SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 3, 1998
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MATEC Corporation
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(Exact name of registrant as specified in its charter)
Maryland 1-4184 06-0737363
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
75 South Street, Hopkinton, MA 01748
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(Address of principal executive offices)
Registrant's telephone number, including area code: (508) 435-9039
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Item 2. Acquisition or Disposition of Assets
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On August 3, 1998, the Registrant sold certain assets (including
accounts receivable, inventory, machinery and equipment and intellectual
property) of its wholly owned subsidiaries, Matec Instruments, Inc.
("MII") and Matec Applied Sciences, Inc. ("MASI") to a newly formed
corporation. Ken Bishop, who was President of MII and MASI until August
3, 1998, owns 53% of the newly formed corporation. MII and MASI had
comprised the Registrant's Instruments Segment of business.
The purchase price received consisted of approximately $847,000 in
cash, a subordinated promissory note in the principal amount of $250,000,
a $250,000 guaranteed royalty with payments based on 1.5% of future sales,
and the assumption of certain liabilities including trade payables. The
cash amount is subject to closing adjustments. In addition, the buyer has
entered into a 5 year lease agreement with the Registrant to lease space
that it currently occupies and the buyer also has a 5 year option to
purchase the real estate that includes the leased space. The terms of the
transaction were the result of arms-length negotiations between
representatives of the Registrant and the buyer. The Company will report
an after-tax gain of approximately $240,000 or $.09 per share in the third
quarter of 1998 in connection with the sale.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(b) Pro Forma Financial Information
-----------------------------------
The following pro forma information is incorporated by reference from
the Registrant's July 5, 1998 Form 10-Q:
Consolidated Condensed Balance Sheets, Consolidated Statements of
Operations, Consolidated Condensed Statements of Cash Flows,
Consolidated Statements of Comprehensive Income, and Notes to
Consolidated Condensed Financial Statements
The unaudited pro forma consolidated financial information presented
herein gives effect to the Company's sale of MII and MASI on August 3,
1998. The Company's unaudited pro forma consolidated financial
information should be read in conjunction with the historical financial
statements in the 1997 MATEC Corporation and Subsidiaries Annual Report
which is incorporated by reference in Form 10-K for the year ended
December 31, 1997.
The accompanying December 31, 1997 unaudited pro forma consolidated
condensed balance sheet reflects the historic consolidated balance sheet
adjusted to reflect the net assets of MII and MASI classified as "Net
assets of discontinued operations". The accompanying unaudited pro forma
consolidated statement of operations for the year ended December 31, 1997
gives effect to the sale of MII and MASI as though the sale occurred prior
to January 1, 1997.
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MATEC Corporation and Subsidiaries
Unaudited Pro Forma Consolidated Condensed Balance Sheet
December 31, 1997
(In thousands)
Adjustments Unaudited
As Reported (Note A) Pro Forma
----------- ----------- ---------
Cash and cash equivalents $ 885 $ - $ 885
Receivables, net 3,124 (1,203) 1,921
Inventories 3,193 (595) 2,598
Deferred income taxes and
other current assets 976 (103) 873
Property, plant and
equipment, net 3,909 (132) 3,777
Marketable equity securities 4,658 - 4,658
Net assets of discontinued
operations 5,662 1,482 7,144
Other assets 90 (20) 70
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Total assets $ 22,497 $ (571) $ 21,926
======== ========= ========
Accounts payable $ 1,194 $ (261) $ 933
Accrued liabilities 1,172 (310) 862
Income taxes payable 416 - 416
Deferred income taxes 2,317 - 2,317
Long-term debt 1,989 - 1,989
Stockholders' equity 15,409 - 15,409
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Total liabilities and
stockholders' equity $ 22,497 $ (571) $ 21,926
======== ========= ========
(A) The adjustments reflect the reclassification of the assets and
liabilities of both MII and MASI to "Net assets of discontinued
operations".
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MATEC Corporation and Subsidiaries
Unaudited Pro Forma Consolidated Condensed Statement of Operations
For the Year Ended December 31, 1997
(In thousands, except per share data)
Adjustments Unaudited
As Reported (Note A) Pro Forma
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Net sales $ 16,974 $ (4,078) $ 12,897
Cost of sales 12,325 (2,587) 9,738
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Gross profit 4,649 (1,491) 3,159
Operating expenses:
Selling and administrative 3,930 (1,061) 2,869
Research and development 124 (124) -
Restructuring (recovery) (134) 134 -
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3,919 (1,051) 2,869
Operating profit 730 (440) 290
Other income (expense):
Interest expense (260) (19) (241)
Other, net 48 (4) 44
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(212) (15) (197)
Earnings from continuing
operations before income
taxes 518 (425) 93
Income tax expense (211) (173) (38)
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Earnings from continuing
operations $ 307 $ (252) $ 55
======== ======== ========
Basic and diluted earnings
per share - continuing
operations $ .11 $ .02
===== =====
Weighted average shares:
Basic 2,737 2,737
Diluted 2,759 2,759
(A) The adjustments reflect removing the results of operations for both
MII and MASI from continuing operations.
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(c) Exhibits
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(2) Asset Purchase Agreement by and among Matec Instruments, Inc., Matec
Applied Sciences, Inc. and Northboro Acquisition Corp.
(13) The Consolidated Condensed Balance Sheets, Consolidated Statements of
Operations, Consolidated Condensed Statements of Cash Flows,
Consolidated Statements of Comprehensive Income, and Notes to
Consolidated Condensed Financial Statements included in the
Registrant's July 5, 1998 Form 10-Q is incorporated into Item 7 (b)
of this Current Report on Form 8-K.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
MATEC Corporation
By:/s/ Michael J. Kroll
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Michael J. Kroll
Vice President and Treasurer
Date: August 17, 1998
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of August 3, 1998 by and among
MATEC INSTRUMENTS, INC. and MATEC APPLIED SCIENCES, INC., Delaware
corporations with a place of business at 56 Hudson Street,
Northborough, Massachusetts 01532 (the Seller), and NORTHBORO
ACQUISITION CORP., a Massachusetts corporation with a place of
business at 56 Hudson Street, Northborough, Massachusetts 01532 (the
Buyer).
WITNESSETH:
WHEREAS, the Seller desires to sell to the Buyer, and the Buyer
desires to purchase from the Seller, certain assets of the Seller, all
upon the terms and conditions hereinafter set forth;
NOW, THEREFOR, in consideration of the mutual covenants and
agreements contained herein, the parties hereto do hereby agree as
follows:
1. Certain Definitions. As used in this agreement, the following
terms shall have the meanings set forth below.
"Affiliate" shall mean, with respect to any Person, any Person
which directly or indirectly controls, is controlled by or is under
common control with such Person.
"Agreement" shall mean this Asset Purchase Agreement and all
Schedules and Exhibits hereto, as the same may from time to time be
amended.
"Assumed Liabilities" shall be the liabilities of the Seller
shown or reflected on the Updated Base Balance Sheet which are
outstanding at the time of the Closing Date and do not constitute
Retained Liabilities, together with the liabilities set forth in
Exhibit A hereof.
"Base Balance Sheet" shall mean the internally prepared balance
sheet of the Seller dated July 5, 1998, attached hereto as Exhibit B.
"Business Property Rights" shall mean and include all of the
Sellers right, title and interest in and to the name Matec Instruments
and Matec Applied Sciences, Inc. subject to the restrictions set forth
in Section 9 herein and any other corporate or trade names used by the
Seller, together with all trademarks, copyrights, patents, intellectual
property, and all other intangible personal property owned by the
Seller.
"Closing Date" shall mean a date on or after the conditions
specified in Sections 12 and 13 hereof have been satisfied or waived,
but in no event later than August 3, 1998, or such other date as may be
agreed to by the parties to this Agreement.
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"Financial Statements" shall mean the financial statements of
the Seller as and for the calendar year ending December 31, 1997 and as
of the second quarter ending July 5, 1998 (including the balance sheet,
the related statements of operations, retained earnings and cash
flows).
"Intellectual Property" shall have the meaning ascribed in
Section 10(k) of this Agreement.
"Litigation Expense" shall mean any expenses reasonably incurred
in connection with investigating, defending or asserting any claim,
action, suit or proceeding incident to any matter indemnified against
under this Agreement, including, without limitation, court filing fees,
court costs, arbitration fees or costs, witness fees, and fees and
disbursements of legal counsel, investigators, expert witnesses,
accountants and other professionals.
"Loss" shall mean any loss, obligation, claim, liability,
settlement payment, award, judgment, fine, penalty, interest charge,
expense, damage or deficiency or other charge, other than Litigation
Expense.
"Net Book Value of the Purchased Assets" shall mean the book
value of the Purchased Assets as set forth in the Base Balance Sheet
less all Assumed Liabilities.
"Person" shall mean and include an individual, a corporation, a
partnership, a limited liability company, a limited liability
partnership, a joint venture, a trust, an unincorporated association, a
government or political subdivision or agency thereof or any other
entity.
"Purchased Assets" shall have the meaning given that term in
Section 2(a) hereof and more specifically set forth in Exhibit A
hereto.
"Retained Assets" shall have the meaning given that term in
Section 2(a) hereof.
"Retained Liabilities" shall mean all notes payable and all
liabilities of the Seller of whatever nature which are not specifically
Assumed Liabilities, including, but not limited to, the liabilities
described in Exhibit C hereto.
"Taxes" shall mean all federal, state, local, foreign, and other
taxes, including, without limitation, income taxes, estimated taxes,
alternative minimum taxes, excise taxes, sales taxes, use taxes,
value-added taxes, gross receipts taxes, franchise taxes, capital stock
taxes, employment and payroll-related taxes, withholding taxes, stamp
taxes, transfer taxes, windfall profit taxes, environmental taxes and
property taxes, whether or not measured in whole or in part by net
income, and all deficiencies, or other additions to tax, interest,
fines and penalties owed by it, required to be paid by it through the
date hereof whether disputed or not.
"Updated Base Balance Sheet" shall mean the Base Balance Sheet
brought current through the Closing Date in accordance with generally
accepted accounting principles consistently applied and the historical
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accounting practices of the Seller as of the Closing Date and as agreed
to by the Buyer and the Seller.
2. Purchase and Sale of Assets
(a) Sale of Assets. Subject to the provisions of this
Agreement, Seller agrees to sell and Buyer agrees to purchase, at the
Closing Date, all of the properties, assets and business of Seller of
every kind and description, tangible and intangible, real, personal or
mixed, and wherever located, including, without limitation, all assets
shown or reflected in the Updated Base Balance Sheet of Seller and
described on Exhibit D attached hereto and incorporated herein, and all
of Sellers good will and the exclusive right to use the name of Seller
as all or part of a trade or corporate name; provided, however,
notwithstanding any other provision of this Agreement or any Exhibit
hereto, there shall be excluded from such purchase and sale the
following property:
(i) Assets and property disposed of since the date
of the Base Balance Sheet in the ordinary course of business and such
other assets as have been or are disposed of pursuant to this
Agreement; and
(ii) Leasehold improvements made by Seller to the
land and/or buildings known as and located at 56 Hudson Street,
Northborough, Massachusetts, in an amount estimated to be $65,000.00;
(iii) Sellers stock record books, corporate record
books containing minutes of meetings of directors and stockholders and
such other records as have to do exclusively with Sellers organization
or stock capitalization (collectively, the Corporate Records);
(iv) The assets and property described in Exhibit E
hereto.
The assets, property and business of Seller to be sold to and
purchased by Buyer under this Agreement are hereinafter sometimes
referred to as the Purchased Assets. The assets and property described
above not purchased by Buyer and retained by Seller are collectively
referred to as the Retained Assets.
(b) Assumption of Liabilities. Upon the sale and purchase of
the Purchased Assets, Buyer shall assume and agree to pay or discharge
when due in accordance with their respective terms all Assumed
Liabilities; provided, however, that notwithstanding any other
provision of this Agreement or any Exhibit hereto Buyer shall not
assume and shall not pay any of the Retained Liabilities.
The assumption of the Assumed Liabilities shall not enlarge any
rights of third parties under contracts or arrangements with Buyer or
Seller and nothing herein shall prevent any party from contesting in
good faith with any third party any of said Liabilities.
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3. Purchase Price. In consideration of the sale by Seller to
Buyer of the Purchased Assets, subject to the assumption by Buyer of
the Assumed Liabilities and the satisfaction of all of the conditions
contained herein, Buyer shall pay to Seller the sum equal to the Net
Book Value of the Purchased Assets as of the Closing Date initially
based on the Base Balance Sheet plus Two Hundred Fifty Thousand Dollars
($250,000.00) (the Purchase Price). The Net Book Value of the
Purchased Assets portion of the Purchase Price shall be paid to Seller
by federal wire transfer or by bank cashiers check and the balance of
the Purchase Price ($250,000.00) shall be paid by delivery to Seller
of Buyer's junior subordinated promissory note (the Note) in
substantially the form as attached hereto as Exhibit F. Within
fifteen (15) business days following the Closing Date, the Net Book
Value of the Purchased Assets shall be recalculated based upon the
Updated Base Balance Sheet, and any adjustment in said value from that
paid by Buyer as of the Closing Date shall be paid by the appropriate
party by federal wire transfer or bank cashiers check. The Note shall
be subordinated to Buyer's commercial financing on terms and conditions
reasonably acceptable to said lending institution. The Note shall be
secured by a security interest in the assets of the Buyer subordinate
to Buyers commercial lender and shall be personally guaranteed by the
Stockholders of Buyer in proportion to their respective ownership
interests in the Buyer.
4. Royalty Agreement. Buyer shall grant to Seller a royalty on
all sales of products of the Buyer equal to one and one-half (1.5%)
percent of sales for a defined period of time, all as to be more fully
set forth in a Royalty Agreement to be executed as of the Closing Date.
5. Further Assurances. Seller from time to time after the
Closing at the request of Buyer and without further consideration shall
execute and deliver further instruments of transfer and assignment and
take such other action as Buyer may reasonably require to more
effectively transfer and assign to, and vest in, Buyer each of the
Purchased Assets. Nothing herein shall be deemed a waiver by Buyer of
its right to receive at the Closing an effective assignment of each of
the leases, contracts, commitments or rights of Seller as otherwise set
forth in this Agreement.
6. Allocation of Purchase Price. Within sixty (60) days
of the Closing, Buyer and Seller shall allocate the purchase price (and
all other capitalized costs) among the Purchased Assets. Such
allocation shall be made in accordance with the provisions of Section
1060 of the Internal Revenue Code of 1986, as amended (the Code), and
shall be binding upon Buyer and Seller for all purposes (including
financial accounting purposes, financial and regulatory reporting
purposes and tax purposes). Buyer and Seller also each agree to file
IRS form 8594 consistently with the foregoing and in accordance with
Section 1060 of the Code.
7. Assumption of Warranty Claims. A description of the existing
warranty claims currently being serviced by the Seller and for which
the Seller has received notice is set forth in Exhibit E. From and
after the Closing Date, Buyer shall provide all required warranty
service on systems sold by the Seller prior to the Closing Date. A
warranty reserve shall be created in the amount of $35,000.00 and
reflected in the Updated Base Balance Sheet in order to compensate
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Buyer for said assumption. To the extent such a reserve does not
appear on the Base Balance Sheet, an adjustment to the Purchase Price
shall be made as of the Closing Date in anticipation of such reserve
appearing on the Updated Base Balance Sheet.
8. Instruments of Transfer; Payment of Purchase Price.
(a) Sellers Deliveries. At the Closing, the Seller shall
deliver the following to the Buyer, each of which shall be in form
reasonably satisfactory to the Buyer:
(i) bills of sale for the Purchased Assets;
(ii) instruments of transfer reasonably necessary to
transfer to the Buyer all of the Sellers rights to any licenses,
permits, and Business Property Rights and Intellectual Property
included as Purchased Assets;
(iii) Certificate of Good Standing for the Seller from
the Secretary of State for the State of Delaware and the Secretary of
State for the Commonwealth of Massachusetts and the Department of
Revenue;
(iv) tax waiver for the Seller;
(v) Secretary's Certificate regarding the due authority
of persons executing documents on behalf of the Seller;
(vi) legal opinion of the Sellers counsel in
substantially the form attached hereto as Exhibit G;
(vii) Certificate as to the Sellers compliance with
Section 12(b) and Section 14(a) and (b) of this Agreement;
(viii) permission letter for use of the names Matec
Instruments and Matec Applied Sciences;
(ix) Articles of Amendment changing Sellers name as more
fully described in Section 9 herein; and
(x) such other instrument or instruments of transfer,
in such form as shall be reasonably necessary or appropriate to vest in
the Buyer all of the Sellers right, title and interest to the Purchased
Assets and to carry out the terms of this Agreement.
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(b) Buyer's Deliveries. At the Closing, the Buyer shall
deliver the following to the Seller, each of which shall be in form
reasonably satisfactory to the Seller:
(i) federal wire transfer or certified or bank check
of immediately available funds for an aggregate amount equal to the
cash portion of the Purchase Price;
(ii) the Note;
(iii) a Security Agreement and UCC-1 Financing
Statements to effectuate the security interest described in Section 3
hereof;
(iv) the pro rata guaranties of the Shareholders of the
Buyer;
(v) Certificate of Legal Existence for the Buyer;
(vi) legal opinion of Buyers counsel in substantially
the form attached hereto as Exhibit H;
(vii) Certificate as to the Buyers compliance with
Sections 13(a) and 13(b) of this Agreement;
(viii) Clerks Certificate regarding the due authority of
persons executing documents on behalf of the Buyer;
(ix) the Royalty Agreement referred to in Section 4;
(x) an assignment and assumption agreement pursuant to
which Buyer assumes the Assumed Liabilities and Seller retains the
Retained Liabilities;
(xi) a certificate or certificates, executed by each of
the stockholders of the Buyer, as to each of their knowledge of each
matter in this Agreement which is qualified by reference to the Sellers
knowledge (and the Seller shall be entitled to rely on such
certificate(s) in making any representations, warranties or other
statements in this Agreement or otherwise, on the date hereof, on the
Closing Date or otherwise, which is qualified by reference to the
Sellers knowledge; provided, however, that the Seller shall not be
entitled to rely on such certificate(s) with regard to any fact as to
which Ted Valpey or Mike Kroll has knowledge to the contrary);
(xii) an undertaking, executed by each of the
stockholders of the Buyer, that each of such stockholders will use
their commercial reasonable efforts to cause each of the conditions to
the Buyers obligations under this Agreement to be satisfied on or
before August 3, 1998; and
(xiii) such other instrument or instruments in such form
as shall be reasonably necessary or appropriate to carry out the terms
of this Agreement.
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9. Use of Name. The Seller agrees that from and after the
Closing Date, neither the Seller nor any Affiliate thereof shall use
the name Matec Instruments or Matec Applied Sciences, except as
specifically provided herein. The Seller, as a corporation, may
continue to utilize the name Matec Instruments or Matec Applied
Sciences for the sole purpose of winding up its business affairs,
provided that in no event shall it use the name for longer than twelve
(12) months following the Closing Date. At the Closing Date, the
Seller shall execute and deliver to the Buyer Articles of Amendment
changing its name and which the Buyer shall cause same to be filed with
the Secretary of State of Delaware and Massachusetts as of the Closing
Date. The Buyer agrees (i) that all material of Buyer shall delete all
reference to being a subsidiary of Matec and (ii) for a period of one
(1) year from the Closing Date to include the statement formerly a
subsidiary of Matec Corporation on any promotional materials.
10. Representations and Warranties of the Seller. The
Seller represents and warrants to the Buyer as follows:
(a) Organization; Good Standing; Power; etc. The Seller is
a duly organized, validly existing corporation in good standing under
the laws of the State of Delaware and as a foreign corporation in the
Commonwealth of Massachusetts. The Seller has the corporate power,
authority and capacity to own, lease and operate its properties, and to
carry on its business as and where the same is now being conducted.
(b) Authorization. The Seller has the requisite corporate
power, authority and capacity to enter into this Agreement and to
perform all of its obligations hereunder. All corporate proceedings
required to be taken by the Seller to authorize the execution and
delivery of this Agreement and the performance of the Sellers
obligations hereunder have been duly taken, and this Agreement
constitutes the legal, valid and binding obligation of the Seller,
enforceable against it in accordance with its terms.
(c) Consents. No permit, consent, approval, or
authorization of any governmental authority or any other Person on the
part of the Seller is required in connection with the execution or
delivery by the Seller of this Agreement or the consummation of the
transactions contemplated hereby, except for the tax waiver referred to
in Section 8(a)(iv) above.
(d) Adequacy of and Title to Property and Assets. Except
for liens in favor of Massachusetts Capital Resource Company and
BankBoston, N.A., the Seller has good and marketable title to all of
the Purchased Assets, none of which are subject to a mortgage, pledge,
lien, security interest, lease, charge, encumbrance or conditional sale
or other title retention agreement. Documents to release such liens
will be delivered to the Buyer on or prior to the Closing Date.
(e) Agreements, etc. There are no agreements, contracts,
leases or other outstanding commitments involving remaining payments in
excess of $2,500.00 pertaining to the Purchased Assets except as set
forth in Exhibit I.
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(f) ERISA.
(i) There are no employee benefit plans, programs and
arrangements (as defined in Section 3(3) of ERISA, hereinafter the
Employee Benefit Plans) sponsored or maintained for the benefit of any
current or former employee, officer or director of the Seller for which
the Buyer is intended to be a successor employer to the Seller for such
Employee Benefit Plans. Further, the Seller and the Buyer agree that
no Employee Benefit Plan sponsored or maintained by the Buyer is
intended to be and no such plan shall be a successor plan to any
Employee Benefit Plan of the Seller.
(ii) The Seller has complied in form and in operation
in all material respects with ERISA and the Internal Revenue Code of
1986, as amended, and any and all regulations promulgated thereunder.
(iii) The Seller confirms that it has and will continue
to comply with all Massachusetts requirements relating to employee
notification for group medical coverage and the Employee Benefits
Plans.
(g) Financial Statements. The Financial Statements and
Base Balance Sheet present fairly the financial position and results of
operations of the Seller, as of the dates and for the periods
indicated, and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis except for the lack
of footnotes.
(h) Litigation, etc. There is no suit, action or
litigation, administrative hearing, arbitration, labor controversy,
warranty claim, governmental inquiry, investigation or other proceeding
or claim (including environmental or land use proceedings) pending or,
to the Sellers knowledge, threatened against or relating to the Seller
except as set forth in Exhibit J. There are no judgments, consent
decrees or injunctions against, affecting or binding upon the Seller.
The Seller is in compliance with all laws, ordinances, requirements,
orders and regulations applicable to it, the violation of which would
have a material adverse effect on the business of the Seller or on the
ability of the Seller to consummate the transactions contemplated
hereby.
(i) Taxes. The Seller has duly filed all federal, state,
local and foreign tax returns which were required to be filed by it,
and all such returns are true and correct. The Seller has paid all
taxes when due pursuant to such returns or pursuant to any assessments
received by it or which it is obligated to withhold from amounts owing
to any employee, creditor or third party. The Seller has an audit
scheduled with the Commonwealth of Massachusetts during June, 1998 and
with the Internal Revenue Service in July, 1998 and Seller shall be
liable for all penalties, interest and taxes determined to be due from
said audits. All monies required to be withheld by the Seller from
employees for income taxes, Social Security and unemployment insurance
taxes have been collected or withheld, and accrued, reserved against,
and entered upon the books of the Seller and, if not paid to date,
shall be paid by the Seller on a timely basis.
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(j) No Material Adverse Change. Since the Base Balance
Sheet, there has been no material adverse change in the business of the
Seller, nor is there any fact or condition which exists which is
reasonably likely to materially adversely affect the Seller, which has
not been disclosed in this Agreement.
(k) Intellectual Property. All of the representations set
forth in this Section 10(k) are only to the Sellers knowledge, whether
that qualification is specifically set forth in any given
representation or not.
(i) Except as described in Exhibit K, Seller has exclusive
ownership, or exclusive license to use, of all patent, copyright, trade
secret, trademark, or other proprietary rights (collectively,
Intellectual Property) used or to be used in the business of Seller as
presently conducted. Sellers rights in all of such Intellectual
Property are freely transferable. There are no claims or demands of
any other person pertaining to any of such Intellectual Property and no
proceedings have been instituted, or are pending or threatened, which
challenge the rights of Seller in respect thereof. Seller has the
right to use, free and clear of claims or rights of other persons, all
customer lists, designs, manufacturing or other processes, computer
software, systems, data compilations, research results and other
information required for or incident to its products or its business as
presently conducted.
(ii) All patents, patent applications, trademarks,
trademark applications and registrations and registered copyrights
which are owned by or licensed to Seller or used by Seller in its
business as presently conducted, and all other items of Intellectual
Property which are material to the business or operations of Seller,
are listed in Exhibit K. All of such patents, patent applications,
trademark registrations, trademark applications and registered
copyrights have been duly registered in, filed in or issued by the
United States Patent and Trademark Office, the United States Register
of Copyrights, or the corresponding offices of other jurisdictions as
identified on said Exhibit, and have been properly maintained and
renewed in accordance with all applicable provisions of law and
administrative regulations in the United States and each such
jurisdiction.
(iii) All licenses or other agreements under which Seller
is granted rights in Intellectual Property are listed in Exhibit K.
All said licenses or other agreements are in full force and effect,
there is no material default by any party thereto, and, except as set
forth on Exhibit H, all of Sellers rights thereunder are freely
assignable. To the knowledge of Seller, the licensors under said
licenses and other agreements have and had all requisite power and
authority to grant the rights purported to be conferred thereby. True
and complete copies of all such licenses or other agreements, and any
amendments thereto, have been provided to Buyer or will be provided
prior to the Closing Date.
(iv) All licenses or other agreements under which Seller
has granted rights to others in Intellectual Property owned or licensed
by Seller are listed in Exhibit K. All of said licenses or other
agreements are in full force and affect, there is no material default
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by any party thereto, and, except as set forth on Exhibit H, all of
Sellers rights thereunder are freely assignable. True and complete
copies of all such licenses or other agreements, and any amendments
thereto, have been provided to Buyer or will be provided prior to the
Closing Date.
(v) The present business, activities and products of Seller
do not infringe any Intellectual Property of any other person. No
proceeding charging Seller with infringement of any adversely held
Intellectual Property has been filed or is threatened to be filed. To
Sellers knowledge, there exists no unexpired patent or patent
application which includes claims that would be infringed by or
otherwise adversely affect the products, activities or business of
Seller. Seller is not making unauthorized use of any confidential
information or trade secrets of any person, including without
limitation any former employer of any past or present employee of
Seller. Except as set forth in Exhibit K, neither Seller nor, to the
knowledge of Seller, any of its employees have any agreements or
arrangements with any persons other than Seller related to confidential
information or trade secrets of such persons or restricting any such
employees engagement in business activities or any nature. The
activities of Sellers employees on behalf of Seller do not violate any
such agreements or arrangements known to Seller which any such
employees have with other persons.
(l) Warranty of Other Claims. To the best of the Sellers
knowledge, there are no existing or threatened product liability,
warranty or other similar claims, or any facts upon which a material
claim of such nature could be based, against Seller for products or
services which are defective or fail to meet any product or service
warranties except as disclosed in Exhibit L. No claims has been
asserted against Seller for renegotiation or price redetermination of
any business transaction.
(m) Inventories. All inventory of the Seller is located at
its address first above written or at certain off-site locations which
have been disclosed to Buyer in writing.
(n) Company Actions. Since the date of the Base Balance
Sheet, the Seller has operated its business in the ordinary course.
(o) Deliveries. The Seller has delivered or shall make
available to the Buyer true, correct and complete copies of the
by-laws, articles of incorporation and organizational documents of the
Seller and if embodied in written form, all leases, licenses,
agreements, plans, financial statements, tax returns, Business Property
Rights, insurance policies and other information relevant to this
transaction.
(p) Undisclosed Liabilities. Except as reflected or
reserved against on the Financial Statements or the Base Balance Sheet,
as of the date hereof, to the Sellers knowledge, there are no material
liabilities or obligations of the Seller of a type that would be
required to be set forth on a balance sheet prepared in accordance with
generally accepted accounting principles consistently applied or in the
notes thereto.
-10-
<PAGE>
(q) Environmental Compliance. To the extent applicable to
Sellers business operated in the ordinary course and the best of its
knowledge, the Seller is in compliance with all applicable federal,
state and local laws and regulations relating to pollution control and
environmental contamination, including, without limitation, all laws
and regulations governing the generation, use, collection, treatment,
storage, transportation, recovery, removal, discharge or disposal of
oil and hazardous materials (as defined below) and all laws and
regulations with regard to record keeping, notification, and reporting
requirements respecting oil and hazardous materials. The Seller has
not received any notice of, or been subject to, any administrative or
judicial proceeding pursuant to such laws or regulations either now or
at any time during the past three (3) years. To the best of the
Sellers knowledge, there are no present facts or circumstances that
could form the basis for the assertion of any claim against the Seller
relating to environmental matters, including, without limitation, any
claim arising from past or present environmental practices asserted
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (CERCLA), the Resource Conservation and Recovery
Act (RCRA) or any other federal, state or local environmental statute.
For purposes of this Section 9(q), the term hazardous materials means
materials defined as hazardous substances, hazardous wastes or solid
wastes in CERCLA, RCRA and in any similar federal, state or local
environmental statute. Without limitation, the Seller shall remove and
dispose of all barrels of hazardous materials located at or around its
place of business.
(r) Brokers. There is no broker or finder or other Person
who would have any valid claim against the Seller for a fee, commission
or brokerage in connection with this Agreement or the transactions
contemplated hereby as a result of any agreement, understanding,
arrangement or action by the Seller. The Seller hereby agrees to save
the Buyer harmless and agree to indemnify the Buyer from any Loss or
Litigation Expense incurred by the Buyer on account of a claim by a
broker, finder, or any other Person arising out of this Agreement or
the transactions contemplated hereby as a result of any agreement,
understanding, arrangement, or action by the Seller.
(s) Retained Liabilities. All Retained Liabilities will be
paid by the Seller in accordance with their terms.
11. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller as follows:
(a) Organization; Good Standing; Power. The Buyer is a
corporation duly organized, validly existing and in good standing under
the laws of the Commonwealth of Massachusetts. The Buyer has the
requisite power, authority and capacity to own, lease and operate its
properties and to carry on its intended business. The Buyer was formed
for the purpose of engaging in, and has not engaged in or conducted any
business other than in connection with, the transactions contemplated
by this Agreement. The Buyer has no liabilities other than any
liabilities incurred in connection with the transactions contemplated
by this Agreement.
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<PAGE>
(b) Authorization. The Buyer has the requisite power,
authority and capacity to enter into this Agreement and the Note and
Security Agreement when executed and to perform all of its obligations
hereunder and thereunder. The Buyer has duly taken or will have duly
taken all necessary action to approve this Agreement, the Note and the
Security Agreement and the performance of its obligations hereunder and
thereunder. This Agreement and each of the Note and Security Agreement
when duly executed will constitute the legal, valid and binding
obligation of the Buyer enforceable against it in accordance with their
terms.
(c) Litigation. There is no suit, action or litigation,
administrative hearing, governmental inquiry, investigation,
arbitration or other proceeding pending or, to the Buyers knowledge,
threatened against or relating to the Buyer that would hinder Buyers
ability to perform under this Agreement.
(d) Consents. No permit, consent, approval, or
authorization of any governmental authority or any other Person on the
part of the Buyer is required in connection with the execution or
delivery by the Buyer of this Agreement or the consummation of the
transactions contemplated hereby.
(e) Brokers. There is no broker or finder or other Person
who would have any valid claim against the Buyer for a fee, commission
or brokerage in connection with this Agreement or the transactions
contemplated hereby as a result of any agreement, understanding,
arrangement or action by the Buyer. The Buyer hereby agrees to save
the Seller harmless and agrees to indemnify the Seller from any Loss or
Litigation Expense incurred by the Seller on account of a claim by some
other broker, finder, or other Person arising out of this Agreement or
the transactions contemplated hereby as a result of any agreement,
undertaking, arrangement, or action by the Buyer.
12. Conduct and Transactions Prior to Closing.
(a) Access to Records and Properties. From and after the
date hereof, the Seller and the Buyer shall afford each other and their
representatives, free and full access at all reasonable times during
normal business hours to the assets, properties, books and records of
the Seller in order that the Buyer may have full opportunity to make
investigations of the Sellers assets and affairs, and to such
additional financial and operating data and other information about the
Sellers assets and business as the Buyer shall from time to time
reasonably request. In conducting its investigations, the Buyer agrees
not to unreasonably interfere with the conduct of the Sellers
business. If for any reason the transactions contemplated herein are
not consummated, the Buyer will promptly return to the Seller, all
records and information concerning the Seller.
(b) Operation of Business. From the date hereof until the
Closing Date, the Seller shall operate its business as currently
operated, maintaining inventory and sales costs at levels consistent
with Sellers operation through the date of the Base Balance Sheet. The
Seller shall use its best efforts to preserve intact its current
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<PAGE>
business organization and its relationships with suppliers, customers,
employees and other Persons having material dealings with it.
Notwithstanding the foregoing, Seller shall not be responsible for any
breach of the foregoing caused by or at the direction of Buyer or any
of its stockholders.
13. Conditions Precedent to the Obligations of the Seller. All
obligations of the Seller under this Agreement are subject to the
fulfillment, at or prior to the Closing Date, of each of the following
conditions, which conditions may be waived only by the Seller:
(a) The representations and warranties of the Buyer herein
contained shall be true and correct as of the date hereof and shall
continue to be true and correct as of the Closing Date with the same
force and effect as though made as of the Closing Date except as
otherwise contemplated by this Agreement and for any representations
and warranties that speak as of a specific date.
(b) The Buyer shall have performed or complied with all the
obligations, agreements and covenants of the Buyer herein contained to
be performed by it prior to or as of the Closing Date.
(c) The Buyer shall have delivered to the Seller the items
set forth in Section 8(b).
(d) No action, suit or proceeding by or before any court or
any governmental or regulatory authority shall have been commenced, and
no investigation by any governmental or regulatory authority shall have
been commenced, seeking to restrain, prevent or change the transactions
contemplated hereby or seeking judgments against the Buyer awarding
substantial damages which would materially impact the transactions
contemplated hereby;
(e) The Buyer and Seller shall have entered into the lease
contemplated by Section 14(e) hereof on terms reasonably acceptable to
Seller.
14. Conditions Precedent to the Obligations of the Buyer. All
obligations of the Buyer under this Agreement are subject to the
fulfillment, at or prior to the Closing Date, of each of the following
conditions, which conditions may be waived only by the Buyer:
(a) The representations and warranties of the Seller herein
contained shall be true and correct as of the date hereof and shall
continue to be true and correct as of the Closing Date with the same
force and effect as though made as of the Closing Date except as
otherwise contemplated by this Agreement and for any representations
and warranties that speak as of a specific date.
(b) The Seller shall have performed or complied with all
the obligations, agreements and covenants herein contained to be
performed by them prior to or as of the Closing Date.
(c) The Seller shall have delivered to the Buyer the items
set forth in Section 8(a).
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<PAGE>
(d) No action, suit or proceeding by or before any court or
any governmental or regulatory authority shall have been commenced, and
no investigation by any governmental or regulatory authority shall have
been commenced, seeking to restrain, prevent or change the transactions
contemplated hereby or seeking judgments against the Seller awarding
substantial damages which would materially impact the transactions
contemplated hereby.
(e) Buyer and Seller entering into a five (5) year lease
with two (2) four (4) year options relative to Buyers use of that
portion of the building owned by the Seller located at 56 Hudson
Street, Northborough, Massachusetts (the Building) currently occupied
by Sellers operation and storage (the Leased Area) on terms reasonably
acceptable to Buyer, which lease shall contain the following terms and
conditions:
(i) The annual rent for the Leased Area during the
first year of the lease shall be $66,836.00. The rent shall increase
each year by a factor of not more than two (2%) percent of the
previous years rent;
(ii) The Seller shall be responsible for the payment of
the cost of heat and electrical service to the Leased Area so long as
the business conducted is substantially similar to the business
presently operated by the Seller;
(iii) The Buyer shall be responsible for and shall pay a
pro rata portion (based on square footage) of any increase in real
estate taxes assessed to the property of which the Leased Area is a
part over and above the real estate taxes assessed for fiscal 1998;
(iv) The Buyer shall be provided a right to add
additional area in the Building to the Leased Area (as same becomes
available as the leases for the tenants existing as of the Closing Date
expire or said tenants otherwise vacate the Building) upon the same
terms and conditions (with additional rent based on pro rata square
foot rent) as set forth in the lease between Buyer and Seller;
(v) Buyer, at its cost, shall have the right to make
improvements and alterations to the Leased Area in accordance with all
applicable laws and regulations, including additions to the Building on
land of the Seller, subject to Sellers reasonable review and approval,
as may be deemed necessary by Buyer for the conduct of Buyers business.
(vi) Buyer shall be granted by Seller an option to
purchase the Building and all land associated therewith, together with
an approximately 15,000 square foot parcel of land opposite the
Building and currently used for parking, for a total purchase price of
$500,000.00, plus the unamortized portion of any capital repairs and
improvements made to the building by Seller during the term of the
lease having an original cost of not less than $10,000.00. The
conveyance of the parking area parcel shall be subject to an adequate
right of way to be established by mutual agreement of the parties
adequate to provide Seller access to the remaining land of Seller
northerly of the parking area;
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<PAGE>
(vii) The option to purchase referred to above shall
include the option to purchase the two lots northerly of 56 Hudson
Street, Northborough, Massachusetts, being shown on Northborough
Assessors Map 67 as Lots 17 and 18 (the Lots). In the event Buyer
exercises the option to purchase the Lots, the purchase price shall be
determined by each party obtaining an MAI appraisal of the Lots for the
highest and best permitted use and, provided the appraisals are within
fifteen (15%) percent of each other, the appraisal values shall be
averaged to determine the purchase price. If the appraisals are more
than fifteen (15%) percent apart, the appraisers shall retain a third
appraiser (which cost shall be shared by the Buyer and the Seller) and
the results of the three appraisals will be compared so that the two
appraisals closest in value will be averaged to determine the purchase
price. The option to purchase the Lots may not be exercised without
simultaneously exercising the option contained in Section 14(e)(vi).
(f) Buyer entering into a mutually acceptable non-exclusive
manufacturing/sales agreement for Buyer to market and sell the
Transducer Devices manufactured by Valpey-Fisher, which agreement shall
include discount purchase price from published list price based on
volume and delivery scheduling and pricing on custom designs on terms
equivalent to the most favored offered to any customer; and
(g) Buyer obtaining conventional term financing from a
lending institution in an amount of not less than $1,000,000.00, on
terms and conditions reasonably acceptable to the Buyer.
The Buyer agrees to use its best efforts to cause each of the
conditions set forth in Section 14 to be satisfied on or before August
3, 1998.
15. Indemnification; Survival.
(a) Indemnification by the Buyer. The Buyer shall
indemnify and save harmless the Seller, officers and directors of the
Seller and their respective successors and assigns from, against, for
and in respect of:
(i) any Loss incurred or required to be paid because
of (A) the breach of any representation, warranty, covenant or
agreement of the Buyer in this Agreement or (B) the failure of Buyer to
fulfill any of the Assumed Liabilities.
(ii) any Loss incurred by Seller from the use or
operation of the Purchased Assets from or after the Closing Date,
including, without limitation, any product liability claims arising
from sales after the Closing Date;
(iii) any Litigation Expense incurred or required to be
paid in connection with any matter indemnified against in Section
15(a)(i) or 15(a)(ii) hereof, except for Litigation Expense incurred in
any claim, action, suit or proceeding brought by a party indemnified
under Section 15(a)(i) or 15(a)(ii) hereof seeking indemnification
hereunder in which there is not either a settlement or a final
determination that such indemnified party is entitled to
indemnification hereunder.
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<PAGE>
(b) Indemnification by the Seller. The Seller shall
indemnify and save harmless the Buyer, and its respective successors
and assigns from, against, for and in respect of:
(i) any Loss incurred or required to be paid because
of the breach of any representation, warranty, covenant or agreement of
the Seller in this Agreement.
(ii) any Loss incurred or required to be paid because
of a failure by the Seller to pay, perform or discharge when due any of
its liabilities or Retained Liabilities;
(iii) any Litigation Expense incurred or required to be
paid in connection with any matter indemnified against in Section
15(b)(i) or 15(b)(ii) hereof, except for Litigation Expense incurred in
any claim, action, suit or proceeding brought by a party indemnified
under Section 15(b)(i) or 15(b)(ii) hereof seeking indemnification
hereunder in which there is not either a settlement or a final
determination that such indemnified party is entitled to
indemnification hereunder;
(iv) any Litigation Expense incurred or required to be
paid in connection with any of the litigation described in Exhibit J,
subject to the terms of Exhibit J.
(c) Survival. Except for obligations under Sections
15(a)(i)(B), 15(a)(ii) or 15(b)(ii), the representations, warranties,
covenants and agreements of the parties hereto (including
indemnification obligations of the parties hereunder with respect to
all Losses and Litigation Expense incurred or required to be paid)
shall survive the execution and delivery of this Agreement for a period
of two (2) years.
(d) Notice. The indemnified party shall use its best
efforts to give prompt written notice to the indemnifying party or
parties of any claim or event known to it which does or may give rise
to a claim by the indemnified party against the indemnifying party or
parties based on this Agreement, stating the nature and basis of said
claims or events and the amounts thereof, to the extent known, and the
indemnifying party shall have a reasonable opportunity to contest said
claim at its own expense, with the cooperation of the indemnified
party. Failure to give notice within thirty (30) days shall reduce the
indemnifying party's indemnification obligation to the extent the
defense of such claim is impaired or the amount of damages is
increased.
(e) Limitation of Liability. Notwithstanding the foregoing
provisions of this Section 15, none of Buyer, Principal Stockholders
and any other Person shall be entitled to any relief against Seller
arising from any breach of any of the representations, warranties or
other statements contained in this Agreement or any document
contemplated hereby, and none of such Persons shall be entitled to rely
on any such representation, warranty or other statement, with respect
to any condition, event or omission (i) of which any of the Buyer, the
Principal Stockholders or the other stockholders of the Buyer had
knowledge prior to the Closing Date or (ii) which arose from any
inaccuracy in or omission from the certificate referred to in Section
8(b)(xi) above.
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<PAGE>
(f) Limitations of Indemnification. Notwithstanding any
other provision of this Agreement, (i) neither Buyer nor Seller nor any
other Person may assert any claim for indemnification or any Loss
unless the fact that gives rise to such claim gives rise to Loss in
excess of One Thousand Dollars ($1,000.00) (excluding litigation
expenses and attorneys fees incurred solely for purposes of making a
determination under this clause), and in that event the obligation of
Seller or Buyer or Principal Stockholders together, as the case may be,
shall apply only to the amount of the Loss in excess of One Thousand
Dollars ($1,000.00), (ii) neither the Buyer nor the Seller nor any
other Person may assert any claim for indemnification of any Loss
unless the aggregate amount for which Seller or Buyer or Principal
Stockholders together, as the case may be, would have had an
indemnification obligation under this Agreement (but for the operation
of this clause) exceeds Twenty-Five Thousand Dollars ($25,000.00), and
in that event the obligation of Seller or Buyer or Principal
Stockholders together, as the case may be, shall apply only to the
amount of the Loss in excess of Twenty-Five Thousand Dollars
($25,000.00), and (iii) in no event shall the aggregate amount paid by
Seller to Buyer and any other Person or by Buyer and the Principal
Stockholders to the Seller and any other Person for indemnification of
Losses exceed Six Hundred Thousand Dollars ($600,000.00). The dollar
thresholds set forth in this subsection have been negotiated for the
special purpose of the provisions to which they relate and are not to
be taken as evidence of the level of materiality for purpose of any
other provisions of this Agreement or any statutory or any other law
that may be applicable to the transactions contemplated by this
Agreement under which a level of materiality might be an issue. The
limitations contained in the Section 15(f) shall not apply to any
indemnification obligation arising pursuant to Section 15(a)(i)(B),
15(a)(ii) or 15(b)(ii).
(g) Setoff. If at any time the Seller has an
indemnification obligation under this Section 15, the Seller may, at
its option, setoff and apply such obligation to reduce the amount due
to the Seller under the Note.
(h) Exclusive Remedy. The indemnification provisions set
forth in this Section 15 shall constitute the exclusive remedy for
Seller, Buyer, Principal Stockholders, and the other Persons entitled
to indemnification hereunder for any alleged breach or default by any
party to this Agreement under this Agreement or in connection with or
relating to the transactions contemplated by this Agreement except for
(i) claims based upon fraud or willful misconduct and (ii) claims for
specific performance.
16. Termination. Notwithstanding anything to the contrary
herein, this Agreement may be terminated and the transactions
contemplated hereby may be abandoned prior to closing:
(a) by the mutual consent of the Seller and the Buyer at
any time prior to the Closing Date;
(b) by the Buyer if there exists a material breach of any
representation, warranty, covenant or agreement made to the Buyer under
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this Agreement (which breach is not cured upon 15 days written notice)
or if any condition to the obligations of the Buyer hereunder becomes
impossible to fulfill in any material way and is not waived by Buyer;
(c) by the Buyer if the due diligence performed by the
Buyer discloses, in the exercise of the Buyers reasonable discretion,
that the condition of the Seller is materially different than
represented in the Financial Statements.
(d) by the Seller if any condition of the obligations of
the Seller hereunder becomes impossible to fulfill in any material way
and same is not waived by the Seller;
(e) by the Seller if there exists a material breach of any
representation, warranty, covenant or agreement made to the Seller
(which breach is not cured upon 15 days written notice);
(f) by either Seller or Buyer if the Closing has not
occurred by August 3, 1998.
17. Amendments; Waivers, etc. This Agreement may be amended,
modified and supplemented only by written agreement of the parties
hereto.
18. Expenses. Except as otherwise provided in this Section 18
or elsewhere in this Agreement, each party hereto shall bear all of its
own expenses, including, without limitation, the fees and disbursements
of its counsel.
19. Notices, etc. All notices, consents, demands, requests,
approvals and other communications which are required or may be given
hereunder shall be in writing and shall be deemed to have been duly
given (a) when delivered personally, (b) if sent by facsimile, when
receipt thereof is acknowledged at the facsimile number below, (c) the
second day following the day on which the same has been delivered
prepaid to a national air courier service, or (d) three business days
following deposit in the mails registered or certified, postage
prepaid, in each case, addressed as follows:
if to the Seller: MATEC Corporation
75 South Street
Hopkinton, MA 01748
Attention: Michael J. Kroll
Fax: (508) 435-4496
with a copy to: Mirick, O'Connell, DeMallie & Lougee, LLP
1700 BankBoston Tower
100 Front Street
Worcester, MA 01608
Attention: David L. Lougee, Esq.
Fax: (508) 791-8502
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<PAGE>
if to the Buyer: Northboro Acquisition Corp.
56 Hudson Street
Northboro, Massachusetts 01532
Attention: Kenneth C. Bishop
Fax:
with a copy to: Fletcher, Tilton and Whipple, P.C.
The Guaranty Building
370 Main Street, 12th Floor
Worcester, Massachusetts 01608-1771
Attention: Mark L. Donahue, Esq.
Fax: (508) 791-1201
or to such other Person or Persons at such address or addresses as may
be designated by written notice hereunder.
20. Assignment. No party may assign or convey this Agreement
or any of their respective rights or obligations hereunder to any other
party.
21. Applicable Law. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the
Commonwealth of Massachusetts without giving effect to conflict of laws
principles thereof.
22. Entire Agreement. This Agreement and all Exhibits and
Schedules hereto embody the entire agreement and understanding of the
parties hereto and supersede any prior agreement or understanding
between the parties.
23. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.
24. Headings. Headings of the Sections in this Agreement are
for reference purposes only and shall not be deemed to have any
substantive effect.
25. Binding Effect. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs,
administrators, executors, successors and assigns to the extent
permitted; provided, however, that nothing in this Agreement, expressed
or implied, is intended to confer on any Person other than the parties
hereto or their respective authorized successors and assigns, any
rights and remedies, obligations or liabilities under or by reason of
this Agreement.
26. Post-Closing Covenants. From and after the Closing Date,
the Buyer shall afford the Seller and its representatives access to the
records of the Seller purchased by the Buyer during normal business
hours to the extent reasonably requested by the Seller. Buyer shall
make available the business records of the Seller being purchased for
the purposes of any tax audits of the Commonwealth of Massachusetts or
the Internal Revenue Service. From and after the Closing Date, the
Buyer shall make available Gene Murray (to the extent employed by the
Buyer) for the purposes of assisting the Seller in tax audits scheduled
in 1998.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.
SELLER:
MATEC INSTRUMENTS, INC.
By:
Ted Valpey, Chairman
MATEC APPLIED SCIENCES, INC.
By:
Ted Valpey, Chairman
BUYER:
NORTHBORO ACQUISITION CORP.
By:
Kenneth C. Bishop, President
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<PAGE>
<PAGE>
The exhibits to the Asset Purchase Agreement are not included
herewith. Registrant hereby undertakes and agrees to furnish a copy of
each such exhibit to the Securities and Exchange Commission upon
request.
<PAGE>
MATEC Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
(In thousands, except share data) (Unaudited)
7/5/98 12/31/97(a)
-------- --------
ASSETS
Current assets:
Cash and cash equivalents ............................ $ 4,254 $ 885
Receivables, less allowances of $60 and $45 .......... 2,028 1,921
Inventories .......................................... 3,168 2,598
Deferred income taxes and other current assets ....... 1,342 873
------- -------
Total current assets ............................... 10,792 6,277
------- -------
Property, plant and equipment, at cost ................. 7,375 10,583
Less accumulated depreciation ........................ 5,029 6,806
------- -------
2,346 3,777
------- -------
Marketable equity securities ........................... 3,946 4,658
Net assets of discontinued operations .................. 914 7,144
Other assets ........................................... 79 70
------- -------
$18,077 $21,926
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ..................................... $ 889 $ 933
Accrued liabilities .................................. 1,615 862
Income taxes ......................................... 1,077 416
------- -------
Total current liabilities .......................... 3,581 2,211
------- -------
Deferred income taxes .................................. 1,832 2,317
Long-term debt ......................................... 1,991 1,989
Stockholders' equity:
Preferred stock, $1.00 par value-
Authorized 1,000,000 shares; issued none ............ - -
Common stock, $.05 par value-
Authorized 10,000,000 shares; Issued 2,716,948 and
3,804,195 shares ................................... 136 190
Capital surplus ...................................... 5,513 6,443
Retained earnings .................................... 2,755 11,443
Net unrealized gain on marketable equity securities .. 2,269 2,696
Treasury stock at cost, 0 and 1,070,544 shares ....... - (5,363)
------- -------
Total stockholders' equity ...................... 10,673 15,409
------- -------
$18,077 $21,926
======= =======
(a) Restated to reflect discontinued operations.
See notes to consolidated condensed financial statements.
<PAGE>
MATEC Corporation and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data) (Unaudited)
Three Months Ended Six Months Ended
7/5/98 6/29/97(a) 7/5/98 6/29/97(a)
------- ------- -------- --------
Net sales ..................... $ 3,397 $ 3,230 $ 6,896 $ 6,173
Costs and expenses:
Cost of sales ................ 2,583 2,451 5,267 4,755
Selling and administrative .. 751 732 1,514 1,420
------- ------- ------- -------
3,334 3,183 6,781 6,175
Operating profit .............. 63 47 115 (2)
Other income (expense):
Interest expense ............. (50) (57) (102) (112)
Gain on sale of property, plant
and equipment ............... - 386 -
Other, net ................... 42 15 55 3
------- ------- ------- -------
(8) (42) 339 (109)
Earnings (loss) from continuing
operations before income taxes 55 5 454 (111)
Income tax (expense) benefit .. (22) (2) (182) 44
------- ------- ------- -------
Earnings (loss) from continuing
operations ................... 33 3 272 (67)
Discontinued operations, net of
taxes:
Earnings from operations .... 9 38 111 90
Gain on sale ................ 198 - 198 -
------- ------- ------- -------
Net earnings .................. $ 240 $ 41 $ 581 $ 23
======= ======= ======= =======
Earnings (loss) per share:
Basic:
Continuing operations ....... $ .02 $ .00 $ .10 $(.02)
Discontinued operations:
Operations, net of taxes ... .00 .02 .04 .03
Gain on sale, net of taxes . .07 .00 .07 .00
----- ----- ----- -----
$ .09 $ .02 $ .21 $ .01
===== ===== ===== =====
Diluted:
Continuing operations ....... $ .02 $ .00 $ .10 $(.02)
Discontinued operations:
Operations, net of taxes ... .00 .01 .04 .03
Gain on sale, net of taxes . .07 .00 .07 .00
----- ----- ----- -----
$ .09 $ .01 $ .21 $ .01
===== ===== ===== =====
Weighted average shares:
Basic ....................... 2,747 2,734 2,740 2,741
Diluted ..................... 2,748 2,771 2,741 2,741
Cash dividends per share ...... $1.75 $ - $1.75 $ -
===== ===== ===== =====
(a) Restated to reflect discontinued operations.
See notes to consolidated condensed financial statements.
<PAGE>
MATEC Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
7/5/98 6/29/97(a)
-------- --------
Cash flows from operating activities:
Net earnings (loss) from continuing operations ... $ 272 $ (67)
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization .................. 268 283
Deferred income taxes .......................... (200) (20)
Gain on sale of property, plant and equipment .. (386) -
Other .......................................... 2 2
Changes in operating assets and liabilities .... (70) (276)
------- -------
Net cash (used) by operating activities (114) (78)
- ----------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 1,862 -
Capital expenditures, net ........................ (314) (201)
Other, net........................................ (8) (2)
------- -------
Net cash provided (used) by investing activities 1,540 (203)
- ----------------------------------------------------------------------
Cash flows from financing activities:
Dividend paid .................................... (4,827) -
Net (repayments) under lines of credit ........... - (400)
Purchases of common stock ........................ (164) (80)
Stock options exercised .......................... 101 -
------- -------
Net cash (used) by financing activities ........... (4,890) (480)
- ----------------------------------------------------------------------
Net cash provided by discontinued operations ...... 6,833 986
- ----------------------------------------------------------------------
Net increase in cash and cash equivalents ......... 3,369 225
Cash and cash equivalents:
Beginning of period .............................. 885 610
------- -------
End of period .................................... $ 4,254 $ 835
======= =======
Non-cash investing and financing activities:
During 1998, the Company retired all of its treasury stock. The
total cost of the treasury shares of $5,527,000 reduced common stock,
capital surplus and retained earnings by $56,000, $1,028,000 and
$4,443,000, respectively.
(a) Restated to reflect discontinued operations.
See notes to consolidated condensed financial statements.
<PAGE>
MATEC Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)
Three Months Ended
7/5/98 6/29/97
------- -------
Net earnings ................................. $ 240 $ 41
Other comprehensive income, net of tax:
Unrealized gain (loss) on marketable
equity securities, net of tax benefit
of $77 in 1998 and tax expense of $130
in 1997 ..................................... (116) 194
------- -------
Comprehensive income ......................... $ 124 $ 235
======= ========
Six Months Ended
7/5/98 6/29/97
------- -------
Net earnings ................................ $ 581 $ 23
Other comprehensive income, net of tax:
Unrealized gain (loss) on marketable
equity securities, net of tax benefit
of $284 in 1998 and tax expense of $78
in 1997 .................................... (427) 116
------- -------
Comprehensive income ........................ $ 154 $ 139
======= =======
See notes to consolidated condensed financial statements.
<PAGE>
MATEC Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
1. Financial Presentation:
The interim financial statements are unaudited but, in the opinion of
management, reflect all adjustments necessary for fair presentation of
results for such periods. The results of operations for any interim
period are not necessarily indicative of results for the full year.
The accounting policies followed by the Company are set forth
in Note 1 to the Company's financial statements in the 1997 MATEC
Corporation and Subsidiaries Annual Report which is incorporated by
reference in Form 10-K for the year ended December 31, 1997.
2. Description of Business:
As described below, the Company has disposed of its Steel Cable and
Instruments business segments. As a result, the Company's current
remaining business is conducted through its Valpey-Fisher subsidiary.
This operation was previously reported in the Electronics business
segment.
3. Inventories:
Inventories consist of the following (in thousands):
7/5/98 12/31/97
------- --------
Raw materials ....................... $ 1,472 $ 800
Work in process ..................... 949 1,078
Finished goods ...................... 747 720
------- -------
$ 3,168 $ 2,598
======= =======
4. Discontinued Operations:
On April 15, 1998, the Company sold all of the assets of its Bergen
Cable Technologies, Inc. ("Bergen") subsidiary. The purchase price
received consisted of $7.5 million in cash, a subordinated promissory
note in the principal amount of $1,250,000, a 10% stock and membership
interest in the acquiring entities, and assumption of certain liabilities
including trade payables. The gain on the sale was $198,000 after a tax
provision of $132,000.
Since the acquiring entity has significant third-party debt compared
to its equity and the Company's note is subordinated to the third party
debt, the Company will not record any gain realized on the note and stock
portions of the sale until cash payments are received by the Company.
<PAGE>
The operating results of Bergen have been reported as discontinued
operations, and previously reported financial statements have been
restated to reflect this classification. The operating results of Bergen
are presented in the Consolidated Statements of Operations under the
caption "Discontinued operations, net of taxes: Earnings (loss) from
operations" and include (in thousands):
Three Months Ended Six Months Ended
7/5/98 6/29/97 7/5/98 6/29/97
------- ------- ------- -------
Net sales $ 260 $ 3,633 $ 4,411 $ 7,322
Earnings (loss) before
income taxes (86) 17 (15) 129
Income tax (expense) benefit 34 (7) 6 (52)
Net earnings (loss) (52) 10 (9) 77
At December 31, 1997, the net assets of Bergen included in the
Balance Sheet caption "Net assets of discontinued operations" were (in
thousands): Current assets - $5,008; property, plant and equipment, net -
$2,407; and current liabilities - $1,753.
See footnote 7. Subsequent Events.
5. Stockholders' Equity:
On July 2, 1998, the Company reincorporated in Maryland. In
connection with the reincorporation, stockholders who owned less than 100
shares of Common Stock on July 2, 1998 ceased to be stockholders and
received cash of $4.03 per share ("the Cash Out"). The reincorporation
and Cash Out were approved by stockholders at the Company's Special in
Lieu of Annual Meeting held on June 18, 1998.
As a result of the Cash Out, the Company acquired 35,705 shares of
Common Stock at a cost of $143,891. In connection with the
reincorporation, the 1,111,947 shares of treasury stock held by the
Company on July 2, 1998, which included the 35,705 shares of common stock
acquired as a result of the Cash Out, were retired and were reclassified
as reductions to common stock issued. The total cost of the treasury
shares of $5,526,880 reduced common stock, capital surplus, and retained
earnings by $55,597, $1,028,551 and $4,442,732, respectively.
6. New Accounting Standards:
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income" during the first
quarter of 1998, as required. SFAS 130 establishes standards for
reporting and displaying comprehensive income and its components in a set
of financial statements. The adoption of SFAS 130 had no impact on the
Company's net earnings or stockholders' equity.
Comprehensive income is defined as the change in equity of a
business enterprise during a period from transactions and other events
and circumstances from nonowner sources. Presently, the only component
of comprehensive income for the Company is unrealized holding gains
(losses) on available for sale marketable equity securities.
The Company is evaluating its segment disclosures and will adopt
SFAS No. 131, "Disclosures about Segments of an Enterprise and related
Information" in the 1998 fourth quarter as required.
<PAGE>
7. Subsequent Event:
On August 3, 1998, the Company sold certain assets of its Matec
Instruments, Inc. ("MII") and Matec Applied Sciences, Inc. ("MASI")
subsidiaries to a newly formed corporation. Ken Bishop, who was
President of MII and MASI until August 3, 1998, owns 53% of the newly
formed corporation. MII and MASI had comprised the Company's Instruments
Segment of business.
The purchase price received consisted of approximately $847,000 in
cash, a subordinated promissory note in the principal amount of $250,000,
a $250,000 guaranteed royalty with payments based on 1.5% of future
sales, and the assumption of certain liabilities including trade
payables. The cash amount is subject to closing adjustments. In
addition, the buyer has entered into a 5 year lease agreement with the
Company to lease the space that it currently occupies and the buyer also
has a 5 year option to purchase the real estate that includes the leased
space. The Company will report an after-tax gain of approximately
$240,000 or $.09 per share in the third quarter of 1998.
As a result, the operating results of MII and MASI have been reported
as discontinued operations, and previously reported financial statements
have been restated to reflect this sale. The operating results of MII
and MASI are presented in the Consolidated Statements of Operations under
the caption "Discontinued operations, net of taxes: Earnings (loss) from
operations" and include (in thousands):
Three Months Ended Six Months Ended
7/5/98 6/29/97 7/5/98 6/29/97
------- ------- ------- -------
Net sales $ 1,263 $ 682 $ 2,337 $ 1,495
Earnings (loss) before
income taxes 100 47 199 20
Income tax (expense) benefit (39) (19) (79) (8)
Net earnings (loss) 61 28 120 12
Net assets of MII and MASI presented in the Consolidated Condensed
Balance Sheets under the caption "Net assets of discontinued operations"
include (in thousands):
7/5/98 12/31/97
------- --------
Current assets $ 1,421 $ 1,922
Property, plant and equipment, net 107 132
Current liabilities 614 572
------- -------
$ 914 $ 1,482
======= =======
<PAGE>
<PAGE>
