FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND LIMITED WAIVER OF DEFAULTS
Exhibit
10.56b
FOURTH
AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND LIMITED WAIVER OF
DEFAULTS
THIS
FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND LIMITED WAIVER OF DEFAULTS
(the “Amendment”), dated April 14, 2009, is
entered into by and among MISCOR GROUP, LTD., an Indiana corporation (“MISCOR”),
MAGNETECH INDUSTRIAL SERVICES, INC., an Indiana corporation (“MIS”), ▇▇▇▇▇▇▇
ELECTRIC, LLC, an Indiana limited liability company (“▇▇▇▇▇▇▇”), HK ENGINE
COMPONENTS, LLC, an Indiana limited liability company (“HK”), IDEAL
CONSOLIDATED, INC., an Indiana corporation (“Ideal”), 3-D SERVICE, LTD., an Ohio
limited liability company (“3D”), and AMERICAN MOTIVE POWER, INC., a Nevada
corporation (“AMP” and together with MISCOR, MIS, ▇▇▇▇▇▇▇, ▇▇, Ideal and 3D, the
“Borrowers” and each a “Borrower”) and ▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION
(the “Lender”), acting through its ▇▇▇▇▇ Fargo Business Credit operating
division.
RECITALS
The
Lender and the Borrowers are parties to a Credit and Security Agreement dated
January 14, 2008, as amended (the “Credit Agreement”).
The
Borrowers have requested that the Lender waive certain defaults under the Credit
Agreement and that certain amendments be made to the Credit Agreement, which the
Lender is willing to do pursuant to the terms and conditions set forth
herein.
NOW,
THEREFORE, in consideration of the premises and of the mutual covenants and
agreements herein contained, it is agreed as follows:
1. Defined
Terms. Capitalized terms used in this Amendment which are
defined in the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein. In addition, Section 1.1 of the
Credit Agreement shall be amended by adding or amending, as applicable, the
following definitions:
“Daily
Three Month LIBOR” means, for any day, the rate of interest equal to LIBOR then
in effect for delivery for a three (3) month period. When interest is
determined in relation to Daily Three Month LIBOR, each change in the interest
rate shall become effective each Business Day that the Lender determines that
Daily Three Month LIBOR has changed.
“EBITDA”
means, for any period, the net income (loss) from the Borrowers’ operations
before (a) interest, (b) taxes, (c) depreciation, amortization and other
non-cash charges and income, and (d) extraordinary items, all as determined on a
consolidated basis in accordance with GAAP, applied in a manner consistent with
the financial statements for such period and acceptable to the
Lender.
“LIBOR”
means the rate per annum (rounded upward, if necessary, to the nearest whole one
eighth of one percent (1/8 %) determined pursuant to the following
formula:
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LIBOR
=
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Base
LIBOR
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|
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100%
- LIBOR Reserve Percentage
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(i) “Base
LIBOR” means the rate per annum for United States dollar deposits quoted by the
Lender for loans that reference Daily Three Month LIBOR as the Inter-Bank Market
Offered Rate in effect from time to time for three (3) month delivery of funds
in amounts approximately equal to the principal amount of such
loans. The Borrowers understand and agree that the Lender may base
its quotation of the Inter-Bank Market Offered Rate upon such offers or other
market indicators of the Inter-Bank Market as the Lender in its discretion deems
appropriate, including but not limited to the rate offered for U.S. dollar
deposits on the London Inter-Bank Market.
(ii) “LIBOR
Reserve Percentage” means the reserve percentage prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for “Eurocurrency
Liabilities” (as defined in Regulation D of the Federal Reserve Board, as
amended), adjusted by the Lender for expected changes in such reserve percentage
during the applicable term of the Revolving Note and the Real Estate
Note.
“LIBOR
Advance Rate” means an annual interest rate equal to the sum of Daily Three
Month LIBOR, plus five and
one-quarter percent (5.25%), which interest rate shall change whenever Daily
Three Month LIBOR changes.
“Maximum
Line Amount” means Eleven Million Dollars ($11,000,000).
2. Amendment to Section
2.2. Section 2.2 of the Credit Agreement shall be amended by
amending the following subsections:
(a) Intentionally
deleted.
(b) Procedures for
Requesting Revolving Advances. If the Borrowers do not utilize
the Loan Manager service, the Borrowers shall request each Revolving Advance so
that the request is received by the Lender not later than the Cut-off Time on
the third Business Day preceding the Business Day on which an Advance is to be
made. Each request that conforms to the terms of this Agreement shall
be effective upon receipt by the Lender, shall be in writing or by telephone or
telecopy transmission, and shall be confirmed in writing by the Borrowers if so
requested by the Lender, by (i) an Officer of the Borrowers, or (ii) a Person
designated as the Borrowers’ agent by an Officer of the Borrowers in a writing
delivered to the Lender, or (iii) a Person whom the Lender reasonably believes
to be an Officer of the Borrowers or such a designated agent. The
Borrower shall repay all Revolving Advances even if the Lender does not receive
such confirmation and even if the Person requesting a Revolving Advance was not
in fact authorized to do so. Any request for a Revolving Advance,
whether written or telephonic, and whether initiated manually by the Borrowers
or automatically through the Borrowers’
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utilization
of the Lender’s Loan Manager service, shall be deemed to be a representation by
the Borrowers that all conditions set forth in Article IV of this Agreement have
been satisfied as of the time of the request.
3. Amendment to Section
2.7(a). Section 2.7(a) of the Credit Agreement shall be
amended as follows:
(a) Interest. Except
as provided in Section 2.7(c) and Section 2.7(f), the principal amount of each
Advance shall bear interest at the LIBOR Advance Rate.
4. Amendment to Section
6.1. Section 6.1 of the Credit Agreement shall be amended by
adding the following as subsection (t):
(t) Cash Flow
Forecasts. On Wednesday of each week, commencing April 22,
2009, an updated thirteen (13) week cash flow forecast. Such
forecasts shall be certified by the Borrowers’ chief financial officer as being
the most accurate forecasts available and be delivered with an analysis of any
material variances from the cash flow forecast delivered for the prior
week.
5. Amendment to Section
6.2. Section 6.2 of the Credit Agreement shall be amended by
amending the following subsections:
(a) Minimum Book Net
Worth. The Borrowers will maintain, as of each date described
below during the term hereof, its Book Net Worth at an amount not less than the
amount set forth below opposite such date:
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Date
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Minimum Book Net Worth
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December
31, 2009
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$38,750,000
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December
31, 2010, and each December 31 thereafter
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Book
Net Worth as of prior December 31 plus
$1,000,000
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(b) Minimum Net
Income. The Borrowers will achieve during each fiscal
year-to-date period ending during the periods described below, Net Income of not
less than the amount set forth opposite such period (numbers appearing between
“< >” are negative):
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Date
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Minimum Net Income
|
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Fiscal
year ending December 31, 2010, and each fiscal year
thereafter
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$1,000,000
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(d) Debt Service
Coverage Ratio. The Borrowers will maintain a Debt Service
Coverage Ratio of not less than (i) 1.0 to 1.0 as of the end of each fiscal
quarter for the fiscal year-to-date period then ended, commencing with the
fiscal quarter ending March 31, 2010, and (ii) 1.1 to 1.0 as of each fiscal year
end for the fiscal year then ended, commencing with the fiscal year ending
December 31, 2010.
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In
addition, Section 6.2 shall be amended by adding the following as subsection
(e):
(e) Minimum
EBITDA. The Borrowers will achieve during each period
described below, EBITDA of not less than the amount set forth opposite such
period (numbers appearing between “< >” are negative)”
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Date
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Minimum EBITDA
|
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One
(1) month period ending April 30, 2009
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<$414,000>
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Two
(2) month period ending May 31, 2009
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<$751,000>
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Three
(3) month period ending June 30, 2009
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<$994,000>
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Four
(4) month period ending July 31, 2009
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<$647,000>
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Five
(5) month period ending August 31, 2009
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<$206,000>
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Six
(6) month period ending September 30, 2009
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$466,000
|
|
Seven
(7) month period ending October 31, 2009
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$909,000
|
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Eight
(8) month period ending November 30, 2009
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$1,321,000
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Nine
(9) month period ending December 31, 2009
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$1,715,000
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Ten
(10) month period ending January 31, 2010
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$1,715,000
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6. Amendment to Section
7.1. Section 7.1 of the Credit Agreement shall be amended by
adding the following as subsection (r):
(r) The
Borrowers shall fail to deliver to the Lender on or before May 7, 2009, the
Borrowers’ final projected balance sheets, income statements, statements of cash
flow and projected Availability for each remaining month of the fiscal year
ending December 31, 2009, each in reasonable detail. Such items will
be certified by the Borrowers’ chief financial officer as being the most
accurate projections available and identical to the projections used by the
Borrowers for internal planning purposes and be delivered with a statement of
underlying assumptions and such supporting schedules and information as the
Lender may in its discretion require.
7. Payments to Subordinated
Creditor. Notwithstanding anything to the contrary in the
Credit Agreement or any Subordination Agreement, the Borrowers shall be
prohibited from making any payment on the subordinated indebtedness owed to ▇▇▇▇
▇▇▇▇▇▇▇.
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8. No Other
Changes. Except as explicitly amended by this Amendment, all
of the terms and conditions of the Credit Agreement shall remain in full force
and effect and shall apply to any advance or letter of credit
thereunder.
9. Limited Waiver of
Defaults. Prior to giving effect to this Amendment, the
Borrowers are in default of Sections 6.2(b) (Minimum Net Income) and 6.2(d)
(Debt Service Coverage Ratio) of the Credit Agreement as of and for the fiscal
year ending on December 31, 2008 (the “Existing Defaults”). Upon the
terms and subject to the conditions set forth in this Amendment, the Lender
hereby waives the Existing Defaults. This waiver shall be effective
only in this specific instance and for the specific purpose for which it is
given, and this waiver shall not entitle the Borrower to any other or further
waiver in any similar or other circumstances.
10. Accommodation and Waiver
Fee. The Borrowers shall pay to the Lender a fully earned,
non-refundable fee in the amount of One Hundred Thousand Dollars ($100,000) in
consideration of the Lender’s execution of this Amendment and the waivers set
forth herein, payable in two installments of Fifty Thousand Dollars ($50,000)
each, on the date hereof and on the date sixty (60) days following the date
hereof.
11. Conditions
Precedent. This Amendment shall be effective when the Lender
shall have received an executed original hereof, together with each of the
following, each in substance and form acceptable to the Lender in its sole
discretion:
(a) The
Acknowledgment and Agreement of Subordinated Creditors set forth at the end of
this Amendment, duly executed by each Subordinated
Creditor.
(b) With
respect to each Borrower, a Certificate of the Secretary of the Borrower
certifying as to (i) the resolutions of the board of directors or manager,
as applicable, of the Borrower approving the execution and delivery of this
Amendment, (ii) the fact that the Constituent Documents of the Borrower,
which were certified and delivered to the Lender pursuant to the Certificate of
Authority of the Borrower’s secretary issued in connection with the original
execution of the Credit Agreement, continue in full force and effect and have
not been amended or otherwise modified except as set forth in the Certificate to
be delivered, and (iii) certifying that the officers and agents of the
Borrower who have been previously certified to the Lender as being authorized to
sign and to act on behalf of the Borrower continue to be so authorized or
setting forth the sample signatures of each of the officers and agents of the
Borrower authorized to execute and deliver this Amendment and all other
documents, agreements and certificates on behalf of the Borrower.
(c) Such
other matters as the Lender may require.
12. Representations and
Warranties. Each Borrower (as to such Borrower) hereby
represents and warrants to the Lender as follows:
(a) The
Borrower has all requisite power and authority to execute this Amendment, and
this Amendment, and has been duly executed and delivered by the
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Borrower
and constitutes the legal, valid and binding obligations of the Borrower,
enforceable in accordance with its terms.
(b) The
execution, delivery and performance by the Borrower of this Amendment, has been
duly authorized by all necessary action and does not (i) require any
authorization, consent or approval by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, (ii) violate
any provision of any law, rule or regulation or of any order, writ, injunction
or decree presently in effect, having applicability to the Borrower, or the
Constituent Documents of the Borrower, or (iii) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which the Borrower is a party or by
which it or its properties may be bound or affected.
(c) All
of the representations and warranties contained in Article V of the Credit
Agreement are correct on and as of the date hereof as though made on and as of
such date, except to the extent that such representations and warranties relate
solely to an earlier date.
13. References. All
references in the Credit Agreement to “this Agreement” shall be deemed to refer
to the Credit Agreement as amended hereby; and any and all references in the
Security Documents to the Credit Agreement shall be deemed to refer to the
Credit Agreement as amended hereby.
14. No
Waiver. Except with respect to the Existing Defaults, the
execution of this Amendment and the acceptance of all other agreements and
instruments related hereto shall not be deemed to be a waiver of any Default or
Event of Default under the Credit Agreement or a waiver of any breach, default
or event of default under any Security Document or other document held by the
Lender, whether or not known to the Lender and whether or not existing on the
date of this Amendment.
15. Release. Each
Borrower hereby absolutely and unconditionally releases and forever discharges
the Lender, and any and all participants, parent corporations, subsidiary
corporations, affiliated corporations, insurers, indemnitors, successors and
assigns thereof, together with all of the present and former directors,
officers, agents and employees of any of the foregoing, from any and all claims,
demands or causes of action of any kind, nature or description, whether arising
in law or equity or upon contract or tort or under any state or federal law or
otherwise, which such Borrower had, now has or has made claim to have against
any such person for or by reason of any act, omission, matter, cause or thing
whatsoever arising from the beginning of time to and including the date of this
Amendment, whether such claims, demands and causes of action are matured or
unmatured or known or unknown.
16. Fees, Costs and
Expenses. Each Borrower hereby reaffirms its agreement under
the Credit Agreement to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Loan Documents, including
without limitation all reasonable fees and disbursements of legal
counsel. Without limiting the generality of the foregoing, the
Borrowers specifically agree to pay all reasonable fees and disbursements
of
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counsel
to the Lender for the services performed by such counsel in connection with the
preparation of this Amendment and the documents and instruments incidental
hereto. The Borrower hereby agrees that the Lender may, at any time
or from time to time in its sole discretion and without further authorization by
the Borrower, make a loan to the Borrower under the Credit Agreement, or apply
the proceeds of any loan, for the purpose of paying any such fees,
disbursements, costs and expenses.
17. Miscellaneous. This
Amendment may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed an original and all of which
counterparts, taken together, shall constitute one and the same
instrument.
Signatures
appear on following page.
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IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first above written.
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▇▇▇▇▇
FARGO BANK, NATIONAL ASSOCIATION
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By:
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/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ |
By:
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/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
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▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Vice President
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▇▇▇▇
▇. ▇▇▇▇▇▇▇, Chief Executive Officer
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MAGNETECH
INDUSTRIAL SERVICES, INC.
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▇▇▇▇▇▇▇
ELECTRIC, LLC
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By:
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/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ |
By:
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/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
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▇▇▇▇
▇. ▇▇▇▇▇▇▇, Chief Executive Officer
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▇▇▇▇
▇. ▇▇▇▇▇▇▇, Chief Executive Officer
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HK
ENGINE COMPONENTS, LLC
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3-D
SERVICE, LTD.
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By:
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/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ |
By:
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/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
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▇▇▇▇
▇. ▇▇▇▇▇▇▇, Chief Executive Officer
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▇▇▇▇
▇. ▇▇▇▇▇▇▇, Chief Executive Officer
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IDEAL
CONSOLIDATED, INC.
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By:
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/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |||
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▇▇▇▇
▇. ▇▇▇▇▇▇▇, Chief Executive Officer
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AMERICAN
MOTIVE POWER, INC.
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By:
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/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |||
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▇▇▇▇
▇. ▇▇▇▇▇▇▇, Chief Executive Officer
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ACKNOWLEDGMENT
AND AGREEMENT OF SUBORDINATED CREDITORS
The
undersigned, each a subordinated creditor of MISCOR GROUP, LTD., an Indiana
corporation (“MISCOR”), MAGNETECH INDUSTRIAL SERVICES, INC., an Indiana
corporation (“MIS”), ▇▇▇▇▇▇▇ ELECTRIC, LLC, an Indiana limited liability
company (“▇▇▇▇▇▇▇”), HK ENGINE COMPONENTS, LLC, an Indiana limited liability
company (“HK”), IDEAL CONSOLIDATED, INC., an Indiana corporation (“Ideal”), 3-D
SERVICE, LTD., an Ohio limited liability company (“3D”), and AMERICAN MOTIVE
POWER, INC., a Nevada corporation (“AMP” and together with MISCOR, MIS, ▇▇▇▇▇▇▇,
▇▇, Ideal and 3D, the “Borrowers” and each a “Borrower”) to ▇▇▇▇▇ FARGO BANK,
NATIONAL ASSOCIATION (the “Lender”), acting through its ▇▇▇▇▇ Fargo Business
Credit operating division pursuant to a Subordination Agreement dated as of
January 14, 2008 (the “Subordination Agreement”), hereby (i) acknowledges
receipt of the foregoing Amendment; (ii) consents to the terms and
execution thereof; and (iii) reaffirms his or its obligations to the Lender
pursuant to the terms of his or its Subordination Agreement.
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BDEWEES,
INC.
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By:
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/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |
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▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, President
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XGEN
III, LTD.
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By:
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/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |
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▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, Manager
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| /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | ||
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▇▇▇▇
▇. ▇▇▇▇▇▇▇
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