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EXHIBIT 10.1
FORBEARANCE AND AMENDMENT AGREEMENT
This Forbearance and Amendment Agreement (the "Agreement"), dated as of
August 31, 2001 is by and between INDUSTRIAL HOLDINGS, INC., a Texas corporation
(the "Borrower"), a group of affiliated business entities of the Borrower as set
forth on the execution pages of this Agreement (collectively, the "Guarantors"),
NATIONAL BANK OF CANADA, a Canadian Chartered Bank ("Bank Canada"), HIBERNIA
NATIONAL BANK ("Hibernia Bank"), and COMERICA BANK_TEXAS, a Texas banking
association ("Comerica Bank") (collectively, the "Lenders").
RECITALS:
Section 1. The Loan Papers. Borrower and Lenders entered into that
certain Amended and Restated Credit Agreement, as the same has been amended from
time to time, (the "Credit Agreement") dated June 17, 1999, pursuant to which
Lenders agreed, subject to the terms and provisions in the Credit Agreement, to
extend credit to Borrower in the aggregate amount of not more than
$55,000,000.00 all as more fully specified in the Credit Agreement. Borrower's
indebtedness to Lenders is evidenced by those certain Promissory Notes, executed
by Borrower and payable to the order of Lenders as follows: (i) $30,000,000.00
promissory note dated June 17, 1999 payable to the order of Comerica Bank; (ii)
$15,000,000.00 promissory note dated June 17, 1999 payable to the order of Bank
Canada; and (iii) $10,000,000.00 promissory note dated June 17, 1999 payable to
the order of Hibernia Bank (collectively, the "Notes"). Pursuant to the terms
and conditions set forth in the Fifth Amendment (herein so called) to the Credit
Agreement, the aggregate amount of the Lenders' obligation to extend credit to
Borrower was permanently reduced to $43,000,000.00 (the "Commitment"). The
Notes, the Credit Agreement, and any and all documents or instruments executed
in connection therewith or related thereto including, without limitation,
security agreements, assignments, consents, guaranties, pledges, corporate
resolutions, financing statements, or any other agreement, and all renewals,
extensions, amendments, modifications and restatements thereof, shall be
referred to herein as the "Loan Papers." The indebtedness and obligations of
Borrower and the Guarantors evidenced by the Loan Papers (the "Indebtedness")
are secured by security interests and liens in certain personal and real
property, wherever located, of the Borrower and Guarantors including, without
limitation, all accounts, inventory, equipment, general intangibles, fixtures,
instruments, chattel paper contract rights, documents, insurance proceeds, and
all funds in the accounts of Borrower at Lenders (collectively, the
"Collateral").
Section 2. Maturity and Existing Defaults. Borrower and each Guarantor,
acknowledge that the Notes matured and became due and payable in full on this
date, August 31, 2001. As the Borrower has not repaid the Indebtedness in full,
an event of default exists under the Loan Papers. Additionally, Borrower, and
each Guarantor also acknowledge that other defaults and events of default under
the Loan Papers have occurred and continue and that those defaults and events of
default are described on Exhibit "A" hereto.
FORBEARANCE AND AMENDMENT AGREEMENT PAGE 1
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Section 3. Forbearance Request by Borrower. Borrower has requested that
Lenders forbear from exercising their rights and remedies arising as a result of
any and all of Borrower's current defaults, in order to allow Borrower
sufficient time to pay Lenders an amount of good and collected funds to satisfy
Borrower's Indebtedness to Lenders under the terms and provisions of the Loan
Papers. Pursuant to the terms and conditions hereof, Lenders are willing to
forbear from taking such action until September 30, 2001. Additionally, the
Borrower has advised the Lenders that it has entered into a Merger Agreement
(hereinafter defined) which when consummated will result in the payment in full
of the Indebtedness, but that such Merger Agreement requires the Borrower to
dispose of the EPG Group (hereinafter defined) and ▇▇▇▇▇▇ (hereinafter defined)
before the Merger Agreement can be consummated. The Borrower has further advised
the Lenders that it intends to enter into definitive disposition agreements by
not later than September 30, 2001 to sell the EPG Group and ▇▇▇▇▇▇. Accordingly,
the Borrower has requested that the Lender's forbearance extend beyond September
30, 2001 to October 31, 2001. Provided that the Borrower is, on or before
September 30, 2001, in a position to demonstrate to the Lenders that it has
entered into such definitive agreements concerning the disposition of the EPG
Group and ▇▇▇▇▇▇ with bona fide third party purchasers that are financially
capable of completing such transactions, all in the manner hereinafter provided,
and subject to the provisions hereof, the Lenders are willing to extend the end
of the Forbearance Period from September 30, 2001 to October 31, 2001.
AGREEMENTS:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, representations, warranties and agreements contained herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein shall
have the same meanings as set forth in the Credit Agreement. In addition, the
following terms, for the purposes of this Agreement, shall have the following
meanings:
(a) "▇▇▇▇▇▇" means ▇▇▇▇▇▇ Industries, Inc., a Delaware corporation.
(b) "Commitment" shall have the meaning ascribed to that term on page
one hereof.
(c) "Definitive Disposition Agreements" shall have the meaning ascribed
to that term on page 4 hereof.
(d) "Effective Date" shall mean the date that Lenders shall have
notified Borrower in writing that Lenders have received such
instruments, evidence and certificates as Lenders may reasonably
require to consummate the transactions contemplated hereby and evidence
the authority of Borrower
FORBEARANCE AND AMENDMENT AGREEMENT PAGE 2
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to execute this Agreement and that the terms of this Agreement shall have come
into full force and effect.
(e) "EnSerCo" shall mean EnSerCo, L.L.C., a limited liability company.
(f) "EPG Group" shall mean ▇▇▇▇▇▇▇▇ Metal Forming, Inc., ▇▇▇ Machinery
Movers, Inc., OF Acquisition, L.P., Philform, Inc. and American Rivet
Company, Inc.
(g) "Fifth Amendment" shall have the meaning ascribed to that term on
page one hereof.
(h) "Forbearance Period" shall mean the period commencing on the
Effective Date and continuing until 5:00 p.m., Houston, Texas time on
September 30, 2001 unless extended until October 31, 2001 pursuant to
the provisions of Section 2 hereof, but subject to earlier termination
pursuant to the terms and provisions of this Agreement.
(i) "Merger Agreement" shall mean that certain Agreement and Plan of
Merger among Industrial Holdings, Inc., T_3 Energy Services, Inc. and
First Reserve Fund VIII, a limited partnership dated as of May 7, 2001,
as the same is amended from time to time, provided, where required, the
Lenders consent to such amendment.
(j) "Specified Defaults" shall mean the defaults of Borrower under the
Loan Papers as more specifically described in Exhibit "A" attached
hereto.
(k) "Termination Event" shall mean the occurrence of any of the
following: (i)any representation or warranty made or deemed made by
Borrower in this Agreement shall be false, misleading or erroneous in
any material respect when made or deemed to have been made, (ii)
Borrower shall fail to perform, observe or comply with any covenant,
agreement or term contained in this Agreement, (iii) any default or
event of default, other than the Specified Defaults, shall occur under
this Agreement or the Loan Papers, (iv) the Borrower shall commence a
voluntary proceeding seeking liquidation, reorganization, or other
relief with respect to itself or its debts under any bankruptcy,
insolvency, or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian, or other
similar official of it or a substantial part of its property or shall
consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it or shall make a general assignment for
the benefit of creditors or shall generally fail to pay its debts as
they become due or shall take any corporate action to authorize any of
the foregoing, (v) an involuntary proceeding shall be commenced against
the Borrower seeking liquidation, reorganization, or other
FORBEARANCE AND AMENDMENT AGREEMENT PAGE 3
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relief with respect to it or its debts under any bankruptcy,
insolvency, or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian, or other
similar official for it or a substantial part of its property, should
any substantial creditor of the Borrower, other than EnSerCo, commence
or threaten, in writing, to commence any legal proceeding to collect
indebtedness owing to them by the Borrower, the conclusion of the
Forbearance Period or the Termination Date.
2. Forbearance by Lenders. Subject to the terms of this Agreement and so long as
no Termination Event shall have occurred, Lenders hereby agree to forbear until
5:00 p.m., Houston, Texas time on September 30, 2001, from exercising their
rights and remedies arising as a result of the occurrence of the Specified
Defaults. Notwithstanding the foregoing, the forbearance granted by Lenders
pursuant hereto shall not constitute and shall not be deemed to constitute a
waiver of any of the Specified Defaults or of any other default under the Loan
Papers.
NOTWITHSTANDING THE FOREGOING, provided that the Borrower timely
presents evidence, satisfactory to each of the Lenders, that, prior to September
30, 2001: (i) it has entered into Definitive Disposition Agreements (herein so
called), containing no financing or due diligence contingencies (nor any other
contingencies which, in the discretion of the Lenders, constitute unusual
pre-conditions to closing and funding on transactions such as those described in
the Definitive Disposition Agreements), for the disposition of the EPG Group and
▇▇▇▇▇▇ with bona fide third party purchasers that are financially capable of
completing the acquisition of such entities by not later than October 31, 2001;
(ii) in connection with the Definitive Disposition Agreements the Borrower has
received non-refundable, commercially reasonable cash escrow deposits (iii) the
Lenders have received, reviewed and approved the terms of each of the Definitive
Disposition Agreements under which (y) Subsidiaries are disposing of assets, or
(z) Subsidiaries are being sold; (iv) the Borrower is then in full compliance
with the terms of the Merger Agreement; (v) no amendment to the Merger Agreement
has diminished or delayed the proceeds to be received thereunder by the Lenders
and (vi) each of the Lenders acknowledges in writing that each of the above
preconditions have been met, then, and only then, shall the Forbearance Period
be extended through and including 5:00 p.m. Houston time, October 31, 2001, or
such earlier date a Termination Event occurs.
At 5:00 p.m., Houston, Texas time September 30, 2001, or, in the case
the Forbearance Period is extended, at 5:00 p.m., Houston, Texas time October
31, 2001, the Forbearance Period shall terminate automatically without further
act or action by Lenders, and Lenders shall be entitled to exercise any and all
rights and remedies available under the Loan Papers and this Agreement, at law,
in equity, or otherwise without any further lapse of time, expiration of
applicable grace periods, or requirements of notice, all of which are hereby
expressly waived by Borrower and each Guarantor.
FORBEARANCE AND AMENDMENT AGREEMENT PAGE 4
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3. Approval of First Amendment to Merger Agreement. Provided the First Amendment
to the Merger Agreement is in the form of that attached hereto as Exhibit "B"
and incorporated herein by reference for all purposes, the Lenders acknowledge,
consent to and waive any Event of Default arising as a result of such First
Amendment. Notwithstanding the foregoing, the Lenders do not hereby waive,
modify or amend the provisions of Section 9.3 or Section 9.7 of the Credit
Agreement including their right to review and approve the terms and conditions
of any final Definitive Disposition Agreement as it relates to (i) the sale of
assets by any Subsidiary or (ii) the sale of any one or more of the
Subsidiaries.
4. Representations and Warranties. To induce Lenders to enter into this
Agreement, Borrower hereby represents and warrants to Lenders that (a) Borrower
and each Guarantor are duly organized, validly existing and in good standing
under the laws of the state in which it was organized and formed, whether by
incorporation, partnership, limited liability company, or otherwise, without
limitation, and has the power and authority to perform its obligations under
this Agreement, and (b) the execution, delivery and performance of this
Agreement have been duly authorized by all requisite action on the part of
Borrower and each Guarantor and do not and will not violate the articles of
incorporation or bylaws, partnership agreement, or other governance document or
agreement of Borrower and each Guarantor or any other agreement to which
Borrower or any Guarantor is a party, or any law, rule or regulation, or any
order of any court, governmental authority or arbitrator by which it or any of
its properties is bound.
5. Covenants. Notwithstanding any provisions to the contrary contained in the
Credit Agreement, Borrower hereby covenants and agrees that, from and after the
date hereof, it will perform, observe and comply with each of the following
covenants:
(a) Interest Rate. The interest rate on the Notes shall continue to
accrue at a floating rate equal to the Base Rate (as defined in the
Credit Agreement) plus three percent (3%). Such rate shall be adjusted,
in the manner provided in the Credit Agreement upon the occurrence of
any Termination Event.
(b) Compliance with Loan Papers and this Agreement. Borrower will
perform, observe and comply with each covenant, agreement and term
contained in this Agreement and each of the Loan Papers except for the
Specified Defaults.
(c) Advances Limitations/Interest. For a period of time not to exceed
from and after the Effective Date through the occurrence of a
Termination Event, and subject to all borrowing base limitations set
forth in the Credit Agreement and the terms and conditions of this
Agreement, the Lenders agree to continue to make Advances under the
Credit Agreement and Borrower and each Guarantor each agrees that each
Advance shall constitute a valid and legally enforceable debt and
obligation of the Borrower under the
FORBEARANCE AND AMENDMENT AGREEMENT PAGE 5
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Notes, Credit Agreement and all other Loan Papers and this Agreement, as
appropriate, and that each Guarantor shall be obligated to Lenders under their
respective guaranties or other applicable Loan Papers and this Agreement with
respect to such Advances.
(d) Additional Reporting Requirements. In addition to all reporting
requirements under the Loan Papers, Borrower shall provide Lenders, on
or before the first business day of each month, in a form acceptable to
the Lenders, a rolling eight (8) weeks cash flow projection.
6. Fees. The Borrower acknowledges that, as a result of the amendment to Article
II, Section 2.8 of the Credit Agreement made in the Fifth Amendment, the
Borrower is currently obligated to pay the Agent for the benefit of the Lenders
a fee of $300,000.00 (the "5th Amendment Fee"). The Borrower acknowledges that
the 5th Amendment Fee has not been paid. The 5th Amendment Fee shall be due and
payable on the earliest to occur of the following: (i) a Termination Event; (ii)
the end of the Forbearance Period; (iii) the date the Borrower closes any sale
of its "EPG Group;" or (iv) the date of the closing of the merger pursuant to
the Merger Agreement. The Borrower also agrees that, in the event that the
Indebtedness is not repaid in full by the close of business on November 1, 2001,
it will owe the Agent, for the benefit of the Lenders, an additional fee of
$100,000.00, which fee shall be due and payable in full on November 1, 2001.
7. Amendments to Definitions Contained in Credit Agreement. The definition of
"Termination Date" contained in the Credit Agreement is hereby deleted and the
following substituted therefore:
"Termination Date" means 12:00 p.m. Houston time on October
31, 2001 or such earlier time a Termination Event (as defined in the
Forbearance Agreement dated as of August 31, 2001 by and between the
Banks, the Borrower and the Guarantors) occurs.
8. Amendments to Article X of Credit Agreement (Financial Covenants). Article X,
Sections 10.10 and 10.12 of the Credit Agreement are both hereby revised by, in
both cases, deleting the current provisions in their entirety and replacing them
with the following:
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 TWO
MILLION AND NO/100 DOLLARS ($2,000,000.00) plus ONE HUNDRED PERCENT (100%) of
all consolidated monthly net income which is earned after July 31, 2001.
Compliance with this ratio shall be tested monthly beginning August 31, 2001
commencing with the financial results for the month of July 2001.
FORBEARANCE AND AMENDMENT AGREEMENT PAGE 6
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Section 10.12 EBITDA to Debt Service. The Borrower will
maintain, for the time period set forth below a ratio of EBITDA to Debt
Service, tested monthly, of not less than:
Time Period Ratio
----------- -----
July 1.0 to 1.0
August 0.75 to 1.0
September 1.0 to 1.0
October 1.25 to 1.0.
This ratio shall be tested after eliminating from the
financial results of the Borrower the impact of the financial
statements of the EPG Group.
9. Amendment to Article XI of Credit Agreement (Defaults). All grace periods,
all notice periods, and all opportunities to cure that may be set forth in any
of the Loan Documents are hereby deleted in their entirety and the Borrower
acknowledges that from and after the date hereof there shall be no grace period
nor shall there be any notice and opportunity to cure including, but not limited
to, those grace, notice and/or cure periods set forth at Section 11.1(a) and
11.1(c) of the Credit Agreement. The Borrower and each Guarantor also hereby
waive demand, notice of non_payment, notice of acceleration and notice of intent
to accelerate as it relates to the Indebtedness and/or any instrument evidencing
the same. Additionally, the following Event of Default is added to the Credit
Agreement by adding to Article XI at Section 11.1 the following event:
(z) should EnSerCo fail to promptly agree to any modification or
amendment to the Merger Agreement.
10. Ratification of Loan Papers/Collateral. The Borrower and each Guarantor
hereby acknowledges, ratifies, and reaffirms and agrees that the Notes, Credit
Agreement, each of the other Loan Papers and the first priority, perfected liens
and security interests created thereby in favor of Lenders in the Collateral,
are and shall remain in full force and effect and binding on the Borrower and
Guarantors, and are enforceable in accordance with their respective terms and
applicable law. Borrower and each Guarantor hereby grants Lenders liens and
security interests in the Collateral and acknowledges, ratifies, and reaffirms
all of the terms and provisions of the Loan Papers, except as modified herein,
which are incorporated by reference as of the date hereof as if set forth herein
including, without limitation, all promises, agreements, warranties,
representations, covenants, releases, and indemnifications contained therein.
Borrower each hereby acknowledges, ratifies and confirms the Loan Papers and all
of their respective debts and obligations thereunder.
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11. Remedies Upon Termination Event. Upon the occurrence of a Termination Event,
the Forbearance Period shall terminate without further act or action by Lenders,
and Lenders shall be entitled immediately to institute foreclosure proceedings
against the Collateral and to exercise any and all of the Lenders' rights and
remedies available to it under the Loan Papers and this Agreement, at law, in
equity, or otherwise, without further notice, demand, presentment, notice of
dishonor, notice of acceleration, notice of intent to accelerate, notice of
intent to foreclose, notice of sale, notice of protest or other formalities of
any kind, all of which are hereby expressly waived by Borrower.
12. Acknowledgment of Defaults. Borrower each specifically acknowledges the
existence and continuation of the Specified Defaults.
13. Release and Covenant Not to ▇▇▇. THE BORROWER (IN ITS OWN RIGHT AND ON
BEHALF OF ITS RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, INDEPENDENT
CONTRACTORS, ATTORNEYS AND AGENTS) AND GUARANTORS (IN THEIR OWN RIGHT AND ON
BEHALF OF THEIR RESPECTIVE ATTORNEYS AND AGENTS) (THE "RELEASING PARTIES")
JOINTLY AND SEVERALLY RELEASE, ACQUIT, AND FOREVER DISCHARGE LENDERS AND THEIR
DIRECTORS, OFFICERS, EMPLOYEES, INDEPENDENT CONTRACTORS, ATTORNEYS AND AGENTS,
AND ATTORNEYS (THE "RELEASED PARTIES"), TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE STATE AND FEDERAL LAW, FROM ANY AND ALL ACTS AND OMISSIONS OF THE
RELEASED PARTIES, AND FROM ANY AND ALL CLAIMS, CAUSES OF ACTION, COUNTERCLAIMS,
DEMANDS, CONTROVERSIES, COSTS, DEBTS, SUMS OF MONEY, ACCOUNTS, RECKONINGS,
BONDS, BILLS, DAMAGES, OBLIGATIONS, LIABILITIES, OBJECTIONS, AND EXECUTIONS OF
ANY NATURE, TYPE, OR DESCRIPTION WHICH THE RELEASING PARTIES HAVE AGAINST THE
RELEASED PARTIES, INCLUDING, BUT NOT LIMITED TO, NEGLIGENCE, GROSS NEGLIGENCE,
USURY, FRAUD, DECEIT, MISREPRESENTATION, CONSPIRACY, UNCONSCIONABILITY, DURESS,
ECONOMIC DURESS, DEFAMATION, CONTROL, INTERFERENCE WITH CONTRACTUAL AND BUSINESS
RELATIONSHIPS, CONFLICTS OF INTEREST, MISUSE OF INSIDER INFORMATION,
CONCEALMENT, DISCLOSURE, SECRECY, MISUSE OF COLLATERAL, WRONGFUL RELEASE OF
COLLATERAL, FAILURE TO INSPECT, ENVIRONMENTAL DUE DILIGENCE, NEGLIGENT LOAN
PROCESSING AND ADMINISTRATION, WRONGFUL SETOFF, VIOLATIONS OF STATUTES AND
REGULATIONS OF GOVERNMENTAL ENTITIES, INSTRUMENTALITIES AND AGENCIES (BOTH CIVIL
AND CRIMINAL), RACKETEERING ACTIVITIES, SECURITIES AND ANTITRUST LAWS
VIOLATIONS, TYING ARRANGEMENTS, DECEPTIVE TRADE PRACTICES, BREACH OR ABUSE OF
ANY ALLEGED FIDUCIARY DUTY, BREACH OF ANY ALLEGED SPECIAL RELATIONSHIP, COURSE
OF CONDUCT OR DEALING, ALLEGED OBLIGATION OF FAIR DEALING, ALLEGED OBLIGATION OF
GOOD FAITH, AND ALLEGED OBLIGATION OF GOOD FAITH AND FAIR DEALING, WHETHER OR
NOT IN CONNECTION WITH OR RELATED TO THE LOAN PAPERS AND THIS AGREEMENT, AT LAW
OR IN EQUITY, IN CONTRACT IN TORT, OR OTHERWISE, KNOWN OR UNKNOWN, SUSPECTED OR
UNSUSPECTED (THE "RELEASED CLAIMS"). THE RELEASING PARTIES FURTHER AGREE TO
LIMIT ANY DAMAGES THEY MAY SEEK IN CONNECTION WITH ANY CLAIM OR CAUSE OF ACTION,
IF ANY, TO EXCLUDE ALL PUNITIVE AND EXEMPLARY DAMAGES, DAMAGES ATTRIBUTABLE TO
LOST PROFITS OR OPPORTUNITY, DAMAGES ATTRIBUTABLE TO MENTAL ANGUISH, AND DAMAGES
ATTRIBUTABLE TO PAIN AND SUFFERING, AND THE RELEASING PARTIES DO HEREBY WAIVE
AND RELEASE ALL SUCH DAMAGES WITH RESPECT TO ANY AND ALL CLAIMS OR CAUSES OF
ACTION WHICH MAY ARISE AT ANY TIME AGAINST ANY OF THE RELEASED PARTIES. THE
RELEASING PARTIES REPRESENT AND WARRANT THAT NO FACTS NOW EXIST WHICH COULD
PRESENTLY OR IN THE FUTURE COULD SUPPORT THE ASSERTION OF ANY OF THE RELEASED
CLAIMS AGAINST THE RELEASED PARTIES. THE RELEASING PARTIES FURTHER COVENANT NOT
TO ▇▇▇ THE RELEASED PARTIES ON ACCOUNT OF ANY OF THE RELEASED CLAIMS, AND
EXPRESSLY WAIVE ANY AND ALL DEFENSES THEY MAY HAVE IN CONNECTION WITH THEIR
DEBTS AND OBLIGATIONS UNDER THE LOAN PAPERS AND THIS AGREEMENT. THIS PARAGRAPH
IS IN ADDITION TO AND SHALL NOT IN ANY WAY LIMIT
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ANY OTHER RELEASE, COVENANT NOT TO ▇▇▇, OR WAIVER BY THE RELEASING PARTIES IN
FAVOR OF THE RELEASED PARTIES. ACCEPTANCE OF EACH ADVANCE MADE AFTER THE DATE
HEREOF SHALL CONSTITUTE A RATIFICATION, ADOPTION AND CONFIRMATION BY THE
RELEASING PARTIES OF THE FOREGOING GENERAL RELEASE OF RELEASED CLAIMS THAT ARE
BASED IN WHOLE OR IN PART ON FACTS, WHETHER OR NOT NOW KNOWN OR UNKNOWN,
EXISTING ON OR PRIOR TO THE DATE OF RECEIPT OF ANY SUCH ADVANCE.
14. No Obligation of Lenders. Borrower and each Guarantor hereby acknowledges
and understands that upon the expiration or termination of the Forbearance
Period Lenders shall have the right to proceed to exercise any or all available
rights and remedies, which may include foreclosure on the Collateral and/or
institution of legal proceedings. Lenders shall have no obligation whatsoever to
extend the maturity of the Notes, waive any events of default or defaults, defer
any payments, or further forbear from exercising their rights and remedies.
15. No Implied Waivers. No failure or delay on the part of Lenders in
exercising, and no course of dealing with respect to, any right, power or
privilege under this Agreement, the Credit Agreement or any other Loan Paper
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege under this Agreement, the Credit Agreement or any
other Loan Paper preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
16. Indemnification. This Agreement constitutes one of the transactions and
documents as to which the provisions of Section 13.2 of the Credit Agreement are
applicable.
17. Power of Attorney. Borrower and each Guarantor hereby irrevocably appoints
Lenders and Lenders' authorized agents and employees as their attorney-in-fact
FORBEARANCE AND AMENDMENT AGREEMENT PAGE 9
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jointly and severally, and on their behalf, to endorse, deposit, collect, and
negotiate all checks, drafts and instruments received by, or which come in to
the possession of Lenders or otherwise. This power of attorney is coupled with
an interest and is irrevocable. Borrower and each Guarantor agrees and
acknowledges that Lenders are under no duty or obligation to verify the amounts
of such checks, drafts, or instruments, or to collect any accounts owing to
Borrower or such checks, drafts, or instruments.
18. Survival of Representations and Warranties. All representations and
warranties made in this Agreement or any other Loan Paper shall survive the
execution and delivery of this Agreement, and no investigation by Lenders or any
closing shall affect the representations and warranties or the right of Lenders
to rely upon them.
19. Review and Construction of Documents. Borrower and each Guarantor hereby
acknowledges, and represents and warrants to Lenders, that (a) Borrower and each
Guarantor has had the opportunity to consult with legal counsel of its own
choice and has been afforded an opportunity to review this Agreement with its
legal counsel, (b) Borrower and each Guarantor has reviewed this Agreement and
fully understand the effects thereof and all terms and provisions contained
herein, (c) Borrower and each Guarantor has executed this Agreement of its own
free will and volition, and (d) this Agreement shall be construed as if jointly
drafted by Borrower, each Guarantor and Lenders. The recitals contained in this
Agreement shall be construed to be part of the operative terms and provisions of
this Agreement.
20. ENTIRE AGREEMENT; AMENDMENT. THIS AGREEMENT EMBODIES THE FINAL, ENTIRE
AGREEMENT BETWEEN THE PARTIES HERETO REGARDING LENDERS' FORBEARANCE WITH RESPECT
TO THEIR RIGHTS AND REMEDIES ARISING AS A RESULT OF THE SPECIFIED DEFAULTS AND
SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
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. The provisions of this Agreement may
be amended or waived only by an instrument in writing signed by the parties
hereto. The Notes, Credit Agreement and the other Loan Papers, as modified by
this Agreement, continue to evidence the agreement of the parties with respect
to the subject matter thereof.
FORBEARANCE AND AMENDMENT AGREEMENT PAGE 10
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21. Notices. All notices, requests, demands and other communications under this
Agreement shall be given in accordance with the provisions of the Loan Papers.
In addition as of the Effective Date, Lenders shall be provided with notice via
first class mail, postage prepaid and via facsimile as follows: To Lenders:
Comerica Bank -
Texas
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇ - MC6510
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
National Bank of Canada
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇.
228
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇▇
Hibernia National Bank
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Vice President
To Borrower:
Industrial Holdings, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇
To Guarantors:
Industrial Holdings, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇
22. Successors and Assigns. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective heirs, legal
representatives, successors
FORBEARANCE AND AMENDMENT AGREEMENT PAGE 11
12
and assigns, provided that Borrower each may not assign any rights or
obligations under this Agreement without the prior written consent of Lenders.
23. Arms-Length/Good Faith. This Agreement has been negotiated at arms-length
and in good faith by the parties hereto.
24. Governing Law/Venue. This Agreement shall be governed by and construed in
accordance with the laws of the State of
Texas and applicable laws of the United
States of America. All disputes, claims, demands, actions, causes of action,
suits or proceedings by and among the parties to this Agreement shall be
adjudicated, litigated, heard or tried, if at all, exclusively in the state
courts of Dallas County,
Texas or the United States District Court for the
Northern District of Texas, Dallas Division. Dallas, Texas shall be the
mandatory, exclusive place for the adjudication, litigation, hearing or trial of
any matter by and among the parties to this Agreement. Each party to this
Agreement hereby irrevocably waives any right to have any such dispute, claim,
demand, action, cause of action, suit or proceeding adjudicated, litigated,
heard or tried in any place other than Dallas County, Texas.
25. Subrogation. Any and all rights of any Guarantor against the Borrower
arising as a result of subrogation or otherwise shall in all respects be
subordinate and junior to the rights of Lenders under the Loan Papers and this
Agreement and applicable state and federal law.
26. Interpretation. Wherever the context hereof shall so require, the singular
shall include the plural, the masculine gender shall include the feminine gender
and the neuter and vice versa. The headings, captions and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
27. Severability. In case any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision hereof, and this Agreement shall be construed as if
such invalid, illegal, or unenforceable provision had never been contained
herein.
FORBEARANCE AND AMENDMENT AGREEMENT PAGE 12
13
28. Counterparts. This Agreement may be executed and delivered in any number of
counterparts, and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts taken together shall constitute one and the same
instrument. Execution of this Agreement via facsimile shall be effective, and
signatures received via facsimile shall be binding upon the parties hereto and
shall be effective as originals.
29. Further Assurances. Borrower and each Guarantor agrees to execute,
acknowledge, deliver, file and record such further certificates, instruments and
documents, and to do all other acts and things, as may be requested by Lenders
as necessary or advisable to carry out the intents and purposes of this
Agreement.
30. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO
A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF THE AGENT
OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
[Remainder of Page Intentionally Left Blank _ Signature Pages to Follow]
FORBEARANCE AND AMENDMENT AGREEMENT PAGE 13
14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BORROWER:
INDUSTRIAL HOLDINGS, INC.,
a Texas corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇
FORBEARANCE AND AMENDMENT AGREEMENT PAGE 14
15
GUARANTORS:
The ▇▇▇ Group, Inc., a Texas
corporation;
▇▇▇ Machinery Movers, Inc., a Texas
corporation;
First Texas Credit Corporation, a Texas
corporation;
▇▇▇▇▇▇▇▇ Metal Forming, Inc., a Texas
corporation formerly known as ▇▇▇▇▇▇▇▇
Engineering Company;
Pipeline Valve Specialty, Inc., a Texas
corporation (f/k/a Industrial
Municipal Supply Company);
Bolt Manufacturing Co., Inc., a Texas
corporation, d/b/a ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇
Equipment & Supply Company;
Philform, Inc., a Michigan corporation;
GHX, Incorporated, a Texas corporation;
Regal Machine Tool, Inc., a Texas
corporation, f/k/a ▇▇▇ Machine Tool,
Inc.;
WHIR Acquisition, Inc., a Texas
corporation, d/b/a Ameritech Fastener
Manufacturing;
▇▇▇▇▇▇ Pump & Services, Inc., a
Louisiana corporation;
GHX, Incorporated of Louisiana, a
Louisiana corporation;
▇▇▇▇▇▇ Industries, Inc., a Delaware
corporation;
United Wellhead Services, Inc., a Texas
corporation;
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇
Chief Executive Officer
LENDERS:
COMERICA BANK_TEXAS,
a Texas banking association
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Vice President
NATIONAL BANK OF CANADA,
a Canadian Chartered Bank
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
FORBEARANCE AND AMENDMENT AGREEMENT PAGE 15
16
HIBERNIA NATIONAL BANK
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
FORBEARANCE AND AMENDMENT AGREEMENT PAGE 16
17
EXHIBIT "A"
SPECIFIED DEFAULTS
The Borrower warrants that it is presently in default of only the following
provisions of the Credit Agreement:
1. Failure to pay the Indebtedness in full on August 31, 2001.
2. Failure to pay when due $15,000,000.00 owing to EnSerCo.
FORBEARANCE AND AMENDMENT AGREEMENT PAGE 17