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10-Q
MEASUREMENT SPECIALTIES, INC.
80 Little Falls Road, Fairfield, New Jersey 07004
(973) 808-1819
December 31, 1997
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
ASSETS
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December 31, March 31,
1997 1997
(unaudited)
Current assets:
Cash and cash equivalents $379,745 $238,787
Accounts receivable, trade, net of allowance for doubtful
accounts of $73,000 (December) and $32,000 (March) 3,784,784 2,811,756
Inventories (Note 2) 3,747,051 3,675,870
Prepaid expenses and other current assets 382,236 398,756
--------- ---------
Total current assets 8,293,816 7,125,169
Property and equipment 3,744,765 3,030,387
Less accumulated depreciation and amortization 2,043,772 1,643,976
--------- ---------
1,700,993 1,386,411
Other assets:
Intangible assets, net of accumulated amortization of
$147,000 (December) and $101,000 (March) 142,032 108,316
Other assets 640,652 614,288
--------- ---------
782,684 722,604
--------- ---------
--------- ---------
$10,777,493 $9,234,184
See notes to consolidated financial statements.
LIABILITIES AND SHAREHOLDERS' EQUITY
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December 31, March 31,
1997 1997
(unaudited)
Current liabilities:
Accounts payable, trade $2,765,605 $2,319,840
Accrued payrolls and fringe benefits 450,937 337,787
Income taxes 197,820 641
Accrued expenses and other current liabilities 847,967 762,381
--------- ---------
Total current liabilities 4,262,329 3,420,649
Other liabilities:
Borrowings under bank line of credit agreement (Note 3) 519,000 778,000
Other liabilities 359,708 392,195
--------- ---------
878,708 1,170,195
--------- ---------
Total liabilities 5,141,037 4,590,844
Commitment and contingencies (Note 7)
Shareholders' equity (Note 4):
Serial preferred stock; 221,756 shares authorized; none
outstanding
Common stock, no par; 20,000,000 shares authorized;
issued and outstanding 3,576,887 (December) and
3,531,987 (March) 5,485,431 5,384,950
Additional paid-in capital 72,345 47,141
Retained earnings (deficit) 78,225 (773,109)
Currency translation and other adjustments 455 (15,642)
--------- ---------
Total shareholders' equity 5,636,456 4,643,340
--------- ---------
--------- ---------
$10,777,493 $9,234,184
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
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For the three months For the nine months
ended December 31, ended December 31,
1997 1996 1997 1996
Net sales $9,235,130 $8,810,193 $23,180,852 $18,389,972
Cost of goods sold 5,978,311 5,641,281 14,998,150 11,904,049
--------- --------- ---------- ----------
Gross profit 3,256,819 3,168,912 8,182,702 6,485,923
Other expenses (income):
Selling, general and administrative 1,929,590 1,571,324 5,542,037 4,494,244
Provision for doubtful accounts 30,623 40,869 58,568
Research and development, net of
customer funding 499,236 458,302 1,501,826 1,180,991
Interest expense 20,010 3,695 70,506 3,695
Interest and other income (8,208) (9,482) (36,870) (24,395)
--------- --------- ---------- ----------
2,471,251 2,023,839 7,118,368 5,713,103
Income before income taxes 785,568 1,145,073 1,064,334 772,820
Provision for income taxes 158,000 213,000
--------- --------- ---------- ----------
Net income $627,568 $1,145,073 $851,334 $772,820
Per share information (Note 5):
Basic earnings per common share $0.18 $0.32 $0.24 $0.22
Diluted earnings per common share $0.17 $0.32 $0.23 $0.21
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the year ended March 31, 1997 and the nine months ended December 31, 1997 (Unaudited)
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Currency
Common stock Additional Retained translation
Number paid-in earnings and other
of shares $ capital (deficit) adjustments Total
Balance, April 1, 1996 3,531,987 $5,384,950 $25,000 ($1,947,953) ($2,608) $3,459,389
Fair value of nonemployee common
stock purchase warrants and
nonemployee options issued for
services 22,141 22,141
Net income for the year ended
March 31, 1997 1,174,844 1,174,844
Currency translation adjustment
and unrealized holding gains
and losses on available-for-sale
marketable securities (13,034) (13,034)
--------- ---------- ------- ------------ -------- ----------
Balance, March 31, 1997 3,531,987 5,384,950 47,141 (773,109) (15,642) 4,643,340
Common shares issued upon exercise
of options and related income
tax benefit 44,900 100,481 25,204 125,685
Net income for the nine months
ended December 31, 1997 851,334 851,334
Currency translation adjustment and
unrealized holding gains and
losses on available-for-sale
marketable securities 16,097 16,097
--------- ---------- ------- ------------ -------- ----------
Balance, December 31, 1997 3,576,887 $5,485,431 $72,345 $78,225 $455 $5,636,456
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 6) (Unaudited)
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For the nine months ended December 31,
1997 1996
Cash flows from operating activities:
Net income $851,334 $772,820
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of property and equipment 402,213 236,903
Amortization of intangible assets and deferred financing costs 54,778 49,907
Provision for doubtful accounts 40,869 58,569
Deferred income taxes 1,423 (55,544)
Other adjustments 1,760 31,114
Net changes in operating assets and liabilities:
Accounts receivable, trade (1,013,303) (944,740)
Inventories (71,181) (946,059)
Prepaid expenses and other current assets 7,408 21,715
Other assets 3,981 (55,896)
Accounts payable, trade 445,765 1,855,244
Income taxes 197,179 51,085
Accrued expenses and other current liabilities 225,397 (333,891)
Other liabilities (59,148) (139,352)
---------- ----------
Net cash provided by operating activities 1,088,475 601,875
Cash flows from investing activities:
Purchases of property and equipment (715,454) (550,734)
Purchases of intangible assets (79,367) (72,759)
Proceeds from sale of property and equipement 129
---------- ----------
Net cash used in investing activities (794,821) (623,364)
Cash flows from financing activities:
Borrowings under bank line of credit agreement 11,167,000 1,228,360
Repayments under bank line of credit agreement (11,426,000) (1,228,360)
Proceeds from exercise of options and warrants 100,481
Payment of deferred financing costs (6,564) (10,000)
---------- ----------
Net cash used in financing activities (165,083) (10,000)
Effect of exchange rate changes on cash and cash equivalents 12,387 (4,974)
---------- ----------
Net change in cash and cash equivalents 140,958 (36,463)
Cash and cash equivalents, beginning of period 238,787 771,016
---------- ----------
---------- ----------
Cash and cash equivalents, end of period $379,745 $734,553
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information about interim periods is unaudited)
1. Interim financial statements:
Basis of presentation:
These interim financial statements were prepared pursuant to generally accepted accounting
principles for interim financial information, the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, while they conform with the measurement and classification
provisions of generally accepted accounting principles, they do not include the footnote
information required by generally accepted accounting principles for annual financial
statements. Preparation of these financial statements requires management to make estimates
and assumptions which affect the amounts reported. Actual results could differ from those
estimates. Additionally, these financial statements are subject to adjustments that might
result from the independent audit of the Company's financial statements for the year ending
March 31, 1998. In the opinion of management, all adjustments and disclosures necessary to
make these interim financial statements not misleading have been included. Nevertheless,
reference is made to the annual financial statements included in the Company's Annual Report
on Form 10-K for the year ended March 31, 1997. Operating results for the nine months ended
December 31, 1997 are not necessarily indicative of the results that may be expected for the
year ending March 31, 1998.
Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or market. Cost was
estimated using standard cost.
Stock based compensation:
The Company accounts for employee stock option grants using the intrinsic value based method.
Income taxes:
Income taxes are provided based on the estimated effective annual tax rate. The estimate
gives effect to low foreign tax rates on the undistributed earnings of the Company's
subsidiaries, on which deferred income taxes are not provided.
2. Inventories:
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December March
Raw materials $ 721,319 $ 584,970
Work-in-process 394,828 734,010
Finished goods 2,630,904 2,356,890
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$3,747,051 $3,675,870
3. Borrowings under bank line of credit agreement:
On December 19, 1997, the Company's revolving line of credit agreement was amended to increase
maximum borrowings by $1.3 million to $3.3 million. At December 31, 1997, $519,000 was
outstanding under the agreement, extended by a domestic bank. Advances, rates of which have
been liberalized, are collateralized by a senior security interest in substantially all assets
and repayable by September 30, 1999, the agreement's amended expiration date. Effective
December 19, 1997, borrowings bear interest at 0.125 percent above the bank's prime rate
(aggregating 9.0 percent at December 31, 1997) or at 2.25 percent above the London interbank
offered rates for certain maturities, at the Company's option. Previously, the interest rate
on borrowings was 0.5 percent above the bank's prime rate. The amended agreement requires
maintenance of certain levels of net worth, limits capital expenditures and advances to the
Company's subsidiaries and requires the bank's consent for dividend payments. It also
requires payment of a non-usage fee, computed on the average unused portion of the line of
credit, instead of the higher, previously charged annual facility fee.
4. Shareholders' equity:
The Company is authorized to issue 21,200,000 shares of capital stock of which 221,756 shares
have been designated as serial preferred stock and 20,000,000 shares have been designated as
common stock. No serial preferred stock was outstanding at December 31, 1997. The Board of
Directors has not designated 978,244 authorized shares.
The Company's China subsidiary is subject to certain government regulations, including
currency exchange controls, which limit cash dividends and loans. At December 31, 1997, this
subsidiary's restricted net assets approximated $564,000.
5. Per share information:
On October 1, 1997, the Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share," which requires presentation of basic and diluted per share information
and eliminates the modified treasury stock method of computing dilutive potential common
shares. Basic per share information is computed based on the weighted average common shares
outstanding during each period, after deducting preferred dividend requirements from net
income. Diluted per share information additionally considers the shares that may be issued
upon exercise or conversion of stock options, warrants and convertible securities (less the
shares that may be repurchased with the funds received from their exercise), after adding
preferred dividend requirements back to net income available to common shareholders. The
modified treasury stock method, pursuant to which the Company previously computed dilutive
potential common shares, had assumed investment of a portion of the exercise proceeds.
The total numbers of potential common shares at December 31, 1997 and 1996 were 1,002,600 and
964,500, respectively. To the extent their exercise or conversion prices exceed the average
market price of the common shares during each period, potential common shares are not
considered in the computation of diluted per share information. The weighted average
aggregate numbers of outstanding stock options and warrants not considered dilutive for the
three months ended December 31, 1997 and 1996 were 336,500 and 729,500, respectively. The
weighted average aggregate numbers of outstanding stock options and warrants not considered
dilutive for the nine months ended December 31, 1997 and 1996 were 341,427 and 581,436,
respectively.
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Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
For the three months ended For the three months ended
December 31, 1997 December 31, 1996
Basic per share information $ 627,568 3,569,287 $0.18 $1,145,073 3,531,987 $0.32
Effect of dilutive securities 91,745 25,738
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Diluted per share information $ 627,568 3,661,032 $0.17 $1,145,073 3,557,725 $0.32
For the nine months ended For the nine months ended
December 31, 1997 December 31, 1996
Basic per share information $ 851,334 3,553,656 $0.24 $ 772,820 3,531,987 $0.22
Effect of dilutive securities 94,665 65,655
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Diluted per share information $ 851,334 3,648,321 $0.23 $ 772,820 3,597,642 $0.21
6. Supplemental disclosures of cash flow information:
For 1997, payments of interest expense approximated $70,000 and payments of income taxes
approximated $21,000. Additionally, the Company recognized $25,204 of income tax benefits on
stock option exercises for 1997. For 1996, payments of interest expense approximated $2,000
and payments of income taxes approximated $9,000. Additionally, the Company issued
nonemployee common stock purchase warrants and nonemployee options for services with a fair
value of $22,141 for 1996.
7. Commitment and contingencies:
On September 5, 1997, the Company expanded its industrial product design engineering facility
in Newport News, Virginia and extended the term of the related lease through November 30,
2001. At December 31, 1997, additional minimum rentals attributable to the lease addendum
were:
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Year ending March 31,
1998 $ 3,000
1999 10,000
2000 24,000
2001 29,000
2002 19,000
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$ 85,000
Products generally are marketed under warranties of up to ten years. The Company provides for
estimated product warranty obligations at the time of sale, based on its warranty claims
experience. This estimate is susceptible to changes in the near term based on introductions
of new products, product quality improvements and changes in end user behavior.
Certain compensation of substantially all employees is contingent upon various performance
criteria. Approximately $294,000 and $194,000 were provided for estimated contingent payments
earned for the nine months ended December 31, 1997 and 1996, respectively.
At December 31, 1997, the Company was contingently liable for $135,000 under unused import
letters of credit and its Hong Kong subsidiary was contingently liable for $109,000 under
discounted export letters of credit.
On November 10, 1997, the Company received civil court approval of a mediated settlement, with
a licensee of the Company's technology, of a dispute over a 1991 agreement to produce and
market industrial pressure sensors. The settlement, terms of which are confidential, did not
require a provision for liability to be made in the accompanying financial statements.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Certain statements in this report, which discuss the Company's expectations, intentions and
strategies for the future, are "forward looking statements" within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
statements are based on information available to the Company on the date of this report and
the Company assumes no obligation to update them. Actual results could differ materially from
the forward looking statements. Among the important factors that could cause actual results
to differ are the timely development, market acceptance and warranty performance of new
products, the impact of competitive products and pricing, the continuity of bookings trends,
customers' financial condition, the absence of supply interruptions, success in identifying,
financing and integrating acquisition candidates, uncertainties of doing business in China and
Hong Kong and such additional risks and uncertainties as are detailed from time to time in the
Company's reports and filings with the Securities and Exchange Commission (the "SEC").
RESULTS OF OPERATIONS
Revenues for the nine months ended December 31 increased by $4,791,000 or 26 percent, from
$18,390,000 for 1996 to $23,181,000 for 1997, reflecting record sales levels for the nine-
month and three-month periods ended December 31, 1997. Sales performance continued to benefit
from certain consumer product promotions and development of the industrial pressure transducer
business. Revenue growth in the third quarter was lower than in other quarters primarily
because Christmas season reorders were modest. Net income for 1997 was $851,000 for the nine
months ended December 31 ($628,000 for the third quarter), compared with $773,000 for the nine
months ($1,145,073 for the third quarter) one year earlier.
Sales of consumer bath scales increased by $2,488,000 or 20 percent, from $12,519,000 for 1996
to $15,007,000 for 1997. Sales of tire pressure gauges increased by $1,821,000 or 114
percent, from $1,592,000 for 1996 to $3,413,000 for 1997. Both product categories benefited
from promotional sales campaigns. Promotions comprise a regular part of the Company's
consumer products business and can be expected to vary from year to year. Generally, sales of
other consumer products grew comparably in 1997, though sales of fish scales declined. The
Company is planning to expand its line of fish scales.
Sales of industrial pressure sensors increased by $718,000 or 71 percent, from $1,006,000 for
1996 to $1,724,000 for 1997, partly as a result of the launch of a new product offering
protection against electrostatic effects, electromagnetic and radio-frequency interference.
The Company granted Dresser Industries a license to manufacture comparable products under a
1991 agreement, certain terms of which had been disputed. On November 10, 1997, a civil court
approved the parties' mediated settlement of their differences over the agreement's
interpretation. The settlement, terms of which are confidential, did not require a provision
for liability to be made in the Company's financial statements.
Gross profit for the nine month period increased from 1996 to 1997 by $1,697,000, with the
gross profit percentage remaining at 35.3 percent for both years. Gross profit percentages
fluctuate with changes in product and customer mixes. Additionally, the Company may
experience future price pressures caused by the effects of foreign currency exchange rates on
its foreign sales, and because of the introduction of competing consumer products. The
Company intends to maintain its competitiveness by continuing to expand its product lines,
with technological advances, innovative designs and broader price ranges, while making major
efforts to reduce product costs.
Selling, general and administrative ("SG&A") expenses for the nine months increased by
$1,048,000, or 23 percent, but declined slightly as a percentage of net sales, from 24.4
percent for 1996 to 23.9 percent for 1997. Certain variable SG&A expenses increased somewhat,
mainly as a result of the promotional orders mentioned above, which required special packaging
and handling and certain royalty payments. These increases were more than offset by a lower
provision for estimated product warranty obligations, reflecting the Company's more recent
warranty claims experience which benefited from quality improvements. In March 1997, the
Company's China subsidiary received certification of its conformity with the International
Standards Organization ("ISO") 9002 Quality System Standard. The estimate of product warranty
obligations is susceptible to changes in the near term based on introductions of new products,
product quality improvements and changes in end user behavior. Consumer products are marketed
under warranties to end users of up to ten years. Fixed SG&A expenses increased as a result
of higher sales and marketing expenses, principally personnel, advertising, packaging
development and trade show participation. The Company added to its sales and marketing staff,
which was reorganized around product segments. A regional sales manager was added to
penetrate additional consumer products accounts including premium, incentive and promotional
business, and two new hires are dedicated to developing the industrial pressure sensor
business. Advertising and trade show expenses rose, in part, to support the growth of the
Company's industrial pressure sensor business. Packaging development grew, as a result of
expansion of the number of consumer product offerings.
Research and development expenses increased by $321,000, or 27 percent, from $1,181,000 for
1996 to $1,502,000 for 1997. Much of this increase was attributable to industrial pressure
sensor product development at the Company's Virginia Transducer Engineering Center ("VA-TEC"),
which was not operational for the full nine-month period in 1996. Approximately one-fourth of
the Company's research and development spending for 1997 was attributable to VA-TEC. The
Company's revenue growth has relied on, and is likely to continue to rely on, expansion of its
product lines and, accordingly, research and development expenses will continue to be
significant. The Company intends to continue to invest in industrial pressure product
development, and launch new consumer products and line extensions. Plans include development
of a "smart" microcontroller-based industrial pressure sensor and a new application-specific
integrated circuit to reduce the cost in substantially all consumer products. The Company
recently began to ship its new "frame" scale, which incorporates "Sensor Disc" TM technology
in a lower cost, one-piece frame.
For 1997, the Company provided income taxes of $213,000, at an approximate effective income
tax rate of 20 percent. This estimated rate of tax, which is subject to change in the near
term, is based on the proportion of pretax profits now expected to be earned by the Company's
foreign subsidiaries and favorable overseas tax rates now in effect. Deferred income taxes
are not provided on these subsidiaries' earnings, which are expected to be reinvested. Taxes
were not provided for 1996, because of the availability of operating loss carryforwards.
However, the tax benefits of those losses were not recognized because of management's
assessment, then, that the tax benefits were unlikely to be realized in the near term.
Per share information normally considers the shares that may be issued upon exercise of stock
options and warrants, reduced by the shares that may be repurchased with the funds received
from their exercise. At December 31, 1997, the total number of potential common shares then
underlying stock options and warrants was 1,002,600. However, for the three-month and nine-
month periods then ended, the weighted average numbers of potential common shares not
considered dilutive were 336,500 and 341,427, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital needs for 1997 have increased, compared with 1996, mainly from
higher average inventory levels, attributable in part to expansion of the number of products
offered for sale, and from increased average accounts receivable, primarily as a result of
higher sales volume. Operating activities for the nine months ended December 31, 1997
provided $1,088,000 of cash.
Fixed asset purchases for 1997, aggregating $715,000, mainly comprised productive equipment,
to augment China manufacturing and certain semiconductor wafer processing in New Jersey,
office space expansion at both sites and consumer product tooling costs. Additionally,
$79,000 was spent on computer software to enhance office connectivity and productivity. The
Company expects such capital spending to continue, in line with growth of its product lines
and staff size. At December 31, 1997, there were no material commitments for capital
expenditures.
The Company generally finances its requirements with accounts payable and bank borrowings.
The Company's principal supplier, River Display Ltd. ("RDL"), assembles substantially all
consumer products. While the Company furnishes RDL with the proprietary subassemblies
required in its products, RDL purchases other required components from third parties, reducing
the Company's need to finance certain raw materials through their conversion to finished
inventories.
On December 19, 1997, the Company's bank line of credit was increased by $1.3 million to $3.3
million. Fees were substantially reduced, as were interest rates, which now may be calculated
based on LIBOR or the bank's prime rate, at the Company's option. The term of the agreement
was extended through September 30, 1999. At December 31, 1997, $519,000 was outstanding under
the line of credit agreement.
Management believes that these resources and cash flows expected from operating activities
will continue to be adequate for the Company's existing business and planned internal growth.
However, the Company has begun a pursuit of industrial product acquisition candidates, which
is likely to require additional financing.
The Company has not declared cash dividends on its common equity. Management expects that
earnings that may be generated from the Company's near-term operations will be reinvested and
that, accordingly, dividends will not be paid to common shareholders in the future.
Additionally, the payment of dividends is subject to the consent of the bank that extended a
revolving credit agreement.
At present, there are no material restrictions on the ability of the Company's Hong Kong
subsidiary to transfer funds to the Company as cash dividends, loans, advances or purchases of
materials, products or services. However, distribution and repatriation of dividends by the
Company's China subsidiary are restricted by Chinese laws and regulations, including currency
exchange controls. At December 31, 1997, this subsidiary's restricted net assets approximated
$564,000.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
(3)(i) Second Restated Certificate of Incorporation
(4) Second Amendment to Revolving Loan and Security Agreement with PNC Bank, N.A.
(10) Addendum to Lease with CMEP I
(10) Supply and Distribution Agreement with Korona GmbH & Company, KG
(27) Financial Data Schedule
The Company did not file any reports on Form 8-K during the three months ended December 31,
1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
MEASUREMENT SPECIALTIES, INC. (Registrant)
Date: February 2, 1998 /s/ Joseph R. Mallon Jr.
President, Chief Executive Officer and
Chairman of the Board of Directors
Date: February 2, 1998 /s/ Mark A. Shornick
Chief Financial Officer, Assistant Secretary
and Treasurer
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EXHIBIT 3(i) - SECOND RESTATED CERTIFICATE OF INCORPORATION OF MEASUREMENT
SPECIALTIES, INC.
December 31, 1997
The undersigned Corporation does hereby restate its Certificate of Incorporation in accordance with the
provisions of N.J.S.A. 14A:9-5 as follows:
1.Name.
The name of the Corporation is MEASUREMENT SPECIALTIES, INC.
2.Principal Office and Registered Agent.
The location of the principal office of the Corporation is 169 Ramapo Valley Road, P.O. Box 20, Oakland,
Bergen County, New Jersey 06436. The name of the agent in charge of the principal office and upon
whom process against the Corporation may be served is Michael C. Rudolph.
3.Objects.
The objects for which the Corporation is formed are:
(a)To engage in the business of developing, manufacturing and marketing measuring devices for use in
consumer, commercial and industrial products, but this shall in no way limit the Corporation's authority to
develop, manufacture and market other types of consumer, commercial and industrial products.
(b)To buy, sell, lease, mortgage and maintain real property or any interest and rights in real or personal
property.
(c)To borrow or lend money; to make, issue and receive promissory notes and other types of evidences of
indebtedness, whether or not secured by mortgage, pledge or other lien, and to secure same by
mortgage, pledge or otherwise.
(d)To engage in any business authorized by the Laws of the State of New Jersey, and to do everything
necessary, suitable and proper to accomplish the objectives enumerated above.
(e)The Corporation shall also have power to conduct its business at any location in the State of New
Jersey, in any other state or territory of the United States of America or in any foreign country or place.
4.Authorized Shares.
The Corporation is authorized to issue 21,200,000 shares of stock.
5.Division of Shares into Classes.
The Corporation is authorized to divide its shares into three (3) classes, as follows:
(a)20,000,000 shares without par value shall be designated as Common Stock.
(b)100,000 shares with a par value of $5.00 per share shall be designated as Series A Convertible
Preferred Stock.
(c)100,000 shares with a par value of $5.00 per share shall be designated as Series B Convertible
Preferred Stock.
(d)21,756 shares with a par value of $1.75 per share shall be designated as Series C Preferred Stock.
The Board of Directors is authorized, with respect to the remaining 978,244 authorized shares that have
not been previously been classified: (i) to divide such shares into classes and into series within any class
or classes; (ii) to determine the designation and the number of shares of any class or series; and (iii) to
make all other divisions and determinations related thereto. Before issuing any shares authorized by this
section, the Board of Directors shall cause this Restated Certificate of Incorporation to be amended in
accordance with the provisions of N.J.S.A. 14A:7-2.
6.Relative Rights, Privileges and Limitations on Stock.
(a)Common Stock.
(i)Voting Rights. Except as otherwise provided herein, the holders of Common Stock shall have equal
right to vote, or consent in lieu of voting, at all meetings of the shareholders of the Corporation, or
otherwise, in respect to any matter upon which the vote or the consent in lieu of voting of the shareholder
is required, including without limitation the election of directors. Each common share shall be entitled to
one vote.
(ii)Dividends. No dividends shall be payable on the Common Stock if there are any accrued dividends on
the Series A or Series B Convertible Preferred stock that have not been paid.
(b)Series A Convertible Preferred Stock.
(i)Voting Rights. Except as otherwise provided herein, the holders of Series A Convertible Preferred Stock
shall have equal right to vote, or consent in lieu of voting, at all meetings of the shareholders of the
Corporation, or otherwise, in respect to any matter upon which the vote, or the consent in lieu of voting, of
the shareholders is required, including without limitation the election of directors. Each preferred share
shall be entitled to one vote.
(ii)Exchange of Series A Preferred Stock for Common Stock. Each holder of Series A Convertible Stock
shall, subject to the conditions set forth below, upon surrender of the certificates therefor, exchange his or
her Series A Convertible Preferred Stock into fully paid and non-assessable Common Stock of the
Corporation at the exchange rate of one share of Common Stock for each share of Series A Preferred
Stock (the "Exchange Rate"). Shares of Series A Preferred Stock shall be exchanged only upon such
conditions and at such times as follows:
(A)As promptly as practicable after the exchange, and in any event, within fifteen (15) calendar days
thereafter, the Corporation, at its expense (including payment by it of any applicable issue taxes) will issue
and deliver to the holder of record of such Common Stock, or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, a certificate or certificates for the number of shares of
Common Stock issuable upon such conversion, including fractional shares.
(B)The Corporation shall at all times reserve and keep available, out of its authorized and unissued
stock, solely for the purpose of effecting the conversion of the Series A Preferred Stock, such number of
shares of Common Stock as shall from time to time be sufficient to effect the conversion of all shares of
Series A Preferred Stock from time to time outstanding.
(C)If, prior to the exercise of the exchange, the Corporation shall issue any shares of its Common Stock
as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater
number of shares, then, in either case, the Exchange Rate per share of the Common Stock and the
conversion premium payable therefor shall be proportionately reduced; and, conversely, in the event that
the Corporation shall contract the number of outstanding shares of Common Stock by combining such
shares into a smaller number of shares, then, in such case, the Exchange Rate per share of the
Common Stock and the conversion premium payable therefor shall be proportionately increased and the
number of shares of Common Stock at that time into which a share of Series A Convertible Preferred
Stock may be converted shall be proportionately decreased. If the Corporation shall at any time prior to
the exercise of the exchange declare a dividend payable in cash on its Common Stock and at
substantially the same time offer its holders of Common Stock a right to purchase Common Stock from
the proceeds of such dividend or for an amount substantially equal to such dividend, then, in such cases,
all Common Stock so issued shall be deemed to have been issued as a stock dividend. Any dividend
paid or distributed upon the Common Stock in stock of any other class of securities convertible into
shares of Common Stock shall be treated as a dividend paid in Common Stock to the extent that shares
of Common Stock are issuable upon the exchange thereof.
(iii)Cumulative Dividends. Each share of Series A Convertible Preferred Stock shall earn an annual
cumulative cash dividend of $.675 per share from date of issuance. Dividends shall be payable quarterly
on the first day of each calendar quarter commencing October 1, 1986. No dividends shall be payable on
the Common Stock or any other series of Preferred Stock if there are any accrued dividends on the Series
A Convertible Preferred Stock that have not been paid. Unpaid cumulative dividends on such Preferred
Stock shall not bear interest. After accrued dividends on Series A Convertible Stock have been paid,
additional dividends may be declared and paid or set aside from any remaining surplus for payment in
any year ratably and equally per share on all shares of Preferred and Common Stock.
(iv)Liquidation. In the event of the dissolution, liquidation, or winding up of the Corporation, or a sale of all
its assets, whether voluntary or involuntary, or in the event of its insolvency, there shall be paid to the
holders of the shares of Series A Preferred Stock the sum of $5.00 per share, plus accrued dividends,
before any sums shall be paid or any assets distributed among the holders of the Corporation's Common
Stock. If the assets of the Corporation shall be insufficient to permit the payment in full to the holders of
the shares of Series A Convertible Stock and other series of Preferred Stock of the amount thus
distributable, then the entire assets of the Corporation shall be distributed ratably among the holders of
Series A Convertible Stock and the holders of other series of Preferred Stock. After the foregoing
payments have been made to the holders of shares of Series A Convertible Preferred Stock and holders
of other series of Preferred Stock, the remaining assets and funds of the Corporation shall be distributed
among and paid to the holders of the Common Stock, share and share alike, and in proportion to their
shareholdings. The foregoing provisions of this paragraph shall not, however, be deemed to require the
distribution of assets among the holders of the Series A Convertible Preferred Stock and the holders of
the Common Stock in the event of a consolidation, merger, lease, or liquidation or winding up of the
enterprise.
(v)Redemption. The Corporation shall have the right to redeem all, but not less than all, of the Series A
Convertible Stock at a redemption price of $5.00 per share plus accrued and unpaid cumulative dividends
as of the date of redemption if redeemed from date of issuance through August 30, 1986; and thereafter at
$5.25 per share through September 30, 1987; and thereafter at $5.50 per share through September 30,
1988 and thereafter at $6.00 per share.
(c)Series B Convertible Preferred Stock.
(i)Voting Rights. Except as otherwise provided herein, the holders of Series B Convertible Preferred Stock
shall have equal right to vote, or consent in lieu of voting, at all meetings of the shareholders of the
Corporation, or otherwise, in respect to any matter upon which the vote, or the consent in lieu of voting, of
the shareholders is required, including without limitation the election of directors. Each preferred share
shall be entitled to one vote. Commencing September 1, 1988 the holders of the Series B Preferred Stock
shall vote as a separate class with respect to the election of such number of directors of the Corporation
as shall be equal to a majority of the Board of Directors as constituted on and after September 1, 1988.
(ii)Exchange of Series B Preferred Stock for Common Stock. Each holder of Series B Convertible Stock
shall, subject to the conditions set forth below, upon surrender of the certificates therefor, exchange his or
her Series B Convertible Preferred Stock into fully paid and non-assessable Common Stock of the
Corporation at the exchange rate of one share of Common Stock for each share of Series B Preferred
Stock (the "Exchange Rate"). Shares of Series B Preferred Stock shall be exchanged only upon such
conditions and at such times as follows:
(A)As promptly as practicable after the exchange, and in any event within fifteen (15) calendar days
thereafter, the Corporation, at its expense (including payment by it of any applicable issue taxes), will
issue and deliver to the holder of record of such Preferred Stock, or as such holder (upon payment by
such holder of any applicable transfer taxes) may direct, a certificate or certificates for the number of
shares of Common Stock issuable upon such conversion, including fractional shares.
(B)The Corporation shall at all times reserve and keep available, out of its authorized and unissued
stock, solely for the purpose of effecting the conversion of the Series B Preferred Stock, such number of
shares of Common Stock as shall from time to time be sufficient to effect the conversion of all shares of
Series B Preferred Stock from time to time outstanding.
(C)If, prior to the exercise of the exchange, the Corporation shall issue any shares of its Common Stock
as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater
number of shares, then, in either case, the Exchange Rate per share of the Common Stock and the
conversion premium payable therefor shall be proportionately reduced; and, conversely, in the event that
the Corporation shall contract the number of outstanding shares of Common Stock by combining such
shares into a smaller number of shares, then, in such case, the Exchange Rate per share of the
Common Stock and the conversion premium payable therefor shall be proportionately increased, and the
number of shares of Common Stock at that time into which a share of Series B Convertible Stock may be
converted shall be proportionately decreased. If the Corporation shall, at any time prior to exercise of the
exchange, declare a dividend payable in cash on its Common Stock and at substantially the same time
offer its holders of Common Stock a right to purchase Common Stock from the proceeds of such dividend
or for an amount substantially equal to such dividend, then, in such case, all Common Stock so issued
shall be deemed to have been issued as a stock dividend. Any dividend paid or distributed upon the
Common Stock in stock of any other class of securities convertible into shares of Common Stock shall be
treated as a dividend paid in Common Stock to the extent that shares of Common Stock are issuable
upon the exchange thereof.
(iii)Cumulative Dividends. Each share of Series B Convertible Preferred Stock shall earn an annual
cumulative cash dividend of $.50 per share from date of issuance. Dividends shall be payable annually
on the first day of April commencing April 1986. No dividends shall be payable on the Common Stock or
any other series of Preferred Stock if there are any accrued dividends on the Series B Convertible
Preferred Stock that have not been paid. Unpaid cumulative dividends on such Preferred Stock shall not
bear interest. After accrued dividends on Series B Convertible Stock has been paid, additional dividends
may be declared and paid or set aside from any remaining surplus for payment or in any year ratably and
equally per share on all shares of Preferred and Common Stock.
(iv)Liquidation. In the event of the dissolution, liquidation, or winding up of the Corporation, or a sale of all
its assets, whether voluntary or involuntary, or in the event of its insolvency, there shall be paid to the
holders of the shares of Series B Preferred Stock the sum of $5.00 per share, plus accrued dividends
before any sums shall be paid or any assets distributed among the holders of the Corporation's Common
Stock (if the assets of the Corporation shall be insufficient to permit the payment in full to the holders of
the shares of Series B Convertible Stock and other series of Preferred Stock of the amount thus
distributable, then the entire assets of the Corporation shall be distributed ratably among the holders of
Series B Convertible Stock and the holders of other series of Preferred Stock); and after the foregoing
payments to the holders of shares of Series A Convertible Preferred Stock and the holders of other series
of Preferred Stock, the remaining assets and funds of the Corporation shall be distributed among, and
paid to, the holders of the Common Stock, share and share alike, and in proportion to their
shareholdings. The foregoing provisions of this paragraph shall not, however, be deemed to require the
distribution of assets among the holders of the Series B Convertible Preferred Stock and the holders of
the Common Stock in the event of a consolidation, merger, lease, or sale, which does not in fact result in
the liquidation or winding up of the enterprise.
(v)Redemption. The Corporation shall have the right to redeem all, but not less than all, of the Series B
Convertible Stock at a redemption price of $5.00 per share plus accrued and unpaid cumulative dividends
as of the date of redemption if redeemed from date of issuance through September 30, 1986; at $5.25 per
share after September 30, 1986 through September 30, 1987, at $5.50 per share after September 30,
1987 through August 30, 1988 and after August 30, 1988 at $6.00 per share.
(d)Series C Convertible Preferred Stock.
(i)Voting Rights. The holders of Series C Convertible Preferred Stock shall have equal right to vote, or
consent in lieu of voting, at all meetings of the shareholders of the Corporation, or otherwise, in respect to
any matter upon which the vote, or the consent in lieu of voting, of the shareholders is required, including
without limitation the election of directors.
(ii)Exchange of Series C Preferred Stock for Common Stock. At any time prior to the end of the third
anniversary date of each certificate, each holder of Series C Preferred Stock, subject to the conditions set
forth below, upon surrender of the certificates therefor, shall have the right to exchange his or her Series C
Preferred Stock into fully paid and non-assessable Common Stock of the Corporation at the following
exchange rates: (a) For Series C Preferred Stock exchanged on or before the first anniversary date of this
certificate, one share of Common Stock for 1.05 shares of Series C Preferred Stock; (b) For Series C
Preferred Stock exchanged after the first anniversary date and on or before the second anniversary date of
this certificate, one share of Common Stock for 1.10 shares of Series C Preferred Stock; and (c) For
Series C Preferred Stock exchanged after the second anniversary date and on or before the third
anniversary date of this certificate one share of Common Stock for 1.15 shares of Series C Preferred
Stock.
Shares of Series C Preferred Stock shall be exchanged only upon such conditions and at such times as
follows:
(A)As promptly as practicable after the exchange, and in any event within fifteen (15) calendar days
thereafter, the Corporation, at its expense (including payment by it of any applicable issue taxes), will
issue and deliver to the holder of record of such Preferred Stock, or as such holder (upon payment by
such holder of any applicable transfer taxes) may direct, a certificate or certificates for the number of
shares of Common Stock issuable upon such conversion, including fractional shares.
(B)The Corporation shall at all times reserve and keep available, out of its authorized and unissued
stock, solely for the purpose of effecting the conversion of the Series C Preferred Stock, such number of
shares of Common Stock as shall from time to time be sufficient to effect the conversion of all shares of
Series C Preferred Stock from time to time outstanding.
(C)If, prior to the exercise of the exchange, the Corporation shall issue any shares of its Common Stock
as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater
number of shares, then, in either case, the Exchange Rate per share of the Common Stock and the
conversion premium payable therefor shall be proportionately reduced; and, conversely, in the event that
the Corporation shall contract the number of outstanding shares of Common Stock by combining such
shares into a smaller number of shares, then, in such case, the Exchange Rate per share of the
Common Stock and the conversion premium payable therefor shall be proportionately increased, and the
number of shares of Common Stock at that time into which a share of Series C Convertible Stock may be
converted shall be proportionately decreased. If the Corporation shall, at any time prior to exercise of the
exchange, declare a dividend payable in cash on its Common Stock and at substantially the same time
offer its holders of Common Stock a right to purchase Common Stock from the proceeds of such dividend
or for an amount substantially equal to such dividend, then, in such case, all Common Stock so issued
shall be deemed to have been issued as a stock dividend. Any dividend paid or distributed upon the
Common Stock in stock of any other class of securities convertible into shares of Common Stock shall be
treated as a dividend paid in Common Stock to the extent that shares of Common Stock are issuable
upon the exchange thereof. Issuance of shares of a subsidiary of the Corporation as a dividend to the
Corporation's shareholders shall have no effect on the Exchange Rate.
(D)"Anniversary Date" shall mean the month and day on which this certificate is issued.
(E)"Exchange Rate" shall mean the Exchange Rate which shall apply in accordance with the applicable
terms of subparagraph (ii)(A), (ii)(B), or (ii)(C), at the Corporation's option.
(iii)Cumulative Dividends. Each share of Series C Preferred Stock shall earn an annual cumulative cash
dividend of $.14 per share from date of issuance. Dividends shall be payable annually on the tenth day of
December commencing December 1992. No cash dividends shall be payable on the Common Stock or
any other series of Preferred Stock if there are any accrued dividends on the Series C Convertible
Preferred Stock that have not been paid. (The foregoing prohibition shall have no application to the
declaration or issuance of stock dividends.) Unpaid cumulative dividends shall not bear interest.
(iv)Liquidation. In the event of the dissolution, liquidation, or winding up of the Corporation, or a sale of all
its assets, whether voluntary or involuntary, or in the event of its insolvency, there shall be paid to the
holders of the shares of Series C Preferred Stock the sum of $1.75 per share, plus accrued dividends
before any sums shall be paid or any assets distributed among the holders of the Corporation's Common
Stock. If the assets of the Corporation shall be insufficient to permit the payment in full to the holders of
the shares of Series C Stock and other series of Preferred Stock of the amount thus distributable, then the
entire assets of the Corporation shall be distributed ratably among the holders of Series C Stock and the
holders of other series of Preferred Stock. After the foregoing payments to the holders of shares of Series
C Preferred Stock and the holders of other series of Preferred Stock, the remaining assets and funds of
the Corporation shall be distributed among, and paid to, the holders of the Common Stock, share and
share alike, and in proportion to their shareholdings. The foregoing provisions of this paragraph shall
not, however, be deemed to require the distribution of assets among the holders of the Series C Preferred
Stock and the holders of the Common Stock in the event of a consolidation, merger, lease, or sale, which
does not in fact result in the liquidation or winding up of the enterprise.
(v)Redemption. The Corporation shall have the right to redeem all, but not less than all, of the Series C
Preferred Stock at a redemption price of $1.75 per share plus accrued and unpaid cumulative dividends
as of the date of redemption.
(vi)Registration Rights. In the event the Corporation shall file a registration statement or notification
pursuant to Regulation A ("Registration Statement") for any offering of any equity securities issued or to be
issued by it, the holders of common shares which have been issued upon the conversion of Series C
Preferred Stock shall have the right to register such common shares as part of such registration
statement. Such registration shall be without cost to the owners, with the exception of fees to their own
counsel and sales commissions incurred if the underlying shares are sold. The registration rights
contemplated herein shall be limited, in the case of an offering pursuant to Regulation A, to the amount of
the available exemption; and shall not attach to any registration filed on Form S-8 or Form S-4.
(vii)Right of Repurchase. In the event any of the holder of Series C Preferred Shares shall desire to sell
their shares, he or she as a condition to any such sale shall provide the Corporation with written notice
stating the date (which shall be not less than fifteen days from the date of this notice) price and terms of
the intended sale. Within ten days
after such notice the Corporation shall have the right, which right shall be exercised by written notice to
the holder, to purchase the Series C shares intended for sale subject to the same price and terms as set
forth in the holder's notice to the Corporation. In the event the Corporation fails to exercise such right, the
holder shall be free to sell the Series C Preferred shares in accordance with the terms set forth in the
holder's notice. All notices hereunder shall be made by fax transmission and by Federal Express or other
similar means of delivery and shall be deemed made on the date of delivery to the recipient.
7.Miscellaneous.
(a)Adoption and Amendment of By-Laws. The shareholders, or the Board of Directors of the Corporation,
without the assent or vote of the shareholders, shall have the power to adopt, alter, amend or repeal the
By-Laws of the Corporation.
(b)Indemnification of Officers and Directors. To the fullest extent that the Business Corporation Act of the
State of New Jersey, as it exists on the date hereof or as it may hereafter be amended, permits the
limitation or elimination of the liability of Directors, no director of this Corporation shall be liable to this
Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director. No
amendment to or repeal of this Article shall apply to or have any effect on the liability or alleged liability of
any Director of this Corporation for or with respect to any acts or omissions of such Director occurring
prior to such amendment or appeal.
(c)Transactions with Officers and Directors. A director or officer of the Corporation shall not, in the
absence of fraud, be disqualified by his or her office from dealing with or contracting with the Corporation
as vendor, purchaser or otherwise. In absence of fraud, no transaction, contract or act of the Corporation,
the Board of Directors, or any other duly constituted committee, shall be void, voidable or affected by
reason of the fact that any director or officer of the Corporation, or any firm of which any director or officer of
the Corporation is a member, or any corporation of which any director of officer of the Corporation is an
officer, director, or shareholder, is in any way interested in the transaction, contract or act, if either:
(i)The fact of such common directorship, officership or financial or other interest is disclosed or known to
the Board of Directors or the Executive Committee, and the Board of Directors or the Executive Committee
approves the transaction, contract or act by a vote sufficient for such purposes without the vote of such
interested director, if any, provided that any such director may be counted in determining the presence of a
quorum at any such meeting of the Board of Directors of the Executive Committee or;
(ii)The fact of such common directorship, officership or financial or other interest is disclosed or known to
the shareholders entitled to vote on the transaction, contract or act and the transaction, contract or act is
approved by vote of the shareholders entitled to vote thereon, whether or not the Board of Directors or the
Executive Committee has approved the transaction, contract or act.
(iii)Any such transaction, contract or act that is ratified by a majority in interest of a quorum of the
shareholders of the Corporation having voting power at any annual or special meeting called for such
purpose shall, if such common ownership or financial or other interest is disclosed in the notice of the
meeting, be valid and binding as though approved or ratified by every shareholder of the Corporation,
except as otherwise provided by the Laws of the State of New Jersey; provided, however, that any failure of
the shareholders to approve or ratify such transaction, contract or act, when and if submitted, shall not be
deemed in any way to invalidate the transaction, contract or act, or deprive the Corporation, its directors or
its officers of their right to proceed with the transaction, contract or act.
(d)No Pre-Emptive Rights. No shareholder of the Corporation shall have a pre-emptive right because of
his or her shareholdings to have first offered to him or her any part of any of the presently authorized
shares of the Corporation hereafter issued, optioned, or sold, or any part of any debenture, bonds, notes,
or securities of the Corporation convertible into shares hereafter issued, optioned, or sold by the
Corporation. This provision shall operate to defeat rights in all shares and classes of shares now
authorized and in all debentures, bonds, notes or securities of the Corporation that may be convertible
into shares, and also to defeat pre-emptive rights in any and all shares and classes of shares and
securities convertible into shares which the Corporation may be hereafter authorized to issue by any
amended certificate duly filed. Thus, any and all of the shares of the Corporation presently authorized,
and any and all debentures, bonds, notes or securities of the Corporation convertible into shares and any
and all of the shares of the Corporation that may hereafter be authorized, may at any time be issued,
captioned and contracted for sale, and/or sold and disposed of by direction of the Board of Directors
seem proper and advisable, without first offering the said shares or securities or any part thereof to
existing shareholders.
8.Board of Directors.
(a)Number of Directors. The Corporation shall have at least five (5) and not more than nine (9) Directors.
The number of Directors shall be fixed by the Board.
(b)Election and Term of Directors.
(i)Except as otherwise provided, Directors shall hold office for terms of three (3) years or until their
successors are elected and qualify.
(ii)Directors shall be divided into three (3) groups, to be known as Group A, Group B, and Group C. The
number of Directors in each Group shall be as nearly equal as possible.
(iii)Commencing with the 1997 annual meeting, there shall be three (3) Directors in Group A, two (2)
Directors in Group B, and two (2) Directors in Group C. Group A Directors shall be elected for an initial
term of three (3) years and until their successors are elected and qualify; Group B Directors shall be
elected for an initial term of two (2) years and until their successors are elected and qualify; and Group C
Directors shall be elected for an initial term of one (1) year and until their successors are elected and
qualify. After the initial terms set forth in this subsection, Directors shall be elected for terms of three (3)
years.
(c)Vacancies and Newly Created Directorships. Any directorship not filled at an annual meeting, and any
vacancy that occurs in the Board as a result of resignation, death, increase in the number of Directors, or
otherwise, may be filled by the affirmative vote of a majority of the remaining Directors. Directors elected
by the Board to fill vacancies that occur other than as a result of an increase in the number of Directors
shall hold office until the next annual meeting of Shareholders or until their successors shall have been
elected and qualified, or until their prior resignation or removal. Directors elected to fill vacancies that
occur for any other reason shall hold office until the expiration of the term of the Director being replaced or
until their successors shall have been elected and qualified, or until their prior resignation or removal.
9.Term of Existence.
The period of existence of this Corporation is unlimited.
<S> <C>
IN WITNESS WHEREOF, this Second Restated Certificate of Incorporation has been executed on this
31st day of December 1997.
Attest: Measurement Specialties, Inc.
Damon Germanton, Secretary Joseph R. Mallon, Jr., President
</TABLE>
<TABLE>
EXHIBIT 4 - SECOND AMENDMENT TO REVOLVING LOAN AND SECURITY
AGREEMENT BETWEEN PNC BANK, N.A. AND MEASUREMENT SPECIALTIES, INC.
December 31, 1997
SECOND AMENDMENT TO REVOLVING LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO REVOLVING LOAN AND SECURITY AGREEMENT made this 19th day of December, 1997
between PNC BANK, NATIONAL ASSOCIATION, successor to Midlantic Bank, N.A. ("Lender"), having offices
at One Garret Mountain Plaza, West Paterson, New Jersey 07424 and MEASUREMENT SPECIALTIES, INC., a
corporation organized under the laws of the State of New Jersey ("Borrower"), having its principal
place of business at 80 Little Falls Road, Fairfield, New Jersey 07004;
W I T N E S S E T H:
WHEREAS, Borrower and Lender are parties to a certain revolving credit transaction (the "Loan")
pursuant to which the Lender agreed to extend credit to the Borrower in the maximum principal sum of
Two Million ($2,000,000) Dollars, in accordance with the terms, covenants and conditions of a certain
Revolving Loan and Security Agreement dated July 17, 1995, as amended by a certain First Amendment to
Revolving Loan and Security Agreement dated November 11, 1996 (collectively, the "Loan Agreement")
(all capitalized terms not otherwise defined herein shall have the meanings given to such terms in the
Loan Agreement); and
WHEREAS, the Loan is evidenced by a certain Secured Revolving Loan Note made by Borrower in favor of
Lender dated July 17, 1995 (the "Note"); and
WHEREAS, the Borrower has requested and the Lender has agreed to an extension, credit increase and
further modification to the Loan, subject to the full compliance by Borrower with the terms, covenants
and conditions set forth herein;
NOW THEREFORE, for and in consideration of the foregoing and the mutual promises hereafter set forth,
the Borrower and Lender agree to amend the terms of the Loan as follows:
1.Definitions. The following definitions shall be added to the list of definitions in Section 1 of
the Loan Agreement:
"Business Day" shall mean any day other than a Saturday or Sunday or a legal holiday on which
commercial banks are authorized or required to be closed for business in West Paterson, New Jersey
and, if the applicable Business Day relates to any Borrowing to which the LIBOR-Rate Option applies,
such day must also be a day on which dealings are carried on in the London interbank market.
"Canadian Accounts" -- as defined in Section 2A.1(b)(i)(B).
"First Amended Revolving Note" shall mean that certain First Amended and Restated Secured Revolving
Note of the Borrower of even date herewith.
"LIBOR-Rate" shall mean, with respect to the Revolving Loans to which the LIBOR-Rate Option has been
selected for any LIBOR-Rate Interest Period, the interest rate per annum determined by the Lender by
dividing (the resulting quotient rounded upwards, if necessary, to the nearest 1/16th of 1% per annum)
(i) the rate of interest determined by the Lender in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) to be the average of the London interbank
offered rates set forth on the "LIBO" page of the Reuters Monitor Money Rate Service (or appropriate
successor or, if Reuters or its successor ceases to provide such quotes, a comparable replacement
determined by the Lender) at approximately 11:00 a.m. London time two (2) Business Days prior to the
first day of such LIBOR-Rate Interest Period by (ii) a number equal to 1.00 minus the LIBOR-Rate
Reserve Percentage. The LIBOR-Rate may be expressed by the following formula:
Average of London interbank offered rates on LIBO page of
Reuters Monitor Money Rate Service or appropriate successor
LIBOR Rate= -----------------------------------------------------------
1.00-LIBOR-Rate Reserve Percentage
"LIBOR-Rate Interest Period" shall mean the period on one, two or three months selected by the
Borrower commencing on the date of disbursement of an advance of Revolving Loan proceeds as to which
the LIBOR-Rate Option applies, and each successive period selected by the Borrower thereafter,
provided, that if a LIBOR-Rate Interest Period would end on a day which is not a Business Day, it
shall end on the next succeeding Business Day, unless such day falls in the succeeding calendar month
in which case the LIBOR-Rate Interest Period shall end on the next preceding Business Day. In no
event shall any LIBOR-Rate Interest Period end on a day after the Termination Date.
"LIBOR-Rate Option" shall mean any Revolving Loan when and to the extent that the interest rate
therefor is determined by reference to the LIBOR-Rate.
"LIBOR-Rate Reserve Percentage" shall mean the maximum effective percentage in effect on such day as
prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining
the reserve requirements (including, without limitation, supplemental, marginal and emergency reserve
requirements) with respect to Eurocurrency funding (currently referred to as "Eurocurrency
liabilities").
"Modification Documents" shall mean this Agreement, the First Amended Revolving Note, and all other
agreements, documents or instruments executed and delivered pursuant thereto.
"Prime Rate Option" shall mean any Revolving Loan when and to the extent that the interest rate
therefor is determined by reference to the Prime Rate.
"Termination Date" -- as defined in Section 11.1.
2.Changes to Loan Terms. Sections 2A.1(a)and 2A.1(b) of the Loan Agreement are hereby amended in
their entirety to provide as follows:
"2A.1. Amount and Certain Definitions.
(a)Lender shall, upon the request of Borrower, make loans or issue letters of credit hereunder to
Borrower (a "Revolving Loan" or the "Revolving Loans") from time to time on a revolving loan basis in
an aggregate principal amount not in excess at any time outstanding of the Borrower's Revolving Loan
Limit; provided that, if the outstanding amount of the Revolving Loans should exceed the Revolving
Loan Limit at any time, such excess (i) shall nevertheless be secured by the Collateral and be subject
to the terms of this Agreement, and (ii) shall be payable immediately upon demand by Lender. Each
Revolving Loan shall be in an amount of (i) not less than $100,000.00 for Revolving Loans using the
Prime Rate Option, and (ii) not less than $300,000.00 for Revolving Loans using the LIBOR-Rate Option.
The Revolving Loans shall be payable on the Termination Date. The Revolving Loans may, but need not,
be evidenced by one or more promissory notes (referred to collectively as the "Revolving Note" in the
form of Exhibit A annexed to this Agreement); except as may be otherwise provided in a Revolving Note,
the Revolving Loans shall be payable in accordance with the terms of this Agreement and the First
Amended Note."
Definition of Revolving Loan Limit.
(i) Borrower's Revolving Loan Limit shall be the lesser of Three Million Three Hundred Thousand
($3,300,000.00) Dollars or the sum of the following:
(A) ninety (90%) percent of the face amount of Qualified Accounts (less reserves determined by
Lender for advertising allowances, warranty claims and other contingencies), which percentage Lender
may increase or decrease from time to time as Lender in its sole and absolute discretion may
determine; plus
(B) fifty (50%) percent of the face amount of accounts receivable arising from the sale of goods
or the performance of services by the Borrower in Canada, provided those accounts receivable would
otherwise be deemed Qualified Accounts ("Canadian Accounts")(less reserves determined by Lender for
advertising allowances, warranty claims and other contingencies), which percentage Lender may increase
or decrease from time to time as Lender in its sole and absolute discretion may determine; plus
(C) the lesser of sixty (60%) percent of the Net Value of Qualified Inventory or One Million Three
Hundred Thousand ($1,300,000.00) Dollars, which percentage or amount Lender may increase or decrease
from time to time as Lender in its sole and absolute discretion may determine, less
(D) the full face amount of any and all outstanding letters of credit issued by the Bank for the
account of the Borrower, which amount shall not exceed Five Hundred Thousand ($500,000.00) Dollars at
any given time.
(ii) Lender shall have the right to increase or decrease the Revolving Loan Limit from time to time.
The Revolving Loan Limit shall be subject to the limitation stated in Section 11.3 in the event of
notice of termination of this Agreement.
(iii) Notwithstanding anything to the contrary in this Section 2A.1(b), for a period not exceeding
ninety (90) consecutive days during any fiscal year of Borrower, the limits established pursuant to
this Section 2A.1(b) may be exceeded by an aggregate amount not greater than Three Hundred Thousand
($300,000.00) Dollars; provided that the total amount outstanding during that period shall never
exceed the lesser of (a) Three Million Three Hundred Thousand ($3,300,000.00) Dollars or (b) One
Hundred (100%) percent of all Qualified Accounts, Canadian Accounts and Qualified
Inventory, less the full face amount of any and all outstanding letters of credit issued by the Lender
for the account of the Borrower.
3.Change in Interest Rate; Prime Rate Option and LIBOR-Rate Option. Section 2.A.2 of the Loan
Agreement is hereby amended in its entirety to provide as follows:
"2A.2 Interest Rate. The Borrower shall pay interest to the Lender on the outstanding and unpaid
principal amount of the Revolving Loans made under this Agreement at a rate per annum as follows:
(a)Under the Prime Rate Option, at a fluctuating interest rate per annum (computed on the basis of a
year of 360 days and the actual number of days elapsed) equal to one-eighth (.125%) percent above the
Prime Rate. Each change in the fluctuating interest rate hereunder shall take effect simultaneously
with the corresponding change in the Prime Rate; or
(b) Under the LIBOR-Rate Option, at a per annum rate (computed on the basis of a year of 360 days and
the actual number of days elapsed) equal to the sum of (A) the LIBOR-Rate plus (B) 225 basis points
(2.25%) per annum, for the LIBOR-Rate Interest Period selected by the Borrower in an amount equal to
the Revolving Loan and having a comparable maturity as determined at or about 11 a.m. (London time)
two Business Days prior to the commencement of the LIBOR-Rate Interest Period.
The LIBOR-Rate shall be adjusted with respect to any Revolving Loans to which the LIBOR-Rate Option
applies that are outstanding on the effective date of any change in the LIBOR-Rate Reserve Percentage
as of such effective date. The Lender shall give prompt notice to the Borrower of the LIBOR-Rate as
determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest
error.
If the Lender determines (which determination shall be final and conclusive) that, by reason of
circumstances affecting the interbank LIBOR market generally, deposits in dollars (in the applicable
amounts) are not being offered to banks in the interbank LIBOR market for the selected term, or
adequate means do not exist for ascertaining the LIBOR-Rate, then the Lender shall give notice thereof
to the Borrower. Thereafter, until the Lender notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, (a) the availability of the LIBOR-Rate Option shall be
converted at the expiration of the then-current LIBOR-Rate Interest Period(s) to the Prime Rate
Option.
In addition, if, after the date of this Agreement, the Lender shall determine (which determination
shall be final and conclusive) that any enactment, promulgation or adoption of or any change in any
applicable law, rule or regulation, or any change in the interpretation or administration thereof by a
governmental authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Lender with any guideline, request or directive (whether
or not having the force of law) of any such authority, central bank or comparable agency shall make it
unlawful or impossible for the Lender to make or maintain or fund loans under the LIBOR-Rate Option,
the Lender shall notify the Borrower. Upon receipt of such notice, until the Lender notifies the
Borrower that the circumstances giving rise to such determination no longer apply, (a) the
availability of the LIBOR-Rate Option shall be suspended, and (b) the interest rate on all advances
then bearing interest under the LIBOR-Rate Option shall be converted to the Prime Rate Option either
(i) on the last day of the then-current LIBOR-Rate Interest Period(s) if the Lender may lawfully
continue to maintain advances under the LIBOR-Rate Option to such day, or (ii) immediately if the
Lender may not lawfully continue to maintain advances under the LIBOR-Rate Option."
4.Selection of Prime Rate Option or LIBOR-Rate Option; Prepayments. A new Section 2.C and Section
2.D. are hereby added to the Loan Agreement which provide as follows:
"2C. Notice of Borrowing. The Borrower shall give the Lender written or telephonic notice (effective
upon receipt) of any Revolving Loans under this Agreement, (i) at least one (1) Business Day before
each Revolving Loan, specifying: (1) the date of such Revolving Loan; (2) the amount of such Revolving
Loan; (3) the type of such Revolving Loan; and (4) in the case of a Revolving Loan using the LIBOR-
Rate Option, the duration of the LIBOR-Rate Interest Period applicable thereto. All notices given
under this Section 2C shall be irrevocable.
2D. Prepayments. The Borrower may, subject to Section 2F, upon at least one (1) Business Day's
notice to the Lender prepay Obligations in whole or in part with accrued interest to the date of such
prepayment on the amount prepaid.
2E. Conversions and Renewals. The Borrower may, subject to Section 2F, elect from time to time to
convert all or a part of one type of Revolving Loan by giving the Lender notice of at least one (1)
Business Day before such conversion, specifying: (1) the renewal or conversion date; (2) the amount of
the Revolving Loan to be converted or renewed; (3) in the case of renewals or conversion into a
Revolving Loan using LIBOR-Rate Option, the duration of the LIBOR-Rate Interest Period applicable
thereto.
2F. Funding Loss Indemnification. The Borrower shall pay to the Lender, upon the request of the
Lender, such amount or amounts as shall be sufficient (in the reasonable opinion of the Lender) to
compensate the Lender for any loss, cost or expense incurred as a result of any payment of a Revolving
Loan using LIBOR-Rate Option on a date other than the last day of the Interest Period for such
Revolving Loan."
5.Replacement of Facility Fee and Costs with Non-Usage Fee. Section 2.B.5 regarding Facility Fee and
Costs is hereby deleted in its entirety and replaced with the following:
"2B.5 Non-Usage Fee. The Borrower shall pay to the Lender a non-usage fee on the average daily unused
portion of the Revolving Loan at the rate of ________ per annum, payable quarterly in arrears on the
first day of each calendar quarter during the term of this Agreement."
6.Changes in Reporting Requirements.
(a).Sections 5.5(b), 5.5(d) and 5.5(f) are hereby amended in their entirety to provide as follows:
"(b)Quarterly Financial Statements. As soon as available but in no event later than sixty (60) days
after the end of each of the first three (3) quarters of each fiscal year of Borrower, the Form 10-Q
(or 10-QSB) filed by the Borrower with the Securities and Exchange Commission, including a
consolidated balance sheet of Borrower as of the end of such quarter, the related consolidated
statements of income for such quarter and for the period commencing at the end of the previous fiscal
year and ending with the end of such quarter, and the related consolidated statements of cash flows
and changes in stockholders' equity for the period commencing at the end of the previous fiscal year
and ending with the end of such quarter (all in reasonable detail, with all notes necessary to make
the above mentioned consolidated interim financial statements not misleading, and supporting
schedules, if any) signed by the Borrower's principal executive, financial and accounting officers as
having been prepared in accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q (or 10-QSB) and Rule 10-01 of Regulation S-X (or Item
310(b) of Regulation S-B), together with a consolidating balance sheet of Borrower as of the end of
such quarter and consolidating statement of income for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter (all in reasonable detail), prepared by
management of the Borrower and certified, to the best knowledge and belief of the chief financial
officer of Borrower, as presenting fairly, in all material respects, the information set forth
therein, on a basis consistent with the Borrower's financial statements included in the Form 10-Q (or
10-QSB) filed by the Borrower with the Securities and Exchange Commission.
(d)Accounts, Inventory and Accounts Payable Reports. On or before the twentieth (20th) day of each
month as of the close of the preceding month, and from time to time as Lender may require:
certificates and assignment schedules describing the Qualified Account and Inventory in detail and
total, aging reports of Accounts, Accounts Payable aging reports, and Collateral and Loan
Reconciliation reports, all in such form as Lender may require.
(f)Projections. Within one hundred fifty (150) days following the close of each fiscal year of the
Borrower, consolidated and consolidating financial projections of the Borrower's operations on a
monthly basis for the upcoming fiscal year and on an annual basis for each fiscal year remaining under
the term of this Agreement, all in reasonable detail and in such form as the Lender may require and
prepared by the principal financial officer of the Borrower."
(b).A new Section 5.5(m) is hereby added which shall provide as follows:
"(m) Certificate of No Default. Within sixty (60) days after the end of each of the first three (3)
quarters of each fiscal year of Borrower, and within ninety (90) days after the end of each fiscal
year of Borrower, a certificate of the chief financial officer of the Borrower (a) certifying that to
the best of his or her knowledge, no Default or Event of Default has occurred and is continuing or, if
a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof and
the action which is proposed to be taken with respect thereto and (b) containing computations
demonstrating compliance with the covenants contained in Sections 5 and 6 of this Agreement."
7.Annual Audit. Section 5.6 is hereby amended in its entirety to provide as follows:
"5.6 Access to Records and Property. At any time and from time to time, upon request by Lender, give
any representative of Lender access during normal business hours to inspect any of Borrower's
properties and to examine, copy and make extracts from any and all books, records and documents in the
possession of Borrower or any independent contractor relating to Borrower's affairs or the Collateral
(including without limitation returns for federal income tax and other taxes). The Lender may conduct
such inspection at the Borrower's reasonable expense prior to the execution of this Agreement and
thereafter once per annum during the term of this Agreement."
8.Loans to Related Entities. Section 6.5 is hereby amended in its entirety to provide as follows:
"6.5 Loans. Make advances of cash, services and/or materials to the Borrower's Hong Kong subsidiary,
Measurement Limited, not to exceed One Million Seven Hundred Thousand ($1,700,000.00) Dollars, in the
aggregate, outstanding at any one time.
9.Removal of Working Capital Covenant. Section 6.18 regarding Working Capital is hereby deleted in
its entirety.
10.Change in Tangible Capital Funds and Capital Expenditures Covenants. Sections 6.19 and 6.20 are
hereby amended it their entirety to provide as follows:
"6.19 Tangible Capital Funds.
(a) Cause or permit its consolidated Tangible Capital Funds to be less than:
(i) Three Million Eight Hundred Thousand ($3,800,000.00) Dollars at any time during the fiscal year
ending March 31, 1998, and Four Million Seven Hundred Thousand ($4,700,000.00) at March 31, 1998;
(ii) Four Million ($4,000,000.00) Dollars at any time during the fiscal year ending March 31, 1999,
and Five Million ($5,000,000.00) at March 31, 1999; and
(iii) Four Million One Hundred Fifty Thousand ($4,150,000.00) Dollars at any time during the period
beginning April 1, 1999 and ending September 30, 1999.
(b) Cause or permit its unconsolidated Tangible Capital Funds (that is, the Borrower's Tangible
Capital Funds without giving effect to its non-United States operations), to be less than:
(i) One Million Seven Hundred Thousand ($1,700,000.00) Dollars at any time during the fiscal year
ending March 31, 1998, and Two Million Six Hundred Thousand ($2,600,000.00) at March 31, 1998;
(ii) One Million Nine Hundred Thousand ($1,900,000.00) Dollars at any time during the fiscal year
ending March 31, 1999, and Two Million Seven Hundred Thousand ($2,700,000.00) at March 31, 1999; and
(iii) Two Million One Hundred Thousand ($2,100,000.00) Dollars at any time during the period beginning
April 1, 1999 and ending September 30, 1999.
(c)The term Tangible Capital Funds meaning, as of the time of any determination thereof, the
difference between (i) the sum of (A) the par value (or value stated on the books of Borrower) of the
capital stock of all classes of Borrower, plus (or minus in the case of a deficit) (B) the amount of
Borrower's surplus, whether capital or earned, plus (C) the total amount of any and all subordinated
debt of the Borrower, less (ii) the sum of treasury stock, unamortized debt discount and expense, good
will, trademarks, trade names, patents, deferred charges, and other intangible assets, and any write-
up of the value of any assets, all determined in accordance with generally accepted accounting
principles, applied on a consistent basis.
6.20 Capital Expenditures. Enter into any agreement to purchase or pay for, or become obligated to
pay for, capital expenditures, long term leases, capital leases or sale lease-backs (all determined in
accordance with generally accepted accounting principles consistently applied) during any fiscal year
in an amount aggregating in excess of One Million One Hundred Thousand ($1,100,000.00) Dollars."
11.Addition of Event of Default due to Change in Control. A new Section 8.17 shall be added to the
Loan Agreement which shall provide as follows:
"8.17 Change of Control. (a) The alteration of the Borrower's existing capital stock structure by
issuance of new shares of existing classes of stock, by creation of new classes of stock, or
otherwise, so as to cause a loss of control of the Borrower by its present shareholders, or (b) the
change in the ownership of the Borrower's presently issued and outstanding shares which change would
result in a loss of control of the borrower by its present shareholders."
12.Change in Termination Date. Section 11.1 of the Loan Agreement is hereby amended in its entirety
to provide as follows:
"11.1 Termination By Lender. Lender shall have the right, at any time and in its sole and absolute
discretion and without the necessity for an Event of Default hereunder, to terminate this Agreement,
insofar as it relates to Revolving Loans, (i) upon one hundred twenty (120) days written notice to
Borrower, (ii) upon the occurrence of an Event of Default in accordance with Section 9.1, or (iii) on
September 30, 1999, whichever of (i), (ii) or (iii) shall first occur (the "Termination Date"). Upon
the Termination Date: (a) all provisions for additional Revolving Loans under this Agreement shall
terminate, (b) the principal and interest of the Revolving Loans, and all other Obligations under this
Agreement and the Relevant Documents related to the Revolving Loans, shall become and be immediately
due and payable, without presentment, demand, protest, or further notice of any kind, all of which are
hereby expressly waived by Borrower, and (c) Lender shall be entitled to exercise forthwith (to the
extent and in such order as Lender may elect, in its sole and absolute discretion) any or all of the
rights and remedies referred to in Section 9 of this Agreement for the collection of such amounts."
13.Modifications to Note. The Borrower and Lender agree to modify the Revolving Note pursuant to the
terms, covenants and conditions of the First Amended Revolving Note which is being executed and
delivered on the date hereof.
14.Miscellaneous.
a.Estoppel. Borrower hereby represents, warrants and confirms that there are no defenses,
counterclaims, set-offs, rights, claims or causes of action of any nature whatsoever which Borrower
has or may assert against Lender with respect to the Relevant Documents and the indebtedness secured
thereby.
b.Validity of Modification Documents. Borrower hereby affirms the validity of the Relevant Documents,
as modified by Modification Documents, and confirms that the Relevant Documents, as so modified,
remain enforceable and in full force and effect.
c. No Other Changes. Except as specifically set forth herein, all of the terms, covenants and
conditions of all agreements and documents executed and delivered by the Borrower in connection with
the Loan remain unchanged and in full force and effect.
d. Waiver of Notice. Notice of default and presentment, demand, protest and notice of dishonor as to
any provision of this Agreement or any other agreement or instrument is hereby waived by the Borrower,
except as may be otherwise specifically provided in this Agreement.
e. Governing Law. The within Agreement is to be executed and delivered within the State of New
Jersey, is to be principally performed within the State of New Jersey, and the Borrower and the Bank
elect that the laws of New Jersey shall govern the construction of this Agreement and the rights,
remedies, warranties, representations, covenants, and provisions hereof.
f. Partial Invalidity. If any of the provisions of this Agreement shall contravene or be held
invalid under the laws of any jurisdiction, the Agreement shall be construed as if not containing such
provisions and the rights, remedies, warranties, representations, covenants, and provisions hereof
shall be construed and enforced accordingly in such jurisdiction and shall not in any manner affect
such provision in any other jurisdiction, or any other provisions of this Agreement in any
jurisdiction.
g. Inconsistent Terms. In the event the terms of this Agreement, or any other agreement or
instrument executed and delivered pursuant hereto, conflict with the terms of the Loan Agreement or
any other agreement or instrument executed and delivered pursuant thereto, the terms of this Agreement
and the agreements and instruments executed and delivered pursuant hereto shall govern.
IN WITNESS WHEREOF, the undersigned have set their hands and seals or caused these presents to be
executed by their proper corporate officers the day and year first above written.
<S> <C>
Attest/Witness:
MEASUREMENT SPECIALTIES, INC.
Mark A. Shornick, Joseph R. Mallon, Jr.
Assistant Secretary President/CEO
PNC BANK, National Association
Rachel Stark Janet A. Kutzman,
Attorney-at-law of the State of New Jersey Vice President
CORPORATE ACKNOWLEDGMENT
STATE OF NEW JERSEY )
:ss.
COUNTY OF PASSAIC )
I certify that on the 19th day of December 1997, Joseph R. Mallon, Jr. personally came before me and
this person acknowledged under oath, to my satisfaction, that:
(a) this person signed and delivered this document as the President of Measurement Specialties, Inc.,
the corporation named in this document; and
(b) this document was signed and delivered by the corporation as its voluntary act duly authorized by
a proper resolution of its Board of Directors.
Michael C. Rudolph,
Attorney-at-Law of the State of New Jersey
LENDER ACKNOWLEDGMENT
STATE OF NEW JERSEY )
:ss.
COUNTY OF PASSAIC )
I certify that on the 19th day of December 1997, Janet A. Kutzman personally came before me and this
person acknowledged under oath, to my satisfaction, that:
(a) this person signed and delivered this document as a Vice President of PNC Bank, National
Association, the bank named in this document; and
(b) this document was signed and delivered by the bank as its voluntary act duly authorized by a
proper resolution of its Board of Directors.
RACHEL STARK,
Attorney-at-Law of the State
of New Jersey
</TABLE>
<TABLE>
EXHIBIT 10 - ADDENDUM TO LEASE DATED MAY 30, 1996 BY AND BETWEEN CMEP I, LANDLORD; MEASUREMENT
SPECIALTIES, INC., TENANT; CMI, INC., AGENT
December 31, 1997
September 5, 1997
Addendum 1 to lease dated May 30, 1996 by and between CMEP I, Landlord; Measurement Specialties, Inc.,
Tenant; CMI, Inc., Agent, for the premises of Suites B105 and B106 Canon Boulevard, Newport News, VA
23606.
Premises to be expanded to include Suite B107, approximately 1,000 square feet.
Tenant, at Tenant's expense, to construct 2 openings of at least 36" to connect the units. All work
to be done in a workmanlike manner and to all applicable codes. Landlord to approve all construction,
such approval will not be unreasonably withheld.
Lease expiration to be November 30, 2001.
Monthly rent to be increased by $839.17 upon availability of new space. It is understood that
Landlord must give current Tenant notice to vacate. Every effort will be made to relocate the
existing Tenant in an expeditious manner. Notice must be given by the last day of the month therefore
time is of the essence with reference to the full execution of this document so that notice may be
given to existing Tenant.
Possession to be on or before December 1, 1997 subject to Landlord receiving premises back from
previous Tenant. If space is available prior to December 1, 1997 then space will be turned over to
Measurement Specialties, Inc. and rent will be prorated.
All other terms and conditions to remain that same.
AGREED AND ACCEPTED
<S> <C>
LANDLORD: CMEP I TENANT: MEASUREMENT SPECIALTIES, Inc.
s/ s/ Joseph R. Mallon Jr.
DATE:9/16/97 DATE: 9/12/97
AGENT: CMI, Inc.
s/
</TABLE>
<TABLE>
EXHIBIT 10 - SUPPLY AND DISTRIBUTION AGREEMENT BETWEEN MEASUREMENT SPECIALTIES, INC. AND KORONA GMBH &
COMPANY, KG
December 31, 1997
Supply and Distribution Agreement between
MEASUREMENT SPECIALTIES Inc., 80 Little Falls Road,
Fairfield, New Jersey 07004, United States
and its affiliates
(hereinafter referred to as "MEASUREMENT SPECIALTIES")
and
KORONA GmbH & Co. KG, Nienhagener Strasse 34,
37186 Moringen, Germany
(hereinafter referred to as "KORONA")
Article 1.
Purpose of the Agreement
The purpose of this agreement is to formally establish a strategic alliance between Measurement
Specialties and KORONA in order to expand our efforts in jointly growing our collective market share
of retail sales in Germany, Austria and Switzerland for electronic bath and electronic kitchen scales.
Article 2.
Definitions
(1) Products: Electronic bath and electronic kitchen scales.
(2) Current Products: Non-replaceable lithium LCD bath scales and non-replaceable lithium LCD
kitchen scales.
(3) Future Products: All other electronic bath and electronic kitchen scales.
(4) Territory: shall refer to Germany.
(5) Extended Territory: shall refer to Austria and Switzerland.
Article 3.
Duties and Rights of the Parties
(1)Measurement Specialties will sell Products for retail sale in the Territory only to Korona
(exceptions listed in Exhibit A). Measurement Specialties shall not distribute Products in the
Territory in any other way as described in the precedent sentence, i.e., neither direct, nor through
an agent nor through another importer. In addition, Measurement Specialties shall not sell Products to
a foreign affiliate of a German company for resale into the Territory.
(2)KORONA will purchase the Current Products for distribution in the Territory exclusively from
Measurement Specialties unless Measurement Specialties cannot deliver the quality or technique
required by Korona or Korona determines that it can purchase a Current Product of similar quality
elsewhere at lower price than Measurement Specialties' price. Before any purchase of a Current
Product from a third party, Korona will inform Measurement Specialties of its intention and
Measurement Specialties will have the right, at its sole discretion, to meet the conditions of the
third party offer. If, for special promotions, Measurement Specialties is not able to meet the
quality, technique or the price required by Korona and the parties do not find a solution within 30
days, Korona may buy the Current Products from the third party.
(3)This article does not apply as far as the provisions contained therein do not comply with European
Union law.
Article 4.
Term of Agreement
The agreement will run from the date of signing through December 31, 2001 and will be renewed, with
the consent of both parties, every two years, for a period determined by the parties. The first
renewal date will occur on July 1, 1999.
Article 5.
Future Products
(1)In the event that Measurement Specialties extends its bath scale product range into Replaceable
lithium battery, LED, Solar, Body Fat, Body Mass or any other Future Products, the provisions of this
agreement apply also to these Future Products as soon as Measurement Specialties starts distribution
of the Future Product, if the Future Product is suitable for the German market in quality, execution,
and price. If MEASUREMENT SPECIALTIES does not produce, or by its choice will not produce, any of the
above described products or other Future product, KORONA is then free, at its sole discretion, to buy
these products from any other resource until the time that MEASUREMENT SPEClALTIES decides to produce
the Future Product and starts distributing it. In the event that Korona elects to not purchase and
distribute the Future Product, Measurement Specialties may elect to distribute the Future Product in
the Territory.
(2)KORONA will inform and provide MEASUREMENT SPECIALTIES with information and samples of new products
entering the German market, through other brand name distributors or other OE manufacturers, on a
regular basis.
Article 6.
Termination
If, in any calendar year, KORONA's orders from MEASUREMENT SPECIALTIES are less than the minimum in
Exhibit B, and if the economic situation in Germany is normal* and if one American Dollar costs less
than two Deutsche Marks, MEASUREMENT SPECIALTIES may, at its sole option, terminate the agreement
with 90 days written notice.
* (in the minimum 1% economic growth (gross national product).)
Article 7.
Extended Territory
(1)Generally, this agreement applies in the same way to the Extended Territory as to Germany.
However, MEASUREMENT SPECIALTIES may sell directly into the Extended Territory. If MEASUREMENT
SPECIALTIES does so, MEASUREMENT SPECIALTIES is obliged to pay a commission to KORONA, at a rate of
[omitted]% of MSI's net sales, which is due 20 days after MSI's receipt of payment.
(2)The method of distribution in the Extended Territory is, like in Germany, within the sole
discretion of KORONA. KORONA may distribute directly, through an agent or through an importer, or in
any other way.
Article 8.
Indemnification
MEASUREMENT SPECIALTIES shall indemnify Korona against any product liability claim asserted by a
purchaser of MEASUREMENT SPECIALTIES' products or by any other person who claims damages because of
defects of MEASUREMENT SPECIALTIES' products.
Exhibit A
Measurement Specialties Existing Customer Exceptions
<S> <C>
[Customer's name omitted]
LCD lithium bath scales: model no. LS-100 in the current form
model no. LS-200 in the current form
LCD lithium kitchen scales: model no. MS-11 in the current form
model no. MS-13 in the current form
[Customer's name omitted]
LCD lithium bath scale: model no. 812 in the current form
[Customer's name omitted]
LCD lithium bath scale: model no. MS-7 in the current form
LCD lithium kitchen scale: model no. MS-11 in the current form
Exhibit B
Minimum Annual Purchases (FOB Hong Kong) to Maintain Exclusivity
<S> <C>
Year Amount (USD)
1998 [Amounts omitted]
1999 [Amounts omitted]
2000 [Amounts omitted]
2001 [Amounts omitted]
The minimum annual purchases are dependent on normal economic conditions in the Territory.
Supply and Distribution Agreement
This agreement is made and entered into this 26th day of September 1997 and duly executed as follows:
Korona GmbH & Co. KG Measurement Specialties Inc.
Nienhagener Strasse 3480 Little Falls Road
37186 Moringen Fairfield, New Jersey 07004
Germany United States of America
By:Wolfgang Bulisch By:Joseph R. Mallon Jr.
Its:Manager Its:President
Date:October 14, 1997 Date:October 28, 1997
Korona Haushaltswaren GmbH & Co. KG
Nienhagener Strasse 34
37186 Moringen
Tel. 05554/ 99 20-0
Fax 05554/ 99 20-25 u. 99 20-35
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of Measurement Specialties, Inc. and subsidiaries as
of December 31, 1997, and the related consolidated statements of operations,
shareholders' equity and cash flows for the nine-month period then ended, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000778734
<NAME> MEASUREMENT SPECIALTIES INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-1-1997
<PERIOD-END> DEC-31-1997
<CASH> 380
<SECURITIES> 0
<RECEIVABLES> 3858
<ALLOWANCES> (73)
<INVENTORY> 3747
<CURRENT-ASSETS> 8291
<PP&E> 3745
<DEPRECIATION> (2044)
<TOTAL-ASSETS> 10769
<CURRENT-LIABILITIES> 4279
<BONDS> 0
5485
0
<COMMON> 0
<OTHER-SE> 72
<TOTAL-LIABILITY-AND-EQUITY> 10769
<SALES> 23181
<TOTAL-REVENUES> 23181
<CGS> 14998
<TOTAL-COSTS> 14998
<OTHER-EXPENSES> 7007
<LOSS-PROVISION> 41
<INTEREST-EXPENSE> 71
<INCOME-PRETAX> 1064
<INCOME-TAX> 213
<INCOME-CONTINUING> 851
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 851
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.23
</TABLE>
