Exhibit 10.30
LOAN AND SECURITY AGREEMENT
DATED AS OF JANUARY 31, 2003
BY AND AMONG
MEASUREMENT SPECIALTIES, INC.,
IC SENSORS, INC.,
AS BORROWERS,
AND
FLEET CAPITAL CORPORATION,
AS LENDER
$15,000,000
TABLE OF CONTENTS
Page
----
Section 1 CREDIT FACILITY...................................................................................... 1
1.1 Revolving Credit Loans............................................................................. 1
Section 2 INTEREST, FEES AND CHARGES........................................................................... 2
2.1 Interest........................................................................................... 2
2.2 Computation of Interest and Fees................................................................... 3
2.3 Closing Fee........................................................................................ 3
2.4 Unused Line Fee.................................................................................... 3
2.5 Collateral Administration Fee...................................................................... 3
2.6 Audit and Appraisal Fees........................................................................... 3
2.7 Reimbursement of Expenses.......................................................................... 3
2.8 Bank Charges....................................................................................... 4
Section 3 LOAN ADMINISTRATION.................................................................................. 4
3.1 Manner of Borrowing Revolving Credit Loans......................................................... 4
3.2 Payments........................................................................................... 5
3.3 Mandatory Prepayments of Proceeds of Sale, Loss or Destruction of Collateral....................... 5
3.4 Application of Payments and Collections............................................................ 5
3.5 All Loans to Constitute One Obligation............................................................. 6
3.6 Loan Account....................................................................................... 6
3.7 Statements of Account.............................................................................. 6
Section 4 TERM AND TERMINATION................................................................................. 6
4.1 Term of Agreement.................................................................................. 6
4.2 Termination........................................................................................ 6
Section 5 SECURITY INTERESTS................................................................................... 7
5.1 Security Interest in Collateral.................................................................... 7
5.2 Other Collateral................................................................................... 9
5.3 Lien Perfection; Further Assurances................................................................ 9
5.4 Lien on Realty..................................................................................... 10
5.5 Release of Lender's Lien on Equipment.............................................................. 10
5.6 Release of Lender's Lien on Equity of Measurement Limited.......................................... 10
Section 6 COLLATERAL ADMINISTRATION............................................................................ 10
6.1 General............................................................................................ 10
6.2 Administration of Accounts......................................................................... 11
6.3 Administration of Inventory........................................................................ 13
6.4 Administration of Equipment........................................................................ 13
6.5 Payment of Charges................................................................................. 13
Section 7 REPRESENTATIONS AND WARRANTIES....................................................................... 14
7.1 General Representations and Warranties............................................................. 14
ii
7.2 Continuous Nature of Representations and Warranties................................................ 19
7.3 Survival of Representations and Warranties......................................................... 20
Section 8 COVENANTS AND CONTINUING AGREEMENTS.................................................................. 20
8.1 Affirmative Covenants.............................................................................. 20
8.2 Negative Covenants................................................................................. 22
8.3 Specific Financial Covenants....................................................................... 25
Section 9 CONDITIONS PRECEDENT................................................................................. 25
9.1 Documentation...................................................................................... 26
9.2 No Default......................................................................................... 26
9.3 Other Loan Documents............................................................................... 26
9.4 Availability....................................................................................... 26
9.5 Litigation......................................................................................... 26
9.6 Closing and Collateral Administration Fees......................................................... 26
9.7 Additional Fees and Expenses....................................................................... 26
9.8 Officers' Certificates; Opinions, etc.............................................................. 26
9.9 Measurement Limited Certificates; Opinions, etc.................................................... 26
9.10 Insurance.......................................................................................... 27
9.11 Amendment to Castletop Loan Agreement and Subordination Agreement.................................. 27
9.12 Dominion Account Agreement; Restricted Account Agreements.......................................... 27
9.13 Stock Certificate and Blank Powers................................................................. 27
9.14 Landlord Waiver Agreement; Bailee's Letters........................................................ 27
9.15 December 2002 Sales Data........................................................................... 27
Section 10 EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT................................................... 27
10.1 Events of Default.................................................................................. 27
10.2 Acceleration of the Obligations.................................................................... 29
10.3 Other Remedies..................................................................................... 30
10.4 Remedies Cumulative; No Waiver..................................................................... 31
Section 11 MISCELLANEOUS....................................................................................... 31
11.1 Power of Attorney.................................................................................. 31
11.2 Indemnity.......................................................................................... 32
11.3 Modification of Agreement; Sale of Interest........................................................ 32
11.4 Severability....................................................................................... 33
11.5 Successors and Assigns............................................................................. 33
11.6 Cumulative Effect; Conflict of Terms............................................................... 33
11.7 Execution in Counterparts.......................................................................... 33
11.8 Notice............................................................................................. 33
11.9 Lender's Consent................................................................................... 34
11.10 Credit Inquiries................................................................................... 34
11.11 Time of Essence.................................................................................... 34
11.12 Entire Agreement................................................................................... 34
11.13 Interpretation..................................................................................... 35
11.14 GOVERNING LAW; CONSENT TO FORUM.................................................................... 35
11.15 WAIVERS BY BORROWERS............................................................................... 35
iii
11.16 ORAL AGREEMENTS INEFFECTIVE........................................................................ 36
11.17 Non-applicability of Article 5069-15.01 et. seq.................................................... 36
11.18 Reimbursement...................................................................................... 36
iv
LIST OF EXHIBITS
Exhibit A Form of Revolving Credit Note
Exhibit B Each Borrower's and each Subsidiary's Business Locations
Exhibit C Jurisdictions in which each Borrower and each Subsidiary is
Authorized to do Business
Exhibit D Capital Structure of Borrowers
Exhibit E Corporate Names
Exhibit F Tax Identification Numbers of Subsidiaries
Exhibit G-1 Patents, Trademarks, Copyrights and Licenses
Exhibit G-2 Form of Patent and Trademark Security Agreement
Exhibit H Contracts Restricting Borrower's Right to Incur Debts
Exhibit I Litigation
Exhibit J Capitalized Leases
Exhibit K Operating Leases
Exhibit L Pension Plans
Exhibit M Labor Contracts
Exhibit N Compliance Certificate
Exhibit O Permitted Liens
Exhibit P Borrowing Base Certificate
Exhibit Q Bank Accounts
v
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made this day of January 31, 2003, by
and among FLEET CAPITAL CORPORATION ("LENDER"), a Rhode Island corporation with
an office at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇; and MEASUREMENT
SPECIALTIES, INC. ("MSI"), a New Jersey corporation with its chief executive
office and principal place of business at ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, IC SENSORS, INC. ("IC"), a California corporation with an address
in care of MSI at ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (MSI and IC
being hereinafter referred to individually as a "BORROWER" and collectively as
the "BORROWERS"). Capitalized terms used in this Agreement have the meanings
assigned to them in Appendix A, General Definitions. Accounting terms not
otherwise specifically defined herein shall be construed in accordance with GAAP
consistently applied.
SECTION 1
CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a Total Credit Facility of up to $15,000,000
available upon Borrowers' request therefor, as follows:
1.1 REVOLVING CREDIT LOANS.
(a) LOANS AND RESERVES. Lender agrees, for so long as no Default or
Event of Default exists, to make Revolving Credit Loans to Borrowers from time
to time, as requested by Borrowers in the manner set forth in subsection 3.1(a)
hereof, up to a maximum principal amount at any time outstanding equal to the
Borrowing Base at such time. Lender shall have the right to establish reserves
in such amounts, and with respect to such matters, as Lender shall, in the
exercise of its reasonable credit judgment, deem necessary or appropriate,
against the amount of Revolving Credit Loans which Borrowers may otherwise
request under this subsection 1.1(a), including, without limitation, with
respect to (i) price adjustments, damages, unearned discounts, returned products
or other matters for which credit memoranda are issued in the ordinary course of
any Borrower's business; (ii) shrinkage, spoilage and obsolescence of Inventory;
(iii) slow moving Inventory; (iv) other sums chargeable against Borrowers' Loan
Account as Revolving Credit Loans under any section of this Agreement; (v)
amounts owing by any Borrower to any Person to the extent secured by a Lien on,
or trust over, any Property of such Borrower; and (vi) such other matters,
events, conditions or contingencies as to which Lender, in its sole credit
judgment, determines reserves should be established from time to time hereunder.
The Revolving Credit Loans shall be further evidenced by the Revolving Credit
Note and shall be secured by all of the Collateral. Without limiting the
foregoing, the Initial Availability Reserve will be established as a reserve
with respect to the Borrowing Base.
(b) USE OF PROCEEDS. The Revolving Credit Loans shall be used solely
for (i) the satisfaction of a portion of the existing Indebtedness of Borrowers
to Castletop Capital, L.P., a Texas limited partnership as lender ("CASTLETOP"),
and (ii) any Borrower's general corporate
1
purposes in a manner consistent with the provisions of this Agreement and all
applicable laws, including, capital expenditures permitted under the terms of
this Agreement.
SECTION 2
INTEREST, FEES AND CHARGES
2.1 INTEREST.
(a) RATES OF INTEREST. Interest shall accrue on the principal amount
of the Revolving Credit Loans outstanding at the end of each day at a
fluctuating rate per annum equal to the lesser of (i) 1.0% plus the Base Rate or
(ii) the Maximum Rate. The rate of interest applicable to Revolving Credit Loans
shall increase or decrease by an amount equal to any increase or decrease in the
Base Rate, effective as of the opening of business on the day that any such
change in the Base Rate occurs.
(b) DEFAULT RATE OF INTEREST. Upon and after the occurrence of an
Event of Default, and during the continuation thereof, the principal amount of
all Loans shall bear interest at a rate per annum equal to 2% above the interest
rate otherwise applicable thereto (the "DEFAULT RATE").
(c) MAXIMUM INTEREST. In no event whatsoever shall the aggregate of
all amounts deemed interest hereunder or under the Revolving Credit Note and
charged or collected pursuant to the terms of this Agreement or pursuant to the
Revolving Credit Note exceed the Maximum Rate, nor shall any provisions hereof
be construed as a contract to pay, for the use, forbearance or detention of
money with interest at a rate or in an amount in excess of the Maximum Rate. If
any provisions of this Agreement or the Revolving Credit Note contravene any
such law, such provisions shall be deemed amended to conform to such law.
Notwithstanding anything to the contrary contained herein, no provision of this
Agreement or the Revolving Credit Note shall require the payment or permit the
collection of interest in excess of the Maximum Rate. If any excess of interest
in such respect is herein provided for, or shall be adjudicated to be so
provided, in this Agreement, the Revolving Credit Note or otherwise in
connection with this loan transaction, the provisions of this paragraph shall
govern and prevail, and no Borrower nor the sureties, guarantors, successors or
assigns of any Borrower shall be obligated to pay the excess amount of such
interest, or any other excess sum paid for the use, forbearance or detention of
sums loaned pursuant hereto. If for any reason interest in excess of the Maximum
Rate shall be deemed charged, required or permitted by any court of competent
jurisdiction, any such excess shall be applied as a payment and reduction of the
principal of Indebtedness evidenced by this Agreement and the Revolving Credit
Note; and, if the principal amount hereof has been paid in full, any remaining
excess shall forthwith be paid to Borrowers. In determining whether or not the
interest paid or payable exceeds the Maximum Rate, Borrowers and Lender shall,
to the extent permitted by Applicable Law, (i) characterize any non-principal
payment as an expense, fee, or premium rather than as interest, (ii) exclude
voluntary prepayments and the effects thereof, and (iii) amortize, prorate,
allocate, and spread in equal or unequal parts the total amount of interest
throughout the entire contemplated Term of this Agreement and the Revolving
Credit Note so that the interest for the entire Term does not exceed the Maximum
Rate.
2
2.2 COMPUTATION OF INTEREST AND FEES. Interest and unused line fees
hereunder shall be calculated daily and shall be computed on the actual number
of days elapsed over a year of 360 days. For the purpose of computing interest
hereunder, all items of payment received by Lender shall be deemed applied by
Lender on account of the Obligations (subject to final payment of such items) on
the first Business Day after receipt by Lender of such items in Lender's account
located in Hartford, Connecticut.
2.3 CLOSING FEE. Borrowers shall pay to Lender a closing fee of $150,000
(of which $100,000 was previously paid by the Borrowers), which shall be fully
earned and nonrefundable on the Closing Date and shall be paid concurrently with
the initial Loan hereunder.
2.4 UNUSED LINE FEE. Borrowers shall pay to Lender a fee equal to 0.375%
per annum of the average monthly amount by which $15,000,000 exceeds the sum of
the outstanding principal balance of the Revolving Credit Loans. The unused line
fee shall be payable monthly in arrears on the last day of each calendar month
hereafter.
2.5 COLLATERAL ADMINISTRATION FEE. Borrowers shall pay to Lender a
collateral administration fee of $25,000 annually, payable on the Closing Date
and each anniversary of the Closing Date thereafter.
2.6 AUDIT AND APPRAISAL FEES. Borrowers shall pay to Lender $750 per day
for each auditor or appraiser in connection with any audits and appraisals of
Borrowers' books and records for which the Borrowers have an obligation to
reimburse Lender under the terms of this Agreement, plus all out-of-pocket
expenses incurred by such auditors and appraisers. Audit fees shall be payable
on the first day of the month following the date of issuance by Lender of a
request for payment thereof to Borrowers.
2.7 REIMBURSEMENT OF EXPENSES. If, at any time or times regardless of
whether or not an Event of Default then exists, Lender or any Participating
Lender incurs legal or accounting expenses or any other costs or out-of-pocket
expenses in connection with (i) the negotiation and preparation of this
Agreement or any of the other Loan Documents, any amendment of or modification
of this Agreement or any of the other Loan Documents, or any sale or attempted
sale of any interest herein to a Participating Lender; (ii) the administration
of this Agreement or any of the other Loan Documents and the transactions
contemplated hereby and thereby; (iii) any litigation, contest, dispute, suit,
proceeding or action (whether instituted by Lender, a Borrower or any other
Person) in any way relating to the Collateral, this Agreement or any of the
other Loan Documents or a Borrower's affairs; (iv) any attempt to enforce any
rights of Lender or any Participating Lender against a Borrower or any other
Person which may be obligated to Lender by virtue of this Agreement or any of
the other Loan Documents, including, without limitation, the Account Debtors; or
(v) any attempt to inspect, verify, protect, preserve, restore, collect, sell,
liquidate or otherwise dispose of or realize upon the Collateral; then all such
legal and accounting expenses, other costs and out of pocket expenses of Lender
shall be charged to Borrowers. All amounts chargeable to Borrowers under this
Section 2.7 shall be Obligations secured by all of the Collateral, shall be
payable on demand to Lender or to such Participating Lender, as the case may be,
and shall bear interest from the date such demand is made until paid in full at
the rate applicable to Revolving Credit Loans from time to time. Borrowers shall
also
3
reimburse Lender for expenses incurred by Lender in its administration of
the Collateral to the extent and in the manner provided in Section 6 hereof.
2.8 BANK CHARGES. Borrowers shall pay to Lender, on demand, any and all
fees, costs or expenses which Lender or any Participating Lender pays to a bank
or other similar institution (including, without limitation, any fees paid by
Lender to any Participating Lender) arising out of or in connection with (i) the
forwarding to Borrowers or any other Person on behalf of Borrowers, by Lender or
any Participating Lender, of proceeds of loans made by Lender to Borrowers
pursuant to this Agreement and (ii) the depositing for collection, by Lender or
any Participating Lender, of any check or item of payment received or delivered
to Lender or any Participating Lender on account of the Obligations.
SECTION 3
LOAN ADMINISTRATION.
3.1 MANNER OF BORROWING REVOLVING CREDIT LOANS. Borrowings under the
credit facility established pursuant to Section 1 hereof shall be as follows:
(a) LOAN REQUESTS. A request for a Revolving Credit Loan shall be
made, or shall be deemed to be made, in the following manner: Borrowers may give
Lender notice of their intention to borrow, in which notice Borrowers shall
specify the amount of the proposed borrowing and the proposed borrowing date, no
later than 11:00 a.m. Dallas, Texas time on the proposed borrowing date,
provided, however, that no such request may be made at a time when there exists
a Default or an Event of Default; and the becoming due of any amount required to
be paid under this Agreement, whether as interest or for any other Obligation,
shall be deemed irrevocably to be a request for a Revolving Credit Loan on the
due date in the amount required to pay such interest or other Obligation. As an
accommodation to Borrowers, Lender may permit telephonic or electronic requests
for loans and electronic transmittal of instructions, authorizations, agreements
or reports to Lender by Borrowers. Unless Borrowers specifically direct Lender
in writing not to accept or act upon telephonic or electronic communications
from Borrowers, Lender shall have no liability to Borrowers for any loss or
damage suffered by Borrowers as a result of Lender's honoring of any requests,
execution of any instructions, authorizations or agreements or reliance on any
reports communicated to it telephonically or electronically and purporting to
have been sent to Lender by Borrowers and Lender shall have no duty to verify
the origin of any such communication or the authority of the person sending it.
(b) DISBURSEMENT. Borrowers hereby irrevocably authorize Lender to
disburse the proceeds of each Revolving Credit Loan requested, or deemed to be
requested, pursuant to this subsection 3.1(b) as follows: the proceeds of each
Revolving Credit Loan requested under subsection 3.1(a)(i) shall be disbursed by
Lender in lawful money of the United States of America in immediately available
funds, in the case of the initial borrowing, in accordance with the terms of the
written disbursement letter from Borrowers, and in the case of each subsequent
borrowing, by wire transfer to such bank account as may be agreed upon by
Borrowers and Lender from time to time or elsewhere if pursuant to a written
direction from Borrowers; and the proceeds of each Revolving Credit Loan
requested under subsection 3.1(a)(ii) shall be disbursed by Lender by way of
direct payment of the relevant interest or other Obligation.
4
(c) AUTHORIZATION. Borrowers hereby irrevocably authorize Lender, in
Lender's sole discretion, to advance to Borrowers, and to charge to Borrowers'
Loan Account hereunder as a Revolving Credit Loan, a sum sufficient to pay all
interest accrued on the Obligations during the immediately preceding month and
to pay all costs, fees and expenses at any time owed by Borrowers to Lender
hereunder.
3.2 PAYMENTS. Except where evidenced by notes or other instruments issued
or made by Borrowers to Lender specifically containing payment provisions which
are in conflict with this Section 3.2 (in which event the conflicting provisions
of said notes or other instruments shall govern and control), the Obligations
shall be payable as follows:
(a) PRINCIPAL. Principal payable on account of Revolving Credit
Loans shall be payable by Borrowers to Lender immediately upon the earliest of
(i) the receipt by Lender or Borrowers of any proceeds of any of the Collateral,
to the extent of said proceeds, (ii) the occurrence of an Event of Default in
consequence of which Lender elects to accelerate the maturity and payment of the
Obligations, or (iii) termination of this Agreement pursuant to Section 4
hereof; provided, however, that if an Overadvance shall exist at any time,
Borrowers shall, on demand, repay the Overadvance.
(b) INTEREST. Interest accrued on the Revolving Credit Loans shall
be due on the earliest of (i) the first calendar day of each month (for the
immediately preceding month), computed through the last calendar day of the
preceding month, (ii) the occurrence of an Event of Default in consequence of
which Lender elects to accelerate the maturity and payment of the Obligations or
(iii) termination of this Agreement pursuant to Section 4 hereof.
(c) COSTS, FEES AND CHARGES. Costs, fees and charges payable
pursuant to this Agreement shall be payable by Borrowers as and when provided in
Section 2 hereof, to Lender or to any other Person designated by Lender in
writing.
(d) OTHER OBLIGATIONS. The balance of the Obligations requiring the
payment of money, if any, shall be payable by Borrowers to Lender as and when
provided in this Agreement, the Other Agreements or the Security Documents, or
on demand, whichever is later.
3.3 MANDATORY PREPAYMENTS OF PROCEEDS OF SALE, LOSS OR DESTRUCTION OF
COLLATERAL. Except as provided in subsection 6.4(b) hereof, if any Borrower
sells any of the Collateral (other than Inventory), or if any of the Collateral
is lost or destroyed, Borrowers shall pay to Lender, unless otherwise agreed by
Lender, as and when received by any Borrower and as a mandatory prepayment of
the Revolving Credit Loans, a sum equal to the proceeds (including insurance
payments) received by Borrowers from such sale, loss or destruction.
3.4 APPLICATION OF PAYMENTS AND COLLECTIONS. All items of payment received
by Lender by 12:00 noon, Dallas, Texas time, on any Business Day shall be deemed
received on that Business Day. All items of payment received after 12:00 noon,
Dallas, Texas time, on any Business Day shall be deemed received on the
following Business Day. For the purpose of computing interest hereunder, all
items of payment received by Lender shall be deemed applied by Lender on account
of the Obligations (subject to final payment of such items) on the first
Business Day after receipt of such item in good funds. Borrowers irrevocably
waive the right to
5
direct the application of any and all payments and collections at any time or
times hereafter received by Lender from or on behalf of Borrowers, and Borrowers
do hereby irrevocably agree that Lender shall have the continuing exclusive
right to apply and reapply any and all such payments and collections received at
any time or times hereafter by Lender or its agent against the Obligations, in
such manner as Lender may deem advisable, notwithstanding any entry by Lender
upon any of its books and records. If as the result of collections of Accounts
as authorized by subsection 6.2(f) hereof a credit balance exists in the Loan
Account, such credit balance shall not accrue interest in favor of Borrowers,
but shall be available to Borrowers at any time or times for so long as no
Default or Event of Default exists.
3.5 ALL LOANS TO CONSTITUTE ONE OBLIGATION. The Loans shall constitute one
general Obligation of Borrowers, and shall be secured by Lender's Lien upon all
of the Collateral.
3.6 LOAN ACCOUNT. Lender shall enter all Loans as debits to the Loan
Account and shall also record in the Loan Account all payments made by any
Borrower on any Obligations and all proceeds of Collateral which are finally
paid to Lender, and may record therein, in accordance with customary accounting
practice, other debits and credits, including interest and all charges and
expenses properly chargeable to Borrowers.
3.7 STATEMENTS OF ACCOUNT. Lender will account to Borrowers monthly with a
statement of Loans, charges and payments made pursuant to this Agreement, and
such account rendered by Lender shall be deemed final, binding and conclusive
upon Borrowers unless Lender is notified by Borrowers in writing to the contrary
within thirty (30) days of the date each accounting is mailed to Borrowers. Such
notice shall only be deemed an objection to those items specifically objected to
therein.
SECTION 4
TERM AND TERMINATION
4.1 TERM OF AGREEMENT. Subject to Lender's right to cease making Loans to
Borrowers upon or after the occurrence of any Default or Event of Default, this
Agreement shall be in effect for a period of three years from the date hereof,
through and including January 31, 2006 (the "TERM") unless terminated as
provided in Section 4.2 hereof.
4.2 TERMINATION.
(a) TERMINATION BY LENDER. Lender may terminate this Agreement, upon
written notice to the Borrowers, at any time after the occurrence of an Event of
Default and so long as such Event of Default is continuing.
(b) TERMINATION BY BORROWERS. Upon at least fourteen (14) days prior
written notice to Lender, Borrowers may, at their option, terminate this
Agreement; provided, however, no such termination shall be effective until
Borrowers have paid all of the Obligations in immediately available funds. Any
notice of termination given by Borrowers shall be irrevocable unless Lender
otherwise agrees in writing, and Lender shall have no obligation to make any
Loans on or after the termination date stated in such notice. Borrowers may
elect to terminate
6
this Agreement in its entirety only. No section of this Agreement or type of
Loan available hereunder may be terminated singly.
(c) TERMINATION CHARGES. At the effective date of termination of
this Agreement for any reason, Borrowers shall pay to Lender (in addition to the
then outstanding principal, accrued interest and other charges owing under the
terms of this Agreement and any of the other Loan Documents) as liquidated
damages for the loss of the bargain and not as a penalty, an amount equal to 3%
of the Total Credit Facility if termination occurs during the first twelve-month
period of the Term (January 31, 2003 through January 30, 2004) and 2% of the
Total Credit Facility if termination occurs during the second 12-month period of
the Term (January 31, 2004 through January 30, 2005). If termination occurs on
January 31, 2005 through the last day of the Term, no termination charge shall
be payable.
(d) EFFECT OF TERMINATION. All of the Obligations shall be
immediately due and payable upon the termination date stated in any notice of
termination of this Agreement. All undertakings, agreements, covenants,
warranties and representations of Borrowers contained in the Loan Documents
shall survive any such termination and Lender shall retain its Liens in the
Collateral and all of its rights and remedies under the Loan Documents
notwithstanding such termination until Borrowers have paid the Obligations to
Lender, in full, in immediately available funds, together with the applicable
termination charge, if any. Notwithstanding the payment in full of the
Obligations, Lender shall not be required to terminate its security interests in
the Collateral unless, with respect to any loss or damage Lender may incur as a
result of dishonored checks or other items of payment received by Lender from
Borrowers or any Account Debtor and applied to the Obligations, Lender shall, at
its option, (i) have received a written agreement, executed by Borrowers and by
any Person whose loans or other advances to Borrowers are used in whole or in
part to satisfy the Obligations, indemnifying Lender from any such loss or
damage; or (ii) have retained such monetary reserves and Liens on the Collateral
for such period of time as Lender, in its reasonable discretion, may deem
necessary to protect Lender from any such loss or damage.
SECTION 5
SECURITY INTERESTS
5.1 SECURITY INTEREST IN COLLATERAL. To secure the prompt payment and
performance to Lender of the Obligations, each Borrower hereby grants to Lender
a continuing Lien upon all of such Borrower's assets, including all of the
following Property and interests in Property of such Borrower, whether now owned
or existing or hereafter created, acquired or arising and wheresoever located:
(a) Accounts;
(b) Certificated Securities;
(c) Certificates of Title;
(d) Chattel Paper;
7
(e) Computer Hardware and Software and all rights with respect thereto,
including, any and all licenses, options, warranties, service contracts, program
services, test rights, maintenance rights, support rights, improvement rights,
renewal rights and indemnifications, and any substitutions, replacements,
additions or model conversions of any of the foregoing;
(f) Contract Rights;
(g) Deposit Accounts;
(h) Documents;
(i) Equipment;
(j) Financial Assets;
(k) Fixtures;
(l) General Intangibles, including Payment Intangibles and Software;
(m) Goods (including all of its Equipment, Fixtures and Inventory), and
all accessions, additions, attachments, improvements, substitutions and
replacements thereto and therefor;
(n) Instruments;
(o) Intellectual Property;
(p) Inventory;
(q) Investment Property;
(r) money (of every jurisdiction whatsoever);
(s) Letter-of-Credit Rights;
(t) Payment Intangibles;
(u) Security Entitlements;
(v) Software;
(w) Supporting Obligations;
(x) Uncertificated Securities; and
(y) to the extent not included in the foregoing, all other personal
property of any kind or description;
8
together with all books, records, writings, data bases, information and other
property relating to, used or useful in connection with, or evidencing,
embodying, incorporating or referring to any of the foregoing, and all Proceeds,
products, offspring, rents, issues, profits and returns of and from any of the
foregoing; provided that to the extent that the provisions of any lease or
license of Computer Hardware and Software or Intellectual Property expressly
prohibit (which prohibition is enforceable under applicable law) any assignment
thereof, and the grant of a security interest therein, Lender will not enforce
its security interest in such Borrower's rights under such lease or license
(other than in respect of the Proceeds thereof) for so long as such prohibition
continues, it being understood that upon request of Lender, such Borrower will
in good faith use reasonable efforts to obtain consent for the creation of a
security interest in favor of Lender (and to Lender's enforcement of such
security interest) in such Lender's rights under such lease or license.
Notwithstanding the foregoing, to the extent any Investment Property was issued
by a Person organized under the laws of any jurisdiction other than the United
States of America, a State thereof, or the District of Columbia, Lender's
security interest in such Investment Property shall be limited to all non-voting
Equity and sixty five percent (65%) of the issued and outstanding voting Equity
of any such issuer.
5.2 OTHER COLLATERAL.
(a) COMMERCIAL TORT CLAIMS. Each Borrower shall promptly notify
Lender in writing upon incurring or otherwise obtaining a Commercial Tort Claim
after the Closing Date against any third party and, upon request of Lender,
promptly enter into an amendment to this Agreement and do such other acts or
things deemed appropriate by Lender to give Lender a security interest in any
such Commercial Tort Claim.
(b) OTHER COLLATERAL. Each Borrower shall promptly notify Lender in
writing upon acquiring or otherwise obtaining any Collateral after the date
hereof consisting of Deposit Accounts, Investment Property, Letter-of-Credit
Rights or Electronic Chattel Paper and, upon the request of Lender, promptly
execute such other documents, and do such other acts or things deemed
appropriate by Lender to deliver to Lender control with respect to such
Collateral; promptly notify Lender in writing upon acquiring or otherwise
obtaining any Collateral after the date hereof consisting of Documents or
Instruments and, upon the request of Lender, will promptly execute such other
documents, and do such other acts or things deemed appropriate by Lender to
deliver to Lender possession of such Documents which are negotiable and
Instruments, and, with respect to nonnegotiable Documents, to have such
nonnegotiable Documents issued in the name of Lender; and with respect to
Collateral in the possession of a third party, other than Certificated
Securities and Goods covered by a Document and obtain a written acknowledgement
from the third party that it is holding the Collateral for the benefit of
Lender.
5.3 LIEN PERFECTION; FURTHER ASSURANCES. Borrowers hereby irrevocably
authorize the filing of such UCC-1 financing statements as are required by the
UCC and agree to execute such other instruments, assignments or documents as are
necessary to perfect Lender's Lien upon any of the Collateral and shall take
such other action as may be required to perfect or to continue the perfection of
Lender's Lien upon the Collateral. Unless prohibited by applicable law,
Borrowers hereby irrevocably authorize Lender to execute and file any such
financing statements that indicate the Collateral (a) as "all assets" of
Borrowers or words of similar effect,
9
or (b) as being of an equal or lesser scope, or with greater or lesser detail,
than as set forth in Section 5.1, on Borrowers' behalf. Borrowers also hereby
ratify their authorization for Lender to have filed in any jurisdiction any like
financing statements or amendments thereto if filed prior to the date hereof.
The parties agree that a photographic or other reproduction of this Agreement
shall be sufficient as a financing statement and may be filed in any appropriate
office in lieu thereof. At Lender's request, each Borrower shall also promptly
execute or cause to be executed and shall deliver to Lender any and all
documents, instruments and agreements deemed necessary by Lender to give effect
to or carry out the terms or intent of the Loan Documents, including, without
limitation certificates of title for motor vehicles and/or trailers which are
currently owned or hereinafter acquired by any Borrower.
5.4 LIEN ON REALTY. No Borrower nor any Subsidiary thereof owns any real
property.
5.5 RELEASE OF LENDER'S LIEN ON EQUIPMENT. In the event that (a) MSI
achieves a Consolidated EBITDA for any rolling four fiscal quarters ending on or
after March 31, 2004 of at least $10,500,000, and (b) MSI resolves and/or
settles all material litigation involving any Borrower to Lender's satisfaction
(which shall be in Lender's sole and absolute discretion), MSI may request that
Lender release its Lien in Equipment of Borrowers. Lender will grant such
request, provided, that, (i) no Event of Default has occurred and is continuing,
and (ii) Castletop has released or will release any and all of its Liens in
Equipment, as evidenced by the delivery of UCC-3 termination statements and any
other applicable documents by Castletop, which shall be in form and substance
satisfactory to Lender in its sole discretion, of Borrowers.
5.6 RELEASE OF LENDER'S LIEN ON EQUITY OF MEASUREMENT LIMITED. In the
event that (a) MSI achieves a Consolidated EBITDA for any rolling four fiscal
quarters ending on or after March 31, 2004 of at least $10,500,000, (b) MSI
resolves and/or settles all material litigation involving any Borrower to
Lender's satisfaction (which shall be in Lender's sole and absolute discretion),
and (c) MSI obtains financing otherwise permitted hereunder from a foreign
source pursuant to which MSI is required to deliver the Equity of Measurement
Limited as collateral for such financing, MSI may request that Lender release
its Lien in the Equity of Measurement Limited then pledged to Lender. Lender
will grant such request, provided, that, no Event of Default has occurred and is
continuing.
SECTION 6
COLLATERAL ADMINISTRATION
6.1 GENERAL.
(a) LOCATION OF COLLATERAL. All Collateral, other than Inventory in
transit and motor vehicles, will at all times be kept by Borrowers and their
Subsidiaries at one or more of the business locations set forth in Exhibit B
hereto and shall not, without the prior written approval of Lender, be moved
therefrom except, prior to an Event of Default and Lender's acceleration of the
maturity of the Obligations in consequence thereof, for
10
(i) sales of Inventory in the ordinary course of business; and (ii) removals in
connection with dispositions of Equipment that are authorized by subsection
6.4(b) hereof.
(b) INSURANCE OF COLLATERAL. Borrowers shall maintain and pay for
insurance upon all Collateral wherever located and with respect to Borrowers'
business, covering casualty, hazard, public liability and such other risks in
such amounts and with such insurance companies as are reasonably satisfactory to
Lender. Borrowers shall deliver the originals of such policies to Lender with
satisfactory lender's loss payable endorsements, naming Lender as loss payee,
assignee or additional insured, as appropriate. Each policy of insurance or
endorsement shall contain a clause requiring the insurer to give not less than
thirty (30) days prior written notice to Lender in the event of cancellation of
the policy for any reason whatsoever and a clause specifying that the interest
of Lender shall not be impaired or invalidated by any act or neglect of
Borrowers or the owner of the Property or by the occupation of the premises for
purposes more hazardous than are permitted by said policy. If Borrowers fail to
provide and pay for such insurance, Lender may, at its option, but shall not be
required to, procure the same and charge Borrowers therefor. Borrowers agree to
deliver to Lender, promptly as rendered, true copies of all reports made in any
reporting forms to insurance companies.
(c) PROTECTION OF COLLATERAL. All expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping the Collateral, any
and all excise, property, sales, and use taxes imposed by any state, federal, or
local authority on any of the Collateral or in respect of the sale thereof shall
be borne and paid by Borrowers. If Borrowers fail to promptly pay any portion
thereof when due, Lender may, at its option, but shall not be required to, pay
the same and charge Borrowers therefor. Lender shall not be liable or
responsible in any way for the safekeeping of any of the Collateral or for any
loss or damage thereto (except for reasonable care in the custody thereof while
any Collateral is in Lender's actual possession) or for any diminution in the
value thereof, or for any act or default of any warehouseman, carrier,
forwarding agency, or other person whomsoever, but the same shall be at
Borrowers' sole risk.
6.2 ADMINISTRATION OF ACCOUNTS.
(a) RECORDS, SCHEDULES AND ASSIGNMENTS OF ACCOUNTS. Borrowers shall
keep accurate and complete records of their Accounts and all payments and
collections thereon and shall submit to Lender on such periodic basis as Lender
shall request a sales and collections report for the preceding period, in form
satisfactory to Lender. On or before the twentieth (20th) day of each month from
and after the date hereof, Borrowers shall deliver to Lender, in form acceptable
to Lender, a detailed, aged trial balance of all Accounts existing as of the
last day of the preceding month, specifying the names, addresses, face value,
dates of invoices and due dates for each Account Debtor obligated on an Account
so listed ("SCHEDULE OF ACCOUNTS"), and, upon Lender's request therefor, copies
of proof of delivery and the original copy of all documents, including, without
limitation, repayment histories and present status reports relating to the
Accounts so scheduled and such other matters and information relating to the
status of then existing Accounts as Lender shall reasonably request. In
addition, if either Borrower becomes aware of Accounts in an aggregate face
amount in excess of $250,000 becoming ineligible because they fall within one of
the specified categories of ineligibility set forth in the definition of
Eligible Accounts or otherwise established by Lender, Borrowers shall notify
Lender of such occurrence on the first Business Day following such occurrence
and the Borrowing Base shall
11
thereupon be adjusted to reflect such occurrence. If requested by Lender,
Borrowers shall execute and deliver to Lender formal written assignments of all
of their Accounts weekly or daily, which shall include all Accounts that have
been created since the date of the last assignment, together with copies of
invoices or invoice registers related thereto.
(b) DISCOUNTS, ALLOWANCES, DISPUTES. If any Borrower grants any
discounts, allowances or credits that are not shown on the face of the invoice
for the Account involved, such Borrower shall report such discounts, allowances
or credits, as the case may be, to Lender as part of the next required Schedule
of Accounts. If any amounts due and owing in excess of $250,000 are in dispute
between any Borrower and any Account Debtor, such Borrower shall provide Lender
with written notice thereof at the time of submission of the next Schedule of
Accounts, explaining in detail the reason for the dispute, all claims related
thereto and the amount in controversy. Upon and after the occurrence of an Event
of Default, Lender shall have the right to settle or adjust all disputes and
claims directly with the Account Debtor and to compromise the amount or extend
the time for payment of the Accounts upon such terms and conditions as Lender
may deem advisable, and to charge the deficiencies, costs and expenses thereof,
including attorney's fees, to Borrowers.
(c) TAXES. If an Account includes a charge for any tax payable to
any governmental taxing authority, Lender is authorized, in its sole discretion,
to pay the amount thereof to the proper taxing authority for the account of any
Borrower and to charge Borrowers therefor, provided, however that Lender shall
not be liable for any taxes to any governmental taxing authority that may be due
by any Borrower.
(d) ACCOUNT VERIFICATION. Whether or not a Default or an Event of
Default has occurred, any of Lender's officers, employees or agents shall have
the right, at any time or times hereafter, in the name of Lender, any designee
of Lender, or a Borrower, to verify the validity, amount or any other matter
relating to any Accounts by mail, telephone, electronic communication or
otherwise. Borrowers shall cooperate fully with Lender in an effort to
facilitate and promptly conclude any such verification process.
(e) MAINTENANCE OF DOMINION ACCOUNT. Borrowers shall maintain a
Dominion Account pursuant to a lockbox arrangement acceptable to Lender with
such banks as may be selected by Borrowers and be acceptable to Lender.
Borrowers shall issue to any such banks an irrevocable letter of instruction
directing such banks to deposit all payments or other remittances received in
the lockbox to the Dominion Account for application on account of the
Obligations. All funds deposited in the Dominion Account shall immediately
become the property of Lender and Borrowers shall obtain the agreement by such
banks in favor of Lender to waive any recoupment, setoff rights, and any
security interest in, or against the funds so deposited, except for claims
related to the administration of such account and the handling of items
collection through such account. Lender assumes no responsibility for such
lockbox arrangement, including, without limitation, any claim of accord and
satisfaction or release with respect to deposits accepted by any bank
thereunder.
(f) COLLECTION OF ACCOUNTS, PROCEEDS OF COLLATERAL. To expedite
collection, Borrowers shall endeavor in the first instance to make collection of
their Accounts for Lender. All remittances received by Borrowers on account of
Accounts, together with the proceeds of
12
any other Collateral, shall be held as Lender's property by Borrowers as
trustees of an express trust for Lender's benefit and Borrowers shall
immediately deposit same in kind in the Dominion Account. Lender retains the
right at all times after the occurrence of a Default or an Event of Default to
notify Account Debtors that Accounts have been assigned to Lender and to collect
Accounts directly in its own name, or in the name of Lender's agent, and to
charge the collection costs and expenses, including attorneys' fees to
Borrowers.
6.3 ADMINISTRATION OF INVENTORY.
(a) RECORDS AND REPORTS OF INVENTORY. Borrowers shall keep accurate
and complete records of their Inventory. Borrowers shall to furnish Lender
Inventory reports in form and detail satisfactory to Lender at such times as
Lender may request, but at least once each month, not later than the twentieth
(20th) day of such month. Borrowers shall conduct a physical inventory no less
frequently than annually and shall provide to Lender a report based on each such
physical inventory promptly thereafter, together with such supporting
information as Lender shall request.
(b) RETURNS OF INVENTORY. If at any time or times hereafter any
Account Debtor returns any Inventory to any Borrower the shipment of which
generated an Account on which such Account Debtor is obligated in excess of
$50,000, such Borrower shall immediately notify Lender of the same, specifying
the reason for such return and the location, condition and intended disposition
of the returned Inventory.
6.4 ADMINISTRATION OF EQUIPMENT.
(a) RECORDS AND SCHEDULES OF EQUIPMENT. Borrowers shall keep
accurate records itemizing and describing the kind, type, quality, quantity and
value of their Equipment and all dispositions made in accordance with subsection
6.4(b) hereof, and shall furnish Lender with a current schedule containing the
foregoing information on at least an annual basis and more often if requested by
Lender. Immediately on request therefor by Lender, Borrowers shall deliver to
Lender any and all evidence of ownership, if any, of any of the Equipment.
(b) DISPOSITIONS OF EQUIPMENT. Borrowers will not sell, lease or
otherwise dispose of or transfer any of the Equipment or any part thereof
without the prior written consent of Lender; provided, however, that the
foregoing restriction shall not apply, for so long as no Default or Event of
Default exists, to (i) dispositions of Equipment which, in the aggregate during
any consecutive twelve-month period, has a fair market value or book value,
whichever is less, of $500,000 or less, provided that all proceeds thereof are
remitted to Lender for application to the Loans, or (ii) replacements of
Equipment that is substantially worn, damaged or obsolete with Equipment of like
kind, function and value, provided that the replacement Equipment shall be
acquired prior to or concurrently with any disposition of the Equipment that is
to be replaced, the replacement Equipment shall be free and clear of Liens other
than Permitted Liens that are not Purchase Money Liens, and Borrowers shall have
given Lender at least five (5) days prior written notice of such disposition.
6.5 PAYMENT OF CHARGES. All amounts chargeable to Borrowers under Section
6 hereof shall be Obligations secured by all of the Collateral, shall be payable
on demand and shall
13
bear interest from the date such advance was made until paid in full at the rate
applicable to Revolving Credit Loans from time to time.
SECTION 7
REPRESENTATIONS AND WARRANTIES
7.1 GENERAL REPRESENTATIONS AND WARRANTIES. To induce Lender to enter into
this Agreement and to make advances hereunder, Borrowers jointly and severally
warrant, represent and covenant to Lender that:
(a) ORGANIZATION AND QUALIFICATION. Each of Borrowers and their
Subsidiaries which is a corporation is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each of Borrowers and their Subsidiaries is duly qualified and is
authorized to do business and is in good standing as a foreign entity or
corporation in each state or jurisdiction listed on Exhibit C hereto and in all
other states and jurisdictions where the character of its Properties or the
nature of its activities make such qualification necessary.
(b) CORPORATE POWER AND AUTHORITY. Each of Borrowers and their
Subsidiaries is duly authorized and empowered to enter into, execute, deliver
and perform this Agreement and each of the other Loan Documents to which it is a
party. The execution, delivery and performance of this Agreement and each of the
other Loan Documents have been duly authorized by all necessary corporate action
and do not and will not (i) require any consent or approval of the shareholders
(or members, in the case of a limited liability company) of any Borrower or any
of its Subsidiaries except for such consents or approvals as have been obtained;
(ii) contravene any Borrower's or any of its Subsidiaries' charter, articles or
certificate of incorporation or by-laws or other equivalent documents; (iii)
violate, or cause any Borrower or any of its Subsidiaries to be in default
under, any provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award in effect having applicability to any
Borrower or any of its Subsidiaries; (iv) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which any Borrower or any of its Subsidiaries is a party
or by which it or its Properties may be bound or affected; or (v) result in, or
require, the creation or imposition of any Lien (other than Permitted Liens)
upon or with respect to any of the Properties now owned or hereafter acquired by
any Borrower or any of its Subsidiaries.
(c) LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and each of
the other Loan Documents to which a Borrower or any of its Subsidiaries is a
party when delivered under this Agreement will be, a legal, valid and binding
obligation of such Borrower and such Subsidiary, as applicable, enforceable
against it in accordance with its respective terms subject, as to
enforceability, to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or similar laws affecting
creditors' rights generally.
(d) CAPITAL STRUCTURE. Exhibit D hereto states (i) the correct name
of each Subsidiary of each Borrower, its jurisdiction of incorporation and the
percentage of its Voting Stock owned by each Borrower, (ii) the name of each
Borrower's corporate or joint venture Affiliates and the nature of the
affiliation, (iii) the number, nature and
14
holder of all outstanding Securities of each Borrower and each Subsidiary of
each Borrower and (iv) the number of authorized, issued and treasury shares or
other ownership interest of each Borrower and each Subsidiary of each Borrower.
Each Borrower has good title to all of the shares it purports to own of the
stock of each of its Subsidiaries, free and clear in each case of any Lien other
than Permitted Liens. All such shares have been duly issued and are fully paid
and non-assessable. Except as otherwise provided in Exhibit D, there are no
outstanding options to purchase, or any rights or warrants to subscribe for, or
any commitments or agreements to issue or sell, or any Securities or obligations
convertible into, or any powers of attorney relating to, shares of the capital
stock of any Borrower or any of its Subsidiaries. Except as set forth in Exhibit
D, there are no outstanding agreements or instruments binding upon any of
Borrower's shareholders (or members, in the case of a limited liability company)
relating to the ownership of its shares of capital stock (or member interests,
in the case of a limited liability company). Measurement Specialties United
Kingdom, Ltd. ("MSUK") qualifies as a "Subsidiary" of MSI but since MSUK is
currently in liquidation, MSUK will not be considered a "Subsidiary" for
purposes of this Agreement.
(e) CORPORATE NAMES, ETC. Neither Borrowers nor any of their
Subsidiaries have been known as or used any corporate, fictitious or trade names
except those listed on Exhibit E hereto. Except as set forth on Exhibit E,
neither Borrowers nor any of their Subsidiaries have been the surviving
corporation of a merger or consolidation or acquired all or substantially all of
the assets of any Person. Each of Borrower's and its Subsidiaries' jurisdiction
of incorporation or organization, Type of organization and organizational I.D.
number (if any) is set forth on Exhibit E. The exact legal name of each Borrower
and each of its Subsidiaries is set forth on Exhibit E.
(f) BUSINESS LOCATIONS; AGENT FOR PROCESS. Each Borrower's and each
of its Subsidiaries' chief executive office and other places of business are as
listed on Exhibit B hereto. During the preceding one-year period, neither
Borrowers nor any of their Subsidiaries have had an office, place of business or
agent for service of process other than as listed on Exhibit B. Except as shown
on Exhibit B, no Inventory is stored with a bailee, warehouseman or similar
party, nor is any Inventory consigned to any Person. Except as shown on Exhibit
B, no Inventory is or will be consigned to any Person by Borrowers without
Lender's prior written consent, and, if such consent is given, Borrowers shall,
prior to the delivery of any Inventory on consignment, (i) provide Lender with
all consignment agreements to be used in connection with such consignment, all
of which shall be reasonably acceptable to Lender, (ii) prepare and file
appropriate financing statements with respect to any consigned Inventory,
showing Lender as assignee, (iii) conduct a search of all filings made against
the consignee in all jurisdictions in which any consigned Inventory is to be
located and deliver to Lender copies of the results of all such searches and
(iv) notify, in writing, all the creditors of the consignee which are or may be
holders of Liens in the Inventory to be consigned that Borrowers expect to
deliver certain Inventory to the consignee, all of which Inventory shall be
described in such notice by item or type.
(g) TITLE TO PROPERTIES; PRIORITY OF LIENS. Borrowers and each of
their Subsidiaries have good, indefeasible and marketable title to and fee
simple ownership of, or valid
15
and subsisting leasehold interests in, all of their real Property, if any, and
good title to all of the Collateral and all of their other Property, in each
case, free and clear of all Liens except Permitted Liens. Borrowers have paid or
discharged all lawful claims which, if unpaid, might become a Lien against any
of Borrowers' Properties that is not a Permitted Lien. The Liens granted to
Lender under Section 5 hereof are first-priority Liens, subject only to
Permitted Liens.
(h) ACCOUNTS. Lender may rely, in determining which Accounts are
Eligible Accounts, on all statements and representations made by Borrowers with
respect to any Account or Accounts. Unless otherwise indicated in writing to
Lender, with respect to each Account:
(i) It is genuine and in all respects what it purports to be, and it
is not evidenced by a judgment;
(ii) It arises out of a completed, bona fide sale and delivery of
goods or rendition of services by a Borrower in the ordinary course of its
business and in accordance with the terms and conditions of all purchase
orders, contracts or other documents relating thereto and forming a part
of the contract between a Borrower and the Account Debtor;
(iii) It is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a copy of
which has been furnished or is available to Lender;
(iv) Except for Guaranteed Sale Accounts and the Stayhealthy
Accounts, such Account, and Lender's security interest therein, is not,
and will not (by voluntary act or omission of a Borrower) be in the
future, subject to any offset, Lien, deduction, recoupment, defense,
dispute, counterclaim or any other adverse condition except for disputes
resulting in returned goods where the amount in controversy is deemed by
Lender to be immaterial, and each such Account is absolutely owing to a
Borrower and is not contingent in any respect or for any reason;
(v) No Borrower has made any agreement with any Account Debtor
thereunder for any extension, compromise, settlement or modification of
any such Account or any deduction therefrom, except discounts or
allowances which are granted by such Borrower in the ordinary course of
its business for prompt payment and which are reflected in the calculation
of the net amount of each respective invoice related thereto and are
reflected in the Schedules of Accounts submitted to Lender pursuant to
subsection 6.2(a) hereof;
(vi) Except for Guaranteed Sale Accounts and the Stayhealthy
Accounts, there are no facts, events or occurrences which in any way
impair the validity or enforceability of any Accounts or tend to reduce
the amount payable thereunder from the face amount of the invoice and
statements delivered to Lender with respect thereto;
(vii) To the best of each Borrower's knowledge, the Account Debtor
thereunder (A) had the capacity to contract at the time any contract or
other document giving rise to the Account was executed and (B) such
Account Debtor is Solvent; and
16
(viii) To the best of each Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against any Account
Debtor thereunder which might result in any material adverse change in
such Account Debtor's financial condition or the collectibility of such
Account.
(i) EQUIPMENT. The Equipment of Borrowers is in good operating
condition and repair, 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, reasonable wear and tear excepted. No Borrower will
permit any of the Equipment to become affixed to any real Property leased to
such Borrower so that an interest arises therein under the real estate laws of
the applicable jurisdiction unless the landlord of such real Property has
executed a landlord waiver or leasehold mortgage in favor of and in form
acceptable to Lender, and no Borrower will permit any of the Equipment to become
an accession to any personal Property other than Equipment that is subject to
first-priority (except for Permitted Liens) Liens in favor of Lender.
(j) FINANCIAL STATEMENTS; FISCAL YEAR. The audited Consolidated
balance sheet of MSI and its Subsidiaries as of March 31, 2002 and the unaudited
Consolidated balance sheet of MSI and its Subsidiaries as of December 31, 2002,
and the related statements of income, changes in stockholder's equity, and cash
flows for the periods ended on such dates, have been prepared in accordance with
GAAP, and present fairly the financial positions of MSI and its Subsidiaries at
such dates and the results of their operations for such periods. Since December
31, 2002, there has been no material change in the condition, financial or
otherwise, of Borrowers and such other Persons as shown on the Consolidated
balance sheet as of such date and no change in the aggregate value of Equipment
and real Property owned by Borrowers or such other Persons, except changes in
the ordinary course of business, none of which individually or in the aggregate
has been materially adverse. The fiscal year of Borrowers and each of their
Subsidiaries ends on March 31st of each year.
(k) FULL DISCLOSURE. The financial statements referred to in
subsection 7.1(j) hereof do not, nor does this Agreement or any other written
statement of Borrowers to Lender, contain any untrue statement of a material
fact or omit a material fact necessary to make the statements contained therein
or herein not misleading. There is no fact which Borrowers have failed to
disclose to Lender in writing which materially affects adversely or, so far as
Borrowers can now foresee, will materially affect adversely the Properties,
business, prospects, profits or condition (financial or otherwise) of Borrowers
or any of their Subsidiaries or the ability of Borrowers or their Subsidiaries
to perform this Agreement or the other Loan Documents.
(l) SOLVENT FINANCIAL CONDITION. Each Borrower and each of its
Subsidiaries is now and, after giving effect to the Loans to be made hereunder,
at all times will be, Solvent.
(m) SURETY OBLIGATIONS. No Borrower nor any of its Subsidiaries is
obligated as surety or indemnitor under any surety or similar bond or other
contract, or has issued or entered into any agreement to assure payment,
performance or completion of performance of any undertaking or obligation of any
Person.
(n) TAXES. MSI's federal tax identification number is ▇▇-▇▇▇▇▇▇▇.
IC's federal tax identification number is ▇▇-▇▇▇▇▇▇▇. The federal tax
identification number of each of
17
Borrowers' Subsidiaries is shown on Exhibit F hereto. Each of Borrowers and
their Subsidiaries has filed all federal, state and local tax returns and other
reports it is required by law to file and has paid, or made provision for the
payment of, all taxes, assessments, fees, levies and other governmental charges
upon it, its income and Properties as and when such taxes, assessments, fees,
levies and charges are due and payable, unless and to the extent any thereof are
being actively contested in good faith and by appropriate proceedings and such
Borrower maintains reasonable reserves on its books therefor. The provision for
taxes on the books of Borrowers and their Subsidiaries is adequate for all years
not closed by applicable statutes, and for its current fiscal year.
(o) BROKERS. There are no claims for brokerage commissions, finder's
fees or investment banking fees in connection with the transactions contemplated
by this Agreement.
(p) PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. Each of Borrowers
and their Subsidiaries owns or possesses all the patents, trademarks, service
marks, tradenames, copyrights and licenses necessary for the present and planned
future conduct of its business without any known conflict with the rights of
others. All such patents, trademarks, service marks, tradenames, copyrights,
licenses and other similar rights are listed on Exhibit G-1 hereto.
(q) GOVERNMENTAL CONSENTS. Each of Borrowers and their Subsidiaries
has, and is in good standing with respect to, all governmental consents,
approvals, licenses, authorizations, permits, certificates, inspections and
franchises necessary to continue to conduct its business as heretofore or
proposed to be conducted by it and to own or lease and operate its Properties as
now owned or leased by it.
(r) COMPLIANCE WITH LAWS. Each of Borrowers and their Subsidiaries
has duly complied with, and its Properties, business operations and leaseholds
are in compliance in all material respects with, the provisions of all federal,
state and local laws, rules and regulations applicable to such Borrower or such
Subsidiary, as applicable, its Properties or the conduct of its business and
there have been no citations, notices or orders of noncompliance issued to such
Borrower or any of its Subsidiaries under any such law, rule or regulation. Each
of Borrower and their Subsidiaries has established and maintains an adequate
monitoring system to insure that it remains in compliance with all federal,
state and local laws, rules and regulations applicable to it. No Inventory has
been produced in violation of the Fair Labor Standards Act (29 U.S.C. Section201
et seq.), as amended.
(s) RESTRICTIONS. No Borrower nor any of its Subsidiaries is a party
or subject to any contract, agreement, or charter or other corporate
restriction, which materially and adversely affects its business or the use or
ownership of any of its Properties. No Borrower nor any of its Subsidiaries is a
party or subject to any contract or agreement which restricts its right or
ability to incur Indebtedness, other than as set forth on Exhibit H hereto, none
of which prohibit the execution of or compliance with this Agreement or the
other Loan Documents by such Borrower or any of its Subsidiaries, as applicable.
(t) LITIGATION. Except as set forth on Exhibit I hereto, there are
no actions, suits, proceedings or investigations pending, or to the knowledge of
Borrowers, threatened, against or affecting any Borrower or any of its
Subsidiaries, or the
18
business, operations, Properties, prospects, profits or condition of any
Borrower or any of its Subsidiaries. No Borrower nor any of its Subsidiaries is
in default with respect to any order, writ, injunction, judgment, decree or rule
of any court, governmental authority or arbitration board or tribunal.
(u) NO DEFAULTS. As of the Closing Date, no event has occurred and
no condition exists which would, upon or after the execution and delivery of
this Agreement or Borrowers' performance hereunder, constitute a Default or an
Event of Default. As of the Closing Date, no Borrower nor any of its
Subsidiaries is in default, and no event has occurred and no condition exists
which constitutes, or which with the passage of time or the giving of notice or
both would constitute, a default in the payment of any Indebtedness to any
Person for Money Borrowed.
(v) LEASES. Exhibit J hereto is a complete listing of all
capitalized leases of Borrowers and their Subsidiaries and Exhibit K hereto is a
complete listing of all operating leases of Borrowers and their Subsidiaries
requiring annual lease payments of $25,000 or more. Each of Borrower and their
Subsidiaries is in full compliance with all of the terms of each of its
respective capitalized and operating leases.
(w) PENSION PLANS. Except as disclosed on Exhibit L hereto, no
Borrower nor any of its Subsidiaries has any Plan. Each Borrower and each of its
Subsidiaries are in material compliance with the requirements of ERISA and the
regulations promulgated thereunder with respect to each Plan. No fact or
situation that could reasonably be expected to result in a material adverse
change in the financial condition of any Borrower or any of its Subsidiaries
exists in connection with any Plan. No Borrower nor any of its Subsidiaries has
any withdrawal liability in connection with a Multi-employer Plan.
(x) TRADE RELATIONS. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between any Borrower or any of its Subsidiaries and
any customer or any group of customers whose purchases individually or in the
aggregate are material to the business of any Borrower or any of its
Subsidiaries, or with any material supplier, and there exists no present
condition or state of facts or circumstances which would materially affect
adversely any Borrower or any of its Subsidiaries or prevent any Borrower or any
of its Subsidiaries from conducting such business after the consummation of the
transaction contemplated by this Agreement in substantially the same manner in
which it has heretofore been conducted.
(y) LABOR RELATIONS. Except as described on Exhibit M hereto, no
Borrower nor any of its Subsidiaries is a party to any collective bargaining
agreement. There are no material grievances, disputes or controversies with any
union or any other organization of any Borrower's or any of its Subsidiaries'
employees, or threats of strikes, work stoppages or any asserted pending demands
for collective bargaining by any union or organization.
(z) BANK ACCOUNTS. Exhibit Q hereto sets forth the account number
and location of all bank accounts of each Borrower and their Subsidiaries and a
description of the cash management system for such entities.
19
7.2 CONTINUOUS NATURE OF REPRESENTATIONS AND WARRANTIES. Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be continuous in nature and shall remain accurate, complete and
not misleading at all times during the term of this Agreement, except for
changes in the nature of Borrowers' or their Subsidiaries' businesses or
operations that would render the information in any exhibit attached hereto
either inaccurate, incomplete or misleading, so long as Lender has consented to
such changes or such changes are expressly permitted by this Agreement. Without
limiting the generality of the foregoing, each loan request made pursuant to
subsection 3.1(a) hereof shall constitute Borrowers' reaffirmation, as of the
date of each such loan request, of each representation, warranty or other
statement made or furnished to Lender by or on behalf of any Borrower or any
Subsidiary of any Borrower in this Agreement, any of the other Loan Documents,
or any instrument, certificate or financial statement furnished in compliance
with or in reference thereto except to the extent that a Borrower has provided
updated information with respect to such matter and Lender has expressly
consented in writing thereto.
7.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Borrowers contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by Lender
and the parties thereto and the closing of the transactions described therein or
related thereto.
SECTION 8
COVENANTS AND CONTINUING AGREEMENTS
8.1 AFFIRMATIVE COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrowers jointly
and severally covenant that, unless otherwise consented to by Lender in writing,
they shall:
(a) VISITS AND INSPECTIONS. Permit representatives of Lender, from
time to time, as often as may be reasonably requested, but only during normal
business hours, to visit and inspect the Properties of each Borrower and each of
its Subsidiaries, inspect, audit and make extracts from its books and records,
and discuss with its officers, its employees and its independent accountants,
such Borrower's and each of its Subsidiaries' business, assets, liabilities,
financial condition, business prospects and results of operations.
(b) NOTICES. Promptly notify Lender in writing of the occurrence of
any event or the existence of any fact which renders any representation or
warranty in this Agreement or any of the other Loan Documents inaccurate,
incomplete or misleading.
(c) FINANCIAL STATEMENTS. Keep, and cause each Subsidiary to keep,
adequate records and books of account with respect to its business activities in
which proper entries are made in accordance with GAAP reflecting all its
financial transactions; and cause to be prepared and furnished to Lender the
following (all to be prepared in accordance with GAAP applied on a consistent
basis, unless Borrowers' certified public accountants concur in any change
therein and such change is disclosed to Lender and is consistent with GAAP):
(i) not later than ninety (90) days after the close of each fiscal
year of MSI, unqualified, audited financial statements of MSI and its
Subsidiaries as of the end
20
of such year, on a Consolidated and consolidating basis, certified by a
firm of independent certified public accountants of recognized standing
selected by Borrowers but acceptable to Lender (except for (A) the audited
financial statements for the fiscal year ending March 31, 2003 which may
be qualified and (B) a qualification for a change in accounting principles
with which the accountant concurs);
(ii) not later than thirty (30) days after the end of each month
hereafter, other than the last month of each fiscal quarter, including the
last month of MSI's fiscal year, which is due not later than forty-five
(45) days after the end of such month, unaudited, interim financial
statements of MSI and its Subsidiaries as of the end of such month and of
the portion of MSI's financial year then elapsed, on a Consolidated and
consolidating basis, certified by the principal financial officer of MSI
as prepared in accordance with GAAP and fairly presenting the Consolidated
financial position and results of operations of MSI and its Subsidiaries
for such month and period subject only to changes from audit and year-end
adjustments and except that such statements need not contain notes;
(iii) promptly upon Lender's request, which request may be daily in
Lender's sole and absolute discretion, but in any event, on the last
Business Day of each month, a Borrowing Base Certificate;
(iv) promptly after the sending or filing thereof, as the case may
be, copies of any proxy statements, financial statements or reports which
MSI has made available to its shareholders and copies of any regular,
periodic and special reports or registration statements which MSI files
with the Securities and Exchange Commission or any governmental authority
which may be substituted therefor, or any national securities exchange;
(v) promptly after the filing thereof, copies of any annual and
other report (including applicable schedules) to be filed in connection
with each Plan or any trust created thereunder; and
(vi) such other data and information (financial and otherwise) as
Lender, from time to time, may reasonably request, bearing upon or related
to the Collateral or the financial condition or results of operations of
Borrowers and each of their Subsidiaries.
Concurrently with the delivery of the financial statements described in
clause (i) of this subsection 8.1(c), MSI shall forward to Lender a copy of the
accountants' letter to MSI's management that is prepared in connection with such
financial statements and also shall cause to be prepared and shall furnish to
Lender a certificate of the aforesaid certified public accountants certifying to
Lender that, based upon their examination of the financial statements of MSI and
its Subsidiaries performed in connection with their examination of said
financial statements, they are not aware of any Default or Event of Default, or,
if they are aware of such Default or Event of Default, specifying the nature
thereof, and acknowledging, in a manner satisfactory to Lender. Concurrently
with the delivery of the financial statements described in clauses (i) and (ii)
of this subsection 8.1(c), or more frequently if requested by Lender, MSI shall
cause to be prepared and
21
furnished to Lender a Compliance Certificate in the form of Exhibit N hereto
executed by the principal financial officer of MSI.
(d) LANDLORD AND STORAGE AGREEMENTS. Provide Lender with copies of
all agreements between any Borrower or any of its Subsidiaries and any landlord
or warehouseman which owns any premises at which any Inventory or Equipment may,
from time to time, be kept.
(e) PROJECTIONS. No later than thirty (30) days prior to the end of
each fiscal year of Borrowers, deliver to Lender Projections of Borrowers for
the forthcoming fiscal year, month by month.
(f) DEPOSIT AND BROKERAGE ACCOUNTS. For each deposit account or
brokerage account that any Borrower at any time opens or maintains, such
Borrower shall, at Lender's request and option, pursuant to an agreement in form
and substance satisfactory to Lender, cause the depository bank or securities
intermediary, as applicable, to agree to comply at any time with instructions
from Lender to such depository bank or securities intermediary, as applicable,
directing the disposition of funds from time to time credited to such deposit or
brokerage account, without further consent of such Borrower.
(g) INVENTORY APPRAISALS. Permit representatives of Lender, from
time to time as often as may be reasonably requested, to inspect and appraise
Borrowers' Inventory; provided, that, such inspections and appraisals shall be
at the sole cost of Borrowers beginning with the first such inspection and
appraisal to occur six months after the Closing Date and up to one such
inspection and appraisal annually thereafter. Such appraisal may be prepared by
an independent appraisal firm acceptable to Lender, in its reasonable
discretion. Upon the occurrence and during the continuation of an Event of
Default, all inspections and appraisals shall be at the sole cost of Borrowers.
(h) DOMINION ACCOUNT/CASH MANAGEMENT. Within 120 days following the
Closing Date, Borrowers shall cause the Dominion Account to be moved to and,
established with Bank pursuant to documentation satisfactory to Lender. Once
established with Bank, the Dominion Account and such cash management services
shall thereafter be maintained with Bank throughout the Term.
8.2 NEGATIVE COVENANTS. During the Term of this Agreement, and thereafter
for so long as there are any Obligations to Lender, Borrowers jointly and
severally covenant that, unless Lender has first consented thereto in writing,
they will not:
(a) MERGERS; CONSOLIDATIONS; ACQUISITIONS; STRUCTURAL CHANGES.
Except in connection with a Permitted Acquisition, merge or consolidate, or
permit any Subsidiary of any Borrower to merge or consolidate, with any Person;
nor acquire, nor permit any of its Subsidiaries to acquire, all or any
substantial part of the Properties of any Person; nor change its or any of its
Subsidiaries' state of incorporation or organization or Type of Organization;
nor change its or any of its Subsidiaries' legal names, provided, that, a merger
or consolidation between the Borrowers and/or their Subsidiaries and/or any of
them shall be permitted, provided, further, that, if a Borrower is one of the
entities party to such merger or consolidation, a Borrower shall be the
surviving entity.
22
(b) LOANS. Make, or permit any Subsidiary of any Borrower to make,
any loans or other advances of money (other than for salary, travel advances,
advances against commissions and other similar advances in the ordinary course
of business) to any Person other than (i) a Borrower or (ii) a Subsidiary to the
extent permitted in subSection 8.2(c)(iv) hereof.
(c) TOTAL MONEY BORROWED. Create, incur, assume, or suffer to exist,
or permit any Subsidiary of any Borrower to create, incur or suffer to exist,
any Money Borrowed, except:
(i) Obligations owing to Lender;
(ii) Subordinated Debt approved by Lender in its sole and
absolute discretion;
(iii) Indebtedness of any Borrower to any other Borrower;
(iv) Indebtedness of any Borrower to any Subsidiary of any
Borrower or of any Subsidiary of any Borrower to any Borrower or any other
Subsidiary of a Borrower which is incurred in the ordinary course of
business and is on fair and reasonable terms comparable to what would be
obtained in an arms length transaction, provided, that, the aggregate
amount of such Indebtedness of the Subsidiaries of the Borrowers as to the
Borrowers, net of such Indebtedness of the Borrowers to their Subsidiaries
shall not exceed $4,000,000 at any time;
(v) Permitted Purchase Money Indebtedness;
(vi) contingent liabilities arising out of endorsements of
checks and other negotiable instruments for deposit or collection in the
ordinary course of business; and
(vii) Money Borrowed not included in paragraphs (i) through
(vii) above which does not exceed at any time, in the aggregate, the sum
of $100,000.
(d) AFFILIATE TRANSACTIONS. Enter into, or be a party to, or permit
any Subsidiary of any Borrower to enter into or be a party to, any transaction
with any Affiliate of Borrowers (other than an Affiliate which is another
Borrower or a Subsidiary of a Borrower) or stockholder, except in the ordinary
course of and pursuant to the reasonable requirements of such Borrower's or such
Subsidiary's business and upon fair and reasonable terms which are fully
disclosed to Lender and are no less favorable to such Borrower than would obtain
in a comparable arm's length transaction with a Person not an Affiliate or
stockholder of such Borrower or such Subsidiary.
(e) LIMITATION ON LIENS. Create or suffer to exist, or permit any
Subsidiary of any Borrower to create or suffer to exist, any Lien upon any of
its Property, income or profits, whether now owned or hereafter acquired,
except:
(i) Liens at any time granted in favor of Lender;
23
(ii) Liens at any time granted in favor of Castletop and
securing Subordinated Debt;
(iii) Liens for taxes (excluding any Lien imposed pursuant to
any of the provisions of ERISA) not yet due, or being contested in the
manner described in subSection 7.1(n) hereto, but only if in Lender's
judgment such Lien does not adversely affect Lender's rights or the
priority of Lender's Lien in the Collateral;
(iv) Liens arising in the ordinary course of any Borrower's
business by operation of law or regulation, but only if payment in respect
of any such Lien is not at the time required and such Liens do not, in the
aggregate, materially detract from the value of the Property of any
Borrower or materially impair the use thereof in the operation of any
Borrower's business;
(v) Purchase Money Liens securing Permitted Purchase Money
Indebtedness;
(vi) such other Liens as appear on Exhibit O hereto; and
(vii) such other Liens as Lender may hereafter approve in
writing.
(f) SUBORDINATED DEBT. Make, or permit any Subsidiary of any
Borrower to make, any payment of any part or all of any Subordinated Debt or
take any other action or omit to take any other action in respect of any
Subordinated Debt, except in accordance with the Subordination Agreement
relative thereto.
(g) DISTRIBUTIONS. Declare or make, or permit any Subsidiary of any
Borrower to declare or make, any Distributions except (i) any distribution to a
Borrower and (ii) any Distribution from Jingliang Electronics (Shenzhen) Co.,
Ltd., a company existing and duly organized under the laws of the Peoples
Republic of China ("JINGLIANG"), to Measurement Limited, a company existing and
duly organized under the laws of the Peoples Republic of China (Hong Kong)
("MEASUREMENT LIMITED").
(h) CAPITAL EXPENDITURES. Except in connection with a Permitted
Acquisition, make Capital Expenditures (including, without limitation, by way of
capitalized leases, which, in the aggregate, as to Borrowers and their
Subsidiaries, exceed $4,000,000 during any fiscal year beginning with the fiscal
year ending March 31, 2004.
(i) DISPOSITION OF ASSETS. Sell, lease or otherwise dispose of any
of, or permit any Subsidiary of any Borrower to sell, lease or otherwise dispose
of any of, its Properties, including any disposition of Property as part of a
sale and leaseback transaction, to or in favor of any Person, except (i) sales
of Inventory in the ordinary course of business for so long as no Event of
Default exists hereunder, (ii) a transfer of Property to any Borrower by any
Subsidiary of any Borrower or (iii) dispositions expressly authorized by this
Agreement.
(j) STOCK OF SUBSIDIARIES. Permit any of their Subsidiaries to issue
any additional shares of its capital stock except director's qualifying shares.
24
(k) ▇▇▇▇-AND-HOLD SALES, ETC. Make a sale to any customer on a
▇▇▇▇-and-hold, sale and return, sale on approval or consignment basis (except
for consignment agreements disclosed to Lender in writing and which in all cases
shall be excluded from the Borrowing Base), or any sale on a repurchase or
return basis. This covenant shall not prevent the Borrowers or their
Subsidiaries from making Guaranteed Sales (which in all cases shall be excluded
from the Borrowing Base unless the Guaranteed Sale Accounts relating thereto
qualify as Eligible Guaranteed Sale Accounts).
(l) RESTRICTED INVESTMENT. Except in connection with a Permitted
Acquisition, make or have, or permit any Subsidiary of any Borrower to make or
have, any Restricted Investment.
(m) CONSOLIDATION. File or consent to the filing of any consolidated
income tax return with any Person other than a Subsidiary of any Borrower.
(n) REAL PROPERTY. Purchase or acquire (or enter into any contract
to purchase or acquire), or permit any of their Subsidiaries to purchase or
acquire (or enter into any contract to purchase or acquire) any real property
(o) SETTLEMENT OF LAWSUITS. Make any cash payment in settlement of
any litigation matters unless, after giving effect to such settlement payment
and for a period of thirty (30) consecutive days prior thereto Availability is
not less than $1,500,000; provided, that, without the prior written consent of
Lender the Borrowers shall not make any cash payment in settlement of any of the
following three litigation matters: (1) In re: Measurement Specialties, Inc.
Securities Litigation, 02 Civ. No. 1071 (D.N.J.);United States District Court
for the District of New Jersey; (2) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ v. Measurement Specialties,
Inc. et al., Civil Action No. 02-CV-3431; United States District Court, District
of New Jersey; and (3) Hibernia Litigation; High Court of Dublin.
8.3 SPECIFIC FINANCIAL COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrowers
covenant that, unless otherwise consented to by Lender in writing, they shall:
(a) CONSOLIDATED FIXED CHARGE RATIO. Beginning with the fiscal
quarter ending on June 30, 2003, have a Consolidated Fixed Charge Ratio,
calculated for the fiscal quarter then ending, equal to or greater than 1.0 to 1
as of the end of each fiscal quarter.
(b) MINIMUM AVAILABILITY. Beginning on the Closing Date and
continuing through the earlier of (i) the Borrowers' delivery to Lender of
quarterly financial statements for the fiscal quarter ending June 30, 2003
pursuant to subSection 8.1(c)(ii) hereof and (ii) August 15, 2003, have an
Availability of not less than $2,000,000, unless Lender agrees in its sole and
absolute discretion to a lower minimum Availability.
Section 9
CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Lender under
the other Section s of
25
this Agreement, Lender shall not be required to make any Loan under this
Agreement unless and until each of the following conditions has been and
continues to be satisfied:
9.1 DOCUMENTATION. Lender shall have received, in form and substance
satisfactory to Lender, a duly executed copy of this Agreement and the other
Loan Documents, including, without limitation, the Revolving Credit Note,
together with such additional documents, information, instruments and
certificates as Lender shall require in connection therewith from time to time,
all in form and substance satisfactory to Lender.
9.2 NO DEFAULT. No Default or Event of Default shall exist.
9.3 OTHER LOAN DOCUMENTS. Each of the conditions precedent set forth in
the other Loan Documents shall have been satisfied.
9.4 AVAILABILITY. Lender shall have determined that immediately after
Lender has made the initial Loan contemplated hereby, and paid all closing costs
incurred in connection with the transactions contemplated hereby, Availability
shall not be less than $2,500,000.
9.5 LITIGATION. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of this
Agreement or the consummation of the transactions contemplated hereby, and
Lender shall be satisfied with the status of the litigation disclosed on Exhibit
I hereto.
9.6 CLOSING AND COLLATERAL ADMINISTRATION FEES. Borrowers shall have paid
to Lender, in immediately available funds, (a) the closing fee in the amount of
$150,000 (of which $100,000 was previously paid by the Borrowers), and (b) the
first installment of the collateral administration fee in the amount of $25,000.
9.7 ADDITIONAL FEES AND EXPENSES. Borrowers shall have paid all reasonable
fees and expenses incurred by Lender in connection with its review and analysis
of Borrowers and the Collateral and in the preparation, negotiation and
execution of this Agreement and all related documents, including, without
limitation, all reasonable fees and expenses of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., counsel
to Lender.
9.8 OFFICERS' CERTIFICATES; OPINIONS, ETC. Each Borrower shall have
delivered to Lender (a) such certificates of authorized officers of such
Borrower, certified copies of the certificate of incorporation and bylaws of
such Borrower, certified copies of resolutions of the directors of such Borrower
and such other documents, instruments and agreements as Lender shall require to
evidence the valid corporate existence and authority to conduct business of such
Borrower and the due authorization, execution and delivery of this Agreement,
any documents related to this Agreement and any other legal matters relating to
such Borrower, any Subsidiary or the other Loan Documents entered into by such
Borrower, all in form and substance satisfactory to Lender and its counsel, and
(b) opinions of legal counsel to the Borrowers, with respect to the due
authorization, execution, delivery and enforceability of this Agreement and such
other matters related thereto as Lender shall require.
26
9.9 MEASUREMENT LIMITED CERTIFICATES; OPINIONS, ETC. Borrowers shall have
delivered to Lender (a) such certificates of authorized officers of Measurement
Limited, certified copies of the certificate of incorporation and bylaws of
Measurement Limited, certified copies of resolutions of the board of directors
or applicable governing body of Measurement Limited and such other documents,
instruments and agreements as Lender shall require to evidence the valid
corporate existence and authority to conduct business of Measurement Limited and
any other legal matters relating to Measurement Limited, all in form and
substance satisfactory to Lender and its counsel, and (b) opinions of legal
counsel to Measurement Limited, with respect to the enforceability of the pledge
by MSI of the Equity of Measurement Limited and such other matters related
thereto as Lender shall require.
9.10 INSURANCE. Borrowers shall have delivered certificates of insurance
coverage, dated not more than five Business Days prior to the Closing Date
evidencing that Borrowers and each Subsidiary are carrying insurance required by
Section 6.1(b) of this Agreement and naming Lender as additional insured and
loss payee.
9.11 AMENDMENT TO CASTLETOP LOAN AGREEMENT AND SUBORDINATION AGREEMENT.
Borrowers shall have delivered (i) a certified copy of a fully executed
amendment to the existing Castletop Loan Agreement and (ii) a fully executed
copy of the Subordination Agreement, which amendment and Subordination Agreement
shall both be in form and substance acceptable to Lender in its sole discretion.
9.12 DOMINION ACCOUNT AGREEMENT; RESTRICTED ACCOUNT AGREEMENTS. Borrowers
shall have delivered fully executed tri-party agreements in form and substance
acceptable to Lender in its sole discretion covering each bank account held by a
Borrower as required by Lender.
9.13 STOCK CERTIFICATE AND BLANK POWERS. Borrowers shall have delivered
all certificates evidencing Equity, including, without limitation, all
Certificated Securities, pledged pursuant to this Agreement, together with stock
powers duly executed in blank.
9.14 LANDLORD WAIVER AGREEMENT; BAILEE'S LETTERS. Borrowers shall have
delivered Landlord Waiver Agreements duly executed and delivered by any landlord
of real property leased by any Borrower and Bailee's Letters duly executed and
delivered by any Person who is in possession of inventory on behalf of any
Borrower as required by Lender.
9.15 DECEMBER 2002 SALES DATA. Borrowers shall have delivered a copy of
the December 2002 sales data for Borrowers.
SECTION 10
EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1 EVENTS OF DEFAULT. The occurrence of one or more of the following
events shall constitute an "EVENT OF DEFAULT":
(a) PAYMENT OF OBLIGATIONS. Any Borrower shall fail to pay any of
the Obligations on the due date thereof (whether due at stated maturity, on
demand, upon acceleration or otherwise.
27
(b) MISREPRESENTATIONS. Any representation, warranty or other
statement made or furnished to Lender by or on behalf of any Borrower or any
Subsidiary of any Borrower in this Agreement, any of the other Loan Documents or
any instrument, certificate or financial statement furnished in compliance with
or in reference thereto proves to have been false or misleading in any material
respect when made or furnished or when reaffirmed pursuant to Section 7.2
hereof.
(c) BREACH OF SPECIFIC COVENANTS. Any Borrower shall fail or neglect
to perform, keep or observe any covenant contained in Section s 5.2, 5.3,
6.1(b), 6.2(e), 6.2(f), 8.1(a), 8.1(c), 8.1(f), 8.1(g), 8.2 or 8.3 hereof on the
date that such Borrower is required to perform, keep or observe such covenant.
(d) BREACH OF OTHER COVENANTS. Any Borrower shall fail or neglect to
perform, keep or observe any covenant contained in this Agreement (other than a
covenant which is dealt with specifically elsewhere in Section 10.1 hereof) and
the breach of such other covenant is not cured to Lender's satisfaction within
fifteen (15) days after the sooner to occur of such Borrower's receipt of notice
of such breach from Lender or the date on which such failure or neglect first
becomes known to any officer of such Borrower.
(e) DEFAULT UNDER SECURITY DOCUMENTS/OTHER AGREEMENTS. Any event of
default shall occur under, or any Borrower shall default in the performance or
observance of any term, covenant, condition or agreement contained in, any of
the Security Documents or the Other Agreements and such default shall continue
beyond any applicable grace period.
(f) OTHER DEFAULTS. There shall occur any default or event of
default on the part of any Borrower under any agreement, document or instrument
to which any Borrower is a party or by which any Borrower or any of its Property
is bound, creating or relating to any Indebtedness (other than the Obligations)
in an aggregate amount of $50,000 or greater if the payment or maturity of such
Indebtedness is accelerated in consequence of such event of default or demand
for payment of such Indebtedness is made.
(g) UNINSURED LOSSES. Any material loss, theft, damage or
destruction of any of the Collateral not fully covered (subject to such
deductibles as Lender shall have permitted) by insurance.
(h) INSOLVENCY AND RELATED PROCEEDINGS. Any Borrower shall cease to
be Solvent or shall suffer the appointment of a receiver, trustee, custodian or
similar fiduciary, or shall make an assignment for the benefit of creditors, or
any petition for an order for relief shall be filed by or against any Borrower
under the Bankruptcy Code (if against any Borrower, the continuation of such
proceeding for more than sixty (60) days), or any Borrower shall make any offer
of settlement, extension or composition to their respective unsecured creditors
generally.
(i) BUSINESS DISRUPTION; CONDEMNATION. There shall occur a cessation
of a substantial part of the business of any Borrower or any Subsidiary of any
Borrower for a period which significantly affects any Borrower's capacity to
continue its business, on a profitable basis; or any Borrower or any Subsidiary
of any Borrower shall suffer the loss or revocation of any license or permit now
held or hereafter acquired by such Borrower which is necessary to the
28
continued or lawful operation of its business; or any Borrower shall be
enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of its business
affairs; or any material lease or agreement pursuant to which any Borrower
leases, uses or occupies any Property shall be canceled or terminated prior to
the expiration of its stated term; or any part of the Collateral shall be taken
through condemnation or the value of such Property shall be impaired through
condemnation.
(j) CHANGE OF MANAGEMENT. ▇▇▇▇▇ ▇▇▇▇▇▇▇, or a successor reasonably
acceptable to Lender, shall cease for any reason to be the highest ranking
executive officer of MSI and MSI fails, within fourteen (14) days thereafter,
either to (x) find a replacement acceptable to Lender in its sole and absolute
discretion, or (y) enter into a contract with Corporate Revitalization Partners,
or a similar management consulting firm acceptable to Lender in its sole and
absolute discretion, to provide management services to MSI and the other
Borrowers on terms acceptable to Lender in its sole and absolute discretion.
(k) CHANGE OF OWNERSHIP. MSI shall cease to own and control,
beneficially and of record, all of the issued and outstanding capital stock and
other ownership interests of IC and Measurement Limited; or Measurement Limited
shall cease to own and control, beneficially and of record, all of the issued
and outstanding capital stock and other ownership interests of Jingliang.
(l) ERISA. A Reportable Event shall occur which Lender, in its sole
discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a trustee for any
Plan, or if any Plan shall be terminated or any such trustee shall be requested
or appointed, or if any Borrower or any Subsidiary of any Borrower is in
"default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multi-employer Plan resulting from such Borrower's or such Subsidiary's
complete or partial withdrawal from such Plan.
(m) CHALLENGE TO AGREEMENT. Any Borrower or any Subsidiary of any
Borrower, or any Affiliate of any of them, shall challenge or contest in any
action, suit or proceeding the validity or enforceability of this Agreement, or
any of the other Loan Documents, the legality or enforceability of any of the
Obligations or the perfection or priority of any Lien granted to Lender.
(n) CRIMINAL FORFEITURE. Any Borrower or any Subsidiary of any
Borrower shall be criminally indicted or convicted under any law that could lead
to a forfeiture of any Property of any Borrower or any Subsidiary of any
Borrower; provided, that, any fines which may be imposed by the Securities and
Exchange Commission shall not, in and of themselves, constitute a default
hereunder.
(o) JUDGMENTS. Any money judgment, writ of attachment or similar
process is filed against any Borrower or any Subsidiary of any Borrower, or any
of their respective Property is in an amount in excess of $50,000 and is not
bonded or discharged within thirty (30) days.
29
10.2 ACCELERATION OF THE OBLIGATIONS. Without in any way limiting the
right of Lender to demand payment of any portion of the Obligations payable on
demand in accordance with Section 3.2 hereof, upon or at any time after the
occurrence of an Event of Default, all or any portion of the Obligations shall,
at the option of Lender and without presentment, demand, protest or further
notice by Lender, become at once due and payable and Borrowers shall forthwith
pay to Lender, the full amount of such Obligations, provided, that upon the
occurrence of an Event of Default specified in subSection 10.1(h) hereof, all of
the Obligations shall become automatically due and payable without declaration,
notice or demand by Lender.
10.3 OTHER REMEDIES. Upon and after the occurrence of an Event of Default,
Lender shall have and may exercise from time to time the following other rights
and remedies:
(a) All of the rights and remedies of a secured party under the UCC
or under other applicable law, and all other legal and equitable rights to which
Lender may be entitled, all of which rights and remedies shall be cumulative and
shall be in addition to any other rights or remedies contained in this Agreement
or any of the other Loan Documents, and none of which shall be exclusive.
(b) The right to take immediate possession of the Collateral, and to
(i) require Borrowers to assemble the Collateral, at Borrowers' joint and
several expense, and make it available to Lender at a place designated by Lender
which is reasonably convenient to both parties, and (ii) enter any premises
where any of the Collateral shall be located and to keep and store the
Collateral on said premises until sold (and if said premises be the Property of
a Borrower, Borrowers agree not to charge Lender for storage thereof).
(c) The right to sell or otherwise dispose of all or any Collateral
in its then condition, or after any further manufacturing or processing thereof,
at public or private sale or sales, with such notice as may be required by law,
in lots or in bulk, for cash or on credit, all as Lender, in its sole
discretion, may deem advisable. Lender may at Lender's option, disclaim any and
all warranties regarding the Collateral in connection with any such sale.
Borrowers agree that ten (10) days written notice to Borrowers of any public or
private sale or other disposition of Collateral shall be reasonable notice
thereof, and such sale shall be at such locations as Lender may designate in
said notice. Lender shall have the right to conduct such sales on Borrowers'
premises, without charge therefor, and such sales may be adjourned from time to
time in accordance with applicable law. Lender shall have the right to sell,
lease or otherwise dispose of the Collateral, or any part thereof, for cash,
credit or any combination thereof, and Lender may purchase all or any part of
the Collateral at public or, if permitted by law, private sale and, in lieu of
actual payment of such purchase price, may set off the amount of such price
against the Obligations. The proceeds realized from the sale of any Collateral
may be applied, after allowing two (2) Business Days for collection, first to
the costs, expenses and attorneys' fees incurred by Lender in collecting the
Obligations, in enforcing the rights of Lender under the Loan Documents and in
collecting, retaking, completing, protecting, removing, storing, advertising for
sale, selling and delivering any Collateral; second to the interest due upon any
of the Obligations; and third, to the principal of the Obligations. If any
deficiency shall arise, Borrowers shall remain jointly and severally liable to
Lender therefor.
30
(d) Lender is hereby granted a license or other right to use,
without charge, each Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, tradenames, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral and such Borrower's rights under all
licenses and all franchise agreements shall inure to Lender's benefit.
10.4 REMEDIES CUMULATIVE; NO WAIVER. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrowers contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule contained in any other agreement between Lender and any
Borrower, heretofore, concurrently, or hereafter entered into, shall be deemed
cumulative to and not in derogation or substitution of any of the terms,
covenants, conditions, or agreements of Borrowers herein contained. The failure
or delay of Lender to require strict performance by Borrowers of any provision
of this Agreement or to exercise or enforce any rights, Liens, powers, or
remedies hereunder or under any of the aforesaid agreements or other documents
or security or Collateral shall not operate as a waiver of such performance,
Liens, rights, powers and remedies, but all such requirements, Liens, rights,
powers, and remedies shall continue in full force and effect until all Loans and
all other Obligations owing or to become owing from Borrowers to Lender shall
have been fully satisfied. None of the undertakings, agreements, warranties,
covenants and representations of Borrowers contained in this Agreement or any of
the other Loan Documents and no Default or Event of Default by Borrowers under
this Agreement or any other Loan Documents shall be deemed to have been
suspended or waived by Lender, unless such suspension or waiver is by an
instrument in writing specifying such suspension or waiver and is signed by a
duly authorized representative of Lender and directed to Borrowers.
SECTION 11
MISCELLANEOUS
11.1 POWER OF ATTORNEY. Borrowers hereby jointly and severally irrevocably
designate, make, constitute and appoint Lender (and all Persons designated by
Lender) as Borrowers' true and lawful attorney (and agent-in-fact) and Lender,
or Lender's agent, may, without notice to Borrowers and in either of Borrowers'
or Lender's name, but at the joint and several cost and expense of Borrowers:
(a) At such time or times upon or after the occurrence of a Default
or an Event of Default as Lender or said agent, in its sole discretion, may
determine, endorse any Borrower's name on any checks, notes, acceptances,
drafts, money orders or any other evidence of payment or proceeds of the
Collateral which come into the possession of Lender or under Lender's control.
(b) At such time or times upon or after the occurrence of an Event
of Default as Lender or its agent in its sole discretion may determine: (i)
demand payment of the Accounts from the Account Debtors, enforce payment of the
Accounts by legal proceedings or otherwise, and generally exercise all of any
Borrower's rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge or release any of the Accounts or
other Collateral or any legal proceedings brought to collect any of the Accounts
or other Collateral;
31
(iii) sell or assign any of the Accounts and other Collateral upon such terms,
for such amounts and at such time or times as Lender deems advisable and, at
Lender's option, with all warranties regarding the Collateral disclaimed; (iv)
take control, in any manner, of any item of payment or proceeds relating to any
Collateral; (v) prepare, file and sign any Borrower's name to a proof of claim
in bankruptcy or similar document against any Account Debtor or to any notice of
lien, assignment or satisfaction of lien or similar document in connection with
any of the Collateral; (vi) receive, open and dispose of all mail addressed to
Borrowers and to notify postal authorities to change the address for delivery
thereof to such address as Lender may designate; (vii) endorse the name of any
Borrower upon any of the items of payment or proceeds relating to any Collateral
and deposit the same to the account of Lender on account of the Obligations;
(viii) endorse the name of any Borrower upon any chattel paper, document,
instrument, invoice, freight ▇▇▇▇, ▇▇▇▇ of lading or similar document or
agreement relating to the Accounts, Inventory and any other Collateral; (ix) use
Borrowers' stationery and sign the name of any Borrower to verifications of the
Accounts and notices thereof to Account Debtors; (x) use the information
recorded on or contained in any data processing equipment and computer hardware
and software relating to the Accounts, Inventory, Equipment and any other
Collateral; (xi) make and adjust claims under policies of insurance; and (xii)
do all other acts and things necessary, in Lender's determination, to fulfill
Borrowers' obligations under this Agreement.
11.2 INDEMNITY. BORROWERS HEREBY JOINTLY AND SEVERALLY AGREE TO INDEMNIFY
LENDER AND HOLD LENDER HARMLESS FROM AND AGAINST ANY LIABILITY, LOSS, DAMAGE,
SUIT, ACTION OR PROCEEDING EVER SUFFERED OR INCURRED BY LENDER (INCLUDING
REASONABLE ATTORNEYS FEES AND LEGAL EXPENSES) AS THE RESULT OF ANY BORROWER'S
FAILURE TO OBSERVE, PERFORM OR DISCHARGE SUCH BORROWER'S DUTIES HEREUNDER,
PROVIDED, THAT, THE FOREGOING SHALL NOT APPLY TO ANY LIABILITY, LOSS, DAMAGE,
SUIT, ACTION OR PROCEEDING TO THE EXTENT, BUT ONLY TO THE EXTENT, SOLELY CAUSED
BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDER. IN ADDITION, BORROWERS
SHALL JOINTLY AND SEVERALLY DEFEND LENDER AGAINST AND SAVE IT HARMLESS FROM ALL
CLAIMS OF ANY PERSON WITH RESPECT TO THE COLLATERAL. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, THESE INDEMNITIES SHALL EXTEND TO ANY CLAIMS
ASSERTED AGAINST LENDER BY ANY PERSON UNDER ANY ENVIRONMENTAL LAWS OR SIMILAR
LAWS BY REASON OF ANY BORROWER'S OR ANY OTHER PERSON'S FAILURE TO COMPLY WITH
LAWS APPLICABLE TO SOLID OR HAZARDOUS WASTE MATERIALS OR OTHER TOXIC SUBSTANCES.
NOTWITHSTANDING ANY CONTRARY PROVISION IN THIS AGREEMENT, THE OBLIGATION OF
BORROWERS UNDER THIS SECTION 11.2 SHALL SURVIVE THE PAYMENT IN FULL OF THE
OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
11.3 MODIFICATION OF AGREEMENT; SALE OF INTEREST. This Agreement may not
be modified, altered or amended, except by an agreement in writing signed by
Borrowers and Lender. Borrowers may not sell, assign or transfer any interest in
this Agreement, any of the other Loan Documents, or any of the Obligations, or
any portion thereof, including, without limitation, Borrowers' rights, title,
interests, remedies, powers, and duties hereunder or thereunder. Borrowers
hereby consent to Lender's participation, sale, assignment, transfer or other
32
disposition, at any time or times hereafter, of this Agreement and any of the
other Loan Documents, or of any portion hereof or thereof, including, without
limitation, Lender's rights, title, interests, remedies, powers, and duties
hereunder or thereunder. In the case of an assignment, the assignee shall have,
to the extent of such assignment, the same rights, benefits and obligations as
it would if it were "Lender" hereunder and Lender shall be relieved of all
obligations hereunder upon any such assignments. Borrowers agree that they will
use their best efforts to assist and cooperate with Lender in any manner
reasonably requested by Lender to effect the sale of participations in or
assignments of any of the Loan Documents or any portion thereof or interest
therein, including, without limitation, assisting in the preparation of
appropriate disclosure documents. Borrowers further agree that Lender may
disclose credit information regarding Borrowers and their Subsidiaries to any
potential participant or assignee.
11.4 SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
11.5 SUCCESSORS AND ASSIGNS. This Agreement, the Other Agreements and the
Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrowers and Lender permitted under Section 11.3
hereof.
11.6 CUMULATIVE EFFECT; CONFLICT OF TERMS. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in Section 3.2 hereof
and except as otherwise provided in any of the other Loan Documents by specific
reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with,
any provision in any of the other Loan Documents, the provision contained in
this Agreement shall govern and control.
11.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.
11.8 NOTICE. Except as otherwise provided herein, all notices, requests
and demands to or upon a party hereto, to be effective, shall be in writing and
shall be sent by certified or registered mail, return receipt requested, by
personal delivery against receipt, by overnight courier or by facsimile and,
unless otherwise expressly provided herein, shall be deemed to have been validly
served, given or delivered immediately when delivered against receipt, one
Business Day after deposit in the mail, postage prepaid, or with an overnight
courier or, in the case of facsimile notice, when sent, addressed as follows:
33
If to Lender: Fleet Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Loan Administration Manager
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
If to Borrowers: Measurement Specialties, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
IC Sensors, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇ & English, LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address as each party may designate for itself by notice given
in accordance with this Section 11.8; provided, however, that any notice,
request or demand to or upon Lender pursuant to subSection 3.1(a) or 4.2 hereof
shall not be effective until received by Lender.
11.9 LENDER'S CONSENT. Whenever Lender's consent is required to be
obtained under this Agreement, any of the Other Agreements or any of the
Security Documents as a condition to any action, inaction, condition or event,
Lender shall be authorized to give or withhold such consent in its reasonable
discretion, unless otherwise contained herein, in the Other Agreements or in the
Security Agreements, and to condition its consent upon the giving of additional
collateral security for the Obligations, the payment of money or any other
matter.
11.10 CREDIT INQUIRIES. Borrowers hereby authorize and permit Lender to
respond to usual and customary credit inquiries from third parties concerning
Borrowers or any of their Subsidiaries.
11.11 TIME OF ESSENCE. Time is of the essence of this Agreement, the Other
Agreements and the Security Documents.
34
11.12 ENTIRE AGREEMENT. This Agreement and the other Loan Documents,
together with all other instruments, agreements and certificates executed by the
parties in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and inducements, whether express or implied, oral or written.
11.13 INTERPRETATION. No provision of this Agreement or any of the other
Loan Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or dictated such
provision.
11.14 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN NEGOTIATED,
EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN DALLAS,
TEXAS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS; PROVIDED, HOWEVER, THAT IF ANY OF THE COLLATERAL
SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN TEXAS, THE LAWS OF SUCH
JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF
LENDER'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF LENDER'S OTHER
REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH
JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF TEXAS. AS PART
OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR
FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF ANY BORROWER OR LENDER,
BORROWERS HEREBY CONSENT AND AGREE THAT THE SUPERIOR COURT OF DALLAS COUNTY,
TEXAS, OR, AT LENDER'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF DALLAS, TEXAS DIVISION, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR
AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWERS AND LENDER PERTAINING TO
THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT.
BORROWERS EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWERS HEREBY WAIVE ANY
OBJECTION WHICH BORROWERS MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWERS
HEREBY JOINTLY AND SEVERALLY WAIVE PERSONAL SERVICE OF THE SUMMONS, COMPLAINT
AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF
SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO BORROWERS AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF BORROWERS' ACTUAL
RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT
THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW,
OR TO PRECLUDE THE ENFORCEMENT BY
35
LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY
ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR
JURISDICTION.
11.15 WAIVERS BY BORROWERS. BORROWERS JOINTLY AND SEVERALLY WAIVE (a) THE
RIGHT TO TRIAL BY JURY (WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE
LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL; (b) PRESENTMENT, DEMAND AND
PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY,
RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL
PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND
GUARANTIES AT ANY TIME HELD BY LENDER ON WHICH BORROWERS MAY IN ANY WAY BE
LIABLE AND HEREBY RATIFY AND CONFIRM WHATEVER LENDER MAY DO IN THIS REGARD; (c)
NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR
SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO
EXERCISE ANY OF LENDER'S REMEDIES; (d) THE BENEFIT OF ALL VALUATION,
APPRAISEMENT AND EXEMPTION LAWS; (e) NOTICE OF ACCEPTANCE HEREOF; AND (f) EXCEPT
AS PROHIBITED BY LAW, ANY RIGHT TO CLAIM OR RECOVER ANY SPECIAL, EXEMPLARY OR
PUNITIVE. BORROWERS ACKNOWLEDGE THAT THE FOREGOING WAIVERS ARE A MATERIAL
INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING
UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWERS. BORROWERSS
JOINTLY AND SEVERALLY WARRANT AND REPRESENT THAT THEY HAVE REVIEWED THE
FOREGOING WAIVERS WITH THEIR LEGAL COUNSEL AND HAVE KNOWINGLY AND VOLUNTARILY
WAIVED THEIR JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE
EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.
11.16 ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES, AND THE SAME MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
11.17 NON-APPLICABILITY OF ARTICLE 5069-15.01 ET. SEQ. Borrowers and
Lender hereby agree that, except for Section 15.10(b) thereof, the provisions of
Tex. Rev. Civ. Stat. ▇▇▇. art. 5069-15.01 et. seq. (▇▇▇▇▇▇ 1987) (regulating
certain revolving credit loans and revolving tri-party accounts) shall not apply
to this Agreement or any of the other Loan Documents.
11.18 REIMBURSEMENT. The undertaking by each Borrower to repay the
Obligations and each representation, warranty or covenant of each Borrower are
and shall be joint and several. To the extent that any Borrower shall be
required to pay a portion of the Obligations
36
which shall exceed the amount of loans, advances or other extensions of credit
received by any such Borrower and all interest, costs, fees and expenses
attributable to such loans, advances or other extensions of credit, then such
Borrower shall be reimbursed by the other Borrowers for the amount of such
excess. This Section 11.18 is intended only to define the relative rights of
each Borrower, and nothing set forth in Section 11.18 is intended or shall
impair the obligations of each Borrower, jointly and severally, to pay Lender
the Obligations as and when the same shall become due and payable in accordance
with the terms hereof.
[Signature Pages Follow]
37
IN WITNESS WHEREOF, this Agreement has been duly executed in Dallas,
Texas, on the day and year specified at the beginning of this Agreement.
MEASUREMENT SPECIALTIES, INC.,
a New Jersey corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
Chief Executive Officer
IC SENSORS, INC.,
a New Jersey corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
Chief Executive Officer
ACCEPTED IN DALLAS, TEXAS:
FLEET CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
Senior Vice President
[Signature Page]
APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of January 31, 2003,
by and between Fleet Capital Corporation ("LENDER") and Measurement Specialties,
Inc. and IC Sensors, Inc. (collectively, "BORROWERS"), (a) the terms ACCOUNT,
CERTIFICATED SECURITY, CERTIFICATES OF TITLE, CHATTEL PAPER, COMMERCIAL TORT
CLAIMS, DEPOSIT ACCOUNT, DOCUMENT, ELECTRONIC CHATTEL PAPER, EQUIPMENT,
FINANCIAL ASSET, FIXTURE, GENERAL INTANGIBLES, GOODS, INSTRUMENT, INVENTORY,
INVESTMENT PROPERTY, LETTER-OF-CREDIT RIGHTS, PAYMENT INTANGIBLES, PROCEEDS,
SECURITY ENTITLEMENT, SOFTWARE, SUPPORTING OBLIGATIONS, TANGIBLE CHATTEL PAPER
and UNCERTIFICATED SECURITY, have the respective meanings assigned thereto in
the UCC (as defined below); (b) all terms indicating Collateral having the
meanings assigned thereto under the UCC shall be deemed to mean such Property,
whether now owned or hereafter created or acquired by any Borrower or in which
any Borrower now has or hereafter acquires any interest; (c) capitalized terms
which are not otherwise defined have the respective meanings assigned thereto in
said Loan and Security Agreement; and (d) the following terms shall have the
following meanings (terms defined in the singular to have the same meaning when
used in the plural and vice versa):
ACCOUNT DEBTOR - any Person who is or may become obligated on or under or
on account of any Account, Contract Right, Chattel Paper or General Intangible.
AFFILIATE - a Person (other than a Subsidiary): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, a Person; (ii) which beneficially owns or holds 5%
or more of any class of the Voting Stock of a Person; or (iii) 5% or more of the
Voting Stock (or in the case of a Person which is not a corporation, 5% or more
of the equity interest) of which is beneficially owned or held by a Person or a
Subsidiary of a Person.
AGREEMENT - the Loan and Security Agreement referred to in the first
sentence of this Appendix A, all Exhibits thereto and this Appendix A.
APPLICABLE LAW - all laws, rules and regulations applicable to any Person,
conduct, transaction, covenant or Loan Documents in question, including all
applicable common law and equitable principles; all provisions of all applicable
state and federal constitutions, statutes, rules, regulations and orders of
governmental bodies; and orders, judgments and decrees of all courts and
arbitrators.
AVAILABILITY - the amount of money which Borrowers are entitled to borrow
from time to time as Revolving Credit Loans, such amount being the difference
derived when the principal amount of Revolving Credit Loans then outstanding
(including any amounts which Lender may have paid for the account of Borrowers
pursuant to any of the Loan Documents and which have not been reimbursed by
Borrowers) is subtracted from the Borrowing Base. If the amount outstanding is
equal to or greater than the Borrowing Base, Availability is zero (0).
APPENDIX A-1
BAILEE'S LETTER - a letter in form and substance acceptable to
Lender executed by any Person who is in possession of Inventory on behalf
of any Borrower pursuant to which such Person acknowledges Lender's Lien
with respect thereto.
BANK - Fleet National Bank.
BASE RATE - the rate of interest announced or quoted by Bank from time to
time as its prime rate for commercial loans, whether or not such rate is the
lowest rate charged by Bank to its most preferred borrowers; and, if such prime
rate for commercial loans is discontinued by Bank as a standard, a comparable
reference rate designated by Bank as a substitute therefor shall be the Base
Rate.
BORROWING BASE - as at any date of determination thereof, an amount
equal to the lesser of:
(i) $15,000,000; or
(ii) an amount equal to:
(a) the sum of (1) 85% of the net amount of Eligible Accounts
outstanding at such date, plus (2) the lesser of (x) 85% of the net amount
of Eligible Guaranteed Sale Accounts outstanding at such date and (y)
$1,000,000 from February 1st through August 31st of each year and
$2,500,000 from September 1st through January 31st of each year; provided,
that, such net amount shall calculated by deducting the greater of twenty
percent (20%) of the gross amount of such Eligible Guaranteed Sales
Accounts or the Borrowers' book reserves with respect thereto, plus (3)
the lesser of (A) 85% of the net amount of Eligible UK Accounts
outstanding at such date and (B) $500,000;
PLUS
(b) the lesser of (1) $6,000,000, (2) the sum of (A) 60%, of the
value of Eligible Inventory at such date calculated on the basis of the
lower of cost or market as determined by Lender in its sole discretion
with the cost of raw materials and finished goods calculated on a
first-in, first-out basis, plus (B) the lesser of (x) 60% of the value of
Eligible In-Transit Inventory at such date calculated on the basis of the
lower of cost or market as determined by Lender in its sole discretion
with cost of raw materials and finished goods calculated on a first-in,
first-out basis and net of any reserves related thereto for freight,
duties, and customs fees and (y) $1,250,000, or (3) 90% of the net orderly
liquidation value of each category of Eligible Inventory as appraised by
an appraiser acceptable to Lender and determined by Lender in its sole and
absolute discretion;
MINUS
(c) any and all reserves established by Lender, including, without
limitation, the Initial Availability Reserve.
APPENDIX A-2
For purposes hereof, the net amount of Eligible Accounts at any time shall
be the face amount of such Eligible Accounts less any and all returns, rebates,
discounts (which may, at Lender's option, be calculated on shortest terms),
credits, allowances or excise taxes of any nature at any time issued, owing,
claimed by Account Debtors, granted, outstanding or payable in connection with
such Accounts at such time.
BORROWING BASE CERTIFICATE - a certificate by a responsible officer of
Borrowers, substantially in the form of Exhibit P (or another form acceptable to
Lender) setting forth the calculation of the Borrowing Base, including a
calculation of each component thereof, all in such detail as shall be
satisfactory to Lender. All calculations of the Borrowing Base in connection
with the preparation of any Borrowing Base Certificate shall originally be made
by Borrowers and certified to Lender; provided, that Lender shall have the right
to review and adjust, in the exercise of its reasonable credit judgment, any
such calculation after giving notice thereof to the Borrowers, (1) to reflect
its reasonable estimate of declines in value of any of the Collateral described
therein, and (2) to the extent that such calculation is not in accordance with
this Agreement.
BUSINESS DAY - any day excluding Saturday, Sunday and any day which
-------------
is a legal holiday under the laws of the State of Texas or is a day on
which banking institutions located in such state are closed.
CAPITAL EXPENDITURES - expenditures made or liabilities incurred for the
acquisition of any fixed assets or improvements, replacements, substitutions or
additions thereto which have a useful life of more than one year, including the
total principal portion of Capitalized Lease Obligations.
CAPITALIZED LEASE OBLIGATION - any Indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP.
CASTLETOP SUBORDINATION AGREEMENT - the Subordination Agreement to be
dated on or about the Closing Date among Borrowers, Lender and Castletop.
CLOSING DATE - the date on which all of the conditions precedent in
Section 9 of the Agreement are satisfied and the initial Loan is made under the
Agreement.
COLLATERAL - all of the Property and interests in Property described in
Section 5 of the Agreement, and all other Property and interests in Property
that now or hereafter secure the payment and performance of any of the
Obligations.
COMPUTER HARDWARE AND SOFTWARE - all of a Borrower's rights (including
rights as licensee and lessee) with respect to (i) computer and other electronic
data processing hardware, including all integrated computer systems, central
processing units, memory units, display terminals, printers, computer elements,
card readers, tape drives, hard and soft disk drives, cables, electrical supply
hardware, generators, power equalizers, accessories, peripheral devices and
other related computer hardware; (ii) all Software and all software programs
designed for use on the computers and electronic data processing hardware
described in clause (i) above, including all operating system software,
utilities and application programs in any form (source code and object code in
magnetic tape, disk or hard copy format or any other listings
APPENDIX A-3
whatsoever); (iii) any firmware associated with any of the foregoing; and (iv)
any documentation for hardware, Software and firmware described in clauses (i),
(ii) and (iii) above, including flow charts, logic diagrams, manuals,
specifications, training materials, charts and pseudo codes.
CONSOLIDATED - the consolidation in accordance with GAAP of the accounts
or other items as to which such term applies.
CONSOLIDATED EBITDA - with respect to any fiscal period, the sum of MSI's
Consolidated net earnings (or loss) before interest expense and taxes plus
depreciation and amortization expense for said period as determined in
accordance with GAAP.
CONSOLIDATED FIXED CHARGE COVERAGE RATIO - with respect to any period of
determination, the ratio of (i) Consolidated Operating Cash Flow for such period
to (ii) Consolidated Fixed Charges for such period, all as determined in
accordance with GAAP.
CONSOLIDATED FIXED CHARGES - for any period, the sum of (i) all scheduled
principal payments required to be made during such period in respect of Money
Borrowed, and (ii) Consolidated Total Interest Expense.
CONSOLIDATED OPERATING CASH FLOW - for any period, Consolidated EBITDA of
MSI and its Subsidiaries for such period, minus the sum of (i) cash income taxes
paid during such period by MSI and its Subsidiaries on a consolidated basis, and
(ii) the aggregate amount of unfinanced Capital Expenditures made during such
period by MSI and its Subsidiaries.
CONSOLIDATED TOTAL INTEREST EXPENSE - with respect to any fiscal period,
the aggregate amount of interest required to be paid by Borrowers and their
Subsidiaries during such period in respect of Money Borrowed outstanding during
all or part of such period, whether such interest was or is required to be
reflected as an item of expense or capitalized, including payments consisting of
interest in respect of Capitalized Leases.
CONTRACT RIGHT - any right of any Borrower to payment under a contract for
the sale or lease of goods or the rendering of services, which right is at the
time not yet earned by performance.
CURRENT ASSETS - at any date means the amount at which all of the current
assets of a Person would be properly classified as current assets shown on a
balance sheet at such date in accordance with GAAP except that amounts due from
Affiliates and investments in Affiliates shall be excluded therefrom.
DEFAULT - an event or condition the occurrence of which would, with the
lapse of time or the giving of notice, or both, become an Event of Default.
DEFAULT RATE - as defined in subSection 2.1(b) of the Agreement.
DISTRIBUTION - in respect of any corporation means and includes: (i) the
payment of any dividends or other distributions on capital stock of the
corporation (except distributions in such stock) and (ii) the redemption or
acquisition of Securities unless made contemporaneously from the net proceeds of
the sale of Securities.
APPENDIX A-4
DOMINION ACCOUNT - a special account established by Borrowers pursuant to
the Agreement at a bank selected by Borrower, but acceptable to Lender in its
reasonable discretion, and over which Lender shall have sole and exclusive
access and control for withdrawal purposes.
ELIGIBLE ACCOUNT - an Account arising in the ordinary course of a
Borrower's business from the sale of goods or rendition of services which
Lender, in its reasonable credit judgment, deems to be an Eligible Account.
Without limiting the generality of the foregoing, no Account shall be an
Eligible Account if:
(i) it arises out of a sale made by such Borrower to a Subsidiary or an
Affiliate of such Borrower or to a Person controlled by an Affiliate of such
Borrower; or
(ii) it is unpaid for more than sixty (60) days after the original
due date shown on the invoice; or
(iii) it is due or unpaid more than one hundred and twenty (120)
days after the original invoice date; or
(iv) 50% or more of the Accounts from the Account Debtor are not
deemed Eligible Accounts hereunder; or
(v) the total unpaid Accounts of the Account Debtor exceed 25% (except for
Bed Bath and Beyond which shall be 30%) of the net amount of all Eligible
Accounts, to the extent of such excess; or
(vi) any covenant, representation or warranty contained in the
Agreement with respect to such Account has been breached; or
(vii) the Account Debtor is also a Borrower's creditor or supplier, or the
Account Debtor has disputed liability with respect to such Account, or the
Account Debtor has made any claim with respect to any other Account due from
such Account Debtor to a Borrower, or the Account otherwise is or may become
subject to any right of setoff by the Account Debtor; or
(viii) the Account Debtor has commenced a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or made an assignment
for the benefit of creditors, or a decree or order for relief has been entered
by a court having jurisdiction in the premises in respect of the Account Debtor
in an involuntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or any other petition or other application for relief under
the federal bankruptcy laws has been filed against the Account Debtor, or if the
Account Debtor has failed, suspended business, ceased to be Solvent, or
consented to or suffered a receiver, trustee, liquidator or custodian to be
appointed for it or for all or a significant portion of its assets or affairs;
or
(ix) it arises from a sale to an Account Debtor outside the United States
and Canada, unless the sale is on letter of credit, guaranty or acceptance
terms, in each case acceptable to Lender in its sole discretion; or
APPENDIX A-5
(x) it arises from a sale to the Account Debtor on a ▇▇▇▇-and-hold,
guaranteed sale, sale-or-return, sale-on-approval, consignment or any other
repurchase or return basis; or
(xi) the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless a Borrower assigns
its right to payment of such Account to Lender, in a manner satisfactory
to Lender, so as to comply with the Assignment of Claims Act of 1940 (31
U.S.C. Section 203 et seq., as amended); or
(xii) the Account is subject to a Lien other than a Permitted Lien; or
(xiii) the goods giving rise to such Account have not been delivered to
and accepted by the Account Debtor or the services giving rise to such Account
have not been performed by a Borrower and accepted by the Account Debtor or the
Account otherwise does not represent a final sale; or
(xiv) the Account is evidenced by chattel paper or an instrument of
any kind, or has been reduced to judgment; or
(xv) a Borrower has made any agreement with the Account Debtor for any
deduction therefrom, except for discounts or allowances which are made in the
ordinary course of business for prompt payment and which discounts or allowances
are reflected in the calculation of the face value of each invoice related to
such Account; or
(xvi) a Borrower has made an agreement with the Account Debtor to extend
the time of payment thereof.
ELIGIBLE GUARANTEED SALE ACCOUNT - a Guaranteed Sale Account arising out
of a Guaranteed Sale by a Borrower to Sam's Club, Costco or Costco Canada which
would be an "Eligible Account" but for the requirement set forth in clause (x)
of the definition of Eligible Account.
ELIGIBLE IN-TRANSIT INVENTORY - such In-Transit Inventory which would be
"Eligible Inventory" but for the requirement set forth in clause (vii)(b) of the
definition of Eligible Inventory.
ELIGIBLE INVENTORY - such Inventory of a Borrower (other than packaging
materials and supplies) which Lender, in its reasonable credit judgment, deems
to be Eligible Inventory. Without limiting the generality of the foregoing, no
Inventory shall be Eligible Inventory if:
(i) it is not raw materials or finished goods, or work-in-process that is,
in Lender's opinion, readily marketable in its current form; or
(ii) it is not in good and saleable condition; or
(iii) it is obsolete or unmerchantable; or
(iv) it does not meet all standards imposed by any governmental agency or
authority; or
APPENDIX A-6
(v) it does not conform in all respects to the warranties and
representations set forth in the Agreement; or
(vi) it is not at all times subject to Lender's duly perfected,
first-priority security interest and no other Lien except a Permitted Lien; or
(vii) it (a) is not situated at a location in compliance with the
Agreement or (b) is in transit.
ELIGIBLE UK ACCOUNT - an Account which would be an "Eligible Account" but
for the fact that it arises from a sale of Inventory shipped directly from the
United States to a Account Debtor located in the United Kingdom and payable in
United States currency.
ENVIRONMENTAL LAWS - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety and environmental matters.
"EQUITY" - shares of capital stock or a partnership, profits, capital or
member interest, or options, warrants or any other right to substitute for or
otherwise acquire the capital stock or a partnership, profits, capital or member
interest of any Borrower or Subsidiary and shall expressly include all "stock
appreciation rights", "phantom stock" "profit participations" and other similar
interests.
ERISA - the Employee Retirement Income Security Act of 1974, as amended,
and all rules and regulations from time to time promulgated thereunder.
EVENT OF DEFAULT - as defined in Section 10.1 of the Agreement.
GAAP - generally accepted account principles in the United States of
America in effect from time to time.
GUARANTEED SALE - a sale of Inventory by a Borrower to a retail merchant
the terms of which sale provide that the retail merchant may return unsold
saleable merchandise to such Borrower.
GUARANTEED SALE ACCOUNT - an Account arising out of a Guaranteed Sale.
IN-TRANSIT INVENTORY - Inventory which (a) has been delivered to a common
carrier for shipment to a Borrower, (b) has been inspected and approved by a
Borrower or an agent of a Borrower, (c) is the subject of (i) a negotiable ▇▇▇▇
of lading or other negotiable document of title, the original of which is in the
possession of Lender or an agent thereof, as applicable, vesting title to such
inventory in a Borrower or (ii) a non-negotiable ▇▇▇▇ of lading or other
non-negotiable document of title (a copy of which has been delivered to Lender)
which if issued on and after February 1, 2003 names Lender as consignee
thereunder; provided, that, all Inventory shipped on or after February 1, 2003
which is the subject of a non-negotiable document of title, shall be subject to
a bailee agreement executed by the carrier or other holder of such Inventory and
delivered to Lender in form an substance acceptable to Lender in its sole and
absolute discretion pursuant to which such carrier or other holder acknowledges
Lender's rights in the
APPENDIX A-7
Inventory and agrees to other terms required by Lender, and (d) is covered by a
policy of insurance obtained by Borrowers and meeting the requirements of
Section 6.1(b) of the Agreement.
INDEBTEDNESS - as applied to a Person means, without duplication
(i) all items which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a balance sheet
of such Person as at the date as of which Indebtedness is to be determined,
including, without limitation, Capitalized Lease Obligations,
(ii) all obligations of other Persons which such Person has guaranteed,
(iii) all reimbursement obligations in connection with letters of credit
or letter of credit guaranties issued for the account of such Person, and
(iv) in the case of Borrowers (without duplication), the Obligations.
INITIAL AVAILABILITY RESERVE - a reserve in the amount of $1,000,000 with
respect to the Borrowing Base; provided, that, such reserve shall be eliminated
upon (a) MSI's delivery of its audited consolidated financial statements for the
fiscal year ended March 31, 2003 as certified by an opinion of a certified
public account acceptable to Lender and performed in accordance with GAAP, (b)
resolution and/or settlement of all material litigation involving any Borrower
to Lender's satisfaction (which shall be in Lender's sole and absolute
discretion), (c) no Event of Default has occurred or is continuing, and no Event
of Default shall occur as a result of the elimination of such reserve, and (d)
after giving effect to the elimination of such reserve, Availability is at least
$2,000,000.
INTELLECTUAL PROPERTY - all past, present and future: trade secrets,
know-how and other proprietary information; trademarks, internet domain names,
service marks, trade dress, trade names, business names, designs, logos, slogans
(and all translations, adaptations, derivations and combinations of the
foregoing) indicia and other source and/or business identifiers, and the
goodwill of the business relating thereto and all registrations or applications
for registrations which have heretofore been or may hereafter be issued thereon
throughout the world; copyrights (including copyrights for computer programs)
and copyright registrations or applications for registrations which have
heretofore been or may hereafter be issued throughout the world and all tangible
property embodying the copyrights, unpatented inventions (whether or not
patentable); patent applications and patents; industrial design applications and
registered industrial designs; license agreements related to any of the
foregoing and income therefrom; books, records, writings, computer tapes or
disks, flow diagrams, specification sheets, computer software, source codes,
object codes, executable code, data, databases and other physical
manifestations, embodiments or incorporations of any of the foregoing; the right
to ▇▇▇ for all past, present and future infringements of any of the foregoing;
all other intellectual property; and all common law and other rights throughout
the world in and to all of the foregoing.
LANDLORD WAIVER AGREEMENT - an agreement, in form and substance
satisfactory to Lender, executed and delivered by each landlord of real property
leased by any Borrower pursuant to which such landlord subordinates or waives
all of its Liens to the Liens of Lender in
APPENDIX A-8
the Property of such Borrower located on the leased real property and grants
certain rights to Lender.
LIEN - any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on common law, statute or contract. The term "LIEN" shall also include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property. For the purpose of the Agreement, a Borrower shall be deemed
to be the owner of any Property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for security
purposes.
LOAN ACCOUNT - the loan account established on the books of Lender
pursuant to Section 3.6 of the Agreement.
LOAN DOCUMENTS - the Agreement, the Other Agreements and the Security
Documents.
LOANS - all loans and advances of any kind made by Lender, and/or by any
affiliate of Lender, pursuant to the Agreement.
MAXIMUM RATE - the maximum non-usurious rate of interest permitted by
Applicable Law that at any time, or from time to time, may be contracted for,
taken, reserved, charged or received on the Obligations in question or, to the
extent that at any time Applicable Law may thereafter permit a higher maximum
non-usurious rate of interest, then such higher rate. Notwithstanding any other
provision hereof, the Maximum Rate shall be calculated on a daily basis
(computed on the actual number of days elapsed over a year of 365 or 366 days,
as the case may be).
MONEY BORROWED - means (i) Indebtedness arising from the lending of money
by any Person to a Borrower; (ii) Indebtedness, whether or not in any such case
arising from the lending by any Person of money to a Borrower, (A) which is
represented by notes payable or drafts accepted that evidence extensions of
credit, (B) which constitutes obligations evidenced by bonds, debentures, notes
or similar instruments, or (C) upon which interest charges are customarily paid
(other than accounts payable) or that was issued or assumed as full or partial
payment for Property; (iii) Indebtedness that constitutes a Capitalized Lease
Obligation; (iv) reimbursement obligations with respect to letters of credit or
guaranties of letters of credit and (v) Indebtedness of a Borrower under any
guaranty of obligations that would constitute Indebtedness for Money Borrowed
under clauses (i) through (iii) hereof, if owed directly by such Borrower.
MULTIEMPLOYER PLAN - has the meaning set forth in Section 4001(a)(3) of
ERISA.
OBLIGATIONS - all Loans and all other advances, debts, liabilities,
obligations, covenants and duties, together with all interest, fees and other
charges thereon, owing, arising, due or payable from any of the Borrowers to
Lender, and/or to any affiliate of Lender, of any kind or nature, present or
future, whether or not evidenced by any note, guaranty or other instrument,
whether arising under the Agreement or any of the other Loan Documents or
otherwise whether
APPENDIX A-9
direct or indirect (including those acquired by assignment), absolute or
contingent, primary or secondary, due or to become due, now existing or
hereafter arising and however acquired.
ORGANIZATIONAL I.D. NUMBER - with respect to a Borrower, the
organizational identification number assigned to such Borrower by the applicable
governmental unit or agency of the jurisdiction of organization of such
Borrower.
OTHER AGREEMENTS - any and all agreements, instruments and documents
(other than the Agreement and the Security Documents), heretofore, now or
hereafter executed by a Borrower, any Subsidiary of a Borrower or any other
third party and delivered to Lender in respect of the transactions contemplated
by the Agreement.
OVERADVANCE - the amount, if any, by which the outstanding principal
amount of Revolving Credit Loans exceeds the Borrowing Base.
PARTICIPATING LENDER - each Person who shall be granted the right by
Lender to participate in any of the Loans described in the Agreement and who
shall have entered into a participation agreement in form and substance
satisfactory to Lender.
PERMITTED ACQUISITION - the purchase of a business or its assets by a
Borrower the form and substance of which acquisition have been approved in
writing by Lender in its sole and absolute discretion.
PERMITTED LIENS - any Lien of a kind specified in subSection 8.2(e) of the
Agreement.
PERMITTED PURCHASE MONEY INDEBTEDNESS - Purchase Money Indebtedness of any
Borrower incurred after the date hereof which is secured by a Purchase Money
Lien and which, when aggregated with the principal amount of all other such
Indebtedness and Capitalized Lease Obligations of Borrower at the time
outstanding, does not exceed $250,000. For the purposes of this definition, the
principal amount of any Purchase Money Indebtedness consisting of capitalized
leases shall be computed as a Capitalized Lease Obligation.
PERSON - an individual, partnership, corporation, limited liability
company, joint stock company, land trust, business trust, or unincorporated
organization, or a government or agency or political subdivision thereof.
PLAN - an employee benefit plan now or hereafter maintained for employees
of a Borrower that is covered by Title IV of ERISA.
PROJECTIONS - MSI's forecasted Consolidated (a) balance sheets, (b) profit
and loss statements, (c) cash flow statements, and (d) capitalization
statements, all prepared on a consistent basis with MSI's historical financial
statements, together with appropriate supporting details and a statement of
underlying assumptions.
PROPERTY - any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
APPENDIX A-10
PURCHASE MONEY INDEBTEDNESS - means and includes (i) Indebtedness (other
than the Obligations) for the payment of all or any part of the purchase price
of any fixed assets, (ii) any Indebtedness (other than the Obligations) incurred
at the time of or within ten (10) days prior to or after the acquisition of any
fixed assets for the purpose of financing all or any part of the purchase price
thereof, and (iii) any renewals, extensions or refinancings thereof, but not any
increases in the principal amounts thereof outstanding at the time.
PURCHASE MONEY LIEN - a Lien upon fixed assets which secures Purchase
Money Indebtedness, but only if such Lien shall at all times be confined solely
to the fixed assets the purchase price of which was financed through the
incurrence of the Purchase Money Indebtedness secured by such Lien.
REPORTABLE EVENT - any of the events set forth in Section 4043(b) of
ERISA.
RESTRICTED INVESTMENT - any investment made in cash or by delivery of
Property to any Person, whether by acquisition of stock, Indebtedness or other
obligation or Security, or by loan, advance or capital contribution, or
otherwise, or in any Property except the following:
(i) investments in one or more Subsidiaries of a Borrower to the
extent existing on the Closing Date;
(ii) Property to be used in the ordinary course of business;
(iii) Current Assets arising from the sale of goods and services in the
ordinary course of business of Borrowers and their Subsidiaries;
(iv) investments in direct obligations of the United States of America, or
any agency thereof or obligations guaranteed by the United States of America,
provided that such obligations mature within one (1) year from the date of
acquisition thereof;
(v) investments in certificates of deposit maturing within one (1) year
from the date of acquisition issued by a bank or trust company organized under
the laws of the United States or any state thereof having capital surplus and
undivided profits aggregating at least $100,000,000;
(vi) investments in commercial paper given the highest rating by a
national credit rating agency and maturing not more than 270 days from the date
of creation thereof; and
(vii) investments in money market mutual funds having assets in excess of
$2,000,000,000 and which invest in the types of investments listed in items
(iv), (v) and (vi) above.
REVOLVING CREDIT LOAN - a Loan made by Lender as provided in Section
1.1(a) of the Agreement.
REVOLVING CREDIT NOTE - the Revolving Credit Note to be executed by
Borrowers on or about the Closing Date in favor of Lender to evidence the
Revolving Credit Loan, which shall be in the form of Exhibit A to the Agreement.
APPENDIX A-11
SCHEDULE OF ACCOUNTS - as defined in subSection 6.2(a) of the Agreement.
SECURITY - shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
SECURITY DOCUMENTS - All instruments and agreements now or at any time
hereafter securing the whole or any part of the Obligations.
SOLVENT - as to any Person, that such Person (i) owns Property whose fair
saleable value is greater than the amount required to pay all of such Person's
Indebtedness (excluding contingent debts which are the subject of a bonafide
dispute and have not been resolved by judgment, settlement or otherwise), (ii)
is able to pay all of its Indebtedness as such Indebtedness matures and (iii)
has capital sufficient to carry on its business and transactions and all
business and transactions in which it is about to engage.
STAYHEALTHY ACCOUNT - an Account of the Borrower which is the obligation
of ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇.
SUBORDINATED DEBT - Indebtedness of Borrower that is subordinated to the
Obligations in a manner satisfactory to Lender in its sole and absolute
discretion, including principal of up to $2,000,000 owing to Castletop and
covered by the Castletop Subordination Agreement.
SUBORDINATION AGREEMENT - one or more subordination agreements, including,
without limitation, the Castletop Subordination Agreement, among Borrowers,
Lender and the Person(s) providing Subordinated Debt subordinating such
Subordinated Debt on terms and conditions satisfactory to Lender in its sole and
absolute discretion.
SUBSIDIARY - any corporation of which a Person owns, directly or
indirectly through one or more intermediaries, more than 50% of the Voting Stock
at the time of determination.
TERM - as defined in Section 4.1 of the Agreement.
TOTAL CREDIT FACILITY - $15,000,000.
TYPE OF ORGANIZATION - with respect to a Borrower, the kind or type of
entity by which such Borrower is organized, such as a corporation or limited
liability company.
UCC - the Uniform Commercial Code as in effect in the State of New Jersey
on the date of this Agreement, as the UCC may be amended or otherwise modified.
VOTING STOCK - Securities of any class or classes of a corporation the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
OTHER TERMS. All other terms contained in the Agreement shall have, when
the context so indicates, the meanings provided for by the UCC to the extent the
same are used or defined therein.
APPENDIX A-12
CERTAIN MATTERS OF CONSTRUCTION. The terms "herein," "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular Section , paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The Section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of the Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any of the Loan Documents shall include any and
all modifications thereto and any and all extensions or renewals thereof.
APPENDIX A-13
EXHIBIT A
FORM OF REVOLVING CREDIT NOTE
$15,000,000 January 31, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇
FOR VALUE RECEIVED, the undersigned (hereafter "BORROWERS"), hereby
jointly and severally promise to pay to the order of FLEET CAPITAL CORPORATION
("LENDER"), at the office of the Lender, located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, in lawful money of the United States of America and in
immediate available funds, the principal amount of Fifteen Million Dollars
($15,000,000) or so much of such principal amount as shall be outstanding and
unpaid on January 31, 2006.
This Revolving Credit Note (the "NOTE") is the Revolving Credit Note
referred to in, and is issued pursuant to, that certain Loan and Security
Agreement between Borrowers and Lender dated the date hereof (hereinafter, as
amended from time to time, the "LOAN AGREEMENT"), and is entitled to all of the
benefits and security of the Loan Agreement. All of the terms, covenants and
conditions of the Loan Agreement and the Security Documents are hereby made a
part of this Note and are deemed incorporated herein in full. All capitalized
terms used herein, unless otherwise specifically defined in this Note, shall
have the meanings ascribed to them in the Loan Agreement.
The rate of interest in effect hereunder shall be calculated with
reference to the Base Rate as more specifically provided in the Loan Agreement.
The interest due shall be computed in the manner provided in the Loan Agreement.
Except as otherwise expressly provided in the Loan Agreement, if any
payment on this Note becomes due and payable on a day other than a Business Day,
the maturity there of shall be extended to the next succeeding Business Day, and
with respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension.
This Note shall be subject to mandatory prepayment in accordance with the
provisions of Section 3.3 of the Loan Agreement. Borrowers may also terminate
the Loan Agreement and, in connection with such termination, prepay this Note in
the manner provided in Section 4 of the Loan Agreement.
Upon the occurrence and continuation of any one or more of the Events of
Default specified in the Loan Agreement which have not been cured by Borrowers
or waived by Lender, Lender may declare all Obligations evidenced hereby to be
immediately due and payable (except with respect to any Event of Default set
forth in subSection 10.1(f) of the Loan Agreement, in which case all Obligations
evidenced hereby shall automatically become immediately due and payable without
the necessity of any notice or other demand) without presentment, demand,
protest or any other action or obligation of the Lender.
APPENDIX A - A-1
Time is of the essence of this Note. Borrowers hereby waive presentment,
demand, protest and notice of any kind. No failure to exercise, and no delay in
exercising, any rights hereunder on the part of the holder hereof shall operate
as a waiver of such rights.
Wherever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or remaining provisions of
this Note. No delay or failure on the part of Lender in the exercise of any
right or remedy hereunder shall operate as a waiver thereof, nor as acquiescence
in any default, nor shall any single or partial exercise by Lender of any right
or remedy preclude any other right or remedy. Lender, at its option, may enforce
its rights against any collateral securing this Note without enforcing its
rights against Borrowers, any guarantor of the indebtedness evidenced hereby or
any other property or indebtedness due or to become due to Borrowers. Borrowers
agree that, without releasing or impairing Borrowers' liability hereunder,
Lender may at any time release, surrender, substitute or exchange any collateral
securing this Note and may at any time release any party primarily or
secondarily liable for the indebtedness evidenced by this Note.
The validity, interpretation and enforcement of this promissory note shall
be governed by the internal laws of the state of Texas without giving effect to
the conflict of laws principles thereof.
MEASUREMENT SPECIALTIES, INC.,
a New Jersey corporation
By:
---------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
IC SENSORS, INC.,
a California corporation
By:
---------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
APPENDIX A - A-2
