EXHIBIT 10.4
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("SECURITY AGREEMENT"), is made and entered
into as of March 8, 2005, by and between National Coal Corporation, a Tennessee
corporation ("BORROWER") and a wholly-owned subsidiary of National Coal Corp., a
Florida corporation ("PARENT"), Borrower being herein referred to as "GRANTOR"),
in favor of Crestview Capital Master, LLC, a limited liability company
("CRESTVIEW"), as agent (in such capacity, "AGENT") for itself and the holders
party to the Purchase Agreements referred to below (Agent 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, Parent 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 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):
"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.
"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.
"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.
"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
$5,137,726, issued by Grantor to 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.
"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.
"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 Grantor, Parent 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 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 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 Grantor in the original
aggregate principal amount not to exceed $5,000,000, which loans are made to
Grantor pursuant to the Purchase Agreements.
"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
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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, 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 Grantor's right, title and interest in, to, and
under the following (all of which being hereinafter collectively called the
"COLLATERAL"):
(i) That certain Highwall Miner manufactured by
Superior Highwall Miners, NV, with an office at Beckley, West Virginia, Serial
No. SHM-37-V/800 together with a SHM Low-profile cutterhead, a 1500 kW
generator, a 50kW generator, a generator handling vehicle, five spare pushbeams,
and a container with shelving and spare parts for the foregoing; and
(ii) all Documents, Chattel Paper and Proceeds
representing the foregoing and all manufacturer's warranties on, 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 Grantor that, anything
herein to the contrary notwithstanding, Grantor shall observe and perform all
the conditions and obligations to be observed and performed by it under any
contract to which it may be a party and 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. Neither Agent nor any Holder shall have any
obligation or liability under any contract 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 pursuant hereto, nor shall Agent or Holders be required or obligated in
any manner to perform or fulfill any of the obligations of Grantor under or
pursuant to any contract, 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 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.
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(b) If required by Agent at any time during the
continuation of any Default or Event of Default, any Proceeds, when first
collected by Grantor, received on account of any Collateral, shall be promptly
deposited by Grantor in precisely the form received (with all necessary
endorsements) in a special bank account to be 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 Grantor for and as Agent's property for the
ratable benefit of Holders and shall not be commingled with 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
Grantor. If a Default or an Event of Default has occurred and is continuing, at
the request of Agent Grantor shall deliver to Agent for the ratable benefit of
Holders all original and other documents evidencing, 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 Grantor shall deliver photocopies thereof to Agent for the
ratable benefit of Holders at the Agent's request.
4. REPRESENTATIONS AND WARRANTIES. 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, 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. Holders
acknowledge the existence of a blanket lien on all assets of Grantor in favor of
X.X. Xxxxx Special Opportunities Fund, L.P., without Holders agreeing to assign
any priority to such lien.
(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 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 enforceable as such as against creditors of and purchasers from 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.
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(d) Grantor's principal place of business and the place
where its records concerning the Collateral are kept and the location of the
Collateral are set forth on SCHEDULE III hereto, and Grantor will not change
such principal place of business or remove such records or change the location
of the Collateral 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. 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 Collateral without giving fifteen (15) days' prior written notice thereof to
Agent.
5. COVENANTS. 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. Grantor
shall pay any and all UCC filing fees required by the states of Tennessee and
Florida which are required to be paid to file a UCC-1 financing statement. Agent
agrees not to require a filing in Florida unless required to perfect its lien in
the Collateral on the written advice of counsel. Upon the written request of
Agent, and at the sole expense of Grantor, 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, 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. Grantor
also hereby authorizes Agent to file any such financing or continuation
statement without the signature of Grantor to the extent permitted by applicable
law.
(b) MAINTENANCE OF RECORDS. Grantor will keep and
maintain at its own cost and expense satisfactory and complete records of the
Collateral. If requested by Agent, Grantor will xxxx its books and records
pertaining to the Collateral to evidence this Security Agreement and the
security interests granted hereby. 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, Grantor
agrees that Agent and Holder shall have a special property interest in all of
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, 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, 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, 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
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by 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 Grantor, and all such obligations of Grantor shall be and
remain enforceable against and only against Grantor and shall not be enforceable
against Agent or any Holder.
(d) COMPLIANCE WITH LAWS. 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 Grantor's business; PROVIDED, HOWEVER, that
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. 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 Grantor's rights under the Collateral against the
claims and demands of all Persons whomsoever.
(f) FURTHER IDENTIFICATION OF COLLATERAL. 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. Grantor will keep and
maintain the Equipment in good operating condition sufficient for the
continuation of the business conducted by Grantor on a basis consistent with
past practices, and Grantor will provide all maintenance and service and all
repairs necessary for such purpose.
(h) CONTINUOUS PERFECTION. 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 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) 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 Grantor and in the name of 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,
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hereby gives Agent the power and right, on behalf of Grantor, without notice to
or assent by 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 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
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; and (G)
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 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 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. 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
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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 Grantor or Parent for any act or failure to act, except for its
own gross negligence or willful misconduct.
(d) 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
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 GRANTOR'S OBLIGATIONS. If 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 Grantor to Agent
for the ratable benefit of Holders on demand and shall constitute Secured
Obligations secured hereby.
8. REMEDIES, RIGHTS UPON DEFAULT.
(a) If any Default or Event of Default shall occur and be
continuing, the Agent 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, 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 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 Grantor hereby releases. 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 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, 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 Grantor. To the
maximum extent permitted by applicable law, Grantor
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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. 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 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. 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, Grantor also being
liable for the fees of any attorneys employed by Agent and Holders to collect
such deficiency.
(b) 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) 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.
(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 the costs and expenses of
the Agent in connection with the performance of its obligations under this
Agreement, second to payment of all the Secured Obligations and then to pay to
the Grantor, or its representatives or as a court of competent jurisdiction may
direct, any surplus then remaining from such Proceeds.
9. Intentionally Omitted.
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 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 Grantor for liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of
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creditors, or should a receiver or trustee be appointed for all or any
significant part of 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 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:
Crestview Capital Master, LLC
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 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
10
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
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 Grantor.
15. SUCCESSORS AND ASSIGNS; GOVERNING LAW.
(a) This Security Agreement and all obligations of
Grantor hereunder shall be binding upon the successors and assigns of 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. Intentionally Omitted.
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17. FURTHER INDEMNIFICATION. 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.
18. WAIVER OF JURY TRIAL. 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 CORPORATION,
a Tennessee corporation
By: /S/ XXX X. XXX
-------------------------------
Name: XXX X. XXX
-------------------------------
Title: CHIEF EXECUTIVE OFFICER
Accepted and acknowledged as Agent for the ratable benefit of Holders by:
/S/ XXXXXX XXXX
-----------------------------
Crestview Capital Master, LLC
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SCHEDULE I
PERMITTED LIENS
NONE
SCHEDULE II
FILINGS
GRANTOR JURISDICTION FILING OFFICE
------- ------------ -------------
National Coal Corporation Tennessee Secretary of State
SCHEDULE III
LOCATION OF RECORDS
AND CERTAIN COLLATERAL
National Coal Corporation
000 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
