EXHIBIT 10.5 - SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the
"Amendment"), dated as of June 30, 2000, is between INDUSTRIAL HOLDINGS, INC.
("Borrower"), COMERICA BANK-TEXAS ("Agent") and COMERICA BANK-TEXAS, NATIONAL
BANK OF CANADA and HIBERNIA NATIONAL BANK (the "Banks").
RECITALS:
A. Borrower, Banks and Agent have entered into that certain Amended and
Restated Credit Agreement (the "Agreement") dated as of June 17, 1999.
B. Pursuant to the Agreement, Guarantors executed that certain Amended and
Restated Guaranty Agreement (the "Guaranty") dated as of June 17, 1999 which
guaranteed to Agent the payment and performance of the Obligations.
C. Borrower, Banks and Agent having as of March 1, 2000 previously amended
the Agreement now desire to again amend the Agreement as herein set forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Capitalized terms used in this Amendment, to the extent
not otherwise defined herein, shall have the same meanings as in the Agreement,
as amended hereby. Additionally the following terms defined in the Agreement are
here re-defined and from and after the following means:
"APPLICABLE LENDING OFFICE" means for each Bank, the Lending Office of
such Bank (or of an Affiliate of such Bank) designated below its name on the
signature pages to the Second Amendment to Amended and Restated Credit Agreement
or such other office of such Bank (or of an Affiliate of such Bank) as such Bank
may from time to time specify to the Borrower and the Agent.
"APPLICABLE MARGIN" means the Base Rate plus THREE (3%) PERCENT.
"APPLICABLE RATE" means the Base Rate plus the Applicable Margin.
"COMMITMENT" means, as to each Bank, the obligation of such Bank to make
Revolving Advances and issue Letters of Credit hereunder, in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
set forth opposite the name of such Bank on the signature pages to the Second
Amendment to the Amended and Restated Credit Agreement under the heading
"Commitment," as the same may be reduced pursuant to Section 2.9 or terminated
pursuant to Section 2.9 or 11.2.
"DEBT SERVICE" means the sum of (a) all aggregate scheduled (as the same
may be modified from time to time) principal payments owed by the Borrower and
its Subsidiaries other than payments owing to EnSerCo or Trinity Industries,
Inc. during the applicable period immediately preceding the date of calculation
plus (b) cash Interest Expense for the applicable period immediately preceding
the date of calculation, plus (c) all regularly scheduled (as the same may be
modified from time to time) payments on account of Capital Lease Obligations
that became due and owing during the applicable period immediately preceding the
date of calculation.
"ELIGIBLE ACCOUNTS" means the aggregate of all accounts receivable of the
Borrower and the Guarantors that are acceptable to Agent in its sole discretion
and satisfy the following conditions: (i) are due and payable within thirty (30)
days; (ii) have been outstanding less than ninety (90) days past the original
date of invoice; (iii) have arisen in the ordinary course of business from
services performed by Borrower or any of the Guarantors to or for the
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account debtor or the sale by Borrower or any of the Guarantors of goods in
which such Person had sole ownership where such goods have been shipped or
delivered to the account debtor; (iv) represent complete bona fide transactions
which require no further act under any circumstances on the part of Borrower or
any of the Guarantors to make such accounts receivable payable by the account
debtor; (v) the goods sold which gave rise to such accounts receivable were
shipped or delivered to the account debtor on an absolute sale basis and not on
a consignment, a sale or return basis, a guaranteed sale basis, a xxxx and hold
basis, or on the basis of any similar understanding; (vi) the goods sold which
gave rise to such accounts receivable were not, at the time of sale thereof,
subject to any Lien, except the security interest in favor of Agent created by
the Loan Documents; (vii) are not subject to any provision prohibiting
assignment or requiring notice of or consent to such assignment; (viii) are
subject to a perfected, first priority security interest in favor of Agent and
are not subject to any other Lien; (ix) are not subject to setoff, counterclaim,
defense, allowance, dispute, or adjustment other than normal discounts for
prompt payment, and the goods sold which gave rise to such accounts receivable
have not been returned, rejected, repossessed, lost, or damaged; (x) the account
debtor is not insolvent or the subject of any bankruptcy or insolvency
proceeding and has not made an assignment for the benefit of creditors,
suspended normal business operations, dissolved, liquidated, terminated its
existence, ceased to pay its debts as they become due, or suffered a receiver or
trustee to be appointed for any of its assets or affairs; (xi) are not evidenced
by chattel paper or an instrument of any kind; (xii) are owed by a Person or
Persons that are citizens of or organized under the laws of the United States or
any State and are not owed by any Person located outside of the United States of
America; (xiii) if any accounts receivable are owed by the United States of
America or any department, agency, or instrumentality thereof, the Federal
Assignment of Claims Act shall have been complied with; and (xiv) are not owed
by an Affiliate of Borrower. No account receivable owed by an account debtor to
Borrower shall be included as an Eligible Account if more than THIRTY-FIVE
PERCENT (35%) of the balances then outstanding on accounts receivable owed by
such account debtor and its Affiliates to Borrower and the Guarantors have
remained unpaid for more than eighty-nine (89) days from the dates of their
original invoices. The amount of any Eligible Accounts owed by an account debtor
to Borrower or the Guarantors shall be reduced by the amount of all "contra
accounts" and other obligations owed by such Person to such account debtor.
"ENSERCO" shall mean EnSerCo, L.L.C., a Delaware limited liability
company.
"LETTER OF CREDIT COMMITMENT" means the commitment of the Issuing Bank to
issue, and the commitment of the Banks severally to participate in Letters of
Credit from time to time issued or outstanding under Article II, in an aggregate
amount not to exceed on any date the amount of Ten Million and No/100 Dollars
($10,000,000.00); provided that the Letter of Credit Commitment is a part of the
combined Commitments, rather than a separate independent commitment.
"LOAN DOCUMENTS" means this Agreement and all promissory notes, security
agreements, deeds of trust, assignments, guaranties, and other instruments,
documents, mortgages and agreements executed and delivered pursuant to or in
connection with this Agreement, including the Limited Guaranty Agreement, the
Subordination Agreement, the Registration Rights Agreement, the Collateral
Assignment of the $3,450,000 OrbitForm Note A and the $3,450,000 OrbitForm Note
B, the Collateral Assignment of the Xxxxxx and Xxxxxx Notes, as such
instruments, documents, and agreements may be amended, modified, renewed,
extended, or supplemented from time to time.
"SUBORDINATED INDEBTEDNESS" means Debt of the Borrower, the repayment of
which is subordinated in a manner and method satisfactory to the Banks but, in
no event, shall it include the obligations of the Borrower to EnSerCo.
"TERMINATION DATE" means 11:00 a.m. Houston, Texas time on January 31,
2001, or such earlier date and time on which the Commitments terminate as
provided in this Agreement.
"TRINITY" means Trinity Industries, Inc., a Delaware corporation.
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Additionally, the following defined terms are hereby DELETED, without
replacement, from the Agreement.
"Eurodollar Advance"
"Eurodollar Rate"
"Monthly Payment Date"
"Reference Bank"
Additionally, the following defined terms are hereby ADDED to the
Agreement:
"AGREEMENT TO ACQUIRE OF ACQUISITION, L.P." means that certain Letter
Agreement by and between the Borrower and SJMB dated June 30, 2000 and any
subsequent agreement, including a partnership interest acquisition agreement
relating to the Borrower's acquisition of that portion of OF Acquisition, L.P.
it currently does not own.
"COLLATERAL ASSIGNMENT OF XXXXXX AND XXXXXX NOTES" shall mean that certain
Collateral Assignment of Notes executed as of June 14, 2000 by the Borrower and
in favor of the Agent.
"COLLATERAL ASSIGNMENT OF ORBITFORM NOTE" shall mean that certain
Collateral Assignment of Note dated as of June 14, 2000 between Philform, Inc.
and the Agent.
"DEFERRED INTEREST" shall mean the incremental difference between the
interest rate that accrued on each Note from January 1, 2000 through the
effective date hereof.
"EXIT FEE" shall mean $275,000.
"EXTENSION FEE" shall mean $225,000.
"LIMITED GUARANTY AGREEMENT" shall mean the Limited Guaranty executed by
SJMB dated June 15, 2000 and in favor of the Banks.
"OF ACQUISITION, L.P." shall mean OF Acquisition, L.P., a Texas limited
partnership.
"OPTIONAL CREDIT SUPPORT AGREEMENT" shall mean the Optional Credit Support
Agreement executed by SJMB of even date with the Second Amendment and Restated
Loan Agreement.
"REGISTRATION RIGHTS AGREEMENT" shall mean that certain Registration
Rights Agreement by and between the Borrower and the Banks relating to the
Warrants and dated of even date with the issuance of the first Warrant under
Section 2.7 hereof.
"REIMBURSEMENT AGREEMENT" means that certain Reimbursement Agreement
between the Borrower and SJMB dated on or about the date hereof and relating to
the Subordinated Note.
"SJMB" means SJMB, L.P., a Delaware limited partnership.
"SJCP" means St. Xxxxx Capital Partners, L.P. a Delaware limited
partnership.
"SUBORDINATED NOTE" means collectively all subordinated convertible
promissory notes issued, pursuant to the Reimbursement Agreement or issued
pursuant to the Optional Credit Support Agreement, by the Borrower and payable
to SJMB and, if issued, the $3,450,000.00 OrbitForm Note A and the $3,450,000.00
OrbitForm Note B.
"SUBORDINATION AGREEMENT" means that certain Subordination Agreement
between the Borrower and SJMB and the Banks relating to the Subordinated Note
and dated of even date with the Second Amendment to the Amended and Restated
Loan Agreement.
"SUBORDINATED PLEDGE AGREEMENT" means that certain Subordinated Pledge
Agreement between the Borrower and SJMB relating to the Subordinated Note and
dated of even date with the Second Amendment to the Amended and Restated Loan
Agreement.
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"SUBORDINATED SECURITY AGREEMENT" means that certain Subordinated Security
Agreement between the Borrower and SJMB relating to the Subordinated Note and
dated of even date with the Second Amendment to the Amended and Restated Loan
Agreement.
"$3,450,000 ORBITFORM NOTE A" means that certain $3,450,000.00
Subordinated Convertible Promissory Note executed by Industrial Holdings, Inc.
and payable to the order of SJMB.
"$3,450,000 ORBITFORM NOTE B" means that certain $3,450,000.00
Subordinated Convertible Promissory Note executed by Industrial Holdings, Inc.
and payable to the order of SJMB.
"WARRANTS" shall mean the warrants to be issued pursuant to the Lenders
granting the holder thereof the right to purchase from the Borrower, and for a
period of up to five (5) years, fully paid and validly issued non-assessable
shares of the Borrower at a price of $1.40 per share.
"WEEKLY PAYMENT DATE" shall mean the first Business Day of each calendar
week.
ARTICLE II
AMENDMENTS
2.1 AMENDMENT RE: EURODOLLAR ADVANCES. As a result of the definitional
changes set forth above, the interest rate applicable to the current unpaid
balance of all Revolving Advances and all future Revolving Advances shall be,
until there occurs an Event of Default, the Base Rate plus THREE PERCENT (3%).
Accordingly, all references in the Agreement to EURODOLLAR ADVANCES to the
extent not otherwise as defined out of the Agreement, are hereby acknowledged by
the parties to be meaningless.
2.2 AMENDMENT TO SECTION 2.4 - INTEREST. Section 2.4 of the Agreement is
hereby amended by deleting the following phrase:
ACCRUED AND UNPAID INTEREST ON THE ADVANCES SHALL BE DUE AND PAYABLE AS
FOLLOWS:
(a) IN THE CASE OF REVOLVING ADVANCES WHICH ARE BASE RATE ADVANCES,
ON EACH MONTHLY PAYMENT DATE AND ON THE TERMINATION DATE;
(b) IN THE CASE OF EACH REVOLVING ADVANCE WHICH IS AN EURODOLLAR
ADVANCE, ON THE LAST DAY OF THE INTEREST PERIOD WITH RESPECT THERETO;
(c) UPON THE PAYMENT OR PREPAYMENT OF ANY REVOLVING ADVANCE OR THE
CONVERSION OF ANY REVOLVING ADVANCE TO A REVOLVING ADVANCE OF ANOTHER TYPE
(BUT ONLY ON THE PRINCIPAL AMOUNT SO PAID, PREPAID, OR CONVERTED);
(d) IN THE CASE OF EACH SWING LINE ADVANCE, ON THE DATE THE
OUTSTANDING PRINCIPAL AMOUNT THEREOF IS REQUIRED TO BE REPAID; AND
(e) ON THE TERMINATION DATE.
The above phrase is REPLACED by the following:
Accrued and non-paid interest on the Advances shall be due and payable on
the Weekly Payment Date.
2.3 AMENDMENT TO SECTION 2.5 - BORROWING PROCEDURE. Effective as of the
date hereof, Section 2.5 is hereby amended in its entirety to read as follow:
Section 2.5 BORROWING PROCEDURE . The Borrower shall give the Agent
notice by means of an appropriate Advance Request Form for each Revolving
Advance which is a Base Rate Advance by at least 12:00 p.m. and for each
Swing Line Advance by at least 12:00 p.m., in both cases, Dallas, Texas
time
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on the Business Day of such requested Base Rate Advances. The Agent
at its option may accept telephonic requests for Advances, provided that
such acceptance shall not constitute a waiver of the Agent's right to
delivery of an Advance Request Form in connection with subsequent
Advances. Any telephonic request for a Revolving Advance by the Borrower
shall be promptly confirmed by submission of a properly completed Advance
Request Form to the Agent. Each Revolving Advance shall be in a minimum
principal amount of $50,000.00. Each Swing Line Advance shall be in a
minimum principal amount of $50,000.00. The Agent shall promptly notify
each Bank of the contents of each such notice. Not later than 2:00 p.m.
Dallas, Texas time on the date specified for each Revolving Advance
hereunder, each Bank will make available to the Agent at the Principal
Office in immediately available funds, for the account of the Borrower,
its pro rata share of each Revolving Advance. After the Agent's receipt of
such funds and subject to the other terms and conditions of this
Agreement, the Agent will make each Revolving Advance available to the
Borrower by depositing the same, in immediately available funds, in an
account of the Borrower (designated by the Borrower) maintained with the
Agent at the Principal Office. The Swing Line Bank will make each Swing
Line Advance available to the Borrower by depositing same, in immediately
available funds, in such account referenced above. All notices under this
Section required to be made by the Borrower shall be irrevocable and shall
be given by the Borrower no later than 10:00 a.m. Dallas, Texas, time on
the day which is not less than the number of Business Days specified above
for such notice.
2.4 AMENDMENT TO SECTION 2.6 - CONVERSIONS AND CONTINUATIONS. Section 2.6
of the Agreement entitled "Conversions and Continuations" is hereby deleted in
its entirety without replacement but without deletion of the heading "SECTION
2.6."
2.5 AMENDMENT TO SECTION 2.8 - FEES. Section 2.8 - Fees is hereby amended
by adding a new Section (c) thereto to read as follows:
(c) The Borrower hereby agrees to pay to the Agent for the account
of each Bank the Extension Fee and the Exit Fee. The Extension Fee and the
Exit Fee shall be payable all as more fully provided in Section 2.20.
2.6 PAYMENT OF EXTENSION FEE, EXIT FEE AND DEFERRED INTEREST. A new
Section 2.20 entitled "Payment of Extension Fee and Deferred Interest" is added
to the Agreement to read as follows:
Section 2.20 PAYMENT OF EXTENSION FEE, EXIT FEE AND DEFERRED
INTEREST. The Borrower and the Banks hereby agree that the Deferred
Interest and Extension Fee are currently due and owing. The Borrower and
the Banks hereby agree that payment of the Extension Fee, Exit Fee and the
Deferred Interest is hereby deferred until the earlier to occur of the
following: (i) the sale or refinancing of the GHX Real Property, (ii) the
sale by the Borrower or any Subsidiaries of other assets or (iii) the
Termination Date. In the event that any sale or refinancing of the GHX
Real Property, or the sale of any other asset, does not generate
sufficient proceeds to pay the Extension Fee, Exit Fee plus the Deferred
Interest in full such amounts received shall be received in partial
payment of, at the election of the Banks, either the Extension Fee, Exit
Fee or the Deferred Interest.
2.7 RIGHT TO RECEIVE WARRANTS. A new Section 2.21 entitled "Warrants" is
added to the Agreement to read as follows:
Section 2.21 WARRANTS. In the event that the Extension Fee, Exit Fee
and the Deferred Interest are not all repaid in full prior to the date set
forth below, the Banks shall be entitled to receive from the Borrower the
indicated number of Warrants:
(a) if not paid on or before August 31, 2000 - 75,000 Warrants;
(b) if not paid on or before October 30, 2000 - an additional 25,000
Warrants;
(c) if not paid on or before the Termination Date - an additional
50,000 Warrants.
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If Warrants accrue hereunder, they are to be issued and delivered in the
form attached hereto as EXHIBIT C without the necessity of demand by the Banks
and within ten (10) days of the date they accrue. Upon the issuance of the first
Warrant hereunder, Borrower will also execute and deliver the Registration
Rights Agreement in the form attached hereto as EXHIBIT B. Failure to so issue
and deliver the Warrants and Registration Rights Agreement shall constitute an
Event of Default.
2.8 AMENDMENT TO SECTION 8.1(B). Effective as of the date hereof, Section
8.1(b) is hereby amended in its entirety to read as follows:
(b) MONTHLY FINANCIAL STATEMENTS. As soon as available, and in any
event within THIRTY (30) days after the end of each of the months of each
fiscal year of the Borrower, a copy of an unaudited financial report of
the Borrower and the Subsidiaries as of the end of such fiscal quarter and
for the portion of the fiscal year then ended, containing, on a
consolidated and consolidating basis, balance sheets and statements of
income, retained earnings (consolidated only), and cash flow (consolidated
only), in each case setting forth in comparative form the figures for the
corresponding period of the preceding fiscal year, all in reasonable
detail certified by the chief financial officer of the Borrower to have
been prepared in accordance with GAAP and to fairly and accurately present
(subject to year-end audit adjustments and without the requirement that
there be added such notes and other disclosures routinely added by an
accountant preparing audited statements) the financial condition and
results of operations of the Borrower and the Subsidiaries, on a
consolidated and consolidating basis, at the date and for the periods
indicated therein including a description, in such detail as the Banks
shall reasonably require, of any variance from any budget previously
submitted and such explanatory comments as may be needed to explain such
variance;
2.9 AMENDMENT TO SECTION 8.1(C). Effective as of the date hereof, Section
8.1(c) is hereby amended in its entirety to read as follows:
Section 8.1(c) CERTIFICATE OF NO DEFAULT. Concurrently with the
delivery of each of the financial statements referred to in Subsections
8.1(a) and 8.1(b), a certificate of the chief executive or chief financial
officer of the Borrower (i) stating that to the best of such officer's
knowledge, no Default has occurred and is continuing, or if a Default has
occurred and is continuing, a statement as to the nature thereof and the
action that is proposed to be taken with respect thereto, and (ii) showing
in reasonable detail the calculations demonstrating compliance with
Article X;
2.10 MENDMENT TO SECTION 8.1. Effective as of the date hereof, Section 8.1
is hereby amended by adding a new Section 8.1(n) to read as follows:
Section 8.1(n) AUDITS. From time to time, at any time upon the
request of the Agent, a report of an independent collateral field examiner
(which may or may not be affiliated with the Banks), with respect to the
Accounts and Inventory component included in the Borrowing Base. So long
as no Event of Default exists hereunder, the Borrower will promptly
reimburse the Banks for the lessor of (i) the actual cost of such audit or
(ii) $5,000.00 per Subsidiary audited for up to four (4) audits of each
Subsidiary during each twelve (12) month period. The Banks anticipate
conducting their audits once a Fiscal Quarter. Morever, they reserve the
right to cluster or spread out the audits during each twelve (12) month
period. Upon the occurrence of an Event of Default, all such audits shall
be conducted at the sole cost and expense of the Borrower.
2.11 AMENDMENT CONCERNING BEST EFFORTS TO REFINANCE. A new Section 8.15
entitled "Best Efforts to Refinance" is added to the Agreement to read as
follows:
Section 8.15 BEST EFFORTS TO REFINANCE. The Borrower agrees to use
its best efforts to obtain refinancing of the Obligations by promptly
initiating negotiations with more than one potential lender. Commencing
July 17, 2000, and at the end of each calendar month and at the middle of
each calendar month thereafter, the Borrower shall provide the Banks with
a written report describing the status of its refinancing efforts.
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2.12 AMENDMENT CONCERNING BEST EFFORTS TO SELL AND/OR REFINANCE GHX REAL
PROPERTY. A new Section 8.16 entitled "Best Efforts to Sell and/or Refinance GHX
Real Property" is added to the Agreement to read as follows:
Section 8.16 BEST EFFORTS TO SELL AND/OR REFINANCE GHX REAL
PROPERTY. The Borrower agrees to use its best efforts to consummate and
close the sale of the GHX Real Property by not later than August 31, 2000.
Consistent with the provisions of the Deeds of Trust, the Banks have the
right to approve the terms of any such sale. In the alternative, the
Borrower agrees to use its best efforts to refinance the indebtedness
owing to the Agent (not the Banks) which is secured by the GHX Real
Property provided, however, the Agent does not need to approve or agree to
such refinancing unless it produces sufficient funds to retire the
indebtedness owing to the Agent and secured by the GHX Real Property and
generate sufficient additional funds to pay the Extension Fee, Exit Fee
and the Deferred Interest.
2.13 AGREEMENT TO ACQUIRE OF ACQUISITION, L.P. A new Section 8.17 is added
to the Agreement to read as follows:
Section 8.17 AGREEMENT TO ACQUIRE OF ACQUISITION, L.P. Upon the
execution of the Second Amendment to the Amended and Restated Credit
Agreement, the Borrower will establish the date for a shareholder vote to
consider the approval of the Agreement to Acquire OF Acquisition, L.P. The
Borrower will use its best efforts to promptly obtain shareholder approval
of such agreement and will promptly and efficiently pursue all regulatory
approvals. Once the Agreement to Acquire OF Acquisition, L.P. is entered
into, the Borrower will not modify or amend such Agreement without the
prior written approval of the Banks. The undertaking of this obligation by
the Borrower does not represent the Bank's consent to the various terms
and conditions of the Agreement to Acquire OF Acquisition, L.P.. As
expressly set forth herein, certain payments and provisions of the
Agreement to Acquire OF Acquisition, L.P. may not be made or performed
without the prior written approval of the Banks.
2.14 AMENDMENT TO SECTION 9.2 - LIMITATION ON LIENS. Effective as of the
date hereof, Section 9.2 - Limitation on Liens is hereby amended by adding the
following subsections (g) and (h) thereto to read as follows:
(g) Liens in the form of the Subordinated Security Agreement and the
Subordinated Pledge Agreement; and
(h) Liens in the form of second liens on any of Borrower's or
Subsidiary's real property (other than GHX Real Property located in
Houston, Xxxxxx County, Texas) provided that the deeds of trust creating
the second liens are in form and substance acceptable to the Banks.
2.15 AMENDMENT TO ARTICLE IX. Article IX is amended by adding a new
Section 9.15 entitled "Limitation on Payment of Related Party Expenses" to read
as follows:
Section 9.15. LIMITATION ON PAYMENT OF RELATED PARTY EXPENSES. The
Borrower will not pay any of the expenses related to SJMB's purchase of
Belleli Energy until the Exit Fee, the Extension Fee and the Deferred
Interest have all been repaid in full and, even after each of those items
have been repaid in full, the Borrower shall not make any payment of the
expenses related to SJMB's purchase of Belleli Energy if, after taking
into account such a payment, an Event of Default would arise hereunder.
Additionally, the Borrower shall pay no cash, or any equivalent thereof,
as an origination fee, breakup fee, points or other similar expense or
consideration in connection with the Agreement to Acquire OF Acquisition,
L.P. until the Extension Fee, Exit Fee and the Deferred Interest have been
repaid in full. Additionally, no such origination fee, breakup fee, points
or other similar expense shall be paid if the payment of the same; without
the prior approval of the Banks, would result in an Event of Default
hereunder.
2.16 AMENDMENT TO ARTICLE X - FINANCIAL COVENANTS. The Borrower's
obligations to comply with the financial ratios set forth in the Agreement at
Article X is hereby suspended. From and after the date of the Second Amendment
to the Amended and Restated Credit Agreement, the Borrower shall be required to
comply with, and shall submit monthly financial covenant analysis and statements
certifying compliance with the following financial ratios which are here added
to Article X and reads as follows:
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Section 10.10. CONSOLIDATED TANGIBLE NET WORTH. The Borrower will
maintain at all times Consolidated Tangible Net Worth in an amount equal
to not less than ninety percent (90%) of the aggregate of its Consolidated
Tangible Net Worth as it exists as of May 31, 2000 plus all consolidated
monthly net income generated thereafter. Compliance with this ratio shall
be tested monthly beginning June 30, 2000 and commencing with financial
results for the month of May, 2000 and on a cumulative basis for the 2000
year to date.
Section 10.11 CAPITAL EXPENDITURES. The Borrower shall not make or
incur, and will not permit any Subsidiary to make or incur, Capital
Expenditures, including Capital Lease Obligations, in excess of $3,500,000
for the calendar year 2000. In calculating Capital Expenditures, the
Borrower shall not include Capital Expenditures made by its subsidiary
Blastco Services Company.
Section 10.12 EBITDA TO DEBT SERVICE. The Borrower will maintain, in
the manner described below, a ratio of EBITDA to Debt Service of not less
than 1.25 to 1.0, tested monthly, and calculated in the following manner:
(i) EBITDA for the month of June, 2000 shall be compared to Debt
Service for the month of June, 2000.
(ii) EBITDA for the months of June and July, 2000 shall be added
together and divided by two (2) and compared to Debt Service
for the month of July, 2000.
(iii) EBITDA for the months of June, July and August, 2000 shall be
combined and divided by three (3) and compared to Debt Service
for the month of August, 2000.
(iv) Beginning with August, 2000 and thereafter, EBITDA for the
preceding three months shall be added together and divided by
three (3) and compared to Debt Service for the most recent
month for which the ratio is to be calculated.
In the event Borrower fails to comply with any requirements of this Section
10.12, such non-compliance shall not constitute an Event of Default hereunder,
if, within ten (10) days after being notified by the Bank of such
non-compliance, SJMB makes a capital contribution or loans Subordinated
Indebtedness to Borrower that in each case is in an amount which, if added to
EBITDA for the period in question, would be sufficient to cure such
non-compliance.
Section 10.13 REVISIONS TO SECTIONS 10.10 THROUGH 10.12 OF THE
AGREEMENT. In the event the Banks hereinafter consent to the terms of any
sale of Xxxxxx Industries, and after taking into account the effect of any
such sale, the Borrower believes future defaults will occur under Section
10.10, 10.11, or 10.12 of the Agreement solely as the result of such sale,
the Borrower may request that the Banks reset one or more of those
financial ratios. The Banks may condition their consent to any such sale
to the Borrower's agreement to the reset of one or more of such ratios.
2.17 AMENDMENTS TO ARTICLE XI. The following subsections are added to
Section 11.1 which is entitled "Events of Default":
(p) The Borrower fails to obtain prior to August 15, 2000 new equity
and/or debt in form and substance acceptable to the Banks and if debt,
subordinate in a fashion acceptable to the Banks, in an aggregate minimum
amount of ONE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($1,500,000.00).
(q) If prior to August 31, 2000 a sufficient majority of the
shareholders of the Borrower fail to approve the Agreement to Acquire OF
Acquisition, L.P.
(r) If prior to September 1, 2000 the Borrower has failed to
complete the acquisition, on terms acceptable to the Banks, of all of OF
Acquisition, L.P.
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(s) Should EnSerCo initiate any legal proceedings in an effort to
collect the indebtedness evidenced by the EnSerCo Loan Documents.
(t) Should the Borrower pay any of the indebtedness evidenced by the
EnSerCo Loan Documents or owing to Trinity.
(u) Should Xxxxxx Financial, Inc. declare a default against the
Borrower.
(v) Should the Borrower fail to obtain within 45 days from the date
hereof a default waiver from Xxxxxx Financial, Inc., in form and substance
acceptable to the Banks, waiving all current defaults by the Borrower to
Xxxxxx Financial, Inc..
2.18 EVENTS OF DEFAULT WAIVED. The Borrower has disclosed the existence of
the Defaults described on EXHIBIT A. As set forth in Section 2.16 hereof the
Banks have revised Section 10.10 through 10.12 of the Agreement. The Banks
hereby waive their right to pursue remedies for the prior Defaults arising as a
result of the Borrower's prior failure to comply with Section 10.1 through 10.6
of the Agreement. The Banks also hereby waive their right to pursue remedies
arising as a result of the Borrower's prior failure to comply with the disclosed
Defaults under Sections 8.1(a), 8.1(b), 8.1(c), 8.1(f) and 8.14. Furthermore,
the Banks waive their right to pursue remedies arising as a result of Borrower's
current defaults in the covenants, payment and cross-default provisions of the
EnSerCo Loan Documents. Finally, the Banks hereby waive their right to pursue
remedies arising as a result of the Borrower's (i) current defaults in the
financial covenants and cross-default provisions of the loan documents with
Xxxxxx Financial, Inc.; and (ii) failure to make payment to Trinity on the
Trinity Promissory Note.
ARTICLE III
CONDITIONS PRECEDENT
3.1 CONDITIONS. The effectiveness of this Amendment is subject to the
satisfaction of the following conditions precedent:
(a) Agent shall have received all of the following, each dated (unless
otherwise indicated) the date of this Amendment, in form and substance
satisfactory to Agent:
(1) RESOLUTIONS. Resolutions of the Board of Directors of Borrower
certified by its Secretary or an Assistant Secretary which authorize the
execution, delivery, and performance by Borrower and each Guarantor of
this Amendment and the other Loan Documents to which Borrower and each
Guarantor is or is to be a party hereunder;
(2) INCUMBENCY CERTIFICATE. A certificate of incumbency certified by
the Secretary or an Assistant Secretary of Borrower and each Guarantor
certifying the names of the officers of Borrower and each Guarantor
authorized to sign this Amendment and each of the other Loan Documents to
which Borrower and each Guarantor is or is to be a party hereunder
(including the certificates contemplated herein) together with specimen
signatures of such officers;
(3) BYLAWS. The bylaws of Borrower certified by the Secretary or an
Assistant Secretary of Borrower;
(4) GOVERNMENTAL CERTIFICATES. Certificates of the appropriate
government officials of the state of incorporation of Borrower and each
Guarantor as to the existence and good standing of Borrower and each
Guarantor, each dated within ten (10) days prior to the date of this
Amendment;
(5) OPINIONS OF COUNSEL. Opinions of counsel to the Borrower and
SJMB in form acceptable to and from counsel to the Banks;
(6) ADDITIONAL AGREEMENTS. The Banks shall have received and
approved executed copies of the Registration Rights Agreement, the
Reimbursement Agreement, the Optional Credit Support Agreement and the
Agreement to Acquire OF Acquisition, L.P., and the Subordination Agreement
and the
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Subordinated Note, all of which shall be satisfactory to the Banks in the
exercise of their sole but reasonable discretion;
(7) ADDITIONAL INFORMATION. Agent shall have received such
additional documents, instruments and information as Agent or its legal
counsel, Xxxxxxxx Xxxxxxxx & Xxxxxx P.C., may request.
(b) The representations and warranties contained herein and in all other
Loan Documents, as amended hereby, shall be true and correct as of the date
hereof as if made on the date hereof;
(c) Except for as described on EXHIBIT A hereto no Event of Default shall
have occurred and be continuing and no event or condition shall have occurred
that with the giving of notice or lapse of time or both would be an Event of
Default.
(d) All corporate proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments, and other legal
matters incident thereto shall be satisfactory to Agent and its legal counsel,
Xxxxxxxx Xxxxxxxx & Xxxxxx P.C.
ARTICLE IV
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
4.1 RATIFICATIONS. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions set forth in
the Agreement and except as expressly modified and superseded by this Amendment,
the terms and provisions of the Agreement are ratified and confirmed and shall
continue in full force and effect. Borrower and Agent agree that the Agreement
as amended hereby shall continue to be legal, valid, binding and enforceable in
accordance with its terms.
4.2 REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Agent that (i) the execution, delivery and performance of this
Amendment and any and all other Loan Documents executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the articles of incorporation or
bylaws of Borrower, (ii) the representations and warranties contained in the
Agreement, as amended hereby, and any other Loan Document are true and correct
on and as of the date hereof as though made on and as of the date hereof, (iii)
no Event of Default, other than those listed on EXHIBIT A, has occurred and is
continuing and no event or condition has occurred that with the giving of notice
or lapse of time or both would be an Event of Default, and (iv) other than as
set forth on EXHIBIT A, Borrower is in full compliance with all covenants and
agreements contained in the Agreement as amended hereby.
ARTICLE V
MISCELLANEOUS
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made in this Amendment or any other Loan Document including any Loan
Document furnished in connection with this Amendment shall survive the execution
and delivery of this Amendment and the other Loan Documents, and no
investigation by any Bank or any closing shall affect the representations and
warranties or the right of Banks to rely upon them.
5.2 REFERENCE TO AGREEMENT. Each of the Loan Documents, including the
Agreement and any and all other agreements, documents, or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to the
terms of the Agreement as amended hereby, are hereby amended so that any
reference in such Loan Documents to the Agreement shall mean a reference to the
Agreement as amended hereby.
5.3 EXPENSES OF AGENT. As provided in the Agreement, Borrower agrees to
pay on demand all costs and expenses incurred by Agent in connection with the
preparation, negotiation, and execution of this Amendment and the other Loan
Documents executed pursuant hereto and any and all amendments, modifications,
and supplements thereto, including without limitation the costs and fees of
Agent's legal counsel, and all costs and expenses incurred by Agent in
connection with the enforcement or preservation of any rights under the
Agreement,
K-10
as amended hereby, or any other Loan Document, including without limitation the
costs and fees of Agent's legal counsel.
5.4 SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
5.5 APPLICABLE LAW. This Amendment and all other Loan Documents executed
pursuant hereto shall be deemed to have been made and to be performable in
Dallas, Dallas County, Texas and shall be governed by and construed in
accordance with the laws of the State of Texas.
5.6 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and shall inure
to the benefit of the Banks and Borrower and their respective successors and
assigns, except Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of the Banks.
5.7 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
5.8 EFFECT OF WAIVER. No consent or waiver, express or implied, by the
Banks to or for any breach of or deviation from any covenant, condition or duty
by Borrower or Guarantor shall be deemed a consent or waiver to or of any other
breach of the same or any other covenant, condition or duty.
5.9 HEADINGS. The headings, captions, and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
5.10 NON-APPLICATION OF CHAPTER 346 OF TEXAS FINANCE CODE. The provisions
of Chapter 346 of the Texas Finance Code are specifically declared by the
parties hereto not to be applicable to this Agreement or any of the other Loan
Documents or to the transactions contemplated hereby.
5.11 ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER INSTRUMENTS, DOCUMENTS
AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT EMBODY
THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR
VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR
DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE
PARTIES HERETO.
K-11
Executed as of the date first written above.
BORROWER:
INDUSTRIAL HOLDINGS, INC., a
Texas corporation
By: __________________________
Xxxxxxx X. Xxxxx
President and Chief Financial Officer
ADDRESS FOR NOTICES:
Industrial Holdings, Inc.
0000 Xxxxxxx
Xxxxxxx, Xxxxx 00000
Fax No.: 000-000-0000
Telephone No.: 000-000-0000
Attention: Xx. Xxxxxx X. Xxxx
AGENT:
COMERICA BANK-TEXAS
By: __________________________
Xxxxx X. Xxxx
Vice President
ADDRESS FOR NOTICES:
Comerica Bank - Texas
X.X. Xxx 000000
Xxxxxx, Xxxxx 00000-0000
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Mr. Xxxx Xxx
WITH A COPY TO:
Comerica Bank - Texas
P.O. Box 650282
Mail Code 6510
Xxxxxx, Xxxxx 00000-0000
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxx X. Xxxx
BANKS:
Commitment: COMERICA BANK-TEXAS
$27,250,000.00
By: __________________________
Xxxxx X. Xxxx
Vice President
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ADDRESS FOR NOTICES:
Comerica Bank - Texas
X.X. Xxx 000-000
Xxxxxx, Xxxxx 00000-0000
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Mr. Xxxx Xxx
WITH A COPY TO:
Comerica Bank - Texas
P.O. Box 650282
Mail Code 6510
Xxxxxx, Xxxxx 00000-0000
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxx X. Xxxx
LENDING OFFICE FOR ADVANCES:
Comerica Bank - Texas
P.O. Box 650282
Mail Code 6510
Xxxxxx, Xxxxx 00000-0000
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxx X. Xxxx
Commitment: NATIONAL BANK OF CANADA, a
$13,650,000.00 Canadian Chartered Bank
By: __________________________
Name: ________________________
Title: _______________________
ADDRESS FOR NOTICES:
National Bank of Canada
0000 Xxx Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xx. Xxxxx Xxxxxxx
WITH A COPY TO:
National Bank of Canada
000 X. 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Mr. Xxxxxxx Xxxxx
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LENDING OFFICE FOR ADVANCES:
National Bank of Canada
0000 Xxx Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xx. Xxxxxx Xxxx
Commitment: HIBERNIA NATIONAL BANK
$9,100,000.00
By: __________________________
Xxxxx Xxxxxxxx
Vice President
ADDRESS FOR NOTICES:
Hibernia National Bank
000 Xxxxxxx Xxxxxx., 00xx Xx.
Xxx Xxxxxxx, Xxxxxxxxx 00000
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xx. Xxxxx Xxxxxxxx
LENDING OFFICE FOR ADVANCES:
Hibernia National Bank
000 Xxxxxxx Xxxxxx., 00xx Xx.
Xxx Xxxxxxx, Xxxxxxxxx 00000
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xx. Xxxxx Xxxxxxxxx
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Guarantors hereby consent and agree to this Amendment and agree that the
Guaranty shall remain in full force and effect and shall continue to be the
legal, valid and binding obligation of Guarantors enforceable against Guarantors
in accordance with its terms.
Guarantor:
A & B Bolt and Supply, Inc., a Louisiana corporation
The Xxx Group, Inc., a Texas corporation
Xxx Machinery Sales, Inc., a Texas corporation d/b/a
Xxx/Paul's Machine/Sales
Xxx Machinery Movers, Inc., a Texas corporation
d/b/a Ideal Products
U.S. Crating, Inc., a Texas corporation (f/k/a Xxx
Export Crating, Inc.)
First Texas Credit Corporation, a Texas corporation
Xxxxxxxx Engineering Company, a Texas corporation
Pipeline Valve Specialty, Inc., a Texas corporation
(f/k/a Industrial Municipal Supply Company)
Bolt Manufacturing Co., Inc., a Texas corporation,
d/b/a Xxxxxx Bolt Manufacturing Co., Inc.
LSS-Lone Star-Houston, Inc., a Texas corporation
American Rivet Company, Inc., an Illinois corporation
Manifold Valve Services, Inc., a Delaware
corporation, d/b/a Xxxxxx Equipment & Supply Company
Philform, Inc., a Michigan corporation
GHX, Incorporated, a Texas corporation
Regal Machine Tool, Inc., a Texas corporation, f/k/a
Xxx Machine Tool, Inc.
WHIR Acquisition, Inc., a Texas corporation, d/b/a Ameritech Fastener
Manufacturing
Xxxxxx Pump and Supply, Inc., a Louisiana
corporation
GHX, Incorporated of Louisiana, a Louisiana
corporation
Xxxxxx Industries, Inc., a Delaware corporation
United Wellhead Services, Inc., a Texas corporation
By: ___________________________
Name: Xxxxxxxxx Xxxxx
Title: Vice President
K-15
EXHIBIT A
EXISTING EVENTS OF DEFAULT
The Borrower warrants that it is presently in default of only the
following provisions of the Credit Agreement:
1. Section 10.1 - CURRENT RATIO
2. Section 10.2 - CONSOLIDATED NET WORTH
3. Section 10.3 - FUNDED DEBT/EBITDA RATIO
4. Section 10.4 - CASH FLOW COVERAGE RATIO
5. Section 10.5 - LEVERAGE RATIO
6. Section 10.6 - SENIOR SECURED FUNDED DEBT TO EBITDA RATIO
7. Section 8.1(a) - AUDITED ANNUAL FINANCIAL STATEMENT to be delivered
within 90 days of year-end. (1999 calendar year-end only)
8. Section 8.1(c) - CERTIFICATE OF NO DEFAULT (1999 calendar year-end only)
9. Section 8.14 - REPAYMENT OF OTHER EXISTING DEBT. Borrower has not
repaid the funded debt of $15,000,000.00 plus accrued interest owed to
XxXxxXx.
00. Section 8.1(f) - OBLIGATION TO NOTIFY DEFAULTS. Borrower may not have
notified Banks of each of the above defaults within five (5) days.
11. Defaults in the covenants, payment and cross-default provisions of the
EnSerCo Loan Documents.
12. Defaults in the financial covenants and cross-default provisions of the
loan documents with Xxxxxx Financial, Inc.
13. Default in the payment to Trinity on the promissory note issued to
Trinity (the "Trinity Promissory Note").
14. Section 8.1(b) - QUARTERLY FINANCIAL STATEMENTS. Failure to provide
March 31, 2000 financial statements within 45 days of quarter end.
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