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United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 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):
November 6, 1996 (October 18, 1996)
ENVIROMETRICS, INC.
Delaware 0-23892 57-0941152
(State or other (Commission File IRS Employer
jurisdiction of No.) ID No.)
incorporation)
9229 University Boulevard Charleston, SC 29406
(Address of principal executive offices)
(803) 553-9456
Registrant's telephone no., including area code
4055 Faber Place Drive, Suite 201, Charleston, SC 29405
(Former name or former address, if changed since last report)
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Item 5. Other Events.
See the following press release, dated October 18, 1996, announcing certain
merger discussions currently taking place within the Company.
Public Relations Contact:
Ms. Sue Ivey
Phone: 803. 553.9456
ENVIROMETRICS, Inc.
ANNOUNCES MERGER DISCUSSIONS
Charleston, South Carolina
For Immediate Release Friday, October 18, 1996
Envirometrics, Inc. (NASDAQ:EVRM) today announced that a Letter of Intent
has been executed with Intellisource, Inc. to acquire 100% of the outstanding
stock of Employee Management Solutions, Inc. (EMS), a wholly owned subsidiary
of Intellisource, Inc., an OSG, Inc. Company. In a related transaction,
EVRM has entered into a letter of intent to acquire substantially all of the
assets and certain liabilities of Employee Resource Management, Inc. (ERM),
a South Carolina corporation. ERM is a Professional Employer Organization
(PEO)/Administrative Employer Group (AEG) that provides human resource
outsourcing to a variety of businesses across a broad base of industries.
EVRM is also expected to execute a multi-year contract with Intellisource to
provide support for its information systems, including financial, marketing,
sales and service support. Intellisource is a Safeguard Scientifics, Inc.
(NYSE:SFE) affiliated company that provides full outsourcing services from
advisory help to turnkey solutions, enabling customers to gain the benefits
of reengineering support tasks while freeing resources for core competitive
activities.
EVRM will create a comprehensive array of outsourcing support services that
includes employee benefits, environmental compliance services, safety and
health technical services, and the complete management and administration of
"back office" and human resource services. This transaction will allow EVRM
to capitalize on the rapidly growing outsourcing market and will create one
of the few publicly traded PEO/AEG's in the United States.
The transaction will be accomplished through an exchange of stock and is
subject to approval of the companies' Boards of Directors. Annual gross
revenues of the combined companies are estimated to be in excess of $40
million for 1996.
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Envirometrics, Inc., headquartered in Charleston, South Carolina, is a
Delaware holding company and is the only publicly traded environmental
health and safety company in South Carolina. It recently announced the
initiation of The PointSource Program, a new strategic alliance program
designed exclusively for a selective group of environmental and occupational
health firms. The PointSource Program enables participants to share in the
equity growth of Envirometrics, Inc. by earning five year stock options.
These options are earned by the participant purchasing services and products
through the company's subsidiary operations. The PointSource Program will
be provided to the PEO/AEG clients after the acquisition is complete.
Employee Management Solutions, Inc. is a wholly owned subsidiary of
Intellisource, Inc., which is headquartered in Fairfield, Connecticut with
offices in Atlanta, Georgia, Houston, Texas, and Charleston, South Carolina.
Intellisource is a Safeguard Scientifics, Inc. company. Safeguard has
revenues of approximately $1.5 billion per year, is headquartered in Wayne,
Pennsylvania, and is a unique partnership of entrepreneurial companies
focused on improving business productivity.
Safeguard has previously brought emerging companies to market through rights
offerings to Safeguard shareholders. Past Safeguard rights offerings
include Novell, Inc., CompuCom Systems, Inc., Cambridge Technology Partners
(Massachusetts), Inc., Coherent Communications systems corporation, USDATA
Corporation and, most recently, Integrated Systems Consulting Group, Inc.
ERM Inc., a PEO/AEG with corporate headquarters located in Charleston, South
Carolina, has approximately 1800 employees under employment in twelve states.
ERM was established in 1990 with revenues of less than $300,000. In 1996
revenues are expected to be in excess of $30 million. ERM was 1994
Entrepreneur of the Year in South Carolina in the emergent growth category
and recognized by the United States Chamber of Commerce as a South Carolina
Blue Chip Enterprise for 1995. ERM is a member of both the National
Association of Professional Employer Organizations (NAPEO) and the National
Association of Alternative Staffing (NAAS).
ERM, as a PEO/AEG, is an organization that provides an integrated and cost
effective approach to the management of critical human resource
responsibilities and employer risks for its clients. ERM delivers these
services by establishing and maintaining an employer relationship with the
workers assigned to clients and by contractually assuming substantial
employer responsibilities and risks from clients. Because ERM has a large
number of employees, its economies of scale generally allow it to provide
most human resources at costs equal to or lower than it s customers' costs,
and with superior quality. Economies are especially pronounced for
customers with fewer than 200 employees.
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Item 7 - Financial Statements and Exhibits
(a) Financial Statements
None.
(b) Exhibits
The following exhibits are filed as part of this Form 8-K:
1. Letter of Intent from Employee Resource Management, Inc. dated September
12, 1996
2. Letter of Intent from Intellisource, Inc. dated October 15, 1996
SIGNATURES
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 hereto duly authorized.
ENVIROMETRICS, INC.
(Registrant)
Dated: November 5, 1996
By: /s/Richard D. Bennett
Richard D. Bennett
President and CEO
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September 12, 1996
Mr. Robert L. Berman, President
Employee Resource Management, Inc.
PO Box 32338
Charleston, SC 29417-2338
RE: Purchase of Selected Assets of Employee Resource Management, Inc.
(the "Company").
Dear Sirs:
This letter will serve to reflect the substance of our mutual intention at
this time pursuant to which Envirometrics, Inc., a Delaware corporation, or
its newly formed acquisition subsidiary (collectively referred to as the
"Buyer"), shall acquire from Employee Resource Management, Inc., a South
Carolina corporation (the "Seller"), certain selected assets of the Seller
used in connection with the Seller's business as an employee leasing company
("the Business"), and the assumption by Buyer of certain identified liabilities
he transaction will require further documentation and approvals, including the
preparation and execution of a formal agreement setting forth the terms and
conditions of the proposed purchase. Nevertheless, the parties hereto have
executed this letter to evidence their mutual intention to proceed in good
faith to complete work required to negotiate the terms of a purchase
agreement consistent with this letter.
The proposed terms and conditions include, but are not limited to, the
following:
1. ASSETS AND LIABILITIES. Buyer will purchase from Seller, certain
selected assets, tangible and intangible, owned or used by the Seller and
related to the Business of Seller (the "Assets"). The liabilities assumed
by Buyer will include all of the scheduled liabilities related to the
operation of the Business, but shall specifically not include the following
(the "Excluded Claims"): any liability related to workmens' compensation
liability insurance claims made by Liberty Mutual Insurance Company agains
o the operation of the Business by Seller prior to consummation of the
transaction outlined herein (the "Acquisition") or any civil or criminal
liabilities of current or past employees, principals, or agents of the Seller.
2. CONSIDERATION.
(a) Fixed Consideration. At closing, the Buyer shall deliver to Seller an
aggregate number of shares of common stock, $0.001 par value (the "Common
Stock") of Envirometrics, Inc. (the "Fixed Consideration"). The number of
shares relating to the Fixed Consideration shall be derived from, but not
limited to, the following determinants:
(i) Relative valuations of the Seller and the Buyer.
(ii) Preservation of the Seller's tax loss carry forward.
(iii) Change of control considerations.
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(b) Contingent Consideration. It is agreed and acknowledged that on
or prior to the consummation of the Acquisition, Buyer intends to organize a
wholly-owned subsidiary (the "Company") that will be the actual purchaser of
the Assets from Seller, and which shall assume the liabilities of the Seller
under the terms hereof. In addition to the Fixed Consideration, additional
consideration (the "Contingent Consideration") in the form of additional
shares or warrants for Common Stock shall be earned by the Seller or by the
Affiliatees (as hereinafter defined) based upon a mutually acceptable earn
out program over a three year period or the extinction of the tax loss
carry forward, which ever is earlier.
(c ) Buyer shall reserve for issuance in its treasury all of the Contingent
Consideration.
3. PURCHASE AGREEMENT. The transaction contemplated by the Acquisition will
be subject to the negotiation and execution of a definitive asset purchase
agreement (the "Purchase Agreement") with terms satisfactory to Seller and
Buyer. The Purchase Agreement will contain representations, warranties,
covenants, conditions, and indemnification provisions customary in
transactions of this type and size. The parties will use their best efforts
to finalize the Purchase Agreement expeditiously and to conclude the Closing
no later than December 31, 1996.
4. ACCESS. To permit Buyer to conduct its due diligence investigation,
Seller will permit Buyer and its agents to have reasonable access to the
premises in which the Seller conducts its business, to all of its books,
records and personnel files, to its financial statements (both those
prepared by outside accountants and auditors and those internally generated)
to its tax returns, and to its consultants and professionals (e.g., auditors
and attorneys). Seller will also furnish to Buyer such financial data,
operating data, and other information as Buyer shall reasonably request. Buyer
does hereby agree to provide to Seller equivalent access to Buyer's operating
financial and other information, and to its consultants and professionals, for
the same purposes. Buyer and Seller agree to retain all information so
obtained from the other in confidence. In the event that the Purchase
Agreement is not consummated for any reason, each of the parties hereto shall
return promptly to the other all documents or copies received by it in
connection with the proposed transaction (except such documents as shall be
necessary either Seller nor Buyer shall disclose to any third party (except
as required by law, including federal and state securities laws and
regulations in the reasonable opinion of counsel to Buyer or Seller), either
the substance of this letter of intent for discussion or any information
concerning the transactions preceding or contemplated by this letter of intent.
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5. INDEMNIFICATION. The Purchase Agreement will contain an indemnity
provision mutually agreeable to the parties pursuant to which Seller and
Messrs. Robert L. Berman and William E. King, III, Robert T. Rand and Ms.
Kelli C. Yountz, its principal stockholders (the "Affiliates"), will
indemnify and hold Buyer and its affiliates harmless from any and all
expenses or damages arising in connection with a breach of any
representation, warranty or covenant of Seller contained in the Purchase
Agreement or otherwise in connection with the operation of the Business by
the Seller prior to the consumamtion of the Acquisition (the "Closing") in
violation of the terms of the Purchase Agreement (including the
representations, warranties, agreements and covenants contained therein.
Specifically, Seller and the Affiliates shall indemnify Buyer against any
liability or expenses related to liabilities of Seller that are not
specifically assumed by the Company under the terms of the Purchase
Agreement. The indemnification obligations of seller and the Affiliates
shall be secured, in part, by means of placing the Fixed Consideration
and/or the Contingent Consideration, if any issued or which may be issued
to Seller in escrow, to be held by Ten State Street, L.L.P., during a
negotiated survival period of Seller's representations to Buyer under the
terms of the Purchase Agreement. The escrow arrangement referred to herein
shall be subject to the terms of an Escrow Agreement to be executed at the
Closing. A similar indemnification agreeable to seller shall be negotiated
and given to seller by buyer at closing.
6. CONDITIONS TO CLOSING. Buyer's and Seller's obligations to consummate
the transactions contemplated by this letter of intent will be subject to
certain conditions, including but not limited to the following:
(a) Buyer and Seller shall have completed a due diligence review of the
Business and of the Seller and its affiliates (including the Affiliates)
satisfactory to Buyer in its sole discretion, including satisfactory analysis
of any Liberty Mutual Insurance workmens' compensation claims, or any civil
or criminal liabilities of current or past employees, principals, or Agents
of the Seller.
(b) All required filings with or approvals, consents, and authorization of
local, municipal, state and federal regulatory authorities to permit the
Closing, in form satisfactory to Buyer and Seller, shall have been received,
including any filings, qualifications or registrations under applicable
federal and state securities laws;
(c) All required consents of any other third parties to permit the Closing,
in form satisfactory to Buyer, shall have been received;
(d) Buyer shall receive all audited financial statements with respect to
Seller, its predecessors and affiliates, as in the opinion of counsel to and
auditors for Buyer, shall be necessary for Buyer to meet its obligations
under the Securities Exchange Act of 1934, as amended, including Regulation
S-X as promulgated thereunder by the Securities and Exchange Commission;
(e) No material adverse change, except for subsequently disclosed changes
otherwise reported, shall have occurred since December 31, 1995, based upon
Buyer's and Seller's audited December 31, 1995 financial statements
previously delivered to each other (the "Audited Financial Statements") in
the financial condition of Seller or the Business, as determined by Buyer or
Seller in their respective discretion;
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(f) No undisclosed material litigation, environmental or product liability
condition or issue concerning the Businesses not disclosed in the Audited
Financial Statements, and which could materially adversely affect the
Businesses and their future prospects for success shall be pending or
threatened, or shall have occurred, on or prior to the Closing;
(g) Buyer and Seller shall have concluded satisfactory negotiations with
certain current employees of each, and effective on the date of Closing
Buyer and Seller shall have entered into agreements to hire all those
employees each shall have a desire to hire;
(h) Buyer shall have entered into Consulting and Non-Competition agreements
with each of Seller, Robert L. Berman, William E. King, III, Robert T. Rand
and Kelli C. Yountz, and an Escrow and Voting Trust Agreement with respect
to indemnification of Buyer under the terms of the Purchase Agreement, on
terms satisfactory to Buyer. Seller shall have entered into similar
agreements with certain employees of Buyer;
(i) Approval and authorization of the Acquisition by the stockholders and
Boards of Directors of each of Buyer and Seller, to the extent deemed
necessary by counsel to Buyer or Seller; and
(j) No previously undisclosed pending loss of Buyer's or Seller's material
customers shall occur or be discovered by Buyer or Seller on or prior to the
Closing.
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7. NEWS RELEASE. Neither Seller nor Buyer will issue or approve a news
release or other announcement concerning the Acquisition without the prior
approval of the other as to the contents of the announcement and its
release, which approval will not be unreasonably withheld; provided, (i)
that to the extent that Buyer's counsel deems it necessary to comply with
federal and state securities laws that Buyer or its affiliates issue a press
release with respect to the Acquisition in advance of Seller's approval, Buyer
shall be entitled to do so and shall give Seller notice of such release prior
to issuance of the release by Buyer; (ii) Seller understands and agrees that
Buyer will provide a copy of this letter to NASDAQ, together with commentary
about the terms thereof, in connection with Buyer's listing on NASDAQ; and
(iii) to the extent that Seller has advance knowledge of any news release by
Buyer or its affiliates, Seller shall hold the contents thereof strictly
confidential until it has been generally released to the public.
8. NEGOTIATIONS WITH OTHERS. Unless Buyer and Seller agree earlier to
abandon the Acquisition or to allow third party discussions but not closings,
until the earlier of November 15, 1996 or the Closing: (i) Neither Seller
nor Buyer will offer the Business or any part thereof for sale to any third
party, will not negotiate for the sale of the Business or any part thereof;
and (ii) Buyer will not negotiate for its purchase of a business or
substantially all of the operating assets of a business. In the event that
Buyer or Seller or any of tits affiliates (including but not limited to the
Affiliates) or representatives is in breach of this Section 8, and either (i)
a definitive purchse agreement with respect to the Acquisition is not
executed on or before November 15, 1996, or (ii) the Closing does not occur on
or before December 31, 1996, for whatever reason, if the Business or any part
thereof is sold, or an agreement to sell the Business or any part thereof is
executed by Seller (as specificaly prohibited by this Section), to or with
any person other than Buyer or its designee prior to December 31, 1996, then
Seller, and each of the Affiliates, jointly and severally, shall be obligated
to pay to Buyer in cash a dollar amount equal to all of the Buyer's actual
expenses incurred in connection with the negotiation and preparation of this
letter of intent and the Purchase Agreement (including costs and expenses of
performing its due diligence investigation of the Business, the Seller and
the Affiliates, and the preparation of any financial statements and the
rendering of any audit reports thereon by McGladrey & Pullen, LLP (or other
firm of certified public accountants) as shall be deemed necessary by
Buyer in order to consumamte and meet regulatory requirements with respect to
the transactions contemplated hereby), up to a maximum of $50,000. If Buyer
similarly executes a purchase for sale as specifically probibited by this
Section, it is similarly obligated to pay Seller its expenses up to a maximum
of $50,000.
9. DUE DILIGENCE EXPENSES. To defray, in part, the reasonable, actual
costs and expenses of Buyer's and Seller's due diligence investigations (the
"Diligence Expenses"), Buyer and Seller each agree to contribute $12,500
prior to 5 P.M. on October 4, 1996 to the escrow account at Ten State Street
from which expenses shall be paid for investigation of the Excluded Claims
and other mutually agreed due diligence costs and costs mandated by this
agreement including and required audit of Seller and/or Buyer. Escrow funds
up to $2,000 from Seller will first be applied to cover investigation of the
Excluded Claims and Seller has the right to approve any additional expenditures
regarding the Excluded Claims. Remaining funds, if any, shall be returned to
the respective parties following closing or abandonment of the acquisition.
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10. CONDUCT OF BUSINESS; INTERIM OPERATION. Until November 15, 1996, or
for such longer period of time as the Buyer and Seller shall mutually agree in
writing is necessary to prepare, negotiate and conclude the Purchase
Agreement, Seller will use its best efforts to conduct its business in a
reasonable and prudent manner in accordance with past practices, preserve
its existing business organizations and relationships with its employees,
customers, suppliers, and others with whom it has a business relationship;
preserve and protect its properties; and conduct its business in compliance
with all applicable laws and regulations, and not undertake any transactions
outside the ordinary course of business, such as major purchases, the
acceptance of major orders or price or salary adjustments, without Buyers
prior written consent, which shall not be unreasonably withheld.
11. CLOSING DATE. The closing date under the Purchase Agreement will be
November 30, 1996, or such other date as maybe agreed upon by both parties.
12. BROKERS' FEES. Neither Seller nor Buyer has entered into arrangements
with any broker, finder, or investment banker that will result in payment of a
fee in connection with this transaction.
13. EXPENSES. Each party will pay its own expenses incurred in this
transaction, whether or not the purchase of the Business is consummated,
including attorneys' and accountants' fees, except as defined in paragraphs 8
and 9 above.
14. SCOPE. This is a letter of intent only and is non-binding to either
party. It is not intended to be a final, definitive agreement except with
respect to Sections 4, 7, 8 and 9, of this letter of intent which are binding
upon the parties hereto and will survive execution of the definitive Purchase
agreement unless otherwise agreed to by both parties hereto.
15. COUNTERPARTS. This letter may be executed in counterparts which, when
viewed together, shall constitute a single original document.
If this letter sets forth your intent to proceed in good faith substantially
in the manner outlined herein, please sign a copy of this letter and return
it to me.
Very truly yours,
ENVIROMETRICS, INC.
(a Delaware Corporation)
By: ___________________________
Richard D. Bennett
President and Chief
Executive Officer
ACCEPTED AND AGREED:
EMPLOYEE RESOURCE MANAGEMENT, INC.
By: _______________________________
Robert L. Berman, President
Date: _________________
AFFILIATES:
Robert L. Berman
Robert T. Rand
William E. King, III
Kelli C. Yountz
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October 15, 1996
Mr. Charles H. Gibbons
President and CEO
Intellisource, Inc.
55 Walls Drive
Fairfield, CT 06430
Dear Mr. Gibbons:
This letter serves to express the intent of Envirometrics, Inc. to purchase
100% of the outstanding shares of common stock of Employee Management
Solutions, Inc., (EMS) a wholly owned subsidiary of Intellisource, Inc. for
cash.
It is the further intention of Envirometrics, Inc. to complete an agreement
with Employee Resource Management, Inc. (ERM), a Professional Employee
Organization, (PEO) for the purchase of certain assets and liabilities and to
transfer these certain assets and liabilities of the PEO line of business
into EMS. Completion of a definitive agreement with Intellisource is
contingent upon completion of an agreement with ERM to purchase certain
assets and liabilities and is also contingent upon execution of a multi-year
contract with Intellisource, Inc. to provide support to the PEO line of
business.
In exchange for the facilitation and completion of a definitive agreement,
Envirometrics will grant options to Intellisource for the purchase of common
shares of stock of Envirometrics, Inc. with an exercise price of $4.00 to
$5.00.
The final purchase price for EMS, the number of options to be granted to
Intellisource and the exercise price of the options will be determined at a
future date.
This proposed transaction is subject to the approval of each company's Board
of Directors and shareholder approval, if necessary.
This letter of intent shall remain in effect until November 15, 1996.
If you agree with the above, please indicate your acceptance by signing below.
Sincerely,
Richard D. Bennett, MSPH, CIH
President and CEO
Agreed and accepted:
_________________ ___________
Charles H. Gibbons Date
President and CEO
Intellisource, Inc.
