EXHIBIT 99.2
SECURITY AND PLEDGE AGREEMENT
THIS SECURITY AND PLEDGE AGREEMENT ("SECURITY AGREEMENT"), is made and
entered into as of April 15, 2004, by and between National Coal Corp., a Florida
corporation ("BORROWER"), and National Coal Corporation, a Tennessee corporation
and a wholly-owned subsidiary of Borrower (Borrower and such subsidiary being
individually a "GRANTOR" and collectively the "GRANTORS"), in favor of Xxxxxxx
Xxxxx, a individual ("XXXXX"), as agent (in such capacity, "AGENT") for himself
and the holders party to the Purchase Agreements referred to below (Xxxxx and
the holders party to the Purchase Agreements and their respective successors,
endorsees, transferees and assigns, collectively "HOLDERS").
W I T N E S S E T H:
WHEREAS, pursuant to a Note and Warrant Purchase Agreement between
Borrower and a Holder (as the same may from time to time be amended, modified,
or supplemented, each a "PURCHASE AGREEMENT" and collectively, the "PURCHASE
AGREEMENTS"), each Holder has agreed to make a loan (collectively, the "SENIOR
NOTE LOANS") to Borrower; and
WHEREAS, each Holder is willing to make a Senior Note Loan but only
upon the condition, among others, that each Grantor shall have executed and
delivered this Security Agreement to Agent for the ratable benefit of the
Holders.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms defined
in the Purchase Agreements are used herein as therein defined, and the following
terms shall have the following meanings (such meanings being equally applicable
to both the singular and plural forms of the terms defined):
"ACCOUNT DEBTOR" shall mean any "account debtor," as such term is
defined in section 9102(a)(3) of the UCC, with respect to any of the Collateral.
"ACCOUNTS" shall mean any "account," as such term is defined in section
9102(a)(2) of the UCC, comprising any of the Collateral.
"CHATTEL PAPER" shall mean any "chattel paper," as such term is defined
in section 9102(a)(11) of the UCC, comprising any of the Collateral.
"COLLATERAL" shall have the meaning assigned to such term in SECTION 2
of this Security Agreement.
"CONTRACTS" shall mean all contracts, undertakings, or other agreements
(other than rights evidenced by Chattel Paper, Documents, or Instruments)
comprising any of the Collateral, including, without limitation, with respect to
an Account, any agreement relating to the terms of payment or the terms of
performance thereof.
"COPYRIGHTS" shall mean all of the following comprising any of the
Collateral: (i) all copyrights, registrations, and applications therefor; (ii)
all renewals and extensions thereof; (iii) all income, royalties, damages, and
payments now and hereafter due or payable or both with respect thereto,
including, without limitation, damages and payments for past or future
infringements or misappropriations thereof; (iv) all rights to xxx for past,
present, and future infringements or misappropriations thereof; and (v) all
other rights corresponding thereto throughout the world.
"DOCUMENTS" shall mean any "documents," as such term is defined in
section 9102(a)(30) of the UCC, comprising any of the Collateral.
"EQUIPMENT" shall mean any "equipment," as such term is defined in
section 9102(a)(33) of the UCC, comprising any of the Collateral.
"GENERAL INTANGIBLES" shall mean any "general intangibles," as such
term is defined in section 9102(a)(42) of the UCC, comprising any of the
Collateral.
"HEREBY," "HEREIN," "HEREOF," "HEREUNDER" and words of similar import
refer to this Security Agreement as a whole (including, without limitation, any
schedules hereto) and not merely to the specific section, paragraph, or clause
in which the respective word appears.
"INSTRUMENTS" shall mean any "instrument," as such term is defined in
section 9102(a)(47) of the UCC, comprising any of the Collateral, other than
instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"INTELLECTUAL PROPERTY COLLATERAL" shall mean all of the Copyrights,
Licenses, Patents, Trademarks, and Trade Secrets as to which Agent for the
ratable benefit of Holders has been granted a security interest hereunder.
"INVENTORY" shall mean all "inventory," as such term is defined in
section 9102(a)(48) of the UCC, comprising any of the Collateral.
"LETTER OF INTENT" shall mean that certain Letter of Intent, dated
March 15, 2004, by and among such Grantor and U.S. Coal, Inc., a Tennessee
corporation, and all schedules, exhibits and documents delivered in connection
therewith.
"LICENSE" shall mean any Patent License, Trademark License, or other
license as to which Agent for the ratable benefit of Holders has been granted a
security interest hereunder.
"LIENS" shall mean, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, hypothecation, encumbrance, charge or security interest
in, on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset, and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"NOTES" means the Senior Secured Promissory Notes, evidencing the
Senior Note Loans in the original aggregate principal amount not to exceed
$7,500,000, issued by such Grantor to
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the Holders under the Purchase Agreements entered into contemporaneously with
this Agreement or subsequent to the execution of this Agreement with respect to
Senior Note Loans made after the date of this Agreement.
"PATENT LICENSE" shall mean any written agreement comprising any of the
Collateral granting any right to practice any invention on which a Patent is in
existence.
"PATENTS" shall mean all of the following comprising any of the
Collateral: (i) all patents and patent applications; (ii) all inventions and
improvements described and claimed therein; (iii) all reissues, divisions,
continuations, renewals, extensions, and continuations-in-part thereof; (iv) all
income, royalties, damages and payments now and hereafter due and/or payable to
such Grantor with respect thereto, including, without limitation, damages and
payments for past, present or future infringements or misappropriations thereof;
(v) all rights to xxx for past, present, and future infringements or
misappropriations thereof; and (vi) all other rights corresponding thereto
throughout the world.
"PERMITTED LIENS" shall mean (i) Liens for taxes not yet delinquent,
(ii) Liens imposed by law and incurred in the ordinary course of business for
obligations not yet due to carriers, warehousemen, laborers, materialmen, (iii)
Liens in respect of pledges or deposits under workers' compensation laws or
similar legislation, (v) Liens reflected on SCHEDULE I to this Security
Agreement, and (vi) Liens in respect of assets acquired, if any, by such Grantor
from U.S. Coal, Inc. pursuant to the Letter of Intent, if and to the extent such
assets are acquired subject to such Liens.
"PROCEEDS" shall mean "proceeds" as such term is defined in section
9102(a)(64) of the UCC.
"PURCHASE AGREEMENT" shall mean a Note and Warrant Purchase Agreement
between such Grantor and a Holder (as the same may from time to time be amended,
modified, or supplemented), pursuant to which Holder has made a Senior Note Loan
to such Grantor, which Purchase Agreement was entered into contemporaneously
with this Security Agreement or subsequent to the execution of this Security
Agreement with respect to Senior Note Loans made after the date of this Security
Agreement.
"SECURED OBLIGATIONS" shall mean (i) all of the unpaid principal amount
of, and accrued interest on, the Notes; (ii) all fees and costs owing by such
Grantor under the Purchase Agreements to Agent or any Holder; and (iii) all
other indebtedness, liabilities and obligations of such Grantor to Agent or any
Holder, whether now existing or hereafter incurred, created under, arising out
of, or in connection with the Purchase Agreements, the Notes or this Security
Agreement.
"SECURITY AGREEMENT" shall mean this Security Agreement, as the same
may from time to time be amended, modified, or supplemented and shall refer to
this Security Agreement as in effect on the date such reference becomes
operative.
"SENIOR NOTE LOANS" shall mean loans to such Grantor in the original
aggregate principal amount not to exceed $7,500,000, which loans are made to
such Grantor pursuant to the Purchase Agreements.
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"TRADE SECRETS" shall mean trade secrets comprising any of the
Collateral, along with any and all (i) income, royalties, damages, and payments
now and hereafter due and/or payable to any Grantor with respect thereto,
including, without limitation, damages and payments for past or future
infringements or misappropriations thereof; (ii) rights to xxx for past,
present, and future infringements or misappropriations thereof; and (iii) all
other rights corresponding thereto throughout the world.
"TRADEMARK LICENSE" shall mean any written agreement comprising any of
the Collateral granting any right to use any Trademark or Trademark
registration.
"TRADEMARKS" shall mean all of the following comprising any of the
Collateral: (i) all trademarks (including service marks and trade names, whether
registered or at common law), registrations and applications therefor, and the
entire product lines and goodwill of such Grantor's business connected therewith
and symbolized thereby; (ii) all renewals thereof; (iii) all income, royalties,
damages, and payments now and hereafter due or payable or both with respect
thereto, including, without limitation, damages and payments for past, present,
or future infringements or misappropriations thereof; (iv) all rights to xxx for
past, present, and future infringements or misappropriations thereof; and (v)
all other rights corresponding thereto throughout the world.
"UCC" shall mean the Uniform Commercial Code as the same may, from time
to time, be in effect in the State of Tennessee; PROVIDED, HOWEVER, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Agent's and any Holder's security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of Tennessee, the term "UCC" shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such attachment, perfection, or priority and
for purposes of definitions related to such provisions.
2. GRANT OF SECURITY INTEREST AND PLEDGE.
(a) As collateral security for the prompt and complete
payment and performance when due (whether at stated maturity, by acceleration,
or otherwise) of all the Secured Obligations and to induce Agent and each Holder
to enter into the Purchase Agreement and to make the Senior Note Loans in
accordance with the terms thereof, each Grantor hereby assigns, conveys,
mortgages, pledges, hypothecates, and transfers to Agent for the ratable benefit
of Holders, and hereby grants to Agent for the ratable benefit of Holders, a
security interest in, all of such Grantor's right, title and interest in, to,
and under the following (all of which being hereinafter collectively called the
"COLLATERAL"):
(i) all Equipment and other goods and personal
property of such Grantor used directly in the mining, storage, washing, and
transportation of coal;
(ii) all fee simple and leasehold rights in real
property of such Grantor;
(iii) all coal mineral rights of such Grantor;
(iv) all mining permits and bonds associated
therewith of such Grantor;
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(v) all of the assets acquired, if any, by such
Grantor from U.S. Coal, Inc. pursuant to the Letter of Intent; and
(vi) all Proceeds of the foregoing and all
accessions to, substitutions, and replacements for, and rents, profits, and
products of each of the foregoing.
3. RIGHTS OF AGENT AND HOLDERS; LIMITATIONS ON AGENT'S AND
HOLDERS' OBLIGATIONS.
(a) It is expressly agreed by each Grantor that, anything
herein to the contrary notwithstanding, such Grantor shall remain liable under
each of the Contracts and each of the Licenses assigned as Collateral under this
Security Agreement, to observe and perform all the conditions and obligations to
be observed and performed by it thereunder and each Grantor shall perform all of
its duties and obligations thereunder, all in accordance with and pursuant to
the terms and provisions of each such Contract or License. Neither Agent nor any
Holder shall have any obligation or liability under any Contract or License by
reason of or arising out of this Security Agreement or the granting to Agent or
Holders of a security interest therein or the receipt by Agent or any Holder of
any payment relating to any Contract or License pursuant hereto, nor shall Agent
or Holders be required or obligated in any manner to perform or fulfill any of
the obligations of any Grantor under or pursuant to any Contract or License, or
to make any payment, or to make any inquiry as to the nature or the sufficiency
of any payment received by it or the sufficiency of any performance by any party
under any Contract or License, or to present or file any claim, or to take any
action to collect or enforce any performance or the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
(b) Agent authorizes each Grantor to collect the Accounts
assigned as Collateral under this Security Agreement, provided that such
collection is performed in a prudent and businesslike manner, and Agent for the
ratable benefit of Holders may, upon the occurrence and during the continuation
of any Default or Event of Default and without notice, limit or terminate such
authority at any time. If required by Agent at any time during the continuation
of any Default or Event of Default, any Proceeds, when first collected by any
Grantor, received in payment of any such Account or in payment for any of
Inventory or on account of any of Contracts, shall be promptly deposited by such
Grantor in precisely the form received (with all necessary endorsements) in a
special bank account maintained by Agent for the ratable benefit of Holders
subject to withdrawal by Agent for the ratable benefit of Holders only, as
hereinafter provided, and until so turned over shall be deemed to be held in
trust by such Grantor for and as Agent's property for the ratable benefit of
Holders and shall not be commingled with such Grantor's other funds or
properties. Such Proceeds, when deposited, shall continue to be collateral
security for all of the Secured Obligations and shall not constitute payment
thereof until applied as hereinafter provided. Agent shall apply all or a part
of the funds on deposit in said special account to the principal of or interest
on or both in respect of any of the Secured Obligations in accordance with the
provisions of SECTION 8(D) hereof and any part of such funds which Agent elects
not so to apply and deems not required as collateral security for the Secured
Obligations shall be paid over from time to time by Agent to such Grantor. If a
Default or an Event of Default has occurred and is continuing, at the request of
Agent such Grantor shall deliver to Agent for the ratable benefit of Holders all
original and other documents evidencing,
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and relating to, the sale and delivery of such Inventory or the performance of
labor or service that created such Accounts, including, without limitation, all
original orders, invoices, and shipping receipts; and, prior to the occurrence
of a Default or an Event of Default such Grantor shall deliver photocopies
thereof to Agent for the ratable benefit of Holders at the Agent's request.
(c) Agent may at any time, upon the occurrence and during
the continuation of any Default or Event of Default (whether or not waived),
after first notifying each Grantor of its intention to do so, notify, with
respect to Accounts, Contracts, Instruments and Chattel Paper assigned as
Collateral under this Security Agreement, Account Debtors, parties to the
Contracts, obligors of Instruments and obligors in respect of Chattel Paper that
the Accounts and the right, title, and interest of such Grantor in and under
such Contracts, such Instruments, and such Chattel Paper have been assigned to
Agent for the ratable benefit of Holders and that payments shall be made
directly to Agent for the ratable benefit of Holders. Upon the request of Agent,
such Grantor will so notify such Account Debtors, parties to such Contracts,
obligors of such Instruments, and obligors in respect of such Chattel Paper.
Upon the occurrence and during the continuation of a Default or an Event of
Default (whether or not waived) Agent may in its own name or in the name of
others communicate with such Account Debtors, parties to such Contracts,
obligors of such Instruments, and obligors in respect of such Chattel Paper to
verify with such Persons to Agent's satisfaction the existence, amount, and
terms of any such Accounts, Contracts, Instruments, or Chattel Paper.
(d) Upon reasonable prior notice to each Grantor (unless
a Default or an Event of Default has occurred and is continuing, in which case
no notice is necessary), Agent shall have the right, during normal business
hours, to make test verifications of the Accounts and physical verifications of
the Inventory in any reasonable manner and through any reasonable medium, and
such Grantor agrees to furnish all such assistance and information as Agent may
require in connection therewith.
4. REPRESENTATIONS AND WARRANTIES. Each Grantor hereby represents
and warrants that:
(a) Except for the security interest granted to Agent for
the ratable benefit of Holders pursuant to this Security Agreement and other
Permitted Liens, such Grantor is the sole owner of each item of the Collateral
in which it purports to grant a security interest hereunder, having good and
marketable title thereto, free and clear of any and all Liens.
(b) No effective security agreement, financing statement,
equivalent security or lien instrument, or continuation statement covering all
or any part of the Collateral is on file or of record in any public office,
except such as may have been filed by such Grantor in favor of Agent for the
ratable benefit of Holders pursuant to this Security Agreement or such as relate
to other Permitted Liens.
(c) Upon appropriate financing statements having been
filed in the jurisdictions listed on SCHEDULE II hereto, this Security Agreement
is effective to create a valid and continuing priority lien on and priority
perfected security interest in the Collateral with respect to which a security
interest may be perfected by filing pursuant to the UCC, in favor of Agent for
the ratable benefit of Holders, prior to all other Liens except Permitted Liens,
and is
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enforceable as such as against creditors of and purchasers from such Grantor
(other than purchasers of Inventory in the ordinary course of business) and as
against any purchaser of real property where any of the Equipment is located and
any present or future creditor obtaining a Lien on such real property.
(d) Upon appropriate collateral assignments of leases and
deeds of trusts having been filed in the appropriate counties in which the
property is located, this Security Agreement is effective to create a valid and
continuing priority lien on and priority perfected security interest in the real
property interests included in the Collateral, in favor of Agent for the ratable
benefit of Holders, prior to all other Liens except Permitted Liens, and is
enforceable as such as against creditors of and purchasers from such Grantor and
any present or future creditor obtaining a Lien on such real property.
(e) Such Grantor's principal place of business and the
place where its records concerning the Collateral are kept and the location of
the Inventory and Equipment are set forth on SCHEDULE III hereto, and such
Grantor will not change such principal place of business or remove such records
or change the location of the Inventory and Equipment unless it has taken such
action as is necessary to cause the security interest of Agent for the ratable
benefit of Holders in the Collateral to continue to be perfected in accordance
with the provisions of SECTION 4(c) hereof. Such Grantor will not change its
principal place of business or the place where its records concerning the
Collateral are kept or change the location of the Inventory and Equipment
without giving fifteen (15) days' prior written notice thereof to Agent.
5. COVENANTS. Each Grantor covenants and agrees with Agent and
Holder that from and after the date of this Security Agreement and until the
Secured Obligations are fully satisfied:
(a) FURTHER DOCUMENTATION; PLEDGE OF INSTRUMENTS. Upon
the written request of Agent, and at the sole expense of such Grantor, such
Grantor will promptly and duly execute and deliver any and all such further
instruments and documents and take such further action as Agent may reasonably
deem desirable to obtain the full benefits of this Security Agreement and of the
rights and powers herein granted, including, without limitation, using their
best efforts to secure all consents and approvals necessary or appropriate for
the assignment to Agent for the ratable benefit of Holders of any Contract held
by such Grantor or in which such Grantor has any rights not heretofore assigned,
the filing of any financing or continuation statements under the UCC with
respect to the Liens and security interests granted hereby, transferring
Collateral to the Agent's possession (if a security interest in such Collateral
can be perfected only by possession) for the ratable benefit of Holders, placing
the interest of Agent as lienholder on the certificate of title of any vehicle
comprising any of the Collateral, and using its best efforts to obtain waivers
of Liens from landlords and mortgagees with respect to any of the Collateral.
Such Grantor also hereby authorizes Agent to file any such financing or
continuation statement without the signature of such Grantor to the extent
permitted by applicable law.
(b) MAINTENANCE OF RECORDS. Such Grantor will keep and
maintain at its own cost and expense satisfactory and complete records of the
Collateral, including, without limitation, a record of all payments received and
all credits granted with respect to the Collateral and all other dealings with
the Collateral. If requested by Agent, such Grantor will xxxx its
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books and records pertaining to the Collateral to evidence this Security
Agreement and the security interests granted hereby. If requested by Agent, all
Chattel Paper assigned as Collateral under this Security Agreement will be
marked with the following legend: "This writing and the obligations evidenced or
secured hereby are subject to the security interest of Xxxxxxx Xxxxx, as Agent
for the ratable benefit of Holders." If requested by Agent, the security
interest of the Agent shall be noted on the certificate of title of each vehicle
assigned as Collateral under this Security Agreement. For Agent's and Holder's
further security, such Grantor agrees that Agent and Holder shall have a special
property interest in all of such Grantor's books and records pertaining to the
Collateral and, upon the occurrence and during the continuation of any Default
or Event of Default, and upon request by Agent, such Grantor shall deliver and
turn over any such books and records to Agent for the ratable benefit of Holders
or to its representatives. Prior to the occurrence of a Default or an Event of
Default and upon reasonable notice from Agent, such Grantor shall permit any
representative of Agent reasonable access to inspect such books and records and
will provide photocopies thereof to Agent.
(c) INDEMNIFICATION. In any suit, proceeding, or action
brought by Agent or any Holder, or against Agent or any Holder by a third party,
relating to or arising from any of the Collateral, such Grantor will save,
indemnify, and keep Agent and each Holder harmless from and against all expense,
loss, or damage suffered by reason of any defense, setoff, counterclaim,
recoupment, or reduction of liability whatsoever of the obligor thereunder,
arising out of a breach by such Grantor of any obligation thereunder or arising
out of any other agreement, indebtedness, or liability at any time owing to, or
in favor of, such obligor or its successors from such Grantor, and all such
obligations of such Grantor shall be and remain enforceable against and only
against such Grantor and shall not be enforceable against Agent or any Holder.
(d) COMPLIANCE WITH LAWS. Such Grantor will comply, in
all material respects, with all acts, rules, regulations, orders, decrees, and
directions of any governmental authority, applicable to the Collateral or any
part thereof or to the operation of such Grantor's business; PROVIDED, HOWEVER,
that such Grantor may contest any act, regulation, order, decree, or direction
in any reasonable manner that shall not in the reasonable opinion of Agent
adversely affect Agent's or any Holder's rights hereunder or adversely affect
the first priority of its security interest in the Collateral.
(e) LIMITATION ON LIENS ON COLLATERAL. Such Grantor will
not create, permit, or suffer to exist, and will defend the Collateral against
and take such other action as is necessary to remove, any Lien on the Collateral
except Permitted Liens, and will defend the right, title, and interest of Agent
and Holders in and to any of such Grantor's rights under the Collateral against
the claims and demands of all Persons whomsoever.
(f) FURTHER IDENTIFICATION OF COLLATERAL. Such Grantor
will if so requested by Agent furnish to Agent for the ratable benefit of
Holders, as often as Agent reasonably requests, statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as Agent may reasonably request, all in reasonable detail.
(g) MAINTENANCE OF EQUIPMENT. Such Grantor will keep and
maintain the Equipment in good operating condition sufficient for the
continuation of the business conducted
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by such Grantor on a basis consistent with past practices, and such Grantor will
provide all maintenance and service and all repairs necessary for such purpose.
(h) CONTINUOUS PERFECTION. Such Grantor will not change
its name, identity, or corporate structure in any manner that might make any
financing or continuation statement filed in connection herewith seriously
misleading within the meaning of section 9507 of the UCC (or any other then
applicable provision of the UCC) unless such Grantor shall have given Agent at
least fifteen (15) days' prior written notice thereof and shall have taken all
action (or made arrangements to take such action substantially simultaneously
with such change if it is impossible to take such action in advance) necessary
or reasonably requested by Agent to amend such financing statement or
continuation statement so that it is not seriously misleading.
6. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) Each Grantor hereby irrevocably constitutes and
appoints Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Grantor and in the name of
such Grantor or in its own name, from time to time in Agent's discretion, for
the purpose of carrying out the terms of this Security Agreement, to take any
and all appropriate action and to execute and deliver any and all documents and
instruments that may be necessary or desirable to accomplish the purposes of
this Security Agreement and, without limiting the generality of the foregoing,
hereby gives Agent the power and right, on behalf of such Grantor, without
notice to or assent by such Grantor to do the following:
(i) to ask, demand, collect, receive, and give
acquittances and receipts for any and all moneys due and to become due under any
Collateral and, in the name of such Grantor or its own name or otherwise, to
take possession of and endorse and collect any checks, drafts, notes,
acceptances, or other Instruments for the payment of moneys due under any
Collateral and to file any claim or to take any other action or proceeding in
any court of law or equity or otherwise deemed appropriate by Agent for the
purpose of collecting any and all such moneys due under any Collateral whenever
payable and to file any claim or to take any other action or proceeding in any
court of law or equity or otherwise deemed appropriate by Agent for the purpose
of collecting any and all such moneys due under any Collateral whenever payable;
(ii) to pay or discharge taxes, Liens, security
interests, or other encumbrances levied or placed on or threatened against the
Collateral, to effect any repairs or any insurance called for by the terms of
this Security Agreement and to pay all or any part of the premiums therefor and
the costs thereof; and
(iii) (A) to direct any party liable for any
payment under any of the Collateral to make payment of any and all moneys due,
and to become due thereunder, directly to Agent for the ratable benefit of
Holders or as Agent shall direct; (B) to receive payment of and receipt for any
and all moneys, claims and other amounts due, and to become due at any time, in
respect of or arising out of any Collateral; (C) to sign and indorse any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications, and notices in
connection with accounts and other Documents constituting or relating to the
Collateral; (D) to commence and prosecute any suits, actions, or proceedings at
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law or in equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right in respect of any
Collateral; (E) to defend any suit, action, or proceeding brought against such
Grantor with respect to any Collateral; (F) to settle, compromise, or adjust any
suit, action, or proceeding described above and, in connection therewith, to
give such discharges or releases as Agent may deem appropriate; (G) to license
or, to the extent permitted by an applicable license, sublicense, whether
general, special, or otherwise, and whether on an exclusive or non-exclusive
basis, any Copyright, Patent, or Trademark, throughout the world for such term
or terms, on such conditions, and in such manner, as Agent shall in its sole
discretion determine; and (H) generally to sell, transfer, pledge, make any
agreement with respect to, or otherwise deal with any of the Collateral as fully
and completely as though Agent were the absolute owner thereof for all purposes,
and to do, at Agent's option and such Grantor's expense, at any time, or from
time to time, all acts and things that Agent reasonably deems necessary to
protect, preserve, or realize upon the Collateral and Agent's and Holders' Lien
therein, in order to effect the intent of this Security Agreement, all as fully
and effectively as such Grantor might do.
(b) Agent agrees that, except upon the occurrence and
during the continuation of a Default or an Event of Default, it shall forebear
from exercising the power of attorney or any rights granted to Agent for the
ratable benefit of Holders pursuant to this SECTION 6. Each Grantor hereby
ratifies, to the extent permitted by law, all that said attorneys shall lawfully
do or cause to be done by virtue hereof. The power of attorney granted pursuant
to this SECTION 6 is a power coupled with an interest and shall be irrevocable
until the Secured Obligations are indefeasibly paid in full.
(c) The powers conferred on Agent for the ratable benefit
of Holders hereunder are solely to protect Agent's and Holders' interests in the
Collateral and shall not impose any duty upon it to exercise any such powers.
Agent shall be accountable only for amounts that it actually receives as a
result of the exercise of such powers and neither it nor any of its officers,
directors, employees, or agents shall be responsible to any Grantor for any act
or failure to act, except for its own gross negligence or willful misconduct.
(d) Each Grantor also authorizes Agent, at any time and
from time to time upon the occurrence and during the continuation of any Default
or Event of Default, (i) to communicate in its own name with any party to any
Contract with regard to the assignment of the right, title, and interest of such
Grantor in and under the Contracts hereunder and other matters relating thereto
and (ii) to execute, in connection with the sale provided for in SECTION 8
hereof, any endorsements, assignments, or other instruments of conveyance or
transfer with respect to the Collateral.
7. PERFORMANCE BY AGENT OF SUCH GRANTOR'S OBLIGATIONS. If any
Grantor fails to perform or comply with any of its agreements contained herein
and Agent, as provided for by the terms of this Security Agreement, shall itself
perform or comply, or otherwise cause performance or compliance, with such
agreement, the reasonable expenses of Agent incurred in connection with such
performance or compliance, together with interest thereon at the rate then in
effect in respect of the Senior Note Loans, shall be payable by such Grantor to
Agent for the ratable benefit of Holders on demand and shall constitute Secured
Obligations secured hereby.
10
8. REMEDIES, RIGHTS UPON DEFAULT.
(a) If any Default or Event of Default shall occur and be
continuing, Agent may, and shall at the request of Holders holding sixty percent
(60%) or more of the then outstanding Secured Obligations, exercise in addition
to all other rights and remedies granted to it in this Security Agreement and in
any other instrument or agreement securing, evidencing, or relating to the
Secured Obligations, all rights and remedies of a secured party under the UCC.
Without limiting the generality of the foregoing, each Grantor expressly agrees
that in any such event Agent, without demand of performance or other demand,
advertisement, or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon such Grantor or any other person
(all and each of which demands, advertisements, and/or notices are hereby
expressly waived to the maximum extent permitted by the UCC and other applicable
law), may forthwith collect, receive, appropriate, and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
an option or options to purchase, or sell or otherwise dispose of and deliver
such Collateral (or contract to do so), or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange or broker's board or
at any of Agent's offices or elsewhere at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
Agent shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of such Collateral so sold, free of any right or equity of
redemption, which equity of redemption such Grantor hereby releases. Each
Grantor further agrees, at Agent's request, to assemble the Collateral and make
it available to Agent at places that Agent shall reasonably select, whether at
such Grantor's premises or elsewhere. Agent shall apply the net proceeds of any
such collection, recovery, receipt, appropriation, realization, or sale, as
provided in SECTION 8(D) hereof, such Grantor remaining liable for any
deficiency remaining unpaid after such application, and only after so paying
over such net proceeds and after the payment by Agent of any other amount
required by any provision of law, including section 9615(a)(3) of the UCC, need
Agent account for the surplus, if any, to such Grantor. To the maximum extent
permitted by applicable law, each Grantor waives all claims, damages, and
demands against Agent and Holders arising out of the repossession, retention, or
sale of the Collateral except such as arise out of the gross negligence or
willful misconduct of Agent or any Holder. Each Grantor agrees that Agent need
not give more than twenty (20) days' notice (which notification shall be deemed
given when mailed or delivered on an overnight basis, postage prepaid, addressed
to such Grantor at its address referred to in SECTION 12 hereof) of the time and
place of any public sale or of the time after which a private sale may take
place and that such notice is reasonable notification of such matters. Each
Grantor shall remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay all amounts to which Agent
and Holders are entitled, such Grantor also being liable for the fees of any
attorneys employed by Agent and Holders to collect such deficiency.
(b) Each Grantor also agrees to pay all costs of Agent
and Holders, including, without limitation, reasonable attorneys' fees, incurred
in connection with the enforcement of any of its rights and remedies hereunder.
(c) Each Grantor hereby waives presentment, demand,
protest, or any notice (to the maximum extent permitted by applicable law) of
any kind in connection with this Security Agreement or any Collateral.
11
(d) The Proceeds of any sale, disposition, or other
realization upon all or any part of the Collateral shall be distributed by Agent
in the following order: first to payment in full of all the Secured Obligations
and then to pay to the Grantors, or their representatives or as a court of
competent jurisdiction may direct, any surplus then remaining from such
Proceeds.
9. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL. For
the purpose of enabling Agent to exercise rights and remedies under SECTION 8
hereof at such time as Agent, without regard to this SECTION 9, shall be
lawfully entitled to exercise such rights and remedies, each Grantor hereby
grants to Agent for the ratable benefit of Holders an irrevocable, non-exclusive
license (exercisable without payment of royalty or other compensation to any
Grantor) to use, license, or sublicense any Copyright, Patent, Trade Secret, or
Trademark, now owned or hereafter acquired by such Grantor, and wherever the
same may be located, and including, without limitation, in such license
reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer and automatic machinery software and
programs used for the compilation or printout thereof.
10. APPOINTMENT OF AGENT; LIMITATION ON AGENT'S DUTY IN RESPECT OF
COLLATERAL. Agent, or any successor thereof, has been appointed as Agent
hereunder by Holders under, and shall be entitled to the benefits of, the
Purchase Agreements. Agent shall be obligated and shall have the right hereunder
to make demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking action (including, without
limitation, the release or substitution of Collateral) solely in accordance with
this Security Agreement and the Purchase Agreements, and Holders shall be bound
thereby. Agent shall not have any duty as to any Collateral in its possession or
control or in the possession or control of any agent or nominee of it or any
income thereon or as to the preservation of rights against prior parties or any
other rights pertaining thereto, except that Agent shall use reasonable care
with respect to the Collateral in its possession or under its control.
Furthermore, neither Agent nor any of its officers, directors, agents, or
employees shall be liable for any action taken or omitted by any of them
hereunder or any other Transaction Document or in connection herewith or
therewith, unless caused by it or their gross negligence or willful misconduct.
Upon request of any Grantor, Agent shall account for any moneys received by it
in respect of any foreclosure on or disposition of the Collateral.
11. REINSTATEMENT. This Security Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by or
against any Grantor for liquidation or reorganization, should any Grantor become
insolvent or make an assignment for the benefit of creditors, or should a
receiver or trustee be appointed for all or any significant part of any
Grantor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a "voidable preference", "fraudulent conveyance", or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored, or
returned, the Secured Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored, or returned.
12. NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval,
declaration, or other communication shall or may
12
be given to or served upon any of the parties by any other party, or whenever
any of the parties desires to give or serve upon any other communication with
respect to this Security Agreement, each such notice, demand, request, consent,
approval, declaration, or other communication shall be in writing and either
shall be delivered in person with receipt acknowledged or sent by registered or
certified mail, return receipt requested, postage prepaid, or by telecopy, and
confirmed by telecopy answerback addressed as follows:
(a) If to Agent, at:
Xxxxxxx Xxxxx
c/o Crestview Capital
00 Xxxxxx Xxxxx, Xxxxx X
Xxxxxxxxxx, XX 00000
Facsimile Number: (000) 000-0000
With copies to:
Xxxxxxx Xxxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxx
Facsimile Number: (000) 000-0000
(b) If to any Grantor, at its principal business address
specified on SCHEDULE III hereto
With a copy to:
Xxxxxx Xxxxxxxx & Markiles, LLP
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx XxXxxxxx
Facsimile Number: (000) 000-0000
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied, and confirmed by telecopy answerback, or
three (3) Business Days after the same shall have been deposited in the United
States mail. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration, or other communication to the persons
designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration,
or other communication.
13. SEVERABILITY. Any provision of this Security Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
13
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
14. NO WAIVER; CUMULATIVE REMEDIES. Neither Agent nor any Holder
shall by any act, delay, omission, or otherwise be deemed to have waived any of
its rights or remedies hereunder, and no waiver shall be valid unless in
writing, signed by Agent, and then only to the extent therein set forth. A
waiver by Agent of any right or remedy hereunder on any one occasion shall not
be construed as a bar to any right or remedy which Agent would otherwise have
had on any future occasion. No failure to exercise nor any delay in exercising
on the part of Agent, any right, power, or privilege hereunder, shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power, or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law. None of the
terms or provisions of this Security Agreement may be waived, altered, modified,
or amended except by an instrument in writing, duly executed by Agent and, where
applicable by the Grantors.
15. SUCCESSORS AND ASSIGNS; GOVERNING LAW.
(a) This Security Agreement and all obligations of each
Grantor hereunder shall be binding upon the successors and assigns of such
Grantor, and shall, together with the rights and remedies of Agent hereunder,
inure to the benefit of Agent, Holders, all future holders of the Notes and
their respective successors and assigns. No sales of participations, other
sales, assignments, transfers, or other dispositions of any agreement governing
or instrument evidencing the Secured Obligations or any portion thereof or
interest therein shall in any manner affect the security interest granted to
Agent for the ratable benefit of Holders, hereunder.
(b) THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TENNESSEE
WITHOUT REGARD TO THE PROVISIONS THEREOF RELATING TO CONFLICT OF LAWS.
16. USE AND PROTECTION OF INTELLECTUAL PROPERTY COLLATERAL.
Notwithstanding anything to the contrary contained herein, unless a Default or
Event of Default has occurred and is continuing, Agent shall from time to time
execute and deliver, upon the written request of any Grantor, any and all
instruments, certificates, or other documents, in the form so requested,
necessary or appropriate in the judgment of such Grantor to permit such Grantor
to continue to exploit, license, use, enjoy, and protect the Intellectual
Property Collateral.
17. FURTHER INDEMNIFICATION. Such Grantor agrees to pay, and to
save Agent and Holder harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all excise, sales, or other similar
taxes that may be payable or determined to be payable with respect to any of the
Collateral or in connection with any of the transactions contemplated by this
Security Agreement.
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18. WAIVER OF JURY TRIAL. Each Grantor waives all right to trial
by jury in any action or proceeding to enforce or defend any rights or remedies
hereunder, or under the Purchase Agreements, or relating to each of the
foregoing.
19. SECTION TITLES. The Section titles contained in this Security
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
20. COUNTERPARTS. This Security Agreement may be executed in any
number of counterparts, which shall, collectively and separately, constitute one
agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.
NATIONAL COAL CORP.,
a Florida corporation
By: /s/ Xxx X. Xxx
-----------------------------------
Name: Xxx X. Xxx
-----------------------------------
Title: CEO
-----------------------------------
NATIONAL COAL CORPORATION,
a Tennessee corporation
By: /s/ Xxx X. Xxx
-----------------------------------
Name: Xxx X. Xxx
-----------------------------------
Title: CEO
-----------------------------------
Accepted and acknowledged as Agent for the ratable benefit of Holders by:
/s/ Xxxxxxx Xxxxx
--------------------------------
Xxxxxxx Xxxxx
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SCHEDULE I
PERMITTED LIENS
1. The following UCC Financing Statements have been filed with respect to
assets of National Coal Corporation, a Tennessee corporation and a
wholly-owned subsidiary of Borrower.
Filing
Secured Party Jurisdiction Date Filing Number Collateral
------------------------------- ------------ --------- ------------- ----------
Xxxxxxx Machinery Corporation Tennessee 6/19/03 303-031812 Equipment
Xxxxxxx Machinery Corporation Tennessee 7/7/03 203-031909 Equipment
Xxxxxxx Machinery Corporation Tennessee 7/9/03 203-032444 Equipment
Xxxxxxx Machinery Corporation Tennessee 7/9/03 203-032445 Equipment
Xxxxxxx Machinery Corporation Tennessee 7/9/03 203-032446 Equipment
Xxxxxxx Machinery Corporation Tennessee 7/9/03 203-032447 Equipment
Xxxxxxx Machinery Corporation Tennessee 7/9/03 203-032448 Equipment
Free Service Tire Company, Inc. Tennessee 10/10/03 203-055099 Equipment
Xxxxxxx Machinery Corporation Tennessee 12/4/03 203-067620 Equipment
Xxxxxxx Machinery Corporation Tennessee 12/4/03 203-067621 Equipment
2. There are no UCC Financing statements filed with respect to assets of
Borrower.
17
SCHEDULE II
FILINGS
GRANTOR JURISDICTION FILING OFFICE
------- ------------ -------------
National Coal Corp. Florida Secretary of State
National Coal Corporation Tennessee Secretary of State
18
SCHEDULE III
LOCATION OF RECORDS
AND CERTAIN COLLATERAL
National Coal Corp.
c/o National Coal Corporation
000 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
National Coal Corporation
000 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
19
