<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 0-21513
DXP ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Texas 76-0509661
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
580 Westlake Park Boulevard, Suite 1100 77079
Houston, Texas (Zip Code)
(Address of principal executive offices)
281/531-4214
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Number of shares outstanding of each of the issuer's classes of common stock, as
of May 7, 1998:
Common Stock: 8,314,845
<PAGE> 2
Item 1: Financial Statement
DXP ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, except Per Share Amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $ 2,259 $ 736
Trade accounts receivable, net of allowance for doubtful
accounts of $608 and $476, respectively 26,830 25,707
Inventory 28,922 26,018
Prepaid expenses and other current assets 1,107 996
Deferred income taxes 796 722
-------- --------
Total current assets 59,914 54,179
Property, plant and equipment, net 10,384 10,403
Other assets 6,864 3,054
-------- --------
Total assets 77,162 67,636
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Trade accounts payable 18,197 14,368
Employee compensation 1,224 1,384
Other accrued liabilities 1,082 704
Current portion of long-term debt 1,198 1,461
-------- ------
Total current liabilities 21,701 17,917
Long-term debt, less current portion 38,245 33,395
Deferred compensation 739 739
Deferred income taxes 514 479
Equity subject to redemption:
Series A preferred stock--1,122 shares 112 112
Common stock, 280,428 shares 1,963 1,963
Shareholders' Equity:
Series A preferred stock, 1/10th vote per share; $1.00 par
value; liquidation preference of $100 per share; 1,000,000
shares authorized; 2,992 shares issued and outstanding: 2 2
Series B convertible preferred stock, 1/10th vote per share;
$1.00 par value; $100 stated value; liquidation preference
of $100 per share; 1,000,000 shares authorized; 17,700
shares issued and outstanding 18 18
Common stock, $.01 par value, 50,000,000 shares
authorized; 8,375,717 shares issued, of which 8,034,417
shares are outstanding, 280,428 shares are equity subject to
redemption, and 60,872 shares are treasury stock 80 80
Paid-in capital 852 852
Retained earnings 13,516 12,659
Treasury stock (580) (580)
-------- --------
Total shareholders' equity 13,888 13,031
Total liabilities and shareholders' equity $ 77,162 $ 67,636
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 3
DXP ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1998 1997
-------- --------
<S> <C> <C>
Sales $ 49,004 $ 30,129
Cost of sales 36,419 21,756
-------- --------
Gross Profit 12,585 8,373
Selling, general and administrative expenses 10,508 7,043
-------- --------
Operating income 2,077 1,330
Other income 176 429
Interest expense (785) (539)
-------- --------
Income before income taxes 1,468 1,220
Provision for income taxes 590 429
-------- --------
Net income $ 878 $ 791
Preferred stock dividend 21 38
-------- --------
Net Income attributable to common
Shareholders $ 857 $ 753
======== ========
Basic earnings per common share $ .10 $ .09
-------- --------
Common shares outstanding 8,315 7,994
-------- --------
Diluted earnings per share $ .08 $ .07
-------- --------
Common and common equivalent shares
outstanding 11,401 10,984
-------- --------
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
DXP ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net cash provided by operating activities $ 3,415 $ 1,006
INVESTING ACTIVITIES:
Purchase of Tri-Electric Supply net assets (6,208) --
Purchase of property and equipment (250) (227)
-------- --------
Net cash used in investing activities (6,458) (227)
FINANCING ACTIVITIES:
Proceeds from debt 53,634 29,205
Principal payments on revolving line of credit, long-term and
Subordinated debt, and notes payable to bank (49,047) (29,844)
Dividends paid (21) (38)
-------- --------
Net cash provided by financing activities 4,566 (677)
-------- --------
INCREASE(DECREASE) IN CASH 1,523 102
CASH AT BEGINNING OF PERIOD 736 876
-------- --------
CASH AT END OF PERIOD $ 2,259 $ 979
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
DXP ENTERPRISES INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Note 1: Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted. The Company believes that the
presentations and disclosures herein are adequate to make the information not
misleading. The condensed consolidated financial statements reflect all
elimination entries and adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the interim periods.
The results of operations for the interim periods are not necessarily indicative
of the results of operations to be expected for the full year. These condensed
consolidated financial statements should be read in conjunction with the
Company's audited consolidated financial statements included in the Company's
10-K Annual Report for the year ended December 31,1997, filed with the
Securities and Exchange Commission.
Note 2: The Company
DXP Enterprises, Inc. (the "Company") was incorporated on July 26, 1996 in the
State of Texas. The Company is a leading supplier of maintenance, repair and
operating ("MRO") products, equipment and services to industrial customers. The
Company provides MRO products in the following categories: fluid handling
equipment, bearings and power transmission equipment, general mill and safety
supplies and electrical supplies. The Company also offers a line of valve and
valve automation products to its customers.
Note 3: Inventory
The Company uses the last-in, first-out (LIFO) method of inventory valuation for
approximately 56 percent of its inventories. Remaining inventories are accounted
for using the first-in, first-out (FIFO) method. An actual valuation of
inventory under the LIFO method can be made only at the end of each year based
on the inventory levels and costs at that time. Accordingly, interim LIFO
calculations must necessarily be based on management's estimates of expected
year-end inventory levels and costs. Because these are subject to many forces
beyond management's control, interim results are subject to the final year-end
LIFO inventory valuation. The reconciliation of FIFO inventory to LIFO basis is
as follows:
<TABLE>
<CAPTION>
3/31/98 12/31/97
-------- --------
(in thousands)
<S> <C> <C>
Finished goods $ 29,976 $ 27,280
Work in process 2,697 2,276
-------- --------
Inventories at FIFO 32,673 29,556
Less - LIFO allowance (3,751) (3,538)
-------- --------
Inventories $ 28,922 $ 26,018
======== ========
</TABLE>
5
<PAGE> 6
Note 4: Acquisition
On February 26, 1998, a wholly-owned subsidiary of the Company acquired
substantially all the assets of Tri-Electric Supply, Ltd ("Tri-Electric"). The
purchase price consisted of $6.2 million in cash, assumption of $1.6 million of
trade payables and other accrued expenses and a deferred payment up to a maximum
of $275,000 based on the earnings before interest and taxes and depreciation of
the acquired company to be paid on March 31, 1999, if earned. The results of
operations of Tri-Electric are included in the consolidated statements of income
from the date of acquisition. Goodwill of $3.9 million was recorded in
connection with the acquisition. The acquisition has been accounted for using
the purchase method of accounting.
The Company is continuing its evaluation of the acquisition of Tri-Electric as
it relates to the purchase price allocation. The allocation of the purchase
price is based on the best estimates of the Company using information currently
available. Certain adjustments relating to this acquisition are subject to
change based upon the final determination of the fair values of the net assets
acquired.
Note 5: Long-Term Debt
The Company has secured lines of credit for up to $40 million with an
institutional lender. The rate of interest ranges from LIBOR plus 2.25 percent
to prime plus .50 percent (8.50 percent at March 31, 1998). The line of credit
is secured by receivables, inventory, and machinery and equipment and matures
January, 1999. An executive officer of the Company, who is also a shareholder
of the Company, has personally guaranteed up to $500,000 of the obligations of
the Company under the line of credit. Additionally, certain shares held in trust
for this executive officer's children are also pledged to secure this line of
credit. The borrowings available under the existing lines of credit at March 31,
1998 approximated $3.1 million. This facility includes loan covenants, which,
among other things, require the Company to maintain a positive cash flow and
other financial ratios, which are measured monthly. During April 1998, the
Company amended its Credit Facility. (See Note 6)
Note 6: Subsequent Events
Effective April 29th, 1998, the Company amended its lines of credit with its
lender. The restructure provided for a combined line of credit for up to $50
million. Additionally, the loan restructure increased the Company's term loan
from $4.9 million to $9.9 million upon conversion of $5.0 million of the amounts
outstanding under the revolving loan to the term loan. The amended credit
facility provides for a $15.0 million acquisition term loan to be used for
acquisitions provided certain customary provisions related to combined cash
flows and acquisition pricing are met. Additionally, interest rates will range
from LIBOR plus 1.50 to LIBOR plus 3.00 depending upon the relationship of the
Company's debt to cash flow and financial covenants tied to debt service levels
and cash flow.
6
<PAGE> 7
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Revenues for the three months ended March 31, 1998 increased 62.7% to $49.0
million from the three months ended March 31, 1997. The Company's acquisitions
during the period accounted for $14.5 million of the $18.9 million increase in
revenues. Sales of bearings and power transmission equipment for the quarter
ended March 31, 1998 increased 19.6%, or $2.4 million over the comparable period
in 1997, accounting for 7.8% of the revenue increase. Sales of valve and valve
automation equipment increased 39.8%, or $.7 million over the comparable period
in 1997, accounting for 2.2% of the revenue increase. During the three months
ended March 31, 1998, sales of pumps and pump products increased 4.5%, or $1.3
million, over the comparable period in 1997, accounting for 5.6% of the revenue
increase.
Gross margins decreased 2.1% for the first quarter of 1998 as compared to the
first quarter of 1997, from 27.8% of sales to 25.7%. The decrease in gross
margin is attributable to lower margins associated with the two businesses
acquired in May, 1997 and a third in February, 1998. The Company currently
expects some increase in manufacturers prices to continue due to increased raw
material costs and strong market conditions. Although the Company intends to
attempt to pass on these price increases to its customers to maintain current
gross margins, there can be no assurances that the Company will be successful in
this regard.
Selling, general and administrative expense decreased as a percentage of
revenues by 1.9% for the first quarter of 1998 as compared to the first quarter
of 1997.
Operating income for the three month period ended March 31, 1998 was consistent
as a percentage of revenues as compared to the first quarter of 1997.
Interest expense during the first quarter of 1998 increased by $246,000 to
$785,000 compared to the first quarter of 1997. Long-term debt at March 31, 1998
increased by $15.5 million as a result of the financing of two acquisitions
during the second quarter of 1997 and a third during the first quarter of 1998,
resulting in greater interest costs. Average interest rates were consistent
during the three months ended March 31, 1998 as compared to the same period in
1997.
The Company's provision for income taxes for the three months ended March 31,
1998 increased by $161,000 compared to the same period of 1997, as a result of
the increase in profits.
Net income for the three month period ended March 31, 1998, increased $87,000
from the three month period ended March 31, 1997 due to the increase in revenue
volume and the decrease of selling, general and administrative expenses as a
percentage of revenue.
Liquidity and Capital Resources
Under the Company's loan agreements with its bank lender (the "Credit
Facility"), all available cash is generally applied to reduce outstanding
borrowings, with operations funded through borrowings under the credit facility.
The Company's policy is to maintain low levels of cash and cash equivalents and
to use borrowings under its line of credit for working capital. The Company had
$3.1 million available for borrowings under its working capital line of credit
at March 31, 1998. Working capital at March 31, 1998 and December 31, 1997 was
$38.2 million and $36.5 million, respectively. During the first three months of
1998 and the year 1997, the Company collected its trade receivables in
approximately 49 and 46 days, respectively, and turned its inventory
approximately five times on an annualized basis.
7
<PAGE> 8
Subsequent to the end of the first quarter of 1998, the Company amended the
Credit Facility and currently has a combined line of credit for up to $50
million. Additionally, the loan restructure increased the Company's term loan
from $4.9 million to $9.9 million upon conversion of $5.0 million of the amounts
outstanding under the revolving loan to the term loan. The amended credit
facility provides for a $15.0 million acquisition term loan to be used for
acquisitions provided certain customary provisions related to combined cash
flows and acquisition pricing are met. Additionally, interest rates will range
from LIBOR plus 1.50 to LIBOR plus 3.00 depending upon the relationship of the
Company's debt to cash flow and financial covenants tied to debt service levels
and cash flow. The line of credit is secured by receivables, inventory, and
machinery and equipment and matures January, 2000. The facility contains
customary affirmative and negative covenants as well as financial covenants that
require the Company to maintain a positive cash flow and other financial ratios,
such as tangible net worth less than five to one and current assets to current
liabilities greater than two to one.
The Company generated cash from operating activities of $3.4 million in the
first three months of 1998 as compared to $1.0 million during the first three
months of 1997 due primarily to a reduction in the net working capital
components during the first three months of 1998.
The Company had capital expenditures of approximately $250,000 for the first
three months of 1998 as compared to $227,000 during the same period of 1997.
Capital expenditures in the first three months of 1998 were primarily related to
computer hardware ($136,000). Capital expenditures for 1997 were predominantly
for the expansion of a facility in LaPorte, Texas ($80,000), leasehold
improvements and furniture and fixtures at the corporate office and for office
equipment and computer automation.
On February 26, 1998, a wholly-owned subsidiary of the Company acquired
substantially all of the assets of Tri-Electric Supply, Ltd ("Tri-Electric").
The purchase price consisted of $6.2 million in cash, assumption of 1.6 million
of trade payables and other accrued expenses and a deferred payment of up to a
maximum of $275,000 based on the earnings before interest and taxes and
depreciation of the acquired Company to be paid on March 31, 1999, if earned.
The results of operations of Tri-Electric are included in the consolidated
statements of income from the date of acquisition. The acquisition has been
accounted for using the purchase method of accounting. Goodwill of $3.9 million
was recorded in connection with the acquisition.
The Company expects that its software will be year 2000 compatible by the end of
1998. The upgrading of the Company's software to address year 2000 issues is
being handled through new releases of current software. All costs associated
with year 2000 issues will be included as part of normal software upgrades or
operating costs, as appropriate. The Company does not believe that any of the
costs associated with year 2000 issues will be material to its financial
condition or results of operations.
The Company believes that cash generated from operations and available under its
Credit Facility will meet its future ongoing operational and liquidity needs and
capital requirements. Funding of the Company's acquisition program and
integrated supply strategy will require capital in the form of the issuance of
additional equity or debt financing. There can be no assurance that such
financing will be available to the Company or as to the terms thereof.
Item 3: Quantitative and Qualitative Disclosures About Market Price
Not Applicable
Part II: Other Information
Item 1. Legal Proceedings
From time to time, the Company is a party to legal proceedings arising in the
ordinary course of business. The Company is not currently a party to any
litigation that it believes could have a material adverse effect on the results
of operations or financial condition of the Company.
Item 2. Changes in Securities-None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders-None
Item 5. Other Information
8
<PAGE> 9
CAUTIONARY STATEMENTS
The Company's expectations with respect to future results of operations that may
be embodied in oral and written forward-looking statements, including any
forward-looking statements that may be contained in this Quarterly Report on
Form 10-Q, are subject to risks and uncertainties that must be considered when
evaluating the likelihood of the Company's realization of such expectations. The
Company's actual results could differ materially. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
below.
Risks Associated With Acquisition Strategy
Future results for the company will depend in part on the success of the Company
in implementing its acquisition strategy. This strategy includes taking
advantage of a consolidation trend in the industry and effecting acquisitions of
distributors with complementary or desirable new product lines, strategic
distribution locations and attractive customer bases and manufacturer
relationships. The ability of the Company to implement this strategy will be
dependent on its ability to identify, consummate and successfully assimilate
acquisitions on economically favorable terms. Although the Company is actively
seeking acquisitions that would meet its strategic objectives, there can be no
assurance that the Company will be successful in these efforts. In addition,
acquisitions involve a number of specific risks, including possible adverse
effects on the Company's operating results, diversion of management's attention
and failure to retain key acquired personnel, all of which could have a material
adverse effect on the Company's business, financial condition and results of
operations. There can be no assurance that the Company or other industrial
supply distributors acquired in the future will achieve anticipated revenues and
earnings. In addition, the Credit Facility contains certain restrictions that
could adversely affect its ability to implement its acquisition strategy. Such
restrictions include a provision prohibiting the Company from merging or
consolidating with, or acquiring all or a substantial part of the properties or
capital stock of, any other entity without the prior written consent of the
lender. There can be no assurance that the Company will be able to obtain the
lender's consent to any of its proposed acquisitions.
Risks Related to Acquisition Financing
The Company currently intends to finance acquisitions by using shares of its
common stock, par value $.01 per share (the "Common Stock"), for a portion or
all of the consideration to be paid. In the event that the Common Stock does not
maintain a sufficient market value, or potential acquisition candidates are
otherwise unwilling to accept Common Stock as part of the consideration for the
sale of their business, the Company may be required to use more of its cash
resources, if available, to maintain its acquisition program. If the Company
does not have sufficient cash resources, its growth could be limited unless it
is able to obtain additional capital through debt or equity financing. Under the
Credit Facility, all available cash generally is applied to reduce outstanding
borrowings. As of March 31, 1998, the Company had $3.1 million available under
the Credit Facility, and there can be no assurance that the Company will be able
to obtain additional financing on a timely basis or on terms the Company deems
acceptable. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources".
Risks Related to Growth Strategy
Future results for the Company also will depend in part on the Company's success
in implementing its internal growth strategy, which includes expanding existing
product lines and adding new product lines. The ability of the Company to
implement this strategy will depend on its success in acquiring and integrating
new product lines and marketing integrated forms of supply arrangements such as
those being pursued by the Company through its SmartSource and American MRO
programs. The Company acquired the assets of two companies in the second quarter
of 1997 and another in the first quarter of 1998 and plans to acquire other
distributors with complementary or desirable product lines and customer bases.
Although the Company intends to increase sales and product offerings to the
customers of these and other acquired companies, reduce costs through
consolidating certain administrative and sales functions and integrate the
acquired companies' management information systems with the Company's system,
there can be no assurance that the Company will be successful in these efforts.
9
<PAGE> 10
Substantial Competition
The Company's business is highly competitive. The Company competes with a
variety of industrial supply distributors, some of which may have greater
financial and other resources than the Company. Although many of the Company's
traditional distribution competitors are small enterprises selling to customers
in a limited geographic area, the Company also competes with larger distributors
that provide integrated supply programs such as those offered through
outsourcing services similar to those that are being offered by the Company's
SmartSource and American MRO programs. Some of these large distributors may be
able to supply their products in a more timely and cost-efficient manner than
the Company. The Company's competitors include direct mail suppliers, large
warehouse stores and, to a lesser extent, certain manufacturers.
Risks of Economic Trends
Demand for the Company's products is subject to changes in the United States
economy in general and economic trends affecting the Company's customer and the
industries in which they compete in particular. Many of these industries, such
as the oil and gas industry, are subject to volatility while others, such as the
petrochemical industry, are cyclical and materially affected by changes in the
economy. As a result, the Company may experience changes in demand for its
products as changes occur in the markets of its customers.
Dependence on Key Personnel
The Company will continue to be dependent to a significant extent upon the
efforts and ability of David R. Little, its Chairman of the Board, President and
Chief Executive Officer. The loss of the services of Mr. Little or any other
executive officer of the company could have a material adverse effect on the
Company's financial condition and results of operations. The Company does not
maintain key-man life insurance on Mr. Little or on the lives of its other
executive officers. In addition, the Company's ability to grow successfully will
be dependent upon its ability to attract and retain qualified management and
technical and operational personnel. The failure to attract and retain such
persons could materially adversely effect the Company's business, financial
condition and results of operations.
Dependence on Supplier Relationships
The Company has distribution rights for certain product lines and depends on
these distribution rights for a substantial portion of its business. Many of
these distribution rights are pursuant to contracts that are subject to
cancellation upon little or no prior notice. The termination or limitation by
any key supplier of its relationship with the Company could have a material
adverse affect on the Company's business, financial condition and results of
operations.
Risks Associated with Hazardous Materials
Certain of the Company's operations are subject to federal, state and local laws
and regulations controlling the discharge of materials into or otherwise
relating to the protection of the environment. Although the Company believes
that it has adequate procedures to comply with applicable discharge and other
environmental laws, the risks of accidental contamination or injury from the
discharge of controlled or hazardous materials and chemicals cannot be
eliminated completely. In the event of such an accident, the Company could be
held liable for any damages that result and any such liability could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Sixth Amendment to Second Amended and Restated Loan and
Security Agreement and Amendment to Other Agreements dated
April 29, 1998, by and among SEPCO Industries, Inc., Bayou
Pumps, Inc. and American MRO, Inc. and Fleet Capital
Corporation.
10.2 Amendment to Loan and Security Agreement dated April 29,
1998, by and between Pelican State Supply Company, Inc. and
Fleet Capital Corporation.
10.3 Amendment to Loan and Security Agreement dated April 29,
1998, by and between DXP Acquisition, Inc., d/b/a Strategic
Acquisition, Inc. and Fleet Capital Corporation.
10.4 Secured Promissory Note dated April 29, 1998, payable by
SEPCO Industries, Inc., Bayou Pumps, Inc. and American MRO,
Inc. to Fleet Capital Corporation.
11.1 Statement re: Computation of Per Share Earnings
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedules
(b) Reports on Form 8-K
None
10
<PAGE> 11
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DXP Enterprises, Inc.
Date: May 14, 1998 By: /s/ GARY A. ALLCORN
---------------------------------------
Gary A. Allcorn
Senior Vice President/Finance and Chief
Financial Officer
(Duly authorized officer and
principal financial officer)
11
<PAGE> 12
Exhibit
Number EXHIBIT INDEX
------- -------------
10.1 Sixth Amendment to Second Amended and Restated Loan and
Security Agreement and Amendment to Other Agreements dated
April 29, 1998, by and among SEPCO Industries, Inc., Bayou
Pumps, Inc. and American MRO, Inc. and Fleet Capital
Corporation.
10.2 Amendment to Loan and Security Agreement dated April 29,
1998, by and between Pelican State Supply Company, Inc. and
Fleet Capital Corporation.
10.3 Amendment to Loan and Security Agreement dated April 29,
1998, by and between DXP Acquisition, Inc., d/b/a Strategic
Acquisition, Inc. and Fleet Capital Corporation.
10.4 Secured Promissory Note dated April 29, 1998, payable by
SEPCO Industries, Inc., Bayou Pumps, Inc. and American MRO,
Inc. to Fleet Capital Corporation.
11.1 Statement re: Computation of Per Share Earnings
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedules
<PAGE> 1
EXHIBIT 10.1
SIXTH AMENDMENT TO SECOND AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
AND AMENDMENT TO OTHER AGREEMENTS
THIS SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT AND AMENDMENT TO OTHER AGREEMENTS (this "Amendment") is made and
entered into this 29th day of April, 1998, to be effective as of the respective
date herein indicated, by and among SEPCO INDUSTRIES, INC., a Texas corporation
("Sepco"), BAYOU PUMPS, INC., a Texas corporation ("Bayou") and AMERICAN MRO,
INC., a Nevada corporation ("American") (Sepco, Bayou and American being
hereinafter individually and collectively referred to as "Borrower", as governed
by the provisions of Section 1.4, Section 1.5, and Section 1.6 of the Loan
Agreement, as hereinafter defined), and FLEET CAPITAL CORPORATION, a Rhode
Island corporation ("Lender"), successor-in-interest by merger to Fleet Capital
Corporation, a Connecticut corporation (Fleet Capital Corporation, a Connecticut
corporation, having been, formerly known as Shawmut Capital Corporation, and
having been the successor-in-interest by assignment to Barclays Business Credit,
Inc., a Connecticut corporation).
RECITALS
A. Sepco and Barclays Business Credit, Inc., have entered into that
certain Second Amended and Restated Loan and Security Agreement, dated as of
April 1, 1994, as amended by that certain First Amendment to Second Amended and
Restated Loan and Security Agreement and Secured Promissory Note, dated May,
1995, executed by Sepco and Fleet Capital Corporation, a Connecticut corporation
(at that time known as Shawmut Capital Corporation), and as amended by that
certain Second Amendment to Second Amended and Restated Loan and Security
Agreement, entered into on April 3, 1996, executed by Sepco and Fleet Capital
Corporation, a Connecticut corporation, and as amended by that certain Third
Amendment to Second Amended and Restated Loan and Security Agreement, dated
September 9, 1996, executed by Sepco, Bayou and Lender, and as amended by that
certain Fourth Amendment to Second Amended and Restated Loan and Security
Agreement, dated October 24, 1996, executed by Lender and Borrower, and as
amended by that certain letter agreement dated November 4, 1996, entered into by
Lender and Borrower, and as amended by that certain Fifth Amendment to Second
Amended and Restated Loan and Security Agreement, dated June 2, 1997, executed
by Lender and Borrower (as amended, the "Loan Agreement").
B. Lender, effective May 1, 1996, as successor-in-interest by merger to
Fleet Capital Corporation, a Connecticut corporation, succeeded to, and today
remains the present holder of, all right, title and interest of Fleet Capital
Corporation, a Connecticut corporation, in the Loan Agreement and each of the
Other Agreements.
C. Borrower and Lender desire to further amend the Loan Agreement and
the Other Agreements as hereinafter 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, intending to be legally bound, agree as
follows:
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 1
<PAGE> 2
AGREEMENT
ARTICLE I
DEFINITIONS
1.01 Capitalized terms used in this Amendment are defined in the Loan
Agreement, as amended hereby, unless otherwise stated.
ARTICLE II
AMENDMENTS
Effective as of the respective date herein indicated, the Loan
Agreement and the Other Agreements are hereby respectively amended as follows:
2.01 REFERENCES TO "INDEX, INC." AND "INDEX" IN THE LOAN AGREEMENT AND
THE OTHER AGREEMENTS. The Loan Agreement and the Other Agreements are hereby
amended by (i) deleting any and all references to "Index, Inc." therefrom and
substituting "DXP Enterprises, Inc." in lieu thereof, and (ii) deleting any and
all references to "Index" therefrom and substituting "DXP" in lieu thereof.
Index, Inc., a Texas corporation, has changed its name to DXP Enterprises, Inc.
2.02 AMENDMENT TO SECTION 1.1 OF THE LOAN AGREEMENT; ADDITION OF
CERTAIN DEFINITIONS. Effective as of the date of execution of this Amendment,
Section 1.1 of the Loan Agreement is hereby amended by adding the following new
definitions thereto, to be inserted in their proper alphabetical order:
ACQUISITION TERM LOANS - the Loans described in Section 2.2(A) of
this Agreement.
ACQUISITION TERM LOANS CONDITIONS - with respect to the making of
a specific Acquisition Term Loan pursuant to Section 2.2(A) of this Agreement,
the following conditions precedent must be satisfied in a manner satisfactory to
Lender:
(i) No Event of Default or Default shall exist or will exist
after giving effect to the requested Acquisition Term Loan;
(ii) Since the date of execution of the Sixth Amendment,
there shall not have occurred any material adverse change in the
business, financial condition or results of operations of Borrower
or the existence or value of any Collateral or any event,
condition or state of facts which would reasonably be expected to
materially and adversely affect the business, financial condition
or results of operations of Borrower;
(iii) Lender shall have received and reviewed (a) the
audited financial statements of the relevant Target Company for
the most recent fiscal year of such Target Company (or if such
Target Company does not have audited annual financial statements,
such unaudited annual financial statements of such Target Company
as shall be satisfactory to Lender, in Lender's sole discretion);
and (b) the most recent interim financial statements of such
Target Company, all of which such financial statements shall be in
form and substance satisfactory to Lender;
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 2
<PAGE> 3
(iv) After giving effect to the acquisition to be funded by
such Acquisition Term Loan, Borrower shall be in compliance with
each of the financial covenants set forth in Section 9.3 of this
Agreement, as calculated as of the most recent financial covenant
test date;
(v) After giving effect to the acquisition to be funded by
such Acquisition Term Loan, the ratio of (a) the aggregate
principal amount of all Senior Debt outstanding on the date of
such acquisition to (b) the EBITDA calculated for the twelve
calendar month period ending on the date of such acquisition,
shall be equal to or less than 4.00 to 1.00; and
(vi) Lender shall have received the following documents,
certificates and items, each in form and substance satisfactory to
Lender:
(a) A collateral assignment of the relevant asset
purchase agreement or stock purchase agreement, as the case
may be, relating to the acquisition to be funded by such
Acquisition Term Loan, duly executed by Borrower in favor of
Lender and duly accepted by the relevant seller;
(b) A copy of the executed asset purchase agreement or
stock purchase agreement, as the case may be, relating to
such acquisition, together with copies of all other
documentation relating thereto;
(c) Evidence satisfactory to Lender, in its sole
discretion, that Lender has a perfected first priority Lien
in such of the assets of the Target Company being
transferred to Borrower in connection with the acquisition
as shall be required by Lender; and
(d) Such other documents, certificates and items as
shall be required by Lender.
ACQUISITION TERM LOANS NOTE - the Secured Promissory Note
(Acquisition Term Loans), to be executed by Borrower on or about the date of
execution of the Sixth Amendment, in favor of Lender, to evidence the
Acquisition Term Loans, which shall be in the form of Exhibit A attached to the
Sixth Amendment.
CAPITALIZED LEASE OBLIGATION - any Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
DOMESTIC MARGIN - at all times up to and including June 30, 1998 -
0.50% per annum. Thereafter, 0.00% per annum.
DXP - DXP Enterprises, Inc., a Texas corporation, formerly known
as Index, Inc.
EBITDA - for any fiscal period of Borrower, means the sum of (i)
the Adjusted Net Earnings From Operations of DXP and its Subsidiaries for such
period, plus (ii) non-cash charges of DXP and its Subsidiaries in respect to
depreciation and amortization for such period, plus (iii) Tax Expense of DXP and
its Subsidiaries for period, plus (iv)
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 3
<PAGE> 4
Interest Expense of DXP and its Subsidiaries for such period, all of the
above being determined on a consolidated basis in accordance with GAAP.
EURODOLLAR ADJUSTMENT DATE - initially, July 1, 1998, and
thereafter, the first Business Day of the calendar month during which Lender
receives the Compliance Certificate required by Section 9.1(J) hereof having a
calculation date as of the last day of September, December, March, or June, as
the case may be (referred to in this Agreement as "Quarterly Compliance
Certificate"), beginning with the Compliance Certificate having the calculation
date as of September 30, 1998.
EURODOLLAR MARGIN - (i) for all Revolving Credit Loans which are
Eurodollar Loans and are outstanding during the period ending on June 30, 1998,
2.00% per annum (no portion of the Term Loans being able to be Eurodollar Loans
prior to July 1, 1998), and thereafter (ii) for all Eurodollar Loans outstanding
during the period beginning on a Eurodollar Adjustment Date and ending on the
day preceding the subsequent Eurodollar Adjustment Date, the applicable percent
per annum set forth in the pricing table below respectively for Revolving Credit
Loans and for the Term Loans opposite the ratio of (i) the aggregate principal
amount of all Senior Debt outstanding on the calculation date of the applicable
Quarterly Compliance Certificate to (ii) the EBITDA calculated for the trailing
twelve calendar month period ending on the calculation date of the applicable
Quarterly Compliance Certificate (which EBITDA may contain adjustments for the
Target Company EBITDA of any Target Company purchased with an Acquisition Term
Loan during the relevant twelve calendar month period, provided that any such
adjustment must be consented to by Lender, which consent shall be given or
withheld by Lender in its sole discretion, and such adjustment must also be
calculated in a manner satisfactory to Lender, in Lender's sole discretion).
PRICING TABLE
<TABLE>
<CAPTION>
EURODOLLAR MARGIN
FOR REVOLVING EURODOLLAR MARGIN
RATIO OF SENIOR DEBT CREDIT LOANS FOR TERM LOANS
TO EBITDA
- ----------------------------------------- ---------------- ------------------
<S> <C> <C>
(i) Greater than or equal to 4.50 (i) 2.50% (i) 3.00%
to 1.00
(ii) Less than 4.50 to 1.00, but (ii) 2.25% (ii) 2.75%
greater than or equal to 4.00 to
1.00
(iii) Less than 4.00 to 1.00, but (iii) 2.00% (iii) 2.50%
greater than or equal to 3.50 to
1.00
(iv) Less than 3.50 to 1.00, but (iv) 1.75% (iv) 2.25%
greater than or equal to 3.00 to
1.00
(v) Less than 3.00 to 1.00 (v) 1.50% (v) 2.00%
</TABLE>
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 4
<PAGE> 5
If Borrower shall fail to deliver a Quarterly Compliance Certificate by
the date required pursuant to Section 9.1(J) of this Agreement, then effective
as of the date such Quarterly Compliance Certificate becomes delinquent, the
applicable Eurodollar Margin shall be conclusively presumed to equal the highest
applicable Eurodollar Margin specified in the pricing table set forth above,
such automatic adjustment to remain in effect until the first Business Day of
the calendar month during which such delinquent Quarterly Compliance Certificate
is delivered. From and after the first Business Day of the calendar month during
which such delinquent Quarterly Compliance Certificate is delivered and until
the next Eurodollar Adjustment Date, the Eurodollar Margin shall be determined
by reference to such delinquent Quarterly Compliance Certificate and the pricing
table set forth above.
FIXED CHARGE RATIO - for any fiscal period of Borrower means, the ratio
of (i) an amount equal to (a) the sum of (1) the Adjusted Net Earnings From
Operations of DXP and its Subsidiaries for such period, plus (2) non-cash
charges of DXP and its Subsidiaries in respect to depreciation and amortization
for such period, plus (3) Interest Expense of DXP and its Subsidiaries for such
period minus (4) Capital Expenditures made by DXP and its Subsidiaries during
such period, to (ii) Fixed Charges of DXP and its Subsidiaries for such period,
all of the above being determined on a consolidated basis in accordance with
GAAP.
FIXED CHARGES - for any fiscal period of Borrower means the sum of (i)
scheduled principal payments required to be made by DXP and its Subsidiaries
during such period in respect to Indebtedness, plus (ii) Interest Expense of DXP
and its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP.
INTEREST EXPENSE - with respect to any fiscal period, the interest
expense incurred for such period as determined in accordance with GAAP plus
Letter of Credit and LC Guaranty fees owing for such period.
MONEY BORROWED - means (i) Indebtedness arising from the lending of
money by any Person to DXP or any Subsidiary of DXP, (ii) Indebtedness, whether
or not in any such case arising from the lending by any Person of money to DXP
or any Subsidiary of DXP (A) which is represented by notes payable or drafts
accepted that evidence extensions of credit, (B) which constitutes obligations
evidenced by bonds, debentures, notes or similar instruments or (C) upon which
interest charges are customarily paid (other than accounts payable) or that was
issued or assumed as full or partial payment for Property; (iii) Indebtedness
that constitutes a Capitalized Lease Obligation; (iv) reimbursement obligations
with respect to letters of credit or guaranties of letters of credit; and (v)
Indebtedness of DXP or any Subsidiary of DXP under any guaranty of obligations
that would constitute Indebtedness for Money Borrowed under clauses (i) through
(iv) hereof, if owed directly by DXP or such Subsidiary of DXP.
NOTES - the Term Note and the Acquisition Term Loans Note.
SENIOR DEBT - means all Money Borrowed, excluding Subordinated Debt.
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 5
<PAGE> 6
SENIOR INTEREST COVERAGE RATIO - for any fiscal period of Borrower
means, the ratio of (i) an amount equal to the sum of (a) the Adjusted Net
Earnings From Operations of DXP and its Subsidiaries for such period, plus (b)
Tax Expense of DXP and its Subsidiaries for such period, plus (c) Interest
Expense of DXP and its Subsidiaries for such period in respect of Senior Debt,
to (ii) Interest Expense of DXP and its Subsidiaries for such period in respect
of Senior Debt, all as determined on a consolidated basis in accordance with
GAAP.
SIXTH AMENDMENT - the Sixth Amendment to Second Amended and Restated
Loan and Security Agreement, by and between Lender and Borrower.
STOCK OFFERING - the secondary stock offering of capital stock in DXP
which is expected to raise approximately $25,000,000 in net proceeds for DXP.
TARGET COMPANY - shall have the meaning set forth in Section 2.2(A) of
this Agreement.
TARGET COMPANY ADJUSTED NET EARNINGS FROM OPERATIONS - with respect to
any fiscal period, means the consolidated (in accordance with GAAP) net earnings
(or loss) of the Target Company and its Subsidiaries after provision for income
taxes for such fiscal period of the Target Company, all as reflected on the
consolidated financial statement of the Target Company and its Subsidiaries
supplied to Lender by Borrower but excluding: (a) any gain or loss arising from
the sale of capital assets; (b) any gain arising from any write-up of assets;
(c) earnings of any Subsidiary accrued prior to the date it became a Subsidiary;
(d) earnings of any corporation, substantially all the assets of which have been
acquired in any manner by the Target Company or a Subsidiary of the Target
Company, realized by such corporation prior to the date of such acquisition; (e)
net earnings of any business entity (other than a Subsidiary) in which the
Target Company or a Subsidiary of the Target Company has an ownership interest
unless such net earnings shall have actually been received by the Target Company
or such Subsidiary of the Target Company in the form of cash distributions; (f)
any portion of the net earnings of any Subsidiary which for any reason is
unavailable for payment of dividends to the Target Company or a Subsidiary of
the Target Company; (g) the earnings of any Person to which any assets of the
Target Company or any Subsidiary of the Target Company shall have been sold,
transferred or disposed of, or into which the Target Company or a Subsidiary of
the Target Company shall have merged, or been a party to any consolidation or
other form of reorganization, prior to the date of such transaction; (h) any
gain arising from the acquisition of any Securities of the Target Company or a
Subsidiary of the Target Company; and (i) any gain arising from extraordinary or
non-recurring items.
TARGET COMPANY EBITDA - for any fiscal period of the relevant Target
Company, means the sum of (i) the Target Company Adjusted Net Earnings From
Operations for such period, plus (ii) non-cash charges of such Target Company
and its Subsidiaries in respect to depreciation and amortization for such
period, plus (iii) Tax Expense of such Target Company and its Subsidiaries for
such period, plus (iv) interest expense of such Target Company and its
Subsidiaries for such period, all of the above being determined on a
consolidated basis in accordance with GAAP.
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 6
<PAGE> 7
TAX EXPENSE - with respect to any fiscal period, the tax expense
incurred for such period as determined in accordance with GAAP."
2.03 AMENDMENT TO DEFINITION OF "BORROWING BASE" IN SECTION 1.1 OF
THE LOAN AGREEMENT. Effective as of the date of execution of this Amendment,
Section 1.1 of the Loan Agreement is hereby amended and restated to read in its
entirety as follows:
"BORROWING BASE - as at any date of determination thereof, an
amount equal to the lesser of:
(a) Forty Million Dollars ($40,000,000), minus the
aggregate unpaid principal balance of the Term Loan and of the
Acquisition Term Loans at such date; or
(b) an amount equal to:
(i) 85% of the net amount of eligible Accounts
outstanding at such date (as determined by Lender in
its sole discretion);
PLUS
(ii) the lesser of (A) Twelve Million Five
Hundred Thousand Dollars ($12,500,000) or (B) 50% of
the value of Eligible Inventory (as determined by
Lender in its sole discretion) at such date consisting
of finished goods, calculated on the basis of the lower
of cost or fair market value (as determined by Lender
in its sole discretion) with the cost of finished goods
calculated on a first-in, first-out basis;
MINUS (subtract from the sum of clauses (i) and
(ii) above)
(iii) an amount equal to the sum of (A) the face
amount of all LC Guaranties and Letters of Credit
issued by Lender or Affiliates of Lender and
outstanding at such date and (B) any amounts which
Lender may be obligated to pay in the future for the
account of Borrower pursuant to this Agreement, the
Other Agreements or otherwise.
For purposes hereof, the net amount of Eligible Accounts at
any time shall be the face amount of such Eligible Accounts less any
and all returns, rebates, discounts (which may, at Lender's option, be
calculated on shortest terms), credits, allowances or excise taxes of
any nature at any time issued, owing, claimed by Account Debtors,
granted, outstanding or payable in connection with such Accounts at
such time."
2.04 AMENDMENT TO DEFINITION OF "COMMITMENT" IN SECTION 1.1 OF THE
LOAN AGREEMENT. Effective as of the date of execution of this Amendment, the
definition of "Commitment" contained in Section 1.1 of the Loan Agreement is
amended and restated to read in its entirety as follows:
"Commitment - Forty Million Dollars ($40,000,000.00)."
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 7
<PAGE> 8
2.05 AMENDMENT TO DEFINITION OF "LOANS" IN SECTION 1.1 OF THE LOAN
AGREEMENT. Effective as of the date of execution of this Amendment, the
definition of "Loans" contained in Section 1.1 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
"LOANS - all loans and advances made by Lender pursuant to
this Agreement, including, without limitation, all Revolving Credit
Loans and the Term Loan and the Acquisition Term Loans."
2.06 AMENDMENT TO DEFINITION OF "TERM NOTE" IN SECTION 1.1 OF THE
LOAN AGREEMENT. Effective as of the date of execution of this Amendment, the
definition of "Term Note" in Section 1.1 of the Loan Agreement is hereby amended
and restated to read in its entirety as follows:
"TERM NOTE - that certain Secured Promissory Note, dated March
1, 1994, in the original principal amount of $1,329,277.37, executed by
Sepco, and payable to the order of Lender, as renewed, extended,
modified and restated from time to time, including, without limitation,
as modified and extended by (i) the Third Amendment Modification
Agreements (which Third Amendment Modification Agreements, among other
things, modified the Term Note to reflect the increase of the Term Loan
to $5,000,000), and (ii) the Sixth Amendment (which Sixth Amendment,
among other things, modified the Term Note to reflect the increase of
the Term Loan to $9,887,000.00)."
2.07 AMENDMENT TO SECTION 2.2 OF THE LOAN AGREEMENT. - Effective as of
the date of execution of this Amendment, Section 2.2 of the Loan Agreement is
hereby amended and restated to read in its entirety as follows:
"2.2 TERM LOAN. The parties hereto agree that effective as of
April 1, 1994, (i) Lender made to Sepco that certain term loan in the
original principal amount of $1,329,277.37, evidenced by that certain
Secured Promissory Note, dated April 1, 1994, in the original principal
amount of $1,329,277.37, executed by Sepco, and payable to the order of
Lender, and (ii) as of the date of execution of the Third Amendment,
the unpaid principal amount of such term loan was $82,231.76, and that
in connection with the Third Amendment, at the request of Sepco Lender
converted $4,917,768.24 of the principal amount of Revolving Credit
Loans made to Sepco by Lender outstanding on the date of execution of
the Third Amendment to a term loan, which term loan was combined and
consolidated with the outstanding principal amount of the term loan
made to Sepco on April 1, 1994, such that the combined term loan was in
the aggregate principal amount of $5,000,000. Sepco further agrees,
represents and warrants that as of the date of execution of the Sixth
Amendment, the unpaid principal amount of such term loan is
$4,887,000.00, and that there are no claims or offsets against, or
defenses or counterclaims to, payment of such amount to Lender. Sepco
further agrees, represents and warrants that it has requested that
Lender make on the date of execution of the Sixth Amendment an
additional $5,000,000 term loan to Sepco, the proceeds of which will be
used to replace working capital used by Sepco to acquire assets of
Tri-Electric Supply, Ltd., and that such additional $5,000,000 term
loan be combined and consolidated with the existing term loan, such
that the combined and consolidated term loan shall be in the aggregate
principal amount of $9,887,000.00 (such combined and consolidated
term loan being referred to in this Agreement as the 'Term Loan').
Subject to the terms and conditions of this Agreement, Lender agrees to
make the Term Loan to Sepco, and in connection therewith to advance on
the date of execution the Sixth Amendment an additional
$5,000,000.00. The Term Loan shall be repayable in accordance with
the terms of the Term Note, and shall be secured by the Collateral.
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 8
<PAGE> 9
The parties hereto agree that the Term Loan represents a portion of the
'Sepco Obligations' referred to and defined in Section 1.5 of this
Agreement. If Sepco sells any of its Equipment or real Property, or if
any of the other Property owned by Sepco is taken by condemnation,
Sepco shall pay to Lender, unless otherwise agreed to by Lender, as and
when received by Sepco and as a mandatory prepayment of the Term Loan
(or, at Lender's option, such of the other Obligations as Lender may
elect), a sum equal to the proceeds received by Sepco from such sale or
condemnation, less any state or federal income tax directly
attributable thereto
2.08 ADDITION OF A NEW SECTION 2.2(A) TO THE LOAN AGREEMENT.
Effective as of the date of execution of this Amendment, a new section, Section
2.2(A), is hereby added to the Loan Agreement to read in its entirety as
follows:
"(A) ACQUISITION TERM LOANS. Subject to all of the terms and
conditions of this Agreement, for so long as no Default or Event of
Default exists and Borrower has satisfied the Acquisition Term Loans
Conditions, Lender may from time to time during the period beginning
the date of execution of the Sixth Amendment and continuing until
January 1, 2000, make Loans (referred to in this Agreement as the
'Acquisition Term Loans') to Borrower to finance Borrower's acquisition
of assets of a company engaged in the business of supplying or
distributing maintenance, repair, and/or operating products, equipment
and services to industrial customers (each such company being referred
to in this Agreement as a 'Target Company'), provided that the
aggregate principal amount of the Acquisition Term Loans advanced by
Lender to Borrower under this Agreement shall not exceed $15,000,000,
Lender's commitment to make up to $15,000,000 in Acquisition Term Loans
being a multiple advance term loan facility and not a revolving credit
facility. Each Acquisition Term Loan shall be subject to approval in
Lender's sole discretion, and shall be in such amount as may be
mutually agreed upon by Borrower and Lender, but in no event shall the
Acquisition Term Loan exceed 100% of the purchase price of such assets
of the Target Company; provided, however, such purchase price shall not
exceed (i) six times (ii) the Target Company EBITDA for such Target
Company for the twelve calendar month period of such Target Company
ending on the calculation date of the most recent acceptable financial
statements of such Target Company provided to Lender. The Acquisition
Term Loans shall be secured by the Collateral and shall be repaid as
set forth in the Acquisition Term Loans Note."
2.09 AMENDMENT TO SECTION 3.1(A) OF THE LOAN AGREEMENT. Effective
as of the date of execution of this Amendment, the first two sentences of
Section 3.1(A) of the Loan Agreement are amended and restated to read in their
entirety as follows:
"(A) Outstanding principal on the Loans shall bear interest,
calculated daily, at the following rates per annum (individually
called, as applicable, an 'Applicable Annual Rate'): (i) Eurodollar
Loans shall bear interest at a rate per annum equal to the applicable
Eurodollar Margin plus the Eurodollar Base Rate for the Eurodollar
Interest Period applicable thereto, and (ii) all other Loans shall bear
interest at a rate per annum equal to the applicable Domestic Margin
plus the Base Rate. All Loans shall bear interest at a rate per annum
equal to the applicable Domestic Margin plus the Base Rate unless the
Borrower provides a Eurodollar Borrowing Notice to the Lender in
accordance with Section 3.7(A) irrevocably electing that all or a
portion of the Loans are to bear interest at a Eurodollar Base Rate;
provided, however, prior to July 1, 1998, no portion of the Term Loans
may be elected by Borrower to bear interest at a Eurodollar Base Rate.
Each Loan that is not a Eurodollar Loan shall be increased or
decreased, as
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 9
<PAGE> 10
the case may be, by an amount equal to any increase or decrease in the
Base Rate, with such adjustments to be effective as of the opening of
business on the day that any such change in the Base Rate becomes
effective."
2.10 AMENDMENT TO SECTION 3.1(B) OF THE LOAN AGREEMENT. Effective
as of the date of execution of this Amendment, Section 3.1(B) of the Loan
Agreement is hereby amended by amending and restating clause (ii) of such
Section 3.1(B) in its entirety as follows:
"(ii) unless preempted by federal law, the Applicable Annual
Rate or Default Rate, as applicable, from time to time in effect
hereunder may not exceed the applicable 'weekly ceiling' (as such term
is defined in Chapter 303 of the Texas Finance Code [Vernon's Texas
Codes Annotated], as amended from time to time) from time to time in
effect."
2.11 AMENDMENT TO SECTION 3.3 OF THE LOAN AGREEMENT. Effective as
of the date of execution of this Amendment, Section 3.3 of the Loan Agreement is
amended as follows:
(i) Section 3.3(A) is amended by deleting therefrom the
reference to the date "January 2, 1999" and substituting therefor the
date "January 2, 2000."
(ii) Section 3.3(C) is amended and restated to read in its
entirety as follows:
"(C) At the effective date of any such termination by
Borrower, Borrower shall pay to Lender (in addition to the
then outstanding principal, accrued interest and other charges
owing under this Agreement and any of the Other Agreements),
as liquidated damages for the loss of the bargain and not as a
penalty, an amount equal to $50,000 if termination occurs at
any time prior to January 2, 2000 or during any Renewal Term
thereafter. If termination occurs on the last day of the
Original Term or the last day of any Renewal Term, no
termination charge shall be payable."
2.12 AMENDMENT TO SECTION 3.4 OF THE LOAN AGREEMENT. Effective as of
the date of execution of this Amendment, the first sentence of Section 3.4 of
the Loan Agreement is amended and restated to read in its entirety as follows:
"Principal and interest on the Term Loan shall be payable as
provided in the Term Note, and principal and interest on the
Acquisition Term Loans shall be payable as provided in the Acquisition
Term Loans Note."
2.13 AMENDMENT TO SECTION 9.3 OF THE LOAN AGREEMENT. Effective as of
the date of execution of this Amendment, Section 9.3 of the Loan Agreement is
hereby amended and restated to read in its entirety as follows:
"9.3. SPECIFIC FINANCIAL COVENANTS. During the term of this
Agreement, and thereafter for so long as there are any Obligations to
Lender, Borrower covenants that, unless otherwise consented to by
Lender in writing, DXP and its Subsidiaries shall:
(A) Maintain, on a consolidated basis in accordance
with GAAP, as of the end of each fiscal quarter, beginning
with the fiscal quarter ending on June 30, 1998, for the
twelve calendar month period ending on such date, a Fixed
Charge Ratio of not less than 1.50 to 1.00.
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 10
<PAGE> 11
(B) Achieve, on a consolidated basis in accordance with
GAAP, on the last day of each fiscal quarter, set forth below,
for the twelve calendar month period ending on such date, a
Senior Interest Coverage Ratio equal to or greater than the
ratio set forth below for the twelve calendar month period
ending on the date corresponding thereto:
<TABLE>
<CAPTION>
DATE RATIO
--------------------------- --------------------
<S> <C>
(i) June 30, 1998 (i) 2.75 to 1.00
(ii) September 30, 1998 (ii) 2.75 to 1.00
(iii) December 31, 1998 (iii) 2.75 to 1.00
(iv) Each March 31, June 30, (iv) 3.00 to 1.00
September 30 and December 31
thereafter occurring
</TABLE>
(C) Maintain, on a consolidated basis in accordance
with GAAP, as of the last day of each fiscal quarter set forth
below (the 'Calculation Date'), a ratio of (i) the Senior Debt
of DXP and its Subsidiaries on such Calculation Date, to (ii)
an amount equal to (a) the EBITDA of DXP and its Subsidiaries
for the twelve calendar month period ending on such
Calculation Date, minus (b) Capital Expenditures made by DXP
and its Subsidiaries during such period, of not greater than
the ratio set forth below on the Calculation Date
corresponding thereto:
<TABLE>
<CAPTION>
CALCULATION DATE RATIO
---------------- -----
<S> <C>
(i) June 30, 1998 (i) 4.50 to 1.00
(ii) September 30, 1998 (ii) 4.50 to 1.00
(iii) December 31, 1998 (iii) 4.50 to 1.00
(iv) Each March 31, June 30, (iv) 4.00 to 1.00
September 30, and December 31
thereafter occurring
</TABLE>
Notwithstanding the foregoing, beginning with the first
Calculation Date to occur after the consummation of the Stock
Offering, and continuing on each subsequent Calculation Date,
the relevant maximum ratio shall be 3.00 to 1.00."
2.14 AMENDMENT TO SECTION 11.1(A) OF THE LOAN AGREEMENT. Effective
as of the date of execution of this Amendment, Section 11.1(A) of the Loan
Agreement is amended by adding after the words "Term Note" but before the word
"within," the words "and/or the Acquisition Term Loans Note".
2.15 AMENDMENT TO SECTION 11.1(B) OF THE LOAN AGREEMENT. Effective
as of the date of execution of this Amendment, Section 11.1(B) of the Loan
Agreement is amended by adding after the words "Term Note," but before the word
"on," the words "or the Acquisition Term Loans Note".
2.16 AMENDMENT TO SECTION 11.1 OF THE LOAN AGREEMENT; ADDITION OF
NEW SECTIONS 11.1(P), 11.1(Q), 11.1(R) AND 11.1(S). Effective as of the date of
execution of this Amendment, Sections 11.1(P), (Q), (R) and (S) are hereby added
to Section 11.1 of the Loan Agreement to read in their entirety as follows:
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 11
<PAGE> 12
"(P) Borrower ceases to be a Subsidiary of DXP, unless due to
the merger of Borrower into DXP, with DXP being the surviving entity;
or
(Q) Each of Borrower, American MRO, Inc., Bayou Pumps, Inc.,
Pelican State Supply Company, Inc. and DXP Acquisition, Inc., d/b/a
Strategic Acquisition, Inc. has not by October 1, 1998, been merged
into DXP, with DXP being the surviving entity, upon terms and
conditions and pursuant to documentation satisfactory to Lender; or
(R) The occurrence of an 'Event of Default,' as such term is
defined in that certain Loan and Security Agreement, dated May 29,
1997, executed by Lender and Pelican State Supply Company, Inc., as
renewed, extended, modified and restated from time to time; or
(S) The occurrence of an 'Event of Default,' as such term is
defined in that certain Loan and Security Agreement, dated June 16,
1997, executed by Lender and DXP Acquisition, Inc., d/b/a Strategic
Acquisition, Inc., as renewed, extended, modified and restated from
time to time."
2.17 AMENDMENT TO SECTION 12.10 OF THE LOAN AGREEMENT. Effective as
of the date of execution of this Amendment, Section 12.10 of the Loan Agreement
is amended such that copies of all notices to Lender shall hereafter also be
sent to the following address:
"Patton Boggs, L.L.P.
2200 Ross Avenue, Suite 900
Dallas, Texas 75201-2774
Attention: Kenneth M. Vesledahl, Esq.
Facsimile No. (214) 871-2688"
2.18 AMENDMENT TO SECTION 12.16 OF THE LOAN AGREEMENT. Effective as
of the date of execution of this Amendment, Section 12.16 of the Loan Agreement
is hereby amended and restated to read in its entirety as follows:
"12.16 NONAPPLICABILITY OF CHAPTER 303 OF TEXAS FINANCE CODE.
Borrower and Lender hereby agree that the provisions of Chapter 346 of
the Texas Finance Code [Vernon's Texas Codes Annotated] (which
regulates certain revolving loan accounts and revolving triparty
accounts) shall not apply to this Agreement or any of the other Loan
Documents."
2.19 EXTENSION OF MATURITY OF TERM NOTE. The maturity of the Term
Note is hereby renewed and extended until January 2, 2000.
2.20 AMENDMENT TO PRINCIPAL BALANCE OF TERM NOTE. Borrower and
Lender hereby amend the Term Note such that (i) each reference in the Term Note
to the dollar amount "$5,000,000.00" is deleted and substituted therefor is the
dollar amount "$9,887,000.00", and (ii) the reference to the phrase "FIVE
MILLION AND NO/100 DOLLARS" is deleted and substituted therefor is the phrase
"NINE MILLION EIGHT HUNDRED EIGHTY SEVEN THOUSAND AND NO/100 DOLLARS."
2.21 AMENDMENT TO INTEREST RATE PROVISIONS IN THE TERM NOTE.
Borrower and Lender hereby amend the Term Note as follows:
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 12
<PAGE> 13
(a) The first paragraph on the first page of the Term Note
is amended by deleting therefrom the phrase "0.50% above the Base Rate
(the 'Annual Term Rate')," and substituting therefor the phrase "the
Applicable Annual Rate (as defined in the Loan Agreement)", and each
other reference in the Term Note to the words "Annual Term Rate" is
deleted and substituted therefor are the words "Applicable Annual
Rate."
(b) The last paragraph on page one of the Term Note (as it
carries forward on page two of the Term Note) is hereby amended and
restated to read in its entirety as follows:
"Borrower acknowledges and understands that the Base
Rate merely serves as a basis upon which effective rates of
interest are calculated for loans making reference to the per
annum rate of interest established by Bank from time to time
as its base rate and that such rate may not be the lowest or
best rate at which Bank calculates interest or extends credit.
Each portion of the outstanding principal amount of this Note
that is not a Eurodollar Loan (as defined in the Loan
Agreement) shall be increased or decreased, as the case may
be, by an amount equal to any increase or decrease in the Base
Rate, with such adjustments to be effective as of the opening
of business on the date that any such change in the Base Rate
becomes effective. The Base Rate in effect on the date hereof
shall be the Base Rate effective as of the opening of business
on the date hereof, but if this Note is executed on a day that
is not a Business Day, the Base Rate in effect on the date
hereof shall be the Base Rate effective as of the opening of
business on the last Business Day immediately preceding the
date hereof. The rate of interest in effect hereunder may be
increased in accordance with the provisions of the Loan
Agreement. Interest on this Note shall be calculated on a
daily basis (computed on the actual number of days elapsed
over a year of 360 days); provided, however, interest due at
the Maximum Legal Rate shall be calculated on the basis of
actual days elapsed over a year of 365 or 366 days, as the
case may be."
(c) The first full paragraph on page two of the Term Note
is amended by deleting therefrom the words "Base Rate" and substituting
therefor the words "Applicable Annual Rate."
2.22 AMENDMENT TO PAYMENT TERMS IN THE TERM NOTE. Effective as of
the date of execution of this Amendment, the last paragraph on page two of the
Term Note is amended and restated to read in its entirety as follows:
"The principal amount of and accrued interest on this Note
shall be due and payable on the dates and in the manner hereinafter set
forth:
(a) interest shall be due and payable monthly, in
arrears, on the first day of each month, commencing on August
1, 1996, and continuing until such time as the full principal
balance, together with all other amounts owing hereunder,
shall have been paid in full;
(b) the principal shall be due and payable in equal
monthly installments of EIGHTY-TWO THOUSAND FIVE HUNDRED AND
NO/100 DOLLARS ($82,500.00) each, commencing on October 1,
1998, and continuing on the first day of each month thereafter
to and including the first day of December, 1999; and
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 13
<PAGE> 14
(c) the entire unpaid principal balance hereof,
together with any and all other amounts due hereunder, shall
be due and payable on January 2, 2000."
2.23 AMENDMENT TO PREPAYMENT PREMIUM PROVISION IN THE TERM NOTE.
The Term Note is further amended by deleting the third sentence presently found
in the second full paragraph of page three of the Term Note and substituting
therefor the following new sentence:
"If Borrower terminates the Loan Agreement pursuant to Section 3.3(B)
thereof, then, upon the effective date of such termination, Borrower
shall pay to Lender (in addition to any other charges due under the
terms of the Loan Agreement) the termination charge provided for in
Section 3.3(C) of the Loan Agreement."
ARTICLE III
NO WAIVERS
3.01 Nothing contained herein shall be construed as a waiver by
Lender of any covenant or provision of the Loan Agreement, the Other Agreements,
this Amendment or of any other contract or instrument between Borrower and
Lender, and the failure of Lender at any time or times hereafter to require
strict performance by Borrower of any provision thereof shall not waive, affect
or diminish any right of Lender to thereafter demand strict compliance
therewith. Lender hereby reserves all rights granted under the Loan Agreement,
the Other Agreements, this Amendment and any other contract or instrument
between Borrower and Lender.
ARTICLE IV
CONDITIONS PRECEDENT
4.01 CONDITIONS TO EFFECTIVENESS. The effectiveness of this
Amendment is subject to the satisfaction of the following conditions precedent
in a manner satisfactory to Lender, unless specifically waived in writing by
Lender:
(a) Lender shall have received each of the following, each
in form and substance satisfactory to Lender, in its sole discretion,
and, where applicable, each duly executed by each party thereto, other
than Lender:
(i) This Amendment, duly executed by Borrower, together
with the relevant Consent, Ratification, and Amendment,
respectively duly executed by David R. Little, individually,
Gary A. Allcorn, Trustee for Kacey Joyce Little, Nicholas
David Little and Andrea Rae Little 1988 Trusts, DXP
Enterprises, Inc. ("Parent"), DXP Acquisition, Inc., d/b/a
Strategic Acquisition, Inc. and Pelican State Supply Company,
Inc.;
(ii) The Acquisition Term Loans Note, in the form of
Exhibit A attached hereto, duly executed by Borrower;
(iii) UCC-1 Financing Statements covering all of the
assets of American MRO, Inc., duly executed by American MRO,
Inc., in favor of Lender, for filing in the relevant filing
offices in Alabama, Arkansas, Colorado, Louisiana, Nevada, New
Mexico, Oklahoma and Texas;
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 14
<PAGE> 15
(iv) Original stock powers, duly executed by the Andrea
Rae Little 1988 Trust, the Kacey Joyce Little 1988 Trust, the
Nicholas David Little 1988 Trust and Parent, covering the
Parent stock certificates owned by such entities;
(v) Original stock powers, duly executed by Parent,
covering the Pelican State Supply Company, Inc. and DXP
Acquisition, Inc., d/b/a Strategic Acquisition, Inc. and Sepco
stock certificates owned by Parent;
(vi) An Amendment to each of the existing Parent Stock
Pledge Agreements, duly executed by Parent;
(vii) Pelican State Supply Company, Inc. shall have
executed amendment documentation satisfactory to Lender
regarding the credit facility provided by Lender to Pelican
State Supply Company, Inc.;
(viii) DXP Acquisition, Inc., d/b/a Strategic
Acquisition, Inc. shall have executed amendment documentation
satisfactory to Lender regarding the credit facility provided
by Lender to DXP Acquisition, Inc., d/b/a Strategic
Acquisition, Inc.; and
(ix) All other documents Lender may request with
respect to any matter relevant to this Amendment or the
transactions contemplated hereby;
(b) Lender shall have received in immediately available
funds from Borrower payment of $50,000 of the $100,000 restructuring
fee described in Section 5.03 of this Amendment;
(c) The representations and warranties contained herein and
in the Loan Agreement and the Other Agreements, as each is amended
hereby, shall be true and correct as of the date hereof, as if made on
the date hereof;
(d) No Default or Event of Default shall have occurred and
be continuing, unless such Default or Event of Default has been
otherwise specifically waived in writing by Lender; and
(e) 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 Lender and its legal counsel.
ARTICLE V
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
5.01 RATIFICATIONS. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Loan Agreement and the Other Agreements, and, except as expressly
modified and superseded by this Amendment, the terms and provisions of the Loan
Agreement and the Other Agreements are ratified and confirmed and shall continue
in full force and effect. Each Borrower and Lender agree that the Loan Agreement
and the Other Agreements, as amended hereby, shall continue to be legal, valid,
binding and enforceable in accordance with their respective terms.
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 15
<PAGE> 16
5.02 REPRESENTATIONS AND WARRANTIES. Each Borrower hereby
represents and warrants to Lender that (a) the execution, delivery and
performance of this Amendment and any and all Other Agreements executed and/or
delivered in connection herewith have been authorized by all requisite corporate
action on the part of such Borrower and will not violate the Articles of
Incorporation or Bylaws of such Borrower; (b) attached hereto as Annex A is a
true, correct and complete copy of presently effective resolutions of each
Borrower's Board of Directors authorizing the execution, delivery and
performance of this Amendment and any and all Other Agreements executed and/or
delivered in connection herewith, certified by the Assistant Secretary of
Borrower; (c) the representations and warranties contained in the Loan
Agreement, as amended hereby, and any Other Agreement are true and correct on
and as of the date hereof and on and as of the date of execution hereof as
though made on and as of each such date; (d) no Default or Event of Default
under the Loan Agreement, as amended hereby, has occurred and is continuing,
unless such Default or Event of Default has been specifically waived in writing
by Lender; (e) each Borrower is in full compliance with all covenants and
agreements contained in the Loan Agreement and the Other Agreements, as amended
hereby; (f) Sepco has not amended its Articles of Incorporation or its Bylaws
since the date of the Loan Agreement, (g) Bayou has not amended its Articles of
Incorporation or its Bylaws since the date of incorporation of Bayou and (h)
American has not amended its Articles of Incorporation or its Bylaws since the
date of incorporation of American.
5.03 RESTRUCTURING FEE. In consideration for the agreements of
Lender contained herein including, without limitation, extending the Original
Term, and restructuring and increasing the Term Loan, and providing for the
Acquisition Term Loans facility, but subject to the provisions of Section 3.1(C)
of the Loan Agreement, Sepco agrees to pay Lender a fee of $100,000. Such fee
shall be fully earned on the date of execution of this Amendment. This fee shall
be paid in three installments. The first such installment shall be in the amount
of $50,000 and shall be due and payable on the date of execution of this
Amendment. The second installment shall be in the amount of $25,000, and shall
be due and payable on the earlier to occur of (i) the effective date of
termination of this Agreement or (ii) September 30, 1998; provided, however,
this $25,000 installment of such fee shall be waived by Lender provided that by
the earlier of such dates each of the following events shall have occurred: (i)
(a) the Stock Offering shall have been consummated, (b) Parent shall have
received at least $23,500,000 in net proceeds from the Stock Offering, and (c)
all of such net proceeds shall have been applied to payment of the Revolving
Credit Loans; and (ii) David R. Little shall have paid in full all outstanding
indebtedness of David R. Little to Lender. The third installment shall be in the
amount of $25,000, and shall be due and payable on the earlier to occur of (i)
the effective date of termination of this Agreement, or (ii) March 31, 1999;
provided, however, this $25,000 installment of such fee shall be waived by
Lender provided that by the earlier of such dates each of the following events
shall have occurred: (i) (a) the Stock Offering shall have been consummated, (b)
Parent shall have received at least $23,500,000 in net proceeds from the Stock
Offering, and (c) all of such net proceeds shall have been applied to payment of
the Revolving Credit Loans, and (ii) David R. Little shall have paid in full all
outstanding indebtedness of David R. Little to Lender.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in the Loan Agreement or any Other
Agreement, including, without limitation, any document furnished in connection
with this Amendment, shall survive the execution and delivery of this Amendment
and the Other Agreements, and no investigation by Lender or any closing shall
affect the representations and warranties or the right of Lender to rely upon
them.
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 16
<PAGE> 17
6.02 REFERENCE TO LOAN AGREEMENT. Each of the Loan Agreement and
the Other Agreements, 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 Loan Agreement, as amended hereby, are hereby amended so
that any reference in the Loan Agreement and such Other Agreements to the Loan
Agreement shall mean a reference to the Loan Agreement as amended hereby.
6.03 EXPENSES OF LENDER. As provided in the Loan Agreement, each
Borrower agrees to pay on demand all costs and expenses incurred by Lender in
connection with the preparation, negotiation, and execution of this Amendment
and the Other Agreements executed pursuant hereto and any and all amendments,
modifications, and supplements thereto, including, without limitation, the costs
and fees of Lender's legal counsel, and all costs and expenses incurred by
Lender in connection with the enforcement or preservation of any rights under
the Loan Agreement, as amended hereby, or any Other Agreements, including,
without, limitation, the costs and fees of Lender's legal counsel.
6.04 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.
6.05 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and
shall inure to the benefit of Lender and each Borrower and their respective
successors and assigns, except that no Borrower may assign or transfer any of
its rights or obligations hereunder without the prior written consent of Lender.
6.06 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.
6.07 EFFECT OF WAIVER. No consent or waiver, express or implied, by
Lender to or for any breach of or deviation from any covenant or condition by
any Borrower shall be deemed a consent to or waiver of any other breach of the
same or any other covenant, condition or duty.
6.08 HEADINGS. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
6.09 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER AGREEMENTS
EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE
IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS.
6.10 FINAL AGREEMENT. THE LOAN AGREEMENT AND THE OTHER AGREEMENTS,
EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH
RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED. THE
LOAN AGREEMENT AND THE OTHER AGREEMENTS, AS AMENDED HEREBY, MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NO
MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS
AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY EACH BORROWER
AND LENDER.
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 17
<PAGE> 18
6.11 RELEASE. EACH BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO
DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR
NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF
ITS LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR
DAMAGES OF ANY KIND OR NATURE FROM LENDER. EACH BORROWER HEREBY VOLUNTARILY AND
KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, AGENTS,
EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS,
CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR
UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED,
CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART
ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH ANY BORROWER MAY NOW OR
HEREAFTER HAVE AGAINST LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS
AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF
CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM
ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING,
TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST
LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN
AGREEMENT OR OTHER AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS
AMENDMENT.
IN WITNESS WHEREOF, this Amendment has been executed and is effective
as of the date first above-written.
"BORROWER"
SEPCO INDUSTRIES, INC.
By: /s/ GARY A. ALLCORN
-------------------------------
Name Gary A. Allcorn
------------------------------
Title: Senior V.P./Finance
----------------------------
BAYOU PUMPS, INC.
By: /s/ GARY A. ALLCORN
-------------------------------
Name Gary A. Allcorn
------------------------------
Title: Senior V.P./Finance
----------------------------
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 18
<PAGE> 19
AMERICAN MRO, INC.
By: /s/ GARY A. ALLCORN
------------------------------
Name Gary A. Allcorn
----------------------------
Title Senior V.P./Finance
---------------------------
"LENDER"
FLEET CAPITAL CORPORATION
By: /s/ H. MICHAEL WILLS
------------------------------
Name H. Michael Wills
-----------------------------
Title: VP
--------------------------
ANNEXES:
A-1 - Certified Resolutions of Sepco Industries, Inc.
A-2 - Certified Resolutions of Bayou Pumps, Inc.
A-3 - Certified Resolutions of American MRO, Inc.
SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 19
<PAGE> 20
ANNEX A-1
CERTIFIED RESOLUTIONS OF
SEPCO INDUSTRIES, INC.'S BOARD OF DIRECTORS
RESOLVED: That any officer of Sepco Industries, Inc., a Texas
corporation (the "Corporation"), acting alone, by his signature be, and the same
hereby is, authorized and directed, in the name of and on behalf of the
Corporation (a) to amend the Corporation's existing Second Amended and Restated
Loan and Security Agreement by and between the Corporation and Fleet Capital
Corporation, a Rhode Island corporation ("Lender"), successor-in-interest by
merger to Fleet Capital Corporation, a Connecticut corporation (Fleet Capital
Corporation, a Connecticut Corporation having been formerly known as Shawmut
Capital Corporation and having been the successor-in-interest by assignment to
Barclays Business Credit, Inc.), (b) to execute and deliver to Lender with such
changes in the terms and provisions thereof as the officer executing same shall,
in his sole discretion, deem advisable, (i) a certain proposed Sixth Amendment
to Second Amended and Restated Loan and Security Agreement and Amendment to
Other Agreements to be executed by Corporation, Bayou Pumps, Inc., American MRO,
Inc. and Lender, a draft of which has been reviewed and discussed by the Board
of Directors of the Corporation, and (ii) such other agreements, instruments,
statements and writings as the officer or officers executing the same may deem
desirable or necessary in connection therewith, and (c) to perform such other
acts as the officer or officers performing such acts on behalf of the
Corporation may deem desirable or necessary in connection therewith; and be it
FURTHER RESOLVED: That said agreements will benefit the Corporation,
both directly and indirectly, and are in the best interests of the Corporation;
and be it
FURTHER RESOLVED: That said agreements and other statements in writing
executed in the name and on behalf of the Corporation by any officer of the
Corporation shall be presumed conclusively to be the instruments, the execution
of which is authorized by these resolutions; and be it
FURTHER RESOLVED: That the officers of the Corporation be, and the same
hereby are, authorized and directed to execute, in the name of and on behalf of
the Corporation, security agreements, financing statements, assignments,
collateral reports, loan statements, confirmations of delivery, lien statements,
pledge certificates, release certificates, removal reports, guaranties, cross-
collateralization agreements and such other writings and to take such other
actions as are necessary in their dealings with Lender, and any such papers
executed and any such actions taken by any of them prior to this time are
approved, ratified and confirmed; and be it
FURTHER RESOLVED: That the Secretary or any Assistant Secretary of the
Corporation, by the signature of any one or more of them, be, and the same
hereby are, authorized and directed to attest the execution by the Corporation
of the papers signed pursuant to these resolutions, to affix the seal of the
Corporation thereto, if required by Lender, and to certify to Lender the
adoption of these resolutions.
ANNEX A-1 TO SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - Page 1
<PAGE> 21
CERTIFICATION
The undersigned hereby certifies that the within and foregoing
resolutions are in effect as of the date hereof, without modification, and that
the person signing the within and foregoing Amendment on behalf of the
Corporation is the duly elected officer stated below his name, that he is
authorized to sign such Amendment, and that his signature thereon is genuine.
DATED: April 29, 1998.
/s/ GARY A. ALLCORN
----------------------------------------
[Assistant] Secretary of the Corporation
ANNEX A-1 TO SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - Page 2
<PAGE> 22
ANNEX A-2
CERTIFIED RESOLUTIONS OF
BAYOU PUMPS, INC.'S BOARD OF DIRECTORS
RESOLVED: That any officer of Bayou Pumps, Inc., a Texas corporation
(the "Corporation"), acting alone, by his signature be, and the same hereby is,
authorized and directed, in the name of and on behalf of the Corporation (a) to
become a party to and amend that certain Second Amended and Restated Loan and
Security Agreement by and between Sepco Industries, Inc. ("Sepco") and Fleet
Capital Corporation, a Rhode Island corporation ("Lender"),
successor-in-interest by merger to Fleet Capital Corporation, a Connecticut
corporation (Fleet Capital Corporation, a Connecticut Corporation having been
formerly known as Shawmut Capital Corporation and having been the
successor-in-interest by assignment to Barclays Business Credit, Inc.), as
thereafter amended (Corporation being a present party to such Second Amended and
Restated Loan and Security Agreement), (b) to execute and deliver to Lender with
such changes in the terms and provisions thereof as the officer executing same
shall, in his sole discretion, deem advisable, (i) a certain proposed Sixth
Amendment to Second Amended and Restated Loan and Security Agreement and
Amendment to Other Agreements to be executed by Corporation, Sepco, American
MRO, Inc. and Lender, a draft of which has been reviewed and discussed by the
Board of Directors of the Corporation, and (ii) such other agreements,
instruments, statements and writings as the officer or officers executing the
same may deem desirable or necessary in connection therewith, and (c) to perform
such other acts as the officer or officers performing such acts on behalf of the
Corporation may deem desirable or necessary in connection therewith; and be it
FURTHER RESOLVED: That said agreements will benefit the Corporation,
both directly and indirectly, and are in the best interests of the Corporation;
and be it
FURTHER RESOLVED: That said agreements and other statements in writing
executed in the name and on behalf of the Corporation by any officer of the
Corporation shall be presumed conclusively to be the instruments, the execution
of which is authorized by these resolutions; and be it
FURTHER RESOLVED: That the officers of the Corporation be, and the same
hereby are, authorized and directed to execute, in the name of and on behalf of
the Corporation, security agreements, financing statements, assignments,
collateral reports, loan statements, confirmations of delivery, lien statements,
pledge certificates, release certificates, removal reports, guaranties, cross-
collateralization agreements and such other writings and to take such other
actions as are necessary in their dealings with Lender, and any such papers
executed and any such actions taken by any of them prior to this time are
approved, ratified and confirmed; and be it
FURTHER RESOLVED: That the Secretary or any Assistant Secretary of the
Corporation, by the signature of any one or more of them, be, and the same
hereby are, authorized and directed to attest the execution by the Corporation
of the papers signed pursuant to these resolutions, to affix the seal of the
Corporation thereto, if required by Lender, and to certify to Lender the
adoption of these resolutions.
ANNEX A-2 TO SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - Page 1
<PAGE> 23
CERTIFICATION
The undersigned hereby certifies that the within and foregoing
resolutions are in effect as of the date hereof, without modification, and that
the person signing the within and foregoing Amendment on behalf of the
Corporation is the duly elected officer stated below his name, that he is
authorized to sign such Amendment, and that his signature thereon is genuine.
DATED: April 29, 1998.
/s/ GARY A. ALLCORN
---------------------------------------
[Assistant] Secretary of the Corporation
ANNEX A-2 TO SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - Page 2
<PAGE> 24
ANNEX A-3
CERTIFIED RESOLUTIONS OF
AMERICAN MRO, INC.'S BOARD OF DIRECTORS
RESOLVED: That any officer of American MRO, Inc., a Nevada corporation
(the "Corporation"), acting alone, by his signature be, and the same hereby is,
authorized and directed, in the name of and on behalf of the Corporation (a) to
amend that certain Second Amended and Restated Loan and Security Agreement by
and between Sepco Industries, Inc. ("Sepco") and Fleet Capital Corporation, a
Rhode Island corporation ("Lender"), successor-in-interest by merger to Fleet
Capital Corporation, a Connecticut corporation (Fleet Capital Corporation, a
Connecticut Corporation having been formerly known as Shawmut Capital
Corporation and having been the successor-in-interest by assignment to Barclays
Business Credit, Inc.), (b) to execute and deliver to Lender with such changes
in the terms and provisions thereof as the officer executing same shall, in his
sole discretion, deem advisable, (i) a certain proposed Sixth Amendment to
Second Amended and Restated Loan and Security Agreement and Amendment to Other
Agreements to be executed by Corporation, Sepco, Bayou Pumps, Inc. and Lender, a
draft of which has been reviewed and discussed by the Board of Directors of the
Corporation, and (ii) such other agreements, instruments, statements and
writings as the officer or officers executing the same may deem desirable or
necessary in connection therewith, and (c) to perform such other acts as the
officer or officers performing such acts on behalf of the Corporation may deem
desirable or necessary in connection therewith; and be it
FURTHER RESOLVED: That said agreements will benefit the Corporation,
both directly and indirectly, and are in the best interests of the Corporation;
and be it
FURTHER RESOLVED: That said agreements and other statements in writing
executed in the name and on behalf of the Corporation by any officer of the
Corporation shall be presumed conclusively to be the instruments, the execution
of which is authorized by these resolutions; and be it
FURTHER RESOLVED: That the officers of the Corporation be, and the same
hereby are, authorized and directed to execute, in the name of and on behalf of
the Corporation, security agreements, financing statements, assignments,
collateral reports, loan statements, confirmations of delivery, lien statements,
pledge certificates, release certificates, removal reports, guaranties, cross-
collateralization agreements and such other writings and to take such other
actions as are necessary in their dealings with Lender, and any such papers
executed and any such actions taken by any of them prior to this time are
approved, ratified and confirmed; and be it
FURTHER RESOLVED: That the Secretary or any Assistant Secretary of the
Corporation, by the signature of any one or more of them, be, and the same
hereby are, authorized and directed to attest the execution by the Corporation
of the papers signed pursuant to these resolutions, to affix the seal of the
Corporation thereto, if required by Lender, and to certify to Lender the
adoption of these resolutions.
ANNEX A-3 TO SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - Page 1
<PAGE> 25
CERTIFICATION
The undersigned hereby certifies that the within and foregoing
resolutions are in effect as of the date hereof, without modification, and that
the person signing the within and foregoing Amendment on behalf of the
Corporation is the duly elected officer stated below his name, that he is
authorized to sign such Amendment, and that his signature thereon is genuine.
DATED: April 29, 1998.
/s/ GARY A. ALLCORN
----------------------------------------
[Assistant] Secretary of the Corporation
ANNEX A-3 TO SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - Page 2
<PAGE> 26
CONSENT, RATIFICATION, AND AMENDMENT
The undersigned, DAVID R. LITTLE, has executed that certain Amended and
Restated Unconditional Guaranty, dated September 16, 1994 (the "Guaranty"), in
favor of FLEET CAPITAL CORPORATION, a Rhode Island corporation ("Lender"),
successor-in-interest by merger to Fleet Capital Corporation, a Connecticut
corporation (Fleet Capital Corporation, a Connecticut corporation, having
formerly been known as Shawmut Capital Corporation and having been the
successor-in-interest by assignment to Barclays Business Credit, Inc.). The
undersigned hereby (i) consents and agrees to the terms of the Sixth Amendment
to Second Amended and Restated Loan and Security Agreement and Amendment to
Other Agreements, dated as of April 29, 1998 (the "Loan Amendment"), by and
among Sepco Industries, Inc., a Texas corporation, Bayou Pumps, Inc., a Texas
corporation, American MRO, Inc., a Nevada corporation, and Lender, a copy of
which has been reviewed by the undersigned, and (ii) agrees that the Guaranty
shall remain in full force and effect and shall continue to be the legal, valid
and binding obligation of the undersigned enforceable against it in accordance
with its terms. Furthermore, the undersigned hereby agrees and acknowledges that
(a) the obligations, indebtedness and liabilities arising in connection with the
Loan Amendment comprise some, but not all, of the "Obligations" as such term is
used in the Guaranty, (b) the Guaranty is an "Other Agreement", as such term is
defined in the Loan Agreement, (c) the Guaranty, is not as of this date subject
to any claims, defenses or offsets, (d) nothing contained in the Loan Agreement
or any Other Agreement entered into prior to or as of the date hereof shall
adversely affect any right or remedy of Lender under the Guaranty, and (e) the
execution and delivery of the Loan Amendment shall in no way reduce, impair or
discharge any obligations of the undersigned as guarantor pursuant to the
Guaranty and shall not constitute a waiver by Lender of any of Lender's rights
against the undersigned.
Dated: April 29, 1998.
/s/ DAVID R. LITTLE
-------------------------------------
David R. Little, individually
CONSENT AND RATIFICATION TO SIXTH AMENDMENT TO
SECOND AMENDED AND RESTATED LOAN AND SECURITY - Page 1
<PAGE> 27
CONSENT, RATIFICATION, AND AMENDMENT
The undersigned, GARY A. ALLCORN, TRUSTEE FOR KACEY JOYCE LITTLE,
NICHOLAS DAVID LITTLE AND ANDREA RAE LITTLE 1988 TRUSTS, has executed that
certain Amended and Restated Pledge Agreement dated September 16, 1994 (the
"Pledge Agreement"), in favor of FLEET CAPITAL CORPORATION, a Rhode Island
corporation ("Lender"), successor-in-interest by merger to Fleet Capital
Corporation, a Connecticut corporation (Fleet Capital Corporation, a Connecticut
corporation, having been formerly known as Shawmut Capital Corporation and
having been the successor-in-interest by assignment to Barclays Business Credit,
Inc.). The undersigned hereby (i) consents and agrees to the terms of the Sixth
Amendment to Second Amended and Restated Loan and Security Agreement and
Amendment to Other Agreements, dated as of April 29, 1998 (the "Loan
Amendment"), executed by Sepco Industries, Inc., a Texas corporation, Bayou
Pumps, Inc., a Texas corporation, American MRO, Inc., a Nevada corporation, and
Lender, a copy of which has been reviewed by the undersigned, and (ii) agrees
that the Pledge Agreement shall remain in full force and effect and shall
continue to be the legal, valid and binding obligation of the undersigned
enforceable against it in accordance with its terms. Furthermore, the
undersigned hereby agrees and acknowledges that (a) the obligations,
indebtedness and liabilities arising in connection with the Loan Amendment
comprise some, but not all, of the "Secured Indebtedness" as such term is used
in the Pledge Agreement, (b) the Pledge Agreement is an "Other Agreement" as
such term is defined in the Loan Agreement, (c) the Pledge Agreement, is not as
of the date hereof subject to any claims, defenses or offsets, (d) nothing
contained in this Agreement or any Other Agreement entered into prior to or as
of the date hereof shall adversely affect any right or remedy of Lender under
the Pledge Agreement, and (e) the execution and delivery of the Loan Amendment
shall in no way reduce, impair or discharge any obligations of the undersigned
pursuant to the Pledge Agreement and shall not constitute a waiver by Lender of
any of Lender's rights against the undersigned.
Dated: April, 1998.
/s/ GARY A. ALLCORN
---------------------------------------
GARY A. ALLCORN, TRUSTEE FOR
KACEY JOYCE LITTLE, NICHOLAS
DAVID LITTLE AND ANDREA RAE
LITTLE 1988 TRUSTS
CONSENT AND RATIFICATION TO SIXTH AMENDMENT TO
SECOND AMENDED AND RESTATED LOAN AND SECURITY - Page 2
<PAGE> 28
CONSENT, RATIFICATION, AND AMENDMENT
The undersigned has executed each of the following guaranty agreements
in favor of FLEET CAPITAL CORPORATION, a Rhode Island corporation ("Lender")
(each such guaranty agreement being hereinafter referred to as a "Guaranty"):
(1) Continuing Guaranty Agreement [Indebtedness of Sepco
Industries, Inc.], dated as of October 24, 1996;
(2) Continuing Guaranty Agreement [Indebtedness of Bayou Pumps,
Inc.], dated as of October 24, 1996; and
(3) Continuing Guaranty Agreement [Indebtedness of American MRO,
Inc.], dated as of October 24, 1996.
The undersigned hereby (i) consents and agrees to the terms of the Sixth
Amendment to Second Amended and Restated Loan and Security Agreement and
Amendment to Other Agreements, dated as of April 29, 1998 (the "Loan
Amendment"), by and among Sepco Industries, Inc., a Texas corporation, Bayou
Pumps, Inc., a Texas corporation, American MRO, Inc., a Nevada corporation, and
Lender, a copy of which has been reviewed by the undersigned, and (ii) agrees
that each Guaranty shall remain in full force and effect and shall continue to
be the legal, valid and binding obligation of the undersigned enforceable
against it in accordance with its terms. Furthermore, the undersigned hereby
agrees and acknowledges that (a) the obligations, indebtedness and liabilities
arising in connection with the Loan Amendment comprise some, but not all, of the
"Obligations" as such term is used in each Guaranty, (b) each Guaranty is an
"Other Agreement", as such term is defined in the Loan Agreement, (c) no
Guaranty is as of this date subject to any claims, defenses or offsets, (d)
nothing contained in the Loan Agreement or any Other Agreement entered into
prior to or as of the date hereof shall adversely affect any right or remedy of
Lender under any Guaranty, and (e) the execution and delivery of the Loan
Amendment shall in no way reduce, impair or discharge any obligations of the
undersigned as guarantor pursuant to each Guaranty and shall not constitute a
waiver by Lender of any of Lender's rights against the undersigned.
Dated: 29, 1998.
DXP ENTERPRISES, INC., formerly known
as Index, Inc.
By: /s/ GARY A. ALLCORN
--------------------------------
Name Gary A. Allcorn
--------------------------------
Title: Senior V.P./Finance
------------------------------
CONSENT AND RATIFICATION TO SIXTH AMENDMENT TO
SECOND AMENDED AND RESTATED LOAN AND SECURITY - Page 1
<PAGE> 29
CONSENT, RATIFICATION, AND AMENDMENT
The undersigned has executed each of the following guaranty agreements
in favor of FLEET CAPITAL CORPORATION, a Rhode Island corporation ("Lender")
(each such guaranty agreement being hereinafter referred to as a "Guaranty"):
(1) Continuing Guaranty Agreement [Indebtedness of Sepco
Industries, Inc.], dated as of June 16, 1997;
(2) Continuing Guaranty Agreement [Indebtedness of Bayou Pumps,
Inc.], dated as of June 16, 1997; and
(3) Continuing Guaranty Agreement [Indebtedness of American MRO,
Inc.], dated as of June 16, 1997.
The undersigned hereby (i) consents and agrees to the terms of the Sixth
Amendment to Second Amended and Restated Loan and Security Agreement and
Amendment to Other Agreements, dated as of April 29, 1998 (the "Loan
Amendment"), by and among Sepco Industries, Inc., a Texas corporation, Bayou
Pumps, Inc., a Texas corporation, American MRO, Inc., a Nevada corporation, and
Lender, a copy of which has been reviewed by the undersigned, and (ii) agrees
that each Guaranty shall remain in full force and effect and shall continue to
be the legal, valid and binding obligation of the undersigned enforceable
against it in accordance with its terms. Furthermore, the undersigned hereby
agrees and acknowledges that (a) the obligations, indebtedness and liabilities
arising in connection with the Loan Amendment comprise some, but not all, of the
"Obligations" as such term is used in each Guaranty, (b) each Guaranty is an
"Other Agreement", as such term is defined in the Loan Agreement, (c) no
Guaranty is as of this date subject to any claims, defenses or offsets, (d)
nothing contained in the Loan Agreement or any Other Agreement entered into
prior to or as of the date hereof shall adversely affect any right or remedy of
Lender under any Guaranty, and (e) the execution and delivery of the Loan
Amendment shall in no way reduce, impair or discharge any obligations of the
undersigned as guarantor pursuant to each Guaranty and shall not constitute a
waiver by Lender of any of Lender's rights against the undersigned.
Dated: April 29, 1998.
DXP ACQUISITION, INC., d/b/a
STRATEGIC ACQUISITION, INC.
By: /s/ Gary A. Allcorn
--------------------------------
Name Gary A. Allcorn
-------------------------------
Title: Senior V.P./Finance
-----------------------------
CONSENT AND RATIFICATION TO SIXTH AMENDMENT TO
SECOND AMENDED AND RESTATED LOAN AND SECURITY - Page 1
<PAGE> 30
CONSENT, RATIFICATION, AND AMENDMENT
The undersigned has executed each of the following guaranty agreements
in favor of FLEET CAPITAL CORPORATION, a Rhode Island corporation ("Lender")
(each such guaranty agreement being hereinafter referred to as a "Guaranty"):
(1) Continuing Guaranty Agreement [Indebtedness of Sepco
Industries, Inc.], dated as of May 29, 1997;
(2) Continuing Guaranty Agreement [Indebtedness of Bayou Pumps,
Inc.], dated as of May 29, 1997; and
(3) Continuing Guaranty Agreement [Indebtedness of American MRO,
Inc.], dated as of May 29, 1997.
The undersigned hereby (i) consents and agrees to the terms of the Sixth
Amendment to Second Amended and Restated Loan and Security Agreement and
Amendment to Other Agreements, dated as of April 29, 1998 (the "Loan
Amendment"), by and among Sepco Industries, Inc., a Texas corporation, Bayou
Pumps, Inc., a Texas corporation, American MRO, Inc., a Nevada corporation, and
Lender, a copy of which has been reviewed by the undersigned, and (ii) agrees
that each Guaranty shall remain in full force and effect and shall continue to
be the legal, valid and binding obligation of the undersigned enforceable
against it in accordance with its terms. Furthermore, the undersigned hereby
agrees and acknowledges that (a) the obligations, indebtedness and liabilities
arising in connection with the Loan Amendment comprise some, but not all, of the
"Obligations" as such term is used in each Guaranty, (b) each Guaranty is an
"Other Agreement", as such term is defined in the Loan Agreement, (c) no
Guaranty is as of this date subject to any claims, defenses or offsets, (d)
nothing contained in the Loan Agreement or any Other Agreement entered into
prior to or as of the date hereof shall adversely affect any right or remedy of
Lender under any Guaranty, and (e) the execution and delivery of the Loan
Amendment shall in no way reduce, impair or discharge any obligations of the
undersigned as guarantor pursuant to each Guaranty and shall not constitute a
waiver by Lender of any of Lender's rights against the undersigned.
Dated: April 29, 1998.
PELICAN STATE SUPPLY
COMPANY, INC.
By: /s/ GARY A. ALLCORN
--------------------------------
Name Gary A. Allcorn
-------------------------------
Title: Senior V.P./Finance
------------------------------
CONSENT AND RATIFICATION TO SIXTH AMENDMENT TO
SECOND AMENDED AND RESTATED LOAN AND SECURITY - Page 1
<PAGE> 1
EXHIBIT 10.2
AMENDMENT TO LOAN AND SECURITY AGREEMENT
[Pelican State Supply Company, Inc.]
THIS AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is
made and entered into this 29th day of April, 1998, to be effective as of the
respective date herein indicated, by and between PELICAN STATE SUPPLY COMPANY,
INC., a Nevada corporation ("Borrower") and FLEET CAPITAL CORPORATION, a Rhode
Island corporation ("Lender").
RECITALS
A. Borrower and Lender have entered into that certain Loan and
Security Agreement, dated as of May 29, 1997 (the "Loan Agreement").
B. Borrower and Lender desire to amend the Loan Agreement and the
other Loan Documents as hereinafter 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, intending to be legally bound, agree as
follows:
AGREEMENT
ARTICLE I
DEFINITIONS
1.01 Capitalized terms used in this Amendment are defined in the
Loan Agreement, as amended hereby, unless otherwise stated.
ARTICLE II
AMENDMENTS TO LOAN AGREEMENT
Effective as of the respective date herein indicated, the Loan
Agreement is hereby amended as follows:
2.01 AMENDMENT TO SECTION 1.1; ADDITION OF CERTAIN DEFINITIONS.
Effective as of the date of execution of this Amendment, Section 1.1 of the
Loan Agreement is hereby amended by adding the following new definitions
thereto, to be inserted in their proper alphabetical order:
"ACQUISITION TERM LOAN - shall have the same meaning as in the
Sepco Loan Agreement.
CAPITALIZED LEASE OBLIGATION - any Indebtedness represented by
obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP."
DOMESTIC MARGIN - at all times up to and including June 30,
1998-0.50% per annum. Thereafter, 0.00% per annum.
AMENDMENT TO LOAN AND SECURITY AGREEMENT - Page 1
<PAGE> 2
EBITDA - for any fiscal period of Borrower, means the sum of
(i) the Adjusted Net Earnings From Operations of Parent and its
Subsidiaries for such period, plus (ii) non-cash charges of Parent and
its Subsidiaries in respect to depreciation and amortization for such
period, plus (iii) Tax Expense of Parent and its Subsidiaries for such
period, plus (iv) Interest Expense of Parent and its Subsidiaries for
such period, all of the above being determined on a consolidated basis
in accordance with GAAP.
EURODOLLAR ADJUSTMENT DATE - initially, July 1, 1998, and
thereafter, the first Business Day of the calendar month during which
Lender receives the Compliance Certificate required by Section 9.1(J)
hereof having a calculation date as of the last day of September,
December, March or June, as the case may be (referred to in this
Agreement as a 'Quarterly Compliance Certificate'), beginning with the
Compliance Certificate having the calculation date as of September 30,
1998.
EURODOLLAR MARGIN - (i) for all Eurodollar Loans outstanding
during the period ending on June 30, 1998, 2.00% per annum, and
thereafter (ii) for all Eurodollar Loans outstanding during the period
beginning on a Eurodollar Adjustment Date and ending on the day
preceding the subsequent Eurodollar Adjustment Date, the applicable
percent per annum set forth in the pricing table below opposite the
ratio of (i) the aggregate principal amount of all Senior Debt
outstanding on the calculation date of the applicable Compliance
Certificate to (ii) the EBITDA calculated for the trailing twelve
calendar month period ending on the calculation date of the applicable
Compliance Certificate (which EBITDA may contain adjustments for the
Target Company EBITDA of any Target Company purchased by Sepco with an
Acquisition Term Loan during the relevant twelve calendar month
period, provided that any such adjustment must be consented to by
Lender, which consent shall be given or withheld by Lender in its sole
discretion, and such adjustment must also be calculated in a manner
satisfactory to Lender, in Lender's sole discretion).
PRICING TABLE
<TABLE>
<CAPTION>
RATIO OF SENIOR DEBT EURODOLLAR
TO EBITDA MARGIN
- ------------------------------------------- ------------
<S> <C> <C> <C>
(i) Greater than 4.50 to 1.00 (i) 2.50%
(ii) Equal to or less than 4.50 to (ii) 2.25%
1.00, but greater than 4.00
to 1.00
(iii) Equal to or less than 4.00 to (iii) 2.00%
1.00, but greater than 3.50
to 1.00
(iv) Equal to or less than 3.50 to (iv) 1.75%
1.00, but greater than 3.00
to 1.00
(v) Equal to or less than 3.00 to (v) 1.50%
1.00
</TABLE>
If Borrower shall fail to deliver a Quarterly Compliance
Certificate by the date required pursuant to Section 9.1(J) of this
Agreement, then effective as of the date such
AMENDMENT TO LOAN AND SECURITY AGREEMENT - Page 2
<PAGE> 3
Quarterly Compliance Certificate becomes delinquent, the applicable
Eurodollar Margin shall be conclusively presumed to equal the highest
applicable Eurodollar Margin specified in the pricing table set forth
above, such automatic adjustment to remain in effect until the first
Business Day of the calendar month during which such delinquent
Quarterly Compliance Certificate is delivered. From and after the
first Business Day of the calendar month during which such delinquent
Quarterly Compliance Certificate is delivered and until the next
Eurodollar Adjustment Date, the Eurodollar Margin shall be determined
by reference to such delinquent Quarterly Compliance Certificate and
the pricing table set forth above.
FIXED CHARGE RATIO - for any fiscal period of Borrower means,
the ratio of (i) an amount equal to (a) the sum of (1) the Adjusted
Net Earnings From Operations of Parent and its Subsidiaries for such
period, plus (2) non-cash charges of Parent and its Subsidiaries in
respect to depreciation and amortization for such period, plus (3)
Interest Expense of Parent and its Subsidiaries for such period, minus
(4) Capital Expenditures made by Parent and its Subsidiaries during
such period, to (ii) Fixed Charges of Parent and its Subsidiaries for
such period, all of the above being determined on a consolidated basis
in accordance with GAAP.
FIXED CHARGES - for any fiscal period of Borrower means the
sum of scheduled principal payments required to be made by Parent and
its Subsidiaries during such period in respect to Indebtedness, plus
(ii) Interest Expense of Parent and its Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.
INTEREST EXPENSE - with respect to any fiscal period, the
interest expense incurred for such period as determined in accordance
with GAAP plus Letter of Credit and LC Guaranty fees owing for such
period.
MONEY BORROWED - means (i) Indebtedness arising from the
lending of money by any Person to Parent or any Subsidiary of Parent,
(ii) Indebtedness, whether or not in any such case arising from the
lending by any Person of money to Parent or any Subsidiary of Parent
(A) which is represented by notes payable or drafts accepted that
evidence extensions of credit, (B) which constitutes obligations
evidenced by bonds, debentures, notes or similar instruments or (C)
upon which interest charges are customarily paid (other than accounts
payable) or that was issued or assumed as full or partial payment for
Property; (iii) Indebtedness that constitutes a Capitalized Lease
Obligation; (iv) reimbursement obligations with respect to letters of
credit or guaranties of letters of credit; and (v) Indebtedness of
Parent or any Subsidiary of Parent under any guaranty of obligations
that would constitute Indebtedness for Money Borrowed under clauses
(i) through (iv) hereof, if owed directly by Parent or such Subsidiary
of Parent.
SENIOR DEBT means all Money Borrowed, excluding Subordinated
Debt.
SENIOR INTEREST COVERAGE RATIO - for any fiscal period of
Borrower means, the ratio of (i) an amount equal to the sum of (a) the
Adjusted Net Earnings From Operations of Parent and its Subsidiaries
for such period, plus (b) Tax Expense of Parent and its Subsidiaries
for such period, plus (c) Interest Expense of Parent and its
Subsidiaries for such period in respect of Senior Debt, to (ii)
Interest Expense of Parent and its Subsidiaries for such period in
respect of Senior Debt, all as determined on a consolidated basis in
accordance with GAAP.
AMENDMENT TO LOAN AND SECURITY AGREEMENT - Page 3
<PAGE> 4
STOCK OFFERING - the secondary stock offering of capital stock
in Parent which is expected to raise approximately $25,000,000 in net
proceeds for Parent.
TARGET COMPANY - shall have the same meaning as in the Sepco
Loan Agreement.
TARGET COMPANY EBITDA - shall have the same meaning as in the
Sepco Loan Agreement.
TAX EXPENSE - with respect to any fiscal period, the tax
expense incurred for such period as determined in accordance with
GAAP."
2.02 AMENDMENT TO DEFINITION OF "BORROWING BASE" IN SECTION 1.1.
Effective as of the date of execution of this Amendment, the definition of
"Borrowing Base" contained in Section 1.1 of the Loan Agreement is hereby
amended by (i) deleting therefrom the phrase "Three Million Dollars
($3,000,000)" and substituting therefor the phrase "Two Million Five Hundred
Thousand Dollars ($2,500,000)", and (ii) deleting therefrom the phrase "One
Million Two Hundred Fifty Thousand Dollars ($1,250,000)" and substituting
therefor the phrase "One Million Five Hundred Thousand Dollars ($1,500,000)."
2.03 AMENDMENT TO DEFINITIONS OF "COMMITMENT" IN SECTION 1.1.
Effective as of the date of execution of this Amendment, the definition of
"Commitment" contained in Section 1.1 of the Loan Agreement is hereby amended
and restated to read in its entirety as follows:
"Commitment - Two Million Five Hundred Thousand Dollars
($2,500,000.00)."
2.04 AMENDMENT TO SECTION 3.1(A). Effective as of the date of
execution of this Amendment, the first two sentences of Section 3.1(A) of the
Loan Agreement are amended and restated to read in their entirety as follows:
"(A) Interest shall accrue on the principal amount of the
Revolving Credit Loans outstanding at the end of each day, at the
following rates per annum (individually called, as applicable, an
'Applicable Annual Rate'): (i) Eurodollar Loans shall bear interest
at a rate per annum equal to the applicable Eurodollar Margin plus the
Eurodollar Base Rate for the Eurodollar Interest Period applicable
thereto and (ii) all other Revolving Credit Loans shall bear interest
at a rate per annum equal to the applicable Domestic Margin plus the
Base Rate. Revolving Credit Loans shall bear interest at a rate per
annum equal to the applicable Domestic Margin plus the Base Rate
unless the Borrower provides a Eurodollar Borrowing Notice to the
Lender in accordance with Section 3.7(A) irrevocably electing that all
or a portion of the Revolving Credit Loans are to bear interest at a
Eurodollar Base Rate."
2.05 AMENDMENT TO SECTION 3.1(B). Effective as of the date of
execution of this Amendment, Section 3.1(B) of the Loan Agreement is hereby
amended by amending and restating clause (ii) of such Section 3.1(B) in its
entirety as follows:
"(ii) unless preempted by federal law, the Applicable
Annual Rate or Default Rate, as applicable, from time to time in
effect hereunder may not exceed the applicable 'weekly ceiling' (as
such term is defined in Chapter 303 of the Texas Finance Code
AMENDMENT TO LOAN AND SECURITY AGREEMENT - Page 4
<PAGE> 5
[Vernon's Texas Codes Annotated], as amended from time to time) from
time to time in effect."
2.06 AMENDMENT TO SECTION 3.3. Effective as of the date of
execution of this Amendment, Section 3.3 of the Loan Agreement is amended as
follows:
"(i) Section 3.3(A) is amended by deleting therefrom the
reference to the date "January 2, 1999" and substituting therefor the
date "January 2, 2000."
(ii) Section 3.3(D) is amended and restated to read in its
entirety as follows:
"(D) At the effective date of any termination of
this Agreement, Borrower shall pay to Lender (in addition to
the then outstanding principal, accrued interest and other
charges owing under this Agreement and any of the Other
Agreements), as liquidated damages for the loss of the bargain
and not as a penalty, an amount equal to $50,000, if
termination occurs at any time prior to January 2, 2000 or
during any Renewal Term thereafter. If termination occurs on
the last day of the Original Term or the last day of any
Renewal Term, no termination charge shall be payable. In
addition, no termination charge shall be payable hereunder if
the Sepco Loan Agreement is terminated on the same effective
date as the termination of this Agreement and the $50,000
termination charge payable by Sepco under the Sepco Loan
Agreement has been paid by Sepco."
2.07 AMENDMENT TO SECTION 9.3. Effective as of the date of
execution of this Amendment, Section 9.3 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
"9.3. Specific Financial Covenants. During the term of
this Agreement, and thereafter for so long as there are any
Obligations to Lender, Borrower covenants that, unless otherwise
consented to by Lender in writing, Parent and its Subsidiaries shall:
(A) Maintain, on a consolidated basis in
accordance with GAAP, as of the end of each fiscal quarter,
beginning with the fiscal quarter ending on June 30, 1998, for
the twelve calendar month period ending on such date, a Fixed
Charge Ratio of not less than 1.50 to 1.00.
(B) Achieve, on a consolidated basis in
accordance with GAAP, on the last day of each fiscal quarter
set forth below, for the twelve calendar month period ending
on such date, a Senior Interest Coverage Ratio equal to or
greater than the ratio set forth below for the twelve calendar
month period ending on the date corresponding thereto:
<TABLE>
<CAPTION>
DATE RATIO
---- -----
<S> <C>
(i) June 30, 1998 (i) 2.75 to 1.00
(ii) September 30, 1998 (ii) 2.75 to 1.00
(iii) December 31, 1998 (iii) 2.75 to 1.00
(iv) Each March 31, June 30, (iv) 3.00 to 1.00
September 30 and December 31
thereafter occurring
</TABLE>
AMENDMENT TO LOAN AND SECURITY AGREEMENT - Page 5
<PAGE> 6
(C) Maintain, on a consolidated basis in
accordance with GAAP, as of the last day of each fiscal
quarter set forth below (the 'Calculation Date'), a ratio of
(i) the Senior Debt of Parent and its Subsidiaries on such
Calculation Date, to (ii) an amount equal to (a) the EBITDA of
Parent and its Subsidiaries for the twelve calendar month
period ending on such Calculation Date, minus (b) Capital
Expenditures made by Parent and its Subsidiaries during such
period, of not greater than the ratio set forth below on the
Calculation Date corresponding thereto:
<TABLE>
<CAPTION>
CALCULATION DATE RATIO
---------------- -----
<S> <C>
(i) June 30, 1998 (i) 4.50 to 1.00
(ii) September 30, 1998 (ii) 4.50 to 1.00
(iii) December 31, 1998 (iii) 4.50 to 1.00
(iv) Each March 31, June 30, (iv) 4.00 to 1.00
September 30 and December 31
thereafter occurring
</TABLE>
Notwithstanding the foregoing, beginning with the first
Calculation Date to occur after the consummation of the Stock
Offering, and continuing on each subsequent Calculation Date,
the relevant maximum ratio shall be 3.00 to 1.00."
2.08 AMENDMENT TO SECTION 11.1(P). Effective as of the date of
execution of this Amendment, Section 11.1(P) of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
"(P) Borrower and/or Sepco ceases to be a Subsidiary of
Parent, unless due to the merger of Borrower and/or Sepco into Parent,
with Parent being the surviving entity;"
2.09 AMENDMENT TO SECTION 11.1; ADDITION OF A NEW SECTION 11.1(R).
Effective as of the date of execution of this Amendment, Section 11.1 of the
Loan Agreement is amended by adding thereto a new Section 11.1(R), to read in
its entirety as follows:
"(R) Each of Borrower, American MRO, Bayou, Sepco, and DXP
Acquisition, Inc., d/b/a Strategic Acquisition, Inc. have not by
October 1, 1998, been merged into Parent, with Parent being the
surviving entity, upon terms and conditions and pursuant to
documentation satisfactory to Lender."
2.10 AMENDMENT TO SECTION 11.1; ADDITION OF A NEW SECTION 11.1(S).
Effective as of the date of execution of this Amendment, Section 11.1 of the
Loan Agreement is amended by adding thereto a new Section 11.1(S) to read in
its entirety as follows:
"(S) The occurrence of an 'Event of Default,' as such term
is defined in that certain Loan and Security Agreement, dated June 16,
1997, executed by Lender and DXP Acquisition, Inc., d/b/a Strategic
Acquisition, Inc., as renewed, extended, modified and restated from
time to time."
AMENDMENT TO LOAN AND SECURITY AGREEMENT - Page 6
<PAGE> 7
2.11 AMENDMENT TO SECTION 12.10. Effective as of the date of
execution of this Amendment, Section 12.10 of the Loan Agreement is amended by
deleting therefrom the reference to:
"Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Attention: Kenneth M. Vesledahl, Esq."
and substituting therefor the following:
"Patton Boggs, L.L.P.
2200 Ross Avenue, Suite 900
Dallas, Texas 75201-2774
Attention: Kenneth M. Vesledahl, Esq.
Facsimile No. (214) 871-2688"
2.12 AMENDMENT TO SECTION 12.16. Effective as of the date of
execution of this Amendment, Section 12.16 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
"12.16. Nonapplicability of Chapter 303 of Texas Finance
Code. Borrower and Lender hereby agree that the provisions of Chapter
346 of the Texas Finance Code + [Vernon's Texas Codes Annotated]
(which regulates certain revolving loan accounts and revolving
triparty accounts) shall not apply to this Agreement or any of the
other Loan Documents."
ARTICLE III
NO WAIVERS
3.01 Nothing contained herein shall be construed as a waiver by
Lender of any covenant or provision of the Loan Agreement, the other Loan
Documents, this Amendment or of any other contract or instrument between
Borrower and Lender, and the failure of Lender at any time or times hereafter
to require strict performance by Borrower of any provision thereof shall not
waive, affect or diminish any right of Lender to thereafter demand strict
compliance therewith. Lender hereby reserves all rights granted under the Loan
Agreement, the other Loan Documents, this Amendment and any other contract or
instrument between Borrower and Lender.
ARTICLE IV
CONDITIONS PRECEDENT
4.01 CONDITIONS TO EFFECTIVENESS. The effectiveness of this
Amendment is subject to the satisfaction of the following conditions precedent
in a manner satisfactory to Lender, unless specifically waived in writing by
Lender:
(a) Lender shall have received each of the following,
each in form and substance satisfactory to Lender, in its sole
discretion, and, where applicable, each duly executed by each party
thereto, other than Lender:
(i) This Amendment, duly executed by Lender,
together with the relevant Consent, Ratification, and
Amendment, respectively duly executed by Sepco Industries,
AMENDMENT TO LOAN AND SECURITY AGREEMENT - Page 7
<PAGE> 8
Inc., Bayou Pumps, Inc., American MRO, Inc., DXP Acquisition,
Inc. d/b/a Strategic Acquisition, Inc. and DXP Enterprises,
Inc.;
(ii) All other documents Lender may request with
respect to any matter relevant to this Amendment or the
transactions contemplated hereby;
(b) The representations and warranties contained herein
and in the Loan Agreement and the other Loan Documents, as each is
amended hereby, shall be true and correct as of the date hereof, as if
made on the date hereof;
(c) No Default or Event of Default shall have occurred
and be continuing, unless such Default or Event of Default has been
otherwise specifically waived in writing by Lender; and
(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 Lender and its legal counsel.
ARTICLE V
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
5.01 RATIFICATIONS. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Loan Agreement and the other Loan Documents, and, except as
expressly modified and superseded by this Amendment, the terms and provisions
of the Loan Agreement and the other Loan Documents are ratified and confirmed
and shall continue in full force and effect. Each Borrower and Lender agree
that the Loan Agreement and the other Loan Documents, as amended hereby, shall
continue to be legal, valid, binding and enforceable in accordance with their
respective terms.
5.02 REPRESENTATIONS AND WARRANTIES. Borrower hereby represents
and warrants to Lender that (a) 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; (b) attached hereto as Annex A is a true, correct and
complete copy of presently effective resolutions of Borrower's Board of
Directors authorizing the execution, delivery and performance of this Amendment
and any and all other Loan Documents executed and/or delivered in connection
herewith, certified by the Assistant Secretary of Borrower; (c) the
representations and warranties contained in the Loan Agreement, as amended
hereby, and any other Loan Documents are true and correct on and as of the date
hereof and on and as of the date of execution hereof as though made on and as
of each such date; (d) no Default or Event of Default under the Loan Agreement,
as amended hereby, has occurred and is continuing, unless such Default or Event
of Default has been specifically waived in writing by Lender; (e) Borrower is
in full compliance with all covenants and agreements contained in the Loan
Agreement and the other Loan Documents, as amended hereby; and (f) Borrower has
not amended its Articles of Incorporation or its Bylaws since the date of the
Loan Agreement.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in the Loan Agreement or any other Loan
Documents, including, without limitation, any document
AMENDMENT TO LOAN AND SECURITY AGREEMENT - Page 8
<PAGE> 9
furnished in connection with this Amendment, shall survive the execution and
delivery of this Amendment and the other Loan Documents, and no investigation
by Lender or any closing shall affect the representations and warranties or the
right of Lender to rely upon them.
6.02 REFERENCE TO LOAN AGREEMENT. Each of the Loan Agreement and
the other Loan Documents, and any and all other Loan Documents, documents or
instruments now or hereafter executed and delivered pursuant to the terms
hereof or pursuant to the terms of the Loan Agreement, as amended hereby, are
hereby amended so that any reference in the Loan Agreement and such other Loan
Documents to the Loan Agreement shall mean a reference to the Loan Agreement as
amended hereby.
6.03 EXPENSES OF LENDER. As provided in the Loan Agreement,
Borrower agrees to pay on demand all costs and expenses incurred by Lender 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 Lender's legal counsel, and all costs and
expenses incurred by Lender in connection with the enforcement or preservation
of any rights under the Loan Agreement, as amended hereby, or any other Loan
Documents, including, without, limitation, the costs and fees of Lender's legal
counsel.
6.04 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.
6.05 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and
shall inure to the benefit of Lender and Borrower and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights or obligations hereunder without the prior written consent of
Lender.
6.06 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.
6.07 EFFECT OF WAIVER. No consent or waiver, express or implied,
by Lender to or for any breach of or deviation from any covenant or condition
by Borrower shall be deemed a consent to or waiver of any other breach of the
same or any other covenant, condition or duty.
6.08 HEADINGS. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
6.09 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS
EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE
PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.
6.10 FINAL AGREEMENT. THE LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE
PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS
EXECUTED. THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY,
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES. NO
AMENDMENT TO LOAN AND SECURITY AGREEMENT - Page 9
<PAGE> 10
MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS
AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY BORROWER AND
LENDER.
6.11 RELEASE. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS
LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES
OF ANY KIND OR NATURE FROM LENDER. BORROWER HEREBY VOLUNTARILY AND KNOWINGLY
RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF
ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN,
ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR
CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE
THE DATE THIS AMENDMENT IS EXECUTED, WHICH BORROWER MAY NOW OR HEREAFTER HAVE
AGAINST LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF
ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT,
VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS",
INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING,
RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL
RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN
AGREEMENT OR OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS
AMENDMENT.
IN WITNESS WHEREOF, this Amendment has been executed and is effective
as of the date first above-written.
"BORROWER"
PELICAN STATE SUPPLY COMPANY, INC.
By: /s/ Gary A. Allcorn
-------------------
Name: Gary A. Allcorn
-------------------
Title: Senior V.P./Finance
-------------------
"LENDER"
FLEET CAPITAL CORPORATION
By: /s/ H. Michael Wills
--------------------
Name: H. Michael Wills
--------------------
Title: VP
-------------------
ANNEXES:
A-1 - Certified Resolutions of Pelican State Supply Company, Inc.
AMENDMENT TO LOAN AND SECURITY AGREEMENT - Page 10
<PAGE> 11
ANNEX A-1
CERTIFIED RESOLUTIONS OF
PELICAN STATE SUPPLY COMPANY, INC.'S BOARD OF DIRECTORS
RESOLVED: That any officer of Pelican State Supply Company, Inc., a
Nevada corporation (the "Corporation"), acting alone, by his signature be, and
the same hereby is, authorized and directed, in the name of and on behalf of
the Corporation (a) to amend the Corporation's existing Loan and Security
Agreement by and between the Corporation and Fleet Capital Corporation, a Rhode
Island corporation ("Lender"), (b) to execute and deliver to Lender with such
changes in the terms and provisions thereof as the officer executing same
shall, in his sole discretion, deem advisable, (i) a certain proposed Amendment
to Loan and Security Agreement to be executed by Corporation and Lender, a
draft of which has been reviewed and discussed by the Board of Directors of the
Corporation, and (ii) such other Loan Documents, instruments, statements and
writings as the officer or officers executing the same may deem desirable or
necessary in connection therewith, and (c) to perform such other acts as the
officer or officers performing such acts on behalf of the Corporation may deem
desirable or necessary in connection therewith; and be it
FURTHER RESOLVED: That said agreements will benefit the Corporation,
both directly and indirectly, and are in the best interests of the Corporation;
and be it
FURTHER RESOLVED: That said agreements and other statements in
writing executed in the name and on behalf of the Corporation by any officer of
the Corporation shall be presumed conclusively to be the instruments, the
execution of which is authorized by these resolutions; and be it
FURTHER RESOLVED: That the officers of the Corporation be, and the
same hereby are, authorized and directed to execute, in the name of and on
behalf of the Corporation, security agreements, financing statements,
assignments, collateral reports, loan statements, confirmations of delivery,
lien statements, pledge certificates, release certificates, removal reports,
guaranties, cross- collateralization agreements and such other writings and to
take such other actions as are necessary in their dealings with Lender, and any
such papers executed and any such actions taken by any of them prior to this
time are approved, ratified and confirmed; and be it
FURTHER RESOLVED: That the Secretary or any Assistant Secretary of
the Corporation, by the signature of any one or more of them, be, and the same
hereby are, authorized and directed to attest the execution by the Corporation
of the papers signed pursuant to these resolutions, to affix the seal of the
Corporation thereto, if required by Lender, and to certify to Lender the
adoption of these resolutions.
CERTIFICATION
The undersigned hereby certifies that the within and foregoing
resolutions are in effect as of the date hereof, without modification, and that
the person signing the within and foregoing Amendment on behalf of the
Corporation is the duly elected officer stated below his name, that he is
authorized to sign such Amendment, and that his signature thereon is genuine.
DATED: April 29, 1998.
/s/ GARY A. ALLCORN
----------------------------------------
[Assistant] Secretary of the Corporation
CONSENT AND RATIFICATION TO
AMENDMENT TO LOAN AND SECURITY - Page 1
<PAGE> 12
CONSENT, RATIFICATION, AND AMENDMENT
The undersigned, SEPCO INDUSTRIES, INC., has executed that certain
Continuing Guaranty Agreement, dated May 29, 1997 (the "Guaranty"), in favor of
FLEET CAPITAL CORPORATION, a Rhode Island corporation ("Lender"). The
undersigned hereby (i) consents and agrees to the terms of the Amendment to
Loan and Security Agreement, dated as of April 29, 1998 (the "Loan Amendment"),
by and between Pelican State Supply Company, Inc., a Nevada corporation, and
Lender, a copy of which has been reviewed by the undersigned, and (ii) agrees
that the Guaranty shall remain in full force and effect and shall continue to
be the legal, valid and binding obligation of the undersigned enforceable
against it in accordance with its terms. Furthermore, the undersigned hereby
agrees and acknowledges that (a) the obligations, indebtedness and liabilities
arising in connection with the Loan Amendment comprise some, but not all, of
the "Obligations" as such term is used in the Guaranty, (b) the Guaranty is an
"Other Agreement", as such term is defined in the Loan Agreement, (c) the
Guaranty is not as of this date subject to any claims, defenses or offsets, (d)
nothing contained in the Loan Agreement or any Other Agreement entered into
prior to or as of the date hereof shall adversely affect any right or remedy of
Lender under the Guaranty, and (e) the execution and delivery of the Loan
Amendment shall in no way reduce, impair or discharge any obligations of the
undersigned as guarantor pursuant to the Guaranty and shall not constitute a
waiver by Lender of any of Lender's rights against the undersigned.
Dated: April 29, 1998.
SEPCO INDUSTRIES, INC.
By: /s/ GARY A. ALLCORN
------------------------
Name: Gary A. Allcorn
------------------------
Title: Senior V.P./Finance
------------------------
CONSENT AND RATIFICATION TO
AMENDMENT TO LOAN AND SECURITY - Page 1
<PAGE> 13
CONSENT, RATIFICATION, AND AMENDMENT
The undersigned, AMERICAN MRO, INC., has executed that certain
Continuing Guaranty Agreement, dated May 29, 1997 (the "Guaranty"), in favor of
FLEET CAPITAL CORPORATION, a Rhode Island corporation ("Lender"). The
undersigned hereby (i) consents and agrees to the terms of the Amendment to
Loan and Security Agreement, dated as of April 29, 1998 (the "Loan Amendment"),
by and between Pelican State Supply Company, Inc., a Nevada corporation, and
Lender, a copy of which has been reviewed by the undersigned, and (ii) agrees
that the Guaranty shall remain in full force and effect and shall continue to
be the legal, valid and binding obligation of the undersigned enforceable
against it in accordance with its terms. Furthermore, the undersigned hereby
agrees and acknowledges that (a) the obligations, indebtedness and liabilities
arising in connection with the Loan Amendment comprise some, but not all, of
the "Obligations" as such term is used in the Guaranty, (b) the Guaranty is an
"Other Agreement", as such term is defined in the Loan Agreement, (c) the
Guaranty is not as of this date subject to any claims, defenses or offsets, (d)
nothing contained in the Loan Agreement or any Other Agreement entered into
prior to or as of the date hereof shall adversely affect any right or remedy of
Lender under the Guaranty, and (e) the execution and delivery of the Loan
Amendment shall in no way reduce, impair or discharge any obligations of the
undersigned as guarantor pursuant to the Guaranty and shall not constitute a
waiver by Lender of any of Lender's rights against the undersigned.
Dated: April 29, 1998.
AMERICAN MRO, INC.
By: /s/ GARY A. ALLCORN
------------------------
Name: Gary A. Allcorn
------------------------
Title: Senior V.P./Finance
------------------------
CONSENT AND RATIFICATION TO
AMENDMENT TO LOAN AND SECURITY - Page 1
<PAGE> 14
CONSENT, RATIFICATION, AND AMENDMENT
The undersigned, BAYOU PUMPS, INC., has executed that certain
Continuing Guaranty Agreement, dated May 29, 1997 (the "Guaranty"), in favor of
FLEET CAPITAL CORPORATION, a Rhode Island corporation ("Lender"). The
undersigned hereby (i) consents and agrees to the terms of the Amendment to
Loan and Security Agreement, dated as of April 29, 1998 (the "Loan Amendment"),
by and between Pelican State Supply Company, Inc., a Nevada corporation, and
Lender, a copy of which has been reviewed by the undersigned, and (ii) agrees
that the Guaranty shall remain in full force and effect and shall continue to
be the legal, valid and binding obligation of the undersigned enforceable
against it in accordance with its terms. Furthermore, the undersigned hereby
agrees and acknowledges that (a) the obligations, indebtedness and liabilities
arising in connection with the Loan Amendment comprise some, but not all, of
the "Obligations" as such term is used in the Guaranty, (b) the Guaranty is an
"Other Agreement", as such term is defined in the Loan Agreement, (c) the
Guaranty is not as of this date subject to any claims, defenses or offsets, (d)
nothing contained in the Loan Agreement or any Other Agreement entered into
prior to or as of the date hereof shall adversely affect any right or remedy of
Lender under the Guaranty, and (e) the execution and delivery of the Loan
Amendment shall in no way reduce, impair or discharge any obligations of the
undersigned as guarantor pursuant to the Guaranty and shall not constitute a
waiver by Lender of any of Lender's rights against the undersigned.
Dated: April 29, 1998.
BAYOU PUMPS, INC.
By: /s/ GARY A. ALLCORN
------------------------
Name: Gary A. Allcorn
------------------------
Title: Senior V.P./Finance
------------------------
CONSENT AND RATIFICATION TO
AMENDMENT TO LOAN AND SECURITY - Page 1
<PAGE> 15
CONSENT, RATIFICATION, AND AMENDMENT
The undersigned, DXP ACQUISITION, INC. D/B/A STRATEGIC ACQUISITION,
INC., has executed that certain Continuing Guaranty Agreement, dated June 16,
1997 (the "Guaranty"), in favor of FLEET CAPITAL CORPORATION, a Rhode Island
corporation ("Lender"). The undersigned hereby (i) consents and agrees to the
terms of the Amendment to Loan and Security Agreement, dated as of April 29,
1998 (the "Loan Amendment"), by and between Pelican State Supply Company, Inc.,
a Nevada corporation, and Lender, a copy of which has been reviewed by the
undersigned, and (ii) agrees that the Guaranty shall remain in full force and
effect and shall continue to be the legal, valid and binding obligation of the
undersigned enforceable against it in accordance with its terms. Furthermore,
the undersigned hereby agrees and acknowledges that (a) the obligations,
indebtedness and liabilities arising in connection with the Loan Amendment
comprise some, but not all, of the "Obligations" as such term is used in the
Guaranty, (b) the Guaranty is an "Other Agreement", as such term is defined in
the Loan Agreement, (c) the Guaranty is not as of this date subject to any
claims, defenses or offsets, (d) nothing contained in the Loan Agreement or any
Other Agreement entered into prior to or as of the date hereof shall adversely
affect any right or remedy of Lender under the Guaranty, and (e) the execution
and delivery of the Loan Amendment shall in no way reduce, impair or discharge
any obligations of the undersigned as guarantor pursuant to the Guaranty and
shall not constitute a waiver by Lender of any of Lender's rights against the
undersigned.
Dated: April 29, 1998.
DXP ACQUISITION, INC.
D/B/A STRATEGIC ACQUISITION, INC.
By: /s/ GARY A. ALLCORN
------------------------
Name: Gary A. Allcorn
------------------------
Title: Senior V.P./Finance
------------------------
CONSENT AND RATIFICATION TO
AMENDMENT TO LOAN AND SECURITY - Page 1
<PAGE> 16
CONSENT, RATIFICATION AND AMENDMENT
The undersigned, DXP ENTERPRISES, INC., has executed (x) that certain
Continuing Guaranty Agreement, dated May 29, 1997 (the "Guaranty"), in favor of
FLEET CAPITAL CORPORATION, a Rhode Island corporation ("Lender"), and (y) that
certain Stock Pledge Agreement, dated as of May 29, 1997, executed by the
undersigned and Fleet (the "Security Agreement"). The undersigned hereby (i)
consents and agrees to the terms of the Amendment to Loan and Security
Agreement, dated as of April 29, 1998 (the "Loan Amendment"), by and between
Pelican State Supply Company, Inc., a Nevada corporation, and Lender, a copy of
which has been reviewed by the undersigned, and (ii) agrees that each of the
Guaranty and the Security Agreement shall remain in full force and effect and
shall continue to be the legal, valid and binding obligation of the
undersigned, enforceable against it in accordance with its terms. Furthermore,
the undersigned hereby agrees and acknowledges that (a) the obligations,
indebtedness and liabilities arising in connection with the Loan Amendment
comprise some, but not all, of the "Obligations", as such term is used in the
Guaranty, and some, but not all, of the "Secured Obligations", as such term is
used in the Security Agreement, (b) each of the Guaranty and the Security
Agreement is an "Other Agreement", as such term is defined in the Loan
Agreement, (c) neither the Guaranty nor the Security Agreement is, as of the
date hereof, subject to any claims, defenses or offsets, (d) nothing contained
in the Loan Agreement or any Other Agreement entered into prior to or as of the
date hereof shall adversely affect any right or remedy of Lender under the
Guaranty or under the Security Agreement, and (e) the execution and delivery of
the Loan Amendment shall in no way reduce, impair or discharge any obligations
of the undersigned as guarantor pursuant to the Guaranty or as debtor pursuant
to the Security Agreement and shall not constitute a waiver by Lender of any of
Lender's rights against the undersigned.
Dated: April 29, 1998.
DXP ENTERPRISES, INC.
By: /s/ GARY A. ALLCORN
------------------------
Name: Gary A. Allcorn
------------------------
Title: Senior V.P./Finance
------------------------
CONSENT AND RATIFICATION TO
AMENDMENT TO LOAN AND SECURITY - Page 1
<PAGE> 1
EXHIBIT 10.3
AMENDMENT TO LOAN AND SECURITY AGREEMENT
[DXP Acquisition, Inc., d/b/a Strategic Acquisition, Inc.]
THIS AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is
made and entered into this 29th day of April, 1998, to be effective as of the
respective date herein indicated, by and between DXP ACQUISITION, INC., D/B/A
STRATEGIC ACQUISITION, INC., a Nevada corporation ("Borrower") and FLEET
CAPITAL CORPORATION, a Rhode Island corporation ("Lender").
RECITALS
A. Borrower and Lender have entered into that certain Loan and
Security Agreement, dated as of June 16, 1997 (the "Loan Agreement").
B. Borrower and Lender desire to amend the Loan Agreement and the
other Loan Documents as hereinafter 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, intending to be legally bound, agree as
follows:
AGREEMENT
ARTICLE I
DEFINITIONS
1.01 Capitalized terms used in this Amendment are defined in the
Loan Agreement, as amended hereby, unless otherwise stated.
ARTICLE II
AMENDMENTS TO LOAN AGREEMENT
Effective as of the respective date herein indicated, the Loan
Agreement is hereby amended as follows:
2.01 AMENDMENT TO SECTION 1.1; ADDITION OF CERTAIN DEFINITIONS.
Effective as of the date of execution of this Amendment, Section 1.1 of the
Loan Agreement is hereby amended by adding the following new definitions
thereto, to be inserted in their proper alphabetical order:
"ACQUISITION TERM LOAN - shall have the same meaning as in the
Sepco Loan Agreement.
CAPITALIZED LEASE OBLIGATION - any Indebtedness represented by
obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP."
DOMESTIC MARGIN - at all times up to and including June 30,
1998-0.50% per annum. Thereafter, 0.00% per annum.
AMENDMENT TO LOAN AND SECURITY AGREEMENT - PAGE 1
<PAGE> 2
EBITDA - for any fiscal period of Borrower, means the sum of
(i) the Adjusted Net Earnings From Operations of Parent and its
Subsidiaries for such period, plus (ii) non-cash charges of Parent and
its Subsidiaries in respect to depreciation and amortization for such
period, plus (iii) Tax Expense of Parent and its Subsidiaries for such
period, plus (iv) Interest Expense of Parent and its Subsidiaries for
such period, all of the above being determined on a consolidated basis
in accordance with GAAP.
EURODOLLAR ADJUSTMENT DATE - initially, July 1, 1998, and
thereafter, the first Business Day of the calendar month during which
Lender receives the Compliance Certificate required by Section 9.1(J)
hereof having a calculation date as of the last day of September,
December, March or June, as the case may be (referred to in this
Agreement as a 'Quarterly Compliance Certificate'), beginning with the
Compliance Certificate having the calculation date as of September 30,
1998.
EURODOLLAR MARGIN - (i) for all Eurodollar Loans outstanding
during the period ending on June 30, 1998, 2.00% per annum, and
thereafter (ii) for all Eurodollar Loans outstanding during the period
beginning on a Eurodollar Adjustment Date and ending on the day
preceding the subsequent Eurodollar Adjustment Date, the applicable
percent per annum set forth in the pricing table below opposite the
ratio of (i) the aggregate principal amount of all Senior Debt
outstanding on the calculation date of the applicable Compliance
Certificate to (ii) the EBITDA calculated for the trailing twelve
calendar month period ending on the calculation date of the applicable
Compliance Certificate (which EBITDA may contain adjustments for the
Target Company EBITDA of any Target Company purchased by Sepco with an
Acquisition Term Loan during the relevant twelve calendar month
period, provided that any such adjustment must be consented to by
Lender, which consent shall be given or withheld by Lender in its sole
discretion, and such adjustment must also be calculated in a manner
satisfactory to Lender, in Lender's sole discretion).
PRICING TABLE
<TABLE>
<CAPTION>
RATIO OF SENIOR DEBT EURODOLLAR
TO EBITDA MARGIN
------------------------------------ --------------
<S> <C> <C>
(i) Greater than 4.50 to (i) 2.50%
1.00
(ii) Equal to or less than 4.50 to (ii) 2.25%
1.00, but greater than 4.00
to 1.00
(iii) Equal to or less than 4.00 to (iii) 2.00%
1.00, but greater than 3.50
to 1.00
(iv) Equal to or less than 3.50 to (iv) 1.75%
1.00, but greater than 3.00
to 1.00
(v) Equal to or less than 3.00 to (v) 1.50%
1.00
</TABLE>
AMENDMENT TO LOAN AND SECURITY AGREEMENT - PAGE 2
<PAGE> 3
If Borrower shall fail to deliver a Quarterly Compliance
Certificate by the date required pursuant to Section 9.1(J) of this
Agreement, then effective as of the date such Quarterly Compliance
Certificate becomes delinquent, the applicable Eurodollar Margin shall
be conclusively presumed to equal the highest applicable Eurodollar
Margin specified in the pricing table set forth above, such automatic
adjustment to remain in effect until the first Business Day of the
calendar month during which such delinquent Quarterly Compliance
Certificate is delivered. From and after the first Business Day of
the calendar month during which such delinquent Quarterly Compliance
Certificate is delivered and until the next Eurodollar Adjustment
Date, the Eurodollar Margin shall be determined by reference to such
delinquent Quarterly Compliance Certificate and the pricing table set
forth above.
FIXED CHARGE RATIO - for any fiscal period of Borrower means,
the ratio of (i) an amount equal to (a) the sum of (1) the Adjusted
Net Earnings From Operations of Parent and its Subsidiaries for such
period, plus (2) non-cash charges of Parent and its Subsidiaries in
respect to depreciation and amortization for such period, plus (3)
Interest Expense of Parent and its Subsidiaries for such period, minus
(4) Capital Expenditures made by Parent and its Subsidiaries during
such period, to (ii) Fixed Charges of Parent and its Subsidiaries for
such period, all of the above being determined on a consolidated basis
in accordance with GAAP.
FIXED CHARGES - for any fiscal period of Borrower means the
sum of scheduled principal payments required to be made by Parent and
its Subsidiaries during such period in respect to Indebtedness, plus
(ii) Interest Expense of Parent and its Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.
INTEREST EXPENSE - with respect to any fiscal period, the
interest expense incurred for such period as determined in accordance
with GAAP plus Letter of Credit and LC Guaranty fees owing for such
period.
MONEY BORROWED - means (i) Indebtedness arising from the
lending of money by any Person to Parent or any Subsidiary of Parent,
(ii) Indebtedness, whether or not in any such case arising from the
lending by any Person of money to Parent or any Subsidiary of Parent
(A) which is represented by notes payable or drafts accepted that
evidence extensions of credit, (B) which constitutes obligations
evidenced by bonds, debentures, notes or similar instruments or (C)
upon which interest charges are customarily paid (other than accounts
payable) or that was issued or assumed as full or partial payment for
Property; (iii) Indebtedness that constitutes a Capitalized Lease
Obligation; (iv) reimbursement obligations with respect to letters of
credit or guaranties of letters of credit; and (v) Indebtedness of
Parent or any Subsidiary of Parent under any guaranty of obligations
that would constitute Indebtedness for Money Borrowed under clauses
(i) through (iv) hereof, if owed directly by Parent or such Subsidiary
of Parent.
SENIOR DEBT means all Money Borrowed, excluding Subordinated
Debt.
SENIOR INTEREST COVERAGE RATIO - for any fiscal period of
Borrower means the ratio of (i) an amount equal to the sum of (a) the
Adjusted Net Earnings From Operations of Parent and its Subsidiaries
for such period, plus (b) Tax Expense of Parent and its Subsidiaries
for such period, plus (c) Interest Expense of Parent and its
Subsidiaries for such period in respect of Senior Debt, to (ii)
Interest Expense of Parent and its
<PAGE> 4
Subsidiaries for such period in respect of Senior Debt, all as
determined on a consolidated basis in accordance with GAAP.
AMENDMENT TO LOAN AND SECURITY AGREEMENT - PAGE 3
STOCK OFFERING - the secondary stock offering of capital stock
in Parent which is expected to raise approximately $25,000,000 in net
proceeds for Parent.
TARGET COMPANY - shall have the same meaning as in the Sepco
Loan Agreement.
TARGET COMPANY EBITDA - shall have the same meaning as in the
Sepco Loan Agreement.
TAX EXPENSE - with respect to any fiscal period, the tax
expense incurred for such period as determined in accordance with
GAAP."
2.02 AMENDMENT TO DEFINITION OF "BORROWING BASE" IN SECTION 1.1.
Effective as of the date of execution of this Amendment, the definition of
"Borrowing Base" contained in Section 1.1 of the Loan Agreement is hereby
amended by deleting therefrom the phrase "Twelve Million Dollars ($12,000,000)"
and substituting therefor the phrase "Seven Million Five Hundred Thousand
Dollars ($7,500,000)."
2.03 AMENDMENT TO DEFINITIONS OF "COMMITMENT" IN SECTION 1.1.
Effective as of the date of execution of this Amendment, the definition of
"Commitment" contained in Section 1.1 of the Loan Agreement is hereby amended
and restated to read in its entirety as follows:
"Commitment - Seven Million Five Hundred Thousand Dollars
($7,500,000.00)."
2.04 AMENDMENT TO SECTION 3.1(A). Effective as of the date of
execution of this Amendment, the first two sentences of Section 3.1(A) of the
Loan Agreement are amended and restated to read in their entirety as follows:
"(A) Interest shall accrue on the principal amount of the
Revolving Credit Loans outstanding at the end of each day, at the
following rates per annum (individually called, as applicable, an
'Applicable Annual Rate'): (i) Eurodollar Loans shall bear interest
at a rate per annum equal to the applicable Eurodollar Margin plus the
Eurodollar Base Rate for the Eurodollar Interest Period applicable
thereto and (ii) all other Revolving Credit Loans shall bear interest
at a rate per annum equal to the applicable Domestic Margin plus the
Base Rate. Revolving Credit Loans shall bear interest at a rate per
annum equal to the applicable Domestic Margin plus the Base Rate
unless the Borrower provides a Eurodollar Borrowing Notice to the
Lender in accordance with Section 3.7(A) irrevocably electing that all
or a portion of the Revolving Credit Loans are to bear interest at a
Eurodollar Base Rate."
2.05 AMENDMENT TO SECTION 3.1(B). Effective as of the date of
execution of this Amendment, Section 3.1(B) of the Loan Agreement is hereby
amended by amending and restating clause (ii) of such Section 3.1(B) in its
entirety as follows:
"(ii) unless preempted by federal law, the Applicable
Annual Rate or Default Rate, as applicable, from time to time in
effect hereunder may not exceed the applicable
<PAGE> 5
'weekly ceiling' (as such term is defined in Chapter 303 of the Texas
Finance Code [Vernon's Texas Codes Annotated], as amended from time to
time) from time to time in effect."
AMENDMENT TO LOAN AND SECURITY AGREEMENT - PAGE 4
2.06 AMENDMENT TO SECTION 3.3. Effective as of the date of
execution of this Amendment, Section 3.3 of the Loan Agreement is amended as
follows:
"(i) Section 3.3(A) is amended by deleting therefrom the
reference to the date "January 2, 1999" and substituting therefor the
date "January 2, 2000."
(ii) Section 3.3(D) is amended and restated to read in its
entirety as follows:
"(D) At the effective date of any termination of
this Agreement, Borrower shall pay to Lender (in addition to
the then outstanding principal, accrued interest and other
charges owing under this Agreement and any of the Other
Agreements), as liquidated damages for the loss of the bargain
and not as a penalty, an amount equal to $50,000 if
termination occurs at any time prior to January 2, 2000 or
during any Renewal Term thereafter. If termination occurs on
the last day of the Original Term or the last day of any
Renewal Term, no termination charge shall be payable. In
addition, no termination charge shall be payable hereunder if
the Sepco Loan Agreement is terminated on the same effective
date as the termination of this Agreement and the $50,000
termination charge payable by Sepco under the Sepco Loan
Agreement has been paid by Sepco."
2.07 AMENDMENT TO SECTION 9.3. Effective as of the date of
execution of this Amendment, Section 9.3 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
"9.3. Specific Financial Covenants. During the term of
this Agreement, and thereafter for so long as there are any
Obligations to Lender, Borrower covenants that, unless otherwise
consented to by Lender in writing, Parent and its Subsidiaries shall:
(A) Maintain, on a consolidated basis in
accordance with GAAP, as of the end of each fiscal quarter,
beginning with the fiscal quarter ending on June 30, 1998, for
the twelve calendar month period ending on such date, a Fixed
Charge Ratio of not less than 1.50 to 1.00.
(B) Achieve, on a consolidated basis in
accordance with GAAP, on the last day of each fiscal quarter
set forth below, for the twelve calendar month period ending
on such date, a Senior Interest Coverage Ratio equal to or
greater than the ratio set forth below for the twelve calendar
month period ending on the date corresponding thereto:
<TABLE>
<CAPTION>
DATE RATIO
---- -----
<S> <C>
(i) June 30, 1998 (i) 2.75 to 1.00
(ii) September 30, 1998 (ii) 2.75 to 1.00
(iii) December 31, 1998 (iii) 2.75 to 1.00
(iv) Each March 31, June 30, (iv) 3.00 to 1.00
September 30, and December 31
thereafter occurring
</TABLE>
AMENDMENT TO LOAN AND SECURITY AGREEMENT - PAGE 5
<PAGE> 6
(C) Maintain, on a consolidated basis in
accordance with GAAP, as of the last day of each fiscal
quarter set forth below (the 'Calculation Date'), a ratio of
(i) the Senior Debt of Parent and its Subsidiaries on such
Calculation Date, to (ii) an amount equal to (a) the EBITDA of
Parent and its Subsidiaries for the twelve calendar month
period ending on such Calculation Date, minus (b) Capital
Expenditures made by Parent and its Subsidiaries during such
period, of not greater than the ratio set forth below on the
Calculation Date corresponding thereto:
<TABLE>
<CAPTION>
CALCULATION DATE RATIO
---------------- -----
<S> <C>
(i) June 30, 1998 (i) 4.50 to 1.00
(ii) September 30, 1998 (ii) 4.50 to 1.00
(iii) December 31, 1998 (iii) 4.50 to 1.00
(iv) Each March 31, June 30, (iv) 4.00 to 1.00
September 30, and December 31
thereafter occurring
</TABLE>
Notwithstanding the foregoing, beginning with the first
Calculation Date to occur after the consummation of the Stock
Offering, and continuing on each subsequent Calculation Date,
the relevant maximum ratio shall be 3.00 to 1.00."
2.08 AMENDMENT TO SECTION 11.1(P). Effective as of the date of
execution of this Amendment, Section 11.1(P) of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
"(P) Borrower and/or Sepco ceases to be a Subsidiary of
Parent, unless due to the merger of Borrower and/or Sepco into Parent,
with Parent being the surviving entity;"
2.09 AMENDMENT TO SECTION 11.1; ADDITION OF A NEW SECTION 11.1(S).
Effective as of the date of execution of this Amendment, Section 11.1 of the
Loan Agreement is amended by adding thereto a new Section 11.1(R), to read in
its entirety as follows:
"(S) Each of Borrower, American MRO, Bayou, Sepco, and
Pelican State Supply Company, Inc. have not by October 1, 1998, been
merged into Parent, with Parent being the surviving entity, upon terms
and conditions and pursuant to documentation satisfactory to Lender."
2.10 AMENDMENT TO SECTION 12.10. Effective as of the date of
execution of this Amendment, Section 12.10 of the Loan Agreement is amended by
deleting therefrom the reference to:
"Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Attention: Kenneth M. Vesledahl, Esq."
AMENDMENT TO LOAN AND SECURITY AGREEMENT - PAGE 6
<PAGE> 7
and substituting therefor the following:
"Patton Boggs, L.L.P.
2200 Ross Avenue, Suite 900
Dallas, Texas 75201-2774
Attention: Kenneth M. Vesledahl, Esq.
Facsimile No. (214) 871-2688"
2.11 AMENDMENT TO SECTION 12.16. Effective as of the date of
execution of this Amendment, Section 12.16 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
"12.16. Nonapplicability of Chapter 303 of Texas Finance
Code. Borrower and Lender hereby agree that the provisions of Chapter
346 of the Texas Finance Code [Vernon's Texas Codes Annotated] (which
regulates certain revolving loan accounts and revolving triparty
accounts) shall not apply to this Agreement or any of the other Loan
Documents."
ARTICLE III
NO WAIVERS
3.01 Nothing contained herein shall be construed as a waiver by
Lender of any covenant or provision of the Loan Agreement, the other Loan
Documents, this Amendment or of any other contract or instrument between
Borrower and Lender, and the failure of Lender at any time or times hereafter
to require strict performance by Borrower of any provision thereof shall not
waive, affect or diminish any right of Lender to thereafter demand strict
compliance therewith. Lender hereby reserves all rights granted under the Loan
Agreement, the other Loan Documents, this Amendment and any other contract or
instrument between Borrower and Lender.
ARTICLE IV
CONDITIONS PRECEDENT
4.01 CONDITIONS TO EFFECTIVENESS. The effectiveness of this
Amendment is subject to the satisfaction of the following conditions precedent
in a manner satisfactory to Lender, unless specifically waived in writing by
Lender:
(a) Lender shall have received each of the following,
each in form and substance satisfactory to Lender, in its sole
discretion, and, where applicable, each duly executed by each party
thereto, other than Lender:
(i) This Amendment, duly executed by Lender,
together with the relevant Consent, Ratification, and
Amendment, respectively duly executed by Sepco Industries,
Inc., Bayou Pumps, Inc., American MRO, Inc., Pelican State
Supply Company, Inc. and DXP Enterprises, Inc.;
(ii) All other documents Lender may request with
respect to any matter relevant to this Amendment or the
transactions contemplated hereby;
(b) The representations and warranties contained herein
and in the Loan Agreement and the other Loan Documents, as each is
amended hereby, shall be true and correct as of the date hereof, as if
made on the date hereof;
AMENDMENT TO LOAN AND SECURITY AGREEMENT - PAGE 7
<PAGE> 8
(c) No Default or Event of Default shall have occurred
and be continuing, unless such Default or Event of Default has been
otherwise specifically waived in writing by Lender; and
(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 Lender and its legal counsel.
ARTICLE V
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
5.01 RATIFICATIONS. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Loan Agreement and the other Loan Documents, and, except as
expressly modified and superseded by this Amendment, the terms and provisions
of the Loan Agreement and the other Loan Documents are ratified and confirmed
and shall continue in full force and effect. Each Borrower and Lender agree
that the Loan Agreement and the other Loan Documents, as amended hereby, shall
continue to be legal, valid, binding and enforceable in accordance with their
respective terms.
5.02 REPRESENTATIONS AND WARRANTIES. Borrower hereby represents
and warrants to Lender that (a) 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; (b) attached hereto as Annex A is a true, correct and
complete copy of presently effective resolutions of Borrower's Board of
Directors authorizing the execution, delivery and performance of this Amendment
and any and all other Loan Documents executed and/or delivered in connection
herewith, certified by the Assistant Secretary of Borrower; (c) the
representations and warranties contained in the Loan Agreement, as amended
hereby, and any other Loan Documents are true and correct on and as of the date
hereof and on and as of the date of execution hereof as though made on and as
of each such date; (d) no Default or Event of Default under the Loan Agreement,
as amended hereby, has occurred and is continuing, unless such Default or Event
of Default has been specifically waived in writing by Lender; (e) Borrower is
in full compliance with all covenants and agreements contained in the Loan
Agreement and the other Loan Documents, as amended hereby; and (f) Borrower has
not amended its Articles of Incorporation or its Bylaws since the date of the
Loan Agreement.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in the Loan Agreement or any other Loan
Documents, including, without limitation, any 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 Lender or any closing
shall affect the representations and warranties or the right of Lender to rely
upon them.
6.02 REFERENCE TO LOAN AGREEMENT. Each of the Loan Agreement and
the other Loan Documents, and any and all other Loan Documents, documents or
instruments now or hereafter executed and delivered pursuant to the terms
hereof or pursuant to the terms of the Loan Agreement, as amended hereby, are
hereby amended so that any reference in the Loan Agreement and such other Loan
Documents to the Loan Agreement shall mean a reference to the Loan Agreement as
amended hereby.
AMENDMENT TO LOAN AND SECURITY AGREEMENT - PAGE 8
<PAGE> 9
6.03 EXPENSES OF LENDER. As provided in the Loan Agreement,
Borrower agrees to pay on demand all costs and expenses incurred by Lender 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 Lender's legal counsel, and all costs and
expenses incurred by Lender in connection with the enforcement or preservation
of any rights under the Loan Agreement, as amended hereby, or any other Loan
Documents, including, without, limitation, the costs and fees of Lender's legal
counsel.
6.04 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.
6.05 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and
shall inure to the benefit of Lender and Borrower and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights or obligations hereunder without the prior written consent of
Lender.
6.06 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.
6.07 EFFECT OF WAIVER. No consent or waiver, express or implied,
by Lender to or for any breach of or deviation from any covenant or condition
by Borrower shall be deemed a consent to or waiver of any other breach of the
same or any other covenant, condition or duty.
6.08 HEADINGS. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
6.09 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS
EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE
PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.
6.10 FINAL AGREEMENT. THE LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE
PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS
EXECUTED. THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY,
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY
PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED
BY BORROWER AND LENDER.
6.11 RELEASE. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS
LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES
OF ANY KIND OR NATURE FROM LENDER. BORROWER HEREBY
AMENDMENT TO LOAN AND SECURITY AGREEMENT - PAGE 9
<PAGE> 10
VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER, ITS
PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE
CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND
LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED,
SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS
EXECUTED, WHICH BORROWER MAY NOW OR HEREAFTER HAVE AGAINST LENDER, ITS
PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND
IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION
OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING,
WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING,
COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE
APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR
OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.
IN WITNESS WHEREOF, this Amendment has been executed and is effective
as of the date first above-written.
"BORROWER"
DXP ACQUISITION, INC.,
D/B/A STRATEGIC ACQUISITION, INC.
By: /s/ GARY A. ALLCORN
------------------------
Name: Gary A. Allcorn
------------------------
Title: Senior V.P./Finance
------------------------
"LENDER"
FLEET CAPITAL CORPORATION
By: /s/ H. MICHAEL WILLS
------------------------
Name: H. Michael Wills
------------------------
Title: VP
------------------------
ANNEXES:
A-1 - Certified Resolutions of DXP Acquisition, Inc., d/b/a Strategic
Acquisition, Inc.
AMENDMENT TO LOAN AND SECURITY AGREEMENT - PAGE 10
<PAGE> 11
ANNEX A-1
CERTIFIED RESOLUTIONS OF
DXP ACQUISITION, INC.,
D/B/A STRATEGIC ACQUISITION, INC.'S BOARD OF DIRECTORS
RESOLVED: That any officer of DXP Acquisition, Inc., d/b/a Strategic
Acquisition, Inc., a Nevada corporation (the "Corporation"), acting alone, by
his signature be, and the same hereby is, authorized and directed, in the name
of and on behalf of the Corporation (a) to amend the Corporation's existing
Loan and Security Agreement by and between the Corporation and Fleet Capital
Corporation, a Rhode Island corporation ("Lender"), (b) to execute and deliver
to Lender with such changes in the terms and provisions thereof as the officer
executing same shall, in his sole discretion, deem advisable, (i) a certain
proposed Amendment to Loan and Security Agreement to be executed by Corporation
and Lender, a draft of which has been reviewed and discussed by the Board of
Directors of the Corporation, and (ii) such other Loan Documents, instruments,
statements and writings as the officer or officers executing the same may deem
desirable or necessary in connection therewith, and (c) to perform such other
acts as the officer or officers performing such acts on behalf of the
Corporation may deem desirable or necessary in connection therewith; and be it
FURTHER RESOLVED: That said agreements will benefit the Corporation,
both directly and indirectly, and are in the best interests of the Corporation;
and be it
FURTHER RESOLVED: That said agreements and other statements in
writing executed in the name and on behalf of the Corporation by any officer of
the Corporation shall be presumed conclusively to be the instruments, the
execution of which is authorized by these resolutions; and be it
FURTHER RESOLVED: That the officers of the Corporation be, and the
same hereby are, authorized and directed to execute, in the name of and on
behalf of the Corporation, security agreements, financing statements,
assignments, collateral reports, loan statements, confirmations of delivery,
lien statements, pledge certificates, release certificates, removal reports,
guaranties, cross- collateralization agreements and such other writings and to
take such other actions as are necessary in their dealings with Lender, and any
such papers executed and any such actions taken by any of them prior to this
time are approved, ratified and confirmed; and be it
FURTHER RESOLVED: That the Secretary or any Assistant Secretary of
the Corporation, by the signature of any one or more of them, be, and the same
hereby are, authorized and directed to attest the execution by the Corporation
of the papers signed pursuant to these resolutions, to affix the seal of the
Corporation thereto, if required by Lender, and to certify to Lender the
adoption of these resolutions.
CERTIFICATION
The undersigned hereby certifies that the within and foregoing
resolutions are in effect as of the date hereof, without modification, and that
the person signing the within and foregoing Amendment on behalf of the
Corporation is the duly elected officer stated below his name, that he is
authorized to sign such Amendment, and that his signature thereon is genuine.
DATED: April 29, 1998.
/s/ GARY A. ALLCORN
----------------------------------------
[Assistant] Secretary of the Corporation
CONSENT AND RATIFICATION TO
AMENDMENT TO LOAN AND SECURITY - Page 1
<PAGE> 12
CONSENT, RATIFICATION, AND AMENDMENT
The undersigned, SEPCO INDUSTRIES, INC., has executed that certain
Continuing Guaranty Agreement, dated June 16, 1997 (the "Guaranty"), in favor
of FLEET CAPITAL CORPORATION, a Rhode Island corporation ("Lender"). The
undersigned hereby (i) consents and agrees to the terms of the Amendment to
Loan and Security Agreement, dated as of April 29, 1998 (the "Loan Amendment"),
by and between DXP Acquisition, Inc., d/b/a Strategic Acquisition, Inc., a
Nevada corporation, and Lender, a copy of which has been reviewed by the
undersigned, and (ii) agrees that the Guaranty shall remain in full force and
effect and shall continue to be the legal, valid and binding obligation of the
undersigned enforceable against it in accordance with its terms. Furthermore,
the undersigned hereby agrees and acknowledges that (a) the obligations,
indebtedness and liabilities arising in connection with the Loan Amendment
comprise some, but not all, of the "Obligations" as such term is used in the
Guaranty, (b) the Guaranty is an "Other Agreement", as such term is defined in
the Loan Agreement, (c) the Guaranty is not as of this date subject to any
claims, defenses or offsets, (d) nothing contained in the Loan Agreement or any
Other Agreement entered into prior to or as of the date hereof shall adversely
affect any right or remedy of Lender under the Guaranty, and (e) the execution
and delivery of the Loan Amendment shall in no way reduce, impair or discharge
any obligations of the undersigned as guarantor pursuant to the Guaranty and
shall not constitute a waiver by Lender of any of Lender's rights against the
undersigned.
Dated: April 29, 1998.
SEPCO INDUSTRIES, INC.
By: /s/ GARY A. ALLCORN
------------------------
Name: Gary A. Allcorn
------------------------
Title: Senior V.P./Finance
------------------------
CONSENT AND RATIFICATION TO
AMENDMENT TO LOAN AND SECURITY - Page 1
<PAGE> 13
CONSENT, RATIFICATION, AND AMENDMENT
The undersigned, AMERICAN MRO, INC., has executed that certain
Continuing Guaranty Agreement, dated June 16, 1997 (the "Guaranty"), in favor
of FLEET CAPITAL CORPORATION, a Rhode Island corporation ("Lender"). The
undersigned hereby (i) consents and agrees to the terms of the Amendment to
Loan and Security Agreement, dated as of April 29, 1998 (the "Loan Amendment"),
by and between DXP Acquisition, Inc., d/b/a Strategic Acquisition, Inc., a
Nevada corporation, and Lender, a copy of which has been reviewed by the
undersigned, and (ii) agrees that the Guaranty shall remain in full force and
effect and shall continue to be the legal, valid and binding obligation of the
undersigned enforceable against it in accordance with its terms. Furthermore,
the undersigned hereby agrees and acknowledges that (a) the obligations,
indebtedness and liabilities arising in connection with the Loan Amendment
comprise some, but not all, of the "Obligations" as such term is used in the
Guaranty, (b) the Guaranty is an "Other Agreement", as such term is defined in
the Loan Agreement, (c) the Guaranty is not as of this date subject to any
claims, defenses or offsets, (d) nothing contained in the Loan Agreement or any
Other Agreement entered into prior to or as of the date hereof shall adversely
affect any right or remedy of Lender under the Guaranty, and (e) the execution
and delivery of the Loan Amendment shall in no way reduce, impair or discharge
any obligations of the undersigned as guarantor pursuant to the Guaranty and
shall not constitute a waiver by Lender of any of Lender's rights against the
undersigned.
Dated: April 29, 1998.
AMERICAN MRO, INC.
By: /s/ GARY A. ALLCORN
------------------------
Name: Gary A. Allcorn
------------------------
Title: Senior V.P./Finance
------------------------
CONSENT AND RATIFICATION TO
AMENDMENT TO LOAN AND SECURITY - Page 1
<PAGE> 14
CONSENT, RATIFICATION, AND AMENDMENT
The undersigned, BAYOU PUMPS, INC., has executed that certain
Continuing Guaranty Agreement, dated June 16, 1997 (the "Guaranty"), in favor
of FLEET CAPITAL CORPORATION, a Rhode Island corporation ("Lender"). The
undersigned hereby (i) consents and agrees to the terms of the Amendment to
Loan and Security Agreement, dated as of April 29, 1998 (the "Loan Amendment"),
by and between DXP Acquisition, Inc., d/b/a Strategic Acquisition, Inc., a
Nevada corporation, and Lender, a copy of which has been reviewed by the
undersigned, and (ii) agrees that the Guaranty shall remain in full force and
effect and shall continue to be the legal, valid and binding obligation of the
undersigned enforceable against it in accordance with its terms. Furthermore,
the undersigned hereby agrees and acknowledges that (a) the obligations,
indebtedness and liabilities arising in connection with the Loan Amendment
comprise some, but not all, of the "Obligations" as such term is used in the
Guaranty, (b) the Guaranty is an "Other Agreement", as such term is defined in
the Loan Agreement, (c) the Guaranty is not as of this date subject to any
claims, defenses or offsets, (d) nothing contained in the Loan Agreement or any
Other Agreement entered into prior to or as of the date hereof shall adversely
affect any right or remedy of Lender under the Guaranty, and (e) the execution
and delivery of the Loan Amendment shall in no way reduce, impair or discharge
any obligations of the undersigned as guarantor pursuant to the Guaranty and
shall not constitute a waiver by Lender of any of Lender's rights against the
undersigned.
Dated: April 29, 1998.
BAYOU PUMPS, INC.
By: /s/ GARY A. ALLCORN
------------------------
Name: Gary A. Allcorn
------------------------
Title: Senior V.P./Finance
------------------------
CONSENT AND RATIFICATION TO
AMENDMENT TO LOAN AND SECURITY - Page 1
<PAGE> 15
CONSENT, RATIFICATION, AND AMENDMENT
The undersigned, PELICAN STATE SUPPLY COMPANY, INC., has executed that
certain Continuing Guaranty Agreement, dated June 16, 1997 (the "Guaranty"), in
favor of FLEET CAPITAL CORPORATION, a Rhode Island corporation ("Lender"). The
undersigned hereby (i) consents and agrees to the terms of the Amendment to
Loan and Security Agreement, dated as of April 29, 1998 (the "Loan Amendment"),
by and between DXP Acquisition, Inc., d/b/a Strategic Acquisition, Inc., a
Nevada corporation, and Lender, a copy of which has been reviewed by the
undersigned, and (ii) agrees that the Guaranty shall remain in full force and
effect and shall continue to be the legal, valid and binding obligation of the
undersigned enforceable against it in accordance with its terms. Furthermore,
the undersigned hereby agrees and acknowledges that (a) the obligations,
indebtedness and liabilities arising in connection with the Loan Amendment
comprise some, but not all, of the "Obligations" as such term is used in the
Guaranty, (b) the Guaranty is an "Other Agreement", as such term is defined in
the Loan Agreement, (c) the Guaranty is not as of this date subject to any
claims, defenses or offsets, (d) nothing contained in the Loan Agreement or any
Other Agreement entered into prior to or as of the date hereof shall adversely
affect any right or remedy of Lender under the Guaranty, and (e) the execution
and delivery of the Loan Amendment shall in no way reduce, impair or discharge
any obligations of the undersigned as guarantor pursuant to the Guaranty and
shall not constitute a waiver by Lender of any of Lender's rights against the
undersigned.
Dated: April 29, 1998.
PELICAN STATE SUPPLY COMPANY, INC.
By: /s/ GARY A. ALLCORN
------------------------
Name: Gary A. Allcorn
------------------------
Title: Senior V.P./Finance
------------------------
CONSENT AND RATIFICATION TO
AMENDMENT TO LOAN AND SECURITY - Page 1
<PAGE> 16
CONSENT, RATIFICATION AND AMENDMENT
The undersigned, DXP ENTERPRISES, INC., has executed (x) that certain
Continuing Guaranty Agreement, dated June 16, 1997 (the "Guaranty"), in favor
of FLEET CAPITAL CORPORATION, a Rhode Island corporation ("Lender"), and (y)
that certain Stock Pledge Agreement, dated as of June 16, 1997, executed by the
undersigned and Fleet (the "Security Agreement"). The undersigned hereby (i)
consents and agrees to the terms of the Amendment to Loan and Security
Agreement, dated as of April 29, 1998 (the "Loan Amendment"), by and between
DXP Acquisition, Inc., d/b/a Strategic Acquisition, Inc., a Nevada corporation,
and Lender, a copy of which has been reviewed by the undersigned, and (ii)
agrees that each of the Guaranty and the Security Agreement shall remain in
full force and effect and shall continue to be the legal, valid and binding
obligation of the undersigned, enforceable against it in accordance with its
terms. Furthermore, the undersigned hereby agrees and acknowledges that (a)
the obligations, indebtedness and liabilities arising in connection with the
Loan Amendment comprise some, but not all, of the "Obligations", as such term
is used in the Guaranty, and some, but not all, of the "Secured Obligations",
as such term is used in the Security Agreement, (b) each of the Guaranty and
the Security Agreement is an "Other Agreement", as such term is defined in the
Loan Agreement, (c) neither the Guaranty nor the Security Agreement is, as of
the date hereof, subject to any claims, defenses or offsets, (d) nothing
contained in the Loan Agreement or any Other Agreement entered into prior to or
as of the date hereof shall adversely affect any right or remedy of Lender
under the Guaranty or under the Security Agreement, and (e) the execution and
delivery of the Loan Amendment shall in no way reduce, impair or discharge any
obligations of the undersigned as guarantor pursuant to the Guaranty or as
debtor pursuant to the Security Agreement and shall not constitute a waiver by
Lender of any of Lender's rights against the undersigned.
Dated: April 29, 1998.
DXP ENTERPRISES, INC.
By: /s/ GARY A. ALLCORN
------------------------
Name: Gary A. Allcorn
------------------------
Title: Senior V.P./Finance
------------------------
CONSENT AND RATIFICATION TO
AMENDMENT TO LOAN AND SECURITY - Page 1
<PAGE> 1
EXHIBIT 10.4
SECURED PROMISSORY NOTE
[ACQUISITION TERM LOANS]
$15,000,000.00 DALLAS, TEXAS APRIL 29, 1998
FOR VALUE RECEIVED, each of the undersigned (collectively,
"Borrower"), hereby jointly and severally promise to pay to the order of Fleet
Capital Corporation, a Rhode Island corporation ("Lender"), at 2711 North
Haskell, Suite 2100, LB 21, Dallas, Texas 75204, or at such other address as
the holder hereof shall so notify Borrower, in such coin or currency of the
United States which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment, the principal sum of FIFTEEN
MILLION AND NO/100 DOLLARS ($15,000,000.00), or as much as may be advanced
hereunder as Acquisition Term Loans (as defined in the Loan Agreement),
together with interest from and after the date of the funding of the initial
Acquisition Term Loan hereunder on the unpaid principal balance outstanding at
a variable rate per annum equal to the lesser of (i) the Applicable Annual Rate
(as defined in the Loan Agreement), or (ii) the Maximum Legal Rate.
This Secured Promissory Note (this "Note") is the Acquisition Term
Loans Note referred to in, and is issued pursuant to, that certain SECOND
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT between Sepco Industries, Inc.
and Lender dated April 1, 1994 (as amended, renewed and extended from time to
time, the "Loan Agreement"), and is entitled to all of the benefits and
security of the Loan Agreement. All of the terms, covenants and conditions of
the Loan Agreement and all other instruments evidencing or securing the
indebtedness hereunder (including, without limitation, the "Other Agreements"
as defined in the Loan Agreement) are hereby made a part of this Note and are
deemed incorporated herein in full. All capitalized terms used in this Note,
unless otherwise specifically defined herein, shall have the meanings ascribed
to them in the Loan Agreement.
Borrower acknowledges and understands that the Base Rate merely serves
as a basis upon which effective rates of interest are calculated for loans
making reference to the per annum rate of interest established by Bank from
time to time as its base rate and that such rate may not be the lowest or best
rate at which Bank calculates interest or extends credit. After the date of
the funding of the initial Acquisition Term Loan hereunder, the rate of
interest in effect hereunder on each portion of the outstanding principal
amount of this Note that is not a Eurodollar Loan (as defined in the Loan
Agreement) shall be increased or decreased, as the case may be, by an amount
equal to any increase or decrease in the Base Rate, with such adjustments to be
effective as of the opening of business on the date that any such change in the
Base Rate becomes effective. The Base Rate in effect on the date of the
funding of the initial Acquisition Term Loan hereunder shall be the Base Rate
effective as of the opening of business on the date of funding. The rate of
interest in effect hereunder may be increased in accordance with the provisions
of the Loan Agreement. Interest on this Note shall be calculated on a daily
basis (computed on the actual number of days elapsed over a year of 360 days);
provided, however, interest due at the
SECURED PROMISSORY NOTE - PAGE 1
<PAGE> 2
Maximum Legal Rate shall be calculated on the basis of actual days
elapsed over a year of 365 or 366 days, as the case may be.
Upon and after the occurrence of an Event of Default, and during the
continuation thereof, the principal amount of this Note shall bear interest, at
a fluctuating rate per annum equal to the lesser of (i) 4% above the Applicable
Annual Rate (the "Default Rate"), calculated daily (computed on the actual days
elapsed over a year of 360 days), or (ii) the Maximum Legal Rate.
If at any time the amount of such interest computed on the basis of
the Applicable Annual Rate or the Default Rate, whichever is applicable (the
"Applicable Rate"), would exceed the amount of such interest computed upon the
basis of the maximum rate of interest permitted by applicable state or federal
law in effect from time to time hereafter (the "Maximum Legal Rate"), the
interest payable under this Note shall be computed upon the basis of the
Maximum Legal Rate, but any subsequent reduction in the Applicable Rate shall
not reduce such interest thereafter payable hereunder below the amount computed
on the basis of the Maximum Legal Rate until the aggregate amount of such
interest accrued and payable under this Note equals the total amount of
interest which would have accrued if such interest had been at all times
computed solely on the basis of the Applicable Rate.
The principal amount and accrued interest of this Note shall be due
and payable on the dates and in the manner hereinafter set forth:
(a) interest shall be due and payable monthly, in
arrears, on the first day of each month, commencing on the first day
of the first month after the funding of the initial Acquisition Term
Loan, and continuing until such time as the full principal balance,
together with all other amounts owing hereunder, shall have been paid
in full;
(b) with respect to each Acquisition Term Loan funded
hereunder prior to October 1, 1998, principal installments equal to
1/60 of the original principal amount of such Acquisition Term Loan
shall be due and payable monthly, commencing on October 1, 1998, and
continuing regularly thereafter on the first day of each succeeding
month during the term of this Note;
(c) with respect to each Acquisition Term Loan funded
hereunder on or after October 1, 1998, principal installments equal to
1/60 of the original principal amount of such Acquisition Term Loan
shall be due and payable monthly, commencing on the first day of the
first month immediately succeeding the funding of such Acquisition
Term Loan and continuing regularly thereafter on the first day of each
succeeding month thereafter during the term of this Note; and
(d) the entire unpaid principal balance hereof, together
with any and all other amounts due hereunder, shall be due and payable
in full on the last day of the Original Term or the Renewal Term, as
applicable.
SECURED PROMISSORY NOTE - PAGE 2
<PAGE> 3
Notwithstanding the foregoing, the entire unpaid principal balance and accrued
interest on this Note shall be due and payable immediately upon any termination
of the Loan Agreement pursuant to Section 3.3 thereof or otherwise.
The occurrence of an Event of Default under the Loan Agreement,
including, without limitation, the failure to pay any installment of principal
or interest on this Note in full on or within ten days after the due date
thereof in accordance with the terms of this Note, shall constitute an event of
default under this Note and shall entitle Lender, at its option, upon, or at
any time after the occurrence of any such Event of Default, to declare the then
outstanding principal balance and accrued interest hereof to be, and the same
shall thereupon become, immediately due and payable without notice to or demand
upon Borrower, all of which Borrower hereby expressly waives. If this Note is
collected by or through an attorney at law, then Borrower shall be obligated to
pay, in addition to the principal balance and accrued interest hereof,
reasonable attorneys' fees and court costs.
This Note shall be subject to mandatory prepayment, without premium or
penalty, in accordance with the provisions of Section 3.4(D) of the Loan
Agreement. Subject to the next sentence, Borrower may voluntarily prepay,
without premium or penalty, this Note in whole at any time or in part from time
to time upon ten days' prior written notice to Lender, provided that each such
prepayment shall be made together with accrued interest on the principal amount
so prepaid on the prepayment date, and any partial prepayment shall be in an
amount equal to $100,000 or in $100,000 multiples thereof. If Borrower
terminates the Loan Agreement pursuant to Section 3.3(B) thereof, then, upon
the effective date of such termination, Borrower shall pay to Lender (in
addition to any other charges due under the terms of the Loan Agreement) the
termination charge provided for in Section 3.3(C) of the Loan Agreement.
All partial prepayments, whether mandatory or voluntary, shall be
applied to installments of principal in the inverse order of their maturities.
No agreements, conditions, provisions or stipulations contained in the
Loan Agreement, this Note or any other instrument, document or agreement
between Borrower and Lender or default of Borrower, or the exercise by Lender
of the right to accelerate the payment of the maturity of principal and
interest, or to exercise any option whatsoever contained in the Loan Agreement,
this Note or any other agreement between Borrower and Lender, or the arising
from any contingency whatsoever, shall entitle Lender to charge or collect, in
any event, interest exceeding the Maximum Legal Rate and in no event shall
Borrower be obligated to pay interest exceeding such Maximum Legal Rate and all
agreements, conditions or stipulations, if any, which may in any event or
contingency whatsoever operate to bind, obligate or compel Borrower to pay a
rate of interest exceeding the Maximum Legal Rate, shall be without binding
force or effect, at law or in equity, to the extent only of the excess of
interest over such Maximum Legal Rate. In the event any interest is charged or
collected in excess of the Maximum Legal Rate ("Excess"), Borrower acknowledges
and stipulates that any such charge or collection shall be the result of an
accident and bona fide error, and such Excess shall be, first, applied to
reduce the principal then unpaid hereunder; second, applied to reduce the
Obligations; and third, returned to Borrower, it being the intention of the
parties hereto not to enter at any time into a usurious or
SECURED PROMISSORY NOTE - PAGE 3
<PAGE> 4
otherwise illegal relationship. Borrower recognizes that, with fluctuations in
the Applicable Annual Rate, the Default Rate and the Maximum Legal Rate, such
an unintentional result could inadvertently occur. By the execution of this
Note, Borrower covenants that (i) the credit or return of any Excess shall
constitute the acceptance by Borrower of such Excess, and (ii) Borrower shall
not seek or pursue any other remedy, legal or equitable, against Lender, based
in whole or in part upon the charging or receiving of any interest in excess of
the maximum authorized by applicable law. For the purpose of determining
whether or not any Excess has been contracted for, charged or received by
Lender, all interest at any time contracted for, charged or received by Lender
in connection with this Note, shall be amortized, prorated, allocated and
spread in equal parts during the entire term of this Agreement.
Time is of the essence of this Note. To the fullest extent permitted
by applicable law, Borrower, for itself and its legal representatives,
successors and assigns, expressly waives presentment, demand, protest, notice
of dishonor, notice of non-payment, notice of acceleration, notice of intent to
accelerate, notice of maturity, notice of protest, presentment for the purpose
of accelerating maturity, diligence in collection, and the benefit of any
exemption or insolvency laws.
Wherever possible each provision of this Note shall be interpreted in
such a manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or remaining
provisions of this Note. No delay or failure on the part of Lender in the
exercise of any right or remedy hereunder shall operate as a waiver thereof,
nor as an acquiescence in any default, nor shall any single or partial exercise
by Lender of any right or remedy preclude any other right or remedy. Lender,
at its option, may enforce its rights against any collateral securing this Note
without enforcing its rights against Borrower, any guarantor of the
indebtedness evidenced hereby or any other property or indebtedness due or to
become due to Borrower. Borrower agrees that, without releasing or impairing
Borrower's liability hereunder, Lender may at any time release, surrender,
substitute or exchange any collateral securing this Note and may at any time
release any party primarily or secondarily liable for the indebtedness
evidenced by this Note.
This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of Texas, as more fully provided in
Section 12.18 of the Loan Agreement.
[The remainder of this page intentionally left blank.]
SECURED PROMISSORY NOTE - PAGE 4
<PAGE> 5
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed
and delivered on the date first above written.
SEPCO INDUSTRIES, INC.
By: /s/ Gary A. Allcorn
---------------------
Name: Gary A. Allcorn
---------------------
Title: Senior V.P./Finance
---------------------
BAYOU PUMPS, INC.
By: /s/ GARY A. ALLCORN
---------------------
Name: Gary A. Allcorn
---------------------
Title: Senior V.P./Finance
---------------------
AMERICAN MRO, INC.
By: /s/ Gary A. Allcorn
---------------------
Name: Gary A. Allcorn
---------------------
Title: Senior V.P./Finance
---------------------
SECURED PROMISSORY NOTE - PAGE 5
<PAGE> 1
Exhibit 11.1: Statement re: Computation of Per Share Earnings.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
----------- ------------
<S> <C> <C>
Basic:
Average shares outstanding 8,314,845 7,993,947
Net Income 857,000 753,000
Per share amount $ .1031 $ .0942
Dilutive:
Average shares outstanding 8,314,845 7,993,947
Net effect of dilutive stock options --
based on the treasure stock method using
period-end market price, if higher than
average market price 2,246,244 1,897,633
Assumed conversion of Class A convertible
Preferred Stock 840,000 1,092,000
Total 11,401,089 10,983,580
Net Income $ 878,000 $ 791,000
Per share amount $ .0770 $ .0720
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS OF DXP
ENTERPRISES, INC. AS OF MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,259
<SECURITIES> 0
<RECEIVABLES> 27,765
<ALLOWANCES> 935
<INVENTORY> 28,922
<CURRENT-ASSETS> 59,914
<PP&E> 19,800
<DEPRECIATION> 9,416
<TOTAL-ASSETS> 77,162
<CURRENT-LIABILITIES> 21,701
<BONDS> 0
112
20
<COMMON> 80
<OTHER-SE> 12,931
<TOTAL-LIABILITY-AND-EQUITY> 77,162
<SALES> 49,004
<TOTAL-REVENUES> 49,004
<CGS> 36,419
<TOTAL-COSTS> 36,419
<OTHER-EXPENSES> 10,508
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 785
<INCOME-PRETAX> 1,468
<INCOME-TAX> 590
<INCOME-CONTINUING> 878
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 878
<EPS-PRIMARY> .10
<EPS-DILUTED> .08
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DXP
ENTERPRISES, INC.'S UNAUDITED FINANCIAL STATEMENTS FOR THE QUARTER ENDED
SEPTEMBER 30, 1996 AND MARCH 31, JUNE 30, AND SEPTEMBER 30, 1997 AND AUDITED
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31,
1997.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JUL-01-1996 JAN-01-1996 JAN-01-1997 APR-01-1997 JUL-01-1997
<PERIOD-END> SEP-30-1996 DEC-31-1996 MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 1 876 979 0 556
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 16,558 17,335 20,200 26,107 27,201
<ALLOWANCES> 200 210 301 406 310
<INVENTORY> 16,719 17,175 16,665 28,380 28,027
<CURRENT-ASSETS> 34,602 36,226 38,378 55,131 56,263
<PP&E> 15,068 15,862 16,091 19,232 19,351
<DEPRECIATION> 7,987 8,044 8,299 8,553 8,799
<TOTAL-ASSETS> 42,856 45,042 47,123 69,059 69,985
<CURRENT-LIABILITIES> 9,043 10,614 11,416 18,927 18,808
<BONDS> 0 0 0 0 0
600 600 600 2,255 292
1,509 17 17 20 20
<COMMON> 9 80 160 80 80
<OTHER-SE> 7,483 10,362 11,035 12,189 12,438
<TOTAL-LIABILITY-AND-EQUITY> 42,856 45,042 47,123 69,059 69,985
<SALES> 95,214 125,208 30,129 69,470 118,277
<TOTAL-REVENUES> 95,214 125,208 30,129 69,470 118,277
<CGS> 70,574 93,091 21,756 50,371 86,706
<TOTAL-COSTS> 21,587 28,381 21,753 50,371 86,706
<OTHER-EXPENSES> 0 0 7,043 16,347 26,661
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 1,556 2,101 539 1,008 1,960
<INCOME-PRETAX> 1,497 1,635 1,220 2,480 2,950
<INCOME-TAX> 607 745 429 888 1,070
<INCOME-CONTINUING> 890 890 791 1,592 1,880
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 890 890 791 1,592 1,880
<EPS-PRIMARY> .10 .10 .09 .19 .22
<EPS-DILUTED> .09 .09 .07 .14 .17
</TABLE>
