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EXHIBIT 10.14(a)
SUBORDINATION AGREEMENT
This Subordination Agreement (this "Agreement") is made as of November
11, 1997, by the following Persons (all of whom are herein collectively called
"Related Persons"):
AEI Holding Company, Inc., a Delaware corporation ("Borrower"), Xxxxx
Xxxxxxxxx, owner of 50% of the outstanding shares of capital stock of
Borrower, Xxxxxxxxx Enterprises, Inc., a Kentucky corporation
("Xxxxxxxxx"), owner of 50% of the outstanding shares of capital stock
of Borrower, (collectively referred to as the "Stockholders" and
individually as "Stockholder"), all of Borrower's wholly-owned direct
and indirect subsidiaries, Tennessee Mining, Inc., a Kentucky
corporation ("Tennessee Mining"), Xxxxx-Xxxxx Co., Inc., a Kentucky
corporation ("Xxxxx-Xxxxx"), Xxxxxxxxx Mining, Inc., a Kentucky
corporation ("Xxxxxxxxx Mining") (Tennessee Mining, Xxxxx-Xxxxx, and
Xxxxxxxxx Mining being hereinafter referred to individually as
"Subsidiary" and collectively with all wholly-owned direct and
indirect subsidiaries as "Subsidiaries"), and each other Subsidiary of
Borrower which at any time hereafter executes and delivers a
counterpart of this Agreement to Agent (as defined below).
RECITALS:
1. Borrower, Agent, and Lenders (as defined below) have entered
into a Credit Agreement of even date herewith (herein, as from time to time
supplemented, amended or restated, called the "Credit Agreement"), pursuant to
which Lenders have agreed to extend credit to Borrower, subject to the terms
and conditions expressed therein.
2. One of such conditions precedent is that the Related Persons
shall subordinate all of their obligations to each other to all obligations of
any Related Person to any of Agent and Lenders.
3. Borrower owns directly, or indirectly through one or more
subsidiaries, one hundred percent (100%) of the outstanding shares of capital
stock of Tennessee Mining, Xxxxx-Xxxxx, and Xxxxxxxxx Mining; and the
Subsidiaries, Borrower, and the other direct and indirect subsidiaries of
Borrower are mutually dependent on each other in the conduct of their
respective businesses under a holding company structure, and Borrower's ability
to obtain credit under the Credit Agreement will inure to the benefit of all of
the Related Persons.
4. The board of directors of each Related Person (other than Xxxxx
Xxxxxxxxx) has determined that the execution, delivery and performance of this
Agreement may reasonably be expected to benefit such Related Person, directly
or indirectly, and is in the best interests of such Related Person. Xxxxx
Xxxxxxxxx has determined that the execution, delivery and performance of this
Agreement may reasonably be expected to benefit him, directly or indirectly,
and is in his best interests.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to
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induce Lenders to extend credit under the Credit Agreement, the Related Persons
hereby agree, with and for the benefit of Agent and Lenders, as follows:
Section 1. Definitions.
(a) Reference to Credit Agreement. Reference is hereby made to the
Credit Agreement for the meaning of certain capitalized terms which are defined
therein and which are used but not defined herein.
(b) Specific Definitions. As used herein, the terms "Agreement" and
"Credit Agreement" have the meanings indicated above, and the following
additional terms have the following meanings:
"Agent" means the Person who, at the time in question, is the "Agent"
under the Credit Agreement. Whenever there is only one Lender under the Credit
Agreement, "Agent" shall also refer to such Lender in such capacity as the only
Lender.
"Final Payment Date" means the earliest date after the date hereof on
which all Senior Obligations have been paid in cash and satisfied in full and
no Senior Creditor has any outstanding commitment (whether or not conditioned
on the satisfaction of any condition precedent) to lend money or otherwise
extend credit to any Related Person.
"Insolvency Proceeding" means, with respect to any Person, any
voluntary or involuntary liquidation, dissolution, sale of all or substantially
all assets, marshaling of assets or liabilities, receivership, conservatorship,
assignment for the benefit of creditors, insolvency, bankruptcy,
reorganization, arrangement or composition of such person or entity (whether or
not pursuant to bankruptcy, insolvency or other similar laws) and any other
proceeding under laws for the protection of debtors involving such Person or
any of its assets.
"Lender" means NationsBank of Texas, N.A. and all other Persons who
at any time are "Lenders" under the Credit Agreement.
"Liable Party" means Borrower and any endorsers, guarantors or other
obligors, primary or secondary, of any or all of the Obligations.
"Obligations" means, with respect to any creditor, all debts,
liabilities and obligations (of any character whatsoever) which are owed to
such creditor by any Related Person, whether as principal, surety, endorser,
guarantor, accommodation party or otherwise, whether now existing or hereafter
incurred or arising, whether principal, interest, fees or expenses, whether
direct, indirect, contingent, primary, secondary, joint and several, joint or
several, or otherwise, and irrespective of the manner in which (or the Person
or Persons in whose favor) such debts, liabilities, or other obligations were
at their inception (or may hereafter be) created, or the manner in which such
creditor may have acquired rights with respect thereto.
"Permitted Distribution" has the meaning given it in Section 2.
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"Person" means an individual, corporation, partnership, association,
joint stock company, trust or trustee thereof, estate or executor thereof,
unincorporated organization or joint venture, court or governmental unit or any
agency or subdivision thereof, or any other legally recognizable entity.
"Senior Creditors" means Agent and each Lender.
"Senior Obligations" means all Obligations owed by any Related Person
to any Senior Creditor, including all Obligations arising under the Credit
Agreement and the other Loan Documents and including any interest accruing
after the commencement of any Insolvency Proceeding whether or not such
interest is an allowed claim enforceable against such Related Person in such
Insolvency Proceeding.
"Subordinated Obligations" means all Obligations owed by any Related
Person to any other Related Person, including all Obligations arising out of
any cash management activities and including any interest accruing after the
commencement of any Insolvency Proceeding whether or not such interest is an
allowed claim enforceable against such Related Person in such Insolvency
Proceeding.
"Termination Date" means the 91st day following the Final Payment
Date; provided, however, that this Agreement shall continue to be effective or
be reinstated, as though such payment had not been made, if at any time any
payment of any of the Senior Obligations is rescinded or must otherwise be
returned by any Senior Creditor in connection with an Insolvency Proceeding
involving any Related Person.
(c) References and Headings. Unless the context otherwise requires or
unless otherwise provided herein, references in this Agreement to a particular
agreement, instrument or document (including references to promissory notes,
loan agreements, guaranties and security documents) also refer to and include
all renewals, extensions, amendments, modifications, supplements or
restatements of any such agreement, instrument or document, provided that
nothing contained in this Section shall be construed to authorize any party
hereto to execute or enter into any such renewal, extension, amendment,
modification, supplement or restatement. The headings used herein are for
purposes of convenience only and shall not be used in construing the provisions
hereof. The words "this Agreement," "this instrument," "herein," "hereof,"
"hereby" and words of similar import refer to this Agreement as a whole and not
to any particular subdivision unless expressly so limited. The word "or" is not
exclusive, and the word "including" (in its various forms) means "including
without limitation". Pronouns in masculine, feminine and neuter genders shall
be construed to include any other gender, and words in the singular form shall
be construed to include the plural and vice versa, unless the context otherwise
requires.
Section 2. Subordination of Obligations. Each Related Person hereby,
expressly and in all respects, subordinates and makes junior and inferior:
(i) all Subordinated Obligations owed to it and the payment
and enforcement of such Subordinated Obligations, to
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(ii) the Senior Obligations and the payment and enforcement
of the Senior Obligations.
Prior to the Termination Date, no Related Person to whom Subordinated
Obligations are owed shall accept, receive or collect (by set-off or other
manner) any payment or distribution on account of, or ask for, demand or
accelerate, directly or indirectly, any Subordinated Obligation, and no Related
Person owing any Subordinated Obligation shall make any such payment except as
expressly provided below in this section. Borrower may make payments (i) to any
Subsidiary if no Default or Event of Default has occurred and is continuing,
(ii) to Stockholders with respect to the amounts that the Borrower is permitted
to pay them pursuant to Section 7.6 of the Credit Agreement (the "Permitted
Distribution"), and (iii) to Xxxxx Xxxxxxxxx with proceeds of the Senior
Unsecured Notes for the repayment of loans made by Xxxxx Xxxxxxxxx to Xxxxxxxxx
Enterprises, Inc. and assumed by Borrower.
Section 3. No Obligations Which Cause Default. No Related Person
shall at any time incur any Subordinated Obligations to any other Related
Person if in so doing a Default or Event of Default would thereby occur.
Section 4. Subordination of Liens. Any Liens at any time securing the
Subordinated Obligations are hereby made, and will at all times prior to the
Termination Date be, subject, subordinate, junior and inferior in all respects
to all Liens securing the Senior Obligations; provided that this section shall
not be construed as a consent by Senior Creditors to any Liens prohibited by
the Credit Agreement or any other Loan Document.
Section 5. Assets Wrongly Received. If any Related Person receives
any payment or distribution of any kind (whether in cash, securities or other
property) in contravention of this Agreement, it shall hold such payment or
distribution in trust for Senior Creditors, shall segregate the same from all
other cash or assets it holds, and shall immediately deliver the same to Agent
for the benefit of Senior Creditors in the form received by such Related Person
(together with any necessary endorsement) to be applied to or, at Agent's
option held as collateral for, the payment or prepayment of the Senior
Obligations.
Section 6. Specific Performance. Agent is hereby authorized to demand
specific performance of this Agreement at any time when any Related Person
shall have failed to comply with any of the provisions of this Agreement. Each
Related Person hereby irrevocably waives any defense based upon the adequacy of
a remedy at law which might be asserted as a bar to such remedy of specific
performance and waives any requirement of the posting of any bond which might
otherwise be required before such remedy of specific performance is granted.
Section 7. No Acceleration or Institution of Collection Proceedings.
Prior to the Termination Date, no Related Person shall accelerate or collect or
attempt to collect any part of the Subordinated Obligations --whether through
the commencement or joinder of an action or proceeding (judicial or otherwise)
or an Insolvency Proceeding, the enforcement of any rights against any property
of another Related Person (including any such enforcement by foreclosure,
repossession or sequestration proceedings), or otherwise -- except (a) when
Agent shall either request that Related Persons join it in bringing any such
proceeding or request that any Related
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Person file claims in connection with any such proceeding, or (b) to receive
payments as permitted under Section 2.
Section 8. Insolvency Proceedings, Power of Attorney.
(a) Upon any distribution of all or any of the assets of any Related
Person, upon the dissolution, winding up, liquidation or reorganization of any
Related Person (whether or not in any Insolvency Proceeding), or upon an
assignment for the benefit of creditors or any other marshaling of the assets
and liabilities of any Related Person, then any payment or distribution of any
kind (whether in cash, securities or other property) which otherwise would be
payable or deliverable upon or with respect to the Subordinated Obligations
owed by such Related Person, except the Permitted Distribution, shall be paid
and delivered directly to Agent to be applied to or, at Agent's option held as
collateral for, the payment or prepayment of the Senior Obligations.
(b) During the pendency of any Insolvency Proceeding with respect to
any Related Person, each Related Person shall promptly execute, deliver and
file any documents and instruments which Agent may from time to time request in
order to (i) file appropriate proofs of claim in respect of the Subordinated
Obligations in such Insolvency Proceeding, except the Permitted Distribution,
(ii) instruct any receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making any payment or distribution in such Insolvency
Proceeding to make all payments which might otherwise be payable or deliverable
in respect of the Subordinated Obligations, except the Permitted Distribution,
directly to Agent, and (iii) otherwise effect the purposes of this Agreement.
(c) Cumulative of the foregoing, each Related Person hereby grants to
Agent the express power and authority (which power and authority are coupled
with an interest and shall be irrevocable) to do the following until the
Termination Date in the name of and on behalf of such Related Person:
(i) to file appropriate claims (whether by proofs of claim
or otherwise) in any Insolvency Proceeding and to take such other
actions in such Insolvency Proceeding as may be necessary or desirable
to prevent the waiver or release of any claims for Subordinated
Obligations or to enforce the terms of this Agreement.
(ii) to prosecute and enforce such claims in such Insolvency
Proceeding, to initiate and participate in other proceedings to
enforce such Subordinated Obligations, and to collect and receive any
and all such cash or other assets which may be paid on account of
Subordinated Obligations in such Insolvency Proceeding or in any other
proceeding.
(iii) to exercise any vote with respect to Subordinated
Obligations which any Related Person may have in any Insolvency
Proceeding.
Agent shall, however, have no duty to any Related Person to exercise any of the
foregoing power and authority, and Agent may do so or decline to do so in its
sole and absolute discretion.
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Section 9. Assignment and Marking of Subordinated Obligations.
Prior to the Termination Date, no Related Person shall without the prior
consent of Agent:
(a) transfer, assign, pledge, encumber or (except for
payments allowed under Section 2 hereof) otherwise dispose of any
right, claim or interest in all or any part of the Subordinated
Obligations to any Person other than another Related Person or Agent,
acting for the benefit of Senior Creditors.
(b) subordinate any of the Subordinated Obligations to any
Obligations other than the Senior Obligations.
(c) permit any amendment or modification to the terms of the
Subordinated Obligations or any agreement or document executed in
connection therewith.
Each Related Person shall upon Agent's request cause each instrument to which
it is a party that evidences all or any part of the Subordinated Obligations to
bear upon its face a conspicuous statement or legend to the effect that such
instrument and the indebtedness evidenced thereby are subordinate to the
payment of all Senior Obligations pursuant to this Agreement, and each Related
Person shall, in the case of any Subordinated Obligations to which it is a
party that is not evidenced by any instrument, upon Agent's request cause such
Subordinated Obligations to be evidenced by an appropriate instrument or
instruments endorsed with such statement or legend.
Section 10. Obligations Hereunder Not Affected. No action or inaction
of any Senior Creditor or any other Person, and no change of law or
circumstances, shall release or diminish the obligations, liabilities,
agreements or duties hereunder of any Related Person, affect this Agreement in
any way, or afford any Person any recourse against any Senior Creditor. Without
limiting the generality of the foregoing, none of the obligations, liabilities,
agreements and duties of the Related Persons under this Agreement shall be
released, diminished, impaired, reduced or affected by the occurrence of any of
the following at any time or from time to time, even if occurring without
notice to or without the consent of any or all Related Persons (any right of
any of the Related Persons to be so notified or to require such consent being
hereby waived):
(a) the release (by operation of law or otherwise) of any
Related Person from its duty to pay any of the Senior Obligations.
(b) any invalidity, deficiency, illegality or
unenforceability of any of the Senior Obligations or the documents and
instruments evidencing, governing or securing the Senior Obligations,
in whole or in part, any bar by any statute of limitations or other
law to recovery on any of the Senior Obligations, or any defense or
excuse for failure to perform on account of force majeure, act of God,
casualty, impracticability or other defense or excuse with respect to
the Senior Obligations whatsoever.
(c) the taking or accepting by any Senior Creditor of any
additional security for or subordination to any or all of the Senior
Obligations.
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(d) any release, discharge, surrender, exchange,
subordination, non-perfection, impairment, modification or stay of
actions or lien enforcement proceedings against, or loss of any
security at any time existing with respect to, the Senior Obligations.
(e) the modification or amendment of, or waiver of compliance
with, any terms of the documents and instruments evidencing, governing
or securing the Senior Obligations.
(f) the insolvency, bankruptcy or disability of any Related
Person or the filing or commencement of any Insolvency Proceeding
involving any Related Person or other proceeding with respect thereto.
(g) any increase or decrease in the amount of the Senior
Obligations or in the time, manner or terms in accordance with which
the Senior Obligations are to be paid, or any adjustment, indulgence,
forbearance, waiver or compromise that may be granted or given with
respect to the Senior Obligations.
(h) any neglect, delay, omission, failure or refusal of any
Senior Creditor to take or prosecute any action for the collection of
the Senior Obligations or to foreclose or take or prosecute any action
in connection with any instrument or agreement evidencing or securing
all or part of the Senior Obligations.
(i) any release of the proceeds of collateral which may come
into the possession of any Senior Creditor or its Affiliates.
(j) any judgment, order or decree by any court or
governmental agency or authority that a payment or distribution by any
Related Person to any Senior Creditor upon the Senior Obligations is a
preference or fraudulent transfer under applicable bankruptcy or
similar laws for the protection of creditors or is for any other
reason required to be refunded by such Senior Creditor or paid by such
Senior Creditor to any other Person.
(k) the release or discharge for any reason of any Liable
Party hereto from any of its obligations under this Agreement.
(l) any modification of, or waiver of compliance with, any
terms of this Agreement with respect to any party hereto.
(m) any neglect, delay, omission, failure or refusal of any
Senior Creditor to take or prosecute any action against any Person in
connection with this Agreement.
Section 11. Waiver. Each Related Person hereby waives promptness,
diligence, notice of acceptance, notice of any Default or Event of Default,
notice of acceleration of any Senior Obligations, and any other notice with
respect to any of the Senior Obligations and this Agreement, and any
requirement that Senior Creditors exhaust any other right or take any action
against any Related Person or any other Person or any collateral.
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Section 12. Subrogation.
(a) No payment or distribution to any Senior Creditor pursuant to the
provisions of this Agreement shall entitle any Related Person to exercise any
rights of subrogation in respect thereof prior to the Termination Date, and
until such time no Related Person shall have any right of subrogation to any
Senior Creditor, or any right to receive contribution or reimbursement from any
other Related Person, on account of this Agreement or any other Loan Document.
(b) After the Termination Date, and provided that no payments received
by Senior Creditors are voidable or must otherwise be returned, each Related
Person shall be subrogated to the rights of each Senior Creditor to receive
distributions applicable to Senior Obligations to the extent that distributions
otherwise payable to such Related Person have been applied to the payment of
Senior Obligations owing to such Senior Creditor.
(c) Any distribution made pursuant to this Agreement to a Senior
Creditor on account of Subordinated Obligations owing by one Related Person to
a second Related Person, shall not, as between such Related Persons, be
considered a payment of such Subordinated Obligations.
(d) If any Senior Creditor ever enforces any security interests or
otherwise obtains any ownership interests in the stock of or partnership
interests in any Related Person (whether by foreclosure, in an Insolvency
Proceeding, as part of a settlement, or otherwise), thereby causing such first
Related Person to cease to be owned by another Related Person and to instead
become owned by a Senior Creditor or by any other Person which is not a Related
Person, then all claims of any Related Persons for Subordinated Obligations
owed by such first Related Person shall thereupon be deemed terminated and
released, and no Related Person shall at any time thereafter have any right of
subrogation to any claims of any Senior Creditor against such first Related
Person or any right to receive contribution or reimbursement from such first
Related Person.
Section 13. Representations and Warranties of the Related Persons.
Each Related Person hereby represents and warrants to each Senior Creditor
that:
(a) The recitals at the beginning of this Agreement are true and
correct in all respects.
(b) Each Related Person (other than Xxxxx Xxxxxxxxx) is duly
organized, validly existing and in good standing under the laws of the state of
its organization or formation. Each Related Person has all requisite power and
authority to execute, deliver and perform this Agreement.
(c) The execution, delivery and performance by each Related Person
(other than Xxxxx Xxxxxxxxx) of this Agreement have been duly authorized by all
necessary corporate action and do not and will not contravene its certificate
or articles of incorporation or bylaws.
(d) The execution, delivery and performance by the Related Persons of
this Agreement do not and will not contravene any law or governmental
regulation or any contractual restriction binding on or affecting any Related
Person or any of its properties, and do not and will not result in or require
the creation of any Lien upon or with respect to any of its properties.
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(e) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or other regulatory body or third
party, is required for the due execution, delivery and performance by any
Related Person of this Agreement.
(f) This Agreement is a legal, valid and binding obligation of each
Related Person, enforceable against each Related Person in accordance with its
terms except as limited by bankruptcy, insolvency or other similar laws of
general application relating to the enforcement of creditors' rights.
(g) There is no action, suit or proceeding pending or, to the
knowledge of any Related Person, threatened against or otherwise affecting any
Related Person before any court, arbitrator or governmental department,
commission, board, bureau, agency or instrumentality which may materially and
adversely affect any Related Person's financial condition or its ability to
perform its obligations hereunder.
Section 14. No Oral Change. No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by Related
Persons and Agent (with the consent of Senior Creditors to the extent required
under Section 10.1 of the Credit Agreement). No waiver of any provision of this
Agreement, and no consent to any departure by Related Persons therefrom, shall
be effective unless it is in writing and signed by Agent (with the consent of
Senior Creditors to the extent required under Section 10.1 of the Credit
Agreement), and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
Section 15. Governing Law. This Agreement shall be deemed a contract
and instrument made under the laws of the State of Texas and shall be construed
and enforced in accordance with and governed by the laws of such state and the
laws of the United States of America, without regard to principles of conflicts
of law.
Section 16. Invalidity of Particular Provisions. If any term or
provision of this Agreement shall be determined to be illegal or unenforceable,
all other terms and provisions hereof shall nevertheless remain effective and
shall be enforced to the fullest extent permitted by applicable law.
Section 17. Additional Documentation. Upon Agent's request, each
Related Person will execute any further instruments and take all other action
which, in Agent's opinion, may be necessary or desirable to carry out more
fully the purposes of this Agreement.
Section 18. Notices. All notices provided for hereunder shall be in
writing or by facsimile and, if to any Related Person, addressed, delivered or
transmitted to it at the address or facsimile number of Borrower set forth in
the Credit Agreement, and, if to the Agent, addressed, delivered or transmitted
to it at the address or facsimile number of the Agent specified in the Credit
Agreement, or as to any party at such other address as shall be designated by
such party in a written notice to each other party complying as to delivery
with the terms of this Section. All such notices and other communications, if
mailed and properly addressed with postage prepaid or if properly addressed and
sent by prepaid courier service, shall be deemed given when
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received; any such notice or communication, if transmitted by facsimile, shall
be deemed given when transmitted (upon receipt of electronic confirmation of
transmission).
Section 19. Successors and Assigns. No rights or obligations hereunder
of any Related Person may be assigned or delegated, but this Agreement and such
obligations shall pass to and be fully binding upon the successors of each
Related Person. This Agreement shall apply to and inure to the benefit of each
Senior Creditor, its successors, and its assigns which are permitted under the
Credit Agreement.
Section 20. Counterparts. This Agreement may be separately executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement. Any Subsidiary of Borrower may from time to time be
added hereto as a Related Person by executing and delivering a counterpart
hereof to Agent; no consent or other writing from any other Related Person
shall be required for the addition hereto of any such Subsidiary as a Related
Person and as a party hereto.
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IN WITNESS WHEREOF, this Agreement is executed as of the date first
above written.
BORROWER:
AEI HOLDING COMPANY, INC.
By: /s/ Xxx Xxxxx
-----------------------
Name: Xxx Xxxxx
Title: Controller/Treasurer
SUBSIDIARIES:
TENNESSEE MINING, INC.
By: /s/ Xxxx Xxxxx
-----------------------
Name: Xxxx Xxxxx
Title: Vice President
XXXXX-XXXXX CO., INC.
By: /s/ Xxxx Xxxxx
-----------------------
Name: Xxxx Xxxxx
Title: Secretary
XXXXXXXXX MINING, INC.
By: /s/ Xxxx Xxxxx
-----------------------
Name: Xxxx Xxxxx
Title: Secretary
STOCKHOLDERS:
XXXXXXXXX ENTERPRISES, INC.
By: /s/ Xxxx Xxxxx
-----------------------
Name: Xxxx Xxxxx
Title: Vice President
/s/ XXXXX XXXXXXXXX
--------------------------
XXXXX XXXXXXXXX
