SEVENTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND WAIVER OF DEFAULTS

 

 

This SEVENTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND WAIVER OF DEFAULTS (the “Amendment”), dated April 15, 2010, is entered into by and among MISCOR GROUP, LTD., an Indiana corporation (“MISCOR”), MAGNETECH INDUSTRIAL SERVICES, INC., an Indiana corporation (“MIS”), and HK ENGINE COMPONENTS, LLC, an Indiana limited liability company (“HK” and together with MISCOR and MIS, the “Borrowers” and each a “Borrower”) and WELLS FARGO BANK, NATIONAL ASSOCIATION (the “Lender”), acting through its Wells 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 make certain changes to the Credit Agreement and that the Lender waive certain defaults, all of which the Lender is willing to do pursuant to the terms and conditions of this Amendment.

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 deleting the defined term “Original Maturity Date” and amending the definition of Maturity Date as follows:

 

“Borrowing Base” means at any time the lesser of:

 

(a)           The Maximum Line Amount; or

 

(b)           Subject to change from time to time in the Lender’s sole discretion, the sum of:

 

(i)           The lesser of (A) the product of the Accounts Advance Rate times Eligible Accounts of each of MIS and HK; or (B) $5,800,000, less

 

(ii)           The Borrowing Base Reserve, less

 

(iii)           The Personal Property Tax Reserve, less

 

(iv)           The Real Estate Tax Reserve, less

 

(v)           The Landlord Reserve, less

 

(vi)           Indebtedness that any Borrower owes to the Lender that has not yet been advanced on the Revolving Note, including, without limitation, the L/C Amount, and the dollar amount that the Lender in its reasonable discretion then determines to be a reasonable determination of each Borrower’s credit exposure with respect to any swap, derivative, foreign exchange, hedge, deposit, treasury management or other similar transaction or arrangement offered to any Borrower by Lender that is not described in Article II of this Agreement.

 

“Maturity Date” means January 1, 2011.

 

2.           Amendment of Section 2.11.  Section 2.11 of the Credit Agreement shall be amended to read as follows:

 

Section 2.11   Maturity Date.  Unless terminated (i) by the Lender pursuant to Section 7.2 or (ii) by the Borrowers pursuant to Section 2.12, the Credit Facility shall remain in effect until the Maturity Date.

 

3.           Amendment to Section 6.2.  Section 6.2 of the Credit Agreement shall be amended to read as follows:

 

Section 6.2   Financial Covenants.

 

(a)           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).

 

	Date		Minimum EBITDA
	Three (3) fiscal month period ending April 4, 2010		<$1,381,000>
	Four (4) fiscal month period ending May 2, 2010		<$1,469,000>
	Five (5) fiscal month period ending May 30, 2010		<$1,416,000>
	Six (6) fiscal month period ending July 4, 2010		<$1,492,000>
	Seven (7) fiscal month period ending August 1, 2010		<$1,479,000>
	Eight (8) fiscal month period ending August 29, 2010		<$1,434,000>
	Nine (9) fiscal month period ending October 3, 2010		<$1,511,000>
	Ten (10) fiscal month period ending October 31, 2010		<$1,209,000>
	Eleven (11) fiscal month period ending November 28, 2010		<$831,000>
	Twelve (12) fiscal month period ending December 31, 2010		<$576,000>

 

(b)           Capital Expenditures.  The Borrowers collectively, will not incur or contract to incur Capital Expenditures of more than Five Hundred Thousand Dollars ($500.000.00) during the fiscal year ending December 31, 2010.

 

3.           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.

 

4.           Waiver of Defaults.  Prior to giving effect to this Amendment, the Borrowers are in default of the following Sections of the Credit Agreement (the “Current Defaults”):

 

	Credit Agreement Section		Period/Date of Default
	6.2(a) (Minimum Book Net Worth)		December 31, 2009
	6.2(c) (Capital Expenditures (from working capital))		Fiscal year ended December 31, 2009

 

Upon the terms and subject to the conditions set forth in this Amendment, and provided the Borrowers’ Book Net Worth as shown on its audited financial statements for the year ended December 31, 2009, is not less than Twenty One Million Five Hundred Thousand Dollars ($21,500,000), the Lender specifically waives the Current 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 circumstance.

 

5.           Accommodation Fee.  The Borrowers shall pay to the Lender a fully earned, non-refundable fee in the amount of Seventy Five Thousand Dollars ($75,000) in consideration of the Lender’s agreement to waive the Current Defaults and enter into this Amendment, payable in installments of Twenty Five Thousand Dollars ($25,000) each on the date hereof, thirty (30) days subsequent to the date hereof and sixty (60) days subsequent to the date hereof.

 

6.           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.

 

7.           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 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.

 

8.           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.

 

9.           No Other Waiver.  Except as provided in Paragraph 4, 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.

 

 

10.           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.

 

11.           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 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.

 

12.           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.

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written.

MISCOR GROUP, LTD.			WELLS FARGO BANK, NATIONAL ASSOCIATION
By:	/s/ John A. Martell		By:	/s/ Daniel J. Manella
	John A. Martell, Chief Executive Officer			Daniel J. Manella, Vice President
MAGNETECH INDUSTRIAL SERVICES, INC.
By:	/s/ John A. Martell
	John A. Martell, Chief Executive Officer
HK ENGINE COMPONENTS, LLC
By:	/s/ John A. Martell
	John A. Martell, Chief Executive Officer

 

 

The undersigned, each a subordinated creditor of MISCOR GROUP, LTD., an Indiana corporation (“MISCOR”), MAGNETECH INDUSTRIAL SERVICES, INC., an Indiana corporation (“MIS”), and HK ENGINE COMPONENTS, LLC, an Indiana limited liability company (“HK” and together with MISCOR and MIS, the “Borrowers” and each a “Borrower”) to WELLS FARGO BANK, NATIONAL ASSOCIATION (the “Lender”), acting through its Wells 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.

 

	BDEWEES, INC.
	By:	/s/ Bernard L. DeWees
		Bernard L. DeWees, President
	XGEN III, LTD.
	By:	/s/ Thomas J. Embrescia
		Thomas J. Embrescia, Manager
	/s/ John A. Martell
	John A. Martell