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EXHIBIT 10.2
March 30, 1999
Pelican State Supply Company, Inc.
580 Westlake Park Boulevard
Suite 1100
Houston, Texas 77079
Attention: Chief Financial Officer
Re: WAIVER OF VIOLATION OF SECTIONS 9.3(A), (B) AND (C) OF THE
LOAN AND SECURITY AGREEMENT WITH FLEET CAPITAL CORPORATION AND
AMENDMENT TO DEFINITIONS OF "BORROWING BASE", "COMMITMENT" AND
AVAILABILITY IN THE LOAN AND SECURITY AGREEMENT AND POSSIBLE
INCREASE IN APPLICABLE ANNUAL RATE UNDER THE LOAN AND SECURITY
AGREEMENT AND ADDITION OF TWO NEW COVENANTS RELATING TO
MONTHLY FIXED CHARGE RATIO AND MONTHLY AVERAGE AVAILABILITY
AND DELETION OF RIGHT TO REQUEST EURODOLLAR LOANS.
Gentlemen:
Reference is hereby made to that certain Loan and Security Agreement,
dated as of May 29, 1997, executed by Fleet Capital Corporation, a Rhode Island
corporation ("Lender") and Pelican State Supply Company, Inc., a Nevada
corporation ("Borrower") (as amended from time to time, the "Loan Agreement").
Unless otherwise indicated, all terms used herein shall have the same meanings
as in the Loan Agreement.
The Borrower has informed Lender that as of the measurement periods
ended December 31, 1998, and March 31, 1999, respectively, the Borrower was in
violation of the financial covenants contained in Sections 9.3(A), (B) and (C)
of the Loan Agreement (collectively, the "Financial Covenant Violations"), and
has requested that Lender waive such violations.
In addition, Borrower hereby agrees and acknowledges that it has
requested, effective as of the date hereof, that (i) Lender agree to amend the
definition of "Borrowing Base" contained in Section 1.1 of the Loan Agreement by
(a) deleting therefrom the phrase "Two Million Five Hundred Thousand Dollars
($2,500,000)" and substituting therefor the phrase "One Million Four Hundred
Thousand Dollars ($1,400,000)," and (b) by deleting the phrase "One Million Five
Hundred Thousand Dollars ($1,500,000)" and substituting therefor the phrase "One
Million Four Hundred Thousand Dollars ($1,400,000), (ii) Lender agree to amend
and restate the definition of "Commitment" contained in Section 1.1 of the Loan
Agreement to read in its entirety as follows: "Commitment - One Million Four
Hundred Thousand Dollars ($1,400,000)", (iii) Lender agree to amend and restate
the definition of "Availability" contained in Section 1.1 of the Loan Agreement
to read in its entirety as follows:
"Availability - The amount of money which Borrower is entitled to
borrow from time to time as Revolving Credit Loans, such amount being
the difference derived when the sum of the principal amount of
revolving Credit Loans then outstanding (including any amounts which
Lender may have paid for the account of Borrower pursuant to any of the
Loan Documents and which have not been reimbursed by Borrower) and the
undrawn amount of all LC Guaranties then outstanding is subtracted from
the Borrowing Base, as
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March 30, 1999
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the calculation is determined by Lender. If the amount outstanding is
equal to or greater than the Borrowing Base, Availability is 0.",
(iv) the following sentence shall be added to Section 3.7(A) of the Loan
Agreement:
"The Borrower agrees that Borrower shall no longer have the right to
request a Eurodollar Loan under the Loan Agreement, and Lender shall
not be required to make a Eurodollar Loan to Borrower.", and
(v) Lender agree to add the following two financial covenants to Section 9.3 of
the Loan Agreement, which shall be added as a new Section 9.3(D) and a new
Section 9.3(E), which shall read and be as follows in their entirety:
"(D) Maintain, on a consolidated basis in accordance with GAAP, as of
the end of each fiscal month, beginning with the fiscal month ending on
March 31, 1999, a Fixed Charge Ratio of not less than 1.00 to 1.00, for
each such month.
(E) Maintain average monthly Availability on a consolidated basis of
not less than $3,000,000. For purposes of meeting this requirement, up
to$1,000,000 of the Borrowing Base which is in excess of the combined
Commitments of DXP Enterprises, Inc., Pelican State Supply Company,
Inc., and Sepco Industries, Inc., Bayou Pumps, Inc. and America MRO,
Inc. can be used to meet this average monthly Availability
requirement."
Lender hereby waives the Financial Covenant Violations and agrees to
the revisions to the Loan Agreement set forth above; provided, however, that (i)
such agreement to the above-described revisions to the Loan Agreement and such
waiver shall not apply to or constitute a consent to any future amendment to any
other provision of the Loan Agreement or a waiver of any other past, present or
future violation or violations of any other provision of the Loan Agreement, and
(ii) Lender's agreement to the above-described revisions to the Loan Agreement
and Lender's failure to exercise any right, privilege or remedy as a result of
the violation set forth above shall not directly or indirectly in any way
whatsoever either: (a) impair, prejudice or otherwise adversely affect Lender's
right at any time to exercise any right, privilege, or remedy in connection with
the Loan Agreement, any other agreement, or any other contract or instrument, or
(b) amend or alter any provision of the Loan Agreement, any other agreement, or
any other contract or instrument, or (c) constitute any course of dealing or
other basis for altering any obligation of Borrower or any right, privilege, or
remedy of Lender under the Loan Agreement, any other agreement, or any other
contract or instrument.
Except as expressly set forth herein, all of the other terms,
provisions and conditions of the Loan Agreement and other agreements shall
remain and continue in full force and effect.
Except as expressly stated herein, Lender reserves all of its rights,
privileges and remedies under the Loan Agreement, each other agreement and any
other contracts or instruments executed by Borrower
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March 30, 1999
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and/or for the benefit of Lender. In order to induce Lender to execute this
letter, Borrower accepts and agrees to each provision of this letter.
Notwithstanding any provision of this letter to the contrary, this
letter shall not be directly or indirectly effective against Lender for any
purpose unless and until Lender receives a copy of this letter which has been
duly signed by the Borrower.
Yours very truly,
FLEET CAPITAL CORPORATION
By: H. MICHAEL WILLS
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Its: Senior Vice President
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AGREED AND ACCEPTED:
PELICAN STATE SUPPLY COMPANY, INC.
By: GARY A. ALLCORN
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Its: Senior Vice President/Finance
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