UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-KSB
-----------
ANNUAL OR TRANSITIONAL REPORT
(Mark One)
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1999
OR
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-15486
MIKRON INSTRUMENT COMPANY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY 22-1895668
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
16 THORNTON ROAD, OAKLAND, NJ 07436
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(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 405-0900
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
Name of each exchange on
Title of each class which registered
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Common Stock, one-third cent par value Nasdaq Small-Cap Market
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes |X| No |_|
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |X|
Revenues for the most recent fiscal year were $7,090,631.
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of January 24, 2000, based upon the average bid and asked prices
of such stock on that date was $3,014,608. Solely for purposes of the foregoing
calculation all of the registrant's directors and officers are deemed to be
affiliates.
The number of shares of the registrant's Common Stock outstanding as of January
24, 2000 was 4,285,700
Transitional Small Business Disclosure Format Yes |_| No |X|
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PART I
ITEM 1. BUSINESS.
GENERAL
Mikron Instrument Company, Inc. ("Mikron" or the "Company") a New Jersey
corporation organized in 1969, develops, manufactures, markets and services
equipment and instruments for non-contact temperature measurement. The Company's
products are typically used to measure the temperature of moving objects, or
stationary objects in environments or situations where contact temperature
measurement would be difficult, hazardous or impracticable, and wherever rapid
temperature changes must be accurately tracked instantaneously. The predominant
market for the Company's hand-held infrared thermometers is industrial quality
control applications and maintenance. The Company also markets its products to
laboratories and original equipment manufacturers, both domestic and foreign,
where "fixed" infrared thermometers are incorporated as integral components of
production equipment.
The Company also manufactures high resolution thermal imaging products under the
name of Pyrovision(R), and manufactures and/or markets calibration sources and a
variety of accessories and optional equipment for its infrared thermometers.
PRODUCT DESIGN
Although the Company has developed a line of infrared thermometry products for
many scientific and industrial applications, all such products operate in
essentially the same way. All physical objects emit infrared radiation. The
amount of such radiation is a function of the surface temperature of each such
object. The Company's infrared thermometry products detect and measure such
radiation, convert it into an electrical signal and translate the signal into a
temperature reading of the target surface of the object, all without contact
with the object. The basic components of a Company infrared thermometer consist
of a lens and mirrors or a fiber optic assembly for focusing on the object, an
infrared detector head which converts the infrared radiation emitted from the
surface of the focused object into an electrical signal, electrical circuitry, a
meter or output indicator, and the housings for these components.
The Company sells two basic kinds of infrared thermometers: "portable" units and
"fixed" units and product sales are a mix of portable and fixed infrared
thermometers and calibration sources. The different models in the Company's
product line have each been designed with different focusing methods, detectors,
electrical circuitry, indicators and housings so as to optimize performance
under different applications, sets of conditions or temperature ranges.
The portable units are battery-powered with digital meters and are hand-held for
temperature measurement of target surfaces typically in a laboratory or
industrial facility. The price range of the Company's portable units is between
$1,275 and $5,000.
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The fixed units are externally powered, have electrical outputs instead of
meters and are permanently incorporated as an integral component of a machine or
on a production line. The price range of the fixed units manufactured by the
Company is between $225 and $7,000.
CURRENT PRODUCT OFFERINGS
The Company has introduced a number of new products in the past few years, and
continues to expand existing product lines, that management believes will
contribute to its sales.
In October 1999, Mikron acquired the assets of Texas Infrared, Inc., a Hancock,
Michigan based manufacturer of a fixed mounted, uncooled focal plane array
thermal imaging camera and a sophisticated software package that enables users
to acquire and analyze images and generate reports. The Texas Infrared camera
was incorporated into the existing Mikron product line and is sold under the
"MikroScan" name. The software has been adapted to interface with all Mikron
imaging cameras and is sold under the "MiKroSpec" name. Typical applications for
imaging products are in predictive-preventive maintenance, process monitoring,
and non-destructive testing.
In January, 1998, the Company commenced distribution of the Mikron TH5104
IR-Man(R) Portable Thermal Imager which is manufactured by NEC San-ei Instrument
Ltd. ("NEC"). This high resolution, high sensitivity product was designed for
plant and equipment preventative and predictive maintenance and condition
monitoring applications. Typical applications include monitoring electrical
panels, components, transformers and motors as well as energy auditing of
buildings and HVAC equipment.
In January, 1998, the Company introduced the Mikron M680 Infraducer(R). A
multi-channel fiber optic infrared thermometer. This product features
exceptionally broad temperature spans and selected spectral responses and was
designed for applications requiring accurate temperature measurement at multiple
locations such as monitoring rapid thermal processing in the semiconductor
manufacturing process. Other applications include crystal growing, heat
treatment and fabrication of metals, vacuum metal melting and automatic
induction heating.
In September 1996, the Company introduced the Mikron Model M385, an
ultra-precision, low temperature blackbody calibration standard. This
calibration source is designed for applications in metrology laboratories as
well as medical, life sciences and environmental science disciplines.
In October 1995, the Company introduced the Mikron Model M68L, a new product
line of fiber optic infrared sensors. This unit offers two high temperature
spectral response ranges and offers dual temperature ranges in each unit. They
are excellent for applications in the glass industry, induction heating and in
hazardous environments. Pricing starts at approximately $1,990.
In October 1995, the Mikron Model M9000 Pyrovision Thermal Imaging system was
formally introduced to the marketplace. This high temperature thermal imaging
system operates in the range of 600 degrees C to 2400 degrees C. Its unique near
infrared imaging, high speed and excellent spatial resolution offer significant
advantages over conventional imagers. The price range of this product is between
$25,000 and $50,000.
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In 1994, the Company introduced the Mikron M100 IR-Man, a hand-held series of
non-contact infrared thermometers with precision laser sighting. The principal
application of this product is in preventative maintenance.
The Mikron M380 Series of freezing point blackbody calibration sources was
introduced in 1993. It is used for setting and verifying the accuracy of
calibration of infrared equipment to national standards.
The Model M190-TS was introduced in 1995 as a transfer standard for calibration
laboratories. It allows laboratories and national standards laboratories to
accurately transfer the calibration of one blackbody source to another. It has
been sold to national standards laboratories around the world.
The Company designs, assembles and/or markets accessories and optional equipment
for its infrared thermometers, such as its Infracouple infrared temperature
sensors, lenses, fiber optic assemblies, calibration equipment, mounts,
protective jackets and cases, batteries, chargers and camera adapters.
The Company also services its products during and after the expiration of the
applicable warranty period, which is from one to two years, depending on the
model. These services also include re-calibration of instruments and blackbody
sources that are traceable to NIST. With the growing requirement for traceable
calibration throughout the industry, the company has expanded its capacity in
service.
PRINCIPAL MARKETS, MARKETING AND CUSTOMERS
The Company's infrared thermometry products and accessories are used
industrially (i) in manufacturing processes to measure the process temperature
of metals, wood, plastics, paper, textiles, rubber, glass, ceramics, food and
chemicals, (ii) for condition monitoring and preventative and predictable
maintenance purposes to check temperatures of kiln walls, heat exchangers,
boilers, engines, compressors, transmissions, bearings, gears, pumps, steam
lines and traps, transformers, electrical switch gear and heat loss prevention;
(iii) for quality control to test the temperature and integrity of electronic
equipment, electrical components and circuitry, insulation, and cooling and
heating systems. The Company has initiated efforts to expand the sales of its
products into a variety of non-industrial industries including, among others,
scientific research laboratories.
The Company's products are sold through a network of approximately 85
independent sales representatives and distributors worldwide. The sales
activities of such sales representatives and distributors are coordinated by
five employees of the Company, who are also directly responsible for the balance
of the Company's sales. The Company promotes its products through printed
advertisements in selected industrial and trade journals. The Company also
promotes its products by participating in national and international trade
shows.
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During each of the fiscal years ended October 31, 1998 and 1999, the Company had
approximately 1,000 customers, none of which accounted for more than 10% of its
sales. The Company estimates that it currently has an active customer base of
3,000 customers. The loss by the Company of any single customer would not have a
materially adverse effect on the Company.
In fiscal 1999, approximately 20% of the Company's sales were to customers
outside of the United States, as compared to approximately 19% in fiscal 1998.
As a significant portion of the business is done through known accounts, in
dollars, and the balance is sold on letter of credit terms, there is little
credit or currency risk associated with this business. International exchange
rates have made exports from the United States more viable than in the past, and
the Company intends to take advantage of this situation. However, no assurance
can be given that the Company will be successful in this regard.
COMPETITION
Infrared thermometry equipment and instruments similar to the Company's products
are currently available from other manufacturers, some of whom are larger and
have greater financial and technological resources than the Company.
The Company believes that its sales constitute a small percentage of the
worldwide market for infrared thermometry products. The primary competitive
factors with respect to infrared thermometry products are accuracy, sensitivity,
response time, quality control and the availability of products which optimize
performance in specific applications, conditions and temperature ranges.
Although the Company believes its products compete favorably with respect to
such factors, there can be no assurance that the Company can maintain its
competitive position against current and potential competitors.
In the past two years there have been a number of new products and competitors
entering the low price hand held infrared thermometer market. The Company
believes that this trend will continue as this market grows and that higher
capabilities at stable or reduced pricing will be critical for process or fixed
infrared systems in the next few years. Consequently, strategic marketing and
focus will be critical for growth within these product lines.
INVENTORY, SUPPLIES AND MANUFACTURING
The Company subcontracts the manufacture of almost all of the components that go
into its products. The Company's manufacturing operations primarily involve the
assembly, testing, quality control, calibration and packaging of materials and
components, which are generally available in the marketplace from numerous
suppliers and sources. Since the components are readily available from other
suppliers and since there are several electronic assembly firms available, a
change in suppliers would not have a material effect on the Company's
operations. Materials and components necessary for the Company's manufacturing
activities have always been available in the past and the Company does not
anticipate any future shortages or unavailability in the supply of such
materials and components.
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The Company attempts to maintain a sufficient inventory of materials and
components so as to be able to fill orders for its products within six weeks
after receipt of an order. Its inventory stock is closely monitored by computer,
which enables the Company to be consistent in its order response time and to
maintain its inventory at desired levels.
QUALITY ASSURANCE
In May 1996, the Company secured ISO 9001 certification of its Quality Assurance
systems. This international customer driven certification, encompasses all
operating aspects of the Company's business including sales and marketing,
design and engineering, manufacturing, testing and calibration. ISO 9001
certification brings the Company's quality systems and operating systems a level
of recognition from most domestic and international customers.
The Company's principal products have also been tested and certified to meet or
exceed CE sensitivity and emissions standards for electro-magnetic interference.
RESEARCH AND DEVELOPMENT
The Company conducts product development activities to increase the size of its
available market through broader product offerings and to cost reduce its
products resulting in more competitive pricing and/or better operating margins.
For the past year, the Company's research and development activities has been
primarily devoted to the development of new infrared thermometry products, as
well as the adaptation and enhancement of existing products for new
applications.
The Company believes that its ability to maintain a technological edge in
infrared technology and to achieve early market entry with new infrared
thermometry products are critical factors to its business. Accordingly, it has
been increasing its research and development budget in recent years. The new
products introduced by the Company over the last several years, were a direct
outgrowth of its research and development program. See "Current Product
Offerings."
INTELLECTUAL PROPERTY
The Company owns two patents covering technology related to its infrared
thermometry products, and derives royalty payments from one of its patents.
Neither of these patents is material to the Company's overall business.
Furthermore, there can be no assurances that the Company's patents will provide
an adequate measure of protection against competitive technology which could
circumvent such patent or that an issued patent would withstand review and be
held valid by a court of competent jurisdiction. No other patents have been
issued or applied for with respect to any of the Company's products or other
proprietary technical information and there is no assurance that any products of
the Company will be patentable.
The protection of proprietary technology and information developed by the
Company will be limited to such protection as the Company may be able to secure
pursuant to trade secret or copyright laws or under any confidentiality
agreements which it may enter. The Company has filed trademarks and trade names
for certain of its product names and marks, however, there is
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no assurance as to the validity, enforceability or lack of infringement of such
trade names and trademarks.
The Company is a party to confidentiality agreements with key personnel and
third parties. There can be no assurance that the scope of any such protection
the Company is able to secure will be adequate to protect its proprietary
information, or that the Company will have the financial resources to engage in
litigation against parties who may infringe such proprietary technology or
copyrights. In addition, there can be no assurance that others will not develop
similar technology independently of the Company. The Company, however, believes
that the limited protection of its proprietary technology will not materially
affect its business or future prospects. The Company believes that its products
do not infringe the proprietary rights of third parties. There can be no
assurance, however, that third parties will not assert infringement claims in
the future.
Mikron(R), IR-Man(R), Pyrovision(R), Infraducer(R) and Infracouple(R) are
trademarks of the Company which has been registered with the United States
Patent and Trademark Office.
EMPLOYEES
As of October 31, 1999, the Company's staff was comprised of 53 persons, 51 of
whom were full time and 2 of whom were part time. Of the total number of
employees, 14 are engaged in design engineering and research and development, 19
in manufacturing and production, 6 in marketing and sales, 8 in administration
and finance, 4 in general office and 3 are executives. None of Company's
employees is represented by unions. The Company has not experienced any strikes
or work stoppages and, in the opinion of the Company's management, it has good
working relations with its employees.
CERTAIN CONTRACTUAL ARRANGEMENTS
The Company also has a variety of agreements with Chori Co., Ltd. ("Chori") and
an affiliate of Chori, Chori of America, Inc. ("Chori-America") which includes
the transfer of certain technology, the cross-licensing of each other's
technology, the marketing of each other's products, and the collection of
proceeds from the Company's foreign sales. See "Certain Relationships and
Related Transactions."
In March 1998, the Company entered into a sales representation agreement with
Anritsu Meter Co., Ltd. ("Anritsu"). Pursuant to the agreement, the Company was
granted the exclusive, except as to Anritsu, right to promote and sell Anritsu
products in North America. The agreement has a five year term with a one year
notice period for termination thereafter. Anritsu manufactures a full line of
lower cost contact temperature probes, indicators and calibrators.
FORWARD-LOOKING STATEMENTS
Some of the statements made in this Form 10-KSB are forward-looking in nature,
including but not limited to the Company's business strategy, marketing
assumptions, product development, plans concerning the commercialization of
products, certain financial information and other statements that are not
historical facts. The occurrence of the events described, and the
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achievement of the intended results are subject to the future occurrence of
certain events and scientific results, some or all of which are not predictable
or within the Company's control; therefore, actual results may differ materially
from those anticipated in any forward-looking statements.
ITEM 2. PROPERTIES.
The Company maintains its corporate and administrative facilities at 16 Thornton
Road, Oakland New Jersey. The building has approximately 26,397 square feet and
is also used for the Company's production and warehouse facilities. The lease,
which expires on December 31, 2000, requires the Company to pay real estate
taxes, insurance, maintenance and other operating costs. The lease, provides for
rent at a fixed annual amount of approximately $191,380 payable in equal monthly
installments. The Company has an option to renew the lease for an additional
five year period with the rent to be paid during the option period to be the
fair market rental value of the property as determined by an independent M.A.I.
appraiser.
ITEM 3. LEGAL PROCEEDINGS.
There are no pending material legal proceedings to which the Company is a party
or to which any of its properties is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On August 20, 1999 the Company held its Annual Meeting of Shareholders for the
fiscal year ended October 31, 1999. At the meeting, the shareholders approved an
amendment to the Company's Certificate of Incorporation which replaced the Board
of Directors consisting of three classes, each of which was elected annually,
with an unclassified Board of Directors elected annually. The shareholders also
elected management's nominees for directors, Steven N. Bronson (Chairman),
Gerald D. Posner, Keikhosrow Irani, Dennis Stoneman, Jeffery Adduci and Paul M.
Bronson, and the shareholders also approved:
o a proposal to create the Mikron Instrument Company, Inc. 1999 Omnibus
Stock Incentive Plan;
o an amendment to the Company's Certificate of Incorporation which
eliminated the supermajority shareholder voting requirements imposed by
article twelfth thereof;
o an amendment to the Certificate of Incorporation limiting the liability of
the Company's officers and directors to the fullest extent permitted by
New Jersey law; and
o a proposal to ratify the selection of the accounting firm of Feldman Sherb
Horowitz & Co. as the Company's independent auditors for fiscal year
ending October 31, 1999
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED MATTERS.
The Company's Common Stock, is traded on the Nasdaq SmallCap Market under the
symbol "MIKR." The following table sets forth the range of high and low closing
bid prices for the Company's Common Stock as reported by the SmallCap Market for
the last two fiscal years. These quotations represent inter-dealer prices,
without adjustment for retail mark-ups, mark-downs or commissions and do not
necessarily represent actual transactions:
Fiscal Years Bid Price
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Low High
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2000:
First Quarter through
January 19, 2000 $1.25 $1.34
1999:
First Quarter $1.03 $1.63
Second Quarter $0.843 $1.25
Third Quarter $0.875 $1.43
Fourth Quarter $1.06 $1.12
1998:
First Quarter $1.00 $2.25
Second Quarter $1.00 $2.88
Third Quarter $1.13 $2.59
Fourth Quarter $0.25 $1.50
On January 19, 2000, the closing bid and asked price quotations for the
Company's Common Stock were $1.25 and $1.34, respectively. The Company believes
that its Common Stock is held of record by approximately 62 persons, including
several brokerage firms holding shares in street name for more than 400
beneficial owners.
DIVIDEND POLICY
The Company has not, to date, paid nor declared any cash or other dividends on
its shares of Common Stock since its inception. The Company has no current plans
to pay dividends on its Common Stock and intends to retain earnings, if any, for
working capital purposes. Any future determination as to the payment of
dividends on the Common Stock will depend upon the results of operations,
capital requirements, the financial condition of the Company and other relevant
factors.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's results
of operations and financial condition. This discussion should be read in
conjunction with the financial statements and notes thereto appearing elsewhere
herein. See also "Business."
OVERVIEW
The Company, develops, manufactures, markets and services equipment and
instruments, including hand-held infrared thermometers, for non-contact
temperature measurement. The Company's products are typically used to measure
the temperature of moving objects, or stationary objects in environments or
situations where contact temperature measurement would be difficult, hazardous
or impracticable, and wherever rapid temperature changes must be accurately
tracked instantaneously. The Company's predominant markets include industrial
quality control applications and maintenance, as well as laboratories and
original equipment manufacturers where "fixed" infrared thermometers are
incorporated as integral components of production equipment. Recently, the
Company has begun to augment its own product development activities by
distributing certain compatible and strategic products of other manufacturers of
both contact and non-contact temperature measurement instruments and accessories
such as NEC and Anritsu.
RESULTS OF OPERATIONS
Year Ended October 31, 1999 Compared To Year Ended October 31, 1998
Net sales for the fiscal year ended October 31, 1999 were $7,090,631 as compared
to sales of $8,426,771 for the fiscal year ended October 31, 1998. The 15.8%
decline in sales was primarily due to two factors - the economic slow down in
Asian markets which had the effect of reducing demand for the Company's
products, and uneven performance in the Company's US and European distribution
channels. In order to address those factors, the Company brought in new senior
management in May, 1999 who, among other things, made changes to the Company's
commissioned sales force and undertook various other steps to reinvigorate the
Company's organic growth. Management believes that, as a result of such efforts,
orders during the second half of fiscal 1999 (May - Oct.) increased by 41.5%
over the orders processed during the first half of fiscal 1999.
The cost of goods sold, as a percentage of net sales for fiscal 1999 was 47.4%
as compared to 46.4% for fiscal 1998. The .5% increase was principally the
result of lower gross margin on the thermal imager that the Company imports from
a Japanese supplier.
Selling, general and administrative expenses consist primarily of expenses
associated with the marketing and selling of the Company's products, along with
accounting and administrative expenses. During the fiscal year ended October 31,
1999, selling, general and administrative expenses were $3,461,580, as compared
to $3,620,910 for the immediately preceding fiscal year.
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During the second half of fiscal 1999, the Company acquired the thermal imaging
business and assets of Texas Infrared, Inc. The Company paid various operating
expenses incurred by Texas Infrared during the period between the August 2, 1999
execution of the acquisition agreement, and the October 1999 closing of the
transaction. Those expenses were included in selling, general and administrative
expenses. The decrease in selling, general and administrative expenses was due
to a $144,000 reduction in advertising expenditures over comparable expenses of
the immediately preceding fiscal year.
Research and development expenses consist primarily of the salaries of the
Company's research and development personnel and other expenses associated with
new product development and enhancements to existing product lines. Despite
reduced sales volume the Company's commitment to research and development has
continued. The Company spent $707,190 in fiscal 1999 as compared to $726,242 for
the same period in fiscal 1998.
The loss before income taxes for fiscal year ended October 31, 1999 was $352,222
as compared to a net profit before income tax of $231,617 achieved in fiscal
1998. The loss is a direct result of the above-mentioned diminution in sales.
Year Ended October 31, 1998 Compared To Year Ended October 31, 1997
Net sales for the fiscal year ended October 31, 1998 were $8,250,730, as
compared to sales of $6,618,513 for the fiscal year ended October 31, 1997. This
substantial increase of 25% is primarily attributed to the introduction and
sales of the portable thermal imager Model TH5104. The cost of goods sold
consists primarily of the costs of direct materials and labor associated with
sales and support of the company's products. The cost of goods sold as a
percentage of net sales for fiscal 1998 was 47% as compared to 45.5% for fiscal
1997. The increase of 1.5% was principally the result of a lower gross profit
margin for Model TH5104 thermal imager that is imported and cannot enjoy the
same gross margin of profit as a product manufactured by Mikron.
Selling, general administrative expenses consist primarily of the costs of
sales, marketing, finance, management and administrative personnel, advertising,
promotions, trade shows and facilities expenses. For the fiscal year ended
October 31, 1998 selling, general administrative expenses were $3,620,910 as
compared to $3,192,219 for the same period in 1997. A major portion of this
increase is due to promotion, marketing, exhibitions and training associated
with the introduction of Model TH5104. In addition, Mikron introduced a new,
comprehensive 250 page general catalog that encompasses descriptions of all
Mikron products and associated technical information at a cost of nearly
$75,000. Also, Mikron embarked on the design of a comprehensive home page
web-site for the Internet. The cost associated with development of the web-site
during 1998 is estimated at $35,000.
Research and development expenses consist primarily of research and development
personnel and other expenses associated with the development of new products,
enhancement of existing products and engineering support of the manufacturing
process. The Company spent $726,241 in fiscal year 1998 as compared with
$658,070 for the same period in 1997. Such expenditures covered both research
and development conducted by the Company as well as contracted
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research and development. The dollar increase was principally attributed to an
accelerated effort to develop more variations and software of the Company's
Model M680 Infraducer and work on the new Model M9000 Pyrovision imaging
pyrometer as well as Model M770 Infraducer and blackbody sources.
The profit before income taxes for the fiscal year ended October 31, 1998 was
$231,617 as compared to a net loss of $36,251 for the same period in 1997. The
increase in profits in fiscal 1998 was due primarily to a substantial increase
in sales. The introduction of Model TH5104 thermal imager contributed to the
final profitability of the Company even though other parameters such as greater
efficiency in manufacturing were contributing factors.
YEAR 2000 ISSUES
The Company has conducted a full review of its computer systems, and the
products and systems which it manufactures and markets to identify the programs
and systems that could be affected by the so called "year 2000 problem." As of
the date of filing of this Report, all products and systems manufactured by the
Company are Year 2000 compliant. The computer software programs upon which the
Company relies to run its daily operations, including purchasing, manufacturing,
engineering and accounting, are Year 2000 compliant.
The Company intends to continue to monitor its Year 2000 compliance and to
correct any noncompliance as it is discovered. Management anticipates funding
such efforts out of operating cash flow. Although no assurance can be given, the
Company presently believes that the effects of any noncompliance on its part, or
by its customers and suppliers, will not have a material adverse effect on the
Company's business, financial condition, results of operations or cash flows.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 1999, the Company had cash, cash equivalents and short-term
investments of $1,229,636 as compared to $415,400 at October 31, 1998. In
addition, the Company had accounts receivable of $960,527 at October 31, 1999
compared to $1,057,079 at October 31, 1998. The additional liquidity is due to
the equity investments of Messrs. Posner and Stoneman, the Company's President
and Vice President, respectively.
As of October 31, 1999, the Company had working capital of $3,714,400 and a
backlog of $956,271 Management believes that the Company has adequate resources
to meet expected needs and to fund its anticipated research and development
efforts for the next 12 months. In the event additional capital is required in
excess of cash generated by operations, the Company presently intends to raise
such additional capital by continued borrowing arrangements and/or the sale of
additional equity securities, although there can be no assurance that the
Company will be successful in obtaining additional operating capital on terms
acceptable to it.
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ITEM 7. FINANCIAL STATEMENTS
The Company's balance sheets at October 31, 1999 and 1998 and the related
statements of operations, shareholders' equity and statement of cash flows for
each of the fiscal years ended October 31, 1999 and 1998 and the report of the
independent certified public accountants thereon and financial statement
schedules required under Regulation S-X are submitted herein as a separate
section starting at Page F-1 following Item 13 of this Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors and executive officers of the Company are as follows:
Name Age Position
---- --- --------
Steven N. Bronson 34 Chairman of the Board
Gerald D. Posner 51 President and Chief Executive Officer
Dennis Stoneman 66 Vice President
Keikhosrow Irani 63 Chief Technical Officer
Jeffery Adduci 46 Director
Paul M. Bronson 37 Director
Set forth below is a biographical description of each director and executive
officer of the Company based on information supplied by each of them.
Steven N. Bronson was appointed to the Company's Board of Directors in September
1996. He became Chairman in August 1998. Between 1991 and October 1998, Mr.
Bronson was the President of Barber & Bronson Incorporated ("B&B"), a full
service securities brokerage and investment banking firm which had its principal
offices in Miami, Florida. Since April, 1996, Mr. Bronson also has served as
President of Catalyst Financial Corp., an investment banking firm which was also
located in Miami, Florida. In October 1998, Mr. Bronson relocated to New York
City. At that time, he closed down the operations of B&B and he expanded
Catalyst's operations to encompass brokerage and market making operations as an
NASD member firm, as well as investment banking services. Mr. Bronson also sits
on the Board of Directors of the Regional Investment Bankers Association, an
industry association engaged in capital formation
13
<PAGE>
and the distribution of securities. In addition, Mr. Bronson serves as a
National Trustee for the Boys and Girls Club of America.
Mr. Posner is the former President and a shareholder of Electronic Measurements,
Inc., a privately held, New Jersey based manufacturer of power supplies. Under
Mr. Posner's leadership, a successful LBO creating significant investor
appreciation was completed in 1998, resulting in the sale of Electronic
Measurements, Inc to Siebe, plc. Prior to his involvement at Electronic
Measurements, Mr. Posner was President of Eurotherm plc's temperature
instrumentation subsidiary in the U.S. Mr. Posner holds a B.S.E.E. degree from
Cooper Union and an M.B.A. degree from Clark University.
Mr. Stoneman has spent the past 14 years working in various capacities for
several U.S. and overseas subsidiaries of Eurotherm plc. Since 1996, Mr.
Stoneman has served as Eurotherm's Director of Business Development, primarily
concerning with the acquisition of companies in the field of instrumentation,
controls, solid state relays, AC and DC variable speed motor controls.
Mr. Irani is one of the Company's founders and has served as one of its
directors since the Company was organized in 1969. On August 31, 1995 he became
President and Chief Executive Officer. On May 17, 1999 he relinquished his
position as President, and became Chief Technical Officer. Mr. Irani holds the
degree of Master of Science in Electrical Engineering from the University of
Missouri.
Mr. Adduci became a director, by appointment to fill a vacancy on the Board, on
February 4, 1999, and was elected as a director at the August 1999 Annual
Meeting. He is President of the Regional Investment Bankers Association
("RIBA"), a national association of regional and independent broker-dealers and
investment banking firms seeking to improve conditions in their industry,
strengthen the free enterprise system and enhance a business environment
conducive to meeting the capital formation needs of small, growth companies.
Since 1994, when Mr. Adduci became RIBA's president, member underwriters have
completed some 650 financings totaling more than $6.4 billion. Between 1990 and
1994, Mr. Adduci was Vice President of Regional Investment Brokers Syndicate,
Inc., a national organization of small brokerage firms principally engaged in
small business capital formation.
Mr. Bronson who is the brother of Steven N. Bronson, the Chairman of the
Company's Board of Directors, has been employed by Lighting Division of Philips
Electronics during the past 13 years in various process and manufacturing
engineering and supervisory capacities. Most recently he has served as a senior
engineer in that Division's phosphor metals department. Mr. Bronson holds a B.S.
in ceramic engineering from Alfred University. He was first elected to the Board
at the August 1999 Annual Meeting.
The terms of each director commenced on August 20,1999 and will end one year
from that date, or when their respective successors shall have been duly elected
or appointed.
The Company's Certificate of Incorporation contains provisions indemnifying its
officers, directors, employees and agents against certain liabilities.
14
<PAGE>
ITEM 10 - EXECUTIVE COMPENSATION.
Between August 1998 and May 16, 1999, Steven N. Bronson served as the Company's
Chief Executive Officer. However, he did not receive any compensation from the
Company in such capacity. Commencing on May 17, 1999, Gerald D. Posner began
serving as the Company's President and Chief Executive Officer for which he is
being paid a salary at the annual rate of $200,000. Also, commencing on May 17,
1999, Dennis Stoneman began serving as a Vice President for which he is being
paid a salary at the annual rate of $100,000. The following table sets forth
certain information regarding compensation paid by the Company during each of
the its last three fiscal years to Mr. Posner during fiscal 1999 in his capacity
as Chief Executive, to Keikhosrow Irani in his capacity as the Company's Chief
Executive Officer in fiscal 1997 and as President in 1998, and to each of the
Company's executive officers who received salary and bonus payments in excess of
$100,000 during the fiscal year ended October 31, 1998 (collectively, the "Named
Executives"). The Company has not paid any compensation that would qualify as
payouts pursuant to long-term incentive plans ("LTIP Payouts"), or "All Other
Compensation" and it did not issue any SARs during such period of time.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
----------------------------------------- -------------------------
Restricted Securities
Name and Principal Other Annual Stock Underlying
Position Year Salary ($) Bonus ($) Compensation ($) Awards ($) Options (#)
---- ---------- --------- ----------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gerald D. Posner, CEO 1999 (1) $84,615 -- (2)
Keikhosrow Irani, Pres. 1998 $130,000 11,000 (3)
Keikhosrow Irani, CEO 1997 $127,000 11,000 (3)
Dennis Stoneman, VP 1999 (4) $42,307 3,000 (5) -- (6)
</TABLE>
- ----------
(1) May 17, 1999 - October 31, 1999.
(2) Does not include 171,428 shares of common stock issuable pursuant to
options which contain vesting conditions and performance targets which
have not yet been satisfied. See "Employment Contracts, Termination Of
Employment And Change In Control Arrangements."
(3) Mr. Irani has Company paid life insurance and incidental personal use of a
Company-leased automobile. See, "Certain Relationships and Related
Transactions."
(4) May 17, 1999 - October 31, 1999.
15
<PAGE>
(5) Mr. Stoneman receives a car allowance of $500.00 per month.
(6) Does not include 171,428 shares of common stock issuable pursuant to
options which contain vesting conditions and performance targets which
have not yet been satisfied. See "Employment Contracts, Termination Of
Employment And Change In Control Arrangements."
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The Company did not grant any SARs to any of its executive officers during the
fiscal year ended October 31, 1999. The following table describes the options
granted to the Named Executives during that fiscal year.
<TABLE>
<CAPTION>
Individual Grants
- -----------------------------------------------------------------------------------------------------
Number of % of Total Options
Securities Underlying Granted to Employees Exercise or Base
Name Options Granted (#) During Fiscal Year Price ($/Sh) Expiration Date
- --------------------- --------------------- -------------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Gerald D. Posner, CEO 171,428 (1) 43.6% $1.00 8/17/2003
Dennis Stoneman, VP 171,428 (1) 43.6% $1.00 8/17/2003
</TABLE>
(1) In accordance with the employment agreements between the Company and Messrs.
Posner and Stoneman, each of them was granted options under the Company's
Omnibus Incentive Stock Ownership Plan (the "Plan") to purchase 171,428 shares
of Common Stock at an exercise price of $1.00 per share. The vesting of such
options shall occur at the rate of 25% per annum at the end of each one year
period during the term of each agreement, and the exercise of all vested options
shall be conditioned upon the achievement of a set of pre-determined earnings,
revenue and other performance targets to be formulated mutually by each
executive and the Board or the committee administering the Plan. The term of
such options shall be the 51 month period commencing on May 17, 1999. See,
"Employment Contracts, Termination Of Employment And Change In Control
Arrangements."
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
None of the Named Executive Officers exercised any options during the fiscal
year ended October 31, 1999.
COMPENSATION OF DIRECTORS
The Company has not paid and does not presently propose to pay compensation to
any director for acting in such capacity, except for nominal sums for attending
Board of Directors meetings and reimbursement for reasonable expenses in
attending those meetings.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
16
<PAGE>
In December, 1996, Keikhosrow Irani, who was then the Company's President,
entered into a five year employment agreement with the Company. Pursuant to this
agreement, Mr. Irani received compensation at the rate of $130,000 in 1998, and
will receive base salaries of $135,000 in 1999, $140,000 in 2000 and $150,000 in
2001. Mr. Irani has exercised a two year renewal option contained in that
agreement. He is entitled to receive a base salary of $150,000 during each of
those two year periods. The agreement also provides Mr. Irani with use of an
automobile and for disability income equal to his base salary for up to six
months of disability. In the event of disability lasting beyond six months or in
the event of death of Mr. Irani, the agreement requires a payment of 50% of the
total amount of his last three years' salary over a term of three years. The
agreement also requires the Company to provide disability and life insurance to
Mr. Irani.
In May 1999, Gerald D. Posner and Dennis Stoneman, the Company's President and a
Vice President, respectively, entered into four year employment agreements with
the Company which provide for the payment of annual salaries of $200,000 and
$100,000, respectively, subject to such merit increases, in each case, as the
Company's Board, or the Compensation Committee thereof, shall determine to
grant. In accordance with such agreements, each of Messrs. Posner and Stoneman
was granted options under the Plan to purchase 171,428 shares of Common Stock at
an exercise price of $1.00 per share. See, "Option/SAR Grants In Last Fiscal
Year."
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who beneficially own more than 10% of
the Company's Common Stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("SEC"). Such
persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) forms filed by such persons. Based solely on the Company's
review of such forms furnished to the Company and written representations from
certain reporting persons, the Company believes that such filing requirements
were complied with by all of its executive officers and directors.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is information concerning the Common Stock ownership as of
January 19, 1999 by (i) each person who is known by the Company to own
beneficially 5% or more of its outstanding Common Stock, (ii) each director, and
(iii) all directors and officers of the Company as a group:
Amount and Nature Percentage of
of Beneficial Outstanding Shares
Name of Beneficial Owner (1) Ownership (1) Owned (2)
- ---------------------------- ----------------- ------------------
Steven N. Bronson (3) 896,287 (4) 20.2%
Keikhosrow Irani 645,587 15.1%
17
<PAGE>
Chori Co., Ltd. (5) 350,000 8.2%
Gerald Posner 333,333 7.8%
Denis Stoneman 166,667 3.9%
Jeffery Adduci (6) -- --
Paul M. Bronson (7) -- --
All Officers and
Directors as a Group (of 7) 2,042,271 (8) 46.0%
- ----------
(1) All shares are owned beneficially and of record unless indicated
otherwise. Unless otherwise indicated, the address of each shareholder is
c/o the Company.
(2) Based upon 4,285,700 shares issued and outstanding.
(3) Mr. Bronson's address is c/o Catalyst Financial, LLC, 900 Third Avenue,
Suite 201, New York, NY 10022. ("Catalyst")
(4) Includes 153,685 shares issuable pursuant to warrants held by Mr. Bronson,
which may be exercised within 60 days of the date of this Report. Also
includes 100,000 shares issuable pursuant to warrants held by Catalyst,
which may be exercised within 60 days of the date of this Report. Mr.
Bronson is the sole owner and manager of Catalyst and has full discretion
to exercise such warrants, and to vote and dispose of such shares. See
"Certain Relationships and Related Transactions."
(5) The address of this shareholder is 4-7 Kawaramachi, 2-chome, Chuo-ku,
Osaka 541, Japan.
(6) Mr. Adduci's address is c/o Regional Investment Bankers Association, 171
Church Street, Charleston, S.C. 29401
(7) Mr. Bronson's address is 6004 Cos Corners Road, Bath, NY 14810
(8) Includes 153,685 shares issuable pursuant to warrants held by Steven N.
Bronson, which may be exercised within 60 days of the date of filing of
this Report.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company previously retained Barber & Bronson ("B&B") as its exclusive
investment banker until September 30, 1998. Under the Company's agreement with
B&B, it paid $1,000 per month to B&B and issued to certain principals of B&B
warrants to purchase up to 400,000 shares of common stock at prices ranging from
$0.81 per share to $2.50 per share. Steven Bronson, the President, sole director
and principal shareholder of B&B, received warrants to purchase 318,060 of those
400,000 shares. On December 31, 1998, Mr. Bronson exercised warrants to purchase
131,500 shares at prices ranging between $.81 and $1.50 per share. Also, on that
date, one of the warrants which entitled Mr. Bronson to purchase 32,875 shares
of an exercise price of $1.75 per share expired unexercised. Mr. Bronson
continues to hold one of
18
<PAGE>
those warrants which entitles him to purchase up to 153,685 shares of common
stock at an exercise price of $2.50 per share through September 30, 2000.
On May 3, 1999, the Company entered into a three year financial consulting
services agreement with Catalyst Financial, LLC. ("Catalyst"), a licensed
brokerage and investment banking firm solely owned and controlled by Steven N.
Bronson. Catalyst's basic compensation under this agreement includes a payment
of $5,000 per month during the term of the agreement and a five year warrant
entitling it to purchase 100,000 shares of common stock at an exercise price of
$1.00 per share. Furthermore, in the event that the Company effectuates, as a
result of any introduction made by Catalyst, a merger, acquisition,
consolidation, reorganization, recapitalization, business combination or other
transaction (in each case, an "M&A Transaction") during the term of the
agreement, and during the one year period following the end of such term,
Catalyst shall be entitled to receive a finder's fee with respect thereto based
upon a sliding scale ranging from 5% of the first $5,000,000 of consideration to
1% of any consideration in excess of $20,000,000. Also, if Catalyst renders
consulting services with respect to an M&A Transaction which does not result
from an introduction made by it, Catalyst shall be entitled to receive a
finder's fee with respect thereto based upon a sliding scale ranging from 2.5%
of the first $5,000,000 of consideration to .5% of any consideration in excess
of $20,000,000.
The Company purchases certain of the products it sells to its customers from
Chori Co., Ltd. ("Chori"), and Chori-America. Chori is an owner of more than
five percent (5%) of the Company's common stock. During fiscal 1999, the Company
purchased approximately $684,000 of products from or through Chori, and paid
Chori and Chori-America approximately $72,000, representing commissions paid at
the rate of 5% of sales to those companies in their respective capacities as
international sales representatives for all of the Company's products.
Since August, 1992, the Company has provided $500,000 of life insurance for Mr.
Irani.
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-B
3.1 The Certificate of Incorporation of the Company as amended effective
September 29, 1989., filed as Exhibit (3)-2 to Registration No. 33-2653-NY under
the Securities Act of 1933 (the "1933 Act"), is hereby incorporated by
reference.
3.2 The Certificate of Incorporation of the Company as amended effective October
13, 1989, filed as Exhibit (3)-3 to Registration No. 33-2653-NY under the 1933
Act, is hereby incorporated by reference.
3.3 Certificate of Amendment to the Certificate of Incorporation, effective
August 31, 1999.
4.1 Specimen of amended certificate representing the Company's Common Stock,
one-third cent per value, filed as Exhibit (4)-1 to Registration No. 33-2653-NY
under the 1933 Act, is hereby incorporated by reference.
19
<PAGE>
4.2 Mikron Instrument Company, Inc. Common Stock Purchase Warrants, dated as of
January 1, 1994, held by Barber & Bronson Incorporated, filed as Exhibit 4(c) to
the Company's 10-K Report dated January 27, 1994 and is hereby incorporated by
reference.
4.3 Mikron Instrument Company, Inc. Omnibus Stock Incentive Plan.
10.1 Agency Agreement, dated as of April 15, 1992, between Mikron Instrument
Company, Inc. and Chori America, Inc., filed as Exhibit 10-B to the Company's
Form 8-K Report dated April 15, 1992, as amended in an amendment dated July 10,
1992, is hereby incorporated by reference.
10.2 License and Technical Assistance Agreement, dated as of April 15, 1992,
between Mikron Instrument Company, Inc. and Anritsu Meter Company, Ltd., filed
as Exhibit 10-D to the Company's Form 8-K Report dated April 15, 1992, as
amended in an amendment dated July 10, 1992, is hereby incorporated by
reference.
10.3 Mikron Instrument Company, Inc. Amended and Restated Profit Sharing Plan
and Trust Agreement, dated November 1, 1980, filed as Exhibit 10 (g) to the
Company's 10-K Report dated January 28, 1991 and is hereby incorporated by
reference.
10.4 Settlement Agreement dated as of July 1, 1992 between Mikron Instrument
Co., Inc. and Square D Company, filed as Exhibit 10 (i) to the Company's 10-K
Report dated January 25, 1993 and is hereby incorporated by reference.
10.5 Mikron Instrument Company, Inc. 401(K) Profit-Sharing Plan dated January 1,
1993, filed as Exhibit 10(j) to the Company's 10-K Report dated January 27, 1994
and is hereby incorporated by reference.
10.6 Investment Banking Agreement dated as of January 1, 1994 between Mikron
Instrument Company and Barber & Bronson Incorporated, filed as Exhibit 10(k) to
the Company's 10-K Report dated January 27, 1994 and is hereby incorporated by
reference.
10.7 Settlement Agreement dated as of March 31, 1994 between Mikron Instrument
Company, Inc. and Land Instrument International, Inc., filed as Exhibit 10 to
the Company's 8-K Report dated March 31, 1994, as awarded by an Amendment dated
June 20, 1994, and is hereby incorporated by reference.
10.8 Amended and Restated Employment Agreement and Covenant Not to Compete
between Mikron Instrument Company, Inc. and Donald S. Michael dated as of July
24, 1995, filed as Exhibit 10 to the Company's 8-K Report dated November 24,
1995 and is hereby incorporated by reference.
10.9 Investment Banking Agreement dated as of October 1, 1995 between Mikron
Instrument Company, Inc. and Barber & Bronson Incorporated, filed as Exhibit 10
to the Company's 8-K Report dated January 3, 1996 and is hereby incorporated by
reference.
20
<PAGE>
10.10 Employment Agreement between the Company and Keikhosrow Irani, dated as of
December 20, 1996, filed as Exhibit 10 to the Company's Report on Form 10-KSB
dated November 24, 1995 and is hereby incorporated by reference.
10.11 Settlement Agreement between the Company and Raytek Corporation, filed as
Exhibit 10.11 to the Company's Report on Form 10-KSB dated January 29, 1998 and
is hereby incorporated by reference.
10.12 Sales Representation Agreement between the Company and Anritsu Meter Co.,
Ltd., filed as Exhibit 10.12 to the Company's Report on Form 10-KSB dated
January 29, 1998 and is hereby incorporated by reference.
10.13 Employment Agreement between the Company and Gerald D. Posner.
10.14 Employment Agreement between the Company and Dennis Stoneman.
10.15 Financial Consulting Agreement between Catalyst Financial, LLC and the
Company.
27 Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the last quarter of the
period covered by this Report.
21
<PAGE>
MIKRON INSTRUMENT COMPANY, INC.
FINANCIAL STATEMENTS
INDEX
Page
Number
------
INDEPENDENT AUDITORS' REPORT F - 2
FINANCIAL STATEMENTS:
Balance Sheet - October 31, 1999 F - 3
Statements of Operations - Years ended
October 31, 1999 and 1998 F - 4
Statement of Shareholders' Equity - Years ended
October 31, 1999 and 1998 F - 5
Statement of Cash Flows - Years ended
October 31, 1999 and 1998 F - 6
Notes to Financial Statements F - 7
All schedules are omitted because they are inapplicable, not required, or the
information is included elsewhere in the financial statements or notes thereto.
F-1
<PAGE>
[FELDMAN SHERB EHRLICH & CO., P.C. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Board of Directors
Mikron Instrument Company, Inc.
Oakland, New Jersey
We have audited the accompanying balance sheet of Mikron Instrument
Company, Inc. as of October 31, 1999 and the related statements of operations,
stockholders' equity and cash flows for the years ended October 31, 1999 and
1998. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
the financial position of Mikron Instrument Company, Inc. as of October 31, 1999
and the results of its operations and its cash flows for the years ended October
31, 1999 and 1998 in conformity with generally accepted accounting principles.
Feldman Sherb Horowitz & Co., P.C.
Certified Public Accountants
New York, New York
January 7, 2000
F-2
<PAGE>
MIKRON INSTRUMENT COMPANY, INC.
BALANCE SHEET
October 31, 1999
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,229,626
Trade accounts receivable, less allowance for
doubtful accounts of $83,000 960,527
Inventories 2,200,733
Prepaid expenses and other current assets 77,900
----------
TOTAL CURRENT ASSETS 4,468,786
PROPERTY AND EQUIPMENT, net 327,916
OTHER ASSETS 96,815
----------
$4,893,517
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 749,362
Current portion of capital lease obligation 5,024
----------
TOTAL CURRENT LIABILITIES 754,386
----------
LONG-TERM LIABILITIES:
Capital lease obligation 1,502
----------
TOTAL LONG-TERM LIABILITIES 1,502
----------
SHAREHOLDERS' EQUITY
Common stock, $.003 par value; 15,000,000 shares
authorized, 4,285,700 shares issued and outstanding 12,858
Additional paid-in capital 4,051,393
Retained earnings 73,378
----------
TOTAL SHAREHOLDERS' EQUITY 4,137,629
----------
$4,893,517
==========
See notes to financial statements
F-3
<PAGE>
MIKRON INSTRUMENT COMPANY, INC.
STATEMENTS OF OPERATIONS
Year Ended October 31,
----------------------
1999 1998
---- ----
REVENUES:
Net sales $ 6,969,057 $ 8,250,730
Royalties 121,574 176,041
----------- -----------
TOTAL REVENUES 7,090,631 8,246,771
----------- -----------
COSTS AND EXPENSES:
Cost of goods sold 3,304,160 3,872,590
Selling, general and administrative 3,461,580 3,620,910
Research and development 707,190 726,242
----------- -----------
TOTAL COSTS AND EXPENSES 7,472,930 8,219,742
----------- -----------
INCOME (LOSS) FROM OPERATIONS (382,299) 207,029
OTHER INCOME:
Investment and interest income 30,077 24,588
----------- -----------
INCOME (LOSS) BFEORE PROVISION FOR
INCOME TAXES (352,222) 231,617
PROVISION FOR INCOME TAXES -- 50,000
----------- -----------
NET INCOME (LOSS) $ (352,222) $ 181,617
=========== ===========
NET INCOME (LOSS) PER SHARE-BASIC AND DILUTED $ (0.09) $ 0.05
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES-BASIC 4,013,783 3,654,200
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES-DILUTED 4,013,783 3,683,170
=========== ===========
See notes to financial statements
F-4
<PAGE>
MIKRON INSTRUMENT COMPANY, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Total
------------------- Paid-In Retained Stockholders'
Shares Amount Capital Earnings Equity
------ ------ ------- -------- ------
<S> <C> <C> <C> <C> <C>
Balance October 31, 1997 3,654,200 $ 10,963 $ 3,153,049 $ 243,983 $ 3,407,995
Net income -- -- -- 181,617 181,617
--------- ----------- ----------- ----------- -----------
Balance October 31, 1998 3,654,200 10,963 3,153,049 425,600 3,589,612
Issuance of stock with
respect to exercise of
warrants 131,500 395 149,844 -- 150,239
Issuance of stock with
respect to private
placement 500,000 1,500 748,500 -- 750,000
Net loss -- -- -- (352,222) (352,222)
--------- ----------- ----------- ----------- -----------
Balance October 31, 1999 4,285,700 $ 12,858 $ 4,051,393 $ 73,378 $ 4,137,629
========= =========== =========== =========== ===========
</TABLE>
See notes to financial statements
F-5
<PAGE>
MIKRON INSTRUMENT COMPANY, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended October 31,
----------------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (352,222) $ 181,617
----------- -----------
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation 77,391 66,646
Amortization -- 37,500
Changes in assets and liabilities:
(Increase) decrease in trade accounts receivable 96,552 (146,244)
(Increase) in inventories 84,319 (26,605)
(Increase) in prepaid and other current assets 15,584 (4,772)
Increase in other assets (96,815) --
(Decrease) increase in accounts payable and accrued liabilities 212,324 (155,328)
----------- -----------
389,355 (228,803)
----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 37,133 (47,186)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (118,837) (81,091)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (118,837) (81,091)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock 900,239 --
Decrease in long-term debt (4,309) (4,318)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES 895,930 (4,318)
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 814,226 (132,595)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 415,400 547,995
----------- -----------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 1,229,626 $ 415,400
=========== ===========
</TABLE>
See notes to financial statements
F-6
<PAGE>
MIKRON INSTRUMENT COMPANY, INC.,
NOTES TO FINANCIAL STATEMENTS
Mikron Instrument Company, Inc. (the "Company") is engaged in designing
and manufacturing a broad range of non-contact temperature measurement devices
for sale to domestic and foreign markets. The Company also sells high
sensitivity infrared thermal imaging devices.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Cash and Cash Equivalents - Cash equivalents are carried at cost,
which approximates market. The Company considers all highly liquid
investments with a maturity date of three months or less when
purchased to be cash equivalents.
b. Inventories - Inventories are stated at the lower of cost (average
cost method) or market.
c. Property and Equipment - Property and equipment are stated at cost.
Depreciation is computed principally using straight-line
depreciation over the estimated useful lives of individual assets or
the remaining terms of leases.
d. Revenues - Net sales are recognized at the time of shipment.
Royalties are recorded as earned in accordance with specific terms
of each license agreement.
e. Research and Development Costs - Research and development costs are
expressed as incurred.
f. Advertising Costs - The costs of advertising are expressed as
incurred.
g. Earnings per Share - The Company has adopted SAS No. 128, "Earnings
per Share". Net income (loss) per common share has been restated for
all periods presented to conform to the provisions of SAS No. 128.
Basic earnings (loss) per share is computed by dividing net income
(loss) available to common stockholders by the weighted average
number of common shares outstanding during the period. Diluted
earnings per share reflects the amount that would have resulted if
potential common stock had been converted to common stock, as
prescribed by SAS No. 128.
h. Accounting 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.
F-7
<PAGE>
MIKRON INSTRUMENT COMPANY, INC.,
NOTES TO FINANCIAL STATEMENTS - (continued)
i. Fair Value of Financial Instruments - The carrying amounts reported
in the balance sheet for cash, trade receivables, accounts payable
and accrued expenses approximate fair value based on the short term
maturity of these instruments.
j. New Accounting Pronouncement - The Company will adopt Statement of
Financial Accounting Standard No. 133 ("SFAS No. 133"), "Accounting
for Derivative Instruments and Hedging Activities" as amended by
SFAS No. 137 for the year ended December 31, 2000. SFAS No. 133
establishes a new model for accounting for derivatives and hedging
activities and supersedes and amends a number of existing standards.
The application of the new pronouncement is not expected to have a
material impact on the Company's financial statements.
k. Stock-Based Compensation - In October 1995, the Financial Accounting
Standards Board issued Statement No.123, "Accounting for Stock-Based
Compensation," which is effective for transactions entered into
after December 31, 1995. Statement No.123 establishes a fair value
method of accounting for stock-based compensation, through either
recognition or disclosure. The Company adopted the employee
stock-based compensation disclosure - only provisions of Statement
No. 123 in fiscal 1998 by disclosing the pro forma net income
amounts assuming the fair value method was adopted May 1, 1996. The
adoption of Statement No. 123 did not impact the Company's results
of operations, financial position or cash flows.
l. Accounting for Long Lived Assets - The company reviews long-lived
assets and certain identifiable assets for impairment whenever
circumstances and situations change such that there is an indication
that the carrying amount may not be recoverable. At October 31,
1999, the Company believes that there has been no impairment of its
long -lived assets.
2. INVENTORIES
The components of inventories at October 31, 1999 are as follows:
Materials and parts $1,641,532
Work in process 204,109
Finished goods 355,092
----------
$2,200,733
==========
F-8
<PAGE>
MIKRON INSTRUMENT COMPANY, INC.,
NOTES TO FINANCIAL STATEMENTS - (continued)
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at October 31,1999:
Machinery and equipment $ 965,925
Furniture and fixtures 62,570
Leasehold Improvements 64,445
Software Developments 64,545
-----------
1,157,585
Less: accumulated depreciation (829,669)
-----------
$ 327,916
===========
4. EMPLOYEE BENEFIT PLAN
The Company sponsors a 401(k) plan covering substantially all full-time
employees, which provides for Company matching of 30% of the participant's
elective deferral, but in no event greater than 1.5% of the participant's
compensation. The Company's matching expense for the plan was $13,050 and
$23,045 for the years ended October 31, 1999 and 1998 respectively.
5. CAPITAL LEASE OBLIGATION
The Company has leased equipment under non-calculable lease agreements
which expire at December 2000. As of October 31, 1999 minimum annual lease
commitments under capital leases with terms in excess of one year are as
follows:
2000 $ 5,616
2001 1,404
-------
Total future minimum lease payments 7,020
Less amounts representing interest (494)
-------
Present value of minimum lease payments 6,526
Less: Current portion of obligations under capital lease (5,024)
=======
Long-term obligations under capital lease, net of current
portion $ 1,502
=======
F-9
<PAGE>
MIKRON INSTRUMENT COMPANY, INC.,
NOTES TO FINANCIAL STATEMENTS - (continued)
6. COMMITMENTS
Operating Leases
The Company has a five year operating lease agreement for its
manufacturing, warehouse and office facilities, with an option to extend
the lease for an additional five years. The lease expires December 31,
2000. The lease provides for the Company to pay certain operating costs of
the leased property. Rent expense for the years ended October 31, 1999,
and 1998, was approximately $203,865 and $196,306 respectively.
At October 31, 1999, the minimum future rental commitments under this
lease are as follows:
Year Ending October 31,
-----------------------
2000 $216,000
Employment Contracts
The Company has an employment agreement with an officer expiring December
31, 2001. The agreement provides for compensation of $140,000 and $150,000
for 2000 and 2001, respectively.
The Company also has employment contracts with two other officers for four
year terms which commenced in May 1999. The annual compensation payable
under those contracts is $200,000 and $100,000, respectively. In
accordance with such agreements, each of those officers was awarded
options under the Company's Omnibus Stock Incentive Plan to purchase
171,428 shares of Common Stock at an exercise price of $1.00 per share.
Such options will vest at the rate of 25% per annum at the end of each of
the first four years of the five year term thereof. Exercise of the vested
portion of each option is conditioned upon achievement of predetermined
performance targets.
Investment Banking Agreement
In October 1995, the Company entered into a three year agreement with an
investment banking firm to serve as the Company's financial advisor and
granted the investment banking firm to purchase a total of 200,000 shares
of the Company's common stock with an exercise price of $2.50 per share
for which the investment banking firm paid the
F-10
<PAGE>
MIKRON INSTRUMENT COMPANY, INC.,
NOTES TO FINANCIAL STATEMENTS - (continued)
Company $666. The fair market value of the Company's stock at October 31,
1999 was $1.00. The warrants expire on September 30, 2000.
In May 1999, the Company entered into an agreement with another investment
banking firm owned by the Company's chairman. Per agreement, the
investment banking firm is to receive an annual compensation of $60,000
over next three years and is entitled to receive warrants to purchase
100,000 shares of the Company's common stock at $1.00 a share.
Consulting Agreement
In October 1999, the Company entered into an agreement with a consultant
to a develop patents. The agreement provides for a monthly compensation of
$6,000 and will expire either at the end of October 2000 or upon
completion of the project, whichever comes first. Subsequent to the
termination of the contract, the consultant is entitled to receive three
percent of the contract price generated from the patents.
Credit Agreements
The Company has a commercial line of credit agreement with a bank which
provides a line of credit of up to $600,000 at the prime interest rate and
a foreign exchange line's daily settlement of $200,000. This agreement
runs through February 28, 2001, and is secured by all of the present and
future accounts receivable, inventory and fixed assets of the Company.
7. STOCKHOLDERS' EQUITY
In December 1998, 131,500 shares of the Company's common stock was issued
for $15,239 as a result of exercise of warrants by a former Chief
Executive Officer. Also, the Company issued 333,333 and 166,667 shares of
its common stock to two officers for $750,000 in May 1999.
8. INCOME TAXES
Income statement presentation of the Company's Income Tax Provision and
Deferred Tax Assets and Liabilities are presented in accordance with
Financial Accounting Standards Board Statement 109, "Accounting for Income
Taxes." Deferred Tax Assets as of October 31, 1999 consist of the
following:
F-11
<PAGE>
MIKRON INSTRUMENT COMPANY, INC.,
NOTES TO FINANCIAL STATEMENTS - (continued)
Net operating loss carry forward $ 123,000
Less: valuation allowance (123,000)
=========
$ --
=========
Reconciliation of the provision for income taxes shown in the financial
statements and amounts computed by applying the Federal statutory income
tax rates are as follows:
Year ended October 31,
----------------------
1999 1998
--------- ---------
Net (loss) earnings before income taxes $(352,222) $ 231,617
========= =========
Provision (benefit) for income taxes $ 123,000 $ 68,000
Tax benefit not recognized -- --
Benefit provided by net operating (123,000) (18,000)
loss carry forward
Research and development credits -- (50,000)
--------- ---------
$ -- $ --
========= =========
Alternative minimum tax $ -- $ 50,000
========= =========
9. ADVERTISING COSTS
Advertising costs amounted to approximately $341,372 and $488,636 for the
years ended October 31, 1999 and 1998, respectively.
10. RELATED PARTY TRANSACTIONS
The Company purchases certain of its products from a Japanese company that
is a stockholder. Purchases from this company, for the years ended October
31, 1999, and 1998 were approximately $683,933 and $936,658, respectively.
In addition, under the terms of a distribution agreement, this company
acts as the international sales representative for all of the Company's
products for which it earns a 5% commission.
F-12
<PAGE>
MIKRON INSTRUMENT COMPANY, INC.,
NOTES TO FINANCIAL STATEMENTS - (continued)
For the years ended October 31, 1999, and 1998, the company received
commissions of approximately $41,000 and $72,000, respectively.
The Company also has entered into an investment banking agreement with an
investment banking firm owned by the Chairman of the Company (see Note 6.)
11. ASSET PURCHASE
The Company purchased assets from another entity in October 1999 for
$250,000. The acquired assets include receivables, inventories, fixed
assets and a patent license. The patent license is classified as Other
Assets on the balance sheet and will be amortized over three years
beginning January 2000.
Pursuant to the purchase agreement, the Company will pay the owner of the
selling entity royalties equal to five percent of the net revenues
generated from the Company's sales of industrial fixed position uncooled
focal plane array thermal imaging cameras, together with all other
equipment, software and engineering services included in such sales. The
royalties will be paid from November 1, 1999 to October 31, 2004.
The Company also issued to the owner of the selling entity an option to
purchase up to 50,000 shares of the Company's common stock at $1.00 per
share. The option shall vest at the rate of 10,000 shares per year during
the five year period ending October 26, 2004, and each 10,000 share
tranche shall be exercisable during the three year period commencing on
the date of vesting thereof.
F-13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized on the 27th day of January, 2000.
MIKRON INSTRUMENT COMPANY, INC.
By: /s/ Gerald D. Posner
-----------------------------------------
Gerald D. Posner, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
/s/ Gerald D. Posner
- ---------------------- Chief (Principal) Executive Officer, January 27, 2000
Gerald D. Posner Director
/s/ Michael Brady
- ---------------------- Vice President, Chief (Principal January 27, 2000
Michael Brady Financial Officer)
/s/ Steven N. Bronson
- ---------------------- Chairman of the Board January 27, 2000
Steven N. Bronson
/s/ Keikhosrow Irani
- ---------------------- Chief Technical Officer, Director January 27, 2000
Keikhosrow Irani
/s/ Dennis Stoneman
- ---------------------- Vice President, Director January 27, 2000
Dennis Stoneman
- ---------------------- Director January __, 2000
Jeffery Adduci
/s/ Paul M. Bronson
- ---------------------- Director January 27, 2000
Paul M. Bronson
22
<PAGE>
Index To Exhibits
Exhibit No. Description
- ----------- -----------
3.3 Certificate of Amendment to the Certificate of Incorporation,
effective August 31, 1999.
4.3 Mikron Instrument Company, Inc. Omnibus Stock Incentive Plan.
10.13 Employment Agreement between the Company and Gerald D. Posner.
10.14 Employment Agreement between the Company and Dennis Stoneman.
10.15 Financial Consulting Agreement between Catalyst Financial, LLC
and the Company.
27 Financial Data Schedule
23
Exhibit 3.3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
MIKRON INSTRUMENT COMPANY, INC.
Pursuant to the provisions of Section 14A:9-2(4) and Section 14A:9-4(3),
Corporations General, of the New Jersey Statutes, the undersigned Corporation
executes the following Certificate of Amendment of its Certificate of
Incorporation:
1. The name of the Corporation is:
MIKRON INSTRUMENT COMPANY, INC.
2. The following amendments to the Certificate of Incorporation were approved
by the directors and thereafter duly adopted by the shareholders of the
Corporation on the 20th day of August, 1999:
(a) Article FIFTH of the Certificate of Incorporation is hereby amended to
read in its entirety as follows:
"FIFTH: The business and affairs of the Corporation shall be managed
by or under the direction of a Board of Directors consisting of not less
than three directors or more than nine directors, the exact number of
directors to be determined from time to time solely by resolution adopted
by the Board of Directors. All directors shall be of one class and serve
for a term ending at the annual meeting following the annual meeting at
which the director was elected. Each director shall hold office after the
annual meeting at which his or her term is scheduled to end until his or
her successor shall be elected and shall qualify, subject, however, to
prior death, resignation, disqualification or removal from office. Any
newly created directorship resulting from an increase in the number of
directors may be filled by a majority of the Board of Directors then in
office, provided that a quorum is present, and any other vacancy on the
Board of Directors may be filled by a majority of the directors then in
office, even if less than a quorum, or by a sole remaining director."
(b) Article TWELFTH of the Certificate of Incorporation is deleted in its
entirety and is replaced with new Article TWELFTH which shall read in its
entirety as follows:
"TWELFTH: Subject to, and to the fullest extent permitted by,
N.J.S.A. 14A:2-
<PAGE>
7(3), as amended from time to time, no director or officer shall be liable
to the Corporation or to any of its shareholders for monetary damages for
breach of any duty as a director or officer, except with respect to (1) a
breach of a duty of loyalty to the Corporation or its shareholders; (2)
acts or omissions not in good faith or which involve a knowing violation
of law; or (3) a transaction from which the director or officer derived an
improper personal benefit."
3. The foregoing amendments to the Certificate of Incorporation were adopted
upon the receipt of the affirmative vote of a majority of the votes cast
by the holders of shares entitled to vote thereon at a meeting of the
shareholders of the Corporation held on August 20, 1999.
4. This amendment of the Certificate of Incorporation is to become effective
upon filing.
I, GERALD POSNER, President of Mikron Instrument Company, Inc., a New
Jersey corporation, do hereby certify that the aforementioned amendments to the
Certificate of Incorporation have been duly adopted pursuant to the procedures
set forth in N.J.S.A. 14A:9- 2(4) at a meeting of the shareholders of the
Corporation upon the affirmative vote of a majority of the votes cast by the
holders of shares entitled to vote thereon, and that the Board of Directors of
Mikron Instrument Company, Inc. directed that the Amendment to the Certificate
of Incorporation be duly filed with the Secretary of State of New Jersey.
I do hereby certify that the Corporation is not in the hands of a
receiver, trustee or other court appointed officer.
-------------------------------
GERALD POSNER, President
Mikron Instrument Company, Inc.
16 Thornton Road
Oakland, New Jersey 07436
2
Exhibit 4.3
MIKRON INSTRUMENT COMPANY, INC.
OMNIBUS STOCK INCENTIVE PLAN
ARTICLE I
DEFINITIONS
1.01. Agreement means a written agreement between the Company and a Participant
or any written instrument issued by the Company to a Participant (including any
amendment or supplement thereto) specifying the terms and conditions of an award
of Restricted Shares or Performance Shares or a grant of an Option or SAR made
to such Participant.
1.02. Board means the Board of Directors of the Company.
1.03. Code means the Internal Revenue Code of 1986, as amended.
1.04. Committee means the Compensation Committee of the Board, consisting solely
of not less than two non-employee directors who have been appointed to
administer the Plan.
1.05. Common Stock means the Company's common stock, one-third cent par value.
1.06. Company means Mikron Instrument Company, Inc.
1.07. Corresponding SAR means a SAR that is granted in relation to a particular
Option and that can be exercised only upon the surrender to the Company,
unexercised, of that portion of the Option to which the SAR relates.
1.08. Date of Exercise means (i) with respect to an Option, the date that the
Option price is received by, and (ii) with respect to a SAR, the date that the
notice of exercise is received by, the Company.
1.09. Fair Market Value of the Common Stock shall be the mean between the
following prices, as applicable, for the date as of which fair market value is
to be determined, as quoted in The Wall Street Journal (or in such other
reliable publication as the Committee, in its discretion, may determine to rely
upon): (a) if the Common Stock is listed on the New York Stock Exchange, the
highest and lowest sales prices per share of the Common Stock as quoted in the
NYSE-Composite Transactions listing for such date, (b) if the Common Stock is
not listed on such exchange, the highest and lowest sales prices per share of
Common Stock for such date on (or on any composite index including) the
principal United States securities exchange registered under the Exchange Act on
which the Common Stock is listed, or (c) if the Common Stock is not listed on
any such exchange, the
<PAGE>
highest and lowest sales prices per share of the Common Stock for such date on
the Nasdaq Stock Market or any successor thereto ("Nasdaq"). If there are no
such sale price quotations for the date as of which fair market value is to be
determined, but there are such sale price quotations within a reasonable period
both before and after such date, then fair market value shall be determined by
taking a weighted average of the means between the highest and lowest sales
prices per share of the Common Stock as so quoted on the nearest date before and
the nearest date after the date as of which fair market value is to be
determined. The average should be weighted inversely by the respective numbers
of trading days between the selling dates and the date as of which fair market
value is to be determined. If there are no such sale price quotations on or
within a reasonable period both before and after the date as of which fair
market value is to be determined, then fair market value of the Common Stock
shall be the mean between the bona fide bid and asked prices per share of Common
Stock as so quoted for such date on Nasdaq, or if none, the weighted average of
the means between such bona fide bid and asked prices on the nearest trading
date before and the nearest trading date after the date as of which fair market
value is to be determined, if both such dates are within a reasonable period.
The average is to be determined in the manner described above in this paragraph.
If the fair market value of the Common Stock cannot be determined on the basis
previously set forth in this paragraph on the date as of which fair market value
is to be determined, the Committee shall in good faith determine the fair market
value of the Common Stock on such date. Fair market value shall be determined
without regard to any restriction other than a restriction which, by its terms,
will never lapse.
1.10. Incentive Stock Option shall have the meaning given to it by Section 422
of the Code.
1.11. Initial Value means, with respect to a SAR, the Fair Market Value of one
share of Common Stock on the date of grant, as set forth in an Agreement.
1.12. Involuntary Termination means a Termination of Employment for a reason
other than death, Retirement, Total Disability or voluntary resignation.
1.13. Non-Employee Director means a director who:
(a) is not currently an officer of the Company or a parent or subsidiary
of the Company, or otherwise currently employed by the Company or a parent or
subsidiary of the Company;
(b) does not receive compensation, either directly or indirectly, for
services rendered as a consultant or in any capacity other than as a director,
except for an amount which does not exceed the dollar amount for which
disclosure would be required pursuant to any provision of Regulations S-K
promulgated by the Commission;
(c) does not possess an interest in any other transaction for which
disclosure
2
<PAGE>
would be required by any provision of said Regulation S-K; and
(d) is not engaged in a business relationship for which disclosure would
be required by any provision of said Regulation S-K.
1.13 Nonstatutory Option means any Option granted by the Company pursuant to
this Plan which is not an Incentive Stock Option.
1.14. Option means any stock option that entitles the holder to purchase from
the Company a stated number of shares of Common Stock at the price set forth in
an Agreement including, but not limited to, an Incentive Stock Option, a
Nonstatutory Option and a Performance Option..
1.15. Participant means an employee of the Company, or of a Subsidiary,
including an employee who is a member of the Board, or a non-employee director,
and any other person who satisfies the requirements of Article IV and is
selected by the Committee or by the Board to receive a Restricted Share or
Performance Share award, an Option, a SAR, or a combination thereof.
1.16 Performance Option means an Option entitling the Participant to purchase
from the Company a stated number of shares of Common Stock at the price set
forth in an Agreement, the exercise of which is conditioned upon the achievement
of one or more of the Performance Targets set forth in such Option or the
Agreement.
1.17 Performance Period means an accounting period of the Company or a
Subsidiary of not less than one year, as determined by the Committee in its
discretion.
1.18. Performance Share means an award, expressed in dollars or shares of Common
Stock, granted to a Participant with respect to a Performance Period. Awards of
Performance Shares expressed in dollars may be established as fixed dollar
amounts, as a percentage of salary, as a percentage of a pool based on earnings
of the Company, a Subsidiary or Subsidiaries or any branch, department or other
portion thereof or in any other manner determined by the Committee in its
discretion, provided that the amount thereof shall be capable of being
determined as a fixed dollar amount as of the close of the Performance Period.
1.19 Performance Target means that level of performance established by the
Committee which must be met in order for an award of Performance Shares to be
fully earned. The Performance Target may be expressed in terms of earnings per
share, return on assets, asset growth, ratio of capital to assets or such other
level or levels of accomplishment by the Company, a Subsidiary or Subsidiaries,
any branch, department or other portion thereof or the Participant individually
as may be established or revised from time to time by the
3
<PAGE>
Committee.
1.20. Plan means the Mikron Instrument Company, Inc. Omnibus Stock Incentive
Plan.
1.21. Restricted Shares means shares of Common Stock awarded to a Participant
under Article VII. Shares of Common Stock shall cease to be Restricted Shares
when, in accordance with the terms of the applicable Agreement, they become
transferable and free of substantial risks of forfeiture.
1.22. Retirement means a Termination of Employment by reason of a Participant's
cessation of employment (or, in the case of a non-employee director, the
cessation of his or her tenure as such), other than by reason of a Total
Disability or Termination for Cause.
1.23. SAR means a stock appreciation right that entitles the holder to receive,
with respect to each share of Common Stock encompassed by the exercise of such
SAR, the amount determined by the Committee and specified in an Agreement. In
the absence of such a determination, the holder shall be entitled to receive,
with respect to each share of Common Stock encompassed by the exercise of such
SAR, the excess of the Fair Market Value on the Date of Exercise over the
Initial Value. References to "SARs" include both Corresponding SARs and SARs
granted independently of Options, unless the context requires otherwise.
1.24. Subsidiary means any "subsidiary corporation" as such term is defined in
Code section 424.
1.25. Termination of Employment means with respect to (a) Participants who are
employees of the Company or a Subsidiary, the time when the employee-employer
relationship between the Participant and the Company ceases to exist for any
reason including, but not limited to termination by resignation, discharge,
death, Total Disability or Retirement; and (b) Participants who are non-employee
directors, the time when the Participant ceases to be a director by reason of
his or her resignation, failure to stand for re-election or dismissal.
1.26. Termination for Cause means an Involuntary Termination of a Participant:
(a) if the Participant has a written employment agreement with the Company or
any Subsidiary, "for cause" as that or a similar term is defined in the
employment agreement; or (b) if the Participant does not have a written
employment agreement with the Company or any Subsidiary, by reason of (i) the
Participant's dishonesty or misconduct (including substance abuse) in the
performance of his or her duties; or (ii) a wilful failure by the Participant to
perform his or her assigned duties which adversely affects the Company; of (iii)
the conviction of the Participant of a felony or other criminal act. All
determinations of whether or not a Termination for Employment is "for cause"
will be made by the
4
<PAGE>
Committee in its sole and absolute discretion.
1.27. Total Disability means the inability of a Participant to engage in any
substantial gainful activity by reason of a medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than 12 months.
All determinations as to the date and extent of disability of a Participant will
be made by the Committee in its sole and absolute discretion.
ARTICLE II
PURPOSES
The Plan is intended to assist the Company in recruiting and retaining
employees and directors with ability and initiative by enabling them to
participate in its future success and to associate their interests with those of
the Company and its shareholders. The Plan is intended to permit the award of
Restricted Shares, the award of Performance Shares, the grant of SARs, and the
grant of Performance Options, Incentive Stock Options and Nonstatutory Options.
The proceeds received by the Company from the sale of Common Stock pursuant to
this Plan shall be used for general corporate purposes.
ARTICLE III
ADMINISTRATION
Except as provided in this Article III, the Plan shall be administered by
the Committee. The Committee shall have authority to award Restricted Shares and
Performance Shares and to grant Options and SARs upon such terms (not
inconsistent with the provisions of this Plan) as the Committee may consider
appropriate. Such terms may include conditions (in addition to those contained
in this Plan) on the exercisability of all or any part of an Option or SAR or on
the transferability or forfeitability of Restricted Shares. Notwithstanding any
such conditions, the Committee may, in its discretion, accelerate the time at
which any Option or SAR may be exercised or the time at which Restricted Shares
may become transferable or nonforfeitable. In addition the Committee shall have
complete authority to interpret all provisions of this Plan; to prescribe the
form of Agreements; to adopt, amend, and rescind rules and regulations
pertaining to the administration of the Plan; and to make all other
determinations necessary or advisable for the administration of this Plan. The
express grant in the Plan of any specific power to the Committee shall not be
construed as limiting any power or authority of the Committee. Any decision
made, or action taken, by the Committee or in connection with the administration
of this Plan shall be final and conclusive. No member of the Committee
5
<PAGE>
shall be liable for any act done in good faith with respect to this Plan or any
Agreement, or Option, SAR, Restricted Share award or Performance Share award.
All expenses of administering this Plan shall be borne by the Company.
The Committee, in its discretion, may delegate to one or more officers of
the Company all or part of the Committee's authority and duties with respect to
Participants who are not subject to the reporting and other provisions of
Section 16 of the Securities Exchange Act of 1934, as in effect from time to
time (the "Exchange Act"). In the event of such delegation, and as to matters
encompassed by the delegation, references in the Plan to the Committee shall be
interpreted as a reference to the Committee's delegate or delegates. The
Committee may revoke or amend the terms of a delegation at any time, but such
action shall not invalidate any prior actions of the Committee's delegate or
delegates that were consistent with the terms of the Plan.
In addition to, and not in substitution or replacement of, the powers and
authority conferred upon the Committee pursuant to this Plan, the Board shall
also be entitled to award Restricted Shares or Performance Shares and/or to
grant one or more Options, SARs, or Options and SARs to any eligible
Participant, and when it makes such awards and/or grants, all of the provisions
of this Plan which pertain to the Committee shall be construed as though the
word "Board" appeared in place of the word "Committee," and the Board shall
have, and shall be entitled to exercise, all of the powers and authority
conferred upon the Committee when making, amending, modifying canceling,
settling or rescinding any of such awards and/or grants.
ARTICLE IV
ELIGIBILITY
4.01. General. Any employee of the Company or of any Subsidiary (including any
corporation that becomes a Subsidiary after the adoption of this Plan) is
eligible to participate in this Plan if the Committee, in its sole discretion,
determines that such person has contributed or can be expected to contribute to
the profits or growth of the Company or a Subsidiary. Any such employee may be
awarded Restricted Shares or Performance Shares or may be granted one or more
Options, SARs, or Options and SARs. A director of the Company who is an employee
of the Company or a Subsidiary, and a non-employee director of the Company or a
Subsidiary, may be awarded Restricted Shares and Performance Shares and may be
granted Options or SARs under this Plan. Further, the Committee may from time to
time in its sole discretion award Restricted Shares and Performance Shares and
may grant Options or SARs to non-employees or non-key employees in conjunction
with mergers and acquisition transactions.
4.02. Grants. The Committee will designate individuals to whom Restricted Shares
and
6
<PAGE>
Performance Shares are to be awarded and to whom Options and SARs are to be
granted and will specify the number of shares of Common Stock subject to each
award or grant. An Option may be granted with or without a related SAR. The
Committee may grant Incentive Stock Options and Nonstatutory Options to the same
Participant, but not in tandem. A SAR may be granted with or without a related
Option. All Restricted Shares and Performance Shares awarded, and all Options
and SARs granted, under this Plan shall be evidenced by Agreements which shall
be subject to the applicable provisions of this Plan and to such other
provisions as the Committee may adopt. No Participant may be granted Incentive
Stock Options or related SARs (under all Incentive Stock Option plans of the
Company and its Subsidiaries) which are first exercisable in any year for Common
Stock having an aggregate Fair Market Value (determined as of the date an Option
is granted) exceeding $100,000.
ARTICLE V
COMMON STOCK SUBJECT TO PLAN
5.01. Source of Shares. Upon the award of Restricted Shares and when a
Performance Share is earned, the Company may issue authorized but unissued
shares of Common Stock. Upon the exercise of an Option or SAR, the Company may
deliver to the Participant (or the Participant's broker if the Participant so
directs), authorized but unissued Common Stock.
5.02. Maximum Number of Shares. The maximum aggregate number of shares of Common
Stock that may be issued pursuant to the exercise of Options and SARs and the
award of Restricted Shares and the settlement of Performance Shares under this
Plan is 857,140, subject to increases and adjustments as provided in Article IX.
5.03. Forfeitures, etc. If an Option or SAR is terminated, in whole or in part
for any reason other than its exercise, the number of shares of Common Stock
allocated to the Option or SAR or portion thereof may be reallocated to other
Options, SARs granted, or Restricted Shares and Performance Share awards to be
granted under this Plan. Any Restricted Shares that are forfeited or Performance
Shares that are unearned may be reallocated to other Options or SARs granted, or
Restricted Shares awarded, under this Plan.
ARTICLE VI
OPTIONS AND STOCK APPRECIATION RIGHTS
6.01. Nonstatutory Options. The Committee may grant Nonstatutory Options under
this Plan. Such Nonstatutory Stock Options must comply with all applicable
requirements of this Plan except for those which pertain solely to Incentive
Stock Options.
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6.02. Incentive Stock Options. The Committee may grant Incentive Stock Options
under this Plan which shall comply with all of the restrictions and limitations
set forth in Section 422 of the Code. To the extent that any Option does not
qualify as an Incentive Stock Option, it shall constitute a Nonstatutory Stock
Option.
6.03. Performance Options. The Committee may grant Performance Options under
this Plan. All such options shall be Nonstatutory Options.
6.04. Vesting of Options. The Participant's Agreement shall specify the date or
dates on which the Participant may begin to exercise all or a portion of his
Option. Subsequent to such dates or dates, the Option shall be deemed "vested."
Notwithstanding the terms of any Agreement, the Committee at any time may
accelerate such date or dates and otherwise waive or amend any conditions of the
grant.
6.05. Grant and Exercise of SARs. SARs may be granted to Participants by the
Committee independently of any Option granted pursuant to this Article or as a
Corresponding SAR. In the case of a Corresponding SAR granted in tandem with a
Nonstatutory Option, such SAR may be exercised either at or after the time of
the exercise of such Nonstatutory Option. In the case of a Corresponding SAR
granted in tandem with an Incentive Stock Option, such SAR may be exercised only
at the time of the exercise of such Incentive Stock Option.
A Corresponding SAR, shall terminate and no longer be exercisable upon the
termination or exercise of related Option. However, if a Corresponding SAR is
granted with respect to less than the full number of shares covered by a related
Option, such SAR shall terminate only if and to the extent that the number of
shares covered by the exercise or termination of the related Option exceeds the
number of shares not covered by such SAR.
6.06. Exercise of Options and SARs Conditioned on Continuous Employment. Except
as otherwise provided in this Plan or by the Compensation Committee, no
Participant may exercise an Option or SAR unless at the time of exercise he or
she has been continuously in the employ of the Company or a Subsidiary since the
date of grant thereof.
6.07. Terms and Conditions of Stock Appreciation Rights. SARs shall be subject
to such terms and conditions as shall be determined from time to time by the
Committee and embodied in the Agreements and in procedures established by the
Committee. The Committee at any time may accelerate the exercisability of any
SAR and otherwise waive or amend any conditions of the grant of a SAR.
6.08. Maximum Option or Stock Appreciation Right Period. The maximum period in
which an Option or SAR may be exercised shall be determined by the Committee on
the date of grant except that no Option that is an Incentive Stock Option and
any
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Corresponding SAR that relates to such Option shall be exercisable after the
expiration of ten years from the date the Option or SAR was granted. The terms
of any Option or SAR may provide that it is exercisable for a period less than
such maximum period.
6.09. Option Exercise Price. The price per share for Common Stock purchased on
the exercise of an Option shall not be less than 100% of the Fair Market Value
of the Common Stock on the date the Option is granted.
6.10. Payment of Option Exercise Price. Unless otherwise provided by the
Agreement, payment of the Option exercise price shall be made in cash or a cash
equivalent acceptable to the Committee. If the Agreement so provides, payment of
all or part of the exercise price may be made by surrendering shares of Common
Stock to the Company. If Common Stock is used to pay all or part of the exercise
price, the shares surrendered must have a Fair Market Value (determined as of
the day preceding the Date of Exercise) that is not less than such price or part
thereof.
6.11. Determination of Payment of Cash and/or Common Stock Upon Exercise of SAR.
At the Committee's discretion, the amount payable as a result of the exercise of
a SAR may be settled in cash, Common Stock, or a combination of cash and common
Stock. A Fractional share shall not be deliverable upon the exercise of a SAR
but a cash payment will be made in lieu thereof.
6.12. Reload Options. The Committee shall have the authority to specify at the
time of grant that a Participant shall be granted another Option (a "Reload
Option") in the event such Participant exercises all or part of a Nonstatutory
Option (an "Original Option") by surrendering in accordance with Section 6.10
hereof already owned shares of Common Stock in full or partial payment of the
exercise price under such Original Option, subject to the availability of shares
of Common Stock under the Plan at the time of exercise. Each Reload Option shall
cover a number of shares of Common Stock equal to the number of shares of Common
Stock surrendered in payment of the exercise price, shall have an exercise price
per share of Common Stock equal to the Fair Market Value of the Common Stock on
the date of grant of such Reload Option and shall expire on the stated
expiration date of the Original Option. A Reload Option shall be exercisable at
any time and from time to time from and after the date of grant of such Reload
Option (or, as the Committee, in its sole discretion, shall determine at the
time of grant, at such time or times as shall be specified in the Reload
Option); provided, however, that a Reload Option granted to a Participant
subject to the provisions of Section 16(b) of the Exchange Act shall not be
exercisable during the first six months from the date of grant of such Reload
Option. The first such Reload Option may provide for the grant, when exercised,
of one subsequent Reload Option to the extent and upon such terms and
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conditions, consistent with this Section 6.12, as the Committee, in its sole
discretion, shall specify at or after the time of grant of such Reload Option. A
Reload Option shall contain such other terms and conditions which may include a
restriction on the transferability of the number of shares of Common Stock
received upon exercise of the Original Option reduced by a number of shares
equal in value to the tax liability incurred upon exercise as the Committee, in
its sole discretion, may deem desirable which may be set forth in the Agreement
evidencing the Reload Option.
6.13. Nontransferability. Any Option or SAR granted under this Plan shall be
nontransferable except by will or by the laws of descent and distribution. In
the event of any such transfer, the Option and any Corresponding SAR that
relates to such Option must be transferred to the same person or persons or
entity or entities. During the lifetime of a Participant to whom an Option or
SAR is granted, the Option or SAR may be exercised only by the Participant. No
right or interest of a Participant in any Option or SAR shall be liable for, or
subject to, any lien, obligation, or liability of such Participant.
6.14. Cancellation and New Grant of Options. The Committee shall have the
authority to effect, at any time, and from time to time, with the consent of the
affected Participants, the cancellation of any or all outstanding Options under
the Plan and the grant in substitution therefor of new Options under the Plan
covering the same or different numbers of shares of Common Stock having an
Option exercise price per share which may be lower or higher than the exercise
price per share of the canceled Options.
6.15. Shareholder Rights. No Participant shall have any rights as a shareholder
with respect to shares subject to an Option or SAR until the Date of Exercise of
such Option or SAR.
6.16. Retirement of Holder of Options or Stock Appreciation Rights. If there is
a Termination of Employment of a Participant to whom an Option and/or SAR has
been granted due to Retirement, each Incentive Stock Option held by the retired
Participant, whether or not then vested, may be exercised until the earlier of
(a) the end of the three month period immediately following the date of such
Termination of Employment; or (b) the expiration of the term specified in the
Option or SAR. In the case of a Nonstatutory Option, there shall be substituted
the words, "the end of the twelve month period" for the words "the end of the
three month period" in the immediately preceding sentence.
6.17. Total Disability of Holder of Options or Stock Appreciation Rights. If
there is a Termination of Employment of a Participant to whom an Option and/or a
SAR has been granted by reason of his or her Total Disability, each Option
and/or SAR held by the Participant, whether or not then vested, may be exercised
until the earlier of: (a) the end of the twelve month period immediately
following the date of such Termination of Employment; or (b) the expiration of
the term specified in the Option or SAR.
6.18. Death of Holder of Options or Stock Appreciation Rights. If there is a
Termination
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of Employment of a Participant to whom an Option or SAR has been granted by
reason of his or her death, or (b) the death of a former employee within three
months following the date of his or her Retirement (or, in the case of a
Non-statutory Option, within twelve months following the date of his or her
Retirement), or (c) the death of a former employee within twelve months
following the date of his or her Termination of Employment by reason of Total
Disability, then each Option and SAR held by the person at the time of his or
her death, whether or not then vested, may be exercised by the person or persons
to whom the Option or SAR shall pass by will or by the laws of descent and
distribution (but by no other persons) until the earlier of (i) the end of the
twelve month period immediately following the date of death (or such longer
period as is permitted by the Committee); and (ii) the expiration of the term
specified in the Option or SAR.
6.19. Termination of Employment for Cause: Voluntary Termination Prior to
Retirement. If there is a Termination of Employment for Cause of a Participant
to whom an Option or SAR has been granted under this Plan, or if a Participant
voluntarily terminates his or her employment prior to Retirement (other than by
reason of Total Disability), then all Options and SARs held by such Participant,
whether or not then vested, shall automatically be canceled at the time of such
Termination of Employment and shall be of no further force or effect thereafter.
This section shall not affect any Common Stock acquired by the Participant upon
exercise of Options or SARs prior to such Termination of Employment by the
Participant.
ARTICLE VII
RESTRICTED SHARE AWARDS
7.01. Award. In accordance with the provisions of this Article VII, the
Committee will designate each individual to whom an award of Restricted Shares
is to be made and will specify the number of shares of Common Stock covered by
the award.
7.02. Vesting. The Committee, on the date of the award, may prescribe that a
Participant's rights in the Restricted Shares shall be forfeitable or otherwise
restricted for a period of time set forth in the Agreement. By way of example
and not of limitation, the restrictions may postpone transferability of the
shares or may provide that the shares will be forfeited if the Participant
separates from the service of the Company and its Subsidiaries before the
expiration of a stated term or if the Company and its Subsidiaries or the
Participant fail to achieve stated objectives.
7.03. Shareholder Rights; Escrow. Prior to their forfeiture in accordance with
the terms as the Agreement and while the shares are Restricted Shares, a
Participant will have all rights of a shareholder with respect to Restricted
Shares, including the right to receive
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dividends and vote the shares; provided, however, that (a) a Participant may not
sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of
Restricted Shares, (b) the Company shall retain custody of the certificates
evidencing Restricted Shares and (c) the Participant will deliver to the Company
a stock power, endorsed in blank, with respect to each award of Restricted
Shares. The limitations set forth in the preceding sentence shall not apply
after the shares cease to be Restricted Shares.
7.04 Restricted Share Agreement. Restricted Share awards shall be evidenced by
an Agreement in the form prescribed by the Committee which shall set forth such
terms, conditions and restrictions as the Committee in its discretion deems
appropriate. Restricted Share awards shall be effective only upon execution of
the applicable Agreement on behalf of the Company by the Chief Executive Officer
(if other than the President), the President or any Vice President, and by the
Participant.
ARTICLE VIII
PERFORMANCE SHARE AWARDS; PERFORMANCE OPTION GRANTS
8.01 Award and Grant. The Committee may award Performance Shares and grant
Performance Options which shall be earned by a Participant based on the level of
performance over a specified period of time by the Company, a Subsidiary or
Subsidiaries, any branch, department or other portion thereof or the Participant
individually, as determined by the Committee.
8.02 Procedure for Earning Award or Grant. A Participant shall earn awarded
Performance Shares, and shall be entitled to exercise granted Performance
Options by meeting the Performance Target for the Performance Period. If the
Minimum Target has not been attained at the end of the Performance Period, no
part of the Performance Share shall have been earned by the Participant, and no
part of the Performance Option grant for such Performance Period shall be
exercisable. If the Minimum Target is attained but the Performance Target is not
attained, the portion of the Performance Share award earned by the Participant,
or the portion of the Performance Option grant which shall be exercisable by the
Participant, shall be determined on the basis of a formula established by the
Committee.
8.03 Adjustments to Awards and Grants. At any time prior to the end of a
Performance Period, the Committee may adjust downward (but not upward) the
Performance Target and/or the Minimum Target as a result of major events
unforeseen at the time of the Performance Share award or Performance Option
grant, such as changes in the economy, the industry, laws affecting the
operations of the Company or a Subsidiary or any other event the Committee
determines would have a significant impact upon the
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probability of attaining the previously established Performance Target.
8.04 Payment of Awards. Payment of earned Performance Shares shall be made to
Participants following the close of the Performance Period as soon as
practicable after the time the amount payable is determined by the Committee.
Payment in respect of earned Performance Shares, whether expressed in dollars or
shares, may be made in cash, in shares of Common Stock, or partly in cash and
partly in shares of Common Stock, as determined by the Committee at the time of
payment. For this purpose, Performance Shares expressed in dollars shall be
converted to shares, and Performance Shares expressed in shares shall be
converted to dollars, based on the Fair Market Value of the Common Stock as of
the date the amount payable is determined by the Committee.
8.04 Effects of Termination of Employment. If prior to the close of the
Performance Period the employment of a Participant who received an award of
Performance Shares or a grant of Performance Options is voluntarily terminated
with the consent of the Company or a Subsidiary or the Participant retires, or
if the Participant dies during employment, (a) the Committee may in its absolute
discretion determine to pay all or any part of the Performance Share award based
upon the extent to which the Committee determines the Performance Target or
Minimum Target has been achieved as of the date of termination of employment,
retirement or death, the period of time remaining until the close of the
Performance Period and/or such other factors as the Committee may deem relevant;
and (b) the exercisability of the Performance Option shall be governed by the
applicable provisions of Article VI, unless the Committee, in its absolute
discretion, determines otherwise. If the Committee in its discretion determines
that all or any part of the Performance Share award shall be paid, payment shall
be made to the Participant or his or her estate as promptly as practicable
following such determination and may be made in cash, in shares of Common Stock,
or partly in cash and partly in shares of Common Stock, as determined by the
Committee at the time of the payment. For this purpose, Performance Shares
expressed in dollars shall be converted to shares, and Performance Shares
expressed in shares shall be converted to dollars, based on the Fair Market
Value of the Common Stock as of the date the amount payable is determined by the
Committee.
If, prior to the close of a Performance Period, a Termination of
Employment of a Participant who received an award of Performance Shares occurs
for any reason other than voluntary termination with the consent of the Company
or a Subsidiary, Retirement or death, the Performance Shares of the Participant
shall be deemed not to have been earned, and no portion of such Performance
Shares may be paid. Whether Termination of Employment is a voluntary termination
with the consent of the Company or a Subsidiary shall be determined, in its
discretion, by the Committee. Any determination by the Committee on any matter
with respect to Performance Shares shall be final and binding on both the
Company and the awardee.
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8.05 Performance Share Agreement. Performance Share awards shall be evidenced by
an Agreement in the form prescribed by the Committee which shall set forth the
amount or manner of determining the amount of the Performance Shares, the
Performance Period, the Performance Target and any Minimum Target and such other
terms and conditions as the Committee in its discretion deems appropriate.
Performance Share awards shall be effective only upon execution of the
applicable Performance Share Agreement on behalf of the Company by the Chief
Executive Officer (if other than the President), the President or any Vice
President, and by the Participant.
ARTICLE IX
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares that may be issued pursuant to the exercise
of Options and SARs and the award of Restricted Shares and the settlement of
Performance Shares under this Plan shall be proportionately adjusted, and the
terms of outstanding Restricted Share awards, Performance Share Awards, Options,
and SARs shall be adjusted, as the Committee shall determine to be equitably
required in the event that (a) the Company (i) effects one or more stock
dividends, stock split-ups, subdivisions or consolidations of shares or (ii)
engages in a transaction to which Code section 424 applies or (b) there occurs
any other event which, in the judgment of the Committee necessitates such
action. Any determination made under this Article IX by the Committee shall be
final and conclusive.
The issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services, either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, outstanding
awards of Restricted Shares, Performance Shares, Options or SARs.
The Committee may award Restricted Shares and Performance Shares, may
grant Options, and may grant SARs in substitution for stock awards, stock
options, stock appreciation rights, or similar awards held by an individual who
becomes an employee of the Company or a Subsidiary in connection with a
transaction described in the first paragraph of this Article IX. Notwithstanding
any provision of the Plan (other than the limitations of Article V), the terms
of such substituted Restricted Share and Performance Share awards and Option or
SAR grants shall be as the Committee, in its discretion, determines is
appropriate.
ARTICLE X
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COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Option or SAR shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made under this Plan except in compliance with all applicable federal and
state laws and regulations (including, without limitation, withholding tax
requirements) and the rules of all domestic stock exchanges on which shares may
be listed. The Company shall have the right to rely on an opinion of its counsel
as to such compliance. Any share certificate issued to evidence Common Stock for
which Restricted Shares are awarded, Performance Shares were earned or for which
an Option or SAR is exercised may bear such legends and statements as the
Committee may deem advisable to assure compliance with federal and state laws
and regulations. No Option or SAR shall be exercisable, no Common Stock shall be
issued, no certificate for shares shall be delivered, and no payment shall be
made under this Plan until the Company has obtained such consent or approval as
the Committee may deem advisable from regulatory bodies having jurisdiction over
such matters.
ARTICLE XI
GENERAL PROVISIONS
11.01. Effect on Employment. Neither the adoption of this Plan, its operation,
nor any documents describing or referring to this Plan (or any part thereof)
shall confer upon any employee any right to continue in the employ of the
Company or a Subsidiary or in any way affect any right and power of the Company
or a Subsidiary to terminate the employment of any employee at any time with or
without assigning a reason therefor.
11.02. Unfunded Plan. The Plan, insofar as it provides for grants and awards,
shall be unfunded, and the Company shall not be required to segregate any assets
that may at any time be represented by grants or awards under this Plan. Any
liability of the Company to any person with respect to any grant under this Plan
shall be based solely upon any contractual obligations that may be created
pursuant to this Plan. No such obligation of the Company shall be deemed to be
secured by any pledge of, or other encumbrance on, any property of the Company
or any Subsidiary
11.03. Rules of Construction. Headings are given to the articles and sections of
this Plan solely as a convenience to facilitate reference. The reference to any
statute, regulation, or other provision of law shall be construed to refer to
any amendment to or successor of such provision of law.
11.04. Employee Status. For purposes of determining the applicability of Code
section 422 (relating to Incentive Stock Options), or in the event that the
terms of any Option or SAR
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provide that it may be exercised or that awards of Restricted Shares or
Performance Shares may become vested or earned only during employment or within
a specified period of time after Termination of Employment, the Committee may
decide to what extent leaves of absence for governmental or military service,
illness, temporary disability, or other reasons shall not be deemed
interruptions of continuous employment.
11.05 Tax Withholding. Each Participant shall, no later than the date as of
which the value of a grant of an Option or SAR, or an award of any Restricted
Shares or Performance Shares or other amount received thereunder first becomes
includable in the gross income of the Participant for Federal income tax
purposes, pay to the Company, or make arrangements satisfactory to the Committee
regarding payment of any Federal, state, or local taxes of any kind required by
law to be withheld with respect to such income. The Committee may permit payment
of such taxes to be made through the tender of cash or Common Stock, the
withholding of Common Stock or cash to be received through grants or awards of
any other arrangement satisfactory to the Committee. The Company and its
Subsidiaries shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the Participant.
11.06 Indemnification. No member of the Board or the Committee shall be liable
for any action or determination taken or made in good faith with respect to this
Plan nor shall any member of the Board or the Committee be liable for any
Agreement issued pursuant to this Plan or any grants or awards made under it.
Each member of the Board and the Committee shall be indemnified by the Company
against any losses incurred in such administration of the Plan, unless his or
her action constitutes serious and willful misconduct.
11.07 Other Compensation Plans. The adoption of the Plan shall not affect any
other existing or future incentive or compensation plans for directors, officers
or employees of the Company or its Subsidiaries. Moreover, the adoption of this
Plan shall not preclude the Company or its Subsidiaries from: (a) establishing
any other forms for incentive or other compensation for directors, officers or
employees of the Company or its Subsidiaries; or (b) assuming any forms of
incentives or other compensation of any person or entity in connection with the
acquisition or the business or assets, in whole or in part, of any person or
entity.
11.08 Non-Contravention of Securities Laws. Notwithstanding anything to the
contrary expressed in this Plan, any provisions hereof that vary from or
conflict with any applicable Federal or State securities laws (including any
regulations promulgated thereunder) shall be deemed to be modified to conform to
and comply with such laws.
11.09 Unenforceability of a Particular Provision. The unenforceability of any
particular provision of this document shall not affect the other provisions, and
the document shall be
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construed in all respects as if such unenforceable provision were omitted.
ARTICLE XII
AMENDMENT
The Board may amend or terminate this Plan from time to time; provided,
however, that no amendment may become effective until shareholder approval is
obtained if (i) the amendment increases the aggregate number of shares of Common
Stock that may be issued under the Plan or (ii) the amendment changes the class
of individuals eligible to become Participants. No amendment shall, without a
Participant's consent, adversely affect any rights of such Participant under any
outstanding Restricted Share or Performance Share award or under any Option or
SAR outstanding at the time such amendment is made.
ARTICLE XIII
DURATION OF PLAN
No Restricted Shares or Performance Shares may be awarded and no Option or
SAR may be granted under this Plan after October 31, 2004. Restricted Share and
Performance Share awards and Option and SAR grants made before that date shall
remain valid in accordance with their terms.
Restricted Shares and Performance Shares may be awarded and Options and
SARs may be granted under this Plan upon its adoption by the Board, provided
that no Restricted Share or Performance Share award, or Option or SAR grant will
be effective unless this Plan is approved by a majority of the Company's
shareholders voting either in person or by proxy at a duly held shareholders'
meeting within twelve months of such adoption.
17
Exhibit 10.13
EMPLOYMENT AGREEMENT made and entered into as of May 3, 1999, between
MIKRON INSTRUMENT COMPANY, INC., a New Jersey corporation (the "Company") and
GERALD D. POSNER (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, upon the terms and conditions hereinafter
provided,
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Employment
(a) The Company hereby employs the Executive as an executive of the
Company (as his duties are more particularly described in paragraph 1(b) hereof)
for the period commencing on May 17, 1999 and terminating on May 16, 2003,
unless Executive's employment is terminated earlier pursuant to Article 4 of
this Agreement (the "Employment Period").
(b) During the Employment Period, (i) the Executive shall serve as the
Company's President and Chief Executive Officer, reporting directly and solely
to the Board of Directors of the Company (the "Board"); (ii) the Executive shall
devote substantially all of his time and efforts to the Company's business,
provided, however, that the Executive may serve on a reasonable number of boards
of directors, trade associations and public service organizations, committees
and commissions; (iii) the Board shall nominate the Executive for election to
the Board; and (iv) the Executive shall stand for election as a Director of the
Company at the annual meetings of shareholders held throughout the term of his
service under this Agreement.
(c) The Executive accepts such employment, and agrees to perform such
services as may from time to time be assigned to him by, or pursuant to the
authorization of, the Board, consistent with his position as President and Chief
Executive Officer. The Executive agrees that during the Employment Period he
will not, directly or indirectly, engage or participate in, or become employed
by, or render advisory or other services to, any business entity which competes
directly with the Company's current business, i.e., the development,
manufacture, marketing and servicing of infrared non-contact temperature
measurement devices, temperature sensors, calibration sources and thermal
imaging systems, except in the performance of his duties for the Company.
2. Compensation
(a) Annual Base Salary. The Company shall pay to the Executive, and the
Executive shall accept from the Company, for the Executive's services during the
Employment Period, a salary at the rate of $200,000 per annum. The compensation
to be paid to the Executive as provided for in this paragraph 2(a) shall be
payable in accordance with the Company's customary employee payroll policy as in
effect from time to time during the Employment Period. On or
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before November 30 of each year during the Employment Period the Board or a duly
appointed Compensation Committee of the Board (the "Committee") shall review the
Executive's employment performance during the one year (or shorter) period (the
"Review Period") which shall have ended on the immediately preceding October 31
to determine the amount of any merit increase in the Executive's salary. Any
such increase shall be effective for the one year period commencing on November
1 of the year immediately following the Review Period. The Executive's salary
shall not be decreased without his prior consent thereto in writing.
(b) Benefits. The Executive shall be afforded the opportunity to
participate in all benefit plans established by the Company through which the
Company's employees have been, or shall be, afforded the opportunity to
purchase, or otherwise receive, any life insurance, health insurance,
hospitalization, disability, stock option and/or other fringe benefits.
(c) Stock Options. The Company shall establish an incentive stock option
plan for the executives, employees and directors of the Company (the "Plan").
The participants in the Plan shall be entitled to purchase, pursuant to the
options to be granted thereunder (which may be "incentive stock options" within
the meaning of Section 422(b) of the Internal Revenue Code, or non-incentive
stock options) an aggregate number of shares of the Company's common stock,
one-third cent par value (the "Common Stock"), as shall be equal to
approximately 20% of the total number of shares of Common Stock which shall be
issued and outstanding upon consummation of the stock purchase agreement dated
of as May 3, 1999 between the Company and the Executive (the "post-agreement
issued and outstanding shares"). As soon as practically possible after the Plan
has been authorized by the Company's shareholders, the Company shall register
the Common Stock to be issued upon exercise of the options to be granted
thereunder for sale by the Company, and for resale by holders thereof, pursuant
to the Securities Act of 1933, as amended.
The Executive, together with the Company's new Vice President -
Sales and Marketing, Mr. Dennis Stoneman, and such other executives as shall be
hired by the Company during the term of this Agreement upon the advice of the
Executive, shall be entitled to purchase, pursuant to the options to be granted
under the Plan an aggregate number of shares of Common Stock as shall be equal
to 10% of the total number of post-agreement issued and outstanding shares. The
exercise price for each of such options shall be $1.00 per share. The vesting of
such options shall occur at the rate of 25% per annum at the end of each Review
Period during the Employment Period, and the exercise of all vested options
shall be conditioned upon the achievement of a set of pre-determined earnings,
revenue and other performance targets to be formulated mutually by the Executive
and the Board or the committee administering the Plan (the "Performance
Targets"). The term of such options shall be the 51 month period commencing on
the date of commencement of the Employment Period. The Plan and such options
shall provide that, upon the death, disability or termination of employment of
the Executive other than "for cause," all options which shall then have vested,
or which would have vested if such event had occurred on the last day of the
then current Review Period, shall be exercisable by the Executive, or by the
person or persons to whom such options shall pass by will or by the laws of
descent and distribution, as the case may be, during the six month period
following the date of occurrence of such event, provided, that, all applicable
conditions to the exercise of such options shall have been satisfied on or
before the date of exercise thereof. Each
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option granted pursuant to the Plan shall also contain such other terms,
limitations and conditions as the Board or the committee administering the Plan
shall deem appropriate pursuant to the provisions of the Plan.
In the event that the Company's shareholders fail to authorize the
Plan, the options to be granted hereunder shall be issued as non-Plan options in
accordance with, and subject to all of the foregoing terms and conditions.
(d) Expense Reimbursements. The Company shall reimburse the Executive for
all out of pocket travel, lodging, meal, entertainment and other expenses of a
similar nature that he shall incur while engaged in the Company's business. Such
reimbursements shall be made in accordance with the Company's customary policies
pertaining thereto as in effect from time to time during the Employment Period.
3. Confidentiality
(a) Definitions. For purposes of this Agreement, the following definitions
shall apply:
(i) "Inventions" shall mean all infrared non-contact temperature
measurement devices, temperature sensors, calibration sources and thermal
imaging systems, and any and all components thereof or Software incorporated
therein (collectively, the "Devices") invented, conceived or otherwise made or
developed by the Executive, in whole or in part, within the scope of his duties
during his employment by the Company, and all modifications, and enhancements
thereof, whether or not patentable or copyrightable.
(ii) "Work Product" shall mean all Devices and any and all
components thereof in the process of being created or modified, and all other
documentation, creative works, know-how, and information pertaining to such
Devices or components thereof created or developed, in whole or in part, by the
Executive within the scope of his duties during his employment by the Company,
whether or not copyrightable, patentable or otherwise protectable, excluding
Inventions.
(iii) "Trade Secrets" shall mean all Devices and any and all
components thereof, documentation, know-how, and information relating to the
past, present, or future business of the Company or any plans therefor, or
relating to the past, present, or future business of a third party or plans
therefor which are disclosed to the Company, which the Company does not disclose
to third parties without restrictions on use or further disclosure; provided,
however, Trade Secrets shall not include the general knowledge and experience
obtained by the Executive during his employment by the Company.
(iv) "Proprietary Information" shall mean all Inventions, Work
Product, Trade Secrets, and any and all processes, methods, techniques,
projects, developments, plans, research data, financial data, personnel data,
customer lists and supplier lists created by or for the Company which is
maintained in confidentiality and disclosed only to other executives or
employees of the Company on a need to know basis.
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(v) "Software" shall mean each of one or more standard computer
programs (which each may consist of one or more modules or sub-programs),
together with the media upon which it resides, and all accompanying standard
documentation pertaining thereto, as well as all "derivative works" thereof,
i.e., any source code, object code, software instruction or set of software
instructions, or documentation, in human readable or machine readable form,
developed directly or indirectly by the Executive or on his behalf which is in
whole or in part based upon, or derived from, Software.
(b) The Executive's Obligations Concerning Inventions and Work Product.
(i) The Executive will make full and prompt disclosure to the
Company of all Inventions, improvements thereon, enhancements thereof, Work
Product, discoveries, methods, developments and works of authorship, whether or
not copyrightable or patentable, which are created, made, developed, conceived
or reduced to practice by the Executive or under his direction or jointly with
others during his employment by the Company, whether or not during normal
working hours or on the premises of the Company (all of which are collectively
referred to in this Agreement as "Developments").
(ii) The Executive agrees to assign and the Executive does hereby
assign to the Company (or any person or entity designated by the Company) all of
his right, title and interest in and to all Developments and all related
patents, patent applications, copyrights and copyright applications. However,
this sub-paragraph 3(b)(ii) shall not apply to Developments which do not relate
to the present or planned business or research and development of the Company
and which are made and conceived by the Executive other than 1) during normal
working hours, 2) on the Company's premises; and 3) using the Company's
facilities, devices, equipment or Proprietary Information. The Executive
understands that, to the extent this Agreement shall be construed in accordance
with the laws of any state which precludes a requirement in an employment
agreement to assign certain classes of inventions made by an employee, this
sub-paragraph 3(b)(ii) shall be interpreted not to apply to any Development
which a court rules and/or the Company agrees falls within such classes.
(iii) The Executive agrees to cooperate fully with the Company, both
during and after his employment with the Company, with respect to the
procurement, maintenance and enforcement of copyrights and patents (both in the
United States and foreign countries) relating to Developments. The Executive
shall sign all papers, including, without limitation, copyright applications,
patent applications, declarations, oaths, formal assignments, assignments of
priority rights, and powers of attorney, which the Company may deem necessary or
desirable in order to protect its rights and interests in any Development.
(c) The Executive's Obligations Concerning Trade Secrets.
(i) During the term of this Agreement and at all times thereafter,
the Executive shall treat Trade Secrets on a confidential basis and not disclose
them to others without the prior written permission of the Company, or use them
for any purpose other than for the performance of services for the Company.
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(ii) Trade Secrets are the Company's sole and exclusive property and
the Executive shall surrender to the Company possession of all Trade Secrets in
his possession upon any suspension or termination of his employment. If after
the suspension or termination of his employment hereunder, the Executive become
aware of any Trade Secrets in his possession, the Executive shall promptly
surrender possession thereof to the Company.
(d) The Executive's Obligations Applicable to All Proprietary Information.
(i) During the term of this Agreement and at all times thereafter,
the Executive shall not disclose any Proprietary Information to others outside
the Company or use the same for any unauthorized purposes without written
approval by the Board of Directors of the Company, unless and until such
Proprietary Information has become public knowledge other than through its
unauthorized dissemination by the Executive.
(ii) The Executive agrees that all files, letters, memoranda,
reports, records, data, sketches, drawings, notebooks, Software program
diagrams, documentation, schematics and printouts in any tangible media
including, but not limited to, paper, photographs, computer disks and tapes and
other forms of human-readable and machine-readable media, containing Proprietary
Information, whether created by the Executive or others, which shall come into
his custody or possession, shall be and are the exclusive property of the
Company to be used by the Executive only in the performance of his duties for
the Company. All such tangible media or copies thereof and all other tangible
property of the Company in his custody or possession shall be delivered to the
Company, upon the earlier of 1) a request by the Company or 2) termination of
his employment. After such delivery, the Executive shall not retain any such
tangible media or copies thereof or any such other tangible property.
(iii) The Executive agrees that his obligation not to disclose or to
use information, know-how and records of the types set forth in sub-paragraph
3(d)(i) and (ii) above, and his obligation to return tangible media and other
tangible property, set forth in sub-paragraph 3d(ii) above, also extends to such
types of information, know-how, records and tangible property of customers of
the Company or suppliers to the Company or other third parties who may have
disclosed or entrusted the same to the Company or to the Executive in the course
of the Company's business.
(iv) The Executive shall provide the Company with all information,
documentation and assistance that it may request to perfect, enforce, or defend
the proprietary rights in or based on the Inventions, Work Product or Trade
Secrets. The Company, in its sole discretion, shall determine the extent of the
proprietary rights, if any, to be protected. All such information, documentation
and assistance shall be provided at reasonable compensation to the Executive, if
provided after any suspension or termination of his employment.
(e) Other Agreements. The Executive hereby represents that, except as the
Executive has disclosed in writing to the Company, the Executive is not bound by
the terms of any agreement with any previous employer or other party to refrain
from using or disclosing any trade secret or confidential or proprietary
information in the course of his employment with the
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Company or to refrain from competing, directly or indirectly, with the business
of such previous employer or any other party. The Executive further represents
that his performance of all the terms of this Agreement and as an employee of
the Company does not and will not breach any agreement to keep in confidence
proprietary information, knowledge or data acquired by the Executive in
confidence or in trust prior to his employment with the Company, and the
Executive will not disclose to the Company or induce the Company to use any
confidential or proprietary information or material belonging to any previous
employer or others.
(f) United States Government Obligations. The Executive acknowledges that
the Company from time to time may have agreements with other persons or with the
United States Government, or agencies thereof, which impose obligations or
restrictions on the Company regarding Inventions made during the course of work
under such agreements or regarding the confidential nature of such work. The
Executive agrees to be bound by all such obligations and restrictions which are
made known to the Executive and to take all action necessary to discharge the
obligations of the Company under such agreements.
4. Termination:
(a) Notwithstanding any other provision hereof, each of the Company and
the Executive may terminate the Executive's employment under this Agreement for
cause. The termination shall be evidenced by written notice thereof given by the
terminating party to the other, specifying the cause for termination and the
date of termination. For purposes hereof, the term "cause":
(i) as it relates to the Executive, shall mean the inability of the
Executive, through medical disability including mental or physical illness, to
perform his duties under this Agreement for a period in excess of one hundred
eighty (180) consecutive days during any period of 12 consecutive months; death
of the Executive; material dishonesty relating to the business of the Company;
refusal to perform or neglect of the substantive duties assigned to the
Executive, or breach of any of the material provisions of this Agreement which,
in each case, shall not be cured within 30 days after the Executive's receipt of
written notice identifying the duties in question or the provision(s) of the
Agreement that have been breached, as the case may be, and setting forth the
facts pertaining thereto; the inability of the Company to achieve total
stockholders' equity for either of the fiscal years ended October 31, 2001 or
2002 (as reflected in the Company's audited financial statements for such years)
which shall not be less than its total stockholders' equity for the fiscal year
ended October 31, 1998; the inability of the Company to achieve the Performance
Targets for either of the fiscal years ended October 31, 2001 or 2002; or
conviction of a felony related to the business of the Company; and
(ii) as it relates to the Company, shall mean failure to pay
compensation to the Executive when due, diminution of duties or demotion from
the position of President and Chief Executive Officer, relocation of the
Company's principal offices to a place that is located outside of a circle that
has a radius of more than 50 miles from the current address of the Company's
office or breach of any of the material provisions of this Agreement which shall
not be cured within 30 days after the Company's receipt of written notice
identifying the provision(s) of the Agreement that have been breached, and
setting forth the facts pertaining thereto.
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(b) The medical disability referred to in sub-paragraph 4(a)(i) hereof
shall be confirmed and/or rejected by an independent medical examination
performed by a licensed medical doctor located in New York, New York who shall
be chosen jointly by the Company and the Executive. The Executive agrees to
provide the Company, upon request, with all medical reports with regard to
medical disability obtained by the Executive from the Executive's physicians. In
the event the Company and the Executive can not agree on the choice of a doctor,
or either of them disagrees with the determination of the doctor they have
chosen, then the issue of disability shall be determined by arbitration in the
City of New York by the American Arbitration Association by a panel of three
physicians. The administrative costs of such proceedings shall be borne by the
Company. However, each party shall be solely responsible for payment of the fees
and disbursements of his or its respective counsel and witnesses.
(c) The Company agrees that in the event that the Executive should be
disabled as provided above, he shall be entitled to receive from the Company,
during the periods set forth below, the difference, if any, between any
disability insurance benefits provided pursuant to a policy or policies funded
or paid for by the Company, and 100% of his salary, plus any earned but unpaid
bonus, during the first ninety days of his disability and 80% of said salary and
bonus during the next ninety days of his disability, after which 180 day period
the Executives' compensation under this Agreement shall thereupon cease during
said disability, and the Company may elect to terminate the Executive's
employment pursuant to sub-paragraph 4(a)(i) hereof.
(d) In the event the Executive is terminated by the Company for cause in
accordance with this Article 4, the obligations of the Company under this
Agreement shall cease, except for any sums owed to the Executive, pursuant to
paragraphs 2(a) and (b) hereof for services rendered prior to such termination.
(e) The Executive and the Company or its successor in interest shall have
the right to terminate this Agreement with thirty (30) days notice upon any
change in control of the Company (whether by merger, stock transfer or
otherwise) provided that the Company or its successor in interest shall notify
the Executive of its intention to terminate no later than ninety (90) days after
the date on which such change in control takes effect. For purposes of the
preceding sentence, a "change in control" shall be deemed to occur if: (i) any
"person" (as such term is defined in the Securities Exchange Act of 1934, as
amended) acting singly or in concert with one or more other persons, acquires
securities representing 50% or more of the combined voting power of the
Company's then outstanding securities; (ii) during any one year period,
individuals who at the beginning of such period constitute the Board and any new
director whose election by the Board or nomination for election by the Company's
shareholders was approved by a vote of at least a majority of the directors then
still in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; (iii) the shareholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than 1) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent, in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of
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the Company, at least 50% of the combined voting power of the voting securities
of the Company or such surviving entity outstanding immediately after such
merger or consolidation, or 2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or (iv) the shareholders approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of its assets.
(f) In the event that this Agreement shall be terminated pursuant to the
provisions of paragraph 4(e) hereof, (i) the Company shall pay to the Executive
a lump sum severance payment equal to one year's salary calculated on the basis
of the salary in effect for the year in which termination occurs, plus any bonus
that he would be entitled to receive but for the occurrence of such termination;
and (ii) notwithstanding any provision to the contrary contained elsewhere
herein or on any option instrument evidencing the Executive's ownership of, and
rights and entitlements regarding, the options to be granted to him pursuant to
paragraph 2(c) hereof, all vesting and performance conditions, requirements and
restrictions regarding such options shall thereupon be deemed to have been
satisfied, met or waived, as the case may be, and all of such options shall be
exercisable for a period of not less than 180 days after the date of termination
of this Agreement.
5. Non-Competition:
(a) The Executive agrees that he shall not, during the Employment Period
and for six (6) months thereafter, (i) solicit for himself, or any other person
or entity, the business of providing or servicing infrared non-contact
temperature measurement devices, temperature sensors, calibration sources and
thermal imaging systems to any customer who did business with the Company or its
affiliates within one year prior to the termination of this Agreement, or cause
any such customer to cease contracting with the Company; (ii) hire, or otherwise
seek to engage the services of, or cause the cessation of employment or
engagement by the Company of, any employee, agent, consultant, wholesaler,
independent contractor, sales or other representative who has performed services
for the Company or any of its affiliates within one year prior to the end of the
Employment Period.
(b) The obligations in this Article 5 shall survive the termination of
this Agreement for six months. The necessity of protection of the Company
against the competition of the Executive, and the nature and scope of such
protection, has been carefully considered by the parties hereto. The parties
agree and acknowledge that the duration, scope and restrictions applicable to
the covenant not to compete described in this Article V are fair, reasonable and
necessary, that adequate compensation has been received by the Executive for
such obligations, and that these obligations do not prevent the Executive from
earning a livelihood.
(c) The Executive agrees that if he shall violate any of the provisions of
this Article 5, the Company shall be entitled to an accounting and, if
appropriate to the violation, repayment of all profits, compensation,
commissions or other remuneration that the Executive, directly or indirectly,
may realize arising from or related to any such violation. These remedies shall
be in
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addition to, and not in limitation of, any injunctive relief or other rights to
which the Company may be entitled.
6. Miscellaneous
(a) Notices: All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be delivered by
hand, by facsimile transmission or by guaranteed next day overnight courier:
(i) If to the Executive, to:
Gerald D. Posner
8 Victorian Hill
Manalapan, New Jersey 07726
Fax No. (732) 462-2575
(ii) If to the Company, to:
Mikron Instrument Company, Inc.
16 Thornton Road
Oakland, New Jersey 07436
Attention: Steven N. Bronson, Chairman
Fax No. (201) 405-0090
or at such other address as either party may specify by written notice to the
other party, and each such notice, request, consent and other communication
shall for all purposes of the Agreement be treated as being effective or having
been given when delivered.
(b) Entire Agreement: This Agreement constitutes the entire and exclusive
understanding between the parties with respect to the matters referred to
herein, and no waiver of or modification to the terms hereof shall be valid
unless in writing signed by the party to be charged and only in that specific
instance and to the extent therein set forth. All prior and contemporaneous
agreements, understandings, and representations with respect to the subject
matter of this Agreement are hereby terminated and superseded by this Agreement.
(c) Severability: If any provision of this Agreement is invalid, illegal
or unenforceable, the balance of this Agreement shall remain in effect, and if
any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
(d) Non-Assignability: This Agreement is for personal services and may not
be assigned by the Executive in any manner, by operation of law or otherwise,
without the written consent of the Company. This Agreement shall be binding on
all successors and assigns of the Company.
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(e) Governing Law: This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New Jersey applicable to
contracts made and to be performed solely within said state.
(f) Article Headings: The Article headings herein have been inserted for
convenience of reference only and shall in no way modify, restrict or affect any
of the terms or provisions hereof.
(g) Benefit. This Agreement will be binding upon and inure to the benefit
of the parties hereto and their respective heirs, executors, administrators
successors and assigns.
(h) Delays; Omissions; Waivers. No delay or omission by the Company in
exercising any right under this Agreement will operate as a waiver of that or
any other right. A waiver or consent given by the Company on any one occasion is
effective only in that instance and will not be construed as a bar to or waiver
of any right on any other occasion.
(i) Specific Performance; Indemnification. The Executive acknowledges and
agrees that, because of the unique and extraordinary nature of his services, any
breach or threatened breach of the provisions of Article 3 and this Article 5
hereof will cause irreparable injury and incalculable harm to the Company and
that it shall, accordingly, be entitled to injunctive or other equitable relief.
The foregoing, however, shall not be deemed to waive or to limit in any respect
any other right or remedy which the Company may have with respect to such
breach.
(j) Form 3 Filing. The Company covenants and agrees that it shall prepare,
and shall timely file with the Securities and Exchange Commission (the
"Commission") an initial statement of beneficial ownership of the Company's
securities by the Executive on Form 3 promulgated by the Commission. The
Executive shall cooperate with the Company in connection with the preparation
and execution of such statement.
(k) Dispute Resolution. All disputes arising between the parties with
regard to any of the provisions of this Agreement and/or the Executive's
employment by the Company shall be resolved by arbitration proceedings conducted
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association in effect at the time of commencement of such proceedings. Such
arbitration shall be held in New York, New York before a sole arbitrator who
shall be an attorney possessing not less than ten years' experience as a
specialist in matters pertaining to executive employment. If only one party
shall be the prevailing party in any such arbitration proceeding, the arbitrator
shall include in the award to such party an amount calculated to reimburse the
prevailing party for the reasonable fees of his or its counsel (including such
counsel's disbursements) paid or payable by such prevailing party with respect
to the legal services rendered by such counsel in such proceeding.
[The balance of this page has been left blank intentionally]
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(l) Directors' and Officers' Liability Insurance Coverage. During the term
of this Agreement the Company shall purchase and maintain one or more directors'
and officers' liability insurance policies providing the Executive with such
coverages subject to such limits as the Board may deem appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written.
Mikron Instrument Company, Inc.
By:
-----------------------------
-----------------------------
Gerald D. Posner
11
Exhibit 10.14
EMPLOYMENT AGREEMENT made and entered into as of May 3, 1999, between
MIKRON INSTRUMENT COMPANY, INC., a New Jersey corporation (the "Company") and
DENNIS STONEMAN (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, upon the terms and conditions hereinafter
provided,
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Employment
(a) The Company hereby employs the Executive as an executive of the
Company (as his duties are more particularly described in paragraph 1(b) hereof)
for the period commencing on May 17, 1999 and terminating on May 16, 2003,
unless Executive's employment is terminated earlier pursuant to Article 4 of
this Agreement (the "Employment Period").
(b) During the Employment Period, (i) the Executive shall serve as a Vice
President, reporting directly to the President, and when directed to do so, to
the Board of Directors of the Company (the "Board"); (ii) the Executive shall
devote substantially all of his time and efforts to the Company's business for a
period of not less than two five day business weeks during each calendar month;
(iii) the Board shall nominate the Executive for election to the Board; and (iv)
the Executive shall stand for election as a Director of the Company at the
annual meetings of shareholders held throughout the term of his service under
this Agreement.
(c) The Executive accepts such employment, and agrees to perform such
services as may from time to time be assigned to him by, or pursuant to the
authorization of, President or the Board, consistent with his position as Vice
President. The Executive agrees that during the Employment Period he will not,
directly or indirectly, engage or participate in, or become employed by, or
render advisory or other services to, any business entity which competes
directly with the Company's current business, i.e., the development,
manufacture, marketing and servicing of infrared non-contact temperature
measurement devices, temperature sensors, calibration sources and thermal
imaging systems, except in the performance of his duties for the Company.
2. Compensation
(a) Annual Base Salary. The Company shall pay to the Executive, and the
Executive shall accept from the Company, for the Executive's services during the
Employment Period, a salary at the rate of $100,000 per annum. The compensation
to be paid to the Executive as provided for in this paragraph 2(a) shall be
payable in accordance with the Company's customary employee payroll policy as in
effect from time to time during the Employment Period. On or before November 30
of each year during the Employment Period the Board or a duly appointed
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Compensation Committee of the Board (the "Committee") shall review the
Executive's employment performance during the one year (or shorter) period (the
"Review Period") which shall have ended on the immediately preceding October 31
to determine the amount of any merit increase in the Executive's salary. Any
such increase shall be effective for the one year period commencing on November
1 of the year immediately following the Review Period. The Executive's salary
shall not be decreased without his prior consent thereto in writing.
(b) Stock Options. The Company shall establish an incentive stock option
plan for the executives, employees and directors of the Company (the "Plan").
The participants in the Plan shall be entitled to purchase, pursuant to the
options to be granted thereunder (which may be "incentive stock options" within
the meaning of Section 422(b) of the Internal Revenue Code, or non-incentive
stock options) an aggregate number of shares of the Company's common stock,
one-third cent par value (the "Common Stock"), as shall be equal to
approximately 20% of the total number of shares of Common Stock which shall be
issued and outstanding upon consummation of the stock purchase agreement dated
of as May 3, 1999 between the Company and the Executive (the "post-agreement
issued and outstanding shares"). As soon as practically possible after the Plan
has been authorized by the Company's shareholders, the Company shall register
the Common Stock to be issued upon exercise of the options to be granted
thereunder for sale by the Company, and for resale by holders thereof, pursuant
to the Securities Act of 1933, as amended.
The Executive, together with the Company's new President, Gerald D.
Posner, and such other executives as shall be hired by the Company during the
term of this Agreement upon the advice of Mr. Posner, shall be entitled to
purchase, pursuant to the options to be granted under the Plan an aggregate
number of shares of Common Stock as shall be equal to 10% of the total number of
post-agreement issued and outstanding shares. The exercise price for each of
such options shall be $1.00 per share or the fair market value of the Common
Stock on the date of grant thereof, whichever shall be greater. The vesting of
such options shall occur at the rate of 25% per annum at the end of each Review
Period during the Employment Period, and the exercise of all vested options
shall be conditioned upon the achievement of a set of pre-determined earnings,
revenue and other performance targets to be formulated by the Board or the
committee administering the Plan. The term of such options shall be the 51 month
period commencing on the date of commencement of the Employment Period. The Plan
and such options shall provide that, upon the death, disability or termination
of employment of the Executive other than "for cause," all options which shall
then have vested, or which would have vested if such event had occurred on the
last day of the then current Review Period, shall be exercisable by the
Executive, or by the person or persons to whom such options shall pass by will
or by the laws of descent and distribution, as the case may be, during the six
month period following the date of occurrence of such event, provided, that, all
applicable conditions to the exercise of such options shall have been satisfied
on or before the date of exercise thereof. Each option granted pursuant to the
Plan shall also contain such other terms, limitations and conditions as the
Board or the committee administering the Plan shall deem appropriate pursuant to
the provisions of the Plan.
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(c) Expense Reimbursements. The Company shall reimburse the Executive for
all out of pocket travel, lodging, meal, entertainment and other expenses of a
similar nature that he shall incur while engaged in the Company's business. Such
reimbursements shall be made in accordance with the Company's customary policies
pertaining thereto as in effect from time to time during the Employment Period.
3. Confidentiality
(a) Definitions. For purposes of this Agreement, the following definitions
shall apply:
(i) "Inventions" shall mean all infrared non-contact temperature
measurement devices, temperature sensors, calibration sources and thermal
imaging systems, and any and all components thereof or Software incorporated
therein (collectively, the "Devices") invented, conceived or otherwise made or
developed by the Executive, in whole or in part, within the scope of his duties
during his employment by the Company, and all modifications, and enhancements
thereof, whether or not patentable or copyrightable.
(ii) "Work Product" shall mean all Devices and any and all
components thereof in the process of being created or modified, and all other
documentation, creative works, know-how, and information pertaining to such
Devices or components thereof created or developed, in whole or in part, by the
Executive within the scope of his duties during his employment by the Company,
whether or not copyrightable, patentable or otherwise protectable, excluding
Inventions.
(iii) "Trade Secrets" shall mean all Devices and any and all
components thereof, documentation, know-how, and information relating to the
past, present, or future business of the Company or any plans therefor, or
relating to the past, present, or future business of a third party or plans
therefor which are disclosed to the Company, which the Company does not disclose
to third parties without restrictions on use or further disclosure; provided,
however, Trade Secrets shall not include the general knowledge and experience
obtained by the Executive during his employment by the Company.
(iv) "Proprietary Information" shall mean all Inventions, Work
Product, Trade Secrets, and any and all processes, methods, techniques,
projects, developments, plans, research data, financial data, personnel data,
customer lists and supplier lists created by or for the Company which is
maintained in confidentiality and disclosed only to other executives or
employees of the Company on a need to know basis.
(v) "Software" shall mean each of one or more standard computer
programs (which each may consist of one or more modules or sub-programs),
together with the media upon which it resides, and all accompanying standard
documentation pertaining thereto, as well as all "derivative works" thereof,
i.e., any source code, object code, software instruction or set of software
instructions, or documentation, in human readable or machine readable form,
developed directly or indirectly by the Executive or on his behalf which is in
whole or in part based upon, or derived from, Software.
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(b) The Executive's Obligations Concerning Inventions and Work Product.
(i) The Executive will make full and prompt disclosure to the
Company of all Inventions, improvements thereon, enhancements thereof, Work
Product, discoveries, methods, developments and works of authorship, whether or
not copyrightable or patentable, which are created, made, developed, conceived
or reduced to practice by the Executive or under his direction or jointly with
others during his employment by the Company, whether or not during normal
working hours or on the premises of the Company (all of which are collectively
referred to in this Agreement as "Developments").
(ii) The Executive agrees to assign and the Executive does hereby
assign to the Company (or any person or entity designated by the Company) all of
his right, title and interest in and to all Developments and all related
patents, patent applications, copyrights and copyright applications. However,
this sub-paragraph 3(b)(ii) shall not apply to Developments which do not relate
to the present or planned business or research and development of the Company
and which are made and conceived by the Executive other than 1) during normal
working hours, 2) on the Company's premises; and 3) using the Company's
facilities, devices, equipment or Proprietary Information. The Executive
understands that, to the extent this Agreement shall be construed in accordance
with the laws of any state which precludes a requirement in an employment
agreement to assign certain classes of inventions made by an employee, this
sub-paragraph 3(b)(ii) shall be interpreted not to apply to any Development
which a court rules and/or the Company agrees falls within such classes.
(iii) The Executive agrees to cooperate fully with the Company, both
during and after his employment with the Company, with respect to the
procurement, maintenance and enforcement of copyrights and patents (both in the
United States and foreign countries) relating to Developments. The Executive
shall sign all papers, including, without limitation, copyright applications,
patent applications, declarations, oaths, formal assignments, assignments of
priority rights, and powers of attorney, which the Company may deem necessary or
desirable in order to protect its rights and interests in any Development.
(c) The Executive's Obligations Concerning Trade Secrets.
(i) During the term of this Agreement and at all times thereafter,
the Executive shall treat Trade Secrets on a confidential basis and not disclose
them to others without the prior written permission of the Company, or use them
for any purpose other than for the performance of services for the Company.
(ii) Trade Secrets are the Company's sole and exclusive property and
the Executive shall surrender to the Company possession of all Trade Secrets in
his possession upon any suspension or termination of his employment. If after
the suspension or termination of his employment hereunder, the Executive become
aware of any Trade Secrets in his possession, the Executive shall promptly
surrender possession thereof to the Company.
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(d) The Executive's Obligations Applicable to All Proprietary Information.
(i) During the term of this Agreement and at all times thereafter,
the Executive shall not disclose any Proprietary Information to others outside
the Company or use the same for any unauthorized purposes without written
approval by the Board of Directors of the Company, unless and until such
Proprietary Information has become public knowledge other than through its
unauthorized dissemination by the Executive.
(ii) The Executive agrees that all files, letters, memoranda,
reports, records, data, sketches, drawings, notebooks, Software program
diagrams, documentation, schematics and printouts in any tangible media
including, but not limited to, paper, photographs, computer disks and tapes and
other forms of human-readable and machine-readable media, containing Proprietary
Information, whether created by the Executive or others, which shall come into
his custody or possession, shall be and are the exclusive property of the
Company to be used by the Executive only in the performance of his duties for
the Company. All such tangible media or copies thereof and all other tangible
property of the Company in his custody or possession shall be delivered to the
Company, upon the earlier of 1) a request by the Company or 2) termination of
his employment. After such delivery, the Executive shall not retain any such
tangible media or copies thereof or any such other tangible property.
(iii) The Executive agrees that his obligation not to disclose or to
use information, know-how and records of the types set forth in sub-paragraph
3(d)(i) and (ii) above, and his obligation to return tangible media and other
tangible property, set forth in sub-paragraph 3d(ii) above, also extends to such
types of information, know-how, records and tangible property of customers of
the Company or suppliers to the Company or other third parties who may have
disclosed or entrusted the same to the Company or to the Executive in the course
of the Company's business.
(iv) The Executive shall provide the Company with all information,
documentation and assistance that it may request to perfect, enforce, or defend
the proprietary rights in or based on the Inventions, Work Product or Trade
Secrets. The Company, in its sole discretion, shall determine the extent of the
proprietary rights, if any, to be protected. All such information, documentation
and assistance shall be provided at reasonable compensation to the Executive, if
provided after any suspension or termination of his employment.
(e) Other Agreements. The Executive hereby represents that, except as the
Executive has disclosed in writing to the Company, the Executive is not bound by
the terms of any agreement with any previous employer or other party to refrain
from using or disclosing any trade secret or confidential or proprietary
information in the course of his employment with the Company or to refrain from
competing, directly or indirectly, with the business of such previous employer
or any other party. The Executive further represents that his performance of all
the terms of this Agreement and as an employee of the Company does not and will
not breach any agreement to keep in confidence proprietary information,
knowledge or data acquired by the Executive in confidence or in trust prior to
his employment with the Company, and the Executive will not disclose to the
Company or induce the Company to use any confidential or proprietary information
or material belonging to any previous employer or others.
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(f) United States Government Obligations. The Executive acknowledges that
the Company from time to time may have agreements with other persons or with the
United States Government, or agencies thereof, which impose obligations or
restrictions on the Company regarding Inventions made during the course of work
under such agreements or regarding the confidential nature of such work. The
Executive agrees to be bound by all such obligations and restrictions which are
made known to the Executive and to take all action necessary to discharge the
obligations of the Company under such agreements.
4. Termination:
(a) Notwithstanding any other provision hereof, each of the Company and
the Executive may terminate the Executive's employment under this Agreement for
cause. The termination shall be evidenced by written notice thereof given by the
terminating party to the other, specifying the cause for termination and the
date of termination. For purposes hereof, the term "cause":
(i) as it relates to the Executive, shall mean the inability of the
Executive, through medical disability including mental or physical illness, to
perform his duties under this Agreement for a period in excess of one hundred
eighty (180) consecutive days during any period of 12 consecutive months; death
of the Executive; material dishonesty relating to the business of the Company;
refusal to perform or neglect of the substantive duties assigned to the
Executive, or breach of any of the material provisions of this Agreement which,
in each case, shall not be cured within 30 days after the Executive's receipt of
written notice identifying the duties in question or the provision(s) of the
Agreement that have been breached, as the case may be, and setting forth the
facts pertaining thereto; the inability of the Company to achieve total
stockholders' equity for either of the fiscal years ended October 31, 2001 or
2002 (as reflected in the Company's audited financial statements for such years)
which shall not be less than its total stockholders' equity for the fiscal year
ended October 31, 1998; the inability of the Company to achieve the Performance
Targets for either of the fiscal years ended October 31, 2001 or 2002; or
conviction of a felony related to the business of the Company; and
(ii) as it relates to the Company, shall mean failure to pay
compensation to the Executive when due, diminution of duties or demotion from
the position of President and Chief Executive Officer, relocation of the
Company's principal offices to a place that is located outside of a circle that
has a radius of more than 50 miles from the current address of the Company's
office or breach of any of the material provisions of this Agreement which shall
not be cured within 30 days after the Company's receipt of written notice
identifying the provision(s) of the Agreement that have been breached, and
setting forth the facts pertaining thereto.
(b) The medical disability referred to in sub-paragraph 4(a)(i) hereof
shall be confirmed and/or rejected by an independent medical examination
performed by a licensed medical doctor located in New York, New York who shall
be chosen jointly by the Company and the Executive. The Executive agrees to
provide the Company, upon request, with all medical reports with regard to
medical disability obtained by the Executive from the Executive's physicians. In
the event the Company and the Executive can not agree on the choice of a doctor,
6
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or either of them disagrees with the determination of the doctor they have
chosen, then the issue of disability shall be determined by arbitration in the
City of New York by the American Arbitration Association by a panel of three
physicians. The administrative costs of such proceedings shall be borne by the
Company. However, each party shall be solely responsible for payment of the fees
and disbursements of his or its respective counsel and witnesses.
(c) The Company agrees that in the event that the Executive should be
disabled as provided above, he shall be entitled to receive from the Company,
during the periods set forth below, the difference, if any, between any
disability insurance benefits provided pursuant to a policy or policies funded
or paid for by the Company, and 100% of his salary, plus any earned but unpaid
bonus, during the first ninety days of his disability and 80% of said salary and
bonus during the next ninety days of his disability, after which 180 day period
the Executives' compensation under this Agreement shall thereupon cease during
said disability, and the Company may elect to terminate the Executive's
employment pursuant to sub-paragraph 4(a)(i) hereof.
(d) In the event the Executive is terminated by the Company for cause in
accordance with this Article 4, the obligations of the Company under this
Agreement shall cease, except for any sums owed to the Executive, pursuant to
paragraphs 2(a) and (b) hereof for services rendered prior to such termination.
(e) The Executive and the Company or its successor in interest shall have
the right to terminate this Agreement with thirty (30) days notice upon any
change in control of the Company (whether by merger, stock transfer or
otherwise) provided that the Company or its successor in interest shall notify
the Executive of its intention to terminate no later than ninety (90) days after
the date on which such change in control takes effect. For purposes of the
preceding sentence, a "change in control" shall be deemed to occur if: (i) any
"person" (as such term is defined in the Securities Exchange Act of 1934, as
amended) acting singly or in concert with one or more other persons, acquires
securities representing 50% or more of the combined voting power of the
Company's then outstanding securities; (ii) during any one year period,
individuals who at the beginning of such period constitute the Board and any new
director whose election by the Board or nomination for election by the Company's
shareholders was approved by a vote of at least a majority of the directors then
still in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; (iii) the shareholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than 1) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent, in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, at least 50% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation, or 2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or (iv) the shareholders approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of its assets.
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(f) In the event that this Agreement shall be terminated pursuant to the
provisions of paragraph 4(e) hereof, (i) the Company shall pay to the Executive
a lump sum severance payment equal to one year's salary calculated on the basis
of the salary in effect for the year in which termination occurs, plus any bonus
that he would be entitled to receive but for the occurrence of such termination;
and (ii) notwithstanding any provision to the contrary contained elsewhere
herein or on any option instrument evidencing the Executive's ownership of, and
rights and entitlements regarding, the options to be granted to him pursuant to
paragraph 2(c) hereof, all vesting and performance conditions, requirements and
restrictions regarding such options shall thereupon be deemed to have been
satisfied, met or waived, as the case may be, and all of such options shall be
exercisable for a period of not less than 180 days after the date of termination
of this Agreement.
5. Non-Competition:
(a) The Executive agrees that he shall not, during the Employment Period
and for six (6) months thereafter, (i) solicit for himself, or any other person
or entity, the business of providing or servicing infrared non-contact
temperature measurement devices, temperature sensors, calibration sources and
thermal imaging systems to any customer who did business with the Company or its
affiliates within one year prior to the termination of this Agreement, or cause
any such customer to cease contracting with the Company; (ii) hire, or otherwise
seek to engage the services of, or cause the cessation of employment or
engagement by the Company of, any employee, agent, consultant, wholesaler,
independent contractor, sales or other representative who has performed services
for the Company or any of its affiliates within one year prior to the end of the
Employment Period.
(b) The obligations in this Article 5 shall survive the termination of
this Agreement for six months. The necessity of protection of the Company
against the competition of the Executive, and the nature and scope of such
protection, has been carefully considered by the parties hereto. The parties
agree and acknowledge that the duration, scope and restrictions applicable to
the covenant not to compete described in this Article V are fair, reasonable and
necessary, that adequate compensation has been received by the Executive for
such obligations, and that these obligations do not prevent the Executive from
earning a livelihood.
(c) The Executive agrees that if he shall violate any of the provisions of
this Article 5, the Company shall be entitled to an accounting and, if
appropriate to the violation, repayment of all profits, compensation,
commissions or other remuneration that the Executive, directly or indirectly,
may realize arising from or related to any such violation. These remedies shall
be in addition to, and not in limitation of, any injunctive relief or other
rights to which the Company may be entitled.
6. Miscellaneous
(a) Notices: All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be delivered by
hand, by facsimile transmission or by guaranteed next day overnight courier:
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(i) If to the Executive, to:
Dennis Stoneman
1562 Doe Trail Lane
Yardley, Pennsylvania 19067
Fax No. (215) 493-8290
(ii) If to the Company, to:
Mikron Instrument Company, Inc.
16 Thornton Road
Oakland, New Jersey 07436
Attention: Steven N. Bronson, Chairman
Fax No. (201) 405-0090
or at such other address as either party may specify by written notice to the
other party, and each such notice, request, consent and other communication
shall for all purposes of the Agreement be treated as being effective or having
been given when delivered.
(b) Entire Agreement: This Agreement constitutes the entire and exclusive
understanding between the parties with respect to the matters referred to
herein, and no waiver of or modification to the terms hereof shall be valid
unless in writing signed by the party to be charged and only in that specific
instance and to the extent therein set forth. All prior and contemporaneous
agreements, understandings, and representations with respect to the subject
matter of this Agreement are hereby terminated and superseded by this Agreement.
(c) Severability: If any provision of this Agreement is invalid, illegal
or unenforceable, the balance of this Agreement shall remain in effect, and if
any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
(d) Non-Assignability: This Agreement is for personal services and may not
be assigned by the Executive in any manner, by operation of law or otherwise,
without the written consent of the Company. This Agreement shall be binding on
all successors and assigns of the Company.
(e) Governing Law: This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New Jersey applicable to
contracts made and to be performed solely within said state.
(f) Article Headings: The Article headings herein have been inserted for
convenience of reference only and shall in no way modify, restrict or affect any
of the terms or provisions hereof.
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(g) Benefit. This Agreement will be binding upon and inure to the benefit
of the parties hereto and their respective heirs, executors, administrators
successors and assigns.
(h) Delays; Omissions; Waivers. No delay or omission by the Company in
exercising any right under this Agreement will operate as a waiver of that or
any other right. A waiver or consent given by the Company on any one occasion is
effective only in that instance and will not be construed as a bar to or waiver
of any right on any other occasion.
(i) Specific Performance; Indemnification. The Executive acknowledges and
agrees that, because of the unique and extraordinary nature of his services, any
breach or threatened breach of the provisions of Article 3 and this Article 5
hereof will cause irreparable injury and incalculable harm to the Company and
that it shall, accordingly, be entitled to injunctive or other equitable relief.
The foregoing, however, shall not be deemed to waive or to limit in any respect
any other right or remedy which the Company may have with respect to such
breach.
(j) Form 3 Filing. The Company covenants and agrees that it shall prepare,
and shall timely file with the Securities and Exchange Commission (the
"Commission") an initial statement of beneficial ownership of the Company's
securities by the Executive on Form 3 promulgated by the Commission. The
Executive shall cooperate with the Company in connection with the preparation
and execution of such statement.
(k) Dispute Resolution. All disputes arising between the parties with
regard to any of the provisions of this Agreement and/or the Executive's
employment by the Company shall be resolved by arbitration proceedings conducted
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association in effect at the time of commencement of such proceedings. Such
arbitration shall be held in New York, New York before a sole arbitrator who
shall be an attorney possessing not less than ten years' experience as a
specialist in matters pertaining to executive employment. If only one party
shall be the prevailing party in any such arbitration proceeding, the arbitrator
shall include in the award to such party an amount calculated to reimburse the
prevailing party for the reasonable fees of his or its counsel (including such
counsel's disbursements) paid or payable by such prevailing party with respect
to the legal services rendered by such counsel in such proceeding.
[The balance of this page has been left blank intentionally]
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(l) Directors' and Officers' Liability Insurance Coverage. During the term
of this Agreement the Company shall purchase and maintain one or more directors'
and officers' liability insurance policies providing the Executive with such
coverages subject to such limits as the Board may deem appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written.
Mikron Instrument Company, Inc.
By:
---------------------------------
-------------------------------------
Dennis Stoneman
11
Exhibit 10.15
FINANCIAL CONSULTING AGREEMENT
THIS FINANCIAL CONSULTING AGREEMENT (this "Agreement"), made as of this
3rd day of May, 1999, is by and between, Mikron Instrument Company, Inc., a New
Jersey corporation (the "Company"), with its principal place of business at 16
Thornton Road, Oakland, New Jersey 07436, and Catalyst Financial Corp., a
Florida corporation ("Catalyst"), having its principal place of business at 16
East 52nd Street, Suite 501, New York, New York 10022.
R E C I T A L S:
A. The Company is a public company with a class of equity securities
publicly traded, and desires to retain Catalyst to provide certain financial
consulting services.
B. Catalyst desires to provide certain financial consulting services to
the Company in accordance with the terms and conditions contained hereinafter.
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
the parties hereto hereby agree as follows:
1 . Consulting Services. During the term of this Agreement, Catalyst is
hereby retained by the Company to provide financial consulting services to the
Company, as said services relate to corporate finance matters. Catalyst shall
provide such financial consulting services as reasonably requested by the
Company during the term of this Agreement, provided that nothing hereunder shall
require Catalyst to devote a minimum number of hours per calendar month toward
the performance of services hereunder. Unless otherwise agreed to by Catalyst,
all services hereunder shall be performed by Catalyst, in its sole discretion,
at its principal place of business or other offices. Notwithstanding anything
contained herein to the contrary, the services to be performed by Catalyst
hereunder may be performed by any employee or consultant to Catalyst.
2. Term. The term of this Agreement shall be for three years commencing as
of the date first written above and terminating one day prior to the third
anniversary hereof. Thereafter, this Agreement shall be renewed for subsequent
one year terms upon mutual agreement of the parties.
3. Compensation.
(a) In consideration for the performance of services hereunder, the
Company hereby agrees to pay Catalyst the aggregate sum of $5,000 per month
during the term of this Agreement. The initial monthly payment shall be made as
of the date hereof, and each subsequent monthly payment shall be due and payable
on each successive monthly anniversary of such date. The Company further hereby
agrees to pay on a pre-approval basis all out-of-pocket
Catalyst FINANCIAL
<PAGE>
expenses incurred by Catalyst in connection with such services to be rendered
hereunder. Catalyst may, from time to time, deem it to be in the best interests
of the Company to retain an outside consultant in connection with certain
specific acquisitions or proposed transactions. In such event, the Company
agrees to pay any and all fees and expenses of such consultant.
(b) In addition, and in consideration of the payment of $100, and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the Company hereby grants Catalyst five (5) year warrants, which
warrants may be assigned to shareholders, directors, officers, employees,
consultants or partners of Catalyst or any successor, to purchase an aggregate
100,000 shares of the Company's Common Stock exercisable at $1.00 per share. The
warrants shall be immediately exercisable and shall be in substantially the form
attached hereto as Exhibit A, and incorporated herein by reference.
At any time during the term of these warrants, the then holders (the
"Holders") of a majority of the warrants issued under this Agreement, and/or the
shares of Common Stock which were issued upon exercise thereof, shall have the
right upon written notice to the Company and on at least two occasions to demand
registration of the shares of Common Stock underlying the warrants or the shares
of Common Stock which previously were issued upon exercise thereof (the "Demand
Registration Rights"). Upon such notice, the Company shall use its best efforts
to prepare and file with the Securities and Exchange Commission (the "SEC"), at
the Company's sole cost and expense with respect to the exercise of the Demand
Registration Rights, a registration statement to permit the public sale of such
shares of Common Stock. The Company will use its best efforts to cause said
registration statement to be declared effective by the SEC as soon as possible
and shall continue to use its best efforts to cause such registration statement
to be deemed current for at least one hundred twenty (120) days after the
effective date thereof. Notwithstanding anything contained herein to the
contrary, the Holders shall have the right to demand registration of the
afore-described shares on two separate occasions; with each of such demand
registration rights being deemed satisfied hereunder when said registration
statement relating thereto is declared effective by the SEC, provided the other
provisions hereunder are complied with by the Company.
In addition, if at any time commencing after the date hereof and expiring
five years thereafter, the Company proposes to register any of its securities
under the Securities Act of 1933, as amended (other than in connection with a
merger or pursuant to Form S-8, S-4 or comparable registration statement), it
will give written notice by registered mail, at least twenty (20) days prior to
the filing of each registration statement, to the Holders of its intention to do
so. If such Holders notify the Company within twenty (20) days after receipt of
any such notice of its or their desire to include any of the afore-described
shares in such proposed registration statement, the Company shall afford such
Holders the opportunity to have any such shares registered under such
registration statement, at the Company's sole cost and expense. The Company
shall also use its best efforts to cause the sale of such shares to be
registered in up to ten (10) states identified by the Holders, at the Company's
sole cost and expense.
The Company shall bear all expenses, incurred in the preparation and
filing of such registration statements or post-effective amendment (and related
state registrations, to the extent permitted by applicable law) and the
furnishing of copies of the preliminary and final prospectus
Catalyst FINANCIAL 2
<PAGE>
thereof to the Holders, other than fees and expenses of Holders' counsel, and
other than sales commissions incurred by the then Holders with respect to the
sale of such securities.
4. Right of First Refusal. For a period of three years from the date of
this Agreement, the Company hereby agrees to afford to Catalyst the right to act
as the Company's exclusive managing underwriter or placement agent, as the case
may be, in any public offering(s) and private placement(s) to be effectuated by
or on behalf of the Company, on such terms no less favorable than any other
underwriter, broker-dealer, or placement agent, and with such compensation to be
determined on a deal-by-deal basis. In the event Catalyst determines not to so
participate in any such financing and the terms thereof are then subsequently
changed, the Company shall afford Catalyst the opportunity to act as the
exclusive managing underwriter or placement agent, as the case may be, in any
such financing as modified. Notwithstanding anything contained in this Section 4
to the contrary, nothing hereunder shall obligate Catalyst to so participate in
any such financing.
5. Finder's Fee. In the event the Company effectuates a merger,
acquisition, consolidation, reorganization, recapitalization, business
combination or other transaction pursuant to which the Company acquires, is
acquired by or combines with another entity subsequent to the date hereof and on
or prior to one year from the date of termination in this Agreement,
irrespective of any reason for such termination, and such merger, acquisition,
consolidation, reorganization, recapitalization, business combination or other
transaction is effectuated as a result or consequence of any introduction made
directly or indirectly by Catalyst, including, without limitation, any
introduction made by an third party to whom the Company was initially
introduced, directly or indirectly by Catalyst, or which transaction was
initiated, directly or indirectly, by Catalyst, then the Company hereby agrees
to pay Catalyst the following cash consideration, which payment shall be due and
payable in cash on the date of any such closing with respect thereto:
5% of the consideration from $1 and up to $5,000,000, plus
4% of the consideration in excess of $5,000,000 and up to
$10,000,000, plus
3% of the consideration in excess of $10,000,000 and up to
$15,000,000, plus
2% of the consideration in excess of $15,000,000 and up to
$20,000,000, plus
1% of the consideration paid in excess of $20,000,000.
In addition, Catalyst shall provide consulting services to the
Company in connection with any merger, acquisition, consolidation,
reorganization, recapitalization, business combination or other transaction not
arranged, directly or indirectly, by Catalyst. The Company shall pay Catalyst. a
fee equal to the following percentages based upon the value of the transaction:
2.5% of the consideration from $1 and up to $5,000,000, plus
2.0% of the consideration in excess of $5,000,000 and up to
$10,000,000, plus
1.5% of the consideration in excess of $10,000,000 and up to
$15,000,000, plus
1.0% of the consideration in excess of $15,000,000 and up to
$20,000,000, plus
.5 % of the consideration paid 'in excess of $20,000,000.
Catalyst FINANCIAL 3
<PAGE>
For purposes of this Agreement, "consideration" shall mean the total
present value of all cash, securities, or other property (i) received by the
Company at the closing of a transaction referred to above or to be received in
the future by it with respect to such transaction (other than payments of
interest or dividends); (ii) paid by the Company in connection with the
acquisition of the (X) assets or (Y) stock (and any securities, including debt,
options and warrants convertible into capital stock, or other rights to acquire
such capital stock) by the Company or a wholly-owned subsidiary thereof of
another company at the closing of a transaction referred to above or to be
received in the future by such other company or its securityholders with respect
to such transaction (other than payments of interest or dividends); (iii) to be
received by the company's securityholders (other than optionees under the
Company's employee stock plans) in the event of the merger of the Company into
another entity where the Company is not the survivor; (iv) to be received by
another company's securityholders (other than optionees under its employee stock
plans) in the event such other company merges with the Company or an affiliate
of the Company where such other company is not the survivor; and (v) transferred
or contributed to a joint venture or similar joint enterprise or undertaking by
the venturers within twelve months of the formation thereof or as specifically
required under the controlling agreement among the venturers. In the event of
any of the scenarios referred to in clauses (i) through (iv) above, the amount
by which the assumption, directly or indirectly (by operation of law or
otherwise), or any repayment of any long-term liabilities (liabilities maturing
more than one (1) year after the consummation of the transaction) of the
acquired or non-surviving entity exceeds its cash on hand at closing, shall be
considered consideration. In the event a transaction referred to above is
consummated in one or more steps, including without limitation, any additional
consideration to be paid in any subsequent step in the transaction, all such
amounts shall be included in the definition of consideration. For purposes of
this Agreement, consideration is not deemed to include amounts paid (X) in
connection with signing bonuses for employment contracts, and (Y) with respect
to employment contracts to the extent the amount payable thereunder is the same
as the amount to be paid prior to the transaction.
If all or a portion of the consideration paid in the transaction is
other than cash or securities, then the value of such non-cash consideration
shall be the fair market value thereof on the date the transaction is
consummated as mutually agreed upon in good faith by the Company and Catalyst.
If the parties cannot so agree, they shall jointly select an independent
appraiser to determine such value. The decision of the independent appraiser
shall be binding. The Company shall bear one half of the cost of such appraisal,
and Catalyst shall be responsible for the balance thereof. If such non-cash
consideration consists of common stock, options, warrants or rights for which a
public trading market existed prior to consummation of the transaction, then the
value of such securities shall be determined by the average closing or last
sales price for the ten (10) trading days prior to the consummation of the
transaction; provided, however, that if such non-cash consideration consists of
newly-issued, publicly traded common stock, options, warrants or rights for
which no public trading market existed prior to the consummation of the
transaction, then the value thereof shall be the average of the closing prices
for the 20 trading days subsequent to the fifth trading day after the
consummation of the transaction. In such event, the fee payable to Catalyst
pursuant to this Paragraph 5 shall be paid on the 30th trading day subsequent to
consummation of the transaction. If no public market exists for the common
stock, options, warrants or rights issued in the transaction, then the value of
such securities shall be as mutually agreed upon in good faith by the Company
and Catalyst. If such non-cash
Catalyst FINANCIAL 4
<PAGE>
consideration consists of preferred stock or debt securities, then the value of
such securities shall be the face or principal amount thereof unless it is
mutually agreed upon in good faith by the Company and Catalyst that the market
value of such securities is different than the face value or principal amount of
such securities, in which case the value of such securities will be the fair
market value of such securities as mutually agreed upon in good faith by the
Company and Catalyst. If all or a portion of the consideration payable in
connection with a transaction includes contingent future payments, then the
Company shall pay Catalyst any additional cash fee, determined in accordance
with this Paragraph 5, as, when, and if such contingent payments are paid.
If the consideration to be paid is computed in any foreign currency,
the value of such foreign currency for purposes hereof shall be converted into
U.S. dollars at the prevailing exchange rate on the date or dates on which such
consideration is paid.
6. Representations of the Company. The Company hereby represents and
warrants that any and all information supplied hereunder to Catalyst in
connection with any and all services to be performed hereunder by Catalyst for
and on behalf of the Company shall be true, complete and correct as of the date
of such dissemination and shall not fail to state a material fact necessary to
make any of such information not misleading. The Company hereby acknowledges
that the ability of Catalyst to adequately provide financial consulting services
hereunder is dependent upon the prompt dissemination of accurate, correct and
complete information to Catalyst. The Company further represents and warrants
hereunder that this Agreement and the transactions contemplated hereunder,
including the issuance of the warrants hereunder, have been duly and validly
authorized by all requisite corporate action; that the Company has the full
right, power and capacity to execute, deliver and perform its obligations
hereunder; and that this Agreement, upon execution and delivery of the same by
the Company, will represent the valid and binding obligation of the Company
enforceable in accordance with its terms. The representations and warranties set
forth herein shall survive the termination of this Agreement.
7. Indemnification.
(a) The Company hereby agrees to indemnify, defend and hold harmless
Catalyst, its officers, directors, principals, employees, partners, consultants,
affiliates, and shareholders, and their successors and assigns from and against
any and all claims, damages, losses, liability, deficiencies, actions, suits,
proceedings, costs or legal expenses (collectively the "Losses") arising out of
or resulting from: (i) any breach of a representation, or warranty by the
Company contained in this Agreement; or (ii) any activities or services
performed hereunder by Catalyst, unless such Losses were the result of the
intentional misconduct or gross misconduct of Catalyst or were the result of any
information supplied by Catalyst; or (iii) any and all costs and expenses
(including reasonable attorneys' and paralegals' fees) related to the foregoing,
and as more fully described below.
(b) If Catalyst receives written notice of the commencement of any
legal action, suit or proceeding with respect to which the Company is or may be
obligated to provide indemnification pursuant to this Section 7, Catalyst shall,
within thirty (30) days of the receipt of
Catalyst FINANCIAL 5
<PAGE>
such written notice, give the Company written notice thereof (a "Claim Notice").
Failure to give such Claim Notice within such thirty (30) day period shall not
constitute a waiver by Catalyst of its right to indemnity hereunder with respect
to such action, suit or proceeding. Upon receipt by the Company of a Claim
Notice from Catalyst with respect to any claim for indemnification which is
based upon a claim made by a third party ("Third Party Claim"), Catalyst may
assume the defense of the Third Party Claim with counsel of its own choosing, as
described below. The Company shall cooperate in the defense of the Third Party
Claim and shall furnish such records, information and testimony and attend all
such conferences, discovery proceedings, hearings, trial and appeals as may be
reasonably required in connection therewith. Catalyst shall have the right to
employ its own counsel in any such action, but the fees and expenses of such
counsel shall be at the expense of Catalyst unless the Company shall not have
promptly employed counsel to assume the defense of the Third Party Claim, in
which event such fees and expenses shall be borne solely by the Company. The
Company shall not satisfy or settle any Third Party Claim for which
indemnification has been sought and is available hereunder, without the prior
written consent of Catalyst. If the Company shall fail with reasonable
promptness either to defend such Third Party Claim or to satisfy or settle the
same, Catalyst may defend, satisfy or settle the Third Party Claim at the
expense of the Company and the Company shall pay to Catalyst the amount of any
such Loss within ten (10) days after written demand therefor. The
indemnification provisions hereunder shall survive the termination of this
Agreement.
8. Amendment. No modification, waiver, amendment, discharge or change of
this Agreement shall be valid unless the same is evidenced by a written
instrument, executed by the party against which such modification, waiver,
amendment, discharge, or change is sought.
9. Notices. All notices, demands or other communications given hereunder
shall be in writing and shall be deemed to have been duly given when delivered
in person or transmitted by facsimile transmission or on the third calendar day
after being mailed by United States registered or certified mail, return receipt
requested, postage prepaid, to the addresses hereinabove first mentioned or to
such other address as any party hereto shall designate to the other for such
purpose in the manner hereinafter set forth.
10. Entire Agreement. This Agreement contains all of the understandings
and agreements of the parties with respect to the subject matter discussed
herein. All prior agreements, whether written or oral, are merged herein and
shall be of no force or effect.
11. Severability. The invalidity, illegality or unenforceability of any
provision or provisions of this Agreement will not affect any other provision of
this Agreement, which will remain in full force and effect, nor will the
invalidity, illegality or unenforceability of a portion of any provision of this
Agreement affect the balance of such provision. In the event that any one or
more of the provisions contained in this Agreement or any portion thereof shall
for any reason be held to be invalid, illegal or unenforceable in any respect,
this Agreement shall be reformed, construed and enforced as if such invalid,
illegal or unenforceable provision had never been contained herein.
12. Construction and Enforcement. This Agreement shall be construed in
accordance with the laws of the State of New York, without application of the
principles of
Catalyst FINANCIAL 6
<PAGE>
conflicts of laws. If it becomes necessary for any party to institute legal
action to enforce the terms and conditions of this Agreement, the successful
party will be awarded reasonable attorneys' fees at all trial and appellate
levels, expenses and costs. Any suit, action or proceeding with respect to this
Agreement shall be brought in the state or federal courts located in New York
County in the State of New York. The parties hereto hereby accept the exclusive
jurisdiction of those courts for the purpose of any such suit, action or
proceeding. Venue for any such action, in addition to any other venue permitted
by statute, will be New York County, New York. The parties hereto hereby
irrevocably waive, to the fullest extent permitted by law, any objection that
any of them may now or hereafter have to the laying of venue of any suit, action
or proceeding arising out of or relating to this Agreement or any judgment
entered by any court in respect thereof brought in New York County, New York,
and hereby further irrevocably waive any claim that any suit, action or
proceeding brought in New York County, New York, has been brought in an
inconvenient forum.
13. Binding Nature. The terms and provisions of this Agreement shall be
binding upon and inure to the benefit of the parties, and their respective
successors and assigns.
14. Confidential Information. Catalyst agrees that all non-public
information pertaining to the prior, current or contemplated business of the
Company are valuable and confidential assets of the Company. Such information
shall include, without limitation, information relating to customer lists,
bidding procedures, intellectual property, patents, trademarks, trade secrets,
financing techniques and sources and such financial statements of the Company as
are not available to the public. Catalyst, its officers, directors, employees,
agents and shareholders shall hold all such information in trust and confidence
for the Company and shall not use or disclose any such information for other
than the benefit of the Company's business and shall be liable for damages
incurred by the Company as a result of the use or disclosure of such information
by Catalyst, its officers, directors, employees, agents or shareholders for any
purpose other than the benefit of the Company's business, either during the term
of this Agreement or after the termination or expiration thereof, except (i)
where such information is publicly available or later becomes publicly available
other than through a breach of this Agreement, or (ii) where such information is
subsequently lawfully obtained by Catalyst from a third party or parties who are
not under an obligation of confidentiality to the Company, or (iii) if such
information is known to Catalyst prior to the execution of this Agreement, or
(iv) as may be required by law.
15. Independent Contractor Status. It is expressly understood and agreed
that Catalyst shall, at all times, act as an independent contractor with respect
to the Company and not as an employee or agent of the Company, and nothing
contained in this Agreement shall be construed to create a joint venture,
partnership, association or other affiliation, or like relationship, between the
parties. It is specifically agreed that the relationship is and shall remain
that of independent parties to a contractual relationship and that Catalyst
shall have no right to bind the Company in any manner. In no event shall either
party be liable for the debts or obligations of the other except as otherwise
specifically provided in this Agreement.
16. Counterparts. This Agreement may be executed in any number of
counterparts, including facsimile signatures which shall be deemed as original
signatures. All executed
Catalyst FINANCIAL 7
<PAGE>
counterparts shall constitute one Agreement, notwithstanding that all
signatories are not signatories to the original or the same counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Mikron Instrument Company, Inc.
By:
----------------------------------
President
Catalyst Financial Corp.
By:
----------------------------------
Steven N. Bronson, President
Catalyst FINANCIAL 8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet at October 31, 1999 and the Statement of Operations for the year ended
October 31, 1999 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
<CASH> 1,229,626
<SECURITIES> 0
<RECEIVABLES> 1,043,527
<ALLOWANCES> 83,000
<INVENTORY> 2,200,733
<CURRENT-ASSETS> 4,468,786
<PP&E> 1,157,585
<DEPRECIATION> 829,669
<TOTAL-ASSETS> 4,893,517
<CURRENT-LIABILITIES> 754,386
<BONDS> 1,502
0
0
<COMMON> 12,858
<OTHER-SE> 4,124,771
<TOTAL-LIABILITY-AND-EQUITY> 4,893,517
<SALES> 6,969,057
<TOTAL-REVENUES> 7,090,631
<CGS> 3,304,160
<TOTAL-COSTS> 7,472,930
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (352,222)
<INCOME-TAX> 0
<INCOME-CONTINUING> (352,222)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (352,222)
<EPS-BASIC> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
