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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
(AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
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SENTEX SENSING TECHNOLOGY, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: Common
Shares, without par value
(2) Aggregate number of securities to which transaction
applies: 109,184,594
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
In accordance with Rule 0-11(c), the fee was calculated to be one-fiftieth
of one percent of the aggregate of the cash and the value of securities (other
than its own) and other property to be received by the registrant. The value of
the securities to be received was based on the average of the bid and asked
price for the securities on May 10, 2000.
$2,070,077
(4) Proposed maximum aggregate value of transaction: $2,070,077
(5) Total fee paid: $415
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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SENTEX SENSING TECHNOLOGY, INC.
, 2000
Dear Shareholder:
I am pleased to forward to you the enclosed proxy statement for the Special
Meeting of Shareholders of Sentex Sensing Technology, Inc. to be held on
, , 2000, at 10:00 a.m., Eastern Standard Time, at our
corporate offices located at 1801 East 9th Street, Suite 1510, Cleveland, Ohio
44114, to consider and act upon the proposals set forth in the enclosed Notice
of Special Meeting of Shareholders. Please review and consider the enclosed
materials carefully.
Among other things, you will be asked to consider and vote on a proposal to
approve the Asset Purchase Agreement, dated March 14, 2000, pursuant to which
substantially all of the assets of Monitek Technologies, Inc., a wholly owned
subsidiary of Sentex, and its subsidiary, Monitek GmbH, will be sold to Metrisa,
Inc. and Metrisa GmbH. In consideration for the assets, Metrisa, Metrisa GmbH
will transfer to Sentex 160,000 shares of common stock of Metrisa, pay to Sentex
approximately $1,500,000, subject to adjustment as set forth in the asset
purchase agreement, and, upon certain conditions, make royalty payments. The
non-stock consideration will be paid by the assumption of various liabilities,
in cash, and in the form of a promissory note.
At the meeting, in addition to approving the asset purchase agreement, you
will be asked to elect five directors to serve until the next annual meeting of
shareholders and until their respective successors are elected and qualified.
Your board of directors has carefully considered the terms of the asset
purchase agreement and has determined that its approval is in the best interests
of Sentex and its shareholders. The board of directors strongly supports the
sale of assets and the election of the five nominees as directors and recommends
that you vote in favor of the proposal to approve the asset purchase agreement
and for the election of each of the nominees for director.
Very truly yours,
/s/
ROBERT S. KENDALL
Chairman and Chief Executive Officer
Proxy statement dated , 2000 and first mailed to
shareholders on , 2000.
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SENTEX SENSING TECHNOLOGY, INC.
---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 2000
---------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Sentex
Sensing Technology, Inc., a New Jersey corporation ("Sentex"), will be held at
our corporate offices located at 1801 East 9th Street, Suite 1510, Cleveland,
Ohio 44114, on , , 2000, at 10:00 a.m., Eastern
Standard Time, for the following purposes:
1. To vote on a proposal to approve the Asset Purchase Agreement, dated
as of March 14, 2000, by and among Metrisa, Inc., a Delaware corporation
("Metrisa"), Metrisa GmbH, a German company and a wholly owned
subsidiary of Metrisa ("Metrisa GmbH"), Sentex, Monitek Technologies,
Inc., a Delaware corporation and a wholly owned subsidiary of Sentex
("Monitek"), Monitek GmbH, a German company and a wholly owned
subsidiary of Monitek ("Monitek GmbH"), and, solely with respect to
certain provisions, CPS Capital Ltd., an Ohio limited liability company,
pursuant to which Monitek and Monitek GmbH will sell substantially all
of their assets to Metrisa and Metrisa GmbH.
2. To elect five directors to serve until the next annual meeting and
until their respective successors are elected and qualified.
3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Only shareholders of record on , 2000 are entitled to notice of
and to vote at the meeting or any adjournments or postponements thereof. More
detailed information concerning each proposal is set forth in the accompanying
proxy statement and the appendix thereto.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL TO
APPROVE THE ASSET PURCHASE AGREEMENT AND FOR THE ELECTION OF THE FIVE PERSONS
NOMINATED BY SENTEX TO SERVE AS DIRECTORS.
By Order of the Board of Directors
/s/
Peggy Nutaitis, Secretary
, 2000
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. YOU MAY REVOKE YOUR PROXY BY (i) DULY EXECUTING A LATER-DATED PROXY
RELATING TO THE SAME SHARES AND DELIVERING IT TO THE SECRETARY OF SENTEX SENSING
TECHNOLOGY, INC. PRIOR TO THE TAKING OF THE VOTE AT THE SPECIAL MEETING; (ii)
FILING A WRITTEN NOTICE OF REVOCATION WITH THE SECRETARY OF SENTEX SENSING
TECHNOLOGY, INC. PRIOR TO THE TAKING OF THE VOTE AT THE SPECIAL MEETING; OR
(iii) ATTENDING THE SPECIAL MEETING AND VOTING YOUR SHARES IN PERSON.
YOUR VOTE IS IMPORTANT.
TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE
ENCLOSED RETURN ENVELOPE.
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TABLE OF CONTENTS
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SUMMARY TERM SHEET.......................................... 1
QUESTIONS AND ANSWERS....................................... 4
WHERE YOU CAN FIND MORE INFORMATION......................... 5
THE SPECIAL MEETING......................................... 7
General................................................... 7
Record Date and Voting.................................... 7
Vote Required............................................. 7
Voting and Revocation of Proxies.......................... 8
Solicitation of Proxies................................... 8
SALE OF ASSETS PROPOSAL..................................... 8
The Sale of Assets........................................ 8
Background of the Sale of Assets....................... 8
Recommendation of the Board of Directors and Reasons
for the Sale of Assets................................ 11
Anticipated Operations of Sentex Following the Sale of
Assets................................................ 12
Use of Proceeds........................................ 12
Interests of Certain Persons in the Sale of Assets..... 12
The Asset Purchase Agreement.............................. 12
Sale of Assets......................................... 12
Assumed Liabilities.................................... 12
Purchase Price; Purchase Price Adjustments............. 12
Representations and Warranties......................... 13
Covenants.............................................. 14
Conditions to the Sale of Assets....................... 15
No Solicitation or Negotiation......................... 17
Termination............................................ 17
Indemnification........................................ 19
Accounting Treatment................................... 20
Regulatory Approvals...................................... 20
Federal Income Tax Considerations of the Sale of Assets... 20
The Companies............................................. 20
Sentex's Business...................................... 20
Metrisa's Business..................................... 20
Appraisal Rights.......................................... 21
ELECTION OF DIRECTORS....................................... 21
Nominees for Election at the Special Meeting.............. 21
EXECUTIVE COMPENSATION...................................... 23
Summary Compensation Table................................ 23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 23
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..... 24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 24
ADDITIONAL INFORMATION...................................... 25
Experts................................................... 25
Independent Public Accountants............................ 25
Other Matters............................................. 25
Shareholder Proposals For 2001 Annual Meeting............. 26
Asset Purchase Agreement................................Appendix A
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SUMMARY TERM SHEET
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Sentex Sensing Technology, Inc.
1801 East 9th Street, Suite 1510
Cleveland, Ohio 44114
(216) 687-0287............................ Sentex, through its Monitek subsidiary, is a
manufacturer and marketer of environmental and process
control instrumentation to monitor and analyze fluids in
the petrochemical, refining, beverage and other
industries.
Metrisa, Inc.
25 Wiggins Avenue
Bedford, Massachusetts 01730
(781) 275-3705............................ Metrisa is a product development, manufacturing and
contract test services company that specializes in
manufacturing instruments and providing test services
for measuring the properties of a wide variety of
materials, liquids and gases.
Time and Place of Shareholder Meeting..... The special meeting will be held at our corporate
offices located at 1801 East 9th Street, Suite 1510,
Cleveland, Ohio 44114 on , ,
2000, at 10:00 a.m., Eastern Standard Time. See "The
Special Meeting -- General."
Proposals................................. At the meeting you will consider and vote:
- on a proposal to approve the asset purchase agreement
by and among Metrisa, Metrisa GmbH, Sentex, Monitek,
Monitek GmbH, and, solely with respect to certain
provisions, CPS Capital Ltd.
- to elect five directors of Sentex to serve until the
next annual meeting and until their respective
successors are elected and qualified.
See "The Special Meeting -- General."
Voting and Revocation of Proxies.......... You can vote at the special meeting if you owned common
shares at the close of business on , 2000.
You will be entitled to cast one vote for each share you
owned at that time. See "The Special Meeting -- Record
Date and Voting."
The sale of assets proposal requires the affirmative
vote of a majority of the votes cast at the special
meeting. New Jersey law provides that the candidates
receiving the greatest number of votes in the election
of directors will be elected. See "The Special
Meeting -- Vote Required."
You can vote your shares by attending the special
meeting and voting in person, or by marking the enclosed
proxy card with your vote, signing it and returning it
in the enclosed return envelope. You can revoke your
proxy as late as the date of the special meeting by
taking the actions described under the caption "The
Special Meeting -- Voting and Revocation of Proxies."
Simply attending the meeting will not revoke your proxy.
CPS is the principal shareholder of Sentex and has the
power to direct the vote of approximately 43.7% of the
common shares. CPS has agreed to vote in favor of the
sale of assets proposal and has expressed an intention
to vote for the election of the five nominees for
director. As of , 2000, CPS and Sentex's
directors, officers and their other affiliates were
entitled to vote
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48,560,752 common shares, which represented
approximately 44.5% of the outstanding common shares.
Your vote is very important. Please sign, date and
return the proxy card as soon as possible.
Recommendation of the Board of
Directors................................. The board of directors recommends that you vote:
- FOR the sale of assets proposal.
- FOR the election of the five persons who have been
nominated for election as directors.
The reasons for the board's recommendation with respect
to the sale of assets are set forth in "Sale of Assets
Proposal -- The Sale of Assets -- Recommendation of the
Board of Directors and Reasons for the Sale of Assets."
Sale of Assets............................ Under the terms of the asset purchase agreement, Metrisa
and Metrisa GmbH will purchase substantially all of the
assets of Monitek and Monitek GmbH and assume some
specified liabilities of Monitek and Monitek GmbH. In
consideration for the transfer of assets, Metrisa and
Metrisa GmbH will issue 160,000 shares of Metrisa common
stock to us, pay to us approximately $1,500,000, subject
to adjustment under circumstances set forth in the asset
purchase agreement, and, upon certain conditions, make
royalty payments. This non-stock consideration will be
paid by the assumption of various liabilities, in cash,
and in the form of a promissory note. See "Sale of
Assets Proposal -- The Asset Purchase Agreement."
No Funds Available for Payment to
Shareholders.............................. Due to outstanding liabilities, no portion of the
proceeds from the sale of assets will be available for
distribution to shareholders. See "Sale of Assets
Proposal -- The Sale of Assets -- Use of Proceeds."
No Solicitation........................... We have agreed not to solicit an acquisition proposal
from a third party. We have also agreed not to take part
in any discussions regarding an unsolicited acquisition
proposal. We may respond to a superior proposal if our
board of directors determines in good faith, and upon
the written advice of counsel, that it is required to do
so in the exercise of its fiduciary duties. If we
terminate the agreement upon receipt of a superior
proposal, we are required to pay a termination fee. See
"Sale of Assets Proposal -- The Asset Purchase
Agreement -- No Solicitation or Negotiation."
Conditions to Closing..................... The asset purchase agreement contains various conditions
to closing, including, without limitation, the retention
of various key employees by Metrisa and Metrisa GmbH and
shareholder approval of the sale of assets. See "Sale of
Assets Proposal -- The Asset Purchase
Agreement -- Conditions to the Sale of Assets."
Termination............................... The asset purchase agreement may be terminated by the
mutual written consent of the parties. In addition, a
party may terminate the asset purchase agreement if:
- the other party breaches in any material respect any
of its obligations, covenants or agreements under the
asset purchase agreement and fails to cure the breach
or failure within the specified time period;
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- if any of the representations and warranties of the
other party are not true in any material respect and
that party fails to correct that misrepresentation
within the specified time period; or
- if the conditions to the other party's obligations
under the asset purchase agreement become incapable of
satisfaction.
Sentex may terminate the asset purchase agreement if it
receives a superior proposal. See "Sale of Assets
Proposal -- The Asset Purchase
Agreement -- Termination."
Termination Fee........................... If the asset purchase agreement is terminated and any of
Sentex, Monitek, Monitek GmbH or CPS enter into any
transaction relating to an acquisition proposal as a
result of negotiations in violation of the asset
purchase agreement or pursuant to a superior proposal,
Sentex must pay Metrisa $150,000 and the reasonable
costs and expenses incurred by Metrisa and Metrisa GmbH
in connection with the asset purchase agreement and the
transactions contemplated thereby. See "Sale of Assets
Proposal -- The Asset Purchase
Agreement -- Termination."
Management and Operations of Sentex
After the Sale of Assets.................. Monitek and Monitek GmbH contribute substantially all of
our total revenues and constitute substantially all of
our total assets, so that immediately following the sale
of assets, our operations will be minimal. Our present
management will continue to the have the responsibility
of managing Sentex after the sale of assets. "Sale of
Assets Proposal -- The Sale of Assets -- Anticipated
Operations of Sentex Following the Sale of Assets."
Interests of Certain Persons.............. Metrisa is currently negotiating with James S. O'Leary,
Chief Financial Officer of Sentex, to retain his
services as an employee. Mr. O'Leary is also entitled to
a bonus of $5,000 upon consummation of the asset
purchase agreement.
CPS has agreed to vote for the approval of the sale of
assets.
In addition, Robert S. Kendall, President of Sentex, and
CPS have provided loans for working capital to Sentex,
and Mr. Kendall and CPS could require the repayment of
these loans with the consideration received in the sale
of assets. See "Sale of Assets Proposal -- The Sale of
Assets -- Interests of Certain Persons in the Sale of
Assets."
Accounting Treatment...................... The sale of assets will be treated as a sale for
financial reporting and accounting purposes, in
accordance with generally accepted accounting
principles. See "Sale of Assets Proposal -- The Asset
Purchase Agreement -- Accounting Treatment."
Federal Income Tax Considerations of the
Sale of Assets............................ The sale of assets will not result in any federal income
tax consequences to you, but the sale of assets will be
a taxable transaction to us for federal income tax
purposes. See "Sale of Assets Proposal -- Federal Income
Tax Considerations of the Sale of Assets."
Appraisal Rights.......................... Shareholders are not entitled to appraisal rights in
connection with the sale of assets.
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QUESTIONS AND ANSWERS
Q. WHAT AM I VOTING ON?
A. At the meeting, you will consider and vote:
- on a proposal to approve the asset purchase agreement by and among
Metrisa, Metrisa GmbH, Sentex, Monitek, Monitek GmbH, and, solely with
respect to certain provisions, CPS, pursuant to which Monitek and Monitek
GmbH will sell substantially all of their assets to Metrisa and Metrisa
GmbH; and
- to elect five directors to serve until the next annual meeting and until
their respective successors are elected and qualified.
Q. WHEN DO YOU EXPECT TO COMPLETE THE SALE OF ASSETS?
A. We are working toward completing the sale of assets as quickly as possible.
We hope to complete the sale of assets before July 31, 2000.
Q. HOW DO I VOTE?
A. Complete and sign the enclosed proxy card and return it in the enclosed
return envelope. You can also vote in person at the special meeting. We
urge you to read this entire document carefully before voting.
Q. CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A. Yes, you may change your vote by:
- filing a written notice of revocation with Sentex's Secretary before the
taking of the vote at the special meeting;
- signing another proxy card and delivering it to Sentex's Secretary before
the taking of the vote at the special meeting; or
- attending the special meeting and voting in person.
Please be advised, however, that simply attending the special meeting will
not revoke your proxy.
Q. WHAT DO I NEED TO DO NOW?
A. Mail your completed and signed proxy card in the enclosed return envelope as
soon as possible, so that your vote concerning approval of the asset
purchase agreement and the election of directors will be counted at the
special meeting.
Q. WHO CAN HELP ANSWER MY QUESTIONS?
A. If you would like additional copies of this document, or have questions
about the sale of assets, you should contact:
Julius L. Hess
Sentex Sensing Technology, Inc.
1801 East 9th Street, Suite 1510
Cleveland, Ohio 44114
(216) 687-0287
Q. IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES?
A. No, unless you provide instructions to your broker on how to vote. You
should follow the directions provided by your broker regarding how to
instruct your broker to vote your shares.
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Q. CAN I VOTE MY SHARES IN PERSON?
A. Yes. You may attend the special meeting and vote your shares in person,
rather than signing and mailing your proxy card.
Q. HOW WILL MY SHARES BE VOTED IF I RETURN A BLANK PROXY CARD?
A. If you sign and return your proxy card and do not indicate how you want to
vote, your shares will be voted in favor of the proposal to approve the
asset purchase agreement and for the election of the five nominees for
director.
Q. WHAT ARE THE FEDERAL TAX CONSEQUENCES OF THE SALE OF ASSETS?
A. The sale of assets will not result in any federal income tax consequences to
shareholders. The sale of assets will be a taxable transaction for Monitek,
a member of the Sentex consolidated operating group, for federal income tax
purposes. However, it is not expected that the sale of assets will result
in material federal, state or local income tax liability, if any, to
Monitek.
Q. WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETING?
A. Sentex does not expect to ask you to vote on any matters other than as set
forth in this proxy statement.
We have not authorized anyone to give any information or make any
representation about the sale of assets or Sentex that is different from, or in
addition to, that contained in this proxy statement or in any of the materials
that we have incorporated into this document. Therefore, if anyone does give you
information of this sort, you should not rely on it. This document is dated
, 2000. You should not assume that the information contained
in this document is accurate as of any other date unless the information
specifically indicates that another date applies.
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THE SPECIAL MEETING
GENERAL
This proxy statement is being furnished to shareholders as part of the
solicitation of proxies by the board of directors for use at the special meeting
of shareholders of Sentex to be held on , , 2000 at
our corporate offices located at 1801 East 9th Street, Suite 1510, Cleveland,
Ohio 44114, commencing at 10:00 a.m., Eastern Standard Time, and at any
adjournment or postponement thereof.
At the special meeting, shareholders will consider and vote:
- On a proposal to approve the asset purchase agreement by and among
Metrisa, Metrisa GmbH, Sentex, Monitek, Monitek GmbH, and, solely
with respect to certain provisions, CPS, pursuant to which Monitek
and Monitek GmbH will sell substantially all of their assets to
Metrisa and Metrisa GmbH.
- To elect five directors to serve until the next annual meeting and
until their respective successors are elected and qualified.
- To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Each copy of this proxy statement is accompanied by a proxy card for use at
the special meeting. The board of directors recommends that you vote FOR the
sale of assets proposal and the election of the persons who have been nominated
by Sentex for election as directors.
RECORD DATE AND VOTING
Sentex has fixed , 2000 as the record date for the
determination of shareholders entitled to notice of and to vote at the special
meeting. Accordingly, only shareholders of record at the close of business on
, 2000, will be entitled to notice of and to vote at the special
meeting. Each share is entitled to one vote, which may be cast either in person
or by properly executed proxy, at the special meeting. As of , 2000,
there were 109,184,594 common shares outstanding.
VOTE REQUIRED
The affirmative vote of a majority of the votes cast at the special meeting
is required to approve the sale of assets proposal. New Jersey law provides that
the candidates receiving the greatest number of votes in the election of
directors will be elected.
Shares represented in person or by proxy will be counted for the purpose of
determining whether a quorum is present at the special meeting. Shares held by
shareholders who abstain from voting will be treated as shares that are present
and entitled to vote at the special meeting for the purpose of determining
whether a quorum exists, but will not be counted as votes cast on the sale of
assets proposal. Brokers who hold shares in nominee or "street name" for
customers who are the beneficial owners of those shares are prohibited from
giving a proxy to vote shares held for those customers with respect to the
matters to be voted upon at the special meeting unless they receive specific
instructions from those customers. Shares represented by proxies returned by a
broker holding those shares in "street name" will be counted for the purpose of
determining whether a quorum exists, even if those shares are not voted in
matters when discretionary voting by the broker is not allowed. These shares are
known as broker non-votes.
CPS, Sentex's principal shareholder, has agreed to vote FOR the approval of
the asset purchase agreement and FOR each of the five directors who have been
nominated for election. CPS has the power to direct the vote of approximately
43.7% of the common shares. As of May 15, 2000, CPS and Sentex's directors,
officers and their affiliates were entitled to vote 48,560,752 common shares,
which represented 44.5% of the outstanding common shares.
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VOTING AND REVOCATION OF PROXIES
If the enclosed proxy is executed and returned to Sentex, the persons named
in it will vote the common shares represented by that proxy at the special
meeting. When a choice has been specified in the proxy, the common shares
represented thereby will be voted in accordance with that specification at the
special meeting. If no specification is made, those shares will be voted at the
special meeting:
FOR the approval of the sale of assets proposal; and
FOR the election of the five individuals who have been nominated for
election as director.
If any other matters are properly presented for consideration at the
special meeting, including, among other things, a motion to adjourn the meeting
to another time or place (including, without limitation, for the purpose of
soliciting additional proxies), the persons named in the enclosed proxy and
acting thereunder will have discretion to vote on those matters in accordance
with their best judgment (unless authorization to use that discretion is
withheld). Sentex is not aware of any matters expected to be presented at the
meeting other than as described in the Notice of Special Meeting of
Shareholders.
Execution of the enclosed proxy will not affect your right to attend the
special meeting or to vote in person. However, your presence at the special
meeting alone, without further action, will not revoke your proxy. You may
revoke your proxy by:
- filing a written notice of revocation bearing a later date than the proxy
with the Secretary of Sentex before the taking of the vote at the special
meeting,
- duly executing a later-dated proxy relating to the same shares and
delivering it to the Secretary of Sentex before the taking of the vote at
the special meeting, or
- attending the special meeting and voting your shares in person.
In order to vote in person at the special meeting, you must attend the meeting
and cast your votes in accordance with the voting procedures established for the
meeting. Any written notice of revocation or subsequent proxy should be sent so
as to be delivered at or before the taking of the vote at the special meeting to
Sentex Sensing Technology, Inc., 1801 East 9th Street, Suite 1510, Cleveland,
Ohio 44114, Attention: Secretary.
SOLICITATION OF PROXIES
This solicitation of proxies is made by and on behalf of the board of
directors. All expenses of the solicitation of proxies for the special meeting
will be borne by Sentex. In addition to the solicitation of proxies by mail,
Sentex will request banks, brokers and other record holders to send proxies and
proxy materials to the beneficial owners of common shares and secure their
voting instructions, if necessary. In addition, proxies may be solicited by
directors, officers and employees of Sentex in person or by telephone,
facsimile, telegram or other means of communication. These persons will receive
no additional compensation for solicitation of proxies, but may be reimbursed
for reasonable out-of-pocket expenses incurred in connection with any
solicitation.
SALE OF ASSETS PROPOSAL
THE SALE OF ASSETS
BACKGROUND OF THE SALE OF ASSETS
Since purchasing Monitek, CPS and Robert S. Kendall have provided
substantial working capital assistance to Sentex either in the form of loans or
a guarantee on a $2,000,000 line of credit from a bank that is fully extended.
In addition, CPS has deferred management fees in excess of $325,000. In 1998,
Mr. Kendall informed the board that CPS's commitment to continue to provide
additional advances would be considered on a case-by-case basis and proposed
that the board consider opportunities to sell the business of
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Monitek and Monitek GmbH and pursue other lines of business for Sentex. The
board agreed to consider any proposals to buy the business. In connection with
operating Monitek and Monitek GmbH, Sentex received indications from time to
time of interest in purchasing Monitek's business.
In November 1998, Joseph Caruso, a director and former chairman of Metrisa,
contacted Mr. Kendall and renewed a long-time interest in acquiring the assets
of Monitek and Monitek GmbH. A series of discussions occurred over the next few
days that led to a letter dated November 10, 1998 from Mr. Caruso to Mr.
Kendall. In that letter, Mr. Caruso stressed the good strategic fit between
Monitek and Metrisa and that Metrisa was interested in expanding through
acquisitions. Mr. Caruso also indicated acquisitions for Metrisa would be easier
to accomplish with new funds that it had recently raised. In addition, Mr.
Caruso outlined a potential transaction that contemplated Metrisa purchasing
substantially all the assets of Monitek and Monitek GmbH for book value with a
premium on the assets to be paid as a royalty on 5% of revenues for the first
five years. The letter did not include any proposal with respect to assuming any
debt or liabilities of Monitek or Monitek GmbH.
Discussions were held between Mr. Kendall and Mr. Caruso throughout
November and December. On December 31, 1998, Mr. Caruso sent a letter to Mr.
Kendall regarding the $2,000,000 bank debt of Sentex. In that letter Metrisa
proposed two alternatives, each of which involved CPS or Mr. Kendall assuming
the debt. No further significant discussion occurred on this point, but Sentex
recognized that Metrisa was not willing to assume the bank debt in any fashion
because it would have a negative financial impact on Metrisa.
Over the next two months the parties sought to resolve differences in the
proposed deal structure, value of the inventory, selection of assets, royalty
payments and scope of indemnities (including for CPS). In addition, Mr. Kendall
and Mr. Caruso discussed strategic issues and challenges caused by the proposed
transaction, such as retaining key personnel in California and Germany, moving
the operations in California to Boston, marketing and product development
efforts and their respective business philosophies and goals.
As a result of these meetings and discussions, on February 24 1999, Mr.
Caruso outlined a transaction structure to purchase substantially all of the
assets of Monitek and Monitek GmbH based on their net book value, with a premium
paid in the form of a royalty and to assume certain liabilities. Under Metrisa's
proposal, it would retain the right to purchase the assets of its choice. Based
on pre-due diligence assumptions, Metrisa anticipated acquiring the selected
assets for approximately $1.9 million by assuming approximately $1.9 million in
liabilities. Metrisa also proposed more definitive terms of the royalty payments
that were based on minimum threshold sales, no royalties for the first year and
dependent upon product lines and adequate gross margins. In addition, Metrisa
conditioned the assumption of the liabilities owed to CPS on CPS's willingness
to accept 80,000 shares of Metrisa common stock in exchange for those
liabilities and proposed Sentex pay for Metrisa's costs of moving the operation
to Boston.
In a letter dated March 5, 1999, Kendall responded in disagreement to many
of the points. In particular, Mr. Kendall indicated the royalty payments had far
too many conditions and did not start to payout until too late in the process
and that Sentex should not be fully responsible for Metrisa's move to Boston. He
also informed Metrisa that the number of shares offered to CPS was insufficient.
On April 17, 1999, after several negotiated drafts, the parties executed a
non-binding Letter of Intent reflecting the resolution of the foregoing issues.
The primary resolutions were as follows (a) CPS would receive 160,000 shares of
Metrisa common stock for CPS advances (including accrued management fees, but
Metrisa would have a call right for 100,000 shares at $5 per share), (b) the
royalty payments would commence in year one and continue for five years and
would be at reduced levels for the first $5 million in sales and then at
increased levels thereafter with overall declining percentages throughout the
term of the payment, (c) Metrisa could set-off from the royalty payments up to
$250,000 of closing costs and 50% of any amounts incurred above that amount and
Metrisa would have to provide estimates of the closing costs prior to executing
a definitive agreement and (d) CPS would indemnify Metrisa up to the value of
the cash and shares it received in exchange for its debt, but the value of the
shares was left undetermined.
After the Letter of Intent was executed, Mr. Caruso and Mr. Wolf and his
staff conducted a due diligence analysis of Monitek's business. In the course of
the due diligence process, Sentex and CPS, on the
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one hand, and Metrisa, on the other hand, began to disagree on the treatment of
various items and issues and how they were contemplated to be addressed in the
Letter of Intent versus how they were addressed in an initial draft of a
definitive agreement. In particular, CPS believed its participation in the
transaction with respect to indemnification and post-closing liabilities had
been significantly extended beyond the scope of the Letter of Intent by
attempting to assign an artificially high price to the shares. Metrisa believed
to the contrary. Metrisa also informed Sentex that it would not satisfy a recent
advance by CPS at the closing, but would expect to pay that amount over time. In
addition, Metrisa tried to extend the payment period of certain debt owed to a
key employee and his former partners that Sentex incurred in connection with the
acquisition of their business. The key employee rejected this offer and informed
Sentex that it would look to Sentex to pay the sums in a timely manner. These
issues substantially stalled the progress of entering into a definitive
agreement.
On June 15, 1999, Mr. Kendall sent a letter to Mr. Caruso and Mr. Wolf
outlining these specific problems. In addition, Mr. Kendall, on behalf of
Sentex, expressed a strong objection to Monitek's attempt at securing all of its
assets for a modest pre-closing advance of only $70,000 and for proposing to
secure additional performance obligations under the terms of the definitive
agreement. On June 20, 1999, Mr. Caruso responded to Mr. Kendall's letter that
essentially stated that if CPS and Sentex did not proceed with this deal, things
would only continue to worsen for both Sentex and CPS. Sentex and CPS did not
view the response as constructive or addressing their concerns.
On June 30, 1999, the Sentex board of directors met to discuss the
strategic direction of Sentex. At the meeting, Mr. Kendall advised the board
that the deal with Metrisa was experiencing significant difficulties, and he did
not expect them to be resolved by the July 1, 1999, the date the Letter of
Intent expired. Other alternatives were discussed, such as closing the
California office, except for limited personnel. On July 1, 1999, the Letter of
Intent expired.
Later in July 1999, Mr. Kendall was approached by a third party bidder. The
bidder stated that it had a high level of interest in purchasing Monitek from
Sentex. A series of discussions were carried on and a meeting was arranged
between Messrs. Kendall and O'Leary and a representative of the bidder. Meetings
were held over July 23 and July 24, 1999 in New York City. After the meetings in
New York, the bidder proposed paying approximately $3,000,000 in cash for
substantially all of the assets of Monitek and Monitek GmbH. The bidder's
proposal did not include any obligation to assume any of the operating
liabilities of Monitek or Monitek GmbH and expected Sentex to pay all the
termination liabilities in connection with closing the operations in Germany.
Furthermore, despite repeated requests by Mr. Kendall, the bidder refused to
provide any information about its credit worthiness that would allow Sentex to
make a reasonable judgment as to whether the bidder could finance the proposed
transaction. Based on these two concerns, Mr. Kendall, in consultation with
members of the board, determined it was not in the best interest of Sentex to
pursue this proposed transaction any further.
In August 1999, Mr. Caruso contacted Mr. Kendall to inform him that Metrisa
was still interested in purchasing the assets of Monitek and Monitek GmbH. In
September 1999, negotiations resumed between Metrisa and Sentex with an emphasis
on simplifying the transaction. The primary changes to the deal structure were
as follows (a) Sentex would, in addition to retaining the bank debt, retain all
debt owed to CPS (including accrued management fees) and debt owed to the key
employee and his former partners, (b) the 160,000 shares would be paid to
Sentex, not CPS, and there would be no call option on the shares, (c) the
royalty would only cover sales under a proposed contract with the U.S. Navy, and
(d) Sentex would not be responsible for any closing costs of the facility in
California, but would be responsible for all severance obligations of employees
not hired by Metrisa. The new deal also retained the concept that Metrisa would
be able to purchase and assume the assets and liabilities of its choice. Sentex
agreed with this so long as all exclusions were identified prior to entering
into a definitive agreement and this right did not extend through closing.
Over the course of the next several months, Mr. Wolf conducted extensive
due diligence on the operations in California and Germany that resulted in
several trips to each place. During these trips, Mr. Wolf identified each asset
(or class of asset) and each liability (or class of liability) that Metrisa was
willing to
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<PAGE> 14
purchase and assume, respectively, and identified each of the employees Metrisa
was willing to hire and each contract Metrisa would assume. This detailed
selection process caused a substantial delay in the progress of the transaction
and in many instances was objected to by Sentex on the basis that it would no
longer make a transaction viable or attractive to Sentex. Over time, the parties
were able to reach a resolution on these matters. On March 14, 2000 the board of
directors of Sentex approved a definitive asset purchase agreement that was
executed on that day.
RECOMMENDATION OF THE BOARD OF DIRECTORS AND REASONS FOR THE SALE OF ASSETS
The board of directors believes that the terms of the sale are advisable
and in the best interests of Sentex and its shareholders and has unanimously
approved and recommended the asset purchase agreement and the transactions
contemplated thereby. In reaching its determination to approve and recommend the
asset purchase agreement, the board of directors considered a number of factors
including:
1. The fact that Sentex faces significant short and long-term liquidity
requirements and relies on CPS for its capital;
2. The current financial condition of Sentex;
3. CPS's indication that it would withdraw financial support unless Sentex
disposed of its existing business and entered other lines of business;
4. The substantial investment required in developing new products and
distribution systems balanced against the risks and potential rewards of
that investment;
5. The fact that other alternatives available to Sentex to achieve its
strategic objectives, such as expanding the current business through
acquisition or expansion, were limited in light of Sentex's liquidity
and capital requirements, its share price, and the availability of
financial sources therefor; and
6. The fact that Metrisa and Metrisa GmbH are better suited to utilize the
assets of Monitek and Monitek GmbH in a way that will maximize the value
and productivity of those assets.
In approving the asset purchase agreement and the transactions contemplated
thereby, the board of directors also considered certain negative aspects of the
proposed transaction, including the following:
1. The fact that no portion of the proceeds from the sale of assets will be
available for distribution to the shareholders because the purchase
price is not sufficient to cover the liabilities of Sentex;
2. The fact that Monitek and Monitek GmbH contribute substantially all of
Sentex's total revenues and constitute substantially all of Sentex's
total assets, so that immediately following the sale of assets, Sentex's
operations will substantially consist of settling its liabilities and
managing and holding Metrisa shares and promissory notes;
3. The fact that Metrisa's financial position did not permit it to offer
more consideration in the form of cash and that it lacked an interest in
pursuing a transaction on a more simplified and aggressive basis; and
4. The taxable nature of the sale of assets.
The foregoing discussion of the information and factors considered by the
board of directors is not intended to be exhaustive but is believed to include
material factors considered by the board of directors in making its decision. In
view of the wide variety of factors considered by the board of directors in
connection with its evaluation of the sale of assets and the complexity of those
matters, the board of directors did not consider it practicable to, nor did it
attempt to quantify, rank or otherwise assign relative weights to the specific
factors it considered in reaching its decision. In considering the factors
described above, individual members of the board of directors may have given
different weights to different factors.
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ANTICIPATED OPERATIONS OF SENTEX FOLLOWING THE SALE OF ASSETS
Monitek and Monitek GmbH contribute substantially all of Sentex's total
revenues and constitute substantially all of Sentex's total assets, so that
immediately following the sale of assets, Sentex's operations will substantially
consist of settling its liabilities and managing and holding Metrisa shares and
promissory notes. Sentex may purchase additional assets in other lines of
business, which at this time have not been determined. No assurance can be given
that Sentex will be able to acquire other lines of business.
USE OF PROCEEDS
The consideration received upon the sale of assets will not be sufficient
to pay any dividends or distributions to shareholders. Sentex intends to use the
consideration received in the transaction to satisfy existing liabilities and,
if CPS is willing to defer some of the liabilities owed it, to purchase
additional assets in other lines of business, which at this time have not been
determined.
INTERESTS OF CERTAIN PERSONS IN THE SALE OF ASSETS
Metrisa is currently negotiating to retain the services of James S.
O'Leary, Chief Financial Officer of Sentex, after consummation of the asset
purchase agreement. In addition, Mr. O'Leary is entitled to a bonus of $5,000
upon consummation of the asset purchase agreement.
CPS has agreed to vote for approval of the asset purchase agreement and has
indicated that it will vote for the election of the five nominees for director.
From May 1997 through November 1999, CPS and Mr. Kendall provided Sentex
with a series of loans for working capital purposes. The aggregate amount of
these loans is more than the consideration to be received in the sale of assets.
Therefore, if CPS and Mr. Kendall require the repayment of these loans upon
consummation of the sale of assets, they could receive the entire consideration
for the sale of assets.
THE ASSET PURCHASE AGREEMENT
The following is a brief summary of certain provisions of the asset
purchase agreement, a copy of which is attached as Appendix A to this proxy
statement. This summary is qualified by reference to the asset purchase
agreement. We urge you to read the entire asset purchase agreement for a more
complete understanding of the terms and conditions of the sale of assets.
SALE OF ASSETS
Pursuant to the asset purchase agreement, each of Monitek and Monitek GmbH
will sell substantially all of its assets to Metrisa and Metrisa GmbH. The
assets of Monitek and Monitek GmbH to be acquired will not include cash, the
name Sentex and some other selected assets.
ASSUMED LIABILITIES
Metrisa and Metrisa GmbH have agreed to assume selected liabilities of
Monitek and Monitek GmbH.
PURCHASE PRICE; PURCHASE PRICE ADJUSTMENTS
Subject to various adjustments discussed below and in consideration of the
transfer of assets, Metrisa and Metrisa GmbH will transfer 160,000 shares of
Metrisa common stock to Sentex, pay Sentex $1,490,077, and, upon certain
conditions, make royalty payments. The amount of non-stock consideration will be
increased or decreased at closing by the difference between the net book value
of the tangible purchased assets and $1,490,077. A final adjustment will be made
45 days after closing. The payment of the non-stock consideration will be made
by the assumption of various liabilities of Monitek and Monitek GmbH by Metrisa
and Metrisa GmbH, payment in cash of $500,000, reduced by the amount of any
loans or advances by Metrisa to Sentex prior to closing, and in the form of a
promissory note. If the amount of the promissory note would be less than zero,
the amount by which the promissory note would be less than zero will be set
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off dollar-for-dollar against the cash payment. The promissory note will be
secured by a security interest junior to Metrisa and Metrisa GmbH's existing
creditors.
On March 14, 2000, Sentex obtained a loan from Metrisa in the amount of
$50,000 as an advance payment of the purchase price. At closing, this loan will
be deducted from the cash payment made by Metrisa and Metrisa GmbH and the
promissory note representing the loan will be canceled.
For a period of five years following the closing date, Metrisa and Metrisa
GmbH will pay Monitek on a monthly basis a royalty on the amounts they receive
from the United States Department of Defense for sales of acoustic products of
Monitek for measurement of water in jet fuel, net of discounts and returns and
uncollectible accounts. The amount of the royalty is as follows:
<TABLE>
<CAPTION>
CALENDAR YEAR ROYALTY PERCENTAGE
------------- ------------------
<S> <C>
2000........... 10% of gross revenues in excess of $250,000
2001........... 8% of gross revenues in excess of $500,000
2002........... 6% of gross revenues in excess of $500,000
2003........... 4% of gross revenues in excess of $500,000
2004........... 2% of gross revenues in excess of $500,000
</TABLE>
Metrisa and Metrisa GmbH are entitled to set off against any royalty any
amount payable to Metrisa and Metrisa GmbH with respect to indemnifiable claims.
There is currently no agreement with the United States Department of Defense and
no assurance can be made that Metrisa will make any sales to the United States
Department of Defense.
REPRESENTATIONS AND WARRANTIES
The asset purchase agreement contains various representations and
warranties, qualified by specified exceptions and materiality standards, of each
of Metrisa, Metrisa GmbH, Monitek and Monitek GmbH related to, among other
things:
- Due organization, valid existence, good standing, corporate power and
similar corporate matters;
- Capital structure;
- Authorization, execution, delivery, performance and enforceability of the
asset purchase agreement and related matters;
- Documents and reports filed with the SEC and the accuracy and
completeness of information contained in those documents and reports;
- Ownership of equity securities;
- Contracts, licenses, leases, instruments and other commitments;
- Completeness and accuracy of various financial statements;
- Transactions with affiliates;
- Real property;
- Personal property;
- Tax matters;
- Required consents or approvals and violations of any instruments or laws;
- Employee benefit plans;
- Employees and compensation of employees;
- Intellectual property;
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- The absence of material adverse changes;
- Inventory;
- Compliance with various laws;
- The absence of pending or threatened actions, suits, proceedings or
investigations;
- Environmental matters;
- Customers and suppliers;
- The absence of undisclosed liabilities;
- Year 2000 matters; and
- Brokers' or finders' fees.
COVENANTS
Covenants of Sentex, Monitek and Monitek GmbH. Prior to the closing, each
of Monitek and Monitek GmbH will and Sentex will cause each of Monitek and
Monitek GmbH to use its reasonable efforts under its existing financial
condition to:
- Maintain its corporate existence;
- Preserve its material business organization intact, retain its permits,
licenses and franchises, preserve its existing contracts and do nothing
to intentionally diminish the goodwill of its customers, suppliers,
personnel and others having business relations;
- Conduct its business only in the ordinary course; and
- Not take any action to intentionally cause a material breach of the
representations and warranties of Sentex, Monitek and Monitek GmbH set
forth in the asset purchase agreement.
In addition, each of Monitek and Monitek GmbH has agreed not to, and Sentex
has agreed to cause each of Monitek and Monitek GmbH not to, prior to closing,
without Metrisa and Metrisa GmbH's prior written consent:
- Change its method of management or operations;
- Dispose of or acquire any material assets or properties, other than
inventory and the collection of its accounts receivable in the ordinary
course of business;
- Except in the ordinary course of business, subject any of its properties
or assets to any lien, security interest or encumbrance;
- Except in the ordinary course of business, modify, amend, cancel or
terminate any existing agreement material to its business;
- Except in the ordinary course of business, make any change in the
compensation paid or payable to certain officers, directors, employees,
agents, representatives or consultants or pay or agree to pay any bonus
or similar payment (other than bonus payments to which it is committed
and that are disclosed in the asset purchase agreement);
- Enter into any contract or agreement with respect to which it has any
liability or obligation or that may otherwise have any continuing effect
after closing, other than in the ordinary course of business, or that may
place any material limitation on the method of conducting or scope of its
business;
- Declare, pay or set aside for payment any dividend (in stock or property,
excluding cash) or other distribution of property, excluding cash, in
respect of its capital stock;
- Discharge any indebtedness, the effect of which might adversely affect
Metrisa's future relationships with Monitek or Monitek GmbH's customers
or suppliers; or
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- Take any other action that would materially and adversely affect or
detract from the value of Monitek, its assets or its business.
Monitek, Monitek GmbH and CPS have also agreed to use all reasonable
efforts to cause the conditions to Metrisa and Metrisa GmbH's obligations to
effect the sale of assets to be satisfied as soon as practicable.
The asset purchase agreement also contains some other agreements, including
the following:
- Metrisa and Metrisa GmbH will have the exclusive right to use the names
"Monitek," "Monitek Technologies, Inc.," and "Monitek GmbH," and Monitek
and Monitek GmbH have agreed to take all necessary action to allow
Metrisa and Metrisa GmbH to exercise that right and to cease using those
names immediately after the closing.
- Any payments, orders for products or leads with respect thereto received
by Monitek and Monitek GmbH after closing that arise from or relate to
the ownership or operation of the assets purchased by Metrisa and Metrisa
GmbH will be forwarded to Metrisa and Metrisa GmbH by Monitek or Monitek
GmbH within five days of receipt.
- Each of Sentex and Monitek agree that for a period of five years
following the closing and Monitek GmbH agrees that for a period of two
years following the closing that none of Sentex, Monitek or Monitek GmbH
will, without the prior written consent of Metrisa and Metrisa GmbH,
directly or indirectly, compete with Metrisa or Metrisa GmbH in the
optical and acoustic instrument business.
Covenants of Metrisa and Metrisa GmbH. Each of Metrisa and Metrisa GmbH has
agreed that it will use all reasonable efforts to cause the conditions to
Sentex, Monitek and Monitek GmbH's obligations to effect the sale of assets to
be satisfied as soon as practicable. During the time period between the
execution of the asset purchase agreement and prior to the effectiveness of the
sale of assets, Metrisa and Metrisa GmbH have agreed not to disclose to any
third party or use for any purpose any of the confidential or proprietary
information relating to Monitek and Monitek GmbH's business that is in their
possession or knowledge and that is to be transferred to Metrisa and Metrisa
GmbH on the closing date, except to the extent that the information is in the
public domain, is generally known within the industry or is obtained through
lawful methods not involving a breach of the asset purchase agreement.
Each of Metrisa and Metrisa GmbH has agreed that:
- It will forward to Monitek and Monitek GmbH any excluded assets or
proceeds therefrom that it receives after closing within five days of
receipt thereof.
- Following closing, it will hold excluded inventory of Monitek and Monitek
GmbH but that title to the excluded inventory will remain with Monitek
and Monitek GmbH. To the extent that Metrisa or Metrisa GmbH sells any
excluded inventory after closing, it will pay to Sentex the lesser of (1)
book value of the excluded inventory that is sold or (2) the amount equal
to the price at which the excluded inventory was sold.
- Following closing, it will use reasonable efforts to collect the accounts
receivable that it does not purchase, and to the extent that it receives
payments with respect to those accounts receivable, it will pay those
amounts to Sentex; provided, that it must turn over to Monitek and
Monitek GmbH for collection all excluded accounts receivable on which
payment has not been received on or before 18 months following the
closing date.
CONDITIONS TO THE SALE OF ASSETS
There are a number of conditions that must be met (or waived by the party
for whose benefit the condition exists) for the sale of assets to be completed.
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Conditions to Obligations of the Parties. The obligations of all of the
parties to effect the sale of assets are subject to the following:
- The completion of the sale of assets must not violate any order, decree
or judgment of any court or governmental body having competent
jurisdiction; and
- The execution of a Bill of Sale, Assignment and Assumption Agreement.
Conditions to Obligations of Sentex, Monitek and Monitek GmbH. The further
conditions to the obligations of Sentex, Monitek and Monitek GmbH to effect the
sale of assets include:
- The representations and warranties of Metrisa and Metrisa GmbH must be
true and correct in all material respects as of the closing date or
another specific date set forth in the asset purchase agreement;
- The performance and compliance by Metrisa and Metrisa GmbH in all
material respects with each and every covenant, agreement and condition
required to be performed or complied with by them on or prior to the
closing date;
- The receipt of all consents, licenses, approvals and permits required to
be obtained by Metrisa and Metrisa GmbH for the sale of assets, in each
case in which the failure to obtain the same would have a material
adverse effect on or materially interfere with Metrisa or Metrisa GmbH's
operation of the business following completion of the sale of assets, and
no withdrawal or suspension of that consent, license, approval or permit;
- The receipt of a certificate signed by Metrisa and Metrisa GmbH
confirming that all representations and warranties of Metrisa and Metrisa
GmbH are true and correct in all material respects on and as of the
closing date and the performance and compliance in all material respects
by Metrisa and Metrisa GmbH with each and every covenant, agreement and
condition required to be performed or complied with by them on or prior
to the closing date;
- The receipt of a legal opinion of counsel to Metrisa and Metrisa GmbH, as
to certain matters;
- The receipt of the consideration from Metrisa and Metrisa GmbH; and
- Sentex, Monitek and Monitek GmbH obtaining all necessary consents and
approvals of their respective shareholders and boards of directors
required to effect the sale of assets.
Conditions to Obligations of Metrisa and Metrisa GmbH. The further
conditions to the obligations of Metrisa and Metrisa GmbH to complete the sale
of assets include:
- The representations and warranties of Monitek and Monitek GmbH must be
true and correct in all material respects as of the closing date or
another specific date set forth in the asset purchase agreement;
- The performance and compliance by Sentex, Monitek and Monitek GmbH in all
material respects with each and every covenant, agreement and condition
required to be performed or complied with by them on or prior to the
closing date;
- The receipt of all consents, licenses, approvals and permits required to
be obtained by Sentex, Monitek and Monitek GmbH for the sale of assets,
in each case in which the failure to obtain the same would have a
material adverse effect on or materially interfere with Metrisa or
Metrisa GmbH's operation of the business following completion of the sale
of assets, and no withdrawal or suspension of that consent, license,
approval or permit;
- The receipt of a certificate signed by Sentex, Monitek and Monitek GmbH
confirming that all representations and warranties of Sentex, Monitek and
Monitek GmbH are true and correct in all material respects on and as of
the closing date and the performance and compliance in all material
respects by Sentex, Monitek and Monitek GmbH with each and every
covenant, agreement and condition required to be performed or complied
with by them on or prior to the closing date;
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<PAGE> 20
- The receipt of a legal opinion of counsel to Sentex, Monitek and Monitek
GmbH, as to certain matters;
- Preparation for filing by Monitek and Monitek GmbH of amendments to their
certificates of incorporation changing their respective names;
- acceptance of employment with Metrisa or Metrisa GmbH by certain
individuals on terms satisfactory to Metrisa or Metrisa GmbH, as
applicable;
- Monitek and Monitek GmbH entering into an agreement with BFI, a German
technical institute, and Chemtronics, on terms satisfactory to Metrisa
and Metrisa GmbH, to allow Metrisa and Metrisa GmbH, to use certain
technology relating to fluccomat products without restriction and to
provide for the manufacture of those products by Chemtronics; and
- Metrisa and Metrisa GmbH obtaining all necessary consents and approvals
of their respective board of directors and third party creditors required
for completion of the sale of assets.
NO SOLICITATION OR NEGOTIATION
Until the earlier of the closing date and April 30, 2000, none of Sentex,
Monitek, Monitek GmbH or any of their affiliates, officers, directors,
representatives or agents may:
- solicit, initiate or encourage any other proposal or offers relating to
any proposal (as such proposal may be amended, modified or supplemented
from time to time) with respect to a merger, consolidation, share
exchange or similar transaction involving Monitek or any subsidiary of
Monitek, or any purchase of all or any significant portion of the assets
of Monitek or any subsidiary of Monitek, or any equity interest in
Monitek or any subsidiary of Monitek,
- participate in any discussions or negotiations regarding, or furnish to
any other person any information with respect to, or otherwise cooperate
in any way, assist or participate in, facilitate or encourage any effort
or attempt by any other person relating to, such a proposal, or
- enter into any transaction, or enter into any agreement relating to any
transaction, with any person relating to such a proposal.
The board of directors of Sentex is not prohibited from:
- taking and disclosing to the shareholders of Sentex a position with
respect to a tender offer for common shares by a third party pursuant to
the Securities Exchange Act of 1934,
- making disclosures to the shareholders of Sentex as, in the good faith
judgment of the board of directors of Sentex, upon the written advice of
outside counsel, may be required to comply with its fiduciary duties
under applicable law,
- responding to any unsolicited proposal or inquiry by advising the person
making that proposal or inquiry of the terms of the no solicitation
provisions of the asset purchase agreement, or
- responding to a superior proposal if the board of directors determines in
good faith, and upon the written advice of counsel, that it is required
to do so in the exercise of its fiduciary duties; provided, that, neither
Sentex nor its board of directors may terminate the asset purchase
agreement except in accordance with its terms. A superior proposal is a
bona fide, written, unsolicited proposal relating to a possible
transaction by any person that, in the reasonable good faith judgment of
the board of directors, is reasonably likely to be consummated and is
more favorable to the shareholders of Sentex than the terms of the
transactions contemplated by the asset purchase agreement.
TERMINATION
The asset purchase agreement may be terminated at any time prior to the
closing by the mutual written consent of Metrisa, Metrisa GmbH, Sentex, Monitek
and Monitek GmbH.
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Metrisa and Metrisa GmbH may terminate the asset purchase agreement:
- If Sentex, Monitek or Monitek GmbH breach or fail to perform in any
material respect any of their obligations, covenants or agreements under
the asset purchase agreement and fail to correct that breach or failure
within ten days after receiving notice of the breach or failure from
Metrisa or Metrisa GmbH;
- If any of the representations and warranties of Sentex, Monitek or
Monitek GmbH are not true in any material respect and they fail to
correct that misrepresentation within ten days after receiving notice of
the misrepresentation from Metrisa or Metrisa GmbH; or
- If the conditions to the obligations of Metrisa and Metrisa GmbH under
the asset purchase agreement become incapable of satisfaction.
Monitek and Monitek GmbH may terminate the asset purchase agreement:
- If Metrisa or Metrisa GmbH breach or fail to perform in any material
respect any of their obligations, covenants or agreements under the asset
purchase agreement and fail to correct that breach or failure within ten
days after receiving notice of the breach or failure from Monitek or
Monitek GmbH;
- If any of the representations and warranties of Metrisa or Metrisa GmbH
are not true in any material respect and they fail to correct that
misrepresentation within ten days after receiving notice of the
misrepresentation from Monitek or Monitek GmbH;
- If the conditions to the obligations of Sentex, Monitek and Monitek GmbH
under the asset purchase agreement become incapable of satisfaction; or
- If they receive a superior proposal as discussed in "--No Solicitation or
Negotiation" above.
Either party may terminate the asset purchase agreement if the closing does
not occur on or before July 31, 2000; provided that the terminating party is not
in material breach or violation of the asset purchase agreement.
If the asset purchase agreement is terminated (1) by the written consent of
the parties or (2) by either party if its conditions to closing become incapable
of satisfaction and no party is in breach or violation of the asset purchase
agreement, the obligations of the parties will terminate without further
liability of any party. If the asset purchase agreement is terminated for any
other reason (other than Monitek or Monitek GmbH's receipt of a superior
proposal) at a time when one or more parties is in breach or violation of the
asset purchase agreement, the liabilities and obligations of the parties not in
breach or violation of the asset purchase agreement will terminate, and the
parties that are in breach or violation of the asset purchase agreement will
remain liable for those breaches or violations. Nothing will restrict the
remedies available against those breaching or violating parties.
If the asset purchase agreement is terminated and any of Sentex, Monitek,
Monitek GmbH or CPS enter into any transaction, or agreement relating to any
transaction with any person relating to an acquisition proposal as a result of
negotiations in violation of the terms of the asset purchase agreement or
pursuant to a superior proposal, Sentex must pay to Metrisa, as its exclusive
remedy, the sum of $150,000 and the reasonable costs and expenses incurred by
Metrisa and Metrisa GmbH in connection with the asset purchase agreement and the
transactions contemplated thereby, including attorneys' and accountants' fees
and expenses. Sentex's obligation to pay $150,000 will be secured by a security
interest in the assets of Monitek and Monitek GmbH.
17
<PAGE> 22
INDEMNIFICATION
Sentex, Monitek and Monitek GmbH have agreed to jointly and severally
indemnify Metrisa and Metrisa GmbH, and their respective officers and directors,
against any and all liabilities arising out of or resulting from:
- any breach of the representations, warranties or covenants of Sentex,
Monitek or Monitek GmbH,
- any liabilities related to assets purchased by Metrisa and Metrisa GmbH,
the business of Monitek and Monitek GmbH or Monitek or Monitek GmbH that
are not assumed by Metrisa or Metrisa GmbH, and
- all costs and expenses (including reasonable attorneys' fees) incurred in
connection with the foregoing.
Sentex, Monitek and Monitek GmbH have also agreed to jointly and severally
indemnify Metrisa and Metrisa GmbH against claims made by creditors with respect
to noncompliance with any bulk transfer law, except to the extent those claims
result from liabilities assumed by Metrisa and Metrisa GmbH.
Prior to seeking to enforce their right to indemnity, Metrisa and Metrisa
GmbH are entitled to set off any claim against any amounts payable to Sentex as
royalties or under the promissory note. Prior to exercise of this right of set
off, Metrisa and Metrisa GmbH must give Sentex 30 days' prior written notice to
allow Sentex to settle or otherwise compromise that claim to the reasonable
satisfaction of Metrisa and Metrisa GmbH. This right to set off is not Metrisa
and Metrisa GmbH's only remedy with respect to claims for indemnification.
The maximum amount that Metrisa and Metrisa GmbH can recover against
Sentex, Monitek and Monitek GmbH for indemnifiable claims is the purchase price
at closing plus royalties. In addition, if the closing occurs, Metrisa and
Metrisa GmbH cannot recover against any indemnifiable claim based upon breach of
representations or warranties or covenants until the aggregate amount of
indemnifiable claims exceeds $15,000. Once aggregate indemnifiable claims exceed
$15,000, the total amount of indemnifiable claims may be recovered, including
the amount of claims aggregating less than $15,000.
No claim against Sentex, Monitek or Monitek GmbH for a breach of
representations, warranties and covenants can be brought more than two years
following the closing date, except for:
- claims arising from representations and warranties with respect to title
to personal property, tax matters, environmental matters and brokers
survive for three years following the closing date;
- claims of which Sentex, Monitek and Monitek GmbH have been notified with
reasonable specificity by Metrisa and Metrisa GmbH within the two year
period;
- claims for material breaches of representations and warranties of Sentex,
Monitek or Monitek GmbH that were known by any of them to be inaccurate
at closing survive for four years following the closing date; and
- all other claims for indemnification against Sentex, Monitek or Monitek
GmbH survive the closing date for a period of three years, except for any
claims of which Sentex, Monitek or Monitek GmbH have been notified with
reasonable specificity by Metrisa and Metrisa GmbH within that three year
period.
CPS has agreed to indemnify Metrisa and Metrisa GmbH, and their respective
officers and directors, against any and all liabilities arising out of or
resulting from (1) any breach of the representations, warranties or covenants of
Monitek GmbH that relate to Monitek GmbH or the portion of the business
conducted through Monitek GmbH, (2) any liabilities relating to Monitek GmbH
that are not assumed by Metrisa or Metrisa GmbH, and (3) all costs and expenses
(including reasonable attorneys' fees) incurred in connection with the
foregoing.
No claim against CPS for indemnification can be brought after the earlier
to occur of (1) the second anniversary of the closing date, and (2) that time
after closing that Sentex's consolidated audited balance sheet for any fiscal
year indicates total consolidated shareholders' equity in excess of $1,000,000,
except for
18
<PAGE> 23
claims of which CPS has been notified with reasonable specificity within that
two year period. After the closing, the exclusive remedy of Metrisa and Metrisa
GmbH against CPS with respect to any breach of any representation, warranty or
covenant of Monitek GmbH is the right to pursue claims of indemnification.
Metrisa and Metrisa GmbH have agreed to indemnify Sentex, Monitek and
Monitek GmbH against any and all liabilities arising out of or resulting from:
- any breach of the representations, warranties or covenants of Metrisa or
Metrisa GmbH,
- any liabilities that are assumed by Metrisa or Metrisa GmbH, and
- all costs and expenses (including reasonable attorneys' fees) incurred in
connection with the foregoing.
ACCOUNTING TREATMENT
The sale of assets will be treated as a sale for financial reporting and
accounting purposes, in accordance with generally accepted accounting
principles.
REGULATORY APPROVALS
Sentex is not aware of any regulatory or governmental approvals required to
consummate the sale of assets.
FEDERAL INCOME TAX CONSIDERATIONS OF THE SALE OF ASSETS
The sale of assets will not result in any federal income tax consequences
to shareholders. The sale of assets will be a taxable transaction for Monitek,
which is a member of the Sentex consolidated group, for federal income tax
purposes. However, it is not expected that the sale of assets will result in
material federal, state or local income tax liability, if any.
THE COMPANIES
SENTEX'S BUSINESS
Sentex, through its Monitek subsidiary, designs, develops, assembles and
markets instruments for the measurement of clarity (turbidity), suspended solids
content, color and purity of liquids in industrial and waste water environments.
Monitek's products are typically used in-line (i.e., inserted directly into the
monitored liquid), thereby facilitating automation and control of various
industrial processes by providing on-line (i.e., continuous) measurement of the
characteristic being monitored. Monitek's current line of products, which are
based on optical and acoustic technologies, has been specially adapted for
various applications in the chemical and petrochemical, water treatment, food
and beverage, pulp and paper, and biotechnology and pharmaceutical industries,
where their abilities to withstand high temperature, extremes in pressure and
corrosive environments are important factors.
Sentex is incorporated in New Jersey, and its executive offices are located
at 1801 East 9th Street, Suite 1510, Cleveland, Ohio 44114. Its telephone number
is (216) 687-0287.
METRISA'S BUSINESS
Metrisa is a product development, manufacturing and contract test services
company which specializes in manufacturing instruments and providing contract
test services for measuring the properties of a wide variety of materials,
liquids and gases. Metrisa operates its business through its Tytronics, Nametre,
and Holometrix-Micromet Divisions. The Tytronics and Nametre Divisions
constitute its process analytical segment. The Holometrix-Micromet Division
constitutes its materials characterization segment. The Tytronics Division
designs, manufactures and markets on-line liquid and gas chemical analyzers for
specific applications and worldwide process and environmental markets. The
Nametre Division also develops and manufactures in-line and laboratory viscosity
analyzers, for the process and environmental markets. The Holometrix-Micromet
Instruments Division designs, manufactures and distributes instruments which
measure thermophysical
19
<PAGE> 24
(temperature) properties and perform cure monitoring of a broad range of
materials. The Holometrix-Micromet Testing Services Division provides contract
test and engineering services to evaluate a number of temperature-related
performance factors of virtually any material. The Holometrix-Micromet Testing
Services Division also performs mechanical and physical properties testing.
Metrisa is incorporated in Delaware, and its executive offices are located
at 25 Wiggins Avenue, Bedford, Massachusetts 01730. Its telephone number is
(781) 275-3300.
APPRAISAL RIGHTS
Shareholders who object to the sale of assets have no dissenters' rights
under New Jersey law, the Sentex certificate of incorporation, or the Sentex
bylaws, nor will those rights be voluntarily accorded to the shareholders.
ELECTION OF DIRECTORS
In accordance with the Sentex bylaws, the number of directors has been
fixed at five. At the special meeting, the shares represented by proxies, unless
otherwise specified, will be voted for the election of the five nominees
hereafter named, each to serve until the next annual meeting and until their
respective successors are elected and qualified. Under New Jersey law,
abstentions and broker non-votes, if any, will not be counted in favor of or
against any nominee. Director nominees who receive the greatest number of
affirmative votes will be elected directors.
Sentex's nominees for director are identified in the following table. Each
nominee is currently a director. If for any reason any of the nominees is not a
candidate when the election occurs (which is not expected), the board of
directors expects that proxies will be voted for the election of a substitute
nominee designated by management. The following information is furnished with
respect to each person nominated for election as a director.
NOMINEES FOR ELECTION AT THE SPECIAL MEETING
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
---- --- --------------------------------------------
<S> <C> <C>
Robert S. Kendall 60 Chairman, President and Treasurer Sentex
James S. O'Leary 61 Chief Financial Officer Sentex
James G. Few 50 Vice President Corporate Network, Inc.
Julius L. Hess 37 Assistant Vice President CPS
Ronald M. Lipson 64 Attorney
</TABLE>
Each of the nominees for election as a director has been engaged in the
principal occupation or activity indicated for at least five years, except as
described below.
ROBERT S. KENDALL has been the Chairman, President and Treasurer of Sentex
since March 1, 1996. He is also Chairman and President of CPS, a mergers and
acquisitions company based in Cleveland. Until April 1996, he was also Chairman
of the Board and founder of LDI Corporation, an asset leasing and technology
services company which he, along with two others, founded in 1972. LDI is one of
the largest independent lessors of technology and computer equipment in the
United States. Mr. Kendall is also a general partner in NCP, Ltd., a real estate
partnership actively engaged in investing in, acquiring, financing and managing
commercial, industrial and other properties. From 1969 to 1972, Mr. Kendall was
branch manager at Victor-Nixdorf Computer, a manufacturer and distributor of
computer systems. From 1963 to 1969, he was a salesman, financial specialist and
sales manager at Burroughs Corporation (now Unisys Corp.). Mr. Kendall graduated
from Case Western Reserve University with a bachelor's degree in psychology in
1960, and attended graduate school at John Carroll University.
JAMES S. O'LEARY has been employed by Monitek since August 1982 and has
served as its Executive Vice President, Secretary and Treasurer since April
1987. Sentex has retained his services and, from
20
<PAGE> 25
December 1996 through November 1998, he served as Vice President of Finance and
Chief Financial Officer. In December 1998, Mr. O'Leary was elected as a director
and was appointed Chief Operating Officer of Sentex. In September 1999, Mr.
O'Leary resigned from his position as Chief Operating Officer, but he is still
employed by Sentex, on a part-time basis, as Chief Financial Officer.
JAMES G. FEW has been a director of Sentex since March 1996. Mr. Few is
presently a Vice President of Corporate Network, Inc., a management consulting
firm in the long-term health care industry. From March 1996 through December
1996, he served as the Chief Financial Officer and Vice President of Sentex and
from December 1996 through June 1998, he also assumed the role of Chief
Operating Officer. Mr. Few also served as Vice President and Chief Financial
Officer of CPS from October 1995 through June 1998. From June 1993 to October
1995, he was engaged as an independent financial consultant. Mr. Few served as
Senior Vice President of Boston Distributors from November 1992 through May 1993
where he was responsible for finance, accounting systems and warehouse
operations. In February 1993, Boston Distributors was declared bankrupt and was
liquidated some time thereafter. From May 1991 through November 1992, Mr. Few
served as Executive Vice President of Operations and Finance for Progressive
Communications Technology. Mr. Few was engaged as an independent financial
consultant from 1989 to 1991. From 1978 to 1989, he served as Executive Vice
President and Chief Financial Officer of Harris Wholesale Drug Company, where he
oversaw three operating divisions. Prior thereto, he served as Division
Controller of IT&T for eight years. Mr. Few received a bachelor's degree in
Business Management from Providence College.
JULIUS L. HESS has served as Assistant Vice President of CPS since November
1994 and is responsible for research and analysis. At CPS he serves as lead
analyst in the location and evaluation for acquisition of publicly held
companies or divisions of companies which are believed to be undervalued, or
closely held companies with potential for appreciation. Prior to joining CPS,
Mr. Hess was Human Resources Manager for a division of GE Capital from 1990 to
1994. From 1989 to 1990, he was Senior Human Resources Representative for B.F.
Goodrich and prior thereto he was Compensation and Labor Relations Manager from
1986 to 1989 at the Mayo Clinic Medical Center. Mr. Hess graduated from Miami
University in Oxford, Ohio, with a bachelor's degree in political science in
1983 and attended graduate school at the University of Minnesota. Mr. Hess is
Mr. Kendall's son-in-law.
RONALD M. LIPSON has been an attorney for more than 35 years in Cleveland,
Ohio, practicing in various areas including corporate, business, and real estate
law. He was the incorporating attorney for LDI Corporation and formerly served
as legal counsel and a director of LDI Corporation. Mr. Lipson is also a general
partner in G&C Properties, an Ohio real estate partnership engaged in buying,
selling and managing various types of real estate. Mr. Lipson attended Ohio
University and graduated from Adelbert College of Case Western Reserve
University with a bachelor's degree in business administration in 1955. He also
received a Doctor of Jurisprudence degree in 1958 from Case Western Reserve
University School of Law.
Three meetings of the board of directors were held during the fiscal year
ended November 30, 1999. Each director attended all of the meetings of the board
of directors.
The board of directors does not currently have a nominating committee,
audit committee or a compensation committee.
21
<PAGE> 26
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following information is set forth with respect to the Company's Chief
Executive Officer and each of the Company's other executive officers whose total
compensation exceeded $100,000 for the fiscal year ended November 30, 1999:
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
OTHER ANNUAL
YEAR SALARIES BONUS COMPENSATION
---- -------- ----- ------------
<S> <C> <C> <C> <C>
Robert S. Kendall 1999 $175,000(1) -0- -0-
(Chief Executive Officer) 1998 $175,000(1) -0- -0-
1997 $275,000(1) -0- -0-
</TABLE>
- ---------------
(1) Represents compensation paid to CPS for management services rendered.
Amounts assigned to Mr. Kendall represent the allocation provided Sentex by
CPS at Sentex's request, and may not actually represent any sum actually
paid to him by CPS. Amounts for fiscal 1996 only reflect amounts reportable
from March 1, 1996 through November 30, 1996. Since May 31, 1997, Sentex has
not made any payments to CPS for management services but has accrued for
those fees.
Long-Term Compensation. No long-term compensation was paid during the
fiscal years ended November 30, 1999, 1998 or 1997 to any executive officer of
Sentex by way of restricted stock awards, options or stock appreciation rights,
or other long-term incentive plans.
Stock Options. Sentex adopted its 1996 Long-Term Stock Option Plan at a
special meeting of its shareholders held on November 14, 1996. Under the plan,
Sentex may grant different types of options covering up to 7,000,000 common
shares to its existing and future directors, officers and employees. As of
November 30, 1999, there were no Sentex stock options held by the directors or
executive officers of Sentex. Upon consummation of the merger of a wholly owned
subsidiary of Sentex with and into Monitek, options to purchase Monitek common
stock held by James O'Leary were converted into options to purchase 344,875
Sentex common shares. On December 2, 1996, Mr. O'Leary became the Chief
Financial Officer of Sentex. In August 1998, half of Mr. O'Leary's options
expired, leaving him with options to purchase 172,438 common shares at November
30, 1999.
Compensation Pursuant to Plans. Sentex has no plans pursuant to which cash
or non-cash equivalents were paid during the fiscal years ended November 30,
1999, 1998 or 1997.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the common shares as of May 15, 2000 by: (a) Sentex's directors;
(b) each other person who is known by Sentex to own beneficially more than 5% of
the outstanding common shares; (c) Sentex's Chief Executive Officer and the
other four most highly compensated executive officers named in the Summary
Compensation Table; and (d) Sentex's executive officers and directors as a
group. Except as otherwise described in the notes below, the
22
<PAGE> 27
following beneficial owners have sole voting power and sole investment power
with respect to all common shares set forth opposite their names.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER(1) OF BENEFICIAL OWNER PERCENTAGE
---------------------- ------------------- ----------
<S> <C> <C>
Robert S. Kendall(2)........................................ 47,700,814 47.4%
James G. Few................................................ -- --
Julius L. Hess.............................................. -- --
James S. O'Leary(3)......................................... 172,438 *
1495 Zephyr Avenue
Hayward, CA 94544
Ronald M. Lipson............................................ 687,500 *
3 Laurel Hill Lane
Pepper Pike, Ohio 44124
CPS(4)...................................................... 47,700,814 47.4%
1801 East 9th Street
Cleveland, Ohio 44114
All Directors and Officers
(as a group 5 persons)...................................... 48,560,752 48.2%
</TABLE>
- ---------------
(1) The name and address of each individual listed in the table, except where
otherwise indicated, is c/o Sentex Sensing Technology, Inc., 1801 East 9th
Street, Cleveland, OH 44114.
(2) The common shares set forth herein with respect to Mr. Kendall are all held
of record by CPS or are beneficially owned by CPS. Mr. Kendall and his wife
own 100% of the outstanding membership interests in CPS.
(3) All common shares are held in the form of options that were acquired in
connection with the merger of a wholly owned subsidiary of Sentex with and
into Monitek, pursuant to which Monitek became a wholly owned subsidiary of
Sentex.
(4) CPS is the record holder of 47,700,814 common shares and has sole voting and
dispositive power with respect to those shares.
*Represents less than 1% of the outstanding common shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
As required under the securities laws of the United States, Sentex's
directors, its executive (and certain other) officers, and any persons holding
ten percent or more of the common shares must report their ownership of common
shares and any changes in that ownership to the Securities and Exchange
Commission and to the National Association of Securities Dealers, Inc.'s
Automated Quotation System. Specific due dates for these reports have been
established. During the year ended November 30, 1999, Mr. Kendall purchased an
additional 10,000 common shares and he inadvertently failed to report this
transaction on Form 4.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CPS Management Agreement. After CPS acquired effective control of Sentex,
CPS entered into a Management Agreement with Sentex, which was effective on
March 1, 1996. In connection with the execution of the merger agreement among
Sentex, a wholly owned subsidiary of Sentex, and Monitek, CPS and Sentex entered
into an Amended and Restated Management Agreement. Pursuant to the original
Management Agreement, CPS agreed to cause its personnel to perform the functions
that would normally be performed by the officers of Sentex. Presently, that
personnel consists mainly of Mr. Kendall, the Chairman of CPS, and Peggy
Nutaitis, the Secretary of CPS. In order to permit Mr. Kendall and Ms. Nutaitis
to
23
<PAGE> 28
function as officers and for them to be properly insured as officers of Sentex,
Mr. Kendall has been elected as the President and Treasurer of Sentex, and Ms.
Nutaitis has been elected Secretary of Sentex.
Under the terms of the original Management Agreement, CPS received an
annual fee of $193,800, which was payable monthly. Under the terms of the
Amended and Restated Management Agreement, the annual fee was increased to
$393,800 to account for the increase in tasks and responsibilities relating to
the operation of Monitek. Due to the present financial condition of Sentex, CPS
has not received payment under the Amended and Restated Management Agreement
since May 1997, but Sentex has accrued that expense. On May 15, 1998, CPS and
Sentex entered into the Second Amended and Restated Management Services
Agreement, pursuant to which CPS agreed to accept 5,025,745 common shares in
lieu of accrued management fees equaling $196,900, representing fees for the
second half of fiscal 1997. All the shares acquired by CPS were acquired for
investment purposes.
In December 1997, CPS and Sentex agreed to a reduced management fee of
$250,000 for fiscal 1998 and in December 1998, the parties agreed to reduce the
fee to $200,000 for fiscal 1999 and subsequent years. CPS and Sentex have agreed
that the balance due as of November 30, 1999, which totals $325,000, and the fee
for fiscal 2000, will be paid at some future time when the financial condition
of Sentex improves.
Working Capital Assistance. During fiscal 1997 through fiscal 1999, CPS and
Mr. Kendall provided Sentex assistance in connection with funding its working
capital needs in the form of loans and security for bank loans. From May 1997
through November 1999, CPS provided Sentex a series of temporary working capital
loans at a prime rate at National City Bank, Cleveland, Ohio. The outstanding
balance of those loans totaled $1,705,232, including accrued interest, as of
November 30, 1999. From time to time Mr. Kendall has also provided security to
banks by permitting the banks to obtain a security interest in Mr. Kendall's
personal assets and/or providing guarantees so Sentex could obtain financing
from the bank. Except for the interest to be received on the loans provided by
CPS, neither Mr. Kendall nor CPS has received nor will receive any remuneration
in connection with providing working capital assistance to Sentex. Sentex
believes the interest payable to CPS is and was on terms no less favorable than
could be obtained pursuant to an arms-length transaction.
ADDITIONAL INFORMATION
EXPERTS
Hausser + Taylor LLP, independent auditors, have audited the consolidated
financial statements and schedules of Sentex for the year ended November 30,
1999, as set forth in their report, which is incorporated by reference in this
proxy statement. Sentex's consolidated financial statements and schedules are
incorporated by reference in this proxy statement in reliance on Hausser +
Taylor LLP's report, given on their authority as experts in accounting and
auditing.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Hausser + Taylor LLP, independent public accountants, was the
Independent Auditors for Sentex for fiscal year 1999. Representatives of Hausser
+ Taylor LLP will be present at the special meeting. Those representatives will
have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
OTHER MATTERS
As of the date of this proxy statement, the board of directors knows of no
other matter that will be presented for consideration at the special meeting. If
any other matter properly comes before the special meeting or any adjournment or
postponement thereof and is voted upon, the enclosed proxies will be deemed to
confer discretionary authority on the individuals named as proxies as to that
matter. The individuals named as proxies intend to vote or not vote in
accordance with the recommendation of management of Sentex.
24
<PAGE> 29
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any shareholder who intends to present a proposal at the 2001 Annual
Meeting of Shareholders for inclusion in the proxy statement and form of proxy
relating to that meeting may do so in accordance with Securities and Exchange
Commission Rule 14a-8 and is advised that the proposal must be received by the
Secretary at Sentex's principal executive offices located at 1801 East 9th
Street, Suite 1510, Cleveland, Ohio 44114, not later than , 2000.
For those shareholder proposals which are not submitted in accordance with Rule
14a-8, the proxies designated by the board of directors may exercise their
discretionary voting authority, without any discussion of the proposal in the
proxy materials, with respect to any proposal which is received by Sentex after
, 2001.
25
<PAGE> 30
SENTEX SENSING TECHNOLOGY, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL REPORT
F-1
<PAGE> 31
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
AUDITORS' REPORT ON THE FINANCIAL STATEMENTS................ F-3
FINANCIAL STATEMENTS
Consolidated Balance Sheet................................ F-4
Consolidated Statements of Operations..................... F-5
Consolidated Statements of Stockholders' Equity........... F-6
Consolidated Statements of Cash Flows..................... F-7
Notes to Consolidated Financial Statements................ F-8-F-16
</TABLE>
F-2
<PAGE> 32
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Sentex Sensing Technology, Inc.
Cleveland, Ohio
We have audited the accompanying consolidated balance sheet of Sentex
Sensing Technology, Inc. and subsidiaries as of November 30, 1999, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the two years in the period ended November 30, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Sentex Sensing
Technology, Inc. and subsidiaries as of November 30, 1999, and the consolidated
results of their operations and their cash flows for each of the two years in
the period ended November 30, 1999, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2A to the
financial statements, the Company has in the past and continues to sustain
substantial net and operating losses. In addition, the Company has used
substantial amounts of working capital in its operations which has reduced the
Company's liquidity to a very low level. Additionally, the Company's stock is no
longer listed on the NASDAQ Small Cap Market tier of the NASDAQ stock market and
is now traded on the Over-the-Counter Bulletin Board which might limit the
Company's ability to raise equity capital. These matters raise substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded assets or the amounts and classification of
liabilities that might be necessary in the event the Company cannot continue in
existence.
HAUSSER + TAYLOR LLP
Cleveland, Ohio
March 3, 2000
F-3
<PAGE> 33
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
NOVEMBER 30, 1999
<TABLE>
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents.......................... $ 15,280
Accounts receivable, less allowance for doubtful
accounts of $10,000............................. 649,034
Inventories........................................ 962,390
Other current assets............................... 89,488
-----------
Total current assets....................... $ 1,716,192
Property and Equipment, less accumulated depreciation
and amortization of $209,003....................... 123,793
Other Assets
Goodwill (net of accumulated amortization of
$51,210)........................................ 350,192
Consulting contracts ($288,750) and other assets... 303,145 653,337
----------- -----------
$ 2,493,322
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable:
Bank............................................ $2,000,000
Related party................................... 1,705,232 $ 3,705,232
----------
Trade accounts payable............................. 628,881
Accrued liabilities................................ 589,683
Convertible subordinated notes payable............. 11,348
-----------
Total current liabilities.................. $ 4,935,144
Long-Term Debt
Consulting contracts payable....................... 160,550
Commitments and Contingencies
Stockholders' Equity
Common stock, no par value
Authorized -- 200,000,000 shares
Issued -- 109,460,911 shares
Outstanding -- 100,514,911 shares............... 2,880,079
Retained earnings (deficit)........................ (5,199,658)
Treasury shares at cost, 8,946,000 shares.......... (313,218)
Accumulated other comprehensive income............. 30,425
-----------
Total stockholders' equity................. (2,602,372)
-----------
$ 2,493,322
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 34
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED NOVEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Revenues
Net sales................................................. $ 4,114,559 $ 5,589,591
Interest and other income................................. 18,464 129,567
----------- -----------
Total revenues.................................... 4,133,023 5,719,158
Cost and Expenses
Cost of sales............................................. 2,241,163 2,789,240
Selling, general and administrative....................... 3,154,765 4,493,502
Research and development.................................. 177,542 217,789
Loss on sale of assets.................................... -- 423,283
----------- -----------
Total costs and expenses.......................... 5,573,470 7,923,814
----------- -----------
Loss Before Provision for Income Tax Expense................ (1,440,447) (2,204,656)
Provision for Income Tax Expense............................ -- --
----------- -----------
Net Loss.................................................... $(1,440,447) $(2,204,656)
=========== ===========
Net Loss Per Share (Basic and Diluted)...................... $ (0.01) $ (0.02)
=========== ===========
Weighted Average Number of Shares Outstanding............... 100,514,911 90,693,556
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 35
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED NOVEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK RETAINED TREASURY STOCK OTHER TOTAL
------------------------ EARNINGS --------------------- COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT (DEFICIT) SHARES AMOUNT INCOME EQUITY
----------- ---------- ----------- --------- --------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -- November 30, 1997... 87,865,762 $2,153,489 $(1,554,555) 8,946,000 $(313,218) $21,951 $ 307,667
Comprehensive income (loss)
Net loss..................... -- -- (2,204,656) -- -- -- (2,204,656)
Translation adjustment....... -- -- -- -- -- 3,748 3,748
-----------
Comprehensive income
(loss)..................... (2,200,908)
Issuance of common stock for:
Conversion of subordinated
notes and payment of
accrued interest*.......... 16,569,404 529,690 -- -- -- -- 529,690
Satisfaction of unpaid
management fees*........... 5,025,745 196,900 -- -- -- -- 196,900
----------- ---------- ----------- --------- --------- ------- -----------
Balance -- November 30, 1998... 109,460,911 2,880,079 (3,759,211) 8,946,000 (313,218) 25,699 (1,166,651)
Comprehensive income (loss)
Net loss..................... -- -- (1,440,447) -- -- -- (1,440,447)
Translation adjustment....... -- -- -- -- -- 4,726 4,726
-----------
Comprehensive income
(loss)..................... (1,435,721)
----------- ---------- ----------- --------- --------- ------- -----------
Balance -- November 30, 1999... 109,460,911 $2,880,079 $(5,199,658) 8,946,000 $(313,218) $30,425 $(2,602,372)
=========== ========== =========== ========= ========= ======= ===========
</TABLE>
- ---------------
* These shares are considered issued and outstanding even though they have not
been formally issued by the transfer agent
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 36
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................... $(1,440,447) $(2,204,656)
Adjustments to reconcile net loss to net cash used by
operating activities:
Amortization of discount on convertible subordinated notes
payable................................................ 538 25,500
Depreciation and amortization............................. 197,165 84,283
Translation and other adjustments......................... 5,802 200,578
Loss on sale of assets.................................... -- 423,283
Changes in assets and liabilities:
Accounts receivable.................................... 50,375 366,782
Inventories............................................ 156,600 32,935
Other current assets................................... (27,209) 117,666
Other assets........................................... (2,460) 14,225
Accounts payable....................................... 24,584 (253,640)
Accrued expenses and other current liabilities......... (232,591) (313,907)
----------- -----------
Total adjustments.................................... 172,804 697,705
----------- -----------
Net cash used by operating activities............. (1,267,643) (1,506,951)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment....................... (16,443) (30,014)
Proceeds from sale of assets................................ -- 18,050
----------- -----------
Net cash used by investing activities............. (16,443) (11,964)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments to related party................................... -- (33,333)
Net proceeds (payments) on note payable -- bank............. 119,600 (219,600)
Net proceeds on note payable -- related party............... 1,154,232 551,000
Payments on consulting contracts............................ (85,599) --
----------- -----------
Net cash provided by financing activities......... 1,188,233 298,067
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (95,853) (1,220,848)
CASH AND CASH EQUIVALENTS -- BEGINNING OF YEAR.............. 111,133 1,331,981
----------- -----------
CASH AND CASH EQUIVALENTS -- END OF YEAR.................... $ 15,280 $ 111,133
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest............................................... $ 246,219 $ 89,173
</TABLE>
- ---------------
See notes to the consolidated financial statements for certain noncash investing
and financing activities.
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 37
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, BACKGROUND AND INDUSTRY SEGMENT
The consolidated financial statements include the accounts of Sentex
Sensing Technology, Inc. and its wholly-owned subsidiaries (the "Company"). All
material intercompany accounts and transactions have been eliminated in
consolidation.
The Company's business is confined to a single industry segment,
manufacturing analysis equipment. One of the subsidiaries, Sentex Systems, Inc.,
whose assets and operations were disposed of in the year ended November 30,
1998, was engaged in the business of developing, manufacturing and selling
automated gas chromatography devices designed to detect the presence of certain
substances by identifying and measuring the concentrations of certain
atmospheric vapors (see Note 14). Monitek Technologies, Inc. ("Monitek") was
acquired by the Company on November 30, 1996 and designs, develops, assembles
and markets instruments for the measurement of clarity (turbidity), suspended
solid content, color, purity, flow, level and volume of liquids in industrial
waste water environments. Monitek GmbH, a wholly-owned subsidiary of Monitek,
was formed in Germany to sell and service Monitek's products throughout
Continental Europe. At November 30, 1999, Monitek GmbH's assets, located in
Continental Europe, represent approximately 41% of the Company's total
consolidated assets. A new subsidiary, Cypress Instruments, Inc. ("Cypress"),
was acquired by the Company on March 5, 1998 for the purpose of acquiring a new
product line that was currently under development. The products under
development are similar to those of Monitek and have been folded into their
existing product lines.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Going Concern. The accompanying financial statements have been prepared
in conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. However, the Company has in the
past and continues to sustain substantial net and operating losses. In addition,
the Company has used substantial amounts of working capital in its operations
which has reduced the Company's liquidity to a very low level. Additionally, the
Company's stock is no longer listed on the NASDAQ Small Cap Market tier of the
NASDAQ stock market and is now traded on the Over-the-Counter Bulletin Board
which might limit the Company's ability to raise equity capital. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence. The Company's ability to continue in existence is
primarily dependent upon its ability to arrange adequate financing and to attain
satisfactory levels of operating cash flows.
B. Inventories. Inventories are stated at the lower of cost (determined by
the first-in, first-out method) or market.
C. Property and Equipment. Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization are
computed using straight-line and accelerated methods over the estimated useful
lives of the respective assets.
When assets are retired or otherwise disposed of, the cost and related
accumulated depreciation or amortization are removed from the accounts and any
resulting gain or loss is recognized in income or loss for the period. The cost
of maintenance and repairs is included in the statements of operations as
incurred; significant renewals and betterments are capitalized.
D. Revenue Recognition. The Company records revenue as products are shipped
to customers.
E. Research and Development Costs. Research and development costs are
expensed as incurred.
F-8
<PAGE> 38
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
F. Cash and Cash Equivalents. Cash equivalents are comprised of certain
highly liquid investments with a maturity of three months or less when
purchased.
G. Concentration of Credit and Risk Factors. Financial instruments which
potentially subject the Company to concentrations of credit risk are cash and
equivalents, investments in certificates of deposit and accounts receivable
arising from its normal business activities. Concentrations of credit risk with
respect to trade receivables are limited, due to the number of customers
comprising the Company's customer base and their disposition across different
industries and geographic areas. Bad debt expenses have not been material. The
Company places its cash and cash equivalents with high credit quality financial
institutions. The amount on deposit in any one institution that exceeds
federally insured limits is subject to credit risk.
The Company operates in an environment with many financial risks,
including, but not limited to, its lack of history of profitable operations, the
inherent risks associated with new product research and development, the highly
competitive nature of the industry in which it operates and worldwide economic
conditions. The Company's ability to capitalize on its current and emerging
technology and diversity of its operations and products is also dependent upon
the Company's ability to obtain the necessary capital through operating cash
flow, additional borrowings or additional equity funds.
H. Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
I. Income Taxes. The Company utilizes Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), Accounting for Income Taxes, which requires an
asset and liability approach to financial accounting and reporting for income
taxes. The difference between the financial statement and tax basis of assets
and liabilities is determined annually. Deferred income tax assets and
liabilities are computed for those temporary differences that have future tax
consequences using the current enacted tax laws and rates that apply to the
periods in which they are expected to affect taxable income. Valuation
allowances are established, if necessary, to reduce the deferred tax asset to
the amount that will, more likely than not, be realized. Income tax expense is
the current tax payable or refundable for the period plus or minus the net
change in the deferred tax assets and liabilities.
The Company has no current plans to repatriate undistributed earnings of
Monitek's foreign subsidiary. Therefore, no tax has been provided to cover the
repatriation of such undistributed earnings. The cumulative amount of
undistributed earnings for which the Company has not provided United States
income taxes is not material.
The Company has terminated its IC-DISC and, therefore, has begun
repatriation of the undistributed earnings of the IC-DISC. The undistributed
earnings of approximately $780,000 are recognized as income by the Company over
a 10-year period ending March 31, 2001.
J. Fair Value of Financial Instruments. The fair values of cash, accounts
receivable, accounts payable and other short-term obligations approximate their
carrying values because of the short maturity of these financial instruments.
The carrying values of the Company's long-term obligations approximate their
fair value. In accordance with Statement of Financial Accounting Standards No.
107, Disclosure About Fair Value of Financial Instruments, rates available at
balance sheet dates to the Company are used to estimate the fair value of
existing debt.
F-9
<PAGE> 39
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
K. Foreign Currency Translation. The Company accounts for foreign currency
translation in accordance with Statement of Financial Accounting Standards No.
52, Foreign Currency Translation. The functional currency of the Company's
German subsidiary is the deutsche mark. All transactions of that subsidiary
denominated in currency other than the functional currency are remeasured into
the functional currency with the resulting gain or loss included as foreign
currency transaction gains or losses in the accompanying consolidated statements
of operations. Assets and liabilities denominated in currencies other than U.S.
dollars are translated at year end exchange rates and all statement of
operations items are translated at the weighted average exchange rate for the
year.
L. Loss Per Share. Loss per share is calculated using the weighted average
number of shares outstanding.
M. New Authoritative Pronouncements. In June 1997, SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information, was issued.
SFAS No. 131 changes the standards for reporting financial results by operating
segments, related products and services, geographic areas and major customers.
The Company adopted the new standard, which did not materially affect the
Company's financial statements.
In June 1998, SFAS 133, Accounting for Derivative Instruments and Hedging
Activities, was issued. SFAS 133 establishes accounting and reporting standards
for derivative instruments and hedging activities. SFAS 133 is effective for
fiscal years beginning after June 15, 2000. Management believes this
pronouncement will have no effect on the financial statements.
NOTE 3. ACQUISITIONS
In March 1998, the Company acquired 100% of the outstanding stock of
Cypress Instruments, Inc. ("Cypress") for the purpose of acquiring a new product
line that was under development. The acquisition was not material to the overall
business of the Company and was accounted for as a purchase. Consideration in
the amount of $150,000 was given in the form of a contingent payment. The excess
of the aggregate purchase price over the estimated fair value of the net assets
acquired (goodwill) was $150,000, and is being amortized over 20 years. In
connection with the acquisition, the Company entered into consulting agreements
with the former shareholders of Cypress (see Note 9).
On November 30, 1996, the Company acquired 100% of the outstanding stock of
Monitek Technologies, Inc. (see Note 1). The acquisition was accounted for as a
purchase and resulted in the issuance of 11,659,681 common shares and
convertible notes having face and discounted values of $622,000 and $468,000,
respectively, in exchange for 100% of the outstanding stock and other securities
of Monitek. The acquisition cost attributable to the common shares of $348,000
was based on the estimated fair value, including goodwill, of the net assets
acquired, net of the cost attributable to the convertible notes and before costs
associated with the registration of the securities issued ($150,000, which was
charged against stockholders' equity). In addition, the total acquisition cost
includes direct acquisition costs of $72,319. The estimated fair market value of
tangible assets and liabilities acquired was $2,650,153 and $2,013,236,
respectively. The excess of the aggregate purchase price over the estimated fair
market value of the net assets acquired (goodwill) was approximately $251,402,
which is being amortized on a straight-line basis over 20 years.
F-10
<PAGE> 40
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 4. INVENTORIES
Inventories consist of the following at November 30, 1999:
<TABLE>
<S> <C>
Raw materials............................................... $431,797
Work-in-process............................................. 254,430
Finished goods.............................................. 276,163
--------
$962,390
========
</TABLE>
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at November 30, 1999:
<TABLE>
<S> <C>
Machinery and equipment..................................... $315,192
Furniture and fixtures...................................... 17,604
--------
332,796
Less accumulated depreciation and amortization.............. 209,003
--------
$123,793
========
</TABLE>
NOTE 6. ACCRUED LIABILITIES
Accrued liabilities consist of the following at November 30, 1999:
<TABLE>
<S> <C>
Accrued acquisition -- Cypress Instruments, Inc............. $138,900
Accrued bonuses and other compensation...................... 16,138
Accrued commissions......................................... 13,936
Accrued pension............................................. 328,764
Accrued payroll and related taxes........................... 24,198
Other accrued liabilities................................... 67,747
--------
$589,683
========
</TABLE>
NOTE 7. NOTES PAYABLE -- BANK AND OTHER BORROWING ARRANGEMENTS
The Company has available a $2,000,000 demand line of credit secured by the
Company's assets and the assets of the Company's Chairman of the Board. Interest
is charged on a 90 day contract period at the lower of the prime lending rate or
LIBOR plus 150 basis points (8.75% as of November 30, 1999). Interest is payable
monthly. Amounts outstanding under the line amounted to $2,000,000 at November
30, 1999.
During the years ended November 30, 1999 and 1998, a principal shareholder
and the Company's Chairman provided the Company assistance in connection with
funding its working capital needs in the form of loans and security for bank
loans. As of November 30, 1999, the Company had notes payable of $1,705,232
(bearing interest at the prime rate) to its principal shareholder, CPS Capital,
Ltd., in connection with such unsecured loans.
Interest expense for the years ended November 30, 1999 and 1998 amounted to
$228,525 and $182,372, respectively.
F-11
<PAGE> 41
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 8. CONVERTIBLE SUBORDINATED NOTES PAYABLE
In connection with the acquisition of Monitek on November 30, 1996, the
Company issued convertible notes having aggregate face and discounted values of
$622,000 and $468,000, respectively. The unsecured notes, which are subordinated
to all present and future obligations of the Company, have a stated interest
rate of 5.05% per annum and were discounted using a yield rate of 15% to reflect
management's estimate of the fair value of the debt.
Interest on the notes is payable annually (November 30) in shares of the
Company's common stock based on the average of the bid and ask prices of the
shares on the last ten trading days prior to the date on which the interest
payment is due. Interest expense related to the convertible subordinated notes
payable amounted to approximately $1,562 and $14,645 for the years ended
November 30, 1999 and 1998, respectively. In 1998, the Company issued 1,118,467
shares of common stock in satisfaction of the accrued interest. The notes were
convertible at various rates ($.0194 and $.0562 on $136,414 and $485,586 of face
amount, respectively) averaging $.03 per face amount of debt, into an aggregate
of 15,671,969 shares of the Company's common stock.
The notes were convertible by the holder 300 days after the second
anniversary of issuance and earlier under certain conditions including certain
changes in control or the restructuring/recapitalization of the Company. The
notes could be converted at the Company's option 345 days after the second
anniversary of issuance into that number of shares by dividing the face amount
of the note by $.075 or at a time earlier at the standard conversion rates
($.0194 and $.0562) if there is a proxy contest for control of the Company's
Board of Directors or if the Company is unable, in the judgment of the Company's
Board of Directors, without compelling such a conversion, to obtain the
requisite shareholder vote to approve a material transaction approved by the
Board of Directors. The conversion terms contain standard anti-dilutive
provisions to adjust the conversion price. In the event the notes are not
converted, they become due on November 30, 1999.
In 1998, a board resolution was proposed to allow the holder of
significantly all of the Company's convertible subordinated notes payable to
convert its notes immediately without regard to restrictions thereon in the
hopes of reducing the amount of the Company's debt. The holder agreed to convert
the notes if CPS Capital, Ltd. ("CPS") purchased the common shares that would be
held by the holder following conversion. CPS agreed to purchase the common
shares (including shares issued in satisfaction of accrued interest) for
approximately $230,000. Pursuant to the board resolution, convertible notes,
having a face value of $609,578 and a carrying value of $529,690, were converted
into 15,450,937 shares of the Company's common stock. The remaining face and
carrying values of the subordinated notes at November 30, 1999 amounted to
$12,423 and $11,348, respectively.
NOTE 9. CONSULTING CONTRACTS PAYABLE
In connection with the purchase of Cypress (see Note 3), the Company
entered into consulting agreements with the principal stockholders of Cypress.
Payments under the agreements total $385,049 and are payable over thirty-six
months. The Company has included the cost of the contracts in other assets and
the payment requirements as a liability in its financial statements. The cost of
contracts will be ratably expensed over the thirty-six month period of the
contracts. As of November 30, 1999, the following is a schedule of future
payment requirements:
<TABLE>
<S> <C>
2000........................................................ $128,350
2001........................................................ 128,350
2002........................................................ 32,200
--------
$288,900
========
</TABLE>
F-12
<PAGE> 42
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 10. COMMITMENTS AND CONTINGENCIES
The Company leases certain equipment and occupies premises under various
operating leases. Rental expense amounted to approximately $315,000 and $272,000
(of which $-0- and $32,500 were for related party leases) for the years ended
November 30, 1999 and 1998, respectively. Future minimum payments under leases
that have initial or remaining terms in excess of one year are as follows at
November 30, 1999:
<TABLE>
<S> <C>
2000........................................................ $135,442
2001........................................................ 73,333
--------
$208,775
========
</TABLE>
NOTE 11. STOCK INCENTIVE PLAN
The Company has a long-term incentive plan ("Incentive Plan") to provide
current and future directors, officers and employees incentives to stimulate
their active interest in the development and financial success of the Company.
The Incentive Plan provides for the granting of "incentive stock options," under
Section 422 of the Internal Revenue Code of 1986, as amended, or other stock
options, stock appreciation rights, restricted or nonrestricted stock awards to
purchase not more than 7,000,000 shares (which shares have been reserved by the
Company) of common stock as determined by the Company's Incentive Plan Committee
(the "Committee"). The option prices per share of common stock, which is the
subject of incentive stock options and other stock options under the Incentive
Plan, shall not be less than 100% of the fair market value of the Company's
shares of common stock on the date such option is granted. The Committee shall
determine when each option is to expire but no option shall be exercisable for a
period of more than 10 years from the date upon which the option is granted.
Generally, options granted under the Incentive Plan vest or terminate upon the
employee leaving the Company and are subject to automatic acceleration of any
vesting requirements given certain changes in control of the Company.
Stock appreciation rights may be awarded by the Committee at the time or
subsequent to the time of the granting of options. Stock appreciation rights
awarded shall provide that the option holder shall have the right to receive an
amount equal to 100% of the excess, if any, of the fair market value of the
shares of common stock covered by the option over the option price. Such amount
shall be payable, as determined by the Committee, in one or more of the
following manners: (a) cash; (b) fully-paid shares of common stock having a fair
market value equal to such amount; or (c) a combination of cash and shares of
common stock. As of November 30, 1999, the Company has not granted any awards
under the Incentive Plan.
Stock options outstanding at November 30, 1996 consisted of Monitek stock
options that were automatically converted, at the date of acquisition (see Note
3), into options to purchase 2,583,110 of the Company's common shares at an
average exercise price of $.1038 per share and a range of $.0725 to $.1812 per
share. During the year ended November 30, 1997, 241,412 shares under option were
forfeited and 689,749 shares under option expired by their terms but were
extended for an additional 18 months with an exercise price equal to the
original exercise price of $.1812 per share (the fair value of the options under
SFAS 123 was not material). During the years ended November 30, 1999 and 1998,
776,002 and 1,307,075 shares under option expired or were forfeited. Options
outstanding to purchase the Company's stock at November 30, 1999 amounted to
258,621 shares at an exercise price of $.0725 per share.
NOTE 12. PROFIT-SHARING PLAN
The Company has a profit-sharing plan and a 401(k) retirement plan for the
benefit of eligible employees. Contributions under the plans are determined at
the discretion of the Board of Directors and are credited to employees based
upon a percentage of eligible salaries. The Company elected to suspend all
contributions for the years ended November 30, 1999 and 1998.
F-13
<PAGE> 43
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 13. INCOME TAXES
As referred to in Note 1, the Company utilizes SFAS 109, Accounting for
Income Taxes. A reconciliation between the Company's effective income tax rate
and the statutory federal income tax rate is as follows for the years ended
November 30:
<TABLE>
<CAPTION>
1999 1998
----- -----
<S> <C> <C>
Expected federal income tax benefit at the statutory
rate..................................................... (34.0)% (34.0)%
Increase in taxes resulting from:
Effect of operating loss for which no tax carrybacks are
available............................................. 34.0 33.9
Other...................................................... -- 0.1
----- -----
--% --%
===== =====
</TABLE>
The tax effects of significant temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax liabilities are
presented below for the years ended November 30:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts and miscellaneous
other.......................................... $ (17,600) $ (24,200)
Net operating loss carryforward................... 1,846,200 1,525,400
---------- ----------
Total gross deferred tax assets........... 1,828,600 1,501,200
Less valuation allowance.......................... 1,828,600 1,501,200
---------- ----------
Net deferred tax assets................... $ -- $ --
========== ==========
</TABLE>
The deferred tax assets do not include deferred tax assets related to
purchased net operating loss carryforwards that are subject to usage limitations
(see below).
The Company established a valuation allowance against tax benefits that are
potentially available to the Company but have not yet been recognized. This
valuation allowance relates to the amount of net operating loss carryforwards in
excess of existing net taxable temporary differences and to certain deductible
temporary differences that may not reverse during periods in which the Company
may generate net taxable income. During the years ended November 30, 1999 and
1998, the Company recorded increases of $327,400 and $591,000, respectively, in
the valuation allowance primarily as a result of the net operating loss
generated during the year.
At November 30, 1999, the Company had approximately $11,695,000 of net
operating loss carryforwards available to offset future federal taxable income.
The federal net operating loss carryforwards expire at various dates through
2019. Federal tax law imposes restrictions on the utilization of net operating
loss carryforwards in the event of a change in ownership. The Company's net
operating loss includes approximately $6,265,000 of loss carryforwards that are
subject to limitations as a result of these provisions.
NOTE 14. LOSS ON SALE OF ASSETS
In September 1998, the Company divested itself of Sentex Systems, Inc.'s
operation, which generated less than 15% of the Company's revenues, but a much
more significant part of the Company's losses. The Company agreed to sell all of
the outstanding capital stock of Sentex Systems, Inc. to a company which is
principally owned by Amos Linenberg. Prior to the sale, Mr. Linenberg was the
President of Sentex Systems, Inc. and an Executive Vice President of the
Company. In the past, Mr. Linenberg has been a principal
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<PAGE> 44
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 14. LOSS ON SALE OF ASSETS -- CONTINUED
shareholder of the Company and served as a director of the Company. In
consideration for all of the capital stock of Sentex Systems, Inc., Mr.
Linenberg terminated 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 Sentex Systems,
Inc. through June 30, 1998 and the Buyer assumed all the costs and operating
expenses of Sentex Systems, Inc. from July 1, 1998 through the closing. The
Company incurred a $423,283 loss, representing the disposal of the net assets of
Sentex Systems, Inc.
NOTE 15. RELATED PARTY TRANSACTIONS
Effective March 1, 1996, the Company entered into a management agreement
with an affiliate and significant shareholder, CPS Capital, Ltd., to perform
management and executive services at an annual fee of $193,800, payable ratably
each month, plus any reasonable "out-of-pocket" expenses. In June 1996, under
the terms of the Amended and Restated Management Agreement, the annual fee was
increased to $393,800 to account for the increase in tasks and responsibilities
relating to the operation of Monitek. Due to the present financial condition of
the Company, CPS has not received payment under the Amended and Restated
Agreement since May 1997, but the Company has accrued such expense. On May 15,
1998, CPS and the Company entered into the Second Amended and Restated
Management Services Agreement, pursuant to which CPS agreed to accept 5,025,745
common shares in lieu of accrued management fees equaling $196,900, representing
fees for the second half of fiscal 1997.
In December 1997, CPS and the Company agreed to a reduced management fee of
$250,000 for fiscal 1998 and, in December 1998, the parties agreed to reduce the
fee to $200,000 for fiscal 1999. CPS and the Company have agreed that the
balance due as of November 30, 1998, which totals $125,000, and the fee for
fiscal 1999 ($200,000) will be paid at some future time when the financial
condition of the Company improves.
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<PAGE> 45
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 16. SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one industry segment as described in Note 1 and two
geographical reporting segments. Sales and operating losses for the years ended
November 30, 1999 and 1998, and identifiable assets classified by the major
geographic areas in which the Company operates, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Sales to unaffiliated customers:
United States
Domestic..................................... $ 1,315,848 $ 2,109,442
Export sales................................. 412,921 423,040
Continental Europe.............................. 2,385,790 3,057,109
Intercompany transfers............................ 642,346 396,846
Eliminations...................................... (642,346) (396,846)
----------- -----------
Net sales......................................... 4,114,559 5,589,591
Operating loss:
United States................................... (734,372) (2,053,572)
Continental Europe.............................. (496,014) (57,054)
----------- -----------
Total operating loss.............................. (1,230,386) (2,110,626)
Interest expense.................................. (230,087) (223,597)
Other income, net................................. 20,026 129,567
----------- -----------
Loss before income tax expense.................... $(1,440,447) $(2,204,656)
=========== ===========
Identifiable assets:
United States................................... $ 1,460,523 $ 1,707,479
Continental Europe.............................. 1,032,799 1,240,800
----------- -----------
Total assets...................................... $ 2,493,322 $ 2,948,279
=========== ===========
</TABLE>
NOTE 17. SUBSEQUENT EVENT
On March 14, 2000, the Company announced the sale of the business conducted
by Monitek and Monitek GmbH to Metrisa, Inc. (MTRE) of Bedford, Massachusetts.
Under terms of the sale, the Company will sell substantially all of its Monitek
and Monitek GmbH assets to Metrisa for cash, notes, the assumption of selected
liabilities, and Metrisa stock. The consideration received upon the sale of the
assets will not be sufficient to pay any dividends or distributions to the
shareholders. Sentex intends to use the consideration received in the
transaction to satisfy existing liabilities and, if available, purchase
additional assets in other lines of business, which at this time have not been
determined. Metrisa makes scientific and process control equipment for markets
worldwide.
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<PAGE> 46
APPENDIX A
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of this
14th day of March, 2000 by and among Metrisa, Inc. a Delaware corporation
("Metrisa"), Metrisa GmbH, a German company and wholly owned subsidiary of
Metrisa ("Metrisa GmbH" and, together with Metrisa, the "Buyer"), Sentex Sensing
Technology, Inc., a New Jersey corporation ("Sentex"), Monitek Technologies,
Inc., a Delaware corporation and wholly owned subsidiary of Sentex ("Monitek"),
Monitek GmbH, a German company and wholly owned subsidiary of Monitek (the
"Subsidiary" and, together with Monitek, the "Seller"), and solely with respect
to the provisions of Article 8 hereof, CPS Capital, Ltd., an Ohio limited
liability company (the "Stockholder").
INTRODUCTION
Sentex and Seller wish to sell, and Buyer wishes to buy, substantially all
of the assets of Seller not expressly excluded by Buyer hereunder, which assets
relate to Seller's optical and acoustic instrument business (the "Business"), on
the terms and conditions set forth herein. The Stockholder, as a significant
stockholder and creditor of Sentex and Monitek, is willing to provide certain
limited indemnifications.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
PURCHASE AND SALE; CLOSING
SECTION 1.01. Purchase and Sale of Seller's Assets.
(a) With the exception of those tangible assets which Buyer has
elected to exclude in accordance with subsection (b) below, and otherwise
subject to the terms and conditions of this Agreement, Sentex shall cause
Seller to, and Seller shall, sell, convey, transfer, assign and deliver to
Buyer at the Closing (as hereinafter defined), free and clear of all liens,
security interests, mortgages, encumbrances and restrictions, other than as
provided herein, all of Seller's assets and properties of every kind,
nature and description, whether tangible or intangible (collectively, the
"Purchased Assets"), including, without limitation, the following assets of
Seller:
(i) all accounts receivable, customer, security and utility
deposits, and prepaid expenses of the Business not listed in Schedule
1.01(b);
(ii) all tangible assets, including, without limitation,
inventories not referenced on Schedule 1.01(b), work in process,
finished goods and raw materials, tooling, machinery, equipment, parts,
supplies, tangible assets listed on Schedule 2.08, vehicles, laboratory
and office equipment, furniture and other fixed assets and leasehold
improvements not listed in Schedule 1.01(b);
(iii) all intangible assets and records used or useful in
connection with the Business, including, without limitation, all
goodwill, trademarks, trade names (excluding the name "Sentex" or any
forms thereof), service marks (whether or not registered), service
names, copyrights and applications therefor, patent rights and patent
applications pending, brand names, commercial and technical trade
secrets, licenses, inventions, processes, know-how, confidential
information and other proprietary property, rights and interests;
application and operational software, distributor and representative
lists, bills of material, vendor lists, laboratory notebooks,
engineering designs and drawings and all other operational books,
records, and data used in the Business, and all assembly drawings,
parts, lists, purchase orders, and purchase commitments and all other
contract rights, schematics and component and test specifications, and
manufacturing, inspection, and operating procedures, all financial,
accounting and operating data and records (provided Seller may make
copies for itself to
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the extent reasonably necessary to prepare government reports or for its
stockholders legitimate business needs), including, without limitation,
all books, records, notes, sales and sales promotional data, advertising
materials, credit information, cost and pricing information, customer
and supplier lists, business plans, projections, reference catalogs,
payroll and personnel records and all other similar property, rights and
information;
(iv) subject to section 1.02, all existing orders and backlog,
sales proposals, open quotations, sales leads, and bids from or to
customers and potential customers of the Business not listed in Schedule
1.01(b); and
(v) subject to section 1.02, all rights under all leases, license
agreements, software licenses, contracts, agreements, sale orders,
purchase orders and other commitments, warranties and warranty claims
and awards, prepaid expenses and retentions not listed in Schedule
1.01(b).
(b) Notwithstanding the foregoing, Seller shall not transfer and
assign to Buyer, and the Purchased Assets shall not include, the following
assets of Seller (collectively, the "Excluded Assets"): (i) the minute
books of Seller; (ii) Seller's rights under this Agreement; (iii) cash and
cash equivalents on hand, if any, as of the Closing; and (iv) those assets
listed on Schedule 1.01(b) by Buyer.
(c) The Buyer and Seller acknowledge and agree that the Subsidiary
shall sell and Metrisa GmbH shall purchase that portion of the Purchased
Assets owned by the Subsidiary as of the Closing, together with certain
other Purchased Assets owned by Monitek allocated between Metrisa and
Metrisa GmbH prior to the Closing.
SECTION 1.02. Assignment of Contracts and Agreements.
(a) Effective on the Closing Date, all purchase contracts, supply
contracts, consignment stock contracts, and all distributor and agency
contracts relating to the Business which are not listed on Schedule 1.01(b)
shall be assigned by Seller to Buyer (and allocated between Metrisa and
Metrisa GmbH as they shall determine prior to the Closing).
(b) Prior to the Closing, the parties hereto shall use reasonable
efforts to obtain such consents of third parties as may be required for the
assignment of the contracts referred to in subparagraph (a) above. If in
any specific instance such consent cannot be obtained, Buyer may
nevertheless in its discretion as of the Closing accept the assignment of
any such contract or exclude any such contract from the Purchased Assets by
amendment of Schedule 1.01(b) together with the exclusion of any related
assumed liabilities by appropriate amendment of Schedule 1.04(a) or
Schedule 1.04(b).
(c) Obligations and liabilities under such contracts for continuing or
recurring performance or for divisible performance which are assumed by
Buyer shall be allocated on a time basis between the periods before and
after the Closing and the value of any performance advanced by, or
outstanding and due from, Seller or the respective other parties to
contracts shall be allocated between Seller and Buyer. Where Seller, in
respect of contracts transferred and assigned, has already received
payments on account for which no performance has yet been effected, such
payments (to the extent not previously accounted for) on account shall be
remitted to Buyer. Where Seller has already effected performance in respect
of contracts transferred and assigned to Buyer and payment therefor has not
yet been made, any amounts (to the extent not previously accounted for)
received by Buyer in payment of such performance shall be remitted to
Seller. In furtherance of the foregoing, all benefits, obligations and
liabilities relating to such assumed contracts that arise after the Closing
shall inure to the benefit of, or shall be assumed by, Buyer in accordance
with section 1.04.
SECTION 1.03. Purchase Price.
(a) Amount. The aggregate purchase price to be paid by Buyer for the
Purchased Assets shall be the Closing Purchase Price (as hereinafter
defined), which shall be payable as set forth below.
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<PAGE> 48
(b) Certain Definitions.
(i) "Base Purchase Price" means $1,490,077 calculated in accordance
with Schedule 1.03(b)(i).
(ii) "Closing Balance Sheet" means the consolidated balance sheet
of Seller as of immediately prior to the Closing, prepared after the
Closing by Buyer in accordance with generally accepted accounting
principals or the equivalent under the laws of Germany ("GAAP"), on a
basis consistent with, and modified by, the procedures and practices
used in the preparation of Seller's Balance Sheet (as defined in section
2.05), which shall not include the Excluded Assets, as finally
determined in accordance with section 1.02(e) or any liabilities not
assumed by Buyer.
(iii) "Closing Purchase Price" means the sum of the Intangible
Purchase Price and the Base Purchase Price (y) reduced or increased by
the amount by which the Net Asset Value (as hereinafter defined) is less
than or exceeds, as the case may be, the Base Purchase Price and (z)
reduced by the amount of any loans or advances by Buyer to Seller or
Sentex prior to the Closing.
(iv) "Intangible Purchase Price" means 160,000 shares ("Shares") of
Metrisa's common stock, $.50 par value, to be paid by Buyer to Seller in
connection with the purchase of all intangible assets and records of
Seller used or useful in connection with the Business as further
described in section 1.01 with such Shares allocated between Monitek and
the Subsidiary in proportion to the dollar value of the intangible
assets of Monitek and the Subsidiary shown on their respective Closing
Balance Sheets.
(v) "Net Asset Value" means the net book value of the tangible
assets of Seller included in the Purchased Assets as of immediately
prior to Closing, determined on a consolidated basis as to Seller in
accordance with GAAP, on a basis consistent with, and modified by, the
procedures and practices used in the preparation of Seller's Balance
Sheet. For purposes of determining Net Asset Value, no value shall be
attributed to assets listed on Schedule 1.01(b) or to intangible assets,
including, without limitation, goodwill, the previous write-up of assets
associated with the acquisition of Monitek by Sentex, the value of any
software, any value placed on Cypress Instruments, Inc. ("Cypress") by
Sentex, or any other intellectual property of any kind or description.
(vi) "Net Liabilities Amount" means the amount of the Assumed
Liabilities (as defined in section 1.04) as of immediately prior to
Closing, determined on a consolidated basis as to Seller in accordance
with GAAP, on a basis consistent with the procedures and practices used
in the preparation of Seller's Balance Sheet, it being acknowledged that
no amount will be included in the Net Liabilities Amount if an accrual
for such liability would not be required under GAAP.
(c) Pre-Closing Estimated Purchase Price Certificate. At least four
days before the Closing, Sentex and Seller will furnisher to Buyer an
estimated Closing Balance Sheet together with a certificate (the "Estimated
Purchase Price Certificate") in the form of Schedule 1.03(c) attached
hereto setting forth (i) the estimated Net Asset Value, (ii) the estimated
Net Liabilities Amount, and (iii) the estimated Closing Purchase Price.
(d) Payment. Subject to the terms and conditions of this Agreement, at
the Closing, Buyer shall pay the Intangible Purchase Price together with
the Base Purchase Price, to Monitek and the Subsidiary based on the
allocation described in section 1.03(b)(iv) and the portion of the Net
Asset Value of the Purchased Assets purchased by Metrisa and Metrisa GmbH
with any increase or decrease to the Base Purchase Price by the difference
in the Net Asset Value and the Base Purchase Price shown on the Estimated
Purchase Price Certificate and approved by Buyer. In the case of the
payment of the Intangible Purchase Price, payment shall be made by delivery
of the Shares registered in the name as directed by Sentex and, in the case
of the payment of the Base Purchase Price, payment shall be made by (i)
assumption of the estimated Net Liabilities Amount shown on the Estimated
Purchase Price Certificate, (ii) payment in cash of $500,000, reduced by
the amount of any loans or advances by Buyer to Seller or Sentex prior to
the Closing, by wire transfer of immediately available funds to an account
directed by Sentex and (iii) payment of the Additional Amount (as
hereinafter defined) by execution and
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<PAGE> 49
delivery of the form of Promissory Note attached hereto as Exhibit
1.03(d)(i) (the "Promissory Note"), registered in the name directed by
Sentex, which Promissory Note shall be secured by a security interest
junior to Buyer's existing creditors pursuant to the Security Agreement
attached hereto as Exhibit 1.03(d)(ii). The "Additional Amount" shall be
the Base Purchase Price, with any increase or decrease thereto shown on the
Estimated Purchase Price Certificate and approved by Buyer, less the sum of
$500,000 and the estimated Net Liabilities Amount shown on the Estimated
Purchase Price Certificate, provided, however, if the Additional Amount is
less than zero, the amount by which the Additional Amount is less than zero
shall be set-off dollar-for-dollar against the cash portion of the Base
Purchase Price payable at Closing. Any indebtedness or advances by Buyer to
Seller or Sentex prior to the Closing which reduce the Base Purchase Price
in accordance herewith shall be canceled effective as of the Closing.
(e) Determination of Closing Purchase Price.
(i) Within forty-five (45) days after the Closing Date, Buyer will
deliver to Sentex: (A) its proposed Closing Balance Sheet and (B) a
certificate (the "Closing Purchase Price Certificate"), executed by
Buyer, stating that such Closing Balance Sheet was prepared as provided
in paragraph (b) of this section 1.02 and setting forth (W) a
reconciliation of the changes to the proposed Closing Balance Sheet from
the estimated Closing Balance Sheet, (X) the Net Asset Value, (Y) the
Net Liabilities Amount and (Z) a computation of the Closing Purchase
Price.
(ii) If Sentex delivers written notice (the "Disputed Items
Notice") to Buyer within fifteen (15) days after receipt by Sentex of
the proposed Closing Balance Sheet and the Closing Purchase Price
Certificate, stating that Sentex objects to any items on the Closing
Balance Sheet, specifying the basis for such objection and setting forth
Sentex's proposed modification to the Closing Balance Sheet and
computation of the Closing Purchase Price, Buyer and Sentex will attempt
to resolve and finally determine the Closing Purchase Price and agree
upon a Closing Balance Sheet as promptly as practicable.
(iii) If Buyer and Sentex are unable to agree upon the Closing
Purchase Price and the Closing Balance Sheet within forty-five (45) days
after delivery of the Disputed Items Notice, Buyer and Sentex will
select by lot an independent "Big-5" accounting firm (other than any
firm retained by Sentex or Buyer) to resolve the disputed items and make
a determination of the Closing Purchase Price and Closing Balance Sheet.
Such determination will be made within thirty (30) days after such
selection and will be binding upon the parties. The fees, costs and
expenses of the accounting firm so selected will be borne fifty percent
(50%) by Buyer and fifty percent (50%) by Sentex.
(iv) If Sentex does not deliver the Disputed Items Notice to Buyer
within fifteen (15) days after receipt by Sentex of the Closing Purchase
Price Certificate, the Closing Purchase Price specified in the Closing
Purchase Price Certificate and the Closing Balance Sheet will be
conclusively presumed to be true and correct in all respects and will be
binding upon the parties.
(v) At such time as the Closing Purchase Price is finally
determined, either (A) Buyer shall pay Seller an aggregate amount equal
to the Closing Purchase Price less the amount paid at Closing under
section 1.02(d) pursuant to a dollar for dollar increase in the
principal amount due pursuant to the Promissory Note or (B) Seller shall
pay Buyer an aggregate amount equal to the excess of the amount paid at
Closing under section 1.02(d) over the Closing Purchase Price pursuant
to a dollar for dollar decrease in the principal amount due pursuant to
the Promissory Note, provided, however, if such decrease would reduce
the principal amount of the Promissory Note to less than zero, such
excess amount shall be paid in cash to Buyer by wire transfer of
immediately available funds.
SECTION 1.04. Assumption and Exclusion of Liabilities. At the Closing,
Buyer (with appropriate allocation between Metrisa and Metrisa GmbH as they
shall determine prior to the Closing) shall assume and
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<PAGE> 50
agree to pay when due, perform and discharge in accordance with the terms
thereof, only the following liabilities and obligations of Seller existing as of
the Closing (the "Assumed Liabilities"):
(a) all obligations of Seller for future performance as of the Closing
under certain leases, license agreements, trade payables, contracts,
agreements, unfilled product sale and purchase orders for materials,
services and supplies as set forth on Schedule 1.04(a);
(b) all obligations arising with respect to certain purchase orders of
Seller's customers as set forth on Schedule 1.04(b);
(c) all obligations of Seller described on Schedule 1.04(c);
Except for the Assumed Liabilities, Buyer shall not assume or in any way be
responsible for any other liabilities or other obligations of Sentex or Seller
of any kind, including, without limitation debts, accounts payable, indebtedness
for borrowed money and any indebtedness owed by Sentex or Seller to their
respective lenders or stockholders, amounts owed in respect of taxes, any
severance, wages accrued for periods prior to the Closing, unpaid vacation or
sick leave or other amounts owed to employees or former employees of Sentex or
Seller upon termination of employment or otherwise or with respect to any
pension, profit sharing, retirement, employee benefit or similar plan or
arrangement, including, without limitation, with respect to those individuals
that may be treated as employees (so called, "Scheinselbstandige") of Seller
under the laws of Germany (other than vacation or sick leave assumed by Buyer in
accordance with section 1.06 and listed on Schedule 1.04(c)).
SECTION 1.05. Royalty Payments.
(a) For a period of five (5) years following the Closing Date and
subject to sections 1.05(b) and 1.05(c) hereof, Buyer will pay Monitek a
royalty (the "Royalty") equal, in each period set forth below, to the
applicable percentage set forth opposite such period of the Gross Navy
Revenues (as hereinafter defined) during such period, as follows:
<TABLE>
<CAPTION>
PERIOD ROYALTY PERCENTAGE DURING PERIOD
------ --------------------------------
<S> <C>
Calendar year 10% of Gross Navy Revenues in excess of $250,000
2000............
Calendar year 8% of Gross Navy Revenues in excess of $500,000
2001............
Calendar year 6% of Gross Navy Revenues in excess of $500,000
2002............
Calendar year 4% of Gross Navy Revenues in excess of $500,000
2003............
Calendar year 2% of Gross Navy Revenues in excess of $500,000
2004............
</TABLE>
"Gross Navy Revenues" shall mean the amounts received from the United
States Department of Defense or any duly authorized paying agent by Buyer
from the sale of acoustic products of Seller for measurement of water in
jet fuel (collectively, the "Products"), net of discounts and returns and
uncollectible accounts.
(b) The Royalty shall be accounted for and paid monthly within 30 days
after the end of each month during the five years following the Closing
Date, except that the first such accounting and payment period shall be for
the period commencing on the Closing Date and continuing through the last
day of the month following the month in which the Closing occurs. No
Royalties shall be due with respect to sales occurring following the fifth
year after the Closing Date.
(c) Buyer agrees to use all reasonable efforts to fill all orders for
the Products prior to the end of each calendar year and further agrees that
it will not intentionally delay the shipment or the completion of any order
for any Products that could reasonably have been completed and shipped in
the prior calendar year.
(d) Monitek and Sentex shall have the right, not more often than once
each calendar year, at their own expense, upon reasonable notice and during
normal business hours, to review the books and records of Buyer to verify
the amount of Royalties payable pursuant to this section 1.05. Any
confidential information of Buyer that is obtained by Monitek or Sentex as
a result of such review shall be kept in
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<PAGE> 51
confidence by Monitek and Sentex and shall be protected from disclosure in
the same manner as the confidential information of Monitek and Sentex.
(e) Buyer shall be entitled to set-off against any Royalty otherwise
due Monitek any amount payable to Buyer pursuant to Article 8.
SECTION 1.06. Employees. (a) Sentex and Seller acknowledge that Buyer shall
extend offers of employment only to Monitek's employees listed on Schedule
1.06(a) to be effective following the Closing. Except as described in this
section 1.06, Buyer shall have no responsibility or obligation to extend offers
to or hire any of Monitek's employees, including, without limitation any sales
agents or others who may be deemed employees of Monitek, and all liability,
costs and expense relating to any employees or sales agents of Monitek whether
or not listed on Schedule 1.06(a) for salaries, wages, severance, employee
benefit programs or otherwise which accrued prior to the Closing or which arises
as a result of the transactions contemplated by this Agreement, except to the
extent such liability, costs or expenses are Assumed Liabilities, shall be the
sole and exclusive responsibility of Monitek and Sentex. Offers of employment to
the employees of Monitek listed on Schedule 1.06(a) shall be on terms acceptable
to Buyer in its sole discretion and Buyer shall have no responsibility or
obligation with respect to any prior or existing employee benefit programs or
policies of Monitek with respect to any such employees hired by Buyer.
Appropriate adjustments shall be made as of the Closing Date with respect to
wages and benefits, including, without limitation accrued vacation pay, payable
to employees of Seller who are to become employees of Buyer effective following
the Closing.
(b) Buyer acknowledges that under German law it is required to offer all
employees of the Subsidiary employment under the terms and conditions that
existed between the Subsidiary and any of those employees prior to the Closing.
Schedule 1.06(b) sets forth the name of each of the Subsidiary's employees and
their total annual wages, salaries and benefits. Seller represents that under
the terms of its existing agreements with those employees it is not obligated to
and assumes no obligation to pay any amounts greater than the amounts on
Schedule 1.06(b). Subsidiary acknowledges that immediately after the Closing
Buyer will dismiss the employees set forth on Schedule 1.06(b) underneath the
caption "Dismissed Employees" and that Buyer shall be entitled to offset from
any payments on the Promissory Note or otherwise recover from Seller the amount
of salaries, wages and benefits that are required to be and are paid to those
Dismissed Employees under German law. Buyer agrees to use reasonable efforts to
negotiate a severance settlement with the Dismissed Employees to reduce Seller's
obligations to Buyer. If Buyer dismisses any employees on Schedule 1.06(b),
other than the Dismissed Employees, prior to the first anniversary of the
Closing Date, then Buyer may offset from the Promissory Note, or otherwise
recover from Seller, 50% of salaries, wages and other benefits of the first two
employees dismissed by Buyer that the Buyer would still be obligated to pay
under German law, provided such amount will not exceed $50,000. Buyer agrees to
use reasonable efforts to negotiate a settlement of such severance amounts.
SECTION 1.07. Allocation. The sum of the Purchase Price and the Assumed
Liabilities shall be allocated among the Purchased Assets prior to the Closing
in accordance with principles and guidelines set forth in Section 1060 of the
Internal Revenue Code of 1986, as amended. It is agreed by the parties that such
allocation shall be arrived at by arm's-length negotiation and in the judgment
of the parties shall properly reflect the fair market value of the Purchased
Assets transferred pursuant to this Agreement. It is agreed that the allocations
under this section 1.07 will be binding on all parties for federal, state, local
and other tax purposes in connection with the purchase and sale of the Purchased
Assets, and will be consistently reflected by each party on its tax returns.
SECTION 1.08. The Closing. The closing (the "Closing") of the purchase and
sale of the Purchased Assets hereunder will take place at the offices of Choate,
Hall & Stewart in Boston, Massachusetts on May 15, 2000, or if the conditions
set forth in Article 6 herein are not then satisfied or waived, at such later
date as is two business days after satisfaction or waiver of such conditions
(the "Closing Date") or such other time as the parties may mutually agree.
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SECTION 1.09. Deliveries at Closing. At the Closing: (a) upon satisfaction
or waiver of the conditions set forth in section 6.02 herein, Sentex and Seller
will deliver or cause to be delivered to Buyer the instruments, consents,
opinions, certificates and other documents required by section 6.01; and (b)
upon satisfaction or waiver of the conditions set forth in section 6.01 herein,
Buyer will deliver or cause to be delivered to Sentex and Seller the
instruments, opinions, certificates and other documents required by section
6.02.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
SELLER AND THE STOCKHOLDER
Sentex and Seller hereby jointly and severally represent and warrant to
Buyer that each of the statements contained in this Article 2 is true and
correct as of the date hereof and will be true and correct as of the Closing
Date:
SECTION 2.01. Organization, Power and Standing. Sentex, Monitek and the
Subsidiary are duly organized, validly existing and in good standing under the
laws of their respective jurisdictions, with all requisite corporate power and
authority to own, lease and operate their properties and to carry on the
Business as currently conducted. Except as set forth on Schedule 2.01, Sentex,
Monitek and the Subsidiary are not required to qualify to do business as a
foreign entity in any jurisdiction in which the failure to so qualify would have
a Material Adverse Effect. As used herein, "Material Adverse Effect" means an
effect that is materially adverse to the Business, assets or financial condition
of Seller or that Seller knows is reasonably likely to have such a material
adverse effect after the Closing.
SECTION 2.02. Validity and Enforceability. The execution, delivery and
performance of this Agreement by Sentex and Seller and the other instruments and
agreements contemplated hereby are within their respective corporate powers,
have been duly authorized by all necessary corporate and stockholder action and
will not result in any violation of, be in conflict with or constitute a default
under, any of their respective organizational documents or under any law,
statute, regulation, ordinance, contract, agreement, instrument, judgment,
decree or order to which any of them is a party or by which any of them is
bound. This Agreement is, and each of the other agreements and instruments of
Sentex and Seller contemplated hereby will be, the valid and binding obligations
of each of them who are (or are to become) parties thereto, enforceable in
accordance with their respective terms.
SECTION 2.03. Subsidiaries. Other than as set forth in Schedule 2.03,
Seller does not own any equity securities or have the power to vote or direct
the voting of any equity securities of any entity and does not, directly or
indirectly, own or have the right to acquire any equity interest in any
corporation, joint venture, partnership or other entity. Seller does not have
any investment in, loan to, or advance of cash or other extension of credit to
any entity or individual, other than in the ordinary course of Seller's
business.
SECTION 2.04. Contracts and Commitments. Schedule 2.04 contains a complete
and accurate list of all:
(a) marketing, advertising, subscription, fulfillment or similar
contracts;
(b) contracts under which the amount payable by Seller with respect to
the Business is dependent on the revenues or income or similar measure of
Seller;
(c) licenses, leases, contracts and other arrangements with respect to
any material property of Seller relating to the Business;
(d) trademark license, trademark promotion and other similar
arrangements relating to the Business where Seller is either licensee or
licensor;
(e) agreements, contracts or instruments to which Seller is a party
relating to the borrowing of money, the capital lease or purchase on an
installment basis of any asset, or the guarantee of any of the foregoing;
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(f) contracts relating to the Business with respect to which Seller
has any liability or obligation, contingent or otherwise, other than
purchase orders and sales commitments providing for the payment to or from
Seller of less than $15,000 and entered into in the ordinary course of
Seller's business; and
(g) any other contracts, instruments, commitments, plans or
arrangements of Seller that relate to the Business.
All the foregoing (whether written or unwritten) are herein called the
"Contracts". Such list includes with respect to each Contract the names of the
parties, the date thereof, and its title. Seller has furnished to Buyer copies
of all Contracts. The Contracts listed on Schedule 2.04 set forth the entire
agreement and understanding between Seller and the respective third parties with
respect to the subject matter thereof, and, except as indicated in such
Schedule, there have been no amendments or material side or supplemental
arrangements to or in respect of any Contract. Each Contract is valid and
binding and in full force and effect. Seller is not in default in the
performance, observance or fulfillment of any of the material obligations,
covenants or conditions contained in any of the Contracts material to the
Business and, to Seller's knowledge, no other default or event has occurred and
is continuing that with notice or the passage of time or both would constitute a
material default or material event of default under any such Contract (each a
"Default").
SECTION 2.05. Financial Statements. Seller has delivered to Buyer (a)
audited consolidated balance sheets of Seller as at November 30, 1997 and 1998
and related audited consolidated statements of income, stockholders' equity and
cash flow of Seller for the years then ended; and (b) Seller's consolidated
balance sheet as of September 30, 1999 (the "Balance Sheet") and the unaudited
consolidated statements of income, stockholders' equity and cash flow of Seller
for the ten (10) month period then ended (collectively, the "Financial
Statements"). Such Financial Statements and the notes thereto, if any, are
complete and accurate in all material respects as to the Purchased Assets and,
as to the Borrower as a whole, such Financial Statements fairly present in all
material respects the financial condition of Seller at the respective dates
thereof and the results of operations for the periods then ended, and were
prepared in accordance with the books and records of Seller in conformity with
GAAP consistently applied during the periods covered thereby.
SECTION 2.06. Affiliate Transactions. Except as set forth on Schedule 2.06,
or as otherwise disclosed in its reports filed with the Securities and Exchange
Commission (the "SEC") (a) Seller is not a party to any contract or arrangement,
or indebted, either directly or indirectly, to any of its officers, directors or
stockholders, their relatives or Affiliates, and (b) none of such persons or
entities is indebted to or has any direct or indirect ownership interest in, or
any contractual relationship with, any person or entity with which Seller is or
was Affiliated or with which Seller has a business relationship, or any person
or entity which, directly or indirectly, competes with Seller. As used in this
Agreement, the term "Affiliate" shall have the meaning given to it in Rule 12b-2
promulgated under the Exchange Act.
SECTION 2.07. Real Property. Seller does not own any real property.
Schedule 2.07 sets forth each interest in real property leased by Seller in
connection with the Business (the "Leased Property"), the lessor of the Leased
Property and the annual rent payable in respect of the Leased Property. Seller
enjoys a valid leasehold interest and peaceful and quiet possession of the
Leased Property, is not in material default under any such leasehold and Seller
has not received written notice that the lessor under any of the leases has
taken action or threatened to terminate the lease before the expiration date
specified in the lease. The real property listed on Schedule 2.07 includes all
real property used by Seller in the conduct of the Business.
SECTION 2.08. Personal Property. Schedule 2.08 contains a complete and
accurate list of each item of personal property owned or used by Seller that has
a value of at least $5,000, indicating whether each such item is owned, leased
or licensed. Seller has good title to or a valid leasehold or license interest
in each item of personal property used by it in the Business (including good and
marketable title to all assets reflected on the Balance Sheet), free and clear
of any security interests or encumbrances of every kind, nature and description.
The Purchased Assets include each of the items listed on Schedule 2.08. The
assets and properties of Seller include all assets currently used in the conduct
of the Business and are adequate to conduct its operations as currently
conducted.
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SECTION 2.09. Tax Matters. Buyer will have no liability with respect to
Taxes for any period prior to the Closing with respect to the Business and
Seller's operation thereof. Seller has not taken any actions that will result
in, or failed to take any actions required to avoid, any security interests,
liens, encumbrances, or claims on or with respect to any of the assets of Seller
attributable to any failure (or alleged failure) to pay any Tax, and no such
security interests, liens, encumbrances, or claims currently exist, will exist
or have been alleged. Seller has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party. For
purposes of this Agreement, "Tax" and "Taxes" shall mean any or all federal,
state, local or foreign tax of any kind whatsoever of Seller, including, without
limitation, any estimated tax payments, interest, penalties or other additions
thereto, whether or not disputed, and any taxes imposed under sections 1374 and
1375 of the Code.
SECTION 2.10. Required Authorizations and Consents. Schedule 2.10 sets
forth all licenses, permits and authorizations of governmental authorities held
by Seller which are material to the Business (the "Authorizations"). Seller is
in compliance with all such Authorizations, all of which are in full force and
effect. There are no other such Authorizations that are material to the
Business, or any material division thereof, as currently conducted. Except for
the Authorizations and consents of third parties specified on Schedule 2.10, no
consent, order, authorization or other approval, including, without limitation,
any consent, approval or authorization of or declaration or filing with any
governmental authority or any party to a Contract, is required on the part of
Seller for or in connection with the execution, delivery or performance of this
Agreement, to prevent a Default, or for Buyer to carry on the Business after
Closing.
SECTION 2.11. ERISA; Compensation and Benefit Plans.
(a) Schedule 2.11 sets forth all employee compensation and benefit
plans, agreements, commitments, practices or arrangements of any type in
the United States and Germany (including, but not limited to, plans
described in section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) offered, maintained or contributed to by Seller
for the benefit of current or former employees of Seller, or with respect
to which Seller has or may have any liability, whether direct or indirect,
actual or contingent (including, but not limited to, liabilities arising
from affiliation under section 414(b), (c), (m) or (o) of the Code or
section 4001(b)(1) of ERISA) (collectively, the "Benefit Plans"). As of the
Closing, Seller will have discharged all liabilities for employee benefits
and compensation under the Benefit Plans, and Buyer will have no liability
of any kind with respect to any Benefit Plan.
(b) With respect to each Benefit Plan: (i) such plan has been
administered and enforced in accordance with its terms and all applicable
laws, regulations and rulings in all material respects; (ii) no breach of
fiduciary duty has occurred with respect to which Seller or any Benefit
Plan may be liable or otherwise damaged in any material respect; (iii) no
material disputes nor any audits or investigations by any governmental
authority are pending or, to the knowledge of Seller, Sentex and the
Stockholder, threatened; (iv) all contributions, premiums, and other
payment obligations have been accrued on the financial statements of Seller
in accordance with generally accepted accounting principles, and, to the
extent due, have been made on a timely basis, in all material respects; and
(v) there are no claims pending or, to the best knowledge of Sentex and
Seller, threatened with respect to any Benefit Plan other than claims for
benefits by employees or beneficiaries arising in the normal course of
operation of any such plan. No Benefit Plan is, or has ever been, subject
to Title IV of ERISA. None of Seller's employees is covered by a
multi-employer plan (within the meaning of section 4001(a)(3) of ERISA) to
which Seller or any member of any group of trades or businesses under
common control with Seller (within the meaning of section 4001(b)(1) of
ERISA) has an obligation to contribute.
SECTION 2.12. Employees and Compensation. None of Seller's employees is
represented by a union, and there is no labor strike, dispute, slowdown,
stoppage, organizational effort, dispute or proceeding by or with any employee
or former employee of Seller or any labor union actually pending or, to the best
knowledge of Sentex and Seller, threatened against Seller. There are no
employment, consulting, severance or similar contracts or arrangements (other
than those terminable at will) with any employees of or consultants
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to Seller, other than as set forth on Schedule 2.12 relating to any Person
listed on Schedule 6.01(j). Seller is not a party to and has no liabilities
under any noncom petition agreement or arrangement with any current or former
employee, officer or director of or consultant to Seller.
SECTION 2.13. Intellectual Property. Schedule 2.13 sets forth all patents,
trademarks, service marks, trade names, copyrights, franchises, licenses, and
all royalty agreements and other rights with respect to the foregoing
(collectively, with any registrations and applications with respect to the
issuance or granting of any of the foregoing, the "Intellectual Property") owned
or used by Seller in connection with the Business. Except as set forth on
Schedule 2.13, Seller holds exclusive interests in the Intellectual Property
purported to be owned by it. Except as listed on Schedule 2.13, Seller has not
received written notice of any claim by any Person that Seller is violating any
trade mark, service mark, trade name, patent or copyright owned by any other
Person or that it is using any name which is confusingly similar to that of any
other Person. Except as listed on Schedule 2.13, the Intellectual Property is
sufficient in all respects to enable Seller to conduct the Business as presently
conducted and to enable Buyer following the Closing without restriction to
manufacture, sell and distribute all products currently being sold by Seller.
Except as listed on Schedule 2.13, Seller has not granted any rights to
manufacture, sell or distribute any of the products currently being sold by
Seller to any Person.
SECTION 2.14. Material Adverse Changes. Since the date of the Balance
Sheet, Seller has conducted the Business only in the ordinary course, and there
have been: (a) no sale, transfer or other disposition of any of its assets,
except in the ordinary course of business; (b) no liens, security interests or
encumbrances placed upon any of its assets; and (c) no other event or condition
that could have a Material Adverse Effect, except as disclosed on Schedule 2.14.
SECTION 2.15. Inventory. Schedule 2.15 sets forth a complete and accurate
list of all inventory owned or possessed by Seller as of the date of this
Agreement. The inventory set forth on Schedule 2.15 is at a normal and customary
level based on Seller's past practice as conducted through the Closing and the
portion of the inventory included in the Purchased Assets is in good condition,
is not obsolete and is saleable for its intended purposes, provided that Seller
makes no representation as to the demand for such inventory.
SECTION 2.16. Regulatory and Legal Compliance. Seller is in compliance with
all foreign, federal, state or local statutes, laws, ordinances, judgments,
decrees, orders or governmental rules, regulations, policies and guidelines
applicable to it, except where noncompliance would not have a Material Adverse
Effect. Seller has not received any written notice from any governmental or
regulatory authority or otherwise of any alleged violation or noncompliance.
SECTION 2.17. Litigation. Except as set forth on Schedule 2.17, there is no
action, suit, proceeding or investigation before any court, arbitrator or
governmental authority, pending, or, to the knowledge of Sentex or Seller,
threatened against Seller, or against any officer, director or employee of
Seller, in relation to the affairs of Seller.
SECTION 2.18. Customers and Suppliers. Schedule 2.18 sets forth a complete
list of Seller's customers and suppliers for the past two (2) years from the
date hereof from which Seller derived revenues of $50,000 or more. Except as set
forth on Schedule 2.18, neither Sentex nor Seller, has received any written
notice, or to the knowledge of Sentex or the Seller, any other notice in the
form of a communication directed to Seller, from a customer set forth on
Schedule 2.18 stating that customer intends to discontinue purchasing, or
significantly reduce, purchases of products from Seller.
SECTION 2.19. Environmental Matters. The ownership or use of Seller's
premises and assets, the occupancy and operation thereof, and the conduct of
Seller's Business are in material compliance with all applicable federal,
foreign, state and local laws, ordinances, regulations, standards and
requirements relating to safety, health, pollution, environmental protection,
hazardous substances and related matters. There is no liability attaching to
such premises or assets or the ownership or operation thereof as a result of any
hazardous substance that may have been discharged on or released from such
premises, or disposed of on-site or off-site, or any other circumstance
occurring prior to the Closing or existing as of the Closing. For purposes of
this section, "hazardous substance" shall mean oil or any other substance which
is included
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within the definition of a "hazardous substance", "pollutant", "toxic
substance", "toxic waste", "hazardous waste", "contaminant" or other words of
similar import in any federal, foreign, state or local environmental law,
ordinance or regulation.
SECTION 2.20. Absence of Undisclosed Liabilities. Except for (a) as
reflected on the Balance Sheet; (b) obligations of future performance under the
Contracts and other contracts entered into in the ordinary course of Seller's
business that are not required to be listed on a schedule hereto; (c)
liabilities and obligations incurred in the ordinary course of Seller's business
after the date of the Balance Sheet; and (d) the Assumed Liabilities, Seller has
no liabilities or obligations, whether absolute, accrued, contingent or
otherwise and whether due or to become due that Buyer is obligated to assume or
that will affect the Purchased Assets or the Business.
SECTION 2.21. Year 2000 Matters. The computer software embedded in or used
in connection with the products sold by Seller in connection with its operation
of the Business are Year 2000 Compliant (as defined below), except where non
compliance would not have a Material Adverse Effect. As used herein, "Year 2000
Compliant" means that neither the performance nor functionality for all such
software applications is affected by dates prior to, during, spanning or after
January 1, 2000 including (a) accurately processing (including calculating,
comparing and sequencing) date and time data from, into and between the years
1999 and 2000 and leap year calculations, (b) functioning without error
interruption or decreased performance relating to such date and time data, (c)
accurately processing such date and time data when used in combination with
other technology, if the other technology properly exchanges date and time data,
(d) accurate date and time data century recognition, (e) calculations that
accurately use the same century and multi-century formulae and date and time
values, (f) date and time interface values which reflect the correct century and
(g) processing, storing, receiving and outputting all date and time data in a
format that accurately indicates the century of the date and time data.
SECTION 2.22. Brokers, Etc. No finder, broker, agent, financial advisor or
other intermediary has acted on behalf of Sentex or Seller in connection with
the negotiation or consummation of this Agreement or any of the transactions
contemplated hereby and no such Person or entity is entitled to any fee,
payment, commission or other consideration in connection therewith as a result
of any arrangement made by any of them.
SECTION 2.23. Disclosure. The representations, warranties and other
statements of Seller contained in this Agreement, the Schedules hereto and all
certificates delivered pursuant to this Agreement, taken as a whole, do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein and therein not
misleading as of the date hereof.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Metrisa and Metrisa GmbH hereby jointly and severally represent and warrant
to Seller and Sentex that each of the statements contained in this Article 3 is
true and correct and will be true and correct as of the Closing Date:
SECTION 3.01. Organization, Power and Standing. Metrisa and Metrisa GmbH
are duly organized, validly existing and in good standing (or have similar
status under the laws of the jurisdiction of its organization) under the laws of
their respective jurisdictions, with all requisite corporate power and authority
to own, lease and operate their properties and to carry on their respective
business as currently conducted. Except as set forth on Schedule 3.01, Metrisa
and Metrisa GmbH are not required to qualify to do business as a foreign entity
in any jurisdiction in which the failure to so qualify would have a Material
Adverse Effect.
SECTION 3.02. Validity and Enforceability. This Agreement is, and each of
the other agreements and instruments of Buyer contemplated hereby will be, the
valid and binding obligations of Buyer, enforceable in accordance with their
respective terms. The execution and performance of this Agreement and the other
instruments and agreements contemplated hereby by Buyer will not result in any
violation of, be in conflict
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with or constitute a default under, any law, statute, regulation, ordinance,
contract, agreement, instrument, judgment, decree or order to which Buyer is a
party or by which Buyer is bound.
SECTION 3.03. Required Consents; No Defaults. Except for the consents
specified on Schedule 3.03, no consent, order, authorization, approval,
declaration or filing, including, without limitation, any consent, approval or
authorization of or declaration or filing with any governmental authority or any
party to any contract or agreement with Buyer, is required on the part of Buyer
for or in connection with the execution, delivery or performance of this
Agreement. Subject to obtaining the consents and other items specified on
Schedule 3.03, the execution, delivery and performance of this Agreement and
other instruments and agreements contemplated hereby by Buyer will not result in
any violation of, be in conflict with, or constitute a default under, any law,
statute, regulation, ordinance, contract, instrument, judgment, decree or order
to which any of them is a party or by which Buyer is bound.
SECTION 3.04. Brokers, Etc. No finder, broker, agent, financial advisor or
other intermediary has acted on behalf of Buyer in connection with the
negotiation or consummation of this Agreement or any of the transactions
contemplated hereby and no such Person or entity is entitled to any fee,
payment, commission or other consideration in connection therewith as a result
of any arrangement made by any of them.
SECTION 3.05. Capitalization of Metrisa. The authorized capital stock of
Metrisa consists of 4,000,000 shares of common stock, $.50 par value ("Common
Stock"), and 10,000,000 shares of preferred stock, $1.00 par value ("Preferred
Stock"). As of January 15, 2000, there were issued and outstanding 1,265,193
shares of Common Stock and no shares of Preferred Stock. As of January 15, 2000,
no shares of Common Stock or Preferred Stock were held in Metrisa's treasury.
All of the issued and outstanding shares of Common Stock have been duly issued
and are fully paid and non-assessable. The shares of Common Stock to be issued
pursuant to this Agreement will upon issuance be validly issued, fully paid and
non-assessable. Except with respect to outstanding options and warrants to
purchase and aggregate of 505,717 shares of Metrisa's Common Stock at a weighted
average exercise price of approximately $2.66 per share, as of January 15, 2000,
there were no outstanding options, warrants, convertible or exchangeable
securities obligating Metrisa to issue shares of its capital stock or other
securities. Metrisa has no so-called "rights plans" currently in effect that
would in any way impair the economic value or voting power of the Shares to be
issued pursuant to this Agreement. Neither the Certificate of Incorporation, as
amended, nor the By-Laws, as amended, of Metrisa contain any provisions that
would impair the Seller's ability to vote or otherwise dispose of the Shares in
any manner otherwise permitted by law.
SECTION 3.06. Metrisa Commission Reports. Metrisa has timely filed with the
SEC and has made available to Seller all reports, forms and other documents
required to be filed by it since October 31, 1997, under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") or the Securities Act of 1933, as
amended (the "Securities Act") (such reports, forms and documents, together with
any amendments thereto, are sometimes collectively referred to as the "Metrisa
Commission Filings"). The Metrisa Commission Filings (a) either did not contain
any untrue statements of a material fact or fail to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading as of
their respective dates, or to the extent that any such misrepresentation or
omission may have existed, such disclosure has been corrected by Metrisa in
subsequent commission filings and (b) complied as of their respective dates in
all material respects with the applicable requirements of the Exchange Act and
the Securities Act, as the case may be, and any applicable rules and regulations
of the SEC thereunder.
SECTION 3.07. Litigation. There is no action, suit, proceeding or
investigation before any court, arbitrator or governmental authority (including,
without limitation, the Securities and Exchange Commission) pending or, to the
knowledge of Metrisa, threatened against Metrisa or against any officer,
director or employee of Metrisa in relation to the affairs of Metrisa.
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ARTICLE 4
COVENANTS OF SENTEX AND SELLER
SECTION 4.01. Conduct of the Business.
(a) Seller will and Sentex will cause Seller to use its reasonable
efforts under its existing financial condition to, prior to the Closing:
(i) maintain its corporate existence;
(ii) preserve its material business organization intact, retain its
permits, licenses and franchises, preserve the existing contracts and do
nothing to intentionally diminish its goodwill of its customers,
suppliers, personnel and others having business relations;
(iii) conduct its business only in the ordinary course; and
(iv) not take any action to intentionally cause a material breach
of representations and warranties of Sentex and Seller set forth in this
Agreement.
(b) Seller will not, and Sentex will cause Seller not to, prior to the
Closing, without Buyer's prior written consent:
(i) change its method of management or operations;
(ii) dispose of or acquire any material assets or properties, other
than inventory and the collection of its accounts receivables in the
ordinary course of Seller's business or any of the Excluded Assets;
(iii) except in the ordinary course of Seller's business, subject
any of its properties or assets to any lien, security interest or
encumbrance;
(iv) except in the ordinary course of Seller's business, modify,
amend, cancel or terminate any existing agreement material to the
Business;
(v) except in the ordinary course of Seller's business, make any
change in the compensation paid or payable to any officer, director,
employee, agent, representative or consultant of Seller listed on
Schedule 6.01(j) or pay or agree to pay any bonus or similar payment
(other than bonus payments to which Seller is committed, and which are
disclosed in this Agreement);
(vi) enter into any contract or agreement with respect to which
Seller has any liability or obligation, contingent or otherwise, or that
may otherwise have any continuing effect after the Closing, other than
in the ordinary course of business, or that may place any material
limitation on the method of conducting or scope of the Business;
(vii) declare, pay or set aside for payment any dividend (in stock
or property, excluding cash) or other distribution of property,
excluding cash, in respect of Seller's capital stock;
(viii) discharge any indebtedness, the effect of which might
adversely affect Buyer's future relationships with customers or
suppliers of Seller; or
(ix) take any other action that would materially and adversely
affect or detract from the value of Seller, its assets or the Business.
SECTION 4.02. Access; Provision of Records. Until the Closing Date, and
subject to section 5.02 hereof, Sentex will cause Seller to, and Sentex and
Seller will, grant to Buyer and its representatives, reasonable access to the
properties, records, books of account, contracts and other documents of Sentex
and Seller, and to senior managers, employees, accountants, legal advisors,
consultants and other personnel of Sentex and Seller, as requested by Buyer. No
investigation or findings of Buyer shall affect the representations and
warranties of Seller and Sentex hereunder. Sentex shall cause Seller to, and
Seller shall, provide Buyer with access, upon reasonable notice, to meet with
Seller's employees regarding offers of employment, if any, made by Buyer to
Seller's employees.
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SECTION 4.03. Efforts. Seller and the Stockholder will use all reasonable
efforts to cause the conditions specified in section 6.01 to be satisfied as
soon as practicable.
SECTION 4.04. No Solicitation or Negotiation.
(a) Until the earlier of the Closing Date and April 30, 2000, neither
Sentex nor Seller nor any of their affiliates, officers, directors,
representatives or agents will (i) solicit, initiate or encourage any other
proposals or offers from any Person relating to an Acquisition Proposal (as
hereinafter defined), (ii) participate in any discussions or negotiations
regarding, or furnish to any other Person any information with respect to,
or otherwise cooperate in any way, assist or participate in, facilitate or
encourage any effort or attempt by any other Person relating to, an
Acquisition Proposal, or (iii) enter into transaction, or enter into any
agreement relating to any transaction, with any Person relating to an
Acquisition Proposal. "Acquisition Proposal" means any proposal (as such
proposal may be amended, modified or supplemented from time to time) with
respect to a merger, consolidation, share exchange or similar transaction
involving Seller or any subsidiary of Seller, or any purchase of all or any
significant portion of the assets of Seller or any subsidiary of Seller, or
any equity interest in Seller or any subsidiary of Seller, other than the
transactions contemplated hereby.
(b) Nothing contained in this section 4.04 or any other provision of
this Agreement shall prohibit the Board of Directors of Sentex from (i)
taking and disclosing to the stockholders of Sentex a position with respect
to a tender offer for Sentex Common Stock by a third party pursuant to
Rules 14d-9 and 14e-2 promulgated under the Exchange Act, (ii) subject to
the provisions of section 9.05, making such disclosure to the stockholders
of Sentex as, in the good faith judgment of the Board of Directors of
Sentex, upon the written advice of outside counsel, may be required to
comply with its fiduciary duties under applicable law, or (iii) responding
to any unsolicited proposal or inquiry by advising the Person making such
proposal or inquiry of the terms of this section 4.04.
(c) Nothing contained in this section 4.04 or any other provision of
this Agreement shall prohibit Sentex from responding to a Superior Proposal
(as defined below) if the Board of Directors of Sentex determines in good
faith, and upon the written advice of counsel, that it is required to do so
in the exercise of its fiduciary duties; provided, that, neither Sentex nor
its Board of Directors may terminate this Agreement except in accordance
with the terms hereof. A "Superior Proposal" means a bona fide, written,
unsolicited proposal relating to a possible transaction described in this
section 4.04 by any Person that, in the reasonable good faith judgment of
the Board of Directors of Sentex, is reasonably likely to be consummated
and is more favorable to the stockholders of Sentex than the terms of the
transactions contemplated by this Agreement.
(d) Sentex shall notify Buyer promptly (and in any event within
forty-eight (48) hours) orally and in writing if any Acquisition Proposal,
or any inquiry that could reasonably be expected to lead to an Acquisition
Proposal, is made, and shall, in any such notice to Buyer, indicate in
reasonable detail the identity of the Person making such proposal or offer
and the terms and conditions of such proposal or offer. Sentex will keep
Buyer fully informed of the status and details (including amendments or
proposed amendments) of any such proposal or offer.
SECTION 4.05. Use of Name. Following the Closing, Buyer shall have the
exclusive right to use the names "Monitek," "Monitek Technologies, Inc." and
"Monitek GmbH" in connection with its operation of the Business, and Seller
agrees to take all necessary action, including, without limitation, changing its
name as soon as practicable after the Closing Date to a name that is not similar
to such name, to allow Buyer to exercise such right, and to cease using such
name immediately after the Closing, except in connection with communications
designed to inform Persons of such name change.
SECTION 4.06. Duty to Remit Payments, Orders and Business Leads. Any
payments, orders for Products or leads with respect thereto received by Seller
after any Closing that arose from or relate to the ownership or operation of the
Purchased Assets by Buyer after such Closing shall be forwarded to Buyer by
Seller within five (5) days of receipt thereof.
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SECTION 4.07. Covenant Not To Compete. Each of Sentex and Monitek agree
that for a period of five (5) years following the Closing and the Subsidiary
agrees that for a period of two (2) years following the Closing that neither
Sentex, Monitek nor the Subsidiary shall, without the prior written consent of
Buyer, directly or indirectly, own, manage, operate, control, finance or
otherwise be interested or participate in the ownership, management, operation
or control of or be employed by, consult or be a joint venturer with, render
services to or be otherwise connected in any manner with any business or
activity which is directly or indirectly competitive with the Business. Without
Buyer's express written consent, each of Sentex, Monitek and the Subsidiary
further agree not to hire or attempt to hire any employee or independent
contractor or service provider of the Business or any former employee or
independent contractor of the Business if such person has resigned from his
employment with Buyer in the prior twelve (12) month period.
SECTION 4.08. Registration. The Subsidiary shall immediately after the
Closing apply in Germany for the registration in its commercial register as set
forth in Exhibit 4.08 at Seller's expense and shall inform Buyer in writing
immediately upon the effectiveness of such registration and provide Buyer with a
copy of the corresponding excerpt from the commercial register.
SECTION 4.09. Tax Clearance. The Seller shall reasonably cooperate with
Metrisa prior to the Closing to enable Metrisa to obtain appropriate
certification from the German taxing authorities that all taxes required to be
paid by the Seller in Germany prior to the Closing have been paid.
ARTICLE 5
COVENANTS OF BUYER
SECTION 5.01. Efforts. Buyer will use all reasonable efforts to cause the
conditions specified in section 6.02 to be satisfied as soon as practicable,
including, without limitation, obtaining all necessary consents.
SECTION 5.02. Confidentiality. Following the execution of this Agreement
and prior to the Closing Date, Buyer, its directors, officers, employees,
stockholders, representatives and agents, will not disclose to any third party
or use for any purpose any of the confidential or proprietary information
relating to the Business that is in its possession or knowledge and that is to
be transferred to Buyer on the Closing Date (the "Information"), except to the
extent such Information is in the public domain, is generally known within the
industry or is obtained through lawful methods not involving a breach of this
section 5.02. If the Closing does not occur as contemplated herein, Buyer shall
return all Information to Seller.
SECTION 5.03. Duty to Remit Payments. Any Excluded Assets or proceeds
therefrom received by Buyer following the Closing shall be forwarded to Seller
within five (5) days of receipt thereof.
SECTION 5.04. Excluded Inventory. All inventory of Seller which Buyer
elects not to purchase pursuant to Article 1 (the "Excluded Inventory") which is
referenced on Schedule 1.01(b) shall be held by Buyer following the Closing but
title thereto shall remain with Seller. Following the Closing, to the extent
Buyer shall sell any Excluded Inventory, Buyer shall pay to Sentex the lesser of
(a) the book value of such Excluded Inventory that Buyer has sold and (b) an
amount equal to the price at which such Excluded Inventory is sold, provided
that Buyer shall return to Seller all Excluded Inventory that has not been sold
on or before five (5) years following the Closing Date. Monitek and Sentex shall
have the right, not more than once each calendar year, at their own expense,
upon reasonable notice and during normal business hours, to review the books and
records of Buyer to verify the amount of Excluded Inventory held by Buyer and
the calculation of any payments with respect thereto due to Seller. Any
confidential information of Buyer that is obtained by Monitek or Sentex as a
result of such review shall be kept in confidence by Monitek and Sentex and
shall be protected from disclosure in the same manner as the confidential
information of Monitek and Sentex.
SECTION 5.05. Excluded Accounts Receivable. Following the Closing, Buyer
shall use reasonable efforts to collect the accounts receivable of Seller which
Buyer does not elect to purchase pursuant to the terms of Article 1 (the
"Excluded Accounts Receivable"). Such "reasonable efforts" shall not require
Buyer to file suit or commence other legal action to collect such Excluded
Accounts Receivable. Following the Closing, to
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the extent Buyer shall receive any payments with respect to Excluded Accounts
Receivable, Buyer shall pay such amounts received to Sentex, provided that Buyer
shall turn over to Seller for collection all Excluded Accounts Receivable on
which payment has not been received on or before eighteen (18) months following
the Closing Date.
SECTION 5.06. Advance of Funds Prior to Closing. At any time prior to
Closing, at the request of Sentex, Buyer shall promptly loan up to $50,000 to
Sentex pursuant to the terms of the Promissory Note attached hereto as Exhibit
5.06(a) (the "Pre-Closing Promissory Note") which Pre-Closing Promissory Note
shall be secured by the assets of Sentex and Seller pursuant to the terms of the
Security Agreement attached hereto as Exhibit 5.06(b). Any such advance of funds
shall be accounted for as of the Closing pursuant to section 1.02.
SECTION 5.07. Access to Books and Records. Following the Closing, upon
reasonable notice and during normal business hours, the Buyer shall allow the
Seller and Sentex access to the books and records of Seller included in the
Purchased Assets in order enable the Seller and Sentex to prepare any necessary
governmental filings following the Closing.
ARTICLE 6
CONDITIONS TO CLOSING
SECTION 6.01. Conditions to Obligations of Buyer. Unless waived in writing
by Buyer, the obligation of Buyer hereunder to effect the proposed transaction
is subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Representations and Warranties True. The representations and
warranties contained in Article 2 shall be true and accurate in all
material respects on and as of the Closing Date with the same effect as
though made on and as of such date unless such representation or warranty
is made as of a specific date, in which case such representation and
warranty shall be made as of the date specified.
(b) Covenants Performed. Sentex and Seller shall have performed and
complied in all material respects with each and every covenant, agreement
and condition required to be performed or complied with by them hereunder
on or prior to the Closing Date.
(c) Licenses, Consents, Etc., Received. Sentex and Seller shall have
obtained and delivered to Buyer copies of all consents, licenses, approvals
and permits of other parties required to be obtained by it for the
transactions contemplated hereby, in each case in which the failure to
obtain the same would have a Material Adverse Effect or materially
interfere with Buyer's operation of the Business following the Closing,
including, without limitation, the consents listed on Schedule 2.10, and no
such consent, license, approval or permit shall have been withdrawn or
suspended.
(d) No Injunctions. The consummation of the transactions contemplated
hereby shall not violate any order, decree or judgment of any court or
governmental body having competent jurisdiction.
(e) Compliance Certificate. Sentex and Seller shall have delivered to
Buyer a certificate signed by them dated by the Closing Date, confirming
the satisfaction by Sentex and Seller of the conditions set forth in
paragraphs (a) and (b) of this section 6.01.
(f) Opinion of Counsel to Seller. Buyer shall have received an opinion
of Baker & Hostetler, or other counsel acceptable to Buyer, as counsel for
Sentex and Seller, dated as of the Closing Date, to the effect set forth in
Exhibit 6.01(f) hereto.
(g) Bill of Sale, Assignment and Assumption Agreement. Seller shall
have entered into a Bill of Sale, Assignment and Assumption Agreement and
Assignment of Patents with Buyer each in a form reasonably satisfactory to
Buyer (the "Bill of Sale").
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(h) Articles of Amendment. Monitek and the Subsidiary shall have
prepared for filing amendments to their respective charters changing their
respective names to names that are not similar to their current names.
(i) Certificates; Documents. Buyer shall have received from each of
Sentex, Monitek and the Subsidiary copies of each of the following,
certified to its satisfaction by an authorized officer of such entity: (i)
the charter of such entity, certified by the Secretary of State of such
entity's jurisdiction or appropriate counterpart, for Monitek GmbH; (ii)
the By-Laws of such entity; (iii) a certificate of the Secretary of State
or appropriate counterpart, for Monitek GmbH of the entity's jurisdiction
as to the legal existence and good standing of such entity; (iv) copies of
resolutions duly adopted by the Board of Directors of such entity and votes
duly adopted by the stockholders, and all authorizations, corporate or
otherwise, for Seller, authorizing the execution, delivery and performance
of this Agreement and the sale of the Purchased Assets; and (v) copies of
such other certificates and documents as Buyer may reasonably request.
(j) Acceptance of Employment. (i) The employees of Monitek listed on
Schedule 6.01(j)(i) shall have entered into employment agreements or
otherwise accepted employment with Buyer on terms reasonably satisfactory
to Buyer, the employees of the Subsidiary listed on Schedule 6.01(j)(i)
shall have accepted employment under the terms Buyer is obligated to offer
employment under German law and the sales representative of the Subsidiary
listed on Schedule 6.01(j)(i) shall have agreed to accept a sales
representative position with Buyer on substantially the same terms as he
currently performs for the Subsidiary, except the commission rate shall be
reduced from 20% to 15%; (ii) not less than three (3) of the employees
listed on Schedule 6.01(j)(ii) shall accept employment with Buyer under the
terms required by German law; and (iii) not less than one of the sales
representatives listed on Schedule 6.01(j)(iii) shall have entered into an
arrangement with Buyer to provide services to Buyer following the Closing
on substantially the same terms provided to Subsidiary, except the
commission rate shall be reduced from 20% to 15%.
(k) Fluccomat Agreements. Seller shall have entered into an agreement
with the German technical institute referred to as "BFI" containing
substantially the terms described on Schedule 6.01(k)(i) as well as the
entity referenced to as "Chemtronics" containing substantially the terms
set forth on Schedule 6.01(k)(ii) to enable Buyer, following the Closing,
to utilize the technology relating to Seller's fluccomat products without
restriction and to provide for the manufacture of such products by
Chemtronics.
(l) Buyer's Approvals and Consents. Buyer shall have obtained all
necessary consents and approvals of its Board of Directors and third party
creditors required to be obtained by it for the transactions contemplated
hereby.
(m) Actions and Proceedings. Prior to the Closing, all actions,
proceedings, instruments and documents required to carry out the
transactions contemplated hereby or incident hereto, including, without
limitation, all stockholder and director approvals of Seller and Sentex,
and all other legal matters required for such transactions shall have been
reasonably satisfactory to counsel for Buyer and such counsel shall have
been furnished with such certified copies of such corporate actions and
proceedings and other instruments as it shall have reasonably requested.
SECTION 6.02. Conditions to Obligations of Seller. Unless waived in writing
by Sentex and Seller, the obligations of Sentex and Seller hereunder to effect
the proposed transaction is subject to the satisfaction at or prior to the
Closing of the following conditions:
(a) Representations and Warranties True. The representations and
warranties contained in Article 3 shall be true and accurate in all
material respects on and as of the Closing Date with the same effect as
though made on and as of such date unless such representation or warranty
is made as of a specific date, in which case such representation and
warranty shall be made as of the date specified.
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(b) Covenants Performed. Buyer shall have performed and complied in
all material respects with each and every covenant, agreement and condition
required to be performed or complied with by it hereunder on or prior to
the Closing Date.
(c) Licenses, Consents, Etc. Received. Buyer shall have obtained and
delivered to Seller copies of all consents, licenses, approvals and permits
of other parties required to be obtained by it for the transactions
contemplated hereby, in each case in which the failure to obtain the same
would have a Material Adverse Effect or materially interfere with Buyer's
operation of the Business following the Closing, including, without
limitation, the consents listed on Schedule 3.03, and no such consent,
license, approval or permit shall have been withdrawn or suspended.
(d) No Injunctions. The consummation of the transactions contemplated
hereby shall not violate any order, decree or judgment of any court or
governmental body having competent jurisdiction.
(e) Compliance Certificate. Buyer shall have delivered to Seller a
certificate, signed by an officer of Buyer, confirming the satisfaction by
Buyer respectively of the conditions set forth in paragraphs (a) and (b) of
this section 6.02.
(f) Opinion of Counsel to Buyer. Seller shall have received an opinion
of Choate, Hall & Stewart, counsel for Buyer, to the effect set forth in
Exhibit 6.02(f) hereto.
(g) Consideration. Buyer shall have paid to Seller the amount, if any,
specified in section 1.02(d).
(h) Bill of Sale, Assignment and Assumption Agreement, Promissory Note
and Security Agreement. Buyer shall have entered into the Bill of Sale in
such form reasonably satisfactory to it, and each of the Promissory Note
and Security Agreement.
(i) Seller's and Sentex's Approvals and Consents. Seller and Sentex
shall have obtained all necessary consents and approvals of their
stockholders and Boards of Directors required to be obtained by them for
the transactions contemplated hereby and Sentex and Seller shall have
obtained the consents referred in items 1 and 2 on Schedule 2.10 or, with
respect to the contracts referenced in item 1 of Schedule 2.10, Buyer shall
have agreed to accept the assignment and assumption of the contract to
which the consent relates.
(j) Certificates; Documents. Seller shall have received from Buyer
copies of each of the following, certified to its satisfaction by an
authorized officer of Buyer: (i) the Certificate of Incorporation of Buyer,
certified by the Secretary of the State of Delaware; (ii) the By-Laws of
Buyer; (iii) a certificate of the Secretary of the State of Delaware as to
the legal existence and good standing of Buyer; and (iv) copies of
resolutions duly adopted by the Board of Directors of Buyer and all
authorizations, corporate or otherwise, for Buyer, authorizing the
execution, delivery and performance of this Agreement and the sale of the
Purchased Assets.
(k) Actions and Proceedings. Prior to the Closing, all actions,
proceedings, instruments and documents required to carry out the
transactions contemplated hereby or incident hereto, including, without
limitation, all director approvals of Buyer, and all other legal matters
required for such transactions shall have been reasonably satisfactory to
counsel for Seller and such counsel shall have been furnished with such
certified copies of such corporate actions and proceedings and other
instruments as it shall have reasonably requested.
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ARTICLE 7
TERMINATION
SECTION 7.01. Termination. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing:
(a) by mutual written consent of Buyer and Seller;
(b) by Buyer, if Sentex or Seller shall have breached or failed to
perform in any material respect any of its obligations, covenants or
agreements under this Agreement, or if any of the representations and
warranties of Sentex or Seller set forth in this Agreement shall not be
true in any material respect, and such breach, failure or misrepresentation
is not cured to Buyer's reasonable satisfaction within 10 days after Buyer
gives Seller or the Stockholder, respectively, written notice identifying
such breach, failure or misrepresentation;
(c) by Seller, if Buyer shall have breached or failed to perform in
any material respect any of its obligations, covenants or agreements under
this Agreement, or any of the representations and warranties of Buyer set
forth in this Agreement shall not be true in any material respect, and such
breach, failure or misrepresentation is not cured to Seller's reasonable
satisfaction within 10 days after Seller gives Buyer written notice
identifying such breach, failure or misrepresentation;
(d) by Buyer, if the conditions set forth in section 6.01 become
incapable of satisfaction;
(e) by Seller, if the conditions set forth in section 6.02 become
incapable of satisfaction;
(f) by Seller or Buyer if the Closing shall not have occurred on or
before July 31, 2000, or such other date, if any, as Seller and Buyer may
agree in writing, except that this Agreement may not be terminated under
this section 7.01(f) by any party that is in material breach of any
representation or warranty or in material violation of any covenant or
agreement contained herein; or
(g) by Seller, if it receives a Superior Proposal pursuant to section
4.04.
SECTION 7.02. Effect of Termination. If this Agreement is terminated (i)
under section 7.01(a) or (ii) under sections 7.01(d) or (e) at such time as no
party is in breach of a representation or warranty or in violation of a covenant
or agreement contained herein, all further obligations of Sentex and Seller to
Buyer, and of Buyer to Sentex and Seller, will terminate without further
liability of any party hereto. If this Agreement is terminated under section
7.01(b), (c), (d), (e) or (f) at such time as one or more parties is in breach
of a representation or warranty or in violation of a covenant or agreement
contained in this Agreement, the liabilities and obligations of the parties not
in breach or violation of this Agreement shall terminate, and the party or
parties that are in breach or violation of this Agreement shall remain liable
for such breaches and violations, and nothing shall be deemed to restrict the
remedies available against such party or parties. If this Agreement is
terminated pursuant to section 7.01(g), Seller shall pay to Buyer, as its
exclusive remedy, the amounts provided for in section 9.02.
ARTICLE 8
INDEMNIFICATION
SECTION 8.01. Survival. The representations, warranties and covenants of
Sentex and Seller contained herein shall survive the Closing and any
investigation made by Buyer, subject to the following:
(a) No claim against Sentex or Seller for a breach of the
representations, warranties and covenants contained herein shall be brought
more than two years following the Closing Date, except for (i) claims
arising out of the representations and warranties contained in sections
2.08 (with respect to title), 2.09, 2.19, 2.20 or 2.22 herein, which shall
survive for a period of three years following the Closing Date, (ii) claims
of which Sentex or Seller shall have been notified with reasonable
specificity by Buyer within such two-year period, (iii) claims for material
breaches of representations and warranties of Sentex or Seller that were
known by either Sentex or Seller to be inaccurate at the Closing which
shall survive for
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four (4) years following the Closing Date, and (iv) all other claims for
indemnification against Sentex or Seller as provided in Section 8.03 which
shall survive the Closing Date for a period of three (3) years, except for
any claims of which Sentex or Seller have been notified with reasonable
specificity by Buyer within such 3-year period.
(b) No claim against Stockholder for indemnification as provided in
Section 8.04 shall be brought after the earlier to occur of (i) the second
anniversary of the Closing Date, and (ii) such time after the Closing that
Sentex's consolidated audited balance sheet for any fiscal year indicates
total consolidated stockholders' equity in excess of $1,000,000, except for
claims of which the Stockholder shall have been notified with reasonable
specificity by Buyer within such two-year period.
SECTION 8.02. Limits on Indemnification. If the Closing occurs, Buyer shall
not be entitled to recover any damages for a breach of the representations and
warranties contained in Article 2 or the covenants contained in Article 4 unless
and until Buyer's claims therefor exceed $15,000 in the aggregate, at which time
Buyer shall be entitled to receive damages for all such claims, including the
first $15,000; provided, that nothing in this Article 8 shall entitle Buyer to
recover damages from Sentex, Seller or Stockholder in excess of (x) the
aggregate dollar value of the Closing Purchase Price plus (y) the amount paid
Sentex pursuant to section 1.05.
SECTION 8.03. Indemnification by Sentex and Seller. Sentex, Monitek and
Subsidiary hereby jointly and severally indemnify and hold harmless Metrisa and
Metrisa GmbH, and the respective officers and directors of Metrisa and Metrisa
GmbH, from and against any and all claims, liabilities, obligations, costs,
damages, losses and expenses of any nature arising out of, resulting from or
relating to any breach of the representations, warranties or covenants of
Sentex, Monitek or Subsidiary under this Agreement, or any liabilities relating
to the Purchased Assets, the Business or Monitek or Subsidiary which are not
included within the Assumed Liabilities (regardless of whether information with
respect thereto is set forth on a Schedule or Exhibit hereto), and all costs and
expenses (including reasonable attorneys' fees) incurred in connection with the
foregoing.
SECTION 8.04. Indemnification by Stockholder. Stockholder hereby
indemnifies and holds harmless Metrisa and Metrisa GmbH and the respective
officers and directors of Metrisa and Metrisa GmbH from and against any and all
claims, liabilities, obligations, costs, damages, losses and expenses of any
nature arising out of or resulting from any breach of the representations,
warranties or covenants of the Subsidiary contained in this Agreement that
relate to the Subsidiary or the portion of the Business conducted through the
Subsidiary, or any liabilities relating to the Subsidiary which are not included
within the Assumed Liabilities (regardless of whether information with respect
thereto is set forth on a Schedule or Exhibit hereto), and all costs and
expenses (including reasonable attorneys' fees) incurred in connection with the
foregoing.
SECTION 8.05. Set-Off, Etc. Prior to seeking to otherwise enforce the right
to indemnity hereunder, Buyer shall, in its sole discretion, be entitled to set
off any claim against any amounts (a) payable to Sentex pursuant to section 1.05
or (b) payable to Sentex in connection with the Promissory Note pursuant to
section 1.03, provided, however, that prior to its exercise of such setoff
right, Buyer shall give Sentex thirty (30) days prior written notice to allow
Sentex to settle or otherwise compromise such claim to the reasonable
satisfaction of Buyer, provided that if such claim is not settled or otherwise
compromised to the reasonable satisfaction of Buyer during such 30 day period,
Buyer may thereafter exercise the setoff right described herein. In no event
shall such offsets constitute Buyer's only remedy with respect to claims for
indemnification under this Article 8.
SECTION 8.06. Indemnification by Buyer. Buyer hereby indemnifies and holds
harmless Sentex and Seller from and against any and all claims, liabilities,
obligations, costs, damages, losses and expenses of any nature, arising out of,
resulting from or relating to any breach of the representations, warranties or
covenants of Buyer under this Agreement, or any liabilities that are included
within the Assumed Liabilities and all costs and expenses (including reasonable
attorneys' fees) incurred in connection with the foregoing.
SECTION 8.07. Procedures for Indemnification of Third Party Claims. A party
or parties entitled to indemnification hereunder with respect to a third party
claim (the "Indemnified Party") will give the party or
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parties required to provide such indemnification (the "Indemnifier") written
notice within thirty (30) days of receipt of or knowledge concerning any legal
proceeding, claim or demand instituted by any third party (in each case, a
"Claim") in respect of which the Indemnified Party is entitled to
indemnification hereunder. The Indemnifier shall have the right, by giving
written notice to the Indemnified Party within ten (10) days after receipt of
notice from the Indemnified Party and stating that it is responsible for such
Claim, at its option and expense, to defend against, negotiate, settle or
otherwise deal with any Claim with respect to which it is the Indemnifier and to
have the Indemnified Party represented by counsel, reasonably satisfactory to
the Indemnified Party, selected by the Indemnifier; provided, that the
Indemnified Party may participate in any proceeding with counsel of its choice
and at its expense; provided further, that Buyer, at any time when it believes
in good faith that any Claim with respect to which any Indemnifier are defending
is having a material adverse effect on its business, may assume the defense and
settlement of such Claim in good faith and be fully indemnified therefor; and
provided further, that the Indemnifier may not enter into a settlement of any
such Claim without the consent of the Indemnified Party unless such settlement
requires no more than a monetary payment for which the Indemnified Party is
fully indemnified or involves other matters not binding upon or affecting the
Indemnified Party. The parties will cooperate fully with each other in
connection with the defense, negotiation or settlement of any Claim.
SECTION 8.08. Procedures for Indemnification of Non-Third Party
Claims. With respect to any claim for indemnification hereunder that does not
involve a third party claim, the Indemnified Party will give the Indemnifier
written notice of such claim. The Indemnifier may acknowledge and agree by
notice to the Indemnified Party in writing to satisfy such claim within ten (10)
days of receipt of notice of such claim from the Indemnified Party. In the event
that the Indemnifier shall dispute such claim, the Indemnifier shall provide
written notice of such dispute to the Indemnified Party within twenty (20) days
of receipt of notice of such claim, setting forth the basis of such dispute.
Upon receipt of notice of any such dispute, the Indemnified Party and the
Indemnifier shall use reasonable efforts to resolve such dispute within thirty
(30) days of the date such notice of dispute is received. In the event that the
Indemnifier shall fail to provide written notice to the Indemnified Party within
twenty (20) days of receipt of notice from the Indemnified Party that the
Indemnifier either acknowledges and agrees to pay such claim or disputes such
claim, the Indemnifier shall be deemed to have acknowledged and agreed to pay
such claim in full and to have waived any right to dispute such claim. Once (a)
the Indemnifier has acknowledged and agreed to pay any claim pursuant to this
section 8.08, (b) any dispute under this section 8.08 has been resolved in favor
of indemnification by mutual agreement of the Indemnifier and the Indemnified
Party, or (c) any dispute under this section 8.08 has been finally resolved in
favor of indemnification by order of a court of competent jurisdiction or other
tribunal having jurisdiction over such dispute, the Indemnifying Party shall pay
the amount of such claim to the Indemnified Party within twenty (20) days of the
date of acknowledgment or resolution, as the case may be, to such account and in
such manner as is designated in writing by the Indemnified Party.
SECTION 8.09. Exclusive Remedy Against Stockholder; Limitations of Remedy
Against Seller and Sentex. After the Closing, the exclusive remedy of the Buyer
against the Stockholder with respect to any breach of any representation,
warranty or covenant of the Subsidiary under this Agreement shall be the right
to pursue claims of indemnification under this Article 8. Except as aforesaid,
the Buyer agrees that it will not be entitled to pursue any other remedies
against the Stockholder at law or in equity. Subject in all respects to the
limitations described in sections 8.01 and 8.02, after the Closing, the Buyer
shall be entitled to pursue any remedies against Sentex or the Seller with
respect to any breach of any representation, warranty or covenant of the Seller
or Sentex under this Agreement, including, without limitation, any claim of
indemnification under this Article 8 or any other remedy at law or in equity.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. Any notices or other communications required or
permitted to be given hereunder shall be deemed given when received and shall be
(a) delivered in person, (b) mailed by registered
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or certified mail, return receipt requested, or (c) sent by a nationally
recognized overnight courier, addressed as follows:
To Buyer:
Metrisa, Inc.
25 Wiggins Avenue
Bedford, Massachusetts 01730
Attn: President
with a copy to:
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
Attn: David Brown, Esq.
To Sentex, Monitek or Monitek GmbH:
1807 East 9th Street, Suite 1510
Cleveland, Ohio 44114
Attn: Robert S. Kendall
with a copy to:
William Toomajian, Esq.
Baker & Hostetler LLP
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114
To the Stockholder:
CPS Capital, Ltd.
1807 East 9th Street, Suite 1510
Cleveland, Ohio 44114
Attn: Robert S. Kendall
SECTION 9.02. Expenses. All legal and other costs and expenses incurred in
connection with this agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses; provided, that, in the
event of the termination of this Agreement and any of Sentex, Monitek, the
Subsidiary or the Stockholder shall enter into any transaction, or enter into
any agreement relating to any transaction, with any Person relating to an
Acquisition Proposal directly or indirectly as a result of any negotiations or
other actions in violation of section 4.04 or pursuant to a Superior Proposal,
within twelve (12) months after the date hereof, Sentex shall immediately pay
Buyer in cash by wire transfer of immediately available funds (a) the reasonable
costs and expenses of Buyer theretofore incurred by Buyer in connection with
this Agreement and the transactions contemplated hereby, including, without
limitation, attorneys' and accountants' fees and expenses, and (b) the sum of
$150,000. The obligation of Sentex to pay Buyer the sum of $150,000 pursuant to
the foregoing provisions shall be secured by a security interest in the assets
of Sentex and Seller substantially in accordance with the terms of the Security
Agreement attached hereto as Exhibit 5.06(b).
SECTION 9.03. Certain Taxes. Notwithstanding any provision of law, all
transfer, documentary, sales, use, real property gains, stamp, registration, and
other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement shall be borne and paid by Sentex and the
Stockholder when due.
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SECTION 9.04. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties and their respective successors
and assigns, provided that neither this Agreement nor any right hereunder may be
assigned by any party without the written consent of Buyer, Sentex, and Seller,
except that Buyer may assign any of its rights under this Agreement to any
wholly owned subsidiary; provided, Buyer remains obligated to perform all of its
obligations hereunder and under the Promissory Note.
SECTION 9.05. Public Announcements. No party to this Agreement shall make,
or cause to be made, any press release or public announcement, including
notification of its shareholders, with respect to this Agreement or the
transactions contemplated hereby or otherwise communicate with any news media or
with its shareholders without the prior written consent of the other party
(unless required by law), and in any such event, each such party shall furnish
to the other parties a copy of any press release or other public announcement.
SECTION 9.06. Amendments and Waivers. This Agreement may be modified or
amended only by a writing signed by Buyer, Seller and Sentex, and by the
Stockholder (solely with respect to Article 8). No waiver of any term or
provision hereof shall be effective unless in writing signed by the party
waiving such term or provision.
SECTION 9.07. Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
SECTION 9.08. Headings. The headings of Articles and Sections herein are
inserted for convenience of reference only and shall be ignored in the
construction or interpretation hereof.
SECTION 9.09. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of Massachusetts,
without regard to the choice of law provisions thereof.
SECTION 9.10. No Waiver. No failure to exercise and no delay in exercising
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The rights provided are cumulative and not exclusive of
any rights provided by law.
SECTION 9.11. Integration. This writing, together with Exhibits and
Schedules hereto, embodies the entire agreement and understanding between the
parties with respect to this transaction and supersedes all prior discussions,
understandings and agreements concerning the matters covered hereby.
SECTION 9.12. Limitation on Scope of Agreement. If any provision of this
Agreement is unenforceable or illegal, said provisions shall be enforced to the
fullest extent permitted by law and the remainder of the Agreement shall remain
in full force and effect.
SECTION 9.13. Further Assurances. Following the Closing, Seller and the
Stockholder will execute and deliver to Buyer such documents and take such other
actions as Buyer may reasonably request in order to consummate the transactions
contemplated hereby, and Buyer will execute and deliver to Seller such documents
and take such other actions as Seller may reasonably request in order to
consummate the transactions contemplated hereby.
SECTION 9.14. Third-Party Beneficiaries. Nothing in this Agreement shall be
construed as giving any Person, other than the parties hereto and their
permitted successors and assigns, any right, remedy or claim under or in respect
of this Agreement or any provision thereof.
SECTION 9.15. Bulk Sales Indemnity. The Buyer hereby waives compliance with
the provisions of any applicable bulk transfer laws, and the Seller and Sentex
covenant that all debts, obligations and liabilities relating to the Business
that are not assumed by the Buyer under this Agreement will be promptly paid and
discharged by the Seller or Sentex as and when they become due and payable. The
Seller and Sentex, jointly and severally, further agree to indemnify and hold
the Buyer harmless from all claims made by creditors with respect to
noncompliance with any bulk transfer law, except to the extent that such claims
result from liabilities assumed by the Buyer hereunder.
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EXECUTED as a sealed instrument as of the day and year first above written.
METRISA, INC.
By /s/ John E. Wolfe
------------------------------------
Name: John E. Wolfe
Title: President
SENTEX SENSING TECHNOLOGY, INC.
By /s/ Robert S. Kendall
------------------------------------
Robert S. Kendall, Chief Executive
Officer and President
MONITEK TECHNOLOGIES, INC.
By /s/ Robert S. Kendall
------------------------------------
Robert S. Kendall, Chief Executive
Officer and President
MONITEK GMBH
By /s/ Robert S. Kendall
------------------------------------
Robert S. Kendall, Chief Executive
Officer and President
Solely with respect to Article 8
hereof:
CPS CAPITAL, LTD.
By /s/ Robert S. Kendall
------------------------------------
Name: Robert S. Kendall
Title: President
The undersigned agrees to vote its
shares of the capital stock of Sentex
in favor of the transaction
contemplated by the foregoing
Agreement
CPS CAPITAL, LTD.
By /s/ Robert S. Kendall
------------------------------------
Robert S. Kendall
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SENTEX SENSING TECHNOLOGY, INC.
PROXY
-----
THIS PROXY IS BEING SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF SENTEX SENSING TECHNOLOGY, INC.
The undersigned hereby appoints ROBERT S. KENDALL and JULIUS L. HESS
and each of them, attorneys and proxies of the undersigned, with full power of
substitution, to attend the special meeting of shareholders of Sentex Sensing
Technology, Inc. ("Sentex") to be held at Sentex's offices located at 1801 East
9th Street, Cleveland, Ohio 44114 on ____________________ , _________________ ,
2000 at 10:00 a.m., Eastern Standard Time, or any adjournment thereof, and to
vote the number of shares of Sentex which the undersigned would be entitled to
vote, and with all the power the undersigned would possess, if personally
present, as follows:
1. On a proposal to approve the Asset Purchase Agreement, dated
as of March 14, 2000, by and among Metrisa, Inc., a Delaware
corporation ("Metrisa"), Metrisa GmbH, a German company and a wholly
owned subsidiary of Metrisa ("Metrisa GmbH"), Sentex, Monitek
Technologies, Inc., a Delaware corporation and a wholly owned
subsidiary of Sentex ("Monitek"), Monitek GmbH, a German company and a
wholly owned subsidiary of Monitek ("Monitek GmbH"), and, solely with
respect to certain provisions, CPS Capital Ltd., an Ohio limited
liability company, pursuant to which Monitek and Monitek GmbH will
sell substantially all of their assets to Metrisa and Metrisa GmbH
(the "Sale of Assets Proposal").
The proxies are instructed to vote on the Sale of Assets Proposal
as follows:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. [ ] FOR or [ ] WITHHOLD AUTHORITY to vote for the election of
each of the following five nominees for director: (i) James G. Few,
(ii) Julius L. Hess, (iii) Robert S. Kendall, (iv) Ronald M. Lipson,
and (v) James S. O'Leary. (INSTRUCTION: To withhold authority to vote
for any individual nominee, print that nominees name in the space
provided below.)
----------------------------------
3. such other business as may properly come before the meeting.
<PAGE> 71
THE PROXIES WILL VOTE AS SPECIFIED ON THE REVERSE SIDE, OR IF A CHOICE IS NOT
SPECIFIED, THEY WILL VOTE FOR APPROVAL OF THE SALE OF ASSETS PROPOSAL AND TO
ELECT THE NOMINEES DESCRIBED IN ITEM 2 ABOVE.
Receipt of the Notice of Special
Meeting of Shareholders and Proxy
Statement dated ___________, 2000
is hereby acknowledged.
Dated:
--------------------------, 2000
--------------------------------------
--------------------------------------
--------------------------------------
Signature(s)
(Please sign exactly as your name or names
appear hereon, indicating, where proper,
official position or representative
capacity. If shares are held jointly, all
holders must sign.)
