ITEM 2. Acquisition or Disposition of Assets
On August 14, 1998, (the "Closing Date") Measurement Specialties,
Inc. (the "Registrant") consummated the acquisition of selected operating
assets and liabilities of the Sensors Division (Sensors) of AMP
Incorporated (AMP). The purchase price of $3.8 million is subject to
change based upon post closing adjustments reflecting any differences
between the estimated assets acquired and liabilities assumed and actual
amounts as of the Closing Date. A total of $3.8 million was paid in cash
to AMP utilizing the proceeds from a $4.0 million term loan issued on
August 14, 1998 and discussed further in Item 5 (other events). A copy of
the press release announcing the acquisition is attached as Exhibit 99.2
and the Asset purchase agreement between the Registrant, AMP and the
Whitaker Corporation (a wholly owned subsidiary of AMP is attached as
Exhibit 99.3.
ITEM 5. OTHER EVENTS.
On August 14, 1998, Measurement Specialties, Inc. (the "Registrant")
entered into a Revolving credit, term loan and Security agreement with
PNC Bank, National Association (PNC). The agreement provides for a five
year, $4.0 million term loan bearing interest at the Eurodollar Rate plus
3% and $5.0 million revolving credit facility. The revolving credit
facility bears interest at the Eurodollar Rate plus 2.75% (which shall be
reduced to no lower than the Eurodollar Rate plus 2.00% based upon
earning before interest, taxes, depreciation and amortization). The
availability under the revolving credit facility reduces to $4.0 million
in October 1999 and expires September 2000. The agreement requires the
Registrant to maintain minimum interest coverage ratios, maximum leverage
ratios, limits capital expenditures and advances to Subsidiaries and
requires consent for the payment of dividends. A copy of the Revolving
credit, term loan and Security agreement is attached as Exhibit 99.4
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Financial Statements of Business Acquired.
The Registrant will file the required financial statements of
business acquired within 60 days of the last date on which this
Report of Form 8-K was required to be filed.
(b) Pro Forma Financial Information.
The Registrant will file the required pro forma financial information
within 60 days of the last date on which this Report of Form 8-K was
required to be filed.
(c) Exhibits.
99.2 Press release regarding the acquisition of certain operating
assets and assumption of selected liabilities by Registrant of the
Sensors Division of AMP Incorporated, dated August 18, 1998.
99.3 Asset purchase agreement dated August 14, 1998between the
Registrant, AMP and the Whitaker Corporation.
99.4 Revolving credit, term loan and Security agreement dated
August 14, 1998 between Registrant and PNC Bank, National
Association (PNC).
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)
/s/ Kirk J. Dischino
Date: August 28, 1998Kirk J. Dischino
Chief Financial Officer
KCSA
W OR L DWI D E
Public & Investor Relations, Corporate & Marketing
Communications
CONTACT: Joseph R. Mallon, Jr., CEO, Kirk J. Dischino, CFO
Measurement Specialties, Inc.
973-808-1819
AMP Richard Skaare
CONTACT: AMP Corporate Communication
717-592-2323
Doug Wilburne
AMP Investor Relations
717-592-4965
KCSA Robert Giordano/Joseph A. Mansi
CONTACT: KCSA Worldwide
212-896-1289/212-896-1205
News
FOR IMMEDIATE RELEASE
MEASUREMENT SPECIALTIES, INC. AND AMP
INCORPORATED
ANNOUNCE COMPLETION OF MSS ACQUISITION OF
THE
SENSORS DIVISION OF AMP INCORPORATED
FAIRFIELD, NJ, HARRISBURG, PA August 18,1998 - Measurement
Specialties, Inc. (AMEX: MSS) and AMP Incorporated (NYSE: AMP)
announced today the completion of the acquisition by
Measurement Specialties of the AMP Sensors Division (Sensors)
of AMP Incorporated. This action is part of AMP's 1998
announced restructuring plan.
Measurement Specialties, Inc. purchased the operating
assets, and assumed selected liabilities of Sensors for $3.8
million. Estimated closing costs of $0.4 million, and
restructuring costs of approximately $0.4 million will be
capitalized as part of the acquisition.
AMP Sensors had calendar 1997 sales of approximately
$8 million. Sensors designs, manufactures and markets their
unique piezoelectric polymer sensors for a wide variety of OEM
applications.
Measurement Specialties stated that it plans to
restructure Sensors to make use of its low cost manufacturing
base. After a period of integration during the cur-rent fiscal
year, Measurement Specialties anticipates that this
restructuring will allow the Company to exploit unique
opportunities offered by Sensors, and sharply increase
measurement Specialties profitability Joseph R. Mallon, Jr.,
Chief Executive Officer of Measurement Specialties, commenting
on the transaction said, "The acquisition brings us new sensor
technology and opportunities for expansion in our targeted
markets. Acquiring Sensors furthers our strategic growth plan.
Sensors varied product offerings, and strong customer support,
when integrated with our low cost manufacturing base, provides
critical mass to our sensors business unit." Mr. Mallon added,
"With the inclusion of Sensors, Measurement Specialties
will have a revenue run rate of over $40 million annually, with
approximately 30 percent coming from OEM sensor products. Sales
are concentrated in the U.S. and Europe with minimal sales in
Southeast Asia."
The transaction was funded by the PNC Bank, NA, the
Company's current bank, with a five year term loan of $4.0
million bearing interest at LIBOR plus 3 percent (aggregating
8.6%). In addition to the term loan, the Company's revolving
credit facility has been increased from $3.3 million to $5
million through October 1999, with $4 million available through
September 2000.
Measurement Specialties, Inc. designs, develops,
manufactures and markets low cost, sensor-based electronic
measurement devices for consumer and industrial products.
Headquartered in Harrisburg, PA, AMP is the world's
leading manufacturer of electrical, electronic, fiber-optic and
wireless interconnection devices and systems. The company has
48,300 employees in 53 countries serving customers in the
automotive, computer, communications, consumer, industrial and
power industries. AMP sales reached $5.75 billion in 1997.
IndustryWeek recently named the company to its list of the "
100 Best Managed Companies."
Theforward-looking statements above involve a number
ofrisks and uncertainties. Factors that might cause actual
results to differ materially include: conditions in the general
economy and in the markets served by Measurement Specialties;
competitivejactors, such as price pressures and the potential
emergence ofrival technologies; interruptions ofsuppliers'
operations affecting availability ofcomponent materials at
reasonable prices; timely development and market acceptance of
new products; success in identifying, financing and integrating
acquisition candidates; changes in product mix, costs and
yields, fluctuations inforeign currency exchange rates;
uncertainties related to doing business in Hong Kong and China;
and the riskjactors listedfrom time to time in Measurement
Specialties SEC reports. Measurement Specialties assumes no
obligation to update the information in this issue.
This release is available on the KCSA Worldwide website at
www. kcsa. com
ASSET PURCHASE AGREEMENT
between
MEASUREMENT SPECIALTIES, INC.,
a New Jersey corporation,
AMP INCORPORATED,
a Pennsylvania corporation,
and
THE WHITAKER CORPORATION,
a Delaware corporation
Dated as of August 14, 1998
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is entered
into as of August 14, 1998, by and between MEASUREMENT SPECIALTIES,
INC., a New Jersey corporation ("Purchaser"), and AMP INCORPORATED,
a Pennsylvania corporation, and The Whitaker Corporation, a wholly
owned subsidiary of AMP Incorporated. (collectively, the "Seller").
Certain capitalized terms used in this Agreement are defined on
Exhibit A.
RECITALS
WHEREAS, Seller is engaged and has been engaged in a
variety of activities, including the development, manufacture,
marketing and sale of piezoelectric polymer films and sensor
components through its AMP Sensors Division (such activities and
operations being herein referred to as the "Business");
WHEREAS, the parties hereto intend that Seller shall sell
to Purchaser, and Purchaser shall purchase from Seller, certain
tangible and intangible assets of Seller related to the Business,
and Purchaser is willing to assume certain specified liabilities
and obligations of Seller incurred in connection with the Business,
all upon the terms and subject to the conditions set forth in this
Agreement.
AGREEMENT
Purchaser and Seller, intending to be legally bound, agree
as follows:
SECTION 1. SALE AND PURCHASE OF ASSETS
1.1 Sale Of Assets. The Seller shall cause to be
sold, assigned, transferred, conveyed and delivered to the
Purchaser, at the Closing (as defined below), good, valid and
marketable title to the Assets free of any Encumbrances (other
than the Assumed Liabilities) on the terms and subject to the
conditions set forth in this Agreement.
1.2 Purchase Price. As consideration for the sale of the
Assets to the Purchaser:
(a) at the Closing, the Purchaser shall
pay to the Seller, in cash, the amount of three million eight
hundred thousand dollars ($3,800,000).
(b) at the Closing, the Purchaser shall
assume the Assumed Liabilities as set forth in Section 1.7.
1.3 Book Value Adjustment.
(a) Within sixty (60) days after the Closing
Date, the Seller shall deliver or cause its accountants to deliver
to the Purchaser a statement of the "Book Value" of the Business
calculated in the manner set forth in Section 1.3(f)(ii) hereof.
(b) As part of the Seller's determination of the
Book Value, the Seller shall complete a physical inventory of the
fixed assets of the Business and complete a physical inventory of
the inventory of the Business. The Purchaser may, at its option,
participate in such inventory and may, at its option, conduct its
own testing of the fixed assets and inventory
(c) If the Purchaser objects to the Seller's
calculation of the Book Value, then, within fifteen days after
the delivery to the Purchaser of the Book Value Statement, the
Purchaser shall deliver to the Seller a written notice describing
in reasonable detail the Purchaser's objections to the Seller's
calculation of the Book Value (an "Objection Notice"). If the Seller
shall not deliver an Objection Notice to the Seller within such
fifteen-day period, then the Seller's calculation of the Book Value
shall be binding and conclusive on the Purchaser and the Seller. If
the Purchaser delivers an Objection Notice to the Seller, and if the
Purchaser and the Seller are unable to agree upon the calculation of
the Book Value within thirty (30) days after an Objection Notice is
delivered to the Seller, the dispute shall be finally settled by a
mutually acceptable independent accounting firm. The determination
by the independent accounting firm of the Book Value shall be
conclusive and binding on the Purchaser and the Seller. The Seller
and the Purchaser shall each bear and pay 50% of the fees and other
expenses of such independent accounting firm.
(d) If the Book Value is greater than the Base Amount
(as defined below), the Purchaser shall pay to the Seller, in cash,
the amount by which the Book Value exceeds the Base Amount. If the
Book Value is less than the Base Amount, then the amount by which
the Base Amount, exceeds the Book Value shall be paid to the
Purchaser.
(e) Any payments required to be made pursuant to
Section 1.3(d) shall be made as follows: (i) if the Purchaser shall
not have delivered an Objection Notice to the Seller in accordance
with the provisions of Section 13(c), then the payment required to
be made pursuant to Section 1.3(d) shall be made within thirty (30)
days after the Purchaser shall have received the Book Value
Statement, and (b) if the Purchaser shall have delivered an
Objection Notice to the Seller in accordance with the provisions of
Section 13(c), then the payment required to be made pursuant to
Section 1.3(d) shall be made within thirty (30) days after the
resolution of the dispute, whether by agreement of the Seller and
the Purchaser or upon the determination of the independent
accounting firm as provided in Section 13(c), as to the dollar
amount of the Book Value.
(f) For purposes of this Section 1.3, the following
terms shall have the following meanings:
(i) "Base Amount" shall mean three million eight
hundred thousand dollars ($3,800,000).
(ii) "Book Value" shall mean the sum of the
dollar value of the Assets determined in accordance with GAAP and
the Accounting Policies created for the transactions related to
this Agreement set forth on Schedule 1.3(f) (the "Accounting
Policies") less the sum of (i) the accounts payable of the
Business at the Closing determined in accordance with GAAP and the
Accounting Policies and (ii) the accrued expenses of the Business
calculated in the manner or in the amount specified in the
Accounting Policies and without regards to GAAP.
1.4 Sales Taxes. The Purchaser shall bear and pay,
and shall reimburse the Seller and the Seller's affiliates for,
any sales taxes, use taxes, transfer taxes, documentary charges,
recording fees or similar taxes, charges, fees or expenses that
may become payable in connection with the sale of the Assets to
the Purchaser.
1.5 Allocation. Within sixty (60) days of the Closing,
the Seller shall deliver to the Purchaser a statement (the
"Allocation Statement") setting forth the Seller's good faith
determination of the manner in which the consideration referred to
in Sections 1.2(a) and 1.2(b)is to be allocated among the Assets.
The Seller, acting in good faith, may amend the Allocation
Statement to take into account the Book Value adjustment referred
to in Section 1.3 by delivering to the Purchaser, within thirty
(30) days after any payment has been made pursuant to Section
1.3(d), written notice of such amendment. If the Purchaser objects
to the Allocation Statement, then within fifteen days after the
delivery of the Allocation Statement, the Purchaser shall deliver a
written notice describing in reasonable detail the Purchaser's
objections to the Allocation Statement (an "Allocation Objection").
If the Purchaser shall not deliver an Allocation Objection to the
Seller within such fifteen day period, the allocation set forth in
the Allocation Statement (as such Allocation Statement may be
amended pursuant to the immediately preceding sentence) shall be
conclusive and binding upon the Purchaser and the Seller for all
purposes, and neither the Seller nor the Purchaser shall file any
tax return or other document with, or make any statement or
declaration to, any governmental body that is inconsistent with
such allocation. If the Purchaser delivers an Objection Allocation
to the Seller, and if the Purchaser and the Seller are unable to
agree upon the allocation within thirty (30) days after an
Objection Allocation is delivered to the Seller, the dispute shall
be finally settled by a mutually acceptable independent accounting
firm. The determination by the independent accounting firm of the
Book Value shall be conclusive and binding on the Purchaser and the
Seller. The Seller and the Purchaser shall each bear and pay 50% of
the fees and other expenses of such independent accounting firm.
1.6 Excluded Assets. Notwithstanding anything to the
contrary set forth in Section 1.1, the following assets of Seller
are specifically excepted from the Assets to be transferred to
Purchaser on the Closing Date (collectively, the "Excluded
Assets"):
(a) all real property owned or leased
by Seller or cash deposits related thereto except for the "Lease"
(as defined below).
(b) federal, state and local income and
franchise tax credits and tax refund claims;
(c) permits, to the extent not lawfully
transferable;
(d) Seller's original minute books, accounting
records, tax returns, receipts for taxes paid, licenses other than
any license relating to the Assets and the Business, accounts
payable records, bank statements, bank records, checks and any
other corporate records and documents of Seller that do not relate
to the Assets or the Business;
(e) all assets of the Seller which do not relate
to the Business including, without limitation, assets relating to
any electrical, electronic and electro-optic connection or
interconnection devices made, designed, developed or sold by
Seller ("Connectors");
(f) the assets of the Business listed on
Schedule 1.6;
(g) all rights to the names "AMP" and "AMP
Incorporated;"
(h) any debt or equity securities of Ocean Power
Technologies, Inc. issued to Seller; and
(i) any software or network connections which
relates or connects to the computer systems of Seller unless it is
listed on Schedule B.
1.7 Assumed Liabilities. Subject to the terms and
conditions of this Agreement, on the Closing Date, Purchaser shall
assume and agree to perform and discharge to the extent indicated
below the following, and only the following, specific debts,
liabilities and obligations of Seller (collectively the "Assumed
Liabilities"):
(a) Contractual Liabilities. Seller's
liabilities and obligations relating to the Business arising from
and after the Closing Date under and pursuant to the Contracts.
(b) Product Warranties. Seller's
product and service warranties and obligations including without
limitation those obligations described in Schedule 1.7(b).
(c) Lease Liability. Seller's
liabilities and obligations pursuant to the lease of the
Property (the "Lease").
(d) Balance Sheet Liabilities. Seller's
liabilities listed on Schedule 13(f).
Notwithstanding anything else in this Agreement to the
contrary, Purchaser shall not assume, pay, perform, or discharge,
and Seller shall solely retain, pay, perform and discharge any
obligations under law, including but not limited to antitrust
civil rights, health, safety, labor, discrimination and
environmental laws relating to periods before the Closing Date.
1.8 Employee Matters. Purchaser agrees to provide
Seller with a list of each employee of the Business who Purchaser
does not want to continue to employ in the Business. Seller shall
terminate such employees and pay each employee a severance payment
equal to one week of such employee's base salary for each year of
such employee's employment with the Seller, with a minimum payment
equal to two weeks of such employee's base salary. If Seller
rehires any of such employees within one year of the date hereof
and such employee is required to repay all or a portion of the
severance to Seller, then Seller shall reimburse Purchaser the
amount that it receives back from such employee.
1.9 Non-Competition. Except for the pachinko market,
the motor vehicle seat occupancy market and the motor vehicle
parking aid market, Seller agrees that for a period of two (2)
years commencing on the Closing Date, neither Seller nor any of
its Affiliates will compete with or against Purchaser, directly
or indirectly, in the design and manufacture of piezoelectric
polymer film-based sensor products and capacative brine level
sensor products (collectively, the "Products"); provided further,
that during such period, Seller may acquire an interest in an
entity the business of which includes, and will continue to
include, the design and manufacture of Products; provided further,
that the revenues earned by such entity in the most recent fiscal
year directly from the design and manufacture of Film Products do
not exceed thirty percent 30% of the total revenues earned by such
entity for such period.
SECTION 2. CLOSING
The closing of the transactions contemplated by
Sections 1 and 2 (the "Closing") shall be held at the offices of
Seller at 10:00 a.m. (Pennsylvania time) on August 14, 1998, or
at such other place, time and/or date as may be jointly designated
by Purchaser and Seller and shall be effective at 11:59 p.m.
(Pennsylvania time) on such date.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that,
except as disclosed or otherwise referred to in the Disclosure
Schedule or in any of the documents identified in the Disclosure
Schedule:
3.1 Good Standing and Corporate Power of Seller.
Seller is validly existing and in good standing as a corporation
under the laws of the Commonwealth of Pennsylvania, and has all
necessary corporate power to perform its obligations under this
Agreement.
3.2 Title To Assets. The Seller owns, and has good,
valid and marketable title to, or leases, and has good title to,
all of the Assets free and clear of any Encumbrances. All
facilities, machinery, equipment, fixtures, vehicles and other
properties owned, leased or used by the Seller are currently in
good operating condition and repair and are reasonably fit and
usable for the purposes for which they are currently being used.
The Seller is in compliance with all material terms of each lease
to which it is a party or is otherwise bound.
3.3 Patents and Trademarks. The Seller owns or
possesses sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes necessary
for the conduct of the Business as now conducted and as presently
proposed to be conducted, without any known infringement of the
rights of others. There are no outstanding options, licenses or
agreements of any kind relating to the foregoing, nor is the
Seller bound by or a party to any options, licenses or agreements
of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information and
other proprietary rights and processes of any other person or
entity other than such licenses or agreements arising from the
purchase of "off the shelf' or standard products. The Seller has
not received any communications relating to the intellectual
property of the Business alleging that the Seller has violated or,
by conducting its business as presently proposed, would violate any
of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or
entity.
3.4 Authority, Approval and Enforceability.
(a) Seller has full corporate power and authority to
execute, deliver and perform its obligations under this Agreement
and all agreements, instruments and documents contemplated hereby,
and all corporate action of Seller necessary for such execution,
delivery and performance has been duly taken. Seller has provided
Purchaser with evidence of such authority.
(b) This Agreement is a legal, valid and binding
obligation of Seller, and, upon due execution and delivery by the
parties thereto, all agreements, instruments and documents to be
executed by Seller in connection with the transactions contemplated
hereby will be legal, valid and binding obligations of Seller, each
enforceable against Seller in accordance with its respective terms,
except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, and subject to general equity
principles and to limitations on availability of equitable relief,
including specific performance.
3.5 Litigation. There is no action, suit, proceeding
or investigation pending or to the Seller's knowledge currently
threatened in writing against the Seller that questions the
validity of this Agreement or the right of the Seller to enter into
such agreement, or to consummate the transactions contemplated
hereby, or which might result, either individually or in the
aggregate, in a Material Adverse Effect. The Seller is not a party
or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or
instrumentality which might result, either individually or in the
aggregate, in a Material Adverse Effect. There is no action, suit,
proceeding or investigation by the Seller relating to the Business
currently pending or which the Seller intends to initiate.
3.6 Compliance with Laws; Permits. Except for environmental
matters which are covered exclusively in Sections 3.8 and 4.6, to
its knowledge, the Seller is not in violation of any applicable
statute, rule or regulation of any domestic or foreign government
or any instrumentality or agency thereof in respect of the conduct
of the Business which violation would have a Material Adverse
Effect. No governmental orders, permissions, consents, approvals or
authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the
execution and delivery of this Agreement, except such as has been
duly and validly obtained or filed, or with respect to any filings
that must be made after the Closing, as will be filed in a timely
manner. The Seller has all franchises, permits, licenses and any
similar authority necessary for the conduct of the Business, the
lack of which could have a Material Adverse Effect.
3.7 Contracts.
(a) There are no agreements, understandings,
instruments, Contracts, proposed transactions, judgments, orders,
writs or decrees relating exclusively to the Business to which the
Seller is a party or to its knowledge by which it is bound which
may involve (i) obligations (contingent or otherwise) of, or
payments to, the Seller in excess of $50,000 (other than obligations
of, or payments to, the Seller arising from purchase or sale
agreements entered into in the ordinary course of business), or (ii)
the license of any patent, copyright, trade secret or other
proprietary right to or from the Seller (other than licenses arising
from the purchase of "off the self' or other standard products), or
(iii) indemnification by the Seller with respect to infringements of
proprietary rights (other than indemnification obligations arising
from purchase or sale agreements entered into in the ordinary
course of business) (collectively, the "Material Contracts").
(b) To its knowledge, Seller has not violated or
breached, or declared or committed any default under, any Material
Contract, and the Seller has not received any notice or other
communication (in writing or otherwise) regarding any actual,
alleged, possible or potential violation or breach of, or default
under, any Material Contract.
(c) No person is renegotiating, or has the right to
renegotiate, any amount paid or payable to the Seller under any
Material Contract or any other term or provision of any Material
Contract.
3.8 Environmental Matters.
(a) Seller's Records Regarding Environmental Matters.
(i) Seller has made available to Purchaser
certain assessments, audit reports, correspondence, analyses,
permits, orders and other records available to Seller regarding
(i) the use, management, processing, generation, treatment,
storage and disposal of Hazardous Substances by the Business;
(ii) its compliance with Environmental Laws in connection with the
Business; and (iii) the environmental conditions of the
Property.
(ii) Seller also has made available to
Purchaser certain records available to Seller regarding prior
owners' or operators' use, management, processing, generation,
treatment, storage and disposal of Hazardous Substances on the
Property; compliance with Environmental Laws; any Environmental
Liabilities; and environmental conditions on and beneath the
Property before such Property were owned or operated by Seller.
(iii) Seller makes no representations or
warranties regarding the completeness or accuracy of the
information included in the records provided under this Section.
(b) Environmental and Safety Compliance. Seller's
conduct of the Business is not in violation of any Environmental
Law and no material expenditures are currently required in order
for the Business to comply with any Environmental Law.
(c) Prior to the Closing Date of this Agreement,
Purchaser may perform a due diligence investigation and other
environmental evaluation in accordance with Schedule 3.8 (the
"Environmental Assessment") of the Property, at its sole expense
and subject to mutually agreeable terms and conditions.
3.9 Suppliers. Except for the agreements referenced
herein, no supplier of the Business to whom the Business made
payments in excess of $50,000 during the fiscal year ended
December 31, 1997 has canceled or otherwise terminated its
relationship with the Business, or has during the last twelve
months decreased materially its sales of equipment, services,
supplies or materials to the Business. No such supplier has
notified the Seller of any plan or intention to terminate, to
cancel or to decrease materially its sale of materials, supplies,
services or equipment to the Business or otherwise materially and
adversely modify its relationship with the Business.
3.10 Customers, Distributors. None of the customers or
distributors who accounted for more than $50,000 of sales of the
Business during the fiscal year ended December 31, 1997 has
canceled or otherwise terminated its relationship with the
Business, or has during the last seven months decreased materially
its usage or purchases of the services or products of the Business.
No such customer or distributor has notified the Seller of any
plan or intention to terminate, to cancel or to decrease
materially its usage, purchase or distribution of the services or
products of the Business or otherwise materially and adversely
modify its relationship with the Business.
3.11 Financial Statements. The Seller has delivered to
Purchaser (a) its unaudited pro forma balance sheet of the
Business as at December 31, 1997 and unaudited statement of income
of the Business for the twelve months ending December 31, 1997 and
(b) its unaudited balance sheet of the Business as at March 31,
1998 and unaudited consolidated statement of income of the Business
for the three month period ending on March 31, 1998 (collectively,
the "Financial Statements"). The Financial Statements, together
with the notes thereto, have been prepared in accordance with the
standard accounting procedures of the Business applied on a
consistent basis throughout the periods indicated, except as
disclosed therein, and present fairly the financial condition and
position of the Business as of December 31, 1997 and March 31,
1998; provided however, that the Financial Statements are subject
to normal recurring year-end audit adjustments (which are not
expected to be material).
3.12 Liabilities. Except for liabilities under Environmental
Laws, which are addressed exclusively in Section 3.8 and Section
4.6, the Seller has no material liabilities and, to the best of
the Seller's knowledge, the Seller knows of no material contingent
liabilities of the Business not disclosed in the Financial
Statements, except current liabilities incurred in the ordinary
course of business subsequent to March 31, 1998 which have not been,
either in any individual case or in the aggregate, materially
adverse.
3.13 Changes. Since March 31, 1998, there has not been to the
Seller's knowledge:
(a) Any material change in the assets, liabilities,
financial condition or operations of the Business from that
reflected in the Financial Statements, other than changes in the
ordinary course of business, none of which individually or in the
aggregate has had or is expected to have a Material Adverse Effect;
(b) Any resignation or termination of any key
employee of the Business; and the Seller, to the best of its
knowledge, does not know of the impending resignation or
termination of employment of any such key employee;
(c) Any damage, destruction or loss, whether or
not covered by insurance, materially and adversely affecting the
properties, business or prospects or financial condition of the
Business;
(d) Any material change in any compensation
arrangement or agreement with any employee or officerof the
Business; or
(e) Any change in any Material Contract which
materially and adversely affects the business, assets,
liabilities, financial condition, operations or prospects of the
Business.
3.14 No Conflict. The execution and delivery by Seller
of this Agreement and any other agreements, instruments and
documents to be executed and delivered by Seller pursuant hereto
do not, and the performance and consummation by Seller of the
transactions contemplated hereby and thereby will not, conflict
with or result in any breach or violation of or default,
termination, forfeiture or lien under (or upon the failure to
give notice or the lapse of time, or both, result in any conflict
with, breach or violation of or default, termination, forfeiture or
lien under) any terms or provisions of Seller's charter documents,
each as amended, any statute, rule, regulation, judicial or
governmental decree, order or judgment, or any Material Contract;
that has or is likely to have a Material Adverse Effect.
3.15 No Consent Required. No consent, authorization,
approval, order, license, certificate or permit or act of or from,
or declaration or filing with, any foreign, federal, state, local
or other governmental authority or regulatory body or any court or
other tribunal or any party to any Material Contract; that has or
is likely to have a Material Adverse Effect, is required for the
execution, delivery or performance by Seller of this Agreement or
any of the other agreements, instruments and documents being or to
be executed and delivered hereunder or in connection herewith or
for the consummation of the transactions contemplated hereby.
3.16 Year 2000 Compliance. Notwithstanding anything
contained in this Agreement to the contrary, Seller makes no
representation or warranty (express or implied) to Purchaser, and
hereby disclaims any and all liability, that (i) any of the Assets,
or (ii) any aspect of the Business, or (iii) any goods or services
sold or provided by Seller to any party, or any aspect thereof, is
or will be Year 2000 Compliant (as defined below in Exhibit A).
Purchaser agrees to accept all the Assets and all the Assumed
Liabilities subject to such disclaimer, and Seller shall not in any
way be in violation of any of its representations, warranties
or obligations contained in this Agreement, or any document or
instrument provided pursuant to this Agreement, for any failure
of any of the foregoing to be Year 2000 Compliant.
3.17 Broker's Fees. No agent, broker, investment banker,
person or firm acting on behalf of Seller is or will be entitled to
any broker's or finder's fee or any other commission directly or
indirectly in connection with the transactions contemplated herein.
Seller further agrees to indemnify Purchaser for any claims, losses
or expenses incurred by such other party as a result of the
representation in this Section 3.17 being untrue.
3.18 Inventories. The inventories relating to the Business
reflected on the Financial Statements have been acquired in the
ordinary course of business and have been accounted for and valued
in accordance with Seller's normal inventory practices.
3.19 Accounts Receivable. The accounts receivable relating
to the Business reflected on the Financial Statements arose from
arms-length sales to unrelated third parties in the ordinary course
of business and sales to Affiliates and have been accounted for and
valued in accordance with Seller's normal credit policies.
3.20 Assets. The assets to be acquired by Purchaser
hereunder constitute all of the assets currently in use and
necessary to the conduct of the Business as conducted by Seller.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants that, to the best of
its knowledge, the following statements are accurate in all
material respects:
4.1 No Conflict. The execution and delivery by Purchaser
of this Agreement and any other agreements, instruments and
documents to be executed and delivered by Purchaser pursuant hereto
do not, and the performance and consummation by Purchaser of the
transactions contemplated hereby and thereby will not, conflict with
or result in any breach or violation of or default, termination,
forfeiture or lien under (or upon the failure to give notice or the
lapse of time, or both, result in any conflict with, breach or
violation of or default, termination, forfeiture or lien under) any
terms or provisions of Purchaser's charter documents, each as
amended, or any statute, rule, regulation, judicial or governmental
decree, order or judgment, or any agreement, lease or other
instrument to which Purchaser is a party or to which Purchaser or
its assets are subject; that has or is likely to have a Material
Adverse Effect.
4.2 No Consent Required. No consent, authorization,
approval, order, license, certificate or permit or act of or from,
or declaration or filing with, any foreign, federal, state, local
or other governmental authority or regulatory body or any court or
other tribunal or any party to any contract, agreement, instrument,
lease or license to which Purchaser is a party or to which
Purchaser or its assets are subject; that has or is likely to have
a Material Adverse Effect, is required for the execution, delivery
or performance by Purchaser of this Agreement or any of the other
agreements, instruments and documents being or to be executed and
delivered hereunder or in connection herewith or for the
consummation of the transactions contemplated hereby.
4.3 Good Standing and Corporate Power. Purchaser is validly
existing and in good standing as a corporation under the laws of
the State of New Jersey, and has all necessary corporate power to
perform its obligations under this Agreement.
4.4 Authority, Approval and Enforceability.
(a) Purchaser has full corporate power and authority
to execute, deliver and perform its obligations under this
Agreement and all agreements, instruments and documents
contemplated hereby, and all corporate action of Purchaser
necessary for such execution, delivery and performance has been
duly taken. Purchaser has provided Seller with evidence of such
authority.
(b) This Agreement is a legal, valid and binding
obligation of Purchaser, and, upon due execution and delivery by
the parties thereto, all agreements, instruments and documents to
be executed by Purchaser in connection with the transactions
contemplated hereby will be legal, valid and binding obligations of
Purchaser, each enforceable against Purchaser in accordance with
its respective terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, and subject to
general equity principles and to limitations on availability of
equitable relief, including specific performance.
4.5 Government Contracts. Purchaser has not been
debarred, suspended or otherwise precluded from performing on U.S.
Government prime contracts, subcontracts or purchase orders.
4.6 Environmental Matters. Purchaser acknowledges that to
the extent it is acquiring any interest in the Property, it accepts
the Property AS IS, WHERE IS, with all faults and defects.
Purchaser is familiar with the Property and acknowledges that,
except for those representations and warranties provided in Section
3.8(b) of this Agreement, Seller makes no representations or
warranties whatsoever as to any defect or condition at the Property.
Purchaser releases, acquits and discharges Seller from any and all
claims, including but not limited to claims arising under CERCLA or
any other Environmental Law, that have been or may be asserted that
arise from or relate in any way to the condition of the Property,
except claims for indemnification pursuant to Section 7 of this
Agreement.
4.7 Broker's Fees. No agent, broker, investment banker,
person or firm acting on behalf of Purchaser is or will be entitled
to any broker's or finder's fee or any other commission directly or
indirectly in connection with the transactions contemplated herein.
Purchaser further agrees to indemnify Seller for any claims, losses
or expenses incurred by such other party as a result of the
representation in this Section 4.7 being untrue.
SECTION 5. CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE
The obligation of Purchaser to purchase the Assets and
otherwise consummate the transactions that are to be consummated
at the Closing is subject to the satisfaction, as of the Scheduled
Closing Time, of the following conditions (any of which may be
waived by Purchaser in whole or in part):
5.1 Representations and Warranties True. The
representations and warranties made by the Seller shall be true and
correct in all material respects at the date of the Closing, with
the same force and effect as if they had been made on and as of
said date.
5.2 Performance of Obligations. The Seller shall have
performed and complied with all agreements and conditions herein
required to be performed or complied with by the Seller on or
before the Closing.
5.3 Consents, Permits, and Waivers. The Seller shall have
obtained any and all consents, permits and waivers as set forth in
Section 3.15 of the Disclosure Schedule necessary or appropriate
for consummation of the transactions contemplated by the Agreement
(except for such as may be properly obtained subsequent to the
Closing).
5.4 No Injunction. There shall not be in effect, at the
Closing Date, any injunction or other binding order of any court or
other tribunal having jurisdiction over Purchaser that prohibits
the purchase of the Assets.
5.5 Sensor Supply Seller and Purchaser shall have entered
into a supply agreement substantially in the form as attached
hereto as Exhibit 5.5 relating to the supply of the Badger Meter
Cam II Switch (p/n 1004876).
SECTION 6. CONDITIONS TO OBLIGATION OF SELLER TO CLOSE
The obligation of Seller to cause the Assets to be sold to
Purchaser and otherwise consummate the transactions that are to be
consummated at the Closing is subject to the satisfaction, as of
the Scheduled Closing Time, of the following conditions (any of
which may be waived by Seller in whole or in part):
6.1 Representations and Warranties True. The
representations and warranties made by the Purchaser shall be true
and correct in all material respects at the date of the Closing,
with the same force and effect as if they had been made on and as
of said date.
6.2 Performance of Obligations. The Purchaser shall have
performed and complied with all agreements and conditions herein
required to be performed or complied with by the Purchaser on or
before the Closing.
6.3 Consents, Permits, and Waivers. The Purchaser shall
have obtained any and all material consents, permits and waivers
necessary or appropriate for consummation of the transactions
contemplated by the Agreement (except for such as may be
properly obtained subsequent to the Closing).
6.4 No Injunction. There shall not be in effect, at the
Scheduled Closing Time, any injunction or other binding order of
any court or other tribunal having jurisdiction over Seller or
the Company that prohibits the sale of the Purchased Stock to
Purchaser.
6.5 Sensor Supply Seller and Purchaser shall have entered
into a supply agreement substantially in the form as attached
hereto as Exhibit 5.5 relating to the supply of the Badger Meter
Cam II Switch (p/n 1004876).
SECTION 7. INDEMNIFICATION BY SELLER
7.1 Indemnification by Seller. Subject to the limitations
set forth in this Section 7 and elsewhere in this Agreement,
Seller shall indemnify and hold Purchaser and each person serving
as an officer, director, partner, employee or agent of Purchaser
(collectively, the "Purchaser Indemnitees"), harmless from and
against any Damages incurred by the Purchaser Indemnitees
resulting from, arising out of, relating to, in the nature of or
caused by (i) a breach by Seller of any representation, warranty
or covenant of Seller set forth in this Agreement, (ii) any
liability of Seller which is not an Assumed Liability or
(iii) the alleged infringement of U.S. Patent No. 5,571,961 held
by KIH, German Utility Model No. 93 21447.2 and all other pending
and/or issued foreign counterparts, or the alleged
misappropriation of KIH proprietary information related to the
RoadTrax Sensors (collectively, the "KIH Intellectual Property")
by Seller or Purchaser (the "KIH Matter"), except in the case
of Damages incurred by Purchaser resulting from, arising out of,
relating to, in the nature of or caused by a breach of Section 8.8
by Purchaser for which Seller shall not be liable for such Damages.
7.2 Indemnification by Purchaser. Subject to the
limitations set forth in this Section 7 and elsewhere in this
Agreement, Purchaser shall indemnify and hold Seller and each
person serving as an officer, director, partner, employee or agent
of Seller (collectively, the "Seller Indemnitees" and with the
Purchaser Indemnitees, the "Indemnitees"), harmless from and
against any Damages incurred by the Indemnitees resulting from,
arising out of, relating to, in the nature of or caused by
(i) a breach by Purchaser of any representation, warranty or
covenant of Purchaser set forth in this Agreement, (ii) any
Assumed Liability or (iii) any Matters relating to the Business
arising after the Closing Date (except for Excluded Assets).
7.3 Expiration of Representations and Warranties . All of
the representations and warranties of Seller and Purchaser set
forth in this Agreement shall terminate and expire, and shall
cease to be of any force or effect, at 5:00 p.m. (Pennsylvania time)
on the second anniversary of the Closing Date, and all liability of
Seller and Purchaser with respect to such representations and
warranties shall thereupon be extinguished; provided, however, that
if, prior to such second anniversary, either party hereto (the
"Claimant") shall have duly delivered a claim notice (as defined
below) to the other party, then the specific indemnification claim
set forth in such claim notice (as defined below) shall survive
such second anniversary (and shall not be extinguished thereby).
Neither Purchaser nor Seller shall have any obligation to indemnify
the other for Damages resulting from, arising out of, relating
to, in the nature of or caused by a breach of a representation,
warranty or covenant by such Purchaser or Seller, respectively,
pursuant to Sections 7.1 and 7.2 or pursuant to the KIH Matter
after two (2) years from the Closing Date.
7.4 Deductible Amount. Without limiting the effect of any
of the other limitations set forth herein and except in connection
with the KIH Matter, Seller shall not be required to make any
indemnification payment hereunder, except to the extent that the
cumulative amount of the Damages actually incurred by Purchaser
exceeds the Deductible Amount; and Seller shall only be required
to pay, and shall only be liable for, the amount by which the
cumulative amount of the Damages actually incurred by Purchaser
actually exceeds the Deductible Amount. The "Deductible Amount"
shall be $100,000.
7.5 Maximum Liability of Seller. Except for the KIH
Matter, the total amount of the payments that Seller can be
required to make under or in connection with this Agreement shall
be limited in the aggregate to a maximum of fifty (50%) percent of
the Base Amount, as adjusted pursuant to Section 1, and Seller's
cumulative liability shall in no event exceed such amount. In
connection with the KIH Matter, the total amount of the payments
that Seller can be required to make in connection with Damages
related to the activities of Purchaser after the Closing shall be
limited to two hundred fifty thousand ($250,000) dollars.
Furthermore, in connection with the KIH Matter there shall be no
limit with respect to Damages related to activities by the Seller
prior to the Closing. If certain Damages cannot be related to
pre-Closing activities or post-Closing activities, then such
Damages shall be apportioned on a pro rata basis based on the
respective sales of infringing products by the Seller pre-Closing
and the Purchaser post-Closing.
7.6 Defense of Third Party Actions. The Seller shall
assume the defense of the KIH Matter with its own counsel. In
addition, if any Indemnitee receives notice or otherwise obtains
knowledge of any Matter or any threatened Matter other than the
KIH Matter that may give rise and to an indemnification claim
against the Indemnitee, then the Indemnitee shall promptly deliver
to the other party hereto (the "Indemnifying Party") a written
claim notice describing such Matter in reasonable detail; provided,
however, that for the sole purpose of determining whether a Matter
or threatened Matter may give rise to an indemnification claim
against Seller within the meaning of this sentence, the limitation
set forth in Section 7.5 shall not be taken into account. The
timely delivery of such written notice by the Indemnitee to the
Indemnifying Party shall be a condition precedent to any liability
on the part of the Indemnifying Party under this Section 7 with
respect to such Matter other than the KIH Matter. The Indemnifying
party has the right, at its option, to assume the defense of any
such Matter other than the KIH Matter with its own counsel. If the
lndemnif~dng Party elects to assume the defense of any such Matter
including the KIH Matter, then:
(a)notwithstanding anything to the contrary contained in
this Agreement, the Indemnifying Party shall not be required to pay
or otherwise indemnify the Indemnitee against any attorneys' fees
or other expenses incurred on behalf of the Indemnitee in connection
with such Matter following the Indemnifying Parties election to
assume the defense of such Matter;
(b) the Indemnitee shall make available to the
Indemnifying Party all books, records and other documents and
materials that are under the direct or indirect control of the
Indemnitee or any of the Indemnitee's Representatives and that the
Indemnitdng Party considers necessary or desirable for the defense
of such Matter;
(c) the Indemnitee shall execute such documents and
take such other actions as the Indemnifying Party may reasonably
request for the purpose of facilitating the defense of, or any
settlement, compromise or adjustment relating to, such Matter;
(d) the Indemnitee shall otherwise fully cooperate
as reasonably requested by the Indemnifying Party in the defense
of such Matter;
(e) the Indemnitee shall have the right to
participate in the defense of such Matter at its own expense,
except in the case of the KIH Matter where the legal fees of the
Purchaser shall be deemed to be Damages;
(f) the Indemnitee shall not admit any liability with
respect to such Matter;
(g) the Indemnifying Party shall have the exclusive
right to settle, adjust or compromise such Matter, on such terms as
it may deem appropriate, without the consent or approval of the
Indemnitee or any other Person.
If the Indemnifying Party elects not to assume the defense of such
Matter, then the Indemnitee shall proceed diligently to defend
such Matter with the assistance of counsel satisfactory to the
Indemnifying Party; provided, however, that the Indemnitee shall
not settle, adjust or compromise such Matter, or admit any
liability with respect to such Matter, without the prior written
consent of the Indemnifying Party.
7.7 Subrogation. To the extent that the Indemnifying
Party makes or is required to make any indemnification payment to
any Indemnitees, the Indemnifying Party shall be entitled to
exercise, and shall be subrogated to, any rights and remedies
(including rights of indemnity, rights of contribution and other
rights of recovery) that the Indemnitee may have against any other
Person with respect to any Damages, circumstances or Matter to
which such indemnification payment is directly or indirectly
related. The Indemnitee shall permit the Indemnifying Party to use
the name of the Indemnitee in any transaction or in any proceeding
or other Matter involving any of such rights or remedies; and the
Indemnitee shall take such actions as the Indemnifying Party may
reasonably request for the purpose of enabling the Indemnifying
Party to perfect or exercise the Indemnifying Party's right of
subrogation hereunder.
7.8 Fraud Notwithstanding any provision of this Agreement
to the contrary, liability of either Purchaser or Seller for common
law fraud, intentional misrepresentation or other claim involving
intentional misconduct shall not be limited in amount, procedure
for dispute resolution or as to time during which a claim may be
made.
7.9 Exclusivity. The right of each party hereto to assert
indemnification claims and receive indemnification payments
pursuant to this Section 7 shall be the sole and exclusive right
and remedy exercisable by such party with respect to any Damages
pursuant to this Agreement (other than in connection with the
Environmental Assessment) and such remedy shall be in lieu of,
and not in addition to, any remedies under statutory or common law,
including CERCLA.
SECTION 8. POST-CLOSING COVENANTS
8.1 Financial Statements. Within ten (10) days of the
Closing, Seller shall provide Purchaser with an estimated,
unaudited balance sheet as of the Closing Date and an estimated
Allocation Statement. Within (60) days of the Closing, Seller shall
provide Purchaser with (i) an audited statement of net assets of
the Business as at December 31, 1997, and December 31, 1996, (ii)
an audited statement of revenue and expenses of the Business for
the twelve months ended December 31, 1997 and December 31, 1996,
and (iii) an audited statement of revenue and expenses for period
from December 31, 1997 through the Closing Date, prepared in
accordance with the GAAP.
8.2 Support. Seller shall provide manufacturing systems
support to Purchaser for nine months from the Closing in
accordance with the terms and conditions in Exhibit 8.2.
8.3 Connector Supply. Seller shall continue to supply
Connectors to Purchaser through the end of 1998 in accordance with
the terms and conditions in the Seller's standard acknowledgment
form and at the prices set forth on Exhibit 8.3.
8.4 04-08 Lead Frame Die. Seller shall continue to supply
Purchaser with lead frames for the 04-08 accelerometer program
through the end of 1999 in accordance with the terms and conditions
in the Seller's standard acknowledgement form at prices set forth
in Exhibit 8.4.
8.5 Film Supply. Purchaser shall continue to supply Seller
piezoelectric polymer film through the end of 1999 in accordance
with the terms and conditions in the Purchaser's standard
acknowledgment form at prices set forth in Exhibit 8.5.
8.6 DuPont C Thread Systems. Purchaser agrees to pay
Seller one third of any proceeds received by Purchaser from DuPont
(up to a maximum of $62,000) pursuant to the sale of any DuPont C
Thread Systems currently held in inventory as set forth on Exhibit 8.6.
8.7 Employees
(a) To assist Purchaser in the transition of accounting
services, Seller will make available to Purchaser the services of
Rod Gilmore, currently the Senior Accountant for the Business, at a
rate of $260 per day. All billings will be based on the daily rate
irrespective of whether Mr. Gilmore's services are used for all or
part of a day. Mr. Gilmore will be made available for up to eight
hours per day, up to four days per week for a period beginning on
the Closing Date and ending on September 30, 1998.
(b) To assist Purchaser in the transition of material
services, Seller will make available to Purchaser the services of
Elizabeth Kelley-Homing, currently the Materials Supervisor of the
Business, at a rate of $257 per day. All billings will be based on
the daily rate irrespective of whether Ms. Kelley-Homing's services
are used for all or part of a day. She will be made available for
up to eight hours per day, up to 2-3 days per week for a period
beginning on the Closing Date and ending on August 31, 1998.
(c) To assist the Purchaser in the transition of
European sales and product development, Richard Brown will remain
an employee of Seller for a period of sixty days after the Closing
Date. At the end of sixty days, Seller will make an offer of
employment to Mr. Brown. Seller will reimburse Purchaser for 100%
of the costs incurred by Purchaser in maintaining Mr. Brown as an
employee, including any severance costs.
8.8 KIH Matter The Purchaser shall use its commercially
reasonable efforts to implement the proposed redesign of the
products which are affected by the KIH Intellectual Property
within six (6) months of the Closing.
8.9 EIF Atochem The Purchaser shall reimburse Seller
for any payment of "Shortfall Amounts" that Seller makes to ELF
Atochem North America, Inc. ("ELF") pursuant to the Assignment
Agreement between ELF and the Seller dated as of the date hereof.
SECTION 9. MISCELLANEOUS PROVISIONS
9.1 Governing Law. This Agreement shall be construed
in accordance with, and governed in all respects by, the laws of
the Commonwealth of Pennsylvania (without giving effect to
principles of conflicts of law).
9.2 Arbitration. If a dispute arises between the parties
relating to the interpretation of performance of this Agreement,
the parties agree to hold a meeting, attended by individuals with
decision-making authority regarding the dispute, to attempt in
good faith to negotiate a resolution of the dispute prior to
pursuing other available remedies. If, within thirty (30) days
after such meeting, the parties have not succeeded in negotiating
the resolution of the dispute, either party may request that such
dispute be resolved through final and binding arbitration. Such
arbitration shall be conducted by a single arbitrator in New York,
New York, in accordance with the then-current commercial
arbitration rules and supplementary procedures for commercial
arbitration of the American Arbitration Association ("AAA"). Such
arbitrator shall be selected by the mutual agreement of the
parties or, failing such agreement, shall be selected according to
the aforesaid AAA rules. The parties shall bear the costs of such
arbitrator equally. The prevailing party in any such arbitration
or in any judicial enforcement or review proceeding shall be
entitled to its reasonable attorneys' fees and costs in addition
to any other amount of recovery ordered by such arbitrator or court.
If judicial enforcement or review of such arbitrator's award is
sought by either party, judgement may be entered upon such award in
a Pennsylvania court of competent jurisdiction according to
Pennsylvania law. The duty of the parties to arbitrate any dispute
relating to the interpretation or performance of this Agreement
thereof shall survive the expiration or termination of this
Agreement for any reason.
9.3 Publicity. No press release, publicity, disclosure
or notice to any person concerning any of the transactions
contemplated by this Agreement shall be issued, given, made or
otherwise disseminated by either Party or any of its
Representatives at any time (whether prior to, at or after the
Closing) without the prior written approval of both parties.
9.4 Notices. All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given: (a)
upon personal delivery to the party to be notified; (b) when
sent by confirmed telex or facsimile if sent during normal
business hours of the recipient, if not, then on the next business
day; (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (d)
one (1) day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification
of receipt. All communications shall be sent to the addresses set
forth below or at such other address as the Seller or Purchaser
may designate by ten (10) days advance written notice to the
other parties hereto.
if to Purchaser:
Measurement Specialties, Inc.
80 Little Falls Road
Fairfield, NJ 07004
Attn: Chief Executive Officer
with a copy to:
John D. Arnold
104 Highland Terrace
Woodside, CA 94062
if to Seller:
AMP Incorporated
470 Friendship Road
M/S 176-034
Harrisburg, PA 17111
Attn: Corporate Development
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attn: Matthew Hemington
9.5 Expenses. Each party shall pay all costs and
expenses that it incurs with respect to the negotiation,
execution, delivery and performance of the Agreement.
9.6 Table of Contents and Headings. The table of contents
of this Agreement and the underlined headings contained in this
Agreement are for convenience of reference only, shall not be
deemed to be a part of this Agreement and shall not be referred to
in connection with the construction or interpretation of this
Agreement.
9.7 Entire Agreement. Except for the letter agreement
dated July 20, 1998 between the parties, which shall not be
reduced or modified by this Agreement, the Agreement, the Exhibits
and Schedules hereto and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party
shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
9.8 Parties in Interest. Nothing in this Agreement is
intended to provide any rights or remedies to any Person
(including any employee or creditor of the Business) other than the
parties hereto.
9.9 Severability. In the event that any provision of
this Agreement, or the application of such provision to any Person
or set of circumstances, shall be determined to be invalid,
unlawful, void or unenforceable to any extent, the remainder of
this Agreement, and the application of such provision to Persons or
circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be affected and
shall continue to be valid and enforceable to the fullest extent
permitted by law.
9.10 Waiver. No failure on the part of either party hereto
to exercise any power, right, privilege or remedy under this
Agreement, and no delay on the part of either party hereto in
exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver thereof; and no single or
partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other
power, right, privilege or remedy.
9.11 Amendments. This Agreement may not be amended,
modified, altered or supplemented except by means of a written
instrument executed on behalf of both Purchaser and Seller.
9.12 Further Assurances. Each party hereto shall
execute and cause to be delivered to each other party hereto such
instruments and other documents, and shall take such other actions,
as such other party may reasonably request (prior to, at or after
the Closing) for the purpose of carrying out or evidencing any of
the transactions contemplated by this Agreement.
9.13 Bulk Transfer Laws. Purchaser hereby waives
compliance with the provisions of any applicable laws relating to
bulk transfers of assets.
9.14 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all
of which together shall constitute one instrument.
Purchaser and Seller have caused this Agreement to be executed
as of August 14, 1998.
MEASUREMENT SPECIALTIES, INC.
By:
Name:
Title:
AMP INCORPORATED
By:
Name:
Title:
THE WHITAKER CORPORATION
By:
Name:
Title:
EXHIBIT A TO
ASSET PURCHASE AGREEMENT
Defined Terms
For purposes of this Agreement (including the Disclosure
Schedule):
"Affiliate" shall mean any person or business entity
which directly or indirectly through
one or more intermediaries, controls, is controlled by, or
is under common control with Seller or
Purchaser.
"Assets" shall mean and include all right, title and
interest in and to the following:
(a) all accounts receivable, notes
receivable and other receivables of the Sell
relating to the Business as set forth on Schedule A
the Property;
(b) all inventory held for use in the conduct of
the Business, including,
without limitation, raw materials, work in process,
finished goods, service parts and supplies
(including all supplies which have been expensed by
Seller);
(c) all ftu-niture, fixtures, equipment,
machinery, parts, tools, dies, jigs,
patterns, molds, and other similar items used in the
conduct of the Business (including, without
limitation, that which has been fully depreciated or is
under construction) as described in
Schedule B;
(d) the leasehold interest and leasehold improvements
created by the lease of
(e) all Proprietary Assets and goodwill of the
Seller relating to the Business as
set forth on Schedule C, except to the extent that Seller
retains a nonexclusive, royalty free,
perpetual, worldwide right and license with right to
sublicense to its affiliates to practice, make,
have made use and sell items which are covered by certain
Proprietary Assets;
(f) all computer software and hardware, and
associated license and
maintenance agreements, used in the conduct of the
Business, including all documentation and
source codes with respect to such software, to the extent
they are legally transferable by Seller;
(g) all rights of the Seller under any written,
oral, implied or other agreement,
contract, understanding, arrangement, instrument, note,
guaranty, indemnity, representation,
warranty, deed, assignment, power of attorney,
certificate, purchase order, work order, insurance
policy, benefit plan, commitment, covenant, assurance or
undertaking of any nature relating
exclusively to the Business with parties other than Seller
(collectively, the "Contracts");
(h) all claims (including claims for
past infringement of Proprietary Assets)
and causes of action of the Seller relating to the
Business against other Persons (regardless of
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1.
whether or not such claims and causes of action have been
asserted by the Seller), and all rights
of indemnity, warranty rights, rights of contribution,
rights to refunds, rights of reimbursement
and other rights of recovery possessed by the Seller
relating to the Business (regardless of
whether such rights are currently exercisable); and
(i) all books, records, files and
data of (or relating directly or indirectly to the
business or operations of) located at the Property.
place.
"Closing Date" shall mean the time and date as of which
the Closing actually takes
"Damages" shall mean any out-of-pocket loss, injury,
liability, claim, expense,
settlement, judgment, award, fine, penalty, fee (including
reasonable attorney's fees) or tax;
provided, however, that Damages will not include any
consequential damages or lost profits and
provided, further that for purposes of computing the
amount of damages incurred by any Person,
there shall be deducted an amount equal to the amount of
any insurance proceeds,
indemnification payments, contribution payments or
reimbursements directly or indirectly
received or receivable by such Person or any of such
Person's affiliates in connection with such
Damages or the circumstances giving rise thereto. In the
case of the KIH Matter, Damages shall
mean the total of the following: (i) any judgment, award,
fine, penalty or fee awarded against
Purchaser; (ii) any amounts paid in settlement of the KIH
Matter; (iii) any attorneys fees and
disbursements incurred by Purchaser pursuant to Section
7.6(e); and (iv) fifty (50%) percent of
the profit margin on lost sales of the Purchaser's
products affected by the KIH patent based on
sales totals and profit margins for such products during
the previous twelve (12) months.
"Encumbrance" shall mean any lien, pledge,
hypothecation, charge, mortgage, security
interest, encumbrance, equity, trust, equitable interest,
claim, preference, right of possession,
lease, tenancy, license, encroachment, covenant,
infringement, interference, Order, proxy,
option, right of first refusal, preemptive right,
community property interest, legend, defect,
impediment, exception, reservation, limitation,
impairment, imperfection of title, condition or
restriction of any nature (including any restriction on
the transfer of any asset, any restriction on
the receipt of any income derived from any asset, any
restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any
other attribute of ownership of any
asset).
"Environmental Laws" shall mean any and all federal,
state, regional and local laws,
regulations, ordinances and other requirements relating to
pollution or protection of the
environment and human health and safety in effect at the
Closing. The term includes without
limitation the Comprehensive Environmental Response,
Compensation and Liability Act
(CERCLA), 42 U.S.C. 9601 et seq.
"Hazardous Substances" shall mean any hazardous,
toxic or dangerous waste,
substance or material defined or regulated as such under
any Environmental Laws, and includes
without limitation petroleum products, asbestos-containing
materials, lead-based paint and radon
gas.
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"GAAP" shall mean generally accepted accounting
principles.
"Material Adverse Effect" Any other event or
condition of any character (as such
events or conditions relate particularly to the Company,
not to markets, economic conditions,
business or industries generally) that, either
individually or cumulatively, has a material and
adverse affect on the business, assets, liabilities,
financial condition, operations or prospects of
the Seller or the Purchaser.
"Matter" shall mean any claim, demand, dispute,
action, suit, examination, audit,
proceeding, investigation, inquiry or other similar matter
involving a third party or otherwise that
may give rise to Damages.
"Person" shall mean any individual, corporation,
association, general partnership,
limited partnership, venture, trust, association, firm,
organization, company, business, entity,
union, society, government (or political subdivision
thereof) or governmental agency, authority
or instrumentality.
"Property" shall mean the property and facilities of
the Business located at 950 Forge
Avenue, Norristown, Pennsylvania.
"Proprietary Asset" shall mean any patent, patent
application, trademark (whether
registered or unregistered), trademark application, trade
name, fictitious business name, service
mark (whether registered or unregistered), service mark
application, copyright (whether
registered or unregistered) or copyright application,
maskwork, maskwork application,
formulations, process, technique, trade secret, know how,
customer list, franchise, system,
computer software, invention, design, blueprint,
engineering drawings, proprietary product,
technology, proprietary right or other intellectual
property right or intangible asset relating
exclusively to the Business.
"Representatives" of a Person shall include:
(a) such Person's affiliates,
stockholders, directors, officers, employees,
agents, attorneys, accountants and representatives; and
(b) all stockholders, directors,
officers, employees, agents, attorneys,
accountants and representatives of each of such Person's
affiliates.
"Year 2000 Compliant" shall mean the ability to
operate, including but not limited to
the manufacture, transportation, or delivery of any
products or services, (i) in the year 2000 and
later with four digit date capability, or (ii) fault-free
in the processing of date in and date-
dependent data (including, but not limited to,
calculating, comparing and sequencing), or (iii)
with appropriate encoding so that the date progression
within, from, into and between centuries
(including, without limitation, the 20'h and 2l't
centuries) shall not adversely affect performance.
238250 vI I/PA
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3.
An extra section break has been inserted above this
paragraph. Do not delete this section break if
you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table
of Contents/Authorities headers and footers to appear on
any pages following the Table of
Contents/Authorities.
2382~O vI I/PA
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1.
Purchaw and Seger have caused this Agmment to be executed
mo of August 14, 1998.
MXAWRZMZM SPMAL I I , INC.
By:
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Na=: ::% -.- sptl R - Y7
Title: CC CD
AMM INcoammATED
By:
Nam:
Title:
Tmz WHITAKER CORPORATION
By-
Name:
Title:
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S"011LIM
P-00/lzmd GLE *ON
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610-8 ZDA
G3j11U1OadS 1N3W:RMb3W
L811909102
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gVel 90-ei-Vv
REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
PNC BANK, NATIONAL ASSOCIATION
WITH
MEASUREMENT SPECIALTIES, INC.
August 1, 1998
"REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
Revolving Credit, Term Loan and Security Agreement dated as of August 1,
1998 among MEASUREMENT SPECIALTIES, INC., a corporation organized under
the laws of the State of New Jersey ("Borrower"), and PNC BANK,
NATIONAL ASSOCIATION, ("Lender").
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, Borrower and Lender hereby agree as follows:
I.DEFINITIONS.
I.1.Accounting Terms. As used in this Agreement, the Note, or any
certificate, report or other document made or delivered pursuant to
this Agreement, accounting terms not defined in Section 1.2 or
elsewhere in this Agreement and accounting terms partly defined in
Section 1.2 to the extent not defined, shall have the respective
meanings given to them under GAAP; provided, however, whenever such
accounting terms are used for the purposes of determining compliance
with financial covenants in this Agreement, such accounting terms shall
be defined in accordance with GAAP as applied in preparation of the
audited financial statements of Borrower for the fiscal year ended
March 31, 1998.
I.2.General Terms. For purposes of this Agreement the following
terms shall have the following meanings:
"Accountants" shall have the meaning set forth in Section 9.7 hereof.
"Acquisition Agreement" shall mean the Asset Purchase Agreement
including all exhibits and schedules thereto dated as of August 14,
1998 between AMP Incorporated, a Pennsylvania corporation, ("Seller")
as seller and Borrower, as buyer.
"Advances" shall mean and include the Revolving Advances as well
as the Term Loan.
"Advance Rates" shall have the meaning set forth in Section 2.1(a)
hereof.
""Affiliate" of any Person shall mean (a) any Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with such Person, or (b)
any Person who is a director or officer (i) of such Person, (ii) of
any Subsidiary of such Person or (iii) of any Person described in
clause (a) above. For purposes of this definition, control of a
Person shall mean the power, direct or indirect, (x) to vote 5%
or more of the securities having ordinary voting power for the
election of directors of such Person, or (y) to direct or cause
the direction of the management and policies of such Person whether
by contract or otherwise.
"Authority" shall have the meaning set forth in Section 4.19(d).
"Base Rate" shall mean the base commercial lending rate of Lender as
publicly announced to be in effect from time to time, such rate to be
adjusted automatically, without notice, on the effective date of any
change in such rate. This rate of interest is determined from time to
time by Lender as a means of pricing some loans to its customers
and is neither tied to any external rate of interest or index nor
does it necessarily reflect the lowest rate of interest actually
charged by Lender to any particular class or category of customers
of Lender.
"Blocked Accounts" shall have the meaning set forth in Section 4.15(h).
"Borrower" shall have the meaning set forth in the preamble to
this Agreement and shall extend to all permitted successors and
assigns of such Persons.
"Borrower's Account" shall have the meaning set forth in Section 2.8.
"Borrowing Base Certificate" shall have the meaning set forth in
Section 2.1 hereto.
"Business Day" shall mean with respect to Eurodollar Rate Loans,
any day on which commercial banks are open for domestic and
international business, including dealings in Dollar deposits
in London, England and New York, New York and with respect to all
other matters, any day other than a day on which commercial banks
in New York are authorized or required by law to close.
"Canadian Eligible Receivable" shall mean any Eligible Receivable in
which the Customer is located in Canada.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C.
''9601 et seq.
"Change of Control" shall mean (a) the occurrence of any event
(whether in one or more transactions) which results in a transfer
of control of Borrower to a Person who is not an Original Owner
or (b) any merger or consolidation of or with Borrower or sale of
all or substantially all of the property or assets of Borrower.
For purposes of this definition, "control of Borrower" shall mean
the power, direct or indirect (x) to vote 50% or more of the
securities having ordinary voting power for the election of directors
of Borrower or (y) to direct or cause the direction of the management
and policies of Borrower by contract or otherwise.
""Charges" shall mean all taxes, charges, fees, imposts, levies or
other assessments, including, without limitation, all net income,
gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, inventory, capital stock, license,
withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation and property taxes, custom duties,
fees, assessments, liens, claims and charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or
additional amounts, imposed by any taxing or other authority,
domestic or foreign (including, without limitation, the Pension
Benefit Guaranty Corporation or any environmental agency or superfund),
upon the Collateral, Borrower or any of its Affiliates.
"Closing Date" shall mean August 14, 1998 or such other date as may be
agreed to by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and the regulations promulgated thereunder.
"Collateral" shall mean and include:
(a)all Receivables;
(b)all Equipment;
(c)all General Intangibles;
(d)all Inventory;
(e)all Leasehold Interests;
(f)all of Borrower's right, title and interest in and to (i)
its respective goods and other property including, but not limited
to, all merchandise returned or rejected by Customers, relating to
or securing any of the Receivables; (ii) all of Borrower's rights
as a consignor, a consignee, an unpaid vendor, mechanic, artisan,
or other lienor, including stoppage in transit, setoff, detinue,
replevin, reclamation and repurchase; (iii) all additional amounts
due to Borrower from any Customer relating to the Receivables;
(iv) other property, including warranty claims, relating to any goods
securing this Agreement; (v) all of Borrower's contract rights,
rights of payment which have been earned under a contract right,
instruments, documents, chattel paper, warehouse receipts, deposit
accounts, money, securities and investment property; (vi) if and when
obtained by Borrower, all real and personal property of third parties
in which Borrower has been granted a lien or security interest
as security for the payment or enforcement of Receivables; and (vii)
any other goods, personal property or real property now owned or
hereafter acquired in which Borrower has expressly granted a
security interest or may in the future grant a security interest
to Lender hereunder, or in any amendment or supplement hereto or
thereto, or under any other agreement between Lender and Borrower;
"(g)all of Borrower's ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers,
computers, computer software (owned by any Borrower or in
which it has an interest), computer programs, tapes, disks
and documents relating to (a), (b), (c), (d), (e), or (f)
of this Paragraph; and
(h)all proceeds and products of (a), (b), (c), (d), (e), (f),
and (g) in whatever form, including, but not limited to:
cash, deposit accounts (whether or not comprised solely of proceeds),
certificates of deposit, insurance proceeds (including hazard,
flood and credit insurance), negotiable instruments and other
instruments for the payment of money, chattel paper, security
agreements, documents, eminent domain proceeds, condemnation
proceeds and tort claim proceeds.
"Consents" shall mean all filings and all licenses, permits,
consents, approvals, authorizations, qualifications and orders
of governmental authorities and other third parties, domestic or
foreign, necessary to carry on Borrower's business, including,
without limitation, any Consents required under all applicable
federal, state or other applicable law.
"Contract Rate" shall mean, as applicable, the Revolving Interest
Rate or the Term Loan Rate.
"Controlled Group" shall mean all members of a controlled group
of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with Borrower,
are treated as a single employer under Section 414 of the Code.
"Customer" shall mean and include the account debtor with respect
to any Receivable and/or the prospective purchaser of goods,
services or both with respect to any contract or contract right,
and/or any party who enters into or proposes to enter into any
contract or other arrangement with Borrower, pursuant to which
Borrower is to deliver any personal property or perform any services.
"Default" shall mean an event which, with the giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning set forth in Section 3.1 hereof.
"Depository Accounts" shall have the meaning set forth in Section
4.15(h) hereof.
"Documents" shall have the meaning set forth in Section 8.1(c)
hereof.
"Dollar" and the sign "$" shall mean lawful money of the United
States of America.
"Domestic Rate Loan" shall mean any Advance that bears interest
based upon the Base Rate.
"Early Termination Date" shall have the meaning set forth in Section
13.1 hereof.
""Earnings Before Interest and Taxes" shall mean for any period
sum of (i) net income (or loss) of Borrower for such period
(excluding extraordinary gains, plus (ii) all interest expense
of such period, plus (iii) all charges against income of Borrower
for such period for federal, state and local taxes actually paid.
"EBITDA" shall mean for any period the sum of (i) Earnings Before
Interest and Taxes for such period plus (ii) depreciation expenses
for such period, plus (iii) amortization expenses for such period.
"Eligible Inventory" shall mean and include Inventory, with respect
to Borrower valued at the lower of cost or market value, determined
on a first-in-first-out basis, which shall be for finished goods as
certified by Borrower, which is not, in Lender's opinion, obsolete,
slow moving or unmerchantable and which Lender, in its sole discretion,
shall not deem ineligible Inventory, based on such considerations as
Lender may from time to time deem appropriate including, without
limitation, whether the Inventory is subject to a perfected, first
priority security interest in favor of Lender and whether the
Inventory conforms to all standards imposed by any governmental
agency, division or department thereof which has regulatory authority
over such goods or the use or sale thereof.
"Eligible Receivables" shall mean and include with respect to Borrower,
each Receivable of Borrower arising in the ordinary course of
Borrower's business and which Lender, in its sole credit judgment,
shall deem to be an Eligible Receivable, based on such considerations
as Lender may from time to time deem appropriate. A Receivable shall
not be deemed eligible unless such Receivable is subject to Lender's
first priority perfected security interest and no other Lien (other
than Permitted Encumbrances), and is evidenced by an invoice or other
documentary evidence satisfactory to Lender. In addition, no
Receivable shall be an Eligible Receivable if:
(a)it arises out of a sale made by Borrower to an Affiliate of
Borrower or to a Person controlled by an Affiliate of Borrower;
(b)(i) it is due or unpaid more than ninety (90) days after the
original due date for accounts with terms less than ninety (90)
days or (ii) is due or unpaid more than one hundred twenty (120)
days after the original due date for accounts with terms of ninety
(90) days or more;
(c)fifty percent (50%) or more of the aggregate amount of all amounts
owed by a particular Customer are overdue more than ninety (90) days
from the invoice date, unless ninety (90) days repayment terms are
granted, in which case not more than fifty percent (50%) o the
aggregate amount of all amounts owed by a particular Customer
are overdue more than one hundred twenty (120) days from the invoice
date, or Borrower has not received any notice nor has it any knowledge
of any facts which adversely affect the credit of such Customer.
Such percentage may, in Lender's sole discretion, be increased or
decreased from time to time;
(d)any covenant, representation or warranty contained in this Agreement
with respect to such Receivable has been breached;
"(e)the Customer shall (i) apply for, suffer, or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
property or call a meeting of its creditors, (ii) admit in writing
its inability, or be generally unable, to pay its debts as they become
due or cease operations of its present business, (iii) make a general
assignment for the benefit of creditors, (iv) commence a voluntary
case under any state or federal bankruptcy laws (as now or hereafter
in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a
petition seeking to take advantage of any other law providing for the
relief of debtors, (vii) acquiesce to, or fail to have dismissed,
any petition which is filed against it in any involuntary case under
such bankruptcy laws, or (viii) take any action for the purpose of
effecting any of the foregoing;
(f)the sale is to a Customer outside the continental United States
of America, unless the sale is on letter of credit, guaranty or
acceptance terms, in each case acceptable to Lender in its sole
discretion;
(g)the sale to the Customer is on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other
repurchase or return basis or is evidenced by chattel paper;
(h)Lender believes, in its sole judgment, that collection of such
Receivable is insecure or that such Receivable may not be paid by
reason of the Customer's financial inability to pay;
(i)the Customer is the United States of America, any state or any
department, agency or instrumentality of any of them, unless the
Borrower assigns its right to payment of such Receivable to Lender
pursuant to the Assignment of Claims Act of 1940, as amended (31
U.S.C. Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et
seq.) or has otherwise complied with other applicable statutes or
ordinances;
(j)the goods giving rise to such Receivable have not been shipped
and delivered to and accepted by the Customer or the services
giving rise to such Receivable have not been performed by the
Borrower and accepted by the Customer or the Receivable otherwise
does not represent a final sale;
(k)the Receivables of the Customer exceed a credit limit determined
by Lender, in its sole discretion, to the extent such Receivable
exceeds such limit;
(l)the Receivable is subject to any offset, deduction, defense,
dispute, or counterclaim, the Customer is also a creditor or supplier
of Borrower or the Receivable is contingent in any respect or for any
reason;
"(m)the Borrower has made any agreement with any Customer for any
deduction therefrom, except for discounts or allowances made in
the ordinary course of business for prompt payment, all of which
discounts or allowances are reflected in the calculation of the
face value of each respective invoice related thereto;
(n)shipment of the merchandise or the rendition of services has not
been completed;
(o)any return, rejection or repossession of the merchandise has
occurred;
(p)such Receivable is not payable to Borrower; or
(q)such Receivable is not otherwise satisfactory to Lender as
determined in good faith by Lender in the exercise of its discretion
in a reasonable manner.
"Environmental Complaint" shall have the meaning set forth in Section
4.19(d) hereof.
"Environmental Laws" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, ordinances and codes relating to the
protection of the environment and/or governing the use, storage,
treatment, generation, transportation, processing, handling, production
or disposal of Hazardous Substances and the rules, regulations,
policies, guidelines, interpretations, decisions, orders and directives
of federal, state and local governmental agencies and authorities with
respect thereto.
"Equipment" shall mean and include all of Borrower's goods (other t
han Inventory) whether now owned or hereafter acquired and wherever
located including, without limitation, all equipment, machinery,
apparatus, motor vehicles, fittings, furniture, furnishings, fixtures,
parts, accessories and all replacements and substitutions therefor
or accessions thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time and the rules and regulations promulgated
thereunder.
"Eurodollar Rate" shall mean for any Eurodollar Rate Loan for the then
current Interest Period relating thereto the interest rate per annum
determined by Lender by dividing (the resulting quotient rounded
upwards, if necessary, to the nearest 1/100th of 1% per annum)
(i) the rate of interest determined by Lender in accordance with
its usual procedures (which determination shall be conclusive
absent manifest error) to be the eurodollar rate two (2) Business
Days prior to the first day of such Interest Period for an amount
comparable to such Eurodollar Rate Loan and having a borrowing date
and a maturity comparable to such Interest Period by (ii) a number
equal to 1.00 minus the Reserve Percentage.
"Eurodollar Rate Loan" shall mean an Advance at any time that bears
interest based on the Eurodollar Rate.
""Event of Default" shall mean the occurrence of any of the events
set forth in Article X hereof.
"Excess Cash Flow" shall be computed as of the close of each fiscal
year by taking 1.2 times the difference between EBITDA and Fixed
Charges. All determinations of Excess Cash Flow shall be based on
the immediately preceding fiscal year and shall be made following the
delivery by the Borrower to the Lender of the Borrower's audited
financial statements for such preceding year.
"Expiration Date" shall mean with respect to the Revolving Advances,
September 30, 2000, unless the Lender, at its option, extends the
Expiration Date for an additional one (1) year.
"Federal Funds Rate" shall mean, for any day, the weighted average
of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers,
as published for such day (or if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank
of New York, or if such rate is not so published for any day which
is a Business Day, the average of quotations for such day on such
transactions received by Lender from three Federal funds brokers of
recognized standing selected by Lender.
"Fixed Charge Coverage Ratio" shall mean and include, with respect
to any fiscal period, the ratio of (a) EBITDA plus capitalized
lease payments during such period, minus capitalized expenditures
made during such period to (b) all Senior Debt Payments plus
dividends during such period.
"Fixed Charges" shall mean for any period of determination the sum
of interest expense, income taxes, scheduled principal installments
of Indebtedness (as adjusted for prepayments), capital expenditures.
"Formula Amount" shall have the meaning set forth in Section 2.1(a).
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"General Intangibles" shall mean and include all of Borrower's
general intangibles, whether now owned or hereafter acquired
including, without limitation, all choses in action, causes of
action, corporate or other business records, inventions, designs,
patents, patent applications, equipment formulations,
manufacturing procedures, quality control procedures, trademarks,
tradenames, service marks, trade secrets, goodwill, copyrights,
design rights, registrations, licenses, franchises, customer lists,
tax refunds, tax refund claims, computer programs, all claims under
guaranties, security interests or other security held by or granted
to Borrower to secure payment of any of the Receivables by a Customer
all rights of indemnification and all other intangible property
of every kind and nature (other than Receivables).
""Governmental Body" shall mean any nation or government, any state
or other political subdivision thereof or any entity exercising the
legislative, judicial, regulatory or administrative functions of or
pertaining to a government.
"Hazardous Discharge" shall have the meaning set forth in Section
4.19(d) hereof.
"Hazardous Substance" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls, petroleum and petroleum
products, methane, hazardous materials, Hazardous Wastes, hazardous
or Toxic Substances or related materials as defined in CERCLA, the
Hazardous Materials Transportation Act, as amended (49 U.S.C.
Sections 1801, et seq.), or any other applicable Environmental
Law of the State of New Jersey and Commonwealth of Pennsylvania
and in the regulations adopted pursuant thereto.
"Hazardous Wastes" shall mean all waste materials subject to
regulation under CERCLA, RCRA or applicable state law, and any
other applicable Federal and state laws now in force or hereafter
enacted relating to hazardous waste disposal.
"Indebtedness" of a Person at a particular date shall mean all
obligations of such Person which in accordance with GAAP would
be classified upon a balance sheet as liabilities (except capital
stock and surplus earned or otherwise) and in any event, without
limitation by reason of enumeration, shall include all indebtedness,
debt and other similar monetary obligations of such Person whether
direct or guaranteed, and all premiums, if any, due at the required
prepayment dates of such indebtedness, and all indebtedness
secured by a Lien on assets owned by such Person, whether or not
such indebtedness actually shall have been created, assumed or
incurred by such Person. Any indebtedness of such Person resulting
from the acquisition by such Person of any assets subject to any
Lien shall be deemed, for the purposes hereof, to be the equivalent
of the creation, assumption and incurring of the indebtedness secured
thereby, whether or not actually so created, assumed or incurred.
"Interest Period" shall mean the period provided for any Eurodollar
Rate Loan.
"Inventory" shall mean and include all of Borrower's now owned or
hereafter acquired goods, merchandise and other personal property,
wherever located, to be furnished under any contract of service or
held for sale or lease, all raw materials, work in process, finished
goods and materials and supplies of any kind, nature or description
which are or might be used or consumed in Borrower's business or
used in selling or furnishing such goods, merchandise and other
personal property, and all documents of title or other documents
representing them.
"Inventory Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(ii) hereof.
"Leasehold Interests" shall mean all of each Borrower's right,
title and interest in and to the premises located on Schedule
1.2(a).
""Lender" and "Lenders" shall have the meaning ascribed to such
term in the preamble to this Agreement and shall include each
Person which becomes a transferee, successor or assign of any Lender.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise),
Charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted
in respect of any asset of any kind or nature whatsoever including,
without limitation, any conditional sale or other title retention
agreement, any lease having substantially the same economic effect
as any of the foregoing, and the filing of, or agreement to give,
any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction.
"Material Adverse Effect" shall mean a material adverse effect on
(a) the condition, operations, assets, business or prospects of
the applicable Person or Persons, (b) Borrower's ability to pay
the Obligations in accordance with the terms thereof, (c) the
value of the Collateral, or Lender's Liens on the Collateral or
the priority of any such Lien or (d) the practical realization
of the benefits of Lender's rights and remedies under this Agreement
and the Other Documents.
"Maximum Leverage Ratio" shall mean and include, with respect to
any fiscal period, the ratio of (a) all Senior Debt Payments to (b)
EBITDA.
"Maximum Loan Amount" shall mean $4,000,000 less repayments of the
Term Loan.
"Maximum Revolving Advance Amount" shall mean $5,000,000, including a
$500,000 sublimit for the issuance of documentary letters of credit
and a $300,000 sublimit for over advances.
"Monthly Advances" shall have the meaning set forth in Section 3.1
hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined
in Sections 3(37) and 4001(a)(3) of ERISA.
"Note" or "Notes" shall mean collectively, the Term Note and the
Revolving Credit Note.
""Obligations" shall mean and include any and all of Borrower's
Indebtedness and/or liabilities to Lender or any corporation that
directly or indirectly controls or is controlled by or is under common
control with Lender of every kind, nature and description, direct or
indirect, secured or unsecured, joint, several, joint and several,
absolute or contingent, due or to become due, now existing or
hereafter arising, contractual or tortious, liquidated or unliquidated,
regardless of how such indebtedness or liabilities arise or by
what agreement or instrument they may be evidenced or whether
evidenced by any agreement or instrument, including, but not limited
to, any and all of Borrower's Indebtedness and/or liabilities under
this Agreement, the Other Documents or under any other agreement
between Lender and Borrower and all obligations of Borrower to
Lender to perform acts or refrain from taking any action.
"Other Documents" shall mean the Note, Stock Pledge Agreement,
Assignment of Patents, Assignment of Trademarks, Common Stock
Purchase Warrant, and any and all other agreements, instruments
and documents, including, without limitation, guaranties, pledges,
powers of attorney, consents, and all other writings heretofore, now
or hereafter executed by Borrower and/or delivered to Lender in
respect of the transactions contemplated by this Agreement.
"Parent" of any Person shall mean a corporation or other entity
owning, directly or indirectly at least 50% of the shares of stock
or other ownership interests having ordinary voting power to elect
a majority of the directors of the Person, or other Persons
performing similar functions for any such Person.
"Participant" shall mean each Person who shall be granted the right
by Lender to participate in any of the Advances and who shall have
entered into a participation agreement in form and substance
satisfactory to Lender.
"Payment Office" shall mean initially 1 Garret Mountain Plaza,
West Paterson, New Jersey 07424; thereafter, such other office
of Lender, if any, which it may designate by notice to Borrower
to be the Payment Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" shall mean (a) Liens in favor of Lender;
(b) Liens for taxes, assessments or other governmental charges not
delinquent or being contested in good faith and by appropriate
proceedings and with respect to which proper reserves have been
taken by Borrower; provided, that, the Lien shall have no effect
on the priority of the Liens in favor of Lender or the value of the
assets in which Lender has such a Lien and a stay of enforcement
of any such Lien shall be in effect; (c) Liens disclosed in the
financial statements referred to in Section 5.5, the existence of
which Lender has consented to in writing; (d) deposits or pledges
to secure obligations under worker's compensation, social security
or similar laws, or under unemployment insurance; (e) deposits or
pledges to secure bids, tenders, contracts (other than contracts for
the payment of money), leases, statutory obligations, surety and appeal
bonds and other obligations of like nature arising in the ordinary
course of Borrower's business; (f) judgment Liens that have been
stayed or bonded and mechanics', workers', materialmen's or other
like Liens arising in the ordinary course of Borrower's business
with respect to obligations which are not due or which are being
contested in good faith by Borrower; (g) Liens placed upon fixed
assets hereafter acquired to secure a portion of the purchase price
thereof, provided that (x) any such lien shall not encumber any
other property of the Borrower and (y) the aggregate amount of
Indebtedness secured by such Liens incurred as a result of such
purchases during any fiscal year shall not exceed the amount
provided for in Section 7.6; and (h) Liens disclosed on Schedule
1.2(b).
""Person" shall mean any individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust,
unincorporated organization, association, limited liability
company, institution, public benefit corporation, joint venture,
entity or government (whether Federal, state, county, city, municipal
or otherwise, including any instrumentality, division, agency,
body or department thereof).
"Plan" shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA, maintained for employees of Borrower or any
member of the Controlled Group or any such Plan to which any Borrower
or any member of the Controlled Group is required to contribute on
behalf of any of its employees.
"Pro Forma Balance Sheet" shall have the meaning set forth in Section
5.5(a) hereof.
"Pro Forma Financial Statements" shall have the meaning set forth in
Section 5.5(b) hereof.
"Projections" shall have the meaning set forth in Section 5.5(b)
hereof.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42 U.S.C.
'' 6901 et seq., as same may be amended from time to time.
"Real Property" shall mean all of Borrower's right, title and interest
in and to the owned and leased premises identified on Schedule 4.19
hereto.
"Receivables" shall mean and include all of Borrower's accounts,
contract rights, instruments (including those evidencing indebtedness
owed to Borrower by their Affiliates), documents, chattel paper,
general intangibles relating to accounts, drafts and acceptances,
and all other forms of obligations owing to Borrower arising out
of or in connection with the sale or lease of Inventory or the
rendition of services, all guarantees and other security therefor,
whether secured or unsecured, now existing or hereafter created,
and whether or not specifically sold or assigned to Lender hereunder.
"Receivables Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(i) hereof.
"Release" shall have the meaning set forth in Section 5.7(c)(i) hereof.
"Reportable Event" shall mean a reportable event described in Section
4043(b) of ERISA or the regulations promulgated thereunder.
"Reserve Percentage" shall mean the maximum effective percentage in
effect on any 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
euroccurency funding.
""Revolving Advances" shall mean Advances made other than the Term Loan.
"Revolving Credit Note" shall mean the promissory note referred to in
Section 2.1(a) hereof.
"Revolving Interest Rate" shall mean a fluctuating interest rate per
annum based on the last twelve (12) months of EBITDA, (as adjusted
quarterly based upon Borrowers financial statements provide to Lender),
as follows:
Senior Debt Payments/EBITDA Eurodollar RateBase Rate +
Less than 2.0X 2.00% .125%
Less than 2.5X but greater than or equal to 2.0X 2.25% .375%
Less than 3.0X but greater than or equal to 2.5X 2.50% .625%
Greater than or equal to 3.0X 2.75%1.00%
"Seller" shall mean AMP Incorporated, a Pennsylvania corporation.
"Senior Debt Payments" shall mean and include all cash actually
expended by Borrower to make (a) interest payments on any Advances
hereunder, plus, (b) scheduled principal payments on the Term Loan,
plus (c) payments for all fees, commissions and charges set forth
herein and with respect to any Advances, plus (d) capitalized lease
payments, plus (e) payments with respect to any other Indebtedness
for borrowed money.
"Settlement Date" shall mean the Closing Date and thereafter Wednesday
of each week unless such day is not a Business Day in which case it
shall be the next succeeding Business Day.
"Stock Pledge" shall mean the assignment executed and delivered by
Borrower to Lender of the Subsidiary Stock.
"Subsidiary" shall mean a corporation or other entity of whose shares
of stock or other ownership interests having ordinary voting power
(other than stock or other ownership interests having such power only
by reason of the happening of a contingency) to elect a majority of the
directors of such corporation, or other Persons performing similar
functions for such entity, are owned, directly or indirectly, by such
Person.
"Subsidiary Stock" shall mean sixty-five percent (65%) of the issued
and outstanding shares of stock owned by Measurement LTD, a Hong Kong
corporation.
"Term" shall have the meaning set forth in Section 13.1 hereof.
"Term Loan" shall mean the Advances made pursuant to Section 2.4
hereof.
""Term Loan Rate" shall mean an interest rate per annum equal to the
sum of the Eurodollar Rate plus three percent (3%) with respect to
Eurodollar Rate Loans.
"Term Note" shall mean the promissory note described in Section 2.4
hereof.
"Termination Event" shall mean (i) a Reportable Event with respect to
any Plan or Multiemployer Plan; (ii) the withdrawal of Borrower or
any member of the Controlled Group from a Plan or Multiemployer Plan
during a plan year in which such entity was a "substantial employer"
as defined in Section 4001(a)(2) of ERISA; (iii) the providing of
notice of intent to terminate a Plan in a distress termination
described in Section 4041(c) of ERISA; (iv) the institution by the
PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v)
any event or condition (a) which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer, any Plan or Multiemployer Plan, or (b)
that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA; or (vi) the partial or complete withdrawal
within the meaning of Sections 4203 and 4205 of ERISA, of Borrower
or any member of the Controlled Group from a Multiemployer Plan.
"Toxic Substance" shall mean and include any material present on the
Real Property or the Leasehold Interests which has been shown to have
significant adverse effect on human health or which is subject to
regulation under the Toxic Substances Control Act (TSCA), 15 U.S.C.
'' 2601 et seq., applicable state law, or any other applicable Federal
or state laws now in force or hereafter enacted relating to toxic
substances. "Toxic Substance" includes but is not limited to asbestos,
polychlorinated biphenyls (PCBs) and lead-based paints.
"Transactions" shall have the meaning set forth in Section 5.5 hereof.
"Transferee" shall have the meaning set forth in Section 14.3(b) hereof.
"Undrawn Availability" at a particular date shall mean an amount equal
to
(a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving
Advance Amount, minus (b) the sum of (i) the outstanding amount of
Advances (other than the Term Loan) plus (ii) fees and expenses for
which Borrower is liable but which have not been paid or charged to
Borrower's Account.
"Week" shall mean the time period commencing with the opening of
business
on a Wednesday and ending on the end of business the following Tuesday.
I.3.Uniform Commercial Code Terms. All terms used herein and defined in
the Uniform Commercial Code as adopted in the State of New Jersey
shall have the meaning given therein unless otherwise defined herein.
"I.4.Certain Matters of Construction. The terms "herein", "hereof"
and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular section, paragraph
or subdivision. Any pronoun used shall be deemed to cover all genders.
Wherever appropriate in the context, terms used herein in the
singular also include the plural and vice versa. All references
to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Unless otherwise
provided, all references to any instruments or agreements to which
Lender is a party, including, without limitation, references to any
of the Other Documents, shall include any and all modifications or
amendments thereto and any and all extensions or renewals thereof.
II.ADVANCES, PAYMENTS.
II.1.(a)Revolving Advances. Subject to the terms and conditions set
forth in this Agreement, Lender, will make Revolving Advances to
Borrower in aggregate amounts outstanding at any time equal to
the lesser of (x) the Maximum Revolving Advance Amount or (y) an
amount equal to the sum of:
(i)up to 90%, subject to the provisions of Section 2.1(c) hereof
("Receivables Advance Rate"), of Eligible Receivables, plus
(ii) up to 50%, subject to the provisions of Section 2.1(c)
hereof ("Canadian Receivables Advance Rate"), of Canadian Eligible
Receivables;
(iii)up to 60%, subject to the provisions of Section 2.1(c) hereof
in an amount outstanding not to exceed $2,000,000 ("Inventory Advance
Rate"), of the value of the Eligible Inventory (the Receivables
Advance Rate, the Canadian Receivables Advance Rate and the Inventory
Advance Rate shall be referred to collectively, as the "Advance
Rates") minus
(iv)less reserves determined by Lender for advertising allowances,
warranty claims and other contingencies plus the full face amount
of any and all outstanding letters of credit issued by the Lender
for the account of the Borrower and such other reserves as Lender
may reasonably deem proper and necessary from time to time.
The amount derived from the sum of (x) Sections 2.1(a)(y)(i), (ii)
and (iii) minus (y) Section 2.1 (a)(y) (iv) at any time and from
time to time shall be referred to as the "Formula Amount" or the
"Borrowing Base". The Revolving Advances shall be evidenced by the
secured promissory note ("Revolving Credit Note") substantially in
the form attached hereto as Exhibit 2.1(a).
"(b)"Borrowing Base Certificate". On the date hereof, and thereafter
within twenty (20) days after the end of each month, Borrower shall
furnish to Lender a certificate (a "Borrowing Base Certificate")
substantially in the form attached hereto as Exhibit 2.1(b),
executed by the Chief Financial Officer of Borrower setting forth
the Borrowing Base and the other information required therein as of
the Borrower's close of business on the last day of the immediately
preceding month together with such other information with respect to
Eligible Receivables and Eligible Inventory of the Borrower as Lender
may reasonably request including, but not limited to, an accounts
receivable aging and an accounts payable aging.
(c)Discretionary Rights. The Advance Rates may be increased or
decreased by Lender at any time and from time to time in the exercise
of its reasonable discretion upon the finding that such reduction is
reasonably necessary to protect the Lender's position. Borrower
consents to any such increases or decreases and acknowledges that
decreasing the Advance Rates or increasing the reserves may limit
or restrict Advances requested by Borrower. Lender shall give
Borrower fifteen (15) days prior written notice of its intention
to decrease the Advance Rates.
2.2.Procedure for Revolving Advances Borrowing.
(a)Borrower may notify Lender prior to 11:00 a.m. on a Business
Day of Borrower's request to incur, on that day, a Revolving Advance
hereunder. Should any amount required to be paid as interest
hereunder, or as fees or other charges under this Agreement or any
other agreement with Lender, or with respect to any other Obligation,
become due, same shall be deemed a request for a Revolving Advance
as of the date such payment is due, in the amount required to pay in
full such interest, fee, charge or Obligation under this Agreement
or any other agreement with Lender, and such request shall be
irrevocable.
(b)Notwithstanding the provisions of (a) above, in the event Borrower
desires to obtain a Eurodollar Rate Loan, Borrower shall give Lender
at least three (3) Business Days' prior written notice, specifying
(i) the date of the proposed borrowing (which shall be a Business Day),
(ii) the type of borrowing and the amount on the date of such Advance
to be borrowed, which amount shall be in minimum amounts of $300,000
and additional increments of $50,000, and (iii) the duration of the
first Interest Period therefor. Interest Periods for Eurodollar Rate
Loans shall be for one, two, or three months; provided, if an
Interest Period would end on a day that is not a Business Day, it shall
end on the next succeeding Business Day unless such day falls in the
next succeeding calendar month in which case the Interest Period shall
end on the next preceding Business Day. No Eurodollar Rate Loan shall
be made available to Borrower during the continuance of a Default or
an Event of Default.
(c)Each Interest Period of a Eurodollar Rate Loan shall commence on the
date such Eurodollar Rate Loan is made and shall end on such date as
Borrower may elect as set forth in (b)(iii) above provided that the
exact length of each Interest Period shall be determined in accordance
with the practice of the interbank market for offshore Dollar deposits
and no Interest Period shall end after the last day of the Expiration
Date or the Term as the case may be.
"Borrower shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by its notice of borrowing given to Lender
pursuant to Section 2.2(b) or by its notice of conversion given to
Lender pursuant to Section 2.2(d), as the case may be. Borrower
shall elect the duration of each succeeding Interest Period by giving
irrevocable written notice to Lender of such duration not less than
three
(3) Business Days prior to the last day of the then current Interest
Period applicable to such Eurodollar Rate Loan. If Lender does not
receive timely notice of the Interest Period elected by Borrower,
Borrower shall be deemed to have elected to convert to a Rate Loan
subject to Section 2.2(d) hereinbelow.
(d)Provided that no Event of Default shall have occurred and be
continuing, Borrower may, on the last Business Day of the then
current Interest Period applicable to any outstanding Eurodollar
Rate Loan, or on any Business Day with respect to Domestic Rate Loans,
convert any such loan into a loan of another type in the same aggregate
principal amount provided that any conversion of a Eurodollar Rate
Loan shall be made only on the last Business Day of the then current
Interest Period applicable to such Eurodollar Rate Loan. If
Borrower desires to convert a loan, Borrower shall give Lender not
less than three (3) Business Days' prior written notice to convert
from a Domestic Rate Loan to a Eurodollar Rate Loan or one (1)
Business Day's prior written notice to convert from a Eurodollar
Rate Loan to a Domestic Rate Loan, specifying the date of such
conversion, the loans to be converted and if the conversion is from
a Domestic Rate Loan to any other type of loan, the duration of the
first Interest Period therefor. After giving effect to each such
conversion, there shall not be outstanding more than six (6)
Eurodollar Rate Loans or Domestic Rate Loans, in the aggregate.
(e)At its option and upon three (3) Business Days' prior written
notice, Borrower may prepay the Eurodollar Rate Loans in whole at
any time or in part from time to time, without premium or penalty,
but with accrued interest on the principal being prepaid to the date
of such repayment. Borrower shall specify the date of prepayment of
Advances which are Eurodollar Rate Loans and the amount of such
prepayment. In the event that any prepayment of a Eurodollar Rate
Loan is required or permitted on a date other than the last Business
Day of the then current Interest Period with respect thereto,
Borrower shall indemnify Lender therefor in accordance with Section
2.2(f) hereof.
(f)Borrower shall indemnify Lender and hold Lender harmless from and
against any and all losses or expenses that Lender may sustain or
incur as a consequence of any prepayment, conversion of or any default
by Borrower in the payment of the principal of or interest on any
Eurodollar Rate Loan or failure by Borrower to complete a borrowing
of, a prepayment of or conversion of or to a Eurodollar Rate Loan
after notice thereof has been given, including, but not limited to,
any interest payable by Lender to lenders of funds obtained by it
in order to make or maintain its Eurodollar Rate Loans hereunder.
A certificate as to any additional amounts payable pursuant to
the foregoing sentence submitted by Lender to Borrower shall be
conclusive absent manifest error.
"(g)Notwithstanding any other provision hereof, if any applicable
law, treaty, regulation or directive, or any change therein or
in the interpretation or application thereof, shall make it unlawful
for Lender (for purposes of this subsection (g), the term "Lender"
shall include any Lender and the office or branch where any Lender
or any corporation or bank controlling such Lender makes or maintains
any Eurodollar Rate Loans) to make or maintain its Eurodollar Rate
Loans, the obligation of Lender to make Eurodollar Rate Loans
hereunder, shall forthwith be canceled and Borrower shall, if any
affected Eurodollar Rate Loans are then outstanding, promptly upon
request from Lender, either pay all such affected Eurodollar Rate
Loans or convert such affected Eurodollar Rate Loans into loans
of another type. If any such payment or conversion of any Eurodollar
Rate Loan is made on a day that is not the last day of the Interest
Period applicable to such Eurodollar Rate Loan, Borrower shall pay
Lender, upon Lender's request, such amount or amounts as may be
necessary to compensate Lender for any loss or expense sustained
or incurred by Lender in respect of such Eurodollar Rate Loan as
a result of such payment or conversion, including (but not limited to)
any interest or other amounts payable by Lender to lenders of funds
obtained by Lender in order to make or maintain such Eurodollar Rate
Loan. A certificate as to any additional amounts payable pursuant
to the foregoing sentence submitted by Lender to Borrower shall be
conclusive absent manifest error.
2.3.Disbursement of Advance Proceeds. All Advances shall be disbursed
from whichever office or other place Lender may designate from time
to time and, together with any and all other Obligations of Borrower
to Lender, shall be charged to Borrower's Account on Lender's books.
Prior to the Expiration Date, Borrower may use the Revolving Advances
by borrowing, prepaying and reborrowing, all in accordance with the
terms and conditions hereof. The proceeds of each Revolving Advance
requested by Borrower or deemed to have been requested by Borrower
under Section 2.2(a) hereof shall, with respect to requested Revolving
Advances to the extent Lender makes such Revolving Advances, be made
available to the Borrower on the day so requested by way of credit
to such Borrower's operating account at the Lender, in immediately
available federal funds or other immediately available funds or, with
respect to Revolving Advances deemed to have been requested by
Borrower,
be disbursed to Lender to be applied to the outstanding Obligations
giving rise to such deemed request.
2.4.Term Loan. Subject to the terms and conditions of this Agreement,
Lender, will make a Term Loan to Borrower in the sum of $4,000,000.
The Term Loan shall be advanced on the Closing Date and shall be, with
respect to principal, payable as follows, subject to acceleration
upon the occurrence of an Event of Default under this Agreement or
termination of this Agreement:
(a)The principal portion of the Term Loan plus interest shall be
payable as follows on the first Business Day of each calendar
quarter, commencing on November 1, 1998, and each February 1,
May 1, August 1 and November 1 thereafter, provided, however
that the last such installment shall be in the amount necessary
to repay in full the unpaid principal amount of the Term Loan;
as follows:
Year after Closing DateQuarterly Amortization Amount
Year 1 $100,000
Year 2 $175,000
Year 3 $225,000
Year 4 $250,000
Year 5 $250,000
"(b)In addition to the Term Loan payment set forth in Section 2.4
(a), Borrower shall pay, as additional principal payments on the
Term Loan, fifty (50%) percent of Excess Cash Flow in accordance
with Section 2.11(b). The Term Loan shall be evidenced by a secured
promissory note, ("Term Note") in substantially the form attached
hereto as Exhibit 2.4.
2.5.Maximum Advances. The aggregate balance of Revolving Advances
outstanding at any time shall not exceed the lesser of (a) Maximum
Revolving Advance Loan Amount or (b) the Formula Amount.
2.6.Repayment of Advances.
(a)The Advances shall be due and payable in full on the last day of
the Expiration Date subject to earlier prepayment as herein provided.
The Term Loan shall be due and payable as provided in Section 2.4
hereof
and in the Term Note.
(b)All payments of principal, interest and other amounts payable
hereunder, or under any of the related agreements shall be made to
Lender at the Payment Office not later than 2:00 P.M. (New York Time)
on the due date therefor in lawful money of the United States of
America in federal funds or other funds immediately available to Lender.
Lender shall have the right to effectuate payment on any and all
Obligations due and owing hereunder by charging Borrower's Account
or by making Advances as provided in Section 2.2 hereof.
(c)Borrower shall pay principal, interest, and all other amounts
payable hereunder, or under any related agreement, without any
deduction whatsoever, including, but not limited to, any deduction
for any setoff or counterclaim.
2.7.Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances
permitted hereunder shall be immediately due and payable without the
necessity of any demand, at the Payment Office, whether or not a
Default or Event of Default has occurred; provided, however, over-
advances
shall be permitted for ninety (90) consecutive days during each
calendar fiscal year period chosen by the Borrower. During the period
of over-advances, the aggregate balance of Advances outstanding shall
be covered at a minimum ratio of 1.00 to 1.00 with an amount equal to
the Borrowing Base.
"2.8.Statement of Account. Lender shall maintain, in accordance with
its customary procedures, a loan account ("Borrower's Account") in
the name of Borrower in which shall be recorded the date and amount
each Advance made by Lender and the date and amount of each payment
in respect thereof; provided, however, the failure by Lender to record
the date and amount of any Advance shall not adversely affect Lender.
Each month, Lender shall send to Borrower a statement showing the
accounting for the Advances made, payments made or credited in respect
thereof, and other transactions between Lender and Borrower, during
such month. The monthly statements shall be deemed correct and binding
upon Borrower in the absence of manifest error and shall constitute an
account stated between Lender and Borrower unless Lender receives a
written statement of Borrower's specific exceptions thereto within
thirty (30) days after such statement is received by Borrower. The
records of Lender with respect to the loan account shall be conclusive
evidence absent manifest error of the amounts of Advances and other
charges thereto and of payments applicable thereto.
2.9.Additional Payments. Any sums expended by Lender due to
Borrower's failure to perform or comply with its obligations
under this Agreement or any Other Document including, without
limitation, Borrower's obligations under Sections 4.2, 4.4, 4.12,
4.13, 4.14 and 6.1 hereof, may be charged to Borrower's Account
as a Revolving Advance and added to the Obligations.
2.10.Mandatory Prepayments.
(a)When Borrower sells or otherwise disposes of any Collateral other
than Inventory or collection of Accounts Receivable in the ordinary
course of business, Borrower shall repay the Advances in an amount
equal to the net proceeds of such sale (i.e., gross proceeds less
the reasonable costs of such sales or other dispositions), such
repayments to be made promptly but in no event more than one (1)
Business Day following receipt of such net proceeds, and until the
date of payment, such proceeds shall be held in trust for Lender.
The foregoing shall not be deemed to be implied consent to any such
sale otherwise prohibited by the terms and conditions hereof.
Such repayments shall be applied first, ratably to the outstanding
principal installments on the Term Loan in the order of the maturities
thereof and, second, to the remaining Advances in such order as
Lender may determine, subject to Borrower's ability to reborrow
Revolving Advances in accordance with the terms hereof.
(b)Borrower shall prepay the outstanding amount of the Term Loan in
an amount equal to 50% of Excess Cash Flow for each fiscal year
commencing on or after April 1, 1998, payable upon delivery of the
financial statements to Lender referred to in and required by Section
9.7 for such fiscal year but in any event not later than ninety (90)
days after the end of each such fiscal year, which amount shall be
applied first, ratably to the outstanding principal installments
in the inverse order of the maturities thereof and, second, to the
remaining Advances in such order as Lender may determine subject to
Borrower's ability to reborrow Revolving Advances in accordance
with the terms hereof. In the event that the financial statement
is not so delivered, then a calculation based upon estimated amounts
shall be made by Lender upon which calculation Borrower shall make
the prepayment required by this Section 2.10(b), subject to adjustment
when the financial statement is delivered to Lender as required hereby.
The calculation made by Lender shall not be deemed a waiver of any
rights Lender may have as a result of the failure by Borrower to
deliver such financial statement.
2.11 Optional Prepayment. Borrower shall have the right, upon
fifteen (15) days prior written notice to the Lender, to prepay the
Term Loan, in compliance with the terms of this Agreement, in whole
or in part, plus accrued interest to the date of prepayment provided,
however, in the event Borrower prepays the Term Loan pursuant to
this Section 2.11 in whole or in part prior to the second anniversary
of the Term Loan, the Borrower shall pay to Lender a prepayment
penalty equal to one-half of one percent (1/2%) of the balance of
the Term Loan.
"2.12 Use of Proceeds. Borrower shall apply the proceeds of
Advances to (i) partially fund the acquisition by Borrower of
certain assets of Seller, (ii) pay fees and expenses relating
to this transaction in an amount not to exceed $500,000 and (iii)
to provide for its working capital needs.
2.13.Letter of Credit Sublimit
(a)Borrower may request the issuance of a letter of credit (each a
"Letter of Credit") by delivering to the Lender a completed
application and agreement for letters of credit in such form as
the Lender may specify from time to time by no later than 10:00 a.m.,
New York time, at least three (3) Business Days, or such shorter
period as may be agreed to by the Lender, in advance of the proposed
date of issuance. Each Letter of Credit shall be either a Standby
Letter of Credit or a Commercial Letter of Credit. The Lender will
issue a Letter of Credit provided that each Letter of Credit shall
(A) have a maximum maturity of twelve (12) months from the date of
issuance, and (B) in no event expire later than ten (10) Business
Days prior to the Expiration Date and providing that in no event
shall the Letters of Credit outstanding exceed, at any one time,
$500,000.
(b)The Borrower shall pay to the Lender (the "Letter of Credit Fee")
equal to the standard pricing for Lender's issuances of letters of
credit (computed on the basis of a year of 360 days and actual days
elapsed), which fee shall be computed on the daily average Letters
of Credit outstanding and shall be payable quarterly in arrears
commencing following issuance of each Letter of Credit and on the
Expiration Date.
III.INTEREST AND FEES.
3.1.Interest. Interest on Advances shall be payable in arrears on
the first day of each month with respect to Domestic Rate Loans
and, with respect to Eurodollar Rate Loans , at the end of each
Interest Period. Interest charges shall be computed on the actual
principal amount of Advances outstanding during the month (the
"Monthly Advances") at a rate per annum equal to (i) with respect
to Revolving Advances, the applicable Revolving Interest Rate and
(ii) with respect to the Term Loan, the Term Loan Rate (as applicable,
the "Contract Rate"). Whenever, subsequent to the date of this
Agreement,
the Base Rate is increased or decreased, the applicable Contract Rate
for Domestic Rate Loans shall be similarly changed without notice or
demand of any kind by an amount equal to the amount of such change
in the Base Rate during the time such change or changes remain in
effect. The Eurodollar Rate shall be adjusted with respect to
Eurodollar Rate Loans without notice or demand of any kind on the
effective date of any change in the Reserve Percentage as of
such effective date. Upon and after the occurrence of an Event
of Default, and during the continuation thereof, the Obligations
shall bear interest at the applicable Contract Rate plus two (2%)
percent per annum (the "Default Rate").
3.2.(a)Underwriting Fee. Upon the execution of this Agreement,
Borrower shall pay to an underwriting fee of $60,000 less that
portion of the fee of $30,000 heretofore paid by Borrower to Lender.
"(b)Commitment Fee. If, for any month during the Term, the average
daily unpaid balance of the Revolving Advances for each day of such
month does not equal the Maximum Revolving Advance Amount, then
Borrower shall pay to Lender a fee at a rate equal to one-quarter
of one percent (1/4%) per annum on the amount by which the Maximum
Revolving Advance Amount exceeds such average daily unpaid balance.
Such fee shall be payable to Lender in arrears on the last day of
each quarter.
3.3 Warrants. The Borrower shall provide Lender,
in addition to all amounts owing or payable by the Borrower to
Lender under or pursuant to this Agreement, including, but not
limited to, the Obligations, the Underwriting Fee and the Commitment
Fee, a Common Stock Purchase Warrant dated the date hereof (the
"Warrant") to be exercised by Borrower in accordance with the terms
set forth in the Warrant. The terms for the registration rights
applicable to the Common Stock, as defined in the Warrant, are set
forth in Schedule 3.3 to this Agreement.
3.4.Computation of Interest and Fees. Interest and fees hereunder shall
be computed on the basis of a year of 360 days and for the actual number
of days elapsed. If any payment to be made hereunder becomes due and
payable on a day other than a Business Day, the due date thereof shall
be extended to the next succeeding Business Day and interest thereon
shall be payable at the applicable Contract Rate during such extension.
3.5.Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law.
In the event interest and other charges as computed hereunder would
otherwise exceed the highest rate permitted under law, such excess
amount shall be first applied to any unpaid principal balance owed
by Borrower, and if the then remaining excess amount is greater than
the previously unpaid principal balance, Lender shall promptly refund
such excess amount to Borrower and the provisions hereof shall be
deemed amended to provide for such permissible rate.
3.6.Increased Costs. In the event that any applicable law, treaty
or governmental regulation, or any change therein or in the
interpretation or application thereof, or compliance by any Lender and
the office or branch where Lender makes or maintains any Eurodollar Rate
Loans with any request or directive (whether or not having the force of
law) from any central bank or other financial, monetary or other
authority, shall:
(a)subject Lender to any tax of any kind whatsoever with respect
to this Agreement or any Other Document or change the basis of
taxation of payments to Lender of principal, fees, interest or
any other amount payable hereunder or under any Other Documents
(except for changes in the rate of tax on the overall net income
of Lender by the jurisdiction in which it maintains its principal
office);
"(b)impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or
deposits in or for the account of, advances or loans by, or other
credit extended by, any office of Lender, including (without
limitation)
pursuant to Regulation D of the Board of Governors of the Federal
Reserve System; or
(c)impose on Lender or the London interbank Eurodollar market any
other condition with respect to this Agreement or any Other Document;
and the result of any of the foregoing is to increase the cost to
Lender of making, renewing or maintaining its Advances hereunder
by an amount that Lender deems to be material or to reduce the amount
of any payment (whether of principal, interest or otherwise) in respect
of any of the Advances by an amount that Lender deems to be material,
then, in any case Borrower shall promptly pay Lender, upon its demand,
such additional amount as will compensate Lender for such additional
cost or such reduction, as the case may be. Lender shall certify the
amount of such additional cost or reduced amount to Borrower, and
such certification shall be conclusive absent manifest error.
3.7.Basis For Determining Interest Rate Inadequate or Unfair.
In the event that Lender shall have determined that:
(a)reasonable means do not exist for ascertaining the Eurodollar
Rate applicable pursuant to Section 2.2 hereof for any Interest
Period; or
(b)Dollar deposits in the relevant amount and for the relevant
maturity are not available in the London interbank Eurodollar market,
with respect to an outstanding Eurodollar Rate Loan, a proposed
Eurodollar Rate Loan, or a proposed conversion of a Domestic Rate
Loan into a Eurodollar Rate Loan then Lender shall give Borrower
prompt written, telephonic or telegraphic notice of such determination.
If such notice is given, (i) any such requested Eurodollar Rate Loan
shall be made as a Domestic Rate Loan, unless Borrower shall notify
Lender no later than 10:00 a.m. (New York City time) two (2) Business
Days prior to the date of such proposed borrowing, that its request
for such borrowing shall be cancelled or made as an unaffected type
of Eurodollar Rate Loan, (ii) any Domestic Rate Loan or Eurodollar
Rate Loan which was to have been converted to an affected type of
Eurodollar Rate Loan shall be continued as or converted into a
Domestic Rate Loan, or, if Borrower shall notify Lender, no later
than 10:00 a.m. (New York City time) two (2) Business Days prior
to the proposed conversion, shall be maintained as an unaffected type
of Eurodollar Rate Loan, and (iii) any outstanding affected Eurodollar
Rate Loans shall be converted into a Domestic Rate Loan, or, if
Borrower shall notify Lender, no later than 10:00 a.m. (New York
City time) two (2) Business Days prior to the last Business Day of
the then current Interest Period applicable to such affected Eurodollar
Rate Loan, shall be converted into an unaffected type of Eurodollar
Rate Loan, on the last Business Day of the then current Interest
Period for such affected Eurodollar Rate Loans. Until such notice
has been withdrawn, Lender shall have no obligation to make an
affected type of Eurodollar Rate Loan or maintain outstanding
affected Eurodollar Rate Loans and Borrower shall not have the right
to convert a Domestic Rate Loan or an unaffected type of Eurodollar
Rate Loan into an affected type of Eurodollar Rate Loan.
"3.8.Capital Adequacy.
(a)In the event that Lender shall have determined that any applicable
law, rule, regulation or guideline regarding capital adequacy, or any
change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof,
or compliance by Lender and the office or branch where Lender makes
or maintains any Eurodollar Rate Loans with any request or directive
regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on Lender's capital as a
consequence of its obligations hereunder to a level below that which
Lender could have achieved but for such adoption, change or compliance
(taking into consideration Lender's policies with respect to capital
adequacy) by an amount deemed by Lender to be material, then, from
time to time, Borrower shall pay upon demand to Lender such additional
amount or amounts as will compensate Lender for such reduction.
In determining such amount or amounts, Lender may use any reasonable a
veraging or attribution methods. The protection of this Section 3.8
shall be available to Lender regardless of any possible contention of
invalidity or inapplicability with respect to the applicable law,
regulation or condition.
(b)A certificate of Lender setting forth such amount or amounts as
shall be necessary to compensate Lender with respect to Section 3.8
(a) hereof when delivered to Borrower shall be conclusive absent
manifest error.
IVCOLLATERAL: GENERAL TERMS
4.1.Security Interest in the Collateral. To secure the prompt
and performance to Lender of the Obligations, Borrower hereby
assigns, pledges and grants to Lender a continuing security interest
in and to all of its Collateral, whether now owned or existing or
hereafter acquired or arising and wheresoever located. Borrower
shall mark its books and records as may be necessary or appropriate
to evidence, protect and perfect Lender's security interest and shall
cause its financial statements to reflect such security interest.
"4.2.Perfection of Security Interest. Borrower shall take all action
that may be necessary or desirable, or that Lender may request, so as
at all times to maintain the validity, perfection, enforceability and
priority of Lender's security interest in the Collateral or to enable
Lender to protect, exercise or enforce its rights hereunder and in
the Collateral, including, but not limited to, (i) immediately
discharging all Liens other than Permitted Encumbrances, (ii)
obtaining landlords' or mortgagees' lien waivers, (iii) delivering
to Lender, endorsed or accompanied by such instruments of assignment
as Lender may specify, and stamping or marking, in such manner as
Lender may specify, any and all chattel paper, instruments, letters
of credits and advices thereof and documents evidencing or forming a
part of the Collateral, (iv) entering into warehousing, lockbox and
other custodial arrangements satisfactory to Lender, and (v) executing
and delivering financing statements, instruments of pledge, mortgages,
notices and assignments, in each case in form and substance satisfactory
to Lender, relating to the creation, validity, perfection, maintenance
or continuation of Lender's security interest under the Uniform
Commercial Code or other applicable law. All charges, expenses
and fees Lender may incur in doing any of the foregoing, and any
local taxes relating thereto, shall be charged to Borrower's Account
as a Revolving Advance of a Domestic Rate Loan and added to the
Obligations, or, at Lender's option, shall be paid to Lender immediately
upon demand.
4.3.Disposition of Collateral. Borrower will safeguard and protect all
Collateral for Lender's general account and make no disposition thereof
whether by sale, lease or otherwise except (a) the sale of Inventory
in the ordinary course of business [and (b) the disposition or transfer
of obsolete and worn-out Equipment in the ordinary course of business
during any fiscal year having an aggregate fair market value of not
more than $50,000 and only to the extent that (i) the proceeds of
any such disposition are used to acquire replacement Equipment which
is subject to Lender's first priority security interest or (ii) the
proceeds of which are remitted to Lender as a prepayment on the Term
Loan.
4.4.Preservation of Collateral. In addition to the rights and
remedies set forth in Section 11.1 hereof, Lender: (a) may at any
time take such steps as Lender deems necessary to protect Lender's
interest in and to preserve the Collateral, including the hiring of
such security guards or the placing of other security protection
measures as Lender may deem appropriate; (b) may employ and maintain
at any of Borrower's premises a custodian who shall have full authority
to do all acts necessary to protect Lender's interests in the
Collateral; (c) may lease warehouse facilities to which Lender may move
all or part of the Collateral; (d) may use any of Borrower's owned or
leased lifts, hoists, trucks and other facilities or equipment for
handling or removing the Collateral; and (e) shall have, and is hereby
granted, a right of ingress and egress to the places where the
Collateral is located, and may proceed over and through any of
Borrower's owned or leased property. Borrower shall cooperate fully
with all of Lender's efforts to preserve the Collateral and will
take such actions to preserve the Collateral as Lender may direct.
All of Lender's expenses of preserving the Collateral, including
any expenses relating to the bonding of a custodian, shall be charged
to Borrower's Account as a Revolving Advance of a Domestic Rate
Loan and added to the Obligations.
4.5.Ownership of Collateral. With respect to the Collateral, at the
time the Collateral becomes subject to Lender's security interest:
(a) Borrower shall be the sole owner of and fully authorized and able
to sell, transfer, pledge and/or grant a first priority security
interest in each and every item of the its respective Collateral to
Lender; and, except for Permitted Encumbrances the Collateral shall
be free and clear of all Liens and encumbrances whatsoever; (b) each
document and agreement executed by Borrower or delivered to Lender
or any Lender in connection with this Agreement shall be true and
correct in all respects; (c) all signatures and endorsements of
Borrower that appear on such documents and agreements shall be genuine
and Borrower shall have full capacity to execute same; and (d)
Borrower's Equipment and Inventory shall be located as set forth on
Schedule 4.5 and shall not be removed from such location(s) without
the prior written consent of Lender except with respect to the sale
of Inventory in the ordinary course of business and Equipment to the
extent permitted in Section 4.3 hereof.
"4.6.Defense of Lender's Interests. Until (a) payment and performance
in full of all of the Obligations and (b) termination of this
Agreement,
Lender's interests in the Collateral shall continue in full force and
effect. During such period Borrower shall not, without Lender's prior
written consent, pledge, sell (except Inventory in the ordinary course
of business and Equipment to the extent permitted in Section 4.3
hereof), assign, transfer, create or suffer to exist a Lien upon or
encumber or allow or suffer to be encumbered in any way except for
Permitted Encumbrances, any part of the Collateral. Borrower shall
defend Lender's interests in the Collateral against any and all
Persons whatsoever. At any time following demand by Lender for payment
of all Obligations, Lender shall have the right to take possession
of the indicia of the Collateral and the Collateral in whatever physical
form contained, including without limitation: labels, stationery,
documents, instruments and advertising materials. If Lender exercises
this right to take possession of the Collateral, Borrower shall, upon
demand, assemble it in the best manner possible and make it available
to Lender at a place reasonably convenient to Lender. In addition,
with respect to all Collateral, Lender shall be entitled to all of
the rights and remedies set forth herein and further provided by
the Uniform Commercial Code or other applicable law. Borrower shall,
and Lender may, at its option, instruct all suppliers, carriers,
forwarders, warehouses or others receiving or holding cash, checks,
Inventory, documents or instruments in which Lender holds a security
interest to deliver same to Lender and/or subject to Lender's order and
if they shall come into any Borrower's possession, they, and each
of them, shall be held by Borrower in trust as Lender's trustee, and
Borrower will immediately deliver them to Lender in their original
form together with any necessary endorsement.
4.7.Books and Records. Borrower shall (a) keep proper books of
record and account in which full, true and correct entries will
be made of all dealings or transactions of or in relation to its
business and affairs; (b) set up on its books accruals with respect
to all taxes, assessments, charges, levies and claims; and (c)
on a reasonably current basis set up on its books, from its earnings,
allowances against doubtful Receivables, advances and investments
and all other proper accruals (including without limitation by
reason of enumeration, accruals for premiums, if any, due on
required payments and accruals for depreciation, obsolescence,
or amortization of properties), which should be set aside from such
earnings in connection with its business. All determinations pursuant
to this subsection shall be made in accordance with, or as required
by, GAAP consistently applied in the opinion of such independent public
accountant as shall then be regularly engaged by Borrower.
4.8.Financial Disclosure. Borrower hereby irrevocably authorizes
and directs all accountants and auditors employed by Borrower at
any time during the Term to exhibit and deliver to Lender copies
of any of Borrower's financial statements, trial balances or
other accounting records of any sort in the accountant's or
auditor's possession, and to disclose to Lender any information
such accountants may have concerning Borrower's financial status
and business operations. Borrower hereby authorizes all federal
state and municipal authorities to furnish to Lender copies of
reports or examinations relating to Borrower, whether made by Borrower
or otherwise; however, Lender will attempt to obtain such information
or materials directly from Borrower prior to obtaining such information
or materials from such accountants or such authorities.
"4.9.Compliance with Laws. Borrower shall comply with all acts,
rules, regulations and orders of any legislative, administrative or
judicial body or official applicable to its respective Collateral or
any part thereof or to the operation of Borrower's business the
non-compliance with which could reasonably be expected to have a
Material Adverse Effect on Borrower. The Collateral at all times
shall be maintained in accordance with the requirements of all
insurance carriers which provide insurance with respect to the
Collateral so that such insurance shall remain in full force and effect.
4.10.Inspection of Premises. At all reasonable times and upon
reasonable
advance notice Lender shall have full access to and the right to
audit,
check, inspect and make abstracts and copies from Borrower's books,
records, audits, correspondence and all other papers relating to the
Collateral and the operation of Borrower's business. Lender, may
enter upon any of Borrower's premises at any time during business
hours and at any other reasonable time, and from time to time, for
the purpose of inspecting the Collateral and any and all records
pertaining thereto and the operation of Borrower's business.
"4.11.Insurance. Borrower shall bear the full risk of any loss of
any nature whatsoever with respect to the Collateral. At Borrower's
own cost and expense in amounts and with carriers acceptable to Lender,
Borrower shall (a) keep all its insurable properties and properties
in which Borrower has an interest insured against the hazards of fire,
flood, sprinkler leakage, those hazards covered by extended coverage
insurance and such other hazards, and for such amounts, as is customary
in the case of companies engaged in businesses similar to Borrower's
including, without limitation, business interruption insurance;, (b)
maintain a bond in such amounts as is customary in the case of
companies engaged in businesses similar to Borrower insuring against
larceny, embezzlement or other criminal misappropriation of insured's
officers and employees who may either singly or jointly with others at
any time have access to the assets or funds of Borrower either directly
or through authority to draw upon such funds or to direct generally
the disposition of such assets; (c) maintain public and product
liability
insurance against claims for personal injury, death or property
damage suffered by others; (d) maintain all such worker's compensation
or similar insurance as may be required under the laws of any state or
jurisdiction in which Borrower is engaged in business; (e) furnish
Lender with (i) copies of all policies and evidence of the maintenance
of such policies by the renewal thereof at least thirty (30) days
before any expiration date, and (ii) appropriate loss payable
endorsements in form and substance satisfactory to Lender, naming
Lender as a co-insured and loss payee as its interests may appear
with respect to all insurance coverage referred to in clauses (a),
and (c) and (e) above, and providing (A) that all proceeds thereunder
shall be payable to Lender, (B) no such insurance shall be affected
by any act or neglect of the insured or owner of the property
described in such policy, and (C) that such policy and loss payable
clauses may not be cancelled, amended or terminated unless at least
thirty (30) days' prior written notice is given to Lender. In the
event of any loss thereunder, the carriers named therein hereby are
directed by Lender and the Borrower to make payment for such loss
to Lender and not to Borrower and Lender jointly. If any insurance
losses are paid by check, draft or other instrument payable to
Borrower and Lender jointly, Lender may endorse Borrower's name
thereon and do such other things as Lender may deem advisable
to reduce the same to cash. Lender is hereby authorized to adjust
and compromise claims under insurance coverage referred to in clauses
(a), and (b) and (e) above. All loss recoveries received by Lender upon
any such insurance may be applied to the Obligations, in such order
as Lender in its sole discretion shall determine. Any surplus shall
be paid by Lender to Borrower or applied as may be otherwise required
by law. Any deficiency thereon shall be paid by Borrower to Lender,
on demand.
4.12.Failure to Pay Insurance. If Borrower fails to obtain insurance
as hereinabove provided, or to keep the same in force, Lender, if
Lender so elects, may obtain such insurance and pay the premium
therefor on behalf of Borrower, and charge Borrower's Account therefor
as a Revolving Advance of a Domestic Rate Loan and such expenses so
paid shall be part of the Obligations.
4.13.Payment of Taxes. Borrower will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon
Borrower or any of the Collateral including, without limitation,
real and personal property taxes, assessments and charges and all
franchise, income, employment, social security benefits, withholding,
and sales taxes. If any tax by any governmental authority is or
may be imposed on or as a result of any transaction between
Borrower and Lender or any Lender which Lender or any Lender may
be required to withhold or pay or if any taxes, assessments, or
other Charges remain unpaid after the date fixed for their payment,
or if any claim shall be made which, in Lender's or any Lender's
opinion, may possibly create a valid Lien on the Collateral, Lender
may without notice to Borrower pay the taxes, assessments or other
Charges and Borrower hereby indemnifies and holds Lender and each
Lender harmless in respect thereof. The amount of any payment by Lender
under this Section 4.13 shall be charged to Borrower's Account as a
Revolving Advance and added to the Obligations and, until Borrower
shall furnish Lender with an indemnity therefor (or supply Lender
with evidence satisfactory to Lender that due provision for the
payment thereof has been made), Lender may hold without interest any
balance standing to Borrower's credit and Lender shall retain its
security interest in any and all Collateral held by Lender.
4.14.Payment of Leasehold Obligations. Borrower shall at all times
pay, when and as due, its rental obligations under all leases under
which it is a tenant, and shall otherwise comply, in all material
respects, with all other terms of such leases and keep them in full
force and effect and, at Lender's request will provide evidence of
having done so.
4.15.Receivables.
(a)Nature of Receivables. Each of the Receivables shall be a bona
fide and valid account representing a bona fide indebtedness incurred
by the Customer therein named, for a fixed sum as set forth in the
invoice relating thereto (provided immaterial or unintentional invoice
errors shall not be deemed to be a breach hereof) with respect to an
absolute sale or lease and delivery of goods upon stated terms of
Borrower, or work, labor or services theretofore rendered by
Borrower as of the date each Receivable is created. Same shall be
due and owing in accordance with the Borrower's standard terms of
sale without dispute, setoff or counterclaim except as may be stated
on the accounts receivable schedules delivered by Borrower to Lender.
"(b)Solvency of Customers. Each Customer, to the best of Borrower's
knowledge, as of the date each Receivable is created, is and will be
solvent and able to pay all Receivables on which the Customer is
obligated in full when due or with respect to such Customers of
Borrower who are not solvent Borrower has set up on its books and
in its financial records bad debt reserves adequate to cover such
Receivables.
(c)Locations of Borrower. Borrower's chief executive office is
located at Fairfield, New Jersey. Until written notice is given
to Lender by Borrower of any other office at which Borrower keeps
its records pertaining to Receivables, all such records shall be
kept at such executive office.
(d)Collection of Receivables. Until Borrower's authority to do so
is terminated by Lender (which notice Lender may give at any time
following the occurrence of an Event of Default or a Default or when
Lender in its sole discretion deems it to be in Lenders' best interest
to do so), Borrower will, at Borrower's sole cost and expense, but
on Lender's behalf and for Lender's account, collect as Lender's
property and in trust for Lender all amounts received on Receivables,
and shall not commingle such collections with Borrower's funds or
use the same except to pay Obligations. Borrower shall, upon request,
deliver to Lender, or deposit in the Blocked Account, in original form
and on the date of receipt thereof, all checks, drafts, notes, money
orders, acceptances, cash and other evidences of Indebtedness.
(e)Notification of Assignment of Receivables. At any time following
the occurrence of an Event of Default or a Default, Lender shall have
the right to send notice of the assignment of, and Lender's security
interest in, the Receivables to any and all Customers or any third
party holding or otherwise concerned with any of the Collateral.
Thereafter, Lender shall have the sole right to collect the
Receivables,
take possession of the Collateral, or both. Lender's actual
collection expenses, including, but not limited to, stationery and
postage, telephone and telegraph, secretarial and clerical expenses
and the salaries of any collection personnel used for collection, may
be charged to Borrower's Account and added to the Obligations.
"(f)Power of Lender to Act on Borrower's Behalf. Lender shall have
the right to receive, endorse, assign and/or deliver in the name of
Lender or Borrower any and all checks, drafts and other instruments
for the payment of money relating to the Receivables, and Borrower
hereby waives notice of presentment, protest and non-payment of any
instrument so endorsed. Borrower hereby constitutes Lender or Lender's
designee as Borrower's attorney with power (i) to endorse Borrower's
name upon any notes, acceptances, checks, drafts, money orders or other
evidences of payment or Collateral; (ii) to sign such Borrower's name
on any invoice or bill of lading relating to any of the Receivables,
drafts against Customers, assignments and verifications of Receivables;
(iii) to send verifications of Receivables to any Customer; (iv) to
sign Borrower's name on all financing statements or any other
documents or instruments deemed necessary or appropriate by Lender
to preserve, protect, or perfect Lender's interest in the Collateral
and to file same; (v) to demand payment of the Receivables; (vi) to
enforce payment of the Receivables by legal proceedings or otherwise;
(vii) to exercise all of Borrower's rights and remedies with respect
to the collection of the Receivables and any other Collateral; (viii)
to settle, adjust, compromise, extend or renew the Receivables; (ix)
to settle, adjust or compromise any legal proceedings brought to collect
Receivables; (x) to prepare, file and sign Borrower's name on a proof
of claim in bankruptcy or similar document against any Customer; (xi)
to prepare, file and sign Borrower's name on any notice of Lien,
assignment or satisfaction of Lien or similar document in connection
with the Receivables; and (xii) to do all other acts and things
necessary
to carry out this Agreement. All acts of said attorney or designee are
hereby ratified and approved, and said attorney or designee shall not
be liable for any acts of omission or commission nor for any error of
judgment or mistake of fact or of law, unless done maliciously or with
gross (not mere) negligence; this power being coupled with an interest
is irrevocable while any of the Obligations remain unpaid. Lender
shall
have the right at any time following the occurrence of an Event of
Default or Default, to change the address for delivery of mail
addressed to Borrower to such address as Lender may designate and
to receive, open and dispose of all mail addressed to Borrower.
(g)No Liability. Neither Lender nor any Lender shall, under any
circumstances or in any event whatsoever, have any liability for
any error or omission or delay of any kind occurring in the
settlement, collection or payment of any of the Receivables or any
instrument received in payment thereof, or for any damage resulting
therefrom. Following the occurrence of an Event of Default or Default
Lender may, without notice or consent from Borrower, sue upon or
otherwise collect, extend the time of payment of, compromise or
settle for cash, credit or upon any terms any of the Receivables
or any other securities, instruments or insurance applicable thereto
and/or release any obligor thereof. Lender is authorized and
empowered to accept following the occurrence of an Event of Default
or Default the return of the goods represented by any of the
Receivables, without notice to or consent by Borrower, all
without discharging or in any way affecting Borrower's liability
hereunder.
(h)Establishment of a Lockbox Account, Dominion Account. All
proceeds of Collateral shall, at the direction of Lender, be
deposited by Borrower into a lockbox account, dominion account
or such other "blocked account" ("Blocked Accounts") as Lender
may require. All funds deposited in such "blocked account" shall
immediately become the property of Lender. Lender does not assume
any responsibility for such "blocked account" arrangement, including
without limitation, any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder.
Alternatively, Lender may establish depository accounts ("Depository
Accounts") in the name of Lender for the deposit of such funds
and Borrower shall deposit all proceeds of Collateral or cause
same to be deposited, in kind, in such Depository Accounts of
Lender in lieu of depositing same to the Blocked Accounts.
(i)Adjustments. Borrower will not, without Lender's consent,
compromise or adjust any material amount of the Receivables (or
extend the time for payment thereof) or accept any material returns
of merchandise or grant any additional discounts, allowances or
credits thereon except for those compromises, adjustments, returns,
discounts, credits and allowances as have been heretofore customary
in the business of Borrower.
"4.16.Inventory. To the extent Inventory held for sale or lease has
been produced by Borrower, it has been and will be produced
Borrower in accordance with the Federal Fair Labor Standards Act of
1938, as amended, and all rules, regulations and orders thereunder.
4.17.Maintenance of Equipment. The Equipment shall be maintained
in good operating condition and repair (reasonable wear and tear
excepted) and all necessary replacements of and repairs thereto
shall be made so that the value and operating efficiency of the
Equipment shall be maintained and preserved. Borrower shall not
use or operate the Equipment in violation of any law, statute,
ordinance, code, rule or regulation. Borrower shall have the right
to sell Equipment to the extent set forth in Section 4.3 hereof.
4.18.Exculpation of Liability. Lender shall not be responsible or
liable for any shortage, discrepancy, damage, loss or destruction of
any part of the Collateral wherever the same may be located and
regardless of the cause thereof. Lender, whether by anything herein
or in any assignment or otherwise, shall not assume any of Borrower's
obligations under any contract or agreement assigned to Lender,
Lender shall not be responsible in any way for the performance by
Borrower of any of the terms and conditions thereof.
4.19.Environmental Matters. (a) Borrower shall ensure that the
Real Property remains in compliance with all Environmental Laws and
they shall not place or permit to be placed any Hazardous Substances
on any Real Property except as not prohibited by applicable law or
appropriate governmental authorities.
(b)Borrower shall establish and maintain a system to assure and
monitor continued compliance with all applicable Environmental Laws
which system shall include periodic reviews of such compliance.
(c)Borrower shall (i) employ in connection with the use of the Real
Property appropriate technology necessary to maintain compliance with
any applicable Environmental Laws and (ii) dispose of any and all
Hazardous Waste generated at the Real Property only at facilities
and with carriers that maintain valid permits under RCRA and any
other applicable Environmental Laws. Borrower shall use their best
efforts to obtain certificates of disposal, such as hazardous
waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrower in connection
with the transport or disposal of any Hazardous Waste generated
at the Real Property.
"(d)In the event Borrower obtains, gives or receives notice of any
Release or threat of Release of a reportable quantity of any
Hazardous Substances at the Real Property (any such event being
hereinafter referred to as a "Hazardous Discharge") or receives
any notice of violation, request for information or notification
that it is potentially responsible for investigation or cleanup of
environmental conditions at the Real Property, demand letter or
complaint, order, citation, or other written notice with regard to
any Hazardous Discharge or violation of Environmental Laws
affecting the Real Property or any Borrower's interest therein
(any of the foregoing is referred to herein as an "Environmental
Complaint") from any Person, including any state agency responsible
in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental
Protection Agency (any such person or entity hereinafter the
"Authority"),
then Borrower shall, within five (5) Business Days, give written
notice of same to Lender detailing facts and circumstances of which
Borrower is aware giving rise to the Hazardous Discharge or
Environmental Complaint. Such information is to be provided to allow
Lender to protect its security interest in the Real Property and is
not intended to create nor shall it create any obligation upon Lender
or any Lender with respect thereto.
(e)Borrower shall promptly forward to Lender copies of any request for
information, notification of potential liability, demand letter
relating to potential responsibility with respect to the investigation
or
cleanup of Hazardous Substances at any other site owned, operated or
used by Borrower to dispose of Hazardous Substances and shall continue
to forward copies of correspondence between Borrower and the Authority
regarding such claims to Lender until the claim is settled. Borrower
shall promptly forward to Lender copies of all documents and reports
concerning a Hazardous Discharge at the Real Property that Borrower
is required to file under any Environmental Laws. Such information
is to be provided solely to allow Lender to protect Lender's security
interest in the Real Property and the Collateral.
(f)Borrower shall respond promptly to any Hazardous Discharge or
Environmental Complaint and take all necessary action in order to
safeguard the health of any Person and to avoid subjecting the
Collateral or Real Property to any Lien. If Borrower shall fail
to respond promptly to any Hazardous Discharge or Environmental
Complaint or Borrower shall fail to comply with any of the requirements
of any Environmental Laws, Lender on behalf of Lenders may, but without
the obligation to do so, for the sole purpose of protecting Lender's
interest in Collateral: (A) give such notices or (B) enter onto the
Real Property (or authorize third parties to enter onto the Real
Property)
and take such actions as Lender (or such third parties as directed by
Lender) deem reasonably necessary or advisable, to clean up, remove,
mitigate or otherwise deal with any such Hazardous Discharge or
Environmental Complaint. All reasonable costs and expenses incurred
by Lender and Lenders (or such third parties) in the exercise of any
such rights, including any sums paid in connection with any judicial
or administrative investigation or proceedings, fines and penalties,
together with interest thereon from the date expended at the Default
Rate for Domestic Rate Loans constituting Revolving Advances shall
be paid upon demand by Borrower, and until paid shall be added to and
become a part of the Obligations secured by the Liens created by the
terms of this Agreement or any other agreement between Lender, any
Lender and Borrower.
"(g)Promptly upon the written request of Lender from time to time,
based on the Lender's reasonable determination that such an assessment
is reasonable, Borrower shall provide Lender, at Borrower's expense,
with an environmental site assessment or environmental audit report
prepared by an environmental engineering firm acceptable in the
reasonable
opinion of Lender, to assess with a reasonable degree of certainty
the existence of a Hazardous Discharge and the potential costs
in connection with abatement, cleanup and removal of any Hazardous
Substances found on, under, at or within the Real Property.
Any report or investigation of such Hazardous Discharge proposed
and acceptable to an appropriate Authority that is charged to
oversee the clean-up of such Hazardous Discharge shall be acceptable
to Lender. If such estimates, individually or in the aggregate,
exceed $100,000, Lender shall have the right to require Borrower to
post a bond, letter of credit or other security reasonably satisfactory
to Lender to secure payment of these costs and expenses.
(h)Borrower shall defend and indemnify Lender and hold Lender and its
employees, Lenders, directors and officers harmless from and against
all loss, liability, damage and expense, claims, costs, fines and
penalties, including attorney's fees, suffered or incurred by Lender
or Lenders under or on account of any Environmental Laws, including,
without limitation, the assertion of any Lien thereunder, with respect
to any Hazardous Discharge, the presence of any Hazardous Substances
affecting the Real Property, whether or not the same originates or
emerges from the Real Property or any contiguous real estate, including
any loss of value of the Real Property as a result of the foregoing
except to the extent such loss, liability, damage and expense is
attributable to any Hazardous Discharge resulting from actions on
the part of Lender or any Lender. Borrower's obligations under this
Section 4.19 shall arise upon the discovery of the presence of any
Hazardous Substances at the Real Property, whether or not any federal,
state, or local environmental agency has taken or threatened any
action in connection with the presence of any Hazardous Substances.
Borrower's obligation and the indemnifications hereunder shall survive
the termination of this Agreement.
(i)For purposes of Section 4.19 and 5.7, all references to Real
Property shall be deemed to include all of Borrower's right, title
and interest in and to its owned and leased premises.
4.20.Financing Statements. Except as respects the financing
statements filed by Lender and the financing statements described
on Schedule 1.2, no financing statement covering any of the
Collateral or any proceeds thereof is on file in any public office.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1.Authority. Borrower has full power, authority and legal
right to enter into this Agreement and the Other Documents and
to perform all its Obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and of the
Other Documents (a) are within Borrower's corporate powers, have
been duly authorized, are not in contravention of law or the terms
of Borrower's by-laws, certificate of incorporation or other applicable
documents relating to Borrower's incorporation or to the conduct
of Borrower's business or of any material agreement or undertaking
to which Borrower is a party or by which Borrower is bound, and (b)
will not conflict with nor result in any breach in any of the
provisions of or constitute a default under or result in the
creation of any Lien except Permitted Encumbrances upon any asset
of Borrower under the provisions of any agreement, charter document,
instrument, by-law, or other instrument to which Borrower or its
property is a party or by which it may be bound.
"5.2.Incorporation and Qualification. (a) Borrower has been duly
incorporated as a corporation and is in good standing under the laws
of the state listed on Schedule 5.2(a) and is qualified to do business
and is in good standing in the states listed on Schedule 5.2(a)
which constitute all states in which qualification and good standing
are necessary for Borrower to conduct its business and own its property
and where the failure to so qualify could reasonably be expected to have
a Material Adverse Effect on Borrower. Borrower has delivered to Lender
true and complete copies of its certificate of incorporation and
by-laws and will promptly notify Lender of any amendment or changes
thereto.
(b)Except as set forth on Schedule 5.2(b), Borrower has no Subsidiaries.
5.3.Survival of Representations and Warranties. All representations
and warranties of Borrower contained in this Agreement and the Other
Documents shall be true at the time of Borrower's execution of this
Agreement and the Other Documents, and shall survive the execution,
delivery and acceptance thereof by the parties thereto and the
closing of the transactions described therein or related thereto.
5.4.Tax Returns. Borrower's federal tax identification number is set
forth on Schedule 5.4. Borrower has filed all federal, state and local
tax returns and other reports each is required by law to file and has
paid all taxes, assessments, fees and other governmental charges that
are due and payable. Federal, state and local income tax returns of
Borrower have been examined and reported upon by the appropriate taxing
authority or closed by applicable statute and satisfied for all fiscal
years prior to and including the fiscal year ending March 31, 1991.
The provision for taxes on the books of Borrower are adequate for all
years not closed by applicable statutes, and for its current fiscal
year, and Borrower has no knowledge of any deficiency or additional
assessment in connection therewith not provided for on its books.
5.5.Financial Statements.
(a)The pro forma balance sheet of Borrower (the "Pro Forma Balance
Sheet")
furnished to Lender on the Closing Date reflects the consummation of
the
transactions contemplated by the Acquisition Agreement and under this
Agreement (the "Transactions") and is accurate, complete and correct
and fairly reflects the financial condition of Borrower as of the
Closing
Date after giving effect to the Transactions, and has been prepared in
accordance with GAAP, consistently applied. The Pro Forma Balance Sheet
has been certified as accurate, complete and correct in all material
respects by the Chief Executive Officer of Borrower. All financial
statements referred to in this subsection 5.5(a), including the related
schedules and notes thereto, have been prepared, in accordance with
GAAP, except as may be disclosed in such financial statements.
"(b)The twelve-month cash flow projections of the Borrower and their
projected balance sheets as of the Closing Date, copies of which are
annexed hereto as Exhibit 5.5(b) (the "Projections") were prepared by
the Chief Financial Officer of Borrower, are based on underlying
assumptions which provide a reasonable basis for the projections
contained therein and reflect Borrower's judgment based on present
circumstances of the most likely set of conditions and course of
action for the projected period. The cash flow Projections together
with the Pro Forma Balance Sheet, are referred to as the "Pro Forma
Financial Statements".
5.6.Corporate Name. Borrower has not been known by any other corporate
name in the past five years and does not sell Inventory under any other
name except as set forth on Schedule 5.6, nor, except as set forth on
Schedule 5.6, has Borrower been the surviving corporation of a merger
or consolidation or acquired all or substantially all of the assets of
any Person during the preceding five (5) years.
5.7.O.S.H.A. and Environmental Compliance.
(a)To the best of its knowledge, Borrower has duly complied with, and
its facilities, business, assets, property, leaseholds and Equipment
are in compliance in all material respects with, the provisions of the
Federal Occupational Safety and Health Act, the Environmental Protection
Act, RCRA and all other Environmental Laws; to the best of its
knowledge,
there have been no outstanding citations, notices or orders of
non-compliance issued to Borrower or relating to its business, assets,
property, leaseholds or Equipment under any such laws, rules or
regulations.
(b)Borrower has been issued all required federal, state and local
licenses, certificates or permits relating to all applicable
Environmental
Laws.
(c)(i)There are no visible signs of releases, spills, discharges,
leaks or disposal (collectively referred to as "Releases") of Hazardous
Substances at, upon, under or within any Real Property or any premises
leased by Borrower; (ii) there are no underground storage tanks or
polychlorinated biphenyls on the Real Property or any premises leased
by
Borrower; (iii) neither the Real Property nor any premises leased by
Borrower has ever been used as a treatment, storage or disposal
facility of Hazardous Waste; and (iv) no Hazardous Substances are
present on the Real Property or any premises leased by Borrower,
excepting such quantities as are handled in accordance with all
applicable manufacturer's instructions and governmental regulations
and in proper storage containers and as are necessary for the operation
of the commercial business of Borrower or of its tenants.
5.8.Solvency; No Litigation, Violation, Indebtedness or Default.
(a)After giving effect to the Transactions, Borrower will be solvent,
able to pay its debts as they mature, has capital sufficient to carry
on their business and all businesses in which they are about to engage,
and (i) as of the Closing Date, the fair present saleable value of its
assets, calculated on a going concern basis, is in excess of the amount
of its liabilities and (ii) subsequent to the Closing Date, the fair
saleable value of its assets (calculated on a going concern basis) will
be in excess of the amount of its liabilities.
"(b)Except as disclosed in Schedule 5.8(b), Borrower does not have (i)
any pending or threatened litigation, arbitration, actions or
proceedings
which involve the possibility of having a Material Adverse Effect on
Borrower, and (ii) any liabilities nor indebtedness for borrowed money
other than the Obligations.
(c)Borrower is not in violation of any applicable statute, regulation
or ordinance in any respect which could reasonably be expected to have
a Material Adverse Effect on Borrower, nor is Borrower in violation
of any order of any court, governmental authority or arbitration board
or tribunal.
(d)Neither Borrower nor any member of the Controlled Group maintains or
contributes to any Plan other than those listed on Schedule 5.8(d)
hereto.
Except as set forth in Schedule 5.8(d), (i) no Plan has incurred any
"accumulated funding deficiency," as defined in Section 302(a)(2) of
ERISA and Section 412(a) of the Code, whether or not waived, and
Borrower and each member of the Controlled Group has met all applicable
minimum funding requirements under Section 302 of ERISA in respect of
each Plan, (ii) each Plan which is intended to be a qualified plan under
Section 401(a) of the Code as currently in effect has been determined
by the Internal Revenue Service to be qualified under Section 401(a)
of the Code and the trust related thereto is exempt from federal income
tax under Section 501(a) of the Code, (iii) neither Borrower nor any
member of the Controlled Group has incurred any liability to the PBGC
other than for the payment of premiums, and there are no premium
payments
which have become due which are unpaid, (iv) no Plan has been
terminated
by the plan administrator thereof nor by the PBGC, and there is no
occurrence which would cause the PBGC to institute proceedings under
Title IV of ERISA to terminate any Plan, (v) at this time, the current
value of the assets of each Plan exceeds the present value of the
accrued
benefits and other liabilities of such Plan and neither Borrower nor any
member of the Controlled Group knows of any facts or circumstances
which
would materially change the value of such assets and accrued benefits
and other liabilities, (vi) neither Borrower nor any member of the
Controlled Group has breached any of the responsibilities, obligations
or duties imposed on it by ERISA with respect to any Plan, (vii)
neither Borrower nor any member of a Controlled Group has incurred any
liability for any excise tax arising under Section 4972 or 4980B of the
Code, and no fact exists which could give rise to any such liability,
(viii) neither Borrower nor any member of the Controlled Group nor any
fiduciary of, nor any trustee to, any Plan, has engaged in a "prohibited
transaction" described in Section 406 of the ERISA or Section 4975 of
the Code nor taken any action which would constitute or result in a
Termination Event with respect to any such Plan which is subject to
ERISA, (ix) Borrower and each member of the Controlled Group has made
all contributions due and payable with respect to each Plan, (x) there
exists no event described in Section 4043(b) of ERISA, for which the
thirty (30) day notice period contained in 29 CFR '2615.3 has not been
waived, (xi) neither Borrower nor any member of the Controlled Group
has any fiduciary responsibility for investments with respect to any
plan existing for the benefit of persons other than employees or
former employees of Borrower and any member of the Controlled Group,
and (xii) neither Borrower nor any member of the Controlled Group has
withdrawn, completely or partially, from any Multiemployer Plan so as
to incur liability under the Multiemployer Pension Plan Amendments Act
of 1980.
"5.9.Patents, Trademarks, Copyrights and Licenses. All patents, patent
applications, trademarks, trademark applications, service marks,
service mark applications, copyrights, copyright applications, design
rights, tradenames, assumed names, trade secrets and licenses owned
or utilized by Borrower are set forth on Schedule 5.9, are valid and
have been duly registered or filed with all appropriate governmental
authorities and constitute all of the intellectual property rights which
are necessary for the operation of its business; there is no objection
to or pending challenge to the validity of any such material patent,
trademark, copyright, design right, tradename, trade secret or license
and Borrower is not aware of any grounds for any challenge, except as
set forth in Schedule 5.9 hereto. Each patent, patent application,
patent license, trademark, trademark application, trademark license,
service mark, service mark application, service mark license,
copyright,
copyright application and copyright license owned or held by Borrower
and all trade secrets used by Borrower consist of original material or
property developed by Borrower or was lawfully acquired by Borrower
from the proper and lawful owner thereof. Each of such items has been
maintained so as to preserve the value thereof from the date of
creation or acquisition thereof. With respect to all software used
by Borrower, Borrower is in possession of all source and object codes
related to each piece of software or is the beneficiary of a source
code escrow agreement, each such source code escrow agreement being
listed on Schedule 5.9 hereto.
5.10.Licenses and Permits. Except as set forth in Schedule 5.10,
Borrower (a) is in compliance with and (b) has procured and is now
in possession of, all material licenses or permits required by any
applicable federal, state or local law or regulation for the operation
of its business in each jurisdiction wherein it is now conducting or
proposes to conduct business and where the failure to procure such
licenses or permits could have a Material Adverse Effect on Borrower.
5.11.Default of Indebtedness. Borrower is not in default in the payment
of the principal of or interest on any Indebtedness or under any
instrument or agreement under or subject to which any Indebtedness has
been issued and no event has occurred under the provisions of any such
instrument or agreement which with or without the lapse of time or
the giving of notice, or both, constitutes or would constitute an event
of default thereunder.
5.12.No Default. Borrower is not in default in the payment or
performance of any of its contractual obligations and no Default has
occurred.
5.13.No Burdensome Restrictions. Borrower is not a party to any contract
or agreement the performance of which could have a Material Adverse
Effect on Borrower. Borrower has not agreed or consented to cause
or permit in the future (upon the happening of a contingency or
otherwise
) any of its property, whether now owned or hereafter acquired,
to be subject to a Lien which is not a Permitted Encumbrance.
5.14No Labor Disputes. Borrower is not involved in any labor dispute;
there are no strikes or walkouts or union organization of Borrower's
employees threatened or in existence and no labor contract is scheduled
to expire during the Term other than as set forth on Schedule 5.14
hereto.
"5.15.Margin Regulations. Borrower is not engaged, nor will it engage,
principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any
"margin stock" within the respective meanings of each of the quoted
terms under Regulation U or Regulation G of the Board of Governors of
the Federal Reserve System as now and from time to time hereafter in
effect. No part of the proceeds of any Advance will be used for
"purchasing" or "carrying" "margin stock" as defined in Regulation
U of such Board of Governors.
5.16.Investment Company Act. Borrower is not an "investment company"
registered or required to be registered under the Investment Company
Act of 1940, as amended, nor is it controlled by such a company.
5.17.Disclosure. No representation or warranty made by Borrower in
this Agreement or in the Acquisition Agreement, or in any financial
statement, report, certificate or any other document furnished in
connection herewith or therewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make
the statements herein or therein not misleading. There is no fact
known to Borrower or which reasonably should be known to Borrower which
Borrower has not disclosed to Lender in writing with respect to the
transactions contemplated by the Acquisition Agreement, or this
Agreement which could reasonably be expected to have a Material
Adverse Effect on Borrower.
5.18.Delivery of Acquisition Agreement. Lender has received complete
copies of the Acquisition Agreement (including all exhibits, schedules
and disclosure letters referred to therein or delivered pursuant
thereto,
if any) and all amendments thereto, waivers relating thereto and other
side letters or agreements affecting the terms thereof. None of such
documents and agreements has been amended or supplemented, nor have any
of the provisions thereof been waived, except pursuant to a written
agreement or instrument which has heretofore been delivered to Lender.
5.19.Swaps. Borrower is not a party to, nor will it be a party to,
any swap agreement whereby Borrower has agreed or will agree to swap
interest rates or currencies unless same provides that damages upon
termination following an event of default thereunder are payable on an
unlimited "two-way basis" without regard to fault on the part of either
party.
5.20.Conflicting Agreements. No provision of any mortgage, indenture,
contract, agreement, judgment, decree or order binding on Borrower or
affecting the Collateral conflicts with, or requires any Consent which
has not already been obtained to, or would in any way prevent the
execution, delivery or performance of, the terms of this Agreement
or the Other Documents.
5.21.Application of Certain Laws and Regulations. Neither Borrower
nor any Affiliate of Borrower is subject to any statute, rule or
regulation which regulates the incurrence of any Indebtedness,
including without limitation, statutes or regulations relative
to common or interstate carriers or to the sale of electricity, gas,
steam, water, telephone, telegraph or other public utility services.
"5.22 Year 2000. Borrower has reviewed the areas within its
business and operations which could be adversely affected by, and
have developed or are developing a program to address on a timely
basis, the risk that certain computer applications used by Borrower
(or any of its respective material suppliers, customers or vendors) may
be unable to recognize and perform properly date-sensitive functions
involving dates prior to and after December 31, 1999 (the "Year 2000
Problem"). The Year 2000 Problem will not result in any Material
Adverse Effect.
VI.AFFIRMATIVE COVENANTS.
Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
6.1.Payment of Fees. Pay to Lender on demand all usual and
customary fees and expenses which Lender incurs in connection
with (a) the forwarding of Advance proceeds and (b) the establishment
and maintenance of any Blocked Accounts or Depository Accounts as
provided for in Section 4.15(h). Lender may, without making demand,
charge Borrower's Account for all such fees and expenses.
6.2.Conduct of Business and Maintenance of Existence and Assets.
(a) Conduct continuously and operate actively its business according
to good business practices and maintain all of its properties useful
or necessary in its business in good working order and condition
(reasonable wear and tear excepted and except as may be disposed
of in accordance with the terms of this Agreement), including,
without limitation, all licenses, patents, copyrights, design rights,
tradenames, trade secrets and trademarks and take all actions
necessary to enforce and protect the validity of any intellectual
property right or other right included in the Collateral; (b) keep
in full force and effect its existence and comply in all material
respects with the laws and regulations governing the conduct of its
business where the failure to do so could reasonably be expected to
have a Material Adverse Effect on Borrower; and (c) make all such
reports and pay all such franchise and other taxes and license fees and
do all such other acts and things as may be lawfully required to
maintain its rights, licenses, leases, powers and franchises under
the laws of the United States or any political subdivision thereof.
6.3.Violations. Promptly notify Lender in writing of any violation of
any law, statute, regulation or ordinance of any Governmental Body, or
of any agency thereof, applicable to Borrower which could reasonably
be expected to have a Material Adverse Effect on Borrower.
6.4.Government Receivables. Take all steps necessary to protect
Lender's
interest in the Collateral under the Federal Assignment of Claims Act
or other applicable state or local statutes or ordinances and deliver
to Lender appropriately endorsed, any instrument or chattel paper
connected with any Receivable arising out of contracts between any
Borrower and the United States, any state or any department, agency or
instrumentality of any of them.
6.5.Minimum Fixed Charge Coverage. Maintain at all times a ratio of
Minimum Fixed Charge Coverage of greater than 1.20 to 1 for any period
of four (4) consecutive fiscal quarters (or if such period does not
include four full fiscal quarters after the Closing Date, for the number
of full fiscal quarters which have elapsed since the Closing Date).
"6.6. Minimum Interest Coverage. Cause or permit the Minimum
Interest
Coverage for any period of four (4) consecutive fiscal quarters of the
Borrower after the Closing Date (or if such period does not include
four full quarters after the Closing Date, for the number of full
fiscal
quarters which have elapsed since the Closing Date) set forth below to
be less than the following ratios during the following periods:
PeriodRatio
August 1, 1998 to March 31, 19993.00
April 1, 1999 and thereafter4.00
6.7.Maximum Leverage Ratio. Cause or permit the Maximum Leverage
Ratio for any period of four (4) consecutive fiscal quarters of
the Borrower, after the Closing Date (or if such period does not
include four full quarters after the Closing Date, for the number
of full fiscal quarters which have elapsed since the Closing Date)
set forth below to be greater than the following ratios during the
following periods:
PeriodRatio
August 1, 1998 to March 31, 1999 3.25
April 1, 1999 to April 30, 2000 2.50
April 1, 2000 and thereafter 2.00
6.8.Execution of Supplemental Instruments. Execute and deliver
to Lender from time to time, upon demand, such supplemental agreements,
statements, assignments and transfers, or instructions or documents
relating to the Collateral, and such other instruments as Lender may
request, in order that the full intent of this Agreement may be carried
into effect.
6.9.Payment of Indebtedness; Taxes. Pay, discharge or otherwise satisfy
at or before maturity (subject, where applicable, to specified grace
periods and, in the case of the trade payables, to normal payment
practices) all its obligations and liabilities of whatever nature,
including but not limited to federal, state and local taxes except
when the failure to do so could not reasonably be expected to have
a Material Adverse Effect or when the amount or validity thereof is
currently being contested in good faith by appropriate proceedings
and Borrower shall have provided for such reserves as Lender may
reasonably deem proper and necessary, subject at all times to any
applicable subordination arrangement in favor of Lenders.
6.10.Standards of Financial Statements. Cause all financial statements
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, and 9.13 as
to which GAAP is applicable to be complete and correct in all material
respects (subject, in the case of interim financial statements, to
normal
year-end audit adjustments) and to be prepared in reasonable detail and
in accordance with GAAP applied consistently throughout the periods
reflected therein (except as concurred in by such reporting accountants
or officer, as the case may be, and disclosed therein).
"6.11.Exercise of Rights. Enforce all of its rights under the
Acquisition Agreement including, but not limited to, all
indemnification rights and pursue all remedies available to it
with diligence and in good faith in connection with the enforcement
of any such rights.
VII.NEGATIVE COVENANTS.
Borrower shall not, until satisfaction in full of the Obligations and
termination of this Agreement:
7.1.Merger, Consolidation, Acquisition and Sale of Assets.
(a)Enter into any merger, consolidation or other reorganization with
or into any other Person or acquire all or a substantial portion of
the assets or stock of any Person or permit any other Person to
consolidate with or merge with it.
(b)Sell, lease, transfer or otherwise dispose of any of its properties
or assets or the properties or assets of Measurement LTD. and Jingliang
Electronics Co., LTD., except in the ordinary course of its business.
7.2.Creation of Liens. Create or suffer to exist any Lien or transfer
upon or against any of its property or assets or the properties or
assets of Measurement LTD. and Jingliang Electronics Co., LTD. now
owned or hereafter acquired, except Permitted Encumbrances.
7.3.Guarantees. Become liable upon the obligations of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than
to Lenders) except the endorsement of checks in the ordinary course of
business.
7.4.Investments. Purchase or acquire obligations or stock of, or any
other interest in, any Person, except (a) obligations issued or
guaranteed
by the United States of America or any agency thereof, (b) commercial
paper with maturities of not more than 180 days and a published rating
of not less than A-1 or P-1 (or the equivalent rating), (c)
certificates of time deposit and bankers' acceptances having maturities
of not more than 180 days and repurchase agreements backed by
United States government securities of a commercial bank if (i)
such bank has a combined capital and surplus of at least $500,000,000,
or (ii) its debt obligations, or those of a holding company of
which it is a Subsidiary, are rated not less than A (or the equivalent
rating) by a nationally recognized investment rating agency, and (d)
U.S. money market funds that invest solely in obligations issued or
guaranteed by the United States of America or an agency thereof.
7.5.Loans. Except as permitted pursuant to Section 7.12(c), make
advances,
loans or extensions of credit to any Person, including without
limitation,
any Parent, Subsidiary or Affiliate.
"7.6.Capital Expenditures. Contract for, purchase or make any
expenditure or commitments for fixed or capital assets (including
capitalized leases) in any fiscal year in an amount in excess of
$1,500,000.
7.7.Dividends. Declare, pay or make any dividend or distribution on
any shares of the common stock, preferred stock of Borrower
(other than dividends or distributions payable in its stock or
split-ups or reclassifications of its stock or membership interests)
or apply any of its funds, property or assets to the purchase,
redemption or other retirement of any common or preferred stock,
or of any options to purchase or acquire any such shares of common or
preferred stock of Borrower.
7.8.Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) except in respect of
Indebtedness to Lenders; Indebtedness incurred for capital expenditures
permitted under Section 7.6 hereof; and Indebtedness assumed under
the Acquisition Agreement; provided, however, that the maximum aggregate
amount outstanding at any time of such Indebtedness shall not exceed
$100,000.
7.9.Nature of Business. Substantially change the nature of the business
in which it is presently engaged, nor except as specifically permitted
hereby purchase or invest, directly or indirectly, in any assets or
property other than in the ordinary course of business for assets or
property which are useful in, necessary for and are to be used in its
business as presently conducted.
7.10.Transactions with Affiliates. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any
property to, or otherwise deal with, any Affiliate.
7.11.Leases. Enter as lessee into any lease arrangement not currently
existing for real or personal property (unless capitalized and permitted
under Section 7.6 hereof) if after giving effect thereto, aggregate
annual rental payments for all additional leased property would exceed
$100,000 in any one fiscal year.
7.12.Subsidiaries.
(a)Form any Subsidiary unless (i) such Subsidiary expressly joins in
this Agreement as a borrower and becomes jointly and severally liable
for the obligations of Borrower hereunder, under the Note, and under any
other agreement between Borrower and Lender and (ii) Lender shall have
received all documents, including legal opinions, it may reasonably
require to establish compliance with each of the foregoing conditions.
(b)Enter into any partnership, joint venture or similar arrangement.
(c)Permit cash and non-cash loans due to Borrower from all of Borrower's
foreign subsidiaries in an amount at any time outstanding aggregating
in excess of $1,700,000 during any fiscal year of Borrower, to be
determined quarterly.
"7.13.Fiscal Year and Accounting Changes. Change its fiscal year
from March 31 or make any change (i) in accounting treatment and
reporting practices except as required by GAAP or (ii) in tax
reporting treatment except as required by law.
7.14.Pledge of Credit. Now or hereafter pledge Lender's credit on
any purchases or for any purpose whatsoever or use any portion of
any Advance in or for any business other than Borrower's business as
conducted on the date of this Agreement.
7.15.Amendment of Certificate of Incorporation , By-Laws. Amend,
modify or waive any term or material provision of its Certificate of
Incorporation or By-Laws unless required by law.
7.16.Compliance with ERISA. (i) (x) Maintain, or permit any member
of the Controlled Group to maintain, or (y) become obligated to
contribute, or permit any member of the Controlled Group to become
obligated to contribute, to any Plan, other than those Plans disclosed
on Schedule 5.8(d), (ii) engage, or permit any member of the Controlled
Group to engage, in any non-exempt "prohibited transaction", as that
term
is defined in section 406 of ERISA and Section 4975 of the Code, (iii)
incur, or permit any member of the Controlled Group to incur, any
"accumulated funding deficiency", as that term is defined in Section
302 of ERISA or Section 412 of the Code, (iv) terminate, or permit
any member of the Controlled Group to terminate, any Plan where such
event could result in any liability of Borrower or any member of the
Controlled Group or the imposition of a lien on the property of
Borrower or any member of the Controlled Group pursuant to Section 4068
of ERISA, (v) assume, or permit any member of the Controlled Group to
assume, any obligation to contribute to any Multiemployer Plan not
disclosed on Schedule 5.8(d), (vi) incur, or permit any member of the
Controlled Group to incur, any withdrawal liability to any
Multiemployer
Plan; (vii) fail promptly to notify Lender of the occurrence of any
Termination Event, (viii) fail to comply, or permit a member of the
Controlled Group to fail to comply, with the requirements of ERISA or
the Code or other applicable laws in respect of any Plan, (ix) fail to
meet, or permit any member of the Controlled Group to fail to meet,
all minimum funding requirements under ERISA or the Code or postpone
or delay or allow any member of the Controlled Group to postpone or
delay any funding requirement with respect of any Plan.
7.17.Prepayment of Indebtedness. At any time, directly or indirectly,
prepay any Indebtedness (other than to Lenders), or repurchase, redeem,
retire or otherwise acquire any Indebtedness of Borrower.
7.18.Other Agreements. Enter into any material amendment, waiver or
modification of the Acquisition Agreement or any related agreements.
VIII.CONDITIONS PRECEDENT.
"8.1.Conditions to Initial Advances. The agreement of Lenders to make
the initial Advances requested to be made on the Closing Date is subject
to the satisfaction, or waiver by Lenders, immediately prior to or
concurrently with the making of such Advances, of the following
conditions precedent:
(a)Note. Lender shall have received the Note duly executed and delivered
by an authorized officer of Borrower;
(b)Filings, Registrations and Recordings. Each document (including,
without limitation, any Uniform Commercial Code financing statement)
required by this Agreement, any related agreement or under law or
reasonably requested by the Lender to be filed, registered or recorded
in order to create, in favor of Lender, a perfected security interest in
or lien upon the Collateral shall have been properly filed, registered
or recorded in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested, and Lender shall have
received an acknowledgment copy, or other evidence satisfactory to it,
of each such filing, registration or recordation and satisfactory
evidence of the payment of any necessary fee, tax or expense relating
thereto;
(c)Corporate Proceedings of Borrower. Lender shall have received a copy
of the resolutions in form and substance reasonably satisfactory to
Lender, of the Board of Directors or Management Committee of Borrower
authorizing (i) the execution, delivery and performance of this
Agreement, the Notes, any related agreements, and the Acquisition
Agreement (collectively the "Documents") and (ii) the granting by
Borrower of the security interests in and liens upon the Collateral
certified by the Secretary or an Assistant Secretary or other authorized
representative of Borrower as of the Closing Date; and, such
certificate shall state that the resolutions thereby certified have not
been amended, modified, revoked or rescinded as of the date of such
certificate;
(d)Incumbency Certificates of Borrower. Lender shall have received a
certificate of the Secretary or an Assistant Secretary or other
authorized representative of Borrower, dated the Closing Date, as to
the incumbency and signature of the officers of Borrower executing this
Agreement, any certificate or other documents to be delivered by it
pursuant hereto, together with evidence of the incumbency of such
Secretary or Assistant Secretary or other authorized representative;
(e)Certificates. Lender shall have received a copy of the Certificate
of Incorporation of Borrower, and all amendments thereto, certified by
the Secretary of State or other appropriate official of its jurisdiction
of formation together with copies of the By-Laws of Borrower and all
agreements of Borrower's members certified as accurate and complete by
the Secretary or other authorized representative of Borrower;
(f)Good Standing Certificates. Lender shall have received good standing
certificates for Borrower dated not more than 10 days prior to the
Closing Date, issued by the Secretary of State or other appropriate
official of Borrower's jurisdiction of incorporation and each
jurisdiction where the conduct of Borrower's business activities or the
ownership of its properties necessitates qualification;
"(g)Legal Opinion. Lender shall have received the executed legal
opinions of John D. Arnold, Esq. and Rubenstein, Rudolph, Meyerson,
Blake & Strull in form and substance satisfactory to Lender which shall
cover such matters incident to the transactions contemplated by this
Agreement, the Note, and related agreements as Lender may reasonably
require and Borrower hereby authorizes and directs such counsel to
deliver such opinions to Lender;
(h)No Litigation. No litigation, investigation or proceeding before or
by any arbitrator or Governmental Body shall be continuing or threatened
against Borrower, or against the members, officers or directors of
Borrower or against the Seller or its officers and directors (A) in
connection with the Other Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of Lender, is
deemed material or (B) which could, in the reasonable opinion of Lender,
have a Material Adverse Effect; and no injunction, writ, restraining
order or other order of any nature materially adverse to Borrower or
Seller or the conduct of its business or inconsistent with the due
consummation of the Transactions shall have been issued by any
Governmental Body;
(i)Financial Condition Certificates. Lender shall have received an
executed Financial Condition Certificate in the form of Exhibit 8.1(i).
(j)Collateral Examination. Lender shall have completed Collateral
examinations (including field audits) and received appraisals, the
results of which shall be satisfactory in form and substance to Lenders,
of the Receivables, Inventory, General Intangibles, Real Property ,
Leasehold Interests and Equipment of Borrower and Seller and all books
and records in connection therewith;
(k)Fees. Lender shall have received all fees payable to Lender and
Lenders on or prior to the Closing Date pursuant to Article III hereof ;
(l)Pro Forma Financial Statements. Lender shall have received a copy of
the Pro Forma Financial Statements which shall be satisfactory in all
respects to Lenders;
(m)Acquisition Documents. Lender shall have received final executed
copies of the Acquisition Agreement and all related agreements,
documents and instruments as in effect on the Closing Date and the
transactions contemplated by such documentation shall be consummated
prior to the making of the initial Advance.
(n)Capital Structure. Lender shall have received a certificate signed
by the Chief Financial Officer of the Borrower, in form and substance
satisfactory to Lender, which shall set forth in reasonable detail the
capital structure of the Borrower as at the Closing Date.
(o)Insurance. Lender shall have received in form and substance
satisfactory to Lender, certified copies of Borrower's casualty
insurance policies, together with loss payable endorsements on Lender's
standard form of loss payee endorsement naming Lender as loss payee, and
certified copies of Borrower's liability insurance policies, together
with endorsements naming Lender as a co-insured;
"(p)Stock Pledge Agreement, Other Documents. Lender shall have received
executed Stock Pledge Agreement, Assignment of Patents and all Other
Documents, each in form and substance satisfactory to Lenders;
(q)Environmental Reports. Lender shall have received all environmental
studies and reports prepared by independent environmental engineering
firms with respect to all Real Property owned or leased by Borrower;
(r)Payment Instructions. Lender shall have received written
instructions from Borrower directing the application of proceeds of the
initial Advances made pursuant to this Agreement;
(s)Blocked Accounts. Lender shall have received duly executed
agreements establishing the Blocked Accounts or Depository Accounts with
financial institutions acceptable to Lender for the collection or
servicing of the Receivables and proceeds of the Collateral;
(t)Consents. Lender shall have received any and all Consents necessary
to permit the effectuation of the transactions contemplated by this
Agreement and the Other Documents; and, Lender shall have received such
Consents and waivers of such third parties as might assert claims with
respect to the Collateral, as Lender and its counsel shall deem
necessary;
(u)No Adverse Material Change. (i) since June 30, 1998, there shall not
have occurred any event, condition or state of facts which could
reasonably be expected to have a Material Adverse Effect and (ii) no
representations made or information supplied to Lender shall have been
proven to be inaccurate or misleading in any material respect;
(v)Leasehold Agreements. Lender shall have received landlord, mortgagee
or warehouseman agreements satisfactory to Lender with respect to all
premises leased by Borrower at which Inventory is located;
(w)Contract Review. Lender shall have reviewed all material contracts
of Borrower and Seller including, without limitation, leases, union
contracts, labor contracts, vendor supply contracts, license agreements
and distributorship agreements and such contracts and agreements shall
be satisfactory in all respects to Lender;
(x)Closing Certificate. Lender shall have received a closing
certificate signed by the Chief Financial Officer of Borrower dated as
of the date hereof, stating that (i) all representations and warranties
set forth in this Agreement and the Other Documents are true and correct
on and as of such date, (ii) Borrower is on such date in compliance with
all the terms and provisions set forth in this Agreement and the Other
Documents, (iii) Borrower is on such date in compliance with all
applicable laws, statutes, rules and regulations of any applicable
Governmental Body, and (iv) on such date no Default or Event of Default
has occurred or is continuing;
"(y)Borrowing Base. Lender shall have received evidence from Borrower
that the aggregate amount of Eligible Receivables and Eligible Inventory
is sufficient in value and amount to support Advances in the amount
requested by Borrower on the Closing Date;
(z)Other. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the Transactions
shall be satisfactory in form and substance to Lender and its counsel.
8.2.Conditions to Each Advance. The agreement of Lenders to make any
Advance requested to be made on any date (including, without limitation,
the initial Advance), is subject to the satisfaction of the following
conditions precedent as of the date such Advance is made:
(a)Representations and Warranties. Each of the representations and
warranties made by Borrower in or pursuant to this Agreement and any
related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in
connection with this Agreement or any related agreement shall be true
and correct in all material respects on and as of such date as if made
on and as of such date;
(b)No Default. No Event of Default or Default shall have occurred and
be continuing on such date, or would exist after giving effect to the
Advances requested to be made, on such date and, in the case of the
initial Advance, after giving effect to the consummation of the
transactions contemplated by the Acquisition Agreement; provided,
however that Lenders, in their sole discretion, may continue to make
Advances notwithstanding the existence of an Event of Default or Default
and that any Advances so made shall not be deemed a waiver of any such
Event of Default or Default; and
(c)Maximum Advances. In the case of any Advances requested to be made,
after giving effect thereto, the aggregate Advances shall not exceed the
maximum amount of Advances permitted under Section 2.1 hereof.
Each request for an Advance by Borrower hereunder shall constitute a
representation and warranty by Borrower as of the date of such Advance
that the conditions contained in this subsection shall have been
satisfied.
IX.INFORMATION AS TO BORROWER.
Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:
"9.1.Disclosure of Material Matters. Immediately upon learning thereof,
report to Lender all matters materially affecting the value,
enforceability or collectibility of any portion of the Collateral
including, without limitation, Borrower's reclamation or repossession
of, or the return to Borrower of, a material amount of goods or claims
or disputes asserted by any Customer or other obligor.
9.2.Schedules. Deliver to Lender on or before the twentieth (20th) day
of each month as and for the prior month (a) accounts receivable
ageings, (b) accounts payable schedules and (c) Inventory reports. In
addition, Borrower will deliver to Lender at such intervals as Lender
may require: (i) confirmatory assignment schedules, (ii) copies of
Customer's invoices, (iii) evidence of shipment or delivery, and (iv)
such further schedules, documents and/or information regarding the
Collateral as Lender may require including, without limitation, trial
balances and test verifications. Lender shall have the right to confirm
and verify all Receivables by any manner and through any medium it
considers advisable and do whatever it may deem reasonably necessary to
protect its interests hereunder. The items to be provided under this
Section are to be in form satisfactory to Lender and executed by
Borrower and delivered to Lender from time to time solely for Lender's
convenience in maintaining records of the Collateral, and Borrower's
failure to deliver any of such items to Lender shall not affect,
terminate, modify or otherwise limit Lender's Lien with respect to the
Collateral.
9.3.Environmental Reports. Furnish Lender, concurrently with the
delivery of the financial statements referred to in Sections 9.7 and
9.8, with a certificate signed by the President or Manager of Borrower
stating, to the best of his knowledge, that Borrower is in compliance
in all material respects with all federal, state and local laws relating
to environmental protection and control and occupational safety and
health. To the extent Borrower is not in compliance with the foregoing
laws, the certificate shall set forth with specificity all areas of non-
compliance and the proposed action Borrower will implement in order to
achieve full compliance.
9.4.Litigation. Promptly notify Lender in writing of any litigation,
suit or administrative proceeding affecting Borrower, whether or not
the claim is covered by insurance, and of any suit or administrative
proceeding, which in any such case could reasonably be expected to have
a Material Adverse Effect on Borrower.
9.5.Material Occurrences. Promptly notify Lender in writing upon the
occurrence of (a) any Event of Default or Default; (b) any event,
development or circumstance whereby any financial statements or other
reports furnished to Lender fail in any material respect to present
fairly, in accordance with GAAP consistently applied, the financial
condition or operating results of Borrower as of the date of such
statements; (c) any accumulated retirement plan funding deficiency
which, if such deficiency continued for two plan years and was not
corrected as provided in Section 4971 of the Code, could subject
Borrower to a tax imposed by Section 4971 of the Code; (d) each and
every default by Borrower which might result in the acceleration of the
maturity of any Indebtedness, including the names and addresses of the
holders of such Indebtedness with respect to which there is a default
existing or with respect to which the maturity has been or could be
accelerated, and the amount of such Indebtedness; and (e) any other
development in the business or affairs of Borrower which could
reasonably be expected to have a Material Adverse Effect; in each case
describing the nature thereof and the action Borrower proposes to take
with respect thereto.
"9.6.Government Receivables. Notify Lender immediately if any of its
Receivables arise out of contracts between Borrower and the United
States, any state, or any department, agency or instrumentality of any
of them.
9.7.Annual Financial Statements. Furnish Lender within ninety (90) days
after the end of each fiscal year of Borrower, financial statements of
Borrower including, but not limited to, statements of income and
stockholders' or members' equity and cash flow from the beginning of the
current fiscal year to the end of such fiscal year and the balance sheet
as at the end of such fiscal year, all prepared in accordance with GAAP
applied on a basis consistent with prior practices, and in reasonable
detail and reported upon without qualification by an independent
certified public accounting firm selected by Borrower and satisfactory
to Lender (the "Accountants") together with the Borrower's annual 10k
audit. The report of the Accountants shall be accompanied by a
statement of the Accountants certifying that (i) they have caused the
Loan Agreement to be reviewed, (ii) in making the examination upon which
such report was based either no information came to their attention
which to their knowledge constituted an Event of Default or a Default
under this Agreement or any related agreement or, if such information
came to their attention, specifying any such Default or Event of
Default, its nature, when it occurred and whether it is continuing, and
such report shall contain or have appended thereto calculations which
set forth Borrower's compliance with the requirements or restrictions
imposed by Sections 6.5, 6.6, 6.7, 6.8, 7.6 and 7.11 hereof. In
addition, the reports shall be accompanied by a certificate of
Borrower's Chief Financial Officer which shall state that, based on an
examination sufficient to permit him to make an informed statement, no
Default or Event of Default exists, or, if such is not the case,
specifying such Default or Event of Default, its nature, when it
occurred, whether it is continuing and the steps being taken by Borrower
with respect to such event, and such certificate shall have appended
thereto calculations which set forth Borrower's compliance with the
requirements or restrictions imposed by Sections 6.5, 6.6, 6.7, 6.8, 7.6
and 7.11 hereof.
9.8.Quarterly Financial Statements. Furnish Lender within 60 days after
the end of each fiscal quarter, an unaudited balance sheet of Borrower
and unaudited statements of income and stockholders' or members' equity
and cash flow of Borrower reflecting results of operations from the
beginning of the fiscal year to the end of such quarter and for such
quarter, prepared on a basis consistent with prior practices and
complete and correct in all material respects, subject to normal year
end adjustments, internally prepared quarterly consolidating statements
for each of the three quarters of June, September and December and
fiscal year end March, together with Borrower's quarterly 10-Q report.
The reports shall be accompanied by a certificate signed by the Chief
Financial Officer of Borrower, which shall state that, based on an
examination sufficient to permit him to make an informed statement, no
Default or Event of Default exists, or, if such is not the case,
specifying such Default or Event of Default, its nature, when it
occurred, whether it is continuing and the steps being taken by Borrower
with respect to such default and, such certificate shall have appended
thereto calculations which set forth Borrower's compliance with the
requirements or restrictions imposed by Sections 6.5, 6.6, 6.7, 6.8, 7.6
and 7.11 hereof.
"9.9.Other Reports. Furnish Lender as soon as available, but in any
event within ten (10) days after the issuance thereof, with copies of
such financial statements, reports and returns as each Borrower shall
send to its stockholders. Furnish Lender with post closing due
diligence report performed by Grant Thornton within ten (10) days of
issuance of such report. Furnish Lender with two (2) years of audited
fiscal statements and as of the Closing Date an interim audit of AMP
Sensors Division prepared by Arthur Anderson within ninety (90) days of
the Closing Date. Furnish Lender within one hundred fifty (150) days
after the end of each fiscal year of Borrower, consolidated and
consolidating financial projections of the Borrower's operations on a
monthly basis for each fiscal year, all in reasonable detail and in such
form as the Lender may require and prepared by the Borrower's Chief
Financial Officer.
9.10.Additional Information. Furnish Lender with such additional
information as Lender shall reasonably request in order to enable Lender
to determine whether the terms, covenants, provisions and conditions of
this Agreement and the Notes have been complied with by Borrower
including, without limitation and without the necessity of any request
by Lender, (a) copies of all environmental audits and reviews, (b) at
least thirty (30) days prior thereto, notice of Borrower's opening of
any new office or place of business or Borrower's closing of any
existing office or place of business, and (c) promptly upon Borrower's
learning thereof, notice of any labor dispute to which Borrower may
become a party, any strikes or walkouts relating to any of its plants or
other facilities, and the expiration of any labor contract to which
Borrower is a party or by which Borrower is bound.
9.11.Notice of Suits, Adverse Events. Furnish Lender with prompt notice
of (i) any lapse or other termination of any Consent issued to Borrower
by any Governmental Body or any other Person that is material to the
operation of Borrower's business, (ii) any refusal by any Governmental
Body or any other Person to renew or extend any such Consent; (iii)
copies of any periodic or special reports filed by Borrower with any
Governmental Body or Person, if such reports indicate any material
change in the business, operations, affairs or condition of Borrower,
or if copies thereof are requested by Lender, and (iv) copies of any
material notices and other communications from any Governmental Body or
Person which specifically relate to Borrower.
"9.12.ERISA Notices and Requests. Furnish Lender with immediate written
notice in the event that (i) Borrower or any member of the Controlled
Group knows or has reason to know that a Termination Event has occurred,
together with a written statement describing such Termination Event and
the action, if any, which Borrower or member of the Controlled Group
has taken, is taking, or proposes to take with respect thereto and, when
known, any action taken or threatened by the Internal Revenue Service,
Department of Labor or PBGC with respect thereto, (ii) Borrower or any
member of the Controlled Group knows or has reason to know that a
prohibited transaction (as defined in Sections 406 of ERISA and 4975 of
the Code) has occurred together with a written statement describing such
transaction and the action which such Borrower or any member of the
Controlled Group has taken, is taking or proposes to take with respect
thereto, (iii) a funding waiver request has been filed with respect to
any Plan together with all communications received by Borrower or any
member of the Controlled Group with respect to such request, (iv) any
increase in the benefits of any existing Plan or the establishment of
any new Plan or the commencement of contributions to any Plan to which
Borrower or any member of the Controlled Group was not previously
contributing shall occur, (v) Borrower or any member of the Controlled
Group shall receive from the PBGC a notice of intention to terminate a
Plan or to have a trustee appointed to administer a Plan, together with
copies of each such notice, (vi) Borrower or any member of the
Controlled Group shall receive any favorable or unfavorable
determination letter from the Internal Revenue Service regarding the
qualification of a Plan under Section 401(a) of the Code, together with
copies of each such letter; (vii) Borrower or any member of the
Controlled Group shall receive a notice regarding the imposition of
withdrawal liability, together with copies of each such notice; (viii)
Borrower or any member of the Controlled Group shall fail to make a
required installment or any other required payment under Section 412 of
the Code on or before the due date for such installment or payment; (ix)
Borrower or any member of the Controlled Group knows that (a) a
Multiemployer Plan has been terminated, (b) the administrator or plan
sponsor of a Multiemployer Plan intends to terminate a Multiemployer
Plan, or (c) the PBGC has instituted or will institute proceedings under
Section 4042 of ERISA to terminate a Multiemployer Plan.
9.13.Additional Documents. Execute and deliver to Lender, upon request,
such documents and agreements as Lender may, from time to time,
reasonably request to carry out the purposes, terms or conditions of
this Agreement.
X.EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
10.1.Failure by Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration
pursuant to the terms of this Agreement or by notice of intention to
prepay, or by required prepayment or failure to pay any other
liabilities or make any other payment, fee or charge provided for herein
when due or in any Other Document;
10.2.Any representation or warranty made or deemed made by Borrower in
this Agreement or any related agreement or in any certificate, document
or financial or other statement furnished at any time in connection
herewith or therewith shall prove to have been misleading in any
material respect on the date when made or deemed to have been made;
10.3.Failure by Borrower to (i) furnish financial information when due
or when requested which is unremedied for a period of fifteen (15) days,
or (ii) permit the inspection of its books or records;
10.4.Issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of Borrower's property which is
not stayed or lifted within forty (40) days;
"10.5.Except as otherwise provided for in Sections 10.1 and 10.3,
failure or neglect of Borrower to perform, keep or observe any term,
provision, condition, covenant herein contained, or contained in any
other agreement or arrangement, now or hereafter entered into between
Borrower and Lender or any Lender except for a failure or neglect of
Borrower to perform, keep or observe any term, provision, condition or
covenant, contained in Sections 4.6, 4.7, 4.9, 4.11, 6.1, 6.3, 6.4, 9.4
or 9.6 hereof which is cured within 30 days from the occurrence of such
failure or neglect;
10.6.Any judgment or judgments are rendered or judgment liens filed
against Borrower for an aggregate amount in excess of $150,000 unless
such are contested in good faith, Borrower has established adequate
reserves in the judgment of the Lender and the Lenders and which within
forty (40) days of such rendering or filing is not either satisfied,
stayed or discharged of record;
10.7.Borrower shall (i) apply for, consent to or suffer the appointment
of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial
part of its property, (ii) make a general assignment for the benefit of
creditors, (iii) commence a voluntary case under any state or federal
bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a
bankrupt or insolvent, (v) file a petition seeking to take advantage of
any other law providing for the relief of debtors, (vi) acquiesce to, or
fail to have dismissed, within sixty (60) days, any petition filed
against it in any involuntary case under such bankruptcy laws, or (vii)
take any action for the purpose of effecting any of the foregoing;
10.8.Borrower shall admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its
present business;
10.9.Any Affiliate or any Subsidiary of Borrower, shall (i) apply for,
consent to or suffer the appointment of, or the taking of possession by,
a receiver, custodian, trustee, liquidator or similar fiduciary of
itself or of all or a substantial part of its property, (ii) admit in
writing its inability, or be generally unable, to pay its debts as they
become due or cease operations of its present business, (iii) make a
general assignment for the benefit of creditors, (iv) commence a
voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi)
file a petition seeking to take advantage of any other law providing for
the relief of debtors, (vii) acquiesce to, or fail to have dismissed,
within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action
for the purpose of effecting any of the foregoing;
10.10.Any change in Borrower's condition or affairs (financial or
otherwise) which in Lender's opinion has a Material Adverse Effect;
10.11.Any Lien created hereunder or provided for hereby or under any
related agreement for any reason ceases to be or is not a valid and
perfected Lien having a first priority interest;
10.12.A default of the obligations of Borrower under any other
agreement to which it is a party shall occur which adversely affects its
condition, affairs or prospects (financial or otherwise) which default
is not cured within any applicable grace period;
10.13.Any Change of Control shall occur;
"10.14.Any material provision of this Agreement shall, for any reason,
cease to be valid and binding on Borrower, or Borrower shall so claim in
writing to Lender;
10.15.any Governmental Body shall (A) revoke, terminate, suspend or
adversely modify any license, permit, patent trademark or tradename of
Borrower, or (B) commence proceedings to suspend, revoke, terminate or
adversely modify any such license, permit, trademark, tradename or
patent and such proceedings shall not be dismissed or discharged within
sixty (60) days, or (c) schedule or conduct a hearing on the renewal of
any license, permit, trademark, tradename or patent necessary for the
continuation of Borrower's business and the staff of such Governmental
Body issues a report recommending the termination, revocation,
suspension or material, adverse modification of such license, permit,
trademark, tradename or patent and any such revocation, termination or
other action would reasonably be expected to have a Material Adverse
Effect on Borrower;
10.16any agreement which is necessary or material to the operation of
Borrower's business shall be revoked or terminated and not replaced by a
substitute acceptable to Lender within thirty (30) days after the date
of such revocation or termination, and such revocation or termination
and non-replacement would reasonably be expected to have a Material
Adverse Effect on Borrower;
10.17.Any portion of the Collateral shall be seized or taken by a
Governmental Body, or Borrower or the title and rights of Borrower or
any Original Owner which is the owner of any material portion of the
Collateral shall have become the subject matter of litigation which
might, in the opinion of Lender, upon final determination, result in
impairment or loss of the security provided by this Agreement or the
Other Documents;
10.18.An event or condition specified in Sections 7.16 or 9.15 hereof
shall occur or exist with respect to any Plan and, as a result of such
event or condition, together with all other such events or conditions,
Borrower or any member of the Controlled Group shall incur, or in the
opinion of Lender be reasonably likely to incur, a liability to a Plan
or the PBGC (or both) which, in the reasonable judgment of Lender, would
have a Material Adverse Effect on Borrower.
XI.LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
"11.1.Rights and Remedies. Upon the occurrence of (i) an Event of
Default pursuant to Section 10.7 all Obligations shall be immediately
due and payable and this Agreement and the obligation of Lenders to make
Advances shall be deemed terminated; and, (ii) any of the other Events
of Default and at any time thereafter (such default not having
previously been cured), at the option of Required Lenders all
Obligations shall be immediately due and payable and Lenders shall have
the right to terminate this Agreement and to terminate the obligation of
Lenders to make Advances and (iii) a filing of a petition against
Borrower in any involuntary case under any state or federal bankruptcy
laws, the obligation of Lenders to make Advances hereunder shall be
terminated other than as may be required by an appropriate order of the
bankruptcy court having jurisdiction over Borrower. Upon the
occurrence of any Event of Default, Lender shall have the right to
exercise any and all other rights and remedies provided for herein,
under the Uniform Commercial Code and at law or equity generally,
including, without limitation, the right to foreclose the security
interests granted herein and to realize upon any Collateral by any
available judicial procedure and/or to take possession of and sell any
or all of the Collateral with or without judicial process. Lender may
enter any of Borrower's premises or other premises without legal process
and without incurring liability to Borrower therefor, and Lender may
thereupon, or at any time thereafter, in its discretion without notice
or demand, take the Collateral and remove the same to such place as
Lender may deem advisable and Lender may require Borrower to make the
Collateral available to Lender at a convenient place. With or without
having the Collateral at the time or place of sale, Lender may sell the
Collateral, or any part thereof, at public or private sale, at any time
or place, in one or more sales, at such price or prices, and upon such
terms, either for cash, credit or future delivery, as Lender may elect.
Except as to that part of the Collateral which is perishable or
threatens to decline speedily in value or is of a type customarily sold
on a recognized market, Lender shall give Borrower reasonable
notification of such sale or sales, it being agreed that in all events
written notice mailed to Borrower at least five (5) days prior to such
sale or sales is reasonable notification. At any public sale Lender
may bid for and become the purchaser, and Lender or any other purchaser
at any such sale thereafter shall hold the Collateral sold absolutely
free from any claim or right of whatsoever kind, including any equity of
redemption and such right and equity are hereby expressly waived and
released by Borrower. In connection with the exercise of the foregoing
remedies, Lender is granted permission to use all of Borrower's
trademarks, trade styles, trade names, patents, patent applications,
licenses, franchises and other proprietary rights which are used in
connection with (a) Inventory for the purpose of disposing of such
Inventory and (b) Equipment for the purpose of completing the
manufacture of unfinished goods. The proceeds realized from the sale of
any Collateral shall be applied as follows: first, to the reasonable
costs, expenses and attorneys' fees and expenses incurred by Lender for
collection and for acquisition, completion, protection, removal,
storage, sale and delivery of the Collateral; second, to interest due
upon any of the Obligations and any fees payable under this Agreement;
and, third, to the principal of the Obligations. If any deficiency
shall arise, Borrower shall remain liable to Lender therefor.
11.2.Lender's Discretion. Lender shall have the right in its sole
discretion to determine which rights, Liens, security interests or
remedies Lender may at any time pursue, relinquish, subordinate, or
modify or to take any other action with respect thereto and such
determination will not in any way modify or affect any of Lender's
rights hereunder.
11.3.Setoff. In addition to any other rights which Lender may have
under applicable law, upon the occurrence of an Event of Default
hereunder, Lender shall have a right to apply Borrower's property held
by Lender to reduce the Obligations.
11.4Rights and Remedies not Exclusive. The enumeration of the foregoing
rights and remedies is not intended to be exhaustive and the exercise of
any right or remedy shall not preclude the exercise of any other right
or remedies provided for herein or otherwise provided by law, all of
which shall be cumulative and not alternative.
"XII.WAIVERS AND JUDICIAL PROCEEDINGS.
12.1.Waiver of Notice. Borrower hereby waives notice of non-payment of
any of the Receivables, demand, presentment, protest and notice thereof
with respect to any and all instruments, notice of acceptance hereof,
notice of loans or advances made, credit extended, Collateral received
or delivered, or any other action taken in reliance hereon, and all
other demands and notices of any description, except such as are
expressly provided for herein.
12.2Delay. No delay or omission on Lender's or any Lender's part in
exercising any right, remedy or option shall operate as a waiver of such
or any other right, remedy or option or of any default.
12.3Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR
(B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS
OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
XIII.EFFECTIVE DATE AND TERMINATION.
13.1.Term. This Agreement, which shall inure to the benefit of and
shall be binding upon the respective successors and permitted assigns of
Borrower, and Lender, shall become effective on the date hereof and
shall continue in full force and effect until November 1,2003 (the
"Term") unless sooner terminated as herein provided. Borrower may
terminate this Agreement at any time upon ninety (90) days' prior
written notice upon payment in full of the Obligations.
"13.2.Termination. The termination of the Agreement shall not affect
Borrower's, Lender's or any of the Obligations having their inception
prior to the effective date of such termination, and the provisions
hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully
disposed of, concluded or liquidated. The security interests, Liens and
rights granted to Lender hereunder and the financing statements filed
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrower's Account may
from time to time be temporarily in a zero or credit position, until all
of the Obligations of Borrower have been paid or performed in full
after the termination of this Agreement or Borrower has furnished Lender
with an indemnification satisfactory to Lender with respect thereto.
Accordingly, Borrower waives any rights which it may have under Section
9-404(1) of the Uniform Commercial Code to demand the filing of
termination statements with respect to the Collateral, and Lender shall
not be required to send such termination statements to Borrower, or to
file them with any filing office, unless and until this Agreement shall
have been terminated in accordance with its terms and all Obligations
paid in full in immediately available funds. All representations,
warranties, covenants, waivers and agreements contained herein shall
survive termination hereof until all Obligations are paid or performed
in full.
XIV.MISCELLANEOUS.
14.1.Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey applied to
contracts to be performed wholly within the State of New Jersey. Any
judicial proceeding brought by or against Borrower with respect to any
of the Obligations, this Agreement or any related agreement may be
brought in any court of competent jurisdiction in the State of New
Jersey, United States of America, and, by execution and delivery of
this Agreement, Borrower accepts for itself and in connection with its
properties, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts, and irrevocably agrees to be bound
by any judgment rendered thereby in connection with this Agreement.
Borrower hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by registered
mail (return receipt requested) directed to Borrower at its address set
forth in Section 14.6 and service so made shall be deemed completed five
(5) days after the same shall have been so deposited in the mails of the
United States of America. Nothing herein shall affect the right to
serve process in any manner permitted by law or shall limit the right of
Lender to bring proceedings against Borrower in the courts of any other
jurisdiction. Borrower waives any objection to jurisdiction and venue
of any action instituted hereunder and shall not assert any defense
based on lack of jurisdiction or venue or based upon forum non
conveniens. Any judicial proceeding by Borrower against Lender
involving, directly or indirectly, any matter or claim in any way
arising out of, related to or connected with this Agreement or any
related agreement, shall be brought only in a federal or state court
located in the State of New Jersey.
"14.2.Entire Understanding. This Agreement and the documents executed
concurrently herewith contain the entire understanding between Borrower
and Lender and supersedes all prior agreements and understandings, if
any, relating to the subject matter hereof. Any promises,
representations, warranties or guarantees not herein contained and
hereinafter made shall have no force and effect unless in writing,
signed by Borrower and Lender's respective officers. Neither this
Agreement nor any portion or provisions hereof may be changed, modified,
amended, waived, supplemented, discharged, canceled or terminated orally
or by any course of dealing, or in any manner other than by an agreement
in writing, signed by the party to be charged. Borrower acknowledges
that it has been advised by counsel in connection with the execution of
this Agreement and Other Documents and is not relying upon oral
representations or statements inconsistent with the terms and provisions
of this Agreement.
14.3.Successors and Assigns; Participations; New Lenders.
(a)This Agreement shall be binding upon and inure to the benefit of
Borrower, Lender, all future holders of the Obligations and their
respective successors and assigns, except that Borrower may not assign
or transfer any of its rights or obligations under this Agreement
without the prior written consent of Lender.
(b)Borrower acknowledges that in the regular course of commercial
banking business one or more Lenders may at any time and from time to
time sell participating interests in the Advances to other financial
institutions (each such transferee or purchaser of a participating
interest, a "Transferee"). Each Transferee may exercise all rights of
payment (including without limitation rights of set-off) with respect to
the portion of such Advances held by it or other Obligations payable
hereunder as fully as if such Transferee were the direct holder thereof
provided that Borrower shall not be required to pay to any Transferee
more than the amount which it would have been required to pay to Lender
which granted an interest in its Advances or other Obligations payable
hereunder to such Transferee had such Lender retained such interest in
the Advances hereunder or other Obligations payable hereunder and in no
event shall Borrower be required to pay any such amount arising from the
same circumstances and with respect to the same Advances or other
Obligations payable hereunder to both such Lender and such Transferee.
Borrower hereby grants to any Transferee a continuing security interest
in any deposits, moneys or other property actually or constructively
held by such Transferee as security for the Transferee's interest in the
Advances.
14.4.Application of Payments. Lender shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and
all proceeds of Collateral to any portion of the Obligations. To the
extent that Borrower makes a payment or Lender receives any payment or
proceeds of the Collateral for Borrower's benefit, which are
subsequently invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid to a trustee, debtor in possession,
receiver, custodian or any other party under any bankruptcy law, common
law or equitable cause, then, to such extent, the Obligations or part
thereof intended to be satisfied shall be revived and continue as if
such payment or proceeds had not been received by Lender.
14.5.Indemnity. Borrower shall indemnify Lender and its officers,
directors, Affiliates, employees and Lender from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, fees and disbursements
of counsel) which may be imposed on, incurred by, or asserted against
Lender in any litigation, proceeding or investigation instituted or
conducted by any governmental agency or instrumentality or any other
Person with respect to any aspect of, or any transaction contemplated
by, or referred to in, or any matter related to, this Agreement or the
Other Documents, whether or not Lender is a party thereto, except to
the extent that any of the foregoing arises out of the willful
misconduct of the party being indemnified.
"14.6Notice. Any notice or request hereunder may be given to Borrower
or to Lender at their respective addresses set forth below or at such
other address as may hereafter be specified in a notice designated as a
notice of change of address under this Section. Any notice or request
hereunder shall be given by (a) hand delivery, (b) overnight courier,
(c) registered or certified mail, return receipt requested, (d) telex or
telegram, subsequently confirmed by registered or certified mail, or (e)
telecopy to the number set out below (or such other number as may
hereafter be specified in a notice designated as a notice of change of
address) during business hours with electronic confirmation of its
receipt. Any notice or other communication required or permitted
pursuant to this Agreement shall be deemed given (a) when personally
delivered to any officer of the party to whom it is addressed, (b) on
the earlier of actual receipt thereof or three (3) days following
posting thereof by certified or registered mail, postage prepaid, or (c)
upon actual receipt thereof when sent by a recognized overnight delivery
service or (d) upon actual receipt thereof when sent by telecopier to
the number set forth below with electronic confirmation of its receipt,
in each case addressed to each party at its address set forth below or
at such other address as has been furnished in writing by a party to the
other by like notice:
(A) If to Lender at PNC Bank, National Association
PNC at:1 Garret Mountain Plaza
West Paterson, New Jersey 07424
Attention: Janet Kutzman, Vice President
Telephone: (973) 881-5487
Telecopier: (973) 881-5288
with a copy to:Sills Cummis Zuckerman Radin Tischman Epstein & Gross
One Riverfront Plaza
Newark, New Jersey 07102
Attention: Diane M. Lavenda, Esq.
Telephone: (973) 643-7000
Telecopier: (973) 643-6500
(B)If to Borrower at:
Measurement Specialties, Inc.
80 Little Falls Road
Fairfield, New Jersey 07004
Attention: Joseph R. Mallon, Jr., CEO
Telephone: (973) 808-1819
Telecopier: (973) 808-1787
"with a copy to:Rubenstein, Rudolph, Meyerson, Blake & Strull
169 Ramapo Valley Road
Oakland, New Jersey 07436
Attention: Michael C. Rudolph, Esq.
Telephone: (201) 337-5805
Telecopier: (201) 337-2280
14.7.Survival. The obligations of Borrower under Sections 2.2(f), 3.6,
3.7, 3.8, 4.19(h), and 14.5 shall survive termination of this Agreement
and the Other Documents and payment in full of the Obligations.
14.8.Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations,
such provision shall be inapplicable and deemed omitted to the extent so
contrary, prohibited or invalid, but the remainder hereof shall not be
invalidated thereby and shall be given effect so far as possible.
14.9.Expenses. All costs and expenses including, without limitation,
reasonable attorneys' fees (including the allocated costs of in house
counsel) and disbursements incurred by Lender (a) in all efforts made to
enforce payment of any Obligation or effect collection of any
Collateral, or (b) in connection with the entering into, modification,
amendment, administration and enforcement of this Agreement or any
consents or waivers hereunder and all related agreements, documents and
instruments (including appraisal, audit, search and filing fees), or (c)
in instituting, maintaining, preserving, enforcing and foreclosing on
Lender's security interest in or Lien on any of the Collateral, whether
through judicial proceedings or otherwise, or (d) in defending or
prosecuting any actions or proceedings arising out of or relating to
Lender's transactions with Borrower, or (e) in connection with any
advice given to Lender with respect to its rights and obligations under
this Agreement and all related agreements, may be charged to Borrower's
Account and shall be part of the Obligations.
14.10.Injunctive Relief. Borrower recognizes that, in the event
Borrower fails to perform, observe or discharge any of its obligations
or liabilities under this Agreement, any remedy at law may prove to be
inadequate relief to Lender; therefore, Lender, if Lender so requests,
shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving that actual damages are not
an adequate remedy.
14.11.Consequential Damages. Neither Lender, nor any attorney for it
shall be liable to Borrower for consequential damages arising from any
breach of contract, tort or other wrong relating to the establishment,
administration or collection of the Obligations.
14.12.Captions. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be
interpreted as part of this Agreement.
"14.13.Counterparts; Telecopied Signatures. This Agreement may be
executed in any number of and by different parties hereto on separate
counterparts, all of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same
agreement. Any signature delivered by a party by facsimile transmission
shall be deemed to be an original signature hereto.
14.14.Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation
of this Agreement or any amendments, schedules or exhibits thereto.
14.15.Confidentiality; Sharing Information. (a) Lender and each
Transferee shall hold all non-public information obtained by Lender, or
such Transferee pursuant to the requirements of this Agreement in
accordance with Lender's, such Lender's and such Transferee's customary
procedures for handling confidential information of this nature;
provided, however, Lender and each Transferee may disclose such
confidential information (a) to its examiners, affiliates, outside
auditors, counsel and other professional advisors, (b) to Lender or to
any prospective Transferees and Purchasing Lenders, and (c) as required
or requested by any Governmental Body or representative thereof or
pursuant to legal process; provided, further that (i) unless
specifically prohibited by applicable law or court order, Lender and
each Transferee shall use its best efforts prior to disclosure thereof,
to notify the Borrower of the applicable request for disclosure of such
non-public information (A) by a Governmental Body or representative
thereof (other than any such request in connection with an examination
of the financial condition of a Lender or a Transferee by such
Governmental Body) or (B) pursuant to legal process and (ii) in no event
shall Lender, any Lender or any Transferee be obligated to return any
materials furnished by Borrower other than those documents and
instruments in possession of Lender or any Lender in order to perfect
its Lien on the Collateral once the Obligations have been paid in full
and this Agreement has been terminated.
(b)Borrower acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided to
Borrower or one or more of its Affiliates (in connection with this
Agreement or otherwise) by Lender or by one or more Subsidiaries or
Affiliates of Lender and Borrower hereby authorizes Lender to share any
information delivered to Lender by Borrower and its Subsidiaries
pursuant to this Agreement, or in connection with the decision of Lender
to enter into this Agreement, to any such Subsidiary or Affiliate of
Lender, it being understood that any such Subsidiary or Affiliate of
Lender receiving such information shall be bound by the provision of
Section 14.15 as if it were a Lender hereunder. Such authorization
shall survive the repayment of the other Obligations and the termination
of the Loan Agreement.
14.16.Publicity. Borrower hereby authorizes Lender to make appropriate
announcements, with prior notice to Borrower, of the financial
arrangement entered into between Borrower and Lender, including, without
limitation, announcements which are commonly known as tombstones, in
such publications and to such selected parties as Lender shall in its
sole and absolute discretion deem appropriate.
"Each of the parties has signed this Agreement as of the day and year
first above written.
[SEAL]MEASUREMENT SPECIALTIES, INC.
ATTEST:
By:_______________________________
________________________Name: Joseph R. Mallon, Jr.
Kirk Dischino Title: Chief Executive Officer
Assistant Secretary
PNC BANK, NATIONAL ASSOCIATION, as Lender
By:_______________________________
Name: Janet Kutzman
Title: Vice President
"List of Exhibits and Schedules
Exhibits
Exhibit 2.1(a) Revolving Credit Note
Exhibit 2.1(b)Borrowing Base Certificate
Exhibit 2.4Term Note
Exhibit 5.5(b) Financial Projections
Exhibit 8.1(i) Financial Condition Certificate
Schedules
Schedule 1.2(a)Leasehold Interests
Schedule 1.2 (b)Permitted Encumbrances
Schedule 3.3Registration Rights
Schedule 4.5 Equipment and Inventory Locations
Schedule 4.15(c)Location of Executive Offices
Schedule 4.19Real Property
Schedule 5.2(a) States of Qualification and Good Standing
Schedule 5.2(b)Subsidiaries
Schedule 5.4Federal Tax Identification Number
Schedule 5.6 Prior Names
Schedule 5.7 Environmental
Schedule 5.8(b) Litigation
Schedule 5.8(d) Plans
Schedule 5.9 Intellectual Property, Source Code Escrow Agreements
Schedule 5.10 Licenses and Permits
Schedule 5.14 Labor Disputes
"Schedule 1.2
(a) Schedule of Leasehold Interests
(b)Schedule of Permitted Encumbrances
"Schedule 1.2A
Original Owners
"Schedule 4.5
Equipment and Inventory Locations
"Schedule 4.15(c)
Location of Executive Offices
"
Schedule 4.19
Real Property
"Schedule 5.2(a)
States of Qualification and Good Standing
"Schedule 5.2(b)
Subsidiaries
"Schedule 5.4
Federal Tax Identification Number
"Schedule 5.6
Prior Names
"Schedule 5.8(b)
Litigation
"Schedule 5.8(d)
Plans
"Schedule 5.9
Intelectual Property
"Schedule 5.10
Licenses and Permits
"Schedule 5.14
Labor Disputes
"TABLE OF CONTENTS
I.DEFINITIONS-1-
1.1.Accounting Terms-1-
1.2.General Terms-1-
1.3.Uniform Commercial Code Terms-19-
1.4.Certain Matters of Construction-19-
II.ADVANCES, PAYMENTS-20-
2.1.(a)Revolving Advances-20-
(b)Borrowing Base Certificate-20-
(c)Discretionary Rights-21-
2.2.Procedure for Revolving Advances Borrowing-21-
2.3.Disbursement of Advance Proceeds-23-
2.4.Term Loan-23-
2.5.Maximum Advances-24-
2.6.Repayment of Advances-24-
2.7.Repayment of Excess Advances-24-
2.8.Statement of Account-24-
2.9.Additional Payments-28-
2.10.Manner of Borrowing and Payment-28-
2.11.Mandatory Prepayments-30-
2.12.Use of Proceeds-31-
2.13.Defaulting Lender-31-
III.INTEREST AND FEES-32-
3.1.Interest-32-
3.2.(a)Closing Fee-33-
(b)Facility Fee-33-
3.3.(a)Collateral Evaluation Fee-34-
(b)Collateral Monitoring Fee-34-
3.4.Computation of Interest and Fees-34-
3.5.Maximum Charges-34-
3.6.Increased Costs-34-
3.7.Basis For Determining Interest Rate Inadequate or Unfair-35-
3.8.Capital Adequacy-36-
IV.COLLATERAL: GENERAL TERMS-37-
4.1.Security Interest in the Collateral-37-
4.2.Perfection of Security Interest-37-
4.3.Disposition of Collateral-37-
4.4.Preservation of Collateral-38-
4.5.Ownership of Collateral-38-
4.6.Defense of Agent's and Lenders' Interests-38-
4.7.Books and Records-39-
4.8.Financial Disclosure-39-
4.9.Compliance with Laws-39-
4.10.Inspection of Premises-40-
4.11.Insurance-40-
4.12.Failure to Pay Insurance-41-
4.13.Payment of Taxes-41-
4.14.Payment of Leasehold Obligations-42-
4.15.Receivables-42-
(a)Nature of Receivables-42-
(b)Solvency of Customers-42-
(c)Locations of Borrower-42-
(d)Collection of Receivables-43-
(e)Notification of Assignment of Receivables-43-
(f)Power of Agent to Act on Borrower's Behalf-43-
(g)No Liability-44-
(h)Establishment of a Lockbox Account, Dominion Account-44-
(i)Adjustments-44-
4.16.Inventory-45-
4.17.Maintenance of Equipment-45-
4.18.Exculpation of Liability-45-
4.19.Environmental Matters-45-
4.20.Financing Statements-47-
V.REPRESENTATIONS AND WARRANTIES-47-
5.1.Authority-47-
5.2.Formation and Qualification-48-
5.3.Survival of Representations and Warranties-48-
5.4.Tax Returns-48-
5.5.Financial Statements-48-
5.6.Corporate Name-49-
5.7.O.S.H.A. and Environmental Compliance-50-
5.8.Solvency; No Litigation, Violation, Indebtedness or Default-50-
5.9.Patents, Trademarks, Copyrights and Licenses-51-
5.10.Licenses and Permits-52-
5.12.No Default-52-
5.13.No Burdensome Restrictions-52-
5.14.No Labor Disputes-52-
5.15.Margin Regulations-52-
5.16.Investment Company Act-53-
5.17.Disclosure-53-
5.18.Delivery of Acquisition Agreement-53-
5.19.Swaps-53-
5.20.Conflicting Agreements-53-
5.21.Application of Certain Laws and Regulations-53-
5.22.Business and Property of Borrower-54-
5.23Year 2000
5.24Bankruptcy Court Order
VI.AFFIRMATIVE COVENANTS-54-
6.1.Payment of Fees-54-
6.2.Conduct of Business and Maintenance of Existence and Assets-54-
6.3.Violations-54-
6.4.Government Receivables-54-
6.5.Net Worth-55-
6.6.Current Ratio-55-
6.7.Fixed Charge Ratio-55-
6.8.Working Capital-55-
6.9.Execution of Supplemental Instruments-55-
6.10.Payment of Indebtedness-55-
6.11.Standards of Financial Statements-55-
6.12.Exercise of Rights-55-
VII.NEGATIVE COVENANTS-56-
7.1.Merger, Consolidation, Acquisition and Sale of Assets-56-
7.2.Creation of Liens-56-
7.3.Guarantees-56-
7.4.Investments-56-
7.5.Loans-56-
7.6.Capital Expenditures-56-
7.7.Dividends-57-
7.8.Indebtedness-57-
7.9.Nature of Business-57-
7.10.Transactions with Affiliates-57-
7.11.Leases-57-
7.12.Subsidiaries-58-
7.13.Fiscal Year and Accounting Changes-58-
7.14.Pledge of Credit-58-
7.15.Amendment of Certificate of Formation, Operating Agreement-58-
7.16.Compliance with ERISA-58-
7.17.Prepayment of Indebtedness-59-
7.18Other Agreements-59-
VIII.CONDITIONS PRECEDENT-59-
8.1.Conditions to Initial Advances-59-
(a)Note-59-
(b)Filings, Registrations and Recordings-59-
(c)Corporate Proceedings of Borrower-59-
(d)Incumbency Certificates of Borrower-60-
(e)Certificates-60-
(f)Good Standing Certificates-60-
(g)Legal Opinion-60-
(h)No Litigation-60-
(i)Financial Condition Certificates-60-
(j)Collateral Examination-60-
(k)Fees-61-
(l)Pro Forma Financial Statements-61-
(m)Acquisition Documents-61-
(n)Cash Capital Contribution; Undrawn Availability-61-
(o)Capital Structure, Other Documents-61-
(p)Insurance-61-
[(q)Guaranties, Pledge Agreement-61-
[(r)Environmental Reports-62-
(s)Payment Instructions-62-
(t)Blocked Accounts-62-
(u)Consents-62-
(v)No Adverse Material Change-62-
(w)Leasehold Agreements-62-
(x)Net Worth-62-
(y)Contract Review-62-
(z)Closing Certificate-62-
[(aa)Borrowing Base-62-
[(ab)Merger; Name Change-63-
[(ac)Other-63-
8.2.Conditions to Each Advance-63-
(a)Representations and Warranties-63-
(b)No Default-63-
(c)Maximum Advances-64-
IX.INFORMATION AS TO BORROWER-64-
9.1.Disclosure of Material Matters-64-
9.2.Schedules-64-
9.3.Environmental Reports-64-
9.4.Litigation-65-
9.5.Material Occurrences-65-
9.6.Government Receivables-65-
9.7.Annual Financial Statements-65-
9.8.Quarterly Financial Statements-66-
9.9.Monthly Financial Statements-66-
9.10.Other Reports-66-
9.11.Additional Information-66-
9.12.Projected Operating Budget-67-
9.13.Variances From Operating Budget-67-
9.14.Notice of Suits, Adverse Events-67-
9.15.ERISA Notices and Requests-67-
9.16.Additional Documents-68-
X.EVENTS OF DEFAULT-68-
XI.LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT-71-
11.1.Rights and Remedies-71-
11.2.Agent's Discretion-72-
11.3.Setoff-72-
11.4.Rights and Remedies not Exclusive-72-
XII.WAIVERS AND JUDICIAL PROCEEDINGS-72-
12.1.Waiver of Notice-73-
12.2.Delay-73-
12.3.Jury Waiver-73-
XIII.EFFECTIVE DATE AND TERMINATION-73-
13.1.Term-73-
13.2.Termination-74-
XIV.REGARDING AGENT-74-
14.1.Appointment-74-
14.2.Nature of Duties-75-
14.3.Lack of Reliance on Agent and Resignation-75-
14.4.Certain Rights of Agent-76-
14.5.Reliance-76-
14.6.Notice of Default-76-
14.7.Indemnification-76-
14.8.Agent in its Individual Capacity-77-
14.9.Delivery of Documents-77-
14.10.Borrowers' Undertaking to Agent-77-
XV.INTENTIONALLY OMITTED
XVI.MISCELLANEOUS-78-
16.1.Governing Law-78-
16.2.Entire Understanding-79-
16.3.Successors and Assigns; Participations; New Lenders-80-
16.4.Application of Payments-82-
16.5.Indemnity-82-
16.6.Notice-82-
16.7.Survival-83-
16.8.Severability-83-
16.9.Expenses-84-
16.10.Injunctive Relief-84-
16.11.Consequential Damages-84-
16.12.Captions-84-
16.13.Counterparts; Telecopied Signatures-84-
16.14.Construction-84-
16.15.Confidentiality; Sharing Information-84-
16.16.Publicity-85-
