FIRST AMENDMENT
TO
REVOLVING CREDIT AGREEMENT
FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT ("First
Amendment"), dated as of November 28, 1997 between ENVIRONMENTAL
TECTONICS CORPORATION, a Pennsylvania corporation (the
"Borrower") and FIRST UNION NATIONAL BANK, a national banking
association (the "Bank").
W I T N E S E T H
WHEREAS, the Borrower and the Bank are parties to a
Revolving Credit Agreement dated as of March 27, 1997 (the
Agreement") pursuant to which the Bank agreed to make available
to the Borrower certain loans upon the terms and conditions
specified in the Agreement;
WHEREAS, the parties wish to amend certain terms and
conditions of the Agreement, as hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and
mutual agreements herein contained, the parties hereto, intending
to be legally bound hereby, agree to amend the Agreement as
herein stated.
1. Effect of Prior Agreements.
This First Amendment is intended to amend the
Agreement, as it has been in effect to the date hereof and as it
shall be amended on and after the date hereof. All capitalized
terms used herein as defined terms shall have the meanings
ascribed to them in the Agreement unless herein provided to the
contrary.
2. Amendments.
(a) The following definitions contained in
Article I of the Agreement are hereby amended and restated in
their entirety to read as follows:
"Letter of Credit Fee Reduction" shall
mean a reduction in the standby letter
of credit fee otherwise charged by the
Bank to the Borrower pursuant to Section
2.1(b)-(2) of this Agreement. The Letter
of Credit Fee Reduction shall equal one-
quarter of one percent (0.25%) if the
Borrower's Leverage Ratio is greater
than 0.75 and less than 1.00. The Letter
of Credit Fee Reduction shall equal
sixty-five one hundredths of one percent
(0.65%) if the Borrower's Leverage Ratio
is less then or equal to 0.75.
"LIBOR" shall mean the rate per annum
(rounded upwards, if necessary, to the
nearest 1/100 of 1%) determined by the
Bank pursuant to the following formula:
London InterBank Offered Rate
LIBOR = 1 - Reserve Percentage
For purposes of this Agreement, the term
"London InterBank Offered Rate" shall
mean, for any Interest Period, as
applied to any Adjusted LIBO Rate Loan,
the rate per annum determined by the
Bank (which determination shall be
conclusive) as the rate at approximately
11:00 a.m. London time (or as soon
thereafter as practicable) two
Eurodollar Business Days prior to the
first day of such Interest Period at
which leading banks in the London
InterBank Market offer deposits of U.S.
Dollars for a period and in an amount
comparable to the Interest Period and
principal amount of such Adjusted LIBO
Rate Loan which rates appear on the
Reuters Screen LIBO Page, provided that
(i) if more than one such offered rate
appears on the Reuters Screen LIBO Page,
the "London Interbank offered Rate" will
be the arithmetic average (rounded
upward, if necessary, to the next higher
1/100th of 1%) of such offered rates;
(ii) if no such offered rates appear on
such page, the "London Interbank Offered
Rate" for such Interest Period will be
as determined by the Bank from another
recognized source of interbank
quotation.
(b) Article I of the Agreement is hereby
supplemented by adding the following definitions thereto in the
Appropriate alphabetical order;
"Reserve Percentage" shall mean, for any
Adjusted LIBO Rate Loan for any Interest
Period therefor, the daily average of
the stated maximum rate (expressed as a
decimal) at which reserves (including,
without limitation, any basic,
supplemental, marginal or emergency
reserves) are required to be maintained
during such Interest Period against
Eurocurrency Liabilities (as that term
is defined in Regulation D of the
Federal Reserve Board), as prescribed by
the Federal Reserve Board (or any
successor or any other banking authority
to which the Bank is subject, including
any board or governmental or
administrative agency of the United
States or any other jurisdiction to
which the Bank is subject). The
Adjusted LIBO Rate shall be adjusted on
and as of the effective day of any
change in the Reserve Percentage
applicable to it.
"Spot Rate of Exchange" shall mean on a
particular day the Bank's spot rate of
exchange for the purchase of Sterling in
the London Foreign Exchange Market with
US Dollars at or about 10:00 a.m. London
time on such day. In the event no such
spot rate of exchange is available, such
spot rate shall be determined by the
Bank, in conjunction with the Borrower,
by mutual agreement of the Bank and the
Borrower.
"Sterling" and "L" shall mean the lawful
currency of the United Kingdom.
"US Dollar or $" shall mean the lawful
currency of the United States of
America;
"US Dollar Amount" shall mean on any
particular day the principal amount in
US Dollars which is outstanding under
the Revolving Credit Facility determined
by converting into US Dollars that part
of the principal balance of the
Revolving Credit Facility that was
advanced in Sterling at the Spot Rate of
Exchange on the date of determination
and adding to such amount the principal
balance of the Revolving Credit Facility
advanced in US Dollars.
(c) Section 2.1(a) of the Agreement is hereby
amended and restated in its entirety to read as follows:
At any time and from time to time during
the period commencing on the Closing
Date and ending on the Termination Date,
upon the request of the Borrower, the
Bank shall provide to the Borrower a
loan or loans which shall be used by the
Borrower for working capital and/or
repayment of indebtedness existing at
the time of the Closing (the "Line of
Credit"). Such loans shall be made in
U.S. Dollars or, subject to
Section 2.1(f), in Sterling. Subject to
Section 2.2(b)(2), any loan request by
the Borrower shall be in a minimum
amount of $100,000.00. To the extent a
loan request exceeds $100,000.00, such
excess shall be in multiples of
$100,000.00. The Borrower may use the
Line of Credit during the period
referred to in the preceding sentence by
borrowing, repaying and reborrowing in
accordance with the terms of this
Agreement. On and before May 31, 1998,
the aggregate outstanding principal
under the Line of Credit (calculated in
U.S. Dollars) at any time shall not
exceed $9,000,000.00. After May 31,
1998, the aggregate outstanding
principal under the Line of Credit
(calculated in U.S. Dollars) at any time
shall not exceed $8,000,000. If, at any
time, the aggregate outstanding
principal under the Line of Credit
(calculated in U.S. Dollars) exceeds:
(i) on or before May 31, 1998,
$9,000,000.00 or (ii) after May 31,
1998, $8,000,000.00, then, without any
requirement of demand or notice from the
Bank, the Borrower shall immediately pay
to the Bank the amount of such excess.
Upon the Termination Date, unless the
same has been extended by written
agreement between the Bank and the
Borrower (which the Bank shall provide,
if at all, no later than forty-five (45)
days prior to the Termination Date), the
Bank's commitment to make Line of Credit
Loans shall terminate, all Line of
Credit Loans shall immediately mature
and all Obligations under the Revolving
Credit Facility shall be immediately due
and payable in full in US Dollars.
(d) The first two sentences of Section 2.1(b) of
the Agreement are is hereby amended and restated in its entirety
to read as follows:
In addition to making loans to the
Borrower under the Line of Credit as
provided in Section 2.1(a) hereof, the
Bank shall, upon the request of the
Borrower and subject to the terms of
this Agreement, also issue one or more
trade or standby letters of credit
("Letters of Credit") for the account of
the Borrower to support trade
obligations of the Borrower or to
benefit customers of the Borrower that
have advanced funds to the Borrower or
have executed maintenance contracts with
the Borrower. The cumulative face
amount of all outstanding Letters of
Credit, together with the Chase Letters
of Credit, shall at no time exceed
$5,000,000; provided, further, that the
cumulative face amount of all
outstanding trade Letters of Credit
shall at no time exceed $2,500,000.
(e) Section 2.1(b)(2) of the Agreement is hereby
amended and restated to read in its entirety as follows:
Issuance of Letters of Credit. Subject
to the provisions of Section 2.1(b)(1),
the Bank shall issue Letters of Credit
for the account of the Borrower,
provided that the Borrower (i) provides
a written request for each such Letter
of Credit specifying the terms thereof,
including, without limitation, the
amount and the name and address of the
beneficiary of such Letter of Credit;
(ii) executes and delivers to the Bank
an application for each such Letter of
Credit pursuant to the form provided for
such purpose by the Bank; and
(iii) executes and delivers to the Bank
such other documents and instruments
which the Bank, in its sole and absolute
discretion, deems reasonable and
necessary. The Borrower shall pay to
the Bank on the date of issuance of each
standby Letter of Credit hereunder a fee
equal to the face amount of the Letter
of Credit multiplied by 1.5% less the
Letter of Credit Fee Reduction, if any.
The Borrower shall pay to the Bank all
fees customarily charged by the Bank at
the time of issuance of any trade
Letters of Credit. The foregoing fees
may be deducted by the Bank from the
Borrower's accounts maintained at the
Bank as such fees are incurred. The
determination of whether the Borrower is
entitled to a Letter of Credit Fee
Reduction with respect to a standby
Letter of Credit shall be made in
connection with the Borrower's delivery
of the certificate required to be
delivered by the Borrower to the Bank
pursuant to Section 6.2 of this
Agreement. Letter of Credit Fee
Reductions for future standby Letters of
Credit will become effective upon the
first Business Day of the fiscal quarter
following the Bank's receipt of the
above-described certificate.
(f) Section 2.1 of the Agreement is supplemented
by adding the following Section 2.1(f)
2.1(f) Currency Provisions. All
requests for Loans shall be accompanied
by a request from the Borrower
requesting the Loan as to the type of
currency that is desired with respect to
such Loan. Advances under the Revolving
Credit Facility will be available only
in US Dollars or in Sterling, provided
however, that: (i) each Loan shall be
made in only one currency; (ii) the Bank
shall perform the notional conversion
into US Dollars of any Sterling
requested and (iii) total Sterling
borrowings shall at no time exceed
$1,000,000 (notionally converted at the
then existing Spot Rate of Exchange).
Requests by the Borrower for Advances in
Sterling shall be made to the Bank's
London Branch at 0 Xxxxxx'x Xxxx,
Xxxxxx, Xxxxxxx XX0X0XX (telephone:
00-000-000-0000; telecopy:
00-000-000-0000). Subject to
Section 2.7 hereof, all amounts advanced
under the Revolving Credit Facility and
all of the other Obligations of the
Borrower hereunder shall be paid in US
Dollars. Borrower's request that an
advance under the Revolving Credit
Facility be made in Sterling shall be
honored by the Bank so long as there
does not exist at the time of such
Borrower's request any national or
international financial, political or
economic conditions or currency exchange
rates or exchange controls, which in the
sole and exclusive opinion of the Bank,
make it impractical or impossible for
the Bank to make such Loan in Sterling;
in such event the Bank shall give the
Borrower notice as promptly as possible
to the effect that as a result of such
event the Loan will not be made in
Sterling, but, at the option of the
Borrower, such Loan will be made
available in US Dollars. Any conversion
of Sterling into US Dollars that is
required for purposes of calculating
(i) the amounts outstanding under the
Revolving Credit Facility in US Dollars
or (ii) for any other reason, shall be
performed by the Bank by its application
of the Spot Rate of Exchange on the date
of such calculation; provided, however,
that on the last Business Day of each
month, the Bank shall calculate the
amounts outstanding under the Revolving
Credit Facility by notionally converting
Sterling borrowings by using a Spot Rate
of Exchange equal to the then existing
Spot Rate of Exchange multiplied by
1.10. To the extent that such
calculation causes the Borrower not to
be in compliance with Section 2.1(a) or
(f) hereof, the Borrower shall
immediately pay to the Bank the amount
of such excess.
(g) Section 2.2(b)(1) of the Agreement is hereby
amended and restated in its entirety to read as follows:
The Borrower may ask the Bank for
indications of LIBOR for specified Line
of Credit Loans and Interest Periods, as
applicable, at any time. If the
Borrower anticipates that it may elect
the Adjusted LIBO Rate to be applicable
to a Line of Credit Loan, the Borrower
shall request an indication of LIBOR
prior to 11:00 a.m. (Philadelphia time)
at least two Eurodollar Business Days
prior to the commencement of the
applicable Interest Period, and if the
Borrower desires to elect the Adjusted
LIBO Rate for such Interest Period, the
Borrower must accept such indication of
LIBOR by notice to the Bank in writing
or by telephone (confirmed promptly in
writing) prior to 11:00 a.m.
(Philadelphia time) on the date of
acceptance, which shall be at least two
Eurodollar Business Days prior to the
commencement of the Interest Period
selected by the Borrower. If the
Borrower does not provide the applicable
notice of election of the Adjusted LIBO
Rate, then the Borrower shall be deemed
to have requested that the Adjusted Base
Rate apply to any Line of Credit Loan
which is subject to any expiring
Interest Period and to any new Line of
Credit Loan, as the case may be, until
the Borrower shall have given
appropriate notice of a requested change
in or determination of the rate of
interest in accordance with this
Section 2.2. No acceptance of an
indication of rate hereunder shall bind
the Bank unless timely made.
(h) Section 2.7 of the Agreement is hereby
supplemented by adding the following paragraph at the end
thereof:
Notwithstanding the foregoing, to the extent
the Borrower has received advances in
Sterling in accordance with Section 2.1(f) of
this Agreement, the Borrower may repay its
obligations to the Bank in Sterling at the
Bank's London Branch at 0 Xxxxxx'x Xxxx,
Xxxxxx, Xxxxxxx XX0X0XX (telephone:
00-000-000-0000; telecopy: 00-000-000-0000).
Upon the receipt by the Bank's London Branch
of a Sterling repayment, the Bank shall
notionally convert such payment into US
Dollars by application of the then prevailing
Spot Rate of Exchange.
(i) Schedule 6.16 of the Agreement is hereby
amended as follows:
(1) Section "A" of Schedule 6.16 is amended
and restated in its entirety to read as follows:
Current Ratio -- The Borrower shall have
at the end of each fiscal quarter a
Current Ratio of not less than 1.10 to
1.00.
(2) The definition of "Current Assets" is
amended and restated in its entirety to read as follows:
"Current Assets" shall mean, at any
time, all assets which, in accordance
with GAAP, should be classified as
current assets of the Borrower,
excluding, however, any and all accounts
receivable related to that certain
contract between the Borrower and
CENTRIFUGE-BASED FLIGHT ENVIRONMENT
TRAINER ("CFET") and any and all claims
receivable.
(3) The definition of "Current Liabilities
is amended and restated in its entirety to read as follows:
"Current Liabilities" shall mean, at any
time, all liabilities which, in
accordance with GAAP should be
classified as current liabilities of the
Borrower, plus, if the Line of Credit
Loans do not constitute current
liabilities in accordance with GAAP, the
Line of Credit Loans, plus the face
amount of all issued Letters of Credit
except those issued for advance payment
guaranties.
3. Conditions. To induce the Bank to enter into this
First Amendment and to extend the Loans contemplated herein, the
Borrower shall perform the following conditions to the Bank's
satisfaction prior to the Bank's acting in reliance hereon:
(a) The Borrower shall execute and deliver to the
Bank this First Amendment and all other documents as the Bank may
require;
(b) The Borrower shall deliver to the Bank
certified resolutions of the Board of Directors of the Borrower
authorizing the execution of this First Amendment, all in such
form as is acceptable to the Bank;
(c) The Borrower shall deliver to the Bank an
officer's certificate in form and substance satisfactory to the
Bank; and
(d) The Borrower shall deliver all other
documents and certificates reasonably requested by the Bank.
4. Representations and Warranties. The Borrower
hereby represents and warrants that:
(a) The representations and warranties contained
in the Agreement and in each certificate, document or financial
statement furnished by the Borrower in connection therewith or in
connection with any other Loan Document, are true and correct on
and as of the date hereof as though made on and as of the date
hereof.
(b) No Event of Default, and no event which with
the passage of time or the giving of notice or both could become
an Event of Default, exists on the date hereof, and no offsets or
defenses exist against the Borrower's obligations under the
Agreement or the documents delivered in connection therewith.
(c) This First Amendment have been duly
authorized, executed and delivered so as to constitute the legal,
valid and binding obligations of the Borrower, enforceable in
accordance with their terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, Moratorium or
other similar laws affecting creditors, rights generally and
general principles of equity.
(d) The execution, delivery and performance
of this First Amendment will not violate any applicable provision
of law or judgment, order or regulation of any court or of any
public or governmental agency or authority nor conflict with or
constitute a breach of or a default under any instrument to which
the Borrower is a party or by which the Borrower or the
Borrower's properties is bound, nor result in the creation of any
lien, charge or encumbrance upon any assets of the Borrower
except those liens permitted by or created under this First
Amendment.
(e) No approval, consent or authorization of, or
registration, declaration or filing with, any governmental or
public body or authority is required in connection with the valid
execution, delivery and performance by the Borrower of this First
Amendment.
5. Reaffirmation. The Borrower hereby affirms and
reaffirms to the Bank all of the terms and conditions of the
Agreement and the other Loan Documents, including, without
limitation, the confession of judgment provision contained
therein, and agrees to abide thereby until all of the Borrower's
obligations to the Bank are satisfied and/or discharged in their
entirety.
6. Guarantors' Representations. Each Guarantor
hereby represents and warrants that:
(a) The representations and warranties which it
made in its respective Guaranty Agreement are true and correct as
of the date hereof.
(b) This First Amendment has been duly authorized
by all requisite action on behalf of each Guarantor and
constitutes the legal, valid and binding obligations of each
Guarantor enforceable in accordance with its terms, except as the
same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting
creditors' rights generally and general principles of equity.
(c) The execution, delivery and performance of
this First Amendment will not violate any applicable provision of
law or judgment, order or regulation of any court or of any
public or governmental agency or authority nor conflict with or
constitute a breach of or a default under any instrument to which
each Guarantor is a party or by which any Guarantor or any of
such Guarantor's properties is bound.
All of the above representations and warranties shall
survive the making of this First Amendment.
7. Guarantors' Acknowledgments. Each Guarantor:
(a) Hereby acknowledges and consents to the
provisions of this First Amendment and confirms and agrees that
its obligations under its respective Guaranty Agreement shall be
unimpaired hereby and that all terms and conditions of its
respective Guaranty Agreement shall remain in full force and
effect and unmodified hereby and are hereby ratified and
confirmed.
(b) Hereby acknowledges the continued existence,
validity and enforceability of its respective Guaranty Agreement,
agrees that the terms, conditions, representations and covenants
of its respective Guaranty Agreement, including, without
limitation, such Guarantor's consent to the Bank entering a
judgment against it by confession, are binding upon it and
certifies that there exists no defenses, offsets or counterclaims
thereto as of the date hereof subject to limitation set forth
therein.
8. Miscellaneous.
(a) All terms, conditions, provisions and
covenants in the Agreement, the Note, the Security Agreement and
the Guaranty Agreements and all other Loan Documents delivered to
the Bank in connection therewith shall remain unaltered and in
full force and effect except as modified or amended hereby and
are hereby ratified and confirmed.
(b) This First Amendment shall be governed and
construed according to the laws of the Commonwealth of
Pennsylvania.
(c) This First Amendment shall inure to the
benefit of, and be binding upon, the parties hereto and their
respective successors and permitted assigns.
(d) This First Amendment may be executed in one
or more counterparts, and by different parties on different
Counterparts, each of which shall be deemed an original, all of
which together shall constitute one and the same instrument, and
in making proof of this First Amendment it shall be necessary
only to produce one counterpart.
(e) This First Amendment shall have effect as of
its date.
IN WITNESS WHEREOF, the parties hereto have executed
this First Amendment as of the day and year first above written.
ATTEST: ENVIRONMENTAL TECTONICS CORPORATION
By:/s/ Xxx X. Xxxxx By:/s/ Xxxxx X. Xxxxxx
Title: Corporate Secretary Title: C.F.O.
FIRST UNION NATIONAL BANK
By:________________________________
Title:_____________________________
ATTEST: ENVIRONMENTAL TECTONICS CORPORATION
(EUROPE) LIMITED
By: /s/ Xxxxxx X. Xxxxx By: /s/ Xxxxx X. Xxxxxx
Title: Director Title: Director and Vice President
ATTEST: ETC INTERNATIONAL CORPORATION
By:/s/ Xxx X. Xxxxx By:/s/ Xxxxx X. Xxxxxx
Title: Asst. Secretary Title: Vice President, C.F.O.
OFFICER'S CERTIFICATE
The undersigned, Xxxxx Xxxxxx, the duly elected and
authorized Chief Financial Officer of Environmental Tectonics
Corporation, a Pennsylvania corporation (the "Company"), without
personal liability, does hereby certify pursuant to Section 4 of
that certain First Amendment dated November 28, 1997, to the
Revolving Credit Agreement dated March 27, 1997, between the
Company and First Union Bank as follows:
(a) The representations and warranties contained in
the Agreement and in each certificate, document or financial
statement furnished by the Borrower in connection therewith or in
connection with any other Loan Document, are true and correct on
and as of the date hereof as though made on and as of the date
hereof.
(b) No Event of Default, and no event which with the
passage of time or the giving of notice or both could become an
Event of Default, exists on the date hereof, and no offsets or
defenses exist against the Borrower's obligations under the
Agreement or the documents delivered in connection therewith.
(c) This First Amendment have been duly authorized,
executed and delivered so as to constitute the legal, valid and
binding obligations of the Borrower, enforceable in accordance
with their terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' right generally and general
principles of equity.
(d) The execution, delivery and performance of this
First Amendment will not violate any applicable provision of law
or judgement, order or regulation of any court or of any public
or governmental agency or authority nor conflict with or
constitute a breach of or a default under any instrument to which
the Borrower is a party or by which the Borrower or the
Borrower's properties is bound, nor result in the creation of any
lien, charge or encumbrance upon any assets, of the Borrower
except those liens permitted by or created under this First
Amendment.
(e) No approval, consent or authorization of , or
registration, declaration or filing with, any governmental or
public body or authority is required in connection with the valid
execution, delivery and performance by the Borrower of this First
Amendment.
IN WITNESS WHEREOF, the undersigned has executed this
officer's certificate this 11th day of February, 1998.
/s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
Chief Financial Officer
