Exhibit 10.6


 


FORBEARANCE
AGREEMENT, AMENDMENT TO WAIVER AND


AMENDMENT
NO. 5 TO CREDIT AGREEMENT


 


This FORBEARANCE AGREEMENT,
AMENDMENT TO WAIVER AND AMENDMENT NO. 5 TO CREDIT AGREEMENT,  dated as of July 11, 2008 (this “Agreement”),
is by and among BOWIE RESOURCES, LLC, a Delaware
limited liability company (the “Borrower”), COLORADO
HOLDING COMPANY, INC., a Delaware corporation (“CHC”), BOWIE RESOURCES MANAGEMENT PARTNER, LLC, a Nevada limited
liability company (“BRMP” and together with CHC sometimes collectively
referred to as the “Guarantors,” and the Guarantors, together with the
Borrower, collectively, the “Member Parties”), and GENERAL
ELECTRIC CAPITAL CORPORATION, as lender (“Lender”) and as
Agent for Lender (in such capacity, the “Agent”).


 


RECITALS:


 


WHEREAS, Borrower,
Guarantors, Agent and Lender are parties to that certain Credit Agreement dated
as of December 20, 2006, as amended by that certain Amendment No. 1
to Credit Agreement dated as of March 12, 2007, as further amended by that
certain Amendment No. 2 to Credit Agreement and Limited Consent dated as
of May 8, 2007, as further amended by that certain Consent, Limited Waiver
and Amendment No. 4 to the Credit Agreement dated August 2007, and as
further amended by that certain Waiver and Amendment No. 3 to the Credit
Agreement dated October 23, 2007 (as further amended, restated or
otherwise modified from time to time, the “Credit Agreement”;
capitalized terms not otherwise defined herein shall have the meanings given
such terms in the Credit Agreement);


 


WHEREAS, pursuant to
the Credit Agreement, Lender made a Term Loan to Borrower in the aggregate
principal amount of $60,000,000.00. As security for the Term Loan and Borrower’s
obligations under the Credit Agreement, Borrower granted to Agent a security
interest in the Collateral. The Collateral includes, but is not limited to, the
Accounts, Chattel Paper, Contracts, Deposit Accounts, Documents, Equipment,
Fixtures, General Intangibles, Goods, Instruments, Inventory and Investment
Property of the Member Parties, and Borrower’s Real Estate;


 


WHEREAS, pursuant to
that certain Consent and Waiver No. 5 to Credit Agreement dated as of May 8,
2008 (the “Waiver”), Agent and Lender waived certain mandatory
prepayment requirements set forth Section 1.3(b)(iii) of the Credit
Agreement with respect to a series of capital contributions to Borrower from
CHC in the aggregate amount of not more than Ten Million Dollars, on terms and
conditions set forth in the Waiver.


 


WHEREAS, Borrower
has, on or prior to the date hereof, failed to (a) make the February 29,
2008, March 31, 2008, April 30, 2008, May 31, 2008 and June 30,
2008 scheduled principal payments to Agent with respect to the Term Loan
pursuant to Section 1.1(a)(ii) of the Credit Agreement, (b) comply
with the minimum Fixed Charge Coverage Ratio covenant set forth in Subsection (b) of
Annex E to the Credit Agreement during the Fiscal Quarter ending March 31,
2008, and (c) meet the audited Financial Statement delivery requirements
contained in Subsection (d) of Annex D to the Credit Agreement (Annual
Audited Financials) for Fiscal Year 


 


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2007. Each such failure
constitutes an Event of Default under the Credit Agreement (each an “Existing
Default” and collectively, the “Existing Defaults”);


 


WHEREAS, Borrower
has informed Agent that Borrower anticipates it will fail to (a) make the July 31,
2008 and August 31, 2008 scheduled principal payments to Agent with
respect to the Term Loan pursuant to Section 1.1(a)(ii) of the Credit
Agreement, (b) comply with the minimum Fixed Charge Coverage Ratio
covenant set forth in Subsection (b) of Annex E to the Credit Agreement
during the Fiscal Quarters ending June 30, 2008, September 30, 2008
and December 31, 2008, (c) comply with the maximum Leverage Ratio
covenant set forth in Subsection (c) of Annex E to the Credit Agreement
during the Fiscal Quarters ending June 30, 2008, September 30, 2008
and December 31, 2008, and (d) comply with the maximum Capital
Expenditures covenant set forth in Subsection (a) of Annex E to the Credit
Agreement during the Fiscal Year commencing January 1, 2008. Each such
failure will constitute an Event of Default under the Credit Agreement (each an
“Anticipated Default” and collectively, the “Anticipated Defaults”;
the Existing Defaults and the Anticipated Defaults are sometimes referred to
collectively herein as the “Designated Defaults”);


 


WHEREAS, by reason
of the existence of the Designated Defaults, Agent has full legal right to
exercise its rights and remedies under the Credit Agreement. Such remedies
include, but are not limited to, the right to repossession and sale of the
Collateral;


 


WHEREAS, Borrower
has requested that Agent and Lender forbear for a period of time from
exercising its rights and remedies under the Credit Agreement with respect to
the Designated Defaults, amend the terms of the Waiver and amend the terms of
the Credit Agreement as set forth herein; and


 


WHEREAS, Agent and
Lender is willing to forbear in the exercise of its remedies under the Credit
Agreement, amend the terms of the Waiver and amend the terms of the Credit
Agreement, both on the terms and conditions set forth herein.


 


NOW, THEREFORE, in
consideration of the premises and the agreements, provisions and covenants herein
contained, the parties hereto agree as follows:


 


SECTION 1.                            AGREEMENT
TO FORBEAR


 


A.                                   During
the period commencing on the date hereof and ending on the earlier of (a) January 1,
2009, and (b) the date that any Forbearance Default (as defined below)
occurs (the “Forbearance Period”), Agent, on behalf of Lender, will
forbear in the exercise of its rights and remedies under the Loan Documents
with respect to the Designated Defaults (the “Forbearance”). Without
limiting the generality of the foregoing, during the Forbearance Period, Agent
will not (i) accelerate the maturity of the Term Loan or initiate
proceedings for the collection of the Term Loan; (ii) file or join in
filing any involuntary petition in bankruptcy with respect to Borrower, or
otherwise initiate or participate in similar insolvency, reorganization or
moratorium proceedings for the benefit of creditors of Borrower; or (iii) repossess
or sell, through judicial proceedings or otherwise, any of the Collateral.


 


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SECTION 2.                            DEFAULT
RATE


 


Commencing on May 1, 2008, interest at
the Default Rate shall accrue on the Term Loan until the Designated Defaults
are cured or waived, and such interest shall be payable upon demand.


 


SECTION 3.                                FORBEARANCE
FEE


 


In consideration of the Forbearance, Borrower
hereby agrees to pay to Agent, for the benefit of Lender, a forbearance fee
equal to $3,500,000 (the “Forbearance Fee”), which fee is fully earned
and payable as of the date hereof.


 


SECTION 4.                                CONDITIONS
PRECEDENT TO EFFECTIVENESS OF FORBEARANCE


 


The Forbearance set forth in this Agreement
shall not be effective unless and until each of the following conditions shall
have been satisfied in Agent’s sole discretion:


 


A.                                 The Borrower, the
other Member Parties, the Lender and the Agent indicate their consent to such
Forbearance by executing and delivering the signature pages hereof to the
Agent.


 


B.                                   Borrower shall have
paid to Agent, for the benefit of Lender, the Forbearance Fee.


 


C.                                   Borrower shall have
paid Agent, for the benefit of the Lender, all of Lender’s costs and expenses
(including attorneys fees) incurred in connection with the preparation of this
Agreement and the documents and instruments incidental hereto.


 


D.                                  Borrower and the
other Member Parties shall deliver such other certificates, documents,
opinions, agreements and information as Agent or any Lender may reasonably
request.


 


SECTION 5.                            FORBEARANCE
DEFAULT


 


Each of the following shall constitute a “Forbearance
Default” hereunder:


 


A.                                 The existence of any
Event of Default (other than the Designated Defaults) under the Credit
Agreement.


 


B.                                   Borrower shall fail
to keep or perform any of the covenants or agreements contained herein,
including but not limited to the payment of the Forbearance Fee.


 


C.                                   Any representation
or warranty of Borrower herein shall be false, misleading or incorrect in any
material respect.


 


SECTION 6.                            AMENDMENT
TO WAIVER


 


Upon the terms and subject to the conditions
set forth in this Agreement and upon satisfaction of each of applicable
conditions precedent set forth herein, Recital A of the Wavier is hereby
restated as follows:


 


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The Credit Parties have informed Agent and
Lender that CHC intends to make a series of capital contributions to Borrower
in the aggregate amount of not more than Eleven Million Five Hundred Thousand
Dollars (collectively, the “Contribution”), and in consideration for the
Contribution, Borrower intends to issue additional Stock to CHC.


 


SECTION 7.                            AMENDMENTS
TO CREDIT AGREEMENT


 


Upon the terms and subject to the conditions
set forth in this Agreement and upon satisfaction of each of applicable
conditions precedent set forth herein, the Credit Agreement is hereby amended
as follows:


 


A.                                   The first recital to
the Credit Agreement shall be restated as follows:


 


WHEREAS,
Borrower has requested that Lenders extend (i) a term loan to Borrower on
the Funding Date for fifty million Dollars ($50,000,000) in the aggregate for
the purpose of refinancing certain indebtedness of Borrower and to provide (a) working
capital financing for Borrower, (b) funds for other general corporate
purposes of Borrower and (c) funds for other purposes permitted hereunder,
(ii) a delayed draw term loan to Borrower for ten million Dollars ($10,000,000)
for the purpose of funding the Debt Service Reserve Account in an amount
sufficient to cause the amount on deposit in the Debt Service Reserve Account
to equal the Debt Service Reserve Amount and the making of a distribution to
the Borrower’s equity holders, and (iii) a term loan to Borrower on July 11,
2008 for thirteen million five hundred thousand Dollars ($13,500,000) to
provide funds for (a) the restoration of Borrower’s coal production
operations with respect to the Mine described in CDMG Permit No. C-1981-038,
(b) the payment of Borrower’s accounts payable, and (c) the payment
of certain Fees; and for these purposes, Lenders are willing to make certain
loans and other extensions of credit to Borrower of up to such amounts upon the
terms and conditions set forth herein; and


 


B.                                     Section 1.1(a)(i) of
the Credit Agreement shall be restated as follows:


 


Subject to the
terms and conditions hereof, the Lender agrees to make (a) in a single
draw on the Funding Date a term loan (the “Closing Date Term Loan”) to
Borrower in the amount of the Lender’s Closing Date Term Loan Commitment, (b) in
a single draw on any Business Day requested by the Borrower in writing to the
Agent following the Audited Financial Statements Approval Date, a delayed draw
term loan (the “Delayed Draw Term Loan”) which shall be part of the Term
Loan hereunder, in the amount of the Lender’s Delayed Draw Term Loan
Commitment, and (c) in a single draw on July 11, 2008, an additional
term loan (the “Term Loan B”), in the amount of the Lender’s Term Loan B
Commitment. The obligations of each Lender hereunder shall be several and not
joint. The Term Loan shall be evidenced by promissory notes substantially in
the form of Exhibit 1.1(a)(i)(1) (each a “Term Note”
and collectively the “Term Notes”), and, except as provided in Section 1.10,
the 


 


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Borrower shall execute and deliver the Term Notes to the applicable
Lender. Each Term Note shall be dated the Funding Date, or in the case of the
Delayed Draw Term Loan, the date the Delayed Draw Term Loan is made. The Term
Notes shall represent the obligation of the Borrower to pay the Lender’s Term
Loan Commitment, together with interest thereon as prescribed in Section 1.5.
The aggregate principal amount of the Term Loan advanced to the Borrower shall
be the primary obligation of the Borrower. The Term Loan B shall be evidenced
by promissory notes substantially in the form of Exhibit 1.1(a)(i)(2) (each
a “Term B Note” and collectively the “Term B Notes”), and, except
as provided in Section 1.10, the Borrower shall execute and deliver
the Term B Notes to the applicable Lender. Each Term B Note shall be dated the
date the Term Loan B is made. The Term B Notes shall represent the obligation
of the Borrower to pay the Lender’s Term Loan B Commitment, together with
interest thereon as prescribed in Section 1.5. The aggregate
principal amount of the Term Loan B advanced to the Borrower shall be the
primary obligation of the Borrower.


 


C.             Section 1.1(a)(ii) of
the Credit Agreement shall be restated as follows:


 


Borrower shall repay the Term Loan in monthly
installments on the last day of each Fiscal Month commencing August 31,
2007, as follows:


 


	
  Fiscal Months Ending During the Period:

  	
   

  	
  Installment Amounts:

  	
   

  
	
  August 31, 2007

  	
   

  	
  $

  	
  2,000,000.00

  	
   

  
	
  October 21, 2007

  	
   

  	
  $

  	
  2,000,000.00

  	
   

  
	
  November 30, 2007

  	
   

  	
  $

  	
  3,000,000.00

  	
   

  
	
  December 31, 2007

  	
   

  	
  $

  	
  3,000,000.00

  	
   

  
	
  January 31, 2008

  	
   

  	
  $

  	
  2,000,000.00

  	
   

  
	
  February 29, 2008 through and
  including the Commitment Termination Date”

  	
   

  	
  $

  	
  1,000,000.00

  	
   

  



 


Notwithstanding
anything set forth in this Section 1.1(a)(ii), the aggregate
outstanding principal balance of the Term Loan shall be due and payable in full
in immediately available funds on the Commitment Termination Date, if not
sooner paid in full. No payment with respect to the Term Loan may be
reborrowed.


 


D.             Section 1.1(a)(iii) of
the Credit Agreement shall be restated as follows:


 


The entire unpaid
balance of the Term Loan B shall be immediately due and payable in full in
immediately available funds on the earlier of (A) December 31, 2008, and (B) the
date of termination of Lender’s obligations to permit the Term Loan B to remain
outstanding pursuant to Section 8.2(b), if not sooner paid in full.
No payment with respect to the Term Loan B may be reborrowed.


 


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E.                                        Section 1.1(a)(iv) of
the Credit Agreement shall be restated as follows:


 


Each payment
of principal with respect to the Term Loan shall be paid to Agent for the
ratable benefit of each Lender making the Term Loan, ratably in proportion to
each such Lender’s respective Term Loan Commitment. Each payment of principal
with respect to the Term Loan B shall be paid to Agent for the ratable benefit
of each Lender making the Term Loan B, ratably in proportion to each such
Lender’s respective Term Loan B Commitment.


 


F.                                        Section 1.3(a) of
the Credit Agreement shall be restated as follows:


 


Borrower may
at any time on at least five (5) days’ prior written notice to Agent (i) voluntarily
prepay all or part of the Term Loan; provided that (A) any such
prepayments or reductions shall be in a minimum amount of $1,000,000 and
integral multiples of $250,000 in excess of such amount and (B) after
giving effect to such reductions, Borrower shall comply with Section 1.3(b)(iv),
and (ii) voluntarily prepay all or part of the Term Loan B; provided
that (A) any such prepayments or reductions shall be in a minimum amount
of $1,000,000 and integral multiples of $250,000 in excess of such amount and (B) after
giving effect to such reductions, Borrower shall comply with Section 1.3(b)(iv).
Any voluntary prepayment must be accompanied by payment of the Fee required by Section 1.7(b),
if any, plus the payment of any LIBOR funding breakage costs in accordance with
Section 1.11(b). Any partial prepayments of the Term Loan made by
Borrower shall be applied, first, to any currently outstanding
Obligations due and payable pursuant to any of the Loan Documents; second,
to prepay the scheduled installments of the outstanding Term Loan in inverse
order of maturity; and third, the balance, if any, of any prepayments
shall be distributed in accordance with Section 5.1 of the Deposit and
Disbursement Agreement. Any partial prepayments of the Term Loan B made by
Borrower shall be applied, first, to any currently outstanding
Obligations due and payable pursuant to any of the Loan Documents; second,
to prepay the outstanding principal balance of the Term Loan B; and third,
the balance, if any, of any prepayments shall be distributed in accordance with
Section 5.1 of the Deposit and Disbursement Agreement.


 


G.                                       Section 1.3(c) of
the Credit Agreement shall be restated as follows:


 


Any
prepayments made by Borrower pursuant to Sections 1.3(b)(i), (b)(ii),
(b)(iii), (b)(iv) or 5.4 shall be applied as follows: first, to
any currently outstanding Obligations due and payable pursuant to any of the
Loan Documents; second, to prepay the outstanding principal balance of
the Term Loan B, until such Term Loan B has been prepaid in full; third,
to prepay the scheduled principal installments of the outstanding Term Loan in
inverse order of maturity, until such Term Loan has been prepaid in full; fourth,
the balance, if any, of any prepayment shall be distributed in accordance with Section 5.1
of the Deposit and Disbursement Agreement.


 


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H.                                      New
Section 1.4(c) shall be added to the Credit Agreement as follows:


 


Borrower shall utilize the
proceeds of the Term Loan B solely to (a) restore Borrower’s coal
production operations with respect to the Mine described in CDMG Permit No. C-1981-038,
(b) pay Borrower’s accounts payable, and (c) pay certain Fees.


 


I.                                           Section 1.5(a) of
the Credit Agreement shall be restated as follows:


 


Except as otherwise provided in Section 1.5(d),
Borrower shall pay interest to Agent, for the ratable benefit of Lenders, in
arrears on each applicable Interest Payment Date, (i) on the principal
amount of the Term Loan from time to time outstanding, at the applicable LIBOR
Rate plus the Applicable Term Loan LIBOR Margin per annum, and (ii) on the
principal amount of the Term Loan B from time to time outstanding, at the
applicable LIBOR Rate plus 5.00%. The Applicable Term Loan LIBOR Margin is
6.00% during the Audited Financial Statements Deficiency Period and 4.00%
thereafter.


 


J.                                          Section 1.9(a) of
the Credit Agreement shall be restated as follows:


 


So long as no Event of Default
has occurred and is continuing, (i) payments matching specific scheduled
payments then due shall be applied to those scheduled payments; (ii) voluntary
prepayments shall be applied in accordance with the provisions of Section 1.3(a);
and (iii) mandatory prepayments shall be applied as set forth in Section 1.3(c).
All payments and prepayments applied to the Term Loan shall be applied ratably
to the portion thereof held by each Lender as determined by its Pro Rata Share.
As to all payments made when an Event of Default has occurred and is continuing
or following the Commitment Termination Date, Borrower hereby irrevocably
waives the right to direct the application of any and all payments received
from or on behalf of Borrower, and Borrower hereby irrevocably agrees that
Agent shall have the continuing exclusive right to apply any and all such
payments against the Obligations of Borrower as Agent may deem advisable
notwithstanding any previous entry by Agent in the Loan Account or any other
books and records. In all circumstances, after acceleration or maturity of the
Obligations, all payments and proceeds of Collateral shall be applied to
amounts then due and payable in the following order: (1) to Fees and Agent’s
Reimbursable Expenses hereunder; (2) to accrued and unpaid interest on the
Term Loan B; (3) to accrued and unpaid interest on the Term Loan; (4) to
the outstanding principal balance of the Term Loan B; (5) to principal
payments on the Term Loan in inverse order of maturity; and (6) to all
other Obligations, including expenses of Lenders to the extent reimbursable
under Section 11.3.


 


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K.                                  The definitions of “Commitments”,
“Loan”, “Notes”, “Pro Rata Share” and “Term Loan” contained in Annex A to the
Credit Agreement shall be restated as follows:


 


“Commitments” means (a) as to any Lender, the aggregate of
such Lender’s Commitment as set forth on Annex H, Annex H-1 and Annex
H-2 to the Agreement or in the most recent Assignment Agreement executed by
such Lender and (b) as to all Lenders, the aggregate of all Lenders’
Commitments, which aggregate commitments shall be (i) sixty million
Dollars ($60,000,000) on the Closing Date, and (ii) seventy three million
five hundred thousand Dollars ($73,500,000) as of July 11, 2008, as such
Commitments may be reduced, amortized or adjusted from time to time in
accordance with the Agreement.


 


“Loan” means, collectively, the Term Loan and the Term Loan B.


 


“Notes” means, collectively, the Term Notes and the Term B
Notes.


 


“Pro Rata Share” means with respect to all matters relating to
any Lender, (a) with respect to the Term Loan, the percentage obtained by
dividing (i) the Term Loan Commitment of that Lender by (ii) the
aggregate Term Loan Commitments of all Lenders, as any such percentages may be
adjusted by assignments permitted pursuant to Section 9.1, (b) with
respect to the Term Loan on and after the Commitment Termination Date, the
percentage obtained by dividing (i) the aggregate outstanding principal
balance of the Term Loan held by that Lender, by (ii) the outstanding
principal balance of the Term Loan held by all Lenders, and (c) with
respect to the Term Loan B, the percentage obtained by dividing (i) the
aggregate outstanding principal balance of the Term Loan B held by that Lender,
by (ii) the outstanding principal balance of the Term Loan B held by all
Lenders.


 


“Term Loan” means the aggregate of the Closing Date Term Loan
and the Delayed Draw Term Loan.


 


L.                                        The
following definitions shall be added to Annex A of the Credit Agreement:


 


“Term Loan B” has the meaning set forth in Section 1.1(a)(i).


 


“Term Loan B Commitment” means (a) as to any Lender with a
Term Loan B Commitment, the commitment of such Lender to make its Pro Rata
Share of the Term Loan B as set forth on Annex H-2 to the Agreement or
in the most recent Assignment Agreement executed by such Lender, and (b) as
to all Lenders with a Term Loan B Commitment, the aggregate commitment of all
Lenders to make the Term Loan B, which aggregate commitment shall be thirteen
million five hundred thousand Dollars ($13,500,000) on July 11, 2008. After
advancing the Term Loan B, each reference to a Lender’s Term Loan B Commitment
shall refer to that Lender’s Pro Rata Share of the outstanding Term Loan B.


 


“Term B Notes” has the meaning set forth in Section 1.1(a)(i).


 


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M.                                 Except as set forth in
the Sections, Annexes and Exhibits of the Credit Agreement amended and restated
pursuant to this Agreement, each reference in the Loan Documents to the phrase “Term
Loan” is hereby restated and replaced with the word “Loan”.


 


N.                                    Annex
H-2 attached hereto shall be added as Annex H-2 to the Credit Agreement.


 


O.                                    Exhibit 1.1(a) to
the Credit Agreement shall be replaced in its entirety with Exhibit 1.1(a)(i)(1) hereto,
and Exhibit 1.1(a)(i)(2) hereto shall be added as Exhibit 1.1(a)(i)(2) to
the Credit Agreement.


 


SECTION 8.                                CONDITIONS
PRECEDENT TO EFFECTIVENESS OF AMENDMENTS TO WAIVER AND CREDIT AGREEMENT


 


The amendments and restatements of certain
provisions of the Wavier and the Credit Agreement, as set forth in this
Agreement, shall not be effective unless and until each of the following
conditions shall have been satisfied in Agent’s sole discretion:


 


A.                                 The Borrower, the
other Member Parties, the Lender and the Agent indicate their consent to such
amendments and restatements by executing and delivering the signature pages hereof
to the Agent.


 


B.                                   The Borrower shall
pay to Agent a non-refundable amendment fee of $1,500,000, which fee is fully
earned and payable as of the date hereof.


 


C.                                   Borrower shall have
paid Agent, for the benefit of the Lender, all of Lender’s costs and expenses
(including attorneys fees) incurred in connection with the preparation of this
Agreement and the documents and instruments incidental hereto.


 


D.                                  Borrower and the
other Member Parties shall deliver such other certificates, documents,
opinions, agreements and information as Agent or any Lender may reasonably
request.


 


SECTION 9.                            COVENANTS
OF BORROWER.


 


In
consideration of the Forbearance, the Waiver amendment and the Term Loan B made
pursuant to this Agreement, Borrower hereby agrees as follows:


 


A.                                 Borrower
shall deliver to Agent, on the first Business Day of each week during the
Forbearance Period, weekly financial projections for Borrower (including weekly
statements of cash flows and liquidity forecasts) for the period beginning on
such Business Day and ending on the last day of the thirteenth week thereafter,
which projections shall be based upon Borrower’s good faith and reasonable
estimates of the future financial performance of Borrower and of the other
information projected therein for the period set forth therein.


 


9














 


B.                                       Borrower
shall conduct good faith negotiations with Agent and shall come to an agreement
with Agent that, on or prior to the end of the Forbearance Period, Borrower
shall replenish and maintain in the Debt Service Reserve Account an amount
acceptable to Agent (such amount not less than the balance of the Debt Service
Reserve Account as of the date hereof) during the period commencing on the date
of agreement between Agent and Borrower and ending on the Commitment
Termination Date.


 


SECTION 10.                         REPRESENTATIONS
AND WARRANTIES


 


The Member Parties hereby, jointly and
severally, represent and warrant to Agent as follows:


 


A.                                       Recitals.  The
Recitals in this Agreement are true and correct in all respects.


 


B.                                         Corporate Power and Authority.  Each Member Party has all requisite corporate
power and authority to enter into this Agreement and to carry out the
transactions contemplated by, and perform its obligations under, the Waiver and
the Credit Agreement, each as amended pursuant to this Agreement.


 


C.                                         Authorization of Agreement. 
The execution and delivery of this Agreement have been duly authorized
by all necessary corporate, limited liability company or partnership (as
applicable) action on that part of each Member Party.


 


D.                                        No Conflict.  The
execution and delivery by each Member Party of this Agreement and the
performance by each Member Party of the Waiver and Credit Agreement, each as
amended pursuant to this Agreement do not and will not (1) violate any
provisions of any law or any governmental rule or regulation applicable to
any Member Party, the certificate or articles of incorporation or bylaws (or
other organizational documents) of any Member Party or any order, judgment or
decree of any court or other agency of government binding on any Member Party; (2) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any material indenture, mortgage, deed to secure debt,
deed of trust, lease, agreement or other instrument to which any Member Party
is a party or by which any Member Party or any of its property is bound (any of
the foregoing, a “Contractual Obligation”); (3) result in or
require the creation or imposition of any Lien upon any of the properties or
assets of a Member Party other than those in favor of the Agent, on behalf of
itself and the Lender, pursuant to the Loan Documents; or (4) require any
approval of stockholders or any approval or consent of any Person under any
Contractual Obligation of any Member Party other than those that have been made
or obtained.


 


E.                                          Governmental Consents. 
No action, consent or approval of, registration or filing with any other
action by any Governmental Authority is required in connection with the
execution and delivery by each Member Party of this Agreement or the
performance by the Member Parties of the Waiver and the Credit Agreement, each
as amended pursuant to this Agreement.


 


F.                                          Binding Obligation. 
This Agreement has been duly executed and delivered by each Member Party
and this Agreement and the Waiver and the Credit Agreement, each as amended
pursuant to this Agreement constitute the legal, valid and binding obligations
of each 


 


10

















 


Member Party enforceable against each Member Party in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting creditors’ rights
generally and except as enforceability may be limited by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).


 


G.                                         Incorporation of Representations and Warranties From Loan Documents.  The representations and warranties continued
in the Loan Documents are and will be true, correct and complete in all
respects on and as of the date hereof to the same extent as though made on and
as of the date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all respects on and as of such earlier date, and except that
CHC and Energy Coal Resources, Inc. have entered into an Option Agreement
dated June 24, 2008, granting Paonia Resources, LLC the right to acquire
75% of the membership interests of Borrower (which option is conditioned upon,
among other things, obtaining Agent’s consent).


 


H.                                        Absence of Default. 
After giving effect to the amendments set forth in Section 7
hereof, no default has occurred and is continuing or will result from the
consummation of the transactions contemplated by this Agreement that would
constitute an Event of Default or a Default (other than the Designated
Defaults).


 


I.                                             Obligations Absolute.  The
obligation of Borrower to repay the Loan, together with all interest accrued
thereon, is absolute and unconditional, and there exists no right of set off or
recoupment, counterclaim or defense of any nature whatsoever to payment of the
Loan.


 


SECTION 11.                         ACKNOWLEDGEMENT
AND CONSENT BY GUARANTORS


 


Each Guarantor
hereby consents to the terms of this Agreement and further hereby confirms and
agrees that, notwithstanding the effectiveness of this Agreement, the
obligations of such Guarantor under each of the Loan Documents to which such
Guarantor is a party shall not be impaired and each of the Loan Documents to
which such Guarantor is a party are, and shall continue to be, in full force
and effect and are hereby confirmed and ratified in all respects.


 


Each Guarantor
hereby acknowledges and agrees that (i) notwithstanding the conditions to
effectiveness set forth in this Agreement, such Guarantor is not required by
the terms of the Waiver, the Credit Agreement or any other Loan Document to
consent to the amendments to the Waiver and the Credit Agreement effected
pursuant to this Agreement and (ii) nothing in the Waiver, the Credit
Agreement, this Agreement or any other Loan Document shall be deemed to require
the consent of such Guarantor to any future amendments to the Credit Agreement.


 


SECTION 12.                         RELEASE OF CLAIMS AND WAIVER.


 


Each Member Party hereby releases, remises, acquits and forever
discharges Agent, Lender and their employees, agents, representatives,
consultants, attorneys, fiduciaries, servants, officers, directors, partners,
predecessors, successors and assigns, subsidiary corporations, parent
corporations and related corporate divisions (collectively, “Released Parties”)
from any and all actions and causes of action, judgments, executions, suits,
debts, claims, demands, liabilities, obligations, damages and expenses of any
and every character, known or unknown, direct and/or 


 


11

















 


indirect, at law or in equity, of whatsoever kind or nature, whether
heretofore or hereafter arising, for or because of any matter or thing done,
omitted or suffered to be done by any Released Party prior to and including the
date of execution hereof and in any way directly or indirectly arising out of
or in any way connected to this Agreement and the Loan Documents, including but
not limited to, claims relating to any settlement negotiations (collectively,
the “Released Matters”).  Each
Member Party acknowledges that the agreements in this Section are intended
to be in full satisfaction of all or any alleged injuries or damages arising in
connection with the Released Matters. 
Each Member Party represents and warrants to Agent that they have not
purported to transfer, assign or otherwise convey any right, title or interest
in any Released Matter to any other Person and that the foregoing constitutes a
full and complete release of all Released Matters.


 


SECTION 13.                         MISCELLANEOUS


 


A.                                     Further Assurances.  The
Member Parties agree to execute such other and further documents and
instruments as Agent may reasonably request to implement the provisions of this
Agreement and to perfect and protect the liens and security interests created
by the Credit Agreement.


 


B.                                       Binding Effect.  This
Agreement shall be binding upon the parties thereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto and
the successors and assigns of Lender.  No other person or entity shall be entitled to
claim any right or benefit hereunder, including, without limitation, the status
of a third-party beneficiary of this Agreement.


 


C.                                       Severability.  In case
any provision in or obligation hereunder shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.


 


D.                                      Effect on Credit Agreement. 
Except as expressly set forth herein, the Lender and Agent agree to no
amendment and grant no waiver or consent with respect to the Credit Agreement
or any other Loan Document, and the Credit Agreement and the other Loan
Documents remain in full force and effect and are hereby ratified and
confirmed.  Lender’s and Agent’s agreeing
to the amendments and waivers contained herein do not and shall not create (nor
shall any Credit Party rely upon the existence of or claim or assert that here
exists) any obligation of Lender or Agent to consider or to agree to any
further amendments or waivers to any Loan Document.  In the event that Lender or Agent
subsequently agrees to consider any further amendment or waiver to any Loan
Document, neither the amendments or waivers contained herein nor any other
conduct of Lender or Agent shall be of any force or effect on Lender’s or Agent’s
consideration or decision with respect to any such amendment or waiver, and
Lender and Agent shall have no further obligation whatsoever to consider or to
agree to any such amendment or waiver. 
Lender and Agent expressly reserve the right to require strict compliance
with the terms of the Credit Agreement and the other Loan Documents in all
respects.  Except as expressly provided herein, the Credit Agreement and the Loan Documents shall remain in full force and effect
in accordance with their respective terms, and this Agreement shall not be
construed to (1) impair the validity, perfection or priority of any lien
or security interest securing the Notes; (2) waive or impair any rights,
powers or remedies of Agent 


 


12

















 


under the Loan Documents; (3) constitute an election of remedies
to the exclusion of any other remedies; (4) constitute an agreement by
Agent or require Agent to waive any Default or Event of Default or extend the
term of the Credit Agreement or the time for payment of any of the Loans; (5) make
any further Loans or other extensions of credit to Borrowers; or (6) constitute
a course of dealing at variance with the Credit Agreement so as to require
further notice by Lender or Agent to require strict compliance with the terms
of the Credit Agreement and the other Loan Documents in the future.  The parties hereto acknowledge and agree that
this Agreement shall be deemed to be a Loan Document.  On and after the date herof, each reference
in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or
words of like import referring to the Credit Agreement, and each reference in
the other Loan Documents to the “Credit Agreement,” “thereunder,” “thereof,” “therein”
or words of like import referring to the Credit shall mean and be a reference
to the Credit Agreement as amended pursuant to this Agreement.


 


E.                                        Fees and Expenses. 
The Member Parties hereby reaffirm their agreement under Section 11.3
of the Credit Agreement to pay or reimburse Agent on demand for all costs and
expenses incurred by Agent in connection with the Credit Agreement, the Loan
Documents and all other documents contemplated thereby, including without
limitation all reasonable fees and disbursements of legal counsel.  Without limiting the generality of the
foregoing, the Member Parties specifically agree to pay all fees and
disbursements of counsel to Agent for the services performed by such counsel in
connection with the preparation of this Agreement and the documents and
instruments incidental hereto.


 


F.                                        Headings.  Section headings
herein are included herein for convenience of reference only and shall not
constitute a part hereof for any other purpose or be given any substantive
effect.


 


G.                                       APPLICABLE LAW.   THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH , THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401
AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).


 


H.                                      Counterparts.  This
Agreement may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.  Any
signature delivered by a party by facsimile transmission shall be deemed to be
an original signature hereto.


 


I.                                           Amendment.  No
amendment, modification, rescission, waiver or release of any provision of this
Agreement shall be effective unless the same shall be in writing and signed by
the parties hereto.


 


J.                                          Entire Agreement.  Except as
expressly set forth herein, there are no agreements or understandings, written
or oral, between the Member Parties or Agent relating to this Agreement, the
Waiver, the Credit Agreement or the other Loan Documents that are not fully and
completely set forth herein or therein.


 


13

















 


IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized as of the date first written above.


 


	
  BORROWER:

  	
   

  	
  BOWIE
  RESOURCES, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Scott Dyer

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Scott Dyer

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  GUARANTORS:

  	
   

  	
  COLORADO
  HOLDING COMPANY, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Stephen Addington

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Stephen Addington

  
	
   

  	
   

  	
  Title:

  	
   

  	
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BOWIE
  RESOURCES MANAGEMENT

  PARTNER, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Keith H. Sieber

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Keith H. Sieber

  
	
   

  	
   

  	
  Title:

  	
   

  	
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  AGENT AND
  LENDER

  	
   

  	
  GENERAL
  ELECTRIC CAPITAL 

  CORPORATION, in its respective 

  capacities as Agent and Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Randall F. Hornick

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Randall F. Hornick

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Authorized Signatory

  
														



 


SIGNATURE PAGE TO FORBEARANCE AGREEMENT, AMENDMENT TO WAIVER AND


AMENDMENT NO. 5 TO CREDIT AGREEMENT (GECC/BOWIE)


 

















 


ANNEX
H-2 (from Annex A - Commitments definition)


 


to


 


CREDIT
AGREEMENT


 


	
   

  	
   

  	
  Lender(s)

  
	
   

  	
   

  	
   

  
	
  Term Loan B Commitment:

  	
   

  	
   

  
	
  $13,500,000

  	
   

  	
  General Electric Capital
  Corporation

  



 


Annex H-2

















 


EXHIBIT 1.1(a)(i)(1)


to


CREDIT AGREEMENT


 


FORM OF
TERM NOTE


 


New York, New York


	
  $50,000,000

  	
   

  	
  [                
      , 20      ]

  



 


FOR VALUE RECEIVED, the undersigned, BOWIE
RESOURCES, LLC, a Delaware limited liability company (“Borrower”), HEREBY
PROMISES TO PAY to the order of
[                                      ]
(“Lender”) at the offices of GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation, as Agent for Lenders (“Agent”), at its address at
[                                                                ],
or at such other place as Agent may designate from time to time in writing, in
lawful money of the United States of America and in immediately available
funds, the amount of FIFTY MILLION DOLLARS AND ZERO CENTS ($50,000,000).  All capitalized terms used but not otherwise
defined herein have the meanings given to them in the “Credit Agreement” (as
hereinafter defined) or in Annex A thereto.


 


This Term Note is one of the Term Notes
issued pursuant to that certain Credit Agreement dated as of December [    ],
2006 by and among Borrower, the other Persons named therein as Credit Parties,
Agent, Lender and the other Persons signatory thereto from time to time as
Lenders (including all annexes, exhibits and schedules thereto and as from time
to time amended, restated, amended and restated, supplemented or otherwise
modified, the “Credit Agreement”), and is entitled to the benefit and security
of the Credit Agreement, the Security Agreement and all of the other Loan Documents
referred to therein.  Reference is hereby
made to the Credit Agreement for a statement of all of the terms and conditions
under which the Loans evidenced hereby are made and are to be repaid.  The principal balance of the Term Loan, the
rates of interest applicable thereto and the date and amount of each payment
made on account of the principal thereof, shall be recorded by Agent on its
books; provided that the failure of Agent to make any such recordation shall
not affect the obligations of Borrower to make a payment when due of any amount
owing under the Credit Agreement or this Term Note.


 


The principal amount of the indebtedness
evidenced hereby shall be payable in the amounts and on the dates specified in
the Credit Agreement.  Interest thereon shall
be paid until such principal amount is paid in full at such interest rates and
at such times, and pursuant to such calculations, as are specified in the
Credit Agreement.  The terms of the
Credit Agreement are hereby incorporated herein by reference.


 


If any payment on this Term Note becomes due
and payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day and, with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during
such extension.


 


Upon and after the occurrence of any Event of
Default, this Term Note may, as provided in the Credit Agreement, and without
demand, notice or legal process of any kind, be declared, and immediately shall
become, due and payable.


 


1

















 


Time is of the essence of this Term
Note.  Demand, presentment, protest and
notice of nonpayment and protest are hereby waived by Borrower.


 


Except as provided in the Credit Agreement, this
Term Note may not be assigned by Lender to any Person.


 


THIS TERM NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THAT STATE.


 


 


	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  BOWIE RESOURCES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


2

















 


EXHIBIT 1.1(a)(i)(2)


to


CREDIT AGREEMENT


 


FORM OF
TERM B NOTE


 


New York, New York


	
  $13,500,000

  	
   

  	
  [                
      , 20      ]

  



 


FOR VALUE RECEIVED, the undersigned, BOWIE
RESOURCES, LLC, a Delaware limited liability company (“Borrower”), HEREBY
PROMISES TO PAY to the order of
[                                      ]
(“Lender”) at the offices of GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation, as Agent for Lenders (“Agent”), at its address at
[                                                                ],
or at such other place as Agent may designate from time to time in writing, in
lawful money of the United States of America and in immediately available
funds, the amount of THIRTEEN MILLION FIVE HUNDRED THOUSAND DOLLARS AND ZERO
CENTS ($13,500,000).  All capitalized
terms used but not otherwise defined herein have the meanings given to them in
the “Credit Agreement” (as hereinafter defined) or in Annex A thereto.


 


This Term B Note is one of the Term B Notes
issued pursuant to that certain Credit Agreement dated as of December [    ],
2006 by and among Borrower, the other Persons named therein as Credit Parties,
Agent, Lender and the other Persons signatory thereto from time to time as
Lenders (including all annexes, exhibits and schedules thereto and as from time
to time amended, restated, amended and restated, supplemented or otherwise
modified, the “Credit Agreement”), and is entitled to the benefit and security
of the Credit Agreement, the Security Agreement and all of the other Loan
Documents referred to therein.  Reference
is hereby made to the Credit Agreement for a statement of all of the terms and
conditions under which the Loans evidenced hereby are made and are to be
repaid.  The principal balance of the
Term Loan B, the rates of interest applicable thereto and the date and amount
of each payment made on account of the principal thereof, shall be recorded by
Agent on its books; provided that the failure of Agent to make any such
recordation shall not affect the obligations of Borrower to make a payment when
due of any amount owing under the Credit Agreement or this Term B Note.


 


The principal amount of the indebtedness
evidenced hereby shall be payable in the amounts and on the dates specified in
the Credit Agreement.  Interest thereon
shall be paid until such principal amount is paid in full at such interest
rates and at such times, and pursuant to such calculations, as are specified in
the Credit Agreement.  The terms of the
Credit Agreement are hereby incorporated herein by reference.


 


If any payment on this Term B Note becomes
due and payable on a day other than a Business Day, the maturity thereof shall
be extended to the next succeeding Business Day and, with respect to payments
of principal, interest thereon shall be payable at the then applicable rate
during such extension.


 


Upon and after the occurrence of any Event of
Default, this Term B Note may, as provided in the Credit Agreement, and without
demand, notice or legal process of any kind, be declared, and immediately shall
become, due and payable.


 


1

















 


Time is of the essence of this Term B
Note.  Demand, presentment, protest and
notice of nonpayment and protest are hereby waived by Borrower.


 


Except as provided in the Credit Agreement,
this Term B Note may not be assigned by Lender to any Person.


 


THIS TERM B NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THAT STATE.


 


 


	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  BOWIE RESOURCES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


2