Document:

Exhibit 10.1

 

EXECUTION VERSION

 

FIFTH AMENDMENT TO CREDIT AGREEMENT

 

FIFTH AMENDMENT TO CREDIT AGREEMENT (this “Fifth Amendment”) dated as of July 23, 2013, among Walter Energy, Inc., a Delaware corporation, Western Coal ULC, an unlimited liability corporation existing under the laws of the Canadian province of British Columbia, Walter Energy Canada Holdings, Inc., a corporation existing under the laws of the Canadian province of British Columbia (together with Walter Energy, Inc. and Western Coal ULC, collectively, the “Borrowers”), the Subsidiary Guarantors party hereto, the Lenders party hereto from time to time and Morgan Stanley Senior Funding, Inc., as Administrative Agent.  Unless otherwise indicated, all capitalized terms used herein and not otherwise defined herein shall have the respective meanings provided to such terms in the Credit Agreement referred to below.

 

W I T N E S S E T H :

 

WHEREAS, the Borrowers, the Lenders and Morgan Stanley Senior Funding, Inc., as Administrative Agent are parties to that certain Credit Agreement, dated as of April 1, 2011 (as amended by the First Amendment to Credit Agreement dated as of January 20, 2012, as further amended by the Second Amendment to Credit Agreement dated as of August 16, 2012, as further amended by the Third Amendment to Credit Agreement dated as of October 29, 2012, as further amended by the Fourth Amendment to Credit Agreement dated as of  March 21, 2013, and as further amended, modified and/or supplemented to, but not including, the date hereof, the “Credit Agreement”);

 

WHEREAS, Walter Energy, Inc., the U.S. Subsidiary Guarantors party thereto from time to time and Morgan Stanley Senior Funding, Inc., as Collateral Agent are parties to that certain U.S. Guaranty and Collateral Agreement, dated as of April 1, 2011 (as amended, modified and/or supplemented to, but not including, the date hereof, the “U.S. Guaranty and Collateral Agreement”); and

 

WHEREAS, subject to the terms and conditions of this Fifth Amendment, the parties hereto wish to amend the Credit Agreement and the U.S. Guaranty and Collateral Agreement as herein provided;

 

NOW, THEREFORE, it is agreed:

 

I.                                        Amendments and Modifications to Credit Agreement.

 

1.              The definition of “Applicable Margin” appearing in Section 1.01 of the Credit Agreement is hereby replaced in its entirety with the following:

 

““Applicable Margin” shall mean (I) prior to the Fifth Amendment Effective Date, with respect to the A Term Loans, B Term Loans, Revolving Loans and Swingline Loans, the applicable rates set forth in the definition of “Applicable Margin” without giving effect to the Fifth Amendment and (II) thereafter, a percentage per annum initially equal to:

 

(i)                                     in the case of A Term Loans maintained as (A) Base Rate Loans, 4.50%, and (B) LIBOR Loans, 5.50%;

 

(ii)                                  in the case of B Term Loans maintained as (A) Base Rate Loans, 4.75% and (B) LIBOR Loans, 5.75%;

 

 

(iii)                               in the case of Revolving Loans maintained as (A) Base Rate Loans, 4.50% (B) LIBOR Loans, 5.50%, (C) Canadian Prime Rate Loans, 4.50% and (D) Canadian CDOR Rate Loans, 5.50%; and

 

(iv)                              in the case of Swingline Loans, maintained as (A) Base Rate Loans, 4.50% and (B) Canadian Prime Rate Loans, 4.50%.

 

From and after each day of delivery of any certificate delivered in accordance with the first sentence of the following paragraph indicating an entitlement to a different margin for any Revolving Loans or Swingline Loans than that described in the immediately preceding sentence (each, a “Start Date”) to and including the applicable End Date described below, the Applicable Margins for such Tranches of Loans (hereinafter, the “Adjustable Applicable Margins”) shall be those set forth below opposite the Total Leverage Ratio indicated to have been achieved in any certificate delivered in accordance with the following sentence:

 

	
Total Leverage Ratio
    	
 
    	
Revolving
   Loan LIBOR
   Margin
    	
 
    	
Revolving Loan and
   Swingline Loan
   Base Rate Margin
    	
 
    	
Revolving
   Loan CDOR Rate
   Margin
    	
 
    	
Revolving
   Loan and Swingline
   Loan Canadian
   Prime Rate Margin
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Greater than 4.50 to 1.00
    	
 
    	
5.50
    	
%
    	
4.50
    	
%
    	
5.50
    	
%
    	
4.50
    	
%
    
	
Greater than 3.75 to 1.00 but less than or equal to 4.50 to 1.00 
    	
 
    	
5.25
    	
%
    	
4.25
    	
%
    	
5.25
    	
%
    	
4.25
    	
%
    
	
Greater than 3.00 to 1.00 but less than or equal to 3.75 to 1.00 
    	
 
    	
5.00
    	
%
    	
4.00
    	
%
    	
5.00
    	
%
    	
4.00
    	
%
    
	
Greater than 2.50 to 1.00 but less than or equal to 3.00 to 1.00 
    	
 
    	
4.75
    	
%
    	
3.75
    	
%
    	
4.75
    	
%
    	
3.75
    	
%
    
	
Less than or equal to 2.50 to 1.00 
    	
 
    	
4.50
    	
%
    	
3.50
    	
%
    	
4.50
    	
%
    	
3.50
    	
%
    

 

The Total Leverage Ratio used in a determination of Adjustable Applicable Margins shall be determined based on the delivery of a certificate of the U.S. Borrower (each, a “Quarterly Pricing Certificate”) by an Authorized Officer of the U.S. Borrower to the Administrative Agent (with a copy to be sent by the Administrative Agent to each Lender), within 45 days of the last day of any Fiscal Quarter of the U.S. Borrower, and within 90 days of the last day of the Fiscal Year which certificate shall set forth the calculation of the Total Leverage Ratio as at the last day of the Test Period ended immediately prior to the relevant Start Date.  The Adjustable Applicable Margins so determined shall apply, except as set forth in the succeeding sentence, from the relevant Start Date to the date on which the next certificate is delivered to the Administrative Agent (such date, the “End Date”).  Notwithstanding anything to the contrary contained above in this definition, the Adjustable Applicable Margins shall be the highest adjustable applicable margins set forth in the chart above for the respective Tranche at all times during which there shall exist any Event of Default.

 

Notwithstanding anything to the contrary contained above in this definition or elsewhere in this Agreement, if it is subsequently determined that the Total Leverage Ratio set forth in any Quarterly Pricing Certificate delivered for any period is inaccurate for any reason and the result thereof is that the Lenders received interest or fees for any period based on an Applicable Margin that is less than that which would have been applicable had the Total Leverage Ratio been accurately determined, then, for all purposes of this Agreement, the “Applicable Margin” for any day occurring within the period covered by such Quarterly Pricing Certificate shall retroactively

 

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be deemed to be the relevant percentage as based upon the accurately determined Total Leverage Ratio for such period, and any shortfall in the interest or fees theretofore paid by the Borrowers for the relevant period pursuant to Sections 2.08(a) and (b) and 4.01(b) as a result of the miscalculation of the Total Leverage Ratio shall be deemed to be (and shall be) due and payable under the relevant provisions of Section 2.08(a) or (b) or Section 4.01(b), as applicable, at the time the interest or fees for such period were required to be paid pursuant to said Section on the same basis as if the Total Leverage Ratio had been accurately set forth in such Quarterly Pricing Certificate (and shall remain due and payable until paid in full, together with all amounts owing under Section 2.08(d), in accordance with the terms of this Agreement).”

 

2.              The definition of “Senior Secured Leverage Ratio” appearing in Section 1.01 of the Credit Agreement is hereby amended by inserting the following text immediately preceding the text “to (y)” appearing therein:

 

“in an aggregate amount not to exceed $240,000,000 plus the Current Portion of any Indebtedness outstanding on such date”.

 

3.              The definition of “Total Leverage Ratio” appearing in Section 1.01 of the Credit Agreement is hereby amended by inserting the following text immediately preceding the text “to (y)” appearing therein:

 

“in an aggregate amount not to exceed $240,000,000 plus the Current Portion of any Indebtedness outstanding on such date”.

 

4.              Clause (y) of the definition of “Unrestricted” appearing in Section 1.01 of the Credit Agreement is hereby replaced in its entirety with the following “Liens permitted by Sections 10.01(i), (iv), (xvii) and (xxvi)”.

 

5.              Section 1.01 of the Credit Agreement is hereby amended by inserting in the appropriate alphabetical order the following new definitions:

 

“Aggregate Unutilized Revolving Loan Commitment” shall mean the Revolving Loan Commitment at such time less the sum of (i) the aggregate outstanding principal amount of all Revolving Loans at such time and (ii) the Letter of Credit Outstandings at such time.

 

“Current Portion” shall mean, with respect to any Indebtedness, as of any date, that portion of such Indebtedness that is due and payable within thirteen months.

 

“Fifth Amendment” shall mean that certain Fifth Amendment to this Agreement, dated as of July 23, 2013, by and among, the Borrowers, the Subsidiary Guarantors party thereto, the Lenders party thereto and the Administrative Agent.”

 

“Fifth Amendment Effective Date” shall have the meaning provided in the Fifth Amendment.”

 

6.              Section 4.01(f) of the Credit Agreement is hereby restated in its entirety as follows:

 

“(f)           At the time of (x) any voluntary prepayment of B Term Loans pursuant to Section 5.01(a), (y) any mandatory repayment of B Term Loans required pursuant to Section 5.02(c)(z) and/or (z) any amendment of this Agreement resulting in a Repricing Event, in each case prior to the eighteen month anniversary of the Fifth Amendment Effective Date, the U.S.

 

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Borrower agrees to pay to the Administrative Agent, for the ratable account of each Lender with B Term Loans (including, with respect to clause (z) above, each Lender that withholds its consent to such Repricing Event and is replaced as a Replaced Lender under Section 2.13), a prepayment fee (I) in the case of clauses (x) and (y) above, on the principal amount so prepaid or repaid and (II) in the case of clause (z), on the principal amount of such B Term Loans outstanding immediately prior to such amendment, in each case, equal to as follows:

 

(A)                               2.0%, if such prepayment, repayment or amendment occurs on or after the Fifth Amendment Effective but on or prior to the six month anniversary of the Fifth Amendment Effective Date; and

 

(B)                               1.0% if such prepayment, repayment or amendment occurs after the six month anniversary of the Fifth Amendment Effective Date but prior to the eighteen month anniversary of the Fifth Amendment Effective Date.

 

Such prepayment fees shall be earned, due and payable upon the date of the (x) prepayment or repayment or (y) the effectiveness of the amendment, as applicable.”

 

7.              Section 5.01(a) of the Credit Agreement is hereby amended by replacing sub-clause (vi) appearing therein in its entirety with the following:

 

“(vi) any prepayment of B Term Loans made during the period commencing on the Fifth Amendment Effective Date and ending on the date occurring eighteen months following the Fifth Amendment Effective Date shall be accompanied by the payment of the fee described in Section 4.01(f).”.

 

8.              Section 5.02(c) of the Credit Agreement is hereby amended by (1) deleting the text “and/or” appearing immediately prior to the text “(y)” appearing there in and inserting the text “,” in lieu thereof and (2) inserting the following new text immediately after the text “respective incurrence of Indebtedness” appearing in clause (y) of such Section:

 

“ and/or (z) any issuance or incurrence by the U.S. Borrower or any of its Subsidiaries of Indebtedness pursuant to Section 10.04(xviii), an amount equal to 100% of the Net Cash Proceeds of the respective incurrence or issuance of Indebtedness; provided, that the mandatory repayment requirement set forth in this clause (z) shall not apply to the first $250,000,000 of such Indebtedness incurred by the U.S. Borrower and its Subsidiaries pursuant to Section 10.04(xviii) after the Fifth Amendment Effective Date”

 

9.              Section 10.02 of the Credit Agreement is hereby amended by (1) deleting the text “and” appearing immediately after clause (xix) thereof, (2) deleting the period appearing immediately after clause (xx) thereof and inserting “;and” lieu thereof and (3) inserting the following text :

 

“(xxi) the U.S. Borrower and its Subsidiaries may sell assets to charitable or not for profit institutions; provided that the aggregate consideration for all Dispositions made pursuant to this clause (xxi) shall not exceed $2,000,000 since the Effective Date.”

 

10.       Section 10.03(iv) of the Credit Agreement is hereby replaced in its entirety with the following:

 

“(iv)                        the U.S. Borrower may pay cash Dividends on the U.S. Borrower Common Stock at the end of each Fiscal Quarter in an aggregate amount not to exceed (x) if the Senior Secured

 

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Leverage Ratio is greater than 4.50:1.00 for the Test Period most recently ended for which financial statements have been delivered to the Lenders pursuant to Section 9.01(a) or (b), as applicable, the lesser of (I) $0.01 per each share of the U.S. Borrower’s Common Stock issued and outstanding at such time and (II) $35,000,000 less the aggregate amount of cash Dividends paid pursuant to this Section 10.03(iv) during the Fiscal Year of which such Fiscal Quarter is a part and (y) if the Senior Secured Leverage Ratio is less than or equal to 4.50:1.00 for the Test Period most recently ended for which financial statements have been delivered to the Lenders pursuant to Section 9.01(a) or (b), as applicable, $35,000,000 less the aggregate amount of cash Dividends paid pursuant to this Section 10.03(iv) during the Fiscal Year of which such Fiscal Quarter is a part; provided that, in each case, no Default or Event of Default then exists or would result therefrom;”

 

11.  Section 10.04(xviii) of the Credit Agreement is hereby replaced in its entirety with the following:

 

“(xviii)  so long as no Default or Event of Default then exists or would result therefrom, additional unsecured Indebtedness incurred by the U.S. Borrower and its Subsidiaries; provided that the aggregate amount of Indebtedness incurred pursuant to this Section 10.04(xviii) in excess of $250,000,000 shall be subject to the prepayment requirement set forth in Section 5.02(c);”

 

12.  Section 10.07 of the Credit Agreement is hereby restated in its entirety as follows:

 

“10.07.   Interest Expense Coverage Ratio.  Commencing with the Fiscal Quarter ending March 31, 2015, the U.S. Borrower will not permit the Interest Expense Coverage Ratio for any Test Period ending on the last day of a Fiscal Quarter of the U.S. Borrower set forth below to be less than the ratio set forth opposite such Fiscal Quarter below:

 

	
Fiscal Quarter Ending 
    	
 
    	
Ratio
    	
 
    
	
March 31, 2015
    	
 
    	
1.25:1.00
    	
 
    
	
June 30, 2015
    	
 
    	
1.50:1.00
    	
 
    
	
September 30, 2015
    	
 
    	
2.00:1.00
    	
 
    
	
December 31, 2015
    	
 
    	
2.00:1.00
    	
 
    
	
March 31, 2016 and   each Fiscal Quarter ending thereafter
    	
 
    	
2.50:1.00
    	
 
    

 

13.  Section 10.08 of the Credit Agreement is hereby restated in its entirety as follows:

 

“10.08.   Senior Secured Leverage Ratio.  Commencing with Fiscal Quarter ending June 30, 2014, the U.S. Borrower will not permit the Senior Secured Leverage Ratio as of the last day of any Fiscal Quarter set forth below to be greater than the ratio set forth opposite such Fiscal Quarter below:

 

	
Fiscal Quarter Ending 
    	
 
    	
Ratio
    	
 
    
	
June 30, 2014
    	
 
    	
8.00:1.00
    	
 
    
	
September 30, 2014
    	
 
    	
7.50:1.00
    	
 
    
	
December 31, 2014
    	
 
    	
6.50:1.00
    	
 
    
	
March 31, 2015
    	
 
    	
5.50:1.00
    	
 
    
	
June 30, 2015
    	
 
    	
5.00:1.00
    	
 
    
	
September 30, 2015
    	
 
    	
4.50:1.00
    	
 
    
	
December 31, 2015 and each Fiscal Quarter ending thereafter
    	
 
    	
3.75:1.00
    	
 
    

 

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14.  Section 10 of the Credit Agreement is hereby amended by inserting the following new Section 10.11 to the end thereof:

 

“10.11.   Minimum Liquidity Requirement.  The U.S. Borrower shall not permit (i) at the end of any Fiscal Quarter on or prior to June 30, 2014, the sum of (x) the Aggregate Unutilized Revolving Loan Commitment and (y) the aggregate amount of Unrestricted cash and Cash Equivalents of the U.S. Borrower and its Subsidiaries to be less than $225,000,000 and (ii) at the end of any Fiscal Quarter after June 30, 2014, at any time the Senior Secured Leverage Ratio is greater than 5.50:1.00 for the Test Period most recently ended for which financial statements have been delivered to the Lenders pursuant to Section 9.01(a) or (b), as applicable, the sum of (x) the Aggregate Unutilized Revolving Loan Commitment and (y) the aggregate amount of Unrestricted cash and Cash Equivalents of the U.S. Borrower and its Subsidiaries to be less than $225,000,000.”

 

15.  Section 10 of the Credit Agreement is hereby amended by inserting the following new Section 10.12 to the end thereof:

 

“10.12.   Capital Expenditures.  (a) The U.S. Borrower and its Subsidiaries will not make any Capital Expenditures during the Fiscal Year ending December 31, 2013 and the Fiscal Year ending December 31, 2014, in excess of (x) with respect to the Fiscal Year ending December 31, 2013, $175,000,000 and (y) with respect to the Fiscal Year ending December 31, 2014, $200,000,000.

 

(b)           In addition to the foregoing, in the event that the amount of Capital Expenditures permitted to be made by the U.S. Borrower pursuant to clause (a) above (before giving effect to any increase in such permitted Capital Expenditure amount pursuant to this clause (b)) is greater than the amount of Capital Expenditures actually made by the U.S. Borrower during such Fiscal Year, the lesser of (x) such excess and (y) $20,000,000 may be carried forward and utilized to make Capital Expenditures in the immediately succeeding Fiscal Year.”

 

II.        Amendments to U.S. Guaranty and Collateral Agreement.

 

1.     The definition of “Obligations” contained in Section 1.02 of the U.S. Guaranty and Collateral Agreement is hereby amended by inserting the following new text immediately after the text ““Other Obligations”” appearing therein:

 

“, provided, that in no circumstances shall Excluded Swap Obligations constitute such Other Obligations”.

 

2.     Section 1.02 of the U.S. Guaranty and Collateral Agreement is hereby amended by inserting in the appropriate alphabetical order the following new definitions:

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

 

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“Excluded Swap Obligation” means,  with  respect  to  any  Guarantor,  (a) any  Swap Obligation  if, and to the extent that, all or a portion of the Guaranty of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order  of   the  Commodity  Futures  Trading  Commission   (or  the   application   or   official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the Guaranty of such Guarantor or the grant of such security interest becomes effective with respect to such Swap Obligation and (b) any other Swap Obligation (i) to the extent all or a portion of the Guaranty of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guaranty thereof) is or becomes illegal under applicable law and (ii) such Swap Obligation is designated as an “Excluded Swap Obligation” of such Guarantor as specified in any agreement between the relevant Loan Parties and counterparty applicable to such Swap Obligations. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guaranty or security interest is or becomes illegal.

 

“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Guarantor  that at the time the relevant Guaranty or grant of the  relevant Lien becomes effective with respect to such Swap Obligation, has total assets exceeding $10,000,000 or otherwise constitutes an “eligible  contract participant” under the Commodity Exchange Act or any regulations promulgated  thereunder and can cause another person to qualify as an “eligible contract participant” at such  time by entering into an agreement under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.

 

3.     Article II of the U.S. Guaranty and Collateral Agreement is hereby amended by adding the following new Section 2.07 to the end thereof:

 

“2.07. Cross-Guaranty. Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Guarantor to honor all of its obligations under this Agreement in respect of Swap Obligations (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section 2.07 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 2.07, or otherwise under this Agreement, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of each Qualified ECP Guarantor under this Section shall remain in full force and effect until the Termination Date. Each Qualified ECP Guarantor intends that this Section 2.07 constitute, and this Section 2.07 shall be deemed to constitute, an “agreement” for the benefit of each other Grantor for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.”

 

III.      Miscellaneous Provisions.

 

1.     In order to induce the Lenders to enter into this Fifth Amendment, the Borrowers hereby represent and warrant that:

 

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(a)           no Default or Event of Default exists as of the Fifth Amendment Effective Date (as defined below), both before and immediately after giving effect to this Fifth Amendment; and

 

(b)           all of the representations and warranties contained in the Credit Agreement and the other Credit Documents are true and correct in all material respects on the Fifth Amendment Effective Date, both before and after giving effect to this Fifth Amendment, with the same effect as though such representations and warranties had been made on and as of the Fifth Amendment Effective Date (it being understood and agreed that (x) any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date and (y) any representation or warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct in all respects on such date).

 

2.     This Fifth Amendment is limited precisely as written and shall not be deemed to (i) be a waiver of or a consent to the modification of or deviation from any other term or condition of the Credit Agreement, the U.S. Guaranty and Collateral Agreement, any other Credit Documents or any of the other instruments or agreements referred to therein or (ii) prejudice any right or rights which any of the Lenders or the Administrative Agent now have or may have in the future under or in connection with the Credit Agreement, the U.S. Guaranty and Collateral Agreement, any other Credit Documents or any of the other instruments or agreements referred to therein.

 

3.     By executing and delivering a counterpart hereof, the Borrowers and each Subsidiary Guarantor hereby agrees that all Loans shall be guaranteed and secured pursuant to and in accordance with the terms and provisions of each of the U.S. Guaranty and Collateral Agreement (as amended herein) and the Canadian Guaranty and Collateral Agreement and the other Security Documents in accordance with the terms and provisions thereof.

 

4.     This Fifth Amendment may be executed in any number of counterparts (including by way of facsimile or other electronic transmission) and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.  A complete set of counterparts shall be lodged with the Borrowers and the Administrative Agent.

 

5.     THIS FIFTH AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

 

6.     This Fifth Amendment shall become effective on the date (the “Fifth Amendment Effective Date”) when each of the following conditions shall have been satisfied:

 

(i)            no Default or Event of Default exists as of the Fifth Amendment Effective Date, both before and immediately after giving effect to this Fifth Amendment;

 

(ii)           all of the representations and warranties contained in the Credit Agreement and the other Credit Documents are true and correct in all material respects on the Fifth Amendment Effective Date, both before and after giving effect to this Fifth Amendment, with the same effect as though such representations and warranties had been made on and as of the Fifth Amendment Effective Date (it being understood and agreed that (x) any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date and (y) any representation or warranty that is qualified as 

 

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to “materiality,” “Material Adverse Effect” or similar language shall be true and correct in all respects on such date);

 

(iii)          the Borrowers and the Required Lenders shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of facsimile or other electronic transmission) the same to LendAmend LLC (facsimile number: 310-388-0370 / e-mail address: WalterEnergy@lendamend.com / online submission at www.LendAmend.com); and

 

(iv)          the Borrowers shall have paid to the Administrative Agent (or its applicable affiliate) all fees (other than the Amendment Fee (as defined below), which shall be paid in accordance with Section 7 below), costs and expenses (including, without limitation, reasonable legal fees and expenses) payable to the Administrative Agent (or its applicable affiliate) to the extent then due.

 

7.     The Borrowers hereby agree that, so long as the Fifth Amendment Effective Date occurs, they shall pay to the Administrative Agent on behalf of each Lender which delivers to the Administrative Agent (or its counsel) an executed counterpart hereof by 12:00 Noon (New York City time) on July 23, 2013 (or, if later, on the Fifth Amendment Effective Date), a non-refundable cash fee (the “Amendment Fee”) in Dollars in an amount equal to the sum of (x) 75.0 basis points (0.75%) of the sum of the aggregate principal amount of such Lender’s A Term Loans and the Revolving Loan Commitment of such Lender outstanding or in effect, as applicable, as of the Fifth Amendment Effective Date and (y) 100.0 basis points (1.00%) of the aggregate principal amount of such Lender’s B Term Loans outstanding as of the Fifth Amendment Effective Date.  The Amendment Fee shall be paid by the Borrowers to the Administrative Agent for distribution to the relevant Lenders not later than the Business Day following the Fifth Amendment Effective Date.

 

8.     This Fifth Amendment shall constitute a “Credit Document” for purposes of the Credit Agreement and the other Credit Documents.

 

9.     From and after the Fifth Amendment Effective Date, all references in the Credit Agreement and each of the other Credit Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement as modified hereby.

 

*      *      *

 

9

 

IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Fifth Amendment to be duly executed and delivered as of the date first above written.

 

	
 
    	
WALTER ENERGY, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Assistant Treasurer and Interim   Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WESTERN COAL ULC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WALTER ENERGY CANADA   HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
PINE VALLEY COAL LTD.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
0541237 B.C. LTD.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    

 

[Signature Page to Fifth Amendment to Walter Energy Credit Agreement]

 

 

	
 
    	
WOLVERINE COAL ULC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WALTER ENERGY HOLDINGS, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
BLUE CREEK SALES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CLEARWATER ENERGY, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
HAMER PROPERTIES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
J.W. WALTER, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    

 

[Signature Page to Fifth Amendment to Walter Energy Credit Agreement]

 

 

	
 
    	
J.W.I. HOLDINGS CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
JIM WALTER RESOURCES, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LAND HOLDINGS CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
TAFT COAL SALES &   ASSOCIATES, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
TUSCALOOSA RESOURCES, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WALTER BLACK WARRIOR BASIN LLC
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    

 

[Signature Page to Fifth Amendment to Walter Energy Credit Agreement]

 

 

	
 
    	
WALTER COKE, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WALTER EXPLORATION &   PRODUCTION LLC
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WALTER LAND COMPANY
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WALTER MINERALS, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WALTER NATURAL GAS, LLC
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WALTER CANADIAN COAL PARTNERSHIP,
    
	
 
    	
by its managing partner, Walter   Canadian Coal ULC
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    

 

[Signature Page to Fifth Amendment to Walter Energy Credit Agreement]

 

 

	
 
    	
CAMBRIAN ENERGYBUILD HOLDINGS ULC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name: 
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
WILLOW CREEK COAL ULC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
WILLOW CREEK COAL PARTNERSHIP,
    
	
 
    	
by its managing partner, Willow Creek   Coal ULC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
WALTER CANADIAN COAL ULC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
WOLVERINE COAL PARTNERSHIP,
    
	
 
    	
by its managing partner, Wolverine   Coal ULC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
BRULE COAL ULC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    

 

[Signature Page to Fifth Amendment to Walter Energy Credit Agreement]

 

 

	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
BRULE COAL PARTNERSHIP,
    
	
 
    	
by its managing partner,   Brule Coal ULC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Griffin
    
	
 
    	
Name:
    	
Michael Griffin
    
	
 
    	
Title:
    	
Treasurer
    

 

[Signature Page to Fifth Amendment to Walter Energy Credit Agreement]

 

 

	
 
    	
MORGAN STANLEY SENIOR   FUNDING, INC., as Administrative Agent and Collateral Agent
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ James R. Pearson
    
	
 
    	
Name: 
    	
Robbie Pearson
    
	
 
    	
Title:
    	
Authorized Signatory
    

 

[Signature Page to Fifth Amendment to Walter Energy Credit Agreement]Exhibit 10.1

 

 

July 18, 2013

 

By Hand
 Robert S. Yorgensen

 

Re: Retention Bonus

 

Dear Bob:

 

As you know, we have been working closely with our financial advisors, board of directors and senior leadership for several months now to identify and evaluate strategic alternatives for STR in the midst of extraordinary circumstances.  While we remain hopeful that this effort will yield an exciting opportunity, we are cognizant of the fact that the process itself may connote an element of uncertainty.  As the board agrees that maintaining a cohesive senior leadership team over the coming year is critical to the successful execution of our strategy as well as the preservation of the company’s value, we are pleased to advise you of your inclusion in a special retention program, as described more fully below.

 

In recognition of your continued service with STR Holdings, Inc.  (the “Company”) through the period (the “Retention Period”) commencing on the date hereof and ending on the earlier of (i) a closing of a Change in Control Transaction (a “Closing”), or (ii) June 30, 2014 (the “Outside Date”), we are offering you, subject to the terms of this letter agreement,  a retention bonus in an amount equal to $333,000,  less all applicable withholdings and deductions required by law (the “Retention Bonus”).  The definitions of capitalized terms used in this letter agreement are provided in Schedule A to this letter agreement.

 

You will be eligible to receive the Retention Bonus if you are actively employed by the Company on the last day of the Retention Period; provided however, in the event that your employment has been terminated during the Retention Period (a) by the Company without Cause, or (b) by you with Good Reason (each, a “Covered Termination”), then you shall be entitled to receive the Retention Bonus as if you were employed through the end of the Retention Period.  In the event that a Closing does not occur by the Outside Date, then you will be entitled to receive up to one hundred percent (100%) of the Retention Bonus upon the achievement by Holdings of all of the Quarterly Financial Targets, or up to twenty five percent (25%) of the Retention Bonus upon the achievement of each Quarterly Financial Target.

 

 

With respect to a Retention Bonus due to you based upon the achievement by Holdings of one or more Quarterly Financial Targets (rather than the payment of a Retention Bonus due to a Closing), such bonus shall be earned quarterly so that up to twenty five percent (25%) of the Retention Bonus shall be due and payable based upon the achievement of each Quarterly Financial Target.  Payment of the Retention Bonus due to the achievement of a Quarterly Financial Target shall be calculated as follows:

 

(i)                                                       up to seventy percent (70%) of the Retention Bonus (the “EBITDA Target Portion”) shall be based upon the achievement of the Quarterly Adjusted EBITDA Targets; and

 

(ii)                                                    thirty percent (30%) of the Retention Bonus (the “Cash Target Portion”) shall be based upon the achievement of the Quarterly Adjusted Cash Targets.

 

A percentage of the EBITDA Target Portion shall be earned in an amount equal to the percentage of the Quarterly Adjusted EBITDA Target achieved by Holdings; provided however, that if Holdings achieves less than eighty percent (80%) of such Quarterly Adjusted EBITDA Target, none of the EBITDA Target Portion of the Retention Bonus shall be awarded to you with respect to such quarterly achievement.  In addition, if Holdings achieves less than one hundred percent (100%) of the Quarterly Adjusted Cash Target, none of the Cash Target Portion of the Retention Bonus shall be awarded to you with respect to such quarterly achievement.

 

If you are eligible to receive the Retention Bonus, it will be paid to you in one lump sum cash payment (i) on the date of Closing, or (ii) by no later than August 31, 2014 (upon satisfaction of one or more Quarterly Financial Targets), as applicable. This letter agreement is intended to comply with, or be exempt from, Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) and shall be construed and administered in accordance with Section 409A.

 

This letter agreement contains all of the understandings and representation between the Company and you relating to the retention bonus and supersedes all prior and contemporaneous understandings, discussions, agreements, representations and warranties, both written and oral, with respect to any retention bonus; provided, however, that this letter agreement shall not supersede any other agreements between the Company and you, including without limitation any employment agreement, severance agreement, confidentiality agreement, non-competition agreement or invention assignment agreement, and shall remain in full force and effect. This letter agreement may not be amended or modified unless in writing signed by both the Company’s Chief Executive Officer and you. This letter agreement, for all purposes, shall be construed in accordance with the laws of the State of Connecticut, without regard to conflicts-of-law principles.

 

We look forward to your continued employment with us.

 

2

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
STR HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ALAN N. FORMAN
    
	
 
    	
 
    	
Name: Alan N. Forman
    
	
 
    	
 
    	
Title: SVP and General Counsel
    

 

 

	
Agreed to and accepted:
    	
 
    
	
 
    	
 
    
	
/s/ ROBERT S. YORGENSEN
    	
 
    
	
Robert S. Yorgensen
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
cc: Chris F. Holm, VP, Human Resources
    	
 
    

 

3

 

Schedule A

 

Defined Terms

 

(a)         “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 and 13d-5 under the Exchange Act.

 

(b)         “Cause” shall have the meaning set forth in the your Employment Agreement with the Company, if applicable, and otherwise shall mean (i) your failure or refusal to follow the reasonable instructions of your supervisor (or for the CEO, the Company’s Board of Directors) (other than due to a Disability), which failure or refusal is not cured within 30 days following written notice; (ii) your conviction of a felony or of a misdemeanor if such misdemeanor involves moral turpitude or misrepresentation, including a plea of guilty or nolo contendere; (iii) your unlawful use (including being under the influence) or possession of illegal drugs on the Company’s or any of its subsidiaries’ premises; (iv) your commission of any act of fraud, embezzlement, misappropriation of funds, intentional misrepresentation, breach of fiduciary duty or other act of dishonesty materially detrimental to the Company or any of its subsidiaries; or (v) your intentional wrongful act or gross negligence that has a materially detrimental effect on the Company or its subsidiaries. For purposes of this Agreement, any termination of your employment due to your death or Disability shall be deemed a termination by the Company for Cause.

 

(c)          “Change in Control Transaction” shall mean the first to occur of any one of the following events:

 

(i)                 any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 50% or more of either (1) the total fair market value of the then outstanding shares of common stock of the Company or (2) the then outstanding securities of the Company generally entitled to vote in the election of directors of the Company; or

 

(ii)              during any twelve (12) month period, individuals who, as of the beginning of such period, constitute the Board (the “Incumbent Board”) cease to constitute at least a majority of the Board; provided, that any person becoming a director of the Company subsequent to the beginning of such period whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company and whose appointment or election was not approved by at least a majority of the directors of the Company in office immediately before any such contest; or

 

A-1

 

(iii)           there is consummated a merger or consolidation of the Company with any other business entity, other than (1) a merger or consolidation which would result in the securities of the Company generally entitled to vote in the election of directors of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into such securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding such securities under an employee benefit plan of the Company or any Subsidiary of the Company, at least 50.1% of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation and generally entitled to vote in the election of directors of the Company or such surviving entity or any parent thereof, or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 50.1% or more of the then outstanding securities of the Company generally entitled to vote in the election of directors of the Company; or

 

(iv)          the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity where the outstanding securities generally entitled to vote in the election of directors of the Company immediately prior to the sale continue to represent (either by remaining outstanding or by being converted into such securities of the surviving entity or any parent thereof) 50.1% or more of the outstanding securities of such entity generally entitled to vote in the election of directors immediately after such sale; or

 

(v)             any other event which the Board of Directors declares to be a Change in Control.

 

(d)         “Disability” shall have the meaning set forth in your Employment Agreement with the Company, if any, and otherwise shall be deemed the reason for the termination by the Company of your employment, if, as a result of your incapacity due to physical or mental illness, you shall have been absent from the full-time performance of the your duties with the Company for a period of six (6) consecutive months, the Company shall have given you a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, you shall not have returned to the full-time performance of your duties.

 

(e)          “Good Reason” for termination by you of your employment shall mean the occurrence (without your express written consent) of any one of the following acts by the Company, or failures by the Company to act.  As set forth below, subsection (i) contains the elements of Good Reason, and subsection (ii) sets forth certain terms and conditions applicable to termination by you for Good Reason;

 

A-2

 

(i)                                     (A)          A material diminution in the nature or status of your responsibilities from those in effect immediately prior to such diminution resulting from, among other things, (a) the assignment to you of any duties inconsistent with your duties and your position (as of the date hereof), immediately prior to such assignment, or (b) the failure of the Company to ensure that you maintain substantially the same duties and position with the Company as you were assigned or held immediately prior to the date hereof;

 

(B)                               A material reduction by the Company in either or both of (1) your annual base salary (a “Base Salary Reduction”); or (2) the target bonus percentage set forth in the Company’s management incentive plan, in each case as in effect on the date hereof;

 

(C)                               The relocation of your principal place of employment to a location more than (fifty) 50 miles from your principal place of employment immediately prior to such relocation or the Company’s requiring you to be based anywhere other than such principal place of employment (or permitted relocation thereof) except for required travel on the Company’s business to an extent substantially consistent with your business travel obligations immediately prior thereto;

 

(D)                               The failure by the Company to pay to you any portion of your current compensation, or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Company, within thirty (30) days of the date such compensation is due;

 

(E)                                The failure by the Company to continue in effect any material compensation plan in which you participate immediately prior to such failure which is material to your total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount or timing of payment of benefits provided and the level of your participation relative to other participants, as existed immediately prior to such failure;

 

(F)                                 The failure by the Company to continue to provide you with benefits substantially similar to those enjoyed by you under any of the Company’s benefit plans, including without limitation, life insurance, health and accident, or disability 

 

A-3

 

plans in which you was participating immediately prior to such failure, the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive you of any material fringe benefit enjoyed by you immediately prior to such action, or the failure by the Company to provide you with the number of paid vacation days to which you is entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of such failure; or

 

(G)                               Any material breach by the Company of your Employment Agreement with the Company, if applicable.

 

(ii)                                  (A)          Any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of this subsection (ii) shall not be effective.

 

(B)                               Your right to terminate your employment for Good Reason shall not be affected by your incapacity due to physical or mental illness.

 

(C)                               For purposes of any determination regarding the existence of Good Reason, any claim by you that Good Reason exists shall be presumed to be correct unless the Company establishes to the Board by clear and convincing evidence that Good Reason does not exist.

 

(D)                               Notwithstanding any provision to the contrary, none of the foregoing provisions shall constitute Good Reason unless (1) no later than ninety (90) days following the occurrence of any of the events set forth in subsection (i) above, you provide written notice to the Company of such event containing a description thereof and stating the subsection of subsection (i) above under which such event constitutes Good Reason (the “Good Reason Notice”) and the Company shall not have cured such event within thirty (30) days following its receipt of such notice, and (2) no later than one hundred eighty (180) days, but no earlier than thirty (30) days, following the Company’s receipt of such Good Reason Notice, you give the Company a notice of termination with respect to the event constituting Good Reason described in such Good Reason Notice.

 

(f)           “Measuring Period” shall mean the year commencing on July 1, 2013 and ending on June 30, 2014,

 

A-4

 

(g)          “New Customer Working Capital” shall mean, with respect to each calendar quarter, the aggregate of inventory and accounts receivables (less related accounts payables) related to sales to new customers above forecasted levels for such calendar quarter.

 

(h)         “Quarterly Adjusted Cash” shall mean, with respect to each calendar quarter, Holdings’ consolidated cash as reported in Holdings’ quarterly or annual filing with the Securities and Exchange Commission less income tax refunds actually received during the Measuring Period, plus (i) New Customer Working Capital during the Measuring Period, and (ii) Board approved capital expenditures during the Measuring Period above forecasted levels in such quarter.

 

(i)             “Quarterly Adjusted Cash Target”  shall mean Quarterly Adjusted Cash as follows:

 

(i)                       for the quarter ending September 30, 2013, $65,200,000;

(ii)                    for the quarter ending December 31, 2013, $60,666,000;

(iii)                 for the quarter ending March 31, 2014, $58,860,000;  and

(iv)                for the quarter ending June 30, 2014, $58,449,000.

 

(j)            “Quarterly Adjusted EBITDA” shall mean, with respect to each calendar quarter. Holdings’ consolidated EBITDA as reported in Holdings’ quarterly or annual filing with the Securities and Exchange Commission

 

(k)         “Quarterly Adjusted EBITDA Target” shall mean Quarterly Adjusted EBITDA as follows:

 

(i)                       for the quarter ending September 30, 2013, $1,045,000;

(ii)                    for the quarter ending December 31, 2013, $2,423,000;

(iii)                 for the quarter ending March 31, 2014, $1,913,000;  and

(iv)                for the quarter ending June 30, 2014, $2,056,000.

 

(l)             “Quarterly Financial Targets” shall mean, with respect to each fiscal quarter ending on September 30, 2013, December 31, 2013, March 31, 2014 and June 30, 2014, the achievement by Holdings of either the Quarterly Adjusted EBITDA Target or the Quarterly Adjusted Cash Target.

 

A-5

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