Document:

Exhibit 10.1

 

SECOND AMENDMENT TO CREDIT AGREEMENT

 

SECOND AMENDMENT TO CREDIT AGREEMENT (this “Second Amendment”) dated as of August 16, 2012, among Walter Energy, Inc., a Delaware corporation, Western Coal Corp., a 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 Corp, collectively, the “Borrowers”), 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 and as further amended, modified and/or supplemented to, but not including, the date hereof, the “Credit Agreement”); and

 

WHEREAS, subject to the terms and conditions of this Second Amendment, the parties hereto wish to amend the Credit Agreement as herein provided;

 

NOW, THEREFORE, it is agreed:

 

I.                                        Amendments and Modifications to Credit Agreement.

 

1.              Section 1.01 of the Credit Agreement is hereby amended by:

 

(a)                                 replacing in its entirety the grid appearing in the definition of “Applicable Margin” with the following;

 

	
Total Leverage Ratio
    	
 
    	
B Term Loan
   LIBOR Margin
    	
 
    	
B Term Loan,
   Base Rate
   Margin
    	
 
    	
A Term Loan and
   Revolving
   Loan LIBOR
   Margin
    	
 
    	
A Term Loan, Revolving
   Loan and Swingline Loan
   Base Rate Margin
    	
 
    	
Revolving
   Loan CDOR Rate
   Margin
    	
 
    	
Revolving
   Loan and Swingline
   Loan Canadian
   Prime Rate Margin
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Greater than 3.25 to 1.00
    	
 
    	
3.25
    	
%
    	
2.25
    	
%
    	
3.25
    	
%
    	
2.25
    	
%
    	
3.25
    	
%
    	
2.25
    	
%
    
	
Greater than 2.00 to 1.00 but less than or equal to 3.25 to 1.00 
    	
 
    	
3.00
    	
%
    	
2.00
    	
%
    	
3.00
    	
%
    	
2.00
    	
%
    	
3.00
    	
%
    	
2.00
    	
%
    
	
Greater than 1.50 to 1.00 but less than or equal to 2.00 to 1.00 
    	
 
    	
2.75
    	
%
    	
1.75
    	
%
    	
2.75
    	
%
    	
1.75
    	
%
    	
2.75
    	
%
    	
1.75
    	
%
    
	
Greater than 1.00 to 1.00 but less than or equal to 1.50 to 1.00 
    	
 
    	
2.75
    	
%
    	
1.75
    	
%
    	
2.50
    	
%
    	
1.50
    	
%
    	
2.50
    	
%
    	
1.50
    	
%
    
	
Less than or equal to 1.00 to 1.00 
    	
 
    	
2.75
    	
%
    	
1.75
    	
%
    	
2.25
    	
%
    	
1.25
    	
%
    	
2.25
    	
%
    	
1.25
    	
%
    

 

 

(b)                                 inserting the text “(subject to clause (z) of the immediately following paragraph)” immediately preceding the text “opposite the Total Leverage Ratio” appearing in the paragraph immediately preceding the grid appearing in the definition of “Applicable Margin”.

 

(c)                                  (i) deleting the text “and” appearing immediately before clause (y) in the second paragraph from the end of the definition of “Applicable Margin” and inserting the text “,” in lieu thereof, (ii) deleting the text “and” appearing in the beginning of clause (y) and (iii) deleting the text “.” appearing immediately following clause (y) in such paragraph and inserting the text “and (z) with respect to B Term Loans, at all times after the delivery of a Quarterly Pricing Certificate which sets forth a Total Leverage Ratio of greater than 3.25:1.00 and such Applicable Margin shall apply at all times thereafter notwithstanding the Total Leverage Ratio set forth in any subsequent Quarterly Pricing Certificate.” in lieu thereof.

 

(d)                                 deleting the words “in an aggregate amount not to exceed $100,000,000” at the end of clause (x)(B) of the definition of “Total Leverage Ratio”.

 

(e)                                  inserting in the appropriate alphabetical order the following new definitions:

 

“Available Incremental Amount” shall mean, at any date of determination, the remainder of (A) $350,000,000 minus (B) the sum of (i) the aggregate principal amount (or face amount, if issued at a discount) of all Secured Notes issued pursuant to Section 10.04(xx)(VI) on or prior to such date (other than any Secured Notes described in clause (c) of the definition thereof), (ii) the aggregate principal amount of all Incremental Term Loans incurred pursuant to Section 2.14 on or prior to such date and (iii) the aggregate amount of all Revolving Loan Commitments incurred pursuant to Section 2.14 on or prior to such date.”

 

“Secured Notes” shall mean (a) any secured Indebtedness of the U.S. Borrower, which may be guaranteed on a secured basis (whether secured pari  passu with the Obligations or junior to the Obligations) by one or more Subsidiary Guarantors, all of the terms and conditions of which (including, without limitation, with respect to interest rate, call protection, amortization, redemption provisions, maturities, covenants, defaults, remedies, collateral and guaranties) are on market terms for secured notes, as such Indebtedness may be amended, restated, modified and/or supplemented from time to time in accordance with the terms hereof and thereof; provided, that in any event, unless the Required Lenders otherwise expressly consent in writing prior to the issuance thereof, (i) no such Indebtedness shall be guaranteed by any Person other than a Subsidiary Guarantor, (ii) no such Indebtedness shall be secured by any assets other than Collateral and such security may rank  pari  passu with, or junior to (but not senior to), the respective Liens created pursuant to the Security Documents and shall be subject to the terms of a Secured Notes Intercreditor Agreement, (iii) no such Indebtedness shall be subject to any scheduled amortization, mandatory redemption, mandatory repayment or mandatory prepayment, sinking fund or similar payment (other than, in each case, customary offers to repurchase upon a change of control, asset sale or event of loss and customary acceleration rights after an event of default) or have a final maturity date, in either case prior to the date occurring 91 days following the latest of the A Term Loan Maturity Date, B Term Loan Maturity Date and Revolving Loan Maturity Date then in effect on the date of issuance thereof and  (iv) the terms of such Indebtedness (including, without limitation, all covenants, defaults, guaranties, collateral and remedies, but excluding as to interest rate, call protection and redemption premium), taken as a whole, are no more restrictive (other than provisions of the Trust Indenture Act of 1939, as amended, which may be applicable to such Indebtedness) in any material respect than the terms applicable to the Borrowers and its Subsidiaries under this Agreement and the other Credit Documents, provided that a certificate of an Authorized Officer of the Borrower delivered to the Administrative Agent in good faith at least five Business Days (or such shorter period as the Administrative Agent may reasonably agree) prior to the incurrence of such Indebtedness, together with a

 

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reasonably detailed description of the material terms and conditions of such Indebtedness or the then most current drafts of the documentation relating thereto, certifying that the Borrower has determined in good faith that the terms and conditions of such Indebtedness satisfy the foregoing requirement shall be conclusive evidence that such terms and conditions satisfy the foregoing requirement; (b) any notes issued by the U.S. Borrower in exchange for, and as contemplated by, the terms of the secured Indebtedness described in clause (a) above and the related registration rights agreement with substantially identical terms (except as to transferability) as the secured Indebtedness described in clause (a) above; and (c) any refinancing, refunding, renewal or extension of any secured Indebtedness described in clause (a) or (b) above; provided that in connection with any such refinancing, refunding, renewal or extension, (x) the principal amount (or accreted value, as applicable) of any such Indebtedness is not increased above the principal amount (or accreted value, as applicable) thereof outstanding immediately prior to such refinancing, refunding, renewal or extension (plus accrued and unpaid interest and premium (including tender premiums) thereon and underwriting discounts, defeasance costs, fees, commissions and expenses) and (y) such Indebtedness otherwise complies with the terms of clause (a) or (b) above, as applicable.”

 

“Secured Notes Documents” shall mean, on and after the execution and delivery thereof, each note, instrument, indenture, agreement, guaranty, security document, the Secured Notes Intercreditor Agreement and any other document relating to each incurrence of Secured Notes, as the same may be amended, modified and/or supplemented from time to time in accordance with the terms hereof and thereof.”

 

“Secured Notes Intercreditor Agreement” shall mean an intercreditor agreement, on customary terms and in form and substance reasonably satisfactory to the Credit Parties and the Collateral Agent, entered into among the Credit Parties, the Collateral Agent and each relevant financial institution acting in its capacity as a collateral agent under Secured Notes Documents in respect of an issuance of Secured Notes (as the same may be amended, modified or supplemented from time to time).”

 

2.              Section 2.14 of the Credit Agreement is hereby amended by replacing the text “$350,000,000” appearing therein and inserting the text “the Available Incremental Amount” in lieu thereof.

 

3.              Section 10.01 of the Credit Agreement is hereby amended by (a) deleting the text “and” appearing at the end of clause (xxiv) thereof, (b) deleting the text “.” appearing immediately following clause (xxv) thereof and inserting the text “; and” in lieu thereof and (c) inserting the following new clause (xxvi):

 

“(xxvi)          Liens created by or pursuant to the Secured Notes Documents (which Liens may rank pari passu with, or junior to (but not senior to), the Liens granted under the Security Documents), so long as such Liens are limited to assets constituting Collateral pursuant to the Security Documents and are subject to the Secured Notes Intercreditor Agreement.”

 

4.              Section 10.01(vi) of the Credit Agreement is hereby amended by inserting the text “other” before the second instance of the text “asset” appearing in clause (y) of the proviso therein.

 

5.              Section 10.01(vii) of the Credit Agreement is hereby amended by deleting the text “any asset of the U.S. Borrower or” appearing in clause (y) of the proviso therein.

 

6.              Section 10.04 of the Credit Agreement is hereby amended by (a) deleting the text “and” appearing at the end of clause (xviii) thereof, (b) deleting the text “.” appearing immediately following clause (xix) thereof and inserting the text “; and” in lieu thereof and (c) inserting the following new clause (xx):

 

3

 

“(xx)                    Indebtedness of the U.S. Borrower represented by the Secured Notes, and secured guaranties thereof by the Subsidiary Guarantors, so long as (I) all such Indebtedness is incurred in accordance with the requirements of the definition of Secured Notes, (II) a Secured Notes Intercreditor Agreement shall have been duly authorized, executed and delivered at the time of the issuance of any Secured Notes and shall be in full force and effect, (III) in the case of any issuance of any Secured Notes described in clause (a) or (c) of the definition thereof, at the time of incurrence thereof, no Default or Event of Default shall exist or would result therefrom, (IV) at the time of incurrence thereof, all of the representations and warranties of each Credit Party set forth in Section 8 and in each other Credit Document shall be true and correct in all material respects as of such time (except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date), (V) the U.S. Borrower shall be in compliance with the covenants set forth in Section 10.07 and 10.08, in each case determined on a Pro Forma Basis as of the date of the most recently ended Test Period, in each case, as if such Indebtedness had been outstanding on the last day of such fiscal quarter of the U.S. Borrower for testing compliance therewith, (VI) the aggregate principal amount (or the aggregate face amount if issued at a discount) of Secured Notes (to the extent incurred pursuant to clause (a) of the definition thereof) that may be incurred at any time pursuant to this clause (xx) shall not exceed the Available Incremental Amount at such time and (VII) the U.S. Borrower shall have furnished to the Administrative Agent a certificate from an Authorized Officer of the U.S. Borrower certifying as to compliance with the requirements of preceding clauses (I), (III), (IV), (V) and (VI) and containing the calculations (in reasonable detail) required by the preceding clauses (V) and (VI).”

 

7.              Sections 10.05(vii) and 10.05(viii) of the Credit Agreement are hereby amended by replacing the text “determined without regard to any write-downs or write-offs of such loans and advances” in each such section and inserting the text “determined without regard to (A) any write-downs or write-offs of such loans and advances or (B) any payment in kind interest (or similar interest) added to the principal amount of such loan or advance” in lieu thereof in each case.

 

8.              Section 10.05(xvii) of the Credit Agreement is hereby amended by replacing the text “$150,000,000” appearing therein and inserting the text “$325,000,000” in lieu thereof.

 

9.              Section 10.07 of the Credit Agreement is hereby amended by replacing the text “3.50:1.00” appearing therein under the column “Ratio” immediately opposite the text “December 31, 2012 and each Fiscal Quarter ending thereafter” with the text “3.00:1.00” in lieu thereof.

 

10.       Section 10.08 of the Credit Agreement is hereby amended by (a) replacing the text “3.25:1.00” appearing therein under the column “Ratio” immediately opposite the text “September 30, 2012” with the text “3.75:1.00” in lieu thereof, (b) replacing the text “3.00:1.00” and the text “December 31, 2012 and each Fiscal Quarter ending thereafter” appearing in the last row of such section with the text “3.75:1.00” and “December 31, 2012 through September 30, 2013”, respectively, in lieu thereof and (c) adding a new row at the end of such section which has the text “3.50:1.00” under the column “Ratio” and the text “December 31, 2013 and each Fiscal Quarter ending thereafter” under the column “Fiscal Quarter Ending”.

 

11.       Section 10.09 of the Credit Agreement is hereby amended by (a) deleting the text “and” appearing at the end of clause (vii) thereof, (b) deleting the text “.” appearing immediately following clause (viii) thereof and inserting the text “; and” in lieu thereof and (c) inserting the following new clause (ix):

 

“(ix)                        restrictions created by the Secured Notes Documents.”

 

4

 

II.                       Miscellaneous Provisions.

 

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

 

(a)                                 no Default or Event of Default exists as of the Second Amendment Effective Date (as defined below), both before and immediately after giving effect to this Second 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 Second Amendment Effective Date, both before and after giving effect to this Second Amendment, with the same effect as though such representations and warranties had been made on and as of the Second 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 Second 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 or the 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 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 and the Canadian Guaranty and Collateral Agreement and the other Security Documents in accordance with the terms and provisions thereof.

 

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

 

(i)                                     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 White & Case LLP, 1155 Avenue of the Americas, New York, NY 10036 Attention:  May Yip (facsimile number: 212-354-8113 / e-mail address: myip@whitecase.com); and

 

5

 

(ii)                                  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 Second 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 August 15, 2012 (or, if later, on the Second Amendment Effective Date), a non-refundable cash fee (the “Amendment Fee”) in Dollars in an amount equal to 25 basis points (0.25%) of the sum of the aggregate principal amount of such Lender’s Term Loans and the Revolving Loan Commitment of such Lender outstanding or in effect, as applicable, as of the Second 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 Second Amendment Effective Date.

 

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

 

9.              From and after the Second 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.

 

*      *      *

 

6

 

IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Second 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 CORP.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Michael Griffin
    
	
 
    	
Name: Michael Griffin
    
	
 
    	
Title: Treasurer
    
	
 
    	
 
    
	
 
    	
WALTER ENERGY CANADA   HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Michael Griffin
    
	
 
    	
Name: Michael Griffin
    
	
 
    	
Title: Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
0847918 B.C. LTD.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
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
    

 

 

	
 
    	
WOLVERINE COAL LTD.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Michael Griffin
    
	
 
    	
Name: Michael Griffin
    
	
 
    	
Title: Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
BLUE CREEK SALES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Michael Griffin
    
	
 
    	
Name: Michael Griffin
    
	
 
    	
Title: Assistant Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CLEARWATER ENERGY, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Michael Griffin
    
	
 
    	
Name: Michael Griffin
    
	
 
    	
Title: Assistant Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
HAMER PROPERTIES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Michael Griffin
    
	
 
    	
Name: Michael Griffin
    
	
 
    	
Title: Assistant Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
J.W. WALTER, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Michael Hurley
    
	
 
    	
Name: Michael Hurley
    
	
 
    	
Title: Vice President - Tax
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
J.W.I. HOLDINGS CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Michael Hurley
    
	
 
    	
Name: Michael Hurley
    
	
 
    	
Title: Vice President - Tax
    

 

 

	
 
    	
JIM WALTER RESOURCES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Michael Griffin
    
	
 
    	
Name: Michael Griffin
    
	
 
    	
Title: Assistant Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LAND HOLDINGS CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Michael Hurley
    
	
 
    	
Name: Michael Hurley
    
	
 
    	
Title: Vice President - Tax
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
TAFT COAL SALES &   ASSOCIATES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Michael Griffin
    
	
 
    	
Name: Michael Griffin
    
	
 
    	
Title: Assistant Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
TUSCALOOSA RESOURCES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Michael Griffin
    
	
 
    	
Name: Michael Griffin
    
	
 
    	
Title: Assistant Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WALTER BLACK WARRIOR BASIN LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Michael Griffin
    
	
 
    	
Name: Michael Griffin
    
	
 
    	
Title: Assistant Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WALTER COKE, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Michael Griffin
    
	
 
    	
Name: Michael Griffin
    
	
 
    	
Title: Assistant Treasurer
    

 

 

	
 
    	
WALTER EXPLORATION &   PRODUCTION LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Michael Griffin
    
	
 
    	
Name: Michael Griffin
    
	
 
    	
Title: Assistant Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WALTER LAND COMPANY
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Michael Hurley
    
	
 
    	
Name: Michael Hurley
    
	
 
    	
Title: Vice President - Tax
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WALTER MINERALS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Michael Griffin
    
	
 
    	
Name: Michael Griffin
    
	
 
    	
Title: Assistant Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WALTER NATURAL GAS, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Michael Griffin
    
	
 
    	
Name: Michael Griffin
    
	
 
    	
Title: Assistant Treasurer
    

 

 

	
 
    	
MORGAN STANLEY   SENIOR FUNDING, INC.,
   as Administrative Agent
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Steven B. King
    
	
 
    	
Name: Steven B. King
    
	
 
    	
Title: Vice President
    

 

 

[Lender Signatures Pages Omitted]EXHIBIT 10.1

 

Digital Domain Media Group, Inc.
 10250 SW Village Parkway
 Port St. Lucie, Florida 34987

 

August 16, 2012

 

 

PBC Digital Holdings II, LLC (the “Purchaser”)

c/o Palm Beach Capital

505 Flagler Drive, Suite 1400

West Palm beach, FL  33401

Attn:  Shaun McGruder

 

Re:          Securities Purchase Agreement (the “Purchase Agreement”), dated as of May 6, 2012, by and among the Company and the investors party thereto (the “Initial Buyers”), as amended from time time

 

Dear Mr. McGruder:

 

All capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Purchase Agreement.

 

A.           Effective as of the Effective Date (as defined below), the Company hereby agrees that notwithstanding anything contained in any of the Transaction Documents to the contrary:

 

(i)            An additional “Closing” (the “Additional Closing”) shall occur on August 16, 2012 (the “Additional Closing Date”) on the terms set forth in the remainder of this paragraph A.  The parties hereto agree that the Purchase Agreement shall, solely with respect to the issuances of Additional Securities (as defined below) contemplated hereby, be adjusted, mutatis mutandis, to effect such Additional Closing, including without limitation, each reference to “Closing” or “Closing Date” therein, referring to the Additional Closing or the Additional Closing Date and each reference to “Notes” or “Warrants” being purchased on the Additional Closing Date, referring to the Additional Note (as defined below) and Additional Warrants (as defined below) being purchased hereunder, as applicable, in connection herewith and therewith.  After the Additional Closing, for purpose of the Purchase Agreement and the other Transaction Documents, the Purchaser shall be a “Buyer” under the Purchase Agreement and the other Transaction Documents (including, without limitation, the Security Documents), the definitions of (1) “Schedule of Buyers” shall be amended to include the Additional Schedule of Buyers (as defined below), (2) “Notes” shall be amended to include the Additional Note, (3) “Warrants” shall be amended to include the Additional Warrants, (4) “Conversion Shares” shall be amended to include the Additional Conversion Shares (as defined below) and (5) “Warrant Shares” shall be amended to include the Additional Warrant Shares (as defined below).

 

(ii)           On the Additional Closing Date, (1) the Company shall issue and sell to the Purchaser, and the Purchaser shall purchase from the Company, a senior secured convertible note, in the form attached hereto as Exhibit A (the “Additional Note”) in the original principal

 

 

amount as is set forth opposite the Purchaser’s name on Schedule 1 (the “Additional Schedule of Buyers”) attached hereto, which shall be convertible into shares of Common Stock (the “Additional Conversion Shares”) in accordance with the terms of the Additional Note, along with warrants to purchase Common Stock in the form attached hereto as Exhibit B (the “Additional Warrants”) to initially acquire up to the aggregate number of shares of Common Stock as is set forth opposite the Purchaser’s name on the Additional Schedule of Buyers (as converted, the “Additional Warrant Shares”, and together with the Additional Conversion Shares, the Additional Note and the Additional Warrants, the “Additional Securities”), (2) the Purchaser shall execute and deliver that certain “Agreement Among Buyers”, in the form attached hereto as Exhibit C (the “Agreement Among Buyers”) and (3) the Company shall have delivered an executed consent letter of the Subordinated Lender consenting to the issuance of the Additional Securities in a form satisfactory to the Purchaser in its sole discretion.  The Company also shall deliver to the Purchaser the deliveries requested by the Purchaser to be delivered by the Company pursuant to Section 7 of the Purchase Agreement (other than those deliverables set forth in subclauses (1) - (3) above, which shall be delivered on the Additional Closing Date) no later than the fifteenth (15) calendar day following the Additional Closing Date.  On the Additional Closing Date the Purchaser shall pay the Company its purchase price (the “Additional Purchase Price”) for such Additional Note and Additional Warrants to be purchased hereunder as is set forth opposite the Purchaser’s name on the Additional Schedule of Buyers and, in connection therewith, the Purchaser further agrees to comply with the second sentence of Section 1(c) of the Purchase Agreement.

 

B.            The parties hereto acknowledge and agree that (1) the Purchaser shall have all rights of a Buyer as set forth herein and under all the Transaction Documents (including, without limitation, the Security Documents) (other than rights under Section 4(o) of the Securities Purchase Agreement); (2) notwithstanding anything set forth in any Transaction Document, the consent of the Purchaser shall not be required for any amendment or waiver to the Purchase Agreement or any other Transaction Document unless both (x) the unanimous written consent of the parties to such Transaction Documents or holders of such Securities, as applicable, is required by the applicable terms and conditions thereof and (y) such amendment or waiver disproportionately and adversely affects the Purchaser. The Company hereby acknowledges and agrees that (i) none of the rights of the Purchaser contemplated hereunder shall limit any rights of the Initial Buyers in any manner and (ii) the Purchaser shall be entitled to rely on all representations and warranties contained in Section 3 of the Purchase Agreement as if such representations and warranties were made to the Purchaser on the Additional Closing Date, subject to qualification by revised schedules thereto which may be delivered by the Company to the Purchaser prior to or after the Additional Closing Date, but in no event later than the fifteenth (15th) calendar day after the Additional Closing Date, (I) notwithstanding anything herein or in the Transaction Documents (after the Effective Date) to the contrary, but solely for purposes of the Registration Rights Agreement, no shares of Common Stock issuable upon conversion or exercise or otherwise pursuant to the Additional Note or the Additional Warrants, as applicable, shall be Registrable Securities thereunder and (II) as of the Effective Date, “Required Holders” as defined in the Purchase Agreement, shall be amended and restated as follows:

 

“Required Holders” or “Requisite Holders” means holders of not less than 55% of all Registrable Securities (excluding any Registrable Securities held by the Company or any of its Subsidiaries) issued or issuable hereunder or pursuant to

 

2

 

the Notes and/or the Warrants (or the Buyers, with respect to any waiver or amendment of Section 4(o)); provided, that such holders (except to the extent any such holder (together with its affiliates) does not beneficially own any Notes or beneficially owns Notes with a then outstanding aggregate principal amount of less than $1 million) must include (x) the Collateral Agent (if a holder of Notes) and any affiliates of the Collateral Agent holding any Notes and (y) the Buyer (other than the Collateral Agent and its affiliates) that immediately following the initial Closing would beneficially own the largest outstanding aggregate original principal amount of Notes.

 

D.            Except as expressly set forth herein, (i) each of the Transaction Documents and each of the obligations of the Company thereunder, and each of the rights of and benefits to the Buyers thereunder, is, and shall continue to be, in full force and effect and each is hereby ratified and confirmed in all respects, except that from and after the date hereof, without implication that the contrary would otherwise be true, (A) all references in the Purchase Agreement to “this letter agreement,” “hereto,” “hereof,” “hereunder” or words of like import referring to the Purchase Agreement shall mean the Purchase Agreement as amended by this letter agreement, (B) all references in the Transaction Documents to “the Purchase Agreement,” “thereto,” “thereof,” “thereunder” or words of like import referring to the Purchase Agreement shall mean the Purchase Agreement as amended by this letter agreement, and (C) all references in the Transaction Documents to “the Transaction Documents,” “thereto,” “thereof,” “thereunder” or words of like import referring to the Transaction Documents shall mean the Transaction Documents as amended by this letter agreement, and (ii) the execution, delivery and effectiveness of this letter agreement shall not operate as an amendment or waiver of any right, power or remedy of any Buyer under any of the Transaction Documents, nor constitute an amendment or waiver of any provision of any of the Transaction Documents and each of the Transaction Documents shall continue in full force and effect, as amended or modified by this letter agreement. The parties hereto agree that this letter agreement (i) amends (and constitutes an amendment to) the Purchase Agreement and all the other Transaction Documents as expressly contemplated by this letter agreement to give full force and effect to the terms and conditions of this letter agreement and (ii) constitutes a Transaction Document.

 

E.            This letter agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

 

F.             The Company shall, on or before 8:30 a.m., New York time, on August     , 2012, file a Current Report on Form 8-K describing all the material terms of the transactions contemplated by this letter agreement in the form required by the 1934 Act. From and after the filing of such 8-K, the Company confirms that it will have disclosed all material, non-public information (if any) regarding the Company and its Subsidiaries delivered to the Purchaser by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by this letter agreement.

 

3

 

G.            Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this letter agreement and the consummation of the transactions contemplated hereby.

 

H.            This letter agreement shall become effective upon the later of (a) such date as the Company shall have obtained a consent in the form attached hereto as Exhibit D from each Initial Buyer and each Initial Buyer shall have executed the Agreement Among Buyers and (b) the Purchaser has executed and delivered the Agreement Among Buyers(the “Effective Date”).

 

I.             Concurrently herewith, the Company shall reimburse the Purchaser for all reasonable costs and expenses incurred by it in connection with preparing and delivering this letter agreement and the prior unpaid and outstanding legal fees and expenses incurred by the Purchaser to date with respect to the Transaction Documents, those certain call option agreements entered into by the Purchaser at the request of the Company, matters related to securities offerings made by the Company and other matters relating to the Company, which amount shall be withheld by Purchaser from the Additional Purchase Price at the Addiitonal Closing.  Except as otherwise set forth in this letter agreement and the Transaction Documents, each party to this letter agreement shall bear its own expenses in connection with the transactions contemplated hereby.

 

J.             The language used in this letter agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

 

K.            The headings of this letter agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this letter agreement.

 

L.            If any provision of this letter agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this letter agreement so long as this letter agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties.  The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

M.           No provision of this letter agreement may be amended other than by an instrument in writing signed by the Company and the Purchaser.

 

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N.            Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with the terms of the Purchase Agreement (with the Effective Date deemed to have occurred for such purpose).

 

O.            This letter agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns in accordance with the terms of the Purchase Agreement (with the Effective Date deemed to have occurred for such purpose).

 

P.             All questions concerning the construction, validity, enforcement and interpretation of this letter agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this letter agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS CONSENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

Q.            The obligations of the Purchaser under this letter agreement and the other Transaction Documents are several and not joint with the obligations of any other Buyer, and neither Purchaser nor any other Buyer shall be responsible in any way for the performance of the obligations of Purchaser under this letter agreement or of Purchaser or any other Buyer under any other Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by Purchaser pursuant hereto or by Purchaser or any other Buyer pursuant thereto, shall be deemed to constitute the Purchaser or any other Buyers as, and the Company acknowledges that neither Purchaser nor any other Buyers so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Purchaser or any other Buyers are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated herein or by the other Transaction Documents or any matters, and the Company acknowledges that Purchaser and the other Buyers are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or the transactions contemplated by this letter agreement and the other Transaction Documents. The decision of Purchaser to purchase securities pursuant to this letter agreement and the other Transaction Documents has been made by Purchaser independently of each other Buyer. Purchaser acknowledges that no other Buyer has acted as agent for Purchaser in connection with Purchaser making its investment hereunder and that no other Buyer will be

 

5

 

acting as agent of Purchaser in connection with monitoring Purchaser’s investment in the securities or enforcing its rights under this letter agreement or the other Transaction Documents. The Company and Purchaser confirms that Purchaser has independently participated with the Company and its Subsidiaries in the negotiation of the transaction contemplated hereby and by the other Transaction Documents with the advice of its own counsel and advisors. Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this letter agreement or out of any other Transaction Documents, and it shall not be necessary for any other Buyer to be joined as an additional party in any proceeding for such purpose. It is expressly understood and agreed that each provision contained in this letter agreement and in each other Transaction Document is between the Company, each Subsidiary and a Buyer, solely, and not between the Company, its Subsidiaries and the Buyers collectively and not between and among the Buyers.

 

[signature page follows]

 

6

 

	
 
    	
 
    	
Sincerely,
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
DIGITAL DOMAIN   MEDIA GROUP, INC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ John C. Textor
    
	
 
    	
 
    	
 
    	
Name: John C.   Textor
    
	
 
    	
 
    	
 
    	
Title: Chief   Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Agreed to and accepted:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
PBC DIGITAL   HOLDINGS II, LLC
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By: PBC GP III,   LLC, its Manager
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Shaun McGruder
    	
 
    	
 
    
	
 
    	
Name: Shaun   McGruder
    	
 
    	
 
    
	
 
    	
Title: Manager
    	
 
    	
 
    

 

 

Schedule 1

 

	
 
    	
 
    	
Address and Facsimile
   Number
    	
 
    	
Original
   Principal Amount
   of Additional
   Note
    	
 
    	
Number of
    Additional
   Warrant Shares
   underlying
   Additional
   Warrants
    	
 
    	
Additional
   Purchase
    Price
    	
 
    	
Legal Representative’s
   Address and Facsimile
   Number
    
	
PBC Digital

Holdings II, LLC
    	
 
    	
c/o Palm Beach Capital

505 Flagler Drive

Suite 1400

West Palm beach, FL 33401

Attn: Shaun   McGruder

Telephone: (561)   659-9022

Facsimile: (561)   659-9055

Attn: Shaun   McGruder
    	
 
    	
$
    	
5,000,000
    	
 
    	
 
    	
 
    	
$
    	
5,000,000
    	
 
    	
Greenberg Traurig,   P.A.

401 East Las Olas   Blvd.

Suite 2000

Fort Lauderdale,   FL 33301

Telephone:   (954)765-0500

Facsimile: (954)   765-1477

Attention: Bruce   I. March, Esq.

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