<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Amendment No. 1)
INDUSTRIAL SCIENTIFIC CORPORATION
(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
45631G-10-6
(CUSIP Number)
Robert K. Morris James J. Barnes
Reed, Smith, Shaw & McClay Buchanan Ingersoll P.C.
435 Sixth Avenue One Oxford Centre, 20th Floor
Pittsburgh, PA 15219 301 Grant Street
412/288-3126 Pittsburgh, PA 15219
412/562-1415
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 23, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box [_].
Note: Schedules filed in paper format shall include a signed original and five
copies of the Schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
(Continued on the following pages)
_________________________
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
Kent D. McElhattan
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
SSN: ###-##-####
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
BK, OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States of America
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 2,434,280*
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
2,434,280*
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,434,280 Shares*
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
74.2%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
IN
- ------------------------------------------------------------------------------
1
<PAGE>
*Includes 126,340 shares held by various family trusts, 14,400 shares held by a
charitable foundation, 2,000 shares held by Kent D. McElhattan's wife, 1,000
shares issuable upon the exercise of stock options held by Kenton E. McElhattan
and 1,940 shares issuable upon the exercise of stock options held by Kent D.
McElhattan, as to which the Reporting Person disclaims beneficial ownership.
The Reporting Person also disclaims beneficial ownership of shares of Common
Stock held by each other Reporting Person.
2
<PAGE>
Kenton E. McElhattan
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
SSN: ###-##-####
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
BK, OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States of America
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 2,434,280*
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
2,434,280*
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,434,280 shares*
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
74.2%
- ------------------------------------------------------------------------------
3
<PAGE>
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
IN
- ------------------------------------------------------------------------------
*Includes 126,340 shares held by various family trusts, 14,400 shares held by a
charitable foundation, 2,000 shares held by Kent D. McElhattan's wife, 1,000
shares issuable upon the exercise of stock options held by Kenton E. McElhattan
and 1,940 shares issuable upon the exercise of stock options held by Kent D.
McElhattan, as to which the Reporting Person disclaims beneficial ownership.
The Reporting Person also disclaims beneficial ownership of shares of Common
Stock held by each other Reporting Person.
4
<PAGE>
Florence L. McElhattan
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
SSN: ###-##-####
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
BK, OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States of America
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 2,434,280*
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
2,434,280*
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,434,280 shares
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
74.2%
- ------------------------------------------------------------------------------
5
<PAGE>
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
IN
- ------------------------------------------------------------------------------
*Includes 126,340 shares held by various family trusts, 14,400 shares held by a
charitable foundation, 2,000 shares held by Kent D. McElhattan's wife, 1,000
shares issuable upon the exercise of stock options held by Kenton E. McElhattan
and 1,940 shares issuable upon the exercise of stock options held by Kent D.
McElhattan, as to which the Reporting Person disclaims beneficial ownership.
The Reporting Person also disclaims beneficial ownership of the shares of Common
Stock held by each other Reporting Person.
6
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Statement of
Kent D. McElhattan,
Kenton E. McElhattan
and
Florence L. McElhattan
Pursuant to Section 13(d)
of the Securities Exchange Act of 1934
in respect of
INDUSTRIAL SCIENTIFIC CORPORATION
This Amendment No. 1 (this "Amendment") amends and supplements the
Statement on Schedule 13D (the "Schedule 13D") filed on behalf of Kent D.
McElhattan, Kenton E. McElhattan and Florence L. McElhattan (each, a "Reporting
Person" and collectively, the "Reporting Group") relating to the common stock,
par value $.01 per share (the "Common Stock"), of Industrial Scientific
Corporation, a Pennsylvania corporation (the "Company").
This Amendment is being filed in connection with Acquisition's execution of
a financing commitment letter, dated as of March 4, 1999, to ISC Acquisition
Corporation, a Pennsylvania Corporation which is wholly owned by the Reporting
Group ("Acquisition"), from PNC Bank, National Association, which financing
commitment letter is further described in Item 3, and certain changes in the
calculation of beneficial ownership of Common Stock by the Reporting Group. The
changes in the calculation of beneficial ownership are to correct errors in the
Schedule 13D and are not the result of any disposition of Common Stock by the
Reporting Group.
Capitalized terms used and not defined in this Amendment have the meanings
set forth in the Schedule 13D.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Item 3 of the Schedule 13D is hereby amended and supplemented by deleting
the final two paragraphs and by adding the following at the end thereof:
The Reporting Persons have calculated that, assuming there are no
Dissenting Shares, approximately $24.6 million will be required to pay the
aggregate Merger Consideration due to shareholders and option holders of the
Company at the closing of the Merger. In addition, it is anticipated that an
aggregate of approximately $400,000 will be required to pay all other expenses
and costs of the Reporting Group and Acquisition relating to the transactions.
7
<PAGE>
Pursuant to a financing commitment letter (the "Commitment"), dated as of
March 4, 1999, to Acquisition from PNC Bank, National Association ("PNC"), PNC
has agreed to provide a $10,000,000 Reducing Revolving Credit Facility (the
"Credit Facility") and a $17,000,000 90-day Note (the "Note") to Acquisition, in
each case subject to the terms and conditions of the Commitment (the
"Financing"). The proceeds of the Financing may be used to acquire all of the
outstanding shares of Common Stock not owned or controlled by the Reporting
Group for an amount not to exceed $28.50 per share plus transaction expenses.
Following the consummation of the Merger, the Company as the surviving
corporation (the "Surviving Corporation") will assume all outstanding
obligations pursuant to the Financing and become the debtor.
The Commitment is conditional, among other things, upon: (i) there being no
material adverse change in the business, assets, operations, financial condition
or business prospects of Acquisition and/or the Company, (ii) the accuracy of
all representations and warranties provided by the Company and/or Acquisition,
compliance with all covenants made by the Company and/or Acquisition and the
absence of any event of default or potential event of default, and (iii) the
satisfaction of conditions to be set forth in the definitive documentation
relating to the Financing. The agreements relating to the Financing will contain
customary representations and warranties and events of default.
No final decisions have been made concerning the method the Surviving
Corporation will use to refinance or repay the indebtedness incurred by
Acquisition under the Financing. Such decisions will be based upon the Surviving
Corporation's review from time to time of the advisability of particular
actions, including the availability of cash flow generated by the Company,
prevailing interest rates, market conditions and other financial and economic
conditions. It is, however, anticipated that the Note will be paid in full on or
before maturation by the Surviving Corporation from working capital.
Furthermore, it is currently expected that the Credit Facility will be repaid by
the Surviving Corporation over time with cash flow from operations.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
Item 5 of the Schedule 13D is hereby amended and supplemented by deleting
the first paragraph and adding the following at the beginning thereof:
(a) - (b) The Company's Quarterly Report on Form 10-Q for the quarter ended
October 31, 1998 reports that as of December 14, 1998, there were outstanding
3,280,137 shares of Common Stock. As of the date hereof, the Reporting Persons
beneficially own an aggregate of 2,434,280 shares of Common Stock, or
approximately 74.2% of the shares of Common Stock deemed outstanding. Of these
shares, (i) Kent D. McElhattan is the record holder of 869,640 shares of Common
Stock and beneficially owns 1,014,320 shares of Common Stock (which includes
shares held by: Kent D. McElhattan's wife, various family trusts, shares held in
a family foundation and shares held for the benefit of Kent D. McElhattan in the
Company's Profit Sharing Plan), (ii) Kenton E. McElhattan is the record holder
of 668,960 shares of Common Stock and beneficially owns 1,434,360 shares of
Common Stock (which includes shares held by Florence L. McElhattan and shares
held in a family foundation), and (iii) Florence L. McElhattan is the record
holder of 750,000 shares of Common Stock and beneficially owns 1,434,360 shares
of Common Stock (which includes shares held directly by Kenton E. McElhattan and
shares held
8
<PAGE>
in a family foundation). The shares of Common Stock beneficially owned by Kent
D. McElhattan constitute approximately 30.9% of the outstanding shares of Common
Stock. The shares of Common Stock beneficially owned by Kenton E. McElhattan
constitute approximately 43.7% of the outstanding shares of Common Stock. The
shares of Common Stock beneficially owned by Florence L. McElhattan constitute
43.7% of the outstanding shares of Common Stock. The Reporting Persons disclaim
beneficial ownership of the 126,340 shares held by various family trusts, 14,400
shares held by a charitable foundation and 2,000 shares held by Kent D.
McElhattan's wife. Each member of the Reporting Group also disclaims beneficial
ownership of shares of Common Stock held by other members of the Reporting
Group.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Item 7 of the Schedule 13D is hereby amended and supplemented by adding the
following at the end thereof:
3. Financing Commitment Letter from PNC Bank, National Association, to ISC
Acquisition, dated as of March 4, 1999
9
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of his or her knowledge and
belief, each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: April 6, 1999 /s/ Kent D. McElhattan
----------------------
Kent D. McElhattan
/s/ Kenton E. McElhattan
------------------------
Kenton E. McElhattan
/s/ Florence L. McElhattan
--------------------------
Florence L. McElhattan
10
<PAGE>
EXHIBIT INDEX
EX-99. Financing Commitment Letter from PNC Bank, National Association, to ISC
Acquisition Corporation, dated as of March 4, 1999
11
<PAGE>
Exhibit 99
March 4, 1999
ISC Acquisition Corporation
1001 Oakdale Road
Oakdale, PA 15071
Attention: James P. Hart
Vice President/Chief Financial Officer
RE: $27,000,000 Acquisition Financing
Dear Jim:
PNC Bank, National Association (the "Bank"), is pleased to advise you that
we have approved a $10,000,000 Reducing Revolving Credit Facility (the "Credit
Facility") and a $17,000,000 90-Day Note (the "Note") to ISC Acquisition
Corporation (the "Borrower"), a corporation created to merge with Industrial
Scientific Corporation. The Credit Facility and Note are described in the
Summary of Terms and Conditions that is attached to and made a part of this
letter (the "Summary"). The Bank looks forward to working with you towards the
closing of the Credit Facility and the Note.
The Summary includes only a brief description of the principal terms of the
Credit Facility and Note. The definitive terms of the Credit Facility and Note
will be documented in a Loan Agreement and the other agreements, instruments,
certificates and documents called for by the Loan Agreement or which the Bank
may otherwise require (together with the Loan Agreement, the "Loan Documents").
Although the Bank has approved the Credit Facility and the Note, the Bank's
obligations are subject to several conditions. First, the Borrower must accept
this letter as provided below, and must comply with all the other conditions of
this letter and the Summary. After receiving the Borrower's acceptance, the
definitive Loan Documents can be prepared. The Bank's obligations are
conditioned on the Loan Documents being signed and delivered to the Bank in a
form that is satisfactory to the Bank and its counsel. This letter is also
issued subject to the statutory and other requirements by which the Bank is
governed. Finally, the Bank's obligations under this letter are subject to the
condition that no material adverse change occurs in the business, assets,
operations, financial condition or business prospects of the Borrower.
<PAGE>
ISC Acquisition Corporation
March 4, 1999
Page Two
The Bank will not be responsible or liable for any damages, consequential
or otherwise, that may be incurred or alleged by any person or entity, including
the Borrower, as a result of this commitment letter.
All out-of-pocket costs and expenses of the Bank will be paid by the
Borrower from time to time upon demand, including, for example, reasonable fees
and expenses of legal counsel, and lien searches, incurred by the Bank in
connection with the preparation, negotiation and delivery of this letter and the
Loan Documents. Because the Bank will incur these expenses even if the Credit
Facility and the Note are not consummated for any reason, the Borrower's expense
reimbursement agreement is unconditional.
The Borrower agrees to indemnify the Bank (and its directors, officers,
employees, agents and controlling persons) against any and all claims, losses,
damages, liabilities, costs and expenses (including, for example, fees and
expenses of counsel and expert witnesses) which may be incurred by any of them
in connection with any investigation, litigation or other proceeding relating to
the Credit Facility or this letter, or the proposed use of proceeds of the
Credit Facility, except for their own gross negligence or willful misconduct.
The Borrower's indemnification obligations are in addition to any other
liability it may otherwise have, and shall survive the termination of this
letter.
This letter is governed by the laws of Pennsylvania. No modification or
waiver of any of the terms of this letter will be valid and binding unless
agreed to in writing by the Bank. When accepted, this letter will constitute the
entire agreement between the Bank and the Borrower concerning the Credit
Facility and the Note, and shall replace all prior understandings, statements,
negotiations and written materials relating to the Credit Facility and the Note.
To accept the terms of the Credit Facility, the Note and this letter,
please sign the enclosed copy of this letter and return it to me by March 26,
1999. If this letter is accepted, the Loan Documents must be signed by May 15,
1999, or this letter will terminate and the Bank will have no liability or
further obligation.
-2-
<PAGE>
ISC Acquisition Corporation
March 4, 1999
Page Three
We appreciate this opportunity to provide financial services to you, and
look forward to your acceptance of this letter.
Very truly yours,
PNC BANK, National Association
/s/ Mark J. Stasenko
--------------------------------
By: Mark J. Stasenko
Title: Vice President
With the intent to be legally bound,
the above terms and conditions are
hereby agreed to and accepted.
ISC Acquisition Corporation
By: /s/ Kent D. McElhattan
___________________________
Title: President
________________________
Date: March 23, 1999
_________________________
-3-
<PAGE>
March 4, 1999
Summary of Terms and Conditions
_________________________ ISC Acquisition Corporation (the
Borrower "Company" or the "Borrower").
_________________________ PNC Bank, National Association
Bank ("PNC", the "Bank").
_________________________ Subject to acceptable documentation,
Credit Facility the Bank will provide:
I. $10,000,000 Reducing Revolving
Credit Facility ("Revolver"). The
commitment under the Revolver will
reduce annually, on the anniversary
date by $2,000,000.
II. $17,000,000 90-day Note.
_________________________ To acquire all of the outstanding
Purpose shares of Industrial Scientific
Corporation (ISCX) not owned or
controlled by the McElhattan family
for an amount not to exceed
$28.50/share plus transaction
expenses.
_________________________ I. Five Years from the date of
Maturity closing.
II. 90 days from the date of closing.
_________________________ I. At maturity. Until maturity, the
Repayment Company may borrow, repay and
reborrow up to the committed amount.
The committed amount reduces
$2,000,000 annually until maturity.
II. At maturity.
_________________________ I,II. Floating Rate Option:
Interest Rates PNC Bank Base Rate* or Libor plus
the credit spread based on the
Funded Debt/EBITDA Ratio on a
rolling four quarter basis,
determined each quarter as follows:
-4-
<PAGE>
---------------------------------------------
Funded Debt LIBOR+ Commitment
Ratio** Fee***
---------------------------------------------
(greater than or =)1.75 75 bps 30 bps
---------------------------------------------
(less than)1.75 50 bps 20 bps
---------------------------------------------
* The Base Rate is the higher of PNC
Bank's Prime rate or the Federal
Funds rate plus 1/2%.
** Funded Debt Ratio consists of the
Company's Total Indebtedness to
earnings before interest, taxes,
depreciation and amortization
("EBITDA"). Total Indebtedness is
defined as all indebtedness for
borrowed money (short and long
term), subordinated debt,
capitalized leases, reimbursement
obligations under letters of credit
and any guaranteed obligations.
*** The commitment fee is payable on
the unused portion of the Revolving
Credit Facility payable quarterly in
arrears.
Interest on Base Rate borrowings is
calculated on an actual/365 or 366
day basis and is payable quarterly.
Under the Revolving Credit Facility,
the Company may have no more than
five borrowing tranches, including
the Base Rate tranche, at any one
time.
II. Fixed Rate Option:
PNC Bank Cost of Funds + 50 bps. As
of March 1, 1999, the indicative
Fixed Rate is 6.22%. The actual rate
will be set at closing.
Prepayment under the Fixed Rate
Option may be subject to a
prepayment penalty if the current
rates on comparable treasury notes
are lower than the rates on treasury
notes at closing. If so, the penalty
is the present value of the
difference.
Interest on LIBOR borrowings is
calculated on an actual/360 day
basis and is payable the earlier of
quarterly or on the last day of each
interest period. LIBOR advances will
be available for periods of 1, 2, 3
or 6 months. LIBOR pricing will be
adjusted for any statutory reserves.
-5-
<PAGE>
Subsequent to an Event of Default
which continues beyond any
applicable cure period, outstandings
shall bear interest at 2% over the
rate of interest applicable under
the Base Rate pricing option.
_________________________ The Company shall pay the Banks such
Yield Protection additional amounts as will
compensate the Banks in the event
applicable law, or change in law,
subjects the Banks to reserve
requirements, capital requirements,
taxes (except for taxes on the
overall net income of the Banks) or
other charges which increase the
cost or reduce the yield to the
Banks, under customary yield
protection provisions.
_________________________
Fees
Closing $10,000 payable to Bank at closing.
_________________________ Reasonable out-of-pocket expenses
Expenses incurred by Bank shall be for the
account of the Company. These
include fees and expenses of any of
Bank's legal counsel. Initial
documentation will be prepared at
the Bank's expense. Subsequent
negotiations, if extensive, will
result in legal costs to be paid by
the Company.
_________________________ I. No collateral is required. The
Collateral Company will agree not to grant a
blanket lien on its assets to any
other creditor.
II. The Borrower will be required
to provide Cash Collateral to the
extent any portion of this Note
remains outstanding at the close of
business on the day the Borrower
merges with Industrial Scientific
Corporation. Additionally, the
Company will agree not to grant a
blanket lien on its assets to any
other creditor.
______________________________ a. Organization and qualification.
Representations and Warranties
b. Capitalization and ownership.
c. Subsidiaries.
d. Power and authority.
-6-
<PAGE>
e. Validity, binding effect and
enforceability.
f. No conflict.
g. Litigation.
h. Title to properties.
i. Financial statements; no
material adverse change.
j. Margin stock.
k. Full disclosure.
l. Taxes.
m. Consents and approvals.
n. No Event of Default; compliance
with instruments.
o. Patents, trademarks, copyrights,
licenses.
p. Security interests.
q. Mortgage liens.
r. Insurance.
s. Compliance with laws.
t. Material contracts.
u. Investment companies.
v. Plans and benefit arrangements.
w. Employment matters.
x. Environmental matters.
y. Senior debt status.
z. Year 2000 compliant.
-7-
<PAGE>
Other Representations and Warranties
as appropriate.
_______________________________ Receipt by Bank of the following, in
Conditions Precedent to Lending form and substance satisfactory to
the Bank:
a. Closing certificate as to
accuracy of Representations and
Warranties, compliance with
covenants and absence of Event of
Default or Potential Event of
Default.
b. Certified resolutions,
incumbency certificate and corporate
documents.
c. Delivery of all definitive
financing documents.
d. Opinion of counsel.
e. No material adverse change in
the Borrower and/or Industrial
Scientific Corporation.
f. No material litigation.
g. Payment of all fees and expenses
subject to reimbursement.
h. Evidence that Industrial
Scientific has not less than
$17,000,000 in cash.
i. Execution of an agreement
satisfactory to the Bank between the
Borrower, Bank and Exchange Agent.
j. Satisfactory review of an
Assumption Agreement between
Borrower and Industrial Scientific
Corporation providing for the full
and timely assumption of Borrowers
liabilities.
Other Conditions Precedent to
Lending as appropriate.
_________________________ a. Provide within 45 days after
Affirmative Covenants each fiscal quarter, consolidated
balance sheets and consolidated
statements of income, retained
earnings and cash flow together with
a Certificate of Compliance from the
Chief Executive Officer, President
or Chief Financial Officer of the
Company.
-8-
<PAGE>
b. Provide within 90 days after
each fiscal year-end, consolidated
balance sheets and consolidated
statements of income, retained
earnings and cash flow together with
(i) a report of an independent
certified public accountant
satisfactory to the Bank, (ii) any
management letters of such
accountants addressed to the Company
and (iii) a Certificate of
Compliance from the Chief Executive
Officer, President or Chief
Financial Officer of the Company.
Other Affirmative Covenants as
appropriate.
_________________________ a. Leverage - The Company's Funded
Negative Covenants Debt to EBITDA shall not exceed
2.00x.
b. Fixed Charge Coverage Ratio - As
of the end of each fiscal quarter,
for the previous four quarters, the
ratio of the Company's Cash Flow
from Operations to Fixed Charges
shall not be less than 1.0:1.
Cash Flow from Operations is defined
as Net Income + Interest Expense +
Depreciation + Amortization + Taxes
+ Non-Cash. Fixed Charges are
defined as Scheduled Principal
Payments or scheduled reductions in
the Revolver + Interest Expense +
Taxes + Dividends (including
distributions for S-Corp taxes if
the Borrower makes that election) +
Stock repurchases post
closing/merger + Capital
Expenditures.
c. Limitation on sale of assets.
d. Limitation on additional
indebtedness, liens and leases.
e. Prohibition on change of
business.
f. Prohibition on change of control.
g. Limitations on mergers and
acquisitions.
h. Limitations on Investments and
Advances to Officers.
-9-
<PAGE>
Other Negative Covenants as
appropriate.
_________________________ a. Payment default.
Events of Default
b. Breach of Representations or
Warranties.
c. Violation of covenant(s).
d. Cross default to other debt.
e. Bankruptcy, insolvency.
f. Failure of Borrower to merger
with Industrial Scientific
Corporation within 48 hours of
funding the Revolver.
Other Events of Default as
appropriate.
_________________________ Pennsylvania.
Governing Law
-10-
