Document:

exv10w1

 

Exhibit 10.1

AMENDED
AND RESTATED FIRST AMENDMENT TO STANDBY PURCHASE AGREEMENT

     This
AMENDED AND RESTATED FIRST AMENDMENT TO STANDBY PURCHASE AGREEMENT (this “Amendment”), dated as of July 3, 2007, by and among Westmoreland
Coal Company, a Delaware corporation (the “Company”), Tontine Capital Partners, L.P., a Delaware
limited partnership (“Standby Purchaser”), and
Silverhawk Capital Partners GP, LLC, a Delaware limited
liability company (“Additional Purchaser”), amends that certain Standby Purchase Agreement (the
“Original Agreement”), dated as of May 2, 2007, by and between the Company and Standby Purchaser.

W I T N E S S E T H :

     WHEREAS, the parties hereto wish to amend the terms of the Original Agreement, as set forth
herein;

     WHEREAS,
this Amended and Restated First Amendment to Standby Purchase
Agreement reflects the correct name of the Additional Purchaser;

     NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, the
parties hereto agree (i) that Additional Purchaser shall be added as a party to the Original
Agreement and shall be entitled to the rights under, and bound by the terms of the Original
Agreement, as amended by this Amendment, applicable to Additional Purchaser (capitalized terms used
herein without definition shall have the respective meaning assigned to such terms in the Original
Agreement), and (ii) as follows:

          1. Amendment to Certain Other Definition. Section 1 of the Original Agreement is
hereby amended as follows:

               (a) The following definition will be added to Section 1 of the Original Agreement immediately
after the definition of the term “Agreement”:

                    “‘AP Securities’ shall mean the shares of Common Stock that are to be purchased by Additional
Purchaser pursuant to Section 22 hereof.”

                    “‘Change of Control Transaction’ shall mean any merger, consolidation, recapitalization, stock
purchase, share exchange, asset acquisition or other business combination involving the Company or
any of its Subsidiaries in one or a series of related events in which the holders of at least a
majority of the Company’s Common Stock are entitled to sell or exchange their shares of Common
Stock for cash, equity securities of another issuer, any combination thereof or any other
consideration.”

                    “‘Immediate Family Member’ shall have the meaning set forth in Item 404 of Regulation S-K.”

               (b) The term “Closing” is hereby amended to add the words “and Section 22” after the words
“Section 2”.

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          2. New Section 22. The Original Agreement is hereby amended by adding the following
immediately after Section 21 of the Original Agreement:

               Section 22. Additional Purchaser.

                    “(a) Purchase of Shares of Common Stock by Additional Purchaser. Subject to the terms and
conditions set forth in this Agreement:

                         (i) If there are any Unsubscribed Shares that Standby Purchaser is not permitted to purchase
as a result of the cap set forth in Section 2(c) hereof, then Additional Purchaser shall purchase
such Unsubscribed Shares at the Subscription Price; provided, however, that
Additional Purchaser shall not purchase any Unsubscribed Shares that would cause Additional
Purchaser to pay an aggregate purchase price hereunder in excess of ten million two hundred
thousand dollars ($10,200,000).

                         (ii) If after giving effect to Additional Purchaser’s purchase of Unsubscribed Shares, if
any, Additional Purchaser has not purchased a number of shares of Common Stock equal to a purchase
price of ten million two hundred thousand dollars ($10,200,000), Additional Purchaser shall have
the option, exercisable in its sole discretion, to purchase at the Closing, at the Subscription
Price, a number of shares of Common Stock up to such shortfall.

                         (iii) Payment of the Subscription Price for the AP Securities shall be made, on the Closing
Date, against delivery of certificates evidencing the AP Securities, in United States dollars by
means of certified or cashier’s checks, bank drafts, money orders or wire transfers. Additional
Purchaser shall be made a party to the Registration Rights Agreement.

                    (b) Representations and Warranties of the Company.

                         (i) Subject to the next sentence and to clause (ii) of this sub-section, the Company
represents and warrants to Additional Purchaser that the representations and warranties contained
in Section 4 of this Agreement are true and correct as of the date of the First Amendment to
Standby Purchase Agreement, dated as of July 3, 2007 (the “Amendment Date”), by and among the
Company, the Standby Purchaser and Additional Purchaser (the “Amendment”), as if made on the
Amendment Date. For purposes of the foregoing, each reference to “Standby Purchaser” in such
representations and warranties shall be deemed to be a reference to “Additional Purchaser.” All
references to the “Agreement” shall be deemed to refer to this Agreement as amended by the
Amendment.

                         (ii) Section 4(i) of the Original Agreement is hereby amended to read as follows: “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

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prior to the Amendment Date in the Company’s public filings pursuant to the Exchange Act and
matters disclosed prior to the Amendment Date in writing by the Company to Standby Purchaser and
Additional Purchaser.”

                    (c) Representations and warranties of Additional Purchaser.

                         (i) Additional Purchaser represents and warrants to the Company, as of the Amendment Date,
that Additional Purchaser is a limited liability company duly organized, validly existing and in
good standing under the laws of Delaware.

                         (ii) Subject to the next sentence, Additional Purchaser hereby makes, with respect to itself
as of the Amendment Date, each of the representations and warranties set forth in Sections 5(b),
5(c) and 5(d) of this Agreement to the Company. For purposes of the foregoing, each reference to
“Standby Purchaser” and “Securities” in such representations and warranties shall be deemed to be a
reference to “Additional Purchaser” and “AP Securities”, respectively.

                         (iii) Additional Purchaser represents and warrants to the Company that (A) neither it nor any
of its Affiliates is an Affiliate of Standby Purchaser, (B) none of it, its Affiliates and any
Immediate Family Member of any of its Affiliates is a director, officer, employee, partner (limited
or general) or member of Standby Purchaser or, to its knowledge, any Affiliate of Standby Purchaser
or any entity of which Standby Purchaser or any Affiliate thereof owns 5% or more, (C) from January
1, 2004 to the present, none of it, its Affiliates, and any Immediate Family Member of any of its
Affiliates has accepted any consulting, advisory or other compensatory fee or payment from Standby
Purchaser, or, to its knowledge, any Affiliate of Standby Purchaser or any entity of which Standby
Purchaser or any Affiliate thereof owns 5% or more, and (D) there are no contracts, arrangements,
understandings or relationships (legal or otherwise) between Additional Purchaser and Standby
Purchaser with respect to the voting of any shares of Common Stock.

                    (d) Deliveries at Closing.

                         (i) At the Closing, the Company shall deliver to Additional Purchaser the following:

                              (A) A certificate or certificates representing the number of shares of Common Stock issued to
Additional Purchaser pursuant to Section 22(a) of this Agreement; and

                              (B) A certificate of an officer of the Company on its behalf to the effect that the
representations and warranties of the Company contained in this Agreement are true and correct in
all material respects on and as of the Closing Date, with the same effect as if made on the Closing
Date.

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                         (ii) At the Closing, Additional Purchaser shall deliver to the Company the following:

                              (A) Payment of the Subscription Price of the AP Securities purchased by Additional Purchaser
pursuant to Section 22(a) of this Agreement; and

                              (B) A certificate of Additional Purchaser to the effect that the representations and
warranties of Additional Purchaser contained in this Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect as if made on the Closing Date.

                    (e) Conditions to Closing. The obligations of Additional Purchaser to consummate the
transactions contemplated hereunder are subject to the fulfillment, or waiver in writing by
Additional Purchaser, prior to or on the Closing Date, of the following conditions:

                         (i) the obligations of Standby Purchaser shall not have been terminated under this Agreement
and Standby Purchaser and/or its Affiliates shall have purchased the full number of Securities that
it is required to purchase pursuant to Section 2 hereof.

                         (ii) The representations and warranties of the Company in Section 22(b) of this Agreement
shall be true and correct in all material respects as of the date hereof and 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).

                         (iii) The Company shall have executed and delivered to Additional Purchaser a duly executed
copy of the Registration Rights Agreement.

                         (iv) The AP Securities shall have been authorized for listing on the American Stock Exchange.

                         (vi) Each of the conditions set forth in (A) clauses (iii), (iv), and (v) of Section 9(a) of
this Agreement, and (B) Sections 9(c)(i) — (iv) of this Agreement shall have been satisfied.
Section 9(a)(iii) is hereby amended and restated to read in its entirety as follows:

                         “Subsequent to the execution and delivery of this Agreement and prior to the
Closing Date, and except for matters disclosed prior to the Amendment Date in the
Company’s public filings pursuant to the Exchange Act and matters disclosed prior
to the Amendment Date in writing by the Company to Standby Purchaser and
Additional Purchaser, there shall not have been any Material Adverse Effect and no
event shall have occurred or circumstance shall exist which would reasonably
likely result in a Material Adverse Effect;”

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Notwithstanding anything else contained herein, waiver of a closing condition or termination by
Additional Purchaser shall not be deemed a waiver or termination by Standby Purchaser or vice versa
nor shall any waiver of a closing condition or termination by the Company with respect to its
obligations to either Additional Purchaser or Standby Purchaser be deemed a waiver or termination
with respect to the other party.

                    (f) Restrictions on Transfer of AP Securities. Additional Purchaser shall be bound by the
terms of Section 11 of the Agreement as if incorporated and made a part of this Section 22(f);
provided, however, that for purposes of the foregoing each reference in Section 11
of the Agreement to “Standby Purchaser” and to “Securities” shall be deemed to be a reference to
“Additional Purchaser” and “AP Securities”, respectively.

                    (g) Lock-Up of AP Securities. Notwithstanding anything to the contrary set forth herein or in
the Registration Rights Agreement, Additional Purchaser agrees:

                         (i) provided that the last reported sale price of the Common Stock on the American Stock
Exchange on the trading date immediately preceding the date of the Closing is at least $22 per
share, that it will not Transfer any AP Securities to any Person until after the first anniversary
of the Closing; and

                         (ii) if the last reported sale price of the Common Stock on the American Stock Exchange on
the trading date immediately preceding the date of the Closing is less than $22 per share, that it
will not prior to the date that is six months following the Closing, Transfer any AP Securities to
any Person for consideration having a value exceeding $18 per share (subject to appropriate
adjustment to reflect any stock split, stock dividend, reverse stock split or like transaction
made, declared or effected with respect to the Common Stock);

provided, however, that the forgoing provisions of this Section 22(g) shall not
restrict (1) any Transfer by the Additional Purchaser to one or more of its Affiliates, provided
that the transferee in each case agrees to be subject to the terms of this Section 22(g) and
further provided that any Transfers by such transferees shall be aggregated with those of the
Additional Purchaser and with those of other such transferees for purposes of determining
compliance with clause (5) of this proviso; (2) any Transfer in connection with a tender offer for
the Company’s Common Stock, whether initiated by the Company or by a third party; (3) any other
transfer to the Company or its Affiliates; (4) any Transfer that is part of a Change of Control
Transaction; or (5) a Transfer of a number of AP Securities that, when aggregated with all previous
Transfers of AP Securities, does not exceed a percentage of the total AP Securities equal to the SP
Transfer Percentage. The “SP Transfer Percentage” shall be calculated from time to time by
dividing (A) the aggregate number of shares of Common Stock Transferred by the Standby Purchaser
and its Affiliates from and after the Closing Date, other than shares Transferred to any Affiliate
of the Standby Purchaser, by (B) the total number of shares of Common Stock

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held by Standby Purchaser and its Affiliates immediately following the Closing plus, if applicable,
the number of Additional Subscription Shares purchased by the Standby Purchaser and its Affiliates.
For purposes of calculating the percentages contemplated by clause (5) and the SP Transfer
Percentage, appropriate adjustments shall be made to reflect any stock split, stock dividend,
reverse stock split or like transaction made, declared or effected with respect to the Common
Stock.

                    (h) Indemnification and Contribution. The Company and Additional Purchaser shall be bound by
the terms of Section 13 of this Agreement as if incorporated and made a part of this Section 22(h);
provided, however, that for purposes of the foregoing each reference in Section 13
of this Agreement to “Standby Purchaser” and to “Standby Indemnified Persons” shall be deemed to be
a reference to “Additional Purchaser” and “Additional Indemnified Persons”, respectively. The
obligations of each of the Standby Purchaser under Section 13(b) of this Agreement and the
Additional Purchaser under this Section 22(h) to provide indemnification to Company Indemnified
Persons with respect to losses, claims, damages or liabilities arising out of or are based upon
information provided in writing to the Company by Standby Purchaser or Additional Purchaser, as the
case may be, specifically for use in any registration statement under which Securities or AP
Securities, as the case may be, are registered under the Securities Act at the request of Standby
Purchaser or Additional Purchaser, as the case may be, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, shall be subject to the same
limitations as are set forth in Section 6(b) of the Registration Rights Agreement as if such
limitations were incorporated into and made a part of this Agreement.

                    (i) Obligations of the Standby Purchaser and Additional Purchaser. The obligations of the
Standby Purchaser and Additional Purchaser under this Agreement are several and not joint or joint
and several and neither Standby Purchaser nor Additional Purchaser shall be liable for any breach
of any of the obligations of the other under this Agreement.

                    (j) Reimbursement of Expenses of Mr. Gardner. The Company agrees to promptly reimburse Ted
Gardner, the Managing Member of the Additional Purchaser, for his reasonable travel and other
direct out-of-pocket expenses in meeting with representatives of the Company in connection with his
determination whether or not to become a member of the Board. The Company agrees that Mr.
Gardner’s reasonable out-of-pocket expenses in connection with his attendance at Board and Board
committee meetings shall be reimbursed by the Company consistent with the Company’s policy for
reimbursing independent directors for such expenses.”

          3. Amendment to Section 4(f). Section 4(f) of the Original Agreement is hereby
amended to add the words “, AP Securities” immediately after the word “Securities” in the first
line and fifth line thereof.

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          4. Amendment to Section 7. Section 7 of the Original Agreement is hereby amended as
follows:

               (a) The words “and Additional Purchaser” shall be added immediately after the words “Standby
Purchaser” in each of clause (i) and clause (v) of Section 7(a) of the Original Agreement.

               (b) The words “and Additional Purchaser” shall be added immediately after the words “Standby
Purchaser” in the second line of clause (vii) of Section 7(a) of the Original Agreement and the
words “or Additional Purchaser” shall be added immediately after the words “Standby Purchaser” in
the fourth line of clause (vii) of Section 7(a) of the Original Agreement.

               (c) The words “, on the one hand,” shall be added immediately after the words “neither the
Company” and the words “or Additional Purchaser, on the other hand” shall be added immediately
after the words “nor Standby Purchaser” in Section 7(e) of the Original Agreement.

          5. Amendment to Section 9(b). Section 9(b) of the Original Agreement is hereby
amended as follows:

               (a) The words “and of Additional Purchaser in Section 22(c)” shall be added immediately after
the words “Section 5” in clause (i) of Section 9(b) of the Original Agreement.

               (b) The words “Each of Additional Purchaser and” shall be added immediately before the words
“Standby Purchaser” in clause (ii) of Section 9(b) of the Original Agreement.

          6. Amendment to Section 12. Section 12 of the Original Agreement is hereby amended as
follows:

               (a) Section 12(a) of the Original Agreement is hereby amended and restated to read in its
entirety as follows:

“Subject to the provisions of the last paragraph of Section 22(e), Standby Purchaser on one
hand may terminate at any time prior to the Closing Date its rights and obligations
hereunder and Additional Purchaser on the other hand may terminate at any time prior to the
Closing Date its rights and obligations hereunder by written notice to the Company if there
is a Material Adverse Effect or a Market Adverse Effect, in either case that is not cured
within twenty-one (21) days after the occurrence thereof (the “Cure Period”),
provided that the right to such termination after the occurrence of each Material
Adverse Effect or a Market Adverse Effect, which has not been cured within the Cure Period,
shall expire seven (7) days after the expiration of such Cure Period.”

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               (b) Section 12(b) of the Original Agreement is hereby amended and restated to read in its
entirety as follows:

                    “(b) Subject to the provisions of the last paragraph of Section 22(e):

                         (i) if there is a material breach of this Agreement by Standby Purchaser or Additional
Purchaser that is not cured within fifteen (15) days after receipt of written notice by
such breaching party, the Company may terminate this Agreement with respect to such
breaching party by written notice to the other parties hereto;

                         (ii) if there is a material breach of this Agreement by the Company that is not cured
within fifteen (15) days after receipt of written notice by the Company, either Standby
Purchaser or Additional Purchaser may terminate its rights and obligations hereunder by
written notice to the other parties hereto; or

                         (iii) the Company may terminate this Agreement on one hand or either Standby Purchaser
or Additional Purchaser may terminate its rights and obligations hereunder on the other
hand if the Closing has not occurred on or prior to November 15, 2007, for any reason
whatsoever, other than a material breach hereunder by such terminating party or failure of
the closing condition specified in Section 9(a)(iv).”

          7. Amendment to Section 14. Section 14 of the Original Agreement is hereby amended by
adding the words “, Additional Purchaser” immediately after the word “Company”.

          8. Amendment to Section 15. Section 15 of the Original Agreement is hereby amended by
adding the following after subsection (b):

               (c) if to Additional Purchaser, at:

Silverhawk
Capital Partners GP, LLC

1901 Roxborough Road

Suite 200

Charlotte, North Carolina 28203

Attn: Ted A. Gardner

Telecopy No.: (704) 366-6666

with a copy to:

Morrison Cohen LLP

909 Third Avenue

New York, New York 10022

Attention: David A. Scherl

Telecopy No.: (212) 735-8708

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          9. Amendment to Section 16. Section 16 of the Original Agreement is hereby amended
and restated in its entirety to read as follows:

               “Section 16. Assignment. This Agreement will be binding upon, and will inure to the
benefit of and be enforceable by, the parties hereto and their respective successors and assigns,
including any person to whom Securities or AP Securities are transferred in accordance herewith.
The rights and obligations under this Agreement, may be assigned, delegated or transferred, in
whole or in part, by Standby Purchaser or Additional Purchaser to any of its Affiliates over which
Standby Purchaser or Additional Purchaser, as the case may be, or any of its Affiliates exercises
investment authority, including, without limitation, with respect to voting and dispositive rights,
provided that any such assignee assumes the obligations of Standby Purchaser or Additional
Purchaser, as the case may be, hereunder and agrees to be bound by the terms of this Agreement in
the same manner as Standby Purchaser or Additional Purchaser, as the case may be. Standby
Purchaser or any of its Affiliates may assign, delegate or transfer, in whole or in part, its Basic
Subscription Privilege to any other Affiliate or to Standby Purchaser. Notwithstanding the
foregoing or any other provisions herein, no such assignment by Standby Purchaser or Additional
Purchaser will relieve Standby Purchaser or Additional Purchaser, as the case may be, or of its
obligations hereunder if such assignee fails to perform such obligations. In addition, upon the
request of Standby Purchaser, the Company and Standby Purchaser will negotiate in good faith to add
one or more third parties designated by Standby Purchaser as additional purchasers of Unsubscribed
Shares and to provide an option to each such additional purchaser, comparable to the Option set
forth in Section 3(a), to purchase additional shares of Common Stock in an amount to be mutually
agreed upon, at the Subscription Price. To the extent there are any such additional purchasers,
the Company and Standby Purchaser will negotiate in good faith to amend this Agreement to add any
such additional purchasers to this Agreement prior to the mailing of the Proxy Statement to the
stockholders of the Company.”

          10. Amendment to Section 17. Section 17 of the Original Agreement is hereby amended
by adding the words “, AP Securities” immediately after the words “Securities”.

          11. Amendment to Section 20. Section 20 of the Original Agreement is hereby amended
by adding the words “and Additional Purchaser” immediately after the words “Standby Purchaser” in
the second line thereof and the words “or Additional Purchaser” immediately after the words
“Standby Purchaser” in the fifth line thereof.

          12. Amendment to Section 21. Section 21 of the Original Agreement is hereby amended
as follows:

               (a) The words “or AP Securities” shall be added immediately after the word “Securities” in
Section 21(a) of the Original Agreement.

               (b) The following shall be added immediately after Section 21(c):

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               “(d) Notwithstanding any provision in this Agreement to the contrary:

                    (i) any amendment, supplement or modification of or to any provision of this Agreement, any
waiver of any provision of this Agreement, and any consent to any departure by any party from the
terms of any provision of this Agreement, shall be effective (A) only in the specific instance and
for the specific purpose for which made or given, and (B) only if it is made or given in writing
and signed by the Company and Standby Purchaser, provided, however, that if any
such amendment, supplement, modification or waiver materially adversely affects Additional
Purchaser, Additional Purchaser shall have the option to terminate its rights and obligations
hereunder by sending written notice of such termination to the parties hereto within forty eight
(48) hours after Additional Purchaser’s receipt of written notice of such amendment, supplement,
modification or waiver, and if Additional Purchaser fails to send such written notice within such
forty eight (48) hour period, Additional Purchaser shall be deemed to have consented to such
amendment, supplement, modification or waiver; and

                    (ii) except where notice is specifically required by this Agreement, no notice to or demand on
the Company in any case shall entitle the Company to any other or further notice or demand in
similar or other circumstances.”

          13. Amendment to Annex B of the Original Agreement. Annex B of the Original Agreement
is hereby amended as follows:

The words “on a pro rata basis” shall be added after the words “Registrable Securities” in clause
(iii)(A) of Section 7(f) of Annex B of the Original Agreement.

          14. Ratification of Agreement. Except as amended hereby, the Agreement shall remain
in full force and effect and is hereby ratified and confirmed.

          15. Counterparts. This Amendment may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all of which, when taken together, shall constitute
one and the same instrument.

          16. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PROVISIONS THEREOF.

[Remainder of Page Intentionally Left Blank]

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     In
Witness Whereof, the undersigned have executed this Amended
and Restated First Amendment to Standby Purchase Agreement as
of the date first written above.

	 	 	 	 	 
	 	WESTMORELAND COAL COMPANY

 	 
	 	By:  	/s/ David J. Blair
 	 
	 	 	Name:  	David J. Blair 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	TONTINE CAPITAL PARTNERS, L.P.
 	 
	 	By:  	TONTINE CAPITAL MANAGEMENT, L.L.C.,

its general partner
 	 
	 	  	By: 	/s/ Jeffrey L. Gendell
 	 
	 	 	 	Name:  Jeffrey L. Gendell 	 
	 	 	 	Title:    Managing Member 	 
	 

	 	 	 	 	 
	 	SILVERHAWK CAPITAL PARTNERS GP, LLC

 	 
	 	By:  	/s/
James C. Cook
 	 
	 	 	Name:  	James C. Cook 	 
	 	 	Title:  	Managing Member 	 
	 

Signature
Page to Amended and Restated

First Amendment to Standby Purchase Agreement

11Exhibit 10.1

Loan and Security Agreement

 

This Loan and Security Agreement is made and entered into effective as of June 15, 2006 between Lon Stalsberg, an individual (“Lender”), and Emerson Remodeling, Inc., a Utah corporation (“Borrower”).

 

Recitals

 

WHEREAS, Borrower is engaged or plans to engage in the business of acquiring real estate properties for renovation and resale; and

 

WHEREAS, Lender desires to loan Borrower the principal amount of $410,035.00 for the purpose of purchasing that certain residential property located 1772 East Holladay Boulevard, Holladay, Utah 84124 (the “Property”); and

 

WHEREAS, Lender also desires to provide additional loans to Borrower from time to time for the renovation and improvement of the Property and for working capital; and

 

WHEREAS, Borrower has agreed to compensate Lender by paying it loan fees and interest on the outstanding balance of the Loans as provided herein;

 

Agreement

 

Now, Therefore, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, Lender and Borrower agree as follows.

 

1. Primary Loan. Lender shall loan Borrower the principal amount of $410,035 for the purchase of the Property (the “Primary Loan”). The Primary Loan shall be represented by a Trust Deed Note in the form attached hereto as Exhibit A and incorporated herein by reference.

 

2. Secondary Loans. Lender will make additional loans to Borrower in such amounts as may be determined by Lender in its sole discretion (the “Secondary Loans”); provided, no Default or Event of Default has occurred and is continuing. Each Secondary Loan shall be represented by a Trust Deed Note in the form attached hereto as Exhibit B and incorporated herein by reference.  The Primary Loan and the Secondary Loans are collectively referred to in this Agreement as the “Loans.”

 

3. Loan Fees. Borrower agrees to pay Lender the following loan fees: (i) Four Thousand One Hundred and 35/100 Dollars ($4,100.35); and (ii) an amount equal to Ten Percent (10%) of the after tax-profit realized by Borrower from the sale of the Property. Such loan fees shall be due and payable in a lump sum at such time as Borrower sells the Property. Such loan fees shall not be subject to interest charges. For purposes of this Section 3, the after-tax profit shall be calculated by taking the net sale price received by Borrower from the sale of Property and subtracting therefrom the cost of the Property, the cost of all improvements made to the Property and all expenses incurred by Borrower in connection with the renovation of the Property. The 

 

resulting amount shall then be further reduced by a percentage equal to the estimated amount of federal and state income tax payable by Borrower with respect to the profit on the sale of the Property. 

 

4. Interest. All Loans shall bear interest at the rate of Ten Percent (10%) per annum. Interest shall accrue and be payable in a lump sum at the time Borrower sells the Property. Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed. 

 

5. Prepayment. Borrower may at any time and from time to time prepay any Loan in whole or in part. Each prepayment will be applied as follows: (a) first, to the payment of interest accrued on all Loans outstanding, and (b) second, to the extent that the amount of such prepayment exceeds the amount of all such accrued interest, to the payment of principal on such Loan or Loans as Borrower may designate.

 

6. Security Interest. To secure the payment and performance of all of the Loans when due, Borrower shall record a Trust Deed against the Property in favor of Borrower, which Trust Deed shall be in substantially the same form as that attached hereto as Exhibit C and incorporated herein by reference.

 

7. Representations of Borrower. In order to induce Lender to enter into this Agreement and to make Loans, Borrower represents and warrants to Lender as follows, and Borrower covenants that the following representations will continue to be true, and that Borrower will at all times comply with all of the following covenants:

 

(a)       Borrower is and will continue to be, duly organized, validly existing and in good standing under the laws of Utah. Borrower is and will continue to be qualified and licensed to do business in all jurisdictions in which any failure to do so would have a material adverse effect on Borrower. The execution, delivery and performance by Borrower of this Agreement, and all other documents contemplated hereby (i) have been duly and validly authorized, (ii) are enforceable against Borrower in accordance with their terms (except as enforcement may be limited by equitable principles and by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to creditors’ rights generally), and (iii) do not violate Borrower’s articles of incorporation, or Borrower’s by-laws, or any law or any material agreement or instrument which is
binding upon Borrower or its properties, and (iv) do not constitute grounds for acceleration of any material indebtedness or obligation under any material agreement or instrument which is binding upon Borrower or its property.

 

(b)       Borrower is now, and will at all times in the future be, the sole owner of the Property. The Property is now and will remain free and clear of any and all liens, charges, security interests, encumbrances and adverse claims, except for the trust deed to be recorded in favor of Lender and an access easement to be granted near the rear of the Property. 

 

(c)       There is no claim, suit, litigation, proceeding or investigation pending or (to best of Borrower’s knowledge) threatened by or against or affecting Borrower in any court or 

 

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before any governmental agency which may result, either separately or in the aggregate, in any material adverse change in the financial condition or business of Borrower, or in any material impairment in the ability of Borrower to carry on its business in substantially the same manner as it is now being conducted. 

 

8. Term. This Agreement shall commence effective as of the date written above and continue in effect until such time as the Property has been sold by Buyer and all amounts due from Borrower to Lender hereunder have been paid in full.

 

9. Events of Default. The occurrence of any of the following events shall constitute an “Event of Default” under this Agreement, and Borrower shall give Lender immediate written notice thereof: (a) any event of default provided in the Trust Deed Notes or the Trust Deed should occur and be continuing; (b) Borrower shall fail to pay when due any Loan or any interest thereon or any other monetary obligation to Lender; (c) Borrower shall fail to perform any other non-monetary obligation, which failure is not cured within 30 business days after the date due, or if such default is not susceptible to cure within such 30 business day period, if Borrower has not commenced and diligently proceeded to cure such default within such 30 business day period; (d) dissolution, termination of existence, insolvency or business failure of Borrower, or
appointment of a receiver, trustee or custodian, for all or any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding by Borrower under any 

reorganization, bankruptcy, insolvency, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect; or (e) the commencement of any proceeding against Borrower under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect, which is not cured by the dismissal thereof within 30 days after the date commenced. 

 

10. Remedies. Upon the occurrence of any Event of Default, and at any time thereafter, Lender, at its option, and without notice or demand of any kind (all of which are hereby expressly waived by Borrower), may do any one or more of the following: (a) cease making Loans or otherwise extending credit to Borrower under this Agreement or any other document or agreement; (b) accelerate and declare all or any part of the Loans to be immediately due, payable, and performable, notwithstanding any deferred or installment payments allowed by any instrument evidencing or relating to any Loan; (c) pursue any of the other remedies provided for in the Trust Deed Notes and the Trust Deed.

 

11. Notices. Any and all notices and communications required or permitted hereunder shall be deemed to have been properly given if mailed, registered mail, return receipt requested, with postage prepaid, addressed as follows:

 

	
             
 	
            If to Lender:
 	
            Lon Stalsberg
 

	
             
 	
            4205 Park View Drive
 

	
             
 	
            Salt Lake City, Utah 84124
 

 

 

3

 

	
             
 	
            If to Borrower to:
 	
            Emerson Remodeling, Inc.
 

	
             
 	
            Atten: R. Scott Beebe, Secretary
 

	
             
 	
            1845 Baywood Drive
 

	
             
 	
            Salt Lake City, UT  84117
 

 

The parties may change the address at which notices are to be given hereunder by informing the other in writing pursuant to the foregoing provisions.

 

12. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state of Utah.

 

13. Attorney’s Fees. If any proceeding is brought by a party with respect to a matter or matters governed by this Agreement, all costs and expenses of the prevailing party incurred in connection with such proceeding, including reasonable attorney’s fees, shall be paid by the non-prevailing party.

 

14. Entire Agreement. This Agreement contains the entire agreement between the parties with respect to any written or oral negotiations, commitments and understandings. This Agreement may only be amended or modified pursuant to a written instrument signed by both parties.

 

15. Headings. The headings are for convenience only and will have no significance in the interpretation of this Agreement.

16. Assignment; Binding Effect. This Agreement and the rights and obligations hereunder shall not be assignable by either party without the prior written consent of the other party. This Agreement is binding on and will inure to the benefit of Lender and Borrower and their respective successors and permitted assigns.

 

17. Severability. If any term, covenant, condition or agreement of this Agreement or the application of it to any person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Agreement or the application of such term, covenant, condition or agreement to persons or circumstances, other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term, covenant, condition or agreement of this Agreement shall be valid and shall be enforced to the extent permitted by law. 

 

18. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one instrument.

 

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In Witness Whereof, this Loan and Security Agreement has been executed by the parties hereto as of the date first written above.

 

	
             
 	
            Lender:
 

 

 

	
             
 	
            /s/ Lon Stalsberg
 

	
             
 	
            Lon Stalsberg, an individual
 

 

	
             
 	
            Borrower:
 	
            Emerson Remodeling, Inc.
 

	
             
 	
            A Utah corporation
 

 

 

	
             
 	
            By /s/ Gregory C. Menges
 

	
             
 	
            Gregory C. Menges, President
 

 

5

 

Exhibit A to Loan and Security Agreement

 

Trust Deed Note

 

DO NOT DESTROY THIS NOTE: When paid, this Note, with Trust Deed securing the same, must be surrendered to Trustee for cancellation before reconveyance will be made.

______________________________________________________________________________

 

	
            $410,035.00
 	
            Salt Lake City, Utah
 

June 15, 2006

 

FOR VALUE RECEIVED, the undersigned, promises to pay to the order of Lon Stalsberg at 4205 Park View Drive, Salt Lake City, Utah 84124, or at such other place as the holder hereof may designate, the principal amount of FOUR HUNDRED TEN THOUSAND THIRTY-FIVE AND NO/100 DOLLARS ($410,035.00), together with interest from date at the rate of TEN PERCENT (10.0%) per annum on the unpaid principal, said principal and interest payable in a lump sum on such date as the undersigned sells the residential property located at 1772 East Holladay Boulevard, Holladay, Utah 84124. Each payment shall be applied first to the payment of accrued and unpaid interest and second to the reduction of principal.

 

If default occurs in the payment of such principal and interest or any part thereof, the holder hereof, at holder’s option and without notice or demand, may declare the entire principal balance and accrued interest immediately due and payable.

 

If this Note is collected by an attorney after default in the payment of principal or interest, either with or without suit, the undersigned, agrees to pay all costs and expenses of collection including a reasonable attorney’s fee.

 

The makers, sureties, guarantors and endorsers hereof severally waive presentment for payment, demand and notice of dishonor and nonpayment of this Note, and consent to any and all extensions of time, renewals, waivers or modifications that may be granted by the holder hereof with respect to the payment or other provisions of this note, and to the release of any security, or any part thereof, with or without substitution. This note is secured by a Trust Deed of even date herewith.

 

In Witness Whereof, this Trust Deed Note has been executed by the undersigned in Salt Lake City, Utah effective as of the date first written above.

 

	
             
 	
            Emerson Remodeling, Inc.
 

	
             
 	
            A Utah corporation
 

 

 

	
             
 	
            Gregory C. Menges
 

	
             
 	
            President
 

 

6

 

Exhibit B to Loan and Security Agreement

 

Trust Deed Note

 

DO NOT DESTROY THIS NOTE: When paid, this Note, with Trust Deed securing the same, must be surrendered to Trustee for cancellation before reconveyance will be made.

______________________________________________________________________________

 

	
            $__________
 	
            Salt Lake City, Utah
 

___________, 200__

 

FOR VALUE RECEIVED, the undersigned, promises to pay to the order of Lon Stalsberg at 4205 Park View Drive, Salt Lake City, Utah 84124, or at such other place as the holder hereof may designate, the principal amount of ______________________________ DOLLARS ($_________), together with interest from date at the rate of TEN PERCENT (10.0%) per annum on the unpaid principal, said principal and interest payable in a lump sum on such date as the undersigned sells the residential property located at 1772 East Holladay Boulevard, Holladay, Utah 84124. Each payment shall be applied first to the payment of accrued and unpaid interest and second to the reduction of principal.

 

If default occurs in the payment of such principal and interest or any part thereof, the holder hereof, at holder’s option and without notice or demand, may declare the entire principal balance and accrued interest immediately due and payable.

 

If this Note is collected by an attorney after default in the payment of principal or interest, either with or without suit, the undersigned, agrees to pay all costs and expenses of collection including a reasonable attorney’s fee.

 

The makers, sureties, guarantors and endorsers hereof severally waive presentment for payment, demand and notice of dishonor and nonpayment of this Note, and consent to any and all extensions of time, renewals, waivers or modifications that may be granted by the holder hereof with respect to the payment or other provisions of this note, and to the release of any security, or any part thereof, with or without substitution. This note is secured by a Trust Deed from the undersigned to Lon Stalsberg dated June 15, 2006 pertaining to the property located at 1772 East Holladay Boulevard, Holladay, Utah 84124.

 

In Witness Whereof, this Trust Deed Note has been executed by the undersigned in Salt Lake City, Utah effective as of the date first written above.

 

	
             
 	
            Emerson Remodeling, Inc.
 

	
             
 	
            A Utah corporation
 

 

 

	
             
 	
            Gregory C. Menges
 

	
             
 	
            President
 

 

7

 

Exhibit C to Loan and Security Agreement

 

WHEN RECORDED, MAIL TO:

Emerson Remodeling, Inc.

1845 Baywood Drive

	
            Salt Lake City, Utah 84117
 

 

TRUST DEED

 

THIS TRUST DEED is made this _____ day of _________, 200__ between Emerson Remodeling, Inc., a Utah corporation, as Trustor, whose address is 1845 Baywood Drive, Salt Lake City, Utah 84117, Paramount Title Corp., whose address is 1326 South 900 East, Salt Lake City, Utah 84105, as Trustee, and Lon Stalsberg, an individual, as Beneficiary.

 

Trustor hereby CONVEYS AND WARRANTS TO TRUSTEE IN TRUST, WITH POWER OF SALE, the following described property situated in Salt Lake County, Utah:

 

BEGINNING SOUTH 77° 04’ EAST 35.71 FEET AND SOUTH 11° 07’ EAST 663.2 FEET AND SOUTH 80° 46’ 50” EAST 403.6 FEET AND SOUTH 33.43 FEET FROM THE NORTH QUARTER CORNER OF SECTION 4, TOWNSHIP 2 SOUTH, RANGE I EAST SALT LAKE BASE & MERIDIAN; THENCE SOUTH 80° 46’ 50” EAST 134.08 FEET; THENCE SOUTH 2° 10’ EAST 138.32 FEET; THENCE WEST 95.85 FEET; THENCE NORTH 24 FEET; THENCE WEST 23 FEET; THENCE SOUTH 24 FEET; THENCE WEST 20 FEET; THENCE NORTH 159.91 FEET TO THE POINT OF BEGINNING.

 

Together with all buildings, fixtures and improvements thereon and all water rights, rights of way, easements, rents, issues, profits, income, tenements, hereditaments, privileges and appurtenances thereunto now or hereafter used or enjoyed with said property, or any part thereof;

 

FOR THE PURPOSE OF SECURING: (1) payment of the indebtedness evidenced by a promissory note dated June 15, 2006, in the principal sum of $410,035.00, payable to the order of Beneficiary at the times, in the manner and with interest as therein set forth; (2) payment of the indebtedness evidenced by a promissory note dated ___________, 2006, in the principal sum of $_______, payable to the order of Beneficiary at the times, in the manner and with interest as therein set forth; (3) the performance of each agreement of Trustor contained herein and in the Loan and Security Agreement between Beneficiary and Trustor dated as of June 15, 2006; (4) the payment of such additional loans or advances as hereafter may be made to Trustor when evidenced by a Trust Deed Note or Notes reciting that they are secured by this Trust Deed; and (5) the payment of any sums expended or advanced by Beneficiary to
protect the security hereof.

 

Trustor agrees to pay all taxes and assessments on the above property, to pay all charges and assessments on water or water stock used on or with said property, not to commit waste, to maintain adequate fire insurance on improvements on said property, to pay all costs and expenses of collection (including Trustee’s and attorney’s fees in event of default in payment of the indebtedness secured hereby) and to pay reasonable Trustee’s fees for any of the services performed by Trustee hereunder, including a reconveyance hereof.

 

The undersigned Trustor requests that a copy of any notice of default and of any notice of sale hereunder be mailed to it at the address hereinbefore set forth.

 

8

 

 

In Witness Whereof, this Trust Deed has been executed by Trustor in Salt Lake City, Utah as of the date first written above.

 

	
             
 	
            Emerson Remodeling, Inc.
 

	
             
 	
            A Utah corporation
 

 

 

	
             
 	
            By _____________________________
 

	
             
 	
            Gregory C. Menges
 

	
             
 	
            President
 

 

 

STATE OF UTAH

	
             
 	
            ss.
 

COUNTY OF SALT LAKE

 

On the _____ day of _____________, 200__, personally appeared before me, Gregory C. Menges, who being by me duly sworn, did say that he is the president of Emerson Remodeling, Inc., a Utah corporation, the corporation that executed the above and foregoing instrument and that said instrument was signed in behalf of said corporation by authority of  a resolution of its board of directors and said Gregory C. Menges acknowledged to me that said corporation executed the same.

 

 

 

	
             
 	
            ___________________________________
 

	
             
 	
            Notary Public
 

	
            My Commission Expires:
 	
            Residing at: Salt Lake City, Utah
 

 

_________________________________

 

 

 

9

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