CREDIT AND COLLATERAL SUPPORT FEE, INDEMNIFICATION AND RIGHT OF FIRST REFUSAL AGREEMENT
Exhibit
10.61
CREDIT AND COLLATERAL SUPPORT
FEE, INDEMNIFICATION AND RIGHT OF FIRST REFUSAL AGREEMENT
FEE, INDEMNIFICATION AND RIGHT OF FIRST REFUSAL AGREEMENT
This Credit and Collateral Support Fee, Indemnification and Right of First Refusal Agreement
(the “Agreement”) is executed as of February 9, 2011 by and between Xxxxxxxxx Land Company, LLC, a
Delaware limited liability company (“Xxxxxxxxx”), and each of the other parties designated as
“Xxxxxxxxx Entities” on the signature pages hereto (Xxxxxxxxx, together with the other undersigned
Xxxxxxxxx Entities herein collectively referred to as the “Xxxxxxxxx Entities”), and Elk Creek,
L.P., a Delaware limited partnership (“Elk Creek”), and each of the other parties designated as
“Elk Creek Entities” on the signature pages hereto (Elk Creek, together with the other undersigned
Elk Creek Entities herein collectively referred to as the “Elk Creek Entities”). Contemporaneously
herewith, the Xxxxxxxxx Entities and Elk Creek have entered into that certain Option Amendment,
Option Exercise and Membership Interest Purchase Agreement (the “Option and Purchase Agreement”).
Capitalized terms used herein and not otherwise defined shall have those meanings ascribed to them
in the Option and Purchase Agreement.
RECITALS
WHEREAS, the Xxxxxxxxx Entities have previously acquired coal reserves and other real property
from certain affiliates and/or subsidiaries of Peabody Energy Corp. (such entities now being
affiliates and/or subsidiaries of Patriot Coal Corporation as a result of its spin-off from Peabody
Energy Corp.), which reserves are more particularly described on Exhibit A attached hereto
(the “Subject Assets”) and, in partial payment therefor, issued notes to the sellers (the “Patriot
Notes”);
WHEREAS, the Xxxxxxxxx Entities have obtained up to a $50,000,000 Senior Secured Revolving
Credit facility and a $100,000,000 Senior Secured Term Loan arranged by PNC Bank, N.A. (the “PNC
Credit Facilities”), the proceeds of which have been used to repay and retire the Patriot Notes in
full (the “PNC Financing”);
WHEREAS, as a condition to the lenders’ willingness to make the PNC Financing available to the
Xxxxxxxxx Entities, Elk Creek became a co-borrower, the other Elk Creek Entities became guarantors,
and Ceralvo Holdings, LLC and Western Mineral Development, LLC mortgaged their assets as additional
security under the PNC Financing (the “Collateral”);
WHEREAS, contemporaneously herewith, the Xxxxxxxxx Entities and Elk Creek have entered into
the Option and Purchase Agreement, whereby Elk Creek shall exercise the Elk Creek Options to
indirectly acquire, through the acquisition of 100% of the membership interests in Western Mineral
Development, LLC, an undivided interest in the Subject Assets equal to the Option Interest, as
further described therein;
WHEREAS, the parties desire to enter into this Agreement to reflect the Elk Creek Entities’
agreement to provide credit and collateral support in connection with the PNC Financing and, in
consideration therefor, the Xxxxxxxxx Entities agree to pay the Elk Creek Entities a credit support
fee and grant a right of first refusal to acquire the remaining portion of
the Subject Assets held
by the Xxxxxxxxx Entities after giving effect to the transactions contemplated by the Option and
Purchase Agreement (the “Remaining Interest”);
NOW, THEREFORE, in consideration of the premises, the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Xxxxxxxxx Entities and the Elk Creek Entities agree as follows:
AGREEMENT
1. Collateral and Credit Support. The Xxxxxxxxx Entities hereby acknowledge that a
condition to the lenders’ willingness to provide the PNC Financing is Elk Creek agreeing to serve
as borrower, the other Elk Creek Entities agreeing to serve as guarantors, and Ceralvo Holdings,
LLC and Western Mineral Development, LLC agreeing to mortgage the Collateral as additional
security, under the PNC Credit Facilities. The parties hereby acknowledge and agree that the
Xxxxxxxxx Entities are the primary obligors and shall have the primary responsibility to service the indebtedness under the PNC Credit
Facilities. Subject to the terms and conditions of the PNC Credit Facilities, the Elk Creek
Entities shall have no obligation to service the indebtedness under the PNC Facilities unless and
until the Xxxxxxxxx Entities have insufficient cash flow to pay the indebtedness as it comes due
under the PNC Financing. In the event that the Xxxxxxxxx Entities have insufficient cash flow to
service the indebtedness as it becomes due under the PNC Financing and subject to the terms and
conditions of this Agreement, the Elk Creek Entities jointly and severally agree to pay the amounts
required under the PNC Financing as and when they become due on behalf of the Xxxxxxxxx Entities.
2. Credit and Collateral Support Fees. In consideration for the Elk Creek Entities
providing the credit and collateral support as specified herein, the Xxxxxxxxx Entities hereby
agree to pay the Elk Creek Entities a credit and collateral support fee in an aggregate amount
equal to 1% per annum of the principal amount outstanding from time to time under the PNC Credit
Facilities from time to time during the period beginning on the date hereof and ending on the date
such fee is paid (the “Support Fee”), and the Support Fee shall be calculated as of the end of each
calendar quarter based on the weighted average of principal under the PNC Credit Facilities
outstanding from time to time during such quarter. The Support Fee shall accrue without compounding
and shall be due and payable in full on the earlier to occur of (i) the repayment in full of all
outstanding indebtedness, liabilities and obligations under the PNC Financing and (ii) if permitted
under the terms of the PNC Credit Facilities, the date on which the lender releases the Elk Creek
Entities under the PNC financing and releases its liens on the Collateral, The Elk Creek Entities
have the option to have the Support Fee payable either in cash or by receipt of a conveyance by the
Xxxxxxxxx Entities of an undivided interest in the Remaining Interest equal to the aggregate amount
of the accrued Support Fee, divided by the fair market value of the Remaining Interest. If the
parties are unable to agree on the fair market value of the Remaining Interest, the fair market
value shall be determined in accordance with Section 5.
3. Indemnification. In the event that the lenders under the PNC Credit Facilities exercise
their rights to require the Elk Creek Entities to make payments to lenders on behalf of the
Xxxxxxxxx Entities or if the lenders foreclose on the Collateral mortgaged under the PNC Credit
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Facilities and apply the proceeds thereof against the Xxxxxxxxx Entities’ primary obligations under
the PNC Credit Facilities, the Xxxxxxxxx Entities shall as soon as reasonably practicable reimburse
and indemnify the Elk Creek Entities in the amount of (i) the Xxxxxxxxx Entities’ obligations
repaid by the Elk Creek Entities, plus (ii) the fair market value of the Collateral foreclosed upon
by the lenders, plus (iii) any and all fees and expenses (including attorneys’ fees) actually
incurred by Elk Creek in satisfying the obligations of the Xxxxxxxxx Entities under the PNC Credit
Facilities (the sum of clauses (i), (ii) and (iii) herein referred to as the “Reimbursement
Amount”). The Xxxxxxxxx Entities shall issue to the Elk Creek Entities a demand note (the “Demand
Note”) in an aggregate principal face amount equal to the Reimbursement Amount. The Demand Note
shall bear interest at the rate of 5% per annum, payable quarterly, commencing on the earlier to
occur of (i) the date that Elk Creek is called to repay any obligations of the Xxxxxxxxx Entities
under the PNC Credit Facilities or (ii) the date that the lenders commence foreclosure proceedings
on the Collateral until such date as Elk Creek is repaid in full. Elk Creek shall have the option
in its sole discretion to convert all indebtedness and accrued interest owed under the Demand Note,
into an undivided interest in the Remaining Interest equal to the aggregate amount of the
indebtedness including accrued interest under the Demand Note, divided by the fair market value of
the Remaining Interest. If the parties are unable to agree on the fair market value of the
Collateral or the Remaining Interest, the fair market value shall be determined in accordance with
Section 5. The Elk Creek Entities hereby agree that all rights to indemnification hereunder,
including but not limited to obligations under the Demand Note, shall be subordinate in priority
and payment to all obligations and indebtedness under the PNC Financing, and no payment shall be
demanded or accepted by the Elk Creek Entities therefor without the prior consent of PNC Bank,
National Association, as agent (“Agent”) under the PNC Financing, as long as any indebtedness or
obligations remains outstanding with respect to the PNC Financing.
4. Right of First Refusal.
(a) In consideration for the Elk Creek Entities providing collateral and credit support as
provided herein, until such time as the indebtedness and accrued interest under the PNC Credit
Facilities have been paid in full, in the event that the Xxxxxxxxx Entities desire to sell or offer to sell or
otherwise transfer or encumber any of the Subject Assets that comprise the Remaining Interest or
any interest therein to any third party other than Elk Creek Entities (a “Proposed Purchaser”), the
Xxxxxxxxx Entities shall first cause the Proposed Purchaser’s offer and all of the terms thereof to
be reduced to writing, and shall promptly notify Elk Creek of the offer (the “Transfer Notice”).
Notwithstanding anything herein, the obligations and rights of this Section 4 shall not apply (a)
to any foreclosure or conveyance by any party in connection with the exercise of default remedies
by the Agent or the other lenders pursuant to the terms of the PNC Financing, or (b) to transfers
among Xxxxxxxxx Entities or their affiliates. The Transfer Notice shall constitute an irrevocable
offer to sell the Subject Assets which are the subject of the Transfer Notice (the “Transferred
Assets”) to Elk Creek on the basis described below, on the same terms and conditions of, the
Transfer Notice, and at a purchase price equal to the price contained in, and on the same terms and
conditions of, the Transfer Notice. The Transfer Notice shall specify the proposed price, the
description of the Subject Assets to be sold, the identity of the Proposed Purchaser, and any other
relevant information.
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(b) Elk Creek shall have a right of first refusal (the “Right of First Refusal”) to purchase
the Transferred Assets, if Elk Creek gives written notice of the exercise of such right to the
Xxxxxxxxx Entities within 30 days (the “Refusal Period”) from the receipt of the Transfer Notice.
The purchase price for the Transferred Assets to be purchased by Elk Creek upon exercise of the
Right of First Refusal will be the bona fide cash price (or the fair market value of any non-cash
consideration as determined in good faith by the Board of Managers of Elk Creek’s general partner)
for which the Xxxxxxxxx Entities propose to transfer such Transferred Assets to the Proposed
Purchaser (subject to any rights Elk Creek may have under Section 2 of this Agreement or any other
agreement to purchase all or some of such Transferred Assets at a lower price), and will be payable
within 60 days after the end of the Refusal Period. Payment of the purchase price will be made in
cash by wire transfer of immediately available funds to the relevant Xxxxxxxxx Entities designated
in the Transfer Notice.
(c) In the event that Elk Creek does not elect to exercise its Right of First Refusal at any
time during the Refusal Period, the Xxxxxxxxx Entities may sell the Transferred Assets to the
Proposed Purchaser on the terms and conditions set forth in the Transfer Notice. Promptly after
such sale, the Xxxxxxxxx Entities shall notify Elk Creek of the consummation thereof and shall
furnish such evidence of the completion and time of completion of the Transfer and of the terms
thereof as may reasonably be requested by Elk Creek. If the Xxxxxxxxx Entities’ sale to a Proposed
Purchaser is not consummated in accordance with the terms of the Transfer Notice on or before
ninety (90) calendar days after the receipt by Elk Creek of the Transfer Notice, any sale of the
Transferred Assets may only be made after renewed compliance with all of the provisions of this
Section 4.
5. Procedure for Determination of Fair Market Value of the Reserves. In the event that the
parties are unable to agree upon the fair market value of the Remaining Interest or the Collateral,
the fair market value of the Remaining Interest or the Collateral, unless otherwise agreed upon or
provided for in accordance with this Agreement, shall be determined by appraisal as provided in
this Section 5. Within 10 days after an appraisal is required under any provision hereof, the
Xxxxxxxxx Entities, on the one hand, and Elk Creek, on the other hand, shall each select an
independent, qualified appraiser who regularly appraises surface and underground coal properties in
the Illinois Basin region, for such purpose. The appraisers so selected shall proceed to determine
promptly the fair market value of the reserves that are subject to appraisal. Each appraiser shall
deliver a written report of its appraisal to all interested parties. The determination of such fair
market value by the appraisers shall be final and binding upon all parties. If the appraisers so
selected are unable to agree upon such fair market value, the appraisers shall jointly agree upon
and appoint another appraiser who shall proceed to promptly determine the fair market value of the
reserves in accordance with the preceding requirements of this Section 5. After the written
report of the additional appraiser has been delivered, the fair market value determinations of all
such appraisers shall be totaled and the total divided by the number of appraisals, with the
resultant average to be conclusive and binding on all parties as to the fair market value of the
reserves; provided, however, that if any fair market value determination of any such appraiser
deviates by more than ten percent (10%) from the median of all such determinations, the fair market
value shall be the average of the two (2) determinations closest in amount and such average of the
two (2) closest determinations shall be conclusive and binding upon all parties as to the fair
market value of the Remaining Interest or the Collateral.
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6. Transfer Taxes. The parties hereby agree that any state transfer taxes due upon the
conveyance of the Remaining Interest (or any portion thereof) to Elk Creek shall be shared equally
between Elk Creek and the Xxxxxxxxx Entities.
7. Specific Performance. The Xxxxxxxxx Entities hereby acknowledge and agree that Elk Creek
would not have an adequate remedy at law and would be irreparably harmed in the event that any of
the provisions of this Agreement were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, the Xxxxxxxxx Entities agree that Elk Creek shall be entitled to
equitable relief, including preliminary and permanent injunctions and specific performance, in the
event the Xxxxxxxxx Entities breach or threaten to breach any of the provisions of this Agreement,
without the necessity of posting any bond or proving special damages or irreparable injury. Such
remedies shall not be deemed to be the exclusive remedies for a breach or threatened breach of this
Agreement by the Xxxxxxxxx Entities, but shall be in addition to all other remedies available at
law or equity.
8. Miscellaneous.
| (a) | Further Assurances. Each party to the Agreement agrees to perform such further acts and to execute and deliver such other and additional documents as may be necessary to carry out the provisions of the Agreement. | ||
| (b) | Amendment. The Agreement may not be amended in whole or in part except by the written agreement of the parties hereto. | ||
| (c) | Assignment. Except as otherwise specifically provided, the Agreement and any right hereunder, shall not be assigned by any party hereunder without the prior written consent of the other party, which shall not be unreasonably withheld; provided that Elk Creek shall be entitled to assign the Agreement to one or more of its affiliates. | ||
| (d) | Severability. If any clause or provision of the Agreement is illegal, invalid, or unenforceable under any present or future law, the remainder of the Agreement will not be affected thereby. It is the intention of the parties that if any such provision is held to be illegal, invalid or unenforceable, there will be added in lieu thereof a provision as similar in terms to such provision as is possible which is legal, valid and enforceable. | ||
| (e) | Binding Effect. The Agreement will inure to the benefit of and bind the respective heirs, legal representatives, successors and permitted assigns of the parties hereto. | ||
| (f) | Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally or by facsimile transmission or mailed (first class postage prepaid) to the parties at the following addresses or facsimile numbers: |
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| (i) | if to the Xxxxxxxxx Entities: Xxxxxxxxx Land Company, LLC 0000 Xxxxxxx Xxxx., Xxxxx 0000 Xx. Xxxxx, XX 00000 Attn: X. Xxxx Xxxxxxxxx, III Facsimile: (000) 000-0000 |
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| (ii) | if to Elk Creek: Elk Creek, L.P. c/o Yorktown Partners LLC 000 Xxxx Xxxxxx, 00xx Xxxxx Xxx Xxxx, XX 00000 Attention: Xxxxx X. Xxxxxxxx Facsimile: (000) 000-0000 |
| (g) | Governing Law; Venue. THE AGREEMENT SHALL BE GOVERNED, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCLUDING THAT BODY OF LAW PERTAINING TO CONFLICTS OF LAW. | ||
| (h) | Counterparts. The Agreement may be executed in multiple counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. Facsimile signatures shall be effective as original signatures. |
[Remainder of Page Left Intentionally Blank]
[Signature Page Follows]
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IN WITNESS WHEREOF, each of the undersigned, by its duly authorized person, has executed this
Agreement as of the date first above written.
| XXXXXXXXX ENTITIES: XXXXXXXXX LAND COMPANY, LLC |
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| By: | /s/ Xxxxxx X. Xxxxxx | |||
| Xxxxxx X. Xxxxxx | ||||
| President and Chief Financial Officer | ||||
| XXXXXXXXX RESOURCES HOLDINGS, LLC |
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| By: | /s/ Xxxxxx X. Xxxxxx | |||
| Xxxxxx X. Xxxxxx | ||||
| President and Chief Financial Officer | ||||
| WESTERN DIAMOND LLC |
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| By: | /s/ Xxxxxx X. Xxxxxx | |||
| Xxxxxx X. Xxxxxx, Manager | ||||
| WESTERN LAND COMPANY, LLC |
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| By: | /s/ Xxxxxx X. Xxxxxx | |||
| Xxxxxx X. Xxxxxx, Manager | ||||
| XXXXXXXXX COAL COMPANY, INC. |
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| By: | /s/ Xxxxxx X. Xxxxxx | |||
| Xxxxxx X. Xxxxxx, President | ||||
| ELK CREEK ENTITIES: ELK CREEK, L.P. |
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| By: | Elk Creek GP, LLC, its general partner | |||
| By: | /s/ Xxxxxx X. Xxxxxx | |||
| Xxxxxx X. Xxxxxx | ||||
| President and Chief Financial Officer | ||||
[Signature Page to Credit and Collateral
Support Agreement]
| ELK CREEK OPERATING, L.P. |
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| By: | Elk Creek Operating GP,LLC, | |||
| its general partner | ||||
| By: | /s/ Xxxxxx X. Xxxxxx | |||
| Xxxxxx X. Xxxxxx | ||||
| President and Chief Financial Officer | ||||
| CERALVO HOLDINGS, LLC |
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| By: | /s/ Xxxxxx X. Xxxxxx | |||
| Xxxxxx X. Xxxxxx, Manager | ||||
| WESTERN MINERAL DEVELOPMENT, LLC |
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| By: | /s/ Xxxxxx X. Xxxxxx | |||
| Xxxxxx X. Xxxxxx, Manager | ||||
[Signature Page to Credit and Collateral Support Agreement]
EXHIBIT A
SUBJECT ASSETS
The Subject Assets shall mean all of the coal reserves and real property described in, and
conveyed, demised or otherwise granted in or under the following deeds and instruments, to Western
Land Company, LLC and/or Western Diamond LLC, subject to all rights-of-way, easements, leases, deed
and plat restrictions, partitions, severances, encumbrances, licenses, reservations, conveyances
and exceptions which are of record as of the date of the exercise of the Option by Elk Creek, and
to all rights of persons in possession, and to physical conditions, encroachments and possessory
rights which would be evident from an inspection of the property at such time:
(i) The Corporation Special Warranty Deed from Central States Coal Reserves of Kentucky, LLC
and Beaver Dam Coal Company to Western Diamond LLC, dated September 19, 2006, of record in Deed
Book 363, page 369, in the Office of the Ohio County Clerk;
(ii) The Partial Assignment of Coal Mining Lease from Central States Coal Reserves of
Kentucky, LLC to Western Diamond LLC dated September 19, 2006, of record in Deed Book 363, page
428, in the Office of the Ohio County Clerk;
(iii) The Corporation Special Warranty Deed from Central States Coal Reserves of Kentucky, LLC
and Beaver Dam Coal Company to Western Diamond LLC, dated September 19, 2006, of record in Deed
Book 363, page 414, in the Office of the Ohio County Clerk;
(iv) The Corporation Special Warranty Deed from Beaver Dam Coal Company to Western Diamond
LLC, dated September 19, 2006, of record in Deed Book 363, page 393, in the Office of the Ohio
County Clerk;
(v) The Corporation Special Warranty Deed from Beaver Dam Coal Company to Western Diamond LLC,
dated September 19, 2006, of record in Deed Book 363, page 403, in the Office of the Ohio County
Clerk;
(vi) The Corporation Special Warranty Deed from Central States Coal Reserves of Kentucky, LLC
to Western Diamond LLC, dated May 31, 2007, of record in Deed Book 528, page 284, in the Office of
the Muhlenberg County Clerk, and the Deed of Confirmation between Central States Coal Reserves of
Kentucky, LLC, Western Diamond LLC and Xxxxxxxxx Coal Reserves, Inc., dated September 30, 2007, of
record in Deed Book 531, page 205, in the Office of the Muhlenberg County Clerk;
(vii) The Corporation Special Warranty Deed from Central States Coal Reserves of Kentucky, LLC
and Beaver Dam Coal Company to Western Diamond LLC, dated May 31, 2007, of record in Deed Book 368,
page 17, in the Office of the Ohio County Clerk, and the Deed of Correction between Central States
Coal Reserves of
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Kentucky, LLC, Beaver Dam Coal Company, LLC and Western Diamond LLC, of record in Deed Book 369,
page 759, in the Office of the Ohio County Clerk;
(viii) The Partial Assignment and Assumption of Mineral Leasehold Estate from Central States
Coal Reserves of Kentucky, LLC to Western Diamond LLC, dated May 31, 2007, of record in Deed Book
528, page 320, in the Office of the Muhlenberg County Clerk;
(ix) The Partial Assignment and Assumption of Mineral Leasehold Estate from Central States
Coal Reserves of Kentucky, LLC to Western Diamond LLC, dated May 31, 2007, of record in Deed Book
528, page 330, in the Office of the Muhlenberg County Clerk.
(x) The Corporation Special Warranty Deed from Central States Coal Reserves of Kentucky, LLC
to Western Land Company, LLC, dated December 12, 2006, of record in Deed Book 524, page 505, in the
Office of the Muhlenberg County Clerk;
(xi) The Corporation Special Warranty Deed from Central States Coal Reserves of Kentucky, LLC
and Beaver Dam Coal Company to Western Land Company, LLC, dated December 12, 2006, of record in
Deed Book 365, page 36, in the Office of the Ohio County Clerk;
(xii) The Partial Assignment and Assumption of Mineral Leasehold Estate from Central States
Coal Reserves of Kentucky, LLC to Western Land Company, LLC, dated November 20, 2006, of record in
Deed Book 524, page 523, in the Office of the Muhlenberg County Clerk, as amended and restated in
Deed Book 527, page 186, in the Office of the Muhlenberg County Clerk;
(xiii) The Partial Assignment and Assumption of Surface and Mineral Leasehold Estate from
Central States Coal Reserves of Kentucky, LLC to Western Land Company, LLC, dated November 20,
2006, of record in Deed Book 365, page 57, in the Office of the Muhlenberg County Clerk;
(xiv) The Corporation Special Warranty Deed from Central States Coal Reserves of Kentucky,
LLC, Beaver Dam Coal Company, Ohio County Coal Company, LLC and Grand Eagle Mining, Inc. to Western
Land Company, LLC, dated March 30, 2007, of record in Deed Book 367, page 1, in the Office of the
Ohio County Clerk;
(xv) The Corporation Special Warranty Deed from Central States Coal Reserves of Kentucky, LLC
to Western Land Company, LLC, dated March 30, 2007, of record in Deed Book 527, page 118, in the
Office of the Muhlenberg County Clerk, as corrected by Deed of Correction dated September 30, 2007,
of record in Deed Book 531, page 213, in the Office of the Muhlenberg County Clerk; and
The Partial Assignment and Assumption of Surface and Mineral Leasehold Estate from Central States
Coal Reserves of Kentucky, LLC to Western Land Company, LLC, dated March 30, 2007, of record in Deed Book 527, page 161, in the Office of the Muhlenberg County Clerk.
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March 30, 2007, of record in Deed Book 527, page 161, in the Office of the Muhlenberg County Clerk.
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