Re: Second Amendment to Forbearance and Amendment Agreement

 

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                                                                    EXHIBIT 10.1

 

                                                    as of May 20, 2005

 

 

UNIVERSAL AUTOMOTIVE, INC.

UNIVERSAL AUTOMOTIVE OF VIRGINIA, INC.

UNIVERSAL BRAKE PARTS, INC..

THE AUTOMOTIVE COMMODITY CONNECTION, INC.

c/o Universal Automotive Industries, Inc.

11859 South Central Avenue

Alsip, Illinois 60803

 

         Re:   Second Amendment to Forbearance and Amendment Agreement

 

Ladies and Gentlemen:

 

     We refer to that certain (a) Loan and Security Agreement, dated as of

January 9, 2004 (as the same now exists or may hereafter be further amended,

modified, supplemented, extended, renewed, restated or replaced, the "Loan

Agreement") by and among Wachovia Capital Finance Corporation (Central),

formerly known as Congress Financial Corporation (Central), as Agent ("Agent"),

the other Lenders from time to time party thereto ("Lenders"), and Universal

Automotive, Inc. ("Universal"), Universal Automotive of Virginia, Inc.

("Virginia"). Universal Brake Parts, Inc. ("Brake Parts") and The Automotive

Commodity Connection, Inc. ("Connection", and together with Universal, Virginia

and Brake Parts, each individually a "Borrower" and collectively, "Borrowers"):

and (b) the letter re. Forbearance and Amendment Agreement dated as of April 11,

2005 among Borrowers, Lender and Agent, as amended by the Letter re: Amendment

to Forbearance and Amendment Agreement dated as of May 12, 2005 (the

"Forbearance Agreement"). All capitalized terms used herein shall have the

meaning assigned thereto in the Forbearance Agreement, unless otherwise defined

herein.

 

     Borrowers have advised Agent and Lenders that Borrowers may be unable to

consummate an Approved Sale by the end of the Forbearance Period and have

requested that Agent and Lenders (a) continue to forbear for a limited period of

time from exercising their rights and remedies with respect to the Existing

Defaults, and (b) continue to make additional Loans to the Borrowers during such

limited forbearance period, and Agent and Lenders are willing to agree to the

foregoing, on and subject to the terms and conditions set forth in this letter

agreement (this "Amendment").

 

     In consideration of the premises and the respective agreements, covenants

and warranties contained herein, the parties hereto hereby agree, covenant and

warrant as follows:

 

     1. Amendment to Forbearance Period.

 

                  (a) Notwithstanding anything to the contrary contained in the

Forbearance Agreement, at Borrowers' request and in reliance upon Borrowers'

representations, warranties and covenants contained in this Amendment, and

subject to the terms and conditions of this

 

 

 

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Amendment, Agent and Lenders hereby agree to forbear during the Revised

Forbearance Period (as defined below) from exercising any of Agent's and

Lenders' rights and remedies with respect to the Existing Defaults, whether

arising under the Loan Agreement, the other Financing Agreements or applicable

law. For the purposes of this Amendment, the "Revised Forbearance Period" means

the period commencing on the effective date of this Amendment and terminating on

the earlier to occur of (i) May 27, 2005, and (ii) the date on which any one or

more of the following events has occurred and is continuing (hereinafter

referred to as an "Additional Event of Default"): (A) Borrowers' failure to

perform or observe any of the terms and conditions of this Amendment, (B)

Borrowers' failure to deliver to Agent, by 5:00 P.M. on May 23, 2005, a

resolution by the Board of Directors of the Borrowers (in form and substance

satisfactory to the Borrowers and the Agent and Lenders): (1) authorizing the

Borrowers to obtain from a person or persons (the "Third Party Investor") loans

(subordinated to the obligations of Agent and Lenders), a cash equity capital

contribution, or the sale of the Borrowers' capital stock or equity, or the

assets of the Borrowers to such Third Party Investor, and (2) in the event that

the Borrowers are unable to obtain a commitment letter by May 26, 2005 from a

Third Party Investor, authorizing the immediate commencement of the orderly

winding down of the Borrowers' business operations and the liquidation of the

Borrowers' assets and further authorizing the Borrowers to fully cooperate with

Agent and Lenders in connection therewith, or (C) the commencement of any

enforcement actions against the Borrowers by Laurus Master Fund, Ltd. seeking

equitable relief, or (D) the occurrence of any Event of Default under the Loan

Agreement that is not an Existing Default.

 

                  (b) During the Revised Forbearance Period, notwithstanding the

existence of the Existing Defaults, at Borrowers' request and as an

accommodation to Borrowers, Agent and Lenders agree to continue making Loans to

Borrowers, except that, notwithstanding anything to the contrary contained in

the Loan Agreement, the aggregate amount of Revolving Loans and Letter of Credit

Accommodations outstanding shall not exceed, at any given time, $14,000,000 in

the aggregate and the aggregate principal amount of Loans and Letter of Credit

Accommodations outstanding to a Borrower shall not exceed the Borrowing Base of

such Borrower or the Revolving Loan Limit of such Borrower.

&