<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported): August 14, 1998
MICROFLUIDICS INTERNATIONAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 000-11625 042793022
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
30 Ossipee Road, Newton, Massachusetts 02464-9101
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 969-5452
-----------------------------
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 14, 1998 (the "Closing Date"), Microfluidics International
Corporation ("MFIC"), a Delaware corporation, purchased substantially all of the
assets (the "Transferred Assets") of Epworth Manufacturing Company of South
Haven, Michigan ("Epworth") and Morehouse-COWLES, Inc. of Fullerton, California
("Morehouse", and together with Epworth, the "Sellers") pursuant to an Asset
Purchase Agreement (the "Agreement") dated as of June 19, 1998 by and among
MFIC, Epworth and Morehouse. Messrs. J.B. Jennings and Bret A. Lewis are the
sole stockholders of both Epworth and Morehouse (the "Principals"). Epworth and
Morehouse each manufactures and distributes a product line of crushing/grinding,
mixing, dissolving and dispersion systems for solid or solids materials
processing which are marketed together under the EMCO U.S.A. trade name. MFIC
intends to continue the operations of Epworth and Morehouse each as a separate
division of MFIC and to continue the use of the Transferred Assets to
manufacture and distribute crushing/grinding, mixing, dissolving and dispersion
systems. The Transferred Assets included cash and cash equivalents, accounts
and notes receivables, inventories, machinery and equipment, intellectual
property rights, furniture and fixtures and leasehold interests and
improvements.
In accordance with the Agreement, MFIC paid or delivered to the Sellers
the following as consideration for the purchase price of the Transferred Assets
(the "Purchase Price"): (i) $5,508,480 in cash of which $3,610,971.07 was
applied to the payment of certain liabilities as set forth in the Agreement,
(ii) two subordinated promissory notes in the aggregate principal amount of
$800,000 (the "Promissory Notes"), and (iii) 900,000 shares of MFIC's restricted
common stock, $.01 par value per share, subject to the restrictions set forth in
a Stockholders Agreement among MFIC and the Principals dated August 14, 1998
(the "Stockholders Agreement"). In addition, MFIC assumed approximately
$1,999,025 in accounts payable and accrued liabilities set forth on the Sellers'
balance sheets as of December 31, 1997 (the "Assumed Liabilities"), certain of
which were also paid on the Closing Date. The consideration paid by MFIC for
the Transferred Assets was determined through arms-length negotiations between
MFIC and the Sellers.
The Agreement provides that the Purchase Price may be subject to a post-
closing reduction based upon the comparison of (a) the net book value of the
Transferred Assets less the Assumed Liabilities as of September 30, 1998 as
reflected on the unaudited balance sheet of MFIC to (b) the net book value of
the Transferred Assets less the Assumed Liabilities as of June 30, 1998 as
reflected on the audited balance sheets of the Sellers.
MFIC paid $1,897,509 from its working capital and borrowed $4,096,050.44
from Comerica Bank, its primary lender, in order to finance the purchase and
payoff certain of the Assumed Liabilities. The revolving loan, security and
ancillary agreements with Comerica Bank (the "Revolving Loan Agreement")
provides up to $5,000,000 in loans with monthly interest payments and the
outstanding principal amount due on September 1, 2001. The line of credit
2
<PAGE>
expires on September 1, 2001. The current outstanding principal balance under
the Revolving Loan Agreement is $4,096,050.44 and bears interest at a rate of
7.125% per annum
Effective on the Closing Date, MFIC expanded its Board of Directors from
four to six members and appointed the Principals to fill the resulting
vacancies. Subject to the terms and conditions set forth in the Agreement, MFIC
agreed to use reasonable efforts to cause the nomination of the Principals as
directors of MFIC at the 1999 annual meeting of its shareholders. Thereafter,
subject to the terms and conditions set forth in the Agreement, MFIC agreed to
use its reasonable efforts to continue to support the nomination of the
Principals as directors of MFIC at subsequent annual meetings of its
shareholders.
Mr. Jennings will be the president of the MFIC's newly created
Morehouse-COWLES Division and Mr. Lewis will be the president of MFIC's newly
created Epworth Mill Division.
The description contained herein of the transaction is qualified in its
entirety by reference to the Agreement (Exhibit 2), Stockholders Agreement
(Exhibit 4), Promissory Notes (Exhibit 99.1 and Exhibit 99.2) and press release
(Exhibit 99.3), copies of which are attached hereto and incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial statements of business acquired.
-----------------------------------------
Audited financial statements of each of Epworth and Morehouse, and
the notes thereto, required by this item will be filed by amendment to
this Form 8-K not later than October 28, 1998.
(b) Pro forma financial information.
-------------------------------
The pro forma financial information required by this Item will be
filed by amendment to this Form 8-K not later than October 28, 1998.
(c) Exhibits.
--------
The following exhibits are filed as part of this report pursuant to Item
601 of Regulation S-K:
Exhibit
-------
Number Description
------ -----------
3
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2 Asset Purchase Agreement dated as of June 19, 1998, by and
among MFIC, Epworth and Morehouse (Filed as Exhibit 2.1 to
Schedule 13D of Bret A. Lewis, File No. 005-35850, and
incorporated herein by reference).
4 Stockholders Agreement dated August 14, 1998, by and among
MFIC and the Principals (Filed as Exhibit 2.2 to Schedule
13D of Bret A. Lewis, File No. 005-35850, and incorporated
herein by reference).
99.1 $500,000 Subordinated Promissory Note issued by MFIC to
Epworth.
99.2 $300,000 Subordinated Promissory Note issued by MFIC to
Epworth.
99.3 Press Release issued by MFIC on August 20, 1998.
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MICROFLUIDICS INTERNATIONAL CORPORATION
Date: August 26, 1998 By: /s/ Irwin J. Gruverman
-----------------------
Irwin J. Gruverman
Chief Executive Officer
5
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EXHIBIT INDEX
Exhibit
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Number Description
------ -----------
2 Asset Purchase Agreement dated as of June 19, 1998, by and
among MFIC, Epworth and Morehouse (Filed as Exhibit 2.1 to
Schedule 13D of Bret A. Lewis, File No. 005-35850, and
incorporated herein by reference).
4 Stockholders Agreement dated August 14, 1998, by and among
MFIC and the Principals (Filed as Exhibit 2.2 to Schedule
13D of Bret A. Lewis, File No. 005-35850, and incorporated
herein by reference).
99.1 $500,000 Subordinated Promissory Note issued by MFIC to
Epworth.
99.2 $300,000 Subordinated Promissory Note issued by MFIC to
Epworth.
99.3 Press Release issued by MFIC on August 20, 1998.
6
<PAGE>
EXHIBIT 99.1
ANY AMOUNT PAYABLE UNDER THIS NOTE MAY BE SET-OFF AGAINST AS PROVIDED IN SECTION
3 HEREIN AND AS PROVIDED IN THE ASSET PURCHASE AGREEMENT (AS DEFINED HEREIN).
SUBORDINATED PROMISSORY NOTE
$500,000 August 14, 1998
FOR VALUE RECEIVED, Microfluidics International Corporation, a Delaware
corporation (the "Company"), hereby promises to pay to the order of Epworth
-------
Manufacturing Company, a Michigan corporation, (the "Payee"), subject to the
-----
conditions set forth herein, the principal sum of Five Hundred Thousand Dollars
($500,000) in lawful money of the United States, together with interest accruing
from the date hereof on the outstanding principal balance (and on any interest
installment not paid when due) at a rate per annum equal to ten percent (10%).
Principal shall be paid in twenty (20) equal quarterly consecutive installments,
and the first payment shall be due on December 31, 1998, and subsequent payments
shall be due on the last day of each September, December, March, and June
thereafter. Interest shall be payable quarterly and the first payment shall be
due on September 30, 1998, and subsequent payments shall be due on the last day
of each September, December, March, and June thereafter. Interest shall be
calculated on the basis of actual days elapsed over a 365 or 366-day year, as
the case may be. Any payments hereunder will be applied in the following order
of priority: first to any accrued and unpaid interest due and owing by the
Company to the Payee and then to the unpaid principal balance of this Note. The
Company may prepay the principal amount outstanding on this Note (together with
any accrued but unpaid interest) in whole or in part without premium, penalty or
fee at any time.
The Company, Payee and Morehouse-COWLES, Inc., a California corporation
("Morehouse"), have entered into a Asset Purchase Agreement dated June 19,
1998, pursuant to which the Company has purchased substantially all of the
assets and assumed certain of the liabilities of each of the Payee and Morehouse
(the "Asset Purchase Agreement"). Capitalized terms used herein and not
otherwise defined shall having the meaning assigned to them in the Asset
Purchase Agreement.
Payments of principal and interest will be made by check or by wire
transfer of funds, in immediately available United States funds, sent to the
holder at the address furnished to the Company for that purpose.
This Note is one of a limited number of Subordinated Promissory Notes of
like tenor, issued or issuable by the Company pursuant to and entitled to the
benefits of the Asset Purchase Agreement, and each holder of this Note, by his,
her or its acceptance hereof, agrees to be bound by the provisions of the Asset
Purchase Agreement. This Note will be registered on the books of the Company or
its agent as to principal and interest. Any transfer of this Note will be
effected only by surrender of this Note to the Company and reissuance of a new
note to the transferee.
1. Subordination. The Payee's rights to payment of principal and
-------------
interest hereunder shall be subject to the rights of the holders of Senior Debt
pursuant to and as defined in the
<PAGE>
Subordination Agreement with Comerica Bank dated the date hereof (the
"Subordination Agreement"), consistent with the provisions of Section 6.09 of
- ------------------------
the Asset Purchase Agreement.
2. Events of Default. The outstanding principal of and accrued interest
-----------------
on this Note shall, at the option of the holder hereof, become immediately due
and payable without notice or demand, subject to the terms of the Subordination
Agreement, upon the happening of any one of the following specified events (such
events referred to herein as an "Event of Default"):
(a) failure to pay any amount as herein set forth within fifteen
(15) days following the due date thereof, which failure remains uncured for
thirty (30) days, provided that an Event of Default will not be deemed to
have occurred if, in accordance with the terms of the Subordination
Agreement, the Company is precluded from making any payments when due
hereunder;
(b) the making of a general assignment for the benefit of
creditors;
(c) the filing of any petition or the commencement of any
proceeding by the Company for any relief under any bankruptcy or insolvency
laws, or any laws relating to the relief of debtors, readjustment of
indebtedness, reorganizations, compositions, or extensions; or
(d) the filing of any petition or the commencement of any
proceeding against the Company for any relief under any bankruptcy or
insolvency laws, or any laws relating to the relief of debtors, readjustment
of indebtedness, reorganizations, compositions, or extensions, which
proceeding is not dismissed within sixty (60) days.
3. Set-Off. Notwithstanding any of the other terms and provisions of
-------
this Note regarding payments of principal and interest, in the event (i) that
the Company shall incur any liability, loss, damage, claim, cost or expense by
reason of any unassumed liabilities or other event that would give the Company a
claim for indemnification from the Payee pursuant to terms of the Asset Purchase
Agreement, (ii) of a pre-closing adjustment to the Purchase Price under Section
1.02(b) of the Asset Purchase Agreement, (iii) of a post-closing adjustment to
the Purchase Price under Section 1.02(c) of the Asset Purchase Agreement or (iv)
of a repurchase of any Uncollected Accounts Receivable under Section 4.15 of the
Asset Purchase Agreement, the Company shall have the right in accordance with
the terms of the Asset Purchase Agreement, in addition to any other rights which
the Company may have at law or in equity or under the Asset Purchase Agreement,
to set-off and deduct from the amounts payable to the Payee hereunder an amount
equal to such liability, loss, damage, claim, cost, expense, payment, adjustment
or repurchase. Any amount set-off against this Note hereunder shall be set-off
in the manner provided in the Asset Purchase Agreement.
4. Waiver by Holder. No waiver of any obligation of the Company under
----------------
this Note shall be effective unless it is in a writing signed by the holder. A
waiver by the holder of any right or remedy under this Note on any occasion
shall not be a bar to exercise of the same right or remedy on any subsequent
occasion or of any other right or remedy at any time.
2
<PAGE>
5. Notice. Any notice required or permitted under this Note shall be in
------
writing and shall be deemed to have been given on the date of delivery, if
personally delivered to the party to whom notice is to be given, or on the fifth
business day after mailing, if mailed to the party to whom notice is to be
given, by certified mail, return receipt requested, postage prepaid, and
addressed as follows:
if to the Company, at
Microfluidics International Corporation
30 Ossipee Road
Newton, Massachusetts 02464-9101; or
at such other address which the Company may provide to the Payee in
writing, from time to time; and
if to the holder, at the most recent address provided to the Company
by the holder for such purpose; or, in each case, to the most recent address,
specified by written notice, given to the sender pursuant to this paragraph.
6. Waiver by Company. The Company hereby expressly waives presentment,
-----------------
demand, and protest, notice of demand, dishonor and nonpayment of this Note, and
all other notices or demands of any kind in connection with the delivery,
acceptance, performance, default or enforcement hereof, and hereby consents to
any delays, extensions of time, renewals, waivers or modifications that may be
granted or consented to by the holder hereof with respect to the time of payment
or any other provision hereof or of the Asset Purchase Agreement.
7. Severability. In the event any one or more of the provisions of this
------------
Note shall for any reason be held to be invalid, illegal or unenforceable, in
whole or in part or in any respect, or in the event that any one or more of the
provisions of this Note operate or would prospectively operate to invalidate
this Note, then and in any such event, such provision(s) only shall be deemed
null and void and shall not affect any other provision of this Note and the
remaining provisions of this Note shall remain operative and in full force and
effect and in no way shall be affected, prejudiced, or disturbed thereby.
8. Governing Law. This Note shall be governed by and construed and
-------------
enforced in accordance with the laws of the Commonwealth of Massachusetts.
9. Prohibition on Certain Transfers.
--------------------------------
(a) Company's Consent. This Note may not be sold, assigned, transferred,
-----------------
exchanged, gifted, pledged, hypothecated or devised without the consent of the
Company, provided that such consent shall not be unreasonably withheld, and may
not be sold, assigned, transferred, exchanged, gifted or devised where the
ultimate transferee either (i) engages in or has a financial interest in, any
business which is competitive with the business of the Company or any
3
<PAGE>
of its affiliates, including but not limited to the Business or (ii) is in the
process of making or contemplating making an offer to purchase any outstanding
class of capital stock of the Company or all or substantially all of the assets
of the Company.
(b) Legend. THIS NOTE MAY BE DEEMED A SECURITY AND, AS SUCH, HAS NOT BEEN
------
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. IF THIS NOTE IS DEEMED A SECURITY, IT MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO MICROFLUIDICS INTERNATIONAL
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
MICROFLUIDICS INTERNATIONAL
CORPORATION
By: /s/ Michael A. Lento
---------------------------------
Name: Michael A. Lento
Title: President
Attested:
By: /s/ Jack Swig
-------------------------
Name: Jack Swig
Title: General Counsel of Microfluidics International Corporation
4
<PAGE>
EXHIBIT 99.2
ANY AMOUNT PAYABLE UNDER THIS NOTE MAY BE SET-OFF AGAINST AS PROVIDED IN SECTION
3 HEREIN AND AS PROVIDED IN THE ASSET PURCHASE AGREEMENT (AS DEFINED HEREIN).
SUBORDINATED PROMISSORY NOTE
$300,000 August 14, 1998
FOR VALUE RECEIVED, Microfluidics International Corporation, a Delaware
corporation (the "Company"), hereby promises to pay to the order of Epworth
-------
Manufacturing Company, a Michigan corporation, (the "Payee"), subject to the
-----
conditions set forth herein, the principal sum of Three Hundred Thousand Dollars
($300,000) in lawful money of the United States, together with interest accruing
from the date hereof on the outstanding principal balance (and on any interest
installment not paid when due) at a rate per annum equal to ten percent (10%).
Principal shall be paid in twelve (12) equal quarterly consecutive installments,
and the first payment shall be due on the Principal Repayment Date (as defined
in the succeeding sentence) and subsequent payments shall be due on the last day
of each September, December, March, and June thereafter until the principal
balance is paid in full. The Principal Repayment Date shall be the earlier of
(i) September 30, 2001 or (ii) in the event that either the employment or
directorship of either J.B. Jennings or Bret Lewis with the Company is
terminated without Cause (as defined hereinafter), the last day of the next
occurrence of either September, December, March, or June following such
termination.
Interest shall be payable quarterly and the first payment shall be due on
September 30, 1998, and subsequent payments shall be due on the last day of each
September, December, March, and June thereafter. Interest shall be calculated
on the basis of actual days elapsed over a 365 or 366-day year, as the case may
be. Any payments hereunder will be applied in the following order of priority:
first to any accrued and unpaid interest due and owing by the Company to the
Payee and then to the unpaid principal balance of this Note. The Company may
prepay the principal amount outstanding on this Note (together with any accrued
but unpaid interest) in whole or in part without premium, penalty or fee at any
time.
The Company, Payee and Morehouse-COWLES, Inc., a California corporation
("Morehouse"), have entered into a Asset Purchase Agreement dated June 19,
1998, pursuant to which the Company has purchased substantially all of the
assets and assumed certain of the liabilities of each of the Payee and Morehouse
(the "Asset Purchase Agreement"). Capitalized terms used herein and not
otherwise defined shall having the meaning assigned to them in the Asset
Purchase Agreement.
Payments of principal and interest will be made by check or by wire
transfer of funds, in immediately available United States funds, sent to the
holder at the address furnished to the Company for that purpose.
This Note is one of a limited number of Subordinated Promissory Notes of
like tenor, issued or issuable by the Company pursuant to and entitled to the
benefits of the Asset Purchase
<PAGE>
Agreement, and each holder of this Note, by his, her or its acceptance hereof,
agrees to be bound by the provisions of the Asset Purchase Agreement. This Note
will be registered on the books of the Company or its agent as to principal and
interest. Any transfer of this Note will be effected only by surrender of this
Note to the Company and reissuance of a new note to the transferee.
1. Subordination. The Payee's rights to payment of principal and
-------------
interest hereunder shall be subject to the rights of the holders of Senior Debt
pursuant to and as defined in the Subordination Agreement with Comerica Bank
dated the date hereof (the "Subordination Agreement"), consistent with the
-----------------------
provisions of Section 6.09 of the Asset Purchase Agreement.
2. Events of Default. The outstanding principal of and accrued interest
-----------------
on this Note shall, at the option of the holder hereof, become immediately due
and payable without notice or demand, subject to the terms of the Subordination
Agreement, upon the happening of any one of the following specified events (such
events referred to herein as an "Event of Default"):
(a) failure to pay any amount as herein set forth within fifteen
(15) days following the due date thereof, which failure remains uncured for
thirty (30) days, provided that an Event of Default will not be deemed to
have occurred if, in accordance with the terms of the Subordination
Agreement, the Company is precluded from making any payments when due
hereunder;
(b) the making of a general assignment for the benefit of
creditors;
(c) the filing of any petition or the commencement of any
proceeding by the Company for any relief under any bankruptcy or insolvency
laws, or any laws relating to the relief of debtors, readjustment of
indebtedness, reorganizations, compositions, or extensions; or
(d) the filing of any petition or the commencement of any
proceeding against the Company for any relief under any bankruptcy or
insolvency laws, or any laws relating to the relief of debtors, readjustment
of indebtedness, reorganizations, compositions, or extensions, which
proceeding is not dismissed within sixty (60) days.
3. Set-Off. Notwithstanding any of the other terms and provisions of
-------
this Note regarding payments of principal and interest, in the event (i) that
the Company shall incur any liability, loss, damage, claim, cost or expense by
reason of any unassumed liabilities or other event that would give the Company a
claim for indemnification from the Payee pursuant to terms of the Asset Purchase
Agreement, (ii) of a pre-closing adjustment to the Purchase Price under Section
1.02(b) of the Asset Purchase Agreement, (iii) of a post-closing adjustment to
the Purchase Price under Section 1.02(c) of the Asset Purchase Agreement or (iv)
of a repurchase of any Uncollected Accounts Receivable under Section 4.15 of the
Asset Purchase Agreement, the Company shall have the right in accordance with
the terms of the Asset Purchase Agreement, in addition to any other rights which
the Company may have at law or in equity or under the Asset Purchase Agreement,
to set-off and deduct from the amounts payable to the Payee hereunder an amount
equal to such liability, loss, damage, claim, cost, expense, payment, adjustment
or repurchase. Any amount set-off
2
<PAGE>
against this Note hereunder shall be set-off in the manner provided in the Asset
Purchase Agreement.
4. Definition of "Cause". For purposes of this Note, "Cause" shall include
---------------------
(i) willful malfeasance, illegal, dishonest or negligent conduct which
constitutes a breach of the covenants and obligations under the employment
agreement between the Company and J.B. Jennings ("Jennings"), dated the date
hereof (the "Jennings Employment Agreement"), or the employment agreement
between the Company and Bret Lewis ("Lewis"), dated the date hereof (the "Lewis
Employment Agreement"), or under any applicable legal principle, or which
involves funds or other assets of the Company, (ii) any conduct which is likely
to have a materially adverse effect upon the goodwill or business position of
the Company, (iii) the failure of either Jennings or Lewis, as the case may be,
to carry out his duties to the Company under the Jennings Employment Agreement
or Lewis Employment Agreement, respectively, (iv) misappropriation of Company
funds or property, or (v) conviction of either Jennings or Lewis, as the case
may be, of a felony.
In making any determination under this Section 4, the Board of Directors of
the Company shall act fairly and in utmost good faith and shall give Jennings or
Lewis, as the case may be, an opportunity to appear and be heard at a meeting of
the Board of Directors or any committee thereof and present evidence on his
behalf.
5. Waiver by Holder. No waiver of any obligation of the Company under this
----------------
Note shall be effective unless it is in a writing signed by the holder. A
waiver by the holder of any right or remedy under this Note on any occasion
shall not be a bar to exercise of the same right or remedy on any subsequent
occasion or of any other right or remedy at any time.
6. Notice. Any notice required or permitted under this Note shall be in
------
writing and shall be deemed to have been given on the date of delivery, if
personally delivered to the party to whom notice is to be given, or on the fifth
business day after mailing, if mailed to the party to whom notice is to be
given, by certified mail, return receipt requested, postage prepaid, and
addressed as follows:
if to the Company, at
Microfluidics International Corporation
30 Ossipee Road
Newton, Massachusetts 02464-9101; or
at such other address which the Company may provide to the Payee in
writing, from time to time; and
if to the holder, at the most recent address provided to the Company
by the holder for such purpose; or, in each case, to the most recent
address, specified by written notice, given to the sender pursuant to this
paragraph.
3
<PAGE>
7. Waiver by Company. The Company hereby expressly waives presentment,
-----------------
demand, and protest, notice of demand, dishonor and nonpayment of this Note, and
all other notices or demands of any kind in connection with the delivery,
acceptance, performance, default or enforcement hereof, and hereby consents to
any delays, extensions of time, renewals, waivers or modifications that may be
granted or consented to by the holder hereof with respect to the time of payment
or any other provision hereof or of the Asset Purchase Agreement.
8. Severability. In the event any one or more of the provisions of this
------------
Note shall for any reason be held to be invalid, illegal or unenforceable, in
whole or in part or in any respect, or in the event that any one or more of the
provisions of this Note operate or would prospectively operate to invalidate
this Note, then and in any such event, such provision(s) only shall be deemed
null and void and shall not affect any other provision of this Note and the
remaining provisions of this Note shall remain operative and in full force and
effect and in no way shall be affected, prejudiced, or disturbed thereby.
9. Governing Law. This Note shall be governed by and construed and
-------------
enforced in accordance with the laws of the Commonwealth of Massachusetts.
10. Prohibition on Certain Transfers.
--------------------------------
(a) Company's Consent. This Note may not be sold, assigned, transferred,
-----------------
exchanged, gifted, pledged, hypothecated or devised without the consent of the
Company, provided that such consent shall not be unreasonably withheld, and may
not be sold, assigned, transferred, exchanged, gifted or devised where the
ultimate transferee either (i) engages in or has a financial interest in, any
business which is competitive with the business of the Company or any of its
affiliates, including but not limited to the Business or (ii) is in the process
of making or contemplating making an offer to purchase any outstanding class of
capital stock of the Company or all or substantially all of the assets of the
Company.
(b) Legend. THIS NOTE MAY BE DEEMED A SECURITY AND, AS SUCH, HAS NOT BEEN
------
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. IF THIS NOTE IS DEEMED A SECURITY, IT MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO MICROFLUIDICS INTERNATIONAL
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
4
<PAGE>
MICROFLUIDICS INTERNATIONAL
CORPORATION
By: /s/ Michael A. Lento
---------------------------------
Name: Michael A. Lento
Title: President
Attested:
By: /s/ Jack Swig
-------------------------
Name: Jack Swig
Title: General Counsel of Microfluidics International Corporation
5
<PAGE>
EXHIBIT 99.3
MICROFLUIDICS INTERNATIONAL CORPORATION ANNOUNCES COMPLETION OF ACQUISITION OF
TWO ESTABLISHED MATERIALS PROCESSING EQUIPMENT MANUFACTURERS
August 20, 1998 10:58 AM
NEWTON, Mass.--(BUSINESS WIRE)--Aug. 20, 1998--MFIC Microfluidics
International Corporation ("MFIC" or the "Company") today announced that on
August 14, 1998 it completed its acquisition of the assets of both Epworth
Manufacturing Company and Morehouse-COWLES, Inc. Each company has a long-
established and well-known product line of crushing/grinding, mixing, dissolving
and dispersion systems that have wide applications. The acquired businesses,
together with MFIC's Microfluidizer(R) materials processing business, will each
assume separate operating division status under the parent Company and will be
operated as the Epworth Mill Division, the Morehouse-COWLES Division and the
Microfluidics Division, respectively. The Company intends to capitalize on the
combined marketing and sales activities emphasizing the broad applications
strengths of the Divisions. Management plans to leave undisturbed both the
operations of the Epworth Mill Division and that of the Morehouse-COWLES
Division in their current respective facilities in Michigan and California. To
that end the Company has named one of the former owners of the acquired
businesses, Bret A. Lewis, as President of the Epworth Mill Division while the
other former owner, J.B. Jennings, will assume duties as President of the
Morehouse-COWLES Division. Additionally, these Division Presidents will
collectively own 900,000 shares of MFIC stock issued in connection with the
acquisition, approximately 15% of MFIC's post-acquisition outstanding issued
shares. Mr. Lewis and Mr. Jennings have been appointed to the Board of Directors
of MFIC.
Reviewed financial statements of Epworth Manufacturing Company and
Morehouse-COWLES, Inc. reflect combined 1997 revenues of approximately $11.7
million, while MFIC reported audited revenues of approximately $7.1 million in
1997. The combined 80 employees of the acquired businesses, when added to MFIC's
staff, will result in a work force of greater than 120 people. The compensation
paid by MFIC in the asset purchase consists of cash, assumption of selected
liabilities, issuance of restricted MFIC shares and subordinated debt. More
extensive details of the asset purchase will be available in the Company's Form
8K to be filed on or by August 31,1998.
Michael A. Lento, President, stated "The considerable synergies
between our respective groups and complementary processes will enable us to
offer more comprehensive systems and solutions to our combined customer base. We
believe that the combined product lines and world-wide sales resources will
ultimately result in a much stronger and versatile business entity."
Irwin Gruverman, CEO and Chairman, stated "We believe that this union
will provide us with a broader business and capabilities base while allowing
acceleration of the Company's growth, equipping the Company with sources of
revenue and growth to ultimately attain much larger revenues and profits than
those attainable solely by either sales of Microfluidizer(R) equipment or of the
Epworth and Morehouse-COWLES lines. Management and the Directors believe that
this use of a portion of our cash and equivalents will be dynamic and ultimately
<PAGE>
result in increased shareholder value for MFIC owners. MFIC may continue, from
time to time, to seek additional strategic acquisitions, mergers and other
arrangements with products, processes and businesses that are complementary to
the Company's business."
The Company believes that this release may contain forward-looking
statements that are subject to certain risks and uncertainties. These forward-
looking statements include statements regarding, the potential benefits of the
business combination and its impact on shareholder value and revenue growth of
the Company. There can be no assurance that the Company's performance after the
business combination will be greater then an aggregation of the individual
Division's or businesses' respective financial performance. The forward-looking
statements are based on management's current expectations and are subject to a
number of factors that could cause actual results to differ materially,
including uncertainty that the performance of the Microfluidizer(R), Epworth
Mill, or Morehouse-COWLES materials processing equipment will continue to
develop and be realized commercially or that a commercial market for any or all
of such equipment will continue to develop and be realized; the Company's
dependence on the development and retention of key customers; the development of
competing or superior technologies and products from other manufacturers;
uncertainty as to the combined entities' ability to successfully integrate their
operations; buying trends of customers; competitors' actions as well as general
economic and market conditions.
MICROFLUIDICS INTERNATIONAL CORPORATION
Microfluidics International Corporation, through its Microfluidics
Division, provides patented and proprietary, high performance Microfluidizer(R)
materials processing equipment to the chemical, pharmaceutical, biotechnology,
cosmetic/personal care, and food processing industries. Through its Epworth Mill
and Morehouse-COWLES Divisions, the Company provides leading equipment,
techniques, and innovative technology and solutions to the chemicals, paints,
pigments and coatings industries for milling, deagglomeration and dissolving.
The combined resources and capabilities of the Company's equipment lines are
used to provide comprehensive solutions for materials processing.
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