Exhibit 10.1

 

SECOND AMENDMENT TO LOAN AGREEMENT

 

THIS SECOND AMENDMENT TO LOAN AGREEMENT (this “Amendment”) is executed on March
28, 2005, effective as of January 1, 2005 (the “Amendment Effective Date”), by
and among NATCO GROUP INC., a Delaware corporation (the “U.S. Borrower”); NATCO
CANADA, LTD., a corporation formed under the laws of the Province of Ontario
(the “Canadian Borrower”); AXSIA GROUP LIMITED, a company incorporated in
England and Wales under the Companies Act of the United Kingdom (the “U.K.
Borrower”); each of the lenders which is or may from time to time become a party
to the Loan Agreement (as defined below) (individually, a “Lender” and,
collectively, the “Lenders”), WELLS FARGO BANK, NATIONAL ASSOCIATION, acting as
agent for the U.S. Lenders (in such capacity, together with its successors in
such capacity, the “U.S. Agent”); HSBC BANK CANADA, acting as agent for the
Canadian Lenders (in such capacity, together with its successors in such
capacity, the “Canadian Agent”), and HSBC BANK PLC, acting as agent for the U.K.
Lenders (in such capacity, together with its successors in such capacity, the
“U.K. Agent”). The U.S. Borrower, the Canadian Borrower and the U.K. Borrower
are herein collectively called the “Borrowers” and the U.S. Agent, the Canadian
Agent and the U.K. Agent are herein collectively called the “Agents”.

 

RECITALS

 

A. The Borrowers, the Lenders and the Agents executed and delivered that certain
Loan Agreement dated as of March 15, 2004, as amended by instrument dated as of
March 15, 2004 (as amended, the “Loan Agreement”). Any capitalized term used in
this Amendment and not otherwise defined shall have the meaning ascribed to it
in the Loan Agreement.

 

B. The Borrowers, the Lenders and the Agents desire to amend the Loan Agreement
in certain respects.

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and warranties herein set forth, and further good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrowers, the Lenders and the Agents do hereby agree as follows:

 

SECTION 1. Amendments to Loan Agreement. On and after the Amendment Effective
Date, the Loan Agreement is amended as follows:

 

(a) The definition of “Borrowed Money Indebtedness” set forth in Section 1.1 of
the Loan Agreement is hereby amended to read in its entirety as follows:

 

Borrowed Money Indebtedness means, with respect to any Person, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments evidencing borrowed money, (iii) all obligations of such Person
under conditional sale or other title retention agreements relating to Property
purchased by such Person, (iv) all obligations of such Person issued or assumed
as the deferred purchase price of Property or services (excluding obligations of
such Person to creditors for raw materials, inventory, services and supplies and
deferred payments for services to employees and former employees incurred in the
ordinary course of such Person’s business), (v) all lease obligations of such
Person which have been capitalized on the balance sheet of such Person in
accordance with GAAP, (vi) all obligations of others secured by any Lien on
Property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, equal to the lesser of the amount of such
obligation or the fair market value of such Property, (vii) Interest Rate Risk
Indebtedness of such Person, (viii) all obligations of such Person in respect of
outstanding surety bonds or letters of credit issued for the account of such
Person (or for which such Person is primarily liable) or bankers’ acceptances
drawn by such Person, (ix) all guarantees of such Person and (x) all outstanding
overdrafts permitted by any Lender or any financial institution.

 

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(b) Section 7.2 of the Loan Agreement is hereby amended to read in its entirety
as follows:

 

7.2 Financial Statements and Information. Furnish to Agents and each Lender each
of the following: (a) as soon as available and in any event within 90 days (or
such shorter time period as may be required for publicly traded entities by the
Securities and Exchange Commission or any successor agency) after the end of
each fiscal year (subject to extension by an additional fifteen (15) days so
long as such extension does not cause U.S. Borrower to be in violation of any
applicable Legal Requirements), Annual Financial Statements of U.S. Borrower;
(b) as soon as available and in any event within 45 days (or such shorter time
period as may be required for publicly traded entities by the Securities and
Exchange Commission or any successor agency) after the end of each of the first
three fiscal quarters of each fiscal year (subject to extension by an additional
five (5) days so long as such extension does not cause U.S. Borrower to be in
violation of any applicable Legal Requirements), Quarterly Financial Statements
of U.S. Borrower; (c) concurrently with the financial statements provided for in
Subsections 7.2(a) and (b) hereof, such schedules, computations and other
information, in reasonable detail, as may be reasonably required by Agents to
demonstrate compliance with the covenants set forth herein or reflecting any
non-compliance therewith as of the applicable date, all certified and signed by
a duly authorized officer of U.S. Borrower as true and correct in all material
respects to the best knowledge of such officer and, commencing with the Annual
Financial Statement prepared as of December 31, 2004, a compliance certificate
(“Compliance Certificate”) substantially in the form of Exhibit F hereto, duly
executed by such authorized officer; (d) by March 31 of each fiscal year, U.S.
Borrower’s annual business plan for the then current fiscal year (including
their proforma balance sheets and income and cash flow projections for such
fiscal year); (e) promptly upon their becoming publicly available, each
financial statement, report, notice or definitive proxy statements sent by U.S.
Borrower to shareholders generally and each regular or periodic report and each
registration statement, prospectus or written communication (other than
transmittal letters) in respect thereof filed by U.S. Borrower with, or received
by U.S. Borrower in connection therewith from, any securities exchange or the
Securities and Exchange Commission or any successor agency; (f) (1) as of the
Effective Date and (2) within 30 days after the end of each calendar month, a
Borrowing Base Certificate as at the Effective Date or the last day of such
calendar month, together with such supporting information as U.S. Agent may
reasonably request; (g) within 30 days after (i) the end of each calendar
quarter or (ii) receipt of a request therefor (which may be given from time to
time) from U.S. Agent, (1) a listing and aging of the Accounts of (x) U.S.
Borrower and its Subsidiaries (other than Foreign Subsidiaries or Excluded
Subsidiaries), (y) the Subsidiaries of Canadian Borrower and (z) the
Subsidiaries of U.K. Borrower which are Foreign Subsidiaries (other than
Excluded Subsidiaries) as of the end of the most recently ended calendar month,
prepared in reasonable detail and containing such other information as U.S.
Agent may reasonably request (including information supporting the progress
payments included in the Eligible Accounts) and (2) a summary of the Inventory
of (x) U.S. Borrower and its Subsidiaries (other than Foreign Subsidiaries or
Excluded Subsidiaries) and (y) the Subsidiaries of Canadian Borrower as of the
end of the most recently ended calendar month, prepared in reasonable detail and
containing such other information as U.S. Agent may reasonably request; (h) from
time to time, at any time upon the request of U.S. Agent, but at the cost of the
applicable Borrower, a report of an independent collateral field examiner
approved by U.S. Agent in writing and reasonably acceptable to the applicable
Borrower (which may be, or be affiliated with, any Agent or one of the Lenders)
with respect to the Accounts and Inventory components included in the U.S.
Borrowing Base, the Canadian Borrowing Base and the U.K. Borrowing Base
(provided, however, that so long as no Event of Default has occurred and is
continuing, U.S. Agent shall not require such a report more than once per
calendar year and during the continuance of an Event of Default, U.S. Agent
shall not require such a report more than once per calendar quarter), and (i)
such other information relating to the condition (financial or otherwise),
operations, prospects or business of any Obligor as from time to time may be
reasonably requested by any Agent or any Lender. Each delivery of a financial
statement pursuant to this Section 7.2 shall constitute a restatement of the
representations contained in the last two sentences of Section 6.2.

 

(c) Section 7.3(b) of the Loan Agreement is hereby amended to read in its
entirety as follows:

 

(b) Funded Debt to EBITDA Ratio - a Funded Debt to EBITDA Ratio of not greater
than (1) 3.25 to 1.00 at all times during the period commencing on January 1,
2005 through and including March 31, 2005, (2) 3.00 to 1.00 at all times during
the period commencing on April 1, 2005 through and including June 30, 2005, and
(3) 2.75 to 1.00 at all times thereafter.

 

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(d) Section 7.3(c) of the Loan Agreement is hereby amended to read in its
entirety as follows:

 

(c) Fixed Charge Coverage Ratio - a Fixed Charge Coverage Ratio of not less than
(1) 1.10 to 1.00 at all times during the period commencing on January 1, 2005
through and including June 30, 2005 and (2) 1.25 at all times thereafter.

 

SECTION 2. Special Provisions Regarding 2004 Annual Financial Statements. The
Lenders agree that the Annual Financial Statements of U.S. Borrower for the
fiscal year 2004 may be delivered to the U.S. Agent on or before April 15, 2005,
notwithstanding any earlier required delivery set forth in the Loan Agreement.
If such Annual Financial Statements are not delivered to the U.S. Agent on or
before April 15, 2005, (i) it shall constitute an Event of Default under the
Loan Agreement and (ii) the terms and provisions of this Amendment shall be null
and void and of no further force and effect and the terms and provisions of the
Loan Agreement in effect prior to the effectiveness of this Amendment shall be
reinstated.

 

SECTION 3. Ratification. Except as expressly amended by this Amendment, the Loan
Agreement and the other Loan Documents shall remain in full force and effect.
None of the rights, title and interests existing and to exist under the Loan
Agreement are hereby released, diminished or impaired, and the Borrowers hereby
reaffirm all covenants, representations and warranties in the Loan Agreement.

 

SECTION 4. Amendment Fee. As a condition precedent to the effectiveness of this
Amendment, the Borrower shall pay to the Agent (for payment to the applicable
Lenders) a fee equal to 0.15% times the sum of (w) the unpaid principal balance
of the Term Loans held by each such Lender plus (x) the Canadian Commitment of
each Lender which shall have joined in the execution of this Amendment plus (y)
the U.K. Commitment of each such Lender plus (z) the U.S. Commitment of each
such Lender.

 

SECTION 5. Expenses. The Borrowers shall pay to the Agents all reasonable fees
and expenses of their respective legal counsel (pursuant to Section 11.3 of the
Loan Agreement) incurred in connection with the execution of this Amendment.

 

SECTION 6. Certifications. The Borrowers hereby certify that (a) no event which
could reasonably be expected to have a Material Adverse Effect has occurred and
is continuing and (b) no Default or Event of Default has occurred and is
continuing or will occur as a result of this Amendment.

 

SECTION 7. Miscellaneous. This Amendment (a) shall be binding upon and inure to
the benefit of the Borrowers, the Lenders and the Agents and their respective
successors, assigns, receivers and trustees; (b) may be modified or amended only
by a writing signed by the required parties; (c) shall be governed by and
construed in accordance with the laws of the State of Texas and the United
States of America; (d) may be executed in several counterparts by the parties
hereto on separate counterparts, and each counterpart, when so executed and
delivered, shall constitute an original agreement, and all such separate
counterparts shall constitute but one and the same agreement and (e) together
with the other Loan Documents, embodies the entire agreement and understanding
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, consents and understandings relating to such subject matter.
The headings herein shall be accorded no significance in interpreting this
Amendment.

 

NOTICE PURSUANT TO TEX. BUS. & COMM. CODE §26.02

 

THE LOAN AGREEMENT, AS AMENDED BY THIS AMENDMENT, AND ALL OTHER LOAN DOCUMENTS
EXECUTED BY ANY OF THE PARTIES PRIOR HERETO OR SUBSTANTIALLY CONCURRENTLY
HEREWITH CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND 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.

 

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IN WITNESS WHEREOF, the Borrowers, the Lenders and the Agents have caused this
Amendment to be signed by their respective duly authorized officers, effective
as of the date first above written.

 

NATCO GROUP INC.,

a Delaware corporation

By:  

/s/ Richard W. FitzGerald

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Richard W. FitzGerald,

Senior Vice President and

Chief Financial Officer

NATCO CANADA, LTD.,

a corporation formed under the laws of the Province of Ontario

By:  

/s/ Richard W. FitzGerald

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Richard W. FitzGerald,

Vice President

AXSIA GROUP LIMITED, a company incorporated in England and Wales under the
Companies Act of the United Kingdom By:  

/s/ Richard W. FitzGerald

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    Richard W. FitzGerald,     Authorized Signatory

 

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WELLS FARGO BANK, NATIONAL ASSOCIATION, as U.S. Agent, Issuer of U.S. Letters of
Credit, and a U.S. Lender By:  

/s/ William S. Rogers

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Name:   William S. Rogers Title:   Vice President COMERICA BANK By:  

/s/ Mona M. Foch

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Name:   Mona M. Foch Title:   Senior Vice President-Texas Division [page left
blank intentionally] [page left blank intentionally] [page left blank
intentionally] AMEGY BANK NATIONAL ASSOCIATION By:  

/s/ Carmen Jordan

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Name:   Carmen Jordan Title:   Senior Vice President BANK OF AMERICA, N.A. By:  

/s/ David A. Batson

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Name:   David A. Batson Title:   Vice President COMPASS BANK By:  

/s/ Eric E. Ensmann

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Name:   Eric E. Ensmann Title:   Senior Vice President

 

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The undersigned hereby join in this Amendment to evidence their consent to
execution by Borrowers of this Amendment, to confirm that each Loan Document now
or previously executed by the undersigned applies and shall continue to apply to
the Loan Agreement, as amended hereby, to acknowledge that without such consent
and confirmation, Lender would not execute this Amendment and to join in the
notice pursuant to Tex. Bus. & Comm. Code §26.02 set forth above.

 

NATIONAL TANK COMPANY,

a Delaware corporation, and

TOTAL ENGINEERING SERVICES TEAM, INC.,

a Louisiana corporation

By:  

/s/ Richard W. FitzGerald

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    Richard W. FitzGerald,     Senior Vice President and Treasurer AXSIA
HOLDINGS LIMITED (formerly known as Starfish Acquisition Limited), a company
incorporated in England and Wales under the Companies Act of the United Kingdom,
AXSIA LIMITED, a company incorporated in England and Wales under the Companies
Act of the United Kingdom, AXSIA SERCK BAKER LIMITED, a company incorporated in
England and Wales under the Companies Act of the United Kingdom, AXSIA HOWMAR
LIMITED, a company incorporated in England and Wales under the Companies Act of
the United Kingdom, and RICHARD MOZLEY LIMITED, company incorporated in England
and Wales under the Companies Act of the United Kingdom

 

By:  

/s/ Richard W. FitzGerald

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    Richard W. FitzGerald,     Authorized Signatory

 

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