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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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) September 4, 1998
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Sentex Sensing Technology, Inc.
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(Exact name of registrant as specified in its charter)
New Jersey 0-13328 22-23338
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation
1801 East Ninth Street, Suite 1501 44114
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 687-9133
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(Former name or former address, if changed since last report.)
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SENTEX SENSING TECHNOLOGY, INC.
Current Report on Form 8-K
Item 2. Acquisition or Disposition of Assets.
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On September 4, 1998, Sentex Sensing Technology, Inc. (the
"Company") completed the sale of all the outstanding capital stock of Sentex
Systems, Inc. ("Systems") to ALR Group Incorporated (the "Buyer"), which is
principally owned by Amos Linenberg. Prior to the sale, Mr. Linenberg was the
President of Systems and an Executive Vice President of the Company. In the
past, Mr. Linenberg has also been a principal shareholder of the Company and
served as a director of the Company. System's business is more fully described
in the Company's Annual Report on Form 10-K.
In consideration for all the capital stock of Systems, the
Buyer caused Mr. Linenberg to terminate his existing Employment Agreement as of
June 30, 1998, which from July 1, 1998 through February 28, 2000 would have
required payments to Mr. Linenberg of approximately $325,000. Except for
approximately $20,000 in expenses, the Company paid all operating costs and
expenses of Systems through June 30, 1998 and the Buyer assumed all the costs
and operating expenses of Systems incurred from July 1, 1998 through the
closing.
In connection with the sale of Systems to the Buyer, the
Company has retained the Mr. Linenberg to consult for the Company on an as
needed basis. The consulting period began effective July 1, 1998 and will
continue through December 31, 1998. Mr. Linenberg receives approximately $12,000
per month under this consulting arrangement.
Item 7. Financial Statements, Pro Forma Financial Information & Exhibits.
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(a) N/A
(b) N/A
(c) Exhibits
2.2 Stock Purchase Agreement, dated August 21, 1998
between the Company and ALR Group Incorporated
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
SENTEX SENSING TECHNOLOGY, INC.
By: /s/ ROBERT S. KENDALL
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Robert S. Kendall, Chairman
and President
Date: September 16, 1998
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EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this 21st day of
August, 1998, by and between ALR Group Incorporated, a Delaware corporation
("Buyer"), and SENTEX SENSING TECHNOLOGY, INC., a New Jersey corporation
("Seller").
W I T N E S S E T H:
WHEREAS, Seller is the record owner of 1,500 outstanding
common shares of SENTEX SYSTEMS, INC., a Delaware corporation (the "Company"),
and Seller desires to sell to Buyer and Buyer desires to purchase from Seller
all such shares on the terms and subject to the conditions hereinafter stated
(all shares being referred to as the "Shares");
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE
1.1 TRANSFER OF SHARES. At the Closing (as defined in Section
1.3), Seller will sell, assign, transfer and deliver to Buyer the Shares, which
represents 1,500 shares of common stock, without par value of the Company under
a duly endorsed stock power. Seller will transfer the Shares to Buyer free and
clear of all liens, security interests, encumbrances, pledges, charges, claims,
voting trusts and restrictions on transfer of any nature whatsoever other than
statutory restrictions imposed by federal or state securities laws.
1.2 PURCHASE PRICE. Buyer will release Seller from all
employment agreements between Amos Linenberg ("AL") and Seller, including,
without limitation, the Employment Agreement between Buyer and Seller, dated
March 1, 1996 (the "Employment Agreement"), subject to Section 1.6(a)(iv) and
Buyer will pay to Seller the sum set forth on Exhibit A, which represents the
net cash owed to Seller based upon certain agreed-upon adjustments (the
"Purchase Price"), subject to adjustments pursuant to Section 1.6.
1.3 THE CLOSING. The closing of the transactions evidenced by
this Agreement (the "Closing") will occur by mutual agreement of the parties,
but in not event later than two business days after the receipt of the
environmental clearance letter commonly referred to between the parties as the
"ISRA Letter."
1.4 DELIVERABLES TO BE RECEIVED AT CLOSING BY THE BUYER.
Seller shall deliver to the Buyer the following: (a) the stock records and
minutes of the Company (b) a share certificate evidencing all this issued and
outstanding capital stock of the Company accompanied by a duly executed stock
power and (c) an executed counterpart of a release of Seller and AL with respect
to certain claims (the "Release").
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1.5 DELIVERABLES TO BE RECEIVED AT CLOSING BY SELLER. The
Buyer shall deliver the following to the Seller: (a) the Purchase Price in the
form of immediately available funds with respect to the cash portion and
evidence satisfactory to the Seller that the Employment Agreement is terminated
(subject to Section 1.6(a)(iv) hereof) (which may be evidenced in the Release)
and (b) an executed counterpart of the Release.
1.6 POST CLOSING ADJUSTMENTS; RETAINED LIABILITIES.
Notwithstanding anything in Articles II, III and IV and V to the contrary:
(a) Subject to the limitations set forth in Section 1.6(b) hereof,
Seller agrees that after the Closing it will pay, honor and
discharge the following obligations:
(i) any claims that the City of Scottsdale may have
relating to products purchased by it prior to March
1, 1996 (provided the Company may not settle any such
claim without the consent of Seller, which will not
be unreasonable withheld);
(ii) All taxes, assessments and other governmental charges
(and interest and penalties relating thereto) upon
the Company or upon any of its properties, assets,
income, receipts, payroll transactions (including
withholding taxes), capital, net worth or franchise
that accrued on or prior to June 30, 1998;
(iii) all trade payables incurred prior to May 1, 1998 for
the payment of inventory and all rental, utility,
maintenance, insurance and office expense, employee
compensation and fringe benefits (including
consultants' fees) and accrued vacation pay
(exclusive of the AL's vacation pay), and customer
security deposits incurred on or prior to June 30,
1998; provided Buyer or the Company has submitted
reasonable supporting documentation to Seller prior
to September 30, 1998 that such expense was incurred
prior to June 30, 1998 and such amount is due and
payable by the Company;
(iv) all Company obligations accrued through June 30, 1998
pursuant to Section 5(a), 5(b) or 5(e) of the
Employment Agreement (other than with respect to
accrued vacation of AL); provided Buyer or the
Company has submitted reasonable supporting
documentation to Seller prior to September 30, 1998
that such expenses or compensation was incurred prior
to June 30, 1998 and such amount is due and payable
by the Company; and
(v) any amounts set forth on Exhibit A that Seller has
taken credit for having paid, but in fact were not
paid (or were paid with cash that the Company had on
hand at June 30, 1998).
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(b) Notwithstanding Seller's obligations in Section 1.6(a) (iii)
and (iv), Seller shall not be required to pay, honor or
discharge any obligation under Section 1.6(a)(iii) or (iv) if
Seller demonstrates that AL as of the date of this Agreement
had actual knowledge of such expenses and Seller did not have
actual knowledge of such expense.
(c) Seller shall make payment to the vendor or taxing authority,
as the case may be, within five (5) days of receipt of
appropriate supporting documents for such expense or tax or by
the date such payment is due, which ever is later. If,
however, the Company or Buyer pays (or has paid) any expense
that the Seller is obligated to pay, honor or discharge
pursuant to Section 1.6(a), then Seller shall promptly
reimburse the Company or the Buyer, as the case may be.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that:
2.1 ORGANIZATION AND AUTHORITY.
(a) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of Delaware, is licensed to do business in
and is in good standing in the State of New Jersey and has full corporate power
and authority to own or lease and to operate its properties and to operate and
carry on its business as presently conducted.
(b) This Agreement has been duly executed and delivered by
Buyer and constitutes a legal, valid and binding obligation of Buyer enforceable
against Buyer in accordance with its terms (except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws of
general application affecting the enforcement of creditors' rights or by general
principles of equity limiting the availability of equitable remedies).
(c) The execution, delivery and performance by Buyer of this
Agreement does not and the consummation of the transactions contemplated hereby
will not, violate, conflict with or result in the breach of or default under (i)
any contract or agreement to which Buyer is a party or by which Buyer is bound,
(ii) the certificate of incorporation or by-laws of Buyer, or (iii) any federal,
state or local laws, rules or regulations applicable to Buyer.
2.2 AUTHORIZATION. All necessary and appropriate action has
been taken by Buyer with respect to the execution and delivery of this Agreement
and the performance of its obligations hereunder.
2.3 CONSENTS AND APPROVALS. No consent, approval, order or
authorization of, or registration, declaration or filing with, any governmental
authority is required in connection with Buyer's execution and delivery of this
Agreement or its performance of the terms hereof.
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2.4 INVESTMENT INTENT. Buyer is acquiring the Shares for the
purpose of investment only and not with a view to, or for sale in connection
with, the distribution thereof within the meaning of the Securities Act of 1933,
as amended.
2.5 BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Buyer.
2.6 LITIGATION. There is no claim, litigation, action, suit,
proceeding, investigation or inquiry, administrative or judicial, pending or, to
the knowledge of Buyer, threatened against Buyer, at law or in equity, before
any federal, state or local court or regulatory agency, or other governmental
authority, which, individually or in the aggregate, is reasonably likely to have
a material adverse effect on the ability of Buyer to consummate the transactions
contemplated hereby or to perform its obligations set forth herein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer that:
3.1 ORGANIZATION AND AUTHORITY.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of Delaware, is licensed to do
business in and is in good standing in the State of New Jersey and has full
corporate power and authority to own or lease and to operate its properties and
to operate and carry on its business as presently conducted.
(b) This Agreement has been duly executed and delivered by
Seller and constitutes a legal, valid and binding obligation of Seller
enforceable against Seller in accordance with its terms (except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws of general application affecting the enforcement of creditors'
rights or by general principles of equity limiting the availability of equitable
remedies).
(c) The execution, delivery and performance by Seller of this
Agreement does not and the consummation of the transactions contemplated hereby
will not, violate, conflict with or result in the breach of or default under (i)
any contract or agreement to which Seller or the Company is a party or by which
Seller or the Company is bound, (ii) the certificate of incorporation or by-laws
of Seller or the Company, or (iii) any federal, state or local laws, rules or
regulations applicable to Seller or the Company (except that the foregoing
representations set forth in clause (i) of this Section 3.1(c) does not include
any contract or agreement executed by AL on behalf the Company).
3.2 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. No
consent, approval, authorization or waiver of, or declaration, filing or
registration with, or notification to,
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any governmental or regulatory authority that has not been made is required by
Seller or the Company in connection with the execution, delivery and performance
by Seller of this Agreement and the consummation by Seller of the transactions
contemplated hereby.
3.3 QUALIFICATIONS. The Company is duly qualified or licensed
and in good standing as a foreign corporation authorized to do business in New
Jersey.
3.4 SUBSIDIARIES. The Company owns no subsidiaries and does
not own, directly or indirectly, nor has it agreed to acquire, any capital stock
of or other equity interest in, nor controls, alone or in combination with
others, any corporation, partnership, joint venture, or other business entity
("Person"), except as may have been purchased, formed or acquired by AL on
behalf of the Company.
3.5 CAPITALIZATION; LISTING. The Company is authorized to
issue 1,500 shares of Common Stock, no par value. The Shares represent all the
issued and outstanding shares of Common Stock and each Share is duly and validly
issued and outstanding and are fully paid and nonassessable. The Shares were not
issued in violation of, and no Share is subject to, any preemptive or
subscription rights. There are no outstanding warrants, options, agreements,
convertible or exchangeable securities or other contracts pursuant to which the
Company may become obligated to issue, sell, purchase, retire or redeem any
shares of its capital stock or other securities, except for any such contracts
that may have been entered into by AL on behalf of the Company.
3.6 THE SHARES. Seller is the lawful owner of all the Shares
and has full legal and equitable title to such Shares and the absolute right to
sell, assign, transfer and deliver the same to Buyer, free and clear of all
liens, charges, pledges, encumbrances, options and rights of first refusal. At
the Closing, Seller will deliver to Buyer full legal and equitable title to all
the Shares, free and clear of all liens, charges, pledges, encumbrances, options
and rights of first refusal and such Shares will be fully paid and
nonassessable.
3.7 BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Seller or the Company unless made by AL on behalf of the
Company.
3.8 OFFICERS AND DIRECTORS; BOOKS AND RECORDS.
(a) All the officers and directors of the Company have
resigned as of the date of Closing, except AL.
(b) There has been delivered to Buyer true and complete copies
of the certificate of incorporation of the Company, as amended to date,
and of the by-laws of the Company, as in effect on the date hereof.
3.9 FINANCIAL INFORMATION. The Seller has delivered to the
Buyer an unaudited balance sheet of the Company (exclusive of intercompany
payables to the Seller and the shareholders' equity) prepared on a historical
basis as of June 30, 1998, a copy of which is attached hereto has Exhibit B (the
"Balance Sheet"). The Balance Sheet has been prepared in
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accordance with generally accepted accounting principles ("GAAP) and presents
fairly, in all material respects, the financial position of the Company
(exclusive of intercompany payables to the Seller and the shareholder's equity)
as of June 30, 1998, except no allowances have been made for inventory
obsolences and no allowance has been made for collectibility of receivables.
3.10 ABSENCE OF UNDISCLOSED LIABILITIES. As of June 30, 1998
(the "Balance Sheet Date"), the Company did not have any liabilities of a type
which would be required to be disclosed on a balance sheet prepared in
accordance with GAAP that were not specifically set forth or adequately reserved
for on the Balance Sheet (except that the foregoing representation is not given
to Buyer with respect to any liabilities that were incurred by the Company as a
result of any action of AL (whether such action was on behalf of the Company or
not).
3.11 COMPLIANCE WITH INSTRUMENTS, PERMITS, LAWS, ETC. Subject
to the following sentence, the Company is and has since March 1, 1996 been in
compliance with, and is not and has not been in violation of or in breach or
default under (with or without the lapse of time or the giving of notice or
both), and has not received any notice of any alleged violation of or breach or
default under:
(a) its certificate of incorporation or by-laws;
(b) any applicable law, ordinance, rule or regulation; and
(c) the terms of any judgment, decree or order binding upon it
(except for any non-compliance with, or violation, breach or default under, the
items referred to in clauses (ii) and (iii) above that will not have a material
adverse effect on the Company). The representation set forth in the preceding
sentence is not given to Buyer to the extent such non-compliance, breach or
default was caused by an action of Buyer (or omission constituting a violation
of law by AL).
3.12 LITIGATION. Except as provided for in Section 1.6(a)(i),
there are no actions, suits, proceedings and investigations pending or, to the
best knowledge of Seller, threatened against the Company or any of its assets.
There are no unsatisfied judgments or settlement agreements or outstanding
orders, injunctions, decrees or awards (whether rendered by a court or
administrative agency or by arbitration) against the Company or against any of
its assets or business.
3.13 ASSETS.
(a) The Company has good and valid title to all tangible
assets that are owned by it and reflected in the Balance Sheet and
valid, subsisting and enforceable leasehold interests in all assets
leased by it, in each case free of all liens, other than Ordinary
Liens. Since March 1, 1996 the Company has not transferred to the
Seller or any of its affiliates title to any property used by the
Company in the operations of its business. "Ordinary Liens" mean (i)
liens for taxes not yet due, (ii) liens for taxes which are being
contested in good faith by appropriate proceedings and which are
adequately reserved for on the books of the Company, and (iii) liens
imposed by law in the ordinary course of business
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securing obligations which are not overdue, or which, if overdue, are
being contested in good faith by appropriate proceedings.
(b) The Company:
(i) does not own real property;
(ii) does not lease any real property other than at
553 Broad Ave., New Jersey;
(iii) does not lease any personal property.
(except that the foregoing representation is not given to Buyer to the extent
Company's ownership of any real property or interest in any such lease is caused
by Buyer acting on behalf of the Company). Seller will execute and deliver to
the Company such assignments and instruments that are necessary to transfer the
title of any assets from the Seller to the Company that have been used
exclusively by the Company in conducting its business.
3.14 INTELLECTUAL PROPERTY RIGHTS.
(a) To the knowledge of Seller, the operation of the Company's
business does not conflict or infringe upon the intellectual property
rights of others, and the Company has not received any notice alleging
any such conflict or infringement (except to the extent received by
AL).
(b) The Company is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders (collectively, the
"Permits") that are necessary to own, lease and operate its properties
and to carry on its business as presently conducted (except for any
Permits the lack of possession of which would not have a material
adverse effect on the Company or Permits which directly relate to the
Company's products and which the Buyer was responsible for obtaining in
connection with fulfilling his duties under his Employment Agreement).
The Permits are in full force and effect (except where failure of a
Permit to be in full force and effect will not have a material adverse
effect on the Company) and there is no action, proceeding or
investigation pending or, to the best knowledge of Seller, threatened
regarding suspension or cancellation of any of the Permits.
3.15 ERISA.
(a) The term "ERISA Plan" refers to each employee benefit plan
within the meaning of Section 3(3) of ERISA or any other bonus, profit
sharing, compensation, pension, severance, deferred compensation,
fringe benefit, insurance, welfare, medical, post-retirement health or
welfare benefit, medical reimbursement, relocation, disability,
accident, sick pay, sick leave, vacation, termination, individual
employment, executive compensation, incentive, commission, payroll
practices, retention or other plan, agreement, policy or arrangement,
maintained by either the Company or by any group of corporations,
trades or businesses (whether or not incorporated) under common control
with the Company or any other entity that would be deemed a "single
employer" of the
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Company, within the meaning of Sections 414(b), (c), (m) or (o) of the
Code or Sections 4001(a)(14) and 4001(b)(1) of ERISA (collectively, the
"ERISA Affiliates"), or to which the Company or any of the ERISA
Affiliates has or had an obligation to contribute. The Sentex
Employee's Profit Sharing Plan is the only ERISA Plan that currently
covers present or former employees of the Company or their
beneficiaries (collectively, the "Plans").
(b) Each Plan (if any) intended to qualify under Section
401(a) of the Code is "qualified," within the meaning of Section 401(a)
of the Code. Any trusts maintained pursuant to such Plans are exempt
from taxation under Section 501 of the Code.
(c) Since March 1, 1996 neither the Company nor any of the
ERISA Affiliates maintains, or is obligated to contribute to, or has
maintained or been obligated to contribute to, any Plan which is
subject to Title IV of ERISA. Since March 1, 1996, no reportable event,
within the meaning of Section 4043 of ERISA, has occurred, is expected
to occur or is continuing with respect to any Plan which is subject to
Title IV of ERISA. Since March 1, 1996, no ERISA Plan which is subject
to Title IV of ERISA ("Title IV Plan") has an "accumulated funding
deficiency," within the meaning of Section 412 of the Code, and no
excise taxes or penalties are due and owing because of any failure to
comply with the minimum funding standards of ERISA and the Code.
(d) Since March 1, 1996, neither the Company (except for any
action of the Company engaged by the Buyer on behalf of the Company),
any Plan, any trust created thereunder, nor any other Person (except
the Buyer) has engaged in any transaction which could subject the
Company (or its shareholders, directors, officers or employees), any
Plan or trust (or their fiduciaries) or any other party dealing with
such Plan or trust to the tax or penalty on a prohibited transaction,
as such term is defined in Sections 406 or 407 of ERISA or Section 4975
of the Code, imposed by Section 4975 of the Code or to a civil penalty
imposed by Section 502(i) of ERISA.
(e) Since March 1, 1996, the Plans have been maintained in
accordance with their respective terms and conditions and the
applicable provisions of ERISA, the Code and other applicable law
(including all rules and regulations promulgated pursuant thereto), and
there has been no violation of ERISA or the Code or other applicable
law or regulations. Since March 1, 1996, the Company and the ERISA
Affiliates have paid on a timely basis all contributions, premiums and
other payments required or due under each ERISA Plan, the Plans, any
other related contract or by law (including without limitation all
contributions, insurance premiums or intercompany charges) with respect
to all periods through the date hereof (on a pro rata basis where such
payments are otherwise discretionary at year end).
(f) Since March 1, 1996, no claim, lawsuit, arbitration or
other action has been asserted, instituted or, to the best knowledge of
Seller, threatened against the Plans (or, to the best knowledge of
Seller, against any trustees or other fiduciaries thereof or the
Company or the ERISA Affiliates) or any assets of the Plans; and, to
the best knowledge of Seller, no Plan is under audit or investigation
by the Internal Revenue Service, the U.S.
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Department of Labor or any other governmental authority and no such
completed audit, if any, has resulted in the imposition of any tax or
penalty.
(g) Since March 1, 1996, neither the Company nor any of the
ERISA Affiliates has incurred or expects to incur any liabilities to
any Title IV Plan or to the Pension Benefit Guaranty Corporation
("PBGC") with respect to a Title IV Plan or been advised by, or
received notice from, the PBGC that the PBGC has instituted or intends
to institute proceedings to terminate any Title IV Plan.
(h) Since March 1, 1996, none of the ERISA Affiliates, the
Company or any of their respective predecessors (if any) has
contributed to or contributes to, or otherwise participates in any
"multiemployer plan" (within the meaning of Sections 3(37) and 4001(a)
of ERISA and Section 414(f) of the Code) ("Multiemployer Plan"); and
neither the Company nor any of the ERISA Affiliates has withdrawn from
any Multiemployer Plan, incurred any withdrawal or other liabilities to
any Multiemployer Plan, received notice of a claim or demand for any
complete withdrawal liability or partial withdrawal liability against
any of them or has any reason to believe that such a claim could be
made.
(i) Since March 1, 1996, the Company has complied, in all
material respects, with all applicable laws relating to the employment
of personnel and labor, other than non-compliance which will not have a
material adverse effect on the Company, except to the extent such
non-compliance was caused by any action of the AL (or omission by AL
constituting a violation of law by AL).
(j) Subject to the following sentence, (i) there are no
controversies pending or, to the best knowledge of Seller, threatened
between Company and any of its employees; (ii) neither the Company nor
the Seller is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by it, nor, to the
best knowledge of Seller, are there any activities or proceedings of
any labor union to organize any such employees; (iii) there are no
grievances outstanding against the Company under any such agreement or
contract; (iv) there are no unfair labor practice complaints pending
against the Company before the National Labor Relations Board or any
current union representation questions involving employees of the
Company; and (v) there is no strike, slowdown, work stoppage or
lockout, or, to the best knowledge of Seller, threat thereof, by or
with respect to any employees of the Company. The representations set
forth in the preceding sentence are not given to the Buyer to the
extent an action by AL (or omission by AL constituting a violation of
law by AL) has caused the representation not to be true.
3.16 CONTRACTS.
(a) Subject to the last sentence of this Section since March
1, 1996, the Company has not become a party to or bound by any:
(i) contract under which it has borrowed any money or
issued any note, bond, indenture or other evidence
of indebtedness or under which it has the right or
obligation to do any of the foregoing;
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(ii) contract with any labor union or association;
(iii) consulting or employment agreement;
(iv) covenant not to compete or confidentiality
agreement;
(v) license or royalty agreement or contract relating
to intellectual property rights;
(vi) contract for capital expenditures or the
acquisition or construction of fixed assets which,
in the aggregate, will require payments of more
than $5,000 from the date hereof;
(vii) contract for the purchase or acquisition by it of
materials, supplies, merchandise, equipment or
services (other than purchase orders made in the
ordinary course of business consistent with past
practice) which, in the aggregate, will require
payments of more than $5,000 from the date hereof;
(viii) contract which will require payments of more than
$15,000 or performance valued at more than $15,000
from the date hereof;
(ix) partnership or joint venture agreement;
(x) mortgage, pledge, security agreement, deed of
trust or other document granting a lien;
(xi) guaranty or endorsement (other than endorsements
for the purpose of collection in the ordinary
course of business) of, or obligation to purchase
goods or services for the purpose of supplying
funds for the purchase or payment of, or
obligation measured by liabilities of others;
(xii) contract relating to the lending of money by it;
(xiii) contract entered into not in the ordinary course
of business; or
(xiv) other contracts that are material to the Company.
The Company has complied, in all material respects, with such contracts and is
not in material breach or default under (with or without the lapse of time or
the giving of notice or both) any provision of any such contracts. To the best
knowledge of Seller, no other party to any such contract with the Company is in
material default thereunder and all such contracts with the Company are in full
force and effect. Each of the representations set forth in this Section is not
made to Buyer and no such contract has been delivered at the Closing to the
extent such contract or agreement has been entered into by the AL on behalf of
the Company.
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3.17 INSURANCE. All insurance policies (the "Insurance
Policies") with respect to the property, assets, operations and business of the
Company are in full force and effect, and there are not pending claims against
the Insurance Policies by the Company as to which the insurers have denied
liability.
ARTICLE IV
TAX AND FINANCIAL REPORTING MATTERS
4.1 TAX FILING AND AMENDMENTS. Seller shall be responsible for
filings all returns, declarations, reports, and claims for refund, or
information returns or statements relating to taxes, including all schedules or
attachment thereto, and including any amendment thereof (the "Tax Return(s)")
for fiscal 1997 and fiscal 1998 for the period through June 30, 1998 and to
amend all such Tax Returns. The Seller shall be entitled to any refunds yielded
as a result of such filings (or amendments thereto) that relate to any period
prior to July 1, 1998 date hereof and shall be responsible to pay, honor and
discharge any additional liabilities for taxes pursuant to Section 1.6(a)(ii).
4.2 COOPERATION ON TAX MATTERS.
(a) Buyer and Seller shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to Section 4.1 hereof (it being
understood that the expense of such cooperation shall be borne by
Seller) and any audit, litigation or other proceeding with respect to
taxes. Such cooperation shall include the retention and (upon the other
party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding
and providing additional information and explanation of any material
provided hereunder. Buyer and Seller agree (i) to retain all books and
records with respect to tax matters pertinent to the Company relating
to any taxable period beginning before the date hereof until the
expiration of the statute of limitations (and, to the extent notified
by the Buyer or the Seller, any extensions thereof) of the respective
taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (ii) to give the other
party reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other party so
requests, the Buy or the Seller, as the case may be, shall allow the
other party to take possession of such books and records.
(b) Buyer and Seller further agree, upon request (and at the
expense of the requesting party), to use their reasonable efforts to
obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce
or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
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4.3 CERTAIN TAXES. All transfer, documentary, sales, use,
stamp, registration and other such taxes and fees (including any penalties and
interest) incurred in connection with the sale of the Shares of the Company to
the Buyer shall be paid by the Seller when due.
4.4 FINANCIAL STATEMENTS. Seller will (a) assist in preparing
a "stand-alone" balance sheet for the Company as of June 30, 1998 under the
instructions of the Company's accountant in order for the Company to prepare
financial statements and Tax Returns subsequent to June 30, 1998 and (ii) will
otherwise cooperate in providing the Company with financial information in its
possession that the Company may require in order for the Company to prepare such
statements and Tax Returns.
ARTICLE V
INDEMNIFICATION
5.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Subject to the limitations set forth in Section 5.3 of this Agreement, all
representations, warranties, covenants and agreements of Buyer or Seller in this
Agreement shall survive for a period of one year following the Closing Date;
provided, however, the representations and warranties contained in Section 3.15
shall survive for a period of two years following the Closing Date; and
provided, further, that the representations and warranties contained in
Sections, 2.5, 3.5, 3.6 and 3.7 shall survive without limitation.
5.2 INDEMNIFICATION.
(a) Subject to the limitations set forth in Section 5.3 of
this Agreement, Seller hereby covenants and agrees to indemnify and
hold harmless Buyer from and against any and all losses, liabilities,
damages, demands, claims, suits, actions, judgments or causes of
action, assessments, reasonable costs and expenses, including, without
limitation, interest, penalties, attorneys' fees, any and all expenses
incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any
and all amounts paid in settlement of any claim or litigation
(collectively, "Damages"), asserted against, resulting from, imposed on
or incurred or suffered by Buyer, directly or indirectly, as a result
of or arising from any inaccuracy in or breach or nonfulfillment of any
of the representations, warranties, covenants or agreements made by
Seller in this Agreement or any facts or circumstances constituting
such an inaccuracy, breach or nonfulfillment (collectively,
"Indemnifiable Claims" when used in the context of Buyer as the
Indemnified Party (as defined in Section 5.3(c) below)).
(b) Subject to the limitations set forth in Section 5.3 of
this Agreement, Buyer hereby covenants and agrees to indemnify and hold
harmless Seller from and against any and all Damages asserted against,
resulting from, imposed on or incurred or suffered by Seller, directly
or indirectly, as a result of or arising from any inaccuracy in or
breach or nonfulfillment of any of the representations, warranties,
covenants or agreements made by Buyer in this Agreement or any facts or
circumstances constituting such an
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inaccuracy, breach or nonfulfillment (collectively, "Indemnifiable
Claims" when used in the context of Seller as the Indemnified Party).
(c) For purposes of this Article, all Damages shall be
computed net of any insurance coverage with respect thereto which
reduces the Damages that would otherwise be sustained; provided,
however, that, in all cases, the taxing of the receipt or realization
of insurance proceeds shall be taken into account in determining the
amount of reduction of Damages.
Notwithstanding anything in this Agreement to the contrary,
Buyer's sole remedy (both at law and equity) for Damages shall be
indemnification by Seller as set forth in Section 5.2(a) and Buyer
hereby waives its right to pursue any other remedy at law or in equity.
Notwithstanding anything in this Agreement to the contrary, Seller's
sole remedy (both at law and equity) for Damages shall be
indemnification by Buyer as set forth in Section 5.2(b) and Seller
hereby waives all right to pursue any other remedy at law or in equity.
5.3 LIMITATIONS ON INDEMNIFICATION. Rights to indemnification
hereunder are subject to the following limitations:
(a) Buyer shall not be entitled to indemnification hereunder
with respect to any Indemnifiable Claim (or, if more than one
Indemnifiable Claim is asserted, with respect to all Indemnifiable
Claims) unless the aggregate amount of Damages with respect to such
Indemnifiable Claim or Claims exceeds Forty Thousand ($40,000) (the
"Threshold"), whereupon Buyer shall be entitled to indemnification for
Damages suffered in excess of the Threshold. Notwithstanding the
foregoing, Buyer shall be entitled to indemnification hereunder with
respect to the full amount of Damages resulting from a breach of the
representations and warranties in Section 3.6 or 3.7 without deduction
of the Threshold.
(b) Seller's maximum aggregate liability to Buyer for
Indemnifiable Claims hereunder shall be Three Hundred Thousand
($300,000), plus reasonable attorneys' fees and reasonable
out-of-pocket enforcement expenses.
(c) The foregoing provisions of this Section notwithstanding,
if, prior to the termination of any obligation to indemnify as provided
for herein, written notice of a claimed breach (which describes the
claimed breach in reasonable detail) is given (in good faith) by the
party seeking indemnification (the "Indemnified Party") to the party
from whom indemnification is sought (the "Indemnifying Party"), or a
suit or action based upon a claimed breach is commenced against the
Indemnifying Party by the Indemnified Party, the Indemnified Party
shall not be precluded from pursuing such claimed breach or suit or
action, or from recovering from the Indemnifying Party (whether through
the courts or otherwise) on the claim, suit or action, by reason of the
termination otherwise provided for above.
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(d) Seller shall not be obligated to indemnify Buyer hereunder
if Seller can establish that Buyer or AL had actual knowledge of facts
and circumstances that made the representation inaccurate.
5.4 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD-PARTY
CLAIMS.
(a) If the Indemnified Party determines to seek
indemnification under this Article with respect to Indemnifiable Claims
resulting from the assertion of liability by third parties, the
Indemnified Party shall promptly give notice to the Indemnifying Party
following the Indemnified Party's becoming aware of any such
Indemnifiable Claim. The notice shall set forth such information with
respect thereto as is then reasonably available to the Indemnified
Party. In case any such liability is asserted against the Indemnified
Party, and the Indemnified Party notifies the Indemnifying Party
thereof, the Indemnifying Party will be entitled, if it so elects by
written notice delivered to the Indemnified Party within 20 days after
receiving the Indemnified Party's notice, to assume the defense,
settlement or other disposition (collectively the "Defense") thereof
with counsel reasonably satisfactory to the Indemnified Party at all
times during the defense of such liability. Notwithstanding the
foregoing, (i) the Indemnified Party shall also have the right to
employ its own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of the Indemnified Party (as long
as the Indemnifying Party continues to defend such matter); (ii) the
Indemnified Party shall not have any obligation to give any notice of
any assertion of liability by a third party unless such assertion is in
writing; and (iii) the rights of the Indemnified Party to be
indemnified hereunder in respect of Indemnifiable Claims shall be
deemed forfeited by its failure to give notice pursuant to the
foregoing only to the extent that the Indemnifying Party is materially
prejudiced by such failure to give notice. With respect to any
assertion of liability by a third party that results in an
Indemnifiable Claim, the parties hereto shall make available to each
other all relevant information in their possession material to any such
assertion.
(b) In the event that the Indemnifying Party, within 20 days
after receipt of the aforesaid notice of an Indemnifiable Claim, fails
to assume the Defense of the Indemnified Party against such
Indemnifiable Claim, the Indemnified Party shall have the right to
undertake the Defense. Notwithstanding the assumption of the Defense by
the Indemnified Party, the Indemnifying Party shall have the right, at
its sole cost and expense, to participate in the Defense of such claim
and to employ its own counsel in connection therewith.
(c) Notwithstanding anything in this Section to the contrary,
(i) the Indemnifying Party shall not, without the Indemnified Party's
written consent, settle or compromise any Indemnifiable Claim or
consent to entry of any judgment in respect thereof unless such
settlement, compromise or consent includes as an unconditional term
thereof the giving by the claimant or the plaintiff to the Indemnified
Party a release from all liability in respect of such Indemnifiable
Claim and (ii) whether or not the Indemnifying Party assumes the
Defense of an Indemnifiable Claim, the Indemnifying Party shall have no
liability with respect to any compromise or settlement of such
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<PAGE> 15
Indemnifiable Claim effected without its consent, which shall not be
unreasonably withheld.
5.5 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO NON-THIRD
PARTY CLAIMS.In the event that the Indemnified Party asserts the existence of a
claim giving rise to Damages (but excluding claims resulting from the assertion
of liability by third parties), it shall give written notice to the Indemnifying
Party specifying the nature and amount of the claim asserted. If the
Indemnifying Party, within 30 days after receipt of such notice from the
Indemnified Party, shall not give written notice to the Indemnified Party
announcing its intent to contest such assertion of the Indemnified Party, such
assertion by the Indemnified Party shall be deemed accepted and agreed to by the
Indemnifying Party. In the event, however, that the Indemnifying Party contests
the assertion of a claim by giving such written notice to the Indemnified Party
within said period, then if the parties hereto, acting in good faith, cannot
reach agreement with respect to such claim within 30 days after the date of such
notice from the Indemnifying Party either party may commence legal proceedings
to resolve the dispute.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 NOTICE. All notices, requests, demands and other
communications required or permitted under this Agreement, including, without
limitation, all notices required pursuant to Article VI of this Agreement, shall
be deemed to have been duly given and made if in writing and served either by
personal delivery (which shall include delivery by Federal Express or similar
services) to the party for whom it is intended or by being deposited postage
prepaid, certified or registered mail, return receipt requested (or such form of
mail as may be substituted therefor by postal authorities), in the United States
mail (in which case it will be deemed delivered five days after being so
mailed), bearing the address shown in this Agreement for, or such other address
as may be designated in writing hereafter by such party:
If to Seller: Sentex Sensing Technology, Inc.
1801 East Ninth Street
Cleveland, Ohio 44114
With a copy to: William M. Toomajian
Baker & Hostetler LLP
3200 National City Center
1900 East 9th Street
Cleveland, OH 44114-3485
If to Buyer: ALR Group Incorporated
C/o Amos Linenberg
553 Broad Ave
Ridgefield, New Jersey 07657
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<PAGE> 16
With a copy to: Joseph Ehrenreich, Esq.
11 E. 44th Street, Floor 17
New York, NY 10017
6.2 ENTIRE AGREEMENT. This Agreement (and the exhibits herein)
embodies the entire agreement and understanding of the parties hereto with
respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements and understanding relative to said subject matter.
6.3 BINDING EFFECT; ASSIGNMENT. This Agreement and the various
rights and obligations arising hereunder shall inure to the benefit of and be
binding upon Buyer, its legal representatives, successors and assigns, and
Seller, his legal representatives, successors and assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
transferred or assigned (by operation of law or otherwise) by any party hereto
without the prior written consent of the other party.
6.4 NO THIRD PARTY BENEFICIARIES. Subject to Section 6.3
hereof, nothing herein, expressed or implied, is intended or shall be construed
to confer upon or give to any person, firm, corporation or legal entity, other
than the parties hereto, any rights, remedies or other benefits under or by
reason of this Agreement.
6.5 COUNTERPARTS. This Agreement may be executed
simultaneously in multiple counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
6.6 CAPTIONS. The article and section headings of this
Agreement are inserted for convenience only and shall not constitute a part of
this Agreement in construing or interpreting any provision hereof.
6.7 EXPENSES AND TRANSACTIONS. Each of Seller and Buyer
covenants and agrees that it shall be responsible for and shall pay all of its
respective costs and expenses heretofore or hereafter paid or incurred in
connection with this Agreement and the transactions contemplated hereby,
including, without limitation, legal and accounting fees.
6.8 WAIVER; CONSENT. This Agreement may not be changed,
amended, terminated, augmented, rescinded or discharged (other than in
accordance with its terms), in whole or in part, except by a writing executed by
the parties hereto, and no waiver of any of the provisions or conditions of this
Agreement or any of the rights of a party hereto shall be effective or binding
unless such waiver shall be in writing and signed by the party claimed to have
given or consented thereto.
6.9 OTHER AND FURTHER COVENANTS. The parties shall, in good
faith, execute such other and further instruments, assignments or documents as
may be necessary for the consummation of the transactions contemplated by this
Agreement, and shall assist and cooperate with each other in connection with
these activities.
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6.10 GENDER. Whenever the context requires, words used in the
singular shall be construed to mean or include the plural and vice versa, and
pronouns of any gender shall be deemed to include and designate the masculine,
feminine or neuter gender.
6.11 GOVERNING LAW. This Agreement shall in all respects be
construed in accordance with and governed by the laws of the State of New Jersey
(without regard to principles of conflicts of laws). The federal and state
courts of Bergen County, New Jersey shall have exclusive jurisdiction with
respect to any dispute relating to such agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed as of the day and year first
above written.
ALR Group Incorporated
By: /s/ AMOS LINENBERG
-------------------------------
Amos Linenberg, President
SENTEX SENSING TECHNOLOGY, INC.,
a New Jersey corporation
By: /s/ ROBERT S. KENDALL
-------------------------------
Robert S. Kendall, President
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