EXECUTION COPY
THIRD AMENDMENT dated as of June 29, 1998,
to the Credit Agreement dated as of
September 23, 1990 (as amended and restated as
of February 7, 1997), as amended by the
Amendments dated as of May 6, 1997, and
November 21, 1997 (the "Credit Agreement"),
among ESCO ELECTRONICS CORPORATION, a Missouri
corporation ("ESCO"), DEFENSE HOLDING CORP., a
Delaware corporation (the "Borrower"), the BANKS
party thereto (the "Banks") and ▇▇▇▇▇▇ GUARANTY
TRUST COMPANY OF NEW YORK, as Agent (the
"Agent").
A. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to them in the Credit
Agreement, as amended hereby.
▇. ▇▇▇▇ and the Borrower have requested that certain
provisions of the Credit Agreement be amended as set forth herein.
The Banks are willing to so amend the Credit Agreement subject to
the terms and conditions set forth herein.
Accordingly, in consideration of the mutual agreements
herein contained and other good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the
parties hereto hereby agree as follows:
SECTION 1. Amendments. (a) Section 1.01 of the Credit
Agreement is hereby amended to add the following definitions:
"AMT" means Advanced Membrane Technology, Inc., a
California corporation.
"AMT Investment" means the acquisition by a Wholly-
Owned Consolidated Subsidiary of all of the outstanding
common stock of AMT in exchange for consideration of
approximately $15,000,000 (adjusted upward to reflect AMT's
cash at closing and downward to reflect AMT's debt at
closing) payable approximately 45% in cash and 55% in shares
of common stock of ESCO.
(b) Article II of the Credit Agreement is hereby
amended and restated by adding the following Section 2.17 at the
end of such Article:
SECTION 2.17. Conversion. Effective upon the
consummation of the AMT Investment, (a) Working Capital
Borrowings in an aggregate principal amount of $7,000,000
shall be automatically converted into Term Borrowings and (b)
the Working Capital Commitments shall be ratably reduced by
$7,000,000. Prior to the date of such conversion, the
Borrower shall notify the Agent in writing of the Working
Capital Borrowing or Borrowings (or portions thereof) that
are to be converted pursuant to the preceding sentence. The
conversion of each such Borrowing (or portion thereof) shall
be allocated ratably to the Loans included in such Borrowing.
If the aggregate principal amount of outstanding Working
Capital Loans would be less than $7,000,000 on the date that
such conversion is to be made pursuant to the first sentence
of this Section, then the Borrower shall borrow additional
Working Capital Loans so that there are not less than
$7,000,000 in aggregate principal amount of Working Capital
Loans outstanding at the time of such conversion.
Notwithstanding the foregoing, no such conversion shall
become effective until receipt by the Security Agent of an
amendment to each mortgage, deed of trust, assignment of
leases or similar instrument or document required by law or
reasonably requested by the Security Agent (all in form and
substance reasonably satisfactory to the Required Banks) to
be filed, registered or recorded in order to maintain in
favor of the Security Agent (or a trustee on its behalf) for
the benefit of the Banks a valid, legal and perfected first
priority security interest in or lien on the real property
(and improvements thereon) owned by the Borrower or any
Specified Subsidiary and identified on Schedule 3.01(j) to
the Credit Agreement, in each case duly executed and
delivered by each mortgagor, grantor or pledgor thereunder.
(c) Section 5.09 of the Credit Agreement is hereby
amended by deleting the words "clause (f), (l) or (n)" from the
second sentence thereof and substituting the words "clause (f),
(l), (n) or (o)".
(d) Section 5.11(a) of the Credit Agreement is hereby
amended by replacing the period at the end of clause (xiv) thereof
with a semicolon and by adding the following clauses (xv) and (xvi)
at the end of such Section:
(xv) Debt of any Subsidiary acquired pursuant to an
acquisition consummated in reliance upon clause (f) or (o) of
Section 5.16; provided that (A) such Debt is outstanding at
the time of and is not incurred in contemplation of such
acquisition and (B) the aggregate principal amount of Debt at
any time outstanding under this clause (xv) shall not exceed
$1,000,000; and
(xvi) Debt incurred by DCS to finance the purchase of
real property and improvements thereon to be used by DCS as
its headquarters, and any Guarantee of such Debt by ESCO;
provided that the aggregate principal amount of such Debt of
DCS at any time outstanding under this clause (xvi) shall not
exceed $2,500,000.
(e) Section 5.16 of the Credit Agreement is hereby
amended by replacing the period at the end of clause (n) thereof
with "; and" and adding the following clause (o) at the end of such
Section:
(o) if at the time thereof and after giving effect
thereto no Default shall have occurred and be continuing, an
Investment by a Wholly-Owned Consolidated Subsidiary
consisting of the AMT Investment; provided that the cash
portion of the consideration for such Investment made
pursuant to this clause (o) and any Debt of AMT remaining
outstanding after the AMT Acquisition shall be treated as an
Investment made pursuant to clause (f) of this Section for
purposes of determining compliance with the limitations of
such clause (f).
(f) Section 5.17 of the Credit Agreement is hereby
amended by replacing the period at the end of clause (n) thereof
with "; and" and adding the following clause (o) at the end of such
Section:
(o) Liens on the real property and improvements referred
to in clause (xvi) of Section 5.11(a) securing Debt of DCS
permitted by such clause.
(g) Section 5.23 of the Credit Agreement is hereby
amended and restated as follows:
SECTION 5.23. Leverage Ratio. The Leverage
Ratio will not exceed (i) 0.70 to 1.00 at any date prior to
October 1, 1999, or (ii) 0.65 to 1.00 at any date on or after
October 1, 1999.
SECTION 2. Representations and Warranties. Each of
ESCO and the Borrower hereby represents and warrants to each Bank,
on and as of the date hereof, that:
(a) This Third Amendment has been duly authorized,
executed and delivered by each of ESCO and the Borrower, and each
of this Third Amendment and the Credit Agreement as amended by this
Third Amendment constitutes a legal, valid and binding obligation
of each of ESCO and the Borrower, enforceable in accordance with
its terms.
(b) The representations and warranties of ESCO, the
Borrower and its Subsidiaries contained in the Credit Agreement and
in each other Loan Document are true and correct in all respects
with the same effect as if made on and as of the date hereof,
except to the extent that such representations and warranties
expressly relate to an earlier date.
(c) After giving effect to this Third Amendment, no
Default has occurred and is continuing.
SECTION 3. Effectiveness. This Third Amendment shall
become effective upon receipt by the Agent of counterparts hereof
signed by each of ESCO, the Borrower and each Bank.
SECTION 4. Miscellaneous. (a) This Third Amendment
constitutes the entire agreement and understanding of the parties
with respect to the subject matter hereof and supersedes any and
all prior agreements and understandings, oral or written, relating
to the subject matter hereof.
(b) Section headings used herein are for convenience
of reference only and are not to affect the construction of, or to
be taken into consideration in interpreting, this Third Amendment.
(c) This Third Amendment shall be construed in
accordance with and governed by the law of the State of New York.
(d) Each reference to a party hereto shall be deemed
to include its successors and assigns, all of whom shall be bound
by this Third Amendment and to whose benefit the provisions of this
Third Amendment shall inure.
(e) This Third Amendment may be executed in any number
of counterparts, each of which shall be an original but all of
which, when taken together, shall constitute but one instrument.
(f) Except as specifically amended or modified hereby,
the Credit Agreement shall continue in full force and effect in
accordance with the provisions thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Third Amendment to be duly executed by their respective authorized
officers as of the date first above written.
ESCO ELECTRONICS CORPORATION
DEFENSE HOLDING CORP.
▇▇▇▇▇▇ GUARANTY TRUST COMPANY OF NEW
YORK, individually and as Agent
NATIONSBANK, N.A.
THE BANK OF NEW YORK
THE BANK OF NOVA SCOTIA
NATIONAL CITY BANK
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
SANWA BUSINESS CREDIT CORPORATION