flow Memo, no
accounts payable outstanding more than forty-five (45) days after invoice date.


 


(e)           Payment of Fees.  Borrower shall have paid the Fees required to
be paid on the Closing Date in the respective amounts specified in Section 1.7
(including the Fees specified in the GE Commitment Letter), and shall have
reimbursed Agent for all fees (including attorney’s fees), costs and expenses
of closing presented as of the Closing Date.


 


(f)            Capital Structure: Other
Indebtedness.  The capital structure of each Credit Party
and the terms and conditions of all Indebtedness of each Credit Party (both
prior to and after giving effect to the Bowie Merger) shall be acceptable to
Agent in its sole discretion.


 


(g)           Consummation of Related
Transactions.  Agent shall have received fully executed
copies of the Borrower LLC Agreement and final and complete executed copies of
each of the other Related Transactions Documents, each of which shall be in
full force and effect in form and substance reasonably satisfactory to
Agent.  The Related Transactions shall
have been consummated in accordance with the terms of the Related Transactions
Documents.


 


(h)           Capital
Structure.  The Agent shall
have approved the legal and ownership structure of the Credit Parties (after
giving effect to the Bowie Merger) and the terms and conditions of each
agreement governing or relating to the transactions contemplated hereby,
including, Borrower LLC Agreement, all Material Contracts of the Credit Parties
(after giving effect to the Bowie Merger), and any other equity or stockholder
agreements.


 


(i)            Control.  No direct or indirect owner of the Borrower
or Mine, or Person having any operational control of the Mine, or any other
Person that could adversely affect the transfer of any of the Borrower’s rights
in the Mine, shall, as of the Closing Date, be listed on the Applicant Violator
System, including Keith Sieber.


 


(j)            Lien
Results.  Agent and Lender
shall have received the results of a recent lien search in each relevant
jurisdiction (including, without limitation, in the United States Patent and
Trademark Office and the United States Copyright Office) with respect to each
Credit Party 


 


13

















 


and
such searches shall reveal no liens on any of the assets of any of such
entities, other than liens permitted by the Loan Documents or liens to be
discharged on or prior to the Closing Date pursuant to documentation
satisfactory to Agent and Lender.


 


(k)           Material
Adverse Effect. 
No development, fact, circumstance or event shall have occurred that has
had or could reasonably be expected to have a Material Adverse Effect.


 


(l)            No
Default. No Default or Event of Default shall have occurred and be
continuing on the Closing Date or after giving effect to the Closing Date Term
Loan to be made on the Funding Date.


 


(m)          Funded
Debt.  The Manager and
chief financial officer of the Borrower shall certify to the Agent that after
giving effect to the Closing Date Term Loan to be made on the Funding Date, the
total Funded Debt of Borrower shall not exceed the total outstanding principal
amount of the Term Loan plus any other Funded Debt permitted under the
Agreement.


 


(n)           Final
Appraisal.  Agent shall have
received a final appraisal from Marshall Miller and Associates, Inc. in
form and substance reasonably satisfactory to it.


 


(o)           Solvency.  The Agent shall have received evidence
reasonably satisfactory to it that both before and after giving effect to the
Bowie Merger, the Closing Date Term Loan and the Closing Date Distribution,
each Credit Party is and will be Solvent, including, the receipt by the Agent
of a solvency certificate duly executed by the Manager and the chief financial
officer of the Borrower certifying to the Agent and Lenders that both before and after giving
effect to (a) the Closing Date Term Loan to be made or incurred on the
Funding Date, (b) the disbursement of the proceeds of such Closing Date
Term Loan pursuant to the instructions of Borrower and this Agreement, (c) the
consummation of the Related Transactions; (d) the consummation of the
Bowie Merger; and (e) the payment and accrual of all transaction costs in
connection with the foregoing, each Credit Party is and will be Solvent.


 


(p)           Financial Statements.  The Agent shall have received the following
financial statements and reports, in each case, in form and substance
reasonably satisfactory to it: (i) the operating plan of Borrower covering
the five (5) year period beginning on January 1, 2006, accompanied by
a satisfactory written analysis by management of such operating plan, (ii) pro
forma balance sheets of Borrower and its Subsidiaries as of September 30,
2006, giving pro forma effect to the Related Transactions and (iii) the
financial statements of Borrower and its Subsidiaries for the Fiscal Quarters
ended March 31, 2006, June 30, 2006 and September 30, 2006,
consisting of a balance sheet and the related consolidated statements of
income, stockholders equity and cash flows for the three, six and nine month
periods ending on such dates respectively certified by the Manager and chief
financial officer of Borrower that they fairly present, in all material
respects, the financial condition of Borrower and its Subsidiaries as at the
end of such Fiscal Quarter and the results of their operations and their cash
flows as at such dates, in each case, subject to changes for the absence of
footnotes and normal year-end audit adjustments.


 


14














 


(q)           Title
Report.  Agent shall have
received (i) a mortgage title insurance policy (or marked commitments to
issue the same) in respect to all owned real property insuring that Borrower is
vested with fee simple title to the owned real property and that the mortgage
is a valid first priority mortgage with respect to the owned real property and (ii) a
title report covering the BLM Leases with assigned serial numbers C-37210 and COC-61209,
in each case, in form and substance reasonably satisfactory to it.


 


(r)            Bonding
Collateral.  Agent shall have
received evidence reasonably satisfactory to it establishing that all of the
collateral pledged by the Borrower pursuant to any Bonding Agreement consists
only of the collateral listed in Disclosure Schedule 3.24 and that the
Bonding Agreements are the only bonding agreements pursuant to which the
Borrower is obligated.


 


(s)           Key Management Personnel.  Borrower shall have retained key management
personnel on terms that are reasonably acceptable to the Agent.


 


(t)            Bonding, Insurance.  The Agent shall have received evidence
reasonably satisfactory to it that (i) all bonding deemed reasonably
necessary by the Agent has been established and shall remain in full force and
effect during the life of the Mine on terms and conditions acceptable to Agent
and (ii) Borrower shall have obtained appropriate types and amounts of
insurance coverage with carriers acceptable to Agent.  All such insurance coverage shall (a) contain
endorsements reflecting the Agent’s status as additional insured and loss
payee, (b) confirm that the Agent is the assignee of all proceeds in
respect of business interruption insurance policies, (c) shall provide for
30 days notice to Agent prior to cancellation, material amendment or
non-renewal and (d) contain such other agreements and information as the
Agent shall reasonably require.


 


(u)           Debt Service Reserve Account.  Borrower shall have deposited an amount equal
to $8,000,000 into the Debt Service Reserve Account.


 


(v)           Capital Expenditures Reserve
Account.
Borrower shall have deposited an amount equal to at least $2,000,000 into the
Capital Expenditures Reserve Account.


 


(w)          Lien Filings.  The Agent shall have received evidence
reasonably satisfactory to it that all recordings and filings of or with
respect to each Collateral Document shall have been completed and that all
other actions that the Agent may reasonably deem necessary or desirable in
order to perfect and protect the first priority liens and security interests
created under the Collateral Documents shall have been taken, completed or
otherwise provided for in a manner reasonably satisfactory to the Agent
(including, without limitation, receipt of duly executed payoff letters and
UCC-1 and UCC-3 financing statements) and the Agent shall have received such
assurances concerning the absence of any un-permitted Liens on or interest in
the Collateral, in form and substance reasonably satisfactory to Agent.


 


(x)            Water Rights Report.  The Agent shall have received a title status
report, in form and substance reasonably satisfactory to it, in respect of the
Borrower’s owned and leased water rights and a certificate, in form and
substance reasonably satisfactory to the Agent, 


 


15

















 


from the Manager and chief financial officer of the Borrower certifying
that the Borrower has all rights to water necessary for the Borrower to operate
the Mine for the term of this Agreement.


 


(y)           Collateral Report.  The Agent shall have received a Collateral
Report in form and substance reasonably satisfactory to the Agent, which will
include a description of the assets and property of each Credit Party as of the
Closing Date.


 


(z)            Francis Settlement.  The Agent shall have received a release
agreement duly executed by Sam Francis, in form and substance reasonably
satisfactory to the Agent.


 


(aa)         Material Contracts.  The Agent shall have received copies of each
executed and effective Material Contract certified by the Manager of the
Borrower.


 


(bb)         Aging Reports.  The Borrower shall have delivered to the
Agent an accounts payable aging report showing, as of the Closing Date, all
accounts payable outstanding more than forty-five (45) days after invoice date
for all invoices received and otherwise in form and substance reasonably satisfactory
to the Agent.


 


(cc)         Motor Vehicle Titles.  The Borrower shall have delivered to the
Agent the original titles to each of the motor vehicles listed on Disclosure
Schedule 2.1(cc).


 


 


2.2           Conditions to Delayed Draw Term
Loan.  No Lender shall be obligated to fund the
Delayed Draw Term Loan, or to take, fulfill, or perform any other action in
connection with the funding of the Delayed Draw Term Loan, until the following
conditions have been satisfied or provided for in a manner reasonably
satisfactory to Agent and its counsel, or waived in writing by Agent.


 


(a)           all of the conditions set forth in Section 2.1
shall have been satisfied or waived and the Closing Date Term Loan shall have
been funded.


 


(b)           the following statements shall be true:


 


(i)            All of the
representations and warranties of any Credit Party contained herein or in any other Loan Document are
true and correct as of such date as determined by Agent or Requisite Lenders,
except to the extent that such representation or warranty expressly relates to
an earlier date and except for changes therein expressly permitted or expressly
contemplated by this Agreement.


 


(ii)           No Default or Event of
Default shall have occurred and be continuing or would result from the making
of the Delayed Draw Term Loan and the use of proceeds thereof.


 


(c)           The Audited Financial Statements Approval Date has occurred.


 


(d)           The outstanding balance in the Debt Service Reserve Account
is equal to $8,750,000 or, immediately after the funding of the Delayed Draw
Term Loan and the 


 


16

















 


application of the funds thereof in accordance with a funds flow
memorandum, the outstanding balance in the Debt Service Reserve Account will be
equal to $8,750,000.


 


(e)           Each of the Agent and Lenders shall have received such
documents, instruments, certificates, reports, statements, agreements and legal
opinions (including a New York law enforceability opinion from a law firm duly
qualified to give such opinion) as Agent shall reasonably request in connection
with the funding of the Delayed Draw Term Loan.


 


(f)            No
direct or indirect owner of the Borrower or Mine, or Person having any
operational control of the Mine, or any other Person that could adversely
affect the transfer of any of the Borrower’s rights in the Mine, shall, as of
the Closing Date, be listed on the Applicant Violator System, including Keith
Sieber.


 


(g)           No
development, fact, circumstance or event shall have occurred that has had or
could reasonably be expected to have a Material Adverse Effect.


 


(h)           The Agent shall have received
evidence reasonably satisfactory to it that both before and after giving effect
to the Delayed Draw Term Loan and any distribution in connection therewith,
each Credit Party is and will be Solvent, including, the receipt by the Agent
of a solvency certificate duly executed by the Authorized Officers of the
Borrower.


 


(i)            The
Manager and chief financial officer of the Borrower shall certify to the Agent
that after giving effect to the Delayed Draw Term Loan, the total Funded Debt
of Borrower shall not exceed the total outstanding principal amount of the Term
Loan plus any other Funded Debt permitted under the Agreement.


 


2.3           Further Conditions to Each Term
Loan.  Except as otherwise expressly provided
herein, no Lender shall be obligated to fund or continue any Term Loan as a
LIBOR Loan, if, as of the date thereof:


 


(a)           (i) any representation or warranty by any Credit
Party contained
herein or in any other Loan Document is untrue or incorrect as of such date as
determined by Agent or Requisite Lenders, except to the extent that such
representation or warranty expressly relates to an earlier date and except for
changes therein expressly permitted or expressly contemplated by this Agreement
and (ii) Agent or Requisite Lenders have determined not to continue any
Term Loan as LIBOR Loan as a result of the fact that such warranty or
representation is untrue or incorrect; or


 


(b)           (i) any Default or Event of Default has occurred and is
continuing and (ii) Agent or Requisite Lenders shall have determined not
to continue any Term Loan as a LIBOR Loan as a result of that Default or Event
of Default.


 


The
continuation of any Term Loan as a new LIBOR Loan shall be deemed to
constitute, as of the date thereof, a representation and warranty by Borrower
that the conditions in this Section 2.3 have been satisfied.


 


17

















 


3.                                      REPRESENTATIONS AND WARRANTIES


 


To induce
Lenders to make the Term Loan, the Credit Parties executing this Agreement,
jointly and severally, make the following representations and warranties to
Agent and each Lender with respect to all Credit Parties, each and all of which
shall survive the execution and delivery of this Agreement.


 


3.1           Corporate Existence; Compliance with
Law.  Each Credit Party (a) is a corporation,
limited liability company or limited partnership duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation or organization set forth in Disclosure Schedule 3.1; (b) is
duly qualified to conduct business and is in good standing in each other
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to be so
qualified would not result in exposure to losses or liabilities which could
reasonably be expected to have a Material Adverse Effect; (c) has the
requisite power and authority and the legal right to own, pledge, mortgage or
otherwise encumber and operate its properties, to lease the property it
operates under lease and to conduct its business as now conducted or proposed
to be conducted; (d) subject to specific representations regarding
Environmental Laws, has all material licenses, Permits (and each Permit
required for the ownership, operation and conduct of the Borrower’s business is
set forth on Disclosure Schedule 3.1(d)), consents or approvals from or
by, and has made all filings with, and has given all notices to, all
Governmental Authorities having jurisdiction, to the extent required for such
ownership, operation and conduct; (e) is in compliance with its charter
and bylaws or partnership or operating agreement, as applicable; and (f) subject
to specific representations set forth herein regarding ERISA, Environmental
Laws, tax and other laws, is in compliance with all applicable provisions of
law (including all mine, health, safety and administrative rules and
regulations), except where the failure to comply, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.


 


3.2           Executive Offices, Collateral
Locations, FEIN.  As of the Closing Date, each Credit Party’s
name as it appears in official filings in its state of incorporation or
organization, state of incorporation or organization, organization type,
organization number, if any, issued by its state incorporation or organization,
and the current location of each Credit Party’s chief executive office and the
warehouses and premises at which any Collateral is located are set forth in Disclosure
Schedule 3.2, none of such locations has changed within the four (4) months
preceding the Closing Date and each Credit Party has only one state of
incorporation or organization.  In
addition, Disclosure Schedule 3.2 lists the federal employer
identification number of each Credit Party.


 


3.3           Corporate Power, Authorization,
Enforceable Obligations.  The execution, delivery and performance by
each Credit Party of the Loan Documents and the Related Transaction Documents
to which it is a party and the creation of all Liens provided for therein: (a) are
within such Person’s power; (b) have been duly authorized by all necessary
corporate, limited liability company or limited partnership action; (c) do
not contravene any provision of such Person’s charter, bylaws or partnership or
operating agreement as applicable; (d) do not violate any law or
regulation, or any order or decree of any court or Governmental Authority; (e) except
as set forth on Disclosure Schedule 3.3, do not conflict with or result
in the breach or termination of, constitute a default under or accelerate or
permit the acceleration of any 


 


18

















 


performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which such Person is a party or by which such Person or any of its property is
bound; (f) do not result in the creation or imposition of any Lien upon
any of the property of such Person other than those in favor of Agent, on
behalf of itself and Lenders, pursuant to the Loan Documents; and (g) except
as set forth on Disclosure Schedule 3.3, do not require the consent or
approval of any Governmental Authority or any other Person, except those
referred to in Section 2.1(c), all of which will have been duly
obtained, made or complied with prior to the Closing Date.  Each of the Loan Documents shall be duly
executed and delivered by each Credit Party that is a party thereto and each
such Loan Document shall constitute a legal, valid and binding obligation of
such Credit Party enforceable against it in accordance with its terms.


 


3.4           Financial Statements and
Projections.  Except for the Projections and the Fair
Salable Balance Sheet, all Financial Statements concerning Borrower and its
Subsidiaries that are referred to below have been prepared in accordance with
GAAP consistently applied throughout the periods covered (except as disclosed
therein and except, with respect to unaudited Financial Statements, for the
absence of footnotes and normal year-end audit adjustments) and present fairly
in all material respects the financial position of the Persons covered thereby
as at the dates thereof and the results of their operations and cash flows for
the periods then ended.


 


(a)           Financial Statements.  The following Financial Statements attached
hereto as Disclosure Schedule 3.4(a) have been delivered on the
date hereof:  The unaudited balance sheet(s) of
Borrower and its Subsidiaries for the Fiscal Quarters ending on March 31,
2006, June 30, 2006 and September 30, 2006, consisting of a balance
sheet and the related consolidated statements of income, stockholders equity
and cash flows for the three, six and nine month periods ending on such dates
respectively.


 


(b)           Pro Forma.  The Pro Forma delivered on the date hereof
and attached hereto as Disclosure Schedule 3.4(b)) was prepared by
Borrower giving pro forma effect to the Related Transactions, was based on the
unaudited consolidated and consolidating balance sheets of Borrower and its
Subsidiaries dated September 30, 2006, and was prepared in accordance with
GAAP, with only such adjustments thereto as would be required in accordance
with GAAP.


 


(c)           Projections.  The Projections delivered on the date hereof
and attached hereto as Disclosure Schedule 3.4(c)) have been prepared by
Borrower in light of the past operations of its business, but including future
payments of known contingent liabilities reflected on the Fair Salable Balance
Sheet, and reflect projections for the five year period beginning on January 1,
2006 on a month-by-month basis for Fiscal Years 2006 and 2007 and on a
year-by-year basis thereafter.  The
Projections are based upon the same accounting principles as those used in the
preparation of the financial statements described above and the estimates and
assumptions stated therein, all of which Borrower believe to be reasonable and
fair in light of current conditions and current facts known to Borrower and, as
of the Closing Date, reflect Borrower’s good faith and reasonable estimates of
the future financial performance of Borrower for the period set forth
therein.  The Projections are not a
guaranty of future performance, and actual results may differ from the
Projections.


 


(d)           Fair Salable Balance Sheet.  The Fair Salable Balance Sheet delivered on
the date hereof and attached hereto as Disclosure Schedule 3.4(d) was
prepared by Borrower on 


 


19

















 


the same basis as the Pro
Forma, except that Borrower’s assets are set forth therein at their fair salable
values on a going concern basis and the liabilities set forth therein include
all contingent liabilities of Borrower stated at the reasonably estimated
present values thereof.


 


3.5           Material Adverse Effect.  Between December 31, 2005 and the
Closing Date: (a) no Credit Party has incurred any obligations, contingent
or noncontingent liabilities, liabilities for Charges, long-term leases or
unusual forward or long-term commitments that are not reflected in the Pro
Forma and that, alone or in the aggregate, could reasonably be expected to have
a Material Adverse Effect, (b) no contract, lease or other agreement or
instrument has been entered into by any Credit Party or has become binding upon
any Credit Party’s assets and no law or regulation applicable to any Credit
Party has been adopted that has had or could reasonably be expected to have a
Material Adverse Effect, and (c) no Credit Party is in default and to the
best of Borrower’s knowledge no third party is in default under any material
contract, lease or other agreement or instrument, that alone or in the
aggregate could reasonably be expected to have a Material Adverse Effect.  Since December 31, 2005 no event has
occurred, that alone or together with other events, could reasonably be
expected to have a Material Adverse Effect.


 


3.6           Ownership of Property; Liens.  As of the Closing Date, the real estate (“Real
Estate”) listed in Disclosure Schedule 3.6 constitutes all of the
real property owned, leased, subleased, or used by any Credit Party.  Each Credit Party owns good and marketable
fee simple title to all of its owned Real Estate, and valid and marketable
leasehold interests in all of its leased Real Estate (in each case, except as
identified in the mortgage title insurance policy (or marked commitments)
delivered to the Agent on the Closing Date), all as described on Disclosure
Schedule 3.6 and copies of all such leases or a summary of terms thereof
reasonably satisfactory to Agent have been delivered to Agent.  Disclosure Schedule 3.6 further
describes any Real Estate with respect to which any Credit Party is a lessor,
sublessor or assignor as of the Closing Date. 
Each Credit Party also has good and marketable title to, or valid
leasehold interests in, all of its personal property and assets.  As of the Closing Date, none of the
properties and assets of any Credit Party are subject to any Liens other than
Permitted Encumbrances, and there are no facts, circumstances or
conditions  known to any Credit Party
that may result in any Liens (including Liens arising under Environmental Laws)
other than Permitted Encumbrances.  Each
Credit Party has received all material deeds, assignments, waivers, consents,
non-disturbance and attornment or similar agreements, bills of sale and other
documents, and has duly effected all material recordings, filings and other
actions necessary to establish, protect and perfect such Credit Party’s right,
title and interest in and to all of that portion of the Real Estate on which
the Credit Parties or their Subsidiaries will be conducting mining operations
during the term of this Agreement and other properties and assets.  Disclosure Schedule 3.6 also describes
any purchase options, rights of first refusal or other similar contractual
rights pertaining to any Real Estate.  As
of the Closing Date, no portion of any Credit Party’s Real Estate has suffered
any material damage by fire or other casualty loss that has not heretofore been
repaired and restored in all material respects to its original condition or
otherwise remedied.  As of the Closing
Date, all Permits required to have been issued or appropriate to enable the
Real Estate to be lawfully occupied and used for all of the purposes for which
it is currently occupied and used have been lawfully issued and are in full
force and effect.


 


20

















 


3.7           Labor Matters.  Except as set forth on Disclosure Schedule
3.7, as of the Closing Date (a) no strikes or other material labor
disputes against any Credit Party are pending or, to any Credit Party’s
knowledge, threatened; (b) hours worked by and payment made to employees
of each Credit Party comply with the Fair Labor Standards Act and each other
federal, state, local or foreign law applicable to such matters; (c) all
payments due from any Credit Party for employee health and welfare insurance
have been paid or accrued as a liability on the books of such Credit Party; (d) no
Credit Party is a party to or bound by any collective bargaining agreement,
management agreement, consulting agreement, employment agreement, bonus,
restricted stock, stock option, or stock appreciation plan or agreement or any
similar plan, agreement or arrangement (and true and complete copies of any
agreements described on Disclosure Schedule 3.7 have been delivered to
Agent); (e) there is no organizing activity involving any Credit Party
pending or, to any Credit Party’s knowledge, threatened by any labor union or
group of employees; (f) there are no representation proceedings pending
or, to any Credit Party’s knowledge, threatened with the National Labor
Relations Board, and no labor organization or group of employees of any Credit
Party has made a pending demand for recognition; and (g) there are no
material complaints or charges against any Credit Party pending or, to the
knowledge of any Credit Party, threatened to be filed with any Governmental
Authority or arbitrator based on, arising out of, in connection with, or
otherwise relating to the employment or termination of employment by any Credit
Party of any individual.


 


3.8           Ventures, Subsidiaries and
Affiliates; Outstanding Stock and Indebtedness.  Except as set forth in Disclosure Schedule
3.8, as of the Closing Date, no Credit Party has any Subsidiaries, is
engaged in any joint venture or partnership with any other Person, or is an
Affiliate of any other Person.  All of
the issued and outstanding Stock of each Credit Party is owned by each of the
Stockholders and in the amounts set forth in Disclosure Schedule 3.8.  Except as set forth in Disclosure Schedule
3.8, there are no outstanding rights to purchase, options, warrants or
similar rights or agreements pursuant to which any Credit Party may be required
to issue, sell, repurchase or redeem any of its Stock or other equity
securities or any Stock or other equity securities of its Subsidiaries.  All outstanding Indebtedness and Guaranteed
Indebtedness of each Credit Party as of the Closing Date (except for the
Obligations) is described in Section 6.3 or Section 6.6
(including Disclosure Schedule 6.3 and Disclosure Schedule 6.6).


 


3.9           Government Regulation.  No Credit Party is an “investment company” or
an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment
company,” as such terms are defined in the Investment Company Act of 1940.  No Credit Party is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, or
any other federal or state statute that restricts or limits its ability to
incur Indebtedness or to perform its obligations hereunder. The making of the
Term Loan by Lenders to Borrower, the application of the proceeds thereof and
repayment thereof and the consummation of the Related Transactions will not
violate any provision of any such statute or any rule, regulation or order
issued by the Securities and Exchange Commission.


 


3.10         Margin Regulations.  No Credit Party is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of “purchasing” or “carrying” any “margin stock”
as such terms are defined in Regulation U of the Federal Reserve Board as now
and from time to time hereafter in effect (such securities being referred to
herein as “Margin Stock”).  No
Credit Party owns any Margin Stock, and none of the 


 


21

















 


proceeds of the Term Loan or
other extensions of credit under this Agreement will be used, directly or
indirectly, for the purpose of purchasing or carrying any Margin Stock, for the
purpose of reducing or retiring any Indebtedness that was originally incurred
to purchase or carry any Margin Stock or for any other purpose that might cause
the Term Loan or other extensions of credit under this Agreement to be
considered a “purpose credit” within the meaning of Regulations T, U or X of
the Federal Reserve Board.  No Credit
Party will take or permit to be taken any action that might cause any Loan
Document to violate any regulation of the Federal Reserve Board.


 


3.11         Taxes.  All Federal and other material tax returns,
reports and statements, including information returns, required by any
Governmental Authority to be filed by any Credit Party have been filed with the
appropriate Governmental Authority or have been extended by the appropriate
Governmental Authority, and all Charges have been paid prior to the date on
which any fine, penalty, interest or late charge may be added thereto for
nonpayment thereof excluding Charges or other amounts being contested in
accordance with Section 5.2(b). 
Proper and accurate amounts have been withheld by each Credit Party from
its respective employees for all periods in full and complete compliance with
all applicable federal, state, local and foreign laws and such withholdings
have been timely paid to the respective Governmental Authorities.  Disclosure Schedule 3.11 sets forth as
of the Closing Date those taxable years for which any Credit Party’s tax
returns are currently being audited by the IRS or any other applicable
Governmental Authority, and any assessments or threatened assessments in
connection with such audit, or otherwise currently outstanding.  Except as described in Disclosure Schedule
3.11, as of the Closing Date, no Credit Party has executed or filed with
the IRS or any other Governmental Authority any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any Charges.  None of the
Credit Parties and their respective predecessors are liable for any Charges: (a) under
any agreement (including any tax sharing agreements) or (b) to each Credit
Party’s  knowledge, as a transferee.  As of the Closing Date, no Credit Party has
agreed or been requested to make any adjustment under IRC Section 481(a),
by reason of a change in accounting method or otherwise, which would reasonably
be expected to have a Material Adverse Effect.


 


3.12         ERISA.


 


(a)           Disclosure Schedule 3.12 lists, as of the Closing Date, (i) all
ERISA Affiliates and (ii) all Plans and separately identifies all Pension
Plans, including Title IV Plans, Multiemployer Plans, and all Retiree Welfare
Plans.  Copies of all such listed Plans,
together with a copy of the latest form IRS/DOL 5500-series, as applicable, for
each such Plan, have been delivered to Agent. 
Except with respect to Multiemployer Plans, each Qualified Plan has been
determined by the IRS to qualify under Section 401 of the IRC, the trusts
created thereunder have been determined to be exempt from tax under the
provisions of Section 501 of the IRC, and nothing has occurred that would
cause the loss of such qualification or tax-exempt status.  Each Plan is in compliance in all material
respects with the applicable provisions of ERISA, the IRC and its terms,
including the timely filing of all reports required under the IRC or
ERISA.  Neither any Credit Party nor
ERISA Affiliate has failed to make any material contribution or pay any
material amount due as required by either Section 412 of the IRC or Section 302
of ERISA or the terms of any such Plan. 
No “prohibited transaction,” as defined in Section 406 of ERISA and
Section 4975 of the IRC, has occurred with respect to any Plan, that would
subject any Credit 


 


22

















 


Party to a material tax on
prohibited transactions imposed by Section 502(i) of ERISA or Section 4975
of the IRC.


 


(b)           Except as set forth in Disclosure Schedule 3.12: (i) no
Title IV Plan has any material Unfunded Pension Liability; (ii) no ERISA
Event has occurred or is reasonably expected to occur; (iii) there are no
pending, or to the knowledge of any Credit Party, threatened material claims
(other than claims for benefits in the normal course), sanctions, actions or
lawsuits, asserted or instituted against any Plan or any Person as fiduciary or
sponsor of any Plan; (iv) no Credit Party or ERISA Affiliate has incurred
or reasonably expects to incur any material liability as a result of a complete
or partial withdrawal from a Multiemployer Plan; and (v) within the last
five years no Title IV Plan of any Credit Party or ERISA Affiliate has been
terminated, whether or not in a “standard termination” as that term is used in Section 4041
of ERISA, nor has any Title IV Plan of any Credit Party or any ERISA Affiliate
(determined at any time within the last five years) with material Unfunded
Pension Liabilities been transferred outside of the “controlled group” (within
the meaning of Section 4001(a)(14) of ERISA) of any Credit Party or ERISA
Affiliate (determined at such time).


 


3.13         No Litigation.  No action, claim, lawsuit, demand,
investigation or proceeding is now pending or, to the knowledge of any Credit
Party, threatened against any Credit Party, before any Governmental Authority
or before any arbitrator or panel of arbitrators (collectively, “Litigation”),
(a) that challenges any Credit Party’s right or power to enter into or
perform any of its obligations under the Loan Documents to which it is a party,
or the validity or enforceability of any Loan Document or any action taken
thereunder, or (b) that could reasonably be expected to have a Material Adverse
Effect.  Except as set forth on Disclosure
Schedule 3.13, as of the Closing Date there is no Litigation pending or, to
any Credit Party’s knowledge, threatened, that seeks damages in excess of
$250,000 or injunctive relief against, or alleges criminal misconduct of, any
Credit Party.


 


3.14         Brokers.  Except as set forth on Disclosure Schedule
3.14, no broker or finder brought about the obtaining, making or closing of
the Term Loan or the Related Transactions, and no Credit Party or Affiliate
thereof has any obligation to any Person in respect of any finder’s or
brokerage fees in connection therewith.


 


3.15         Intellectual Property.  As of the Closing Date, each Credit Party
owns or has rights to use all material Intellectual Property necessary to
continue to conduct its business as now conducted by it or presently proposed
to be conducted by it, and each Patent, Trademark, Copyright and License is
listed, together with application or registration numbers, as applicable, in Disclosure
Schedule 3.15.  Each Credit Party
conducts its business and affairs without infringement of or interference with
any Intellectual Property of any other Person in any material respect.  Except as set forth in Disclosure Schedule
3.15, no Credit Party is aware of any material infringement claim by any
other Person with respect to any Intellectual Property.


 


3.16         Full Disclosure.  No information contained in this Agreement,
any of the other Loan Documents, Financial Statements or Collateral Reports or
other written reports from time to time prepared by any Credit Party and
delivered hereunder or any written statement prepared by any Credit Party and
furnished by or on behalf of any Credit Party to Agent or any Lender pursuant
to the terms of this Agreement contains or will contain any untrue statement of
a 


 


23

















 


material fact or omits or will
omit to state a material fact necessary to make the statements contained herein
or therein not misleading in light of the circumstances under which they were
made.  Projections from time to time
delivered hereunder are or will be based upon the estimates and assumptions
stated therein, all of which Borrower believed at the time of delivery to be
reasonable and fair in light of current conditions and current facts known to
Borrower as of such delivery date, and reflect Borrower’s good faith and
reasonable estimates of the future financial performance of Borrower and of the
other information projected therein for the period set forth therein.  Such Projections are not a guaranty of future
performance and actual results may differ from those set forth in such
Projections.  The Liens granted to Agent,
on behalf of itself and Lenders, pursuant to the Collateral Documents will at
all times be fully perfected first priority Liens in and to the Collateral
described therein, subject, as to priority, only to Permitted Encumbrances.


 


3.17         Environmental Matters.  Except as set forth in Disclosure Schedule
3.17, as of the Closing Date: (i) the Real Estate is free of Hazardous
Materials except for such Hazardous Materials (a) that are present in full
compliance with Environmental Laws, (b) that would not adversely impact
the value or marketability of such Real Estate or (c) that would not
result in Environmental Liabilities that could reasonably be expected to exceed
$200,000; (ii) no Credit Party has caused or suffered to occur any Release
of Hazardous Materials on, at, in, under, above, to, from or about any of its
Real Estate except for such Release (a) that was in full compliance with
Environmental Laws or (b) that would not result in Environmental
Liabilities that could reasonably be expected to exceed $200,000; (iii) the
Credit Parties are and have been in compliance with all Environmental Laws,
except for such noncompliance that would not result in Environmental
Liabilities which could reasonably be expected to exceed $200,000; (iv) the
Credit Parties have obtained, and are in compliance with, all Environmental
Permits required by Environmental Laws for the operations of their respective
businesses as presently conducted, except where the failure to so comply with
such Environmental Permits would not result in Environmental Liabilities that
could reasonably be expected to exceed $200,000, and all such Environmental
Permits are valid, uncontested and in good standing; (v) no Credit Party
is involved in operations or knows of any facts, circumstances or conditions,
including any Releases of Hazardous Materials, that are likely to result in any
Environmental Liabilities of such Credit Party which could reasonably be
expected to exceed $200,000; (vi) there is no Litigation arising under or
related to any Environmental Laws, Environmental Permits or Hazardous Material
that seeks damages, penalties, fines, costs or expenses in excess of $200,000
or injunctive relief against, or that alleges criminal misconduct by, any
Credit Party; (vii) no notice has been received by any Credit Party
identifying it as a “potentially responsible party” or requesting information
under CERCLA or analogous state statutes, and to the knowledge of the Credit
Parties, there are no facts, circumstances or conditions that may result in any
Credit Party being identified as a “potentially responsible party” under CERCLA
or analogous state statutes; and (viii) the Credit Parties have provided
to Agent copies of all existing environmental reports, reviews and audits and
all written information pertaining to actual or potential Environmental
Liabilities, in each case relating to any Credit Party.


 


3.18         Insurance.  Disclosure Schedule 3.18 lists all
insurance policies of any nature maintained, as of the Closing Date, for
current occurrences by each Credit Party, as well as a summary of the terms of
each such policy.


 


24














 


3.19         Deposit and Disbursement
Accounts.  Disclosure Schedule 3.19 lists all
banks and other financial institutions at which any Credit Party maintains
deposit or other accounts as of the Closing Date, including any Disbursement
Accounts, and such Schedule correctly identifies the name, address and
telephone number of each depository, the name in which the account is held, a
description of the purpose of the account, and the complete account number
therefor.


 


3.20         Government Contracts.  Except as set forth in Disclosure Schedule
3.20, as of the Closing Date, no Credit Party is a party to any contract or
agreement with any Governmental Authority and no Credit Party’s Accounts are
subject to the Federal Assignment of Claims Act (31 U.S.C. Section 3727)
or any similar state or local law.


 


3.21         Customer and Trade Relations.  As of the Closing Date, there exists no
actual or, to the knowledge of any Credit Party, threatened termination or
cancellation of, or any material adverse modification or change in:  the business relationship of any Credit Party
with any customer or group of customers whose purchases during the preceding 12
months caused them to be ranked among the ten largest customers of such Credit
Party; or  the business relationship of
any Credit Party with any supplier essential to its operations.


 


3.22         Bonding; Licenses.  Except as set forth on Disclosure Schedule
3.22, as of the Closing Date, no Credit Party is a party to or bound by any
surety bond agreement or binding requirement with respect to products or
services sold by it or any trademark or patent license agreement with respect
to products sold by it.


 


3.23         Solvency.  Both before and after giving effect to (a) the
Closing Date Term Loan to be made or incurred on the Funding Date or such other
date as the Delayed Draw Term Loan is made or incurred, (b) the
disbursement of the proceeds of such Term Loan pursuant to the instructions of
Borrower; (c) the Refinancing and the consummation of the other Related
Transactions; and (d) the payment and accrual of all transaction costs in
connection with the foregoing, each Credit Party is and will be Solvent.


 


3.24         Bonding Collateral.  None of the Credit Parties has (i) pledged
any collateral, other than the collateral identified on Disclosure Schedule
3.24 and the pledges and deposits of collateral permitted pursuant to
clauses (b), (c), (f) and (j) of the definition of “Permitted
Encumbrances,” in respect of the Bonding Agreements or in support of any other
obligation of a Credit Party or (ii) entered into any other bonding
agreement other than the Bonding Agreements. 
All outstanding Indebtedness and Guaranteed Indebtedness of the Credit
Parties in respect of their bonding obligations is described in Disclosure
Schedule 3.24.


 


3.25         Status of Guarantor.  Prior to the Closing Date, BRMP will not have
engaged in any business or incurred any Indebtedness or any other liabilities
(except in connection with its corporate formation, the Related Transactions
Documents and this Agreement).


 


3.26         Liabilities.  None of the Credit Parties has any material
liabilities or other obligations, including, without limitation, contingent
liabilities, other than (i) as set forth in the Financial Statements
provided on the Closing Date, (ii) otherwise disclosed or described in the
representations and warranties contained in this Section 3, or (iii) pursuant
to or in accordance with the Loan Documents.


 


25

















 


3.27         Collateral.  Each of the Credit Parties possesses good and
valid rights in all of the Collateral in which it purports to grant a Lien
under the Collateral Documents, and there are no Liens (including Liens or
retained security titles of conditional vendors) of any nature whatsoever on
any properties of any of the Credit Parties other than Permitted Encumbrances.


 


3.28         Filings and Other Actions
Relating to Collateral.  All Governmental Authority approvals and all
other filings, recordings, registrations and other actions have been made,
obtained and taken in all relevant jurisdictions that are necessary to create
and perfect the Liens provided for in the Collateral Documents (or arrangements
therefor have been made to the satisfaction of the Agent), and the Collateral
Agent, for the benefit of the Lenders, will have the Liens provided for in the
Collateral Documents, and the Collateral Documents shall constitute a valid,
direct, continuing first priority Lien on the Collateral, subject only to
Permitted Encumbrances.


 


3.29         BLM Leases.  No coal leases, other than the BLM
Leases assigned serial numbers C-37210,
C-27432, D-036955 and COC-61209, are necessary for the Borrower
to operate its mining business pursuant to and in accordance with the Borrower’s
Mine Plan. BLM
Leases assigned serial numbers C-25079 and COC-53356 are not a part of Borrower’s
Mine Plan and are not used in the Borrower’s coal mining business.


 


3.30         Applicant Violator System.  No direct or indirect owner of the Borrower
or the Mine, or person having any operational control of the Mine, or any other
Person that could adversely affect the transfer of any of the Borrower’s rights
in the Mine is listed on the Applicant Violator System.


 


3.31         Inventory.  All Inventory of the Credit Parties is stored
or located on real property that is owned in fee simple by the Borrower.


 


3.32         WSERC
Agreement.  No Credit Party has taken any action or
caused any event that will or could give rise to an obligation to make any
payment or make available any bonded amount or constitute a default pursuant to
the Memorandum of Understanding (including any amendments thereto) between
Borrower and the Western Slope Environmental Resource Council.


 


3.33         Equipment.  Each material item of Equipment
of Credit Parties used or held for use in their business is in good working
order, ordinary wear and tear and damage by insured casualty excepted, except
for items of such Equipment as are currently being repaired.


 


3.34         Bonds.  Credit Parties have posted and
maintained in full force and effect all surety bonds, reclamation bonds,
performance bonds, letters of credit, guarantees, and similar instruments
applicable to the Real Estate or Collateral and required by Applicable Law in
order for the Borrower lawfully to conduct its mining operations and business .


 


3.35         Royalties.  The Credit Parties have fully, timely
and properly paid all production and advance or minimum royalties, rentals,
overriding royalties or other burdens on coal production related to any lease,
contract, or agreement in respect of coal productions by Borrower (the “Royalties”),
and Credit Parties have not received any notice of default in connection with
the payment of Royalties.


 


26

















 


3.36         Permit Blocking.  No Credit Party has been
notified (nor is there any pending or threatened notification) by the federal
Office of Surface Mining Reclamation and Enforcement or by any state agency
administering the federal Surface Mining Control and Reclamation Act (“SMCRA”)
or any state counterpart of SMCRA that it is (i) ineligible to receive
additional surface mining permits, or (ii) under investigation to
determine whether its eligibility to receive a SMCRA permit should be revoked
(i.e., “permit blocked”).


 


3.37         Material Contracts.  Set forth on Disclosure Schedule 3.27
is a complete and accurate list as of the Closing Date of all Material
Contracts, showing the parties and subject matter thereof and amendments and
modifications thereto.  For each such
Material Contract, (a) such Material Contract is in full force and effect and
is binding upon and enforceable against the Borrower and, to the knowledge of
the Borrower, all other parties thereto in accordance with its terms, (b) such
Material Contract has not been otherwise amended or modified, and (c) all
consents required thereunder in connection with the issuance of the Term Loan
and the granting of the security in respect thereof have been obtained.  No Borrower is in default under or with
respect to any contractual obligation contained in any Material Contract, which
default could reasonably be expected to have a Material Adverse Effect.  To the knowledge of the Borrower, no Material
Contract counterparty is in default under the applicable Material Contract
beyond any applicable grace period set forth therein.


 


3.38         Water Share Certificates.  Borrower is the sole holder of record and
sole beneficial owner of each of the water share certificates listed on Disclosure
Schedule 3.38 and Borrower does not beneficially own any water share
certificates other than those listed on Disclosure Schedule 3.38.


 


4.            FINANCIAL STATEMENTS AND INFORMATION


 


4.1           Reports and Notices.  Each Credit Party executing this Agreement
hereby agrees that from and after the Closing Date and until the Termination
Date, it shall deliver to Agent or to Agent and Lenders, as required, in form
and substance satisfactory to the Agent, the Financial Statements, notices,
Projections and other information at the times, to the Persons and in the
manner set forth in Annex D.


 


4.2           Communication with Accountants.  Each Credit Party executing this Agreement
authorizes (a) Agent and (b) so long as an Event of Default has
occurred and is continuing, each Lender, to communicate directly with its
independent certified public accountants, including Ernst & Young, and
authorizes and shall instruct those accountants and advisors to communicate to
Agent and each Lender information relating to any Credit Party with respect to
the business, results of operations and financial condition of any Credit
Party.


 


5.            AFFIRMATIVE COVENANTS


 


Each Credit Party executing this Credit Agreement jointly and severally
agrees as to all Credit Parties that from and after the date hereof and until
the Termination Date:


 


5.1           Maintenance of Existence and
Conduct of Business.  Each Credit Party shall:  do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate or limited
liability company existence and its material rights and franchises, including
any 


 


27

















 


material Permits necessary for the conduct of
its business;  continue to conduct its
business substantially as now conducted or as otherwise permitted
hereunder;  at all times maintain,
preserve and protect all of its assets and properties used in the conduct of
its business, and keep the same in good repair, working order and condition in
all material respects (taking into consideration ordinary wear, tear and
casualty and except for obsolete assets) and from time to time make, or cause
to be made, all necessary or appropriate repairs, replacements and improvements
thereto consistent, in all material respects, with industry practices; and  transact business only in such corporate and
trade names as are set forth in Disclosure Schedule 5.1.


 


5.2           Payment of Charges.


 


(a)           Subject to Section 5.2(b), each Credit Party
shall pay and discharge or cause to be paid and discharged promptly all Charges
payable by it, including (i) Charges imposed upon it, its income and
profits, or any of its property (real, personal or mixed) and all Charges with
respect to tax, social security and unemployment withholding with respect to
its employees, (ii) lawful claims for labor, materials, supplies and
services or otherwise, and (iii) all storage or rental charges payable to
warehousemen or bailees, in each case, in accordance with customary terms,
except in the case of clauses (ii) and (iii) where the failure
to pay or discharge such Charges would not result in aggregate liabilities in
excess of $200,000.


 


(b)           Each Credit Party may in good faith contest, by appropriate
proceedings, the validity or amount of any Charges, Taxes or claims described
in Section 5.2(a); provided, that (i) adequate reserves
with respect to such contest are maintained on the books of such Credit Party,
in accordance with GAAP; (ii) no Lien shall be imposed to secure payment
of such Charges (other than payments to warehousemen and/or bailees) that is
superior to any of the Liens securing the Obligations and such contest is
maintained and prosecuted continuously and with diligence and operates to
suspend collection or enforcement of such Charges; (iii) none of the
Collateral becomes subject to forfeiture or loss as a result of such contest;
and (iv) such Credit Party shall promptly pay or discharge such contested
Charges, Taxes or claims and all additional charges, interest, penalties and
expenses, if any, and shall deliver to Agent evidence reasonably acceptable to
Agent of such compliance, payment or discharge, if such contest is terminated
or discontinued adversely to such Credit Party or the conditions set forth in
this Section 5.2(b) are no longer met.


 


5.3           Books and Records.  Each Credit Party shall keep adequate books
and records with respect to its business activities and will keep financial
records and statements in which proper entries, reflecting all financial
transactions, are made in accordance with GAAP and on a basis consistent with
the Financial Statements attached as Disclosure Schedule 3.4(a)).


 


5.4           Insurance; Damage to or
Destruction of Collateral.


 


(a)           The Credit Parties shall carry and maintain at their expense
at all times such insurance as is customarily maintained by owners and
operators of coal mining facilities, and in all events on and after January 1,
2007, shall carry and maintain the minimum insurance coverage set forth in this
Section 5.4(c), all in form and amounts and with insurers
reasonably acceptable to Agent.  If any
Credit Party at any time or times hereafter shall fail to obtain or maintain
any of the policies of insurance required herein, or to pay all premiums relating
thereto, 


 


28

















 


Agent may at any time or times thereafter
obtain and maintain such policies of insurance and pay such premiums and take
any other action with respect thereto that Agent deems advisable.  Agent shall have no obligation to obtain
insurance for any Credit Party or pay any premiums therefor.  By doing so, Agent shall not be deemed to
have waived any Default or Event of Default arising from any Credit Party’s
failure to maintain such insurance or pay any premiums therefor.  All sums so disbursed, including reasonable
attorneys’ fees, court costs and other charges related thereto, shall be
payable on demand by Borrower to Agent and shall be additional Obligations
hereunder secured by the Collateral.


 


(b)           Agent reserves the right at any time upon any change in any
Credit Party’s risk profile (including any change in the product mix maintained
by any Credit Party or any laws affecting the potential liability of such
Credit Party) to require additional forms and limits of insurance to, in Agent’s
opinion, adequately protect both Agent’s and Lenders’ interests in all or any
portion of the Collateral and to ensure that each Credit Party is protected by
insurance in amounts and with coverage customary for its industry.  If reasonably requested by Agent, each Credit
Party shall deliver to Agent from time to time a report of a reputable
insurance broker, reasonably satisfactory to Agent, with respect to its insurance
policies.


 


(c)           Without limiting any of the obligations of the Credit
Parties under this Agreement, from and after January 1, 2007, Credit
Parties shall carry and maintain the following minimum insurances. Such
insurance shall be provided by insurers, in such form and amounts, and with
such deductibles as are acceptable to the Agent and the Lender:


 


(i)            From
and after the Closing Date, the Credit Parties shall maintain all risk property
insurance covering the mine, including tunnels, galleries, shafts, all
structures and all equipment, whether above ground or below, against physical
loss or damage, including but not limited to fire and extended coverage,
collapse, flood, earth movement and mechanical breakdown / electrical
malfunction. Coverage shall be written on a replacement cost basis in an amount
not less than $50,000,000 and include costs to reopen the mine. Such insurance
policy shall contain an agreed amount endorsement waiving any coinsurance
penalty.


 


(ii)           From
and after the Closing Date, the Credit Parties shall maintain business interruption
insurance in an amount equal to twelve (12) months projected loss of net
profits, continuing expenses (including debt service payments) and shall
contain an agreed amount endorsement waiving any coinsurance penalty. Coverage
shall be included for expediting expenses in an amount not less than
$5,000,000. Such insurance shall also cover denial of access. Deductibles shall
not exceed sixty (60) days; and,


 


(iii)          The
Credit Parties shall maintain comprehensive general liability insurance written
on an occurrence basis in an amount not less than $1,000,000. Such coverage
shall include but not be limited to premises and operations, explosion,
collapse and underground hazards X, C & U, broad form contractual,
independent contractors, products and completed operations, sudden and
accidental pollution, broad form property and personal injury liability. Such
insurance shall not contain an exclusion for punitive or exemplary damages
where insurable under law.


 


29

















 


(iv)          The
Credit Parties shall maintain workers’ compensation insurance written with
statutory limits and Employer’s Liability Insurance written in an amount not
less than $1,000,000. Such policy shall not contain an exclusion for
occupational disease.


 


(v)           The
Credit Parties shall maintain Automobile Liability Insurance covering owned,
non-owned and hired vehicles in an amount not less than $1,000,000.


 


(vi)          The
Credit Parties shall maintain excess or umbrella liability insurance in an
amount not less than $20,000,000 written on an occurrence basis providing
coverage limits in excess of the insurance limits required under Sections
5.4(c)(iii), (c)(iv) (employer’s liability only), and (c)(v).
Such insurance shall contain a drop down provision in case of exhaustion of
underlying limits and/or aggregates and apply on a following form basis to the
primary insurances. Such insurance shall not contain an exclusion for punitive
or exemplary damages where insurable under law. Such policy shall not contain
an exclusion for occupational disease.


 


(vii)         From
the date that is thirty (30) days after the Closing Date, the Credit Parties
shall maintain key man life insurance for the benefit of the Agent, on behalf
of itself and the Lenders, in an amount not less than $5,000,000 on the life of
Keith Sieber.


 


A.           Endorsements.  All policies of insurance carried in
accordance with this Section 5.4(c) shall be endorsed to
provide that:


 


1.             Agent,
for itself and the benefit of any Lender, shall be an additional named insured
with respect to the insurance provided in accordance with Sections 5.4 (c)(i) and
(c)(ii) above, and an additional insured with respect to the
insurance provided in accordance with Sections 5.4 (c)(iii), (c)(iv) (employer’s
liability only), (c)(v) and (c)(vi) above with the
understanding that Agent shall not be responsible for any of the obligations of
Credit Parties including but not limited to payment of premiums;


 


2.             with
respect to insurance provided with respect to Sections 5.4(c)(i) and
(c)(ii) above Agent, for itself and the benefit of any Lender,
shall be the sole loss payee;


 


3.             with
respect to the insurance provided in accordance with Sections 5.4(c)(iii),
(c)(iv) (employer’s liability only), (c)(v) and (c)(vi) above
shall be endorsed to provide that, inasmuch as the policies are written to
cover more than one insured, all terms, conditions, insuring agreements and
endorsements, with the exception of the limits of liability, shall operate in
the same manner as if there were a separate policy covering each insured;


 


4.             with
respect to the insurance provided with respect to Sections 5.4(c)(i) and
(c)(ii) above, the interest of the Agent shall not be invalidated
by any action or inaction of the Credit Parties or any other person and shall
insure Agent regardless of any breach or violation by Credit Parties or any
other person of any warranties, declarations or conditions of such policies;


 


30

















 


5.             the
insurers waive all rights of subrogation against Agent and any Lender, any
right of setoff or counterclaim and any other right to deduction, whether by
attachment or otherwise;


 


6.             such
insurance shall be primary without right of contribution of any other insurance
carried by Agent or any Lender; and,


 


7.             if
such insurance is canceled for any reason whatsoever, including non-payment of
premium, or any substantial change is made which affects the interest of the
Agent or any Lender, such cancellation or change shall not be effective as to
the Agent or Lender until thirty (30) days (ten (10) days in the case of
non-payment of premium) after receipt by the Agent and any Lender of written
notice sent by registered mail.


 


B.            Adjustment
Of Losses.  Losses, if any, under any
insurance required to be carried by Sections 5.4(c)(i) and (c)(ii) shall
be adjusted with the insurance companies or otherwise collected, including the
filing of appropriate proceedings by Credit Parties subject to the approval of
the Agent.


 


C.            Certification.          On the Closing Date and
again on January 1, 2007, and at each policy renewal, but not less than
annually, Credit Parties shall provide to Agent approved certification from
each insurer or by an authorized representative of each insurer where it is not
practical for such insurer to execute the certificate itself. Such
certification shall identify the underwriters, the type of insurance, the
limits, deductibles, and term thereof and shall specifically list the special
provisions enumerated in paragraph Section 5.4(c)(A) above for
such insurance required in this Section 5.4.  Upon request, the Credit Parties shall
furnish Agent with copies of all insurance policies, binders, and cover notes
or other evidence of such insurance.


 


D.            Report.  Concurrently with the furnishing of all
certificates referred to in this Section 5.4, Credit Parties shall
furnish the Agent with an opinion from an independent insurance broker,
acceptable to the Agent, stating that all premiums then due have been paid and
that, in the opinion of such broker, the insurance then maintained by the
Credit Parties is in accordance with this Section 5.4.  Furthermore, Credit Parties shall cause such
broker to advise the Agent and any Lender promptly in writing of any default in
the payment of any premiums or any other act or omission, on the part of any
Person, which might invalidate or render unenforceable, in whole or in part,
any insurance provided by the Credit Parties hereunder.


 


(d)           Each Credit Party irrevocably makes, constitutes and
appoints Agent (and all officers, employees or agents designated by Agent), so
long as any Default or Event of Default has occurred and is continuing or the
anticipated insurance proceeds exceed $1,000,000, as such Credit Party’s true
and lawful agent and attorney in fact for the purpose of making, settling and
adjusting claims under any “All Risk” policies of insurance, endorsing the name
of such Credit Party on any check or other item of payment for the proceeds of
any “All Risk” policies of insurance and for making all determinations and
decisions with respect to such “All Risk” policies of insurance.  Agent shall have no duty to exercise any
rights or powers granted to it pursuant to the foregoing
power-of-attorney.  Borrower shall
promptly notify Agent of any loss, damage, or destruction to the Collateral in
the amount of $250,000 or more, whether or not covered by insurance.  After deducting from such proceeds (i) the
expenses incurred by Agent in 


 


31

















 


the collection or handling thereof, and (ii) amounts
required to be paid to creditors (other than Lenders) having Permitted
Encumbrances, Agent may, at its option, apply such proceeds (not including
proceeds received in connection with any key man life insurance policy) to the
reduction of the Obligations in accordance with Section 1.3(c), or
permit or require the applicable Credit Party to use such money, or any part
thereof, to replace, repair, restore or rebuild the Collateral in a diligent
and expeditious manner with materials and workmanship of substantially the same
quality as existed before the loss, damage or destruction.  Notwithstanding the foregoing, if the
casualty giving rise to such insurance proceeds could not reasonably be
expected to have a Material Adverse Effect and such insurance proceeds do not
exceed $500,000 in the aggregate, Agent shall permit the Borrower to replace,
restore, repair or rebuild the property; provided that if the Borrower shall
not have completed or entered into binding agreements to complete such
replacement, restoration, repair or rebuilding within 180 days of such
casualty, Agent may apply such insurance proceeds (not including proceeds
received in connection with any key man life insurance policy) to the
Obligations in accordance with Section 1.3(c).  To the extent not used to replace, repair,
restore or rebuild the Collateral, such insurance proceeds (not including
proceeds received in connection with any key man life insurance policy) shall
be applied in accordance with Section 1.3(c).


 


5.5           Compliance with Laws.  Each Credit Party shall comply in all
material respects with all federal, state, local and foreign laws and
regulations applicable to it, including those relating to reclamations, mines,
mine safety, ERISA, labor laws, and Environmental Laws and Environmental Permits.


 


5.6           Supplemental Disclosure.  From time to time as may be reasonably
requested by Agent (which request will not be made more frequently than once
each year absent the occurrence and continuance of an Event of Default) or at
Credit Parties’ election, the Credit Parties shall supplement each Disclosure
Schedule hereto, or any representation herein or in any other Loan Document,
with respect to any matter hereafter arising that, if existing or occurring at
the date of this Agreement, would have been required to be set forth or
described in such Disclosure Schedule or as an exception to such representation
or that is necessary to correct any information in such Disclosure Schedule or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to any Disclosure Schedule, such Disclosure Schedule shall be
appropriately marked to show the changes made therein); provided that (a) no
such supplement to any such Disclosure Schedule or representation shall amend,
supplement or otherwise modify any Disclosure Schedule or representation, or be
or be deemed a waiver of any Default or Event of Default resulting from the
matters disclosed therein, except as consented to by Agent and Requisite
Lenders in writing, and (b) no supplement shall be required or permitted
as to representations and warranties that relate solely to the Closing Date.


 


5.7           Intellectual Property.  Each Credit Party will conduct its business
and affairs without infringement of or interference with any Intellectual Property
of any other Person in any material respect and shall comply in all material
respects with the terms of its Licenses.


 


5.8           Environmental Matters.  Each Credit Party shall and shall cause each
Person within its control to: (a) conduct its operations and keep and
maintain its Real Estate in compliance with all Environmental Laws and
Environmental Permits, except for such noncompliance that would not result in
Environmental Liabilities which could reasonably be 


 


32

















 


expected to exceed $100,000; (b) implement
any and all investigation, remediation, removal and response actions that are
appropriate or necessary to maintain the value and marketability of the Real
Estate or to otherwise comply with Environmental Laws and Environmental Permits
pertaining to the presence, generation, treatment, storage, use, disposal,
transportation or Release of any Hazardous Material on, at, in, under, above,
to, from or about any of its Real Estate in all material respects; (c) notify
Agent promptly after such Credit Party becomes aware of any violation of
Environmental Laws or Environmental Permits or any Release on, at, in, under,
above, to, from or about any Real Estate that would reasonably be expected to
result in Environmental Liabilities in excess of $250,000; and (d) promptly
forward to Agent a copy of any order, notice, request for information or any
written communication or report received by such Credit Party in connection
with any such violation or Release or any other matter relating to any
Environmental Laws or Environmental Permits that could reasonably be expected
to result in Environmental Liabilities in excess of $250,000, in each case
whether or not the Environmental Protection Agency or any Governmental Authority
has taken or threatened any action in connection with any such violation,
Release or other matter.  If Agent at any
time has a reasonable basis to believe that there may be a violation of any
Environmental Laws or Environmental Permits by any Credit Party or any
Environmental Liability arising thereunder, or a Release of Hazardous Materials
on, at, in, under, above, to, from or about any of its Real Estate, that, in
each case, could reasonably be expected to have a Material Adverse Effect, then  each Credit Party shall, upon Agent’s written
request (i) cause the performance of such environmental audits including
subsurface sampling of soil and groundwater, and preparation of such
environmental reports, at Borrower’ expense, as Agent may from time to time
reasonably request, which shall be conducted by reputable environmental
consulting firms reasonably acceptable to Agent and shall be in form and
substance reasonably acceptable to Agent, and (ii) permit Agent or its
representatives to have access to all Real Estate for the purpose of conducting
such environmental audits and testing as Agent deems appropriate, including
subsurface sampling of soil and groundwater. 
Borrower shall reimburse Agent for the costs of such audits and tests
and the same will constitute a part of 
the Obligations secured hereunder.


 


5.9           Landlords’ Agreements, Mortgagee
Agreements, Bailee Letters and Real Estate Purchases.  Each Credit Party shall use commercially
reasonable efforts to obtain a landlord’s agreement, mortgagee agreement or
bailee letter, as applicable, from the lessor of each leased property,
mortgagee of owned property or bailee with respect to any warehouse, processor
or converter facility or other location where Inventory is stored or located,
which agreement or letter shall contain a waiver or subordination of all Liens
or claims that the landlord, mortgagee or bailee may assert against the
Inventory at that location, and shall otherwise be reasonably satisfactory in
form and substance to Agent.  After the
Closing Date, no real property or warehouse space shall be leased by any Credit
Party and no Inventory shall be shipped to a processor or converter under
arrangements established after the Closing Date without the prior written
consent of Agent or, unless and until a reasonably satisfactory landlord
agreement or bailee letter, as appropriate, shall first have been obtained with
respect to such location.  Each Credit
Party shall timely and fully pay and perform its obligations under all leases
and other agreements with respect to each leased location or public warehouse
where any Collateral is or may be located. 
To the extent otherwise permitted hereunder, if any Credit Party
proposes to acquire a fee ownership interest in Real Estate after the Closing
Date, it shall first provide to Agent a mortgage or deed of trust granting
Agent a first priority Lien on such Real Estate, together with such
environmental audits, mortgage title insurance commitment, real property 


 


33

















 


survey and local counsel opinion(s) as
Agent may reasonably request, and, if reasonably requested by Agent,
supplemental casualty insurance and flood insurance, and such other documents,
instruments or agreements reasonably requested by Agent, in each case, in form
and substance reasonably satisfactory to Agent.


 


5.10         Interest Rate Protection.  Within thirty (30) days after the Closing
Date and at all times thereafter prior to the Commitment Termination Date,
Borrower shall enter into and maintain interest rate cap, swap or collar
agreements, or other agreements or arrangements designed to provide protection
against fluctuations in interest rates, which shall be on terms, for periods
and with counterparties reasonably acceptable to Agent, with respect to, as of
any date of determination, at least seventy-five percent (75%) of the
outstanding principal amount of the Term Loan as of such date.


 


5.11         Further Assurances.  Each Credit Party executing this Agreement
agrees that it shall and shall cause each other Credit Party to, at such Credit
Party’s expense and upon the reasonable 
request of Agent, duly execute and deliver, or cause to be duly executed
and delivered, to Agent such further instruments and do and cause to be done
such further acts as may be necessary or proper in the reasonable opinion of
Agent to carry out more effectively the provisions and purposes of this
Agreement and each Loan Document.


 


5.12         GAAP Reserves.  To the extent required by GAAP, Borrower
shall maintain and reflect on its financial statements adequate reserves for
future costs associated with any black lung liabilities, retiree and health
benefits, any reclamation obligations and any other potential Environmental
Liabilities or claims.


 


5.13         Maintenance of Title;
Maintenance of Liens.  Each Credit Party shall maintain good and
valid rights and title to the Collateral, free and clear of all Liens other
than Permitted Encumbrances, and maintain the perfection and priority of the
Liens in the Collateral created pursuant to the Collateral Documents, subject
only to Permitted Encumbrances.


 


5.14         Collateral Assurances.  Each Credit Party shall promptly execute and
deliver all further agreements, instruments and documents and take all further
action, that may be necessary or that the Agent may reasonably request in order
to create, maintain and preserve the Lien of the Collateral Documents in all of
the Collateral, whether now existing or hereinafter acquired (including the
first priority status thereof); and, from time to time, promptly execute, or
cause to be executed, any all further instruments (including financing
statements, continuation statements, amendments to deeds of trusts and
mortgages and similar statements and documents with respect to any of the
applicable Collateral Documents) reasonably acceptable to the Agent for such
purpose.


 


5.15         Bonding.  Each Credit Party shall maintain at all times
such bonding with respect to its mining Permits as is required by applicable
law.


 


5.16         Annual Meeting.  Each Credit Party agrees to make its senior
management available to the Agent and Lenders for an annual meeting (which may
be held via a conference call) to be held ten (10) Business Days (or such
other date as may be agreed to in writing by the 


 


34

















 


Agent) following the delivery by the Borrower
of the Operating Plan in accordance with Annex D hereto.


 


5.17         Maintenance of Properties.  Each Credit Party agrees to maintain in the
ordinary course of business in good repair, working order and condition
(reasonable wear and tear excepted and except for obsolete properties) all
properties used in their business (whether owned or held under lease), and from
time to time make or cause to be made all needed and appropriate repairs,
renewals, replacements, additions, betterments and improvements thereto.


 


5.18         Future Subsidiaries.  At the time of any acquisition permitted
hereunder by any Credit Party, or the formation of any new Subsidiary of any
Credit Party which is permitted under this Agreement, the Credit Parties, as
the case may be, will, and will cause their respective Subsidiaries, as
appropriate, to (a) in the case of the formation or acquisition of a new
Subsidiary, provide to the Agent an executed security agreement for such new
Subsidiary, together with appropriate UCC-1 financing statements, as well as an
executed guaranty for such new Subsidiary, which shall, in each case,
constitute both Collateral Documents and Loan Documents for purposes of this
Agreement as well as certified copies of their organizational documents; (b) in
the case of any acquisition by any Credit Party of a Person that becomes a
Subsidiary, or the formation of any new Subsidiary, pledge to the Agent all of
the Stock of such Subsidiary or Person which is acquired or formed, or
beneficially owned by any of the Credit Parties, as additional Collateral for
the Obligations to be held by the Agent in accordance with the terms of a
Pledge Agreement, and execute and deliver to the Agent all such documentation
for such pledge as, in the reasonable opinion of the Agent, is appropriate; and
(c) in any case, provide all other documentation, including one or more
opinions of counsel reasonably satisfactory to the Agent which in the
reasonable opinion of the Agent is appropriate with respect to such acquisition
or the formation of such Subsidiary.


 


5.19         BLM Filings.  (i) within ten (10) after the
Closing Date, Borrower shall have prepared and filed a letter, in form and
substance satisfactory to the Agent, with BLM notifying BLM of the execution
and recordation of a deed of trust in the land records of Delta County,
Colorado in respect of the BLM Leases and (ii) within sixty (60) days
after the Closing Date, Borrower shall have filed an Updated
Statement of Qualifications—Federal Coal Leases with BLM to reflect the granting of a 1% membership
interest to BRMP as well as any other information that may be required to be
disclosed to BLM as a result of the consummation of the Related Transactions.


 


5.20         BLM Lease Title Opinion.   No later than ninety (90) days after the
Closing Date, Borrower shall have provided, or caused to be provided to Agent,
a title report, in form and substance reasonably satisfactory to the Agent,
covering the BLM Leases with assigned serial numbers C-25079, COC-53356, C-27432,
and D-036955.


 


5.21         Permit Updates.  No later than twenty-five (25) days after the
Closing Date, Borrower shall have amended, and the appropriate Governmental
Authority shall have approved the amendments to, each of the Permits set forth
on Disclosure Schedule 5.21 to reflect the change in ownership structure
as a result of the Bowie Mergers.


 


35

















 


5.22         Key Man Life Insurance.  Not later than thirty (30) days after the
Closing Date, evidence reasonably acceptable to the Agent shall have been
delivered to the Agent establishing that Borrower has obtained a key man life
insurance policy from an issuer acceptable to the Agent, having among other
attributes, a rating from A.M. Best of at least A:X, payable to the Agent
for the benefit of the Lenders on the life of Keith Sieber in an amount not
less than $5,000,000.


 


5.23         Material Contracts.  Within twenty (20) days of the execution and
delivery thereof, Borrower shall deliver (i) true and correct copies of all
Material Contracts executed after the Closing Date and (ii) consent
agreements, in form and substance reasonably satisfactory to the Agent, from
each counterparty to a Material Contract and from each counterparty to a coal
supply contract entered into with the Borrower after the Closing Date,
acknowledging and consenting (where such consent is required by the terms of
such contracts) (x) to the Loan and the issuance of the Notes hereunder, (y) to
the granting of the security interest in respect thereof and (z) to the
direction of the Borrower that all payments on accounts should be forwarded
directly to the Collection Account.


 


5.24         Ditch Company Notices of
Collateral Assignments.  Borrower shall deliver duly executed
Collateral Assignments from each of (i) The Terror Ditch and Reservoir
Company, (ii) The North Fork Farmers Ditch Association, (iii) The
Deer Trail Ditch Company, (iv) The Fire Mountain Canal and Reservoir
Company in respect of all of its shares of capital stock (for the avoidance of
doubt four separate Collateral Assignments from The Fire Mountain Canal and
Reservoir Company will be executed in connection with this transaction) and (v) The
Pitkin Mesa Pipe Line Company, in each case, no later than thirty (30) days
after the Closing Date.


 


5.25         Water Share Certificates.  Borrower shall have delivered to the Agent
newly issued water share certificates from each of (i) The Terror Ditch
and Reservoir Company, (ii) The North Fork Farmers Ditch Association, (iii) The
Deer Trail Ditch Company, (iv) The Fire Mountain Canal and Reservoir
Company in respect of all of its shares of capital stock (for the avoidance of
doubt four new water share certificates shall be issued by The Fire Mountain
Canal and Reservoir Company) and (v) The Pitkin Mesa Pipe Line Company, in
each case, identifying the Agent as a lienholder, and otherwise in form and
substance satisfactory to the Agent, no later than sixty (60) days after the
Closing Date.


 


36














 


6.                                    NEGATIVE COVENANTS


 


Each Credit
Party executing this Agreement jointly and severally agrees as to all Credit
Parties that from and after the date hereof until the Termination Date:


 


6.1          Mergers,
Subsidiaries, Etc.  No Credit Party shall
directly or indirectly, by operation of law or otherwise, (a) form or
acquire any Subsidiary, or (b) merge with, consolidate with, acquire all
or substantially all of
the assets or Stock of, or otherwise combine with or acquire any Person, other
than any merger or consolidation of any Credit Party into Borrower so long as
Borrower is the survivor of such merger or consolidation.


 


6.2          Investments;
Loans and Advances.  Except for
Permitted Investments and as otherwise expressly permitted by this Section 6.2,
no Credit Party shall
make or permit to exist any investment in, or make, accrue or permit to
exist  loans or advances of money to, any
Person, through the direct or indirect lending of money, holding of securities
or otherwise, except that each Credit Party may maintain (i) its existing
investments as of the Closing Date in its Subsidiaries as set forth on Disclosure
Schedule 6.2 and (ii) its other investments existing as of the Closing
Date as set forth on Disclosure Schedule 6.2.


 


6.3          Indebtedness.


 


(a)           No Credit Party shall create, incur, assume or
permit to exist any Indebtedness, except (without duplication) (i) Indebtedness
secured by purchase money security interests and Capital Leases permitted in Section 6.7(c),
(ii) the Term Loan and the other Obligations, (iii) unfunded pension
fund and other employee benefit plan obligations and liabilities to the extent
they are permitted to remain unfunded under applicable law, (iv) existing
Indebtedness described in Disclosure Schedule 6.3 and Refinancing
Indebtedness in respect of such Indebtedness, (v) hedging obligations under swaps, caps, collar or
similar arrangements entered into pursuant to Section 5.10, (vi) the
Indebtedness of Borrower listed on Disclosure Schedule 3.24, and (vii) Indebtedness
incurred to finance premiums payable in connection with the non-bond insurance
required under Section 5.4 of this Agreement, in an aggregate
amount not to exceed $4,000,000 at any time outstanding in any Fiscal Year.


 


(b)           Except in connection
with Refinancing Indebtedness permitted by Section 6.3(a), no
Credit Party shall, directly or indirectly, voluntarily purchase, redeem,
defease or prepay any principal of, premium, if any, interest or other amount
payable in respect of any Indebtedness prior to its scheduled maturity, other than
(i) the Obligations and (ii) Indebtedness secured by a Permitted
Encumbrance if the asset securing such Indebtedness has been sold or otherwise
disposed of in accordance with Sections 6.8(b) or (c).


 


6.4          Employee
Loans and Affiliate Transactions.


 


(a)           No Credit Party
shall enter into or be a party to any transaction with any other Credit Party
or any Affiliate thereof except in the ordinary course of and pursuant to the
reasonable requirements of such Credit Party’s business and upon fair and
reasonable terms that are no less favorable to such Credit Party than would be
obtained in a comparable arm’s length transaction with a Person not an
Affiliate of such Credit Party. In addition, if any such transaction or series
of related transactions involves payments in excess of $25,000 in the 


 


37

















 


aggregate, the terms
of these transactions must be disclosed in advance to Agent.  All such transactions existing as of the date
hereof are described in Disclosure Schedule 6.4(a).


 


(b)           No
Credit Party shall enter into any lending or borrowing transaction with any
employees of any Credit Party, except loans to its respective employees in the
ordinary course of business consistent with past practices for travel and entertainment
expenses, relocation costs and similar purposes up to a maximum of $25,000 in
the aggregate at any one time outstanding.


 


(c)           The
Borrower shall not, without the express prior written consent of the Agent (i) employ
any Affiliate, (ii) enter into any contract or agreement with any
Affiliate for the provision of any goods or services, including without
limitation for consulting or management services, or (iii) effect any
transaction with any Affiliate, in each case, on a basis less favorable to the
Borrower than would be the case if such transaction had been effected with a
Person not an Affiliate.


 


6.5           Capital Structure
and Business.  If all or part of a
Credit Party’s Stock is pledged to Agent, that Credit Party shall not issue
additional Stock.  No Credit Party shall
amend its charter or bylaws in a manner that would adversely affect Agent or
Lenders or such Credit Party’s duty or ability to repay the Obligations;
provided that the terms of the Borrower LLC Agreement may not be amended
without the express prior written consent of the Agent.  No Credit Party shall engage in any business
other than the businesses currently engaged in by it.


 


6.6           Guaranteed
Indebtedness.  No Credit Party shall
create, incur, assume or permit to exist any Guaranteed Indebtedness except (a) by
endorsement of instruments or items of payment for deposit to the general
account of any Credit Party, (b) for Guaranteed Indebtedness expressly set
forth on Disclosure Schedule 3.24 or Disclosure Schedule 6.6 and (c) for
the Guaranties provided for herein.


 


6.7           Liens.  No Credit Party shall create, incur, assume
or permit to exist any Lien on or with respect to its properties or assets
(whether now owned or hereafter acquired) except for (a) Permitted
Encumbrances;  (b) Liens in existence
on the date hereof and summarized on Disclosure Schedule 6.7 securing
the Indebtedness described on Disclosure Schedule 6.3 and any
Refinancing Indebtedness in respect thereof; and (c) Liens created after
the date hereof by conditional sale or other title retention agreements
(including Capital Leases) or in connection with purchase money Indebtedness
with respect to Equipment and Fixtures acquired by any Credit Party in the
ordinary course of business, involving the incurrence of an aggregate amount of
purchase money Indebtedness and Capital Lease Obligations or any Refinancing
Indebtedness in respect thereof of not more than $250,000  outstanding at any one time for
all such Liens (provided that such Liens attach only to the assets
subject to such purchase money debt and such Indebtedness is incurred within
twenty (20) days following such purchase and does not exceed 100% of the
purchase price of the subject assets).  
In addition, no Credit Party shall become a party to any agreement,
note, indenture or instrument, or take any other action, that would prohibit
the creation of a Lien on any of its properties or other assets in favor of
Agent, on behalf of itself and Lenders, as additional collateral for the
Obligations, except operating leases, Capital Leases or Licenses which, in each
case, prohibit Liens upon the assets that are subject thereto.


 


38

















 


6.8           Sale of Stock and
Assets.  No Credit Party shall sell,
transfer, convey, assign or otherwise dispose of any of its properties or other
assets, including the Stock of any of its Subsidiaries (whether in a public or
a private offering or otherwise) or any of its Accounts, other than (a) the
sale of coal in the ordinary course of business, (b) the sale or
disposition by a Credit Party of Equipment that is obsolete or no longer used
or useful in such Credit Party’s business and having a book value not exceeding
$500,000  in the
aggregate in any Fiscal Year and (c) the sale or disposition by a Credit
Party of Equipment in the ordinary course of business having a book value not
exceeding $500,000  in the
aggregate in any Fiscal Year.


 


6.9           ERISA.  No Credit Party shall, or shall cause or
permit any ERISA Affiliate to, cause or permit to occur (i) an event that
could result in the imposition of a Lien under Section 412 of the IRC or Section 302
or 4068 of ERISA or (ii) an ERISA Event.


 


6.10         Financial
Covenants.  Borrower shall not breach
or fail to comply with any of the Financial Covenants as set forth in Annex
E.


 


6.11         Hazardous
Materials.  No Credit Party shall
cause or permit a Release of any Hazardous Material on, at, in, under, above,
to, from or about any of the Real Estate where such Release would violate in
any respect, or form the basis for any Environmental Liabilities under, any
Environmental Laws or Environmental Permits that would reasonably be expected
to result in a Material Adverse Effect.


 


6.12         Sale-Leasebacks.  No Credit Party shall engage in any
sale-leaseback, synthetic lease or similar transaction involving any of its
assets.


 


6.13         Restricted
Payments.  No Credit Party shall make
any Restricted Payment (other than the required redemption, in accordance with
the terms of the Borrower LLC Agreement, of Borrower’s Stock from the Manager
in connection with the Manager ceasing to serve in such capacity, the Closing
Date Distribution, the Delayed Draw Distribution, any Permitted Tax
Distribution, Permitted Consulting Fees and Permitted Fees), except that if and
so long as no Default or Event of Default shall have occurred and be continuing
or would result from the making of such payment, Borrower may, on a quarterly
basis in respect of the most recent Fiscal Quarter after the calculations set
forth in Section 1.9(c) have been completed by the Agent and the
Independent Engineer (and the Independent Engineer has delivered to the Agent a
Capital Expenditure Certificate), make Restricted Payments on a Distribution
Date in an amount not greater than the Distribution Date Amount, provided,
that, if the Restricted Payment to be made is in respect of the final
Fiscal Quarter of any Fiscal Year such Restricted Payment shall be made, if at
all, only on the Annual Distribution Date; provided, further,
that all of the following conditions shall have been satisfied: (i) the
Debt Service Coverage Ratio for the immediately preceding four Fiscal Quarter
period (for the avoidance of doubt, if the Restricted Payment is being paid on
an Annual Distribution Date, such four Fiscal Quarter period shall end on December 31
of the immediately preceding Fiscal Year) shall have been at least 1.20:1.00, (ii) based
upon the Projections delivered to the Agent in the immediately preceding Fiscal
Quarter pursuant to clause (o) of Annex D, the projected Debt
Service Coverage Ratio for the four Fiscal Quarter period commencing with and
including the Fiscal Quarter in which such Restricted Payment is to be made
(for the avoidance of doubt, if the Restricted Payment is being paid on an
Annual Distribution Date, such four Fiscal Quarter period shall commence on January 1
of the 


 


39

















 


Fiscal Year in which
such payment is being paid), shall be at least 1.20:1.00, (iii) the Debt
Service Reserve Account is fully funded in an amount equal to the Debt Service
Reserve Amount, (iv) the Capital Expenditure Reserve Account is fully
funded in an amount equal to the Capital Expenditure Reserve Minimum Balance, (v) the
Principal Reduction Date has occurred, (vi) the Audited Financial Statements Approval Date
has occurred, (vii) if the Restricted Payment is to be made on an Annual
Distribution Date, the Borrower shall have paid the Excess Coal Prepayment
Amount, if any, to the Agent and (viii) the Agent and Lenders shall have
received a certificate, in form and  substance
reasonably satisfactory to the Agent, from the Authorized Officers of Borrower
certifying that, (a) after giving effect to the payment of any Restricted
Payment, the Borrower will have sufficient funds to satisfy its payment
obligation, if any, provided for in Section 1.3(b)(i); provided,
that the Borrower shall not be required to make the certification otherwise
required to be made pursuant to this clause (viii)(a) if the Restricted
Payment is to be made on an Annual Distribution Date and (b) all of the
conditions set forth in this Section 6.13 have been satisfied.


 


6.14        Change
of Corporate Name, State of Incorporation or Location; Change of Fiscal Year.  No Credit Party shall (a) change its
name as it appears in official filings in the state of its incorporation or
other organization (b) change its chief executive office, principal place
of business, corporate offices or warehouses or locations at which Collateral
is held or stored, or the location of its records concerning the Collateral, (c) change
the type of entity that it is, (d) change its organization identification
number, if any, issued by its state of incorporation or other organization, or (e) change
its state of incorporation or organization or incorporate or organize in any
additional jurisdictions, in each case without at least thirty (30) days prior
written notice to Agent and after Agent’s written acknowledgment that any
reasonable action requested by Agent in connection therewith, including to
continue the perfection of any Liens in favor of Agent, on behalf of Lenders,
in any Collateral, has been completed or taken, and provided that any
such new location shall be in the continental United States.  No Credit Party shall change its Fiscal Year.


 


6.15        No
Impairment of Intercompany Transfers. 
No Credit Party shall directly or indirectly enter into or become bound
by any agreement, instrument, indenture or other obligation (other than this
Agreement and the other Loan Documents) that could directly or indirectly
restrict, prohibit or require the consent of any Person with respect to the
payment of dividends or distributions or the making or repayment of
intercompany loans by a Subsidiary of any Credit Party to any Credit Party or
between Credit Parties.


 


6.16        Changes
Relating to Subordinated Debt ;Material Contracts.


 


(a)           No
Credit Party shall change or amend the terms of any Subordinated Debt (or any
indenture or agreement in connection therewith) if the effect of such amendment
is to: (a) increase the interest rate on such Subordinated Debt; (b) change
the dates upon which payments of principal or interest are due on such
Subordinated Debt other than to extend such dates; (c) change any default
or event of default other than to delete or make less restrictive any default
provision therein, or add any covenant with respect to such Subordinated Debt; (d) change
the redemption or prepayment provisions of such Subordinated Debt other than to
extend the dates therefor or to reduce the premiums payable in connection
therewith; (e) grant any security or collateral to secure payment of such
Subordinated Debt; or (f) change or amend any 


 


40

















 


other term if such
change or amendment would materially increase the obligations of the Credit
Party thereunder or confer additional material rights on the holder of such
Subordinated Debt in a manner adverse to any Credit Party, Agent or any Lender.


 


(b)          No
Credit Party shall change or amend, in any manner materially adverse to such
Credit Party, the terms of any Material Contract without the consent of the
Agent.


 


6.17         Managing Member.  The Manager of Borrower shall not resign or
be removed  effective as of a date prior
to the appointment of a new manager that is reasonably acceptable to the Agent
and the Requisite Lenders.  No Member of
Borrower shall have any rights regarding the management or operation of
Borrower or the Mine, other than those rights that are specifically set forth
in the Borrower LLC Agreement.


 


6.18         Key Employees.  No Credit Party shall permit the management
positions currently held by Keith Sieber, Brad Hanson and Bill Bear to be
vacated by reason of resignation, termination or otherwise, without a
replacement, reasonably acceptable to the Agent, being appointed within sixty
(60) days of such position becoming vacated.


 


6.19         Accounting Changes.  No Credit Party shall make or permit any
material change in accounting policies or reporting practices, without the
consent of the Agent, which consent shall not be unreasonably withheld or
delayed, except changes that are required by GAAP.


 


6.20         Bonding Collateral.  No Credit Party shall (i) pledge any
collateral in respect of its bonding obligations other than the collateral
described on Disclosure Schedule 3.24 and (ii) enter into any other
bonding agreement other than the Bonding Agreements.


 


6.21         Applicant Violator
System.  No Person identified on the
Applicant Violator System shall at any time be an owner of the Borrower or the
Mines, or have any operational control of the Mines, or otherwise have any
adverse affect on the right of the Borrower to transfer its rights in the
Mines.


 


6.22         Tax Distributions.  The Borrower shall not make any Tax
Distributions other than Permitted Tax Distributions.


 


6.23         Synfuels.  From and after January 1. 2007, no Credit
Party shall sell, or enter into any contract or amendment or modification to an
existing contract for the sale of, coal to Synfuels without the prior express
written consent of the Agent, which consent shall not be unreasonably withheld.


 


6.24         Use of Proceeds.  The Borrower shall not use or apply any of
the proceeds it receives from the funding of the Closing Date Term Loan or the
Delayed Draw Term Loan for any purposes other than as specifically set forth in
Section 1.4, the Funds Flow Memo and Disclosure Schedule 1.4.


 


41

















 


7.           TERM


 


7.1          Termination.  The financing arrangements contemplated
hereby shall be in effect until the Commitment Termination Date, and the Term
Loan and all other Obligations shall be automatically due and payable in full
on such date.


 


7.2          Survival
of Obligations Upon Termination of Financing Arrangements.  Except as otherwise expressly provided for in
the Loan Documents, no termination or cancellation (regardless of cause or
procedure) of any financing arrangement under this Agreement shall in any way
affect or impair the obligations, duties and liabilities of the Credit Parties
or the rights of Agent and Lenders relating to any unpaid portion of the Term
Loan or any other Obligations, due or not due, liquidated, contingent or
unliquidated, or any transaction or event occurring prior to such termination,
or any transaction or event, the performance of which is required after the
Commitment Termination Date.  Except as
otherwise expressly provided herein or in any other Loan Document, all
undertakings, agreements, covenants, warranties and representations of or
binding upon the Credit Parties, and all rights of Agent and each Lender, all
as contained in the Loan Documents, shall not terminate or expire, but rather
shall survive any such termination or cancellation and shall continue in full
force and effect until the Termination Date; provided, that the
provisions of Section 11, the payment obligations under Sections
1.13 and 1.14, and the indemnities contained in the Loan Documents
shall survive the Termination Date.


 


8.           EVENTS OF DEFAULT; RIGHTS AND REMEDIES


 


8.1          Events
of Default.  The occurrence of any
one or more of the following events (regardless of the reason therefor) shall
constitute an “Event of Default” hereunder:


 


(a)           Borrower
(i) fails to make any payment of principal on the Term Loan, or (ii) fails
to make any payment of interest on, or Fees owing in respect of the Term Loan
or any of the other Obligations when due and payable and such Default shall not
be cured with three (3) Business Days, or (iii) fails to pay or
reimburse Agent or Lenders for any expense reimbursable hereunder or under any
other Loan Document within ten (10) days following Agent’s demand for such
reimbursement or payment of expenses.


 


(b)           Any
Credit Party fails or neglects to perform, keep or observe any of the
provisions of Sections 1.4, 1.6, 5.4(a), 5.13 or 6, or any of the
provisions set forth in Annexes B or E, 
respectively.


 


(c)           Borrower
fails or neglects to perform, keep or observe any of the provisions of Section 4.1
or any provisions set forth in Annex D and the same shall remain
unremedied for five (5) Business Days or more.


 


(d)           Any
Member Party or ECR fails or neglects to perform, keep or observe any other
provision of this Agreement or of any of the other Loan Documents (other than
any provision embodied in or covered by any other clause of this Section 8.1)
and the same shall remain unremedied for the lesser of  (x) thirty (30) days or (y) the
cure period provided for in the applicable Loan Document.


 


42

















 


(e)           A
default or breach occurs under any other agreement, document or instrument to
which any Member Party is a party that is not cured within any applicable grace
period therefor, and such default or breach (i) involves the failure to
make any payment when due in respect of any Indebtedness or Guaranteed
Indebtedness (other than the Obligations) of any Member Party in excess of
$500,000 in the aggregate (including (x) undrawn committed or available
amounts and (y) amounts owing to all creditors under any combined or
syndicated credit arrangements), or (ii) causes, or permits any holder of
such Indebtedness or Guaranteed Indebtedness or a trustee to cause,
Indebtedness or Guaranteed Indebtedness or a portion thereof in excess of
$500,000 in the aggregate to become due prior to its stated maturity or prior
to its regularly scheduled dates of payment, or cash collateral in respect
thereof to be demanded, in each case, regardless of whether such default is
waived, or such right is exercised, by such holder or trustee.


 


(f)            Any
representation or warranty (without giving effect to any qualification of such
representation or warranty as to the knowledge of any Person except as such
knowledge relates to any threatened action by any Person or to any third party’s
compliance with the terms of any agreement or strikes or material labor
disputes affecting any third party) herein or in any other Loan Document or in
any written statement, report, financial statement or certificate made by any
Member Party or ECR and delivered to Agent or any Lender is untrue or incorrect
in any material respect (except that such materiality qualifier shall not be
applicable to any representations and warranties that are already qualified or
modified by materiality in the text thereof) as of the date when made or deemed
made.


 


(g)           Assets
of any Member Party with a fair market value of $250,000 or more are attached,
seized, levied upon or subjected to a writ or distress warrant, or come within
the possession of any receiver, trustee, custodian or assignee for the benefit
of creditors of any Member Party and such condition continues for thirty (30)
days or more.


 


(h)           A
case or proceeding is commenced against any Member Party seeking a decree or
order in respect of such Member Party (i) under the Bankruptcy Code, or
any other applicable federal, state or foreign bankruptcy or other similar law,
(ii) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) for such Member Party or for any substantial
part of any such Member Party’s assets, or (iii) ordering the winding-up
or liquidation of the affairs of such Member Party, and such case or proceeding
shall remain undismissed or unstayed for ninety (90) days or more or a decree
or order granting the relief sought in such case or proceeding is granted by a
court of competent jurisdiction.


 


(i)            Any
Member Party (i) files a petition seeking relief under the Bankruptcy
Code, or any other applicable federal, state or foreign bankruptcy or other
similar law, (ii) consents to or fails to contest in a timely and
appropriate manner the institution of proceedings thereunder or the filing of
any such petition or the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official)
for such Member Party or for any substantial part of any such Member Party’s
assets, (iii) makes an assignment for the benefit of creditors, (iv) takes
any action in furtherance of any of the foregoing; or (v) admits in
writing its inability to, or is generally unable to, pay its debts as such
debts become due.


 


43

















 


(j)            A
final judgment or judgments for the payment of money in excess of $250,000 in
the aggregate at any time are outstanding against one or more of the Member
Parties (which judgments are not covered by insurance policies as to which
liability has been accepted by the insurance carrier), and the same are not,
within thirty (30) days after the entry thereof, discharged or execution
thereof stayed or bonded pending appeal, or such judgments are not discharged
or paid in full prior to the expiration of any such stay.


 


(k)           Any
material provision of any Loan Document for any reason ceases to be valid,
binding and enforceable in accordance with its terms (or any Member Party shall
challenge the enforceability of any Loan Document or shall assert in writing,
or engage in any action or inaction based on any such assertion, that any
provision of any of the Loan Documents has ceased to be or otherwise is not
valid, binding and enforceable in accordance with its terms), or any Lien
created under any Loan Document ceases to be a valid and perfected first
priority Lien (except as otherwise permitted herein or therein) in any of the
Collateral purported to be covered thereby.


 


(l)            Any
Change of Control occurs.


 


(m)          Any
event occurs (other than a longwall move in the ordinary course of business),
whether or not insured or insurable, as a result of which revenue-producing
activities cease or are substantially curtailed at facilities of Borrower
generating more than 5% of Borrower’ consolidated revenues for the Fiscal Year
preceding such event and such cessation or curtailment continues for more than
thirty (30) days from the occurrence of such event.


 


(n)           Any default or breach by Borrower occurs and is continuing
under any Material Contract or any Material Contract shall be terminated for any
reason other than by reason of the fact that the Material Contract has expired
at the end of its stated term.


 


(o)           An
ERISA Event shall have occurred and the liability related to such ERISA Event,
when aggregated with all other ERISA Events (determined as of the date of
occurrence of such ERISA Event), has resulted in a Material Adverse Effect.


 


(p)           At
any time while BRMP is the Manager of Borrower, Keith Sieber shall for any
reason cease to be the sole member of BRMP.


 


(q)           The
Manager (as defined in the Borrower LLC Agreement) of Borrower shall cease to
be BRMP or another Person reasonably acceptable to the Agent.


 


(r)            Keith
Sieber shall become incapacitated, die or otherwise become unable to perform
his duties as President of the Borrower for a period of thirty (30) days (“Initial
Period”) or more and the Borrower shall not have replaced Keith Sieber with
a Person reasonably acceptable to the Agent within thirty (30) days from the
end of the Initial Period.


 


8.2          Remedies.


 


(a)           If any Event of
Default has occurred and is continuing, Agent may (and at the written request
of Requisite Lenders shall), without notice except as otherwise expressly
provided herein, increase the rate of interest applicable to the Term Loan to
the Default Rate.


 


44














 


(b)          If
any Event of Default has occurred and is continuing, Agent may (and at the
written request of the Requisite Lenders shall), without notice: (i) declare
all or any portion of the Obligations, including all or any portion of the Term
Loan to be forthwith due and payable, all without presentment, demand, protest
or further notice of any kind, all of which are expressly waived by Borrower
and each other Credit Party; or (ii) exercise any rights and remedies
provided to Agent under the Loan Documents or at law or equity, including all
remedies provided under the Code; provided, that upon the occurrence of
an Event of Default specified in Sections 8.1(h) or (i), the
Commitments shall be immediately terminated and all of the Obligations shall
become immediately due and payable without declaration, notice or demand by any
Person.


 


8.3          Waivers
by Credit Parties.  Except as
otherwise provided for in this Agreement or by applicable law, each Credit
Party waives: (a) presentment, demand and protest and notice of presentment,
dishonor, notice of intent to accelerate, notice of acceleration, protest,
default, nonpayment, maturity, release, compromise, settlement, extension or
renewal of any or all commercial paper, accounts, contract rights, documents,
instruments, chattel paper and guaranties at any time held by Agent on which
any Credit Party may in any way be liable, and hereby ratifies and confirms
whatever Agent may do in this regard, (b) all rights to notice and a
hearing prior to Agent’s taking possession or control of, or to Agent’s
replevy, attachment or levy upon, the Collateral or any bond or security that
might be required by any court prior to allowing Agent to exercise any of its
remedies, and (c) the benefit of all valuation, appraisal, marshaling and
exemption laws.


 


9.                                    ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT


 


9.1          Assignment
and Participations.


 


(a)           Subject
to the terms of this Section 9.1, any Lender may make an assignment
to a Qualified Assignee of, or sell participations in, at any time or times,
the Loan Documents, the Term Loan, and any Commitment or any portion thereof or
interest therein, including any Lender’s rights, title, interests, remedies,
powers or duties thereunder.  Any
assignment by a Lender shall: (i) require the consent of Agent (which
consent shall not be unreasonably withheld or delayed) and the execution of an
assignment agreement (an “Assignment Agreement”) substantially in the
form attached hereto as Exhibit 9.1(a) and otherwise in form
and substance reasonably satisfactory to, and acknowledged by, Agent; (ii) be
conditioned on such assignee Lender representing to the assigning Lender and
Agent that it is purchasing the applicable Term Loan to be assigned to it for
its own account, for investment purposes and not with a view to the
distribution thereof; (iii) after giving effect to any such partial
assignment, the assignee Lender shall have Commitments in an amount at least
equal to $5,000,000 and the assigning Lender shall have retained Commitments in
an amount at least equal to $5,000,000; and (iv) include a payment to
Agent of an assignment fee of $3,500; provided, that each assignment
shall be in a principal amount of not less than the lesser of (x) the
entire amount of such Lender’s interest hereunder or (y) $5,000,000,
unless the assignment is from one Lender to another or from one Lender to an
Affiliate or the Agent has otherwise consented to another amount.  In the case of an assignment by a Lender
under this Section 9.1, the assignee shall have, to the extent of such
assignment, the same rights, benefits and obligations as all other Lenders
hereunder.  The assigning Lender shall be
relieved of any future 


 


45

















 


obligations
hereunder with respect to its Commitments or assigned portion thereof from and
after the date of such assignment. 
Borrower hereby acknowledges and agrees that any assignment shall give
rise to a direct obligation of Borrower to the assignee and that the assignee
shall be considered to be a “Lender”.  In
all instances, each Lender’s liability to make the Term Loan hereunder shall be
several and not joint and shall be limited to such Lender’s Pro Rata Share of
the applicable Commitment.  In the event
Agent or any Lender assigns or otherwise transfers all or any part of the
Obligations, Agent or any such Lender shall so notify Borrower and Borrower
shall, upon the request of Agent or such Lender, execute new Notes in exchange
for the Notes, if any, being assigned. 
Notwithstanding the foregoing provisions of this Section 9.1(a),
any Lender may at any time pledge the Obligations held by it and such Lender’s
rights under this Agreement and the other Loan Documents to a Federal Reserve
Bank or otherwise in accordance with applicable law, and any Lender that is an
investment fund may assign the Obligations held by it and such Lender’s rights
under this Agreement and the other Loan Documents to another investment fund
managed by the same investment advisor; provided, that no such pledge to
a Federal Reserve Bank shall release such Lender from such Lender’s obligations
hereunder or under any other Loan Document.


 


(b)          Any
participation by a Lender of all or any part of its Commitments shall be made
with the understanding that all amounts payable by Borrower hereunder shall be
determined as if that Lender had not sold such participation, and that the
holder of any such participation shall not be entitled to require such Lender
to take or omit to take any action hereunder except actions under this
Agreement or any other Loan Documents relating to matters in which affected
Lenders are required to vote or all Lenders are required to vote.  Solely for purposes of Sections 1.11,
1.13, 1.14 and 9.8, Borrower acknowledges and agrees that a participation
shall give rise to a direct obligation of Borrower to the participant and the
participant shall be considered to be a “Lender”.  Except as set forth in the preceding sentence
neither Borrower nor any other Credit Party shall have any obligation or duty
to any participant.  Neither Agent nor
any Lender (other than the Lender selling a participation) shall have any duty
to any participant and may continue to deal solely with the Lender selling a
participation as if no such sale had occurred.


 


(c)           Except
as expressly provided in this Section 9.1, no Lender shall, as
between Borrower and that Lender, or Agent and that Lender, be relieved of any
of its obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Term
Loan, the Notes or other Obligations owed to such Lender.


 


(d)          Each
Credit Party executing this Agreement shall assist any Lender permitted to sell
assignments or participations under this Section 9.1 as reasonably
required to enable the assigning or selling Lender to effect any such
assignment or participation, including the execution and delivery of any and
all agreements, notes and other documents and instruments as shall be
reasonably requested and, if requested by Agent, the preparation of
informational materials for, and the participation of management in meetings
with, potential assignees or participants. 
Each Credit Party executing this Agreement shall certify the
correctness, completeness and accuracy of all descriptions of the Credit
Parties and their respective affairs contained in any selling materials
provided by them and all other information provided by them and included in
such materials, except that any Projections delivered by Borrower shall only be



 


46

















 


certified by
Borrower as having been prepared by Borrower in compliance with the
representations contained in Section 3.4(c).


 


(e)           Any
Lender may furnish any information concerning Credit Parties in the possession
of such Lender from time to time to assignees and participants (including
prospective assignees and participants); provided, that such Lender
shall obtain from assignees or participants confidentiality covenants
substantially equivalent to those contained in Section 11.8.


 


(f)           So
long as no Event of Default has occurred and is continuing, no Lender shall
assign or sell participations in any portion of its Term Loan or Commitments to
a potential Lender or participant, if, as of the date of the proposed
assignment or sale, the assignee Lender or participant would be subject to
capital adequacy or similar requirements under Section 1.14(a),
increased costs under Section 1.14(b), an inability to fund LIBOR
Loans under Section 1.14(c), or withholding taxes in accordance with
Section 1.13(a).


 


(g)          Notwithstanding
anything to the contrary contained herein, any Lender (a “Granting Lender”),
may grant to a special purpose funding vehicle (an “SPC”), identified as
such in writing by the Granting Lender to Agent and Borrower, the option to
provide to Borrower all or any part of any Term Loan that such Granting Lender
would otherwise be obligated to make to Borrower pursuant to this Agreement; provided,
that (i) nothing herein shall constitute a commitment by any SPC to make
the Term Loan; and (ii) if an SPC elects not to exercise such option or
otherwise fails to provide all or any part of such Loan, the Granting Lender
shall be obligated to make such Term Loan pursuant to the terms hereof.  The making of the Term Loan by an SPC hereunder
shall utilize the Commitment of the Granting Lender to the same extent, and as
if such Term Loan were made by such Granting Lender.  No SPC shall be liable for any indemnity or
similar payment obligation under this Agreement (all liability for which shall
remain with the Granting Lender).  Any
SPC may (i) with notice to, but without the prior written consent of,
Borrower and Agent and without paying any processing fee therefor assign all or
a portion of its interests in the Term Loan to the Granting Lender or to any
financial institutions (consented to by Borrower and Agent) providing liquidity
and/or credit support to or for the account of such SPC to support the funding
or maintenance of the Term Loan and (ii) disclose on a confidential basis
any non-public information relating to its Term Loan to any rating agency,
commercial paper dealer or provider of any surety, guarantee or credit or
liquidity enhancement to such SPC.  This Section 9.1(g) may
not be amended without the prior written consent of each Granting Lender, all
or any of whose Term Loan is being funded by an SPC at the time of such
amendment.  For the avoidance of doubt,
the Granting Lender shall for all purposes, including without limitation, the approval
of any amendment or waiver of any provision of any Loan Document or the
obligation to pay any amount otherwise payable by the Granting Lender under the
Loan Documents, continue to be the Lender of record hereunder.


 


9.2          Appointment
of Agent.  GE Capital is hereby
appointed to act on behalf of all Lenders as Agent under this Agreement and the
other Loan Documents.  The provisions of
this Section 9.2 are solely for the benefit of Agent and Lenders
and no Credit Party nor any other Person shall have any rights as a third party
beneficiary of any of the provisions hereof. 
In performing its functions and duties under this Agreement and the
other Loan Documents, Agent shall act solely as an agent of Lenders and does
not assume and shall not be deemed to have assumed any obligation toward or relationship
of agency or trust with or for any Credit Party or 


 


47

















 


any other
Person.  Agent shall have no duties or
responsibilities except for those expressly set forth in this Agreement and the
other Loan Documents.  The duties of
Agent shall be mechanical and administrative in nature and Agent shall not
have, or be deemed to have, by reason of this Agreement, any other Loan
Document or otherwise a fiduciary relationship in respect of any Lender.  Except as expressly set forth in this
Agreement and the other Loan Documents, Agent shall not have any duty to
disclose, and shall not be liable for failure to disclose, any information
relating to any Credit Party or any of their respective Subsidiaries or any Account
Debtor that is communicated to or obtained by GE Capital or any of its
Affiliates in any capacity.  Neither
Agent nor any of its Affiliates nor any of their respective officers,
directors, employees, agents or representatives shall be liable to any Lender
for any action taken or omitted to be taken by it hereunder or under any other
Loan Document, or in connection herewith or therewith, except for damages
caused by its or their own gross negligence or willful misconduct.


 


If Agent shall
request instructions from Requisite Lenders or all affected Lenders with
respect to any act or action (including failure to act) in connection with this
Agreement or any other Loan Document, then Agent shall be entitled to refrain
from such act or taking such action unless and until Agent shall have received
instructions from Requisite Lenders or all affected Lenders, as the case may
be, and Agent shall not incur liability to any Person by reason of so
refraining.  Agent shall be fully
justified in failing or refusing to take any action hereunder or under any
other Loan Document (a) if such action would, in the opinion of Agent, be
contrary to law or the terms of this Agreement or any other Loan Document, (b) if
such action would, in the opinion of Agent, expose Agent to Environmental
Liabilities or (c) if Agent shall not first be indemnified to its
satisfaction against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action.  Without limiting the foregoing, no Lender
shall have any right of action whatsoever against Agent as a result of Agent
acting or refraining from acting hereunder or under any other Loan Document in
accordance with the instructions of Requisite Lenders or all affected Lenders,
as applicable.


 


Agent may
execute any of its respective duties under the Loan Documents by or through
agents or attorneys selected by it using reasonable care, and shall be entitled
to advice of counsel concerning all matters pertaining to such duties.  Agent is hereby authorized to act as
collateral agent hereunder and under the Collateral Documents (the “Collateral
Agent”) and is hereby authorized to act on behalf of the Lenders, in its
own capacity and through other agents or sub-agents appointed by it (without
the consent of any Credit Party) with due care, under the Collateral Documents,
including without limitation by the appointment of another Person to act as
Collateral Agent.


 


9.3          Agent’s
Reliance, Etc.  Neither Agent nor any
of its Affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it or
them under or in connection with this Agreement or the other Loan Documents,
except for damages caused by its or their own gross negligence or willful
misconduct.  Without limiting the
generality of the foregoing, Agent:  (a) 
may treat the payee of any Note as the holder thereof until Agent receives
written notice of the assignment or transfer thereof signed by such payee and
in form reasonably satisfactory to Agent; (b) may consult with legal
counsel, independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts; (c) makes
no warranty or representation to any 


 


48

















 


Lender and shall not
be responsible to any Lender for any statements, warranties or representations
made in or in connection with this Agreement or the other Loan Documents; (d) shall
not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or
the other Loan Documents on the part of any Credit Party or to inspect the
Collateral (including the books and records) of any Credit Party; (e) shall
not be responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the other
Loan Documents or any other instrument or document furnished pursuant hereto or
thereto; and (f) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopy, telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.


 


9.4          GE
Capital and Affiliates.  With respect
to its Commitments hereunder, GE Capital shall have the same rights and
powers under this Agreement and the other Loan Documents as any other Lender
and may exercise the same as though it were not Agent; and the term “Lender” or
“Lenders” shall, unless otherwise expressly indicated, include GE Capital in
its individual capacity.  GE Capital and
its Affiliates may lend money to, invest in, and generally engage in any kind
of business with, any Credit Party, any of their Affiliates and any Person who
may do business with or own securities of any Credit Party or any such
Affiliate, all as if GE Capital were not Agent and without any duty to account
therefor to Lenders.  GE Capital and its
Affiliates may accept fees and other consideration from any Credit Party for
services in connection with this Agreement or otherwise without having to
account for the same to Lenders.


 


9.5          Lender
Credit Decision.  Each Lender
acknowledges that it has, independently and without reliance upon Agent or any
other Lender and based on the Financial Statements referred to in Section 3.4(a) and
such other documents and information as it has deemed appropriate, made its own
credit and financial analysis of the Credit Parties and its own decision to
enter into this Agreement.  Each Lender
also acknowledges that it will, independently and without reliance upon Agent
or any other Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement.  Each Lender acknowledges the potential
conflict of interest of each other Lender as a result of Lenders holding
disproportionate interests in the Term Loan, and expressly consents to, and
waives any claim based upon, such conflict of interest.


 


9.6          Indemnification.  Lenders agree to indemnify Agent (to the
extent not reimbursed by Credit Parties and without limiting the obligations of
Credit Parties hereunder), ratably according to their respective Pro Rata
Shares, from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against Agent in any way relating to or arising out of this Agreement or any
other Loan Document or any action taken or omitted to be taken by Agent in
connection therewith; provided, that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent’s gross
negligence or willful misconduct. Without limiting the foregoing, each Lender
agrees to reimburse Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including reasonable counsel fees) incurred by Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement 


 


49

















 


(whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement and each other Loan Document,
to the extent that Agent is not reimbursed for such expenses by Credit Parties.


 


9.7          Successor
Agent.  Agent may resign at any time
by giving not less than thirty (30) days’ prior written notice thereof to
Lenders and Borrower.  Upon any such
resignation, the Requisite Lenders shall have the right to appoint a successor
Agent.  If no successor Agent shall have
been so appointed by the Requisite Lenders and shall have accepted such
appointment within thirty (30) days after the resigning Agent’s giving notice
of resignation, then the resigning Agent may, on behalf of Lenders, appoint a
successor Agent, which shall be a Lender, if a Lender is willing to accept such
appointment, or otherwise shall be a commercial bank or financial institution
or a subsidiary of a commercial bank or financial institution if such
commercial bank or financial institution is organized under the laws of the
United States of America or of any State thereof and has a combined capital and
surplus of at least $300,000,000.  If no
successor Agent has been appointed pursuant to the foregoing, within thirty
(30) days after the date such notice of resignation was given by the resigning
Agent, such resignation shall become effective and the Requisite Lenders shall
thereafter perform all the duties of Agent hereunder until such time, if any,
as the Requisite Lenders appoint a successor Agent as provided above.  Any successor Agent appointed by Requisite
Lenders hereunder shall be subject to the approval of Borrower, such approval
not to be unreasonably withheld or delayed; provided that such approval
shall not be required if a Default or an Event of Default has occurred and is
continuing.  Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning Agent.  Upon the earlier
of the acceptance of any appointment as Agent hereunder by a successor Agent or
the effective date of the resigning Agent’s resignation, the resigning Agent
shall be discharged from its duties and obligations under this Agreement and
the other Loan Documents, except that any indemnity rights or other rights in
favor of such resigning Agent shall continue. 
After any resigning Agent’s resignation hereunder, the provisions of
this Section 9 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was acting as Agent under this Agreement
and the other Loan Documents.


 


9.8          Setoff
and Sharing of Payments.  In addition
to any rights now or hereafter granted under applicable law and not by way of
limitation of any such rights, upon the occurrence and during the continuance
of any Event of Default and subject to Section 9.9(c), each Lender
is hereby authorized at any time or from time to time, without prior notice to
any Credit Party or to any Person other than Agent, any such notice being
hereby expressly waived, to offset and to appropriate and to apply any and all
balances held by it at any of its offices for the account of Borrower or any
Guarantor (regardless of whether such balances are then due to Borrower or
Guarantors) and any other properties or assets at any time held or owing by that
Lender or that holder to or for the credit or for the account of Borrower or
any Guarantor against and on account of any of the Obligations that are not
paid when due; provided that the Lender exercising such offset rights shall
give notice thereof to the affected Credit Party promptly after exercising such
rights.  Any Lender exercising a right of
setoff or otherwise receiving any payment on account of the Obligations in
excess of its Pro Rata Share thereof shall purchase for cash (and the other
Lenders or holders shall sell) such participations in each such other Lender’s
or holder’s Pro Rata Share of the Obligations as would be necessary to cause
such Lender to share the amount so offset or otherwise received with each other
Lender or holder in accordance 


 


50

















 


with their
respective Pro Rata Shares (other than offset rights exercised by any Lender
with respect to Sections 1.11, 1.13 or 1.14).  Each Credit Party that is a Borrower or
Guarantor agrees, to the fullest extent permitted by law, that (a) any
Lender may exercise its right to offset with respect to amounts in excess of
its Pro Rata Share of the Obligations and may sell participations in such
amounts so offset to other Lenders and holders and (b) any Lender so
purchasing a participation in the Term Loan made or other Obligations held by
other Lenders or holders may exercise all rights of offset, bankers’ lien,
counterclaim or similar rights with respect to such participation as fully as
if such Lender or holder were a direct holder of the Term Loan and the other
Obligations in the amount of such participation.  Notwithstanding the foregoing, if all or any
portion of the offset amount or payment otherwise received is thereafter
recovered from the Lender that has exercised the right of offset, the purchase
of participations by that Lender shall be rescinded and the purchase price
restored without interest.


 


9.9          Payments;
Information; Actions in Concert.


 


(a)            Return
of Payments.


 


(i)            If Agent pays an amount to a Lender
under this Agreement in the belief or expectation that a related payment has
been or will be received by Agent from Borrower and such related payment is not
received by Agent, then Agent will be entitled to recover such amount from such
Lender on demand without setoff, counterclaim or deduction of any kind.


 


(ii)           If Agent determines at any time that
any amount received by Agent under this Agreement must be returned to Borrower
or paid to any other Person pursuant to any insolvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement or any other Loan
Document, Agent will not be required to distribute any portion thereof to any
Lender.  In addition, each Lender will
repay to Agent on demand any portion of such amount that Agent has distributed
to such Lender, together with interest at such rate, if any, as Agent is
required to pay to Borrower or such other Person, without setoff, counterclaim
or deduction of any kind.


 


(b)           Dissemination
of Information.  Agent shall use
reasonable efforts to provide Lenders with any notice of Default or Event of
Default received by Agent from, or delivered by Agent to, any Credit Party,
with notice of any Event of Default of which Agent has actually become aware
and with notice of any action taken by Agent following any Event of Default; provided,
that Agent shall not be liable to any Lender for any failure to do so, except
to the extent that such failure is attributable to Agent’s gross negligence or
willful misconduct.  Lenders acknowledge
that Borrower is required to provide Financial Statements and Collateral
Reports to Lenders in accordance with Annex D hereto and agree that
Agent shall have no duty to provide the same to Lenders.


 


51

















 


(c)            Actions
in Concert.  Anything in this
Agreement to the contrary notwithstanding, each Lender hereby agrees with each
other Lender that no Lender shall take any action to protect or enforce its
rights arising out of this Agreement or the Notes (including exercising any
rights of setoff) without first obtaining the prior written consent of Agent
and Requisite Lenders, it being the intent of Lenders that any such action to
protect or enforce rights under this Agreement and the Notes shall be taken in concert
and at the direction or with the consent of Agent or Requisite Lenders.


 


10.                             SUCCESSORS AND ASSIGNS


 


10.1        Successors
and Assigns.  This Agreement and the
other Loan Documents shall be binding on and shall inure to the benefit of each
Credit Party, Agent, Lenders and their respective successors and assigns
(including, in the case of any Credit Party, a debtor-in-possession on behalf
of such Credit Party), except as otherwise provided herein or therein.  No Credit Party may assign, transfer,
hypothecate or otherwise convey its rights, benefits, obligations or duties
hereunder or under any of the other Loan Documents without the prior express
written consent of Agent and Lenders. 
Any such purported assignment, transfer, hypothecation or other
conveyance by any Credit Party without the prior express written consent of
Agent and Lenders shall be void.  The
terms and provisions of this Agreement are for the purpose of defining the
relative rights and obligations of each Credit Party, Agent and Lenders with
respect to the transactions contemplated hereby and no Person shall be a third
party beneficiary of any of the terms and provisions of this Agreement or any
of the other Loan Documents.


 


11.                             MISCELLANEOUS


 


11.1        Complete
Agreement; Modification of Agreement. 
The Loan Documents constitute the complete agreement between the parties
with respect to the subject matter thereof and may not be modified, altered or
amended except as set forth in Section 11.2.  Any letter of interest, commitment letter,
fee letter or confidentiality agreement, if any, between any Credit Party and
Agent or any Lender or any of their respective Affiliates, predating this
Agreement and relating to a financing of substantially similar form, purpose or
effect shall be superseded by this Agreement. 
Notwithstanding the foregoing, the GE Commitment Letter and any fees and
any other provisions which by the terms of such letter survive termination,
shall survive the execution and delivery of this Agreement and shall continue
to be binding obligations of the parties.


 


11.2        Amendments
and Waivers.


 


(a)           Except
for actions expressly permitted to be taken by Agent, no amendment,
modification, termination or waiver of any provision of this Agreement or any
other Loan Document, or any consent to any departure by any Credit Party
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Agent and Borrower, and by Requisite Lenders or all affected
Lenders, as applicable.  Except as set
forth in clause (c) below, all such amendments, modifications,
terminations or waivers requiring the consent of any Lenders shall require the
written consent of Requisite Lenders.


 


52

















 


(b)          No
amendment, modification, termination or waiver shall, unless in writing and
signed by Agent and each Lender directly affected thereby: (i) increase
the principal amount of any Lender’s Commitment (which action shall be deemed
to directly affect all Lenders (ii) reduce the principal of, rate of
interest on or Fees payable with respect to the Term Loan of any affected
Lender; (iii) extend any scheduled payment date (other than payment dates
of mandatory prepayments under Section 1.3(b)(i)-(iv)) or final
maturity date of the principal amount of the Term Loan of any affected Lender; (iv) waive,
forgive, defer, extend or postpone any payment of interest or Fees as to any
affected Lender; (v) release any Guaranty or, except as otherwise
permitted herein or in the other Loan Documents, release, or permit any Credit
Party to sell or otherwise dispose of, any Collateral, other than the sale of
coal in the ordinary course of business, with a value exceeding $5,000,000 in
the aggregate (which action shall be deemed to directly affect all Lenders); (vi) change
the percentage of the Commitments or of the aggregate unpaid principal amount
of the Term Loan that shall be required for Lenders or any of them to take any
action hereunder; and (vii) amend or waive this Section 11.2
or the definitions of the terms “Requisite Lenders”, insofar as such
definitions affect the substance of this Section 11.2.  Furthermore, no amendment, modification,
termination or waiver affecting the rights or duties of Agent, under this
Agreement or any other Loan Document or any release of any Guaranty or
Collateral requiring a writing signed by all Lenders, shall be effective unless
in writing and signed by Agent, in addition to Lenders required hereinabove to
take such action.  Each amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given.  No amendment, modification, termination or
waiver shall be required for Agent to take additional Collateral pursuant to
any Loan Document.  No amendment,
modification, termination or waiver of any provision of any Note shall be
effective without the written concurrence of the holder of that Note.  No notice to or demand on any Credit Party in
any case shall entitle such Credit Party or any other Credit Party to any other
or further notice or demand in similar or other circumstances.  Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 11.2
shall be binding upon each holder of the Notes at the time outstanding and each
future holder of the Notes.


 


(c)           If,
in connection with any proposed amendment, modification, waiver or termination
(a “Proposed Change”):


 


(i)            requiring the consent of all
affected Lenders, the consent of Requisite Lenders is obtained, but the consent
of other Lenders whose consent is required is not obtained (any such Lender
whose consent is not obtained as described in this clause (i) and
in clause (ii) below being referred to as a “Non-Consenting
Lender”); or


 


(ii)           requiring the consent of Requisite
Lenders, the consent of Lenders holding 51% or more of the aggregate
Commitments is obtained, but the consent of Requisite Lenders is not obtained,


 


then, so long as Agent is not a
Non-Consenting Lender, at Borrower’s request, Agent or a Person reasonably
acceptable to Agent shall have the right with Agent’s consent and in Agent’s
sole discretion (but shall have no obligation) to purchase from such
Non-Consenting Lenders, and such Non-Consenting Lenders agree that they shall,
upon Agent’s request, sell and assign to Agent or such Person, all of the
Commitments of such Non-Consenting Lenders for an amount equal to the principal
balance of the Term Loan held by the Non-Consenting Lenders and all 


 


53

















 


accrued interest and Fees with
respect thereto through the date of sale, such purchase and sale to be
consummated pursuant to an executed Assignment Agreement.


 


(d)          Upon payment in full in cash and performance of all of the
Obligations (other than indemnification Obligations), termination of the
Commitments and a release of all claims against Agent and Lenders, and so long
as no suits, actions, proceedings or claims are pending or threatened against
any Indemnified Person asserting any damages, losses or liabilities that are Indemnified
Liabilities, Agent shall deliver to Borrower termination statements, mortgage
releases and other documents necessary or appropriate to evidence the
termination of the Liens securing payment of the Obligations.


 


11.3         Fees
and Expenses.  Borrower shall
reimburse (i) Agent for all fees, costs and expenses (including the
reasonable fees and expenses of all of its counsel, advisors, consultants and
auditors) and (ii) Agent (and, with respect to clauses (c) and
(d) below, all Lenders) for all fees, costs and expenses, including
the reasonable fees, costs and expenses of counsel or other advisors (including
environmental and management consultants and appraisers), incurred in
connection with the negotiation, preparation and filing and/or recordation of the
Loan Documents and incurred in connection with:


 


(a)           any
amendment, modification or waiver of, consent with respect to, or termination
of, any of the Loan Documents or Related Transactions Documents or advice in
connection with the syndication and administration of the Term Loan made
pursuant hereto or its rights hereunder or thereunder;


 


(b)          any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
Agent, any Lender, any Credit Party or any other Person and whether as a party,
witness or otherwise) in any way relating to the Collateral, any of the Loan
Documents or any other agreement to be executed or delivered in connection
herewith or therewith, including any litigation, contest, dispute, suit, case,
proceeding or action, and any appeal or review thereof, in connection with a
case commenced by or against any or all of the Credit Parties or any other
Person that may be obligated to Agent by virtue of the Loan Documents;
including any such litigation, contest, dispute, suit, proceeding or action
arising in connection with any work-out or restructuring of the Term Loan
during the pendency of one or more Events of Default; provided, that no
Person shall be entitled to reimbursement under this clause (b) in
respect of any litigation, contest, dispute, suit, proceeding or action to the
extent any of the foregoing results from such Person’s gross negligence or
willful misconduct;


 


(c)           any
attempt to enforce any remedies of Agent against any or all of the Credit
Parties or any other Person that may be obligated to Agent or any Lender by
virtue of any of the Loan Documents, including any such attempt to enforce any
such remedies in the course of any work-out or restructuring of the Term Loan
during the pendency of one or more Events of Default; provided, that in
the case of reimbursement of counsel for Lenders other than Agent, such
reimbursement shall be limited to one counsel for all such Lenders;


 


(d)          any
workout or restructuring of the Term Loan during the pendency of one or more
Events of Default, provided, that in the case of reimbursement of
counsel for Lenders other than Agent, such reimbursement shall be limited to
one counsel for all such Lenders; and


 


54

















 


(e)           efforts
to (i) monitor the Term Loan or any of the other Obligations, (ii) evaluate,
observe or assess any of the Credit Parties or their respective affairs, and (iii) verify,
protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise
dispose of any of the Collateral;


 


including, as to each of clauses
(a) through (e) above, all reasonable attorneys’ and other
professional and service providers’ fees arising from such services and other
advice, assistance or other representation, including those in connection with
any appellate proceedings, and all expenses, costs, charges and other fees
incurred by such counsel and others in connection with or relating to any of
the events or actions described in this Section 11.3, all of which
shall be payable, on demand, by Borrower to Agent.  Without limiting the generality of the
foregoing, such expenses, costs, charges and fees may include: fees, costs and
expenses of accountants, environmental advisors, appraisers, investment
bankers, management and other consultants and paralegals; court costs and
expenses; photocopying and duplication expenses; court reporter fees, costs and
expenses; long distance telephone charges; air express charges; telegram or
telecopy charges; secretarial overtime charges; and expenses for travel, lodging
and food paid or incurred in connection with the performance of such legal or
other advisory services.


 


11.4        No
Waiver.  Agent’s or any Lender’s
failure, at any time or times, to require strict performance by the Credit
Parties of any provision of this Agreement or any other Loan Document shall not
waive, affect or diminish any right of Agent or such Lender thereafter to
demand strict compliance and performance herewith or therewith.  Any suspension or waiver of an Event of
Default shall not suspend, waive or affect any other Event of Default whether
the same is prior or subsequent thereto and whether the same or of a different
type.  Subject to the provisions of Section 11.2,
none of the undertakings, agreements, warranties, covenants and representations
of any Credit Party contained in this Agreement or any of the other Loan
Documents and no Default or Event of Default by any Credit Party shall be
deemed to have been suspended or waived by Agent or any Lender, unless such
waiver or suspension is by an instrument in writing signed by an officer of or
other authorized employee of Agent and the applicable required Lenders, and
directed to Borrower specifying such suspension or waiver.


 


11.5        Remedies.  Agent’s and Lenders’ rights and remedies
under this Agreement shall be cumulative and nonexclusive of any other rights
and remedies that Agent or any Lender may have under any other agreement,
including the other Loan Documents, by operation of law or otherwise.  Recourse to the Collateral shall not be
required.


 


11.6        Severability.  Wherever possible, each provision of this
Agreement and the other Loan Documents shall be interpreted in such a manner as
to be effective and valid under applicable law, but if any provision of this
Agreement or any other Loan Document shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Agreement or such other Loan Document.


 


11.7        Conflict
of Terms.  Except as otherwise
provided in this Agreement or any of the other Loan Documents by specific
reference to the applicable provisions of this Agreement, if any provision
contained in this Agreement conflicts with any provision in any of the other
Loan Documents, the provision contained in this Agreement shall govern and
control.


 


55














 


11.8                           Confidentiality.  Agent and each Lender agree to use
commercially reasonable efforts (equivalent to the efforts Agent or such Lender
applies to maintaining the confidentiality of its own confidential information)
to maintain as confidential all confidential information provided to them by
the Credit Parties and designated as confidential for a period of two (2) years
following receipt thereof, except that Agent and any Lender may disclose such
information (a) to Persons employed or engaged by Agent or such Lender; (b) to
any bona fide assignee or participant or potential assignee or participant that
has agreed to comply with the covenant contained in this Section 11.8
(and any such bona fide assignee or participant or potential assignee or
participant may disclose such information to Persons employed or engaged by
them as described in clause (a) above); (c) as required or
requested by any Governmental Authority or reasonably believed by Agent or such
Lender to be compelled by any court decree, subpoena or legal or administrative
order or process; (d) as, on the advice of Agent’s or such Lender’s
counsel, is required by law; (e) in connection with the exercise of any
right or remedy under the Loan Documents or in connection with any Litigation
to which Agent or such Lender is a party; or (f) that ceases to be
confidential through no fault of Agent or any Lender.


 


11.9                           GOVERNING LAW.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY
OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS
OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT
STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.  EACH CREDIT PARTY HEREBY CONSENTS AND AGREES
THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY, CITY OF NEW YORK,
NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN THE CREDIT PARTIES, AGENT AND LENDERS PERTAINING TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED,
THAT AGENT, LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM
THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK
COUNTY; PROVIDED FURTHER, THAT NOTHING IN THIS AGREEMENT
SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER
LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY
OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF AGENT.  EACH CREDIT
PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDIT PARTY HEREBY WAIVES
ANY OBJECTION THAT SUCH CREDIT PARTY MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR  FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT.  EACH CREDIT PARTY HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH 


 


56

















 


CREDIT PARTY AT THE ADDRESS SET FORTH IN ANNEX G OF THIS
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER
OF SUCH CREDIT PARTY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID. EACH OF THE CREDIT
PARTIES AND BRMP HEREBY IRREVOCABLY APPOINTS CT CORPORATION SYSTEMS WITH AN
OFFICE ON THE DATE HEREOF AT 111 EIGHTH AVENUE, NEW YORK, NEW YORK 10011, AS
ITS AGENT TO RECEIVE ON ITS BEHALF AND ON BEHALF OF ITS PROPERTIES, SERVICE OF
PROCESS THAT MAY BE SERVED IN ANY SUCH ACTION. SERVICE UPON CT CORPORATION
SYSTEMS SHALL BE DEEMED TO BE PERSONAL SERVICE ON SUCH PERSON AND SHALL BE
LEGAL AND BINDING UPON SUCH PERSON FOR ALL PURPOSES NOTWITHSTANDING ANY FAILURE
TO MAIL COPIES OF SUCH LEGAL PROCESS TO SUCH PERSON, OR ANY FAILURE ON THE PART OF
SUCH PERSON TO RECEIVE THE SAME.


 


11.10                    Notices.


 


(a)                                  Addresses.  All notices, demands, requests, directions
and other communications required or expressly authorized to be made by this
Agreement shall, whether or not specified to be in writing but unless otherwise
expressly specified to be given by any other means, be given in writing and (i) addressed
to (A) the party to be notified and sent to the
address or facsimile number indicated in Annex G, or (B) otherwise to the
party to be notified at its address specified on the signature page of any
applicable Assignment Agreement, (ii) posted to any
other E-System set
up by or at the direction of Agent in an appropriate location or (iii) addressed
to such other address as shall be notified in writing (A) in the case of
Borrower and Agent, to the other parties hereto and (B) in the case of all
other parties, to Borrower and Agent. 
Transmission by electronic mail (including E-Fax, even if transmitted to
the fax numbers set forth in clause (i) above) shall not be
sufficient or effective to transmit any such notice under this clause (a) unless
such transmission is an available means to post to any E-System.


 


(b)                                 Effectiveness.  All communications described in clause (a) above
and all other notices, demands, requests and other communications made in
connection with this Agreement shall be effective and be deemed to have been
received (i) if delivered by hand, upon personal delivery, (ii) if
delivered by overnight courier service, one Business Day after delivery to such
courier service, (iii) if delivered by mail, when deposited in the mails, (iv) if
delivered by facsimile (other than to post to an E-System pursuant to clause
(a)(ii) above), upon sender’s receipt of confirmation of proper
transmission, and (v) if delivered by posting to any E-System, on the
later of the date of such posting in an appropriate location and the date
access to such posting is given to the recipient thereof in accordance with the
standard procedures applicable to such E-System.  Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration or other
communication to any Person (other than Borrower or Agent) designated in Annex
G to receive copies shall in no way adversely affect the effectiveness of
such notice, demand, request, consent, approval, declaration or other
communication.  The giving of any notice
required hereunder may be waived in writing by the party entitled to receive
such notice.


 


57

















 


11.11                     Section Titles.  The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.


 


11.12                     Counterparts.  This Agreement may be executed in any number
of separate counterparts, each of which shall collectively and separately
constitute one agreement.


 


11.13                     WAIVER OF JURY TRIAL.  BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF
THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG
AGENT, LENDERS AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO,
OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH,
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED
THERETO.


 


11.14                     Press Releases and Related
Matters.  Each Credit Party executing this Agreement
agrees that neither it nor its Affiliates will in the future issue any press
releases or other public disclosure using the name of GE Capital or its
affiliates or referring to this Agreement, the other Loan Documents or the
Related Transactions Documents without at least two (2) Business Days’
prior notice to GE Capital and without the prior written consent of GE Capital
unless (and only to the extent that) such Credit Party or Affiliate is required
to do so under law and then, in any event, such Credit Party or Affiliate will
consult with GE Capital before issuing such press release or other public
disclosure.  Each Credit Party consents
to the publication by Agent or any Lender of advertising material relating to
the financing transactions contemplated by this Agreement using Borrower’s
name, product photographs, logo or trademark. 
Agent or such Lender shall provide a draft of any advertising material
to each Credit Party for review and comment prior to the publication thereof.  Agent reserves the right to provide to
industry trade organizations information necessary and customary for inclusion
in league table measurements.


 


11.15                     Reinstatement.  This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
any Credit Party for liquidation or reorganization, should any Credit Party
become insolvent or make an assignment for the benefit of any creditor or
creditors or should a receiver or trustee be appointed for all or any significant
part of any Credit Party’s assets, and shall continue to be effective or to be
reinstated, as the case may be, if at any time payment and performance of the
Obligations, or any part thereof, is, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by any obligee of
the Obligations, whether as a “voidable preference,” “fraudulent conveyance,”
or otherwise, all as though such payment or performance had not been made.  In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the 


 


58

















 


Obligations shall be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.


 


11.16                     Advice of Counsel.  Each of the parties represents to each other
party hereto that it has discussed this Agreement and, specifically, the
provisions of Sections 11.9 and 11.13, with its counsel.


 


11.17                     No Strict Construction.  The parties hereto have participated jointly
in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties hereto and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of
any provisions of this Agreement.


 


11.18                     Patriot Act Notice.  Each Lender subject to the USA Patriot Act of
2001 (31 U.S.C. 5318 et seq.) hereby notifies each Member Party that, pursuant
to Section 326 thereof, it is required to obtain, verify and record
information that identifies each Member Party, including the name and address
of Member Party and other information allowing such Lender to identify the
Member Parties in accordance with such act.


 


59

















 


IN WITNESS
WHEREOF, this Agreement has been duly executed as of the date first written
above.


 


	
   

  	
  BOWIE RESOURCES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Keith H. Sieber

  
	
   

  	
   

  	
  Name:

  	
  Keith H. Sieber

  
	
   

  	
   

  	
  Title:

  	
  President

  



 

















 


	
   

  	
  COLORADO HOLDING COMPANY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen Addington

  
	
   

  	
   

  	
  Name:

  	
  Stephen Addington

  
	
   

  	
   

  	
  Title:

  	
  President

  



 

















 


	
   

  	
  BOWIE RESOURCES MANAGEMENT

  PARTNER, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Keith H. Sieber

  
	
   

  	
   

  	
  Name:

  	
  Keith H. Sieber

  
	
   

  	
   

  	
  Title:

  	
  Manager

  



 

















 


	
   

  	
  GENERAL ELECTRIC CAPITAL CORPORATION,
 as Agent and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen M. Petricone

  
	
   

  	
   

  	
  Name:

  	
  Stephen M. Petricone

  
	
   

  	
   

  	
  Title: 
  Duly Authorized Signatory

  



 

















 


ANNEX A (Recitals)


 


to


 


CREDIT AGREEMENT


 


DEFINITIONS


 


Capitalized
terms used in the Loan Documents shall have (unless otherwise provided
elsewhere in the Loan Documents) the following respective meanings, and all
references to Sections, Exhibits, Schedules or Annexes in the following
definitions shall refer to Sections, Exhibits, Schedules or Annexes of or to
the Agreement:


 


“Account
Debtor” means any Person who may become obligated to any Credit Party
under, with respect to, or on account of, an Account, Chattel Paper or General
Intangibles (including a payment intangible).


 


“Accounting
Changes” has the meaning ascribed thereto in Annex E.


 


“Accounts”
means all “accounts,” as such term is defined in the Code, now owned or
hereafter acquired by any Credit Party, including (a) all accounts
receivable, other receivables, book debts and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper, or Instruments),
(including any such obligations that may be characterized as an account or
contract right under the Code), (b) all of each Credit Party’s rights in,
to and under all purchase orders or receipts for goods or services, (c) all
of each Credit Party’s rights to any goods represented by any of the foregoing
(including unpaid sellers’ rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed or repossessed goods), (d) all
rights to payment due to any Credit Party for property sold, leased, licensed,
assigned or otherwise disposed of, for a policy of insurance issued or to be
issued, for a secondary obligation incurred or to be incurred, for energy
provided or to be provided, for the use or hire of a vessel under a charter or
other contract, arising out of the use of a credit card or charge card, or for
services rendered or to be rendered by such Credit Party or in connection with
any other transaction (whether or not yet earned by performance on the part of
such Credit Party), (e) all health care insurance receivables and (f) all
collateral security of any kind, given by any Account Debtor or any other
Person with respect to any of the foregoing.


 


“Affiliate”
means, with respect to any Person, (a) each Person that, directly or
indirectly, owns or controls, whether beneficially, or as a trustee, guardian
or other fiduciary, 5% or more of the Stock having ordinary voting power in the
election of directors of such Person, (b) each Person that controls, is
controlled by or is under common control with such Person, (c) each of
such Person’s officers, directors, joint venturers and partners and (d) in
the case of Borrower, the immediate family members, spouses and lineal
descendants of individuals who are Affiliates of Borrower.  For the purposes of this definition, “control”
of a Person shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies, whether through
the ownership of voting securities, by contract or otherwise; provided, however,
that the term “Affiliate” shall specifically exclude Agent and each
Lender.


 














 


“Agent”
means GE Capital in its capacity as Agent for Lenders or its successor
appointed pursuant to Section 9.7.


 


“Agent
Account” means that certain account of Agent, account number 502-787-72 in
the name of Agent at DeutscheBank Trust Company Americas in New York, New York
ABA No. 021 001 033, or such other account as may be specified in writing
by Agent as the “Agent Account.”


 


“Agreement”
means the Credit Agreement by and among Borrower, the other Credit Parties
party thereto, GE Capital, as Agent and Lender and the other Lenders from time
to time party thereto, as the same may be amended, supplemented, restated or
otherwise modified from time to time.


 


“Annual
Distribution Date”  means the last
Business Day of a Fiscal Month in which an Audited Financials Review Date
occurs.


 


“Appendices”
has the meaning ascribed to it in the recitals to the Agreement.


 


“Applicable
Term Loan LIBOR Margin” means the per annum interest rate from time to time
in effect and payable in addition to the LIBOR Rate applicable to the Term
Loan, as determined by reference to Section 1.5(a).


 


“Approval
Right” means, following the delivery to the Agent of any certificate from
the Independent Engineer, the right, but not the obligation of the Agent to
review the amounts set forth in such certificate and to provide written notice
to the Independent Engineer and the Borrower no later than three Business Day’s
after its receipt of such certificate, of any adjustments to the calculations
of Projected EBITDA or projected Capital Expenditures that Agent reasonably
believes should be made.  If Agent so
notifies the Independent Engineer and the Borrower, then at the Independent
Engineer’s or Borrower’s request, the Agent shall promptly provide the
supporting documentation and rationale for such adjustments.  The Agent and the Independent Engineer shall
work together in good faith to resolve any dispute with respect to such
adjustment expeditiously.  Unless and
until there is mutual agreement amongst the Agent and the Independent Engineer
as to the Projected EBITDA and projected Capital Expenditures, the Agent shall
not be deemed to have provided its consent. 
In the event that the Agent fails to provide written notice in
accordance with the first sentence of this definition, the Agent shall be deemed
to have approved the applicable certificate, effective after the first Business
Day after the expiration of the three day notice period.


 


“Assignment
Agreement” has the meaning ascribed to it in Section 9.1(a).


 


“Audited Financial Statements” means (x) the audited
consolidated balance sheets at December 31, 2005 and the related
consolidated statements of income, stockholders equity and cash flows of ECR
and its Subsidiaries (including unaudited separate consolidating balance sheets
and the related consolidating statements of income, stockholders’ equity and
cash flows of the Borrower) for the period since its inception (November 23,
2005) to December 31, 2005, including the audit opinion letter from an
independent certified public accountant of nationally recognized standing
reasonably satisfactory to the Agent which does not include a “going 


 

















 


concern” or other limitation or qualification as to such audit,
certified by the Chief Financial Officer of ECR that they fairly present, in
all material respects, the financial condition of ECR and its Subsidiaries as
at December 31, 2005 and (y) the audited balance sheets at December 31,
2004 and the related statements of income, stockholders’ equity and cash flows
of Borrower and its Subsidiaries for the period from January 1, 2005 to November 23,
2005 and the Fiscal Year ended December 31, 2004, including the audit
opinion letter from an independent certified public accountant of nationally
recognized standing reasonably satisfactory to the Agent which does not include
a “going concern” or other limitation or qualification as to such audit,
certified by the Manager and chief financial officer of Borrower that they
fairly present, in all material respects, the financial condition of Borrower
and its Subsidiaries as at such dates.


 


“Audited
Financial Statements Approval Date” means the date on which the Agent has
delivered written notice to the Borrower that it has reviewed the Audited
Financial Statements and that the results of that review are satisfactory, in
the respective sole discretion of the Agent and the Lenders funding the Delayed
Draw Term Loan.


 


“Audited
Financial Statements Deficiency Period” means the period beginning on the
Closing Date and ending on the Audited Financial Statements Approval Date.


 


“Audited
Financials Review Date” means the tenth day following the receipt by the
Agent and Lenders of the Financial Statements required to be delivered by the
Borrower pursuant to clause (d) of Annex D.


 


“Authorized
Officers” shall mean both (x) the Manager and (y) either (i) Scott
Dyer, (ii) Brad Hanson or (iii) Bill Bear.


 


“Bankruptcy
Code” means the provisions of Title 11 of the United States Code, 11 U.S.C.
§§101 et  seq.


 


“BLM”
means the United States of America Bureau of Land Management.


 


“BLM Leases”
means the coal leases between BLM and the Borrower and assigned serial numbers
C-37210, C-25079, C-27432, COC-53356, COC-61209, and D-036955 and any other
coal lease at any time entered into between a Credit Party and BLM.


 


“Blocked
Accounts” has the meaning ascribed to it in Annex B.


 


“Bonding
Agreements” means the following agreements: 
(a) (i) the Agreement for Bond, dated as of July 9, 2001,
between Lyndon Property Insurance Company, Appalachian Fuels, LLC, Illinois
Fuel Company, LLC and each other party thereto; (ii) the Letter of Credit
Collateral Rider to Agreement, dated July 9, 2001, between the parties to
such Agreement for Bond; and (iii) the Cash Escrow Rider to Agreement,
dated July 9, 2001, between the parties to such Agreement for Bond; (b) 
(i) the Agreement for Bond, dated as of March 25, 2003 (as amended by
the Rider dated May 11, 2004) between Lyndon Property Insurance Company,
Appalachian Fuels, LLC, Illinois Fuel Company, LLC and each other party
thereto; (ii) the Cash Escrow Rider to Agreement, dated March 25,
2003, between the parties to such Agreement for Bond; (iii) the Letter of
Credit Collateral Rider to Agreement, dated March 25, 2003, between 


 

















 


the parties to such Agreement for Bond; (iv) the Agreement for the
Reclamation of the Frontier Mining Sites, dated March 25, 2003, between
the parties to such Agreement for Bond; (v) the Rider for the Reclamation
of Hannco Energy Corporation Mining Sites, dated September 4, 2003,
between the parties to such Agreement for Bond; (vi) the Bowie Resources
Bonding Riders; (vii)  the Amendment to Agreement for Bond (Pax
Amendment), dated November 5, 2003, between the parties to such Agreement
for Bond; (viii) the Amendment to Agreement for Bond (JIF Amendment),
dated June 2, 2004, among the parties to such Agreement for Bond; and (ix) the
Amendment to Agreement for Bond (RSH Amendment), dated May 2, 2006, among
the parties to such Agreement for Bond; (c) the Continuous Contract of
Indemnity, dated April 26, 2004, among Borrower, Colorado Energy Investments,
LLC, Sentient Coal Resources, LLC, Appalachian Fuels, LLC, John C. Smith, Jr.
and Larry Addington in favor of XL Specialty Insurance Company, XL Reinsurance
America, Inc., Greenwich Insurance Company and their affiliated,
associated and subsidiary companies; and (d) Surety Bond No. P64155
issued by Pioneer General Insurance Company on behalf of Borrower.


 


“Borrower”
has the respective meaning ascribed thereto in the preamble to the Agreement.


 


“Borrower
LLC Agreement” means that First Amended and Restated Operating Agreement
for Bowie Resources, LLC dated as of December 20, 2006 by and between CHC
and BRMP.


 


“Bowie
Merger” means (i) the merger of Bowie Orchards with and into Borrower
and (ii) the merger of Sentient with and into CHC.


 


“Bowie Merger
Documents” means (i) the Articles of Merger of Sentient into CHC
between CHC and Sentient effective on December 15, 2006, (ii) the
Articles of Merger  of Bowie Orchards
into and with Bowie Resources, LLC a Kentucky limited liability company, (“BRL”)
effective on December 14, 2006, (iii) the Articles of Merger of BRL
into and with Borrower effective on December 15, 2006, (iv) evidence
reasonably satisfactory to the Agent from the Secretary of State of Kentucky
indicating that the merger of Sentient into CHC has been recorded with such
office and the merger has become effective, (v) evidence reasonably
satisfactory to the Agent from the Secretary of State of Kentucky that the
merger of Bowie Orchards into BRL has been recorded with such office and the
merger has become effective and (vi) evidence reasonably satisfactory to
the Agent from the Secretary of State of Kentucky that the merger of BRL into
Borrower has been recorded with such office and the merger has become
effective.


 


“Bowie
Orchards” means Bowie Orchards, LLC, a Kentucky limited liability company.


 


“BRMP” has the meaning ascribed thereto in the preamble to the
Agreement.


 


“BRMP
Guaranty” means the guaranty of even date herewith executed by BRMP in
favor of Agent and Lenders.


 

















 


“BRMP
Pledge Agreement” means the Pledge Agreement of even date herewith executed
by BRMP in favor of Agent, on behalf of itself and Lenders, pledging all Stock
of its Subsidiaries, if any, and all Intercompany Notes owing to or held by it.


 


 “Business Day” means any day that is
not a Saturday, a Sunday or a day on which banks are required or permitted to
be closed in the State of New York and in reference to LIBOR Loans shall mean
any such day that is also a LIBOR Business Day.


 


 “CHC Pledge Agreement” means the Pledge
Agreement of even date herewith executed by CHC in favor of Agent, on behalf of
itself and Lenders, pledging all Stock of its Subsidiaries, if any, and all
Intercompany Notes owing to or held by it.


 


“Capital
Expenditures” means, with respect to any Person, all expenditures (by the
expenditure of cash or the incurrence of Indebtedness) by such Person during
any measuring period for any fixed assets or improvements or for replacements,
substitutions or additions thereto that have a useful life of more than one
year and that are required to be capitalized under GAAP.


 


“Capital
Expenditure Certificate” means a certificate from the Independent Engineer,
acting reasonably, certifying that Projected EBITDA for any Capital Expenditure
Reserve Calculation Period is either (x) sufficient or (y) insufficient
to cover the projected Capital Expenditures for such calculation period. The
certificate shall set forth in reasonable detail the Projected EBITDA and the
projected Capital Expenditures for the applicable Capital Expenditure Reserve
Calculation Period.  The Independent
Engineer’s calculation of projected Capital Expenditures in clause (b) above
shall be based upon the most recent Projections delivered to the Agent
consistent with the financial reporting requirements set forth in Annex D,
as well as any other reports or information the Independent Engineer deems
necessary in order to  make such
determination.


 


“Capital
Expenditure Deficiency Certificate” means a Capital Expenditure Certificate
certifying that Projected EBITDA is insufficient to cover projected Capital
Expenditures for the applicable Capital Expenditure Reserve Calculation
Period.  The certificate shall include
the Independent Engineer’s calculation of the Capital Expenditure Reserve
Deficiency Amount.


 


“Capital
Expenditure Reserve Account” has the meaning ascribed thereto in Annex B.


 


“Capital
Expenditure Reserve Calculation Period” means the twelve month period
beginning with the first day of the first Fiscal Month of a Fiscal Quarter
following the receipt by the Agent of the Projections required to be delivered
by the Borrower in the immediately preceding Fiscal Quarter pursuant to clause (o) of
Annex D.


 


“Capital
Expenditure Reserve Deficiency Amount” means, for any Capital Expenditure
Reserve Calculation Period, a positive amount equal to the difference between (x) the
projected Capital Expenditures for such calculation period as determined by the
Independent Engineer acting reasonably and (y) Projected EBITDA for such
calculation period.


 

















 


“Capital Expenditure
Reserve Increase Date” means the date on which the Independent Engineer,
acting in accordance with Section 1.9(c), has delivered to the
Agent a Capital Expenditure Deficiency Certificate and such certificate has
been approved by the Agent in accordance with its Approval Right.


 


“Capital
Expenditure Reserve Initial Certification Date”  means the later of (i) January 1,
2008 and (ii) the Capital Expenditure Reserve Initial Reduction Date.


 


“Capital
Expenditure Reserve Initial Reduction Date” means the date on which the
Agent has received a certificate from the Independent Engineer certifying that
the Longwall Expansion Project has been completed.


 


“Capital
Expenditure Reserve Minimum Balance” means (a) for the period from the
first day after the Funding Date until and including the Capital Expenditure
Reserve Initial Reduction Date, $4,000,000, (b) if the Capital Expenditure
Reserve Initial Reduction Date occurs prior to December 31, 2007, for the
period after the Capital Expenditure Reserve Initial Reduction Date until and
including December 31, 2007, $3,000,000, (c) from the Capital
Expenditure Reserve Initial Certification Date until (i) the next Capital
Expenditure Reserve Increase Date (if the Independent Engineer has delivered a
Capital Expenditure Sufficiency Certificate on the Capital Expenditure Reserve
Initial Certification Date), $0, or (ii) the next Capital Expenditure
Reserve Reduction Date (if the Independent Engineer has delivered a Capital
Expenditure Deficiency Certificate on the Capital Expenditure Reserve Initial
Certification Date), the Capital Expenditure Reserve Deficiency Amount as
determined on the Capital Expenditure Reserve Initial Certification Date by the
Independent Engineer in accordance with Section 1.9(c), (d) from
and after a Capital Expenditure Reserve Increase Date until and including a
Capital Expenditure Reserve Reduction Date, an amount equal to the Capital
Expenditure Reserve Deficiency Amount as determined on a quarterly basis by the
Independent Engineer in accordance with Section 1.9(c) and (e) from
and after a Capital Expenditure Reserve Reduction Date until and including a
Capital Expenditure Reserve Increase Date, $0.


 


“Capital
Expenditure Reserve Reduction Date” means the date on which the Independent
Engineer, acting in accordance with Section 1.9(c), has delivered
to the Agent a Capital Expenditure Sufficiency Certificate and such certificate
has been approved by the Agent in accordance with its Approval Right.


 


“Capital
Expenditure Sufficiency Certificate” means a Capital Expenditure
Certificate certifying that Projected EBITDA is sufficient to cover projected
Capital Expenditures for the applicable Capital Expenditure Reserve Calculation
Period.


 


“Capital
Lease” means, with respect to any Person, any lease of any property
(whether real, personal or mixed) by such Person as lessee that, in accordance
with GAAP, would be required to be classified and accounted for as a capital
lease on a balance sheet of such Person.


 


“Capital
Lease Obligation” means, with respect to any Capital Lease of any Person,
the amount of the obligation of the lessee thereunder that, in accordance with
GAAP, would appear on a balance sheet of such lessee in respect of such Capital
Lease.


 

















 


“Cash
Management Systems” has the meaning ascribed to it in Section 1.6.


 


“Cash Sweep
Period” means the period beginning on the first day of the Initial Cash
Sweep Month and ending on the earlier of (x) the Termination Date or (y) the
last day of the Fiscal Month in which the Principal Reduction Date occurs.


 


“Change of
Control” means any event, transaction or occurrence as a result of which, (a) without
the prior express written consent of the Agent and Lenders, which consent shall
not be unreasonably withheld, the current shareholders of ECR as of the date of
this Agreement as set forth on Schedule 2 (such schedule to include each
shareholders ownership interest in ECR as of the date of this Agreement) cease
to own and control all of the economic and voting rights associated with
ownership of at least a majority of all classes of the outstanding Stock of ECR
on a fully diluted basis (other than as a result of a public offering), (b) without
the prior express written consent of the Agent and Lenders, which consent shall
not be unreasonably withheld, ECR ceases to own and control all of the economic
and voting rights associated with ownership of at least one-hundred percent
(100%) of all of the outstanding Stock of all classes of  CHC on a fully diluted basis, (c) CHC
ceases to own and control all of the economic and voting rights associated with
ownership of at least ninety-nine percent (99%) of all of the outstanding
membership interests in the Borrower, (d)  the Manager of Borrower ceases
to own and control all of the economic and voting rights associated with
ownership of the one percent (1%) of all of the outstanding membership
interests of  the Borrower.


 


“Charges”
means all federal, state, county, city, municipal, local, foreign or other
governmental taxes (including taxes owed to the PBGC at the time due and
payable), levies, assessments, charges, liens, claims or encumbrances upon or
relating to (a) the Collateral, (b) the Obligations, (c) the
employees, payroll, income or gross receipts of any Credit Party, (d) any
Credit Party’s ownership or use of any properties or other assets, or (e) any
other aspect of any Credit Party’s business.


 


“Chattel
Paper” means any “chattel paper,” as such term is defined in the Code,
including electronic chattel paper, now owned or hereafter acquired by any
Credit Party.


 


“CHC” has the meaning ascribed thereto in the preamble to the
Agreement.


 


“CHC Guaranty” means the guaranty of even date herewith executed
by CHC in favor of Agent and Lenders.


 


“Closing
Checklist” means the schedule, including all appendices, exhibits or
schedules thereto, listing certain documents and information to be delivered in
connection with the Agreement, the other Loan Documents and the transactions
contemplated thereunder, substantially in the form attached hereto as Annex
C.


 


“Closing
Date” means December 20, 2006.


 


“Closing
Date Distribution” means a distribution on the Funding Date by the Borrower
to CHC and then from CHC to ECR in the amount of $23,291,724.55.


 

















 


“Closing
Date Term Loan” has the meaning set forth in Section 1.1(a)(i).


 


“Closing
Date Term Loan Commitment” means (a) as to any Lender with a Closing
Date Term Loan Commitment, the commitment of such Lender to make its Pro Rata
Share of the Closing Date Term Loan as set forth on Annex H to the
Agreement or in the most recent Assignment Agreement executed by such Lender,
and (b) as to all Lenders with a Closing Date Term Loan Commitment, the
aggregate commitment of all Lenders to make the Closing Date Term Loan, which
aggregate commitment shall be fifty million dollars ($50,000,000) on the
Closing Date.  After advancing the
Closing Date Term Loan, each reference to a Lender’s Closing Date Term Loan
Commitment shall refer to that Lender’s Pro Rata Share of the outstanding
Closing Date Term Loan.


 


“Code”
means the Uniform Commercial Code as the same may, from time to time, be
enacted and in effect in the State of New York; provided, that to the
extent that the Code is used to define any term herein or in any Loan Document
and such term is defined differently in different Articles or Divisions of the
Code, the definition of such term contained in Article or Division 9 shall
govern; provided  further, that in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Agent’s or any Lender’s Lien on any
Collateral is governed by the Uniform Commercial Code as enacted and in effect
in a jurisdiction other than the State of New York, the term “Code”
shall mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating to such
attachment, perfection, priority or remedies and for purposes of definitions
related to such provisions.


 


“Collateral”
means the property covered by the Security Agreement, the Mortgages and the
other Collateral Documents and any other property, real or personal, tangible
or intangible, now existing or hereafter acquired, that may at any time be or
become subject to a security interest or Lien in favor of Agent, on behalf of
itself and Lenders, to secure the Obligations.


 


“Collateral
Assignment” means a Collateral Assignment, in substantially the form of Exhibit A
attached hereto, executed by the Borrower and a ditch company pursuant to which
the Borrower (i) notifies the ditch company of the security interest
granted to the Agent on behalf of itself and the Lenders pursuant to the Loan
Documents, (ii) requests that the grant of the security interest be noted
on the books of such ditch company and (iii)  requests that new share
certificates be issued by the respective ditch company in the name of the
Borrower and identifying the Agent as a lienholder.


 


“Collateral
Documents” means the Security Agreement, the Pledge Agreements, the
Guaranties, the Deed of Trust, the Mortgages, the Deposit and Disbursement
Agreement, the TVA Assignment, the Notices of TVA Assignment and all similar
agreements entered into guaranteeing payment of, or granting a Lien upon
property as security for payment of, the Obligations.


 


“Collateral
Reports” has the meaning ascribed thereto in Annex D to the
Agreement.


 


“Collection
Account” has the meaning ascribed thereto in Annex B to the
Agreement


 

















 


“Commitment
Termination Date” means the earliest of (a) December 20, 2011, (b) the
date of termination of Lenders’ obligations to permit the existing Term Loan to
remain outstanding pursuant to Section 8.2(b), and (c) the
date of indefeasible prepayment in full by Borrower of the Term Loan and the
permanent reduction of all Commitments to zero dollars ($0).


 


“Commitments”
means (a) as to any Lender, the aggregate of such Lender’s Term Loan
Commitment as set forth on Annex H and Annex H-1 to the Agreement
or in the most recent Assignment Agreement executed by such Lender and (b) as
to all Lenders, the aggregate of all Lenders’ Term Loan Commitments, which
aggregate commitment shall be sixty million dollars ($60,000,000) on the
Closing Date, as to each of clauses (a) and (b), as such
Commitments may be reduced, amortized or adjusted from time to time in accordance
with the Agreement.


 


“Compliance
Certificate” has the meaning ascribed to it in Annex D.


 


“Concentration
Accounts” has the meaning ascribed to it in Annex B.


 


“Consulting
Agreement”  means, the Consulting
Agreement dated as of December 20, 2006 by and among Borrower, John
Siegel, Steve Rickmeier and Rickmeier Advisors, Inc


 


“Consulting
Fee First Tier” means, for any Fiscal Month occurring during the Cash Sweep
Period, an amount equal to the sum of (x) the product of (i) $0.10
multiplied by each ton of coal mined and sold during the immediately preceding
Fiscal Month as set forth in the most recent Production Report delivered to the
Agent pursuant to clause (p) of Annex D and (y) the
product of (i) the aggregate amount of any Consulting Fee First Tier due
in accordance with the terms herein but not yet paid and (ii) 1.0075%.


 


“Consulting
Fee Second Tier” means, for any Fiscal Month occurring during the Cash
Sweep Period, an amount equal to the sum of (x) the product of (i) $0.10
multiplied by each ton of coal mined and sold during the immediately preceding
Fiscal Month as set forth in the most recent Production Report delivered to the
Agent pursuant to clause (p) of Annex D and (y) the
product of (i) the aggregate amount of any Consulting Fee Second Tier due
in accordance with the terms herein but not yet paid and (ii) 1.0075%.


 


“Consulting
Fee Third Tier” means, for any full Fiscal Month occurring after the Cash
Sweep Period, an amount equal to the sum of (x) the product of (i) $0.20
multiplied by each ton of coal mined and sold during the immediately preceding
Fiscal Month as set forth in the most recent Production Report delivered to the
Agent pursuant to clause (p) of Annex D and (y) the
product of (i) the aggregate amount of any Consulting Fee First Tier,
Consulting Fee Second Tier and Consulting Fee Third Tier and due in accordance
with the terms herein but not yet paid and (ii) 1.0075%.


 


“Contracts”
means all “contracts,” as such term is defined in the Code, now owned or
hereafter acquired by any Credit Party, in any event, including all contracts,
undertakings, or agreements (other than rights evidenced by Chattel Paper,
Documents or Instruments) in or under which any Credit Party may now or
hereafter have any right, title or interest, including any agreement relating
to the terms of payment or the terms of performance of any Account.


 

















 


“Control
Letter” means a letter agreement between Agent and (i) the issuer of
uncertificated securities with respect to uncertificated securities in the name
of any Credit Party, (ii) a securities intermediary with respect to
securities, whether certificated or uncertificated, securities entitlements and
other financial assets held in a securities account in the name of any Credit
Party, (iii) a futures commission merchant or clearing house, as
applicable, with respect to commodity accounts and commodity contracts held by
any Credit Party, whereby, among other things, the issuer, securities
intermediary or futures commission merchant limits any security interest in the
applicable financial assets in a manner reasonably satisfactory to Agent,
acknowledges the Lien of Agent, on behalf of itself and Lenders, on such
financial assets, and agrees to follow the instructions or entitlement orders
of Agent without further consent by the affected Credit Party.


 


“Copyright
License” means any and all rights now owned or hereafter acquired by any
Credit Party under any written agreement granting any right to use any
Copyright or Copyright registration.


 


“Copyright
Security Agreements” means the Copyright Security Agreements made in favor
of Agent, on behalf of itself and Lenders, by each applicable Credit Party.


 


“Copyrights”
means all of the following now owned or hereafter adopted or acquired by any
Credit Party: (a) all copyrights and General Intangibles of like nature
(whether registered or unregistered), all registrations and recordings thereof,
and all applications in connection therewith, including all registrations,
recordings and applications in the United States Copyright Office or in any
similar office or agency of the United States, any state or territory thereof,
or any other country or any political subdivision thereof, and (b) all
reissues, extensions or renewals thereof.


 


“Credit
Parties” means each Guarantor (other than BRMP and ECR), Borrower, and each
of their respective Subsidiaries.


 


 “Debt Service” means, with respect to
any Person for any fiscal period, an amount equal to the sum of (a) Interest
Expense for such period and (b) the scheduled amortization of any outstanding
Indebtedness during such period.


 


“Debt
Service Coverage Ratio” means, with respect to any Person for any period,
the ratio of EBITDA to Debt Service.


 


“Debt
Service Reserve Account” has the meaning ascribed thereto in Annex B.


 


“Debt
Service Reserve Amount” means (i) as of any date on or prior to the
Principal Reduction Date, (x) $8,000,000 if the Delayed Draw Term
Loan has not been funded as of such date or (y) $8,750,000 if the Delayed
Draw Term Loan has been funded as of such date and (ii) as of any date
after the Principal Reduction
Date, an amount equal to total Term Loan Debt Service for the period
beginning on such date and ending on the six-month anniversary of such date.


 

















 


“Deed of
Trust” means that certain Deed of Trust, Assignment of Production, Security
Agreement, Financing Statement, Fixture Filing and As-Extracted Collateral
Filing dated as of December 19, 2006 among Borrower, the Public Trustee of
Delta County, Colorado and the Agent.


 


“Default”
means any event that, with the passage of time or notice or both, would, unless
cured or waived, become an Event of Default.


 


“Default
Rate” has the meaning ascribed to it in Section 1.5(d).


 


“Delayed
Draw Distribution” means a distribution, on the date that the Delayed Draw
Term Loan is funded, by the Borrower to CHC and then from CHC to ECR in an
amount equal to the difference between $10,000,000 minus the amount
necessary to ensure that the Debt Service Reserve Account as of such date is
funded in an amount equal to $8,750,000.


 


“Delayed Draw
Term Loan Commitment” means (a) as to any Lender with a Delayed Draw
Term Loan Commitment, the commitment of such Lender to make its Pro Rata Share
of the Delayed Draw Term Loan as set forth on Annex H-1 to the Agreement
or in the most recent Assignment Agreement executed by such Lender, and (b) as
to all Lenders with a Delayed Draw Term Loan Commitment, the aggregate
commitment of all Lenders to make the Delayed Draw Term Loan, which aggregate
commitment shall be ten million dollars ($10,000,000) on the Closing Date.  After advancing the Delayed Draw Term Loan,
each reference to a Lender’s Delayed Draw Term Loan Commitment shall refer to
that Lender’s Pro Rata Share of the outstanding Delayed Draw Term Loan.


 


“Delayed
Draw Term Loan” has the meaning set forth in Section 1.1(a)(i).


 


“Deposit
Accounts” means all “deposit accounts” as such term is defined in the Code,
now or hereafter held in the name of any Credit Party.


 


“Deposit
and Disbursement Agreement” means that certain Deposit and Disbursement
Agreement dated as of December 20, 2006 by and between Agent, each of the
Credit Parties, BRMP and Depositary Bank.


 


“Depositary
Bank” means Branch Banking and Trust Company.


 


“Disbursement
Accounts” has the meaning ascribed to it in Annex B.


 


“Disclosure
Schedules” means the Schedules prepared by Borrower and denominated as Disclosure
Schedules 1.4 through 6.7 in the Index to the Agreement.


 


“Distribution
Date”  means the last Business Day of
a Fiscal Month in which a Financials Review Date occurs.


 


“Distribution
Date Amount” has the meaning set forth in clause twelfth of Section 5.1
of the Deposit and Disbursement Agreement.


 














 


“Documents”
means all “documents,” as such term is defined in the Code, now owned or
hereafter acquired by any Credit Party, wherever located.


 


“Dollars”
or “$” means lawful currency of the United States of America.


 


“EBITDA”
means, with respect to any Person for any fiscal period, without duplication,
an amount equal to (a) net income of such Person for such period
determined in accordance with GAAP, minus (b) the sum of (i) income
tax credits, (ii) interest income, (iii) gain from extraordinary
items for such period, (iv) any aggregate net gain (but not any aggregate
net loss) during such period arising from the sale, exchange or other
disposition of capital assets by such Person (including any fixed assets,
whether tangible or intangible, all inventory sold in conjunction with the
disposition of fixed assets and all securities), and (v) any other
non-cash gains or non-cash income that have been added in determining net
income, in each case to the extent included in the calculation of net income of
such Person for such period in accordance with GAAP, but without duplication, plus
(c) the sum of (i) any provision for income taxes, (ii) Interest
Expense, (iii) loss from extraordinary items for such period, (iv) depreciation
and amortization for such period, (v) amortized debt discount for such
period, and (vi) the amount of any deduction to net income as the result
of any grant to any members of the management of such Person of any Stock, in
each case to the extent included in the calculation of net income of such
Person for such period in accordance with GAAP, but without duplication.  For purposes of this definition, the
following items shall be excluded in determining net income of a Person: (1) the
income (or deficit) of any other Person accrued prior to the date it became a
Subsidiary of, or was merged or consolidated into, such Person or any of such
Person’s Subsidiaries; (2) the income (or deficit) of any other Person
(other than a Subsidiary) in which such Person has an ownership interest,
except to the extent any such income has actually been received by such Person
in the form of cash dividends or distributions; (3) the undistributed
earnings of any Subsidiary of such Person to the extent that the declaration or
payment of dividends or similar distributions by such Subsidiary is not at the
time permitted by the terms of any contractual obligation or requirement of law
applicable to such Subsidiary; (4) any restoration to income of any
contingency reserve, except to the extent that provision for such reserve was
made out of income accrued during such period; (5) any write-up of any
asset; (6) any net gain from the collection of the proceeds of life
insurance policies; (7) any net gain arising from the acquisition of any
securities, or the extinguishment, under GAAP, of any Indebtedness, of such
Person; (8) in the case of a successor to such Person by consolidation or
merger or as a transferee of its assets, any earnings of such successor prior
to such consolidation, merger or transfer of assets; and (9) any deferred
credit representing the excess of equity in any Subsidiary of such Person at
the date of acquisition of such Subsidiary over the cost to such Person of the
investment in such Subsidiary.


 


“ECR”
Energy Coal Resources, Inc., a Delaware corporation.


 


“ECR
Guaranty” means the guaranty of
even date herewith executed by ECR in favor of Agent and Lenders.


 


“E-Fax”
means any system used to receive or transmit faxes electronically.


 

















 


“Environmental
Laws” means all applicable federal, state, local and foreign laws,
statutes, ordinances, codes, rules, standards and regulations, now or hereafter
in effect, and any applicable judicial or administrative interpretation
thereof, including any applicable judicial or administrative order, consent
decree, order or judgment, imposing liability or standards of conduct for or
relating to the regulation and protection of human health, safety, the
environment and natural resources (including ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic
species and vegetation).  Environmental
Laws include the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.) (“CERCLA”); the
Hazardous Materials Transportation Authorization Act of 1994 (49 U.S.C. §§ 5101
et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act (7
U.S.C. §§ 136 et seq.); the Solid Waste Disposal Act (42 U.S.C.
§§ 6901 et seq.); the Toxic Substance Control Act (15 U.S.C. §§
2601 et seq.); the Clean Air Act (42 U.S.C. §§ 7401 et seq.); the
Federal Water Pollution Control Act (33 U.S.C. §§ 1251 et seq.); the
Occupational Safety and Health Act (29 U.S.C. §§ 651 et seq.); and the
Safe Drinking Water Act (42 U.S.C. §§ 300(f) et seq.), and any
and all regulations promulgated thereunder, and all analogous state, local and
foreign counterparts or equivalents and any transfer of ownership notification
or approval statutes.


 


“Environmental
Liabilities” means, with respect to any Person, all liabilities,
obligations, responsibilities, response, remedial and removal costs,
investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim, suit, action, investigation, proceeding or demand
by any Person, whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute or common law arising under or
related to any Environmental Laws, Environmental Permits, or in connection with
any Release or threatened Release or presence of a Hazardous Material whether
on, at, in, under, from or about or in the vicinity of any real or personal
property.


 


“Environmental
Permits” means all permits, licenses, authorizations, certificates,
approvals or registrations required by any Governmental Authority under any
Environmental Laws.


 


“Equipment”
means all “equipment,” as such term is defined in the Code, now owned or
hereafter acquired by any Credit Party, wherever located and, in any event,
including all such Credit Party’s machinery and equipment, including processing
equipment, conveyors, machine tools, data processing and computer equipment,
including embedded software and peripheral equipment and all engineering,
processing and manufacturing equipment, office machinery, furniture, materials
handling equipment, tools, attachments, accessories, automotive equipment,
trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock
and other equipment of every kind and nature, trade fixtures and fixtures not
forming a part of real property, together with all additions and accessions
thereto, replacements therefor, all parts therefor, all substitutes for any of
the foregoing, fuel therefor, and all manuals, drawings, instructions,
warranties and rights with respect thereto, and all products and proceeds
thereof and condemnation awards and insurance proceeds with respect thereto.


 

















 


“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time, and any regulations promulgated thereunder.


 


“ERISA
Affiliate” means, with respect to any Credit Party, any trade or business
(whether or not incorporated) that, together with such Credit Party, are
treated as a single employer within the meaning of Sections 414(b), (c), (m) or
(o) of the IRC.


 


“ERISA
Event” means, with respect to any Credit Party or any ERISA Affiliate, (a) with
respect to a Title IV Plan, any event described in Section 4043(c) of
ERISA for which notice to the PBGC has not been waived; (b) the withdrawal
of any Credit Party or ERISA Affiliate from a Title IV Plan subject to Section 4063
of ERISA during a plan year in which it was a substantial employer, as defined
in Section 4001(a)(2) of ERISA; (c) the complete or partial
withdrawal of any Credit Party or any ERISA Affiliate from any Multiemployer
Plan; (d) the filing of a notice of intent to terminate a Title IV Plan in
a distress termination described in Section 4041(c) of ERISA or the
treatment of a plan amendment as a termination under Section 4041 of
ERISA; (e) the institution of proceedings to terminate a Title IV Plan or
Multiemployer Plan by the PBGC; (f) with respect to a Title IV Plan, the
existence of an “accumulated funding deficiency” (as defined in Section 412
of the IRC or Section 302 of ERISA) whether or not waived, or the failure
to make by its due date a required installment under Section 412(m) of
the Code or the failure to make any required contribution to a Multiemployer
Plan; (g) the filing pursuant to Section 412(d) of the Code or Section 303(d) of
ERISA of an application for a waiver of the minimum funding standard with
respect to a Title IV Plan; (h) the making of any amendment to any Title
IV Plan which could result in the imposition of 
a lien or the posting of a bond or other security; (i) with respect
to a Title IV Plan an event described in Section 4062(e) of ERISA; (j) any
other event or condition that would reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan
or for the imposition of liability under Section 4069 or 4212(c) of
ERISA; (k) the termination of a Multiemployer Plan under Section 4041A
of ERISA or the reorganization or insolvency of a Multiemployer Plan under Section 4241
or 4245 of ERISA; (l) the loss of a Qualified Plan’s qualification or tax
exempt status; or (m) the termination of a Plan described in Section 4064
of ERISA.


 


“E-System”
means any electronic system, including Intralinks® and any other Internet or extranet-based site,
whether such electronic system is owned, operated or hosted by Agent, any of
its Affiliates, or any of such Person’s respective officers, directors,
employees, attorneys, agents and representatives or any other Person, providing
for access to data protected by passcodes or other security system.


 


“Event of
Default” has the meaning ascribed to it in Section 8.1.


 


“Excess
Cash” means, on any Business Day during the Cash Sweep Period, the total
outstanding balance remaining in the Collection Account after the Depositary
Bank has transferred from the Collection Account all amounts required to be
transferred, pursuant to the instructions or deemed instructions of the Agent,
by such Depositary Bank on such Business Day, in accordance with clauses first
through tenth of Section 5.1 of the Deposit and Disbursement
Agreement.


 

















 


“Excess
Cash Flow” means, for any Fiscal Year, without duplication, consolidated
net income plus (a) depreciation, amortization and Interest Expense
to the extent deducted in determining consolidated net income, minus (b) non-cash
gains and non-cash income to the extent included in determining consolidated
net income minus (c) Capital Expenditures during such Fiscal Year
(excluding the financed portion thereof), minus (d) Interest
Expense paid or accrued (excluding any original issue discount, interest paid
in kind or amortized debt discount, to the extent included in determining
Interest Expense) and scheduled principal payments paid or payable in respect
of Funded Debt, plus or minus (as the case may be), (e) extraordinary
gains or losses which are cash items not included in the calculation of net
income, plus (f) non-cash losses and non-cash expenses, including
without limitation deducted taxes not paid in cash, to the extent included in
determining consolidated net income.


 


 “Excess Coal” means that portion,
expressed in tons, of all coal sold by the Borrower in any Fiscal Year in
excess of 5.5 million tons.


 


“Excess
Coal Prepayment Amount” means, in respect of any applicable Fiscal Year, an
amount equal to (a) fifty percent (50%) of (b) the product of (i) Excess
Cash Flow for such Fiscal Year multiplied by (ii) the ratio
(expressed as a percentage, to three decimal places) of Excess Coal for such
Fiscal Year over the total number of tons of coal sold in such Fiscal Year.


 


“Fair Labor
Standards Act” means the Fair Labor Standards Act, 29 U.S.C. §201 et
seq.


 


“Fair
Salable Balance Sheet” means a balance sheet of Borrower prepared in
accordance with Section 3.4(d).


 


“Federal
Funds Rate” means, for any day, a floating rate equal to the weighted
average of the rates on overnight Federal funds transactions among members of
the Federal Reserve System, as determined by Agent in its sole discretion,
which determination shall be final, binding and conclusive (absent manifest
error).


 


“Federal
Reserve Board” means the Board of Governors of the Federal Reserve System.


 


“Fees”
means any and all fees payable to Agent or any Lender pursuant to the Agreement
or any of the other Loan Documents.


 


“Financial
Covenants” means the financial covenants set forth in Annex E.


 


“Financials
Review Date” means the tenth day following the delivery and receipt by the
Agent and Lenders of the Financial Statements required to be delivered by the
Borrower pursuant to clause (b) of Annex D.


 


“Financial
Statements” means the consolidated and consolidating income statements,
statements of cash flows and balance sheets of Borrower or ECR (including
separate balance sheets and the related statements of income, stockholders’
equity and cash flows of the Borrower), as applicable, delivered in accordance
with Section 3.4 and Annex D.


 


“Fiscal
Month” means any of the monthly accounting periods of Borrower.


 

















 


“Fiscal
Quarter” means any of the quarterly accounting periods of Borrower, ending
on March 31, June 30, September 30 and December 31 of each
year.


 


“Fiscal
Year” means any of the annual accounting periods of Borrower ending on December 31
of each year.


 


“Fixed
Charges” means, with respect to any Person for any fiscal period, (a) the
aggregate of all Interest Expense paid or accrued during such period, plus
(b) scheduled payments of principal with respect to Indebtedness during
such period; provided that, for the purposes of calculating the Fixed Charge
Coverage Ratio only, the scheduled payments of principal with respect to
Indebtedness for the Fiscal Quarters ending September 30, 2007 and December 31,
2007 shall be deemed to be $3,000,000,  plus
(c) Capital Expenditures during such period other than that portion of
such Capital Expenditures (i) financed by lenders other than the Lenders
hereunder and (ii) constituting Longwall Expansion Expenditures made
during the period beginning on the Closing Date and ending on March 31,
2008, plus (d) income taxes paid or payable in cash with respect to
such fiscal period.


 


“Fixed
Charge Coverage Ratio” means, with respect to any Person for any fiscal
period, the ratio of EBITDA to Fixed Charges.


 


“Fixtures”
means all “fixtures” as such term is defined in the Code, now owned or
hereafter acquired by any Credit Party.


 


“Funded
Debt” means, with respect to any Person, without duplication, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness that by its terms matures more than one year
from, or is directly or indirectly renewable or extendible at such Person’s
option under a revolving credit or similar agreement obligating the lender or
lenders to extend credit over a period of more than one year from the date of
creation thereof, and specifically including Capital Lease Obligations, current
maturities of long-term debt, revolving credit and short-term debt extendible
beyond one year at the option of the debtor, and also including, in the case of
Borrower, the Obligations and, without duplication, Guaranteed Indebtedness
consisting of guaranties of Funded Debt of other Persons.


 


“Funding
Date” means December 21, 2006.


 


“Funds Flow
Memo” means the Funds Flow Memorandum attached hereto as Disclosure
Schedule 1.4 governing the application of the proceeds from the Closing
Date Term Loan.


 


“GAAP”
means generally accepted accounting principles in the United States of America
consistently applied, as such term is further defined in Annex E to the
Agreement.


 


“GE Capital”
means General Electric Capital Corporation, a Delaware corporation.


 


“GE Capital
Commitment Letter” means that certain Commitment Letter (including schedule
A attached thereto) dated as of November 2, 2006 between GE Capital and
Borrower with respect to, among other matters, certain fees to be paid from
time to time by Borrower to GE Capital.


 

















 


“General
Intangibles” means all “general intangibles,” as such term is defined in
the Code, now owned or hereafter acquired by any Credit Party, including all
right, title and interest that such Credit Party may now or hereafter have in
or under any Contract, all payment intangibles, customer lists, Licenses,
Copyrights, Trademarks, Patents, and all applications therefor and reissues,
extensions or renewals thereof, rights in Intellectual Property, interests in
partnerships, joint ventures and other business associations, licenses,
permits, copyrights, trade secrets, proprietary or confidential information,
inventions (whether or not patented or patentable), technical information,
procedures, designs, knowledge, know-how, software, data bases, data, skill,
expertise, experience, processes, models, drawings, materials and records,
goodwill (including the goodwill associated with any Trademark or Trademark
License), all rights and claims in or under insurance policies (including
insurance for fire, damage, loss and casualty, whether covering personal
property, real property, tangible rights or intangible rights, all liability,
life, key man and business interruption insurance, and all unearned premiums),
uncertificated securities, choses in action, deposit, checking and other bank
accounts, rights to receive tax refunds and other payments, rights to receive
dividends, distributions, cash, Instruments and other property in respect of or
in exchange for pledged Stock and Investment Property, rights of
indemnification, all books and records, correspondence, credit files, invoices
and other papers, including without limitation all tapes, cards, computer runs
and other papers and documents in the possession or under the control of such
Credit Party or any computer bureau or service company from time to time acting
for such Credit Party.


 


“Goods”
means all “goods” as defined in the Code, now owned or hereafter acquired by
any Credit Party, wherever located, including embedded software to the extent
included  in “goods” as defined in the
Code, manufactured homes, standing timber that is cut and removed for sale and
unborn young of animals.


 


“Governmental
Authority” means any nation or government, any state or other political
subdivision thereof, and any agency, department or other entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.


 


“Guaranteed
Indebtedness” means as to any Person, any obligation of such Person
guaranteeing, providing comfort or otherwise supporting any Indebtedness,
lease, dividend, or other obligation (“primary obligation”) of any other
Person (the “primary obligor”) in any manner, including any obligation
or arrangement of such Person to (a) purchase or repurchase any such
primary obligation, (b) advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency or any balance sheet condition of the primary obligor, (c) purchase
property, securities or services primarily for the purpose of assuring the
owner of any such primary obligation of the ability of the primary obligor to
make payment of such primary obligation, (d) protect the beneficiary of
such arrangement from loss (other than product warranties given in the ordinary
course of business) or (e) indemnify the owner of such primary obligation against
loss in respect thereof.  The amount of
any Guaranteed Indebtedness at any time shall be deemed to be an amount equal
to the lesser at such time of (x) the stated or determinable amount of the
primary obligation in respect of which such Guaranteed Indebtedness is incurred
and (y) the maximum amount for which such Person may be liable pursuant to
the terms of the instrument embodying such Guaranteed Indebtedness, or, if not 


 

















 


stated or determinable, the maximum reasonably anticipated liability
(assuming full performance) in respect thereof.


 


“Guaranties”
means, collectively, the ECR Guaranty, the BRMP Guaranty, the CHC
Guaranty,  each Subsidiary Guaranty and
any other guaranty executed by any Guarantor in favor of Agent and Lenders in
respect of the Obligations.


 


“Guarantors”
means BRMP, CHC and each other Person, if any, that executes a guaranty or
other similar agreement in favor of Agent, for itself and the ratable benefit
of Lenders, in connection with the transactions contemplated by the Agreement
and the other Loan Documents.


 


“HVB”  means Bayerische Hypo-Und Vereinsbank AG, New
York Branch.


 


“Hazardous
Material” means any substance, material or waste that is regulated by, or
forms the basis of liability now or hereafter under, any Environmental Laws,
including any material or substance that is (a) defined as a “solid waste,”
“hazardous waste,” “hazardous material,” “hazardous substance,” “extremely
hazardous waste,”  “restricted hazardous
waste,” “pollutant,” “contaminant,” “hazardous constituent,” “special waste,” “toxic
substance” or other similar term or phrase under any Environmental Laws, or (b) petroleum
or any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB’s),
or any radioactive substance.


 


“HVB
Pay-Off Letter”  means that certain
letter dated December 15, 2006 from HVB to Borrower concerning the amount
required to be paid by Borrower to HVB in order to satisfy all outstanding
Indebtedness of the Borrower to HVB.


 


“Indebtedness”
means, with respect to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property payment for which is deferred 6 months or more, but excluding
obligations to trade creditors incurred in the ordinary course of business that
are unsecured and not overdue by more than 6 months unless being contested in
good faith, (b) all reimbursement and other obligations with respect to
letters of credit, bankers’ acceptances and surety bonds, whether or not
matured, (c) all obligations evidenced by notes, bonds, debentures or
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all Capital Lease Obligations and the
present value (discounted at the Index Rate as in effect on the Closing Date)
of future rental payments under all synthetic leases, (f) all obligations
of such Person under commodity purchase or option agreements or other commodity
price hedging arrangements, in each case whether contingent or matured, (g) all
obligations of such Person under any foreign exchange contract, currency swap
agreement, interest rate swap, cap or collar agreement or other similar
agreement or arrangement designed to alter the risks of that Person arising
from fluctuations in currency values or interest rates, in each case whether
contingent or matured, (h) all Indebtedness referred to above secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien upon or in property or other assets
(including accounts and contract rights) owned by such Person, even 


 

















 


though such Person has not assumed or become liable for the payment of
such Indebtedness, and (i) the Obligations.


 


“Indemnified
Liabilities” has the meaning ascribed to it in Section 1.11.


 


“Indemnified
Person” has the meaning ascribed to in Section 1.11.


 


“Independent
Engineer” means an independent engineer of recognized expertise appointed
by Agent for the benefit of the Lenders.


 


“Index Rate”
means, for any day, a floating per annum interest rate equal, to the sum of (a) at
any time during the Audited Financial Statements Deficiency Period, six percent
(6%), and four percent (4.00%) thereafter plus (b) the higher of (i) the
rate publicly quoted from time to time by The Wall Street Journal
as the “prime rate” (or, if The Wall Street Journal ceases
quoting a prime rate, the highest per annum rate of interest published by the
Federal Reserve Board in Federal Reserve statistical release H.15 (519)
entitled “Selected Interest Rates” as the Bank prime loan rate or its
equivalent), and (ii) the Federal Funds Rate plus 50 basis points per
annum.  Each change in any interest rate
provided for in the Agreement based upon the Index Rate shall take effect at
the time of such change in the Index Rate.


 


“Index Rate
Loan” means a Term Loan or portion thereof bearing interest by reference to
the Index Rate.


 


“Initial
Cash Sweep Month” means the Fiscal Month which is the seventh complete
month subsequent to the Closing Date.


 


“Instruments”
means all “instruments,” as such term is defined in the Code, now owned or
hereafter acquired by any Credit Party, wherever located, and, in any event,
including all certificated securities, all certificates of deposit, and all
promissory notes and other evidences of indebtedness, other than instruments
that constitute, or are a part of a group of writings that constitute, Chattel
Paper.


 


“Intellectual
Property” means any and all Licenses, Patents, Copyrights, Trademarks, and
the goodwill associated with such Trademarks.


 


“Intercompany
Notes” has the meaning ascribed to it in Section 6.3.


 


“Interest
Coverage Ratio” means, with respect to any Person for any period, the ratio
of EBITDA to Interest Expense.


 


“Interest
Expense” means, with respect to any Person for any fiscal period, interest
expense (whether cash or non-cash) of such Person determined in accordance with
GAAP for the relevant period ended on such date, including, interest expense
with respect to any Funded Debt of such Person and interest expense for the
relevant period that has been capitalized on the balance sheet of such Person.


 

















 


“Interest
Payment Date” means (a) as to any Index Rate Loan, the last Business
Day of each month to occur while such Term Loan is outstanding, and (b) as
to any LIBOR Loan, the last day of  the
applicable LIBOR Period; provided, that in the case of any LIBOR Period
greater than three months in duration, interest shall be payable at three-month
intervals and on the last day of such LIBOR Period; and provided, further,
that in addition to the foregoing, each of (x) the date upon which all of
the Commitments have been terminated and the Term Loan has been paid in full
and (y) the Commitment Termination Date shall be deemed to be an “Interest
Payment Date” with respect to any interest that has then accrued under the
Agreement.


 


“Inventory”
means all “inventory,” as such term is defined in the Code, now owned or
hereafter acquired by any Credit Party, wherever located, and in any event
including inventory, merchandise, goods and other personal property that are
held by or on behalf of any Credit Party for sale or lease or are furnished or
are to be furnished under a contract of service, or that constitute raw
materials, work in process, finished goods, returned goods, or materials or
supplies of any kind, nature or description used or consumed or to be used or
consumed in such Credit Party’s business or in the processing, production,
packaging, promotion, delivery or shipping of the same, including all supplies
and embedded software.


 


“Investment
Property” means all “investment property” as such term is defined in the
Code now owned or hereafter acquired by any Credit Party, wherever located,
including (i) all securities, whether certificated or uncertificated,
including stocks, bonds, interests in limited liability companies, partnership
interests, treasuries, certificates of deposit, and mutual fund shares; (ii) all
securities entitlements of any Credit Party, including the rights of any Credit
Party to any securities account and the financial assets held by a securities
intermediary in such securities account and any free credit balance or other
money owing by any securities intermediary with respect to that account; (iii) all
securities accounts of any Credit Party; (iv) all commodity contracts of
any Credit Party; and (v) all commodity accounts held by any Credit Party.


 


“IRC”
means the Internal Revenue Code of 1986 and all regulations promulgated
thereunder.


 


“IRS”
means the Internal Revenue Service.


 


“Lenders”
means GE Capital, the other Lenders named on the signature pages of the
Agreement, and, if any such Lender shall decide to assign all or any portion of
the Obligations, such term shall include any assignee of such Lender.


 


“Leverage
Ratio” means, with respect to Borrower, on a consolidated basis, the ratio
of (a) Funded Debt as of any date of determination, to (b) EBITDA.


 


“LIBOR
Business Day” means a Business Day on which banks in the City of London are
generally open for interbank or foreign exchange transactions.


 


“LIBOR Loan”
means a Term Loan or any portion thereof bearing interest by reference to the
LIBOR Rate.


 














 


“LIBOR
Period” means, with respect to any LIBOR Loan, each period commencing on a
LIBOR Business Day selected by Borrower pursuant to the Agreement and ending
one, two, three, six or twelve months thereafter, as selected by Borrower’s
irrevocable notice to Agent as set forth in Section 1.5(e); provided,
that the foregoing provision relating to LIBOR Periods is subject to the
following:


 


(a)           if any LIBOR Period would otherwise end on a day that is not
a LIBOR Business Day, such LIBOR Period shall be extended to the next
succeeding LIBOR Business Day unless the result of such extension would be to
carry such LIBOR Period into another calendar month in which event such LIBOR
Period shall end on the immediately preceding LIBOR Business Day;


 


(b)           any LIBOR Period that would otherwise extend beyond the
Commitment Termination Date shall end two (2) LIBOR Business Days prior to
such date;


 


(c)           any LIBOR Period that begins on the last LIBOR Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such LIBOR Period) shall
end on the last LIBOR Business Day of a calendar month;


 


(d)           Borrower shall select LIBOR Periods so as not to require a
payment or prepayment of any LIBOR Loan during a LIBOR Period for such Loan;
and


 


(e)           Borrower shall select LIBOR Periods so that there shall be
no more than 15 separate LIBOR Loans in existence at any one time.


 


“LIBOR Rate”
means for each LIBOR Period, a rate of interest determined by Agent equal to:


 


(a)           the offered rate for deposits in United States Dollars for
the applicable LIBOR Period that appears on Telerate Page 3750 as of 11:00 a.m.
(London time), on the second full LIBOR Business Day next preceding the first
day of such LIBOR Period (unless such date is not a Business Day, in which
event the next succeeding Business Day will be used); divided by


 


(b)           a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day that is two (2) LIBOR Business Days
prior to the beginning of such LIBOR Period (including basic, supplemental,
marginal and emergency reserves under any regulations of the Federal Reserve
Board or other Governmental Authority having jurisdiction with respect thereto,
as now and from time to time in effect) for Eurocurrency funding (currently
referred to as “Eurocurrency Liabilities” in Regulation D of the Federal 


 

















 


Reserve Board that are required to be maintained by a member bank of
the Federal Reserve System.


 


If such
interest rates shall cease to be available from Telerate News Service (or its
successor satisfactory to Agent), the LIBOR Rate shall be determined from such
financial reporting service or other information as shall be mutually acceptable
to Agent and Borrower.


 


“License”
means any Copyright License, Patent License, Trademark License or other license
of rights or interests now held or hereafter acquired by any Credit Party.


 


“Lien”
means any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, easement or encumbrance,
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever (including any lease or title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of, or agreement to give, any financing
statement perfecting a security interest under the Code or comparable law of
any jurisdiction).


 


“Litigation”
has the meaning ascribed to it in Section 3.13.


 


“Loan
Account” has the meaning ascribed to it in Section 1.10.


 


“Loan
Documents” means the Agreement, the Notes, the Collateral Documents, the
Water Use Agreement and all other agreements, instruments, documents and
certificates identified in the Closing Checklist executed and delivered to, or
in favor of, Agent or any Lenders and including all other pledges, powers of
attorney, consents, assignments, contracts, notices, letter of credit agreements
and all other written matter whether heretofore, now or hereafter executed by
or on behalf of any Credit Party, or any employee of any Credit Party, and
delivered to Agent or any Lender in connection with the Agreement or the
transactions contemplated thereby.  Any
reference in the Agreement or any other Loan Document to a Loan Document shall
include all appendices, exhibits or schedules thereto, and all amendments,
restatements, supplements or other modifications thereto, and shall refer to
the Agreement or such Loan Document as the same may be in effect at any and all
times such reference becomes operative.


 


“Loan”
means the Term Loan.


 


“Lock Boxes”
has the meaning ascribed to it in Annex B.


 


“Longwall
Expansion Expenditures” mean costs associated with the Longwall
Expansion Project, not to exceed $4,400,000 in 2007.


 


“Longwall
Expansion Project” means the upgrade of all of the Borrower’s
longwall shields with serial numbers LW 2001 thru 2175 thereby increasing each
shield’s maximum cutting height from 9.5 feet to 11.5 feet.


 

















 


“Manager”
shall mean BRMP and any replacement manager selected in accordance with the
terms of the Borrower LLC Agreement and this Agreement.


 


“Margin
Stock” has the meaning ascribed to in Section 3.10.


 


“Material
Adverse Effect” means any fact, event or circumstance that alone or when
taken with other events or conditions occurring or existing concurrently with
such event or condition, (a) has or is reasonably expected to have a
material adverse effect on the condition (financial or otherwise), business,
performance, prospects, operations, assets, liabilities or property of the
Borrower, (b) materially impairs or is reasonably expected to materially
impair the ability of Borrower to pay and perform its obligations under any
Loan Document and (c) has or is reasonably expected to have a material
adverse effect on the validity or enforceability of any Loan Document, (d) materially
impairs or is reasonably expected to materially impair the ability of any of
the Administrative Agent, the Lenders and other Secured Parties to enforce its
rights and remedies under any Loan Document or (e) has or is reasonably
expected to have any material adverse effect on the Collateral taken as a
whole, the Administrative Agent’s Liens in respect of such Collateral or the
priority of the Liens on such Collateral.


 


“Material
Contract” means (A) any contract providing for the sale by the
Borrower of coal, including without limitation, (i) the TVA Contract, (ii) Confirmation
to purchase coal letter agreement dated September 13, 2004 from Oxbow
Carbon & Minerals LLC (“Oxbow”); (iii) Confirmation to purchase
coal letter agreement dated January 26, 2005 from Oxbow; (iv) Confirmation
to purchase coal letter agreement dated June 6, 2005 from Oxbow; (v) Confirmation
to purchase coal letter agreement dated July 1, 2005 from Oxbow; (vi) Short
Confirmation Agreement for the purchase of coal by Public Service Company of
Colorado dated August 4, 2005 for the term of October 1, 2005 through
December 31, 2007; (vii) Coal Supply Agreement with The Cincinnati
Gas & Electric Co. for the term, January 1, 2006 through December 31,
2006; (viii) Confirmation of purchase from NRG Power Marketing Inc. to
Borrower dated May 4, 2005; (ix) Partial Assignment and Amendment of
Contract for Purchase and Sale of Coal dated as of January 24, 2005 among
Borrower, Synfuels and TVA and (x) New River Energy Resources Coal
Purchase Agreement dated September 20, 2006 between New River Energy
Resources and Borrower; (B) the BLM Leases having Serial Numbers C-37210,
C-27432, D-036955 and COC-61209, (C) any contract for the provision of
goods or services critical to the operation of the Mine, including (i) the
Development and Operations Agreement dated as of March 31, 2004 between
Borrower and Loadout Services, Inc., (ii) Operations Agreement dated
as of November 13, 2001 between Loadout Services, Inc. and Bowie
Resources Limited and (iii) Industry Track Contract dated as of March 14,
2002 among Union Pacific Railroad Company and Bowie Resources Limited and (D) any
contract entered into in renewal or replacement of any of the foregoing, in
whole or in part.


 


“Members”  shall have the meaning set forth in the
Borrower LLC Agreement.


 


“Member
Party” means each Credit Party and BRMP and their respective Subsidiaries.


 


“Mines”
means all properties, assets or other rights, whether real or personal,
tangible or intangible, now owned or leased or hereafter acquired by or for the
benefit of the Borrower, 


 

















 


which assets are used or intended for use in the conduct of the
Borrower’s coal mining and related activities, including, the Mines (as defined
in the Deed of Trust), all associated beneficiation facilities, together with
all plant site, waste dumps, crushing circuits, abandoned heaps, preparation
plants, wash plants, loadout facilities, power supply systems and ancillary and
infrastructure facilities located in Colorado which are used in connection with
such activities.


 


“Mine Plan”
means the economic model prepared by Pincock Allen & Holt relating to
the projected eight-year performance of the Mines.


 


 “Mortgages” means each of the
mortgages, deeds of trust, leasehold mortgages, leasehold deeds of trust,
collateral assignments of leases or other real estate security documents
delivered by any Credit Party to Agent on behalf of itself and Lenders with
respect to any real property, all in form and substance reasonably satisfactory
to Agent.


 


“Multiemployer
Plan” means a “multiemployer plan” as defined in Sections 3(37) or 4001(a)(3) of
ERISA, and to which any Credit Party or ERISA Affiliate is making, is obligated
to make or has made or been obligated to make, contributions on behalf of
participants who are or were employed by any of them.


 


“Notes”
means the Term Notes.


 


“Notices of
TVA Assignment” means (i) the Notice of Assignment executed by the
Borrower and the Agent and acknowledged by the TVA, notifying the accounts
payable department of the TVA of the TVA Assignment and directing that all
payments due under such TVA Contract be directed to the Collection Account and (ii) the
Notice of Assignment executed by the Borrower and the Agent and acknowledged by
the TVA, notifying the disbursing officer under the TVA Contract of the TVA
Assignment.


 


“Obligations”
means all loans, advances, debts, liabilities and obligations for the
performance of covenants, tasks or duties or for payment of monetary amounts
(whether or not such performance is then required or contingent, or such
amounts are liquidated or determinable) owing by any Credit Party to Agent or
any Lender, and all covenants and duties regarding such amounts, of any kind or
nature, present or future, whether or not evidenced by any note, agreement,
letter of credit agreement or other instrument, arising under the Agreement or
any of the other Loan Documents.  This
term includes all principal, interest (including all interest that accrues
after the commencement of any case or proceeding by or against any Credit Party
in bankruptcy, whether or not allowed in such case or proceeding), Fees, Swap
Related Reimbursement Obligations, hedging obligations under swaps, caps and
collar arrangements provided by any Lender in accordance with the terms of the
Agreement, expenses, attorneys’
fees and any other sum chargeable to any Credit Party under the Agreement or
any of the other Loan Documents.


 


“Patent
License” means rights under any written agreement now owned or hereafter
acquired by any Credit Party granting any right with respect to any invention
on which a Patent is in existence.


 

















 


“Patent
Security Agreements” means the Patent Security Agreements made in favor of
Agent, on behalf of itself and Lenders, by each applicable Credit Party.


 


“Patents”
means all of the following in which any Credit Party now holds or hereafter
acquires any interest: (a) all letters patent of the United States or of
any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or of any other country,
including registrations, recordings and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State, or any other country, and (b) all reissues, continuations,
continuations-in-part or extensions thereof.


 


“PBGC”
means the Pension Benefit Guaranty Corporation.


 


“Pension
Plan” means a Plan described in Section 3(2) of ERISA.


 


“Permits”  means any applicable permit, consent,
license, notification and/or approval from or to any Governmental Authority and
any registration or filing with any Governmental Authority or any giving of
notice to any Governmental Authority.


 


“Permitted
Consulting Fees” means fees payable by Borrower to Rickmeier Advisors, Inc.
for those certain consulting services to be provided by Rickmeier Advisors, Inc.
as set forth in the Consulting Agreement; provided that (i) such fees
shall be payable monthly on the last Business Day of each Fiscal Month
commencing with the last Business Day of the Initial Cash Sweep Month, (ii) the
aggregate fees payable in any Fiscal Month shall not exceed (x) during the
Cash Sweep Period, the sum of the aggregate amount of the Consulting Fee First
Tier plus the aggregate amount of the Consulting Fee Second Tier and (y) from
and after the first full Fiscal Month following the end of the Cash Sweep
Period, the Consulting Fee Third Tier, (iii) such fees shall be payable at
the times and in the manner as provided for in the Deposit and Disbursement
Agreement, (iv) no Default or Event of Default has occurred or is
continuing as of the date such fees are paid or would result from the payment
of such fees and (v) in no event may the aggregate fees payable pursuant
to this definition exceed what would otherwise be payable by the Borrower under
the Consulting Agreement.


 


“Permitted
Encumbrances” means the following encumbrances: (a) Liens for taxes or
assessments or other governmental Charges not yet due and payable or which are
being contested in accordance with Section 5.2(b); (b) pledges
or deposits of money securing statutory obligations under workmen’s
compensation, unemployment insurance, social security or public liability laws
or similar legislation (excluding Liens under ERISA); (c) pledges or
deposits of money securing bids, tenders, surety or performance bonds (or
letters of credit issued as collateral therefor), contracts (other than
contracts for the payment of money) or leases to which any Credit Party is a
party as lessee, in each case, made in the ordinary course of business; (d) inchoate
and unperfected workers’, mechanics’ or similar liens arising in the ordinary
course of business, so long as such Liens attach only to Equipment, Fixtures
and/or Real Estate; (e) [intentionally omitted]; (f) deposits
securing, or in lieu of, surety, appeal or customs bonds in proceedings to
which any Credit Party is a party; (g) any attachment or judgment lien not
constituting an Event of Default under Section 8.1(j); (h) zoning
restrictions, easements, licenses, or other restrictions on the use of any Real
Estate or other minor irregularities in title (including 


 

















 


leasehold title) thereto, so long as the same do not materially impair
the use, value, or marketability of such Real Estate; (i) presently
existing or hereafter created Liens in favor of Agent, on behalf of Lenders;
and (j) Liens expressly permitted under clauses (b) and (c) of
Section 6.7 of the Agreement.


 


“Permitted
Fees” means fees payable by the Borrower to certain Stockholders of a
Credit Party or its Affiliates for those certain administrative services
performed by the employees of such Stockholder or Affiliate on behalf of the
Borrower pursuant to certain services agreements; provided that (i) such
fees shall be payable monthly on the last Business Day of each Fiscal Month, (ii) the
aggregate amount of such fees payable in any Fiscal Month shall not exceed the
lesser of (x) such Affiliate or Stockholder’s cost to provide such
administrative services and (y) $20,000 per Fiscal Month and (iii) no
Default or Event of Default has occurred or is continuing as of the date such
fees are paid or would result from the payment of such fees.


 


“Permitted
Investments” means (i) obligations of or directly and fully guaranteed
by the United States of America, or of any agency or instrumentality thereof,
maturing not later than one year from the date of acquisition thereof, (ii) certificates
of deposit and banker’s acceptances maturing not later than six months, or time
deposits maturing not more than one month, from the date of acquisition
thereof, or overnight bank deposits, in each case held or maintained by any
commercial bank having capital, surplus and undivided profits in excess of
$500,000,000 and having a commercial paper rating (or the holding company
thereof having a commercial paper rating) of A-1 (or the equivalent thereof) or
better by Standards & Poor’s Ratings Service (“S&P”) or P-1
(or the equivalent thereof) or better by Moody’s Investors Service, Inc. (“Moody’s”)
and that is a member of the Federal Reserve System of the United States of
America, (iii) commercial paper rated (on the date of acquisition thereof)
A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent
thereof) or better by Moody’s, maturing not later than 180 days from the date
of acquisition thereof, (iv) money market mutual funds having a portfolio
which consists solely of the investments described in clauses (a) through
(c), (v) repurchase agreements with a
term not more than seven (7) days for securities of the type specified in
clause (a) of this definition from a commercial bank satisfying the
conditions set forth in clause (b) of this definition and (vi) cash
deposits in interest bearing accounts held or maintained with a commercial bank
in an aggregate amount not to exceed at any time $25,000.


 


“Permitted
Tax Distribution”  means a
distribution in an amount equal to the federal or state income taxes imposed
upon and paid in cash by the direct or indirect equity holders of Borrower in
the Fiscal Quarter to which such distribution relates, by reason of the fact
that the Borrower is classified as a partnership for U.S. income tax purposes
and that such taxes paid are attributable solely to the income earned by the
Borrower; provided, that, (i) no Default or Event of Default has occurred
and is continuing as of the date of the such distribution or would result from
the making of such distribution (individually or in the aggregate with any
other distributions that have been or are simultaneously paid), (ii) the
distribution is paid from legally available funds and the Borrower is Solvent
after giving effect thereto, (iii) no more than one distribution shall be
made in any Fiscal Quarter and such distribution shall be made on the last
Business Day of the last Fiscal Month of a Fiscal Quarter in an aggregate
amount not to exceed the Permitted Tax Distribution payable to all of the
direct or indirect equity holders of Borrower as calculated above and (iv) the
Authorized Officers of the Borrower have provided the Agent 


 

















 


with a certificate, in form and substance reasonably satisfactory to
the Agent, certifying that (x) the distribution to the equity holder is a
Permitted Tax Distribution, (y) the amount to be paid as a result of the
Permitted Tax Distribution is true and accurate and (z) neither the
Manager nor the chief financial officer have any reason to believe that such
distribution will not be used by the direct or indirect equity holders of
Borrower to pay, finance or reimburse tax payments, installments or estimated
payments arising from the taxable income of the Borrower.


 


“Person”
means any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, limited liability
company, institution, public benefit corporation, other entity or government
(whether federal, state, county, city, municipal, local, foreign, or otherwise,
including any instrumentality, division, agency, body or department thereof).


 


“Plan”
means, at any time, an “employee benefit plan”, as defined in Section 3(3) of
ERISA, that any Credit Party or ERISA Affiliate maintains, contributes to or
has an obligation to contribute to or has maintained, contributed to or had an
obligation to contribute to at any time within the past 7 years on behalf of
participants who are or were employed by any Credit Party or ERISA Affiliate.


 


“Pledge
Agreements” means, collectively, the CHC Pledge Agreement, the BRMP Pledge
Agreement and any pledge agreements entered into after the Closing Date by any
Credit Party (as required by the Agreement or any other Loan Document).


 


“Principal
Reduction Date” the date on which the total amount of principal payments
made by the Borrower in respect of the Term Loan equals $14,000,000 or more.


 


“Prior
Lender” means HVB.


 


“Prior
Lender Obligations” means, as of Funding Date, all  outstanding Indebtedness, accrued fees,
expenses and other obligations of Borrower to HVB.


 


“Proceeds”
means “proceeds,” as such term is defined in the Code, including (a) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
any Credit Party from time to time with respect to any of the Collateral, (b) any
and all payments (in any form whatsoever) made or due and payable to any Credit
Party from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by any
Governmental Authority (or any Person acting under color of governmental
authority), (c) any claim of any Credit Party against third parties (i) for
past, present or future infringement of any Patent or Patent License, or (ii) for
past, present or future infringement or dilution of any Copyright, Copyright
License, Trademark or Trademark License, or for injury to the goodwill
associated with any Trademark or Trademark License, (d) any recoveries by
any Credit Party against third parties with respect to any litigation or
dispute concerning any of the Collateral including claims arising out of the
loss or nonconformity of, interference with the use of, defects in, or
infringement of rights in, or damage to, Collateral, (e) all amounts
collected on, or distributed on account of, other Collateral, including
dividends, interest, distributions and Instruments with respect to Investment
Property and pledged Stock, and (f) any and all other 


 

















 


amounts, rights to payment or other property acquired upon the sale,
lease, license, exchange or other disposition of Collateral and all rights
arising out of Collateral.


 


“Pro Forma”
means the unaudited consolidated and consolidating balance sheet of Borrower
and its Subsidiaries as of September 30, 2006 after giving pro  forma
effect to the Related Transactions.


 


“Projected
EBITDA” means, for any period, an amount not less than zero and otherwise
equal to the difference between EBITDA and Fixed Charges for such period;
provided that for purposes of Projected EBITDA, Fixed Charges shall not include
Capital Expenditures


 


“Projections”
means Borrower’s forecasted consolidated and consolidating:  (a) balance sheets; (b) profit and
loss statements; (c) cash flow statements; and (d) capitalization
statements, all prepared on a Subsidiary by Subsidiary or division-by-division
basis, if applicable, and otherwise consistent with the historical Financial
Statements of the Borrower, together with appropriate supporting details and a
statement of underlying assumptions and, in each case, in form and substance
reasonably satisfactory to the Agent.


 


“Pro Rata
Share” means with respect to all matters relating to any Lender, (a) with
respect to the Term Loan, the percentage obtained by dividing (i) the Term
Loan Commitment of that Lender by (ii) the aggregate Term Loan Commitments
of all Lenders, as any such percentages may be adjusted by assignments
permitted pursuant to Section 9.1, and (b) with respect to the
Term Loan on and after the Commitment Termination Date, the percentage obtained
by dividing (i) the aggregate outstanding principal balance of the Term
Loan held by that Lender, by (ii) the outstanding principal balance of the
Term Loan held by all Lenders.


 


“Qualified
Plan” means a Pension Plan that is intended to be tax-qualified under Section 401(a) of
the IRC.


 


“Qualified
Assignee” means (a) any Lender, any Affiliate of any Lender and, with
respect to any Lender that is an investment fund that invests in commercial
loans, any other investment fund that invests in commercial loans and that is
managed or advised by the same investment advisor as such Lender or by an
Affiliate of such investment advisor, and (b) any commercial bank, savings
and loan association or savings bank or any other entity which is an “accredited
investor” (as defined in Regulation D under the Securities Act of 1933) which
extends credit or buys loans as one of its businesses, including insurance
companies, mutual funds, lease financing companies and commercial finance
companies, in each case, which has a rating of BBB or higher from S&P and a
rating of Baa2 or higher from Moody’s at the date that it becomes a Lender and
which, through its applicable lending office, is capable of lending to Borrower
without the imposition of any withholding or similar taxes; provided
that no Person proposed to become a Lender after the Closing Date and
determined by Agent to be acting in the capacity of a vulture fund or
distressed debt purchaser shall be a Qualified Assignee, and no Person or
Affiliate of such Person proposed to become a Lender after the Closing Date and
that holds Subordinated Debt or Stock issued by any Credit Party shall be a
Qualified Assignee.


 


“Real
Estate” has the meaning ascribed to it in Section 3.6.


 














 


“Refinancing”
means the satisfaction in full by Borrower of the Prior Lender Obligations on
the Funding Date, including without limitation, the cash collateralization of
any outstanding letters of credit issued or guaranteed by the Prior Lender.


 


“Refinancing
Indebtedness”  means refinancings,
replacements, renewals, refundings or extensions of Indebtedness so long as: (a) the
terms and conditions of such refinancings, replacements, renewals, refundings
or extensions do not, in Agent’s reasonable judgment, materially impair the
prospects of repayment of the Term Loan by Borrower or materially impair any
Credit Parties’ creditworthiness, (b) such refinancings, replacements,
renewals, refundings or extensions do not result in an increase in the
principal amount of the Indebtedness so refinanced, replaced, renewed, refunded
or extended, (c) such refinancings, replacements, renewals, refundings or
extensions do not result in an increase in the interest rate with respect to
the Indebtedness so refinanced, replaced, renewed, refunded or extended, (d) such
refinancings, replacements, renewals, refundings or extensions do not result in
a shortening of the average weighted maturity of the Indebtedness so
refinanced, replaced, renewed, refunded or extended, nor are they on terms or
conditions that, taken as a whole, are materially more burdensome or
restrictive to any Credit Party as determined by the Agent in its reasonable
discretion, (e) if the Indebtedness that is refinanced, replaced, renewed,
refunded or extended was subordinated in right of payment to the Term Loan,
then the terms and conditions of the refinancing, replacement, renewal,
refunding or extension must include subordination terms and conditions that are
at least as favorable to the Lenders as those that were applicable to the
refinanced, replaced, renewed, refunded or extended Indebtedness, and (f) the
Indebtedness that is refinanced, replaced, renewed, refunded or extended is not
recourse to any Person that is liable on account of the Term Loan other than
those Persons which were obligated with respect to the Indebtedness that was
refinanced, replaced, renewed, refunded or extended.


 


“Reimbursable
Expenses” means, in respect of the Agent or any Lenders, all fees (other
than Fees), costs, expenses and indemnities due and owing by the Borrower to
the Agent or Lender.


 


“Related
Transactions” means the borrowing of the Closing Date Term Loan on the
Funding Date, the Refinancing, the conversion of the Borrower from a Kentucky
limited liability company to a Delaware limited liability company by merger,
the granting of a one percent (1)% membership interest to BRMP, the Bowie
Merger, the payment of all fees, costs and expenses associated with all of the
foregoing and the execution and delivery of all of the Related Transactions
Documents.


 


“Related
Transactions Documents” means the Loan Documents, the Borrower LLC
Agreement, HVB Payoff Letter, the Bowie Merger Documents, evidence from the
Secretary of State of Delaware indicating that the conversion of the Borrower
from a Kentucky limited liability company to a Delaware limited liability
company by merger has been recorded with such office and become effective and
all other agreements or instruments executed in connection with the Related
Transactions.


 


“Release”
means any release, threatened release, spill, emission, leaking, pumping,
pouring, emitting, emptying, escape, injection, deposit, disposal, discharge,
dispersal, dumping, 


 

















 


leaching or migration of Hazardous Material in the indoor or outdoor
environment, including the movement of Hazardous Material through or in the
air, soil, surface water, ground water or property.


 


“Requisite
Lenders” means Lenders having (a) more than 66 2/3% of the Commitments
of all Lenders, or (b) if the Commitments have been terminated, more than
66 2/3% of the aggregate outstanding amount of the Term Loan.


 


“Restricted
Payment” means, with respect to any Credit Party (a) the declaration
or payment of any dividend or the incurrence of any liability to make any other
payment or distribution of cash or other property or assets in respect of
Stock; (b) any payment on account of the purchase, redemption, defeasance,
sinking fund or other retirement of such Credit Party’s Stock or any other
payment or distribution made in respect thereof, either directly or indirectly;
(c) any payment or prepayment of principal of, premium, if any, or
interest, fees or other charges on or with respect to, and any redemption,
purchase, retirement, defeasance, sinking fund or similar payment and any claim
for rescission with respect to, any Subordinated Debt; (d) any payment
made to redeem, purchase, repurchase or retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire Stock of such
Credit Party now or hereafter outstanding; (e) any payment of a claim for
the rescission of the purchase or sale of, or for material damages arising from
the purchase or sale of, any shares of such Credit Party’s Stock or of a claim
for reimbursement, indemnification or contribution arising out of or related to
any such claim for damages or rescission; (f) any payment, loan,
contribution, or other transfer of funds or other property to any Stockholder
of such Credit Party other than payment of compensation in the ordinary course
of business to Stockholders who are employees of such Person; and (g) any
payment of management or service fees (or other fees of a similar nature) by
such Credit Party to any Stockholder of such Credit Party or its Affiliates.


 


“Retiree
Welfare Plan” means, at any time, a welfare plan (within the meaning of Section 3(1) of
ERISA) that provides for continuing coverage or benefits for any participant or
any beneficiary of a participant after such participant’s termination of
employment, other than continuation coverage provided pursuant to Section 4980B
of the IRC or other similar state law and at the sole expense of the
participant or the beneficiary of the participant.


 


“Security
Agreement” means the Security Agreement of even date herewith entered into
by and among Agent, on behalf of itself and Lenders, and each Credit Party that
is a signatory thereto.


 


“Sentient”
means Sentient Coal Resources LLC.


 


“Software”
means all “software” as such term is defined in the Code, now owned or
hereafter acquired by any Credit Party, other than software embedded in any
category of Goods, including all computer programs and all supporting
information provided in connection with a transaction related to any program.


 


“Solvent”  means, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of
such Person is greater than the total amount of liabilities, 


 

















 


including contingent liabilities, of such Person; (b) the present
fair salable value of the assets of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its debts
as they become absolute and matured; (c) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
Person’s ability to pay as such debts and liabilities mature; and (d) such
Person is not engaged in a business or transaction, and is not about to engage
in a business or transaction, for which such Person’s property would constitute
an unreasonably small capital.  The amount
of contingent liabilities (such as litigation, guaranties and pension plan
liabilities) at any time shall be computed as the amount that, in light of all
the facts and circumstances existing at the time, represents the amount that
can be reasonably be expected to become an actual or matured liability.


 


“Stock”
means all shares, options, warrants, general or limited partnership interests,
membership interests or other equivalents (regardless of how designated) of or
in a corporation, partnership, limited liability company or equivalent entity
whether voting or nonvoting, including common stock, preferred stock or any
other “equity security” (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934).


 


“Stockholder”
means, with respect to any Person, each holder of Stock of such Person.


 


“Subordinated
Debt” means Indebtedness of any Credit Party subordinated to the
Obligations in a manner and form satisfactory to Agent and Lenders in their
sole discretion, as to right and time of payment and as to any other rights and
remedies thereunder.


 


“Subsidiary”
means, with respect to any Person, (a) any corporation of which an
aggregate of more than 50% of the outstanding Stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of 50% or more of such Stock whether by proxy, agreement,
operation of law or otherwise, and (b) any partnership or limited
liability company in which such Person and/or one or more Subsidiaries of such
Person shall have an interest (whether in the form of voting or participation
in profits or capital contribution) of more than 50% or of which any such
Person is a general partner or may exercise the powers of a general
partner.  Unless the context otherwise
requires, each reference to a Subsidiary shall be a reference to a Subsidiary
of a Borrower.


 


“Supporting
Obligations” means all “supporting obligations” as such term is defined in
the Code, including letters of credit and guaranties issued in support of
Accounts, Chattel Paper, Documents, General Intangibles, Instruments, or
Investment Property.


 


“Synfuels”
means I Synfuels, LLC, a Delaware limited liability company.


 


“Tax
Distributions” means distributions paid to direct or indirect members of
the Borrower for the purpose of funding each such member’s income tax liability
relating to its 


 

















 


direct or indirect ownership interest in the Borrower; each Tax
Distribution shall be designated as such, and with respect to a particular
Fiscal Quarter, in Borrower’s books and records.


 


“Taxes”
means taxes, levies, imposts, deductions, Charges or withholdings, and all
liabilities with respect thereto, excluding taxes imposed on or measured by the
net income of Agent or a Lender by the jurisdictions under the laws of which
Agent and Lenders are organized or conduct business or any political
subdivision thereof.


 


“Termination
Date” means the date on which (a) the Term Loan has been indefeasibly
repaid in full, (b) all other Obligations under the Agreement and the
other Loan Documents have been completely discharged, and (c) none of
Borrower shall have any further right to borrow any monies under the Agreement.


 


“TVA”
means the Tennessee Valley Authority.


 


“TVA
Assignment” means the instrument of assignment executed and delivered by
the Borrower, Synfuels, the TVA and Agent, effecting the assignment by the
Borrower and Synfuels to the Agent of all moneys due or to become due under the
TVA Contract and the Partial Assignment and Amendment of Contract for Purchase
and Sale of Coal dated as of January 24, 2005, among Borrower, Synfuels
and the TVA.


 


“TVA
Contract” means the Contract for the Purchase and Sale of Coal (Contract No. P-98P01-238224
(designated as contract 382), dated January 26, 1999 by and between the
Tennessee Valley Authority and Borrower, as the same may be amended,
supplemented or modified from time to time.


 


 “Term Loan” means the aggregate of the
Closing Date Term Loan and the Delayed Draw Term Loan, if funded.


 


“Term Loan
Debt Service” means, for any period, the aggregate amount of interest and
scheduled monthly principal payments on the Term Loan payable during such
period.


 


“Term Loan
Commitment” means the Closing Date Term Loan Commitment or the Delayed Draw
Term Loan Commitment or both, as appropriate in the context.


 


“Term Notes”
has the meaning set forth in Section 1.1(a)(i).


 


“Title IV
Plan” means a Pension Plan (other than a Multiemployer Plan), that is
subject to Title IV of ERISA or Section 412 of the IRC, and that any
Credit Party or ERISA Affiliate maintains, contributes to or has an obligation
to contribute to on behalf of participants who are or were employed by any of
them.


 


“Trademark
Security Agreements” means the Trademark Security Agreements made in favor
of Agent, on behalf of Lenders, by each applicable Credit Party.


 


“Trademark
License” means rights under any written agreement now owned or hereafter
acquired by any Credit Party granting any right to use any Trademark.


 

















 


“Trademarks”
means all of the following now owned or hereafter existing or adopted or
acquired by any Credit Party: (a) all trademarks, trade names, corporate
names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature (whether
registered or unregistered), all registrations and recordings thereof, and all
applications in connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state or territory thereof, or any
other country or any political subdivision thereof; (b) all reissues,
extensions or renewals thereof; and (c) all goodwill associated with or
symbolized by any of the foregoing.


 


“Unfunded
Pension Liability” means, at any time, the aggregate amount, if any, of the
sum of (a) the amount by which the present value of all accrued benefits
under each Title IV Plan exceeds the fair market value of all assets of such
Title IV Plan allocable to such benefits in accordance with Title IV of ERISA,
all determined as of the most recent valuation date for each such Title IV Plan
using the actuarial assumptions for funding purposes in effect under such Title
IV Plan, and (b) for a period of five (5) years following a
transaction which might reasonably be expected to be covered by Section 4069
of ERISA, the liabilities (whether or not accrued) that could be avoided by any
Credit Party or any ERISA Affiliate as a result of such transaction.


 


“Water Use Agreement”
means the Water Use Agreement between the Borrower and Agent dated as of the
Closing Date.


 


Rules of
construction with respect to accounting terms used in the Agreement or the
other Loan Documents shall be as set forth in Annex E.  All other undefined terms contained in any of
the Loan Documents shall, unless the context indicates otherwise, have the
meanings provided for by the Code to the extent the same are used or defined
therein; in the event that any term is defined differently in different
Articles or Divisions of the Code, the definition contained in Article or
Division 9 shall control.  Unless
otherwise specified, references in the Agreement or any of the Appendices to a
Section, subsection or clause refer to such Section, subsection or clause as
contained in the Agreement.  The words “herein,”
“hereof” and “hereunder” and other words of similar import refer to the
Agreement as a whole, including all Annexes, Exhibits and Schedules, as the
same may from time to time be amended, restated, modified or supplemented, and
not to any particular section, subsection or clause contained in the Agreement
or any such Annex, Exhibit or Schedule.


 


Wherever from
the context it appears appropriate, each term stated in either the singular or
plural shall include the singular and the plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, feminine and
neuter genders.  The words “including”, “includes”
and “include” shall be deemed to be followed by the words “without limitation”;
the word “or” is not exclusive; references to Persons include their respective
successors and assigns (to the extent and only to the extent permitted by the
Loan Documents) or, in the case of governmental Persons, Persons succeeding to
the relevant functions of such Persons; and all references to statutes and
related regulations shall include any amendments of the same and any successor
statutes and regulations.  Whenever any
provision in any Loan Document refers to the knowledge (or an analogous phrase)
of any Credit Party, such words are intended to signify that 


 

















 


such Credit
Party has actual knowledge or awareness of a particular fact or circumstance or
that such Credit Party, if it had exercised reasonable diligence, would have
known or been aware of such fact or circumstance.


 

















 


ANNEX B (Section 1.6)


 


to


 


CREDIT AGREEMENT


 


CASH MANAGEMENT SYSTEM


 


Borrower
shall, and shall cause its Subsidiaries to, establish and maintain the Cash
Management Systems described below:


 


(a)           On or before the Closing Date, Borrower shall (i) establish
and maintain lock boxes (“Lock Boxes”) and blocked accounts (“Blocked
Accounts”) at each of the banks set forth in Disclosure Schedule (3.19),
(the “Relationship Banks”) in respect of each of the accounts set forth
in Disclosure Schedule (3.19), pursuant to lock box agreements and
account control agreements, and shall request in writing and otherwise take
such reasonable steps to ensure that all Account Debtors forward payment
directly to such Lock Boxes or directly to the Collection Account (as defined
below), and (ii) deposit and cause its Subsidiaries to deposit or cause to
be deposited promptly, and in any event no later than the first Business Day
after the date of receipt thereof, all cash, checks, drafts or other similar
items of payment relating to or constituting payments made in respect of any
and all Collateral (whether or not otherwise delivered to a Lock Box) into the
Collection Account (as defined below). 
On or before the Closing Date, Borrower shall have established a
collection account (which account shall be subject to the Deposit and
Disbursement Agreement) in its name (the “Collection Account”) at the
bank that shall be designated as the Collection Account bank for Borrower (the “Collection
Account Bank”), which bank shall be reasonably satisfactory to Agent.  On or before the Closing Date, the Collection
Account Bank shall have executed and delivered the Deposit and Disbursement
Agreement.  The Collection Account shall
be subject to the terms of the Deposit and Disbursement Agreement.


 


(b)           Prior to the Closing Date, the Borrower shall establish two
additional deposit accounts at the Collection Account Bank, (i) one of
which shall be used to hold the Capital Expenditure Reserve Minimum Balance (for
the avoidance of doubt, the Capital Expenditure Reserve Minimum Balance on the
Closing Date shall be $2,000,000) (which account shall be known, and is
referred to hereinafter, as the “Capital Expenditure Reserve Account”),
and (ii) one of which shall be used to hold the Debt Service Reserve
Amount (which account shall be known, and is referred to hereinafter, as the “Debt
Service Reserve Account” and together with the Capital Expenditure Reserve
Account “Reserve Accounts”), which Reserve Accounts shall be subject to
Account Control Agreements and the Deposit and Disbursement Agreement.


 


(c)           On or before the Closing Date, the Borrower shall have
caused the Collection Account Bank, and all other Relationship Banks, to have
entered into tri-party blocked account agreements (collectively “Account
Control Agreements”) with Agent for the benefit of itself and Lenders, and
the Borrower and Subsidiaries thereof, as applicable, in form and substance
reasonably acceptable to Agent, in respect of the Collection Account, the
Reserve 


 


B-1

















 


Accounts and all Blocked Accounts set forth in Disclosure Schedule
(3.19), which shall become operative on or prior to the Closing Date.


 


(d)           No later than thirty (30) days after the Closing Date,
Borrower shall have caused all Account Debtors listed on Disclosure Schedule
(3.19) to execute and deliver to the Agent a Notice and Acknowledgement, in
form and substance reasonably satisfactory to the Agent, pursuant to which (i) notice
is given to each such Account Debtor that (x) each Credit Party has
granted a security interest to Agent and Lenders in substantially all of the
assets of each Credit Party and (y) all payments on accounts should be
forwarded directly to the Collection Account and (ii) that each such
Account Debtor acknowledges the security interest and agrees to forward such
payments to the Collection Account.  No
later than sixty (60) days after the Closing Date the Blocked Accounts and the
Blocked Account Agreements in respect of the accounts listed on Disclosure
Schedule (3.19) shall be terminated (the “Initial Account Termination
Date”).


 


(e)           Each Account Control Agreement shall provide, among other
things, that (i) all items of payment deposited in the Blocked Account and
proceeds thereof deposited in the Collection Account are held by such bank as
agent or bailee-in-possession for Agent, on behalf of itself and Lenders, (ii) the
bank executing such agreement has no rights of setoff or recoupment or any
other claim against such account, as the case may be, other than for payment of
its service fees and other charges directly related to the administration of
such account and for returned checks or other items of payment, and (iii) from
and after the Closing Date with respect to banks at which a Blocked Account is
maintained, such bank agrees to forward immediately all amounts in each Blocked
Account to the Collection Account Bank and to commence the process of daily
sweeps from such Blocked Account into the Collection Account.  The Borrower shall not, and shall cause or
permit any Subsidiary thereof not to, accumulate or maintain cash in payroll
accounts as of any date of determination in excess of checks outstanding
against such accounts as of that date and amounts necessary to meet minimum
balance requirements.


 


(f)            Borrower shall close any of
their accounts (and establish replacement accounts in accordance with the
foregoing sentence) promptly and in any event within thirty (30) days following
notice from Agent that the creditworthiness of any bank holding an account is
no longer acceptable in Agent’s reasonable judgment, or as promptly as
practicable and in any event within sixty (60) days following notice from Agent
that the operating performance, funds transfer or availability procedures or
performance with respect to accounts or Lock Boxes of the bank holding such
accounts or Agent’s liability under any tri-party blocked account agreement
with such bank is no longer acceptable in Agent’s reasonable judgment.


 


(g)           The Lock Boxes, Blocked Accounts, the Reserve Accounts and
the Collection Account shall be cash collateral accounts, with all cash, checks
and other similar items of payment in such accounts securing payment of the
Term Loan and all other Obligations, and in which the Borrower and each
Subsidiary thereof shall have granted a Lien to Agent, on behalf of itself and
Lenders, pursuant to the Security Agreement.


 


(h)           All amounts deposited in the Collection Account shall be
applied (and allocated) by the Collection Account Bank in accordance with the
Deposit and Disbursement 


 


B-2

















 


Agreement.  In no event shall any
amount be so applied unless and until such amount shall have been credited in
immediately available funds to the Collection Account.


 


(i)            Borrower shall and shall cause
its Affiliates, officers, employees, agents, directors or other Persons acting
for or in concert with the Borrower (each a “Related Person”) to (i) hold
in trust for Agent, for the benefit of itself and Lenders, all checks, cash and
other items of payment received by Borrower or any such Related Person, and (ii) within
one (1) Business Day after receipt by Borrower or any such Related Person
of any checks, cash or other items of payment, deposit the same into a Blocked
Account of Borrower.  Borrower on behalf
of itself and each Related Person thereof acknowledges and agrees that all
cash, checks or other items of payment constituting proceeds of Collateral are
part of the Collateral.  All proceeds of the
sale or other disposition of any Collateral shall be deposited directly into
the applicable Blocked Account(s).


 


B-3

















 


ANNEX C (Section 2.1(a))


 


to


 


CREDIT
AGREEMENT


 


CLOSING CHECKLIST


 


[TO
BE PROVIDED]


 


C-1














 


ANNEX D (Section 4.1(a))


 


to


 


CREDIT
AGREEMENT


 


FINANCIAL STATEMENTS AND PROJECTIONS — REPORTING


 


Borrower shall
deliver or cause to be delivered to Agent or to Agent and Lenders, as
indicated, the following:


 


(a)           Monthly Financials.  To Agent and Lenders, within thirty (30) days
after the end of each Fiscal Month, financial information regarding Borrower
and its Subsidiaries, certified by the Authorized Officers of Borrower,
consisting of consolidated and consolidating (i) unaudited balance sheets
as of the close of such Fiscal Month and the related statements of income and
cash flows for that portion of the Fiscal Year ending as of the close of such
Fiscal Month; (ii) unaudited statements of income and cash flows for such
Fiscal Month, setting forth in comparative form the figures for the
corresponding period in the prior year and the figures contained in the
Projections for such Fiscal Year, all prepared in accordance with GAAP (subject
to normal year-end adjustments); and (iii) a summary of the outstanding
balance of all Intercompany Notes as of the last day of that Fiscal Month.  Such financial information shall be
accompanied by the certification of the Authorized Officers of Borrower that (i) such
financial information presents fairly in accordance with GAAP (subject to
normal year-end adjustments) the financial position and results of operations
of Borrower and its Subsidiaries, on a consolidated and consolidating basis, in
each case as at the end of such Fiscal Month and for that portion of the Fiscal
Year then ended and (ii) any other information presented is true, correct
and complete in all material respects and that there was no Default or Event of
Default in existence as of such time or, if a Default or Event of Default has
occurred and is continuing, describing the nature thereof and all efforts
undertaken to cure such Default or Event of Default.


 


(b)           Quarterly Financials.  To Agent and Lenders, within forty-five (45)
days after the end of each Fiscal Quarter, consolidated and consolidating financial
information regarding Borrower and its Subsidiaries, certified by the Manager
and chief financial officer of Borrower, including (i) unaudited balance
sheets as of the close of such Fiscal Quarter and the related statements of
income and cash flow for that portion of the Fiscal Year ending as of the close
of such Fiscal Quarter and (ii) unaudited statements of income and cash
flows for such Fiscal Quarter, in each case setting forth in comparative form
the figures for the corresponding period in the prior year and the figures
contained in the Projections for such Fiscal Year, all prepared in accordance
with GAAP (subject to normal year-end adjustments).  Such financial information shall be
accompanied by (A) a statement in reasonable detail (each, a “Compliance
Certificate” showing the calculations used in determining compliance with
each of the Financial Covenants that is tested on a quarterly basis and (B) the
certification of the Manager and chief financial officer of Borrower that (i) such
financial information presents fairly in accordance with GAAP (subject to
normal year-end adjustments) the financial position, results of operations and
statements of cash flows of Borrower and its Subsidiaries, on both a
consolidated and consolidating basis, as at the end of such Fiscal Quarter and
for that portion of the Fiscal Year 


 


D-1

















 


then ended, (ii) any other information presented is true, correct
and complete in all material respects and that there was no Default or Event of
Default in existence as of such time or, if a Default or Event of Default has
occurred and is continuing, describing the nature thereof and all efforts
undertaken to cure such Default or Event of Default.  In addition, Borrower shall deliver to Agent
and Lenders, within forty-five (45) days after the end of each Fiscal Quarter,
a management discussion and analysis that includes a comparison to budget for
that Fiscal Quarter and a comparison of performance for that Fiscal Quarter to
the corresponding period in the prior year.


 


(c)           Operating Plan.
To Agent and Lenders, as soon as available, but not later than thirty (30) days
prior to the end of each Fiscal Year, an annual operating plan for Borrower, in
form and substance reasonably satisfactory to the Agent, on a consolidated and
consolidating basis, approved by the Board of Directors of Borrower, for the
following Fiscal Year, which (i) includes a statement of all of the
material assumptions on which such plan is based, (ii) includes monthly
balance sheets, income statements and statements of cash flows for the
following year (iii) includes updated mine timing maps and (iii) integrates
sales, gross profits, operating expenses, operating profit, cash flow
projections and, all prepared on the same basis and in similar detail as that
on which operating results are reported (and in the case of cash flow
projections, representing management’s good faith estimates of future financial
performance based on historical performance), and including plans for
personnel, Capital Expenditures and facilities.


 


(d)           Annual Audited
Financials. To Agent and Lenders, within ninety (90) days after the end of
each Fiscal Year, audited Financial Statements for ECR and its Subsidiaries
(including separate audited balance sheets and the related audited statements
of income, stockholders’ equity and cash flows of the Borrower) on a
consolidated and (unaudited) consolidating basis, consisting of balance sheets
and statements of income and retained earnings and cash flows, setting forth in
comparative form in each case the figures for the previous Fiscal Year, which
Financial Statements shall be prepared in accordance with GAAP and certified
without qualification, by an independent certified public accounting firm of
national standing acceptable to Agent. 
Such Financial Statements shall be accompanied by (i) a Compliance
Certificate prepared in reasonable detail showing the calculations used in
determining compliance with each of the Financial Covenants, (ii) a report
from such accounting firm to the effect that, in connection with their audit
examination, nothing has come to their attention to cause them to believe that
a Default or Event of Default has occurred with respect to the Financial
Covenants (or specifying those Defaults and Events of Default that they became
aware of), it being understood that such audit examination extended only to
accounting matters and that no special investigation was made with respect to
the existence of Defaults or Events of Default, (iii) the annual letters
to such accountants in connection with their audit examination detailing
contingent liabilities and material litigation matters, and (iv) the
certification of the Chief Executive Officer or Chief Financial Officer of ECR
that all such Financial Statements present fairly in accordance with GAAP the
financial position, results of operations and statements of cash flows of ECR
and its Subsidiaries on a consolidated and consolidating basis, as at the end
of such Fiscal Year and for the period then ended, and that there was no
Default or Event of Default in existence as of such time or, if a Default or
Event of Default has occurred and is continuing, describing the nature thereof
and all efforts undertaken to cure such Default or Event of Default.


 


D-2

















 


(e)           Management Letters.  To Agent and Lenders, within five (5) Business
Days after receipt thereof by any Credit Party, copies of all management
letters, exception reports or similar letters or reports received by such
Credit Party from its independent certified public accountants.


 


(f)            Default Notices.  To Agent, Lenders and Depositary Bank, as
soon as practicable, and in any event within three (3) Business Days after
an executive officer of Borrower has actual knowledge of the existence of (a)(i) any
Default or Event of Default, or (ii) any other event that has had or could
reasonably be expected to have a Material Adverse Effect, telephonic or
telecopied notice specifying the nature of such Default or Event of Default or
other event, including the anticipated effect thereof, which notice, if given
telephonically, shall be promptly confirmed in writing on the next Business
Day.  To Agent and Lenders, as soon as
practicable, and in any event within three (3) Business Days after an
executive officer of Borrower has actual knowledge of the existence of (a) any
event (other than any event involving loss or damage to property) reasonably
expected to result in a mandatory payment of the Obligations, stating the
material terms and conditions of such transaction and estimating the net cash
proceeds thereof, or (b) the commencement of, or any material developments
in, any action, investigation, suit, proceeding, audit, claim, demand, order or
dispute with, by or before any Governmental Authority affecting any Credit
Party or any property of any Credit Party that (i) seeks injunctive or
similar relief, (ii) in the reasonable judgment of the Borrower, exposes
any Credit Party to liability in an aggregate amount in excess of $250,000 or (iii) if
adversely determined would have a Material Adverse Effect and (c) the
acquisition of any material real property or the entering into any material
lease.


 


(g)           SEC Filings and
Press Releases.  To Agent and
Lenders, promptly upon their becoming available, copies of:  (i) all Financial Statements, reports,
notices and proxy statements made publicly available by any Credit Party to its
security holders; (ii) all regular and periodic reports and all
registration statements and prospectuses, if any, filed by any Credit Party
with any securities exchange or with the Securities and Exchange Commission or
any governmental or private regulatory authority; and (iii) all press
releases and other statements made available by any Credit Party to the public
concerning material changes or developments in the business of any such Person.


 


(h)           Subordinated Debt
and Equity Notices.  To Agent, as
soon as practicable, copies of all material written notices given or received
by any Credit Party with respect to any Subordinated Debt or Stock of such
Person, and, within two (2) Business Days after any Credit Party obtains
knowledge of any matured or unmatured event of default with respect to any
Subordinated Debt, notice of such event of default.


 


(i)            Supplemental
Schedules.  To Agent, supplemental
disclosures, if any, required by Section 5.6.


 


(j)            Litigation.  To Agent in writing, promptly upon learning
thereof, notice of any Litigation commenced or threatened against any Credit
Party that (i) seeks damages in excess of $250,000, (ii) seeks
injunctive relief, (iii) is asserted or instituted against any Plan, its
fiduciaries or its assets or against any Credit Party or ERISA Affiliate in
connection with any Plan, (iv) alleges criminal misconduct by any Credit
Party, (v) alleges the violation of any law regarding, 


 


D-3

















 


or seeks remedies in connection with, any Environmental Liabilities or (vi) involves
any product recall.


 


(k)           Insurance Notices.  To Agent, disclosure of losses or casualties
required by Section 5.4.


 


(l)            Lease Default
Notices.  To Agent, (i) within
two (2) Business Days after receipt thereof, copies of any and all default
notices received under or with respect to any leased location or public warehouse
where Collateral is located, (ii) within three (3) Business Days
after payment thereof, evidence of payment of lease or rental payments as to
each leased or rented location for which a landlord or bailee waiver has not
been obtained and (iii) such other notices or documents as Agent may
reasonably request.


 


(m)          Lease Amendments.  To Agent, within two (2) Business Days
after receipt thereof, copies of all material amendments to real estate leases.


 


(n)           Hedging Agreements.  To Agent within two (2) Business Days
after entering into such agreement or amendment, copies of all interest rate,
commodity or currency hedging agreements or amendments thereto.


 


(o)           Additional
Projections.  To Agent and Lenders,
as soon as available and in any event not later than thirty (30) days prior to
the end of each Fiscal Quarter, updated Projections for the five (5) year
period beginning with the next succeeding Fiscal Quarter certified by the
Manager and chief financial officer of the Borrower that such Projections were
prepared in good faith based upon reasonable assumptions at the time made.


 


(p)           Production Reports.  To Agent and Lenders, as soon as available
and in any event no later than three (3) days following the end of any
Fiscal Month, a monthly report, in form and substance reasonably satisfactory
to Agent, setting forth the details relating to coal production at the Mine,
together with production reports, reports on the production rates of estimated
coal reserves and volume shipped to each customer.   To Agent and Lenders, as soon as available
and in any event no later than twenty (20) days following the end of any Fiscal
Month, a monthly report, in form and substance reasonably satisfactory to
Agent, setting forth the details relating to capital expenditures, average
pricing for sales of coal, and other direct costs related to the Mine and
reports on the average cost of coal per ton.


 


(q)           Bonding Reports.  To Agent and Lenders, no later than two (2) days
following any modification to the collateral listed on Disclosure Schedule
3.24, a revised collateral description identifying the collateral being
provided (and the collateral being released) by Borrower pursuant to any
Bonding Agreement.


 


(r)            Collateral Reports.  To Agent and Lenders, as soon as available,
and in any event no later than (30) days following the end of any Fiscal
Quarter, a schedule identifying and describing the assets and property of each
Credit Party and such other reports in connection with the Collateral of each
Credit Party as the Agent may reasonably request, all in reasonable detail (the
“Collateral Reports”).


 


D-4

















 


(s)           Independent Engineer
Certificate.  To the Agent, for each
Capital Expenditure Reserve Calculation Period, the Independent Engineer shall
deliver either a Capital Expenditure Sufficiency Certificate or a Capital
Expenditure Deficiency Certificate with respect to each such Capital
Expenditure Reserve Calculation Period.


 


(t)            Other Documents.  To Agent and Lenders, such other financial
and other information respecting any Credit Party’s business or financial
condition as Agent or any Lender shall from time to time reasonably request.


 


D-5

















 


ANNEX E (Section 6.10)


 


to


 


CREDIT
AGREEMENT


 


FINANCIAL COVENANTS


 


Borrower shall
not breach or fail to comply with any of the following financial covenants,
each of which shall be calculated in accordance with GAAP consistently applied:


 


(a)           Maximum Capital
Expenditures.  Borrower and its
Subsidiaries on a consolidated basis shall not make Capital Expenditures (i) in
the Fiscal Year commencing January 1, 2007 that exceed in the aggregate
$16,000,000 and (ii) in any other Fiscal Year (commencing with the fiscal
year beginning on January 1, 2008) that exceed in the aggregate
$12,500,000 for such Fiscal Year; provided that any Longwall Expansion
Expenditures shall not be deemed to be Capital Expenditures for purposes of
this definition.


 


(b)           Minimum Fixed Charge
Coverage Ratio.  Borrower and its
Subsidiaries shall have on a consolidated basis at the end of each Fiscal
Quarter set forth below, a Fixed Charge Coverage Ratio for the period ending on
the last day of such Fiscal Quarter of not less than the following:


 


	
  Period

  	
   

  	
  Ratio

  
	
   

  	
   

  	
   

  
	
  three-month
  period ending March 31, 2007

  	
   

  	
  1.2:1.0

  
	
   

  	
   

  	
   

  
	
  six-month
  period ending June 30, 2007

  	
   

  	
  1.2:1.0

  
	
   

  	
   

  	
   

  
	
  nine-month
  period ending September 30, 2007

  	
   

  	
  1.2:1.0

  
	
   

  	
   

  	
   

  
	
  twelve-month
  period ending December 31, 2007

  	
   

  	
  1.2:1.0

  
	
   

  	
   

  	
   

  
	
  Each
  twelve-month period ending each Fiscal Quarter thereafter

  	
   

  	
  1.2:1.0

  



 


(c)           Maximum Leverage
Ratio.  Borrower and its Subsidiaries
on a consolidated basis shall have, at the end of each Fiscal Quarter set forth
below, a Leverage Ratio as of the last day of such Fiscal Quarter and for the
12-month period then ended of not more than the following:


 


10.0:1.00 for
the Fiscal Quarters ending March 31, 2007; June 30, 2007; September 30,
2007; and December 31, 2007, and


 


E-1

















 


3.00:1.00 for
each Fiscal Quarter ending thereafter.


 


Unless
otherwise specifically provided herein, any accounting term used in the
Agreement shall have the meaning customarily given such term in accordance with
GAAP, and all financial computations hereunder shall be computed in accordance
with GAAP consistently applied.  That
certain items or computations are explicitly modified by the phrase “in
accordance with GAAP” shall in no way be construed to limit the foregoing.  If any “Accounting Changes” (as defined
below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in the Agreement or any other Loan
Document, then Borrower, Agent and Lenders agree to enter into negotiations in
order to amend such provisions of the Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating
Borrower’s and its Subsidiaries’ financial condition shall be the same after
such Accounting Changes as if such Accounting Changes had not been made; provided,
however, that the agreement of Requisite Lenders to any required
amendments of such provisions shall be sufficient to bind all Lenders.  “Accounting Changes” means (i) changes
in accounting principles required by the promulgation of any rule, regulation,
pronouncement or opinion by the Financial Accounting Standards Board of the
American Institute of Certified Public Accountants (or successor thereto or any
agency with similar functions), (ii) changes in accounting principles
concurred in by the Borrower’s certified public accountant; (iii) purchase
accounting adjustments under A.P.B. 16 or 17 and EITF 88-16, and the
application of the accounting principles set forth in FASB 109, including the
establishment of reserves pursuant thereto and any subsequent reversal (in
whole or in part) of such reserves; and (iv) the reversal of any reserves
established as a result of purchase accounting adjustments.  All such adjustments resulting from
expenditures made subsequent to the Closing Date (including capitalization of
costs and expenses or payment of pre-Closing Date liabilities) shall be treated
as expenses in the period the expenditures are made and deducted as part of the
calculation of EBITDA in such period.  If
Agent, Borrower and Requisite Lenders agree upon the required amendments, then
after appropriate amendments have been executed and the underlying Accounting
Change with respect thereto has been implemented, any reference to GAAP
contained in the Agreement or in any other Loan Document shall, only to the
extent of such Accounting Change, refer to GAAP, consistently applied after
giving effect to the implementation of such Accounting Change.  If Agent, Borrower and Requisite Lenders
cannot agree upon the required amendments within thirty (30) days following the
date of implementation of any Accounting Change, then all Financial Statements
delivered and all calculations of financial covenants and other standards and
terms in accordance with the Agreement and the other Loan Documents shall be
prepared, delivered and made without regard to the underlying Accounting
Change.  For purposes of Section 8.1,
a breach of a Financial Covenant contained in this Annex E shall be
deemed to have occurred as of any date of determination by Agent or as of the
last day of any specified measurement period, regardless of when the Financial
Statements reflecting such breach are delivered to Agent.


 


E-2

















 


ANNEX F (Section 9.9(a))


 


to


 


CREDIT
AGREEMENT


 


LENDERS’ WIRE TRANSFER INFORMATION


 


F-1

















 


ANNEX G (Section 11.10)


 


to


 


CREDIT
AGREEMENT


 


NOTICE ADDRESSES


 


	
  (A)

  	
   

  	
  If to Agent or GE Capital, at

  
	
   

  	
   

  	
  General Electric Capital Corporation

  
	
   

  	
   

  	
  Energy
  Financial Services

  
	
   

  	
   

  	
  120
  Long Ridge Road

  
	
   

  	
   

  	
  3D-105

  
	
   

  	
   

  	
  Stamford,
  CT 06927

  
	
   

  	
   

  	
  Contact: Ivy Owusu

  
	
   

  	
   

  	
  E-mail: 
  debtportfolio@ge.com

  
	
   

  	
   

  	
  Telecopier No.: (203) 357-4890

  
	
   

  	
   

  	
  Telephone No.: (203) 357-3401

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  General Electric Capital Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: Corporate Counsel – Bowie

  
	
   

  	
   

  	
  Telecopier No.: 1-203-357-6632

  
	
   

  	
   

  	
  Telephone No.: 1-203-961-2186

  
	
   

  	
   

  	
   

  
	
  (B)

  	
   

  	
  If to Borrower, at

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Bowie
  Resources, LLC

  
	
   

  	
   

  	
  P.O. Box
  483

  
	
   

  	
   

  	
  43659
  Bowie Road

  
	
   

  	
   

  	
  Paonia,
  CO 81428

  
	
   

  	
   

  	
  Telephone:
  (970) 929-5257

  
	
   

  	
   

  	
  Facsimile:
  (970) 929-5256

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With
  copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Frost
  Brown Todd LLC

  
	
   

  	
   

  	
  250
  West Main Street, Suite 2700

  
	
   

  	
   

  	
  Lexington,
  Kentucky 40507

  
	
   

  	
   

  	
  Attention: 
  Jeffrey L. Hallos

  
	
   

  	
   

  	
  Telephone: (859)
  231-0000

  
	
   

  	
   

  	
  Facsimile:
  (859) 231-0011

  



 


G-1

















 


	
  (C)

  	
   

  	
  If to CHC, at

  
	
   

  	
   

  	
  Colorado
  Holding Company, Inc

  
	
   

  	
   

  	
  1500
  Big Run Road

  
	
   

  	
   

  	
  Ashland,
  Kentucky 41102

  
	
   

  	
   

  	
  Telephone:

  
	
   

  	
   

  	
  Facsimile:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With
  copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Frost
  Brown Todd LLC

  
	
   

  	
   

  	
  250
  West Main Street, Suite 2700

  
	
   

  	
   

  	
  Lexington,
  Kentucky 40507

  
	
   

  	
   

  	
  Attention: 
  Jeffrey L. Hallos

  
	
   

  	
   

  	
  Telephone: (859)
  231-0000

  
	
   

  	
   

  	
  Facsimile:
  (859) 231-0011

  
	
   

  	
   

  	
   

  
	
  (D)

  	
   

  	
  If to BRMP, at

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Bowie
  Resources Management Partner

  
	
   

  	
   

  	
  1326
  Imperia Drive

  
	
   

  	
   

  	
  Henderson,
  Nevada, 89052

  
	
   

  	
   

  	
  Telecopier No.: (801) 269-1003

  
	
   

  	
   

  	
  Telephone No.: (970) 527-7782

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With
  copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Frost
  Brown Todd LLC

  
	
   

  	
   

  	
  250 West Main Street, Suite 2700

  
	
   

  	
   

  	
  Lexington, Kentucky 40507

  
	
   

  	
   

  	
  Attention: 
  Jeffrey L. Hallos

  
	
   

  	
   

  	
  Telephone: (859)
  231-0000

  
	
   

  	
   

  	
  Facsimile:
  (859) 231-0011

  



 


G-2

















 


ANNEX H (from
Annex A - Commitments definition)


 


to


 


CREDIT
AGREEMENT


 


	
   

  	
   

  	
  Lender(s)

  	
   

  
	
  Closing Date Term Loan Commitment:

  	
   

  	
   

  	
   

  
	
  $50,000,000

  	
   

  	
  General Electric Capital Corporation

  	
   

  



 


H-1

















 


ANNEX H-1
(from Annex A - Commitments definition)


 


to


 


CREDIT
AGREEMENT


 


	
   

  	
   

  	
  Lender(s)

  	
   

  
	
  Delayed Draw Term Loan Commitment:

  	
   

  	
   

  	
   

  
	
  $10,000,000

  	
   

  	
  General Electric Capital Corporation

  	
   

  



 


H-2