EXHIBIT 10.1

SECOND AMENDMENT TO

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

THIS SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is
made as of this 28th day of August, 2007, by and among BANK OF AMERICA, N.A., a
national banking association (“Bank of America”) with an office at One South
Wacker Drive, Suite 3400, Chicago, Illinois 60606, individually as a Lender and
as Agent (“Agent”) for itself and any other financial institution which is or
becomes a party hereto (each such financial institution, including Bank of
America, is referred to hereinafter individually as a “Lender” and collectively
as the “Lenders”), the LENDERS and MFRI, INC., a Delaware corporation (“MFRI”),
MIDWESCO FILTER RESOURCES, INC., a Delaware corporation (“Midwesco”),
PERMA-PIPE, INC., a Delaware corporation (“Perma-Pipe”), THERMAL CARE, INC., a
Delaware corporation (“Thermal Care”), TDC FILTER MANUFACTURING, INC., a
Delaware corporation (“TDC”) and MIDWESCO MECHANICAL AND ENERGY, INC., a
Delaware corporation (“Mechanical”). Capitalized terms used in this Agreement
have the meanings assigned to them in Appendix A, General Definitions.
Accounting terms not otherwise specifically defined herein shall be construed in
accordance with GAAP consistently applied. MFRI, Midwesco, Perma-Pipe, Thermal
Care, TDC and Mechanical are sometimes hereinafter referred to individually as a
“Borrower” and collectively as “Borrowers”.

WHEREAS, Borrowers (other than Mechanical), Agent, and the Lender signatories
thereto hereto entered into that certain Amended and Restated Loan and Security
Agreement dated December 15, 2006, as amended by that First Amendment to Amended
and Restated Loan and Security Agreement dated February 28, 2007 by and among
Borrowers, Agent and Lenders (said Amended and Restated Loan and Security
Agreement, as amended from time to time, the “Loan Agreement”); and

WHEREAS, Borrowers, Agent and Lenders desire to amend and restate the Loan
Agreement as provided herein;

NOW, THEREFORE, in consideration of the following terms and conditions, the
parties agreed as follows:

1.           Definitions. All capitalized terms used herein without definition
shall have the meanings contained in the Loan Agreement.

2.           Amended Definitions. The definitions of “Borrowing Base” and “Term
Loan Notes” contained in Appendix A to the Loan Agreement are hereby deleted and
the following are inserted in their stead:

“Borrowing Base – as at any date of determination thereof, an amount equal to
the lesser of:

(i)         the Revolving Credit Maximum Amount minus the sum of (x) unpaid
principal balance of the Term Loan plus (y) the unpaid principal balance of the
Equipment Loans; or

 

 

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(ii)

an amount equal to:

 

(x)

the sum of:

 

(a)       eighty-five percent (85%) of the net amount of Eligible Accounts
(other than Eligible Accounts arising from short Term Projects) outstanding at
such date; plus

(b)       the lesser of Six Million Dollars ($6,000,000) or eighty-five percent
(85%) of the next amount of Eligible Accounts arising from Short Term Projects
outstanding at such date; plus

(c)       the lesser of (1) Fourteen Million Dollars ($14,000,000) or (2)
fifty-five percent (55%) of the value of Eligible Inventory at such date;

MINUS (subtract from the sum of (a) plus (b) plus (c));

(y)        $1,500,000 (the “Availability Reserve”); provided that Borrowers
acknowledge that Agent shall have the right (exercisable in its reasonable
discretion) to increase the Availability Reserve, if for any consecutive period
of five (5) days or more Availability is less than $5,000,000.

* * *

Term Loan Notes – the Amended and Restated Secured Promissory Notes executed by
Borrowers on or about August 28, 2007 in favor of each applicable Lender to
evidence its Term Loan, which shall be in the form of Exhibit 1.3A to the Second
Amendment, together with any replacement or successor notes therefor.”

3.           Letters of Credit. Section 1.2 of the Loan Agreement is hereby
deleted and the following is inserted in its stead:

“1.2       Letters of Credit; LC Guaranties. Agent agrees, for so long as no
Default or Event of Default exists and if requested by MFRI, on its own behalf
and on behalf of all other Borrowers, to (i) issue its, or cause to be issued by
Bank or another Affiliate of Agent, on the date requested by MFRI, on its own
behalf and on behalf of all other Borrowers, Letters of Credit for the account
of Borrowers or (ii) execute LC Guaranties by which Agent, Bank, or another
Affiliate of Agent, on the date so requested by MFRI, shall guaranty the payment
or performance by Borrowers of their reimbursement obligations with respect to
letters of credit; provided that the LC Amount shall not exceed Ten Million
Dollars ($10,000,000) at any time. No Letter of Credit or LC Guaranty may have
an expiration date after the last day of the Term. Notwithstanding anything to
the contrary contained herein, Borrowers, Agent and Lenders hereby agree that
all LC Obligations and all obligations of Borrowers relating thereto shall be
satisfied by the prompt issuance of one or more Revolving Credit Loans that are
Base Rate Portions, which Borrowers hereby acknowledge are requested and Lenders
hereby agree to fund.

 

 

 

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In the event that Revolving Credit Loans are not, for any reason, promptly made
to satisfy all then existing LC Obligations, each Lender hereby agrees to pay to
Agent, on demand, an amount equal to such LC Obligations multiplied by such
Lender’s Revolving Loan Percentage, and until so paid, such amount shall be
secured by the Collateral and shall bear interest and be payable at the same
rate and in the same manner as Base Rate Portions. Immediately upon the issuance
of a Letter of Credit or an LC Guaranty under this Agreement, each Lender shall
be deemed to have irrevocably and unconditionally purchased and received from
Agent, without recourse or warranty, an undivided interest and participation
therein equal to such LC Obligations multiplied by such Lender’s Revolving Loan
Percentage.” (changed language underscored)

4.           Term Loan. Section 1.3 of the Loan Agreement is hereby deleted and
the following is inserted in its stead:

“1.3       Term Loan. On or about March 28, 2005, each Lender made a term loan
(collectively, the “2005 Term Loan”) to Borrowers in the aggregate principal
amount of $4,300,000. As of the date hereof, the aggregate outstanding principal
amount of the 2005 Term Loan is $2,027,000. On the Second Amendment Effective
Date (as defined in Section 5 of the Second Amendment), each Lender, severally
and not jointly, agrees to make a term loan (collectively, the “2007 Term Loan”)
to Borrowers on the Closing Date, in the aggregate principal amount set forth
below such Lender’s signature to this Second Amendment. The aggregate amount of
the 2007 Term Loan is $973,000. The aggregate principal amount of the 2005 Term
Loan and the 2007 Term Loan shall be $3,000,000 as of the Second Amendment
Effective Date. The 2005 Term Loan and the 2007 Term Loan shall be combined into
one term loan (the “Term Loan”), which Term Loan shall be repayable in
accordance with the terms of the Term Loan Notes and shall be secured by all of
the Collateral. The proceeds of the 2007 Term Loan shall be used solely for the
purposes for which the proceeds of the Revolving Credit Loans are authorized to
be used.”

5.           Fixed Charge Coverage Ratio. The definition of “Fixed Charge
Coverage Ratio” contained in Exhibit 8.3 to the Loan Agreement is hereby deleted
and the following is inserted in its stead:

“Fixed Charge Coverage Ratio – with respect to any fiscal period, the ratio of
(i) EBITDA for such period minus Capital Expenditures (excluding, however,
Capital Expenditures financed by third party financing) made within such period
minus income taxes paid in cash in such period to (ii) the sum of Interest
Expense paid in cash within such period plus principal payments of Money
Borrowed (other than Revolving Credit Loans and the $3,150,000 principal payment
made on or about September 1, 2007 in respect of the IRB Indebtedness.)”

6.           Conditions Precedent. This Second Amendment shall become effective
upon satisfaction of each of the following conditions precedent:

(A)       Borrowers, Agent and Lenders shall have executed and delivered to each
other this Second Amendment;

 

 

 

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(B)        Borrowers shall have executed and delivered to Agent an amended and
restated Term Loan Note in the form attached to this Second Amendment as
Exhibit 1.3A; and

(C)       Borrowers shall have delivered to Agent a Certificate of the Secretary
of each Borrower, together with copies of the resolutions of the Board of
Directors of each Borrower authorizing or ratifying the execution, delivery and
performance of this Second Amendment and the other Loan Documents to be executed
by Borrowers and the names of the officer or officers of each Borrower
authorized to sign this Second Amendment and the other Loan Documents to be
executed by each Borrower in connection therewith together with a sample of the
true signature of each such officer.

The date on which all of the above conditions precedent have been satisfied or
waived is hereinafter revered to as the “Second Amendment Effective Date.” After
the Second Amendment Effective Date, Agent shall return the Term Loan Note
previously delivered to Agent and Bank of America, as Agent, marked “Amended and
Superceded.”

7.           Governing Law. This Second Amendment shall be governed by, and
construed in accordance with, the laws of the State of Illinois, without regard
to the principles thereof relating to conflict of laws.

8.           Execution in Counterparts. This Second Amendment may be executed in
any number of counterparts, which shall, collectively and separately, constitute
one Agreement.

9.           Continuing Effect. Except as otherwise provided herein, the Loan
Agreement remains in full force and effect.

(Signature Page Follows)

 

 

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(Signature Page to Second Amendment to

Amended and Restated Loan and Security Agreement)

 

 

MFRI, INC.

By:  /s/ Michael D. Bennett                                   
        Name: Michael D. Bennett                             
        Title: VP CFO                                                   

   

 

MIDWESCO FILTER RESOURCES, INC.

By:  /s/ Michael D. Bennett                                   
        Name: Michael D. Bennett                             
        Title: VP                                                            

   

 

PERMA-PIPE, INC.

By:  /s/ Michael D. Bennett                                   
        Name: Michael D. Bennett                             
        Title: VP                                                            

   

 

THERMAL CARE, INC.

By:  /s/ Michael D. Bennett                                   
        Name: Michael D. Bennett                             
        Title: VP                                                            

   

 

TDC FILTER MANUFACTURING, INC.

By:  /s/ Michael D. Bennett                                   
        Name: Michael D. Bennett                             
        Title: VP                                                            

   

 

MIDWESCO MECHANICAL AND ENERGY, INC.

By:  /s/ Michael D. Bennett                                   
        Name: Michael D. Bennett                             
        Title: VP                                                            

 

 

 

 

 

 

 

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(Signature Page to Second Amendment to

Amended and Restated Loan and Security Agreement)

 

 

BANK OF AMERICA, N.A., as Agent and as a Lender

By:  /s/ Brian Conole                                                 
Name: Brian Conole                                                   
Title: Senior Vice President                                      

2007 Term Loan: $973,000

 

 

 

 

 

 

 

 

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EXHIBIT 1.3A

FORM OF TERM LOAN NOTE

(SECURED PROMISSORY NOTE)

$3,000,000

Amended and Restated as of
August __, 2007
Chicago, Illinois

 

 

FOR VALUE RECEIVED, the undersigned (“Borrowers”), hereby jointly and severally
promises to pay to the order of Bank of America, N.A., a national banking
association (hereinafter “Lender”), or its registered assigns at the office of
Bank of America, N.A., as agent for such Lender, or at such other place in the
United States of America as the holder of this Note may designate from time to
time in writing, in lawful money of the United States, in immediately available
funds, at the time of payment, the principal sum of Three Million Dollars
($3,000,000), together with interest from and after the date hereof on the
unpaid principal balance outstanding from time to time.

This Secured Promissory Note (the “Note”) is one of the Term Loan Notes referred
to in, and is issued pursuant to, that certain Amended and Restated Loan and
Security Agreement dated as of December 15, 2006, by and among Borrowers, the
lender signatories thereto (including Lender), and Bank of America, N.A. (“Bank
of America”) as Agent for said lenders (Bank of America in such capacity
“Agent”) (hereinafter, as amended 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 the Security
Documents are hereby made a part of this Note and are deemed incorporated herein
in full. All capitalized terms used herein, unless otherwise specifically
defined in this Note, shall have the meanings ascribed to them in the Loan
Agreement.

For so long as no Event of Default shall have occurred and be continuing, 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 on the unpaid principal balance outstanding from time to
time shall be paid at such interest rates and at such times as are specified in
the Loan Agreement;

(b)        principal shall continue to be due and payable quarterly on September
1, 2007 and each December 1, March 1, June 1 and September 1 thereafter in
installments equal to $107,142.86 and

(c)        the entire remaining principal amount then outstanding, together with
any and all other amounts due hereunder, shall be due and payable on the last
day of the Term.

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 4 thereof.

 

 

 

Exhibit 1.3A – Page 1

 

 

 

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This Note shall be subject to mandatory prepayment in accordance with the
provisions of Section 3.3 of the Loan Agreement. Borrowers may also prepay this
Note in the manner provided in subsection 3.3.5 or Section 4 of the Loan
Agreement.

Upon the occurrence, and during the continuation, of an Event of Default, this
Note shall or may, as provided in the Loan Agreement, become or be declared
immediately due and payable.

The right to receive principal of, and stated interest on, this Note may only be
transferred in accordance with the provisions of the Loan Agreement.

Demand, presentment, protest and notice of nonpayment and protest are hereby
waived by Borrowers.

This Note shall be governed by, and construed and enforced in accordance with,
the laws of the State of Illinois.

 

 

MFRI, INC.

By:                                                                            
        Name:                                          
                          
        Title:                                                                 

   

 

MIDWESCO FILTER RESOURCES, INC.

By:                                                                            
        Name:                                          
                          
        Title:                                                                 

   

 

PERMA-PIPE, INC.

By:                                                                            
        Name:                                          
                          
        Title:                                                                 

   

 

THERMAL CARE, INC.

By:                                                                            
        Name:                                          
                          
        Title:                                                                 

 

 

 

Exhibit 1.3A – Page 2

 

 

 

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TDC FILTER MANUFACTURING, INC.

By:                                                                            
        Name:                                          
                          
        Title:                                                                 

   

 

MIDWESCO MECHANICAL AND
ENERGY, INC.

By:                                                                            
        Name:                                          
                          
        Title:                                                                 

 

 

 

 

Exhibit 1.3A – Page 3