EXHIBIT 10.3
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FOURTH AMENDMENT TO REVOLVING CREDIT
AND LETTER OF CREDIT AGREEMENT
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THIS FOURTH AMENDMENT is made as of this 31st day of August, 1999 by
and among ENVIRONMENTAL ELEMENTS CORPORATION, a Delaware corporation
("Borrower") and MERCANTILE-SAFE DEPOSIT AND TRUST COMPANY, a Maryland banking
corporation ("Bank").
RECITALS
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A. The Bank previously agreed to extend credit to the Borrower pursuant
to a certain Revolving Credit and Letter of Credit Agreement dated November 24,
1993, as amended by a letter agreement dated May 26, 1994 from Xxxxxxxx X.
Xxxxxxxxxx to Xxxxxx X. XxXxxx, a Second Amendment to Revolving Credit and
Letter of Credit Agreement dated October 25, 1995, and a Third Amendment to
Revolving Credit and Letter of Credit Agreement dated June 12, 1998
(collectively, the "Agreement"), in the form of a line of credit facility in an
original principal amount not to exceed Ten Million Dollars ($10,000,000.00),
which was subsequently reduced to Seven Million Dollars ($7,000,000.00), and
then increased to Twelve Million Dollars ($12,000,000.00).
B. The indebtedness under the Agreement is evidenced by a Line of
Credit Promissory Note dated November 24, 1993 from Borrower to Bank, as
modified by a certain First Amendment to Line of Credit Promissory Note dated
October 25, 1995, certain letter agreements between the Bank and Borrower, a
certain Second Amendment to Line of Credit Promissory Note dated June 12, 1998,
and a certain Third Amendment to Line of Credit Promissory Note of even date
herewith (collectively, the "Note").
C. The repayment of the indebtedness evidenced by the Note is secured
by a Security Agreement dated October 25, 1995 between Borrower and Bank, as
amended by a First Amendment to Security Agreement dated June 12, 1998 and a
Second Amendment to Security Agreement of even date herewith (the "Security
Agreement").
D. The Borrower has requested that the Bank extend the term and
increase the amount of the line of credit facility, and the Bank has agreed,
subject to the terms and conditions hereinafter described.
WITNESSETH
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NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree that the Agreement is hereby modified and amended as follows (the
Agreement, as amended, is hereinafter referred to as the "Agreement"):
1. Recitals. The parties acknowledge and agree that the foregoing
Recitals are true and correct, and are incorporated herein by reference.
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2. Amendments to Agreement.
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A. The aggregate principal amount of the credit facility
described in the first Recital of the Agreement is hereby increased to Fifteen
Million Dollars ($15,000,000.00).
B. The definition of "Note" on Page 3 of the Agreement is
hereby modified to mean the Line of Credit Promissory Note, as heretofore
amended and as amended on even date herewith.
C. The definition of "Other Agreements" on Page 4 of the
Agreement is hereby modified to include this Fourth Amendment, the Third
Amendment to Line of Credit Promissory Note, and the Second Amendment to
Security Agreement of even date herewith between the Borrower and Bank.
D. The definition of "Revolving Credit Commitment" on Page 5
of the Original Agreement is hereby deleted in its entirety and the following is
inserted in its place:
"Revolving Credit Commitment" shall mean, at any given time,
an amount equal to up to Fifteen Million Dollars ($15,000,000.00),
minus the amount of any Letters of Credit then issued and outstanding
under this Agreement."
E. Section 2.01 of the Agreement is hereby amended by
extending the Line of Credit Termination Date until July 1, 2001, as may be
extended by the Bank in writing from time to time thereafter. Notwithstanding
the foregoing, the parties acknowledge and agree that the Bank will annually
review the financial status of the Borrower and its performance under the terms
and provisions of the Agreement, and the Bank shall have the right as a result
of such review not to renew the term of the Note, in the Bank's sole discretion,
upon at least fifty-four (54) week's prior written notice to Borrower.
F. Section 2.01 of the Agreement is hereby amended by
adding the following provision at the end of Section 2.1:
Notwithstanding anything to the contrary contained herein, the
total advances at any time under the Line of Credit plus the face
amount of outstanding Letters of Credit shall not exceed the aggregate
of the following: (i) seventy-five percent (75%) of eligible
Receivables (i.e. Receivables of 120 days or fewer); fifty percent
(50%) of retainage owed to Borrower under existing customer contracts;
and fifty percent (50%) of costs incurred and fees accrued by Borrower
under existing customer contracts which have not yet been billed to
such customers, but will be billed in the ordinary course of business.
The Borrower shall submit monthly to Bank a Borrowing Base Certificate
(the form of which is attached hereto as Exhibit A), subject to such
modifications and adjustments as the Bank may reasonably deem
appropriate as a result of its independent review of the calculations
and supporting data and documentation relating to such Certificate. The
Bank shall not be obligated to make any advance under the Agreement on
the basis of a Borrowing Base Certificate which reports data that is
more than thirty (30) days old.
G. Section 2.04(A) of the Agreement is hereby deleted in
its entirety and the following is inserted in its place:
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The principal amount of all advances made hereunder shall bear
interest at a fluctuating rate equal to the Bank's Prime Rate, as
announced from time to time. The interest rate shall be adjusted as of
the effective date of each change in the Bank's Prime Rate.
H. Section 2.06 of the Agreement is hereby deleted in
its entirety and the following is inserted in its place:
The Borrower agrees to pay to the Bank an annual facility fee
equal to one-half of one percent (0.5%) of the total credit facility
available under the Agreement, which shall be paid quarterly in arrears
(i.e. 0.5% of $15,000,000.00 equals $75,000.00, paid quarterly in the
amount of $18,750.00).
I. Section 3.01 of the Agreement is hereby deleted in
its entirety and the following is inserted in its place:
Subject to the terms hereof, the Bank will from time to time
until the Line of Credit Termination Date, make available Letters of
Credit in an aggregate amount not to exceed Fifteen Million Dollars
($15,000,000.00) minus the total principal amount then - outstanding
under the Line of Credit.
J. Section 6.05 of the Agreement is hereby amended by
increasing the required minimum Tangible Net Worth of Borrower to Six Million
Five Hundred Thousand Dollars ($6,500,000.00), which shall be reviewed quarterly
by the Bank. For purposes hereof, the Borrower's net worth shall be determined
at the end of each calendar quarter, based on the audited financial statements
or the 10-Q financial reports of the Borrower.
K. Borrower agrees it shall constitute a default under the
Agreement if the Borrower experiences a net operating loss during any fiscal
year, as determined by the Bank based upon the audited annual financial
statements of the Borrower.
3. Representations and Warranties. The Borrower hereby confirms that
all of the representations and warranties set forth in Section IV of the
Agreement are accurate, complete and correct as of the date of this Fourth
Amendment, and are incorporated herein by reference.
4. Effect of Amendment. Except as modified and amended herein, the
Agreement shall be and remain in full force and effect. In the event of any
conflict between the terms and provisions of the Agreement and this Fourth
Amendment, the terms and provisions of this Fourth Amendment shall prevail.
Nothing contained herein shall constitute a novation under the Note.
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IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to be executed under seal, intending this to be a sealed instrument,
as of the date first above written.
WITNESS/ATTEST: ENVIRONMENTAL ELEMENTS CORPORATION
_________________________ By:____________________________________(SEAL)
Name: Xxxxx X. Xxxxxxxx
Title: Vice-President and
Chief Financial Officer
MERCANTILE-SAFE DEPOSIT AND TRUST COMPANY
_________________________ By:____________________________________(SEAL)
Xxxxxx X. Xxxxxxx,
Senior Vice-President
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