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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2000
[ ] Transition Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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COMMISSION FILE NUMBER 0-16152
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METRISA, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
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DELAWARE 04-2891557
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
25 WIGGINS AVENUE, BEDFORD, MASSACHUSETTS 01730
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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(781) 275-3300
(ISSUERS TELEPHONE NUMBER, INCLUDING AREA CODE)
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Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
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As of May 12, 2000, 1,265,193 shares of Common Stock were outstanding.
Transitional Small Business Disclosure Format:
Yes No X
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<PAGE>
FORM 10-QSB
QUARTERLY REPORT
TABLE OF CONTENTS
Facing Page............................................................... 1
Table of Contents......................................................... 2
PART I. FINANCIAL INFORMATION (*)
Item 1. Financial Statements
Balance Sheets................................................... 3
Statements of Operations......................................... 4
Statements of Cash Flows......................................... 5
Notes to Financial Statements.................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................ 15
Item 2. Changes in Securities............................................ 15
Item 3. Defaults upon Senior Securities.................................. 15
Item 4. Submission of Matters to a Vote of Security Holders.............. 15
Item 5. Other Information................................................ 15
Item 6. Exhibits and Reports on Form 8-K................................. 15
SIGNATURES................................................................ 16
(*) The financial information at September 30, 1999 has been taken from the
audited financial statements at that date. All other financial statements
are unaudited.
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
METRISA, INC.
BALANCE SHEETS
(Unaudited)
<TABLE><CAPTION>
March 31, September 30,
ASSETS 2000 1999
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,092,809 $ 1,298,984
Accounts receivable, less allowance for
doubtful accounts of $167,000 at March 31,
2000 and September 30, 1999 1,675,262 1,784,246
Inventories: 1,213,428 1,196,530
Prepaid expenses 101,585 73,520
Notes receivable 50,000 10,554
----------- -----------
Total current assets 4,133,084 4,363,834
Equipment and fixtures, net 358,465 406,360
Other assets, net of accumulated amortization of
$649,141 and $543,342 at March 31, 2000 and
September 30, 1999, respectively 1,679,178 1,795,610
----------- -----------
Total assets $ 6,170,727 $ 6,565,804
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to bank 488,938 488,938
Accounts payable 1,176,273 1,260,668
Accrued expenses and other 511,504 569,675
Current portion of long-term debt 235,302 498,754
----------- -----------
Total current liabilities 2,412,017 2,818,035
----------- -----------
Long-term debt, less current portion 1,762,109 2,071,541
Commitments
Stockholders' equity:
Preferred stock $1.00 par value, 10,000,000
shares authorized, 0 shares issued and
outstanding at December 31, 1999 and September
30, 1999, respectively -- --
Common stock, $.50 par value, 4,000,000 shares
authorized, 1,265,193 and 1,020,474 shares
issued and outstanding at March 31, 2000 and
September 30, 1999, respectively 632,597 510,237
Additional paid-in capital 2,450,051 2,013,753
Accumulated deficit (1,086,047) (847,762)
----------- -----------
Total stockholders' equity 1,996,601 1,676,228
----------- -----------
Total liabilities and stockholders' equity $ 6,170,727 $ 6,565,804
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
METRISA, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE><CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales:
Product sales $ 1,455,404 $ 1,574,008 $ 2,913,102 $ 2,870,890
Service sales 334,835 385,113 610,291 716,169
----------- ----------- ----------- -----------
Net sales 1,790,239 1,959,121 3,523,393 3,587,059
Cost of sales 799,118 912,814 1,608,973 1,741,770
----------- ----------- ----------- -----------
Gross profit 991,121 1,046,307 1,914,420 1,845,289
Operating expenses:
Selling, general and administrative 799,060 1,053,238 1,651,212 1,909,811
Research and development 163,418 176,361 301,116 332,164
----------- ----------- ----------- -----------
962,478 1,229,599 1,952,328 2,241,975
----------- ----------- ----------- -----------
Income (loss) from operations 28,643 (183,292) (37,908) (396,686)
Other income (expense):
Interest income 4,537 9,585 8,979 17,491
Interest expense (96,380) (75,620) (209,356) (190,637)
----------- ----------- ----------- -----------
(91,843) (66,035) (200,377) (173,146)
----------- ----------- ----------- -----------
Loss before income taxes (63,200) (249,327) (238,285) (569,832)
Income taxes -- 25,040 -- 25,040
----------- ----------- ----------- -----------
Net loss $ (63,200) $ (274,367) $ (238,285) $ (594,872)
=========== =========== =========== ===========
Net loss per common share-basic and diluted $ (0.05) $ (0.27) $ (0.21) $ (0.58)
Shares outstanding-basic and diluted 1,230,233 1,022,060 1,124,780 1,022,490
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
METRISA, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE><CAPTION>
Six Months Ended
March 31,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Operating activities:
Net loss $ (238,285) $ (594,872)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 170,295 152,761
Amortization of deferred financing costs 24,562 24,000
Changes in operating assets and liabilities,
net of effects of purchase of subsidiaries:
Accounts receivable 108,984 412,085
Notes receivable (39,446) --
Inventories (16,898) (54,932)
Other current assets (28,065) (17,754)
Accounts payable and accrued expenses (142,566) (227,634)
----------- -----------
Net cash used in operating activities (161,419) (306,346)
Investing activities:
Additions to equipment and fixtures (16,031) (46,191)
(Increase) decrease in other assets (5,881) 18,346
----------- -----------
Net cash used in investing activities (21,912) (27,845)
Financing activities:
Increase in bank line of credit -- 195,000
Principal payments on long-term debt (339,425) (479,693)
Principal payments on capital lease obligation (8,459) --
Payment of note payable for Micromet Acquisition -- (208,166)
Proceeds from sale of Common Stock 277,145 --
Proceeds from exercise of stock options 47,895 --
Purchase of treasury stock -- (43,277)
----------- -----------
Net cash used in financing activities (22,844) (536,136)
----------- -----------
Net decrease in cash and cash equivalents (206,175) (870,327)
Cash and cash equivalents at beginning of period 1,298,984 2,469,053
----------- -----------
Cash and cash equivalents at end of period $ 1,092,809 $ 1,598,726
=========== ===========
Non-cash Transactions:
Converion of debt into equity $ 225,000 --
Valuation of warrant issued at debt conversion 8,618 --
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
METRISA, INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three-month
period ended March 31, 2000 are not necessarily indicative of the results that
may be expected for the year ended September 30, 2000. The interim financial
statements should be read in conjunction with the audited financial statements
and footnotes thereto for the year ended September 30, 1999 included in the
Company's Annual Report on Form 10-KSB.
Metrisa, Inc. ("the Company") is comprised of three divisions, all
currently located in Bedford, MA with the recent relocation of the New Jersey
operations in November 1999. These divisions serve two broad markets, the
process/environmental markets, and the materials characterization market.
Tytronics manufactures and markets on-line liquid chemical analyzers to the
process and environmental industries; Nametre manufactures and markets on-line
viscosity analyzers to the process industries. Tytronics and Nametre, together,
constitute the process analytical industry segment. Holometrix Micromet provides
instrumentation and testing services for the measurement of thermal properties
and cure monitoring of composites for the automotive, aerospace, and electronics
packaging industries. Holometrix Micromet constitutes the materials
characterization industry segment.
Certain amounts in prior period financial statements have been reclassified
to conform to current presentation.
2. INVENTORIES
Inventories consisted of the following at:
March 31, September 30,
2000 1999
---------- ----------
Raw materials $ 801,450 $ 680,159
Work-in-process 257,259 302,453
Finished Goods 154,719 213,918
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$1,213,428 $1,196,530
========== ==========
6
<PAGE>
3. NET LOSS PER SHARE
Outstanding options and warrants are included in the computation of diluted
earnings per share using the treasury stock method when their effect is
dilutive. For the periods presented, the exercise price of the options and
warrants was greater than the average market price of the Company's common
stock, hence their inclusion would be anti-dilutive and they have been
appropriately excluded from the computations. Net income (loss) per share
amounts for all periods have been presented. The following is a reconciliation
of the denominator (number of shares) used in the computation of loss per share.
The numerator (net loss) is the same for the basic and diluted computations.
Three Months Ended Six Months Ended
March 31, March 31,
--------------------- ---------------------
2000 1999 2000 1999
--------- --------- --------- ---------
Basic shares 1,230,233 1,022,060 1,124,780 1,022,490
Effect of dilutive securities -- -- -- --
--------- --------- --------- ---------
Dilutive shares 1,230,233 1,020,060 1,124,780 1,020,490
The following table summarizes securities that were outstanding as of March
31, 2000 and 1999, but not included in the calculation of diluted loss per share
because such shares are antidilutive:
2000 1999
--------- ---------
Options 154,431 172,980
Warrants 378,836 539,340
4. SEGMENT REPORTING
The Company operates its business in two identifiable reporting industry
segments: the development and manufacture of process analytical instruments and
the development and manufacture of materials characterization instruments as
well as contract testing services for materials characterization.
A summary of the Company's operations by segment follows:
Three Months Ended Six Months Ended
March 31, March 31,
--------------------- ---------------------
2000 1999 2000 1999
--------- --------- --------- ---------
Sales:
Process analytical 1,041,452 1,295,505 2,037,959 2,346,165
Materials characterization 748,787 663,616 1,485,434 1,240,894
--------- --------- --------- ---------
1,790,239 1,959,121 3,523,393 3,587,059
Income (loss) from operations:
Process analytical (28,169) (54,432) (15,147) (234,285)
Materials characterization 56,812 (128,860) (22,761) (162,401)
--------- --------- --------- ---------
28,643 (183,292) (37,908) (396,686)
7
<PAGE>
5. RESTRUCTURING CHARGES
As of September 30, 1999, the Company recorded a restructuring charge of
$149,288 related to the closure and subsequent consolidation of the Nametre
Division's Metuchen, New Jersey facility into the Company's Bedford,
Massachusetts, facility. The restructuring charge was primarily related to
employee severance expenses and certain non-recurring charges. During the three
months ended March 31, 2000, the Company paid approximately $50,000 in employee
severance charges. Expenditures during the six months ended March 31, 2000
totaled approximately $94,000, with $83,000 related to severance expenses and
$11,000 in non-recurring expenses. A balance of approximately $55,000 remains in
current liabilities and payments of this amount are anticipated to be completed
by November.
6. DEBT AGREEMENT
On January 11, 2000, the Company entered into an agreement with an existing
shareholder and subordinated debt lender, Massachusetts Technology Development
Corporation ("MTDC") and an investment bank, Finova Capital Corporation
("Finova"). MTDC was the holder of a subordinated promissory note for $450,000,
originally due November 23, 1999. Finova is the holder of a subordinated
promissory note for $2,000,000, payable in full on October 1, 2003, with partial
payments beginning October 1, 2000. Under the agreement, MTDC converted $225,000
of the promissory note into 94,937 shares of the Company's common stock. The
Company repaid the remaining balance on the promissory note of $225,000. All of
MTDC's 164,814 warrants were canceled as part of this transaction. Also, the
Company repaid $100,000 of the Finova subordinated promissory note and issued
4,310 warrants to purchase the Company's common stock, at a price of $0.50 per
share. These warrants have been given a value of $8,617, included in financing
costs and will be amortized over the life of the debt.
As part of this agreement, existing investors, including an officer,
purchased additional equity of 116,939 shares of common stock for $277,145.
Also, directors of the Company, including officers, exercised options for 32,843
shares of the Company's common stock for $47,895. As a result of these
transactions, the total shares of common stock outstanding increased from
1,020,474 to 1,265,193 and warrants and options outstanding decreased from
699,064 to 505,717.
7. AGREEMENT TO PURCHASE MONITEK'S ASSETS
The Company announced the signing of an Asset Purchase Agreement to
purchase substantially all of the assets (with certain exceptions) of the
optical and acoustic instrument business of Monitek Technologies, Inc., and
Monitek GmbH, wholly owned subsidiaries of Sentex Sensing Technology, Inc.
Closing of the transaction is subject to certain approvals, including those of
the financing entities of both companies, and is expected before the end of
fiscal 2000.
Monitek is a leading manufacturer and marketer of liquid analysis products
for the chemical, petrochemical, refining, beverage and water markets, with
operations in Livermore, CA and Dusseldorf, Germany. Monitek's operation will
become part of Metrisa's process analytical business segment.
8
<PAGE>
8. NEW ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements," as amended by SAB No. 101A, which is effective no later than the
quarter ending June 30, 2000. SAB No. 101 clarifies the Securities and Exchange
Commission's views regarding the recognition of revenue. The Company will adopt
SAB No. 101 in the third quarter of fiscal 2000. The Company does not expect the
application of SAB No. 101 to have a material impact on their financial position
or results of operations.
In March 2000, the Financial Accounting Standard Board issued FASB
Interpretation ("FIN") No. 44, "Accounting for Certain Transactions Involving
Stock Compensation - an interpretation of APB Opinion No. 25." FIN No. 44
primarily clarifies (a) the definition of an employee for purposes of applying
APB Opinion No. 25, (b) the criteria for determining whether a plan qualifies as
a noncompensatory plan, (c) the accounting consequence of various modifications
to the terms of previously fixed stock options or awards, (d) and the accounting
for an exchange of stock compensation awards in a business combination. FIN No.
44 is effective July 1, 2000, but certain conclusions in FIN No. 44 cover
specific events that occurred after either December 15, 1998 or January 12,
2000. The Company does not expect the application of FIN No. 44 to have a
material impact on their financial position or results of operations.
9
<PAGE>
ITEM 2.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three-Month Period Ended March 31, 2000 as Compared With the Three-Month Period
- -------------------------------------------------------------------------------
Ended March 31, 1999
- --------------------
NET REVENUES in the second quarter of fiscal 2000 totaled $1,790,239 as
compared to $1,959,121 in the comparable quarter of fiscal 1999, a decrease of
$168,882. This 9% decrease was primarily a result of decreased Asian sales,
coupled with the late receipt of certain orders.
COST OF SALES decreased by $113,696, or 13%, from $912,814 (47% of sales)
in the second quarter of fiscal 1999 to $799,118 (45% of sales) in the second
quarter of fiscal 2000. This decrease in cost of sales is attributed primarily
to the reduction in sales volume and the savings from the relocation of
Nametre's viscosity analyzer manufacturing from New Jersey to Massachusetts.
GROSS PROFIT decreased by $55,186 from $1,046,307 (53% of sales) in the
second quarter of fiscal 1999 to $991,121 (55% of sales) in the comparable
period of fiscal 2000. This decline was caused by the effect of a reduction in
net revenues of $168,882, offset by the cost reductions resulting from the
relocation of Nametre's viscosity analyzer manufacturing to Massachusetts,
coupled with other manufacturing cost reductions.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES decreased by $254,178, or 24%,
from $1,053,238 (54% of sales) in the second quarter of fiscal 1999 to $799,060
(45% of sales) in the second quarter of fiscal 2000. This decrease was a result
of savings from both the Nametre relocation and certain other personnel cost
reductions.
RESEARCH AND DEVELOPMENT decreased, by $12,943, or 7%, from $176,361 (9% of
sales) in the second quarter of fiscal 1999 to $163,418 (9% of sales) in the
second quarter of fiscal 2000.
INCOME (LOSS) FROM OPERATIONS improved by $211,935, from a loss of $183,292
in the second quarter of fiscal 1999, to income of $28,643 in the comparable
period of fiscal 2000. Net loss was $63,200 in the second quarter of fiscal
2000, compared with a net loss of $274,367 in the second quarter of 1999, a
decrease of $211,167. The net loss was only slightly affected by net interest
expenses of $25,808 associated with the Company's FY1998 subordinated debt
financing, as these expenses were largely offset by reduced income taxes of
$25,040.
Six-MonthPeriod Ended March 31, 2000 as Compared With the Six-Month period Ended
- --------------------------------------------------------------------------------
March 31, 1999
- --------------
NET REVENUES in the first half of fiscal 2000 totaled $3,523,393 as
compared to $3,587,059 in the comparable period of fiscal 1999, a decrease of
$63,666. This 2% decrease was primarily a result of decreased Asian sales,
primarily affecting the Nametre viscosity analyzer products.
COST OF SALES decreased by $132,797, or 8%, from $1,741,770 (49% of sales)
in the first half of 1999, to $1,608,973 (46% of sales) in the same period of
fiscal 2000. This decrease in cost of sales is attributed primarily to the
reduction in sales volume and the savings resulting from the relocation of
Nametre's viscosity analyzer manufacturing from New Jersey to Massachusetts.
GROSS PROFIT increased by $69,131 from $1,845,289 (51% of sales) in the
second quarter of fiscal 1999 to $1,914,420 (54% of sales) in the comparable
period of fiscal 2000. This increase was due to the cost reductions resulting
from the relocation of Nametre's viscosity analyzer manufacturing to
Massachusetts, coupled with other manufacturing cost reductions, offset by the
effect of a $63,666 reduction in net revenues.
SELLING, GENERAL AND ADMINISTRATIVE expenses decreased by $258,599, or 14%,
from $1,909,811 (53% of sales) to $1,651,212 (47% of sales). This decrease was
primarily a result of the continuing consolidation of selling, marketing and
distribution activities, the Nametre relocation and consolidation, and a smaller
decrease in general and administrative expenses due to reduced staffing, offset
by a small increase in depreciation and amortization.
10
<PAGE>
RESEARCH AND DEVELOPMENT expense decreased by $31,048, or 9%, from $332,164
(9% of sales) to $301,116 (9% of sales). This decrease is a result of continuing
consolidation of the research and development effort, along with a focus on a
more specific set of projects.
LOSS FROM OPERATIONS was $37,908 in the first half of fiscal 2000, compared
with a loss of $396,686 in the comparable period of fiscal 1999. Net loss was
$238,285 in the first half of fiscal 2000, compared with net loss of $594,872 in
the first half of fiscal 1999. The effect of the remaining other income and
expense was minimal; net interest expense increased by $27,231, and was largely
offset by a decrease in income taxes of $25,040.
LIQUIDITY AND CAPITAL RESOURCES
TOTAL ASSETS decreased by $395,077 (6%) in the first half of fiscal 2000,
from $6,565,804 at September 30,1999 to $6,170,727 at March 31, 2000. Cash
decreased by $206,175, largely due to operating losses in the first quarter of
fiscal 2000. Due to increased collection activity, accounts receivable decreased
by $108,984 in the first half of fiscal 2000. Inventories increased slightly by
$16,898, or 1%. All other current assets increased by $67,511, primarily due to
the inclusion of the $50,000 note receivable associated with the signing of the
Monitek Asset Purchase Agreement. Equipment and fixtures decreased by $47,895,
to $358,465, primarily due to depreciation, offset by modest capital
expenditures. Other assets decreased by $116,432 to $1,679,178 in the first half
of fiscal 2000, largely due to the amortization of financing and patent costs.
TOTAL CURRENT LIABILITIES decreased by $406,018 to $2,412,017 in the first
half of fiscal 2000, partially due to a decrease in accounts payable of $84,395,
and a decrease in accrued expenses of $58,171. The current portion of long-term
debt also decreased, by $263,452, largely due to the elimination of $450,000 of
debt due to the MTDC, offset by the inclusion of $200,000 of current debt due to
Finova. Notes payable to bank remained constant at $488,938.
CASH FLOWS were negative in the first half of fiscal 2000, amounting to
$206,175, as compared to a negative cash flow of $870,327 in the comparable
period of fiscal 1999. Operating cash flow improved by $144,927, primarily due
to a significant reduction in net loss. Changes in investing activities were
modest; the net cash used in investing activities was reduced by only $5,933, to
$21,912. The net cash used in financing activities was also significantly
reduced from a cash outflow of $536,136 in the first half of fiscal 1999 to a
cash outflow of $22,844 in the comparable period of fiscal 2000, a reduction of
$513,292. The change in financing activities was largely attributable to a
reduction in net debt repayments of $144,975, coupled with an increase in equity
of $325,040 from the sale of stock and the exercise of stock options.
As of March 31, 2000, the Company had an outstanding order backlog for
product and services of approximately $1,179,000 as compared to a backlog of
$718,000 at the end of fiscal 1999. The Company believes that substantially all
of the current backlog will be realized in fiscal 2000.
11
<PAGE>
Notes Payable Line of Credit, Subordinated Debt Loan, and Debt Agreement
- ------------------------------------------------------------------------
As of September 30, 1998, the Company was a party to a Silicon Valley Bank
combined line of credit and term loan of $1,750,000 secured by substantially all
of the assets of the Company. As of September 30, 1999, this line was decreased
to $1,250,000 through repayment and retirement of the $500,000 term loan.
Advances under this line cannot exceed 75% of the Company's eligible accounts
receivable plus 20% of inventory, as defined. All outstanding amounts are
payable on demand and advances are contingent upon maintaining certain covenants
relative to cash and borrowing availability under the line of credit. As of
March 31, 2000, total advances under this line of credit were $488,938, the same
amount as that outstanding as of September 30, 1999. As of March 31, 2000, the
Company was in compliance with all covenants on this line of credit.
As of September 29, 1998, the Company was party to a $2,000,000
subordinated debt financing agreement with Finova Mezzanine Capital, Inc.
("Finova"), a senior subordinated debt lender, secured by substantially all of
the assets of the Company, but subordinated to the Silicon Valley Bank
financing. This loan is due in full September 30, 2003, with interest-only
payments for the first two years, and partial payments beginning October 1,
2000. This financing required maintenance of a covenant in which the ratio of
long term debt (excluding current portion) to EBITDA cannot exceed certain
levels. In January 2000, this covenant was amended to a cash flow coverage
covenant, effective in the quarter ending March 31, 2000. As of that date, the
Company was in full compliance with the amended covenant.
On January 11, 2000, the Company entered into an agreement with an existing
shareholder and subordinated debt lender, Massachusetts Technology Development
Corporation ("MTDC"), and Finova. MTDC was the holder of a subordinated
promissory note for $450,000, due November 23, 1999. As noted, Finova is the
holder of a subordinated promissory note for $2,000,000, payable in full on
October 1, 2003. Under the agreement, MTDC converted $225,000 of the promissory
note into 94,937 shares of the Company's common stock, at a conversion price of
$2.37 per share, and the Company repaid the remaining balance on the promissory
note of $225,000. The Company also repaid $100,000 of the Finova subordinated
promissory note and issued a warrant to Finova for an additional 4,310 shares of
the Company's common stock, at a price of $0.50 per share.
In connection with this agreement, existing stockholders, including an
officer, purchased additional equity of 116,939 shares of common stock for
$277,145, at a price of $2.37 per share. In addition, directors of the Company,
including officers, exercised options for 32,843 shares of the Company's common
stock for $47,895. As a result of these transactions, the total shares of common
stock outstanding increased from 1,020,474 to 1,265,193 and warrants and options
outstanding decreased from 699,064 to 505,717.
Restructuring Charges
- ---------------------
As of September 30, 1999, the Company recorded a restructuring charge of
$149,288 related to the closure and subsequent consolidation, in part, of the
Nametre Division's Metuchen, New Jersey facility into the Company's Bedford,
Massachusetts, facility. The restructuring charge was primarily related to
employee severance and certain non-recurring charges. The relocation took place
in November 1999 with a complete closure of the facility in January 2000. During
the three months ended December 31, 1999, the Company paid out approximately
12
<PAGE>
$33,000 in severance payments and $11,000 in non-recurring expenses; in the
three months ending March 31, 2000, an additional $50,000 of employee severance
payments were incurred, for a total charge of $94,000, $83,000 in severance
payments and $11,000 in non-recurring expenses. These expenses were charged
against current liabilities, leaving a balance of approximately $55,000 in
current liabilities related to future severance payments. The Company
anticipates that the restructuring payments will be substantially completed
within the next two quarters.
Agreement to Purchase Monitek's Assets
- --------------------------------------
The Company announced the signing of an Asset Purchase Agreement to
purchase substantially all of the assets (with certain exceptions) of the
optical and acoustic instrument business of Monitek Technologies, Inc., and
Monitek GmbH, wholly owned subsidiaries of Sentex Sensing Technology, Inc.
Closing of the transaction is subject to certain approvals, including those of
the financing entities of both companies, and is expected before the end of
fiscal 2000.
Monitek is a leading manufacturer and marketer of liquid analysis products
for the chemical, petrochemical, refining, beverage and water markets, with
operations in Livermore, CA and Dusseldorf, Germany. Monitek's operation will
become part of Metrisa's process analytical business segment.
Other Company Initiatives
- -------------------------
The Company expects to continue to invest in enhanced sales and marketing
efforts, new product development, and the development of strategic
relationships, including licensing, acquisitions (including that mentioned
previously), mergers, or OEM agreements. Management believes that operating
capital, the line of credit from Silicon Valley Bank, and the subordinated debt
financing from Finova, plus the subsequent financing agreement among current
investors, MTDC and Finova, will provide sufficient capital to maintain stable
Company operations throughout fiscal 2000. The Company believes that its
strategic initiatives, the recently completed Nametre restructuring, and other
costs savings will provide stable Company operations for the foreseeable future.
However, there can be no assurance that adequate profitability or operating
funds will be generated as a result of such cost reductions or that strategic
relationships will materialize, or that additional funding, if required, can be
obtained on acceptable terms.
New Accounting Pronouncements
- -----------------------------
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements," as amended by SAB No. 101A, which is effective no later than the
quarter ending June 30, 2000. SAB No. 101 clarifies the Securities and Exchange
Commission's views regarding the recognition of revenue. The Company will adopt
SAB No. 101 in the third quarter of fiscal 2000. The Company does not expect the
application of SAB No. 101 to have a material impact on their financial position
or results of operations.
In March 2000, the Financial Accounting Standard Board issued FASB
Interpretation ("FIN") No. 44, "Accounting for Certain Transactions Involving
Stock Compensation - an interpretation of APB Opinion No. 25." FIN No. 44
primarily clarifies (a) the definition of an employee for
13
<PAGE>
purposes of applying APB Opinion No. 25, (b) the criteria for determining
whether a plan qualifies as a noncompensatory plan, (c) the accounting
consequence of various modifications to the terms of previously fixed stock
options or awards, (d) and the accounting for an exchange of stock compensation
awards in a business combination. FIN No. 44 is effective July 1, 2000, but
certain conclusions in FIN No. 44 cover specific events that occurred after
either December 15, 1998 or January 12, 2000. The Company does not expect the
application of FIN No. 44 to have a material impact on their financial position
or results of operations.
Year 2000 Update
- ----------------
The Company has not experienced any business disruptions related to the
"Year 2000" issue. Nevertheless, the Company is continuing to evaluate the risks
associated with a potential delayed impact of Year 2000 failures. Any such
failure could materially and adversely impact the Company's results of
operations, liquidity, and financial position. The Company believes that its
Year 2000 compliance project has reduced, but not eliminated, the possibility
that its operations in the future will encounter any significant interruptions
related to the Year 2000 issue.
14
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The Company was not involved in any material legal proceedings as of
the date of this report.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submissions of Matters to a Vote of Security Holders
----------------------------------------------------
The Company's Annual Meeting of Stockholders was held March 23, 2000
to consider the election of Joseph J. Caruso, Joaquim S.S. Ribeiro,
Emile Sayegh, Salvatore J. Vinciguerra and John E. Wolfe as
Directors. Stockholders also voted to approve an amendment to the
Company's 1991 Stock Plan, to increase the number of shares of the
Company's common stock, $.50 par value, reserved for issuance
thereunder from 125,000 shares to 240,000 shares, and to approve the
selection of PricewaterhouseCoopers LLP as the Company's independent
auditors for the fiscal year ending September 30, 2000.
The following table indicates the number of votes cast for or
against, as well as the number of abstentions (there were no broker
non-votes) as to each matter considered at the Company's 2000 Annual
Stockholders Meeting.
VOTES VOTES
ITEMS CONSIDERED FOR AGAINST ABSTENTIONS
---------------- --- ------- -----------
1. Fix the number of Directors at 901,108 800 586
five (5)
2. Election of Nominated Officers 901,108 --- ---
3. To approve amendment to the 894,285 8,061 148
Company's 1991 Stock Plan to
increase the number of shares
of the Company's Common Stock,
$.50 par value, reserved for
issuance thereunder from
125,000 to 240,000 shares
4. To approve the selection of 902,264 80 150
PricewaterhouseCoopers LLP as
independent auditors
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
10.20 Asset Purchase Agreement dated March 14, 2000, among
the Company, Sentex Sensing Technology, Inc., Monitek
Technologies Inc., et al (filed herewith).
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K
-------------------
Not applicable.
15
<PAGE>
SIGNATURE
Pursuant to the requirements of the Exchange Act, the Registrant has caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Metrisa, Inc.
By: /s/ John E. Wolfe
-------------------
John E. Wolfe
President
Date: May 15, 2000
16
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of
this 14th day of March, 2000 by and among Metrisa, Inc. a Delaware corporation
("Metrisa"), Metrisa GmbH, a German company and wholly owned subsidiary of
Metrisa ("Metrisa GmbH" and, together with Metrisa, the "Buyer"), Sentex Sensing
Technology, Inc., a New Jersey corporation ("Sentex"), Monitek Technologies,
Inc., a Delaware corporation and wholly owned subsidiary of Sentex ("Monitek"),
Monitek GmbH, a German company and wholly owned subsidiary of Monitek (the
"Subsidiary" and, together with Monitek, the "Seller"), and solely with respect
to the provisions of Article 8 hereof, CPS Capital, Ltd., an Ohio limited
liability company (the "Stockholder").
Introduction
------------
Sentex and Seller wish to sell, and Buyer wishes to buy, substantially
all of the assets of Seller not expressly excluded by Buyer hereunder, which
assets relate to Seller's optical and acoustic instrument business (the
"Business"), on the terms and conditions set forth herein. The Stockholder, as a
significant stockholder and creditor of Sentex and Monitek, is willing to
provide certain limited indemnifications.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
PURCHASE AND SALE; CLOSING
Section 1.01. Purchase and Sale of Seller's Assets.
------------ ------------------------------------
(a) With the exception of those tangible assets which Buyer has elected
to exclude in accordance with subsection (b) below, and otherwise subject to the
terms and conditions of this Agreement, Sentex shall cause Seller to, and Seller
shall, sell, convey, transfer, assign and deliver to Buyer at the Closing (as
hereinafter defined), free and clear of all liens, security interests,
mortgages, encumbrances and restrictions, other than as provided herein, all of
Seller's assets and properties of every kind, nature and description, whether
tangible or intangible (collectively, the "Purchased Assets"), including,
without limitation, the following assets of Seller:
(i) all accounts receivable, customer, security and utility
deposits, and prepaid expenses of the Business not listed in Schedule
1.01(b);
(ii) all tangible assets, including, without limitation,
inventories not referenced on Schedule 1.01(b), work in process,
finished goods and raw materials, tooling,
<PAGE>
machinery, equipment, parts, supplies, tangible assets listed on
Schedule 2.08, vehicles, laboratory and office equipment, furniture and
other fixed assets and leasehold improvements not listed in Schedule
1.01(b);
(iii) all intangible assets and records used or useful in
connection with the Business, including, without limitation, all
goodwill, trademarks, trade names (excluding the name "Sentex" or any
forms thereof), service marks (whether or not registered), service
names, copyrights and applications therefor, patent rights and patent
applications pending, brand names, commercial and technical trade
secrets, licenses, inventions, processes, know-how, confidential
information and other proprietary property, rights and interests;
application and operational software, distributor and representative
lists, bills of material, vendor lists, laboratory notebooks,
engineering designs and drawings and all other operational books,
records, and data used in the Business, and all assembly drawings,
parts, lists, purchase orders, and purchase commitments and all other
contract rights, schematics and component and test specifications, and
manufacturing, inspection, and operating procedures, all financial,
accounting and operating data and records (provided Seller may make
copies for itself to the extent reasonably necessary to prepare
government reports or for its stockholders legitimate business needs),
including, without limitation, all books, records, notes, sales and
sales promotional data, advertising materials, credit information, cost
and pricing information, customer and supplier lists, business plans,
projections, reference catalogs, payroll and personnel records and all
other similar property, rights and information;
(iv) subject to section 1.02, all existing orders and
backlog, sales proposals, open quotations, sales leads, and bids from
or to customers and potential customers of the Business not listed in
Schedule 1.01(b); and
(v) subject to section 1.02, all rights under all leases,
license agreements, software licenses, contracts, agreements, sale
orders, purchase orders and other commitments, warranties and warranty
claims and awards, prepaid expenses and retentions not listed in
Schedule 1.01(b).
(b) Notwithstanding the foregoing, Seller shall not transfer and assign
to Buyer, and the Purchased Assets shall not include, the following assets of
Seller (collectively, the "Excluded Assets"): (i) the minute books of Seller;
(ii) Seller's rights under this Agreement; (iii) cash and cash equivalents on
hand, if any, as of the Closing; and (iv) those assets listed on Schedule
1.01(b) by Buyer.
(c) The Buyer and Seller acknowledge and agree that the Subsidiary
shall sell and Metrisa GmbH shall purchase that portion of the Purchased Assets
owned by the Subsidiary as of the Closing, together with certain other Purchased
Assets owned by Monitek allocated between Metrisa and Metrisa GmbH prior to the
Closing.
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<PAGE>
Section 1.02. Assignment of Contracts and Agreements.
------------ --------------------------------------
(a) Effective on the Closing Date, all purchase contracts, supply
contracts, consignment stock contracts, and all distributor and agency contracts
relating to the Business which are not listed on Schedule 1.01(b) shall be
assigned by Seller to Buyer (and allocated between Metrisa and Metrisa GmbH as
they shall determine prior to the Closing).
(b) Prior to the Closing, the parties hereto shall use reasonable
efforts to obtain such consents of third parties as may be required for the
assignment of the contracts referred to in subparagraph (a) above. If in any
specific instance such consent cannot be obtained, Buyer may nevertheless in its
discretion as of the Closing accept the assignment of any such contract or
exclude any such contract from the Purchased Assets by amendment of Schedule
1.01(b) together with the exclusion of any related assumed liabilities by
appropriate amendment of Schedule 1.04(a) or Schedule 1.04(b).
(c) Obligations and liabilities under such contracts for continuing or
recurring performance or for divisible performance which are assumed by Buyer
shall be allocated on a time basis between the periods before and after the
Closing and the value of any performance advanced by, or outstanding and due
from, Seller or the respective other parties to contracts shall be allocated
between Seller and Buyer. Where Seller, in respect of contracts transferred and
assigned, has already received payments on account for which no performance has
yet been effected, such payments (to the extent not previously accounted for) on
account shall be remitted to Buyer. Where Seller has already effected
performance in respect of contracts transferred and assigned to Buyer and
payment therefor has not yet been made, any amounts (to the extent not
previously accounted for) received by Buyer in payment of such performance shall
be remitted to Seller. In furtherance of the foregoing, all benefits,
obligations and liabilities relating to such assumed contracts that arise after
the Closing shall inure to the benefit of, or shall be assumed by, Buyer in
accordance with section 1.04.
Section 1.03. Purchase Price.
------------ --------------
(a) Amount. The aggregate purchase price to be paid by Buyer for the
Purchased Assets shall be the Closing Purchase Price (as hereinafter defined),
which shall be payable as set forth below.
(b) Certain Definitions.
(i) "Base Purchase Price" means $1,490,077 calculated in
accordance with Schedule 1.03(b)(i).
(ii) "Closing Balance Sheet" means the consolidated balance
sheet of Seller as of immediately prior to the Closing, prepared after
the Closing by Buyer in accordance with generally accepted accounting
principals or the equivalent under the laws of Germany ("GAAP"), on a
basis consistent with, and modified by, the procedures and
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<PAGE>
practices used in the preparation of Seller's Balance Sheet (as defined
in section 2.05), which shall not include the Excluded Assets, as
finally determined in accordance with section 1.02(e) or any
liabilities not assumed by Buyer.
(iii) "Closing Purchase Price" means the sum of the
Intangible Purchase Price and the Base Purchase Price (y) reduced or
increased by the amount by which the Net Asset Value (as hereinafter
defined) is less than or exceeds, as the case may be, the Base Purchase
Price and (z) reduced by the amount of any loans or advances by Buyer
to Seller or Sentex prior to the Closing.
(iv) "Intangible Purchase Price" means 160,000 shares
("Shares") of Metrisa's common stock, $.50 par value, to be paid by
Buyer to Seller in connection with the purchase of all intangible
assets and records of Seller used or useful in connection with the
Business as further described in section 1.01 with such Shares
allocated between Monitek and the Subsidiary in proportion to the
dollar value of the intangible assets of Monitek and the Subsidiary
shown on their respective Closing Balance Sheets.
(v) "Net Asset Value" means the net book value of the
tangible assets of Seller included in the Purchased Assets as of
immediately prior to Closing, determined on a consolidated basis as to
Seller in accordance with GAAP, on a basis consistent with, and
modified by, the procedures and practices used in the preparation of
Seller's Balance Sheet. For purposes of determining Net Asset Value, no
value shall be attributed to assets listed on Schedule 1.01(b) or to
intangible assets, including, without limitation, goodwill, the
previous write-up of assets associated with the acquisition of Monitek
by Sentex, the value of any software, any value placed on Cypress
Instruments, Inc. ("Cypress") by Sentex, or any other intellectual
property of any kind or description.
(vi) "Net Liabilities Amount" means the amount of the
Assumed Liabilities (as defined in section 1.04) as of immediately
prior to Closing, determined on a consolidated basis as to Seller in
accordance with GAAP, on a basis consistent with the procedures and
practices used in the preparation of Seller's Balance Sheet, it being
acknowledged that no amount will be included in the Net Liabilities
Amount if an accrual for such liability would not be required under
GAAP.
(c) Pre-Closing Estimated Purchase Price Certificate. At least four
days before the Closing, Sentex and Seller will furnisher to Buyer an estimated
Closing Balance Sheet together with a certificate (the "Estimated Purchase Price
Certificate") in the form of Schedule 1.03(c) attached hereto setting forth (i)
the estimated Net Asset Value, (ii) the estimated Net Liabilities Amount, and
(iii) the estimated Closing Purchase Price.
(d) Payment. Subject to the terms and conditions of this Agreement, at
the Closing, Buyer shall pay the Intangible Purchase Price together with the
Base Purchase Price, to Monitek and the Subsidiary based on the allocation
described in section 1.03(b)(iv) and the portion of the Net Asset Value of the
Purchased Assets purchased by Metrisa and Metrisa GmbH with any
-4-
<PAGE>
increase or decrease to the Base Purchase Price by the difference in the Net
Asset Value and the Base Purchase Price shown on the Estimated Purchase Price
Certificate and approved by Buyer. In the case of the payment of the Intangible
Purchase Price, payment shall be made by delivery of the Shares registered in
the name as directed by Sentex and, in the case of the payment of the Base
Purchase Price, payment shall be made by (i) assumption of the estimated Net
Liabilities Amount shown on the Estimated Purchase Price Certificate, (ii)
payment in cash of $500,000, reduced by the amount of any loans or advances by
Buyer to Seller or Sentex prior to the Closing, by wire transfer of immediately
available funds to an account directed by Sentex and (iii) payment of the
Additional Amount (as hereinafter defined) by execution and delivery of the form
of Promissory Note attached hereto as Exhibit 1.03(d)(i) (the "Promissory
Note"), registered in the name directed by Sentex, which Promissory Note shall
be secured by a security interest junior to Buyer's existing creditors pursuant
to the Security Agreement attached hereto as Exhibit 1.03(d)(ii). The
"Additional Amount" shall be the Base Purchase Price, with any increase or
decrease thereto shown on the Estimated Purchase Price Certificate and approved
by Buyer, less the sum of $500,000 and the estimated Net Liabilities Amount
shown on the Estimated Purchase Price Certificate, provided, however, if the
Additional Amount is less than zero, the amount by which the Additional Amount
is less than zero shall be set-off dollar-for- dollar against the cash portion
of the Base Purchase Price payable at Closing. Any indebtedness or advances by
Buyer to Seller or Sentex prior to the Closing which reduce the Base Purchase
Price in accordance herewith shall be canceled effective as of the Closing.
(e) Determination of Closing Purchase Price.
(i) Within forty-five (45) days after the Closing Date,
Buyer will deliver to Sentex: (A) its proposed Closing Balance Sheet
and (B) a certificate (the "Closing Purchase Price Certificate"),
executed by Buyer, stating that such Closing Balance Sheet was prepared
as provided in paragraph (b) of this section 1.02 and setting forth (W)
a reconciliation of the changes to the proposed Closing Balance Sheet
from the estimated Closing Balance Sheet, (X) the Net Asset Value, (Y)
the Net Liabilities Amount and (Z) a computation of the Closing
Purchase Price.
(ii) If Sentex delivers written notice (the "Disputed Items
Notice") to Buyer within fifteen (15) days after receipt by Sentex of
the proposed Closing Balance Sheet and the Closing Purchase Price
Certificate, stating that Sentex objects to any items on the Closing
Balance Sheet, specifying the basis for such objection and setting
forth Sentex's proposed modification to the Closing Balance Sheet and
computation of the Closing Purchase Price, Buyer and Sentex will
attempt to resolve and finally determine the Closing Purchase Price and
agree upon a Closing Balance Sheet as promptly as practicable.
-5-
<PAGE>
(iii) If Buyer and Sentex are unable to agree upon the
Closing Purchase Price and the Closing Balance Sheet within forty-five
(45) days after delivery of the Disputed Items Notice, Buyer and Sentex
will select by lot an independent "Big-5" accounting firm (other than
any firm retained by Sentex or Buyer) to resolve the disputed items and
make a determination of the Closing Purchase Price and Closing Balance
Sheet. Such determination will be made within thirty (30) days after
such selection and will be binding upon the parties. The fees, costs
and expenses of the accounting firm so selected will be borne fifty
percent (50%) by Buyer and fifty percent (50%) by Sentex.
(iv) If Sentex does not deliver the Disputed Items Notice to
Buyer within fifteen (15) days after receipt by Sentex of the Closing
Purchase Price Certificate, the Closing Purchase Price specified in the
Closing Purchase Price Certificate and the Closing Balance Sheet will
be conclusively presumed to be true and correct in all respects and
will be binding upon the parties.
(v) At such time as the Closing Purchase Price is finally
determined, either (A) Buyer shall pay Seller an aggregate amount equal
to the Closing Purchase Price less the amount paid at Closing under
section 1.02(d) pursuant to a dollar for dollar increase in the
principal amount due pursuant to the Promissory Note or (B) Seller
shall pay Buyer an aggregate amount equal to the excess of the amount
paid at Closing under section 1.02(d) over the Closing Purchase Price
pursuant to a dollar for dollar decrease in the principal amount due
pursuant to the Promissory Note, provided, however, if such decrease
would reduce the principal amount of the Promissory Note to less than
zero, such excess amount shall be paid in cash to Buyer by wire
transfer of immediately available funds.
Section 1.04. Assumption and Exclusion of Liabilities. At the Closing,
Buyer (with appropriate allocation between Metrisa and Metrisa GmbH as they
shall determine prior to the Closing) shall assume and agree to pay when due,
perform and discharge in accordance with the terms thereof, only the following
liabilities and obligations of Seller existing as of the Closing (the "Assumed
Liabilities"):
(a) all obligations of Seller for future performance as of the Closing
under certain leases, license agreements, trade payables, contracts, agreements,
unfilled product sale and purchase orders for materials, services and supplies
as set forth on Schedule 1.04(a);
(b) all obligations arising with respect to certain purchase orders of
Seller's customers as set forth on Schedule 1.04(b);
(c) all obligations of Seller described on Schedule 1.04(c);
Except for the Assumed Liabilities, Buyer shall not assume or in any
way be responsible for any other liabilities or other obligations of Sentex or
Seller of any kind, including, without
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<PAGE>
limitation debts, accounts payable, indebtedness for borrowed money and any
indebtedness owed by Sentex or Seller to their respective lenders or
stockholders, amounts owed in respect of taxes, any severance, wages accrued for
periods prior to the Closing, unpaid vacation or sick leave or other amounts
owed to employees or former employees of Sentex or Seller upon termination of
employment or otherwise or with respect to any pension, profit sharing,
retirement, employee benefit or similar plan or arrangement, including, without
limitation, with respect to those individuals that may be treated as employees
(so called, "Scheinselbstandige") of Seller under the laws of Germany (other
than vacation or sick leave assumed by Buyer in accordance with section 1.06 and
listed on Schedule 1.04(c)).
Section 1.05. Royalty Payments.
------------ ----------------
(a) For a period of five (5) years following the Closing Date and
subject to sections 1.05(b) and 1.05(c) hereof, Buyer will pay Monitek a royalty
(the "Royalty") equal, in each period set forth below, to the applicable
percentage set forth opposite such period of the Gross Navy Revenues (as
hereinafter defined) during such period, as follows:
Royalty Percentage
Period During Period
------ -------------
Calendar year 2000 10% of Gross Navy
Revenues in excess
of $250,000
Calendar year 2001 8% of Gross Navy
Revenues in excess
of $500,000
Calendar year 2002 6% of Gross Navy
Revenues in excess
of $500,000
Calendar year 2003 4% of Gross Navy
Revenues in excess
of $500,000
Calendar year 2004 2% of Gross Navy
Revenues in excess
of $500,000
"Gross Navy Revenues" shall mean the amounts received from the United States
Department of Defense or any duly authorized paying agent by Buyer from the sale
of acoustic products of Seller for measurement of water in jet fuel
(collectively, the "Products"), net of discounts and returns and uncollectible
accounts.
-7-
<PAGE>
(b) The Royalty shall be accounted for and paid monthly within 30 days
after the end of each month during the five years following the Closing Date,
except that the first such accounting and payment period shall be for the period
commencing on the Closing Date and continuing through the last day of the month
following the month in which the Closing occurs. No Royalties shall be due with
respect to sales occurring following the fifth year after the Closing Date.
(c) Buyer agrees to use all reasonable efforts to fill all orders for
the Products prior to the end of each calendar year and further agrees that it
will not intentionally delay the shipment or the completion of any order for any
Products that could reasonably have been completed and shipped in the prior
calendar year.
(d) Monitek and Sentex shall have the right, not more often than once
each calendar year, at their own expense, upon reasonable notice and during
normal business hours, to review the books and records of Buyer to verify the
amount of Royalties payable pursuant to this section 1.05. Any confidential
information of Buyer that is obtained by Monitek or Sentex as a result of such
review shall be kept in confidence by Monitek and Sentex and shall be protected
from disclosure in the same manner as the confidential information of Monitek
and Sentex.
(e) Buyer shall be entitled to set-off against any Royalty otherwise
due Monitek any amount payable to Buyer pursuant to Article 8.
Section 1.06. Employees. (a) Sentex and Seller acknowledge that Buyer
shall extend offers of employment only to Monitek's employees listed on Schedule
1.06(a) to be effective following the Closing. Except as described in this
section 1.06, Buyer shall have no responsibility or obligation to extend offers
to or hire any of Monitek's employees, including, without limitation any sales
agents or others who may be deemed employees of Monitek, and all liability,
costs and expense relating to any employees or sales agents of Monitek whether
or not listed on Schedule 1.06(a) for salaries, wages, severance, employee
benefit programs or otherwise which accrued prior to the Closing or which arises
as a result of the transactions contemplated by this Agreement, except to the
extent such liability, costs or expenses are Assumed Liabilities, shall be the
sole and exclusive responsibility of Monitek and Sentex. Offers of employment to
the employees of Monitek listed on Schedule 1.06(a) shall be on terms acceptable
to Buyer in its sole discretion and Buyer shall have no responsibility or
obligation with respect to any prior or existing employee benefit programs or
policies of Monitek with respect to any such employees hired by Buyer.
Appropriate adjustments shall be made as of the Closing Date with respect to
wages and benefits, including, without limitation accrued vacation pay, payable
to employees of Seller who are to become employees of Buyer effective following
the Closing.
(b) Buyer acknowledges that under German law it is required to offer
all employees of the Subsidiary employment under the terms and conditions that
existed between the Subsidiary and any of those employees prior to the Closing.
Schedule 1.06(b) sets forth the name of each of
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<PAGE>
the Subsidiary's employees and their total annual wages, salaries and benefits.
Seller represents that under the terms of its existing agreements with those
employees it is not obligated to and assumes no obligation to pay any amounts
greater than the amounts on Schedule 1.06(b). Subsidiary acknowledges that
immediately after the Closing Buyer will dismiss the employees set forth on
Schedule 1.06(b) underneath the caption "Dismissed Employees" and that Buyer
shall be entitled to offset from any payments on the Promissory Note or
otherwise recover from Seller the amount of salaries, wages and benefits that
are required to be and are paid to those Dismissed Employees under German law.
Buyer agrees to use reasonable efforts to negotiate a severance settlement with
the Dismissed Employees to reduce Seller's obligations to Buyer. If Buyer
dismisses any employees on Schedule 1.06(b), other than the Dismissed Employees,
prior to the first anniversary of the Closing Date, then Buyer may offset from
the Promissory Note, or otherwise recover from Seller, 50% of salaries, wages
and other benefits of the first two employees dismissed by Buyer that the Buyer
would still be obligated to pay under German law, provided such amount will not
exceed $50,000. Buyer agrees to use reasonable efforts to negotiate a settlement
of such severance amounts.
Section 1.07. Allocation. The sum of the Purchase Price and the Assumed
Liabilities shall be allocated among the Purchased Assets prior to the Closing
in accordance with principles and guidelines set forth in Section 1060 of the
Internal Revenue Code of 1986, as amended. It is agreed by the parties that such
allocation shall be arrived at by arm's-length negotiation and in the judgment
of the parties shall properly reflect the fair market value of the Purchased
Assets transferred pursuant to this Agreement. It is agreed that the allocations
under this section 1.07 will be binding on all parties for federal, state, local
and other tax purposes in connection with the purchase and sale of the Purchased
Assets, and will be consistently reflected by each party on its tax returns.
Section 1.08. The Closing. The closing (the "Closing") of the purchase
and sale of the Purchased Assets hereunder will take place at the offices of
Choate, Hall & Stewart in Boston, Massachusetts on May 15, 2000, or if the
conditions set forth in Article 6 herein are not then satisfied or waived, at
such later date as is two business days after satisfaction or waiver of such
conditions (the "Closing Date") or such other time as the parties may mutually
agree.
Section 1.09. Deliveries at Closing. At the Closing: (a) upon
satisfaction or waiver of the conditions set forth in section 6.02 herein,
Sentex and Seller will deliver or cause to be delivered to Buyer the
instruments, consents, opinions, certificates and other documents required by
section 6.01; and (b) upon satisfaction or waiver of the conditions set forth in
section 6.01 herein, Buyer will deliver or cause to be delivered to Sentex and
Seller the instruments, opinions, certificates and other documents required by
section 6.02.
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<PAGE>
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
SELLER AND THE STOCKHOLDER
Sentex and Seller hereby jointly and severally represent and warrant to
Buyer that each of the statements contained in this Article 2 is true and
correct as of the date hereof and will be true and correct as of the Closing
Date:
Section 2.01. Organization, Power and Standing. Sentex, Monitek and the
Subsidiary are duly organized, validly existing and in good standing under the
laws of their respective jurisdictions, with all requisite corporate power and
authority to own, lease and operate their properties and to carry on the
Business as currently conducted. Except as set forth on Schedule 2.01, Sentex,
Monitek and the Subsidiary are not required to qualify to do business as a
foreign entity in any jurisdiction in which the failure to so qualify would have
a Material Adverse Effect. As used herein, "Material Adverse Effect" means an
effect that is materially adverse to the Business, assets or financial condition
of Seller or that Seller knows is reasonably likely to have such a material
adverse effect after the Closing.
Section 2.02. Validity and Enforceability. The execution, delivery and
performance of this Agreement by Sentex and Seller and the other instruments and
agreements contemplated hereby are within their respective corporate powers,
have been duly authorized by all necessary corporate and stockholder action and
will not result in any violation of, be in conflict with or constitute a default
under, any of their respective organizational documents or under any law,
statute, regulation, ordinance, contract, agreement, instrument, judgment,
decree or order to which any of them is a party or by which any of them is
bound. This Agreement is, and each of the other agreements and instruments of
Sentex and Seller contemplated hereby will be, the valid and binding obligations
of each of them who are (or are to become) parties thereto, enforceable in
accordance with their respective terms.
Section 2.03. Subsidiaries. Other than as set forth in Schedule 2.03,
Seller does not own any equity securities or have the power to vote or direct
the voting of any equity securities of any entity and does not, directly or
indirectly, own or have the right to acquire any equity interest in any
corporation, joint venture, partnership or other entity. Seller does not have
any investment in, loan to, or advance of cash or other extension of credit to
any entity or individual, other than in the ordinary course of Seller's
business.
Section 2.04. Contracts and Commitments. Schedule 2.04 contains a
complete and accurate list of all:
(a) marketing, advertising, subscription, fulfillment or similar
contracts;
(b) contracts under which the amount payable by Seller with respect to
the Business is dependent on the revenues or income or similar measure of
Seller;
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(c) licenses, leases, contracts and other arrangements with respect to
any material property of Seller relating to the Business;
(d) trademark license, trademark promotion and other similar
arrangements relating to the Business where Seller is either licensee or
licensor;
(e) agreements, contracts or instruments to which Seller is a party
relating to the borrowing of money, the capital lease or purchase on an
installment basis of any asset, or the guarantee of any of the foregoing;
(f) contracts relating to the Business with respect to which Seller has
any liability or obligation, contingent or otherwise, other than purchase orders
and sales commitments providing for the payment to or from Seller of less than
$15,000 and entered into in the ordinary course of Seller's business; and
(g) any other contracts, instruments, commitments, plans or
arrangements of Seller that relate to the Business.
All the foregoing (whether written or unwritten) are herein called the
"Contracts". Such list includes with respect to each Contract the names of the
parties, the date thereof, and its title. Seller has furnished to Buyer copies
of all Contracts. The Contracts listed on Schedule 2.04 set forth the entire
agreement and understanding between Seller and the respective third parties with
respect to the subject matter thereof, and, except as indicated in such
Schedule, there have been no amendments or material side or supplemental
arrangements to or in respect of any Contract. Each Contract is valid and
binding and in full force and effect. Seller is not in default in the
performance, observance or fulfillment of any of the material obligations,
covenants or conditions contained in any of the Contracts material to the
Business and, to Seller's knowledge, no other default or event has occurred and
is continuing that with notice or the passage of time or both would constitute a
material default or material event of default under any such Contract (each a
"Default").
Section 2.05. Financial Statements. Seller has delivered to Buyer (a)
audited consolidated balance sheets of Seller as at November 30, 1997 and 1998
and related audited consolidated statements of income, stockholders' equity and
cash flow of Seller for the years then ended; and (b) Seller's consolidated
balance sheet as of September 30, 1999 (the "Balance Sheet") and the unaudited
consolidated statements of income, stockholders' equity and cash flow of Seller
for the ten (10) month period then ended (collectively, the "Financial
Statements"). Such Financial Statements and the notes thereto, if any, are
complete and accurate in all material respects as to the Purchased Assets and,
as to the Borrower as a whole, such Financial Statements fairly present in all
material respects the financial condition of Seller at the respective dates
thereof and the results of operations for the periods then ended, and were
prepared in accordance with the books and records of Seller in conformity with
GAAP consistently applied during the periods covered thereby.
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Section 2.06. Affiliate Transactions. Except as set forth on Schedule
2.06, or as otherwise disclosed in its reports filed with the Securities and
Exchange Commission (the "SEC") (a) Seller is not a party to any contract or
arrangement, or indebted, either directly or indirectly, to any of its officers,
directors or stockholders, their relatives or Affiliates, and (b) none of such
persons or entities is indebted to or has any direct or indirect ownership
interest in, or any contractual relationship with, any person or entity with
which Seller is or was Affiliated or with which Seller has a business
relationship, or any person or entity which, directly or indirectly, competes
with Seller. As used in this Agreement, the term "Affiliate" shall have the
meaning given to it in Rule 12b-2 promulgated under the Exchange Act.
Section 2.07. Real Property. Seller does not own any real property.
Schedule 2.07 sets forth each interest in real property leased by Seller in
connection with the Business (the "Leased Property"), the lessor of the Leased
Property and the annual rent payable in respect of the Leased Property. Seller
enjoys a valid leasehold interest and peaceful and quiet possession of the
Leased Property, is not in material default under any such leasehold and Seller
has not received written notice that the lessor under any of the leases has
taken action or threatened to terminate the lease before the expiration date
specified in the lease. The real property listed on Schedule 2.07 includes all
real property used by Seller in the conduct of the Business.
Section 2.08. Personal Property. Schedule 2.08 contains a complete and
accurate list of each item of personal property owned or used by Seller that has
a value of at least $5,000, indicating whether each such item is owned, leased
or licensed. Seller has good title to or a valid leasehold or license interest
in each item of personal property used by it in the Business (including good and
marketable title to all assets reflected on the Balance Sheet), free and clear
of any security interests or encumbrances of every kind, nature and description.
The Purchased Assets include each of the items listed on Schedule 2.08. The
assets and properties of Seller include all assets currently used in the conduct
of the Business and are adequate to conduct its operations as currently
conducted.
Section 2.09. Tax Matters. Buyer will have no liability with respect to
Taxes for any period prior to the Closing with respect to the Business and
Seller's operation thereof. Seller has not taken any actions that will result
in, or failed to take any actions required to avoid, any security interests,
liens, encumbrances, or claims on or with respect to any of the assets of Seller
attributable to any failure (or alleged failure) to pay any Tax, and no such
security interests, liens, encumbrances, or claims currently exist, will exist
or have been alleged. Seller has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party. For
purposes of this Agreement, "Tax" and "Taxes" shall mean any or all federal,
state, local or foreign tax of any kind whatsoever of Seller, including, without
limitation, any estimated tax payments, interest, penalties or other additions
thereto, whether or not disputed, and any taxes imposed under sections 1374 and
1375 of the Code.
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Section 2.10. Required Authorizations and Consents. Schedule 2.10 sets
forth all licenses, permits and authorizations of governmental authorities held
by Seller which are material to the Business (the "Authorizations"). Seller is
in compliance with all such Authorizations, all of which are in full force and
effect. There are no other such Authorizations that are material to the
Business, or any material division thereof, as currently conducted. Except for
the Authorizations and consents of third parties specified on Schedule 2.10, no
consent, order, authorization or other approval, including, without limitation,
any consent, approval or authorization of or declaration or filing with any
governmental authority or any party to a Contract, is required on the part of
Seller for or in connection with the execution, delivery or performance of this
Agreement, to prevent a Default, or for Buyer to carry on the Business after
Closing.
Section 2.11. ERISA; Compensation and Benefit Plans.
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(a) Schedule 2.11 sets forth all employee compensation and benefit
plans, agreements, commitments, practices or arrangements of any type in the
United States and Germany (including, but not limited to, plans described in
section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) offered, maintained or contributed to by Seller for the benefit of
current or former employees of Seller, or with respect to which Seller has or
may have any liability, whether direct or indirect, actual or contingent
(including, but not limited to, liabilities arising from affiliation under
section 414(b), (c), (m) or (o) of the Code or section 4001(b)(1) of ERISA)
(collectively, the "Benefit Plans"). As of the Closing, Seller will have
discharged all liabilities for employee benefits and compensation under the
Benefit Plans, and Buyer will have no liability of any kind with respect to any
Benefit Plan.
(b) With respect to each Benefit Plan: (i) such plan has been
administered and enforced in accordance with its terms and all applicable laws,
regulations and rulings in all material respects; (ii) no breach of fiduciary
duty has occurred with respect to which Seller or any Benefit Plan may be liable
or otherwise damaged in any material respect; (iii) no material disputes nor any
audits or investigations by any governmental authority are pending or, to the
knowledge of Seller, Sentex and the Stockholder, threatened; (iv) all
contributions, premiums, and other payment obligations have been accrued on the
financial statements of Seller in accordance with generally accepted accounting
principles, and, to the extent due, have been made on a timely basis, in all
material respects; and (v) there are no claims pending or, to the best knowledge
of Sentex and Seller, threatened with respect to any Benefit Plan other than
claims for benefits by employees or beneficiaries arising in the normal course
of operation of any such plan. No Benefit Plan is, or has ever been, subject to
Title IV of ERISA. None of Seller's employees is covered by a multi-employer
plan (within the meaning of section 4001(a)(3) of ERISA) to which Seller or any
member of any group of trades or businesses under common control with Seller
(within the meaning of section 4001(b)(1) of ERISA) has an obligation to
contribute.
Section 2.12. Employees and Compensation. None of Seller's employees is
represented by a union, and there is no labor strike, dispute, slowdown,
stoppage, organizational effort,
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dispute or proceeding by or with any employee or former employee of Seller or
any labor union actually pending or, to the best knowledge of Sentex and Seller,
threatened against Seller. There are no employment, consulting, severance or
similar contracts or arrangements (other than those terminable at will) with any
employees of or consultants to Seller, other than as set forth on Schedule 2.12
relating to any Person listed on Schedule 6.01(j). Seller is not a party to and
has no liabilities under any noncom petition agreement or arrangement with any
current or former employee, officer or director of or consultant to Seller.
Section 2.13. Intellectual Property. Schedule 2.13 sets forth all
patents, trademarks, service marks, trade names, copyrights, franchises,
licenses, and all royalty agreements and other rights with respect to the
foregoing (collectively, with any registrations and applications with respect to
the issuance or granting of any of the foregoing, the "Intellectual Property")
owned or used by Seller in connection with the Business. Except as set forth on
Schedule 2.13, Seller holds exclusive interests in the Intellectual Property
purported to be owned by it. Except as listed on Schedule 2.13, Seller has not
received written notice of any claim by any Person that Seller is violating any
trade mark, service mark, trade name, patent or copyright owned by any other
Person or that it is using any name which is confusingly similar to that of any
other Person. Except as listed on Schedule 2.13, the Intellectual Property is
sufficient in all respects to enable Seller to conduct the Business as presently
conducted and to enable Buyer following the Closing without restriction to
manufacture, sell and distribute all products currently being sold by Seller.
Except as listed on Schedule 2.13, Seller has not granted any rights to
manufacture, sell or distribute any of the products currently being sold by
Seller to any Person.
Section 2.14. Material Adverse Changes. Since the date of the Balance
Sheet, Seller has conducted the Business only in the ordinary course, and there
have been: (a) no sale, transfer or other disposition of any of its assets,
except in the ordinary course of business; (b) no liens, security interests or
encumbrances placed upon any of its assets; and (c) no other event or condition
that could have a Material Adverse Effect, except as disclosed on Schedule 2.14.
Section 2.15. Inventory. Schedule 2.15 sets forth a complete and
accurate list of all inventory owned or possessed by Seller as of the date of
this Agreement. The inventory set forth on Schedule 2.15 is at a normal and
customary level based on Seller's past practice as conducted through the Closing
and the portion of the inventory included in the Purchased Assets is in good
condition, is not obsolete and is saleable for its intended purposes, provided
that Seller makes no representation as to the demand for such inventory.
Section 2.16. Regulatory and Legal Compliance. Seller is in compliance
with all foreign, federal, state or local statutes, laws, ordinances, judgments,
decrees, orders or governmental rules, regulations, policies and guidelines
applicable to it, except where noncompliance would not have a Material Adverse
Effect. Seller has not received any written notice from any governmental or
regulatory authority or otherwise of any alleged violation or noncompliance.
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Section 2.17. Litigation. Except as set forth on Schedule 2.17, there
is no action, suit, proceeding or investigation before any court, arbitrator or
governmental authority, pending, or, to the knowledge of Sentex or Seller,
threatened against Seller, or against any officer, director or employee of
Seller, in relation to the affairs of Seller.
Section 2.18. Customers and Suppliers. Schedule 2.18 sets forth a
complete list of Seller's customers and suppliers for the past two (2) years
from the date hereof from which Seller derived revenues of $50,000 or more.
Except as set forth on Schedule 2.18, neither Sentex nor Seller, has received
any written notice, or to the knowledge of Sentex or the Seller, any other
notice in the form of a communication directed to Seller, from a customer set
forth on Schedule 2.18 stating that customer intends to discontinue purchasing,
or significantly reduce, purchases of products from Seller.
Section 2.19. Environmental Matters. The ownership or use of Seller's
premises and assets, the occupancy and operation thereof, and the conduct of
Seller's Business are in material compliance with all applicable federal,
foreign, state and local laws, ordinances, regulations, standards and
requirements relating to safety, health, pollution, environmental protection,
hazardous substances and related matters. There is no liability attaching to
such premises or assets or the ownership or operation thereof as a result of any
hazardous substance that may have been discharged on or released from such
premises, or disposed of on-site or off-site, or any other circumstance
occurring prior to the Closing or existing as of the Closing. For purposes of
this section, "hazardous substance" shall mean oil or any other substance which
is included within the definition of a "hazardous substance", "pollutant",
"toxic substance", "toxic waste", "hazardous waste", "contaminant" or other
words of similar import in any federal, foreign, state or local environmental
law, ordinance or regulation.
Section 2.20. Absence of Undisclosed Liabilities. Except for (a) as
reflected on the Balance Sheet; (b) obligations of future performance under the
Contracts and other contracts entered into in the ordinary course of Seller's
business that are not required to be listed on a schedule hereto; (c)
liabilities and obligations incurred in the ordinary course of Seller's business
after the date of the Balance Sheet; and (d) the Assumed Liabilities, Seller has
no liabilities or obligations, whether absolute, accrued, contingent or
otherwise and whether due or to become due that Buyer is obligated to assume or
that will affect the Purchased Assets or the Business.
Section 2.21. Year 2000 Matters. The computer software embedded in or
used in connection with the products sold by Seller in connection with its
operation of the Business are Year 2000 Compliant (as defined below), except
where non compliance would not have a Material Adverse Effect. As used herein,
"Year 2000 Compliant" means that neither the performance nor functionality for
all such software applications is affected by dates prior to, during, spanning
or after January 1, 2000 including (a) accurately processing (including
calculating, comparing and sequencing) date and time data from, into and between
the years 1999 and 2000 and leap year calculations, (b) functioning without
error interruption or decreased performance relating to such date and time data,
(c) accurately processing such date and time
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data when used in combination with other technology, if the other technology
properly exchanges date and time data, (d) accurate date and time data century
recognition, (e) calculations that accurately use the same century and
multi-century formulae and date and time values, (f) date and time interface
values which reflect the correct century and (g) processing, storing, receiving
and outputting all date and time data in a format that accurately indicates the
century of the date and time data.
Section 2.22. Brokers, Etc. No finder, broker, agent, financial advisor
or other intermediary has acted on behalf of Sentex or Seller in connection with
the negotiation or consummation of this Agreement or any of the transactions
contemplated hereby and no such Person or entity is entitled to any fee,
payment, commission or other consideration in connection therewith as a result
of any arrangement made by any of them.
Section 2.23. Disclosure. The representations, warranties and other
statements of Seller contained in this Agreement, the Schedules hereto and all
certificates delivered pursuant to this Agreement, taken as a whole, do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein and therein not
misleading as of the date hereof.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF BUYER
Metrisa and Metrisa GmbH hereby jointly and severally represent and
warrant to Seller and Sentex that each of the statements contained in this
Article 3 is true and correct and will be true and correct as of the Closing
Date:
Section 3.01. Organization, Power and Standing. Metrisa and Metrisa
GmbH are duly organized, validly existing and in good standing (or have similar
status under the laws of the jurisdiction of its organization) under the laws of
their respective jurisdictions, with all requisite corporate power and authority
to own, lease and operate their properties and to carry on their respective
business as currently conducted. Except as set forth on Schedule 3.01, Metrisa
and Metrisa GmbH are not required to qualify to do business as a foreign entity
in any jurisdiction in which the failure to so qualify would have a Material
Adverse Effect.
Section 3.02. Validity and Enforceability. This Agreement is, and each
of the other agreements and instruments of Buyer contemplated hereby will be,
the valid and binding obligations of Buyer, enforceable in accordance with their
respective terms. The execution and performance of this Agreement and the other
instruments and agreements contemplated hereby by Buyer will not result in any
violation of, be in conflict with or constitute a default under, any law,
statute, regulation, ordinance, contract, agreement, instrument, judgment,
decree or order to which Buyer is a party or by which Buyer is bound.
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Section 3.03. Required Consents; No Defaults. Except for the consents
specified on Schedule 3.03, no consent, order, authorization, approval,
declaration or filing, including, without limitation, any consent, approval or
authorization of or declaration or filing with any governmental authority or any
party to any contract or agreement with Buyer, is required on the part of Buyer
for or in connection with the execution, delivery or performance of this
Agreement. Subject to obtaining the consents and other items specified on
Schedule 3.03, the execution, delivery and performance of this Agreement and
other instruments and agreements contemplated hereby by Buyer will not result in
any violation of, be in conflict with, or constitute a default under, any law,
statute, regulation, ordinance, contract, instrument, judgment, decree or order
to which any of them is a party or by which Buyer is bound.
Section 3.04. Brokers, Etc. No finder, broker, agent, financial advisor
or other intermediary has acted on behalf of Buyer in connection with the
negotiation or consummation of this Agreement or any of the transactions
contemplated hereby and no such Person or entity is entitled to any fee,
payment, commission or other consideration in connection therewith as a result
of any arrangement made by any of them.
Section 3.05. Capitalization of Metrisa. The authorized capital stock
of Metrisa consists of 4,000,000 shares of common stock, $.50 par value ("Common
Stock"), and 10,000,000 shares of preferred stock, $1.00 par value ("Preferred
Stock"). As of January 15, 2000, there were issued and outstanding 1,265,193
shares of Common Stock and no shares of Preferred Stock. As of January 15, 2000,
no shares of Common Stock or Preferred Stock were held in Metrisa's treasury.
All of the issued and outstanding shares of Common Stock have been duly issued
and are fully paid and non-assessable. The shares of Common Stock to be issued
pursuant to this Agreement will upon issuance be validly issued, fully paid and
non-assessable. Except with respect to outstanding options and warrants to
purchase and aggregate of 505,717 shares of Metrisa's Common Stock at a weighted
average exercise price of approximately $2.66 per share, as of January 15, 2000,
there were no outstanding options, warrants, convertible or exchangeable
securities obligating Metrisa to issue shares of its capital stock or other
securities. Metrisa has no so-called "rights plans" currently in effect that
would in any way impair the economic value or voting power of the Shares to be
issued pursuant to this Agreement. Neither the Certificate of Incorporation, as
amended, nor the By-Laws, as amended, of Metrisa contain any provisions that
would impair the Seller's ability to vote or otherwise dispose of the Shares in
any manner otherwise permitted by law.
Section 3.06. Metrisa Commission Reports. Metrisa has timely filed with
the SEC and has made available to Seller all reports, forms and other documents
required to be filed by it since October 31, 1997, under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") or the Securities Act of 1933, as
amended (the "Securities Act") (such reports, forms and documents, together with
any amendments thereto, are sometimes collectively referred to as the "Metrisa
Commission Filings"). The Metrisa Commission Filings (a) either did not contain
any untrue statements of a material fact or fail to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were
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made, not misleading as of their respective dates, or to the extent that any
such misrepresentation or omission may have existed, such disclosure has been
corrected by Metrisa in subsequent commission filings and (b) complied as of
their respective dates in all material respects with the applicable requirements
of the Exchange Act and the Securities Act, as the case may be, and any
applicable rules and regulations of the SEC thereunder.
Section 3.07. Litigation. There is no action, suit, proceeding or
investigation before any court, arbitrator or governmental authority (including,
without limitation, the Securities and Exchange Commission) pending or, to the
knowledge of Metrisa, threatened against Metrisa or against any officer,
director or employee of Metrisa in relation to the affairs of Metrisa.
ARTICLE 4
COVENANTS OF SENTEX AND SELLER
Section 4.01. Conduct of the Business.
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(a) Seller will and Sentex will cause Seller to use its reasonable
efforts under its existing financial condition to, prior to the Closing:
(i) maintain its corporate existence;
(ii) preserve its material business organization intact,
retain its permits, licenses and franchises, preserve the existing
contracts and do nothing to intentionally diminish its goodwill of its
customers, suppliers, personnel and others having business relations;
(iii) conduct its business only in the ordinary course; and
(iv) not take any action to intentionally cause a material
breach of representations and warranties of Sentex and Seller set forth
in this Agreement.
(b) Seller will not, and Sentex will cause Seller not to, prior to the
Closing, without Buyer's prior written consent:
(i) change its method of management or operations;
(ii) dispose of or acquire any material assets or
properties, other than inventory and the collection of its accounts
receivables in the ordinary course of Seller's business or any of the
Excluded Assets;
(iii) except in the ordinary course of Seller's business,
subject any of its properties or assets to any lien, security interest
or encumbrance;
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(iv) except in the ordinary course of Seller's business,
modify, amend, cancel or terminate any existing agreement material to
the Business;
(v) except in the ordinary course of Seller's business, make
any change in the compensation paid or payable to any officer,
director, employee, agent, representative or consultant of Seller
listed on Schedule 6.01(j) or pay or agree to pay any bonus or similar
payment (other than bonus payments to which Seller is committed, and
which are disclosed in this Agreement);
(vi) enter into any contract or agreement with respect to
which Seller has any liability or obligation, contingent or otherwise,
or that may otherwise have any continuing effect after the Closing,
other than in the ordinary course of business, or that may place any
material limitation on the method of conducting or scope of the
Business;
(vii) declare, pay or set aside for payment any dividend (in
stock or property, excluding cash) or other distribution of property,
excluding cash, in respect of Seller's capital stock;
(viii) discharge any indebtedness, the effect of which might
adversely affect Buyer's future relationships with customers or
suppliers of Seller; or
(ix) take any other action that would materially and
adversely affect or detract from the value of Seller, its assets or the
Business.
Section 4.02. Access; Provision of Records. Until the Closing Date, and
subject to section 5.02 hereof, Sentex will cause Seller to, and Sentex and
Seller will, grant to Buyer and its representatives, reasonable access to the
properties, records, books of account, contracts and other documents of Sentex
and Seller, and to senior managers, employees, accountants, legal advisors,
consultants and other personnel of Sentex and Seller, as requested by Buyer. No
investigation or findings of Buyer shall affect the representations and
warranties of Seller and Sentex hereunder. Sentex shall cause Seller to, and
Seller shall, provide Buyer with access, upon reasonable notice, to meet with
Seller's employees regarding offers of employment, if any, made by Buyer to
Seller's employees.
Section 4.03. Efforts. Seller and the Stockholder will use all
reasonable efforts to cause the conditions specified in section 6.01 to be
satisfied as soon as practicable.
Section 4.04. No Solicitation or Negotiation.
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(a) Until the earlier of the Closing Date and April 30, 2000, neither
Sentex nor Seller nor any of their affiliates, officers, directors,
representatives or agents will (i) solicit, initiate or encourage any other
proposals or offers from any Person relating to an Acquisition Proposal (as
hereinafter defined), (ii) participate in any discussions or negotiations
regarding, or furnish to any
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other Person any information with respect to, or otherwise cooperate in any way,
assist or participate in, facilitate or encourage any effort or attempt by any
other Person relating to, an Acquisition Proposal, or (iii) enter into
transaction, or enter into any agreement relating to any transaction, with any
Person relating to an Acquisition Proposal. "Acquisition Proposal" means any
proposal (as such proposal may be amended, modified or supplemented from time to
time) with respect to a merger, consolidation, share exchange or similar
transaction involving Seller or any subsidiary of Seller, or any purchase of all
or any significant portion of the assets of Seller or any subsidiary of Seller,
or any equity interest in Seller or any subsidiary of Seller, other than the
transactions contemplated hereby.
(b) Nothing contained in this section 4.04 or any other provision of
this Agreement shall prohibit the Board of Directors of Sentex from (i) taking
and disclosing to the stockholders of Sentex a position with respect to a tender
offer for Sentex Common Stock by a third party pursuant to Rules 14d-9 and 14e-2
promulgated under the Exchange Act, (ii) subject to the provisions of section
9.05, making such disclosure to the stockholders of Sentex as, in the good faith
judgment of the Board of Directors of Sentex, upon the written advice of outside
counsel, may be required to comply with its fiduciary duties under applicable
law, or (iii) responding to any unsolicited proposal or inquiry by advising the
Person making such proposal or inquiry of the terms of this section 4.04.
(c) Nothing contained in this section 4.04 or any other provision of
this Agreement shall prohibit Sentex from responding to a Superior Proposal (as
defined below) if the Board of Directors of Sentex determines in good faith, and
upon the written advice of counsel, that it is required to do so in the exercise
of its fiduciary duties; provided, that, neither Sentex nor its Board of
Directors may terminate this Agreement except in accordance with the terms
hereof. A "Superior Proposal" means a BONA FIDE, written, unsolicited proposal
relating to a possible transaction described in this section 4.04 by any Person
that, in the reasonable good faith judgment of the Board of Directors of Sentex,
is reasonably likely to be consummated and is more favorable to the stockholders
of Sentex than the terms of the transactions contemplated by this Agreement.
(d) Sentex shall notify Buyer promptly (and in any event within
forty-eight (48) hours) orally and in writing if any Acquisition Proposal, or
any inquiry that could reasonably be expected to lead to an Acquisition
Proposal, is made, and shall, in any such notice to Buyer, indicate in
reasonable detail the identity of the Person making such proposal or offer and
the terms and conditions of such proposal or offer. Sentex will keep Buyer fully
informed of the status and details (including amendments or proposed amendments)
of any such proposal or offer.
Section 4.05. Use of Name. Following the Closing, Buyer shall have the
exclusive right to use the names "Monitek," "Monitek Technologies, Inc." and
"Monitek GmbH" in connection with its operation of the Business, and Seller
agrees to take all necessary action, including, without limitation, changing its
name as soon as practicable after the Closing Date to a name that
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is not similar to such name, to allow Buyer to exercise such right, and to cease
using such name immediately after the Closing, except in connection with
communications designed to inform Persons of such name change.
Section 4.06. Duty to Remit Payments, Orders and Business Leads. Any
payments, orders for Products or leads with respect thereto received by Seller
after any Closing that arose from or relate to the ownership or operation of the
Purchased Assets by Buyer after such Closing shall be forwarded to Buyer by
Seller within five (5) days of receipt thereof.
Section 4.07. Covenant Not To Compete. Each of Sentex and Monitek agree
that for a period of five (5) years following the Closing and the Subsidiary
agrees that for a period of two (2) years following the Closing that neither
Sentex, Monitek nor the Subsidiary shall, without the prior written consent of
Buyer, directly or indirectly, own, manage, operate, control, finance or
otherwise be interested or participate in the ownership, management, operation
or control of or be employed by, consult or be a joint venturer with, render
services to or be otherwise connected in any manner with any business or
activity which is directly or indirectly competitive with the Business. Without
Buyer's express written consent, each of Sentex, Monitek and the Subsidiary
further agree not to hire or attempt to hire any employee or independent
contractor or service provider of the Business or any former employee or
independent contractor of the Business if such person has resigned from his
employment with Buyer in the prior twelve (12) month period.
Section 4.08. Registration. The Subsidiary shall immediately after the
Closing apply in Germany for the registration in its commercial register as set
forth in Exhibit 4.08 at Seller's expense and shall inform Buyer in writing
immediately upon the effectiveness of such registration and provide Buyer with a
copy of the corresponding excerpt from the commercial register.
Section 4.09. Tax Clearance. The Seller shall reasonably cooperate with
Metrisa prior to the Closing to enable Metrisa to obtain appropriate
certification from the German taxing authorities that all taxes required to be
paid by the Seller in Germany prior to the Closing have been paid.
ARTICLE 5
COVENANTS OF BUYER
Section 5.01. Efforts. Buyer will use all reasonable efforts to cause
the conditions specified in section 6.02 to be satisfied as soon as practicable,
including, without limitation, obtaining all necessary consents.
Section 5.02. Confidentiality. Following the execution of this
Agreement and prior to the Closing Date, Buyer, its directors, officers,
employees, stockholders, representatives and agents, will not disclose to any
third party or use for any purpose any of the confidential or
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proprietary information relating to the Business that is in its possession or
knowledge and that is to be transferred to Buyer on the Closing Date (the
"Information"), except to the extent such Information is in the public domain,
is generally known within the industry or is obtained through lawful methods not
involving a breach of this section 5.02. If the Closing does not occur as
contemplated herein, Buyer shall return all Information to Seller.
Section 5.03. Duty to Remit Payments. Any Excluded Assets or proceeds
therefrom received by Buyer following the Closing shall be forwarded to Seller
within five (5) days of receipt thereof.
Section 5.04. Excluded Inventory. All inventory of Seller which Buyer
elects not to purchase pursuant to Article 1 (the "Excluded Inventory") which is
referenced on Schedule 1.01(b) shall be held by Buyer following the Closing but
title thereto shall remain with Seller. Following the Closing, to the extent
Buyer shall sell any Excluded Inventory, Buyer shall pay to Sentex the lesser of
(a) the book value of such Excluded Inventory that Buyer has sold and (b) an
amount equal to the price at which such Excluded Inventory is sold, provided
that Buyer shall return to Seller all Excluded Inventory that has not been sold
on or before five (5) years following the Closing Date. Monitek and Sentex shall
have the right, not more than once each calendar year, at their own expense,
upon reasonable notice and during normal business hours, to review the books and
records of Buyer to verify the amount of Excluded Inventory held by Buyer and
the calculation of any payments with respect thereto due to Seller. Any
confidential information of Buyer that is obtained by Monitek or Sentex as a
result of such review shall be kept in confidence by Monitek and Sentex and
shall be protected from disclosure in the same manner as the confidential
information of Monitek and Sentex.
Section 5.05. Excluded Accounts Receivable. Following the Closing,
Buyer shall use reasonable efforts to collect the accounts receivable of Seller
which Buyer does not elect to purchase pursuant to the terms of Article 1 (the
"Excluded Accounts Receivable"). Such "reasonable efforts" shall not require
Buyer to file suit or commence other legal action to collect such Excluded
Accounts Receivable. Following the Closing, to the extent Buyer shall receive
any payments with respect to Excluded Accounts Receivable, Buyer shall pay such
amounts received to Sentex, provided that Buyer shall turn over to Seller for
collection all Excluded Accounts Receivable on which payment has not been
received on or before eighteen (18) months following the Closing Date.
Section 5.06. Advance of Funds Prior to Closing. At any time prior to
Closing, at the request of Sentex, Buyer shall promptly loan up to $50,000 to
Sentex pursuant to the terms of the Promissory Note attached hereto as Exhibit
5.06(a) (the "Pre-Closing Promissory Note") which Pre-Closing Promissory Note
shall be secured by the assets of Sentex and Seller pursuant to the terms of the
Security Agreement attached hereto as Exhibit 5.06(b). Any such advance of funds
shall be accounted for as of the Closing pursuant to section 1.02.
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Section 5.07. Access to Books and Records. Following the Closing, upon
reasonable notice and during normal business hours, the Buyer shall allow the
Seller and Sentex access to the books and records of Seller included in the
Purchased Assets in order enable the Seller and Sentex to prepare any necessary
governmental filings following the Closing.
ARTICLE 6
CONDITIONS TO CLOSING
Section 6.01. Conditions to Obligations of Buyer. Unless waived in
writing by Buyer, the obligation of Buyer hereunder to effect the proposed
transaction is subject to the satisfaction at or prior to the Closing of the
following conditions:
(a) Representations and Warranties True. The representations and
warranties contained in Article 2 shall be true and accurate in all material
respects on and as of the Closing Date with the same effect as though made on
and as of such date unless such representation or warranty is made as of a
specific date, in which case such representation and warranty shall be made as
of the date specified.
(b) Covenants Performed. Sentex and Seller shall have performed and
complied in all material respects with each and every covenant, agreement and
condition required to be performed or complied with by them hereunder on or
prior to the Closing Date.
(c) Licenses, Consents, Etc., Received. Sentex and Seller shall have
obtained and delivered to Buyer copies of all consents, licenses, approvals and
permits of other parties required to be obtained by it for the transactions
contemplated hereby, in each case in which the failure to obtain the same would
have a Material Adverse Effect or materially interfere with Buyer's operation of
the Business following the Closing, including, without limitation, the consents
listed on Schedule 2.10, and no such consent, license, approval or permit shall
have been withdrawn or suspended.
(d) No Injunctions. The consummation of the transactions contemplated
hereby shall not violate any order, decree or judgment of any court or
governmental body having competent jurisdiction.
(e) Compliance Certificate. Sentex and Seller shall have delivered to
Buyer a certificate signed by them dated by the Closing Date, confirming the
satisfaction by Sentex and Seller of the conditions set forth in paragraphs (a)
and (b) of this section 6.01.
(f) Opinion of Counsel to Seller. Buyer shall have received an opinion
of Baker & Hostetler, or other counsel acceptable to Buyer, as counsel for
Sentex and Seller, dated as of the Closing Date, to the effect set forth in
Exhibit 6.01(f) hereto.
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(g) Bill of Sale, Assignment and Assumption Agreement. Seller shall
have entered into a Bill of Sale, Assignment and Assumption Agreement and
Assignment of Patents with Buyer each in a form reasonably satisfactory to Buyer
(the "Bill of Sale").
(h) Articles of Amendment. Monitek and the Subsidiary shall have
prepared for filing amendments to their respective charters changing their
respective names to names that are not similar to their current names.
(i) Certificates; Documents. Buyer shall have received from each of
Sentex, Monitek and the Subsidiary copies of each of the following, certified to
its satisfaction by an authorized officer of such entity: (i) the charter of
such entity, certified by the Secretary of State of such entity's jurisdiction
or appropriate counterpart, for Monitek GmbH; (ii) the By-Laws of such entity;
(iii) a certificate of the Secretary of State or appropriate counterpart, for
Monitek GmbH of the entity's jurisdiction as to the legal existence and good
standing of such entity; (iv) copies of resolutions duly adopted by the Board of
Directors of such entity and votes duly adopted by the stockholders, and all
authorizations, corporate or otherwise, for Seller, authorizing the execution,
delivery and performance of this Agreement and the sale of the Purchased Assets;
and (v) copies of such other certificates and documents as Buyer may reasonably
request.
(j) Acceptance of Employment. (i) The employees of Monitek listed on
Schedule 6.01(j)(i) shall have entered into employment agreements or otherwise
accepted employment with Buyer on terms reasonably satisfactory to Buyer, the
employees of the Subsidiary listed on Schedule 6.01(j)(i) shall have accepted
employment under the terms Buyer is obligated to offer employment under German
law and the sales representative of the Subsidiary listed on Schedule 6.01(j)(i)
shall have agreed to accept a sales representative position with Buyer on
substantially the same terms as he currently performs for the Subsidiary, except
the commission rate shall be reduced from 20% to 15%; (ii) not less than three
(3) of the employees listed on Schedule 6.01(j)(ii) shall accept employment with
Buyer under the terms required by German law; and (iii) not less than one of the
sales representatives listed on Schedule 6.01(j)(iii) shall have entered into an
arrangement with Buyer to provide services to Buyer following the Closing on
substantially the same terms provided to Subsidiary, except the commission rate
shall be reduced from 20% to 15%.
(k) Fluccomat Agreements. Seller shall have entered into an agreement
with the German technical institute referred to as "BFI" containing
substantially the terms described on Schedule 6.01(k)(i) as well as the entity
referenced to as "Chemtronics" containing substantially the terms set forth on
Schedule 6.01(k)(ii) to enable Buyer, following the Closing, to utilize the
technology relating to Seller's fluccomat products without restriction and to
provide for the manufacture of such products by Chemtronics.
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(l) Buyer's Approvals and Consents. Buyer shall have obtained all
necessary consents and approvals of its Board of Directors and third party
creditors required to be obtained by it for the transactions contemplated
hereby.
(m) Actions and Proceedings. Prior to the Closing, all actions,
proceedings, instruments and documents required to carry out the transactions
contemplated hereby or incident hereto, including, without limitation, all
stockholder and director approvals of Seller and Sentex, and all other legal
matters required for such transactions shall have been reasonably satisfactory
to counsel for Buyer and such counsel shall have been furnished with such
certified copies of such corporate actions and proceedings and other instruments
as it shall have reasonably requested.
Section 6.02. Conditions to Obligations of Seller. Unless waived in
writing by Sentex and Seller, the obligations of Sentex and Seller hereunder to
effect the proposed transaction is subject to the satisfaction at or prior to
the Closing of the following conditions:
(a) Representations and Warranties True. The representations and
warranties contained in Article 3 shall be true and accurate in all material
respects on and as of the Closing Date with the same effect as though made on
and as of such date unless such representation or warranty is made as of a
specific date, in which case such representation and warranty shall be made as
of the date specified.
(b) Covenants Performed. Buyer shall have performed and complied in all
material respects with each and every covenant, agreement and condition required
to be performed or complied with by it hereunder on or prior to the Closing
Date.
(c) Licenses, Consents, Etc. Received. Buyer shall have obtained and
delivered to Seller copies of all consents, licenses, approvals and permits of
other parties required to be obtained by it for the transactions contemplated
hereby, in each case in which the failure to obtain the same would have a
Material Adverse Effect or materially interfere with Buyer's operation of the
Business following the Closing, including, without limitation, the consents
listed on Schedule 3.03, and no such consent, license, approval or permit shall
have been withdrawn or suspended.
(d) No Injunctions. The consummation of the transactions contemplated
hereby shall not violate any order, decree or judgment of any court or
governmental body having competent jurisdiction.
(e) Compliance Certificate. Buyer shall have delivered to Seller a
certificate, signed by an officer of Buyer, confirming the satisfaction by Buyer
respectively of the conditions set forth in paragraphs (a) and (b) of this
section 6.02.
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(f) Opinion of Counsel to Buyer. Seller shall have received an opinion
of Choate, Hall & Stewart, counsel for Buyer, to the effect set forth in Exhibit
6.02(f) hereto.
(g) Consideration. Buyer shall have paid to Seller the amount, if any,
specified in section 1.02(d).
(h) Bill of Sale, Assignment and Assumption Agreement, Promissory Note
and Security Agreement. Buyer shall have entered into the Bill of Sale in such
form reasonably satisfactory to it, and each of the Promissory Note and Security
Agreement.
(i) Seller's and Sentex's Approvals and Consents. Seller and Sentex
shall have obtained all necessary consents and approvals of their stockholders
and Boards of Directors required to be obtained by them for the transactions
contemplated hereby and Sentex and Seller shall have obtained the consents
referred in items 1 and 2 on Schedule 2.10 or, with respect to the contracts
referenced in item 1 of Schedule 2.10, Buyer shall have agreed to accept the
assignment and assumption of the contract to which the consent relates.
(j) Certificates; Documents. Seller shall have received from Buyer
copies of each of the following, certified to its satisfaction by an authorized
officer of Buyer: (i) the Certificate of Incorporation of Buyer, certified by
the Secretary of the State of Delaware; (ii) the By-Laws of Buyer; (iii) a
certificate of the Secretary of the State of Delaware as to the legal existence
and good standing of Buyer; and (iv) copies of resolutions duly adopted by the
Board of Directors of Buyer and all authorizations, corporate or otherwise, for
Buyer, authorizing the execution, delivery and performance of this Agreement and
the sale of the Purchased Assets.
(k) Actions and Proceedings. Prior to the Closing, all actions,
proceedings, instruments and documents required to carry out the transactions
contemplated hereby or incident hereto, including, without limitation, all
director approvals of Buyer, and all other legal matters required for such
transactions shall have been reasonably satisfactory to counsel for Seller and
such counsel shall have been furnished with such certified copies of such
corporate actions and proceedings and other instruments as it shall have
reasonably requested.
ARTICLE 7
TERMINATION
Section 7.01. Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing:
(a) by mutual written consent of Buyer and Seller;
(b) by Buyer, if Sentex or Seller shall have breached or failed to
perform in any material respect any of its obligations, covenants or agreements
under this Agreement, or if any
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of the representations and warranties of Sentex or Seller set forth in this
Agreement shall not be true in any material respect, and such breach, failure or
misrepresentation is not cured to Buyer's reasonable satisfaction within 10 days
after Buyer gives Seller or the Stockholder, respectively, written notice
identifying such breach, failure or misrepresentation;
(c) by Seller, if Buyer shall have breached or failed to perform in any
material respect any of its obligations, covenants or agreements under this
Agreement, or any of the representations and warranties of Buyer set forth in
this Agreement shall not be true in any material respect, and such breach,
failure or misrepresentation is not cured to Seller's reasonable satisfaction
within 10 days after Seller gives Buyer written notice identifying such breach,
failure or misrepresentation;
(d) by Buyer, if the conditions set forth in section 6.01 become
incapable of satisfaction;
(e) by Seller, if the conditions set forth in section 6.02 become
incapable of satisfaction;
(f) by Seller or Buyer if the Closing shall not have occurred on or
before July 31, 2000, or such other date, if any, as Seller and Buyer may agree
in writing, except that this Agreement may not be terminated under this section
7.01(f) by any party that is in material breach of any representation or
warranty or in material violation of any covenant or agreement contained herein;
or
(g) by Seller, if it receives a Superior Proposal pursuant to section
4.04.
Section 7.02. Effect of Termination. If this Agreement is terminated
(i) under section 7.01(a) or (ii) under sections 7.01(d) or (e) at such time as
no party is in breach of a representation or warranty or in violation of a
covenant or agreement contained herein, all further obligations of Sentex and
Seller to Buyer, and of Buyer to Sentex and Seller, will terminate without
further liability of any party hereto. If this Agreement is terminated under
section 7.01(b), (c), (d), (e) or (f) at such time as one or more parties is in
breach of a representation or warranty or in violation of a covenant or
agreement contained in this Agreement, the liabilities and obligations of the
parties not in breach or violation of this Agreement shall terminate, and the
party or parties that are in breach or violation of this Agreement shall remain
liable for such breaches and violations, and nothing shall be deemed to restrict
the remedies available against such party or parties. If this Agreement is
terminated pursuant to section 7.01(g), Seller shall pay to Buyer, as its
exclusive remedy, the amounts provided for in section 9.02.
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ARTICLE 8
INDEMNIFICATION
Section 8.01. Survival. The representations, warranties and covenants
of Sentex and Seller contained herein shall survive the Closing and any
investigation made by Buyer, subject to the following:
(a) No claim against Sentex or Seller for a breach of the
representations, warranties and covenants contained herein shall be brought more
than two years following the Closing Date, except for (i) claims arising out of
the representations and warranties contained in sections 2.08 (with respect to
title), 2.09, 2.19, 2.20 or 2.22 herein, which shall survive for a period of
three years following the Closing Date, (ii) claims of which Sentex or Seller
shall have been notified with reasonable specificity by Buyer within such
two-year period, (iii) claims for material breaches of representations and
warranties of Sentex or Seller that were known by either Sentex or Seller to be
inaccurate at the Closing which shall survive for four (4) years following the
Closing Date, and (iv) all other claims for indemnification against Sentex or
Seller as provided in Section 8.03 which shall survive the Closing Date for a
period of three (3) years, except for any claims of which Sentex or Seller have
been notified with reasonable specificity by Buyer within such 3-year period.
(b) No claim against Stockholder for indemnification as provided in
Section 8.04 shall be brought after the earlier to occur of (i) the second
anniversary of the Closing Date, and (ii) such time after the Closing that
Sentex's consolidated audited balance sheet for any fiscal year indicates total
consolidated stockholders' equity in excess of $1,000,000, except for claims of
which the Stockholder shall have been notified with reasonable specificity by
Buyer within such two-year period.
Section 8.02. Limits on Indemnification. If the Closing occurs, Buyer
shall not be entitled to recover any damages for a breach of the representations
and warranties contained in Article 2 or the covenants contained in Article 4
unless and until Buyer's claims therefor exceed $15,000 in the aggregate, at
which time Buyer shall be entitled to receive damages for all such claims,
including the first $15,000; provided, that nothing in this Article 8 shall
entitle Buyer to recover damages from Sentex, Seller or Stockholder in excess of
(x) the aggregate dollar value of the Closing Purchase Price plus (y) the amount
paid Sentex pursuant to section 1.05.
Section 8.03. Indemnification by Sentex and Seller. Sentex, Monitek and
Subsidiary hereby jointly and severally indemnify and hold harmless Metrisa and
Metrisa GmbH, and the respective officers and directors of Metrisa and Metrisa
GmbH, from and against any and all claims, liabilities, obligations, costs,
damages, losses and expenses of any nature arising out of, resulting from or
relating to any breach of the representations, warranties or covenants of
Sentex, Monitek or Subsidiary under this Agreement, or any liabilities relating
to the Purchased Assets, the Business or Monitek or Subsidiary which are not
included within the Assumed Liabilities (regardless of whether information with
respect thereto is set forth on a Schedule or Exhibit
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hereto), and all costs and expenses (including reasonable attorneys' fees)
incurred in connection with the foregoing.
Section 8.04. Indemnification by Stockholder. Stockholder hereby
indemnifies and holds harmless Metrisa and Metrisa GmbH and the respective
officers and directors of Metrisa and Metrisa GmbH from and against any and all
claims, liabilities, obligations, costs, damages, losses and expenses of any
nature arising out of or resulting from any breach of the representations,
warranties or covenants of the Subsidiary contained in this Agreement that
relate to the Subsidiary or the portion of the Business conducted through the
Subsidiary, or any liabilities relating to the Subsidiary which are not included
within the Assumed Liabilities (regardless of whether information with respect
thereto is set forth on a Schedule or Exhibit hereto), and all costs and
expenses (including reasonable attorneys' fees) incurred in connection with the
foregoing.
Section 8.05. Set-Off, Etc. Prior to seeking to otherwise enforce the
right to indemnity hereunder, Buyer shall, in its sole discretion, be entitled
to set off any claim against any amounts (a) payable to Sentex pursuant to
section 1.05 or (b) payable to Sentex in connection with the Promissory Note
pursuant to section 1.03, provided, however, that prior to its exercise of such
setoff right, Buyer shall give Sentex thirty (30) days prior written notice to
allow Sentex to settle or otherwise compromise such claim to the reasonable
satisfaction of Buyer, provided that if such claim is not settled or otherwise
compromised to the reasonable satisfaction of Buyer during such 30 day period,
Buyer may thereafter exercise the setoff right described herein. In no event
shall such offsets constitute Buyer's only remedy with respect to claims for
indemnification under this Article 8.
Section 8.06. Indemnification by Buyer. Buyer hereby indemnifies and
holds harmless Sentex and Seller from and against any and all claims,
liabilities, obligations, costs, damages, losses and expenses of any nature,
arising out of, resulting from or relating to any breach of the representations,
warranties or covenants of Buyer under this Agreement, or any liabilities that
are included within the Assumed Liabilities and all costs and expenses
(including reasonable attorneys' fees) incurred in connection with the
foregoing.
Section 8.07. Procedures for Indemnification of Third Party Claims. A
party or parties entitled to indemnification hereunder with respect to a third
party claim (the "Indemnified Party") will give the party or parties required to
provide such indemnification (the "Indemnifier") written notice within thirty
(30) days of receipt of or knowledge concerning any legal proceeding, claim or
demand instituted by any third party (in each case, a "Claim") in respect of
which the Indemnified Party is entitled to indemnification hereunder. The
Indemnifier shall have the right, by giving written notice to the Indemnified
Party within ten (10) days after receipt of notice from the Indemnified Party
and stating that it is responsible for such Claim, at its option and expense, to
defend against, negotiate, settle or otherwise deal with any Claim with respect
to which it is the Indemnifier and to have the Indemnified Party represented by
counsel, reasonably satisfactory to the Indemnified Party, selected by the
Indemnifier; provided, that the Indemnified Party may
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participate in any proceeding with counsel of its choice and at its expense;
provided further, that Buyer, at any time when it believes in good faith that
any Claim with respect to which any Indemnifier are defending is having a
material adverse effect on its business, may assume the defense and settlement
of such Claim in good faith and be fully indemnified therefor; and provided
further, that the Indemnifier may not enter into a settlement of any such Claim
without the consent of the Indemnified Party unless such settlement requires no
more than a monetary payment for which the Indemnified Party is fully
indemnified or involves other matters not binding upon or affecting the
Indemnified Party. The parties will cooperate fully with each other in
connection with the defense, negotiation or settlement of any Claim.
Section 8.08. Procedures for Indemnification of Non-Third Party Claims.
With respect to any claim for indemnification hereunder that does not involve a
third party claim, the Indemnified Party will give the Indemnifier written
notice of such claim. The Indemnifier may acknowledge and agree by notice to the
Indemnified Party in writing to satisfy such claim within ten (10) days of
receipt of notice of such claim from the Indemnified Party. In the event that
the Indemnifier shall dispute such claim, the Indemnifier shall provide written
notice of such dispute to the Indemnified Party within twenty (20) days of
receipt of notice of such claim, setting forth the basis of such dispute. Upon
receipt of notice of any such dispute, the Indemnified Party and the Indemnifier
shall use reasonable efforts to resolve such dispute within thirty (30) days of
the date such notice of dispute is received. In the event that the Indemnifier
shall fail to provide written notice to the Indemnified Party within twenty (20)
days of receipt of notice from the Indemnified Party that the Indemnifier either
acknowledges and agrees to pay such claim or disputes such claim, the
Indemnifier shall be deemed to have acknowledged and agreed to pay such claim in
full and to have waived any right to dispute such claim. Once (a) the
Indemnifier has acknowledged and agreed to pay any claim pursuant to this
section 8.08, (b) any dispute under this section 8.08 has been resolved in favor
of indemnification by mutual agreement of the Indemnifier and the Indemnified
Party, or (c) any dispute under this section 8.08 has been finally resolved in
favor of indemnification by order of a court of competent jurisdiction or other
tribunal having jurisdiction over such dispute, the Indemnifying Party shall pay
the amount of such claim to the Indemnified Party within twenty (20) days of the
date of acknowledgment or resolution, as the case may be, to such account and in
such manner as is designated in writing by the Indemnified Party.
Section 8.09. Exclusive Remedy Against Stockholder; Limitations of
Remedy Against Seller and Sentex. After the Closing, the exclusive remedy of the
Buyer against the Stockholder with respect to any breach of any representation,
warranty or covenant of the Subsidiary under this Agreement shall be the right
to pursue claims of indemnification under this Article 8. Except as aforesaid,
the Buyer agrees that it will not be entitled to pursue any other remedies
against the Stockholder at law or in equity. Subject in all respects to the
limitations described in sections 8.01 and 8.02, after the Closing, the Buyer
shall be entitled to pursue any remedies against Sentex or the Seller with
respect to any breach of any representation, warranty or covenant of the Seller
or Sentex under this Agreement, including, without limitation, any claim of
indemnification under this Article 8 or any other remedy at law or in equity.
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ARTICLE 9
MISCELLANEOUS
Section 9.01. Notices. Any notices or other communications required or
permitted to be given hereunder shall be deemed given when received and shall be
(a) delivered in person, (b) mailed by registered or certified mail, return
receipt requested, or (c) sent by a nationally recognized overnight courier,
addressed as follows:
To Buyer:
Metrisa, Inc.
25 Wiggins Avenue
Bedford, Massachusetts 01730
Attn: President
with a copy to:
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
Attn: David Brown, Esq.
To Sentex, Monitek or Monitek GmbH:
1807 East 9th Street, Suite 1510
Cleveland, Ohio 44114
Attn: Robert S. Kendall
with a copy to:
William Toomajian, Esq.
Baker & Hostetler LLP
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114
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To the Stockholder:
CPS Capital, Ltd.
1807 East 9th Street, Suite 1510
Cleveland, Ohio 44114
Attn: Robert S. Kendall
Section 9.02. Expenses. All legal and other costs and expenses incurred
in connection with this agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses; provided, that, in the
event of the termination of this Agreement and any of Sentex, Monitek, the
Subsidiary or the Stockholder shall enter into any transaction, or enter into
any agreement relating to any transaction, with any Person relating to an
Acquisition Proposal directly or indirectly as a result of any negotiations or
other actions in violation of section 4.04 or pursuant to a Superior Proposal,
within twelve (12) months after the date hereof, Sentex shall immediately pay
Buyer in cash by wire transfer of immediately available funds (a) the reasonable
costs and expenses of Buyer theretofore incurred by Buyer in connection with
this Agreement and the transactions contemplated hereby, including, without
limitation, attorneys' and accountants' fees and expenses, and (b) the sum of
$150,000. The obligation of Sentex to pay Buyer the sum of $150,000 pursuant to
the foregoing provisions shall be secured by a security interest in the assets
of Sentex and Seller substantially in accordance with the terms of the Security
Agreement attached hereto as Exhibit 5.06(b).
Section 9.03. Certain Taxes. Notwithstanding any provision of law, all
transfer, documentary, sales, use, real property gains, stamp, registration, and
other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement shall be borne and paid by Sentex and the
Stockholder when due.
Section 9.04. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties and their respective
successors and assigns, provided that neither this Agreement nor any right
hereunder may be assigned by any party without the written consent of Buyer,
Sentex, and Seller, except that Buyer may assign any of its rights under this
Agreement to any wholly owned subsidiary; provided, Buyer remains obligated to
perform all of its obligations hereunder and under the Promissory Note.
Section 9.05. Public Announcements. No party to this Agreement shall
make, or cause to be made, any press release or public announcement, including
notification of its shareholders, with respect to this Agreement or the
transactions contemplated hereby or otherwise communicate with any news media or
with its shareholders without the prior written consent of the other party
(unless required by law), and in any such event, each such party shall furnish
to the other parties a copy of any press release or other public announcement.
Section 9.06. Amendments and Waivers. This Agreement may be modified or
amended only by a writing signed by Buyer, Seller and Sentex, and by the
Stockholder (solely with respect
-32-
<PAGE>
to Article 8). No waiver of any term or provision hereof shall be effective
unless in writing signed by the party waiving such term or provision.
Section 9.07. Counterparts. This Agreement may be executed in two or
more counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
Section 9.08. Headings. The headings of Articles and Sections herein
are inserted for convenience of reference only and shall be ignored in the
construction or interpretation hereof.
Section 9.09. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of Massachusetts,
without regard to the choice of law provisions thereof.
Section 9.10. No Waiver. No failure to exercise and no delay in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The rights provided are cumulative and not
exclusive of any rights provided by law.
Section 9.11. Integration. This writing, together with Exhibits and
Schedules hereto, embodies the entire agreement and understanding between the
parties with respect to this transaction and supersedes all prior discussions,
understandings and agreements concerning the matters covered hereby.
Section 9.12. Limitation on Scope of Agreement. If any provision of
this Agreement is unenforceable or illegal, said provisions shall be enforced to
the fullest extent permitted by law and the remainder of the Agreement shall
remain in full force and effect.
Section 9.13. Further Assurances. Following the Closing, Seller and the
Stockholder will execute and deliver to Buyer such documents and take such other
actions as Buyer may reasonably request in order to consummate the transactions
contemplated hereby, and Buyer will execute and deliver to Seller such documents
and take such other actions as Seller may reasonably request in order to
consummate the transactions contemplated hereby.
Section 9.14. Third-Party Beneficiaries. Nothing in this Agreement
shall be construed as giving any Person, other than the parties hereto and their
permitted successors and assigns, any right, remedy or claim under or in respect
of this Agreement or any provision thereof.
Section 9.15. Bulk Sales Indemnity. The Buyer hereby waives compliance
with the provisions of any applicable bulk transfer laws, and the Seller and
Sentex covenant that all debts, obligations and liabilities relating to the
Business that are not assumed by the Buyer under this Agreement will be promptly
paid and discharged by the Seller or Sentex as and when they become due and
payable. The Seller and Sentex, jointly and severally, further agree to
indemnify and hold the Buyer harmless from all claims made by creditors with
respect to noncompliance with any bulk transfer law, except to the extent that
such claims result from liabilities assumed by the Buyer hereunder.
-33-
<PAGE>
EXECUTED as a sealed instrument as of the day and year first above
written.
METRISA, INC.
By /s/ John E. Wolfe
------------------------------------------
John E. Wolfe
President
SENTEX SENSING TECHNOLOGY, INC.
By /s/ Robert S. Kendall
------------------------------------------
Robert S. Kendall, Chief Executive Officer
and President
MONITEK TECHNOLOGIES, INC.
By /s/ Robert S. Kendall
------------------------------------------
Robert S. Kendall, Chief Executive Officer
and President
MONITEK GMBH
By /s/ Robert S. Kendall
------------------------------------------
Robert S. Kendall, Chief Executive Officer
and President
<PAGE>
Solely with respect to Article 8 hereof:
CPS CAPITAL, LTD.
By /s/ Robert S. Kendall
------------------------------------------
Robert S. Kendall, Chief Executive Officer
and President
The undersigned agrees to
vote its shares of the
capital stock of Sentex in
favor of the transaction
contemplated by the
foregoing Agreement
CPS CAPITAL, LTD.
By /s/ Robert S. Kendall
------------------------------------------
Robert S. Kendall, Chief Executive Officer
and President
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<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,092,809
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<RECEIVABLES> 1,842,262
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0
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