FORBEARANCE AGREEMENT
AND SIXTH AMENDMENT TO
SECOND AMENDED AND
RESTATED FINANCING AGREEMENT
THIS FORBEARANCE AGREEMENT AND SIXTH AMENDMENT TO SECOND AMENDED
AND RESTATED FINANCING AGREEMENT (the
“
Agreement ”)
is made and entered into on this 10th day of July, 2008, to be
effective, unless another effective date is otherwise herein
specified, as of June 17, 2008, by and among The CIT
Group/Business Credit, Inc. (“
CIT ”),
SunTrust Bank (“
SunTrust ”),
Wachovia Bank, N.A. (“
Wachovia ”),
and PNC Bank, National Association (“
PNC ”)
(CIT, SunTrust, Wachovia and PNC being herein collectively referred
to as the “
Existing Lenders ”),
The Greinke Personal Living Trust, Frank P. Greinke, an
individual residing in Tacoma, Washington, Trustee (“
Greinke Trust ”)
(the Greinke Trust being herein referred to as the “
Additional Lender ”,
and together with the Existing Lenders, being herein collectively
referred to as the “
Lenders ”),
CIT as administrative and collateral agent (“
Agent ”),
and United Fuel & Energy Corporation, a Texas corporation
(“
United ”),
and Three D Oil Co. of Kilgore, Inc., a Texas corporation
(“
Three D ”),
and Cardlock Fuels System, Inc., a California corporation
(“
Cardlock ”)
(United, Three D and Cardlock being herein individually
referred to as a “
Company ”
and collectively referred to as the “
Companies ”),
and United Fuel & Energy Corporation, a Nevada corporation
(“
Parent ”).
RECITALS
A.
Companies, Lenders and Agent are the present parties to that
certain Second Amended and Restated Financing Agreement, dated as
of March 27, 2007, originally executed by United,
Three D, Existing Lenders and Agent (as amended from time to
time, the “
Financing Agreement ”).
Capitalized terms not otherwise defined herein shall have the
meanings given such terms in the Financing Agreement.
B.
To induce Agent and Lenders to make the loans under the Financing
Agreement to Companies, Parent has delivered to Agent that certain
Guaranty dated October 5, 2007 (“
Guaranty ”)
guaranteeing payment and performance by Companies of their
Obligations.
C.
Companies have requested that Agent and Lenders agree and, subject
to the terms and conditions of this Agreement, Agent and Lenders
have agreed, to amend the Financing Agreement to provide, effective
as of the date the conditions hereinafter specified in
Section 2 of
this Agreement have been satisfied in Agent’s credit judgment
or waived by Agent, to provide for Additional Lender becoming a
party to and a “Lender” under the Financing Agreement
with a Commitment of $5,000,000, which Commitment shall consist
entirely of Revolving Loans pursuant to the Revolving Line of
Credit Commitment, with the aggregate Revolving Line of Credit
Commitments being increased from $80,000,000 to
$85,000,000.
D.
Companies have failed to comply with the EBITDA financial covenant
specified in
Section 7.10(c) of
the Financing Agreement for the measurement period ending on
April 30, 2008, and have informed Agent and Lenders that
Companies will fail to comply with the EBITDA financial covenant
specified in
Section 7.10(c )
for the measurement period ending on May 31, 2008, and
accordingly Events of Default have occurred and are continuing
under
Section 10.1(e) of
the Financing Agreement (the “
Existing Events of Default ”).
E.
By reason of the existence of the Existing Events of Defaults,
Agent and Lenders have full legal right to exercise their rights
and remedies under the Financing Agreement and the other Loan
Documents. Companies have no defenses, offsets or counterclaims to
the exercise of such rights and remedies.
F.
Companies have requested that Agent and Lenders, for the period
from June 17, 2008, until July 18, 2008, forbear from
exercising their rights and remedies under the Loan
Documents.
G.
Agent and Lenders are willing for the period from June 17,
2008 until July 18, 2008, to forbear from exercising their
rights and remedies under the Loan Documents, on the terms and
conditions set forth herein.
AGREEMENT
In
consideration of the Recitals and of the mutual promises and
covenants contained herein, Agent, Lenders, Companies and
Parent agree as follows:
1.
Agreement to Forbear .
During the period commencing on June 17, 2008 and ending on
the earlier to occur of (i) 5:00 p.m. (Dallas, Texas time) on
July 18, 2008 and (ii) the date the Agent receives written
notice from the Required Lenders to terminate this Agreement after
the occurrence of any Forbearance Default (as defined in
Section 7 hereof)
(the “
Forbearance Period ”),
and subject to the other terms and conditions of this Agreement,
each of Agent and each Lender agrees that it will forbear from
exercising its rights and remedies under the Loan Documents due to
the Existing Events of Default;
provided ,
however ,
nothing herein shall limit the rights of Agent pursuant to the
Financing Agreement to establish reserves or the amount of any
reserves. Upon the expiration or termination of the Forbearance
Period, Agent’s and Lenders’ forbearance shall
automatically terminate and Agent and Lenders shall be entitled to
exercise any and all of their rights and remedies under this
Agreement and the Loan Documents without further notice. Companies
and Parent agree that Agent and Lenders shall have no obligation to
extend the Forbearance Period.
2.
Conditions Precedent to Effectiveness of Agreement Against Agent
and Lenders .
This Agreement shall not be effective against Agent and Lenders
unless and until each of the following conditions shall have been
satisfied in Agent’s credit judgment or waived by
Agent:
(a)
Agent shall have received this Agreement, duly executed by
Companies, Parent and Lenders;
(b)
Agent shall have received an agreement among the Lenders as to
certain inter-lender issues, in form and substance satisfactory to
Agent and Existing Lenders, duly executed by Lenders and duly
accepted and agreed to by Companies and Parent (the “
Agreement Among Lenders ”),
the Agreement Among Lenders to be considered to be a Loan Document
for purposes of the Financing Agreement;
(c)
Agent shall have received a Promissory Note in the original
principal amount of $5,000,000, duly executed by Companies and
payable to the order of the Greinke Trust, to evidence Revolving
Loans made by the Greinke Trust;
(d)
Agent shall have received such additional documents, instruments
and information as Agent may request; and
(e)
Agent shall have received evidence satisfactory to Agent that all
organizational proceedings taken in connection with the
transactions contemplated by this Agreement and all documents,
instruments and other legal matters incident thereto shall be
satisfactory to Agent.
3.
Representations and Warranties .
Each of each Company and Parent hereby represents and warrants to
Agent and Lenders as follows:
(a)
Recitals .
The Recitals in this Agreement are true and correct in all material
respects.
(b)
Incorporation of Representations. All
representations and warranties of Companies and Parent in the Loan
Documents are incorporated herein in full by this reference and are
true and correct in all material respects as of the date
hereof.
(c)
Organizational Power; Authorization .
Each of each Company and Parent has the organizational power, and
has been duly authorized by all requisite organizational action, to
execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement has been duly executed and delivered by
each Company and by Parent.
(d)
Enforceability. This
Agreement is the legal, valid and binding obligation of each
Company and Parent, enforceable against each Company and Parent in
accordance with its terms.
(e)
No Violation. Each
of each Company’s and Parent’s execution, delivery and
performance of this Agreement does not and will not
(i) violate any law, rule, regulation or court order to which
any Company or Parent is subject; (ii) conflict with or result
in a breach of any Company’s or Parent’s Articles or
Certificate of Incorporation or Bylaws or any agreement or
instrument to which any Company or Parent is party or by which it
or its properties are bound, or (iii) result in the creation
or imposition of any lien, security interest or encumbrance on any
property of any Company or Parent, whether now owned or hereafter
acquired.
(f)
Obligations Absolute. The
obligation of Companies to repay the loans and the other
Obligations, together with all interest accrued thereon, is
absolute and unconditional, and there exists no right of set off or
recoupment, counterclaim or defense of any nature whatsoever to
payment of the Obligations.
(g)
Full Opportunity for Review; No Undue Influence
.
This Agreement was reviewed by each of each Company and Parent
which acknowledges and agrees that it (i) understands fully
the terms of this Agreement and the consequences of the issuance
hereof; (ii) has been afforded an opportunity to have this
Agreement reviewed by, and to discuss this Agreement with, such
attorneys and other persons as it may wish; and (iii) has
entered into this Agreement of its own free will and accord and
without threat or duress. This Agreement and all information
furnished to Agent and Lenders is made and furnished in good faith,
for value and valuable consideration. This Agreement has not been
made or induced by any fraud, duress or undue influence exercised
by Agent or Lenders or any other person.
(h)
No Other Defaults .
Other than the Existing Events of Default, no Event of Default
exists under the Financing Agreement or any of the other Loan
Documents and each of each Company and Parent is in full compliance
with all covenants and agreements contained therein.
4.
Ratification of Guaranty .
Parent hereby acknowledges and consents to all of the terms and
conditions of this Agreement and the Loan Documents and hereby
ratifies and confirms the Guaranty for the benefit of Agent and
Lenders. Guarantor hereby represents and acknowledges that it has
no claims, counterclaims, offsets, credits or defenses to the Loan
Documents or the performance of its obligations thereunder.
Guarantor agrees that nothing contained in this Agreement or the
Loan Documents shall adversely affect any right or remedy of either
Agent or Lenders under the Guaranty. Guarantor hereby agrees that
with respect to the Guaranty, all references in such Guaranty to
the “Obligations” shall include, without limitation,
the obligations of Companies to Agent and Lenders under the
Financing Agreement, as amended hereby. Guarantor hereby represents
and acknowledges that the execution and delivery of this Agreement
and the other Loan Documents executed in connection herewith shall
in no way change or modify its obligations as a guarantor, debtor,
pledgor, assignor, obligor and/or grantor under its Guaranty and
each other Loan Document to which it is a party and shall not
constitute a waiver by either Agent or any Lender of any of either
Agent’s or any Lender’s rights against
Guarantor.
5.
Additional Agreements .
(a)
Interest During
Forbearance Period .
In consideration for the forbearance provided for in this
Agreement, Companies hereby agree with Agent and Lenders that
notwithstanding any provision in the Financing Agreement or any
other Loan Document to the contrary, during the Forbearance Period
all Obligations shall bear interest at the Default Rate of
Interest.
(b)
Additional Reporting and Information Requirements
.
In addition to any presently existing reporting and informational
requirements set forth in the Financing Agreement, Companies and
Parent agree to deliver by July 3, 2008, to Agent, in form and
substance satisfactory to Agent, updated monthly projections for
calendar year 2008 for Parent and Companies including, without
limitation, income statement, balance sheet, Availability
projection and Fixed Charge Coverage Ratio financial covenant
projections.
(c)
Additional Lender $5,000,000 Revolving Line of Credit
Commitment; Increase in Aggregate Revolving Line of Credit
Commitments from $80,000,000 to $85,000,000 .
Effective as of the date the conditions specified in
Section 2 of
this Agreement have been satisfied in Agent’s credit judgment
or waived by Agent, Additional Lender shall become a party to and a
“Lender” under the Financing Agreement with a
Commitment of $5,000,000, which Commitment shall consist entirely
of Revolving Loans pursuant to the Revolving Line of Credit
Commitment and the aggregate Revolving Line of Credit Commitments
shall accordingly be increased from $80,000,000 to $85,000,000, and
the Lenders shall, through Agent, make such adjustments among
themselves as shall be necessary so that after giving effect to
such adjustments, the Lenders shall hold Revolving Loans in an
amount not greater than their respective Pro Rata Percentages.
Additional Lender has no Commitment regarding the Term Loans. The
parties hereto agree that Additional Lender becoming a Lender
pursuant to the terms and conditions of this Agreement and the
Financing Agreement shall in no event be deemed to be a violation
of
Section 7.13 of
the Financing Agreement.
(d)
Additional Lender Obligations .
Notwithstanding anything to the contrary in the Financing
Agreement, the parties hereto agree that as to Additional Lender,
the term “Obligations”, including, without limitation,
in connection with Obligations which are secured by the Collateral,
shall only apply to indebtedness and obligations of the Companies
to Additional Lender specifically arising pursuant to the Financing
Agreement.
(e)
Termination of Additional Lender Commitment
.
Notwithstanding anything to the contrary in the Financing
Agreement, the parties hereto agree that Additional Lender’s
$5,000,000 Commitment (consisting entirely of a Revolving Line of
Credit Commitment) shall terminate on July 18, 2008,
provided
