exv10w1



 






Exhibit
10.1




EXECUTION VERSION




 





SENIOR SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT




dated as of March 4, 2008




by and among




WESTMORELAND COAL COMPANY,




TONTINE PARTNERS, L.P.

and

TONTINE CAPITAL PARTNERS, L.P.,

as Purchasers

and




TONTINE CAPITAL ASSOCIATES, L.P.,

as Collateral Agent




 





 









 





TABLE OF CONTENTS




SENIOR SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT




	 	 	 	 	 
	Section	 	Page	 
	1. DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	2. PURCHASE OF NOTES
	 	 	9	 
	2.1 Purchase of Notes
	 	 	9	 
	2.2 Closing
	 	 	10	 
	2.3 Use of Proceeds
	 	 	10	 
	2.4 Payment of Principal and Interest
	 	 	10	 
	2.5 Prepayments
	 	 	11	 
	2.6 Receipt of Payments
	 	 	11	 
	2.7 Application of Payments
	 	 	12	 
	2.8 Sharing of Payments
	 	 	12	 
	2.9 Access
	 	 	12	 
	2.10 Taxes
	 	 	13	 
	 
	 	 	 	 
	3. PURCHASERS’ REPRESENTATIONS AND WARRANTIES
	 	 	14	 
	3.1 Existence
	 	 	14	 
	3.2 Authorization
	 	 	14	 
	3.3 Accredited Investor
	 	 	14	 
	3.4 Transfer Restrictions
	 	 	14	 
	 
	 	 	 	 
	4. COMPANY’S REPRESENTATIONS AND WARRANTIES
	 	 	15	 
	4.1 Corporate Existence; Compliance with Law
	 	 	15	 
	4.2 Corporate Power; Authorization; Enforceable Obligations
	 	 	15	 
	4.3 Authorization and Issuance of Notes
	 	 	16	 
	4.4 Authorized and Outstanding Shares of Capital Stock
	 	 	16	 
	4.5 Financial Statements
	 	 	17	 
	4.6 SEC Documents
	 	 	17	 
	4.7 Securities Laws
	 	 	18	 
	4.8 Taxes
	 	 	18	 
	4.9 No Litigation
	 	 	18	 
	4.10 Patents, Trademarks, Copyrights and Licenses
	 	 	19	 
	4.11 No Material Adverse Effect
	 	 	19	 






 









 






TABLE OF CONTENTS




SENIOR SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT




	 	 	 	 	 
	Section	 	Page	 
	5. COVENANTS
	 	 	19	 
	5.1 Affirmative Covenants
	 	 	19	 
	5.2 Negative Covenants
	 	 	22	 
	5.3 WRI Covenants
	 	 	23	 
	5.4 American Stock Exchange Approval
	 	 	23	 
	 
	 	 	 	 
	6. CONDITIONS PRECEDENT
	 	 	23	 
	6.1 Conditions Precedent
	 	 	23	 
	6.2 Additional Conditions
	 	 	25	 
	 
	 	 	 	 
	7. ADDITIONAL PURCHASER RIGHTS
	 	 	26	 
	7.1 Director Rights
	 	 	26	 
	7.2 Observer Rights
	 	 	26	 
	7.3 Rights Offering
	 	 	27	 
	7.4 Preemptive Rights
	 	 	27	 
	 
	 	 	 	 
	8. CONVERSION
	 	 	28	 
	8.1 Conversion of Notes
	 	 	28	 
	 
	 	 	 	 
	9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
	 	 	33	 
	9.1 Events of Default
	 	 	33	 
	9.2 Remedies
	 	 	35	 
	9.3 Waivers by Company
	 	 	36	 
	9.4 Right of Set-Off
	 	 	36	 
	9.5 Appointment of the Collateral Agent
	 	 	36	 
	 
	 	 	 	 
	10. INDEMNIFICATION
	 	 	37	 
	 
	 	 	 	 
	11. MISCELLANEOUS
	 	 	37	 
	11.1 Complete Agreement; Modification of Agreement; Sale of Interest
	 	 	37	 
	11.2 Fees and Expenses
	 	 	38	 
	11.3 No Waiver by Purchaser
	 	 	39	 
	11.4 Remedies
	 	 	40	 
	11.5 Waiver of Jury Trial
	 	 	40	 
	11.6 Severability
	 	 	40	 
	11.7 Binding Effect; Benefits
	 	 	40	 






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TABLE OF CONTENTS




SENIOR SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT




	 	 	 	 	 
	Section	 	Page	 
	11.8 Conflict of Terms
	 	 	40	 
	11.9 Governing Law
	 	 	40	 
	11.10 Notices
	 	 	41	 
	11.11 Survival
	 	 	42	 
	11.12 Section and Other Headings
	 	 	42	 
	11.13 Counterparts
	 	 	42	 
	11.14 Publicity
	 	 	42	 
	11.15 Confidential Information
	 	 	43	 
	11.16 Compliance with First Interstate Loan Documents
	 	 	43	 
	11.17 Termination of Standby Purchase Agreement
	 	 	44	 






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TABLE OF CONTENTS




SENIOR SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT




	 	 	 	 	 
	Section	 	 	 	Page
	Annexes
	 	 	 	 
	 
	 	 	 	 
	Annex I

	-	Allocation of Notes	 	 
	 
	 	 	 	 
	Schedules
	 	 	 	 
	 	 	 	 	 
	Schedule 4.2

	-	Corporate Power; Authorization; Enforceable Obligations	 	 
	Schedule 4.4

	-	Stock and Warrants	 	 
	Schedule 4.5

	-	Financial Statements	 	 
	Schedule 4.6

	-	SEC Documents	 	 
	Schedule 4.9

	-	Litigation	 	 
	Schedule 4.11

	-	Material Adverse Effect	 	 
	 
	 	 	 	 
	Exhibits
	 	 	 	 
	 
	 	 	 	 
	Exhibit A

	 	Form of Note	 	 
	Exhibit B

	 	Registration Rights Agreement	 	 
	Exhibit C-1

	 	Opinion of Company Counsel	 	 
	Exhibit C-2

	 	Opinion of Company General Counsel	 	 
	Exhibit D

	 	Form of Guaranty	 	 
	Exhibit E

	 	Form of Pledge Agreement	 	 
	Exhibit F

	 	Form of Security Agreement	 	 
	Exhibit G

	 	Form of Consent	 	 






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EXECUTION
VERSION




SENIOR SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT




          SENIOR SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT, dated as of March 4, 2008, by and among
Westmoreland Coal Company, a Delaware corporation (“Company”), Tontine Partners, L.P., a
Delaware limited partnership and Tontine Capital Partners, L.P., a Delaware limited partnership,
(each of the forgoing, “Purchaser” and collectively, “Purchasers”) and Tontine
Capital Associates, L.P., a Delaware limited partnership as Collateral Agent (as defined herein).




W I T N E S S E T H :




          WHEREAS, Company has agreed to issue and sell to Purchasers, and Purchasers have agreed to
purchase from Company, upon the terms and conditions hereinafter provided, senior secured
convertible promissory notes in an aggregate principal amount of $15,000,000, which are initially
convertible into an aggregate of 1,500,000 shares of Common Stock (as defined herein) of Company;




          WHEREAS, Company’s wholly-owned subsidiary, Westmoreland Resources, Inc., a Delaware
corporation (“WRI”), shall guaranty Company’s Obligations under this Agreement and the
Notes pursuant to that certain Guaranty (as defined herein);




          WHEREAS, Company, WRI and Purchasers have agreed to enter into that certain Pledge Agreement
(as defined herein) pursuant to which Company shall grant the Collateral Agent (as defined herein)
a second-priority security interest in all of the outstanding shares of WRI for the benefit of
Purchasers;




          WHEREAS, WRI and Purchasers have agreed to enter into that certain Security Agreement (as
defined herein), pursuant to which WRI shall grant a second-priority security interest in
substantially all of its assets as security for the Obligations hereunder for the benefit of
Purchasers;




          NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, it
is agreed as follows:




1. DEFINITIONS




          “Affiliate” shall have the meaning set forth in Rule 12b-2 under the Exchange Act.




          “Agreement” shall mean this Senior Secured Convertible Note Purchase Agreement
including all amendments, modifications and supplements hereto and any appendices, exhibits and
schedules hereto or thereto, and shall refer to the Agreement as the same may be in effect at the
time such reference becomes operative.




          “Balance Sheet” shall have the meaning set forth in Section 4.5(a) hereof.




 









 








          “Business Day” shall mean 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.




          “Cash Equivalents” shall mean (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency thereof maturing within
one year from the date of acquisition thereof; (ii) commercial paper maturing no more than one year
from the date of creation thereof and at the time of their acquisition having the highest rating
obtainable from either Standard & Poor’s Corporation or Moody’s Investors Service, Inc.; and (iii)
certificates of deposit, maturing not more than one year from the date of creation thereof, issued
by (A) commercial banks incorporated under the laws of the United States of America, each having
combined capital, surplus and undivided profits of not less than $200,000,000 and having a rating
of “A” or better by a nationally recognized rating agency or (B) First Interstate Bank.




          “Change of Control” shall mean any of the following: (a) any person or group of
persons (within the meaning of the Exchange Act) (other than Tontine and its Affiliates) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC under the
Exchange Act) of 30% or more of the issued and outstanding shares of Common Stock of Company; (b)
Company shall be a party to a merger or consolidation in which Company is not the survivor or in
which Company’s stockholders immediately prior thereto own less than a majority of the outstanding
voting stock of the survivor; (c) Company shall have sold, leased or otherwise transferred all or
substantially all of its assets on a consolidated basis; or (d) Company shall cease to own all of
the outstanding stock of WRI.




          “Charges” shall mean all federal, state, county, city, municipal, local, foreign or
other governmental (including, without limitation, PBGC) taxes at the time due and payable, levies,
assessments, charges, liens, claims or encumbrances upon or relating to (i) Company’s or any of its
Subsidiaries’ employees, payroll, income or gross receipts, (ii) Company’s or any of its
Subsidiaries’ ownership or use of any of its assets, or (iii) any other aspect of Company’s or any
of the Subsidiaries’ business.




          “Closing” shall have the meaning set forth in Section 2.2 hereof.




          “Closing Date” shall have the meaning set forth in Section 2.2 hereof.




          “Collateral Agent” shall have the meaning set forth in Section 9.5 hereof.




          “Common Stock” shall mean Company’s common stock, par value $2.50 per share.




          “Company” shall have the meaning set forth in the preamble of this Agreement.




          “Company SEC Documents” shall have the meaning set forth in Section 4.6
hereof.




2









 








          “Confidential Information” shall have the meaning set forth in Section 11.15
hereof.




          “Consent” shall mean that certain Consent executed by First Interstate Bank and each
Credit Party a copy of which is attached hereto as Exhibit G, including all amendments,
modifications and supplements thereto and any appendices, exhibits and schedules thereto.




          “Conversion” shall have the meaning set forth in Section 8.1(a) hereof.




          “Conversion Price” shall have the meaning set forth in Section 8.1(a) hereof.




          “Conversion Shares” shall mean the Common Stock issuable upon Conversion of the Notes.




          “Credit Party” and “Credit Parties” shall mean individually, Company or the
Guarantor or collectively, Company and the Guarantor.




          “Current Market Price” shall mean, in respect of any share of Common Stock on any date
herein specified, the average of the daily market prices for 30 consecutive Business Days
commencing 45 days before such date. The daily market price for each such Business Day shall be
(i) the last sale price on such day on the principal stock exchange, including the NASDAQ Stock
Market on which such Common Stock is then listed or admitted to trading, (ii) if no sale takes
place on such day on any such exchange, the average of the last reported closing bid and asked
prices on such day as officially quoted on any such exchange, (iii) if the Common Stock is not then
listed or admitted to trading on any stock exchange, the average of the last reported closing bid
and asked prices on such day in the over-the-counter market, as furnished by the National
Association of Securities Dealers Automatic Quotation System or the National Quotation Bureau,
Inc., (iv) if neither such corporation at the time is engaged in the business of reporting such
prices, as furnished by any similar firm then engaged in such business, or (v) if there is no such
firm, as furnished by any member of the National Association of Securities Dealers (“NASD”)
selected mutually by the Required Purchasers and Company or, if they cannot agree upon such
selection, as selected by two such members of the NASD, one of which shall be selected by the
Required Purchasers and one of which shall be selected by Company.




          “Date of Issuance” shall have the meaning set forth in Section 7.4 hereof.




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




          “Designee” shall have the meaning set forth in Section 7.2 hereof.




          “Election Notice” shall have the meaning set forth in Section 7.4 hereof.




3









 








          “Environmental Laws” shall mean all federal, state and local laws, statutes,
ordinances and regulations, now or hereafter in effect, and in each case as amended or supplemented
from time to time, and any judicial or administrative interpretation thereof, including, without
limitation, any applicable judicial or administrative order, consent decree or judgment, relating
to the regulation and protection of human health, safety, the environment and natural resources
(including, without limitation, ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws include but are
not limited to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended (42 U.S.C. § 9601 et seq.); the Hazardous Material Transportation Act,
as amended (49 U.S.C. § 1801 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended (7 U.S.C. § 136 et seq.); the Resource Conservation and
Recovery Act, as amended (42 U.S.C. § 6901 et seq.); the Toxic Substance Control
Act, as amended (15 U.S.C. § 2601 et seq.); the Clean Air Act, as amended (42
U.S.C. § 740 et seq.); the Federal Water Pollution Control Act, as amended (33
U.S.C. § 1251 et seq.); the Occupational Safety and Health Act, as amended (29
U.S.C. § 651 et seq.); and the Safe Drinking Water Act, as amended (42 U.S.C. §
300f et seq.), and any and all regulations promulgated thereunder, and all
analogous state and local counterparts or equivalents and any transfer of ownership notification or
approval statutes.




          “ERISA” shall mean the Employee Retirement Income Security Act of 1974 (or any
successor legislation thereto), as amended from time to time and any regulations promulgated
thereunder.




          “ERISA Affiliate” shall mean, with respect to Company, any trade or business (whether
or not incorporated) under common control with Company and which, together with Company, are
treated as a single employer within the meaning of Sections 414(b), (c), (m) or (o) of the IRC,
excluding Purchaser and each other person which would not be an ERISA Affiliate if Purchaser did
not own any issued and outstanding shares of Stock of Company.




          “Event of Default” shall have the meaning set forth in Section 9.1 hereof.




          “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and all
rules and regulations promulgated thereunder.




          “Exempt Securities” shall have the meaning set forth in Section 7.4(a) hereof.




          “First Interstate Loan Agreement” shall have the meaning set forth in Section
5.3 hereof.




          “First Interstate Loan Documents” shall mean the First Interstate Loan Agreement, the
related promissory notes, guaranty, pledge agreement, security agreement and any other related
security documents and agreements.




4









 








          “Fiscal Year” shall mean the twelve month period ending December 31. Subsequent
changes of the fiscal year of Company shall not change the term “Fiscal Year,” unless the
Required Purchasers shall consent in writing to such changes.




          “GAAP” shall mean generally accepted accounting principles in the United States of
America as in effect from time to time.




          “Governmental Authority” shall mean 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.




          “Guarantor” shall mean WRI.




          “Guaranty” shall mean that certain Guaranty, executed by the Guarantor, substantially
in the form attached hereto as Exhibit H, as such Guaranty may be amended, supplemented or
otherwise modified from time to time, in accordance with the terms thereof.




          “Indebtedness” of any Person shall mean (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services (including, without
limitation, reimbursement and all other obligations with respect to surety bonds, letters of credit
and bankers’ acceptances, whether or not matured, but not including obligations to trade creditors
incurred in the ordinary course of business), (ii) all obligations evidenced by notes, bonds,
debentures or similar instruments, (iii) all indebtedness created or arising under any conditional
sale or other title retention agreements 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), (iv) all capital lease obligations, (v) all
indebtedness of the types described in clauses (i) through (iv) above that is guaranteed by such
Person and (vi) all Indebtedness referred to in clause (i), (ii), (iii), (iv) or (v) 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 (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness.




          “Interest Payment Date” shall have the meaning assigned to such term in Section
2.4(b) hereof.




          “IRC” shall mean the Internal Revenue Code of 1986, as amended, and any successor
thereto.




          “IRS” shall mean the Internal Revenue Service, or any successor thereto.




          “Issue Price” shall have the meaning set forth in Section 7.4 hereof.




5









 








          “Lien” shall mean 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, without limitation, any 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 as to assets owned by the
relevant Person under the Uniform Commercial Code or comparable law of any jurisdiction).




          “Loan Documents” shall mean this Agreement, the Notes, the Security Agreement, the
Pledge Agreement, the Guaranty, the Consent and all other agreements, instruments, documents and
certificates, including, without limitation, pledges, powers of attorney, consents, assignments,
contracts, notices, and all other written matter whether heretofore, now or hereafter executed by
or on behalf of Company, and delivered to each Purchaser, in its capacity as purchaser of the Notes
hereunder, in connection with this Agreement or the transactions contemplated hereby.




          “Losses” shall have the meaning set forth in Section 10 hereof.




          “Material Adverse Effect” shall mean a material adverse effect on (i) the financial
condition, or on the earnings, financial position, operations, assets, results of operation,
business or prospects of Company and its Subsidiaries taken as a whole, or (ii) Company’s ability
to pay the Obligations in accordance with the terms hereof.




          “Maturity Date” shall have the meaning set forth in Section 2.1 hereof.




          “Maximum Lawful Rate” shall have the meaning set forth in Section 2.4(f)
hereof.




          “Multiemployer Plan” shall mean a “multiemployer plan” as defined in Section
4001(a)(3) of ERISA, and to which Company, any of its Subsidiaries or any ERISA Affiliate is
making, is obligated to make, has made or been obligated to make, contributions on behalf of
participants who are or were employed by any of them.




          “Note” and “Notes” shall mean individually or collectively, the senior secured
subordinated convertible promissory notes of Company in the aggregate principal amount of
$15,000,000 to be issued to Purchasers hereunder on the Closing Date, substantially in the form of
Exhibit A hereto.




          “Notice of Issuance” shall have the meaning set forth in Section 7.4 hereof.




          “Obligations” shall mean all amounts owing by Company to each Purchaser and any of its
respective assignees pursuant hereto or the Notes, including, without limitation, all principal,
interest, fees, expenses, attorneys’ fees and any other sum chargeable to Company under any of the
Loan Documents.




6









 








          “Observer Rights” shall have the meaning set forth in Section 7.2 hereof.




          “Offered Securities” shall have the meaning set forth in Section 7.4 hereof.




          “Other Taxes” shall have the meaning set forth in Section 2.10(b).




          “Organic Change” shall have the meaning set forth in Section 8.1(g) hereof.




          “PBGC” shall mean the Pension Benefit Guaranty Corporation or any successor thereto.




          “Pension Plan” shall all “employee pension plans”, as defined in Section 3(2) of
ERISA.




          “Person” shall mean any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal, state, county,
city, municipal or otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).




          “Plan” shall mean all “employee benefit plans”, as defined in Section 3(3) of ERISA,
and any other employee benefit arrangements or payroll practices, including, without limitation,
severance pay, sick leave, vacation pay, salary continuation for disability, consulting or other
compensation agreements, retirement, deferred compensation, bonus, stock purchase, hospitalization,
medical insurance, life insurance and scholarship programs.




          “Pledge Agreement” shall mean that certain Pledge Agreement executed by Company and
WRI, a copy of which is attached hereto as Exhibit F, including all amendments,
modifications and supplements thereto and any appendices, exhibits and schedules thereto.




          “Preferred Stock” shall mean Company’s Series A Preferred Stock, par value $1.00 per
share.




          “Purchaser” and “Purchasers” shall have the meaning set forth in the preamble
of this Agreement.




          “Registration Rights Agreement” shall mean the Registration Rights Agreement by and
between Company and Purchasers, substantially in the form attached hereto as Exhibit C, as
such agreement may be amended, supplemented or otherwise modified from time to time in accordance
with the terms thereof.




          “Restricted Payment” shall mean (i) the declaration of any dividend or the incurrence
of any liability to make any other payment or distribution of cash or other



7









 






property or assets in respect of Company’s Stock or (ii) any payment on account of the
purchase, redemption or other retirement of Company’s Stock or any other payment or distribution
made in respect of any Stock of Company, either directly or indirectly.




          “Required Purchasers” shall mean Persons who hold at least a majority of the
outstanding principal amount of the Notes.




          “Retiree Welfare Plan” shall refer to any Welfare Plan providing 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 and at the sole expense of the participant or the beneficiary of the
participant.




          “SEC” shall mean the U.S. Securities and Exchange Commission, or any successor
thereto.




          “Securities Act” shall mean the Securities Act of 1933, as amended, and all rules and
regulations promulgated thereunder.




          “Security Agreement” shall mean that certain Security Agreement executed by WRI, a
copy of which is attached hereto as Exhibit E, including all amendments, modifications and
supplements thereto and any appendices, exhibits and schedules thereto.




          “Security Documents” shall mean the Security Agreement, the Pledge Agreement and each
other security document or pledge agreement delivered in accordance with applicable local or
foreign law to grant a valid, perfected security interest in any property as collateral for the
Obligations, and all UCC or other financing statements or instruments of perfection required by
this Agreement, the Security Agreement or any other such security document or pledge agreement to
be filed with respect to the security interests in property and fixtures created pursuant to the
Security Agreement and any other document or instrument utilized to pledge or grant or purport to
pledge or grant a security interest or lien on any property as collateral for the Obligations.




          “Stock” shall mean all shares, options, warrants, general or limited partnership
interests, limited liability company membership interest, participations or other equivalents
(regardless of how designated) of or in a corporation, partnership, limited liability company or
equivalent entity whether voting or nonvoting, including, without limitation, 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 SEC under the Exchange Act).




          “Subsidiary” shall mean, 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



8









 






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 and/or one or more
Subsidiaries of such Person, and (b) any partnership or other entity 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%.




          “Taxes” shall have the meaning set forth in Section 2.10(a) hereof.




          “Tontine” shall mean, collectively, Tontine Partners, L.P. and Tontine Capital
Partners, L.P.




          “Transaction Documents” shall mean this Agreement, the Loan Documents and the
Registration Rights Agreement.




          “Welfare Plan” shall mean any welfare plan, as defined in Section 3(1) of ERISA, which
is maintained or contributed to by Company, any of its Subsidiaries or any ERISA Affiliate.




          “Withdrawal Liability” means, at any time, the aggregate amount of the liabilities, if
any, pursuant to Section 4201 of ERISA, and any increase in contributions pursuant to Section 4243
of ERISA with respect to all Multiemployer Plans.




          “WRI” shall have the meaning set forth in the recitals of this Agreement.




          Any accounting term used in this Agreement shall have, unless otherwise specifically provided
herein, the meaning customarily given such term in accordance with GAAP, and all financial
computations hereunder shall be computed, unless otherwise specifically provided herein, in
accordance with GAAP consistently applied. That certain terms or computations are explicitly
modified by the phrase “in accordance with GAAP” shall in no way be construed to limit the
foregoing. The words “herein,” “hereof” and “hereunder” and other words of
similar import refer to this Agreement as a whole, including the Exhibits and Schedules hereto, as
the same may from time to time be amended, modified or supplemented, and not to any particular
section, subsection or clause contained in this Agreement. 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, the feminine and the neuter.




2. PURCHASE OF NOTES




          2.1 Purchase of Notes. Subject to the terms and conditions set forth in this
Agreement, each Purchaser severally agrees to purchase from Company, and Company agrees to issue
and sell to each Purchaser, on the Closing Date, the Notes in the principal amounts set forth by
each Purchaser’s name on Annex I hereto, for an aggregate purchase price of $15,000,000,
containing the terms set forth herein and in Exhibit A




9









 







hereto. The original aggregate principal amount of the Notes shall be $15,000,000, and the
maturity date thereof shall be March 4, 2013 (the “Maturity Date”).




          2.2 Closing. The closing of the purchase and sale of the Notes (the
“Closing”) shall take place within five Business Days after the satisfaction or waiver of
the conditions set forth in Section 6 hereof or such date and time as shall be mutually
agreed to by the parties hereto (the “Closing Date”) at the offices of Weil, Gotshal &
Manges LLP, 767 Fifth Avenue, New York, New York, or such other place as shall be mutually agreed
to by the parties hereto.




          On the Closing Date, Company will deliver to each Purchaser the Note payable to each such
Purchaser against delivery by each such Purchaser of the purchase price therefor by wire transfer
of immediately available funds to the account of Company.




          2.3 Use of Proceeds. Company shall use the proceeds of the purchase price hereunder
for working capital, capital expenditures, project development and general corporate purposes in
accordance with the terms of this Agreement, but Company shall not use such proceeds to repay any
Indebtedness under the First Interstate Loan Documents.




          2.4 Payment of Principal and Interest.




          (a) Company shall pay the aggregate outstanding principal of the Notes on the Maturity Date.
Company shall pay interest on the aggregate principal amount of the Notes on each Interest Payment
Date, as set forth below.




          (b) Interest on each Note shall accrue from the most recent date on which interest has been
paid for such Note as provided in Section 2.4(d) or, if no interest has been paid, from the
date of issuance listed on the relevant Note. Interest shall accrue at a rate equal to 9.00% per
annum based on the amounts outstanding from time to time under each Note, including any increased
principal amounts of the Notes resulting from an “in kind” interest payment under Section
2.4(d)(ii) and shall be computed on the basis of a 360-day year. Company shall pay interest to
Purchasers quarterly in arrears on the last day of each March, June, September and December,
commencing on March 31, 2008 (each such date, an “Interest Payment Date”) as provided in
Section 2.4(d).




          (c) If any payment on each Note becomes due and payable on a day other than a Business Day,
the maturity thereof shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest thereon shall be payable at the then applicable rate during such
extension.




          (d) Company may, at its option, pay interest on the Notes (i) in cash or (ii) in kind (as of
the relevant Interest Payment Date) by increasing the principal amount of each Note in an aggregate
amount equal to the interest due on such Interest Payment Date; provided, however,
that Company may not pay interest on the Notes in kind (as of the relevant Interest Payment Date)
by increasing the principal amount of each Note if



10









 






this would cause the aggregate principal amount of the Notes to exceed $18,779,460. Any cash
interest payment shall be made in accordance with Section 2.6 herein.




          (e) So long as any Event of Default shall be continuing, the interest rate applicable to each
Note shall be increased by 2.00% per annum above the rate otherwise applicable.




          (f) Notwithstanding anything to the contrary set forth in this Section 2.4, if at any
time until payment in full of the Notes, the interest rate payable thereon exceeds the highest rate
of interest permissible under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto (the “Maximum Lawful Rate”), then in such event and
so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable on the Notes
shall be equal to the Maximum Lawful Rate; provided, however, that if at any time
thereafter the interest rate payable thereon is less than the Maximum Lawful Rate, Company shall
continue to pay interest thereunder at the Maximum Lawful Rate until such time as the total
interest received by Purchasers is equal to the total interest which they would have received had
the interest rate on the Notes been (but for the operation of this paragraph) the interest rate
payable since the Closing Date. Thereafter, the interest rate payable shall be the stated interest
rate unless and until such rate again exceeds the Maximum Lawful Rate, in which event this
paragraph shall again apply. In no event shall the total interest received by Purchasers pursuant
to the terms hereof exceed the amount which they could lawfully have received had the interest due
hereunder been calculated for the full term hereof at the Maximum Lawful Rate. In the event the
Maximum Lawful Rate is calculated pursuant to this paragraph, such interest shall be calculated at
a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which
such calculation is made. In the event that a court of competent jurisdiction, notwithstanding the
provisions of this Section 2.4(f), shall make a final determination that Purchasers have
received interest hereunder or under any of the Loan Documents in excess of the Maximum Lawful
Rate, Purchasers shall, to the extent permitted by applicable law, promptly apply such excess first
to any interest due and not yet paid under the Notes, then to the outstanding principal of the
Notes, then to other unpaid Obligations and thereafter shall refund any excess to Company or as a
court of competent jurisdiction may otherwise order.




          2.5 Prepayments. Company shall have the right at any time, without premium or penalty
and on thirty (30) days’ prior written notice to Purchasers, to voluntarily prepay all or any
portion (in multiples of not less than $500,000 or the amount outstanding on the Notes) of the
Notes; provided, however, Purchasers shall retain conversion rights in respect of
the Notes for such period of thirty (30) days after Company has given such notice. Each prepayment
shall be accompanied by the payment of accrued and unpaid interest on the amount being prepaid,
through the date of prepayment. Any partial repayment of any principal amount of any Notes shall
be on a pro rata basis with respect to all Notes then outstanding.




          2.6 Receipt of Payments. Company shall make each payment under the Notes not later
than 2:00 P.M. (New York City time) on the day when due in lawful




11









 







money of the United States of America in immediately available funds to each
Purchaser’s depository bank in the United States as designated by each Purchaser from time to time
for deposit in each such Purchaser’s depositary account. For purposes only of computing interest
under the Notes, all payments shall be applied by each Purchaser to the Notes held by such
Purchaser on the day payment has been credited by such Purchaser’s depository bank to such
Purchaser’s account in immediately available funds.




          2.7 Application of Payments. Company irrevocably waives the right to direct the
application of any and all payments at any time or times hereafter received by Purchasers from or
on behalf of Company pursuant to the terms of this Agreement, and Company irrevocably agrees that
Purchasers shall have the continuing exclusive right to apply any and all such payments against the
Obligations of Company and in repayment of the Notes as it may deem advisable; provided
that, so long as an Event of Default (or an event which with notice or lapse of time or
both would become an Event of Default) has not occurred and is continuing, the same shall be
applied in the following order: (i) then due and payable fees and expenses; (ii) then due and
payable interest payments on the Notes; and (iii) then due and payable principal payments on the
Notes.




          2.8 Sharing of Payments. If any holder of a Note or a portion thereof shall obtain
any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or
otherwise) on account of the Notes held by it in excess of its ratable share of payments on account
of the Notes held by all holders thereof, such holder shall forthwith purchase from each other
holder such participations in the Notes held by such other holders as shall be necessary to cause
such purchasing holder to share the excess payment ratably with each other holder;
provided, however, that if all or any portion of such excess payment is thereafter
recovered from such purchasing holder, such purchase shall be rescinded and such holder shall repay
to the purchasing holder the purchase price to the extent of such recovery together with an amount
equal to such holder’s ratable share (according to the proportion of (i) the amount of such
holder’s required repayment to (ii) the total amount so recovered from the purchasing holder) of
any interest or other amount paid or payable by the purchasing holder in respect of the total
amount so recovered. Company agrees that any holder so purchasing a participation from another
holder pursuant to this Section 2.8 may, to the fullest extent permitted by law, exercise
all its rights of payment (including the right of set-off) with respect to such participation as
fully as if such holder were the direct creditor of Company in the amount of such participation.
Company further agrees to make all payments on the Notes to all holders thereof on a pro rata
basis, based on the principal amount of the Notes held by each.




          2.9 Access. The Collateral Agent or any Purchaser and their respective officers,
employees and/or agents shall have the right, exercisable as frequently as it determines to be
appropriate, during normal business hours, to visit and inspect the properties and facilities of
Company and its Subsidiaries and to inspect, audit and make extracts from all of Company’s and its
Subsidiaries’ records, files, corporate books and books of account and to discuss the affairs,
finances and accounts of Company
and its Subsidiaries with the principal officers of Company, all at such reasonable times,
upon reasonable notice and as often as the Collateral Agent or Purchasers may reasonably




12









 







request.
Company shall deliver any document or instrument reasonably necessary for the Collateral Agent or
Purchasers, as each may request, to obtain records from any service bureau maintaining records for
Company or its Subsidiaries. Company shall instruct its and its Subsidiaries’ banking and other
financial institutions to make available to the Collateral Agent or Purchasers such information and
records as it may reasonably request.




          2.10
Taxes. (a) Any and all payments by Company hereunder or under the Notes shall be made,
in accordance with this Section 2.10, free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding taxes imposed on or measured by the net income of any
Purchaser (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as “Taxes”). If Company shall be required by law
to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any
Purchaser, (i) the sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable under this
Section 2.10) such Purchaser receives an amount equal to the sum it would have received had
no such deductions been made, (ii) Company shall make such deductions, and (iii) Company shall pay
the full amount deducted to the relevant taxing or other authority in accordance with applicable
law. Notwithstanding anything to the contrary herein, any Purchaser that is not organized under the
laws of the United States of America, any State thereof, or the District of Columbia shall not be
entitled to the benefits of this Section 2.10.




          (b) In addition, Company agrees to pay any present or future stamp or documentary taxes or any
other sales, transfer, exercise, mortgage recording or property taxes, charges or similar levies
that arise from any payment made hereunder or under the Notes or from the execution, sale,
transfer, delivery or registration of, or otherwise with respect to, any of the Transaction
Documents (hereinafter referred to as “Other Taxes”).




          (c) Company shall indemnify each Purchaser for the full amount of Taxes or Other Taxes
(including without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.10) paid by each such Purchaser and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted; provided, however, that
Company shall not be liable for such Taxes or Other Taxes to the extent that any such Taxes or
Other Taxes result from such Purchaser’s gross negligence or willful misconduct as determined by a
final judgment of a court of competent jurisdiction. This indemnification shall be made within 30
days from the date each such Purchaser makes written demand therefor.




          (d) Within 30 days after the date of any payment of Taxes, Company shall furnish to each such
Purchaser the original or a certified copy of a receipt evidencing payment thereof.




13









 








          (e) Without prejudice to the survival of any other agreement of Company hereunder, the
agreements and obligations of Company contained in this Section 2.10 shall survive the
payment in full of the Notes.




3. PURCHASERS’ REPRESENTATIONS AND WARRANTIES




          Each Purchaser makes the following representations and warranties to Company, each and all of
which shall survive the execution and delivery of this Agreement and the Closing hereunder:




          3.1 Existence. Such Purchaser is an entity duly organized, validly existing and in
good standing under the laws of its state of organization.




          3.2 Authorization. This Agreement has been duly and validly authorized, executed and
delivered by such Purchaser and constitutes a binding obligation of such Purchaser, enforceable
against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies
generally, and subject, as to enforceability, to general principles of equity, including principles
of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is
sought in a proceeding at law or in equity).




          3.3 Accredited Investor. Such Purchaser is an “accredited investor” within the
meaning of Rule 501(a) under the Securities Act and is acquiring its Note and the Conversion Shares
for investment for its own account, with no present intention of dividing its participation with
others or reselling or otherwise distributing the same in violation of the Securities Act or any
applicable state securities laws.




          3.4 Transfer Restrictions. Such Purchaser understands that: (i) other than pursuant
to the Registration Rights Agreement with respect to the Conversion Shares, the resale of the Note
and the Conversion Shares has not been and is not being registered under the Securities Act or any
applicable state securities laws, and the Note and the Conversion Shares may not be sold or
otherwise transferred unless (a) the Note and the Conversion Shares are sold or transferred
pursuant to an effective registration statement under the Securities Act, (b) at Company’s request,
other than in connection with any transfer to any Affiliate of Tontine, such Purchaser shall have
delivered to Company an opinion of counsel (which opinion shall be in form, substance and scope
reasonably satisfactory to Company’s counsel) to the effect that the Note and the Conversion Shares
to be sold or transferred may be sold or transferred pursuant to an exemption from such
registration, or (c) the Note and the Conversion Shares are sold pursuant to Rule 144 promulgated
under the Securities Act; (ii) any sale of such Note and the Conversion Shares made in reliance on
Rule 144 under the Securities Act may be made only in accordance with the terms of such Rule; and
(iii) except as set forth in the Registration Rights Agreement with respect to the Conversion
Shares, neither Company nor any other Person is under any obligation to register such Note and the
Conversion Shares under the Securities Act or any state securities laws or to comply with the terms



14









 






and conditions of any exemption thereunder. Such Purchaser acknowledges that an appropriate
restrictive legend will be placed on the certificate or certificates representing the Note and the
Conversion Shares that may be issued pursuant to this Agreement.




4. COMPANY’S REPRESENTATIONS AND WARRANTIES




          Company makes the following representations and warranties to each Purchaser, each and all of
which shall survive the execution and delivery of this Agreement and the Closing hereunder:




          4.1 Corporate Existence; Compliance with Law. Each of Company and WRI (i) is a
corporation duly organized, validly existing and in good standing under the laws of the State of
Delaware; (ii) is duly qualified as a foreign corporation and in good standing under the laws of
each jurisdiction where its ownership or lease of property or the conduct of its business requires
such qualification (except for jurisdictions in which such failure to so qualify or to be in good
standing would not have a Material Adverse Effect); (iii) has the requisite corporate 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 being
conducted; (iv) has, or has applied for, all material licenses, permits, consents or approvals from
or by, and has made all material filings with, and has given all material notices to, all
Governmental Authorities having jurisdiction, to the extent required for such ownership, operation
and conduct; (v) is in compliance with its certificate or articles of incorporation and by-laws;
and (vi) is in compliance with all applicable provisions of law, including ERISA and Environmental
Laws, except for such non-compliance which would not have a Material Adverse Effect.




          4.2 Corporate Power; Authorization; Enforceable Obligations. Except as set forth on
Schedule 4.2, the execution, delivery and performance by each Credit Party of the
Transaction Documents to which it is a party and all instruments and documents to be delivered by
each Credit Party, the issuance and sale of the Notes by Company and the consummation of the other
transactions contemplated by any of the foregoing: (i) are within such Credit Party’s corporate
power and authority; (ii) have been duly authorized by all necessary or proper corporate action;
(iii) are not in contravention of any provision of such Credit Party’s certificate of incorporation
or by-laws; (iv) will not violate any law or regulation, or any order or decree of any court or
governmental instrumentality; (v) will not conflict with or result in the breach or termination of,
constitute a default under or accelerate any performance required by, any indenture, mortgage, deed
of trust, lease, agreement or other instrument to which such Credit Party is a party or by which
such Credit Party or any of its property is bound which, taken individually or in the aggregate, is
material to such Credit Party; (vi) other than those Liens created pursuant to the Transaction
Documents, will not result in the creation or imposition of any Lien upon any of the property of
such Credit Party; and (vii) do not require the consent or approval of, or any filing with, any
Governmental Authority or any other Person (except (A) for those filings required by the
Registration Rights Agreement, (B) the filing of a Form D with the SEC, (C) the filing of UCC-1
financing statements



15









 






with the Secretary of State of Delaware and (D) to the extent previously obtained or made).
At or prior to the Closing Date, each of the Transaction Documents shall have been duly executed
and delivered by each Credit Party party thereto and each shall then constitute a legal, valid and
binding obligation of such Credit Party, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability,
to general principles of equity, including principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).




          4.3 Authorization and Issuance of Notes. The issuance of the Notes has been duly
authorized by all necessary corporate action on the part of Company and, upon delivery to each
Purchaser of each Note against payment in accordance with the terms hereof, each Note will have
been validly issued, free and clear of all pledges, liens, encumbrances and preemptive rights. The
issuance of shares of Common Stock upon conversion of the Notes has been duly authorized by all
necessary corporate action on the part of Company. When issued upon conversion of the Notes, such
Conversion Shares will have been validly issued and fully paid and non-assessable, and none of the
Conversion Shares will have been issued in violation of the preemptive rights of any security
holders of Company arising as a matter of law or under or pursuant to Company’s certificate of
incorporation, as amended, Company’s bylaws, as amended, or any agreement or instrument to which
Company is a party or by which it is bound. Company has duly reserved 1,877,946 shares of Common
Stock for issuance pursuant to the terms of the Notes. Under the rules of the American Stock
Exchange, the laws of the State of Delaware and any other applicable law, the issuance of the
shares of Common Stock upon conversion of the Notes by Purchasers does not require approval of the
stockholders of Company.




          4.4 Authorized and Outstanding Shares of Capital Stock.




          (a) After giving effect to the Closing and as at the Closing Date (except with respect to
(a)(i)(A) below, which is as of January 31, 2008), the authorized capital stock of Company consists
of (i) 30,000,000 shares of Common Stock, of which, (A) 9,436,915 shares are issued and
outstanding, (B) 1,094,001 shares are reserved for issuance upon conversion of the Preferred Stock,
(C) 150,000 shares are reserved for issuance upon exercise of Company’s warrants issuable pursuant
to Company’s extension of its $30,000,000 bridge loan facility from SOF Investments, L.P., (D)
343,366 shares are reserved for issuance upon exercise of options and other awards granted under
Company’s stock option and incentive plans, (E) 310,266 stock appreciation rights are issued and
outstanding under Company’s incentive plans and (F) 1,877,946 shares are reserved for issuance upon
Conversion of the Notes on the Maturity Date assuming no interest is paid in cash, and (ii)
5,000,000 shares of Preferred Stock, of which 160,129 shares are issued and outstanding, as of the
date hereof. The number of shares of Common Stock issuable upon conversion of the Preferred Stock,
upon exercise of Company’s warrants issuable pursuant to Company’s extension of its bridge loan
facility from SOF Investments, L.P., and upon exercise of options and other awards granted



16









 






under Company’s stock option and incentive plans is subject to adjustment in the manner
specified in the Certificate of Designation governing the Preferred Stock, the Note Purchase
Agreement dated June 29, 2006 (and the form of warrant included therein), as amended, including by
the Second Amendment dated as of October 1, 2007 and the stock option and incentive plans,
respectively. All of the outstanding shares of Common Stock and Preferred Stock have been duly
authorized, are validly issued, fully paid and nonassessable and were offered, sold and issued in
compliance with all applicable federal and state securities laws and without violating any
contractual obligation or any other preemptive or similar rights.




               Except as set forth on Schedule 4.4, (i) there is no existing option, warrant, call,
commitment or other agreement to which Company is a party requiring, and there are no convertible
securities of Company outstanding which upon conversion would require, the issuance of any
additional shares of Stock of Company or other securities convertible into shares of equity
securities of Company, other than the Notes, and (ii) there are no agreements to which Company is a
party with respect to the voting or transfer of the Stock of Company. Except as set forth on
Schedule 4.4, there are no stockholders’ preemptive rights or rights of first refusal or
other similar rights with respect to the issuance of Stock by Company.



          4.5 Financial Statements. (a) Except as provided in Schedule 4.5, the
previously filed and subsequently withdrawn audited consolidated balance sheet of Company as at
December 31, 2006, and the related consolidated statements of income and cash flows for the year
then ended, and the draft unaudited consolidated balance sheet of Company as at September 30, 2007
(the “Balance Sheet”) and the related draft unaudited consolidated statements of income,
and cash flows for the nine months then ended, copies of which have previously been delivered to
Purchaser, have been, except as noted therein, prepared in conformity with GAAP consistently
applied throughout the periods involved and present fairly in all material respects the
consolidated financial position of Company as at the dates thereof, and the consolidated results of
its operations and cash flows for the periods then ended, subject, in the case of the interim
financial statements, to normal year-end audit adjustments.




          (b) Except as set forth on Schedule 4.5, neither Company nor any of its Subsidiaries
has any material obligations, contingent or otherwise, including, without limitation, liabilities
for Charges, long-term leases or unusual forward or long-term commitments which are not reflected
in the Balance Sheet, other than those incurred since September 30, 2007, in the ordinary course of
business.




          (c) Except as set forth on Schedule 4.5, no dividends or other distributions have been
declared, paid or made upon any shares of capital Stock of Company, nor have any shares of capital
Stock of Company been redeemed, retired, purchased or otherwise acquired for value by Company since
September 30, 2007.




          4.6 SEC Documents. Except as set forth on Schedule 4.6, since January 1,
2005, Company has filed with the Commission all forms, reports, schedules,



17









 






statements and other documents required to be filed by it through the date hereof
under the Exchange Act, or the Securities Act (all such documents, as supplemented and amended
since the time of filing, collectively, the “Company SEC Documents”). Except as set forth
on Schedule 4.6, the Company SEC Documents, including without limitation all financial
statements and schedules included in the Company SEC Documents, at the time filed or, in the case
of any Company SEC Document amended or superseded by a filing prior to the date of this Agreement,
then on the date of such amending or superseding filing, and, in the case of registration
statements and proxy statements, on the dates of effectiveness and the dates of mailing,
respectively, (i) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading, and (ii) complied in all
material respects with the applicable requirements of the Exchange Act and the Securities Act, as
applicable.




          4.7 Securities Laws. In reliance on the investment representations contained in
Sections 3.3 and 3.4, the offer, issuance, sale and delivery of the Notes and the
Conversion Shares, as provided in this Agreement, are exempt from the registration requirements of
the Securities Act and all applicable state securities laws, and are otherwise in compliance with
such laws. Neither Company nor any Person acting on its behalf has taken or will take any action
(including, without limitation, any offering of any securities of Company under circumstances which
would require the integration of such offering with the offering of the Notes or the Conversion
Shares under the Securities Act and the rules and regulations of the SEC thereunder) which would
reasonably be expected to subject the offering, issuance or sale of the Notes or the Conversion
Shares, to the registration requirements of Section 5 of the Securities Act.




          4.8 Taxes. Except as set forth on Schedule 4.8 or as would not reasonably be
expected to cause a Material Adverse Effect, all federal, state, local and foreign tax returns,
reports and statements required to be filed by Company and its Subsidiaries have been timely filed
with the appropriate Governmental Authority and all such returns, reports and statements are true,
correct and complete in all material respects. All Charges and other impositions due and payable
for the periods covered by such returns, reports and statements have been paid prior to the date on
which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof, or
any such fine, penalty, interest, late charge or loss has been paid or is being contested in good
faith by appropriate proceedings. Proper and accurate amounts have been withheld by Company and
its Subsidiaries from its employees for all periods in material compliance with the tax, social
security and unemployment withholding provisions of applicable federal, state, local and foreign
law and such withholdings have been timely paid to the respective governmental agencies.




          4.9 No Litigation. Except as set forth on Schedule 4.9, no action, claim or
proceeding is now pending or, to the knowledge of Company or its Subsidiaries, threatened against
Company or any of its Subsidiaries, at law, in equity or otherwise, before any court, board,
commission, agency or instrumentality of any federal, state, or



18









 






local government or of any agency or subdivision thereof, or before any arbitrator
or panel of arbitrators that has had or would reasonably be expected to cause a Material Adverse
Effect.




          4.10 Patents, Trademarks, Copyrights and Licenses. Company and each of its
Subsidiaries owns or otherwise has sufficient rights in all licenses, patents, patent applications,
copyrights, service marks, trademarks and registrations and applications for registration thereof,
and trade names necessary to continue to conduct its business as heretofore conducted by it and now
being conducted by it.




          4.11 No Material Adverse Effect. Since December 31, 2006, there have not been any
events, changes, occurrences or state of facts that, individually or in the aggregate, have had or
would reasonably be expected to have a Material Adverse Effect, except for matters disclosed prior
to the date hereof in Company’s public filings pursuant to the Exchange Act, matters disclosed on
Schedule 4.11, and matters disclosed prior to the date hereof in writing by Company to
Purchasers.




5. COVENANTS




          5.1 Affirmative Covenants. Company covenants and agrees that from and after the date
hereof (except as otherwise provided herein, or unless the Required Purchasers have given their
prior written consent) until this Agreement has terminated and so long as any Note is outstanding:




          (a) Financial and Business Information.




               (i) Monthly Information. Commencing with the month ending February 29, 2008, Company
will deliver to the Collateral Agent on behalf of Purchasers who are Affiliates of Tontine and to
each other Purchaser as soon as practicable after the end of each month, but in any event within 30
days thereafter: (A) an unaudited consolidated balance sheet of Company and its Subsidiaries, if
any, at the end of such month and (B) unaudited consolidated statements of income, retained
earnings and cash flows of Company and its Subsidiaries, if any, for such month and for the portion
of such year ending with such month.



               (ii) Quarterly Information. Company will deliver to the Collateral Agent on behalf of
Purchasers who are Affiliates of Tontine and to each other Purchaser as soon as practicable after
the end of each of the first three quarterly fiscal periods in each Fiscal Year of Company, but in
any event within 45 days thereafter, (A) an unaudited consolidated balance sheet of Company and its
Subsidiaries, if any, as at the end of such quarter, and (B) unaudited consolidated statements of
income, retained earnings and cash flows of Company and its Subsidiaries, if any, for such quarter
and (in the case of the second and third quarters) for the portion of the fiscal year ending with
such quarter, setting forth in comparative form in each case the projected consolidated figures for
such period and the actual consolidated figures for the comparable period of the prior fiscal year.
Such statements shall be (1) prepared in accordance with GAAP




19











 




consistently applied, except that such statements are subject to normal and recurring year-end
adjustments and do not include notes, (2) in reasonable detail and (3) certified by the principal
financial or accounting officer of Company.




               (iii) Annual Information. Company will deliver to the Collateral Agent on behalf of
Purchasers who are Affiliates of Tontine and to each other Purchaser as soon as practicable after
the end of each Fiscal Year of Company, but in any event within 90 days thereafter, or, with
respect to the Fiscal Year ending December 31, 2007, within 120 days thereafter, (A) an audited
consolidated balance sheet of Company and its Subsidiaries, if any, as at the end of such year, and
(B) audited consolidated statements of income, retained earnings and cash flows of Company and its
Subsidiaries, if any, for such year; setting forth in each case in comparative form the figures for
the previous year. Such statements shall be (1) prepared in accordance with GAAP consistently
applied, (2) in reasonable detail and (3) accompanied by an opinion from KPMG LLP, Company’s
independent registered public accounting firm or such other firm of independent certified public
accountants of recognized national standing selected by Company and reasonably acceptable
Purchasers.



               (iv) Filings. Company will deliver to the Collateral Agent on behalf of Purchasers
who are Affiliates of Tontine and to each other Purchaser, promptly upon their becoming available,
one copy of each report, notice or proxy statement sent by Company to its stockholders generally,
and of each regular or periodic report (pursuant to the Exchange Act) and any registration
statement, prospectus or other writing (other than transmittal letters) (including, without
limitation, by electronic means) pursuant to the Securities Act filed by Company with (i) the SEC
or (ii) any securities exchange on which shares of Common Stock of Company are listed.



               (v) Projections. Company will deliver to the Collateral Agent on behalf of Purchasers
who are Affiliates of Tontine and to each other Purchaser within 15 days prior to the beginning of
each Fiscal Year:



                    (A) projected consolidating and consolidated balance sheets of Company and its Subsidiaries
for such Fiscal Year, on a monthly basis (to the extent available);



                    (B) projected consolidating and consolidated cash flow statements of Company and its
Subsidiaries including summary details of cash disbursements, for such Fiscal Year, on a monthly
basis;



                    (C) projected consolidating and consolidated income statements of Company and its Subsidiaries
for such Fiscal Year, on a monthly basis; and



                    (D) projected five-year plan of Company and its Subsidiaries for the five-year period
commencing with such Fiscal Year, to the extent such plan is prepared;



20









 





               (vi) in each case, approved by the Board of Directors of Company, together with appropriate
supporting details.



               (vii) Additional Information. Company will, and will cause WRI to, deliver to the
Collateral Agent on behalf of Purchasers who are Affiliates of Tontine and to each other Purchaser
all financial and written reports delivered to the lenders under the First Interstate Bank Loan
Documents.



          (b) Communication with Accountants. Company authorizes the Collateral Agent and each
Purchaser to communicate directly with its independent certified public accountants and tax
advisors and authorizes those accountants to disclose to the Collateral Agent or such Purchaser any
and all financial statements and other supporting financial documents and schedules including
copies of any management letter with respect to the business, financial condition and other affairs
of Company and any of its Subsidiaries.




          (c) Tax Compliance. Company shall pay all transfer, excise or similar taxes (not
including income or franchise taxes) in connection with the issuance, sale, delivery or transfer by
Company to Purchasers of the Notes and the Common Stock issuable upon conversion thereof, and shall
indemnify and save each Purchaser harmless without limitation as to time against any and all
liabilities with respect to such taxes. Company shall not be responsible for any income taxes in
connection with the transfer of the Notes or such Common Stock by the holder thereof. The
obligations of Company under this Section 5.1(c) shall survive the payment, prepayment or
redemption of the Notes and the termination of this Agreement.




          (d) Insurance. Company shall maintain insurance covering, without limitation, fire,
theft, burglary, public liability, property damage, product liability, workers’ compensation,
directors’ and officers’ insurance and insurance on all property and assets material to the
operation of the business, all in amounts customary for the industry. Company shall pay all
insurance premiums payable by them.




          (e) Compliance with Law. Company shall comply with all laws, including ERISA and
Environmental Laws, applicable to it, except where the failure to comply would not be reasonably
likely to result in a Material Adverse Effect.




          (f) Maintenance of Existence and Conduct of Business. Company shall: (i) do or cause
to be done all things necessary to preserve and keep in full force and effect its corporate
existence, and its rights and franchises; (ii) at all times maintain, preserve and protect all of
its patents, trademarks and trade names, and preserve all the remainder of its material assets
necessary for the conduct of its business and keep the same in good repair, working order and
condition (taking into consideration ordinary wear and tear) and from time to time make, or cause
to be made, all needful and proper repairs, renewals and replacements, betterments and improvements
thereto consistent with industry practices and (iii) continue to conduct business solely in its
existing lines of
business and businesses related thereto in a manner consistent with past business practices.





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          5.2 Negative Covenants. Company covenants and agrees that from and after the date
hereof (except as otherwise provided herein, or unless the Required Purchasers have given their
prior written consent) until this Agreement has terminated and so long as any Note is outstanding:




          (a) Sales of Assets; Liquidation. Company shall not, and shall not permit any
Subsidiary of Company to, (i) sell, transfer, convey or otherwise dispose of any of their
respective assets or properties, (ii) liquidate, dissolve or wind up Company, or any of its
Subsidiaries, except for transfers to Company, whether voluntary or involuntary; provided,
however, that the foregoing shall not prohibit (i) the sale of inventory and other assets
in the ordinary course of business, (ii) the sale of surplus or obsolete equipment and fixtures
(iii) transfers resulting from any casualty or condemnation of assets or properties or (iv) sales
involving assets with a value not greater than $5,000,000 as to which the net proceeds are either
(x) reinvested in Company’s or, if sold by a Subsidiary, such Subsidiary’s or Company’s existing or
related lines of business or (y) applied to repay Indebtedness, within 180 days after such sale.




          (b) Transactions with Affiliates. Company shall not and shall not permit any
Subsidiary of Company to enter into or be a party to any transaction with any Affiliate of Company
or such Subsidiary, except (i) transactions expressly permitted hereby, (ii) transactions in the
ordinary course of and pursuant to the reasonable requirements of Company’s or such Subsidiary’s
business and upon fair and reasonable terms that are fully disclosed to Purchaser and are no less
favorable to Company or such Subsidiary than would be obtained in a comparable arm’s-length
transaction with a Person not an Affiliate of Company or such Subsidiary, (iii) transactions
between Company and its wholly-owned Subsidiaries or between such Subsidiaries and (iv) payment of
compensation to employees and directors’ fees.




          (c) Restricted Payments. Company shall not and shall not permit any Subsidiary of
Company to make any Restricted Payments nor shall Company permit any Subsidiary to make such
payments with respect to Company’s Stock.




          (d) Permitted Acquisitions or Investments. Company shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly in any transaction or related series of
transactions, acquire or invest in, whether for cash, debt, Stock, or other property or assets or
by guaranty of any obligation, any assets or business of any Person other than (i) acquisitions of
assets in the ordinary course of business of Company, (ii) acquisitions by Company or wholly-owned
Subsidiaries of Company from Company or any such wholly-owned Subsidiary or investments therein,
(iii) acquisitions involving an aggregate purchase price of not more than $2,000,000, but not to
exceed $5,000,000 in any Fiscal Year, (iv) investments in Cash Equivalents or (vi) investments in
certain restricted cash accounts, cash collateral accounts and trust accounts required pursuant to
agreements to which Company or any Subsidiary are party, so long as such investments
are consistent with the provisions of such agreements. Company shall not, and shall not
permit any of its Subsidiaries to, invest in any Person if, after giving effect thereto, such
Person would be an Affiliate, but not a Subsidiary, of Company.





22









 








          (e) Mergers and Subsidiaries. Neither Company nor any Subsidiaries of Company shall
directly or indirectly, by operation of law or otherwise, merge with, consolidate with, or
otherwise combine with any Person, nor shall Company create any Subsidiary, other than (i) the
creation of wholly-owned Subsidiaries or (ii) mergers of wholly-owned Subsidiaries of Company into
Company or any other of its wholly-owned Subsidiaries.




          5.3 WRI Covenants. Company shall cause WRI to comply with each and every covenant
under the headings “Affirmative Covenants” and “Negative Covenants” contained in the First
Interstate Business Loan Agreement by and between WRI and First Interstate Bank dated October 29,
2007 (the “First Interstate Loan Agreement”) as in effect as of the date hereof without
giving affect to any amendments, waivers or modifications thereto.




          5.4 American Stock Exchange Approval. Company shall use best efforts to cause the
listing application with respect to the Conversion Shares to be approved by the American Stock
Exchange and to have the Conversion Shares authorized for listing on the American Stock Exchange.




6. CONDITIONS PRECEDENT




          6.1 Conditions Precedent. The obligation of each Purchaser to purchase the Notes
pursuant to Section 2.1 hereof, is subject to the condition that the Collateral Agent and
each such Purchaser shall have received, on the Closing Date, the following, each dated the Closing
Date unless otherwise indicated, in form and substance satisfactory to each Purchaser:




          (a) Favorable opinions of (i) WilmerHale, counsel to the Credit Parties, substantially in the
form attached hereto as Exhibit C-1 and (ii) Morris W. Kegley, Company’s general counsel,
substantially in the form attached hereto as Exhibit C-2, it being understood that to the
extent that such opinions shall rely upon any other opinion of counsel, each such other opinion
shall be in form and substance reasonably satisfactory to each Purchaser and shall provide that
each Purchaser may rely thereon.




          (b) Resolutions of the board of directors of each Credit Party, certified by the Secretary or
Assistant Secretary of each such Credit Party, as of the Closing Date, to be duly adopted and in
full force and effect on such date, authorizing (i) the consummation of each of the transactions
contemplated by the Transaction Documents to which such Credit Party is a party, and (ii) specific
officers to execute and deliver this Agreement and each other Transaction Document to which such
Credit Party is a party.




          (c) Governmental certificates, dated the most recent practicable date prior to the Closing
Date, showing that each Credit Party is organized and in good standing in their respective states
of formation and are qualified as foreign corporations and in good standing in the jurisdiction of
its principal place of business.





23









 








          (d) A copy of the certificate of incorporation and all amendments thereto of each Credit
Party, certified as of a recent date by the Secretary of State of the respective state of
formation, and copies of each Credit Party’s by-laws, certified by the Secretary or Assistant
Secretary of the relevant Credit Party as true and correct as of the Closing Date.




          (e) The Notes duly executed by Company.




          (f) The Guaranty duly executed by WRI.




          (g) The Security Agreement duly executed by WRI.




          (h) The Pledge Agreement executed by Company and WRI.




          (i) The Consent duly executed by each Credit Party and First Interstate Bank.




          (j) The Registration Rights Agreement duly executed by the parties thereto.




          (k) Certificates of the Secretary or an Assistant Secretary of each Credit Party, dated the
Closing Date, as to the incumbency and signatures of the officers of such Credit Party executing
this Agreement, the Notes, the Security Agreement, the Pledge Agreement, the Guaranty, Consent and
each other Transaction Document to which it is a party and any other certificate or other document
to be delivered pursuant hereto or thereto, together with evidence of the incumbency of such
Secretary or Assistant Secretary.




          (l) Certificate of the President or Chief Executive Officer of each Credit Party, dated the
Closing Date, stating that all of the representations and warranties of such Credit Party contained
herein or in the other Transaction Documents are true and correct in all material respects at and
as of the Closing Date as if made on such date (except for representations and warranties made as
of a specified date, which shall be true and correct in all material respects as of such specified
date) and that no breach of any covenant contained in Section 5 has occurred or would
result from the Closing hereunder.




          (m) Such documents or agreements duly executed by each Credit Party as any Purchaser through
the Collateral Agent may request with respect to the perfection of its security interests granted
under the Loan Documents (including financing statements under the UCC, patent, trademark and
copyright security agreements suitable for filing with the Patent and Trademark Office or the
Copyright Office, as the case may be, and
other applicable documents under the laws of any jurisdiction with respect to the perfection
of Liens created by the Pledge Agreement or the Security Agreement).





24









 








          (n) Evidence of payment or arrangements for payment by the Credit Parties of all applicable
recording taxes, fees, charges, costs and expenses required for the recording of the Security
Documents.




          (o) All consents and approvals of Governmental Authorities and all material consents and
approvals of third parties required in connection with the transactions contemplated by the
Transaction Documents shall have been obtained and shall be in effect, and there shall be no
governmental or judicial action, actual or threatened, that has or would have, singly or in the
aggregate, a reasonable likelihood of restraining, preventing or imposing burdensome conditions on
the transactions contemplated by the Transaction Documents.




          (p) Such other certificates, documents, agreements and information respecting any Credit Party
as any Purchaser through the Collateral Agent may reasonably request.




          6.2 Additional Conditions. The obligation of each Purchaser to purchase the Notes
pursuant to Section 2.1 is subject to the additional conditions precedent that as of the
Closing Date:




          (a) There shall be no litigation, public or private, or administrative proceedings,
governmental investigation or other legal or regulatory developments, actual or threatened, with
respect to any of the transactions contemplated by the Transaction Documents, that, singly or in
the aggregate, could reasonably be expected to result in a Material Adverse Effect (except as set
forth on Schedule 4.9), or could materially and adversely affect the ability of the Credit
Parties to fully and timely perform their respective obligations under the Transaction Documents,
or the ability of the parties to consummate the financings contemplated hereby or the other
transactions contemplated by the Transaction Documents. No judgment, injunction, decree or other
legal restraint shall prohibit, or have the effect of rendering unachievable, the consummation of
the transactions contemplated by this Agreement or any other Transaction Document.




          (b) As of the Closing Date, none of the following events shall have occurred and be
continuing: (A) trading in the Common Stock shall have been suspended by the Commission or the
American Stock Exchange or trading in securities generally on the American Stock Exchange, the New
York Stock Exchange or the Nasdaq National Market shall have been suspended or limited or minimum
prices shall have been established on either such exchange or the Nasdaq National Market, (B) a
banking moratorium shall have been declared either by U.S. federal or New York State authorities,
or (C) there shall have occurred any material new outbreak or material escalation of hostilities,
declaration by the United States of a national emergency or war or other calamity or crisis which
has a material adverse effect on the U.S. financial markets.




          (c) Company shall have amended the Amended and Restated Rights Agreement, dated as of February
7, 2003, between Company and EquiServe Trust





25









 







Company, N.A., as amended by the First Amendment to
Amended and Restated Rights Agreement dated as of May 2, 2007, by executing and delivering an
amendment thereto in the form of Exhibit H hereto.




          (d) Two (2) nominees of Tontine reasonably acceptable to the Board shall have been elected or
appointed to the Board, which Board shall consist of not more than nine (9) members immediately
after giving effect to such additional two (2) directors.




          (e) Company shall have paid all reasonable fees and expenses of (i) Tontine’s outside counsel,
Weil, Gotshal & Manges LLP, and (ii) all special local counsel retained in connection with this
Agreement and the transactions contemplated thereby.




          (f) The representations and warranties of Company contained in this Agreement and in the other
Transaction Documents are true and correct in all material respects at and as of the Closing Date
as if made on such date (except for representations and warranties made as of a specified date,
which shall be true and correct in all material respects as of such specified date) and no breach
of any covenant contained in Section 5 has occurred or would result from the Closing
hereunder.




          (g) Each Credit Party shall be in compliance in all material respects with all the terms and
provisions set forth herein and in each other Loan Document on its part to be observed or
performed, and, no Default shall have occurred and be continuing.




          (h) The Closing shall have occurred no later than March 15, 2008.




7. ADDITIONAL PURCHASER RIGHTS




          7.1 Director Rights. Company acknowledges and agrees that commencing on the Closing
Date and for so long as Tontine and/or its Affiliates own at least ten percent (10%) of the
outstanding shares of Common Stock (including the Conversion Shares issuable upon Conversion of the
Notes on an as converted basis), Tontine shall have the right to designate two Persons for election
to the Board who shall be reasonably acceptable to the Board and who shall be nominated for
election to the Board. So long as Tontine and/or its Affiliates own at least ten percent (10%) of
the outstanding shares of Common Stock (including the Conversion Shares issuable upon Conversion of
the Notes on an as converted basis), the Board shall consist of not more than nine (9) members, and
at such time there is no Preferred Stock outstanding, the Board shall consist of not more than
seven (7) members.




          7.2 Observer Rights. Company further acknowledges and agrees that commencing on the
Closing Date and for so long as Tontine and/or its Affiliates own at least ten percent (10%) of the
outstanding shares of Common Stock (including the Conversion Shares issuable upon Conversion of the
Notes on an as converted basis), Tontine shall have the right to designate one Person who is either
an employee of Tontine
or is otherwise reasonably acceptable to the Board (the “Designee”) to act as an
observer





26









 







to the Board as provided below (“Observer Rights”). During such time as Tontine
has Observer Rights, Company shall invite the Designee to attend any meetings of the Board and any
committees thereof (at the same time directors are invited thereto) and provide the Designee with
such materials (at the same time such materials are provided to directors) as Company provides to
directors in connection with their service on the Board and any committees thereof, provided that
the Designee need not be permitted to attend (i) any portion of any such meeting or be provided
with any portion of such materials to the extent that so doing would jeopardize any legal
privilege, including the attorney-client privilege, and to the extent the subject of such meeting
or materials is potentially adverse to Tontine and (ii) any portion of any such meeting attended
only by the members of the Board in executive session. The exercise by Tontine of Observer Rights
is conditioned upon Company’s receipt of a confidentiality agreement executed by Tontine and the
Designee reasonably satisfactory to Company providing for Tontine’s and the Designee’s preservation
of the confidentiality of any materials provided or information received at any meeting of the
Board or any committee thereof. Company shall promptly reimburse the Designee for all reasonable
expenses incurred in connection with the Designee’s attendance at such meetings.




          7.3 Rights Offering. If Company at any time shall issue rights to its holders of
Common Stock to purchase additional shares of Common Stock or other securities of Company, such
rights shall also be issued to Purchasers with respect to the Notes then held by them. The number
of rights to be so issued shall be determined with respect to the number of Conversion Shares as if
the Notes had been converted on the records date for the issuance of such rights.




          7.4 Preemptive Rights.




          (a) In addition to the rights set forth in Section 7.3, and for so long as Tontine
and/or its Affiliates own at least ten percent (10%) of the outstanding shares of Common Stock
(including the Conversion Shares issuable upon Conversion of the Notes on an as converted basis),
if Company at any time proposes to and does issue shares of Common Stock (or rights, warrants or
other securities convertible into or exchangeable for shares of Common Stock) (any such securities,
the “Offered Securities”), other than Exempt Securities (which term is defined below),
Company shall offer Purchasers the option to acquire, on the same terms and conditions and at the
same price per Offered Security (the “Issue Price”) offered to the other participants in
such offering, up to such number of Offered Securities so that following the issuance (and
conversion or exercise, if applicable) of such Offered Securities each Purchaser would maintain the
same percentage of ownership of Common Stock (including the number of Conversion Shares as if the
Notes had been converted) such Purchaser held immediately prior to the issuance of such Offered
Securities. Company shall give written notice to Purchasers of any such issuance as far in advance
of the date of issuance of such Offered Securities (the “Date of Issuance”) as possible,
but in any event no less than ten (10) Business Days in advance of the Date of Issuance (a
“Notice of Issuance”). The Notice of Issuance will describe in reasonable detail the terms
and conditions of the proposed issuance, including the Issue
Price and the maximum number of Offered Securities that each Purchaser will be entitled





27









 







to
purchase on the Date of Issuance. “Exempt Securities” means securities of Company which
are issued (i) as a dividend, stock split or other distribution payable pro rata to all holders of
Common Stock, (ii) to employees, officers, directors or consultants of Company pursuant to any
compensatory plans or programs approved by Company’s Board of Directors, (iii) in connection with
the conversion of the Preferred Stock or Notes or the conversion or exercise of any options,
warrants or other rights to purchase Common Stock (A) outstanding on the date hereof or (B) issued
in accordance with the foregoing clause (ii) or (iv) solely in consideration for the acquisition
(by merger or otherwise) by Company or any of its Subsidiaries of assets or equity interests of
another entity approved by Company’s Board of Directors.




          (b) Each Purchaser shall have the option to elect to purchase all or part of such Purchaser’s
portion of the Offered Securities described in a Notice of Issuance at the Issue Price and on the
other terms contained in the Notice of Issuance by notifying Company in writing (an “Election
Notice”) at least three (3) Business Days prior to the Date of Issuance. Each Election Notice
will indicate the number of units that each Purchaser elects to purchase.




          (c) The failure of any Purchaser to exercise its right to purchase, in full or in part,
Offered Securities under this Section 7.4 in connection with any one issuance of Offered
Securities by Company will not, in any manner, waive or otherwise impair the rights of such
Purchaser to purchase such Purchaser’s share of Offered Securities in connection with any other
proposed issuance of Offered Securities to which this Section 7.4 is applicable.




          (d) Notwithstanding anything contained in this Section 7.4 to the contrary, Company
may at any time, regardless of whether an Election Notice has been given, prior to the Date of
Issuance abandon an offering as to which it has given a Notice of Issuance, in which case
Purchasers shall have no further right or obligation to purchase Offered Securities described in
such Notice of Issuance.




8. CONVERSION




          8.1 Conversion of Notes.




          (a) Subject to the provisions for adjustment hereinafter set forth, each Note shall be
convertible, in whole or in part, at any time and from time to time, at the option of the holder
thereof (a “Conversion”), up to the outstanding principal amount (including any additions
to the original principal amount resulting from any interest previously paid in kind by Company) of
the Note held by such Purchaser at the time of such conversion into a number of fully paid and
nonassessable shares of Common Stock equal to the quotient obtained by dividing (A) the principal
amount of the Note to be converted (including all accrued and unpaid interest) by (B) the
Conversion Price (as hereinafter defined); provided that if such calculation results in the
aggregate number of shares of Common Stock to be issued in connection with all such Conversions
hereunder
to exceed 19.9% of the number of shares of Common Stock outstanding immediately





28









 







prior to the
execution of this Agreement, the principal amount of the Notes resulting in such excess amounts
shall not be converted into Common Stock and shall instead be paid in cash by Company to such
Purchaser at the time of such Conversion. If the conversion of the Notes by more than one
Purchaser at the same time results in the operation of the proviso in the prior sentence, then each
Purchaser so converting Notes shall receive shares of Common Stock and cash in proportion to the
respective principal amounts of Notes being converted by each Purchaser, unless otherwise agreed by
Purchasers. The Conversion Price shall initially be $10.00 per share of Common Stock and shall be
subject to further adjustments from time to time pursuant to Section 8.1(f) below (the
“Conversion Price”).




          No fractional shares shall be issued upon the conversion of any Note. All shares of Common
Stock (including fractions thereof) issuable upon conversion of any Note by such Purchaser shall be
aggregated for purposes of determining whether conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would result in the
issuance of a fraction of a share of Common Stock, Company shall, in lieu of issuing any fractional
share, pay such Purchaser a sum in cash equal to the Current Market Price of such fraction on the
date of conversion.




          (b) A conversion of any Note may be effected by a Purchaser upon the surrender to Company at
the principal office of Company of the Note to be converted accompanied by a written notice stating
that such Purchaser elects to convert all or a specified amount of its Notes in accordance with the
provisions of this Section 8.1 and specifying the name or names in which such Purchaser
wishes the certificate or certificates for shares of Common Stock to be issued.




          (c) In case the written notice specifying the name or names in which a Purchaser wishes the
certificate or certificates for shares of Common Stock to be issued shall specify a name or names
other than that of such Purchaser, such notice shall be accompanied by payment of all transfer
taxes payable upon the issuance of shares of Common Stock in such name or names. Other than such
taxes, Company will pay any and all issue and other taxes (other than taxes based on income) that
may be payable in respect of any issue or delivery of shares of Common Stock on conversion of the
Notes pursuant hereto. As promptly as practicable, and in any event within five Business Days
after the surrender of each Note and the receipt of such notice relating thereto and, if
applicable, payment of all transfer taxes (or the demonstration to the satisfaction of Company that
such taxes have been paid), Company shall deliver or cause to be delivered (1) certificate(s)
representing the number of validly issued, fully paid and nonassessable full shares of Common Stock
to which each holder of the Notes being converted shall be entitled and (2) if less than all of
principal amount of each Note evidenced by the surrendered Notes is being converted, in exchange
for each Note surrendered, a new Note, of like tenor, in a principal amount equal the full
principal amount of the Note surrendered less the principal amount being converted.




29









 








          (d) A conversion shall be deemed to have been made at the close of business on the date of
giving the written notice referred to in the first sentence of (b) above and of such surrender of
the certificate or certificates representing each Note to be converted so that the rights of the
holder thereof as to the Note being converted shall cease except for the right to receive shares of
Common Stock in accordance herewith, or the right to receive, in addition to shares of Common
Stock, cash in an amount equal to the principal amount of each Note which could not be converted
due to the operation of the proviso in Section 8.1(a), and the Person entitled to receive
the shares of Common Stock shall be treated for all purposes as having become the record holder of
such shares of Common Stock at such time.




          (e) Company shall at all times reserve, and keep available for issuance upon the conversion of
the Notes, such number of its authorized but unissued shares of Common Stock as will from time to
time be sufficient to permit the conversion of all of the aggregate outstanding principal balance
of the Notes at the Maturity Date assuming no interest is paid in cash, and shall take all action
required to increase the authorized number of shares of Common Stock if necessary to permit the
conversion of all of the aggregate outstanding principal balance of the Notes.




          (f) The Conversion Price will be subject to adjustment from time to time as follows:




               (i) In case Company shall at any time or from time to time after the Closing Date (A) pay a
dividend, or make a distribution, on the outstanding shares of Common Stock in shares of Common
Stock, (B) subdivide the outstanding shares of Common Stock, (C) combine the outstanding shares of
Common Stock into a smaller number of shares or (D) issue by reclassification of the shares of
Common Stock any shares of capital stock of Company, then, and in each such case, the Conversion
Price in effect immediately prior to such event or the record date therefor, whichever is earlier,
shall be adjusted so that the holder of any Note thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock or other securities of Company which
Purchaser would have owned or have been entitled to receive after the happening of any of the
events described above, had such Note been surrendered for conversion immediately prior to the
happening of such event or the record date therefor, whichever is earlier. An adjustment made
pursuant to this clause (i) shall become effective (x) in the case of any such dividend or
distribution, immediately after the close of business on the record date for the determination of
holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the
case of such subdivision, reclassification or combination, at the close of business on the day upon
which such corporate action becomes effective. No adjustment shall be made pursuant to this clause
(i) in connection with any transaction to which Section 8.1(g) applies.



               (ii) In case Company shall issue shares of Common Stock (or rights, warrants or other
securities convertible into or exchangeable for shares of Common Stock), other than pursuant to
existing obligations or pursuant to any existing employee benefit plan after the Closing Date,
other than issuances covered by clause (i)



30









 




above, at a price per share (or having an exercise, conversion or exchange price per share)
less than the Conversion Price as of the date of issuance of such shares or of such rights,
warrants or other convertible or exchangeable securities, then, and in each such case, the
Conversion Price shall be reduced to such lower price. For the purpose of determining the
consideration received by Company upon any such issue, if the consideration received by Company is
other than cash, its value will be deemed its fair market value, as determined in good faith by the
Board of Directors of Company.




               (iii) An adjustment made pursuant to clause (ii) above shall be made on the next Business Day
following the date on which any such issuance is made and shall be effective retroactively
immediately after the close of business on such date. No adjustment shall be made pursuant to
clause (ii) in respect of any issuance of shares of Common Stock on or prior to the Closing Date.
For purposes of clause (ii), the aggregate consideration received by Company in connection with the
issuance of shares of Common Stock or of rights, warrants or other securities exchangeable or
convertible into shares of Common Stock shall be deemed to be equal to the sum of the aggregate
offering price of all such Common Stock and such rights, warrants, or other exchangeable or
convertible securities plus the aggregate amount, if any, receivable upon exchange or conversion of
any such exchangeable or convertible securities into shares of Common Stock.



               (iv) In case Company shall at any time or from time to time after the Closing Date declare,
order, pay or make a dividend or other distribution (including, without limitation, any
distribution of stock or other securities or property or rights or warrants to subscribe for
securities of Company or any of its Subsidiaries by way of dividend or spinoff), on its Common
Stock, other than dividends or distributions of shares of Common Stock which are referred to in
clause (i) above and cash dividends paid out of earnings or earned surplus, then the Conversion
Price shall be adjusted so that it shall equal the price determined by multiplying (A) the
applicable Conversion Price on the day immediately prior to the record date fixed for the
determination of stockholders entitled to receive such dividend or distribution by (B) a fraction,
the numerator of which shall be the Current Market Price per share of Common Stock at such record
date less the amount of such dividend or distribution per share of Common Stock, and the
denominator of which shall be such Current Market Price per share of Common Stock. No adjustment
shall be made pursuant to this clause (iv) in connection with any transaction to which Section
7.3, 8.1(f)(ii) or 8.1(g) applies.



               (v) For purposes of this Section 8.1(f), the number of shares of Common Stock at any
time outstanding shall not include any shares of Common Stock then owned or held by or for the
account of Company or any of its Subsidiaries.



               (vi) If Company shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or other distribution, and shall thereafter and before the
distribution to stockholders thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of shares of Common Stock issuable upon
exercise of the right



31









 




of conversion granted by this Section 8.1(f) or in the Conversion Price then in effect
shall be required by reason of the taking of such record.




               (vii) Anything in this Section 8.1(f) to the contrary notwithstanding, Company shall
not be required to give effect to any adjustment in the Conversion Price unless and until the net
effect of one or more adjustments (each of which shall be carried forward), determined as above
provided, shall have resulted in a change of the Conversion Price by at least one cent, and when
the cumulative net effect of more than one adjustment so determined shall be to change the
Conversion Price by at least one cent, such change in Conversion Price shall thereupon be given
effect.



               (viii) If any option or warrant expires or is cancelled without having been exercised, then,
for the purposes of the adjustments set forth above, such option or warrant shall have been deemed
not to have been issued and the Conversion Price shall be adjusted accordingly. No holder of
Common Stock which was previously issued upon conversion of a Note shall have any obligation to
redeem or cancel any such shares of Common Stock as a result of the operation of this clause
(viii).



          (g) In case of any reorganization of capital, reclassification of capital stock (other than a
reclassification of capital subject to Section 8.1(f)(i)), consolidation or merger with or
into another corporation, or sale, transfer or disposition of all or substantially all the
property, assets or business of Company to another corporation (any one or more of such events
being an “Organic Change”), the Notes then outstanding, shall thereafter be convertible
into, in lieu of the Common Stock issuable upon such conversion prior to consummation of such
Organic Change, the kind and amount of shares of stock and other securities and property receivable
(including cash) upon the consummation of such Organic Change by a holder of that number of shares
of Common Stock into which such Notes were convertible immediately prior to such Organic Change
(including, on a pro rata basis, the cash, securities or property received by holders of Common
Stock in any tender or exchange offer that is a step in such Organic Change). In case securities
or property other than Common Stock shall be issuable or deliverable upon conversion as aforesaid,
then all references in this Section 8.1(g) shall be deemed to apply, so far as appropriate
and nearly as may be, to such other securities or property.




          (h) In case at any time or from time to time Company shall pay any stock dividend or make any
other non-cash distribution to the holders of its Common Stock, or shall offer for subscription pro
rata to the holders of its Common Stock any additional shares of stock of any class or any other
right, or there shall be any capital reorganization or reclassification of the Common Stock of
Company or consolidation or merger of Company with or into another corporation, or any sale or
conveyance to another corporation of the property of Company as an entirety or substantially as an
entirety, or there shall be a voluntary or involuntary dissolution, liquidation or winding up of
Company, then, in any one or more of said cases, Company shall use reasonable best efforts to give
at least 20 days’ prior written notice to the registered holder of the Notes at the addresses of
each as shown on the books of Company as of the date on which (i) the books of Company shall close
or a record shall be taken for such stock dividend,





32









 







distribution or subscription rights or (ii) such non-bankruptcy reorganization,
reclassification, consolidation, merger, sale or conveyance, dissolution, liquidation or winding up
shall take place, as the case may be, provided that in the case of any Organic Change to
which Section 8.1(g) applies Company shall use reasonable best efforts to give at least 30
days’ prior written notice as aforesaid. Such notice shall also specify the date as of which the
holders of the Common Stock of record shall participate in such dividend, distribution or
subscription rights or shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such non-bankruptcy reorganization, reclassification, consolidation,
merger, sale or conveyance or participate in such dissolution, liquidation or winding up, as the
case may be. Failure to give such notice shall not invalidate any action so taken.




          (i) Upon any adjustment of the Conversion Price then in effect and any increase or decrease in
the number of shares of Common Stock issuable upon the operation of the conversion set forth in
this Section 8.1, then, and in each such case, Company shall promptly deliver to each
holder of the Notes, a certificate signed by the President or a Vice President and by the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant Secretary of Company setting forth in
reasonable detail the event requiring the adjustment and the method by which such adjustment was
calculated and specifying the Conversion Price then in effect following such adjustment and the
increased or decreased number of shares issuable upon the conversion granted by this Section
8.1, and shall set forth in reasonable detail the method of calculation of each and a brief
statement of the facts requiring such adjustment.




9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES




          9.1 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 and
under the Notes:




          (a) Company shall fail to make any payment of principal of, or interest on or any other amount
owing in respect of, the Notes, or any of the other Obligations when due and payable or declared
due and payable, including pursuant to Section 2.4 or 2.5 hereof, which, other
than principal or interest, shall have remained unremedied for a period of three (3) Business Days.




          (b) Company shall fail or neglect to perform, keep or observe any of the provisions of
Section 5.2 hereof.




          (c) Company shall fail or neglect to perform, keep or observe any other provision of this
Agreement or of any of the other Loan Documents, and the same shall remain unremedied for a period
of twenty (20) days after the earlier of knowledge thereof by Company or the receipt of written
notice of any such failure from the Required Purchasers.




33









 








          (d) A default shall occur under any other agreement, document or instrument to which Company
or any Subsidiary is a party or by which Company or any of its Subsidiaries or any of their
property is bound, and such default (i) involves the failure to make any payment (whether of
principal, interest or otherwise) due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) in respect of any Indebtedness of Company or any of its
Subsidiaries in an aggregate amount exceeding $3,000,000, (ii) causes (or permits any holder of
such Indebtedness or a trustee to cause) such Indebtedness or a portion thereof in an aggregate
amount exceeding $3,000,000, to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment.




          (e) An event of default has occurred and is continuing under the First Interstate Loan
Documents.




          (f) Any representation or warranty herein or in any Loan Document or in any written statement
pursuant thereto or hereto, report, financial statement or certificate made or delivered to the
Collateral Agent or any Purchaser by Company pursuant hereto or thereto shall be untrue or
incorrect in any material respect, as of the date when made.




          (g) Any assets with a value, individually or in the aggregate, in excess of $250,000 of
Company or any of its Subsidiaries shall be 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 Company or any of its Subsidiaries and shall remain unstayed or
undismissed for sixty (60) consecutive days; or Company or any of its Subsidiaries shall have
concealed, removed or permitted to be concealed or removed, any part of its property, with intent
to hinder, delay or defraud its creditors or any of them or made or suffered a transfer of any of
its property or the incurring of an obligation which is fraudulent under any bankruptcy, fraudulent
conveyance or other similar law.




          (h) A case or proceeding shall have been commenced against Company or any of its Subsidiaries
in a court having competent jurisdiction seeking a decree or order in respect of Company or any of
its Subsidiaries (i) under title 11 of the United States Code, as now constituted or hereafter
amended, 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) of Company or any of its Subsidiaries or of any substantial part of its or their
properties, or (iii) ordering the winding-up or liquidation of the affairs of Company or any of its
Subsidiaries and such case or proceeding shall remain undismissed or unstayed for sixty (60)
consecutive days or such court shall enter a decree or order granting the relief sought in such
case or proceeding.




          (i) Company or any of its Subsidiaries shall (i) file a petition seeking relief under title 11
of the United States Code, as now constituted or hereafter amended, or any other applicable
federal, state or foreign bankruptcy or other similar law, (ii) consent to the institution of
proceedings thereunder or to the filing of any such






34









 







petition or
to the appointment of or taking possession by a custodian, receiver, liquidator, assignee,
trustee or sequestrator (or similar official) of Company or any of its Subsidiaries or of any
substantial part of its properties, (iii) fail generally to pay its debts as such debts become due,
or (iv) take any corporate action in furtherance of any such action.




          (j) Final judgment or judgments (after the expiration of all times to appeal therefrom) for
the payment of money in excess of $3,000,000 in the aggregate shall be rendered against Company or
any of its Subsidiaries and the same shall not be (i) fully covered by insurance (subject to
standard deductibles), or (ii) vacated, stayed, bonded, paid or discharged for a period of thirty
(30) days.




          (k) (i) With respect to any Plan, a prohibited transaction within the meaning of Section 4975
of the IRC or Section 406 of ERISA occurs which would reasonably be expected to result in direct or
indirect liability to Company or any of its Subsidiaries, (ii) with respect to any Title IV Plan,
the filing of a notice to voluntarily terminate any such plan in a distress termination, (iii) with
respect to any Multiemployer Plan, Company, any of its Subsidiaries or any ERISA Affiliate shall
incur any Withdrawal Liability, (iv) with respect to any Pension Plan subject to Section 412 of the
Code or Section 302 of ERISA, Company, any of its Subsidiaries or any ERISA Affiliate shall incur
an accumulated funding deficiency or request a funding waiver from the IRS, or (v) with respect to
any Title IV Plan or Multiemployer Plan which has an ERISA Event not described in clauses (ii) -
(iv) hereof, in the reasonable determination of the Agent there is a reasonable likelihood for
termination of any such plan by the PBGC; provided, however, that the events listed
in clauses (i) — (v) hereof shall constitute Events of Default only if the liability, deficiency or
waiver request of Company, any of its Subsidiaries or any ERISA Affiliate, exceeds $3,000,000 in
any case set forth in (i) — (v) above, or exceeds $3,000,000 in the aggregate for all such cases.




          (l) There shall occur any Change of Control.




          9.2 Remedies. If any Event of Default specified in Section 9.1 shall have
occurred and be continuing, the Required Purchasers may, without notice, declare all Obligations to
be forthwith due and payable, whereupon all such Obligations shall become and be due and payable,
without presentment, demand, protest or further notice of any kind, all of which are expressly
waived by Borrower; provided, however, that upon the occurrence of an Event of
Default specified in Section 9.1(h) or (i) hereof with respect to any Credit Party,
such Obligations shall become due and payable without declaration, notice or demand by the Required
Purchasers.




          The Collateral Agent or the Required Purchasers may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Event of Default as it shall deem
advisable in its best interests, including any action (or the failure to act) pursuant to the Loan
Documents. Failure by the Collateral Agent or the Required Purchasers to exercise any remedy shall
not constitute a waiver of the right to exercise the same at any other time. In the event that any
action is taken by any Person in




35









 







response to an Event of Default, including the exercise of rights
or the pursuit of
remedies by the Collateral Agent or the Required Purchasers, the Collateral Agent or the
Required Purchaser, as relevant, may, by a writing delivered to Company, withdraw such pursuit of
remedies, dismiss the specified Event(s) of Default and waive compliance by Company with any
provisions of this Agreement, provided that no such withdrawal, dismissal or waiver may
adversely and disproportionately affect any Note as compared to the effect on the Notes held by any
other Purchaser, without the prior written consent of such Purchaser whose Notes are adversely and
disproportionately affected.




          9.3 Waivers by Company. Except as otherwise provided for in this Agreement and
applicable law, Company waives (i) presentment, demand and protest and notice of presentment,
dishonor notice of intent to accelerate and notice of acceleration, (ii) all rights to notice and a
hearing prior to the Collateral Agent taking possession or control of, or to the Collateral Agent’s
replevy, attachment or levy upon, the Collateral or any bond or security which might be required by
any court prior to allowing the Collateral Agent to exercise any of its remedies, and (iii) the
benefit of all valuation, appraisal and exemption laws. Company acknowledges that it has been
advised by counsel of its choice with respect to this Agreement, the other Loan Documents and the
transactions evidenced by this Agreement and the other Loan Documents.




          9.4 Right of Set-Off. Upon the occurrence and during the continuance of any Event of
Default, each Purchaser is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any time owing by such
Purchaser to or for the credit or the account of Company against any and all of the obligations of
Company now or hereafter existing under this Agreement and the Notes held by such Purchaser
irrespective of whether or not such Purchaser shall have made any demand under this Agreement or
the Notes and although such obligations may be unmatured. Each Purchaser agrees promptly to notify
Company after any such set-off and application made by such Purchaser; provided,
however, that the failure to give such notice shall not affect the validity of such set-off
and application. The rights of each Purchaser under this Section are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which such Purchaser may
have.




          9.5 Appointment of the Collateral Agent. The Notes shall be entitled to the benefits
of certain security to be held by Tontine Capital Associates, L.P., or its successor, as collateral
agent for Purchasers (the “Collateral Agent”) pursuant to the terms of this Agreement and
the other Loan Documents. Each Purchaser hereby designates and appoints the Collateral Agent as
the agent of such Purchaser under the Loan Documents and each such Purchaser irrevocably authorizes
the Collateral Agent, in such capacity, to take such action on its behalf under the provisions of
the Loan Documents and to exercise such powers and perform such duties as are expressly delegated
to the Collateral Agent by the terms of the Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in the Loan
Documents, the Collateral Agent shall not have any





36









 







duties, obligations or responsibilities, except those expressly set forth therein, or any
fiduciary relationship with any Purchasers, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into the Loan Documents or otherwise exist against
the Collateral Agent. Without limiting the generality of the foregoing, the Collateral Agent is
hereby expressly authorized to execute any and all documents (including releases) with respect to
the Collateral (as defined in the Security Agreement and the Pledge Agreement) and the rights of
Purchasers with respect thereto, as contemplated by and in accordance with the provisions of the
Loan Documents. The Collateral Agent may execute any of its duties under the Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Collateral Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.




10. INDEMNIFICATION




          Company agrees to indemnify and hold harmless the Collateral Agent, each Purchaser and its
respective Affiliates and their respective officers, directors and employees from and against any
losses, liabilities, obligations, damages, penalties, actions, proceedings, judgments, suits,
claims, costs, fees, expenses and disbursements (including, without limitation, reasonable
attorneys’ fees and disbursements) of any kind (“Losses”) which are imposed upon, incurred
by or asserted against the Collateral Agent, Purchaser or such other indemnified Persons as a
result of the Collateral Agent or such Purchaser having entered into this Agreement or any of the
other Loan Documents or relating to or arising out of any untrue representation, breach of warranty
or failure to perform any covenants or agreement by Company contained herein or in any certificate
or document delivered pursuant hereto or arising out of any Environmental Law applicable to Company
or its Subsidiaries or otherwise relating to or arising out of the transactions contemplated
hereby; provided, however, that Company shall not be liable for such
indemnification to such indemnified Person to the extent that any such Losses result from such
indemnified Person’s gross negligence or willful misconduct.




11. MISCELLANEOUS




          11.1 Complete Agreement; Modification of Agreement; Sale of Interest. (a) The
Transaction Documents constitute the complete agreement between the parties with respect to the
subject matter hereof and thereof, supercede any previous agreement or understanding between them
relating hereto or thereto and may not be modified, altered or amended except as provided therein,
or in the case of the Loan Documents by an agreement in writing signed by Company and Purchasers in
accordance with Section 11.1(d) hereof. Company may not sell, assign or transfer any of
the Loan Documents or any portion thereof, including, without limitation, Company’s rights, title,
interests, remedies, powers and duties hereunder or thereunder.




37









 








          (b) In the event a Purchaser assigns or otherwise transfers all or any part of the Notes,
Company shall, upon the request of such Purchaser issue new Notes to effectuate such assignment or
transfer.




          (c) Each Purchaser may sell, assign, transfer or negotiate to (i) one or more of its
Affiliates, other lenders, commercial banks, insurance companies, other financial institutions or
(ii) any other Person acceptable to Company, all or a portion of its rights and obligations under
the Notes and the other Loan Documents held by such Purchaser and this Agreement; provided,
however, that acceptance of such assignment by any assignee shall constitute the agreement
of such assignee to be bound by the terms of this Agreement applicable to such Purchaser;
provided further that the rights of Tontine set forth in Section 7.1 and
7.2 may not be transferred or assigned other than to Affiliates of Tontine; and
provided further, no Purchaser may (except to its Affiliates) sell, assign, transfer or
dispose of, whether through the sale of participations, assignment, transfer or other disposition
or otherwise, less than $1,000,000 principal amount of Notes. From and after the effective date of
such an assignment, (x) the assignees thereunder shall, in addition to the rights and obligations
hereunder held by it immediately prior to such effective date, have the rights and obligations
hereunder that have been assigned to it pursuant to such assignment and (y) the assignor thereunder
shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to
such assignment, relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an assignment and acceptance covering all or the remaining portion of an
assignor’s rights and obligations under this Agreement, such assignor shall cease to be a party
hereto).




          (d) No amendment or waiver of any provision of this Agreement, the Notes or any other
Transaction Document, nor consent to any departure by Company therefrom, shall in any event be
effective unless the same shall be in writing and signed by Company and the Required Purchasers,
and then such waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver or
consent shall, unless in writing and signed by each holder of a Note affected thereby do any of the
following: (i) subject such holder to any additional obligations, (ii) reduce the principal of, or
interest on, the Notes or other amounts payable hereunder or release or discharge Company from its
obligations to make such payments, (iii) postpone any date fixed for any payment of principal of,
or interest on, the Notes or other amounts payable hereunder, (iv) change the aggregate unpaid
principal amount of the Notes, or the number of holders thereof, which shall be required for such
holders or any of them to take any action hereunder, (v) increase the Conversion Price or (vi)
amend this Section 11.1(d).




          11.2 Fees and Expenses. Company shall pay all reasonable out-of-pocket expenses of
the Collateral Agent and each Purchaser in connection with the preparation of the Transaction
Documents and the transactions contemplated thereby, including the reasonable fees and expenses of
one counsel to the Collateral Agent and Purchasers collectively and, if reasonably requested by the
Collateral Agent or Purchasers, one local counsel in each jurisdiction in which collateral is
located; provided




38









 







that in the event of a conflict of interest between the Collateral Agent and any Purchaser or
between Purchasers, Company shall pay all reasonable out-of-pocket fees and expenses of such
additional counsel as may be necessary. If, at any time or times, regardless of the existence of
an Event of Default (except with respect to paragraph (iii) below, which shall be subject to an
Event of Default having occurred and be continuing), the Collateral Agent and Purchasers shall
employ counsel or other advisors for advice or other representation or shall incur reasonable legal
or other costs and expenses in connection with:




               (i) any amendment, modification or waiver, or consent with respect to, any of the Loan
Documents or advice in connection with the administration of the loans made pursuant hereto or its
rights hereunder or thereunder;



               (ii) any litigation, contest, dispute, suit, proceeding or action (whether instituted by the
Collateral Agent, Purchaser, Company, any Subsidiary of Company or any other Person) in any way
relating to any of the Transaction Documents or any other agreements to be executed or delivered in
connection herewith; or



               (iii) any attempt to enforce any rights of a Purchaser against Company, WRI or any other
Person, that may be obligated to such Purchaser by virtue of any of the Transaction Documents;


then, and in any such event, the reasonable attorneys’ and other parties’ fees arising from such
services, including those of any appellate proceedings, and all expenses, costs, charges and other
fees incurred by such counsel and others in any way or respect arising in connection with or
relating to any of the events or actions described in this Section shall be payable, on demand, by
Company to the Collateral Agent and each such Purchaser and shall be additional Obligations under
this Agreement and the other Loan Documents; provided, however, that Company shall
not be required to and shall not pay the fees and expenses of more than one counsel to the
Collateral Agent and Purchasers collectively and, if reasonably requested by the Collateral Agent
or Purchasers, one local counsel in each jurisdiction in which collateral is located unless there
is a conflict of interest between the Collateral Agent and any Purchaser or between Purchasers, in
which case Company shall pay all reasonable out-of-pocket fees and expenses of such additional
counsel as may be necessary. Without limiting the generality of the foregoing, such expenses,
costs, charges and fees may include: paralegal fees, costs and expenses; accountants’ and
investment bankers’ fees, costs and expenses; court costs and expenses; photocopying and
duplicating expenses; court reporter fees, costs and expenses; long distance telephone charges; air
express charges; telegram charges; secretarial overtime charges; and expenses for travel, lodging
and food paid or incurred in connection with the performance of such legal services.




          11.3 No Waiver by Purchaser. A Purchaser’s failure, at any time or times, to require
strict performance by Company of any provision of this Agreement and any of the other Loan
Documents shall not waive, affect or diminish any right of such Purchaser thereafter to demand
strict compliance and performance therewith. Any





39









 







suspension or waiver by a Purchaser of an Event of Default by Company under the Loan Documents
shall not suspend, waive or affect any other Event of Default by Company under this Agreement and
any of the other Loan Documents whether the same is prior or subsequent thereto and whether of the
same or of a different type. None of the undertakings, agreements, warranties, covenants and
representations of Company contained in this Agreement or any of the other Loan Documents and no
Event of Default by Company under this Agreement and no defaults by Company under any of the other
Loan Documents shall be deemed to have been suspended or waived by a Purchaser, unless such
suspension or waiver is by an instrument in writing signed by an officer of such Purchaser and the
Required Purchasers and directed to Company specifying such suspension or waiver.




          11.4 Remedies. Each Purchaser’s rights and remedies under this Agreement shall be
cumulative and nonexclusive of any other rights and remedies which such Purchaser may have under
any other agreement, including without limitation, the Loan Documents, the other Transaction
Documents, by operation of law or otherwise.




          11.5 Waiver of Jury Trial. The parties hereto waive all right to trial by jury in any
action or proceeding to enforce or defend any rights under the Transaction Documents.




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




          11.7 Binding Effect; Benefits. This Agreement and the other Transaction Documents
shall be binding upon, and inure to the benefit of, the successors of Company and each Purchaser
and the assigns, transferees and endorsees of each Purchaser.




          11.8 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 is in conflict with, or inconsistent with, any provision in
any of the other Loan Documents, the provision contained in this Agreement shall govern and
control.




          11.9 Governing Law. Except as otherwise expressly provided in any of the Transaction
Documents, in all respects, including all matters of construction, validity and performance, this
Agreement and the Obligations arising hereunder shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York applicable to contracts made and performed in
such state, without regard to the principles thereof regarding conflict of laws, and any applicable
laws of the United States of America. Each Purchaser and Company agree to submit to personal
jurisdiction and to





40












 




waive any objection as to venue in the federal or New York State courts located in the
County of New York, State of New York. Service of process on any Purchaser or Company in any
action arising out of or relating to any of the Transaction Documents shall be effective if mailed
to such party at the address listed in Section 11.10 hereof. Nothing herein shall preclude
a Purchaser or Company from bringing suit or taking other legal action in any other jurisdiction.




          11.10 Notices. Except as otherwise provided herein, whenever it is provided herein
that any notice, demand, request, consent, approval, declaration or other communication shall or
may be given to or served upon any of the parties by another, or whenever any of the parties
desires to give or serve upon another any such communication with respect to this Agreement, each
such notice, demand, request, consent, approval, declaration or other communication shall be in
writing and either shall be delivered in person with receipt acknowledged or by registered or
certified mail, return receipt requested, postage prepaid, or by telecopy and confirmed by telecopy
answerback addressed as follows:



If to Company:



Westmoreland Coal Company

2 North Cascade Avenue, 14th Floor

Colorado Springs, Colorado 80903

Attn: General Counsel

Telecopy Number: (719) 448-8097



with a copy to:



WilmerHale

1875 Pennsylvania Avenue, NW

Washington, D.C. 20006

Attn: Michael J. Levitin, Esq.

Telecopy Number: (202) 663-6363



If to Purchasers:



c/o Tontine Capital Management, L.L.C.

55 Railroad Avenue

Greenwich, Connecticut 06830

Attn: Joseph V. Lash

Telecopy Number: (203) 769-2010



with copies to:



Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153




41









 







Attn: Ted S. Waksman, Esq.

Telecopy Number: (212) 310-8007



If to the Collateral Agent:



Tontine Capital Associates, L.P.

55 Railroad Avenue

Greenwich, Connecticut 06830

Attn: Jeffrey L. Gendell

Telecopy Number: (203) 769-2010



with copies to:



Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Attn: Ted S. Waksman, Esq.

Telecopy Number: (212) 310-8007



or at such other address as may be substituted by notice given as herein provided. The giving of
any notice required hereunder may be waived in writing by the party entitled to receive such
notice. Every notice, demand, request, consent, approval, declaration or other communication
hereunder shall be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy answerback during normal
business hours, or three (3) Business Days after the same shall have been deposited with the United
States mail postage prepaid. Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration or other communication to the Persons designated above to receive
copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration or other communication.




          11.11 Survival. The representations and warranties of Company in this Agreement shall
survive the execution, delivery and acceptance hereof by the parties hereto and the closing of the
transactions described herein or related hereto.



          11.12 Section and Other Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or interpretation of
this Agreement.



          11.13 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which together shall be deemed to be one
and the same instrument.



          11.14 Publicity. Neither Purchasers nor Company shall issue any press release or make
any public disclosure regarding the transactions contemplated hereby unless such press release or
public disclosure is approved by the other party in advance.



42









 







Notwithstanding the foregoing, each of the parties hereto may file the text of this
Agreement and the other Loan Documents as exhibits to its filings with the SEC and may, in
documents required to be filed by it with the SEC or other regulatory bodies, make such statements
with respect to the transactions contemplated hereby as each may be advised by counsel is legally
necessary or advisable, and may make such disclosure as it is advised by its counsel is required by
law, subject to advance consultation with Purchasers.



          11.15 Confidential Information. For the purposes of this Agreement, “Confidential
Information” means information delivered to any Purchaser by or on behalf of Company or any
Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this
Agreement, provided that such term does not include information that (a) was publicly known prior
to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission
by such Purchaser or any person acting on such Purchaser’s behalf, or (c) otherwise becomes known
to such Purchaser other than through disclosure by Company or any Subsidiary. Each Purchaser will
maintain the confidentiality of such Confidential Information in accordance with procedures adopted
by such Purchaser in good faith to protect confidential information of third parties delivered to
such Purchaser, provided that such Purchaser may deliver or disclose Confidential Information to
(i) its directors, officers, employees, agents, attorneys, trustees and affiliates (to the extent
such disclosure reasonably relates to the administration of the investment represented by its Notes
or the Common Stock following the conversion thereof), (ii) its financial advisors and other
professional advisors who agree to hold confidential the Confidential Information substantially in
accordance with the terms of this Section 11.15, (iii) any other holder of any Note, (iv)
any federal or state regulatory authority having jurisdiction over such Purchaser, (v) any
nationally recognized rating agency that requires access to information about such Purchaser’s
investment portfolio, or (vi) any other Person to which such delivery or disclosure may be
necessary or appropriate (w) to effect compliance with any law, rule, regulation or order
applicable to such Purchaser, (x) in response to any subpoena or other legal process, (y) in
connection with any litigation to which such Purchaser is a party or (z) if an Event of Default has
occurred and is continuing, to the extent such Purchaser may determine such delivery and disclosure
to be necessary or appropriate in the enforcement or for the protection of the rights and remedies
under such Purchaser’s Notes and this Agreement. Each holder of a Note, by its acceptance of a
Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this
Section 11.15 as though it were a party to this Agreement. On reasonable request by
Company in connection with the delivery to any holder of a Note of information required to be
delivered to such holder under this Agreement or requested by such holder (other than a holder that
is a party to this Agreement or its nominee), such holder will enter into an agreement with Company
embodying the provisions of this Section 11.15.



          11.16 Compliance with First Interstate Loan Documents. Any obligation of Company or
any Guarantor in this Agreement that requires delivery of collateral or other items to, or the
possession or control of collateral or other items with, the Collateral



43









 







Agent or any Purchaser shall be deemed complied with and satisfied if such delivery is made
to, or such possession or control is with, the agent or any lender under the First Interstate Loan
Documents, so long as the First Interstate Loan Agreement is in full force and effect and has not
been terminated in accordance with its terms or otherwise.



          11.17 Termination of Standby Purchase Agreement. The Standby Purchase Agreement dated
as of May 2, 2007 by and between Company and Tontine, as amended by that certain Amended and
Restated First Amendment dated as of July 3, 2007 by and among the parties thereto, is hereby
terminated and of no further force and effect, other than Section 7(c) thereof which shall continue
in full force and effect.



[Remainder of Page Intentionally Blank]




44









 






          IN WITNESS WHEREOF, Company, the Collateral Agent and each Purchaser have executed this
Agreement as of the day and year first above written.




	 	 	 	 	 	 	 	 	 	 	 
	 	 	WESTMORELAND COAL COMPANY

as Company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	/s/ Keith E. Alessi	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:
	 	Keith E. Alessi	 	 
	 

	 	 	 	 	 	Title:
	 	Chief Executive Officer and President	 	 






	 	 	 	 	 	 	 	 	 	 	 
	 	 	TONTINE PARTNERS, L.P.

as a Purchaser	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	TONTINE MANAGEMENT, L.L.C.,	 	 
	 	 	 	 	its general partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	/s/ Jeffrey L. Gendell	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:
	 	Jeffrey L. Gendell	 	 
	 

	 	 	 	 	 	Title:
	 	Managing Member	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	TONTINE CAPITAL PARTNERS, L.P.

as a Purchaser	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	TONTINE CAPITAL MANAGEMENT, L.L.C.,	 	 
	 	 	 	 	its general partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	/s/ Jeffrey L. Gendell	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:
	 	Jeffrey L. Gendell	 	 
	 

	 	 	 	 	 	Title:
	 	Managing Member	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	TONTINE CAPITAL ASSOCIATES, L.P.

as the Collateral Agent	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	TONTINE CAPITAL
ASSOCIATES GP, L.L.C.,	 	 
	 	 	 	 	its general partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	/s/ Jeffrey L. Gendell	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:
	 	Jeffrey L. Gendell	 	 
	 

	 	 	 	 	 	Title:
	 	Managing Member	 	 






[Signature Page to Note Purchase Agreement]




 









 





ANNEX I




	 	 	 	 	 
	Purchaser	 	Principal Amount of Notes
	Tontine Partners, L.P.
	 	 	$         7,500,000	 
	Tontine Capital Partners, L.P.
	 	 	$         7,500,000	 
	Total
	 	 	$       15,000,000	 






Annex I





 









 






Exhibit A

to

Senior Secured Convertible Note Purchase Agreement




[Form of Senior Secured Convertible Note]




          THIS NOTE AND THE COMMON STOCK (THE “COMMON STOCK”) OF WESTMORELAND COAL COMPANY (THE
“COMPANY”) ISSUABLE UPON CONVERSION HEREOF HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), NOR UNDER ANY STATE SECURITIES
LAWS, AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS, OTHER THAN IN CONNECTION WITH ANY TRANSFER TO ANY AFFILIATE OF TONTINE, THE COMPANY
RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR AN OPINION REASONABLY SATISFACTORY TO THE COMPANY
OF COUNSEL TO THE HOLDER THAT SAID SECURITIES MAY BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED, AS THE
CASE MAY BE, WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.




          THIS NOTE IS SUBJECT TO: (1) THE TERMS OF A SENIOR SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT
(AS AMENDED, RESTATED, AMENDED AND RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME,
THE “NOTE AGREEMENT”), DATED AS OF MARCH 4, 2008, (2) THE TERMS OF A PLEDGE AGREEMENT (AS AMENDED,
RESTATED, AMENDED AND RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, THE “PLEDGE
AGREEMENT”), DATED AS OF MARCH 4, 2008, AND (3) THE TERMS OF A SECURITY AGREEMENT (AS AMENDED,
RESTATED, AMENDED AND RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, THE “SECURITY
AGREEMENT”), DATED AS OF MARCH 4, 2008. THE NOTE AGREEMENT, THE PLEDGE AGREEMENT AND THE SECURITY
AGREEMENT ARE INCORPORATED HEREIN BY REFERENCE. NOTWITHSTANDING ANY CONTRARY STATEMENT CONTAINED
IN THE WITHIN INSTRUMENT, NO PAYMENT ON ACCOUNT OF THE PRINCIPAL OR INTEREST HEREON SHALL BECOME
DUE OR PAID EXCEPT IN ACCORDANCE WITH THE TERMS OF THE NOTE AGREEMENT.




WESTMORELAND COAL COMPANY

SENIOR SECURED CONVERTIBLE NOTE DUE March 4, 2013




      



			
	$15,000,000
	 	March 4, 2008






          FOR VALUE RECEIVED, the undersigned, Westmoreland Coal Company, a Delaware corporation (the
“Company”), hereby promises to pay to [                                        ] or its registered assigns (the “Purchaser”) at
[                                        ], on March 4, 2013 (the “Maturity Date”), the principal sum of FIFTEEN MILLION
DOLLARS ($15,000,000) as such principal amount may be increased from time to time by interest paid
in kind in accordance with Section 2.4(d) of the Note Agreement (as defined below) or such lesser
principal amount thereof as may remain outstanding in lawful money of the United States of America
in immediately available



A-1









 







Exhibit A

to

Senior Secured Convertible Note Purchase Agreement




[Form of Senior Secured Convertible Note]



funds, and to pay interest from the date hereof on the principal amount
hereof from time to time outstanding, in like funds, at said office, at a rate or rates per annum
and payable on such dates as determined pursuant to the terms of that certain Senior Secured
Convertible Note Purchase Agreement dated as of March 4, 2008 by and among the Company, the
Purchaser and the other parties from time to time party thereto (as amended, restated, amended and
restated, supplemented or otherwise modified from time to time, the “Note Agreement”).




          This note (this “Note”) is one of the series of notes issued pursuant to the Note Agreement,
and is subject in all respects to the provisions thereof; the Note Agreement, among other things,
contains provisions for the acceleration of the maturity of this Note upon the happening of certain
events, conversion of any amount owing hereunder into certain equity securities of the Company,
restrictions on the transfer hereof and for the amendment or waiver of certain provisions of the
Note Agreement, all upon the terms and conditions therein specified.




          This Note is entitled to the benefits of a second priority lien on certain security pursuant
to the terms of (i) that certain Pledge Agreement, dated as of March 4, 2008, by and among the
Company, WRI and the Collateral Agent named therein, as the same may be amended, restated, amended
and restated, supplemented or otherwise modified from time to time, and (ii) that certain Security
Agreement, dated as of March 4, 2008, by and among WRI and the Collateral Agent named therein, as
the same may be amended, restated, amended and restated, supplemented or otherwise modified from
time to time.




          The Company hereby waives diligence, presentment, demand, protest and notice of any kind
whatsoever, other than as expressly required by the Note Agreement.




[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]




A-2









 







Exhibit A

to

Senior Secured Convertible Note Purchase Agreement




[Form of Senior Secured Convertible Note]




          This Note shall be construed in accordance with and governed by the laws of the State of New
York without giving effect to principles of conflicts of laws.




	 	 	 	 	 	 	 
	 	 	WESTMORELAND COAL COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 






[signature
page to [______] note]