SECOND AMENDED AND RESTATED FINANCING AGREEMENT
 
The CIT Group/Business Credit, Inc.
(as Agent)
 
SunTrust Bank
(as Documentation Agent)

The Lenders that are parties hereto
 
and
 
United Fuel & Energy Corporation
and
Three D Oil Co. of Kilgore, Inc.
(as Companies)

 
Dated: March 27, 2007

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TABLE OF CONTENTS
 
 
 
 
 
Page
SECTION 1.
 
Definitions
 
2
SECTION 2.
 
Conditions Precedent
 
27
SECTION 3.
 
Loans and Advances
 
30
SECTION 4.
 
Term Loans
 
41
SECTION 5.
 
Letters of Credit
 
42
SECTION 6.
 
Collateral
 
45
SECTION 7.
 
Representations, Warranties and Covenants
 
48
SECTION 8.
 
Interest, Fees and Expenses
 
62
SECTION 9.
 
Powers
 
69
SECTION 10.
 
Events of Default and Remedies
 
70
SECTION 11.
 
Termination
 
75
SECTION 12.
 
Miscellaneous
 
75
SECTION 13.
 
Agreements Regarding the Lenders; Participations and Assignments
 
81
SECTION 14.
 
Agency
 
84
SECTION 15.
 
Joint and Several Liability of Companies
 
89

 
EXHIBITS
 
Exhibit A - Form of Assignment and Transfer Agreement
Exhibit B - Form of Initial Term Loan Promissory Note
Exhibit C - Form of Acquisition Term Loan Promissory Note
Exhibit D - Form of Revolving Loan Promissory Note
Exhibit E - Form of Swingline Note
Exhibit F - Form of Three D Real Property Term Loan Promissory Note
 
SCHEDULES
 
Schedule 1 - Existing Liens
Schedule 7(1) - Company Information
Schedule 7(15)(e) - Permitted Indebtedness; Other Lending Agreements
Schedule 7(15)(g) - Real Property Owned and Leased/Collateral Locations
 
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Schedule 7(15)(h) - Litigation
Schedule 7(15)(l) - Environmental Matters
Schedule 7(15)(q) - Subsidiaries
Schedule 7(15)(r) - Intellectual Property
 
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SECOND AMENDED AND RESTATED FINANCING AGREEMENT
 
THE CIT GROUP/BUSINESS CREDIT, INC. (“CIT”) a New York corporation, with offices
located at Two Lincoln Centre, 5420 LBJ Freeway, Suite 200, Dallas, Texas 75240,
and SUNTRUST BANK (“SunTrust”), a Georgia banking corporation (CIT and SunTrust
in their respective capacity as a Lender [as defined below], being hereinafter
referred to as “Existing Lenders”), PNC BANK, NATIONAL ASSOCIATION (“PNC”), a
national banking association, and WACHOVIA BANK, N.A. (“Wachovia”), a national
banking association (PNC and Wachovia, in their respective capacities as a
Lender, being hereinafter referred to as the “Additional Lenders”) (CIT,
SunTrust, PNC, Wachovia and the Swingline Lender and any other entity becoming a
Lender hereunder pursuant to Paragraph 13.4(b) of Section 13 of this Financing
Agreement, are collectively referred to as the “Lenders” and individually as a
“Lender”), CIT, as the administrative and collateral agent for the Lenders (the
“Agent”), and SunTrust, as documentation agent for the Lenders (the
“Documentation Agent”), are pleased to confirm the terms and conditions under
which the Lenders, acting through the Agent, shall make revolving loans and term
loans and other financial accommodations to UNITED FUEL & ENERGY CORPORATION
(“United”), a Texas corporation formerly known as Eddins-Walcher Company, United
being the surviving entity of the merger of United Fuel & Energy Corporation, a
Texas corporation, into Eddins-Walcher Company, with Eddins-Walcher Company
having changed its name to United Fuel & Energy Corporation in connection with
such merger and being a wholly-owned Subsidiary of United Fuel & Energy
Corporation, a Nevada corporation (“Parent”), United having a principal place of
business at 405 N. Marienfeld, Suite 300, Midland, Texas 79701, and THREE D OIL
CO. OF KILGORE, INC. (“Three D”), a Texas corporation, Three D being a
wholly-owned Subsidiary of United and having a principal place of business at
405 N. Marienfeld, Suite 300, Midland, Texas 79701 (United and Three D being
herein individually referred to as a “Company” and collectively referred to as
the “Companies”).
 
RECITALS:
 
A.  CIT and the Companies are parties to that certain Financing Agreement, dated
as of October 10, 2003, as amended by (i) an Agreement Regarding Brands Shopping
Network, Inc. Transaction and August 2004 Amendment To Financing Agreement dated
as of August 6, 2004, (ii) a September 2004 Extension of Financing Agreement
dated as of September 30, 2004, (iii) an Agreement Regarding Sterling Bank
Transaction and November 2004 Amendment dated as of November 1, 2004, and (iv) a
December 2004 Amendment to Financing Agreement dated as of December __, 2004 (as
amended, the “Original Financing Agreement”).
 
B.  CIT, SunTrust, Agent and Companies entered into that certain Amended and
Restated Financing Agreement dated April 8, 2005 (as amended and modified from
time to time, the “Existing Financing Agreement”).
 
C.  Companies have requested that Agent and Lenders agree and, subject to the
terms and conditions of this Financing Agreement, Agent and Lenders have agreed,
to entirely amend and restate the Existing Financing Agreement to, among other
things:
 
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(i)  
Increase the maximum total credit facility to $90,000,000, including increasing
the Revolving Line of Credit to $70,000,000, making a new term loan in the
amount of $5,000,000 on the Closing Date, and providing for future additional
term loans of up to the aggregate amount of $15,000,000, and for the making by
Lenders of their respective Pro Rata Percentage of new advances made on the
Closing Date; and

 

(ii)  
Provide for the assignment by Existing Lenders to Additional Lenders and
otherwise for the extension by all Lenders of amounts necessary for all Lenders
to hold their respective Pro Rata Percentage of the Commitments, it being the
intent of Companies, Agent and Lenders that the Revolving Loans and Letters of
Credit existing under the Existing Financing Agreement as of the Closing Date
shall continue, remain outstanding and not be repaid on the Closing Date, but
shall be assigned and reallocated among the Lenders as provided in this
Financing Agreement, and accordingly the Loans and Commitments are not in
novation or discharge thereof; and

 

(iii)  
Amend certain provisions of the credit facility provided for in the Existing
Financing Agreement.

 
D.  The parties hereto desire to amend, restate and modify, but not extinguish,
the Existing Financing Agreement in its entirety as hereinafter set forth.
 
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Companies, the Agent and the Lenders agree
to amend and restate the Existing Financing Agreement in the following manner:
 
SECTION 1.   Definitions
 
Accounts shall mean all of each of the Companies’ now existing and future:
(a) accounts (as defined in the UCC), and any and all other receivables (whether
or not specifically listed on schedules furnished to the Agent), including,
without limitation, all accounts created by, or arising from, all of each
Company’s sales, leases, rentals of goods or renditions of services to their
customers, including but not limited to, those accounts arising under any
Company’s trade names or styles, or through any Company’s divisions; (b) any and
all instruments, documents, chattel paper (including electronic chattel paper)
(all as defined in the UCC); (c) unpaid seller’s or lessor’s rights (including
rescission, replevin, reclamation, repossession and stoppage in transit)
relating to the foregoing or arising therefrom; (d) rights to any goods
represented by any of the foregoing, including rights to returned, reclaimed or
repossessed goods; (e) reserves and credit balances arising in connection with
or pursuant hereto; (f) guarantees, supporting obligations, payment intangibles
and letter of credit rights (all as defined in the UCC); (g) insurance policies
or rights relating to any of the foregoing; (h) general intangibles pertaining
to any and all of the foregoing (including all rights to payment, including
those arising in connection with bank and non-bank credit cards), and including
books and records and any electronic media and software thereto; (i) notes,
deposits or property of account debtors securing the obligations of any such
account debtors to the Companies (or any of them); and (j) cash and non-cash
proceeds (as defined in the UCC) of any and all of the foregoing.
 
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Acquisition Term Loan Line of Credit shall mean the aggregate commitment of the
Lenders to make after the Closing Date Acquisition Term Loans to Companies in
aggregate original principal amount of up to $14,000,000 pursuant to Paragraph
4.3 of Section 4 of this Financing Agreement.
 
Acquisition Term Loans shall mean the term loans to be made to the Companies by
the Lenders upon the satisfaction of the conditions set forth in Paragraph 4.3
of Section 4 of this Financing Agreement.
 
Additional Lender shall have the meaning given to such term in the opening
paragraph of this Financing Agreement.
 
Adjustment Date shall mean (a) initially, the Initial Adjustment Date, and
(b) thereafter, the first day of each thereafter occurring May, August, November
and February; provided, however, that if the financial statements of Companies
to be delivered to Agent pursuant to Paragraph 7.8(c) of Section 7 hereof for
the month ending as of the last day of the Fiscal Quarter immediately preceding
such first day of such calendar month (for example, as to May 1, 2008, the
financial statements to be delivered pursuant to Paragraph 7.8(c) of Section 7
hereof for the month ending March 31, 2008) have not been delivered by the due
date for such financial statements, such “Adjustment Date” shall instead be the
tenth day after delivery to Agent of such financial statements.
 
Affiliate shall mean, as applied to any Person, any other Person who, directly
or indirectly, controls, is controlled by, or is under common control with, such
Person. For purposes of this definition, “control” means the possession,
directly or indirectly, of the power to direct the management and policies of a
Person, whether through the ownership of Capital Stock, by contract, or
otherwise; provided, however, that, in any event: (a) any Person which owns
directly or indirectly 10% or more of the Capital Stock having ordinary voting
power for the election of directors or other members of the governing body of a
Person or 10% or more of the partnership or other ownership interests of a
Person (other than as a limited partner of such Person) shall be deemed to
control such Person; (b) each director (or comparable manager) of a Person shall
be deemed to be an Affiliate of such Person; and (c) each partnership or joint
venture in which a Person is a partner or joint venturer shall be deemed to be
an Affiliate of such Person.
 
Agent shall have the meaning given such term in the opening paragraph of this
Financing Agreement.
 
Anniversary Date shall mean September 30, 2012.
 
Applicable Base Rate Margin means, with respect to any amount outstanding under
the Revolving Loans or the Term Loans, as the case may be, which are Base Rate
Loans, the rate of interest per annum determined as set forth below:
 
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(a)  as to the amount of Revolving Loans outstanding on any day:
 
(i)  during the period beginning the Closing Date and continuing until the
Initial Adjustment Date - 0.00%; and
 
(ii)  thereafter, on each Adjustment Date (beginning on the Initial Adjustment
Date) and continuing until the next Adjustment Date, the applicable percent per
annum set forth in the pricing table below opposite the relevant Fixed Charge
Coverage Ratio calculated as of the last day of the relevant Fiscal Quarter for
the four Fiscal Quarter period ending on such day:
 
APPLICABLE BASE RATE
MARGIN PRICING TABLE
 
Fixed Charge Coverage Ratio
 
Applicable Base Rate Margin
(A) Greater than or equal to 1.20 to 1.00
 
(A) 0.00%
(B) Less than 1.20 to 1.00
 
(B) 0.25%

All adjustments to the Applicable Base Rate Margin shall be implemented by the
Agent based on the financial statements and related officer’s certificate for
the relevant period delivered by the Companies to the Agent pursuant to
Paragraph 7.8(c) of Section 7 hereof, and shall take effect retroactively on the
Adjustment Date immediately succeeding the date of the Agent’s receipt of such
financial statements. Notwithstanding the foregoing: (a) no reduction in
Applicable Base Rate Margin shall occur on an Adjustment Date if a Default or an
Event of Default shall have occurred and be continuing on such Adjustment Date
or the date of the Agent’s receipt of the financial statements on which such
reduction is to be based; and (b) if the Companies fail to deliver the financial
statements on which any reduction in applicable margins is to be based within
ten (10) days of the due date for such items set forth in Paragraph 7.8(c) of
Section 7, then effective as of the due date for such financial statements, the
Applicable Base Rate Margin shall increase to the highest margin set forth in
the table above until the following Adjustment Date. Without limitation of any
other provision of this Financing Agreement or any other remedy available to
Agent or Lenders under any of the Loan Documents, if, as a result of any
restatement of or other adjustment to the financial statements delivered by the
Companies to the Agent pursuant to Paragraph 7.8(c) of Section 7 hereof or for
any other reason, the Agent determines that (y) the Fixed Charge Coverage Ratio
as calculated by the Companies as of any applicable date was inaccurate by more
than 0.04 (for example, the Fixed Charge Coverage Ratio is initially reported as
1.20 to 1.00, but as corrected is 1.159 to 1.00) (a “Material Adjustment”) and
(z) a proper calculation of the Fixed Charge Coverage Ratio would have resulted
in a different Applicable Base Rate Margin for any period, then in the event of
a Material Adjustment (but not if a Material Adjustment has not occurred) (i) if
the proper calculation of the Fixed Charge Coverage Ratio would have resulted in
a higher Applicable Base Rate Margin for such period, the Companies shall
automatically and retroactively be obligated to pay to the Agent promptly on
demand by the Agent, an amount equal to the excess of the amount of interest and
fees that should have been paid for such period over the amount of interest and
fees actually paid for such period; and (ii) if the proper calculation of the
Fixed Charge Coverage Ratio would have resulted in a lower Applicable Base Rate
Margin for such period, the Agent shall have no obligation to repay any interest
or fees to the Companies; provided that if, as a result of any Material
Adjustment a proper calculation of the Fixed Charge Coverage Ratio would have
resulted in a higher Applicable Base Rate Margin for one or more periods and a
lower Applicable Base Rate Margin for one or more other periods (due to the
shifting of income or expenses form one period to another period or any similar
reason), then the amount payable by the Companies pursuant to clause (i) above
shall be based upon the excess, if any, of the amount of interest and fees that
should have been paid for all applicable periods over the amount of interest and
fees paid for all such periods.
 
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(b)  as to the amount of Term Loans outstanding on any day - 0.50%.
 
Applicable LIBOR Margin means, on any specific date, with respect to any amount
outstanding under the Revolving Loans or Term Loans, as the case may be, which
are LIBOR Loans, the rate of interest per annum determined as set forth below:
 
(a)  as to the amount of Revolver Loans outstanding on any day:
 
(i)  during the period from the Closing Date until the Initial Adjustment
Date - 1.75%; and
 
(ii)  thereafter, on each Adjustment Date (beginning on the Initial Adjustment
Date) and continuing until the next Adjustment Date, the applicable percent per
annum set forth in the pricing table below opposite the relevant Fixed Charge
Coverage Ratio calculated as of the last day of the relevant Fiscal Quarter for
the four Fiscal Quarter period ending on such day:
 
APPLICABLE LIBOR MARGIN
PRICING TABLE
 
Fixed Charge Coverage Ratio
 
Applicable LIBOR Margin
(A) Greater than or equal to 2.25 to 1.00
 
(A) 1.00%
(B) Less than 2.25 to 1.00, but equal to or greater than 1.75 to 1.00
 
(B) 1.25%
(C) Less than 1.75 to 1.00, but equal to or greater than 1.40 to 1.00
 
(C) 1.50%
(D) Less than 1.40 to 1.00, but equal to or greater than 1.20 to 1.00
 
(D) 1.75%
(E) Less than 1.20 to 1.00
 
(E) 2.00%
 
 
 

 
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All adjustments to the Applicable LIBOR Margin shall be implemented by the Agent
based on the financial statements and related officer’s certificate for the
relevant period delivered by the Companies to the Agent pursuant to
Paragraph 7.8(c) of Section 7 hereof, and shall take effect on the Adjustment
Date immediately succeeding the date of the Agent’s receipt of such financial
statements. Notwithstanding the foregoing: (a) no reduction in Applicable
Margins shall occur on an Adjustment Date if a Default or an Event of Default
shall have occurred and be continuing on such Adjustment Date or the date of the
Agent’s receipt of the financial statements on which such reduction is to be
based; and (b) if the Companies fail to deliver the financial statements on
which any reduction in applicable margins is to be based within ten (10) days of
the due date for such items set forth in Paragraph 7.8(c) of Section 7, then
effective as of the due date for such financial statements, the Applicable LIBOR
Margin shall increase to the highest margin set forth in the table above until
the following Adjustment Date. Without limitation of any other provision of this
Financing Agreement or any other remedy available to Agent or Lenders under any
of the Loan Documents, if, as a result of any restatement of or other adjustment
to the financial statements delivered by the Companies to the Agent pursuant to
Paragraph 7.8(c) of Section 7 hereof or for any other reason, the Agent
determines that (y) the Fixed Charge Coverage Ratio as calculated by the
Companies as of any applicable date was inaccurate and such inaccuracy
constitutes a Material Adjustment and (z) a proper calculation of the Fixed
Charge Coverage Ratio would have resulted in a different Applicable LIBOR Margin
for any period, then in the event of a Material Adjustment (but not if a
Material Adjustment has not occurred) (i) if the proper calculation of the Fixed
Charge Coverage Ratio would have resulted in a higher Applicable LIBOR Margin
for such period, the Companies shall automatically and retroactively be
obligated to pay to the Agent promptly on demand by the Agent, an amount equal
to the excess of the amount of interest and fees that should have been paid for
such period over the amount of interest and fees actually paid for such period;
and (ii) if the proper calculation of the Fixed Charge Coverage Ratio would have
resulted in a lower Applicable LIBOR Margin for such period, the Agent shall
have no obligation to repay any interest or fees to the Companies; provided that
if, as a result of any Material Adjustment a proper calculation of the Fixed
Charge Coverage Ratio would have resulted in a higher Applicable LIBOR Margin
for one or more periods and a lower Applicable LIBOR Margin for one or more
other periods (due to the shifting of income or expenses form one period to
another period or any similar reason), then the amount payable by the Companies
pursuant to clause (i) above shall be based upon the excess, if any, of the
amount of interest and fees that should have been paid for all applicable
periods over the amount of interest and fees paid for all such periods.
 
(b)  as to the amount of Term Loans outstanding on any day - 2.50%.
 
Approved Acquisition shall mean (a) a transaction pursuant to or as a result of
which a Company acquires new Equipment or acquires new Real Estate or acquires
the Capital Stock in or all or a substantial portion of the assets of a target
Person and (b) as to which acquisition Agent has given its prior written consent
(the parties hereto agreeing that such prior written consent by Agent shall
satisfy the consent otherwise required pursuant to the provisions of Paragraph
7.9(g) of Section 7 of this Financing Agreement and that in connection with any
such written consent by Agent that Agent intends to supply the Lenders with such
information as Agent has regarding such proposed acquisition, provided that
there shall nonetheless not be any impact on any such consent given by Agent or
liability on part of Agent if Agent in fact fails to supply such information to
Lenders); provided, however, notwithstanding the foregoing, if the purchase
price payable in connection with such acquisition (exclusive of any amount
payable in connection with Accounts or Inventory) is greater than $3,000,000 or
if, when combined with the aggregate purchase price payable in connection with
all Approved Acquisitions (exclusive of any amount payable in connection with
Accounts or Inventory) previously consented to during such Fiscal Year, the
aggregate purchase price (exclusive of any amount payable in connection with
Accounts or Inventory) of all Approved Acquisitions during such Fiscal Year
which have not previously been consented to in writing by Required Lenders will
exceed $8,000,000, each of Agent and the Required Lenders must have given its
prior written consent to such acquisition in order for such acquisition to
constitute an “Approved Acquisition.”
 
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Approved Acquisition Term Loan shall mean a loan made in conjunction with an
Approved Acquisition otherwise in conformity with the provisions of this
Financing Agreement pursuant to or as a result of which a Company (a) acquires
new Equipment and in connection therewith has requested that Lenders fund an
Acquisition Term Loan in an amount equal to eighty-five percent (85%) of the net
orderly liquidation value of such new Equipment (as determined by an appraisal
in form and substance reasonably satisfactory to Agent, prepared by an appraiser
satisfactory to Agent), (b) acquires new Real Estate and in connection therewith
has requested that Lenders fund an Acquisition Term Loan in an amount equal to
seventy-five percent (75%) of the fair market value of such new Real Estate (as
determined by an appraisal in form and substance reasonably satisfactory to
Agent, prepared by an appraiser satisfactory to Agent), or (c) acquires the
Capital Stock in or all or a substantial portion of the assets of a target
Person and in connection therewith has requested that Lenders fund an
Acquisition Term Loan in an amount satisfactory to Agent (Agent’s determination
of the amount of such Acquisition Term Loan in such case to include, but not be
limited to, the net orderly liquidation value of any Equipment and the fair
market value of any Real Estate acquired in such acquisition, respectively
determined in a manner and pursuant to documentation and materials reasonably
satisfactory to Agent) and in the case of (a), (b) or (c) above, Agent, in its
sole discretion, has approved Companies’ request that an Acquisition Term Loan
be made to Companies in connection with such acquisition; provided, however, no
Company may request an Acquisition Term Loan if at the time of such request a
Default or Event of Default is continuing and no Acquisition Term Loan shall be
made if at the date of funding of such Acquisition Term Loan a Default or Event
of Default is continuing or if Agent shall not have received all documentation
and materials requested by Agent in connection with such acquisition (including,
without limitation, such environmental assessments as to Real Estate as shall be
required by Agent, to be in form and substance satisfactory to Agent).
 
Assignment and Transfer Agreement shall mean the Assignment and Transfer
Agreement in the form of Exhibit A attached hereto.
 
Availability shall mean the amount by which: (a) the Borrowing Base exceeds
(b) the outstanding aggregate amount of all outstanding Revolving Loans (with
the aggregate undrawn amount of the outstanding Letters of Credit not to be
included in the calculation of the aggregate amount of all outstanding Revolving
Loans).
 
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Availability Reserve shall mean, as to any Company, the sum of: (a) (i) three
(3) months rental payments or similar charges for any of such Company’s leased
premises or other Collateral locations for which such Company has not delivered
to the Agent a landlord’s waiver in form and substance reasonably satisfactory
to the Agent, plus (ii) three (3) months estimated payments plus any other fees
or charges owing by such Company to any applicable warehousemen or third party
processor (as determined by the Agent in its reasonable business judgment),
provided that any of the foregoing amounts shall be adjusted from time to time
hereafter upon (x) delivery to the Agent of any such acceptable waiver, (y) the
opening or closing of a Collateral location, and/or (z) any change in the amount
of rental, storage or processor payments or similar charges; (b) any reserve
which the Agent in its credit judgment requires in connection with fuel taxes
and sales taxes; (c) any reserve which the Agent may reasonably require from
time to time pursuant to this Financing Agreement, including without limitation,
for Letters of Credit pursuant to Paragraph 5.1 of Section 5 hereof; (d) any
reserves which the Agent in its sole discretion deems advisable in connection
with the Permitted Indebtedness or the Sterling Intercreditor Agreement; and
(e) such other reserves as the Agent deems necessary in its reasonable judgment
as a result of (i) negative forecasts and/or trends in such Company’s business,
industry, prospects, profits, operations or financial condition, or (ii) other
issues, circumstances or facts that could otherwise negatively impact the
Companies, or any one of them, their business, prospects, profits, operations,
industry, financial condition or assets.
 
Banking Services shall mean each and any of the following bank services provided
to any Company: (a) commercial credit cards, and (b) treasury management
services (including, without limitation, controlled disbursement, automated
clearinghouse transactions, return items, overdrafts and interstate depository
network services).
 
Banking Services Obligations shall mean as to Companies any and all obligations
of Companies, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor) in connection with Banking
Services
 
Base Rate shall mean the rate of interest per annum announced by the JPMorgan
Chase Bank, N.A. from time to time as its prime rate in effect at its principal
office in New York City. (The prime rate is not intended to be the lowest rate
of interest charged by the JPMorgan Chase Bank, N.A. to its borrowers).
 
Base Rate Loans shall mean any loans or advances pursuant to this Financing
Agreement made or maintained at a rate of interest based upon the Base Rate.
 
Borrowing Base shall mean, as to Companies, the amount calculated as follows:
(a) the lesser of (i) Revolving Line of Credit or (ii) the sum of
(A) eighty-five percent (85%) of Companies’ aggregate outstanding Eligible
Accounts Receivable and Companies’ aggregate outstanding Eligible Unbilled
Card-Lock Customer Accounts; provided, however, that if the then Dilution
Percentage is greater than five percent (5.0%), then the rate of advance herein
shall be reduced by the percentage points by which the Dilution Percentage
exceeds five percent (5.0%), plus (B) the sum of (x) sixty-five percent (65%) of
the aggregate value of Companies’ Eligible Inventory, valued at the lower of
cost or market, on an average cost basis, plus (y) sixty-five percent (65%) of
the aggregate value of Companies’ Eligible Card-Lock Inventory, valued at the
lower of cost or market, on an average cost basis, plus (C) the Eligible
Equipment Based Amount, plus (D) one hundred percent (100%) of the aggregate
Eligible Cash Surrender Value of Eligible Life Insurance Policy, plus (E) the
lesser of (x) one hundred percent (100%) of the Dollar balance of the Eligible
Cash Collateral or (y) $10,000,000, minus (b) any applicable Availability
Reserves.
 
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Business Day shall mean any day on which the Agent and the JPMorgan Chase Bank
are open for business.
 
Capital Expenditures shall mean, for any period, the aggregate of all
expenditures of the Companies during such period on account of property, plant,
equipment or similar fixed assets that, in conformity with GAAP, are required to
be included in or reflected in the balance sheet of the Companies.
 
Capital Lease shall mean any lease of property (whether real, personal or mixed)
which, in conformity with GAAP, is accounted for as a capital lease or a Capital
Expenditure in the balance sheet of the Companies.
 
Capital Stock shall mean, with respect to any Person, any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents (however designated) of such Person’s equity, including all common
stock and preferred stock, any limited or general partnership interest and any
limited liability company membership interest.
 
Cash Collateral Account shall mean a demand deposit, money market or other
account satisfactory to Agent, in its sole discretion, maintained at a bank or
financial institution satisfactory to Agent, in its sole discretion, which is at
all times under the “control” of Agent for the benefit of Agent and Lenders
pursuant to Section 9-104 of the UCC as collateral for the Obligations in a
manner and pursuant to documentation satisfactory to Agent, in its sole
discretion, and as to which (a) Agent, for the benefit of itself and the
Lenders, shall have a valid enforceable first priority security interest, (b) no
defense, counterclaim, set off or dispute shall exist or be asserted with
respect thereto (other than any right of setoff permitted to the relevant bank
or other financial institution pursuant to the provisions of the control
agreement executed in connection with such account), and (c) no security
interests exist other than the security interest of Agent (other than any
security interest which may be permitted to the relevant bank or other financial
institution pursuant to the provisions of the control agreement executed in
connection with such account).
 
Casualty Proceeds shall mean (a) payments or other proceeds from an insurance
carrier with respect to any loss, casualty or damage to Collateral and
(b) payments received on account of any condemnation or other government taking
of any Collateral.
 
CIT shall have the meaning given such term in the opening paragraph of this
Financing Agreement.
 
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Citibank Texas shall mean Citibank, N.A., successor by merger to Citibank Texas,
N.A., formerly known as First American Bank SSB.
 
Closing Date shall mean the date that this Financing Agreement has been duly
executed by the parties hereto and delivered to the Agent.
 
Collateral shall mean all present and future property of the Companies,
including, without limitation, all present and future Accounts, Equipment,
Inventory, Documents of Title, General Intangibles, Real Estate and Other
Collateral of each of the Companies.
 
Commitment shall mean, as to any Lender, the amount of the commitment for such
Lender set forth on the signature page to this Financing Agreement or in the
Assignment and Transfer Agreement to which such Lender is a party, as such
amount may be reduced or increased in accordance with the provisions of
Paragraph 13.4(b) of Section 13 or any other applicable provision of this
Financing Agreement.
 
Companies shall have the meaning given to such term in the opening paragraph of
this Financing Agreement.
 
Consolidated Balance Sheet shall mean a consolidated or compiled, as applicable,
balance sheet for the Parent, the Companies and the consolidated subsidiaries of
each, eliminating all inter-company transactions and prepared in accordance with
GAAP.
 
Copyrights shall mean all of each of the Companies’ present and hereafter
acquired copyrights, copyright registrations, recordings, applications, designs,
styles, licenses, marks, prints and labels bearing any of the foregoing,
goodwill, any and all general intangibles, intellectual property and rights
pertaining thereto, and all cash and non-cash proceeds thereof.
 
Current Assets shall mean those assets of the Companies which, in accordance
with GAAP, are classified as current.
 
Current Liabilities shall mean those liabilities of the Companies which, in
accordance with GAAP, are classified as “current.”
 
Default shall mean any event specified in Section 10 hereof, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, event or act, has been satisfied.
 
Default Rate of Interest shall mean a rate of interest per annum on any
Obligations hereunder, equal to the lesser of: (a) the Maximum Legal Rate, or
(b) the sum of: (i) two percent (2%), and (ii) the applicable increment over the
Base Rate (as set forth in Paragraph 8.1 of Section 8 hereof) plus the Base
Rate, or the applicable increment over the LIBOR Rate (as set forth
Paragraph 8.14 of Section 8 hereof) plus the LIBOR Rate, which the Agent and the
Lenders shall be entitled to charge the Companies on all Obligations due to the
Agent and the Lenders by the Companies, as further set forth in Paragraph 10.2
of Section 10 hereof.
 
Depository Accounts shall mean the collection accounts, which are subject to the
Agent’s instructions, as specified in Paragraph 3.4 of Section 3 hereof.
 
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Dilution Percentage shall mean, as of any time of calculation, the then sum of
Companies’ credits, claims, allowances, discounts, write-offs, credits issued as
a result of actual customer contra charges made, offsets and deductions divided
by the then sum of Trade Accounts Receivables, all calculated on a rolling
ninety (90) day average, as determined by and calculated by the Agent from time
to time.
 
Documentation Agent shall have the meaning given such term in the opening
paragraph of this Financing Agreement.
 
Documentation Fee shall mean the Agent’s standard fees relating to any and all
modifications, waivers, releases, amendments or additional collateral with
respect to this Financing Agreement, the Collateral and/or the Obligations.
 
Documents of Title shall mean all of each of the Companies’ present and future
documents (as defined in the UCC), and any and all warehouse receipts, bills of
lading, shipping documents, chattel paper, instruments and similar documents,
all whether negotiable or not and all goods and Inventory relating thereto and
all cash and non-cash proceeds of the foregoing.
 
Dollars or $ shall mean lawful currency of the United States of America.
 
EBITDA shall mean, in any period, all net earnings of the Companies for said
period before (a) all interest and tax obligations, (b) depreciation,
(c) amortization of the Companies for said period, (d) other non-cash items for
said period agreed to by Agent as long as the aggregate amount of such non-cash
items does not exceed three percent (3.00%) of the amount of EBITDA in such
period as calculated prior to the non-cash items referred to in this clause d,
and (e) other non-cash items for said period agreed to by Required Lenders,
determined in accordance with GAAP on a basis consistent with the latest audited
financial statements of the Companies, but excluding the effect of extraordinary
or non-recurring gains or losses for such period.
 
Eligible Accounts Receivable shall mean, as to any Company, the gross amount of
such Company’s Trade Accounts Receivable that are subject to a valid, exclusive,
first priority and fully perfected security interest in favor of the Agent, for
the benefit of the Lenders, which conform to the warranties contained herein and
which, at all times, continue to be acceptable to the Agent, in the exercise of
its reasonable business judgment, less, without duplication, the sum of: (a) any
returns, discounts, claims, credits and allowances of any nature (whether
issued, owing, granted, claimed or outstanding), and (b) reserves for any such
Trade Accounts Receivable that arise from or are subject to or include:
(i) sales to the United States of America, any state or other governmental
entity or to any agency, department or division thereof, except for any such
sales as to which such Company has complied with the Assignment of Claims Act of
1940 or any other applicable statute, rules or regulation, to the Agent’s
satisfaction in the exercise of its reasonable business judgment; provided,
however, the foregoing provisions of this clause (b)(i) shall not apply to sales
to a municipality or a school district unless the Agent determines in its sole
discretion that payments of accounts by such municipality or school district are
covered by a statute, rule or regulation similar to the Assignment of Claims Act
of 1940 as to sales to the United States of America, in which case such Accounts
will be ineligible unless such Company has complied with such statute, rule or
regulation to the Agent’s satisfaction in the exercise of its reasonable
business judgment; (ii) foreign sales, other than sales which otherwise comply
with all of the other criteria for eligibility hereunder and are (x) secured by
letters of credit (in form and substance satisfactory to the Agent and with
respect to which the Companies have complied with the provisions of Paragraph
6.9 of Section 6 hereof) issued or confirmed by, and payable at, banks having a
place of business in the United States of America, or (y) to customers residing
in Canada provided such Accounts do not exceed $500,000 in the aggregate at any
one time; (iii) Accounts that remain unpaid more than (A) thirty (30) days from
invoice date for Accounts subject to ten (10) days (or less) payment terms and
(B) ninety (90) days from invoice date for Accounts subject to any other
lengthier payment terms; (iv) contra accounts; (v) sales to Parent, any other
Company, any subsidiary, or to any company affiliated with the Companies or
Parent in any way; (vi) bill and hold (deferred shipment) or consignment sales;
(vii) sales to any customer which is: (A) insolvent, (B) the debtor in any
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceedings under any federal or state law, (C) negotiating, or has called a
meeting of its creditors for purposes of negotiating, a compromise of its debts,
or (D) financially unacceptable to the Agent or has a credit rating unacceptable
to the Agent; (viii) all sales to any customer if fifty percent (50%) or more
of the aggregate dollar amount of all outstanding invoices to such customer are
unpaid more than (A) thirty (30) days from invoice date for Accounts subject to
ten (10) days (or less) payment terms, and (B) ninety (90) days from invoice
date for Accounts subject to any other lengthier payment terms; (ix) pre-billed
receivables and receivables arising from progress billing; (x) an amount
representing, historically, returns, discounts, claims, credits, allowances and
applicable terms; (xi) sales not payable in United States currency; (xii) sales
of propane fuel to consumers to the extent the aggregate amount of such Accounts
from such consumer propane customers exceeds $3,000,000, to the extent of such
excess, (xiii) any amounts payable to Companies by or through GASCARD pursuant
to the provisions of the GASCARD Agreement, and (xiv) any other reasons deemed
necessary by the Agent in its reasonable business judgment, including without
limitation those which are customary either in the commercial finance industry
or in the lending practices of the Agent or the Lenders.
 
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Eligible Card-Lock Inventory shall mean, as to any Company, such Company’s
finished goods Inventory which would otherwise constitute Eligible Inventory,
except for the fact that it is located at any of the card-lock locations of such
Company.
 
Eligible Cash Collateral shall mean the amount of Dollars on deposit in the Cash
Collateral Account and reflected in the most recent information regarding the
Cash Collateral Account delivered to Agent (which in all events shall be
delivered no less frequently than monthly) in which Agent, on behalf of itself
and Lenders, has a valid and enforceable first priority perfected security
interest; provided, however, that “Eligible Cash Collateral” shall not include
(a) such portion of such amount to the extent that any defense, counterclaim,
setoff or dispute is asserted with respect to such portion; (b) such portion of
such amount that (i) is not owned by a Company or (ii) is subject to any
security interest of any Person, other than the security interest in favor of
Agent, on behalf of itself and the Lenders and other than any security interest
which may be permitted to the relevant bank or other financial institution
pursuant to the provisions of the control agreement executed in connection with
such Cash Collateral Account; (c) such portion of such amount as to which any of
the representations or warranties in this Financing Agreement and the other Loan
Documents are untrue; (d) such portion of such amount to the extent such Dollars
are on deposit in the Cash Collateral Account because of the requirements of
other provisions of this Financing Agreement; or (e) such portion of such amount
to the extent that because of the occurrence and continuation of a Default or
Event of Default or material negative financial performance of the Companies,
Agent has determined in its sole discretion that such portion of such amount
shall no longer constitute “Eligible Cash Collateral.”
 
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Eligible Cash Surrender Value of Eligible Life Insurance Policy shall mean the
aggregate cash surrender value of the Eligible Life Insurance Policy to the
extent the Agent is satisfied in its sole discretion such cash surrender value
is unconditionally payable without offset or defense by such insurer to the
Agent and without any right of recoupment thereto of such insurer.
 
Eligible Equipment shall mean, as to any Company, such Company’s Equipment
consisting of tractors, trailers, trucks and other motor vehicles of such
Company, to the extent such Equipment (a) is subject to a valid, exclusive first
priority and fully perfected security interest in favor of the Agent, for the
benefit of the Lenders, (b) conforms to the warranties contained herein, (c) is
acceptable to the Agent, in the exercise of its reasonable business judgment, to
be included as a component of the Eligible Equipment Based Amount, (d) is
covered by the provisions of the Equipment Analysis, and (e) is fully insured in
the manner required under this Financing Agreement.
 
Eligible Equipment Based Amount shall mean, as of any relevant date of
determination, (a) eighty percent (80%) of the Eligible Equipment of Companies
consisting of rolling stock which is owned by a Company and is covered by the
provisions of the Equipment Analysis, with this amount to be reduced on the
first day of each calendar month, beginning February 1, 2005, by an amount equal
to 1/48 of the aggregate amount determined pursuant to clause (a) above, minus
(b) the greater of the net orderly liquidation value or fair market value, as
determined by the Agent, of any Equipment described in clause (a) above which is
sold, transferred, exchanged or otherwise disposed of or suffers any loss or
damage because of fire or other casualty or in which the Agent does not have or
ceases to have valid, exclusive first priority and fully perfected security
interest.
 
Eligible Inventory shall mean, as to any Company, the gross amount of such
Company’s finished goods Inventory consisting of gasoline, diesel and propane
fuel, lubricants, oil and chemicals that is subject to a valid, exclusive, first
priority and fully perfected security interest in favor of the Agent, for the
benefit of the Lenders, and which conforms to the warranties contained herein
and which, at all times, continues to be acceptable to the Agent in the exercise
of its reasonable business judgment, less, without duplication, any
(a) work-in-process, (b) supplies and raw materials, (c) Inventory not present
in the United States of America, (d) Inventory returned or rejected by any of
the Company’s customers (other than goods that are undamaged and resalable in
the normal course of business) and goods to be returned to a Company’s
suppliers, (e) Inventory in transit to third parties (other than a Company’s
agents or warehouses), or in the possession of a warehouseman, bailee, third
party processor, or other third party, unless such warehouseman, bailee or third
party has executed a notice of security interest agreement (in form and
substance satisfactory to the Agent) and the Agent, for the benefit of the
Lenders, shall have a first priority perfected security interest in such
Inventory, (f) Inventory located at any of the card-lock locations of a Company,
and (g) less any reserves required by the Agent in its reasonable discretion,
including without limitation for special order goods, discontinued, slow-moving
and obsolete Inventory, market value declines, bill and hold (deferred
shipment), consignment sales, shrinkage and any applicable customs, freight,
duties and Taxes.
 
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Eligible Life Insurance Policy shall mean that certain life insurance policy
maintained by the Companies on the life of Jack E. Walcher to the extent such
life insurance policy has been assigned to the Agent as collateral for the
Obligations pursuant to documentation in form and substance satisfactory to the
Agent, which assignment documentation shall have been unconditionally agreed to
and acknowledged in writing by the relevant issuer of such life insurance policy
(such assignment documentation being referred to in this Financing Agreement as
the “Life Insurance Assignment Documentation”).
 
Eligible Unbilled Card-Lock Customer Accounts shall mean bona fide final sales
of fuel to customers of a Company at card-lock locations which have not yet been
invoiced by such Company, but which are invoiced to the relevant Account Debtor
at pre-determined weekly or monthly intervals, to the extent such a card-lock
sales transaction is evidenced by detailed timely sale information in form and
substance and satisfactory to the Agent, in its sole discretion, and to the
extent such Account represents a final sale that would otherwise constitute an
Eligible Accounts Receivable except for the fact such Account has not yet been
invoiced. Once such Card-Lock sales transaction is invoiced, it no longer
constitutes an “Eligible Unbilled Card-Lock Customer Account.”
 
Employee Plan shall mean any employee benefit plan, program or policy with
respect to which any Company or any ERISA Affiliate may have any liability or
any obligation to contribute, other than a Plan or a Multiemployer Plan.
 
Environmental Laws shall mean applicable federal, state or local laws, rules or
regulations, and any applicable judicial interpretations thereof, including any
judicial or administrative order, judgment, permit, approval decision or
determination, in each case pertaining to conservation or protection of the
environment, in effect at the time in question, including the Clean Air Act, the
Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”),
the Federal Water Pollution Control Act, the Occupational Safety and Health Act,
the Resource Conservation and Recovery Act, the Safe Drinking Water Act, the
Toxic Substances Control Act, the Superfund Amendments and Reauthorization Act
of 1986, the Hazardous Materials Transportation Act and analogous state and
local laws as may be amended from time to time thereby imposing either more or
less stringent requirements as relates to activity occurring after the Closing
Date of any such amendments.
 
Equipment shall mean all of each Companies’ present and hereafter acquired
equipment (as defined in the UCC) including, without limitation, all machinery,
equipment, furnishings and fixtures, and all additions, substitutions and
replacements thereof, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto and all proceeds thereof of whatever sort.
 
Equipment Analysis shall mean an analysis in form and substance reasonably
satisfactory to the Agent, in its sole discretion, of the net orderly
liquidation value of certain Equipment of the Companies, prepared at such time
and in a manner and by a person satisfactory to the Agent, in its sole
discretion.
 
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ERISA shall mean the Employee Retirement Income Security Act or 1974, as amended
from time to time and the rules and regulations promulgated thereunder from time
to time.
 
ERISA Affiliate shall mean (a) any person which, together with any Company, is
treated as a “single employer” under Section 414 of the Internal Revenue Code of
1986, as amended, and the regulations thereunder, and (b) any Subsidiary of any
Company.
 
Eurocurrency Reserve Requirements for any day, as applied to a LIBOR Loan, shall
mean the aggregate (without duplication) of the maximum rates of reserve
requirements (expressed as a decimal fraction) in effect with respect to the
Agent or any Lender on such day (including, without limitation, basic,
supplemental, marginal and emergency reserves under Regulation D or any other
applicable regulations of the Board of Governors of the Federal Reserve System
or other governmental authority having jurisdiction with respect thereto, as now
and from time to time in effect, dealing with reserve requirements prescribed
for Eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of such Board) maintained by the Agent or any Lender (such rate to
be adjusted to the nearest one sixteenth of one percent (1/16 of 1%) or, if
there is not a nearest one sixteenth of one percent (1/16 of 1%), to the next
higher one sixteenth of one percent (1/16 of 1%)).
 
Event(s) of Default shall have the meaning provided for in Section 10 hereof.
 
Existing Financing Agreement shall have the meaning given such term in the
Recitals to this Financing Agreement.
 
Existing Lenders shall have the meaning given such term in the opening paragraph
of this Financing Agreement.
 
Fee Letter shall mean that certain fee letter dated on or before the date
hereof, among Companies and Agent, in form and substance mutually agreeable to
Agent and the Companies.
 
Financing Agreement means this Second Amended and Restated Financing Agreement,
as the same may be modified, supplemented, extended, amended or restated from
time to time.
 
Fiscal Quarter shall mean, with respect to the Companies, each three (3) month
period ending on March 31, June 30, September 30 and December 31 of each Fiscal
Year.
 
Fiscal Year shall mean each twelve (12) month period commencing on January 1 of
each year and ending on the following December 31.
 
Fixed Charge Coverage Ratio shall mean, for the relevant period, the ratio
determined by dividing EBITDA by the sum of (a) the amount of principal and
interest repaid or scheduled to be repaid on the Indebtedness during such period
(other than (i) such voluntary prepayments of principal and interest as to which
the Agent and the Lenders have agreed in writing should not be included in this
clause (a), (ii) the principal repaid on Revolving Loans and (iii) any mandatory
prepayments of the Term Loans out of Surplus Cash generated during such period
as required pursuant to Paragraph 4.4(c) of Section 4 hereof), (b) all cash
dividends paid by the Companies to their shareholders and the redemption price
of all Capital Stock redeemed by the Companies, (c) Unfinanced Capital
Expenditures actually incurred by the Companies, and (d) all federal, state and
local income tax expenses due and payable net of any tax refund received by the
Companies.
 
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Fixed Charges shall mean, for the relevant period, the sum of (a) the amount of
principal and interest repaid or scheduled to be repaid on the Indebtedness
during such period (other than (i) such voluntary prepayments of principal and
interest as to which the Agent and the Lenders have agreed in writing should not
be included in this clause (a), (ii) the principal repaid on Revolving Loans and
(iii) any mandatory prepayments of the Term Loans out of Surplus Cash generated
during such period as required pursuant to Paragraph 4.4(c) of Section 4
hereof), (b) all dividends paid by the Companies to their shareholders and the
redemption price of all Capital Stock redeemed by the Companies, (c) Unfinanced
Capital Expenditures actually incurred by the Companies, and (d) all federal,
state and local income tax expenses due and payable net of any tax refund
received by the Companies.
 
GAAP shall mean generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply, provided that in the event the Companies
modify their accounting principles and procedures as applied as of the Closing
Date, the Companies shall provide such statements of reconciliation as shall be
in form and substance reasonably acceptable to the Agent.
 
GASCARD shall have the meaning given to such term in the GASCARD Agreement.
 
GASCARD Agreement shall mean that certain GASCARD SUBLICENSE AGREEMENT entered
into by United, West Texas Gas, Inc. and the other parties signatory thereto, as
the same may be renewed, restated and amended from time to time, together with
all agreements executed in substitution therefor.
 
General Intangibles shall mean all of each of the Companies’ present and
hereafter acquired general intangibles (as defined in the UCC), and shall
include, without limitation, all present and future right, title and interest in
and to: (a) all Trademarks, tradenames, corporate names, business names, logos
and any other designs or sources of business identities, (b) Patents, together
with any improvements on said Patents, utility models, industrial models, and
designs, (c) Copyrights, (d) trade secrets, (e) licenses, permits and
franchises, (f) all applications with respect to the foregoing, (g) all right,
title and interest in and to any and all extensions and renewals, (h) goodwill
with respect to any of the foregoing, (i) any other forms of similar
intellectual property, (j) all customer lists, distribution agreements, supply
agreements, blue prints, indemnification rights and tax refunds, together with
all monies and claims for monies now or hereafter due and payable in connection
with any of the foregoing or otherwise, and all cash and non-cash proceeds
thereof, including, without limitation, the proceeds or royalties of any
licensing agreements between any Company and any licensee of any such Company’s
General Intangibles.
 
Guaranties shall mean the guaranty documents executed and delivered by the
Guarantors guaranteeing the Obligations.
 
Guarantors shall mean Parent and any other person or entity who hereafter
guarantees payment of all or any portion of the Obligations.
 
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Indebtedness shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (a) obligations in respect of
borrowed money or for the deferred purchase price of property, services or
assets, other than Inventory, or (b) lease obligations which, in accordance with
GAAP, have been, or which should be capitalized.
 
Initial Adjustment Date shall mean the later of (a) February 1, 2008 or (b) the
tenth day after the delivery to Agent pursuant to Paragraph 7.8(c) of Section 7
hereof of the financial statements of the Companies for the month ending
December 31, 2007.
 
Initial Term Loan shall mean the term loan in the principal amount $6,000,000
made by the Lenders to the Companies on the Closing Date on the terms and
conditions set forth in Paragraph 4.2 of Section 4 of this Financing Agreement.
 
Insurance Proceeds shall mean proceeds or payments from an insurance carrier
with respect to any loss, casualty or damage to Collateral.
 
Interest Period shall mean:
 
(a)  with respect to any initial request by any of the Companies for a LIBOR
Loan, a one month, two month or three month period commencing on the borrowing
or conversion date with respect to a LIBOR Loan and ending one, two or three
months thereafter, as applicable; and
 
(b)  thereafter with respect to any continuation of, or conversion to, a LIBOR
Loan, at the option of any of the Companies, any one month, two month or three
month period commencing on the last day of the immediately preceding Interest
Period applicable to such LIBOR Loan and ending one, two or three months
thereafter, as applicable;
 
provided that, the foregoing provisions relating to Interest Periods are subject
to the following:
 
(i)  if any Interest Period would otherwise end on a day which is not a Working
Day, that Interest Period shall be extended to the next succeeding Working Day,
unless the result of such extension would extend such payment into another
calendar month in which event such Interest Period shall end on the immediately
preceding Working Day;
 
(ii)  any Interest Period that begins on the last Working Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month, at the end of such Interest Period) shall end on the last
Working Day of a calendar month; and
 
(iii)  for purposes of determining the availability of Interest Periods, such
Interest Periods shall be deemed available if (x) JP Morgan Chase Bank quotes an
applicable rate or the Agent determines LIBOR, as provided in the definition of
LIBOR, (y) LIBOR determined by JP Morgan Chase Bank or the Agent will adequately
and fairly reflect the cost of maintaining or funding its loans bearing interest
at LIBOR, for such Interest Period, and (z) such Interest Period will end on or
before the earlier of Anniversary Date or the last day of the then current term
of this Financing Agreement. If a requested Interest Period shall be unavailable
in accordance with the foregoing sentence, the Companies shall continue to pay
interest on the Obligations at the applicable per annum rate based upon the Base
Rate.
 
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Inventory shall mean all of each of the Companies’ present and hereafter
acquired inventory (as defined in the UCC) and including, without limitation,
all merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same in all
stages of production from raw materials through work-in-process to finished
goods - and all proceeds thereof of whatever sort.
 
Investment Property shall mean all now owned and hereafter acquired investment
property (as defined in the UCC) and all proceeds thereof.
 
Issuing Bank shall mean the bank issuing Letters of Credit for the Companies.
 
Letters of Credit shall mean all letters of credit issued with the assistance of
the Lenders (acting through the Agent) in accordance with Section 5 hereof by
the Issuing Bank for or on behalf of a Company.
 
Letter of Credit Guaranty shall mean the guaranty delivered by the Agent, on
behalf of the Lenders, to the Issuing Bank of any Company reimbursement
obligations under the Issuing Bank’s reimbursement agreement, application for
Letter of Credit or other like document.
 
Letter of Credit Guaranty Fee shall mean the fee the Agent, on behalf of the
Lenders, may charge the Companies under Paragraph 8.3 of Section 8 hereof for:
(a) issuing a Letter of Credit Guaranty, and/or (b) otherwise aiding the
Companies, or any one of them, in obtaining Letters of Credit, all pursuant to
Section 5 hereof.
 
Letter of Credit Sub-Line shall mean the commitment of the Lenders to assist the
Companies in obtaining Letters of Credit, pursuant to Section 5 hereof, in an
aggregate amount of $5,000,000.00.
 
LIBOR shall mean, at any time of determination, and subject to availability, for
each applicable Interest Period, a variable rate of interest equal to: (a) at
the Agent’s election (i) the applicable LIBOR quoted to the Agent by JP Morgan
Chase Bank (or any successor thereof), or (ii) the rate of interest determined
by the Agent at which deposits in U.S. dollars are offered for the relevant
Interest Period based on information presented on Reuters Screen LIBOR01 Page as
of 11:00 A.M. (London time) on the day which is two (2) Business Days prior to
the first day of such Interest Period, provided that, if at least two such
offered rates appear on Reuters Screen LIBOR01 Page in respect of such Interest
Period, the arithmetic mean of all such rates (as determined by the Agent) will
be the rate used; divided by (b) a number equal to 1.0 minus the aggregate (but
without duplication) of the rates (expressed as a decimal fraction) of
Eurocurrency Reserve Requirements in effect on the day which is two (2) Business
Days prior to the beginning of such Interest Period.
 
LIBOR Lending Office shall mean, (a) with respect to the Agent and CIT, shall
mean the office of JP Morgan Chase Bank, or any successor thereof, maintained at
270 Park Avenue, New York, NY 10017, and (b) with respect to each Lender, the
address set forth on the signature page to this Financing Agreement or the
Assignment and Transfer Agreement to which such Lender is a party.
 
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LIBOR Loan shall mean any loans made pursuant to this Financing Agreement which
are made or maintained at a rate of interest based upon LIBOR, provided that
(a) no Default or Event of Default has occurred hereunder, which has not been
waived in writing by the Agent and the Required Lenders, and (b) no LIBOR Loan
shall be made with an Interest Period that ends subsequent to an Anniversary
Date or any applicable Termination Date.
 
Life Insurance Assignment Documentation shall have the meaning given to such
term in the definition of “Eligible Life Insurance Policy.”
 
Line of Credit shall mean the aggregate commitment of the Lenders in an amount
equal to $90,000,000 to (a) make Revolving Loans pursuant to Section 3 of this
Financing Agreement, (b) assist Companies in opening Letters of Credit pursuant
to Section 5 of this Financing Agreement, and (c) make the Term Loans pursuant
to Section 4 of this Financing Agreement.
 
Line of Credit Fee shall: (a) mean the fee payable to the Agent, for the benefit
of the Lenders, due at the end of each month for the Revolving Line of Credit
and the Acquisition Term Loan Line of Credit, and (b) such fee to be equal to
the sum of the amounts set forth below in clause (i) and (ii) and determined as
follows: (i) multiplying (x) the difference between (A) the Revolving Line of
Credit, and (B) the sum, for said month, of the average daily balance of
Revolving Loans plus the average daily balance of Letters of Credit outstanding
for said month, by (y) one-quarter of one percent (0.25%) per annum for the
number of days in said month, and (ii) multiplying (x) the difference between
(A) Acquisition Term Loan Line of Credit and (B) the aggregate amount of
Acquisition Term Loans made pursuant to this Financing Agreement as of the last
day of said month, by (y) one quarter of one percent (0.25%) per annum for the
number of days in said month.
 
Loan Documents shall mean this Financing Agreement, the Promissory Notes, any
mortgages and deeds of trust on any Real Estate, the Fee Letter, the Sterling
Intercreditor Agreement, each Subordination Agreement, the Guaranties, the Life
Insurance Assignment Documentation, the control agreements, any stock pledge
agreements, other collateral documents, any other closing documents and any
other ancillary loan and security agreements executed from time to time in
connection with this Financing Agreement, all as may be renewed, amended,
extended, increased or supplemented from time to time.
 
Material Adjustment shall have the meaning given such term in the definition of
“Applicable Base Rate Margin.”
 
Maximum Legal Rate shall mean the maximum lawful interest rate which may be
contracted for, charged, taken, received or reserved under this Financing
Agreement or the other Loan Documents by the Agent and the Lenders, in
accordance with applicable state or federal law (whichever provides for the
highest permitted rate), taking into account all items contracted for, charged
or received in connection with the Obligations evidenced hereby which are
treated as interest under the applicable state or federal law, as such rate may
change from time to time. The Maximum Legal Rate shall be calculated in a manner
that takes into account any and all fees, payments and other charges in respect
of the Loan Documents that constitute interest under applicable law. Each change
in any interest rate provided for herein based upon the Maximum Legal Rate
resulting from a change in the Maximum Legal Rate shall take effect without
notice to the Companies at the time of such change in the Maximum Legal Rate.
For purposes of determining the Maximum Legal Rate under Texas law, the
applicable rate ceiling shall be: (a) the “weekly ceiling” described in and
computed in accordance with the provisions of Section 303.003 of the Texas
Finance Code, as amended; or (b) if the parties subsequently contract as allowed
by Texas law, the quarterly ceiling or the annualized ceiling computed pursuant
to Section 303.008 of the Texas Finance Code, as amended; provided, however,
that at any time the “weekly ceiling”, the quarterly ceiling or the annualized
ceiling shall be less than 18% per annum or more than 24% per annum, the
provisions of Section 303.009(a) and Section 303.009(c) of the Texas Finance
Code, as amended, shall control for purposes of such determination, as
applicable.
 
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Multiemployer Plan shall mean any plan which is a “multiemployer plan” (as such
term is defined in Section 4001(a)(3) of ERISA) to which each Company or any
ERISA Affiliate contributes or has any obligation or liability to make
contributions, including any withdrawal liability, contingent or otherwise.
 
Net Worth shall mean, at any date of determination, an amount equal to (a) Total
Assets minus (b) Total Liabilities, and shall be determined in accordance with
GAAP, on a consistent basis with the latest audited financial statements of the
Companies.
 
Obligations shall mean all loans, advances and extensions of credit made or to
be made by the Agent and the Lenders to the Companies (or any of them), or to
others for the Companies’ account (including, without limitation, all Revolving
Loans, all Term Loans and Letter of Credit Guaranties); any and all indebtedness
and obligations which may at any time be owing by the Companies (or any of them)
to the Agent or to CIT or any Affiliate of CIT or to any other Lender, howsoever
arising, whether now in existence or incurred by the Companies, or any one of
them, from time to time hereafter (including, without limitation, Banking
Services Obligations and Swap Obligations, provided that as to any Swap
Obligation to which a Lender other than CIT is a party thereto, such Lender
shall have delivered to Agent prior written notice before any transaction
relating to such Swap Obligation is entered into); whether principal, interest,
fees, costs, expenses or otherwise; whether secured by pledge, lien upon or
security interest in any of the Companies’ Collateral, assets or property or the
assets or property of any other person, firm, entity or corporation; whether
such indebtedness is absolute or contingent, joint or several, matured or
unmatured, direct or indirect and whether the Companies, or any one of them, are
liable to the Agent or to CIT or to any Affiliate of CIT or to any other Lender
for such indebtedness as principal, surety, endorser, guarantor or otherwise,
including, without limitation, indebtedness and obligations of Companies to the
Agent or any Lender pursuant to the Companies’ Guaranty. Obligations shall also
include indebtedness owing to the Agent or any Lender by the Companies, or any
one of them, under any Loan Document; indebtedness or obligations incurred by,
or imposed on, the Agent or any Lender as a result of environmental claims
arising out of any of the Companies’ operations, premises or waste disposal
practices or sites in accordance with Paragraph 7.7 of Section 7 hereof; the
Companies’ liability to the Agent as maker or endorser of any promissory note or
other instrument for the payment of money; any of the Company’s liability to the
Agent or any Lender under any instrument of guaranty or indemnity, or arising
under any guaranty, endorsement or undertaking which the Agent, on behalf of the
Lenders, may make or issue to others for the Companies’ account, including any
Letter of Credit Guaranty or other accommodation extended by the Agent with
respect to applications for Letters of Credit, the Agent’s acceptance of drafts
or the Agent’s endorsement of notes or other instruments for the Companies’
account and benefit.
 
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Operating Leases shall mean all leases of property (whether real, personal or
mixed) other than Capital Leases.
 
Original Financing Agreement shall have the meaning given to such term in the
Recitals to this Financing Agreement.
 
Other Collateral shall mean all of each of the Companies’ now owned and
hereafter acquired lockbox, blocked account and any other deposit accounts
maintained with any bank or financial institutions into which the proceeds of
Collateral are or may be deposited; all other deposit accounts and all
Investment Property; all cash and other monies and property in the possession or
control of the Agent or any Lender; all books, records, ledger cards, disks and
related data processing software at any time evidencing or containing
information relating to any of the Collateral described herein or otherwise
necessary or helpful in the collection thereof or realization thereon; and all
cash and non-cash proceeds of the foregoing.
 
Out-of-Pocket Expenses shall mean all of the Agent’s present and future expenses
incurred relative to this Financing Agreement or any other Loan Document,
whether incurred heretofore or hereafter, which expenses shall include, without
being limited to, (a) the cost of record searches, all costs and expenses
incurred by the Agent in opening bank accounts, depositing checks, receiving and
transferring funds, and wire transfer charges, any charges imposed on the Agent
due to returned items and “insufficient funds” of deposited checks and the
Agent’s standard fees relating thereto, (b) any amounts paid by, incurred by or
charged to, the Agent by the Issuing Bank under a Letter of Credit Guaranty or a
Company’s reimbursement agreement, application for Letters of Credit or other
like document which pertain either directly or indirectly to such Letters of
Credit, and the Agent’s standard fees relating to the Letters of Credit and any
drafts thereunder, (c) title insurance premiums and real estate survey costs,
(d) travel, lodging and similar expenses of the Agent’s personnel in connection
with inspecting and monitoring the Collateral from time to time hereunder,
(e) any reasonable applicable counsel fees and disbursements, (f) fees and taxes
relative to the filing of financing statements and recording of real estate lien
documents, and (g) all expenses, costs and fees set forth in Paragraph 10.3 of
Section 10 hereof.
 
Overadvance Rate shall mean a rate equal to: the lesser of (a) the Maximum Legal
Rate or (b) one-half of one percent (1/2%) per annum in excess of the applicable
contract rate of interest determined in accordance with Paragraph 8.1(a) of
Section 8 hereof.
 
Overadvances shall mean the amount by which (a) the sum of all outstanding
Revolving Loans plus the undrawn amount of all outstanding Letters of Credit
exceeds (b) the Borrowing Base.
 
Parent shall have the meaning given such term in the opening paragraph of this
Financing Agreement.
 
Patents shall mean all of each of the Companies’ present and hereafter acquired
patents, patent applications, registrations, any reissues or renewals thereof,
licenses, any inventions and improvements claimed thereunder, and all general
intangible, intellectual property and patent rights with respect thereto of the
Companies or any one of them, and all income, royalties, cash and non-cash
proceeds thereof.
 
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Permitted Encumbrances shall mean (a) liens identified in Schedule 1 attached
hereto; (b) Purchase Money Liens; (c) liens of local or state authorities for
franchise or other like Taxes, provided that the aggregate amounts of such liens
shall not exceed $100,000.00 in the aggregate at any one time; (d) statutory
liens of landlords and liens of carriers, warehousemen, bailees, mechanics,
materialmen and other like liens imposed by law, created in the ordinary course
of business and for amounts not yet due (or which are being contested in good
faith, by appropriate proceedings or other appropriate actions which are
sufficient to prevent imminent foreclosure of such liens) and with respect to
which adequate reserves or other appropriate provisions are being maintained by
the Companies in accordance with GAAP; (e) deposits made (and the liens thereon)
in the ordinary course of business of the Companies (including, without
limitation, security deposits for leases, indemnity bonds, surety bonds and
appeal bonds) in connection with workers’ compensation, unemployment insurance
and other types of social security benefits or to secure the performance of
tenders, bids, contracts (other than for the repayment or guarantee of borrowed
money or purchase money obligations), statutory obligations and other similar
obligations arising as a result of progress payments under government contracts;
(f) easements (including, without limitation, reciprocal easement agreements and
utility agreements), encroachments, minor defects or irregularities in title,
variation and other restrictions, charges or encumbrances (whether or not
recorded) affecting the Real Estate, if applicable, and which in the aggregate
(A) do not materially interfere with the occupation, use or enjoyment by any of
the Companies of their business or the property so encumbered and (B) in the
reasonable business judgment of the Agent do not materially and adversely affect
the value of such Real Estate; (g) liens granted the Agent, for the benefit of
the Lenders, by the Companies or any one of them; (h) liens of judgment
creditors provided such liens do not exceed, in the aggregate, at any time,
$50,000.00 (other than liens bonded or insured to the reasonable satisfaction of
the Agent); (i) tax liens which are not yet due and payable or which are being
diligently contested in good faith by the Companies by appropriate proceedings,
and which liens are not (x) filed on any public records, (y) senior to the liens
of the Agent, or (z) for Taxes due the United States of America or any state
thereof having similar priority statutes, as further set forth in Paragraph 7.6
hereof of Section 7; and (j) liens in favor of Sterling as to property of United
to the extent described in the Sterling Intercreditor Agreement, but only to the
extent such liens only secure the Sterling Term Loan.
 
Permitted Indebtedness shall mean (a) the Indebtedness existing on the Closing
Date and described on Schedule 7.15(e) hereof (provided that after the Closing
Date there are no increases in the principal balance or changes in the payment
terms of such Indebtedness or changes in any collateral therefor), (b) the
Sterling Term Loan, and (c) any extension of any of the Indebtedness described
in clauses (a) and (b) above provided such extension does not involve an
increase in the unpaid principal balance thereof or increase in the principal
amortization or payment terms thereof.
 
Person shall mean any individual, partnership, joint venture, firm, corporation,
limited liability company or partnership, association, trust or other enterprise
or any government or political subdivision or any agency, department or
instrumentality thereof.
 
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Plan shall mean any employee pension benefit plan (as defined in Section 3(2) of
ERISA), subject to Title IV of ERISA or Section 412 of the Internal Revenue Code
of 1986, as amended, other than a Multiemployer Plan, with respect to which any
Company or an ERISA Affiliate contributes or has an obligation or liability to
contribute, including any such plan that may have been terminated.
 
PNC shall have the meaning given such term in the opening paragraph of this
Financing Agreement.
 
Preferred Stock shall mean any issued and outstanding Series A 8% Cumulative
Convertible Preferred Stock of Parent as of the Closing Date.
 
Prepayment Premium shall mean an amount equal to the product obtained by
multiplying the principal amount of any Term Loan prepaid (other than mandatory
prepayments made from Surplus Cash) by (i) one-half of one percent (0.50)% if
such prepayment occurs on or before the first anniversary of the Closing Date,
and one-quarter of one percent (0.25%) if such prepayment occurs after the first
anniversary of the Closing Date.
 
Promissory Notes shall mean, collectively, (i) the notes in the form of Exhibit
B (in the case of the Initial Term Loan) and Exhibit C (in the case of any
Acquisition Term Loan) and Exhibit D (in the case of Revolving Loans) and
Exhibit F (in the case of the Three D Real Property Term Loan) attached hereto,
delivered by the Companies to each Lender to evidence the loans made by such
Lender to the Companies pursuant to Section 3 and Section 4 of this Financing
Agreement, and (ii) the note in the form of Exhibit E attached hereto, delivered
by the Companies to the Swingline Lender to evidence the Swingline Loans made by
Swingline Lender pursuant to Section 3 of this Financing Agreement.
 
Propane Division shall mean the property of Customers directly related to the
supply and sale by Companies of propane fuel to their residential and commercial
propane fuel customers.
 
Propane Tanks shall mean propane tanks of United used in the sale by United of
propane fuel to its residential and commercial propane fuel users.
 
Pro Rata Percentage shall mean, as to each Lender at any time, a fraction
(expressed as a percentage), the numerator of which is the amount of such
Lender’s Commitment at such time and the denominator of which is the aggregate
amount of all Commitments at such time (or in the event that the Commitments of
the Lenders hereunder have terminated, the numerator of which is the principal
amount of loans then owed to such Lender hereunder and the denominator of which
is the principal amount of loans then owed to all Lenders hereunder, as
reflected by CIT’s System); provided that CIT’s Commitment with respect to
Swingline Loans shall be excluded when determining CIT’s Pro Rata Percentage
hereunder.
 
Purchase Money Liens shall mean liens on any item of Equipment acquired after
the date of this Financing Agreement provided that (a) each such lien shall
attach only to the property to be acquired, (b) a description of the Equipment
so acquired is furnished to the Agent, and (c) the debt incurred in connection
with such acquisitions shall not exceed, in the aggregate, $2,500,000 in any
Fiscal Year.
 
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Real Estate shall mean each of each Company’s fee and/or leasehold interests in
real property.
 
Required Lenders shall mean (a) at all times while there are (2) two or fewer
Lenders hereunder, all of the Lenders, and (b) at all times while there are
three (3) or more Lenders hereunder, those Lenders holding at least fifty-one
percent (51%) of the total Commitments (excluding CIT’s Commitment with respect
to Swingline Loans) under the Line of Credit (or fifty-one percent (51%) of the
outstanding principal amount of all loans outstanding hereunder, as reflected by
CIT’s System, in the event that the Commitments of the Lenders hereunder have
terminated).
 
Revolving Line of Credit shall mean the aggregate commitment of the Lenders to
make loans and advances pursuant to Section 3 hereof and issue Letters of Credit
Guaranties to the Companies, in the aggregate amount of $70,000,000.00.
 
Revolving Loan Account shall mean the accounts on the Agent’s books, in each
Company’s name, in which each Company will be charged with all applicable
Obligations under this Financing Agreement.
 
Revolving Loans shall mean the loans and advances made, from time to time, to or
for the account of each of the Companies by the Agent and the Lenders (including
the Swingline Lender) pursuant to Section 3 hereof.
 
Settlement Date shall mean: (a) with respect to Revolving Loans other than
Swingline Loans, Wednesday of each week (or if any Wednesday is not a Business
Day on which all Lenders are open for business, the immediately preceding
Business Day on which all Lenders are open for business), provided that the
Agent, in its discretion, may require that the Settlement Date with respect to
Revolving Loans other than Swingline Loans occur more frequently (even daily) so
long as such Settlement Date is a Business Day on which each Lender is open for
business; and (b) with respect to Swingline Loans, any date specified by the
Swingline Lender upon notice (oral or written) to the Agent, so long as such
date is a Business Day on which each Lender is open for business.
 
Sterling shall mean Sterling Bank.
 
Sterling Intercreditor Agreement shall mean that certain Second Amended and
Restated Intercreditor Agreement, dated on or about the Closing Date, among
Sterling, Agent and Lenders, detailing the respective rights of Sterling and the
Agent as to assets of United and covering other matters relating to the credit
facility established by this Financing Agreement and the Sterling Term Loan.
 
Sterling Term Loan shall mean, collectively, the existing term loans from
Sterling to United which as of the Closing Date have an aggregate unpaid
principal balance of $4,654,516, which term loans are secured only by the real
property of United, together with improvements thereon and fixtures affixed
thereto and certain equipment located thereon, as well as the propane equipment
of United, all as described in the Sterling Intercreditor Agreement.
 
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Sterling Term Loan Documentation shall mean the documentation evidencing,
securing and otherwise executed in connection with or relating to the Sterling
Term Loan.
 
Subordinated Debt shall mean the debt due a Subordinating Creditor (and the
note(s) evidencing such) which has been subordinated, by a Subordination
Agreement, to the prior payment and satisfaction of the Obligations of the
Companies to the Agent and the Lenders.
 
Subordinating Creditor shall mean any party hereafter executing a Subordination
Agreement.
 
Subordination Agreement shall mean the agreement (in form and substance
satisfactory to the Agent) among the Companies, a Subordinating Creditor and the
Agent, on behalf of the Lenders, pursuant to which Subordinated Debt is
subordinated to the prior payment and satisfaction of the Companies’ Obligations
to the Agent and the Lenders.
 
Subsidiary shall mean any corporation or other entity of whose shares of stock
or other ownership interests having ordinary voting power (other than stock or
other ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the directors of such corporation, or other
persons performing similar functions for such entity, are owned, directly or
indirectly, by any Company.
 
Surplus Cash shall mean for any fiscal year of the Companies, the excess of
Companies’ EBITDA for such fiscal year minus the Companies’ Fixed Charges for
such fiscal year.
 
SunTrust shall have the meaning given such term in opening paragraph of this
Financing Agreement.
 
Swap Agreement shall mean any agreement with respect to any swap, forward,
future or derivative transaction or option or similar agreement involving, or
settled by reference to, one or more rates, currencies, commodities, equity or
debt instruments or securities, or economic, financial or pricing indices or
measures of economic, financial or pricing risk or value or any similar
transaction or any combination of these transactions, provided that no phantom
stock or similar plan providing for payments only on account of services
provided by current or former directors, officers, employers or consultants of
Companies shall be a Swap Agreement.
 
Swap Obligations shall mean as to any Company any and all obligations of such
Company, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor) under (a) any and all Swap
Agreements and (b) any and all cancellations, buybacks, reversals, terminations,
or assignments of any Swap Agreement transaction.
 
Swingline Commitment shall mean the commitment of the Swingline Lender to make
Swingline Loans to the Companies pursuant to Paragraph 3.1(b) of Section 3 of
this Financing Agreement, not to exceed ten percent (10%) of the Revolving Line
of Credit in effect from time to time.
 
Swingline Lender shall mean CIT and its successors and assigns.
 
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Swingline Loan shall have the meaning given to such term in Paragraph 3.1(b) of
Section 3 hereof
 
Taxes shall mean all federal, state, municipal and other governmental taxes,
levies, charges, claims and assessments which are or may be due by the Companies
with respect to their business, operations, Collateral or otherwise.
 
Term Loans shall mean, collectively, the Initial Term Loan and the Acquisition
Term Loans, and the Three D Real Property Term Loan.
 
Termination Date shall mean the date on which this Financing Agreement is
terminated, whether by notice of termination given by one of the parties hereto
or by the provisions of this Financing Agreement. Notice of termination by any
one Company shall be deemed to be notice by the Companies for purposes hereof.
 
Termination Fee shall: (a) mean the fee that the Lenders are entitled to charge
the Companies in the event of termination of the Revolving Line of Credit or
this Financing Agreement; and (b) be determined by multiplying the Revolving
Line of Credit, by (i) one-half of one percent (0.50%) if the Termination Date
occurs on or before the first anniversary of the Closing Date, and
(ii) one-quarter of one percent (0.25%) if the Termination Date occurs after the
first anniversary of the Closing Date.
 
Three D shall have the meaning given such term in the opening paragraph of this
Financing Agreement.
 
Three D Real Property Term Loan shall mean the term loan in the principal amount
of $1,000,000 to be made by the Lenders to the Companies on the terms and
conditions set forth in Paragraph 4.4 of Section 4 of this Financing Agreement.
 
Three D Real Property Term Loan Conditions Precedent shall mean each of the
following conditions which conditions must be satisfied in a manner and pursuant
to documentation satisfactory to Agent (or have been waived in writing by Agent)
before the Three D Real Property Term Loan shall be made pursuant to
Paragraph 4.4 of Section 4 of this Financing Agreement:
 
(a) Agent shall have received evidence satisfactory to Agent, in its sole
discretion, that Agent, for the benefit of itself and the Lenders, has a valid
perfected first priority lien against the real property in Anderson County,
Texas and Gregg County, Texas, owned by Three D, free and clear of all defects
and encumbrances other than Permitted Encumbrances; and
 
(b) All of the conditions precedent specified in Section 2 of this Financing
Agreement shall have been and continue to be satisfied (or waived in writing by
Agent).
 
Total Assets shall mean total assets determined in accordance with GAAP, on a
basis consistent with the latest audited financial statements of the Companies.
 
Total Liabilities shall mean total liabilities determined in accordance with
GAAP, on a basis consistent with the latest audited financial statements of the
Companies.
 
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Trade Accounts Receivable shall mean that portion of each of the Companies’
Accounts which arises from the sale of Inventory or the rendition of services in
the ordinary course of the Companies’ business.
 
Trademarks shall mean all of each of the Companies’ present and hereafter
acquired trademarks, trademark registrations, recordings, applications,
tradenames, trade styles, service marks, prints and labels (on which any of the
foregoing may appear), licenses, reissues, renewals, and any other intellectual
property and trademark rights pertaining to any of the foregoing, together with
the goodwill associated therewith, and all cash and non-cash proceeds thereof.
 
UCC shall mean the Uniform Commercial Code as the same may be amended and in
effect from time to time in the state of Texas.
 
Unfinanced Capital Expenditures shall mean Capital Expenditures incurred by the
Companies to the extent not funded with either (i) proceeds of Indebtedness
secured by Purchase Money Liens (other than the Revolving Loans); or
(ii) proceeds of cash infusions of equity.
 
United shall have the meaning given such term in the opening paragraph of this
Financing Agreement.
 
Wachovia shall have the meaning given such term in the opening paragraph of this
Financing Agreement.
 
Working Capital shall mean Current Assets in excess of Current Liabilities.
 
Working Day shall mean any Business Day on which dealings in foreign currencies
and exchanges between banks may be transacted.
 
SECTION 2.  Conditions Precedent
 
2.1  Notwithstanding any other provisions of this Financing Agreement or any of
the other Loan Documents and without affecting in any manner the rights of Agent
or any Lender under the other Sections of this Financing Agreement, it is
understood and agreed that neither Agent nor any Lender will make any initial
loans under Section 3 or Section 4 of this Financing Agreement unless and until
each of the following conditions has been and continues to be satisfied (or has
been waived in writing by Agent), all in form and substance satisfactory to
Agent, in its sole discretion, and that the release by Agent and Lenders of the
existing guaranty and stock pledge agreement executed by Thomas E. Kelly
pursuant to Paragraph 12.15 of Section 12 of this Financing Agreement is
conditioned upon each of the following conditions having been satisfied (or
waived in writing by Agent), all in form and substance satisfactory to Agent, in
its sole discretion:
 
(a)  Lien Searches - The Agent shall have received updated tax, judgment and
Uniform Commercial Code searches satisfactory to the Agent for all locations
presently occupied or used by each of the Companies, United and Parent.
 
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(b)  UCC Filings - The Agent shall have verified to its satisfaction that all
financing statements required to be filed in order to create, in favor of the
Agent, on behalf of the Lenders, a first perfected security interest in (i) the
Collateral, subject only to the Permitted Encumbrances, and all stock in United
and the Companies, are properly filed in each office in each jurisdiction
required in order to create in favor of the Agent a perfected lien on the
Collateral.
 
(c)  Ratifications and Confirmations - Each of the Companies and Parent, shall
have executed and delivered to the Agent, on behalf of the Lenders, (i) this
Financing Agreement and (ii) amendments to, or ratifications and confirmations
of, all Loan Documents previously executed by such parties, each of which shall
be in form and substance satisfactory to the Agent.
 
(d)  Board Resolution - The Agent shall have received a certified copy of the
resolutions of the Board of Directors of each of the Companies and Parent
authorizing (as applicable) the execution, delivery and performance of this
Financing Agreement and the documents described in Paragraph 2.1(c) of this
Section 2, together with a certificate of the Secretary or Assistant Secretary
of each of the Companies and Parent (as the case may be) as to the incumbency
and signature of the officers of each executing such documents.
 
(e)  Officer’s Certificate - The Agent shall have received an executed Officer’s
Certificate of each of the Companies and Parent, in form and substance
satisfactory to the Agent, certifying that (i) the representations and
warranties contained herein are true and correct in all material respects on and
as of the Closing Date; (ii) each of the Companies and Parent is in compliance
with all of the terms and provisions set forth herein; and (iii) no Default or
Event of Default has occurred.
 
(f)  Opinions - Counsel for the Companies and Parent shall have delivered to the
Agent, on behalf of the Lenders, a legal opinion satisfactory to the Agent
opining to such matters incident to the transactions covered by this Financing
Agreement and the other Loan Documents as the Agent and the Lenders may require,
and the Companies and Parent authorize and direct such counsel to deliver such
opinion to the Agent.
 
(g)  Absence of Default - No Default or Event of Default shall have occurred and
no material adverse change shall have occurred in the financial condition,
business, prospects, profits, operations or assets of any of the Companies,
Parent or any other Guarantor.
 
(h)  Legal Restraints/Litigation - As of the Closing Date, there shall be no
(x) litigation, investigation or proceeding (judicial or administrative) pending
or threatened against any of the Companies, Parent or any other Guarantor, or
any of their assets, by any agency, division or department of any county, city,
state or federal government arising out of this Financing Agreement;
(y) injunction, writ or restraining order restraining or prohibiting the
consummation of the financing arrangements contemplated under this Financing
Agreement; or (z) suit, action, investigation or proceeding (judicial or
administrative) pending against any of the Companies, Parent or any other
Guarantor, or any of their assets, which, in the opinion of the Agent, if
adversely determined, could have a material adverse effect on the business,
operation, assets, financial condition or Collateral of the Companies, Parent or
any other Guarantor.
 
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(i)  Sterling Intercreditor Agreement - Companies shall have delivered the
Sterling Intercreditor Agreement to Agent, duly executed by Sterling.
 
(j)  Additional Documents - Each of the Companies and Parent (as applicable)
shall have executed and delivered to the Agent, on behalf of the Lenders, or
arranged for the execution and delivery to the Agent, all other documents and
agreement deemed necessary by the Agent to consummate the transactions
contemplated by this Financing Agreement.
 
(k)  Existing Credit Facility with Citibank Texas. (i) Three D’s existing credit
facility with Citibank Texas shall be terminated, (ii) all loans and obligations
of the Companies and the Guarantors with respect thereto shall be paid or
satisfied in full utilizing the proceeds of the Initial Term Loan to be made
under this Financing Agreement, (iii) all liens and security interests in favor
of Citibank Texas in connection therewith shall be terminated and/or released
upon such payment, and (iv) all documentation with respect thereto shall be
terminated including, without limitation, the First American Term Loan
Documentation and the First American Intercreditor Agreement (as each such term
is defined in the Existing Financing Agreement).
 
(l)  [Reserved]
 
(m)  Schedules. The Companies shall have supplemented or restated all Schedules
to this Financing Agreement to the extent necessary to make such Schedules true
and correct in all material respects as of the Closing Date.
 
(n)  Payoff of Existing Indebtedness of United to William H. Clark, Jr. and
Martin T. Clark. (i) All indebtedness of the Companies and the Guarantors as to
William H. Clark, Jr. and Martin T. Clark shall be paid or satisfied in full
utilizing the proceeds of the Initial Term Loan to be made under this Financing
Agreement, and (ii) all liens and security interests in favor of William H.
Clark, Jr. and/or Martin T. Clark in connection therewith shall be terminated
and released upon such payment.
 
(o)  Mortgages. The Companies shall have executed and delivered to the Agent (or
to an agent of the Agent or an agent of the Title Insurance Company) executed
mortgages and deeds of trust in form and substance satisfactory to the Agent
covering the Real Estate, and the Agent shall have received evidence that all
charges for mortgage taxes and recording fees, if any, shall be paid upon the
recording of each mortgage or deed of trust.
 
(p)  Title Insurance Policies. The Agent shall have received, in respect of each
mortgage and deed of trust described in Paragraph 2.1(o) above (but not
including, however, any deed of trust or mortgage if pursuant to the Sterling
Intercreditor Agreement, Sterling has a lien in the Real Estate covered thereby
superior to the lien therein of Agent), a mortgagee’s marked-up unconditional
commitment for title insurance from a title insurance company reasonably
satisfactory to the Agent (the “Title Insurance Company”). Each such commitment
shall obligate the Title Insurance Company to issue to the Agent, for the
benefit of the Lenders, a title insurance policy: (i) in an amount not less than
the appraised fair market value of the Real Estate covered thereby; (ii) that
insures that the mortgage or deed of trust insured thereby creates a valid first
priority lien on the Real Estate covered thereby, free and clear of all defects
and encumbrances except for Permitted Encumbrances; (iii) that names the Agent,
for the benefit of the Lenders, as the insured thereunder; and (iv) that
contains such endorsements and effective coverage as the Agent may reasonably
require, including, without limitation, a revolving line of credit endorsement.
The Agent also shall have received evidence that all premiums in respect of the
policies to be issued have or will be paid on the Closing Date.
 
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(q)  Surveys. The Agent and the Title Insurance Company shall have received such
surveys of the Real Estate and all improvements thereon as shall be required by
Agent, each of which shall be in form and substance reasonably satisfactory to
the Agent, prepared by an independent licensed land surveyor satisfactory to the
Agent and certified to the Agent and the Title Company.
 
Upon the execution of this Financing Agreement and the initial disbursement of
loans hereunder, all of the above Conditions Precedent shall have been deemed
satisfied except as otherwise set forth hereinabove or as the Companies, the
Agent and the Lenders shall otherwise agree in writing.
 
2.2  Conditions to Each Extension of Credit
 
Except to the extent expressly set forth in this Financing Agreement, the
agreement of the Agent and the Lenders to make any extension of credit requested
to be made by it to any of the Companies on any date (including without
limitation, the initial extension of credit) is subject to the satisfaction of
the following conditions precedent:
 
(a)  Representations and Warranties - Each of the representations and warranties
made by each of the Companies in or pursuant to this Financing Agreement shall
be true and correct in all material respects on and as of such date as if made
on and as of such date.
 
(b)  No Default - No Default or Event of Default shall have occurred and be
continuing on such date or after giving effect to the extension of credit
requested to be made on such date.
 
(c)  Borrowing Base - Except as may be otherwise agreed to from time to time by
the Agent and the Companies in writing, after giving effect to the extension of
credit requested to be made by any of the Companies on such date, the aggregate
outstanding balance of the Revolving Loans and outstanding Letters of Credit
owing by each of the Companies will not exceed the lesser of (i) the Revolving
Line of Credit or (ii) the Borrowing Base.
 
Each borrowing by a Company hereunder shall constitute a representation and
warranty by the Companies as of the date of such loan or advance that each of
the representations, warranties and covenants contained in the Financing
Agreement have been satisfied and are true and correct, except as the Companies,
the Agent and the Lenders shall otherwise agree herein or in a separate writing.
 
SECTION 3.  Loans and Advances.
 
3.1  (a) On the Closing Date, the “Revolving Loans” (as defined in the Existing
Financing Agreement) held by Existing Lenders under the Existing Financing
Agreement shall automatically, and without any action on the part of any Person,
be deemed to be Revolving Loans under this Financing Agreement, and the
Additional Lenders shall by assignments from Existing Lenders (which assignments
shall be deemed to occur automatically, and without the requirement for
additional documentation, on the Closing Date) acquire a portion of the
Revolving Loans of the Existing Lenders so designated in such amounts and the
Lenders shall, through Agent, make such other adjustments among themselves as
shall be necessary so that after giving effect to such assignments and
adjustments, the Lenders shall hold Revolving Loans in an amount not greater
than their respective Pro Rata Percentages. Subject to the terms and conditions
of this Financing Agreement, the Agent and the Lenders, pro rata in accordance
with their respective Pro Rata Percentages, severally (and not jointly) agree to
make loans and advances to each of the Companies on a revolving basis (i.e.
subject to the limitations set forth herein, each of the Companies may borrow,
repay and re-borrow Revolving Loans). Such requests for loans and advances shall
be in amounts not to exceed the lesser of (a) the Availability, or (b) the
Revolving Line of Credit. All requests for loans and advances must be received
by an officer of the Agent no later than (i) 1:00 p.m., New York time, of the
Business Day on which any such Base Rate Loans and advances are required or
(ii) three Business Days prior to any requested LIBOR Loan. Should the Agent
(within the limits set forth in Paragraph 14.10 of Section 14 hereof) or the
Lenders for any reason honor requests for Overadvances, any such Overadvances
shall be made in the Agent’s or the Lenders’ (as applicable) sole discretion and
subject to any additional terms the Agent or the Lenders deem necessary. The
Agent, on behalf of the Lenders, shall disburse all loans and advances to the
Companies and shall handle all collections of Collateral and repayment of all
Obligations. It is understood that for purposes of advances to the Companies and
for purposes of this Paragraph 3.1(a) of Section 3, the Agent will be using the
funds of the Agent, and pending settlement, all interest accruing on such
advances shall be payable to the Agent.
 
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(b)  (i) The Agent and the Lenders agree that in order to facilitate the
administration of the financing arrangement contemplated by this Financing
Agreement, promptly after United or the other Company requests from the Agent a
loan or advance hereunder, the Swingline Lender may elect to have the terms of
this Paragraph 3.1(b) of Section 3 apply to such borrowing request by advancing
to such Company the amount of such requested loan or advance on the applicable
borrowing date (each such loan or advance made by the Swingline Lender shall be
referred to herein as a “Swingline Loan”), with settlement among the Lenders as
to the Swingline Loans to take place on a periodic basis as set forth in
Paragraph 3.1(b)(iv) of this Section 3 below. Each Swingline Loan shall be
subject to all the terms and conditions applicable to other Revolving Loans
funded by the Lenders, except that (i) prior to any settlement thereof among the
Lenders, all payments thereon shall be payable to the Swingline Lender solely
for its own account and (ii) the requirement that the Companies request a LIBOR
Loan three Business Days prior to the funding thereof shall not apply. The
aggregate amount of Swingline Loans outstanding at any time shall not exceed ten
percent (10%) of the Revolving Line of Credit in effect from time to time. The
Swingline Lender shall not make any Swingline Loan if the requested Swingline
Loan would exceed the Availability immediately before giving effect to such
Swingline Loan (i.e. no Overadvances permitted by Paragraph 14.10 of Section 14
hereof shall be made as Swingline Loans). However, Swingline Loans may be made
even if a Default or Event of Default exists so long as the Required Lenders
have not terminated the Commitments pursuant to Paragraph 10.2 of Section 10
hereof.
 
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(ii)  Upon the making of a Swingline Loan (whether before or after the
occurrence of a Default or Event of Default and regardless of whether a
Settlement has been requested with respect to such Swingline Loan), each Lender
shall be deemed, without further action by any party hereto, to have
unconditionally and irrevocably purchased from the Swingline Lender, without
recourse or warranty, an undivided interest and participation in such Swingline
Loan equal to such Lender’s Pro Rata Percentage of such Swingline Loan. The
Swingline Lender may at any time upon notice to the Agent, require that the
Lenders immediately fund their respective participations in the Swingline Loans
on any Settlement Date with respect to Swingline Loans. From and after the date,
if any, on which any Lender has funded its participation in any Swingline Loan
purchased hereunder, the Agent shall promptly distribute to such Lender, such
Lender’s Pro Rata Percentage of all payments of principal and interest, and all
proceeds of Collateral, received by the Agent after such date in respect of such
Swingline Loan.
 
(iii)  Unless the Agent or the Swingline Lender shall have been notified in
writing by any Lender that prior to any advance to the Companies that such
Lender will not make the amount which would constitute its Pro Rata Percentage
of such borrowing on such date available to the Agent on the next Settlement
Date, the Agent and the Swingline Lender may assume that such Lender shall make
such amount available to the Agent on the next Settlement Date, and in reliance
upon such assumption, the Agent or the Swingline Lender, as the case may be, may
make available to the Companies a corresponding amount. A certificate of the
Agent submitted to any Lender with respect to any amount owing under this
subsection shall be conclusive, absent manifest error. If such Lender’s Pro Rata
Percentage of such borrowing is not in fact made available to the Agent by such
Lender on the Settlement Date, the Agent shall be entitled to recover from the
Companies, within three (3) Business Days after written demand, such Lender’s
Pro Rata Percentage of such borrowing, together with interest thereon (for the
account of the Agent) at the rate per annum applicable to such borrowing,
without prejudice to any rights which the Agent may have against such Lender
under Paragraph 13.3 of Section 13 hereof. Nothing contained herein shall be
deemed to obligate the Agent or the Swingline Lender to make available to the
Companies the full amount of a requested advance when the Agent or the Swingline
Lender has any notice (written or otherwise) that any of the Lenders will not
advance its Pro Rata Percentage thereof.
 
(iv)  On each Settlement Date with respect to loans other than Swingline Loans,
the Agent and the Lenders shall each remit to the other, in immediately
available funds, all amounts necessary so as to ensure that, as of the
Settlement Date, the Lenders shall have advanced their respective Pro Rata
Percentages of all outstanding loans. On each Settlement Date with respect to
Swingline Loans, each Lender shall remit to the Agent, for the account of the
Companies, such Lender’s Pro Rata Percentage of the Swingline Loans outstanding
as of such date, and the Agent shall, in turn, remit such funds to the Swingline
Lender for application against the Swingline Loans then outstanding. All
payments made by the Lenders on any Settlement Date with respect to Swingline
Loans shall constitute Revolving Loans to the Companies.
 
(v)  Each Lender’s obligation to make the Revolving Loans referred to in
Paragraph 3.1(a) of Section 3 above and to make the settlements pursuant to this
Paragraph 3.1(b) of Section 3 shall be absolute and unconditional and shall not
be affected by any circumstance, including without limitation (v) any set-off,
counterclaim, recoupment, defense or other right which any such Lender or the
Companies may have against the Agent, the other Companies, any other Lender or
any other person, (w) the occurrence or continuance of a Default or an Event of
Default, (x) any adverse change in the condition (financial or otherwise) of the
Companies, or any of them, (y) any breach of this Financing Agreement or any
other Loan Document by the Companies (or any of them) or any other Lender or
(z) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
 
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(vi)  Companies agree to execute and deliver to each Lender a Promissory Note in
the form of Exhibit D attached hereto to evidence the Pro Rata Percentage of the
Revolving Loans extended to the Companies by such Lender.
 
(vii)  Companies agree to execute and deliver to the Swingline Lender a
Promissory Note in the form of Exhibit E attached hereto to evidence the
Swingline Loans made by Swingline Lender to the Companies.
 
3.2  On or before the 10th day of each month, the Companies agree to furnish
Agent with a borrowing base certificate in form and substance satisfactory to
Agent, certified by the treasurer or chief financial officer of each Company (or
any other authorized officer satisfactory to Agent), together with such
confirmatory schedules of Trade Accounts Receivable and Inventory and such other
information regarding the other components of the Borrowing Base as Agent may
request (all in form and substance satisfactory to Agent); provided, however, if
after the Closing Date the Companies’ Availability is less than $5,000,000 for
five (5) consecutive Business Days, the borrowing base certificate and other
materials described above shall be furnished to Agent at least once each week
until such time as Companies’ Availability has been equal to or greater than
$5,000,000 for twenty (20) consecutive Business Days whereupon the submission of
such a borrowing base certificate and other such materials shall again occur on
a monthly basis; and further provided, however, that if a Default or an Event of
Default has occurred and is continuing, Companies shall submit such borrowing
base certificates and such other materials as frequently as shall be reasonably
requested by Agent. In addition and in furtherance of the continuing assignment
and security interest in each of the Companies’ Accounts and Inventory, each of
the Companies will execute and deliver to Agent, in form and substance
reasonably satisfactory to Agent, such other appropriate reports designating,
identifying and describing the Accounts and Inventory as the Agent may
reasonably request. In addition, upon the Agent’s request, each of the Companies
shall provide the Agent with copies of agreements with, or purchase orders from,
such Companies’ customers, and copies of invoices to customers, proof of
shipment or delivery, access to their computers, electronic media and software
programs associated therewith (including any electronic records, contracts and
signatures) and such other documentation and information relating to said
Accounts and other Collateral as the Agent may reasonably require. Failure to
provide the Agent with any of the foregoing shall in no way affect, diminish,
modify or otherwise limit the security interests granted herein. Each of the
Companies hereby authorizes the Agent to regard the Companies’ printed name or
rubber stamp signature on assignment schedules or invoices as the equivalent of
a manual signature by one of the Companies’ authorized officers or agents.
 
3.3  Each of the Companies hereby represents and warrants that: each Trade
Account Receivable is based on an actual and bona fide sale and delivery of
Inventory or rendition of services to customers, made by the Companies in the
ordinary course of their business; the Inventory being sold, and the Trade
Accounts Receivable created, are the exclusive property of the Companies and are
not and shall not be subject to any lien, consignment arrangement, encumbrance,
security interest or financing statement whatsoever, other than the Permitted
Encumbrances; the invoices evidencing such Trade Accounts Receivable are in the
name of the Companies; and the Companies’ customers have accepted the Inventory
or services, owe and are obligated to pay the full amounts stated in the
invoices (or stated in the sale information maintained by the Companies as to
Eligible Unbilled Card-Lock Customer Accounts) according to their terms, without
dispute, offset, defense, counterclaim or contra, except for disputes and other
matters arising in the ordinary course of business with respect to which the
Companies have complied with the notification requirements of Paragraph 3.5 of
this Section 3. The Companies confirm to the Agent and the Lenders that any and
all Taxes or fees relating to their business, their sales, the Accounts or
Inventory relating thereto, are their sole responsibility and that same will be
paid by the Companies when due, subject to Paragraph 7.6 of Section 7 hereof,
and that none of said Taxes or fees represent a lien on or claim against the
Accounts. The Companies hereby further represent and warrant that they shall not
acquire any Inventory on a consignment basis, nor co-mingle their Inventory with
any of their customers or any other Person, including pursuant to any bill and
hold sale or otherwise, and that their Inventory is marketable to their
customers in the ordinary course of business of the Companies, except as they
may otherwise report in writing to the Agent pursuant to Paragraph 3.5 of
Section 3 hereof from time to time. Each of the Companies also warrants and
represents that they are duly and validly existing corporations and are
qualified in all states where the failure to so qualify would have an adverse
effect on their business or their ability to enforce collection of Accounts due
from customers residing in that state. The Companies agree to maintain such
books and records regarding Accounts and Inventory as the Agent may reasonably
require and agree that the books and records of the Companies will reflect the
Agent’s security interest, for the benefit of the Lenders, in the Accounts and
Inventory. All of the books and records of the Companies will be available to
the Agent at normal business hours, including any records handled or maintained
for the Companies or any one of them by any other company or entity.
 
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3.4  (a) Until the Agent, on behalf of the Lenders, has advised the Companies to
the contrary after the occurrence and during the continuance of an Event of
Default, the Companies, at their expense, will enforce, collect and receive all
amounts owing on their respective Accounts in the ordinary course of their
business and any proceeds they so receive shall be subject to the terms hereof,
and held on behalf of and in trust for the Agent, for the benefit of the
Lenders. Such privilege shall terminate at the election of the Agent, upon the
occurrence of an Event of Default. Any checks, cash, credit card sales and
receipts, notes or other instruments or property received by a Company with
respect to any Collateral, including Accounts, shall be held by such Company in
trust for the Agent, for the benefit of the Lenders, separate from such
Company’s own or the Companies’ property and funds, and promptly turned over to
the Agent with proper assignments or endorsements by deposit to Depository
Accounts subject to Blocked Account Agreements described in Paragraph 3.4(b)
below. Each of the Companies shall: (i) indicate on all of their invoices that
funds should be delivered to and deposited in such a Depository Account;
(ii) direct all of their account debtors to deposit any and all proceeds of
Collateral into such Depository Accounts; provided, however, as an accommodation
to Companies, until such time as the Agent notifies Companies that this practice
is no longer acceptable, customers of the Companies (to the extent such
customers are specified in writing to the Agent) who presently initiate net ACH
debits and credits may continue to be directed to direct these transactions
through the Companies’ operating bank accounts, and the Companies hereby agree
and acknowledge that the gross amount of each account payable by each such
customer represents Collateral and proceeds of Collateral and the
above-described practice of initiation of net ACH debits and credits shall in no
way be deemed to limit or affect the validity of the Agent’s security interest
in such Collateral and the proceeds of such Collateral; (iii) irrevocably
authorize and direct any banks which maintain the Companies’ initial receipt of
cash, checks and other items to promptly wire transfer all available funds to a
Depository Account; and (iv) advise all such banks of the Agent’s security
interest in such funds. The Companies shall provide the Agent with prior written
notice of any and all deposit accounts opened or to be opened subsequent to the
Closing Date, and promptly after the opening of any such account, shall cause
the bank at which such deposit account is located to enter into a Blocked
Account Agreement described in Paragraph 3.4(b) below. All amounts received by
the Agent in payment of Accounts will be credited to the Revolving Loan Account
when the Agent is advised by its bank of its receipt of “collected funds” at the
Agent’s bank account in New York, New York on the Business Day of such advice if
advised no later than 1:00 p.m. EST or on the next succeeding Business Day if so
advised after 1:00 PM EST. No checks, drafts or other instrument received by the
Agent shall constitute final payment to the Agent unless and until such
instruments have actually been collected.
 
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(b)  The Companies shall establish and maintain, in their name and at their
expense, Depository Accounts with such banks as are acceptable to the Agent (the
“Blocked Accounts”) into which each of the Companies shall promptly cause to be
deposited: (i) all proceeds of Collateral received by any of the Companies,
including all amounts payable to the Companies from credit card issuers and
credit card processors, and (ii) all amounts on deposit in deposit accounts used
by the Companies at each of their locations, all as further provided in
Paragraph 3.4(a) above. Unless agreed to by the Required Lenders in writing, the
banks at which the Blocked Accounts are established shall enter into an
agreement, in form and substance satisfactory to the Agent (the “Blocked Account
Agreements”), providing that all cash, checks and items received or deposited in
the Blocked Accounts are the property of the Agent, that the depository bank has
no lien upon, or right of set off against, the Blocked Accounts and any cash,
checks, items, wires or other funds from time to time on deposit therein, except
as otherwise provided in the Blocked Account Agreements, and that automatically,
on each Business Day (except as otherwise provided in the Blocked Account
Agreements), the depository bank will wire, or otherwise transfer, in
immediately available funds, all funds received or deposited into the Blocked
Accounts to such bank account as the Agent may from time to time designate for
such purpose. The Companies hereby confirm and agree that all amounts deposited
in such Blocked Accounts and any other funds received and collected by the
Agent, whether as proceeds of Inventory or other Collateral or otherwise, are
and shall be pledged to the Agent, for the benefit of the Lenders.
 
3.5  The Companies agree to notify the Agent promptly of any matters affecting
the value, enforceability or collectibility of any Account and of all customer
disputes, offsets, defenses, counterclaims, returns, rejections and all
reclaimed or repossessed merchandise or goods, and of any adverse effect in the
value of their Inventory. The Companies agree to issue credit memoranda promptly
(with duplicates to the Agent upon request after the occurrence and during the
continuance of an Event of Default) upon accepting returns or granting
allowances. Upon the occurrence and during the continuance of an Event of
Default (which is not waived in writing by the Agent or cured to Agent’s or
Required Lenders’ satisfaction) following notice from the Agent, the Companies
agree that all returned, reclaimed or repossessed merchandise or goods shall be
set aside by the Companies, marked with the Agent’s name (as secured party) and
held by the Companies for the Agent’s account.
 
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3.6  (a) Subject to (b) below, the Agent shall maintain a Revolving Loan Account
on its books in which each of the Companies will be charged with all loans and
advances made by the Agent and the Lenders to such Company to it or for its
account, and with any other Obligations, including any and all costs, expenses
and reasonable attorney’s fees which the Agent and the Lenders may incur in
connection with the exercise by or for the Agent and the Lenders of any of the
rights or powers herein conferred upon the Agent and the Lenders, or in the
prosecution or defense of any action or proceeding to enforce or protect any
rights of the Agent and the Lenders in connection with this Financing Agreement,
the other Loan Documents or the Collateral assigned hereunder, or any
Obligations owing by such Company. The Companies will be credited with all
amounts received by the Agent from the Companies or from others for the
Companies’ account, including, as above set forth, all amounts received by the
Agent in payment of Accounts, and such amounts will be applied to payment of the
Obligations as set forth herein. In no event shall prior recourse to any
Accounts or other security granted to or by the Companies be a prerequisite to
the Agent’s and the Lenders’ rights to demand payment of any Obligation.
Further, it is understood that the Agent and the Lenders shall have no
obligation whatsoever to perform in any respect any of the Companies’ contracts
or obligations relating to the Accounts.
 
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(b)  In order to utilize the collective borrowing powers of the Companies
(collectively the “Collective Borrowers”) in the most efficient and economical
manner, and in order to facilitate the handling of the accounts of the
Collective Borrowers on the Agent’s books, the Collective Borrowers have
requested, and the Agent and the Lenders have agreed to handle accounts of the
Collective Borrowers on the Agent’s books on a combined basis, all in accordance
with the following provisions: (i) in lieu of maintaining separate accounts on
the Agent’s books in the name of each of the Collective Borrowers, the Agent
shall maintain one account under the name: “United Fuel & Energy Corporation”
(herein the “Collective Account”). Confirmatory assignments of Accounts will
continue to be made to the Agent by each of the Collective Borrowers. Loans and
advances made by the Agent and the Lenders to any of the Collective Borrowers
will be charged to the Collective Account indicated above, along with any
charges and expenses under this Financing Agreement. The Collective Account will
be credited with all amounts received by the Agent from any of the Collective
Borrowers or from others for their account including all amounts received by the
Agent in payment of Accounts assigned to the Agent as provided in this Financing
Agreement; (ii) each month the Agent will render to the Collective Borrowers one
extract of the combined Collective Account, which shall be deemed to be an
account stated as to each of the Collective Borrowers and which will be deemed
correct and accepted by all of the Collective Borrowers unless the Agent
receives a written statement of exceptions from them within thirty (30) days
after such extract has been rendered by the Agent; it is expressly understood
and agreed by each of the Collective Borrowers that the Agent and the Lenders
shall have no obligation to account separately to any of the Collective
Borrowers; (iii) requests for loans and advances may be made by United as agent
for the Collective Borrowers and the Agent, on behalf of the Lenders, is hereby
authorized and directed to accept, honor and rely on such instructions and
requests, subject to the limitation and provisions set forth in this Financing
Agreement. It is expressly understood and agreed by each of the Collective
Borrowers that the Agent and the Lenders shall have no responsibility to inquire
into the correctness of the apportionment, allocation, or disposition of (x) any
loans and advances made to any of the Collective Borrowers or (y) any of the
Agent’s and the Lenders’ expenses and charges relating thereto, and all loans
and advances are made for the Collective Account; (iv) the Collective Borrowers
jointly and severally unconditionally guarantee to the Agent and the Lenders the
prompt payment in full of (A) all loans and advances made and to be made by the
Agent and the Lenders to any of them under this Financing Agreement, as well as
(B) all other Obligations of the Collective Borrowers to the Agent and the
Lenders and hereby expressly confirm in all respects the Guaranties executed by
each of the Collective Borrowers in the Agent’s favor as more fully set forth
therein; (v) all Accounts assigned to the Agent by any of the Collective
Borrowers and any other collateral security now or hereafter given to the Agent
by any of the Collective Borrowers (be it Accounts or otherwise), shall secure
all loans and advances made by the Agent and the Lenders to any of the
Collective Borrowers, and shall be deemed to be pledged to the Agent, for the
benefit of the Lenders, as security for any and all other Obligations of the
Collective Borrowers to the Agent and the Lenders as set forth under this
Financing Agreement, the Guaranties, or any other agreements between the Agent
and the Lenders and any of the Collective Borrowers; (vi) it is understood that
the handling of the accounts of the Collective Borrowers in a combined fashion,
as more fully set forth herein, is done solely as an accommodation to the
Collective Borrowers and at their request, and that the Agent and the Lenders
shall incur no liability to the Collective Borrowers as a result hereof, and to
induce the Agent and the Lenders to do so, and in consideration thereof, each of
the Collective Borrowers hereby agrees to indemnify the Agent and the Lenders
and hold the Agent and the Lenders harmless against any and all liability,
expense, loss or claim of damage or injury, made against the Agent and the
Lenders (or any of them) by any of the Collective Borrowers or by any third
party whosoever, arising from or incurred solely by reason of (1) the method of
handling the accounts of the Collective Borrowers as herein provided, (2) the
Agent and the Lenders relying on any instructions of any of the Collective
Borrowers, or (3) any other action taken by the Agent and the Lenders in
accordance with this subparagraph (b) of Paragraph 3.6 of Section 3 hereof;
provided, however, that the Collective Borrowers shall have no obligation to
indemnify the Agent or any Lender for such liabilities or damages to the extent
attributable to the gross negligence or willful misconduct of the Agent or such
Lender; and (vii) the foregoing request was made because the Collective
Borrowers are engaged in an integrated operation that requires financing on a
basis permitting the availability of credit from time to time to each of the
Collective Borrowers as required for the continued successful operation of each
of the Collective Borrowers. Each of the Collective Borrowers expects to derive
benefit, directly or indirectly, from such availability since the successful
operation of each of the Collective Borrowers is dependent on the continued
successful performance of the functions of the integrated group. In addition,
the Companies have informed the Agent and the Lenders that because all of the
Collective Borrowers continue to be engaged in an integrated operation that
requires financing on an integrated basis and because each Collective Borrower
expects to benefit from the continued successful performance of such integrated
operations and in order to best utilize the collective borrowing powers of each
Collective Borrower in the most effective and cost efficient manner and to avoid
adverse effects on the operating efficiencies of each Collective Borrower and
the existing back-office practices of the Collective Borrowers, each Collective
Borrower has requested that all Revolving Loans and advances be disbursed solely
upon the request of United.
 
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3.7  After the end of each month, the Agent shall promptly send the Companies a
statement showing the accounting for the charges, loans, advances and other
transactions occurring between the Agent and the Lenders and each of the
Companies during that month. The monthly statements shall be deemed correct and
binding upon each of the Companies and shall constitute an account stated
between the Companies, on one hand, and the Agent and the Lenders, on the other
hand, unless the Agent receives a written statement of the exceptions within
thirty (30) days of the date of the monthly statement.
 
3.8  In the event that any requested advance exceeds Availability or that
(a) the sum of (i) the outstanding balance of Revolving Loans and
(ii) outstanding balance of Letters of Credit exceeds (b)(x) the Borrowing Base
or (y) the Revolving Line of Credit, any such nonconsensual Overadvance shall be
due and payable to the Agent, for the benefit of the Lenders, immediately upon
the Agent’s or the Required Lenders’ demand therefor.
 
3.9  (a) Unless this Financing Agreement expressly provides otherwise, so long
as no Event of Default shall have occurred and be continuing, the Agent agrees
to apply (i) all proceeds of Trade Accounts Receivable to the Revolving Loan
Account (first to accrued interest and then to unpaid principal), (ii) proceeds
of rolling stock Eligible Equipment described in the definition of “Eligible
Equipment Based Amount” to the Revolving Loan Account and the amount applied
shall constitute a permanent reduction in the Eligible Equipment Based Amount to
the extent the amount is applied to the outstanding principal amount of the
Revolving Loans, (iii) all proceeds of all other Collateral to the last maturing
installments of principal of the Initial Term Loan until fully repaid, and then
to the last maturing installments of principal of the Three D Real Property Term
Loan until fully repaid, and then to the last maturing installments of principal
of the Acquisition Term Loans (in order of first to mature) until fully repaid,
and (iv) any other payment received by the Agent with respect to the Obligations
in such order and manner as the Agent shall elect in the exercise of its
business judgment. To the extent the Agent applies proceeds of Collateral to the
principal amount of the Revolving Loans, such proceeds shall be applied first to
outstanding Revolving Loans other than Swingline Loans, pro rata according to
each Lender’s Pro Rata Percentage, and then to outstanding Swingline Loans.
 
(b)  Unless this Financing Agreement expressly provides otherwise, so long as no
Event of Default shall have occurred and be continuing, the Agent agrees to
apply all proceeds of Collateral and other payments received which are described
in Paragraph 3.9(a) of Section 3.9 to Base Rate Loans until there are no Base
Rate Loans outstanding, and then to LIBOR Loans; provided that in the event the
aggregate outstanding principal amount of Revolving Loans that are LIBOR Loans
exceeds any applicable limit set forth herein, the Agent may apply all proceeds
of Collateral received by the Agent to the payment of the Obligations in such
manner and in such order as the Agent may elect in the exercise of its business
judgment; and provided further that in no event shall the Agent have any
obligation to apply (i) proceeds of Trade Accounts Receivable to Term Loans that
are Base Rate Loans until all Revolving Loans are fully paid and satisfied,
(ii) proceeds of rolling stock Eligible Equipment described in the definition of
“Eligible Equipment Based Amount” to Term Loans that are Base Rate Loans until
all Revolving Loans are fully paid and satisfied, and (iii) proceeds of other
Collateral to Revolving Loans that are Base Rate Loans until the Term Loans are
fully paid and satisfied. Subject to the terms of the preceding sentence, so
long as no Event of Default shall have occurred and be continuing, if the Agent
receives proceeds of Collateral or other payments that exceed the outstanding
principal amount of Revolving Loans that are Base Rate Loans, the Companies may
request, in writing, that the Agent not apply such excess proceeds to
outstanding Revolving Loans that are LIBOR Loans, in which case the Agent shall
remit such excess to the Companies. If as a result of the application of the
provisions of this Paragraph 3.9(b), any proceeds of Collateral are applied to
loans that are LIBOR Loans, such application shall be treated as a prepayment of
such LIBOR Loans and the Lenders shall be entitled to the costs and fees
provided for in Paragraph 8.19 of Section 8 hereof.
 
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(c)  If an Event of Default shall have occurred and be continuing, the Agent
agrees to apply all proceeds of Collateral and all other payments received by
the Agent to the payment of the Obligations in the manner and order set forth in
Paragraph 10.4 of Section 10 hereof. If as a result of the application of the
provisions of this Paragraph 3.9(c), any proceeds or payments are applied to
loans that are LIBOR Loans, such application shall be treated as a prepayment of
such LIBOR Loans and the Lenders shall be entitled to the costs and fees
provided for in Paragraph 8.19 of Section 8 hereof.
 
3.10  Unless an Event of Default has occurred and is continuing (in which case
the provisions of Paragraph 10.4 of Section 10 hereof shall control), the
parties hereto agree that any amount paid to the Agent, for the benefit of the
Lenders, pursuant to the Eligible Life Insurance Policy (whether as a death
benefit, as cash for surrender of the policy or otherwise), shall be applied to
the Obligations in such order as the Agent and the Required Lenders shall
determine, in their sole discretion, and shall serve to permanently decrease by
such amount the Eligible Cash Surrender Value of Eligible Life Insurance Policy.
 
3.11  Unless an Event of Default has occurred and is continuing (in which case
the provisions of Paragraph 10.4 of Section 10 hereof shall control), the
parties hereto agree that in the event the Propane Division or any other
division of a Company is sold or otherwise transferred or disposed of, the
proceeds of such sale, transfer or disposition shall be applied as follows:
 
(a)  first, to the payment of all costs and expenses of the Agent and its agent
or agents (including, without limitation, the reasonable fees and expenses of
legal counsel and other agents) incurred in connection with the collection of
such proceeds or the protection of the rights and interests of the Agent and the
Lenders therein;
 
(b)  second, to the payment of the Revolving Loans (first to accrued interest
thereon and then to the outstanding principal amount thereof) in an amount equal
to the Borrowing Base availability generated by the assets being sold in
connection with such sale, transfer or disposition;
 
(c)  third, to the extent that the Eligible Equipment Based Amount is in excess
of fifty percent (50%) of the net orderly liquidation value (as determined in a
manner satisfactory to the Agent and the Lenders, in their sole discretion) of
the rolling stock Eligible Equipment described in the definition of “Eligible
Equipment Based Amount,” to the payment of the Revolving Loans in the amount of
such excess as a permanent reduction in the Eligible Equipment Based Amount;
 
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(d)  fourth, to the last maturing installments of principal of the Initial Term
Loan until fully repaid, and then to the last maturing installments of principal
of the Three D Real Property Term Loan until fully repaid, and then to the last
maturing installments of principal of the Acquisition Term Loans (in order of
first to mature) until fully repaid; and
 
(e)  fifth, to the other Obligations in such order as shall be determined by the
Agent in its sole discretion.
 
The parties hereto further agree and acknowledge that the preceding provisions
of this Paragraph 3.11 of Section 3 shall in no event be deemed to constitute
permission or consent by the Agent and the Lenders to any such sale, transfer or
disposition; and the other provisions of this Financing Agreement shall control
as to whether any such sale, transfer or disposition is permitted under this
Financing Agreement. To the extent that the Agent applies proceeds of any such
sale, transfer or disposition to the principal amount Revolving Loans, such
proceeds shall be applied first to outstanding Revolving Loans other than
Swingline Loans, pro rata according to each Lender’s Pro Rata Percentage, and
then to outstanding Swingline Loans.
 
3.12  Unless an Event of Default has occurred and is continuing (in which case
the provisions of Paragraph 10.4 of Section 10 hereof shall control), the
parties hereto agree that in the event any Real Estate or card-lock Equipment in
which the Agent, for the benefit of the Lenders, has a lien is hereafter sold,
transferred or disposed of, the net proceeds from such sale, transfer or
disposition shall be applied as follows:
 
(a)  first, to the payment of all costs and expenses of the Agent and its agent
or agents (including, without limitation, the reasonable fees and expenses of
legal counsel and other agents) incurred in connection with the collection of
such proceeds or the protection of the rights and interests of the Agent and the
Lenders therein;
 
(b)  second, to accrued but unpaid interest on the Obligations;
 
(c)  third, to the last maturing installments of principal of the Initial Term
Loan until fully repaid and then to the last maturing installments of principal
of the Three D Real Property Term Loan until fully paid and then to the last
maturing installments of principal of the Acquisition Term Loans (in order of
first to mature) until fully repaid;
 
(d)  fourth, to the payment of the principal amount of Revolving Loans then
outstanding; and
 
(e)  fifth, to the other Obligations in such order as shall be determined by the
Agent in its sole discretion.
 
The application of such proceeds specified in this Paragraph 3.12 shall be
subject to the provisions of Paragraph 3.11 hereof. The parties hereto agree and
acknowledge that the preceding provisions of this Paragraph 3.12 shall in no
event be deemed to constitute permission or consent by the Agent and the Lenders
to any such sale, transfer or disposition, and the other provisions of this
Financing Agreement shall control as to whether any such sale, transfer or
disposition is permitted under this Financing Agreement. To the extent that the
Agent applies proceeds of any such sale, transfer or disposition to the
principal amount Revolving Loans, such proceeds shall be applied first to
outstanding Revolving Loans other than Swingline Loans, pro rata according to
each Lender’s Pro Rata Percentage, and then to outstanding Swingline Loans.
 
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SECTION 4.  Term Loans
 
4.1  Companies agree to execute and deliver to each Lender a Promissory Note to
evidence the Pro Rata Percentage of the Initial Term Loan and each Acquisition
Term Loan and the Three D Real Property Term Loan to be extended to the
Companies by such Lender.
 
4.2  (a) Upon the satisfaction of the conditions set forth in Paragraph 2.1 of
Section 2 hereof, each of the Lenders (severally and not jointly) agrees to
advance to the Companies such Lender’s Pro Rata Percentage of the Initial Term
Loan.
 
(b)  The principal amount of the Initial Term Loan shall be due and payable as
follows: (i) principal installments of $69,444.44 each shall be due and payable
monthly, commencing on May 1, 2007 and on the first day of each month thereafter
through September 1, 2012, and (ii) the unpaid principal amount of the Initial
Term Loan shall be due and payable on September 30, 2012.
 
4.3  (a) Within the available and unused Acquisition Term Loan Line of Credit,
upon the request of the Companies each of the Lenders (severally and not
jointly) agrees to advance to the Companies such Lender’s Pro Rata Percentage of
the requested Acquisition Term Loan. The Companies agree to use the proceeds of
Acquisition Term Loans solely in connection with funding a transaction described
in the definition of “Approved Acquisition Term Loan”.
 
(b)  The Lenders’ commitments to advance their Pro Rata Percentages of any
Acquisition Term Loan is subject to such requested Acquisition Term Loan being
an Approved Acquisition Term Loan.
 
(c)  The principal amount of each Acquisition Term Loan shall be due and payable
in seventy-two (72) equal consecutive monthly installments of principal
commencing on the first day of the second month following the month in which
such Acquisition Term Loan is made. Each installment shall be in the amount
derived by dividing the principal amount of such Acquisition Term Loan by
seventy-two (72). Notwithstanding the foregoing, the unpaid principal amount of
all Acquisition Term Loans shall be due and payable on September 30, 2012.
 
4.4  (a) Upon the satisfaction of the Three D Real Property Term Loan Conditions
Precedent, each of the Lenders (severally and not jointly) agrees to advance to
the Companies such Lender’s Pro Rata Percentage of the Three D Real Property
Term Loan.
 
(b)  The principal amount of the Three D Real Property Term Loan shall be due
and payable as follows: (i) principal installments of $13,888.88 each shall be
due and payable monthly, commencing on the first day of the second month
following the month in which the Three D Real Property Term Loan is made and on
the first day of each calendar month thereafter through September 1, 2012, and
(ii) the unpaid principal amount of the Three D Real Property Term Loan shall be
due and payable on September 30, 2012.
 
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4.5  Provisions Regarding all Term Loans.
 
(a)  In the event this Financing Agreement or the Revolving Line of Credit is
terminated by either the Agent, the Required Lenders or the Companies for any
reason whatsoever, all Term Loans, together with all accrued and unpaid interest
thereon and the applicable Prepayment Premium, if any, shall be due and payable
in full on the effective date of such termination, notwithstanding any other
provision of this Financing Agreement or the Notes to the contrary.
 
(b)  The Companies, at their option, may prepay any Term Loan at any time, in
whole or in part, provided that on the date of such prepayment, there shall be
due and payable (i) accrued and unpaid interest on the principal so prepaid to
the date of such prepayment and (ii) the Prepayment Premium, if any, due with
respect to such prepayment.
 
(c)  In the event that the Companies have generated Surplus Cash in any fiscal
year, on the date which is ninety (90) days after the end of such fiscal year,
there shall be due and payable a mandatory prepayment of the Term Loans in an
amount equal to twenty-five percent (25%) of the Surplus Cash for such fiscal
year.
 
(d)  Except as the Required Lenders and the Companies shall otherwise agree in a
separate writing, each prepayment of the Term Loans (whether voluntary or
mandatory) shall be applied to accrued but unpaid interest on the Term Loans and
then to the last maturing installments of principal of the Initial Term Loan
until fully repaid, and then to the last maturing installments of principal of
the Three D Real Property Term Loan until fully repaid, and then to the last
maturing installments of principal of the Acquisition Term Loans (in order of
first loan to mature) until fully repaid.
 
(e)  To the extent repaid, the principal amount of any Term Loan may not be
reborrowed under this Section 4.
 
(f)  The Companies hereby authorize the Agent, without notice to the Companies,
to charge the Revolving Loan Account with all payments due under this Section 4
as such amounts become due. Any amount charged to the Revolving Loan Account
shall be deemed a Base Rate Loan hereunder and shall bear interest at the rate
provided in Paragraph 8.1 of Section 8 of this Financing Agreement. The
Companies confirm that any charges which the Agent may make to the Revolving
Loan Account as provided herein will be made as an accommodation to the
Companies and solely at the Agent’s discretion.
 
SECTION 5.  Letters of Credit
 
In order to assist the Companies, or any one of them, in establishing or
opening Letters of Credit with an Issuing Bank, the Companies have requested
that the Lenders (acting through the Agent) join in the applications for such
Letters of Credit, and/or guarantee payment or performance of such Letters of
Credit and any drafts or acceptances thereunder through the issuance of the
Letters of Credit Guaranty, thereby lending the Agent’s and the Lenders’ credit
to the Companies, and the Agent and the Lenders have agreed to do so. These
arrangements shall be handled by the Agent and the Lenders subject to the terms
and conditions set forth below.
 
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5.1  Within the Revolving Line of Credit and Availability, the Lenders (acting
through the Agent) shall assist each of the Companies in obtaining Letter(s) of
Credit in an amount not to exceed the outstanding amount of the Letter of Credit
Sub-Line. The Agent’s and the Lenders’ assistance for amounts in excess of the
limitation set forth herein shall at all times and in all respects be in the
Required Lenders’ sole discretion. It is understood that the term, form and
purpose of each Letter of Credit and all documentation in connection therewith,
and any amendments, modifications or extensions thereof, must be mutually
acceptable to the Agent, the Issuing Bank and the Companies, provided that
documentary Letters of Credit shall not be used for the purchase of domestic
Inventory or to secure present or future debt of domestic Inventory suppliers.
Any and all outstanding Letters of Credit issued hereunder for any Company shall
be reserved dollar for dollar from Availability as an Availability Reserve.
 
5.2  The Agent, on behalf of the Lenders, shall have the right, without notice
to any of the Companies, to charge a Company’s Revolving Loan Account with the
amount of any and all indebtedness, liability or obligation of any kind incurred
by the Agent and the Lenders under the Letters of Credit Guaranty at the earlier
of (a) payment by the Agent and the Lenders under the Letters of Credit
Guaranty; or (b) the occurrence of an Event of Default. Any amount charged to
the Companies’ Revolving Loan Accounts shall be deemed a Revolving Loan
hereunder and shall incur interest at the rate provided in Paragraph 8.1 of
Section 8 hereof.
 
5.3  Each of the Companies unconditionally indemnifies the Agent and the Lenders
and holds the Agent and the Lenders harmless from any and all loss, claim or
liability incurred by the Agent and the Lenders (or any of them) arising from
any transactions or occurrences relating to Letters of Credit established or
opened for any Company’s account, the collateral relating thereto and any drafts
or acceptances thereunder, and all Obligations thereunder, including any such
loss or claim due to any errors, omissions, negligence, misconduct or action
taken by any Issuing Bank, other than for any such loss, claim or liability
arising out of the gross negligence or willful misconduct by the Agent under the
Letters of Credit Guaranty. This indemnity shall survive termination of this
Financing Agreement. The Companies agree that any charges incurred by the Agent
and the Lenders (or any of them) for any of the Companies’ account by the
Issuing Bank shall be conclusive on the Agent and the Lenders and may be charged
to such Company’s Revolving Loan Account.
 
5.4  The Agent and the Lenders shall not be responsible for: (a) the existence,
character, quality, quantity, condition, packing, value or delivery of the goods
purporting to be represented by any documents; (b) any difference or variation
in the character, quality, quantity, condition, packing, value or delivery of
the goods from that expressed in the documents; (c) the validity, sufficiency or
genuineness of any documents or of any endorsements thereon, even if such
documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; (d) the time, place, manner or order in
which shipment is made; (e) partial or incomplete shipment, or failure or
omission to ship any or all of the goods referred to in the Letters of Credit or
documents; (f) any deviation from instructions; (g) delay, default, or fraud by
the shipper and/or anyone else in connection with the goods or the shipping
thereof; or (h) any breach of contract between the shipper or vendors and the
Companies.
 
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5.5  The Companies agree that any action taken by the Agent or the Lenders, if
taken in good faith, or any action taken by any Issuing Bank, under or in
connection with the Letters of Credit, the Letter of Credit Guarantees, the
drafts or acceptances, or the Collateral, shall be binding on each of the
Companies and shall not result in any liability whatsoever of the Agent or the
Lenders to the Companies, except if attributable to the gross negligence or
willful misconduct of Lenders. In furtherance thereof, the Agent, on behalf of
the Lenders, shall have the full right and authority to: (a) clear and resolve
any questions of non-compliance of documents; (b) give any instructions as to
acceptance or rejection of any documents or goods; (c) execute any and all
steamship or airways guaranties (and applications therefore), indemnities or
delivery orders; (d) grant any extensions of the maturity of, time of payment
for, or time of presentation of, any drafts, acceptances, or documents; and
(e) agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letters of Credit, drafts or acceptances; all in the Agent’s name. The Issuing
Bank shall be entitled to comply with and honor any and all such documents or
instruments executed by or received solely from the Agent, all without any
notice to or any consent from the Companies or any one of them. Notwithstanding
any prior course of conduct or dealing with respect to the foregoing including
amendments and non-compliance with documents and/or any Company’s instructions
with respect thereto, the Agent may exercise its rights hereunder in its sole
and reasonable business judgment. In addition, without the Agent’s express
consent and endorsement in writing, the Companies agree: (a) not to execute any
and all applications for steamship or airway guaranties, indemnities or delivery
orders; to grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances or documents; or to agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letters of Credit, drafts
or acceptances; and (b) after the occurrence and during the continuation of an
Event of Default, not to (i) clear and resolve any questions of non-compliance
of documents, or (ii) give any instructions as to acceptances or rejection of
any documents or goods.
 
5.6  The Companies agree that: (a) any necessary import, export or other
licenses or certificates for the import or handling of the Collateral will have
been promptly procured; (b) all foreign and domestic governmental laws and
regulations in regard to the shipment and importation of the Collateral, or the
financing thereof will have been promptly and fully complied with; and (c) any
certificates in that regard that the Agent may at any time request will be
promptly furnished. In connection herewith, the Companies warrant and represent
that all shipments made under any such Letters of Credit are in accordance with
the laws and regulations of the countries in which the shipments originate and
terminate, and are not prohibited by any such laws and regulations. Each of the
Companies assumes all risk, liability and responsibility for, and agrees to pay
and discharge, all present and future local, state, federal or foreign Taxes,
duties, or levies. Any embargo, restriction, laws, customs or regulations of any
country, state, city, or other political subdivision, where the Collateral is or
may be located, or wherein payments are to be made, or wherein drafts may be
drawn, negotiated, accepted, or paid, shall be solely the Companies’ risk,
liability and responsibility.
 
5.7  Upon any payments made to the Issuing Bank under the Letter of Credit
Guaranty, the Agent, on behalf of the Lenders, shall acquire by subrogation, any
rights, remedies, duties or obligations granted or undertaken by the Companies
or any one of them to the Issuing Bank in any application for Letters of Credit,
any standing agreement relating to Letters of Credit or otherwise, all of which
shall be deemed to have been granted to the Agent and apply in all respects to
the Agent and shall be in addition to any rights, remedies, duties or
obligations contained herein.
 
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SECTION 6.  Collateral
 
6.1  As security for the prompt payment in full of all Obligations, each of the
Companies hereby pledges and grants to the Agent, for the benefit of the
Lenders, a continuing general lien upon, and security interest in, all of their
right, title and interest in all of their property, whether now owned or
hereafter acquired, including, without limitation, all of their:
 
(a)  Accounts;
 
(b)  Inventory;
 
(c)  General Intangibles;
 
(d)  Documents of Title;
 
(e)  Real Estate;
 
(f)  Other Collateral; and
 
(g)  Equipment.
 
The security interest granted in the Collateral are given in renewal, extension
and modification of the security interests previously granted to Agent and CIT
by Companies; such prior security interests are not extinguished hereby; and the
ranking, perfection and priority of such prior security interests shall continue
in full force and effect.
 
6.2  The security interests granted hereunder shall extend and attach to:
 
(a)  All Collateral owned by any of the Companies or in which the Companies have
any interest, whether held by the Companies or others for their account, and, if
any Collateral is Equipment, whether the Companies’ interest in such Equipment
is as owner, finance lessee or conditional vendee;
 
(b)  All Equipment, whether the same constitutes personal property or fixtures,
including, but without limiting the generality of the foregoing, all dies, jigs,
tools, benches, molds, tables, accretions, component parts thereof and additions
thereto, as well as all accessories, motors, engines and auxiliary parts used in
connection with, or attached to, the Equipment; and
 
(c)  All Inventory and any portion thereof which may be returned, rejected,
reclaimed or repossessed by either the Agent or the Companies from the
Companies’ customers, as well as to all supplies, goods, incidentals, packaging
materials, labels and any other items which contribute to the finished goods or
products manufactured or processed by the Companies, or to the sale, promotion
or shipment thereof.
 
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6.3  The Companies agree to safeguard, protect and hold all Inventory for the
account of the Agent and the Lenders and make no disposition thereof except in
the ordinary course of their business of the Companies, as herein provided. The
Companies represent and warrant that Inventory will be sold and shipped by the
Companies to their customers only in the ordinary course of the Companies’
business, and then only on open account and on terms currently being extended by
the Companies to their respective customers, provided that, absent the prior
written consent of the Agent, the Companies shall not sell Inventory on a
consignment basis nor retain any lien or security interest in any sold Inventory
(though the foregoing shall in no event prohibit the Companies’ present business
practices in selling propane to their residential customers). Upon the sale,
exchange, or other disposition of Inventory, as herein provided, the security
interest of the Agent, for the benefit of the Lenders, in the Inventory provided
for herein shall, without break in continuity and without further formality or
act, continue in, and attach to, all proceeds, including any instruments for the
payment of money, Trade Accounts Receivable, documents of title, shipping
documents, chattel paper and all other cash and non-cash proceeds of such sale,
exchange or disposition. As to any such sale, exchange or other disposition, the
Agent, on behalf of the Lenders, shall have all of the rights of an unpaid
seller, including stoppage in transit, replevin, rescission and reclamation.
Unless otherwise provided in the Sterling Intercreditor Agreement, the Companies
hereby agree to immediately forward any and all proceeds of Collateral to the
Depository Account, and to hold any such proceeds (including any notes and
instruments), in trust for the Agent pending delivery to the Agent. Irrespective
of the Agent’s perfection status in any and all of the General Intangibles,
including, without limitation, any Patents, Trademarks, Copyrights or licenses
with respect thereto, each of the Companies hereby irrevocably grants the Agent
a royalty free license to sell, or otherwise dispose or transfer, in accordance
with Paragraph 10.3 of Section 10 hereof, and the applicable terms hereof, of
any of the Inventory upon the occurrence of an Event of Default which has not
been waived in writing by the Agent and the Required Lenders.
 
6.4  The Companies agree at their own cost and expense to keep the Equipment in
as good and substantial repair and condition as the same is now or at the time
the lien and security interest granted herein shall attach thereto, reasonable
wear and tear excepted, making any and all repairs and replacements when and
where necessary. The Companies also agree to safeguard, protect and hold all
Equipment in accordance with the terms hereof and subject to the Agent’s
security interest. Absent the Required Lender’s prior written consent, any sale,
exchange or other disposition of any Equipment shall be made by the Companies in
the ordinary course of their business or as set forth herein. The Companies may,
in the ordinary course of their business, sell, exchange or otherwise dispose of
obsolete or surplus Equipment; provided, however, that: (a) the then value of
the Equipment so disposed of in any Fiscal Year does not exceed $500,000 in the
aggregate; and (b) the proceeds of any such sales or dispositions (other than
the proceeds from sale or disposition of the Equipment in which Sterling has a
first priority lien which shall be governed by the terms and provisions of the
Sterling Term Loan Documentation), shall be held in trust by the Companies for
the Agent and the Lenders and shall be immediately delivered to the Agent by
deposit to the Depository Account, except that the Companies may retain and use
such proceeds to purchase forthwith replacement Equipment which the Companies
determine in their reasonable business judgment to have a collateral value at
least equal to the Equipment so disposed of or sold; provided, however, that the
aforesaid right shall automatically cease upon the occurrence of a Default or an
Event of Default which is not waived in writing by the Agent and the Required
Lenders. Upon the sale, exchange, or other disposition of the Equipment, as
herein provided, the security interest provided for herein shall, without break
in continuity and without further formality or act, continue in, and attach to,
all proceeds, including any instruments for the payment of money, Accounts,
documents of title, shipping documents, chattel paper and all other cash and
non-cash proceeds of such sales, exchange or disposition. As to any such sale,
exchange or other disposition, the Agent, on behalf of the Lenders, shall have
all of the rights of an unpaid seller, including stoppage in transit, replevin,
rescission and reclamation.
 
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6.5  The rights and security interests granted to the Agent for the benefit of
the Lenders hereunder shall continue in full force and effect, notwithstanding
the termination of this Financing Agreement or the fact that the Revolving Loan
Accounts may from time to time be temporarily in a credit position, until the
final payment in full to the Agent and the Lenders of all Obligations and the
termination of this Financing Agreement. Any delay, or omission by the Agent and
the Lenders (or any of them) to exercise any right hereunder shall not be deemed
a waiver thereof, or be deemed a waiver of any other right, unless such waiver
shall be in writing and signed by the Agent and the Required Lenders. A waiver
on any one occasion shall not be construed as a bar to, or waiver of, any right
or remedy on any future occasion.
 
6.6  Notwithstanding the Agent’s security interest in the Collateral and to the
extent that the Obligations are now or hereafter secured by any assets or
property other than the Collateral or by the guarantee, endorsement, assets or
property of any other person, the Agent, on behalf of the Lenders, shall have
the right in its sole discretion to determine which rights, liens, security
interests or remedies the Agent shall at any time pursue, foreclose upon,
relinquish, subordinate, modify or take any other action with respect to,
without in any way modifying or affecting any of them, or any of the Agent’s or
the Lenders’ respective rights hereunder.
 
6.7  Any balances to the credit of the Companies and any other property or
assets of the Companies in the possession or control of the Agent or any Lender
may be held by the Agent or such Lender as security for any Obligations and
applied in whole or partial satisfaction of such Obligations when due. The liens
and security interests granted herein, and any other lien or security interest
that the Agent or any Lender may have in any other assets of the Companies,
shall secure payment and performance of all now existing and future Obligations.
The Agent may in its discretion charge any or all of the Obligations to the
Revolving Loan Account when due.
 
6.8  Each of the Companies possess all General Intangibles and rights thereto
necessary to conduct their business as conducted as of the Closing Date and the
Companies shall maintain their rights in, and the value of, the foregoing in the
ordinary course of their business, including, without limitation, by making
timely payment with respect to any applicable licensed rights. The Companies
shall deliver to the Agent, and/or shall cause the appropriate party to deliver
to the Agent, from time to time such pledge or security agreements with respect
to General Intangibles (now or hereafter acquired) of the Companies and their
subsidiaries as the Agent shall require to obtain valid first liens thereon. In
furtherance of the foregoing, the Companies shall provide timely notice to the
Agent of any additional Patents, Trademarks, tradenames, service marks,
Copyrights, brand names, trade names, logos and other trade designations
acquired or applied for subsequent to the Closing Date and the Companies shall
execute such documentation as the Agent may reasonably require to obtain and
perfect its lien thereon. Each of the Companies hereby irrevocably grants to the
Agent, for the benefit of the Lenders, a royalty-free, non-exclusive license in
the General Intangibles, including tradenames, Trademarks, Copyrights, Patents,
licenses, and any other proprietary and intellectual property rights and any and
all of their right, title and interest in any of the foregoing, for the sole
purpose, upon the occurrence of an Event of Default, of the right to:
(i) advertise for sale and sell or transfer any Inventory bearing any of the
General Intangibles, and (ii) make, assemble, prepare for sale or complete, or
cause others to do so, any applicable raw materials or Inventory bearing any of
the General Intangibles, including use of the Equipment and Real Estate for the
purpose of completing the manufacture of unfinished goods, raw materials or
work-in-process comprising Inventory, and apply the proceeds thereof to the
Obligations hereunder, all as further set forth in this Financing Agreement and
irrespective of the Agent’s lien on and perfection in any General Intangibles.
 
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6.9  The Companies represent and warrant to the Agent and the Lenders that as of
the date hereof, the Company is not the beneficiary of any letter of credit. If
any Company becomes a beneficiary under any letter of credit, such Company
agrees to promptly notify the Agent, and upon request by the Agent, such Company
agrees to either (a) cause the issuer of such letter of credit to consent to the
assignment of the proceeds of such letter of credit to the Agent, for the
benefit of the Lenders, pursuant to an agreement in form and substance
satisfactory to the Agent in the exercise of its credit judgment, or (b) cause
the issuer of such letter of credit to name the Agent, for the benefit of the
Lenders, as the transferee beneficiary of such letter of credit.
 
6.10  The Companies represent and warrant to the Agent and the Lenders that as
of the date hereof, no Company holds an interest in any commercial tort claim.
If any Company at any time holds or acquires a commercial tort claim, such
Company agrees to promptly notify the Agent in writing of the details thereof,
and in such writing such Company shall grant to the Agent, for the benefit of
the Lenders, a security interest in such commercial tort claim and in the
proceeds thereof, all upon the terms of this Financing Agreement.
 
6.11  The Companies agree that all chattel paper created by the Companies will
be marked: “This chattel paper is subject to a security interest in favor of The
CIT Group/Business Credit, Inc., as Agent for itself and other lenders. Further
encumbrance or assignment of this chattel paper violates the rights of The CIT
Group/Business Credit, Inc. and such other lenders.”
 
SECTION 7.  Representations, Warranties and Covenants
 
7.1  The Companies hereby warrant and represent that: (a) the fair value of each
Company’s Total Assets exceeds the book value of such Company’s Total
Liabilities; (b) the Companies are generally able to pay their debts as they
become due and payable; and (c) the Companies do not have unreasonably small
capital to carry on their business as it is currently conducted absent
extraordinary and unforeseen circumstances. The Companies further warrant and
represent that: (i) Schedule 7(l) hereto correctly and completely sets forth
each Company’s (A) legal name in its state of organization, (B) state of
organization, (C) Federal Tax identification number, (D) chief executive office,
(E) tradenames used by such Company in connection with the sale of inventory or
providing services to its customers, (F) prior names used in the last five (5)
years (including, such names of such Company’s predecessors in interest as a
result of a merger or consolidation) and (G) the charter or similar
organizational number for the Company in its state of organization or formation;
(ii) except for the Permitted Encumbrances, after filing of financing statements
in the applicable filing clerks office at the locations set forth in Schedule 1,
this Financing Agreement creates a valid, perfected and first priority security
interest in the Collateral in which a security interest may be perfected by the
filing of a financing statement, and the security interest granted herein
constitutes and shall at all times constitute the first and only lien on the
Collateral (other than Permitted Encumbrances); (iii) except for the Permitted
Encumbrances, the Companies are, or will be, at the time additional Collateral
is acquired by them, the absolute owner of the Collateral with full right to
pledge, sell, consign, transfer and create a security interest therein, free and
clear of any and all claims or liens in favor of others; (iv) the Companies
will, at their expense, forever warrant and, at the Agent’s request, defend the
Collateral from any and all claims and demands of any other person other than a
holder of a Permitted Encumbrance; (v) the Companies will not grant, create or
permit to exist, any lien upon, or security interest in, the Collateral, or any
proceeds thereof, in favor of any other Person other than the Agent and holders
of the Permitted Encumbrances; and that the Equipment does not comprise a part
of any Company’s Inventory; and (vi) the Equipment is and will only be used by
the Companies in their business and will not be held for sale or lease, or
removed from their premises, or otherwise disposed of by the Companies except as
otherwise permitted in this Financing Agreement.
 
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7.2  Each of the Companies agrees to maintain books and records pertaining to
the Collateral in accordance with GAAP and in such additional detail, form and
scope as the Agent shall reasonably require. The Companies agree that the Agent
(accompanied by any Lender at its expense) or its agents may enter upon any of
the Companies’ premises at any time during normal business hours, and from time
to time in its reasonable business judgment, for the purpose of inspecting the
Collateral and any and all records pertaining thereto. Each Company irrevocably
authorizes all accountants and third parties to disclose and deliver directly to
the Agent, at the Companies’ expense, all financial statements and information,
books, records, work papers, management reports and other information generated
by them or in their possession regarding the Companies and/or Parent and/or the
Collateral. The Companies agree to afford the Agent thirty (30) days prior
written notice of any change in the location of any Collateral, other than to
locations, that as of the Closing Date, are known to the Agent and at which the
Agent has filed financing statements and otherwise fully perfected its liens
thereon. Upon request by the Agent, each of the Companies agrees to provide to
the Agent a current listing by customer and address as to the location of each
of the individual propane, gasoline and diesel tanks provided to residential
customers of such Company which are located on the premises of such residential
customer. The Companies are also to advise the Agent promptly, in sufficient
detail, of any material adverse change relating to the type, quantity or quality
of the Collateral or on the security interest granted to the Agent therein.
 
7.3  Each of the Companies agrees to: (a) execute and deliver to the Agent, from
time to time, solely for the Agent’s convenience in maintaining a record of the
Collateral, such written statements, and schedules as the Agent may reasonably
require, designating, identifying or describing the Collateral; and (b) provide
the Agent, on request, with an appraisal of the Inventory which appraisal shall
be at the Companies’ expense and otherwise acceptable to the Agent; provided,
however, that unless an Event of Default has occurred and is continuing, the
Agent shall not request such an appraisal more than once during any twelve (12)
calendar month period. Any failure, however, to promptly give the Agent such
statements, or schedules shall not affect, diminish, modify or otherwise limit
the Agent’s security interest in the Collateral.
 
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7.4  Each of the Companies agrees to comply with the requirements of all state
and federal laws in order to grant to the Agent, for the benefit of the Lenders,
valid and perfected first security interests in the Collateral, subject only to
the Permitted Encumbrances. The Agent is hereby authorized by the Companies to
file (including pursuant to the applicable terms of the UCC) from time to time
any financing statements, continuation statements or amendments thereto covering
the Collateral, whether or not such Company’s signature appears thereon. The
Companies hereby consent to and ratify any and all execution and/or filing of
financing statements on or prior to the Closing Date by the Agent. The Companies
agree to do whatever the Agent may reasonably request, from time to time, by way
of: (a) filing notices of liens, financing statements, amendments, renewals and
continuations thereof; (b) cooperating with the agents and employees of the
Agent; (c) keeping Collateral records; (d) transferring proceeds of Collateral
to the Agent’s possession; (e) getting the Agent’s lien noted on all original
certificates of title relating to motor vehicles or other titled rolling stock
part of the Collateral; and (f) performing such further acts as the Agent may
reasonably require in order to effect the purposes of this Financing Agreement,
including but not limited to obtaining control agreements with respect to
deposit accounts and/or Investment Property.
 
7.5  (a) Each of the Companies agrees to maintain insurance on the Real Estate,
Equipment and Inventory under such policies of insurance, with such insurance
companies, in such reasonable amounts and covering such insurable risks as are
at all times reasonably satisfactory to the Agent. All policies covering the
Real Estate and Equipment and Inventory are, subject to the rights of any
holders of Permitted Encumbrances holding claims senior to the Agent, to be made
payable to the Agent, in case of loss, under a standard non-contributory
“mortgagee”, “lender” or “secured party” clause and are to contain such other
provisions as the Agent may require in its credit judgment to fully protect the
Agent’s interest in the Real Estate and Inventory and Equipment and to any
payments to be made under such policies. All originals of such policies or true
copies thereof are to be delivered to the Agent, premium prepaid, with the loss
payable endorsement in favor of the Agent for the benefit of the Lenders, and
shall provide for not less than thirty (30) days prior written notice to the
Agent of the exercise of any right of cancellation. At the Companies’ request,
or if the Companies fail to maintain such insurance, the Agent may arrange for
such insurance, but at the Companies’ expense and without any responsibility on
the Agent’s or the Lenders’ part for: (i) obtaining the insurance; (ii) the
solvency of the insurance companies; (iii) the adequacy of the coverage; or
(iv) the collection of claims. Upon the occurrence of an Event of Default which
is not waived in writing by the Agent and the Required Lenders, the Agent shall,
subject to the rights of any holders of Permitted Encumbrances holding claims
senior to the Agent, have the sole right, in the name of the Agent or the
Companies, to file claims under any such insurance policies, to receive, receipt
and give acquittance for any payments that may be payable thereunder, and to
execute any and all endorsements, receipts, releases, assignments, reassignments
or other documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies.
 
(b)  (i) In the event of any loss or damage by fire or other casualty, insurance
proceeds relating to the Companies’ or a Company’s Inventory shall be applied
first to reduce such Company’s Revolving Loans and then to repay the Term Loans
in the manner set forth in Paragraph 4.4(d) of Section 4 hereof, and then to
repay the other Obligations. Upon the occurrence and during the continuance of
an Event of Default, the Agent may apply Insurance Proceeds to the Obligations
in such manner as it may deem advisable in its sole discretion;
 
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(ii)  In the event any part of the Companies’ or a Company’s Equipment is
damaged by fire or other casualty and the Insurance proceeds for such damage or
other casualty is less than or equal to $100,000.00, the Agent shall promptly
apply such proceeds first to reduce the Companies’ outstanding balance in the
Revolving Loan Account to the extent the proceeds are allocable to rolling stock
Eligible Equipment described in the definition of “Eligible Equipment Based
Amount” (and such amount shall constitute a permanent reduction in the Eligible
Equipment Based Amount), and then to repay the Term Loans in the manner set
forth in Paragraph 4.4(d) of Section 4 hereof, and then to further reduce
Companies’ outstanding balance in Revolving Loan Amount and then to the other
Obligations. Upon the occurrence and during the continuance of an Event of
Default, the Agent may apply Insurance Proceeds to the Obligations in such
manner as the Agent may deem advisable in its sole discretion;
 
(iii)  Absent the occurrence and continuance of an Event of Default, and
provided that the Insurance Proceeds are in excess of $100,000.00, the Companies
may elect (by delivering written notice to the Agent) to replace, repair or
restore such Equipment to substantially the equivalent condition prior to such
fire or other casualty as set forth herein. If the Companies do not, or cannot,
elect to use the Insurance Proceeds as set forth above, the Agent may, subject
to the rights of any holders of Permitted Encumbrances holding claims senior to
the Agent, apply the Insurance Proceeds to the payment of the Obligations in
such manner and in such order as the Agent may reasonably elect; and
 
(iv)  If the Companies elect to use the Insurance Proceeds for the repair,
replacement or restoration of any Equipment, and there is then no Event of
Default, (x) Insurance Proceeds for any loss are in excess of $100,000.00 on
Equipment will be applied to the reduction of the Revolving Loans and (y) the
Agent may set up an Availability Reserve in an amount equal to said Insurance
Proceeds. The Availability Reserve will be reduced dollar-for-dollar upon
receipt of non-cancelable executed purchase orders, delivery receipts or
contracts for the replacement, repair or restoration of Equipment and
disbursements in connection therewith.
 
(c)  In the event of any loss or damage to any Real Estate leased by any Company
by condemnation, fire or other casualty, the Companies may use the Casualty
Proceeds in the manner required or permitted by the lease agreement relating
thereto. In the event of any loss or damage to any Real Estate owned by any
Company by condemnation, fire or other casualty, if the Casualty Proceeds
relating to such condemnation, fire or other casualty are equal to or less than
$100,000, the Agent agrees to apply such Casualty Proceeds to repay the
outstanding Revolving Loans. In the event of any loss or damage to any Real
Estate owned by any Company by condemnation, fire or other casualty, if the
Casualty Proceeds relating to such condemnation, fire or other casualty exceed
$100,000, and so long as the Companies have sufficient business interruption
insurance to replace the lost profits of the facilities affected by the
condemnation, fire or other casualty, the Companies may elect to repair or
replace such Real Estate, subject to the following terms:
 
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(i)  If the Companies reasonably determine that the Real Estate may be repaired
to substantially the same condition of the Real Estate prior to the
condemnation, fire or other casualty, the Companies may elect to repair the Real
Estate by delivering written notice to the Agent within thirty (30) days
following the Agent’s receipt of such Casualty Proceeds. The Agent initially
shall apply all such Casualty Proceeds to the outstanding Revolving Loans and
will establish an Availability Reserve in an amount equal to such Casualty
Proceeds. The Companies shall provide the Agent with a repair plan, the
contract(s) for repair and a total budget certified by an independent third
party experienced in construction costing. If such budget indicates that there
are insufficient Casualty Proceeds to cover the full cost of repair of the Real
Estate, the Companies shall fund such deficiency before the Availability Reserve
established hereunder shall be reduced. The Agent agrees to reduce this
Availability Reserve dollar-for-dollar as and when payments are due under the
contract(s) for repair. Upon completion of the repair of the Real Estate (as
determined by the Agent in the exercise of its business judgment), the Agent
will eliminate any remaining Availability Reserve established hereunder.
 
(ii)  The Companies may elect to replace the Real Estate owned by any Company
only on terms and conditions satisfactory to the Required Lenders in their
credit judgment.
 
If an Event of Default shall have occurred and remain continuing as of the date
of the Agent’s receipt of any Casualty Proceeds, or if the Companies do not or
cannot elect to use the Casualty Proceeds in the manner set forth in paragraph
(c) above, the Agent may, subject to the rights of any holder of a Permitted
Encumbrance having priority over the security interests of the Agent, apply the
Casualty Proceeds to the payment of the Obligations in such manner and in such
order as the Agent may elect in its sole discretion.
 
(d)  In the event the Companies or any one of them fails to provide the Agent
with timely evidence, reasonably acceptable to the Agent, of its maintenance of
insurance coverage required pursuant to Paragraph 7.5(a) above, the Agent may
purchase, at the Companies’ expense, insurance to protect the interests of the
Agent and the Lenders in the Collateral. The insurance acquired by the Agent
may, but need not, protect the Companies’ interest in the Collateral, and
therefore such insurance may not pay claims which the Companies may have with
respect to the Collateral or pay any claim which may be made against the
Companies in connection with the Collateral. In the event the Agent purchases,
obtains or acquires insurance covering all or any portion of the Collateral, the
Companies shall be responsible for all of the applicable costs of such
insurance, including premiums, interest (at the applicable Base Rate for
Revolving Loans set forth in Paragraph 8.1 of Section 8 hereof), fees and any
other charges with respect thereto, until the effective date of the cancellation
or the expiration of such insurance. The Agent may charge all of such premiums,
fees, costs, interest and other charges to the Companies’ Revolving Loan
Accounts. The Companies hereby acknowledge that the costs of the premiums of any
insurance acquired by the Agent may exceed the costs of insurance which the
Companies may be able to purchase on their own. In the event that the Agent
purchases such insurance, the Agent will notify the Companies of said purchase
within thirty (30) days of the date of such purchase. If, within thirty (30)
days of the date of such notice, the Companies provide the Agent with proof that
the Companies had the insurance coverage required pursuant to Paragraph 7.5(a)
above (in form and substance reasonably satisfactory to the Agent) as of the
date on which the Agent purchased insurance and the Companies continued at all
times to have such insurance, then the Agent agrees to cancel the insurance
purchased by the Agent and credit the Companies’ Revolving Loan Account with the
amount of all costs, interest and other charges associated with any insurance
purchased by the Agent, including with any amounts previously charged to the
Revolving Loan Account.
 
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7.6  Each of the Companies agrees to pay, when due, all Taxes, including sales
taxes, assessments, claims and other charges lawfully levied or assessed upon
the Companies or the Collateral unless such Taxes are being diligently contested
in good faith by the Companies by appropriate proceedings and adequate reserves
are established in accordance with GAAP. Notwithstanding the foregoing, if any
lien shall be filed or claimed thereunder (a) for Taxes due the United States of
America, or (b) which in the Agent’s opinion might create a valid lien having
priority over the security interest granted to the Agent herein, such lien shall
not be deemed to be a Permitted Encumbrance hereunder and the Companies shall
immediately pay such tax and remove the lien of record. If the Companies or any
one of them fails to do so promptly, then at the Agent’s election, the Agent may
(i) create an Availability Reserve in such amount as it may deem appropriate in
its business judgment, or (ii) upon the occurrence and during the continuation
of an Event of Default, imminent risk of seizure, filing of any priority lien,
forfeiture, or sale of the Collateral, pay Taxes on the Companies’ behalf, and
the amount thereof shall be an Obligation secured hereby and due on demand.
 
7.7  Each of the Companies: (a) agrees to comply with all acts, rules,
regulations and orders of any legislative, administrative or judicial body or
official, which the failure to comply with would have a material and adverse
impact on the Collateral, or any material part thereof, or on the business or
operations of the Companies or any one of them, provided that the Companies may
contest any acts, rules, regulations, orders and directions of such bodies or
officials in any reasonable manner which will not, in the Agent’s reasonable
opinion, materially and adversely effect the rights of the Agent or the Lenders
hereunder or the validity or priority of the Agent’s liens on the Collateral;
(b) agrees to comply with all environmental statutes, acts, rules, regulations
or orders as presently existing or as adopted or amended in the future,
applicable to the Collateral, the ownership and/or use of their real property
and operation of their business, which the failure to comply with would have a
material and adverse impact on the Collateral, or any material part thereof, or
on the operation of the business of the Companies or any one of them; and
(c) shall not be deemed to have breached any provision of this Paragraph 7.7 if
(i) the failure to comply with the requirements of this Paragraph 7.7 resulted
from good faith error or innocent omission, (ii) the Companies promptly commence
and diligently pursue a cure of such breach, and (iii) such failure is cured
within (30) days following the Companies’ receipt of notice of such failure, or
if such cannot in good faith be cured within thirty (30) days, then such breach
is cured within a reasonable time frame based upon the extent and nature of the
breach and the necessary remediation, and in conformity with any applicable
consent order, consensual agreement and applicable law.
 
7.8  Until termination of this Financing Agreement and payment and satisfaction
of all Obligations due hereunder, the Companies agree that, unless the Agent and
the Required Lenders shall have otherwise consented in writing, each of the
Companies will furnish to the Agent: (a) within one hundred twenty (120) days
after the end of each Fiscal Year of the Companies, an audited Consolidated
Balance Sheet as at the close of such year, and statements of profit and loss,
cash flow and reconciliation of surplus of Parent, the Companies and their
subsidiaries for such year, audited by independent public accountants selected
by the Companies and reasonably satisfactory to the Agent; (b) within sixty (60)
days after the end of each Fiscal Quarter a Consolidated Balance Sheet as at the
end of such period and statements of profit and loss, cash flow and surplus of
Parent, the Companies and their subsidiaries, certified by an authorized
financial or accounting officer of the Companies; (c) within thirty (30) days
after the end of each month a Consolidated Balance Sheet as at the end of such
period and statements of profit and loss, cash flow and surplus of the Companies
and all subsidiaries for such period, certified by an authorized financial or
accounting officer of the Companies; (d) from time to time, such further
information regarding the business affairs and financial condition of the
Parent, the Companies and/or any Subsidiaries thereof as the Agent may
reasonably request, including, without limitation (i) the accountant’s
management practice letter and (ii) annual cash flow projections in form
reasonably satisfactory to the Agent. Each financial statement which the
Companies are required to submit hereunder must be accompanied by an officer’s
certificate, signed by the President, Vice President, Controller, or Treasurer,
pursuant to which any one such officer must certify that: (x) the financial
statement(s) fairly and accurately represent(s) each Companies’ financial
condition at the end of the particular accounting period, as well as the
Companies’ operating results during such accounting period, subject to year-end
audit adjustments; and (y) during the particular accounting period: (A) there
has been no Default or Event of Default under this Financing Agreement;
provided, however, that if any such officer has knowledge that any such Default
or Event of Default, has occurred during such period, the existence of and a
detailed description of same shall be set forth in such officer’s certificate;
(B) the Companies have not received any notice of cancellation with respect to
their property insurance policies; (C) the Companies have not received any
notice of an event that could result in a material adverse effect on the value
of the Collateral taken as a whole; and (D) the exhibits attached to such
financial statement(s) constitute detailed calculations showing compliance with
all financial covenants contained in this Financing Agreement.
 
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7.9  Until termination of the Financing Agreement and payment and satisfaction
of all Obligations hereunder, each of the Companies agrees that, without the
prior written consent of the Agent and the Required Lenders (or the prior
written consent of just Agent in the circumstances described in the definition
of “Approved Acquisition”), except as otherwise herein provided, Parent and the
Companies, or any one of them, will not:
 
(a)  Mortgage, assign, pledge, transfer or otherwise permit any lien, charge,
security interest, encumbrance or judgment, (whether as a result of a purchase
money or title retention transaction, or other security interest, or otherwise)
to exist on any of the Collateral or any other assets of Parent or any Company,
whether now owned or hereafter acquired, except for the Permitted Encumbrances;
 
(b)  Incur or create any Indebtedness other than the Permitted Indebtedness and
other than Indebtedness owing to the Agent and the Lenders;
 
(c)  Sell, lease, assign, transfer or otherwise dispose of Collateral or any
other assets of Parent or any Company, except as otherwise specifically
permitted by this Financing Agreement;
 
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(d)  Merge, consolidate or otherwise alter or modify their respective corporate
names, principal places of business, structure, or existence, re-incorporate or
re-organize, or enter into or engage in any operation or activity materially
different from that presently being conducted by the Companies or Parent or any
one of them, except that the Companies may (A) change their corporate name or
address, or (B) a Company may merge with and into any other Company (with a
Company being the survivor of such merger); provided that in any such instance
under (A) or (B) above (i) the Companies shall give the Agent thirty (30) days
prior written notice thereof, and (ii) the Companies shall execute and deliver,
prior to or simultaneously with any such action, any and all documents and
agreements requested by the Agent to confirm the continuation and preservation
of all security interests and liens granted to the Agent, for the benefit of the
Lenders, hereunder;
 
(e)  Assume, guarantee, endorse, or otherwise become liable upon the obligations
of any Person, except by the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business and
except for Indebtedness owing to the Agent and the Lenders;
 
(f)  Declare or pay any dividend or distributions of any kind on, or purchase,
acquire, redeem or retire, any of the Capital Stock of any Company, of any class
whatsoever, whether now or hereafter outstanding; provided, however, each
Company and Parent may declare and pay cash distributions or cash dividends to
the holders of Preferred Stock in the ordinary course of such Person’s business
in an aggregate amount (taking into account all distributions and dividends made
by each Company and Parent) not to exceed $1,500,000.00 in any Fiscal Year,
provided that no Default or Event of Default shall occur immediately prior to
and after giving effect to such cash distributions or cash dividends; or
 
(g)  Make any advance or loan to, or any investment in, any Person or purchase
or acquire all or substantially all of the stock or assets of any Person; or pay
any management, consulting or other similar fees to any Person affiliated with
the Companies.
 
7.10  Until termination of the Financing Agreement and payment and satisfaction
in full of all Obligations hereunder, the Companies, on a consolidated basis,
shall:
 
(a)  Maintain as of the last day of each calendar month, beginning with February
28, 2007, for the twelve calendar month period ending on such day, a Fixed
Charge Coverage Ratio for such period of not less than 1.05 to 1.00.
 
(b)  without the prior written consent of the Agent and the Required Lenders,
the Companies will not:
 
(i)  enter into any Operating Lease if after giving effect thereto the aggregate
obligations with respect to Operating Leases of the Companies during any Fiscal
Year would exceed $3,000,000.00; or
 
(ii)  contract for, purchase, make expenditures for, lease pursuant to a Capital
Lease or otherwise incur obligations with respect to Unfinanced Capital
Expenditures (whether subject to a security interest or otherwise) during any
Fiscal Year in the aggregate amount in excess of $5,000,000.00.
 
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7.11  Each of the Companies agrees to advise the Agent in writing of: (a) all
expenditures (actual or anticipated) in excess of $150,000.00 from the budgeted
amount therefor in any Fiscal Year for (x) environmental clean-up,
(y) environmental compliance or (z) environmental testing and the impact of said
expenses on each of the Companies’ Working Capital; and (b) any notices the
Companies receive from any local, state or federal authority advising the
Companies of any environmental liability (real or potential) stemming from any
of the Companies’ operations, their premises, their waste disposal practices, or
waste disposal sites used by any of the Companies and to provide the Agent with
copies of all such notices if so required.
 
7.12  EACH OF THE COMPANIES HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS THE
AGENT AND THE LENDERS AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS AND AGENTS (EACH AN “INDEMNIFIED PARTY”) FROM, AND HOLDS EACH OF THEM
HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, OBLIGATIONS, CLAIMS, ACTIONS,
DAMAGES, COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEY’S FEES) AND ANY
PAYMENTS MADE BY THE AGENT OR THE LENDERS PURSUANT TO ANY INDEMNITY PROVIDED BY
THE AGENT OR THE LENDERS WITH RESPECT TO OR TO WHICH ANY INDEMNIFIED PARTY COULD
BE SUBJECT INSOFAR AS SUCH LOSSES, LIABILITIES, OBLIGATIONS, CLAIMS, ACTIONS,
DAMAGES, COSTS, FEES OR EXPENSES WITH RESPECT TO THE LOAN DOCUMENTS, INCLUDING
WITHOUT LIMITATION THOSE WHICH MAY ARISE FROM OR RELATE TO: (A) THE DEPOSITORY
ACCOUNT, THE BLOCKED ACCOUNTS, THE LOCKBOX AND/OR ANY OTHER DEPOSITORY ACCOUNT
AND/OR THE AGREEMENTS EXECUTED IN CONNECTION THEREWITH; AND (B) ANY AND ALL
CLAIMS OR EXPENSES ASSERTED AGAINST THE AGENT OR THE LENDERS AS A RESULT OF ANY
ENVIRONMENTAL POLLUTION, HAZARDOUS MATERIAL OR ENVIRONMENTAL CLEAN-UP RELATING
TO THE REAL ESTATE; OR ANY CLAIM OR EXPENSE WHICH RESULTS FROM ANY OF THE
COMPANIES’ OPERATIONS (INCLUDING, BUT NOT LIMITED TO, ANY OF THE COMPANIES’
OFF-SITE DISPOSAL PRACTICES) AND USE OF THE REAL ESTATE, WHICH THE AGENT OR THE
LENDERS MAY SUSTAIN OR INCUR (OTHER THAN SOLELY AS A RESULT OF THE PHYSICAL
ACTIONS OF THE AGENT OR THE LENDERS ON THE COMPANIES’ PREMISES WHICH ARE
DETERMINED TO CONSTITUTE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT BY A COURT OF
COMPETENT JURISDICTION), ALL WHETHER THROUGH THE ALLEGED OR ACTUAL NEGLIGENCE OF
SUCH PERSON OR OTHERWISE, EXCEPT AND TO THE EXTENT THAT THE SAME RESULTS SOLELY
AND DIRECTLY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED
PARTY AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION. THE COMPANIES
HEREBY AGREE THAT THIS INDEMNITY SHALL SURVIVE TERMINATION OF THIS FINANCING
AGREEMENT, AS WELL AS PAYMENT AND SATISFACTION OF OBLIGATIONS WHICH MAY BE DUE
HEREUNDER. THE AGENT, IN ITS SOLE BUSINESS JUDGMENT, MAY ESTABLISH SUCH
AVAILABILITY RESERVES WITH RESPECT THERETO AS IT MAY DEEM ADVISABLE UNDER THE
CIRCUMSTANCES AND, UPON ANY TERMINATION HEREOF, HOLD SUCH RESERVES AS CASH
RESERVES FOR ANY SUCH CONTINGENT LIABILITIES.
 
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7.13  Without the prior written consent of the Agent, the Companies agree that
they will not enter into any transaction, including, without limitation, any
purchase, sale, lease, loan or exchange of property with the Parent or any
subsidiary or affiliate of the Companies or Parent, provided that, except as
otherwise set forth in this Financing Agreement, the Companies or any one of
them may enter into sale, service and other transactions in the ordinary course
of their business and pursuant to the reasonable requirements of any such
Company, and upon standard terms and conditions and fair and reasonable terms,
no less favorable to such Company than such Company could obtain in a comparable
arms length transaction with an unrelated third party, provided further that no
Default or Event of Default exists or will occur hereunder prior to and after
giving effect to any such transaction.
 
7.14  The Companies shall maintain in full force and effect the Eligible Life
Insurance Policy.
 
7.15  In order to induce the Agent and the Lenders to enter into this Agreement
and to make the loans and advances provided for herein, the Companies make, on
or as of the occurrence of each such loan or advance (except to the extent such
representations or warranties relate to an earlier date or are no longer true
and correct in all material respects solely as a result of transactions not
prohibited by the Loan Documents), the following representations and warranties
to the Agent and the Lenders:
 
(a)  Organization and Qualification. Each of each Company and Parent (i) is duly
organized validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and (ii) has the corporate
power to own its property and to carry on its business as now conducted and
(iii) is duly qualified to do business and is in good standing, in each case in
each jurisdiction in which the failure to be so qualified or in good standing
would reasonably be expected to have a material adverse effect.
 
(b)  Authorization and Validity. Each of each Company and Parent has the
corporate power and authority to execute, deliver and perform its obligations
hereunder and under the other Loan Documents to which such Person is a party and
all such action has been duly authorized by all necessary corporate actions on
its part. The Loan Documents to which it is a party have been duly and validly
executed and delivered by each Company and Parent and constitute valid and
legally binding agreements of such Person enforceable in accordance with the
respective terms thereof, except, in each case, as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws relating to or affecting the enforcement of
creditors’ rights generally and general principles of equity.
 
(c)  Consents. No authorization, consent, approval, license or exemption (other
than such that exist under applicable law, that are permitted, or that have been
obtained) of any person or filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, is necessary for the execution, validity, delivery or performance by
any Company or Parent of any Loan Document to which it is a party or for the
grant of a security interest in or mortgage on the Collateral covered by the
applicable Loan Documents, except such matters relating to performance as would
ordinarily be done in the ordinary course of business after the Closing Date.
 
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(d)  Conflicting or Adverse Agreements or Ratifications. Neither the delivery of
the Loan Documents nor compliance with the terms and provisions hereof or
thereof will violate the provisions of, or constitute a default under (i) the
Articles of Incorporation or the Bylaws of any Company or Parent or (ii) any
applicable law or any applicable regulation, order, writ, injunction or decree
of any court or governmental instrumentality or (iii) any material agreement to
which any Company or Parent is a party or by which it is bound or to which it is
subject.
 
(e)  Other Lending Agreements. As of the Closing Date, all agreements of any
Company (other than this Financing Agreement and the other Loan Documents)
relating to Indebtedness are described on Schedule 7(15)(e) hereto.
 
(f)  Title to Assets; Licenses and Permits. Each Company has good title to all
personal property and good and indefeasible title to or a subsisting leasehold
interest in, all real property as reflected as of the Closing Date on its books
and records as being owned or leased by it after giving effect to the
transaction contemplated herein, subject to no Liens except Permitted
Encumbrances. All of such assets are being maintained by the appropriate Person
in good working condition in accordance with industry standards.
 
(g)  Locations of Collateral. All real property owned and leased by any Company
as of the Closing Date on which Collateral is or may be located is set forth in
Schedule 7(15)(g) hereto. All of the Collateral is located on the owned or
leased premises set forth in Schedule 7(15)(g) hereto. Each Company agrees to
give the Agent thirty (30) days prior written notice of (i) any real property
hereafter leased or owned by such Company on which Collateral is or may be
located, and (ii) any change in the location of any Collateral. To the knowledge
of each Company there are no actual, threatened or alleged defaults of a
material nature with respect to any leases or real property under which any
Company or Parent is bound after giving effect to the transaction contemplated
herein. After giving effect to the transactions contemplated herein, each of
each Company and Parent is current and in good standing with respect to all
governmental approvals, permits, certificates, licenses, consents and franchises
necessary to continue to conduct its business and to own or lease and operate
its properties as heretofore conducted, owned, leased or operated except where
any such failure to obtain or maintain approvals, permits, certificates,
licenses, consents and franchises would not have a material adverse effect. In
addition to any of the other reporting requirements contained in this Agreement,
Companies hereby agree upon request by the Agent to supply the Agent with a
current listing of all real property owned or leased by any Company.
 
(h)  Litigation. No proceedings against or affecting any Company or Parent are
pending or, to the knowledge of any Company, threatened before any court or
governmental agency or department which could reasonably be expected to have a
material adverse effect, except as set forth in Schedule 7(15)(h).
 
(i)  No Defaults. As of the Closing Date, none of any Company or Parent is in
default (i) under any material provisions of any instrument evidencing any
Indebtedness or of any agreement relating thereto in such manner as to cause a
material adverse effect, or (ii) in any respect under or in violation of any
order, writ, injunction or decree of any court or governmental instrumentality,
in such manner as to cause a material adverse effect, or (iii) under any
provision of any material contract to which such Person is a party, which
default would reasonably be expected to have a material adverse effect. The
Companies will give the Agent prompt written notice of any event or circumstance
that constitutes such a default and, in any event, will provide Agent upon
receipt with copies of all material notices from landlords or other property
owners with respect to any business location or operation of any Company or
Parent.
 
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(j)  Investment Company Act/Public Utility Holding Company Act. None of any
Company or Parent (i) is, or is directly or indirectly controlled by or acting
on behalf of any person which is, an “investment company,” as such term is
defined in the Investment Company Act of 1940, as amended, or (ii) is a “holding
company” or a “subsidiary company” of a “holding company” within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
 
(k)  ERISA. (i) Each of each Company and Parent and each ERISA Affiliate have
operated and administered each Plan and Employee Plan in compliance with all
applicable laws except for such instances of noncompliance as have not resulted
in and would not reasonably be expected to have a material adverse effect.
Neither any Company nor Parent nor any ERISA Affiliate has incurred any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans (as defined in
Section 3 of ERISA) which would individually or in the aggregate reasonably be
expected to have a material adverse effect and no event, transaction or
condition has occurred or exists that would reasonably be expected to result in
the incurrence of any such liability by any Company or Parent or any ERISA
Affiliate, or in the imposition of any Lien on any of the properties or assets
of any Company or Parent or any ERISA Affiliate, in either case pursuant to
Title I or IV of ERISA or to such penalty or excise tax provisions or to
Section 401(a)(29) or 412 of the Code, other than such liabilities or liens as
would not individually or in the aggregate reasonably be expected to have a
material adverse effect;
 
(i)  No accumulated funding deficiency (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived, exists or is expected to be
incurred with respect to any Plan;
 
(ii)  The Companies and Parent and their ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under Section 4201 or 4204 of ERISA in respect of multiemployer
plans that individually or in the aggregate would reasonably be expected to have
a material adverse effect; and
 
(iii)  The expected post-retirement benefit obligation (determined as of the
last day of a Company’s or of Parent’s, as the case may be, most recently ended
fiscal year in accordance with Financial Accounting Standards Board Statement
No. 106, without regard to liabilities attributable to continuation coverage
mandated by Section 4980B of the Code) of each Company and Parent and its
Subsidiaries would not reasonably be expected to have a material adverse effect.
 
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(l)  Environmental Matters. To the best of each Company’s knowledge, each of
each Company and Parent (a) possesses all environmental, health and safety
licenses, permits, authorizations, registrations, approvals and similar rights
necessary under Environmental Laws for such Person to conduct its operations as
now being conducted, except where failure to have such licenses, permits,
authorizations, registrations, approvals, and similar rights would not
reasonably be expected to have a material adverse effect on such entity, and
(b) each of such licenses, permits, authorizations, registrations, approvals and
similar rights is valid and subsisting, in full force and effect and enforceable
by such Person, and such Person is in compliance with all terms, conditions or
other provisions of such permits, authorizations, regulations, approvals and
similar rights except for such failure or noncompliance that, individually or in
the aggregate for such Person, would not reasonably be expected to have a
material adverse effect. Except as disclosed in Schedule 7(15)(l), no Company
has received any written notices of any violation or noncompliance with, or
remedial obligation under, any Environmental Laws (which violation,
non-compliance, or remedial obligation has not been cured or would not
reasonably be expected to have a material adverse effect) and there are no
writs, injunctions, decrees, orders or judgments outstanding under the
Environmental Laws, or lawsuits, claims, proceedings, or, to the knowledge of
any Company, investigations or inquiries pending or threatened under
Environmental Laws, relating to the ownership, use, condition, maintenance or
operation of, or conduct of business related to, any property owned, leased or
operated by any Company or other assets of any Company other than those
violations, instances of noncompliance, obligations, writs, injunctions,
decrees, orders, judgments, lawsuits, claims, proceedings, investigations or
inquiries that individually or in the aggregate for the Companies, would
reasonably be expected to have a material adverse effect on such Company. Except
as disclosed in Schedule 7(15)(l), there are no obligations, undertakings or
liabilities arising out of or relating to Environmental Laws which any Company
has agreed to, assumed or retained, or to the best of the Companies’ knowledge,
by which any Company is adversely affected, by contract or otherwise, except
such obligations, undertakings or liabilities as would reasonably be expected to
have a material adverse effect on such Company. Except as disclosed in
Schedule 7(15)(l), no Company has received a written notice or claim to the
effect that any of them are or may be liable to any other person as the result
of a release or threatened release of a Hazardous Material except such notice or
claim that would not reasonably be expected to have a material adverse effect.
Each of each Company and Parent has complied with all Environmental Laws and the
requirements of any permits, licenses or other authorizations issued under any
Environmental Laws.
 
(m)  Purpose of Loans. The proceeds of the Revolving Loans and Term Loans will
be used by the Companies for Working Capital and general corporate purposes.
None of the proceeds of any Revolving Loans or Term Loans will be used directly
or indirectly for the purpose of purchasing or carrying any “margin stock”
within the meaning of Regulation U (herein called “margin stock”) or for the
purpose of reducing or retiring any indebtedness which was originally incurred
to purchase or carry margin stock, or for any other purpose which might
constitute this transaction as a “purpose credit” within the meaning of
Regulation U. Neither any Company nor any agent acting on any Company’s behalf
has taken or will take any action which might cause this Agreement or any other
Loan Document to violate, or involve the Agent or the Lenders in a violation of,
Regulation U, Regulation X or any other regulation of the Board of Governors or
to violate the Securities Exchange Act of 1934.
 
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(n) Indebtedness and Contingent Liabilities. The Companies do not have any
outstanding Indebtedness (excluding the loans and advances hereunder) or
material contractually assumed contingent liabilities other than the Permitted
Indebtedness and the endorsement of negotiable instruments in the ordinary
course of business.
 
(o) Security Interest in Favor of the Agent. This Financing Agreement and the
other Loan Documents create a valid security interest in and lien on all of the
Collateral described herein and therein in favor of the Agent, for the benefit
of the Lenders, securing the Obligations and constitute (subject to (i) the
filing of financing statements and (ii) delivery of any Collateral after the
Closing Date as provided herein or any other Loan Document) and, except for the
Permitted Encumbrances, perfected first priority liens and security interests in
all of such Collateral described herein subject to no liens other than the
Permitted Encumbrances.
 
(p) Financial Statements. Prior to the Closing Date, the Companies furnished to
the Agent the audited, consolidated financial statements of the Parent and the
Companies as of December 31, 2005, and the unaudited, consolidated financial
statements of the Parent and the Companies as of the end of each month
thereafter through January 31, 2007 (such financial statements, collectively,
are referred to as “Financials”). The Financials have been prepared in
conformity with GAAP consistently applied and present fairly, in all material
respects, the consolidated financial condition of the Companies as of the date
thereof; provided, however, Agent and Lenders acknowledge that the above
referenced unaudited financial statements do not contain such notes to financial
statements and year-end adjustments as would be present if such financial
statements were audited. Since January 31, 2007, there has not occurred any
event which could reasonably be expected to have a material adverse effect on
any Company or Parent. The Companies have delivered to the Agent the Companies’
internally prepared financial projections on a consolidated basis for the 12
month period commencing on January 1, 2007 (the “Projections”). The Projections
have been prepared in good faith and are based on what the Companies believe to
be a reasonable assessment of the future performance of the Companies at the
time prepared, it being recognized by the Agent and the Lenders that such
Projections as they related to future events are not to be viewed as fact and
that actual results during the period or periods covered thereby may differ from
the Projections by a material amount.
 
(q) Subsidiaries. Except as disclosed on Schedule 7(15)(q) hereto, as of the
Closing Date, the Companies do not have any Subsidiaries and are not a party to
any joint venture, partnership, or similar organization.
 
(r) Intellectual Property. All Patents, Trademarks and Copyrights which any of
the Companies or their Subsidiaries owns or has a license or other right to use
in connection with manufacturing or selling its Inventory or otherwise
conducting such Company’s business are listed on Schedule 7(15)(r) hereto. Each
Company will give the Agent prompt written notice of any Patent, Trademark or
Copyright owned, acquired or licensed hereafter by such Company or any of such
Company’s Subsidiaries.
 
7.16 At the request of the Agent at any time and from time to time, each Company
shall, at its expense, duly execute and deliver, or cause to be duly executed
and delivered, such further agreements, documents and instruments, and do or
cause to be done such further acts as may be necessary or proper to evidence,
perfect, maintain and enforce the Agent’s security interest and the priority
thereof in the Collateral and to otherwise effectuate the provisions or purposes
of this Agreement or any of the other Loan Documents.
 
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7.17 The Companies agree, at Companies’ expense:
 
(a) As soon as possible, but in no event later than the 30th day after the
Closing Date, to deliver to Agent all the original certificates of title as to
all titled Equipment owned by Company, together with such other documents,
certificates and items as shall be needed from Companies in order for Agent to
get a lien in favor of itself for the benefit of itself and Lenders notated on
each certificate of title.
 
(b) As soon as possible, but in no event later than the 45th day after the
Closing Date, to deliver to Agent the title insurance policies committed to in
the title insurance commitments described in Paragraph 2.1(p) of Section 2 of
this Financing Agreement.
 
(c) As soon as possible, but in no event later than the 60th day after the
Closing Date, deliver to Agent, as to each parcel of Real Estate in which
pursuant to the Sterling Intercreditor Agreement the lien therein of Sterling is
to be superior to the lien therein of Agent, either commitments for mortgagee
title insurance policy similar in scope, terms and provisions to those described
in Paragraph 2.1(p) of Section 2 of this Financing Agreement (except that
Sterling has a first lien in such Real Estate) or, if expressly consented to by
Agent, abstractor’s certificates or such other form of evidence as to title to
and encumbrances against such Real Estate as shall be acceptable to Agent, in
its sole discretion, with each such commitment or abstractor’s certificate or
other form of evidence to be satisfactory to Agent.
 
(d) As soon as possible, but in no event later than the 60th day after the
Closing Date, deliver to Agent evidence satisfactory to Agent that UCC-3
terminations (or, if applicable and acceptable to Agent, UCC-3 partial releases)
have been filed as to (i) the filing with the Texas Secretary of State in favor
of Alon USA, LP against all assets of Eddins-Walcher Company, (ii) the six
filings with the Oklahoma Secretary of State in favor of Legacy Bank as to all
assets of Clark Oil Company dba Great Plains Rent-All, and (iii) the two filings
with the Texas Secretary of State in favor of State National Bank of Big Spring
as to all assets of Ackerly Oil Company, Inc.
 
SECTION 8.      Interest, Fees and Expenses
 
8.1 (a) Interest on the Revolving Loans shall be payable monthly on the first
day of each month. Base Rate Loans shall accrue interest at a per annum rate
equal to the lesser of (i) the Maximum Legal Rate, and (ii) the Base Rate plus
the Applicable Base Rate Margin for Revolving Loans on the average of the net
balances owing by the Companies to the Agent and the Lenders in their Revolving
Loan Accounts at the close of each day during the immediately preceding month.
In the event of any change in said Base Rate, the rate hereunder for Base Rate
Loans shall change, as of the date of such change, so as to remain the lesser of
(i) the Maximum Legal Rate, and (ii) an amount equal to the sum of the
Applicable Base Rate Margin plus the Base Rate. The rate hereunder for Base Rate
Loans shall be calculated based on a 360-day year. The Agent, on behalf of the
Lenders, shall be entitled to charge each such Companies’ Revolving Loan Account
at the rate provided for herein when due until all Obligations have been paid in
full.
 
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(b) Notwithstanding any provision to the contrary contained in this Section 8,
in the event that the sum of (i) the outstanding Revolving Loans and (ii) the
outstanding Letters of Credit exceed the lesser of either (x) the maximum
aggregate amount available under Sections 3 and 5 hereof or (y) the Revolving
Line of Credit: (A) as a result of Revolving Loans advanced by the Agent and the
Lenders at the request of the Companies or any one of them (herein “Requested
Overadvances”), for any one (1) or more days in any month or (B) for any other
reason whatsoever (herein “Other Overadvances”) and such Other Overadvances
continue for five (5) or more days in any month, the average net balance of all
Revolving Loans for such month shall bear interest at the Overadvance Rate.
 
(c) Interest on the outstanding principal balance of each Term Loan shall be
payable monthly on the first day of each month. Base Rate Loans shall accrue
interest at a per annum rate equal to the lesser of (i) the Maximum Legal Rate
and (ii) the Base Rate plus the Applicable Base Rate Margin for Term Loans. In
the event of any change in said Base Rate, the rate hereunder for Base Rate
Loans shall change, as of the date of such change, so as to remain the lesser of
(i) the Maximum Legal Rate and (ii) an amount equal to sum of the Applicable
Base Rate Margin plus the Base Rate. The rate hereunder for Base Rate Loans
shall be calculated based on a 360-day year. The Agent, on behalf of Lenders,
shall be entitled to charge each such Companies’ Revolving Loan Account at the
rate provided for herein when due until all Obligations have been paid in full.
 
(d) Upon the occurrence and during the continuance of an Event of Default and
the giving of any required notice by the Agent in accordance with the provisions
of Paragraph 10.2 of Section 10 hereof, all Obligations shall bear interest at
the Default Rate of Interest.
 
8.2 [Reserved.]
 
8.3 In consideration of the Letter of Credit Guaranty of the Agent, the
Companies shall pay the Agent, for the benefit of the Lenders, the Letter of
Credit Guaranty Fee, which shall be an amount equal to (a) two and one-half
percent (2.50%) on the face amount of each documentary Letter of Credit payable
upon issuance thereof and (b) two and one-half percent (2.50%) per annum,
payable monthly, on the face amount of each standby Letter of Credit less the
amount of any and all amounts previously drawn under such standby Letter of
Credit.
 
8.4 Any and all charges, fees, commissions, costs and expenses charged to the
Agent for the Companies’ account by any Issuing Bank in connection with, or
arising out of, Letters of Credit or out of transactions relating thereto will
be charged to the Revolving Loan Account in full when charged to, or paid by the
Agent or the Lenders, or as may be due upon any termination of this Financing
Agreement, and when made by any such Issuing Bank shall be conclusive on the
Agent and the Lenders.
 
8.5 Each of the Companies shall reimburse or pay the Agent for its own account,
as the case may be, for: (a) all Out-of-Pocket Expenses and (b) any applicable
Documentation Fee.
 
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8.6 Upon the first Business Day of each month, commencing on April 1, 2007, the
Companies shall pay to the Agent, for the benefit of the Lenders, the Line of
Credit Fee. For purposes of calculating the amount of the Line of Credit Fee,
all Swingline Loans shall be included and the amount of such Swingline Loans
shall be deemed to have been advanced by CIT.
 
8.7 [Reserved.]
 
8.8 Companies shall pay to the Agent for its own account, in such amounts and at
such times as are specified in the Fee Letter, the fees specified in the Fee
Letter.
 
8.9 The Companies shall pay the Agent’s standard charges and fees for the
Agent’s personnel used by the Agent for reviewing the books and records of the
Companies and for verifying, testing, protecting, safeguarding, preserving or
disposing of all or any part of the Collateral (which fees shall be in addition
to any fees specified in the Fee Letter and any Out-of-Pocket Expenses), which
fees shall include, without limitation, the Agent’s then standard daily charge
per employee or agent of the Agent for each day such employee or agent shall be
engaged in such review, verification, testing, protection, safeguarding,
preservation or disposition, plus travel, lodging and similar expenses.
 
8.10 Each of the Companies hereby authorizes the Agent to charge their
respective Revolving Loan Account(s) with the amount of all their Obligations
due hereunder as such payments become due. The Companies hereby confirm and
agree that they shall promptly pay any Obligations due hereunder to the Agent
and the Lenders upon the Agent’s request therefor. Each of the Companies
confirms that (a) its liability for any and all of the fee obligations
(including without limitation, those set forth in Paragraph 8.3 and
Paragraphs 8.6 through 8.9 above) and Out-of-Pocket Expenses, set forth in this
Financing Agreement and in any of the other Loan Documents is joint and several,
(b) the Companies, as between themselves, shall determine how to pro-rate any
such payments due hereunder, and (c) for ease of administration, the Agent may
charge any of their Revolving Loan Accounts with the amount of any such fee
payments and any such charges which the Agent may so make to any of the
Companies’ Revolving Loan Account(s) as herein provided will be made as an
accommodation to the Companies and solely at the Agent’s discretion.
 
8.11 In the event that any Lender shall have determined in the exercise of its
reasonable business judgment that, subsequent to the Closing Date, any change in
applicable law, rule, regulation or guideline regarding capital adequacy, or any
change in the interpretation or administration thereof, or compliance by such
Lender with any new request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on such
Lender’s capital as a consequence of its obligations hereunder to a level below
that which such Lender could have achieved but for such adoption, change or
compliance (taking into consideration such Lender’s policies with respect to
capital adequacy) by an amount reasonably deemed by such Lender to be material,
then, from time to time, the Companies shall pay to such Lender no later than
five (5) days following demand from such Lender such additional amount or
amounts as will compensate such Lender’s for such reduction. In determining such
amount or amounts, such Lender may use any reasonable averaging or attribution
methods. The protection of this Paragraph 8.11 shall be available to such Lender
regardless of any possible contention of invalidity or inapplicability with
respect to the applicable law, regulation or condition. A certificate of such
Lender setting forth such amount or amounts as shall be necessary to compensate
such Lender with respect to this Section 8 and the calculation thereof when
delivered to the Companies shall be conclusive on the Companies absent manifest
error. Notwithstanding anything in this paragraph to the contrary, in the event
such Lender has exercised its rights pursuant to this paragraph, and subsequent
thereto determines that the additional amounts paid by the Companies in whole or
in part exceed the amount which such Lender actually required to be made whole,
the excess, if any, shall be returned to the Companies by such Lender, as
applicable.
 
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8.12 In the event that any applicable law, treaty or governmental regulation, or
any change therein or in the interpretation or application thereof, or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other financial, monetary or other
authority, shall:
 
(a) subject any Lender to any tax of any kind whatsoever with respect to this
Financing Agreement or change the basis of taxation of payments to such Lender
of principal, fees, interest or any other amount payable hereunder or under any
other Loan Document (except for changes in the rate of tax on the overall net
income of such Lender by the federal government or the jurisdiction in which it
maintains its principal office);
 
(b) impose, modify or hold applicable any reserve, special deposit, assessment
or similar requirement against assets held by, or deposits in or for the account
of, advances or loans by, or other credit extended by any Lender by reason of or
in respect to this Financing Agreement and the Loan Documents, including
(without limitation) pursuant to Regulation D of the Board of Governors of the
Federal Reserve System; or
 
(c) impose on any Lender any other condition with respect to this Financing
Agreement or any other Loan Document, and the result of any of the foregoing is
to increase the cost to such Lender of making, renewing or maintaining its loans
hereunder by an amount that such Lender deems to be material in the exercise of
its reasonable business judgment or to reduce the amount of any payment (whether
of principal, interest or otherwise) in respect of any of the loans by an amount
that such Lender deems to be material in the exercise of its reasonable business
judgment, then, in any case the Companies shall pay such Lender, within five (5)
days following its demand, such additional cost or such reduction, as the case
may be. Such Lender shall certify the amount of such additional cost or reduced
amount to the Companies and the calculation thereof and such certification shall
be conclusive upon the Companies absent manifest error. Notwithstanding anything
in this paragraph to the contrary, in the event such Lender has exercised its
rights pursuant to this paragraph, and subsequent thereto determine that the
additional amounts paid by the Companies in whole or in part exceed the amount
which such Lender actually required pursuant hereto, the excess, if any, shall
be returned to the Companies by such Lender.
 
8.13 The Companies may request LIBOR Loans on the following terms and
conditions:
 
(a) The Companies may elect from time to time (i) to request any loan made
hereunder to be a LIBOR Loan as of the date of such loan or (ii) to convert Base
Rate Loans to LIBOR Loans, and may elect from time to time to convert LIBOR
Loans to Base Rate Loans by giving the Agent at least three (3) Business Days’
prior irrevocable notice of such election, provided that any such conversion of
LIBOR Loans to Base Rate Loans shall only be made, subject to the second
following sentence, on the last day of an Interest Period with respect thereto.
Should the Companies elect to convert Base Rate Loans to LIBOR Loans, it shall
give the Agent at least four Business Days’ prior irrevocable notice of such
election. If the last day of an Interest Period with respect to a loan that is
to be converted is not a Business Day or Working Day, then such conversion shall
be made on the next succeeding Business Day or Working Day, as the case may be,
and during the period from such last day of an Interest Period to such
succeeding Business Day, as the case may be, such loan shall bear interest as if
it were a Base Rate Loan. All or any part of outstanding Base Rate Loans
outstanding may be converted to LIBOR Loans as provided herein, provided that
partial conversions shall be in multiples in an aggregate principal amount of
$500,000 or more.
 
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(b) Any LIBOR Loans may be continued as such upon the expiration of an Interest
Period, provided the Companies so notify the Agent, at least three (3) Business
Days’ prior to the expiration of said Interest Period, and provided further that
no LIBOR Loan may be continued as such upon the occurrence of any Default or
Event of Default under this Financing Agreement, but shall be automatically
converted to a Base Rate Loan on the last day of the Interest Period during
which occurred such Default or Event of Default. Absent such notification, LIBOR
Rate Loans shall convert to Base Rate Loans on the last day of the applicable
Interest Period. Each notice of election, conversion or continuation furnished
by the Companies pursuant hereto shall specify whether such election, conversion
or continuation is for a one, two, or three month period. Notwithstanding
anything to the contrary contained herein, neither the Agent nor any Lender,
shall be required to purchase United States Dollar deposits in the London
interbank market or from any other applicable LIBOR Rate market or source or
otherwise “match fund” to fund LIBOR Rate Loans, but any and all provisions
hereof relating to LIBOR Rate Loans shall be deemed to apply as if the Agent and
any Lender had purchased such deposits to fund any LIBOR Rate Loans.
 
(c) The Companies may request a LIBOR Loan, convert any Base Rate Loan or
continue any LIBOR Loan provided there is then no Default or Event of Default in
effect.
 
8.14 (a) The LIBOR Loans shall bear interest for each Interest Period with
respect thereto on the unpaid principal amount thereof at a rate per annum equal
to the lesser of (i) the Maximum Legal Rate, or (ii) the LIBOR determined for
each Interest Period in accordance with the terms hereof plus the Applicable
LIBOR Margin.
 
(b) If all or a portion of the outstanding principal amount of the LIBOR Loans
shall not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such outstanding principal amount shall be converted to a Base Rate
Loan at the end of the last Interest Period therefor.
 
(c) The Companies may not have more than three (3) LIBOR Loans outstanding at
any given time.
 
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8.15 (a) Interest in respect of the LIBOR Loans shall be calculated on the basis
of a 360 day year and shall be payable as of the end of each month.
 
(b) The Agent shall, at the request of the Companies, deliver to the Companies a
statement showing the quotations given by JPMorgan Chase Bank and the
computations used in determining any interest rate pursuant to Paragraph 8.14 of
Section 8 hereof.
 
8.16 As further set forth in Paragraph 8.12 above, in the event that the Agent
or any Lender shall have determined in the exercise of its reasonable business
judgment (which determination shall be conclusive and binding upon the
Companies) that by reason of circumstances affecting the interbank LIBOR market,
adequate and reasonable means do not exist for ascertaining LIBOR applicable for
any Interest Period with respect to: (a) a proposed loan that the Companies have
requested be made as a LIBOR Loan; (b) a LIBOR Loan that will result from the
requested conversion of a Base Rate Loan into a LIBOR Loan; or (c) the
continuation of LIBOR Loans beyond the expiration of the then current Interest
Period with respect thereto, the Agent shall forthwith give written notice of
such determination to the Companies at least one day prior to, as the case may
be, the requested borrowing date for such LIBOR Loan, the conversion date of
such Base Rate Loan or the last day of such Interest Period. If such notice is
given (i) any requested LIBOR Loan shall be made as a Base Rate Loan, (ii) any
Base Rate Loan that was to have been converted to a LIBOR Loan shall be
continued as a Base Rate Loan, and (iii) any outstanding LIBOR Loan shall be
converted, on the last day of then current Interest Period with respect thereto,
to a Base Rate Loan. Until such notice has been withdrawn by the Agent, no
further LIBOR Loan shall be made nor shall the Companies have the right to
convert a Base Rate Loan to a LIBOR Loan.
 
8.17 If any payment on a LIBOR Loan becomes due and payable on a day other than
a Business Day or Working Day, the maturity thereof shall be extended to the
next succeeding Business Day or Working Day unless the result of such extension
would be to extend such payment into another calendar month in which event such
payment shall be made on the immediately preceding Business Day or Working Day.
 
8.18 Notwithstanding any other provisions herein, if any law, regulation, treaty
or directive or any change therein or in the interpretation or application
thereof, shall make it unlawful for any Lender to make or maintain LIBOR Loans
as contemplated herein, the then outstanding LIBOR Loans, if any, shall be
converted automatically to Base Rate Loans as of the end of such month, or
within such earlier period as required by law. The Companies hereby agree
promptly to pay any Lender, upon demand, any additional amounts necessary to
compensate such Lender for any costs incurred by such Lender in making any
conversion in accordance with this Section 8 including, but not limited to, any
interest or fees payable by such Lender to lenders of funds obtained by such
Lender in order to make or maintain LIBOR Loans hereunder.
 
8.19 The Companies agree to indemnify and to hold each Lender harmless from any
loss or expense which such Lender may sustain or incur as a consequence of:
(a) Default by the Companies in payment of the principal amount of or interest
on any LIBOR Loans, as and when the same shall be due and payable in accordance
with the terms of this Financing Agreement, including, but not limited to, any
such loss or expense arising from interest or fees payable by such Lender to
lenders of funds obtained by such Lender in order to maintain the LIBOR Loans
hereunder; (b) Default by the Companies in making a borrowing or conversion
after the Companies have given a notice in accordance with Paragraph 8.13 of
Section 8 hereof; (c) any prepayment of LIBOR Loans on a day which is not the
last day of the Interest Period applicable thereto (other than a prepayment
caused by the Swingline Lender’s election to settle a Swingline Loan on a date
that is not the last day of an Interest Period), including, without limitation,
prepayments arising as a result of the application of the proceeds of Collateral
to the Revolving Loans; and (d) Default by the Companies in making any
prepayment after the Companies have given notice to the Agent thereof. The
determination by any Lender of the amount of any such loss or expense, when set
forth in a written notice to the Companies, containing such Lenders’
calculations thereof in reasonable detail, shall be conclusive on the Companies
in the absence of manifest error. Calculation of all amounts payable under this
paragraph with regard to LIBOR Loans shall be made as though such Lender had
actually funded the LIBOR Loans through the purchase of deposits in the relevant
market and currency, as the case may be, bearing interest at the rate applicable
to such LIBOR Loans in an amount equal to the amount of the LIBOR Loans and
having a maturity comparable to the relevant interest period; provided, however,
that each Lender may fund each of the LIBOR Loans in any manner such Lender sees
fit and the foregoing assumption shall be used only for calculation of amounts
payable under this paragraph. In addition, notwithstanding anything to the
contrary contained herein, the Agent shall apply all proceeds of Collateral and
all other amounts received by it from or on behalf of the Companies
(i) initially to the Base Rate Loans and (ii) subsequently to LIBOR Loans;
provided, however, (x) upon the occurrence of an Event of Default or (y) in the
event the aggregate amount of outstanding LIBOR Rate Loans exceeds Availability
or the applicable maximum levels set forth therefor, the Agent may apply all
such amounts received by it to the payment of Obligations in such manner and in
such order as the Agent may elect in its reasonable business judgment. In the
event that any such amounts are applied to Revolving Loans which are LIBOR
Loans, such application shall be treated as a prepayment of such loans and each
Lender shall be entitled to indemnification hereunder. This covenant shall
survive termination of this Financing Agreement and payment of the outstanding
Obligations.
 
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8.20 Notwithstanding anything to the contrary in this Agreement, in the event
that, by reason of any Regulatory Change (for purposes hereof “Regulatory
Change” shall mean, with respect to any Lender, any change after the date of
this Financing Agreement in United States federal, state or foreign law or
regulations (including, without limitation, Regulation D) or the adoption or
making after such date of any interpretation, directive or request applying to a
class of banks including any Lender of or under any United States federal, state
or foreign law or regulations (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful), such Lender
either (a) incurs any material additional costs based on or measured by the
excess above a specified level of the amount of a category of deposits or other
liabilities of such bank which includes deposits by reference to which the
interest rate on LIBOR Loans is determined as provided in this Financing
Agreement or a category of extensions of credit or other assets of such Lender
which includes LIBOR Loans, or (b) becomes subject to any material restrictions
on the amount of such a category of liabilities or assets which it may hold,
then, if such Lender so elects by notice to the Companies, the obligation of
such Lender to make or continue, or to convert Base Rate Loans into LIBOR Loans
hereunder shall be suspended until such Regulatory Change ceases to be in
effect.
 
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8.21 For purposes of this Financing Agreement and Section 8 hereof, any
reference to the Agent and any Lender shall include any financial institution
which may become a new Lender or participant of any Lender subsequent to the
Closing Date.
 
8.22 In no event shall the rates of interest hereunder exceed the Maximum Legal
Rate. In the event that any of the contract rates computed pursuant to Section 8
hereof would exceed the Maximum Legal Rate, the rate of interest under this
Financing Agreement for any such period shall be limited to the Maximum Legal
Rate, but any subsequent reductions in the applicable contract rate shall not
reduce the rates of interest under this Financing Agreement below the Maximum
Legal Rate until the total amount of interest charged hereunder equals the
amount of interest that would have been charged had the applicable contract rate
been charged at all times.
 
SECTION 9.      Powers
 
Each Company hereby constitutes the Agent, or any person or agent the Agent may
designate, as its attorney-in-fact, at each Companies’ cost and expense, to
exercise all of the following powers, which being coupled with an interest,
shall be irrevocable until all Obligations to the Agent and the Lenders have
been paid in full:
 
(a) To receive, take, endorse, sign, assign and deliver, all in the name of the
Agent or the Companies or any one of them, any and all checks, notes, drafts,
and other documents or instruments relating to the Collateral;
 
(b) To receive, open and dispose of all mail addressed to the Companies or any
one of them and to notify postal authorities to change the address for delivery
thereof to such address as the Agent may designate;
 
(c) To request from customers indebted on Accounts at any time, in the name of
the Agent information concerning the amounts owing on the Accounts;
 
(d) To request from customers indebted on Accounts at any time, in the name of
the Companies or any one of them, in the name of certified public accountant
designated by the Agent or in the name of the Agent’s designee, information
concerning the amounts owing on the Accounts;
 
(e) To transmit to customers indebted on Accounts notice of the Agent’s interest
therein and to notify customers indebted on Accounts to make payment directly to
the Agent for the Companies’ account; and
 
(f) To take or bring, in the name of the Agent, the Lenders, or the Companies or
any one of them, all steps, actions, suits or proceedings deemed by the Agent
necessary or desirable to enforce or effect collection of the Accounts.
 
Notwithstanding anything hereinabove contained to the contrary, the powers set
forth in (b), (c), (e) and (f) above may only be exercised after the occurrence
of an Event of Default and until such time as such Event of Default is waived in
writing by the Agent and the Required Lenders.
 
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SECTION 10.    Events of Default and Remedies
 
10.1 Notwithstanding anything hereinabove to the contrary, the Agent may, and
upon the request of the Required Lenders shall, terminate this Financing
Agreement immediately upon the occurrence of any of the following (each of which
is herein referred to as an “Event of Default”):
 
(a) cessation of the business of any Company or any Guarantor, or the calling of
a meeting of the creditors of any Company or any Guarantor for purposes of
compromising the debts and obligations of such Company or such Guarantor;
 
(b) the failure of any Company or any Guarantor to generally meet its debts as
they mature;
 
(c) (i) the commencement by any Company or any Guarantor of any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar proceedings
under any federal or state law; (ii) the commencement against any Company or any
Guarantor of any bankruptcy, insolvency, arrangement, reorganization,
receivership or similar proceeding under any federal or state law by creditors
of such Company or such Guarantor, provided that such commencement of such
proceeding shall not be deemed an Event of Default if such proceeding is
controverted within ten (10) days and dismissed and vacated within thirty (30)
days of commencement, except in the event that any of the actions sought in any
such proceeding shall occur or any Company or any Guarantor shall take action to
authorize or effect any of the actions in any such proceeding; or (iii) the
commencement (x) by any Company’s subsidiaries, or any one of them, of any
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceeding under any applicable state law, or (y) against any Company’s
subsidiaries, or any one of them, of any involuntary bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceeding under applicable
law, provided that such commencement of proceeding shall not be deemed an Event
of Default if such proceeding is controverted within ten (10) days and dismissed
or vacated within thirty (30) days of commencement, except in the event that any
of the actions sought in any such proceeding shall occur or any Company’s
subsidiaries, shall take action to authorize or effect any of the actions in any
such proceeding;
 
(d) breach by any Company of any warranty, representation or covenant contained
herein (other than those referred to in subparagraph (e) below), provided that
such Default by any Company of any of the warranties, representations or
covenants referred in this clause (d) shall not be deemed to be an Event of
Default unless and until such Default shall remain unremedied to the Required
Lender’s satisfaction for a period of ten (10) Business Days from the date of
such breach;
 
(e) breach by any Company of any warranty, representation or covenant of
Paragraphs 3.3 (other than the fourth sentence of Paragraph 3.3) and 3.4 of
Section 3 hereof; Paragraphs 6.3 and 6.4 (other than the first sentence of
Paragraph 6.4) of Section 6 hereof; Paragraphs 7.1, 7.4, 7.5, 7.6, and 7.8
through 7.16 of Section 7 hereof;
 
(f) failure of the Companies, or any one of them, to pay any of the Obligations
within five (5) Business Days of the due date thereof, provided that nothing
contained herein shall prohibit the Agent from charging such amounts to the
Revolving Loan Account on the due date thereof;
 
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(g) any Company or any Guarantor shall (i) engage in any “prohibited
transaction” as defined in ERISA, (ii) have any “accumulated funding deficiency”
as defined in ERISA, (iii) have any “reportable event” as defined in ERISA,
(iv) terminate any “plan”, as defined in ERISA or (v) be engaged in any
proceeding in which the Pension Benefit Guaranty Corporation shall seek
appointment, or is appointed, as trustee or administrator of any “plan”, as
defined in ERISA, and with respect to this subparagraph (h) such event or
condition (x) remains uncured for a period of thirty (30) days from date of
occurrence and (y) could, in the reasonable opinion of the Agent, subject any
Company or any Guarantor to any tax, penalty or other liability material to the
business, operations or financial condition of any such Company or such
Guarantor;
 
(h) without the prior written consent of the Agent and the Required Lenders and,
except as permitted in the Subordination Agreement or the Sterling Intercreditor
Agreement, as the case may be, the Companies or any one of them shall (x) amend
or modify the Subordinated Debt, or (y) make any payment on account of the
Subordinated Debt or (z) amend or modify the Sterling Term Loan Documentation;
 
(i) the occurrence of any event of default (after giving effect to any
applicable grace or cure periods), (x) under any of the Sterling Term Loan
Documentation, or (y) under any instrument or agreement evidencing
(A) Subordinated Debt or (B) any other Indebtedness of the Companies or any one
of them having a principal amount in excess of $250,000;
 
(j) any Guarantor terminates its respective Guaranty or otherwise fails to
perform any of the terms of its respective Guaranty, all prior to termination of
this Financing Agreement and payment in full of all Obligations;
 
(k) any judgment or judgments aggregating in excess of $250,000.00, is obtained
against any Company or any Guarantor and remains unstayed, unvacated and
unsatisfied for more than ten (10) Business Days;
 
(l) the occurrence of any other default or event of default under any other Loan
Document or in any other written agreement between any Company and/or any
Guarantor and the Agent;
 
(m) without the prior written consent of the Agent and the Required Lenders,
make any payment on account of the Sterling Term Loan if such payment is
prohibited by the provisions of the Sterling Intercreditor Agreement; or
 
(n) unless consented to in writing by the Agent and the Required Lenders, any of
the stock of either of the Companies held (directly or indirectly) by Parent is
transferred.
 
 
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10.2 Upon the occurrence of a Default and/or an Event of Default, at the option
of the Agent or the Required Lenders, all loans, advances and extensions of
credit provided for in Sections 3, 4 and 5 hereof shall be thereafter in the
Agent’s and the Lenders’ discretion and the obligation of the Agent and the
Lenders to make Revolving Loans and Acquisition Term Loans, open Letters of
Credit and provide Letters of Credit Guaranties, shall cease unless such Default
is cured to the Agent’s and the Required Lenders’ satisfaction or such Event of
Default is waived in writing by the Agent and the Required Lenders, and at the
option of the Agent or the Required Lenders upon the occurrence of an Event of
Default: (a) all Obligations shall become immediately due and payable; (b) the
Agent and the Lenders may charge the Companies the Default Rate of Interest on
all then outstanding or thereafter incurred Obligations in lieu of the interest
provided for in Section 8 hereof, provided that, with respect to this
clause ”(b)” the Agent has given the Companies written notice of the Event of
Default; provided, however, that no notice is required if the Event of Default
is the Event of Default listed in Paragraph 10.1(c) of this Section 10; and
further provided, however, the Default Rate of Interest shall cease to be
charged if the Event of Default is no longer continuing; (c) the Agent or the
Required Lenders may immediately terminate this Financing Agreement upon notice
to the Companies; provided, however, that upon the occurrence of an Event of
Default listed in Paragraph 10.1(c) of this Section 10, this Financing Agreement
shall automatically terminate and all Obligations shall become due and payable,
without any action, declaration, notice or demand by the Agent or the Lenders;
(d) the Agent may surrender for cash the Eligible Life Insurance Policy; and
(e) the Agent may apply any portion or all of the Eligible Cash Collateral to
the Obligations and the portions so applied will thereafter not constitute
“Eligible Cash Collateral” for purposes of the definition of “Borrowing Base”
under this Financing Agreement. The exercise of any option is not exclusive of
any other option, which may be exercised at any time by the Agent and/or the
Required Lenders. Notwithstanding the foregoing, (i) the Agent and the Required
Lenders have the right to determine, in their discretion, that the occurrence of
any of the events described in Section 10.1 herein shall not otherwise
constitute an Event of Default under this Agreement; provided, however, the
Agent and the Required Lenders shall have no obligation or duty of any kind or
type to make such a determination, any such determination to be in the
discretion of the Agent and the Required Lenders, and any such determination by
the Agent and the Required Lenders must be in writing, and (ii) the Agent and
the Required Lenders have the right at any time and from time to time to waive
any Event of Default.
 
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10.3 Immediately upon the occurrence of any Event of Default, the Agent may, at
its option, and the Agent shall, upon the request of the Required Lenders, to
the extent permitted by law: (a) remove from any premises where same may be
located any and all books and records, computers, electronic media and software
programs associated with any Collateral (including any electronic records,
contracts and signatures pertaining thereto), documents, instruments, files and
records, and any receptacles or cabinets containing same, relating to the
Accounts, or the Agent may use, at the Companies’ expense, such of the
Companies’ personnel, supplies or space at the Companies’ places of business or
otherwise, as may be necessary to properly administer and control the Accounts
or the handling of collections and realizations thereon; (b) bring suit, in the
name of the Companies or the Lenders, or the Agent on behalf of the Lenders, and
generally shall have all other rights respecting said Accounts, including
without limitation the right to: accelerate or extend the time of payment,
settle, compromise, release in whole or in part any amounts owing on any
Accounts and issue credits in the name of the Companies or the Agent, on behalf
of the Lenders; (c) sell, assign and deliver the Collateral and any returned,
reclaimed or repossessed Inventory, with or without advertisement, at public or
private sale, for cash, on credit or otherwise, at the Agent’s sole option and
discretion, and the Agent, on behalf of the Lenders, may bid or become a
purchaser at any such sale, free from any right of redemption, which right is
hereby expressly waived by the Companies; (d) foreclose the security interest in
the Collateral created herein or by the Loan Documents by any available judicial
procedure, or to take possession of any or all of the Collateral, including any
Real Estate, Inventory, Equipment and/or Other Collateral without judicial
process, and to enter any premises where any Inventory and Equipment and/or
Other Collateral may be located for the purpose of taking possession of or
removing the same, and (e) exercise any other rights and remedies provided in
law, in equity, by contract or otherwise. The Agent shall have the right,
without notice or advertisement, to sell, lease, or otherwise dispose of all or
any part of the Collateral, whether in its then condition or after further
preparation or processing, in the name of the Companies or the Agent, on behalf
of the Lenders, or in the name of such other party as the Agent may designate,
either at public or private sale or at any broker’s board, in lots or in bulk,
for cash or for credit, with or without warranties or representations (including
but not limited to warranties of title, possession, quiet enjoyment and the
like), and upon such other terms and conditions as the Agent in its sole
discretion may deem advisable, and (if requested to by the Required Lenders) the
Agent shall have the right to purchase at any such sale on behalf of the
Lenders. If any Inventory and Equipment shall require rebuilding, repairing,
maintenance or preparation, the Agent shall have the right, at its option, to do
such of the aforesaid as is necessary, for the purpose of putting the Inventory
and Equipment in such saleable form as the Agent shall deem appropriate and any
such costs shall be deemed an Obligation hereunder. Any action taken by the
Agent pursuant to this paragraph shall not effect commercial reasonableness of
the sale. The Companies agree, at the request of the Agent, to assemble the
Inventory and Equipment and to make it available to the Agent at premises of the
Companies or elsewhere and to make available to the Agent the premises and
facilities of the Companies for the purpose of the Agent’s taking possession of,
removing or putting the Inventory and Equipment in saleable form. If notice of
intended disposition of any Collateral is required by law, it is agreed that ten
(10) days notice shall constitute reasonable notification and full compliance
with the law. The net cash proceeds resulting from the Agent’s exercise of any
of the foregoing rights, (after deducting all charges, costs and expenses,
including reasonable attorneys’ fees) shall be applied by the Agent to the
payment of the Obligations as set forth below in Paragraph 10.4 of Section 10,
whether due or to become due, in such order as the Agent may elect, and the
Companies shall remain liable to the Agent and the Lenders for any deficiency,
and the Agent in turn agrees to remit to the Companies or their successors or
assigns, any surplus resulting therefrom; provided, however, that if there exist
at such time unpaid liabilities owed by any Company to a Lender and secured by a
security interest or lien described in clause (k) of the definition of
“Permitted Encumbrances”, the Companies irrevocably authorize the Agent to remit
to such Lender the amount of any surplus necessary to satisfy such liabilities.
The enumeration of the foregoing rights is not intended to be exhaustive and the
exercise of any right shall not preclude the exercise of any other rights, all
of which shall be cumulative. EACH COMPANY HEREBY INDEMNIFIES THE AGENT AND THE
LENDERS AND HOLDS THE AGENT AND THE LENDERS HARMLESS FROM ANY AND ALL COSTS,
EXPENSES, CLAIMS, LIABILITIES, OUT-OF-POCKET EXPENSES OR OTHERWISE, INCURRED OR
IMPOSED ON THE AGENT AND THE LENDERS BY REASON OF THE EXERCISE OF ANY OF THEIR
RIGHTS, REMEDIES AND INTERESTS HEREUNDER, INCLUDING, WITHOUT LIMITATION, FROM
ANY SALE OR TRANSFER OF COLLATERAL, PRESERVING, MAINTAINING OR SECURING THE
COLLATERAL, DEFENDING THEIR INTERESTS IN COLLATERAL (INCLUDING PURSUANT TO ANY
CLAIMS BROUGHT BY THE COMPANIES, THE COMPANIES AS DEBTOR-IN-POSSESSION, ANY
SECURED OR UNSECURED CREDITORS OF THE COMPANIES, ANY TRUSTEE OR RECEIVER IN
BANKRUPTCY, OR OTHERWISE), AND EACH COMPANY HEREBY AGREES TO SO INDEMNIFY AND
HOLD THE AGENT AND THE LENDERS HARMLESS, ABSENT THE AGENT’S OR THE LENDERS’
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF
COMPETENT JURISDICTION. The foregoing indemnification shall survive termination
of this Financing Agreement until such time as all Obligations (including the
foregoing) have been finally and indefeasibly paid in full. In furtherance
thereof the Agent may establish such reserves for Obligations hereunder
(including any contingent Obligations) as it may deem advisable in its
reasonable business judgment. Any applicable mortgage(s), deed(s) of trust or
assignment(s) issued to the Agent for the benefit of the Lenders on the Real
Estate shall govern the rights and remedies of the Agent and the Lenders
thereto.
 
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10.4 The Agent agrees to apply the net cash proceeds resulting from the Agent’s
exercise of any of the foregoing rights (after deducting all Out-of-Pocket
Expenses relating thereto) to the payment of the Obligations in the following:
 
(a) first, to all unpaid Out-of-Pocket Expenses;
 
(b) second, to all accrued and unpaid fees owed to Agent (other than in
connection with Banking Services Obligations or Swap Obligations) for its
separate account, after giving effect to any letter agreements between Agent and
individual Lenders;
 
(c) third, on a ratable basis to all accrued and unpaid fees owed to any or all
of the Lenders (other than in connection with Banking Services Obligations or
Swap Obligations) after giving effect to any letter agreements between Agent and
individual Lenders;
 
(d) fourth, to accrued and unpaid interest on advances made to Agent pursuant to
Paragraph 14.10 of Section 14 of this Financing Agreement;
 
(e) fifth, to unpaid principal amount of advances made by Agent pursuant to
Paragraph 14.10 of Section 14 of this Financing Agreement;
 
(f) sixth, on a ratable basis, to all accrued and unpaid interest on the
Revolving Loans (including Swingline Loans) and Term Loans;
 
(g) seventh, on a ratable basis, to unpaid principal amount of all Revolving
Loans (including Swingline Loans) and unpaid reimbursement obligations with
respect to any Letter of Credit Guaranty and to unpaid principal amount of Term
Loans (Agent to determine, in its sole discretion, the order of application of
payment as to the Obligations described in this subparagraph (g));
 
(h) eighth, to pay Agent an amount equal to one hundred ten percent (110%) of
the then undrawn amount of each Letter of Credit, to be held by Agent as cash
collateral for such Obligations;
 
(i) ninth, on a ratable basis, to payment of any amounts owing with respect to
Banking Services Obligations and Swap Obligations; and
 
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(j) tenth, on a ratable basis, to all other Obligations.
 
SECTION 11.    Termination
 
11.1 Except as otherwise permitted herein, this Financing Agreement shall
terminate on the initial Anniversary Date (i.e., September 30, 2012).
Notwithstanding the foregoing or any other provision of this Financing
Agreement, the Lenders (acting through the Agent) may terminate the Financing
Agreement immediately upon the occurrence of an Event of Default; provided,
however, that if the Event of Default is an event listed in Paragraph 10.1(c) of
Section 10 hereof, this Financing Agreement shall terminate in accordance with
Paragraph 10.2 of Section 10. The Companies or any one of them may terminate
this Financing Agreement at any time upon sixty (60) days’ prior written notice
to the Agent. The Companies shall pay to the Agent, for the benefit of the
Lenders, on the Termination Date the relevant Termination Fee and Prepayment
Premium. Notice of termination, as aforesaid, by any one Company shall be deemed
to be notice by the Companies for purposes hereof. All Obligations shall become
due and payable as of any termination hereunder or under Section 10 hereof and,
pending a final accounting, the Agent may withhold any balances in the
Companies’ account (unless supplied with an indemnity satisfactory to the Agent,
in its credit judgment) to cover all of the Obligations, whether absolute or
contingent. With respect to each Letter of Credit that is or will be outstanding
as of the Termination Date, the Companies will, on or prior to the Termination
Date, either (a) cause such Letter of Credit to be returned to the Issuing Bank
undrawn and marked “canceled” or (b) if the Companies are unable to do so,
either (i) provide a “back-to-back” letter of credit to the Agent in a form
satisfactory to the Agent (in its sole discretion), issued by a bank
satisfactory to the Agent, in its credit judgment, in an amount equal to 110% of
the then undrawn amount of such Letter of Credit, or (ii) deposit with the Agent
cash in an amount equal to 110% of the then undrawn amount of such Letter of
Credit, such cash to be remitted by the Agent to the Companies upon the
expiration, cancellation or other termination of such Letter of Credit. All of
the Agent’s and the Lenders’ rights, liens and security interests shall continue
after any termination until all Obligations have been paid and satisfied in
full.
 
SECTION 12.    Miscellaneous
 
12.1 Each of the Companies hereby waives diligence, notice of intent to
accelerate, notice of acceleration, demand, presentment and protest and any
notices thereof as well as notice of nonpayment. No delay or omission of the
Agent or the Lenders to exercise any right or remedy hereunder, whether before
or after the happening of any Event of Default, shall impair any such right or
shall operate as a waiver thereof or as a waiver of any such Event of Default.
No single or partial exercise by the Agent or the Lenders of any right or remedy
precludes any other or further exercise thereof, or precludes any other right or
remedy.
 
12.2 This Financing Agreement and the other Loan Documents executed and
delivered in connection herewith can be changed only by a writing signed by the
Companies, the Agent and the Required Lenders (or by Agent at the written
request of Required Lenders), unless the consent of all Lenders is required
pursuant to Paragraph 14.10 of Section 14 of this Financing Agreement, and shall
bind and benefit the Companies, the Agent and the Lenders and their respective
successors and assigns.
 
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12.3 IT IS THE INTENT OF THE COMPANIES, THE AGENT AND THE LENDERS TO CONFORM
STRICTLY TO ALL APPLICABLE STATE AND FEDERAL USURY LAWS. THE LOAN DOCUMENTS AND
ALL OTHER AGREEMENTS BETWEEN ANY COMPANY, THE AGENT AND THE LENDERS WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER WRITTEN OR ORAL, ARE HEREBY EXPRESSLY
LIMITED SO THAT IN NO CONTINGENCY OR EVENT WHATSOEVER, WHETHER BY REASON OF
ACCELERATION OF THE MATURITY HEREOF OR OTHERWISE, SHALL THE AMOUNT CONTRACTED
FOR, CHARGED OR RECEIVED BY THE AGENT OR THE LENDERS FOR THE USE, FORBEARANCE,
OR DETENTION OF THE MONEY LOANED HEREUNDER OR OTHERWISE, OR FOR THE PAYMENT OR
PERFORMANCE OF ANY COVENANT OR OBLIGATION CONTAINED HEREIN OR IN ANY OTHER LOAN
DOCUMENT EVIDENCING, SECURING OR PERTAINING TO THE OBLIGATIONS EVIDENCED HEREBY
WHICH MAY BE LEGALLY DEEMED TO BE FOR THE USE, FORBEARANCE OR DETENTION OF
MONEY, EXCEED THE LESSER OF THE: MAXIMUM LEGAL RATE AND THE MAXIMUM AMOUNT WHICH
THE COMPANIES AND ANY SUCCESSORS OR ASSIGNS OF THE COMPANIES OR ANY SUCH PERSON
(IF ANY) IS OBLIGATED TO PAY AND THE AGENT AND THE LENDERS ARE LEGALLY ENTITLED
TO CONTRACT FOR, CHARGE OR COLLECT UNDER APPLICABLE STATE OR FEDERAL LAW. IF
FROM ANY CIRCUMSTANCES WHATSOEVER FULFILLMENT OF ANY PROVISION HEREOF OR OF SUCH
OTHER LOAN DOCUMENTS SHALL INVOLVE EXCEEDING THE MAXIMUM LEGAL RATE, THEN THE
OBLIGATION TO BE FULFILLED SHALL BE AUTOMATICALLY REDUCED TO SUCH LIMIT, AND IF
FROM ANY SUCH CIRCUMSTANCE THE AGENT AND THE LENDERS SHALL EVER RECEIVE AS
INTEREST OR OTHERWISE AN AMOUNT IN EXCESS OF THE MAXIMUM LEGAL RATE OR THE
MAXIMUM THAT CAN BE LEGALLY COLLECTED, THEN SUCH AMOUNT WHICH WOULD BE EXCESSIVE
INTEREST SHALL BE APPLIED TO THE REDUCTION OF THE PRINCIPAL INDEBTEDNESS HEREOF
AND ANY OTHER AMOUNTS DUE WITH RESPECT TO THE OBLIGATIONS EVIDENCED HEREBY AND
IN THE OTHER LOAN DOCUMENTS, BUT NOT TO THE PAYMENT OF INTEREST AND IF SUCH
AMOUNT WHICH WOULD BE EXCESS INTEREST EXCEEDS THE OBLIGATIONS AND ALL OTHER NON
INTEREST INDEBTEDNESS DESCRIBED ABOVE, THEN SUCH ADDITIONAL AMOUNT SHALL BE
REFUNDED TO THE COMPANIES. IF ANY EXCESS INTEREST IN SUCH RESPECT IS PROVIDED
FOR IN THIS FINANCING AGREEMENT, OR SHALL BE ADJUDICATED TO BE SO PROVIDED, OR
IN ANY OTHER LOAN DOCUMENT OR OTHERWISE IN CONNECTION WITH THIS TRANSACTION, THE
PROVISIONS OF THIS PARAGRAPH 12.3 OF SECTION 12 SHALL GOVERN AND PREVAIL AND
NEITHER THE COMPANIES NOR ANY SUCCESSORS OR ASSIGNS OF THE COMPANIES OR ANY SUCH
PERSON (IF ANY) SHALL BE OBLIGATED TO PAY THE EXCESS AMOUNT OF SUCH INTEREST OR
ANY OTHER EXCESS SUM PAID FOR THE USE, FORBEARANCE, OR DETENTION OF SUM LOANED
HEREUNDER OR OTHERWISE. IN DETERMINING WHETHER OR NOT ALL SUMS PAID OR AGREED TO
BE PAID BY THE COMPANIES FOR THE USE, FORBEARANCE OR DETENTION OF MONEY EXCEEDS
THE MAXIMUM LEGAL RATE, THE COMPANIES, THE AGENT AND THE LENDERS SHALL TO THE
MAXIMUM EXTENT PERMITTED UNDER APPLICABLE LAW, (A) TREAT ALL OBLIGATIONS AS BUT
A SINGLE EXTENSION OF CREDIT, (B) CHARACTERIZE ANY NONPRINCIPAL PAYMENT AS AN
EXPENSE, FEE OR PREMIUM RATHER THAN AS SUMS PAID OR AGREED TO BE PAID BY THE
COMPANIES FOR THE USE, FORBEARANCE OR DETENTION OF MONEY, (C) EXCLUDE VOLUNTARY
PREPAYMENTS AND THE EFFECT THEREOF, AND (D) AMORTIZE, PRORATE, ALLOCATE AND
SPREAD IN EQUAL PARTS, THE TOTAL AMOUNT OF SUCH SUMS PAID OR AGREED TO BE PAID
BY THE COMPANIES FOR THE USE, FORBEARANCE OR DETENTION OF MONEY THROUGHOUT THE
ENTIRE ACTUAL TERM OF THE OBLIGATIONS SO THAT THE INTEREST RATE IS UNIFORM
THROUGH THE ENTIRE TERM OF THE OBLIGATIONS.
 
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THE COMPANIES, THE AGENT AND THE LENDERS HEREBY AGREE THAT, EXCEPT FOR SECTION
346.004 THEREOF, THE PROVISIONS OF CHAPTER 346 OF THE TEXAS FINANCE CODE
(VERNON’S TEXAS CODE ANNOTATED), AS AMENDED FROM TIME TO TIME, SHALL NOT APPLY
TO THIS FINANCING AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
 
THE TERMS AND PROVISIONS OF THIS PARAGRAPH SHALL CONTROL AND SUPERSEDE EVERY
OTHER PROVISION HEREOF, THE LOAN DOCUMENTS AND ALL OTHER AGREEMENTS BETWEEN OR
AMONG ANY COMPANY, THE AGENT AND/OR THE LENDERS.
 
12.4 If any provision hereof or of any other agreement made in connection
herewith is held to be illegal or unenforceable, such provision shall be fully
severable, and the remaining provisions of the applicable agreement shall remain
in full force and effect and shall not be affected by such provision’s
severance. Furthermore, in lieu of any such provision, there shall be added
automatically as a part of the applicable agreement a legal and enforceable
provision as similar in terms to the severed provision as may be possible.
 
12.5 EACH OF THE COMPANIES, THE AGENT AND THE LENDERS HEREBY WAIVES ANY RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THE LOAN DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREUNDER. EACH OF THE COMPANIES HEREBY
IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF
PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED. IN NO EVENT
WILL THE AGENT OR THE LENDERS BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR
CONSEQUENTIAL DAMAGES.
 
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12.6 Except as otherwise herein provided, any notice or other communication
required hereunder shall be in writing (provided that, any electronic
communications from any of the Companies with respect to any request,
transmission, document, electronic signature, electronic mail or facsimile
transmission shall be deemed binding on the Companies for purposes of this
Financing Agreement, provided further that any such transmission shall not
relieve the Companies from any other obligation hereunder to communicate further
in writing), and shall be deemed to have been validly served, given or delivered
when hand delivered or sent by facsimile, or three days after deposit in the
United State mails, with proper first class postage prepaid and addressed to the
party to be notified or to such other address as any party hereto may designate
for itself by like notice, as follows:
 

 
(A)
if to the Agent and/or the Lenders, at:
 
The CIT Group/Business Credit, Inc.
Two Lincoln Centre
5420 LBJ Freeway, Suite 200
Dallas, Texas 75240
Attn: Regional Credit Manager
Fax No.: (972) 455-1690

     

With a courtesy copy of any material notice to the Agent’s counsel at:

   
 
Patton Boggs LLP
2001 Ross Avenue, Suite 3000
Dallas, Texas 75201
Attn: Kenneth M. Vesledahl
Fax No.: (214) 758-1550

     

 
(B)
if to the Companies, at:

     

   
United Fuel & Energy Corporation
405 N. Marienfeld, Suite 300
Midland, Texas 79701
Attn: Chief Financial Officer
Fax No.: (432) 571-8099

     

With a courtesy copy of any material notice to the Companies’ counsel at:

   
 
Akin Gump Strauss Hauer & Feld LLP
300 Convent Street, Suite 1600
San Antonio, Texas 78205
Attn: Will Liebmann
Fax No.: (210) 224-2035

 
provided, however, that the failure of the Agent to provide the Companies’
counsel with a copy of such notice shall not invalidate any notice given to the
Companies and shall not give the Companies any rights, claims or defenses due to
the failure of the Agent to provide such additional notice.
 
12.7 THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING AGREEMENT
AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
TEXAS, EXCEPT TO THE EXTENT THAT ANY OTHER LOAN DOCUMENT INCLUDES AN EXPRESS
ELECTION TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.
 
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12.8 (a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS, DALLAS
COUNTY, OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF TEXAS AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR
PROCEEDING AND EACH OF THE PARTIES HERETO FURTHER IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL
POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN PARAGRAPH 12.6 OF SECTION 12
HEREOF, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE OTHER PARTY IN ANY OTHER JURISDICTION.
 
(b) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS
OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN
THE COURTS REFERRED TO IN THE FIRST SENTENCE OF CLAUSE (a) ABOVE AND HEREBY
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
 
12.9 Waiver of Consumer Rights. EACH COMPANY HEREBY WAIVES ITS RIGHTS, UNDER THE
DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT, [SECTION 17.41 ET SEQ.
TEXAS BUSINESS & COMMERCE CODE], A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF ITS OWN SELECTION, EACH
COMPANY VOLUNTARILY CONSENTS TO THIS WAIVER. EACH COMPANY EXPRESSLY WARRANTS AND
REPRESENTS THAT SUCH COMPANY (a) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING
POSITION RELATIVE TO THE AGENT AND THE LENDERS, AND (b) HAS BEEN REPRESENTED BY
LEGAL COUNSEL IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.
 
12.10 This Financing Agreement may be executed in any number of counterparts and
by different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Financing Agreement. Delivery of
any executed counterpart of this Financing Agreement by electronic mail or
facsimile transmission shall be equally as effective as delivery of an original
executed counterpart of this Financing Agreement. Any party delivering an
executed counterpart of this Financing Agreement by telefacsimile also shall
deliver an original executed counterpart of this Financing Agreement but the
failure to deliver an original executed counterpart shall not affect the
validity, enforceability, and binding effect of this Financing Agreement.
 
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12.11 No Oral Agreement. THIS WRITTEN AGREEMENT AND THE OTHER DOCUMENTS
REFERENCED HEREIN OR CONTEMPLATED HEREBY REPRESENT THE FINAL AGREEMENT AMONG THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES.
 
12.12 Notwithstanding anything to the contrary contained herein, this Financing
Agreement is not intended to and does not serve to constitute or effect a
novation, repayment or substitution of the existing Obligations. Instead, it is
the express intention of the parties hereto to reaffirm the indebtedness,
liabilities and obligations created under the Existing Financing Agreement which
are and continue to be secured by the Collateral. The Companies acknowledge and
confirm that the liens granted to CIT pursuant to the Loan Documents secure all
indebtedness, liabilities and obligations of the Companies to the Agent and the
Lenders under the Original Financing Agreement and the Existing Financing
Agreement, as amended and restated hereby, and that the term “Secured
Obligations” as used in the Loan Documents (or any other terms used therein to
describe or refer to the indebtedness, liabilities and obligations of the
Companies to Agent and Lenders thereunder) includes, without limitation, the
indebtedness, liabilities and obligations of the Companies hereunder and under
the Existing Financing Agreement, as amended and restated hereby, as the same
may be further amended, modified, supplemented or restated from time to time.
The Loan Documents and all agreements, instruments and documents executed or
delivered in connection with any of the foregoing shall otherwise remain
unmodified and in full force and effect, and each be deemed to be amended to the
extent necessary to give effect to the provisions of this Financing Agreement.
In that regard, (a) all references in the Loan Documents to the Existing
Financing Agreement shall be deemed to be references to this Financing
Agreement, and (b) all cross-references in the Loan Documents to particular
section numbers in the Existing Financing Agreement shall be deemed to be
cross-references to the corresponding sections, as applicable, to this Financing
Agreement. Each Company hereby ratifies and confirms its obligations under the
Loan Documents executed by such Company.
 
12.13 Agent and each Lender acknowledge and agree that the rights of the Agent
and Lenders are subject to the terms and provisions of the Sterling
Intercreditor Agreement.
 
12.14 This Financing Agreement and the financing commitments set forth herein
constitute an amendment, increase, modification and restatement, but not an
extinguishment or novation, of the Existing Financing Agreement and the
financing commitments set forth therein. This Financing Agreement and the other
Loan Documents are not intended as, and shall not be construed as, a release,
impairment or novation of the indebtedness, liabilities and obligations of the
Companies under the Existing Financing Agreement and the other documents
contemplated thereby or the liens and security interests granted therein, all of
which liens and security interests are hereby ratified and affirmed. With
respect to matters relating to the period of this Financing Agreement prior to
the date hereof, all of the provisions of the Existing Financing Agreement are
hereby ratified and confirmed and shall remain in full force and effect. The
Existing Financing Agreement, as modified by the provisions of this Financing
Agreement, shall be construed as one agreement.
 
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12.15 Subject to the satisfaction of the conditions precedent specified in
Paragraph 2.1 of Section 2 of this Financing Agreement, effective as of the
Closing Date, Agent and Lenders hereby release the guaranty and any stock pledge
agreement previously executed by Thomas E. Kelly in connection with the Existing
Financing Agreement and such documents shall be deemed accordingly hereby
terminated.
 
12.16 Each Lender that is subject to the requirements of the USA Patriot Act
(Title III of Pub. L. 107-56 [signed into law October 26, 2001])(the “Act”)
hereby notifies Companies that pursuant to the requirements of the Act, it is
required to obtain, verify and record information that identifies the Companies,
which information includes the names and addresses of the Companies and other
information that will allow such Lender to identify the Companies in accordance
with the Act.
 
SECTION 13.    Agreements Regarding the Lenders; Participations and Assignments.
 
13.1 The Agent shall forward to each Lender a monthly account statement with
respect to such Lender’s Commitment. In addition, the Agent agrees (a) to
provide the Lenders with copies of all financial statements and projections and
business plans of the Parent and the Companies that the Agent receives from the
Companies or their advisors from time to time, and (b) upon the request of a
Lender from time to time, to provide such Lender with copies of all collateral
reports that the Agent receives from the Companies, in each case without any
duty to confirm or verify that such information is true, correct or complete.
 
13.2 After the Agent’s receipt of, or charging of, any Term Loan principal
payments or any interest and fees earned under this Financing Agreement, the
Agent agrees to remit promptly to each Lender its respective Pro Rata Percentage
of:
 
(a) fees payable by the Companies hereunder, provided that the Lenders shall not
share in the fees set forth in Paragraphs 8.5, 8.8 and 8.9 of Section 8 and the
last sentence of Paragraph 8.13(a) of Section 8.13 of this Financing Agreement;
and
 
(b) interest paid on the outstanding principal amount of Revolving Loans (other
than the Swingline Loans), calculated based on the outstanding amount of
Revolving Loans advanced by each of the Lenders as of each Settlement Date
during the period for which interest is paid; and
 
(c) principal and interest paid on the Term Loans.
 
13.3 In the event that any Lender fails to make available to the Agent such
Lender’s Pro Rata Percentage of any borrowing by the Companies on the Settlement
Date in accordance with the provisions of Paragraph 3.1 of Section 3 hereof, and
the Companies do not repay to the Agent such Lender’s Pro Rata Percentage of the
borrowing within three (3) Business Days of the Agent’s written demand to repay
such borrowing, the Agent shall have the right to recover such Lender’s Pro Rata
Percentage of the borrowing directly from such Lender, together with interest
thereon from the date of the borrowing at the rate per annum applicable to such
borrowing. In addition, until the Agent recovers such amount, (x) such Lender
shall not be entitled to receive any payments under Paragraph 13.2 of this
Section 13, and (y) for purposes of voting on or consenting to other matters
with respect to this Financing Agreement or the other Loan Documents, such
Lender’s Commitment shall be deemed to be zero and such Lender shall not be
considered to be a Lender.
 
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13.4 (a) With the prior written consent of the Agent (which consent will not
unreasonably be withheld), the Lenders may sell to one or more commercial banks,
commercial finance lenders or other financial institutions, participations in
the loans and other extensions of credit made and to be made to the Companies
hereunder. The Companies acknowledge that in selling such participations, the
Lenders may grant to participants certain rights to consent to waivers,
amendments and other actions with respect to this Financing Agreement, provided
that the consent of any participant shall be limited solely to matters as to
which all Lenders must consent under Paragraph 14.10 of Section 14 hereof.
Except for the consent rights set forth above, no participant shall have any
rights as a Lender hereunder, and notwithstanding the sale of any participation
by a Lender, such Lender shall remain solely responsible to the other parties
hereto for the performance of such Lender’s obligations hereunder, and the
Companies, the Agent and the other Lenders may continue to deal solely with such
Lender with respect to all matters relating to this Financing Agreement and the
transactions contemplated hereby. In addition, all amounts payable under this
Financing Agreement to a Lender which sells a participation in accordance with
this paragraph shall continue to be paid directly to such Lender.
 
(b) With the prior written consent of the Agent (which consent will not
unreasonably be withheld), the Lenders may assign all or any portion of their
respective rights and obligations under this Financing Agreement to
(i) commercial banks, commercial finance lenders or other financial institutions
and (ii) to an entity, whether a corporation, partnership, trust, limited
liability company or other entity that (a) is engaged in making, purchasing,
holding or otherwise investing in bank loans and similar extensions of credit in
the ordinary course of its business and (b) is administered, serviced or managed
by the assigning Lender or an Affiliate of such Lender provided that the
principal amount of loans assigned to any such Person shall not be less than
$10,000,000, and the assigning Lender shall pay to the Agent an assignment
processing and recording fee of One Thousand Dollars ($1,000.00) for the Agent’s
own account. Each assignment of a Commitment hereunder must be made pursuant to
an Assignment and Transfer Agreement. From and after the effective date of an
Assignment and Transfer Agreement, (i) the assignee thereunder shall become a
party to this Financing Agreement and, to the extent that rights and obligations
hereunder have been assigned to such assignee pursuant to such assignment, shall
have all rights and obligations of a Lender hereunder, and (ii) the assigning
Lender, to the extent that rights and obligations hereunder have been assigned
by such Lender pursuant to such assignment, shall relinquish its rights and be
released from its obligations under this Financing Agreement.
 
13.5 In the event that the Agent, the Lenders or any of them is sued or
threatened with a suit, action or claim by the Companies and Parent, or any of
one of them, or by a creditor, committee of creditors, trustee, receiver,
liquidator, custodian, administrator or other similar official acting for or on
behalf of the Companies and Parent, or any of one of them, on account of (a) any
preference, fraudulent conveyance or other voidable transfer alleged to have
occurred or been received as a result of the operation of this Financing
Agreement or the transactions contemplated hereby, or (b) any lender liability
theory based on any action taken or not taken by such person in connection with
this Financing Agreement or the transactions contemplated hereby, any money paid
in satisfaction or compromise of such suit, action, claim or demand, and any
expenses, costs and attorneys’ fees paid or incurred in connection therewith
(whether by the Agent, the Lenders or any of them), shall be shared
proportionately by the Lenders according to their respective Pro Rata
Percentages, except to the extent that such person’s own gross negligence or
willful misconduct directly gave rise to such suit, action or claim. In
addition, any costs, expenses, fees or disbursements incurred by agents or
attorneys retained by the Agent to effect collection of the Obligations or
enforcement of any rights in the Collateral, including enforcing, preserving or
maintaining rights under this Financing Agreement, shall be shared among the
Lenders according to their respective Pro Rata Percentages to the extent not
reimbursed by the Companies or from the proceeds of Collateral. The provisions
of this Paragraph 13.5 of Section 13 shall not apply to any suits, actions,
proceedings or claims that (a) are filed or asserted prior to the Closing Date
or (b) are based on transactions, actions or omissions occurring prior to the
Closing Date.
 
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13.6 The Companies authorize each Lender, and each Lender shall have the right,
after the occurrence of an Event of Default, without notice, to set off and
apply against any and all property or assets of any Company held by, or in the
possession of such Lender, any of the Obligations owed to such Lender. Promptly
after the exercise of any right to set off, the Lender exercising such right
irrevocably agrees to purchase for cash (and the other Lenders irrevocably agree
to sell) participation interests in each other Lender’s outstanding Revolving
Loans as would be necessary to cause such Lender to share the amount of the
property set off with the other Lenders based on each Lender’s Pro Rata
Percentage. The Companies agree, to the fullest extent permitted by law, that
any Lender also may exercise its right to set off with respect to amounts in
excess of such Lender’s Pro Rata Percentage of the Obligations then outstanding,
and may purchase participation interests in the amounts so set off from the
other Lenders, and upon doing so shall deliver such excess to Agent, for
distribution to the other Lenders in settlement of the participation purchases
described above in this Paragraph 13.6 of Section 13.
 
13.7 For the purposes of this Paragraph 13.7 of Section 13, “Confidential
Information” means all financial projections and all other information delivered
to the Agent or any Lender by or on behalf of the Companies or Parent in
connection with the transactions contemplated by or otherwise pursuant to this
Financing Agreement that is proprietary in nature and that is clearly marked or
labeled (or otherwise adequately identified) as being confidential information
of the Companies or Parent, provided that such term does not include information
that (a) was publicly known or otherwise known to the Agent or any of the
Lenders prior to the time of such disclosure, (b) subsequently becomes publicly
known through no act or omission by the Agent or the Lenders or any person
acting on their behalf, (c) otherwise becomes known to the Agent or the Lenders
other than through disclosure by the Companies or Parent or (d) constitutes
financial statements delivered to the Agent hereunder that are otherwise
publicly available. The Agent and the Lenders will maintain the confidentiality
of such Confidential Information in accordance with commercially reasonable
procedures adopted by the Agent and the Lenders in good faith to protect
confidential information of third parties delivered to them, provided that the
Agent and the Lenders may deliver or disclose Confidential Information to:
 
(a) their respective directors, officers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
administration of the Revolving Line of Credit);
 
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(b) their respective financial advisors and other professional advisors who are
advised to hold confidential the Confidential Information substantially in
accordance with the terms of this Paragraph 13.7 of Section 13;
 
(c) any other Lender;
 
(d) a commercial bank, commercial finance lender or other financial institution
to which the Agent or a Lender sells or offers to sell a portion of its rights
and obligations under this Financing Agreement or any participation therein,
provided that so long as no Event of Default shall have occurred and is
continuing, such entity agrees in writing prior to their receipt of such
Confidential Information to be bound by the provisions of this Paragraph 13.7 of
Section 13; or
 
(e) any other person or entity (including bank auditors and other regulatory
officials) to which such delivery or disclosure may be necessary or appropriate
(i) to comply with any applicable law, rule, regulation or order, (ii) in
response to any subpoena or other legal process, (iii) in connection with any
litigation to which the Agent or a Lender is a party or (iv) if an Event of
Default shall have occurred and is continuing, to the extent the Agent may
reasonably determine such delivery and disclosure to be necessary or appropriate
in the enforcement or for the protection of the rights and remedies under this
Financing Agreement.
 
Each Lender becoming a Lender subsequent to the initial execution and delivery
of this Financing Agreement, by its execution and delivery of an Assignment and
Transfer Agreement, will be deemed to have agreed to be bound by, and to be
entitled to the benefits of, this Paragraph 13.7 of Section 13.
 
SECTION 14.    Agency
 
14.1 Each Lender hereby irrevocably designates and appoints CIT to act as the
Agent for such Lender under this Financing Agreement and the other Loan
Documents, and irrevocably authorizes CIT, as Agent for such Lender, to take
such action on its behalf under the provisions of this Financing Agreement and
the other Loan Documents, and to exercise such powers and perform such duties as
are expressly delegated to the Agent by the terms of this Financing Agreement
and the other Loan Documents, together with such other powers as are reasonably
incidental thereto. In performing its functions under this Financing Agreement,
the Agent is acting solely as an agent of the Lenders, and the Agent does not
assume, and shall not be deemed to have assumed, an agency or other fiduciary
relationship with the Companies. The Agent shall not have any (a) duty,
responsibility, obligation or liability to any Lender, except for those duties,
responsibilities, obligations and liabilities expressly set forth in this
Financing Agreement, or (b) fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Financing Agreement or the other Loan
Documents, or otherwise exist against the Agent. No Lender that also is
designated as a “Documentation Agent” or a “Syndication Agent” hereunder shall
have any right, power, duty, responsibility, obligation or liability under this
Financing Agreement, except for the duties, responsibilities, obligations and
liabilities of a Lender hereunder.
 
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14.2 The Agent may execute any of its duties under this Financing Agreement and
all ancillary documents by or through agents or attorneys, and shall be entitled
to the advice of counsel concerning all matters pertaining to such duties.
 
14.3 Neither the Agent nor any of its officers, directors, employees, agents, or
attorneys shall be liable to any Lender for any action lawfully taken or not
taken by the Agent or such person under or in connection with this Financing
Agreement and the other Loan Documents (except for the Agent’s or such person’s
gross negligence or willful misconduct). Without limiting the generality of the
foregoing, the Agent shall not be liable to the Lenders for (i) any recital,
statement, representation or warranty made by the Companies or Parent or any
officer thereof contained in (x) this Financing Agreement, (y) any other Loan
Document or (z) any certificate, report, audit, statement or other document
referred to or provided for in this Financing Agreement or received by the Agent
under or in connection with this Financing Agreement, (ii) the value, validity,
effectiveness, enforceability or sufficiency of this Financing Agreement, the
other Loan Documents or the Agent’s security interest in the Collateral,
(iii) any failure of the Companies or Parent to perform their respective
obligations under this Financing Agreement and the other Loan Documents,
(iv) any loss or depreciation in the value of, delay in collecting the Proceeds
of, or failure to realize on, any Collateral, (v) the Agent’s delay in the
collection of the Obligations or enforcing the Agent’s rights against the
Companies or Parent, or the granting of indulgences or extensions to the
Companies or Parent or any account debtor of the Companies, or (vi) for any
mistake, omission or error in judgment in passing upon or accepting any
Collateral. In addition, the Agent shall have no duty or responsibility to
ascertain or to inquire as to the observance or performance of any of the terms,
conditions, covenants or other agreements of the Companies or Parent contained
in this Financing Agreement or the other Loan Documents, or to inspect, verify,
examine or audit the assets, books or records of the Companies or Parent at any
time.
 
14.4 The Agent shall be entitled to rely, and shall be fully protected in
relying, upon legal counsel, independent public accountants and experts selected
by Agent, and shall not be liable to the Lenders for any action taken or not
taken in good faith based upon the advice of such counsel, accountants or
experts. In addition, the Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, telecopy, telex or teletype message, statement,
order or other document believed by the Agent in good faith to be genuine and
correct, and to have been signed, sent or made by the proper person or persons.
The Agent shall be fully justified in taking or refusing to take any action
under this Financing Agreement and the other Loan Documents unless the Agent
(a) receives the advice or consent of the Lenders or the Required Lenders, as
the case may be, in a manner that the Agent deems appropriate, or (b) is
indemnified by the Lenders to the Agent’s satisfaction against any and all
liability, cost and expense which may be incurred by the Agent by reason of
taking or refusing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Financing
Agreement and the other Loan Documents in accordance with a request of all
Lenders or the Required Lenders, as the case may be, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all
Lenders.
 
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14.5 The Agent shall not be deemed to have knowledge or notice of the occurrence
of any Default or Event of Default hereunder unless the Agent has received
notice from the Companies or a Lender describing such Default or Event of
Default with specificity. In the event that the Agent receives such a notice,
the Agent shall promptly give notice thereof to all Lenders. The Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Lenders or Required Lenders, as the case may be,
provided that (a) if appropriate, the Agent may require indemnification from the
Lenders under Paragraph 14.4 of this Section 14 prior to taking such action,
(b) under no circumstances shall the Agent have an obligation to take any action
that the Agent believes in good faith would violate any law or any provision of
this Financing Agreement or the other Loan Documents, and (c) unless and until
the Agent shall have received direction from the Lenders or Required Lenders, as
the case may be, the Agent may (but shall not be obligated to) take such action
or refrain from taking action with respect to such Default or Event of Default
as the Agent shall deem advisable and in the best interests of the Lenders.
 
14.6 Each Lender expressly acknowledges that neither the Agent, nor any of its
officers, directors, employees or agents, has made any representation or
warranty to such Lender regarding the transactions contemplated by this
Financing Agreement or the financial condition of the Companies or Parent, and
such Lender agrees that no action taken by the Agent hereafter, including any
review of the business or financial affairs of the Companies or Parent, shall be
deemed to constitute a representation or warranty by the Agent to any Lender.
Each Lender also acknowledges that such Lender has, independently and without
reliance upon the Agent or any other Lender and based on such documents and
information as such Lender has deemed appropriate, made its own credit analysis,
appraisal of and investigation into the business, operations, property,
financial condition and creditworthiness of the Companies or Parent, and made
its own decision to enter into this Financing Agreement. Each Lender agrees,
independently and without reliance upon the Agent or any other Lender and based
on such documents and information as such Lender shall deem appropriate at the
time, (a) to continue to make its own credit analyses and appraisals in deciding
whether to take or not take action under this Financing Agreement and (b) to
make such investigations as such Lender deems necessary to inform itself as to
the business, operations, property, financial condition and creditworthiness of
the Companies and Parent.
 
14.7 THE LENDERS AGREE TO INDEMNIFY THE AGENT (TO THE EXTENT NOT REIMBURSED BY
THE COMPANIES AND WITHOUT LIMITING THE OBLIGATION OF THE COMPANIES TO DO SO),
FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY
KIND WHATSOEVER WHICH MAY AT ANY TIME BE IMPOSED ON, INCURRED BY OR ASSERTED
AGAINST THE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF (A) THIS FINANCING
AGREEMENT OR ANY OTHER LOAN DOCUMENT, (B) THE TRANSACTIONS CONTEMPLATED HEREBY
OR (C) ANY ACTION TAKEN OR NOT TAKEN BY THE AGENT UNDER OR IN CONNECTION WITH
ANY OF THE FOREGOING, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR THE PAYMENT OF
ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING SOLELY
FROM THE AGENT’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
 
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14.8 The Agent and any Lender may make loans to and generally engage in any kind
of business with the Companies, as though the Agent or such Lender were not the
Agent or a Lender hereunder. With respect to loans made by the Agent under this
Financing Agreement as a Lender, the Agent shall have the same rights and
powers, duties and liabilities under this Financing Agreement and the other Loan
Documents as any other Lender, and may exercise the same as though it was not
the Agent, and the term “Lender” and “Lenders” shall include the Agent in its
individual capacity as such.
 
14.9 The Agent may resign as the Agent upon 30 days notice to the Lenders, and
such resignation shall be effective on the earlier of (a) the appointment of a
successor Agent by the Lenders or (b) the date on which such 30-day period
expires. If the Agent provides the Lenders with notice of its intention to
resign as Agent, the Lenders agree to appoint a successor to the Agent as
promptly as possible thereafter, whereupon such successor shall succeed to the
rights, powers and duties of the Agent, and the term “Agent” shall mean such
successor effective upon its appointment. Upon the effective date of an Agent’s
resignation, such Agent’s rights, powers and duties as Agent hereunder
immediately shall terminate, without any other or further act or deed on the
part of such former Agent or any of the parties to this Financing Agreement.
After an Agent’s resignation hereunder, the provisions of this Section 14 shall
continue to inure to such Agent’s benefit as to any actions taken or not taken
by such Agent while acting as the Agent.
 
14.10 Notwithstanding anything contained in this Financing Agreement to the
contrary, without the prior written consent of all Lenders, the Agent will not
agree to:
 
(a) amend or waive the Companies’ compliance with any term or provision of this
Financing Agreement, if the effect of such amendment or waiver would be to
(i) increase the Revolving Line of Credit, the Acquisition Term Loan Line of
Credit or the Line of Credit, (ii) reduce the principal of, or rate of interest
on, the Revolving Loans, the Initial Term Loan or the Acquisition Term Loans,
(iii) reduce or waive the payment of any fee in which all Lenders share
hereunder or (iv) extend the maturity date of any of the Obligations or the date
fixed for payment of any installment thereof;
 
(b) alter or amend (i) this Section 14.10 or (ii) the definition of “Pro Rata
Percentage” or “Required Lenders”;
 
(c) amend the definition of “Borrowing Base”, “Eligible Accounts Receivable”,
“Eligible Card-Lock Inventory”, “Eligible Equipment Based Amount”, or “Eligible
Inventory”, if the effect thereof would be to increase Availability;
 
(d) except as otherwise expressly permitted or required hereunder, (i) during
any fiscal year of the Companies release Collateral having an aggregate value
(as determined by the Agent in its reasonable business judgment) of more than
five percent (5.00%) of the Line of Credit, or (ii) Guarantor of its liabilities
under its Guaranty; or
 
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(e) knowingly make any Revolving Loan to the Companies if after giving effect
thereto the principal amount of all outstanding Revolving Loans plus the undrawn
amount of all outstanding Letters of Credit would exceed the lesser of (i) the
Revolving Line of Credit or (ii) one hundred ten percent (110%) of the Borrowing
Base of the Companies; provided that in no event shall the Agent continue to
knowingly make Overadvances under this Paragraph 14.10(e) of Section 14 for a
period in excess of ninety (90) consecutive days without the consent of all
Lenders, and provided further that after the occurrence of an Event of Default,
the Agent in its sole discretion shall have the right to make Overadvances in
excess of the limitation set forth in clause (ii) above (but within the
Revolving Line of Credit) in order to preserve, protect and realize upon the
Collateral; or
 
(f) waive any Event of Default arising under any provision of this Financing
Agreement that would require the approval of all Lenders if such provision were
amended.
 
In all other respects the Agent is authorized to take or to refrain from taking
any action which the Agent, in the exercise of its reasonable business judgment,
deems to be advisable and in the best interest of the Lenders, unless this
Financing Agreement specifically requires the Companies or the Agent to obtain
the consent of, or act at the direction of, the Required Lenders. Without
limiting the generality of the foregoing sentence, and notwithstanding any other
provision of this Financing Agreement to the contrary, the Agent shall have the
right in its sole discretion to (i) determine whether the requirements for
eligibility set forth in the definitions of “Eligible Accounts Receivable”,
“Eligible Card-Lock Inventory”, “Eligible Inventory”, “Eligible Equipment”,
“Eligible Life Insurance Policy,” and “Eligible Cash Collateral” are satisfied,
(ii) establish, adjust and release the amount of reserves provided for in the
definitions of “Availability Reserve”, “Eligible Accounts Receivable” and
“Eligible Inventory”, (iii) make Overadvances in accordance with Paragraph
14.10(e) of this Section 14, (iv) release any Collateral having a value (as
determined by the Agent in its reasonable business judgment) of up to two
percent (2.00%) of the Line of Credit in each fiscal year of the Companies and
(v) amend any provision of this Financing Agreement or the other Loan Documents
in order to cure any error, ambiguity, defect or inconsistency set forth herein
or therein. In the event the Agent terminates this Financing Agreement pursuant
to the terms hereof, the Agent agrees to cease making additional loans or
advances upon the effective date of termination, except for loans or advances
which the Agent in its sole discretion determines are reasonably required to
preserve, protect or realize upon the Collateral.
 
14.11 If a Lender’s consent to a waiver, amendment or other course of action is
required under the terms of this Financing Agreement and such Lender does not
respond to any request by the Agent for such consent within ten (10) Business
Days after the date of such request, such failure to respond shall be deemed a
consent to the requested course of action. In addition, in the event that any
Lender declines to give its consent to any request by the Agent for consent to a
waiver, amendment or other course of action requiring the consent of such
Lender, each Lender agrees that that any other Lender (or any combination of
Lenders) shall have the right (but not the obligation) to purchase such Lender’s
Pro Rata Percentage of the Commitments for the full amount thereof as of the
date of such purchase, plus accrued interest to the date of such purchase. No
other fee to which such Lender may be entitled hereunder (including, without
limitation, any Termination Fee, Prepayment Premium or any LIBOR breakage costs)
shall be payable with respect to such purchase, notwithstanding the date of such
purchase.
 
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14.12 The obligations of the Lenders set forth in Paragraphs 13.3, 13.5, 13.6 of
Section 13, and Paragraphs 14.4 and 14.7 of this Section 14 shall survive the
termination of this Financing Agreement.
 
SECTION 15.    Joint and Several Liability of Companies
 
15.1 All loans made to the Companies shall be deemed jointly funded to, and
received by, the Companies. Each Company jointly and severally agrees to pay,
and shall be jointly and severally liable for payment and performance of, all
Obligations. Each Company acknowledges and agrees that the joint and several
liability of the Companies is provided as an inducement to Agent and Lenders to
provide loans and other financial accommodations to the Companies, and that each
such loan or other financial accommodation shall be deemed to have been done or
extended by Agent and Lenders in consideration of, and reliance upon, the joint
and several liability of the Companies. The joint and several liability of each
Company hereunder is absolute, unconditional and continuing, regardless of the
validity or enforceability of any of the Obligations, or the fact that a
security interest or lien in any Collateral may not be enforceable or may be
subject to the equities or defenses or prior claims of others, or may be invalid
or defective in any way and for any reason. Each Company hereby waives, to the
full extent permitted by applicable laws, (i) all notices to which such Company
may be entitled as co-obligor with respect to the Obligations, including,
without limitation, notice of (x) acceptance of this Financing Agreement,
(y) the making of loans or other financial accommodations under this Financing
Agreement, or the creation or existence of the Obligations, and (z) presentment,
demand, protest, notice of protest, and notice of non-payment; and (ii) all
defenses based on (w) any modification (or series of modifications) of this
Financing Agreement or the other Loan Documents that may create a substituted
contract, or that may fundamentally alter the risks imposed on such Company
hereunder, (x) the release of any other Company from its duties this Financing
Agreement or the other Loan Documents, or the extension of the time of
performance of any other Company’s duties hereunder or thereunder, (y) the
taking, releasing, impairment or abandonment of any Collateral, or the
settlement, release or compromise of the Obligations or any other Company’s
liabilities with respect to all or any portion of the Obligations, or (z) any
other act (or failure to act) that fundamentally alters the risks imposed on
such Company by virtue of its joint and several liability hereunder. It is the
intent of each Company by this paragraph to waive any and all suretyship
defenses available to such Company with respect to the Obligations, whether or
not specifically numerated above.
 
15.2 Each Company hereby agrees that until the full and final payment and
satisfaction of the Obligations and the termination of this Financing Agreement,
such Company will not exercise any subrogation, contribution or other right or
remedy against the other Company or security for any of the Obligations arising
by reason of such Company’s performance or satisfaction of its joint and several
liability hereunder. In addition, each Company agrees that (i) such Company’s
right to receive any payment of amounts due with respect to such subrogation,
contribution or other rights is subordinated to the full and final payment and
satisfaction of the Obligations, and (ii) such Company agrees not to demand, sue
for or otherwise attempt to collect any such payment until the full and final
payment and satisfaction of the Obligations and the termination of this
Financing Agreement.
 
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15.3 Notwithstanding any provisions of this Financing Agreement to the contrary,
it is the intent of the parties hereto that the joint and several nature of the
obligations of the Companies, and the security interests granted by the
Companies to secure the Obligations, not constitute a fraudulent conveyance
under Section 548 of Chapter 11 of Title II of the United States Code (11 U.S.C.
§ 101, et seq.), as amended, or a fraudulent conveyance or fraudulent transfer
under the applicable provisions of any fraudulent conveyance, fraudulent
transfer or similar law of any state, nation or other governmental unit, as in
effect from time to tome. Accordingly, Agent, Lenders and the Companies agree
that if the Obligations of any Company hereunder, or the security interests
granted by such Company securing the Obligations would, but for the application
of this sentence, constitute a fraudulent conveyance or fraudulent transfer
under applicable law, the Obligations of such Company hereunder, as well as the
security interests serving such Obligations, shall be valid and enforceable only
to the maximum extent that would not cause such obligations, liabilities or
security interests to constitute a fraudulent conveyance or fraudulent transfer
under applicable law.
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
 
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IN WITNESS WHEREOF, the parties hereto have caused this Second Amended and
Restated Financing Agreement to be effective, executed, accepted and delivered
at Dallas, Texas, by their proper and duly authorized officers as of the date
set forth above.
 

       
UNITED FUEL & ENERGY CORPORATION
 
   
   
 
By:
   

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Title: 
     

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THREE D OIL CO. OF KILGORE, INC.
 
   
   
 
By:
   

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Title: 
     

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THE CIT GROUP/BUSINESS CREDIT, INC.,
as the Agent, the Swingline Lender and a Lender
 
   
   
 
By:
   

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Title: 
Vice President    
Amount of Commitment: $30,000,000

 

      SUNTRUST BANK, as Documentation Agent and a Lender  
   
   
 
By:
   

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Title: 
Vice President          
Amount of Commitment: $20,000,000
 
Address:
 
303 Peachtree Street - 2nd Floor
GA - ATL 1981
Atlanta, Georgia 30308

 

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PNC BANK NATIONAL ASSOCIATION, as a Lender
 
   
   
 
By:
   

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Title: 
     

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Amount of Commitment: $20,000,000

 
Address:

 
2100 Ross Avenue
Suite 1850
Dallas, Texas 75201

 

     
WACHOVIA BANK, N.A., as a Lender
 
   
   
 
By:
   

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Title: 
     

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Amount of Commitment: $20,000,000

 
Address:

 
5001 LBJ Freeway, Suite 1050
Dallas, TX 75244

 

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EXHIBIT A
 
Form of Assignment and Transfer Agreement
 
ASSIGNMENT AND TRANSFER AGREEMENT

 
Reference is made to the Second Amended and Restated Financing Agreement dated
as of March ___, 2007 (as amended, restated supplemented or otherwise modified
and in effect from time to time, the “Financing Agreement”) among United Fuel &
Energy Corporation, a Texas corporation (“United”) and Three D Oil Co. of
Kilgore, Inc. a Texas corporation (“Three D”, and together with United,
individually, a “Company” and collectively the “Companies”), the financial
institutions from time to time party thereto, as lenders (collectively, the
“Lenders”, and individually, each a “Lender”), and The CIT Group/Business
Credit, Inc, a New York corporation, as agent for the Lenders (in such capacity,
the “Agent”). Capitalized terms used in this Assignment and Transfer Agreement
(this “Agreement”) and not otherwise defined shall have the meanings given to
such terms in the Financing Agreement. This Agreement, between the Assignor (as
defined and set forth on Schedule 1, which is made a part of this Agreement) and
the Assignee (as defined and set forth on Schedule 1) is effective as of
Effective Date (as set forth on Schedule 1).
 
1. The Assignor hereby irrevocably sells and assigns to the Assignee, without
recourse to the Assignor, and the Assignee hereby irrevocably purchases and
assumes from the Assignor, without recourse to the Assignor, as of the Effective
Date, an undivided interest (the “Assigned Interest”) in and to all of the
Assignor’s rights and obligations under the Financing Agreement respecting
those, and only those, portions of the financing facilities contained in the
Financing Agreement as are set forth on Schedule 1 (collectively, the “Assigned
Facilities”), in an amount for each of the Assigned Facilities as set forth on
Schedule 1.
 
2. The Assignor: (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Financing Agreement or any other instrument,
document or agreement executed or delivered in connection therewith
(collectively the “Loan Documents”), or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Financing Agreement,
any Collateral thereunder or any of the other Loan Documents, other than a
representation and warranty that the Assignor is the legal and beneficial owner
of the Assigned Interest and that the Assigned Interest is free and clear of any
adverse claim; and (ii) makes no representation or warranty and assumes no
responsibility with respect to (x) the financial condition of the Companies or
any Guarantor, or (y) the performance or observance by the Companies or any
Guarantor of any of its respective obligations under the Financing Agreement or
any of the Loan Documents.
 
3. The Assignee (i) represents and warrants that it is legally authorized to
enter into this Agreement, (ii) confirms that it has received a copy of the
Financing Agreement as amended through the Effective Date, together with the
copies of the most recent financial statements of the Companies, and such other
documents and information as the Assignee has deemed appropriate to make its own
credit analysis, (iii) agrees that the Assignee will, independently and without
reliance upon the Agent, the Assignor or any other Lender and based on such
documents and information as the Assignee shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Financing Agreement, (iv) appoints and authorizes the Agent to take such
action as agent on the Assignee’s behalf and to exercise such powers under the
Financing Agreement as are delegated to the Agent by the terms thereof, together
with such powers as are reasonably incidental thereto, (v) agrees that the
Assignee will be bound by the provisions of the Financing Agreement and will
perform in accordance with its terms all the obligations which by the terms of
the Financing Agreement are required to be performed by it as Lender, and
(vi) if the Assignee is organized under the laws of a jurisdiction outside the
United States, attaches the forms prescribed by the Internal Revenue Service of
the United States certifying as to the Assignee’s exemption from United States
withholding taxes with respect to all payments to be made to the Assignee under
the Financing Agreement or such other documents as are necessary to indicate
that all such payments are subject to such tax at a rate reduced by an
applicable tax treaty.
 

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4. Following the execution of this Assignment and Transfer Agreement, such
agreement will be delivered to the Agent for acceptance by the Agent, effective
as of the Effective Date.
 
5. Upon such acceptance, from and after the Effective Date, the Agent shall make
all payments in respect of the Assigned Interest (including payments of
principal, interest, fees and other amounts) to the Assignee, whether such
amounts have accrued prior to the Effective Date or accrue subsequent to the
Effective Date. The Assignor and the Assignee shall make all other appropriate
adjustments in payments for periods prior to the Effective Date made by the
Agent or with respect to the making of this assignment directly between
themselves.
 
6. From and after the Effective Date, (i) the Assignee shall be a party to the
Financing Agreement and, to the extent provided in this Agreement, have the
rights and obligations of a Lender thereunder, and (ii) the Assignor shall, to
the extent provided in this Agreement, relinquish its rights and be released
from its obligations under the Financing Agreement.
 
7. THIS ASSIGNMENT AND TRANSFER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES.
 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by its respective duly authorized officers on Schedule 1 hereto.
 
2

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Schedule 1 to Assignment and Transfer Agreement
 
Name of Assignor: __________________________

 
Name of Assignee: __________________________

 
Effective Date of Assignment:  ________, 200__
 

Assigned Facilities
 
Percentage of Facilities Assigned
 
Dollar Amount Assigned
         
Revolving Line of Credit
 
_____%
 
$________
Initial Term Loan
 
_____%
 
$________
Acquisition Term Loan Line of Credit
 
_____%
 
$________

 

ASSIGNOR:
 
ASSIGNEE:
     
_____________________________
 
_____________________________
     
By: ___________________________
 
By: ___________________________
Its: ___________________________
 
Its: ___________________________

 
Accepted by the Agent:

 
THE CIT GROUP/BUSINESS CREDIT,
INC., as Agent as aforesaid
 
By: ___________________________
Its: ___________________________
 

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EXHIBIT B
 

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EXHIBIT C
 

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EXHIBIT D

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EXHIBIT E
 

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EXHIBIT F
 

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Schedule 1—Existing Liens
 

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Schedule 7(1)—Company Information
 
Exact Name of each Company in its State of Organization:
 
State of Organization:
 
Federal Tax I.D. No.:
 
Chief Executive Office(s):
 
Tradenames:
 
Prior Names:
 
Charter No.:
 

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Schedule 7(15)(e)—Permitted Indebtedness; Other Lending Agreements
 

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Schedule 7(15)(g)—Real Property Owned and Leased/Collateral Locations
 
 

Location of Owned Real Property       Location of Leased Real Property Owner

 
 

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Schedule 7(15)(h)—Litigation
 

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Schedule 7(15)(l)—Environmental Matters
 

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Schedule 7(15)(q)—Subsidiaries
 

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Schedule 7(15)(r)—Intellectual Property
 
Owned
 
Licenses
 

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