UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT 1934
For the quarterly period ended March 31, 2000
Commission file Number 0-23892
ENVIROMETRICS, INC.
(Exact name of registrant as specified in its charter.)
DELAWARE 57-0941152
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
9229 UNIVERSITY BOULEVARD
CHARLESTON, SC 29406
(Address of principal executive offices)
Registrant's telephone number, including area code:
(843) 553-9456
Indicate by check mark whether the registrant(1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [ ] NO [X]
As of December 31, 1999 the Registrant had outstanding 3,640,880 shares of
common Stock. Transitional small business disclosure format (check one):
YES [ ] NO [X]
<PAGE>
INDEX
- -----
PART I. FINANCIAL INFORMATION Page #
Item 1. Financial Statements
Condensed Consolidated Balance Sheet at
March 31, 2000 and December 31, 1999 2
Condensed Statement of Operations for the
First Quarter ended March 31, 2000 and 1999 3
Condensed Statement of Cash Flows for the
First Quarter ended March 31, 2000 and 1999 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Conditions 6-9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 3. Defaults upon Senior Securities 10
Item 5. Other Information 10-17
Item 6. Exhibits and Reports 18
Signature 18
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2000 and December 31, 1999
2000 1999
ASSETS (Unaudited) (Audited)
------ ----------- ---------
CURRENT ASSETS
Cash and cash equivalents $ 44,423 $ 104,607
Trade receivables less allowance
for doubtful accounts $5,000
in 2000 and 1999 50,348 131,654
Inventories 4,000 4,000
Prepaid expenses 16,172 27,634
----------- -----------
TOTAL CURRENT ASSETS 114,943 267,895
----------- -----------
OTHER ASSETS AND INTANGIBLES
Deposits 2,500 2,500
Other 8,265 -
----------- -----------
10,765 2,500
----------- -----------
PROPERTY AND EQUIPMENT
Furniture and equipment 921,358 921,358
Vehicles 9,490 9,490
----------- -----------
930,848 930,848
Less accumulated depreciation (877,505) (870,816)
----------- -----------
53,343 60,032
----------- -----------
$ 179,051 $ 330,427
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ - $ 12,848
Current maturities of
long-term debt 28,154 13,708
Accounts payable 244,843 221,228
Accrued expenses 133,308 170,677
------------ -----------
TOTAL CURRENT LIABILITIES 406,305 418,461
------------ -----------
LONG-TERM DEBT,
less current maturities 71,681 71,681
Deferred Gain on Asset Sale 18,125 24,167
------------ -----------
89,806 95,848
------------ -----------
Redeemable Preferred Sotck 717,985 717,985
------------ -----------
STOCKHOLDERS' EQUITY
Common stock par value $.001;
authorized 10,000,000 shares;
issued 2000 and 1999 -
3,640,880 shares 3,640 3,640
Additional paid-in capital 5,069,388 5,069,388
Retained earnings(deficit) (6,108,073) (5,974,895)
------------ ------------
(1,035,045) (901,867)
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 179,051 $ 330,427
============ ============
See Notes to Condensed Consolidated Financial Statements
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
March 31 March 31
2000 1999
-------- --------
FINANCIAL INCOME (EXPENSE)
Interest income 775 1,843
Interest expense (852) (2,523)
Gain (loss) on disposition
of property 6,042 6,042
Gain (loss) on vendor
balances negotiated - 21,171
Other - 25
----------- ----------
5,965 26,558
----------- ----------
INCOME (LOSS) BEFORE
DISCONTINUED OPERATIONS 5,965 26,558
DISCONTINUED OPERATIONS (139,143) 5,942
----------- ----------
NET INCOME (LOSS) $ (133,178) $ 32,500
=========== ==========
Weighted average number of
common shares outstanding 3,640,880 3,012,686
=========== ==========
Net income (loss)
per common share $ (0.037) $ 0.011
=========== ==========
Net (loss) per common share,
after preferred dividends $ (0.039) $ 0.008
=========== ==========
Dividends per common share $ - $ -
=========== ==========
See Notes to Condensed Consolidated Financial Statements
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FIRST QUARTER ENDED MARCH 31, 2000 AND 1999
March 31 March 31
2000 1999
---- ----
Cash Flows From Discontinued Operation's:
Net (loss) $ (133,178) $ 32,500
Adjustments To Reconcile net
(loss) to net cash used in
discontinued operation's.
Depreciation 6,689 10,866
(Gain)loss on disposal of property (6,042) (6,042)
Common stock issued for interest
and loan costs - -
Net gain on vendor balances negotiated - (21,171)
Change in assets and liabilities:
(Increase) decrease in accounts
receivable 81,306 110,885
(Increase) decrease in prepaid
expenses 11,462 (1,277)
Increase (decrease) in accounts
payable and accrued expenses (13,754) (41,939)
------------ -----------
Net cash (used in) provided by
discontinued operation's (53,517) 83,822
------------ -----------
Cash Flows From Investing Activities:
Collection of note receivable - 218,294
Purchase of furniture and equipment - (2,835)
(Increase) decrease in other assets (8,265) 124
----------- -----------
Net cash provided by investing
activities (8,265) 215,583
----------- -----------
Cash Flows From Financing Activities:
Principal payments on long-term
borrowing 1,598 (27,817)
----------- -----------
Net cash used in financing activities 1,598 (27,817)
----------- -----------
Net increase (decrease) in cash and
cash equivalents (60,184) 271,588
Cash and cash equivalents, beginning 104,607 40,934
----------- -----------
Cash and cash equivalents, ending $ 44,423 $ 312,522
=========== ===========
Supplemental Disclosure of Cash Flows
Information
Cash payments for interest $ 852 $ 2,768
=========== ===========
Supplemental Disclosure of Cash Flows
Information
Issuance of common stock for warrants,
loan costs and other $ - $ 3,554
=========== ===========
Issuance of common stock for
debt conversion $ $ 76,877
=========== ===========
Issuance of preferred stock for
debt conversion $ $ 422,379
=========== ===========
See Notes to Condensed Consolidated Financial Statements
ENVIROMETRICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(1) The unaudited condensed financial statements and related notes have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and regulations.
The accompanying condensed consolidated financial statements of the Company, and
notes thereto, should be read in conjunction with the audited financial
statements and related notes included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999.
The results of activity for the interim periods shown in this report are not
necessarily indicative of results to be expected for the fiscal year. In the
opinion of management, the information contained herein reflects all adjustments
necessary to present fairly the consolidated financial position, discontinued
operations and changes in cash flow for the interim periods. All such
adjustments are of a normal recurring nature.
(2) Net loss per common share is computed using the weighted average number of
common shares outstanding, after giving effect for the 1 for 2 reverse split
effective with the initial public offering in 1994.
(3) The Company's common stock and warrants were deleted from The Nasdaq
SmallCap Market(tm) on December 3, 1996 for failure to meet the capital and
surplus requirement for continued listing. The Company is listed on the
OTC-Bulletin Board. The Company's listing on the OTC-Bulletin board was deleted
November 18, 1999 and re-listed on March 21, 2000 after filing the required
forms 10-KSB for the years 1996, 1997, 1998 and 1999.
(4) At March 31, 2000 the Company had accrued $69,304 in dividends on the
preferred shares discussed above. In March 2000, the holders of all preferred
shares agreed to convert to Common Stock all accrued dividends.
(5) The Company disposed of all remaining operations subsequent to March 31,
2000. Therefore, all activity has been reflected as discontinued operations.
(6) The Company has entered into a binding agreement with The Catapult Group,
Inc. to acquire all of the outstanding stock of that corporation. As of May 15,
2000, the transaction has not been consumated.
<PAGE>
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Subsequent to March 31, 2000 the Company sold its remaining consultative and
laboratory operations. Because of these two transactions, the Company has
reported all activity as discontinued operations for the quarter ended March 31,
2000, and has restated the corresponding amounts for the quarter ended March 31,
1999.
The resignation of a key employee and shareholder had a significant negative
impact on operations for the consultative group. The consultative operations
were subsequently sold to a newly formed limited liability company owned 100% by
the former key employee.
Laboratory activity revenue and cost of revenue remained fairly flat for the
quarter ended March 31, 2000, as compared to the same period ended March 31,
1999. This unit was sold during May 2000.
The following reports the trends had the Company remained as an operating
company.
The following financial information reports operating trends for the Company for
2000 for the remaining operating subsidiary compared to 1999. Net service
revenue for the Consultative Service group which is comprised of health and
safety consulting for the first quarter of 2000 amounted to $49,700 which was
$150,600 (75.2%) lower than the $200,300 reported for the first quarter of 1999.
One customer accounted for $157,800 in 1999 first quarter revenue. Net service
revenue for the Laboratory Service group, which is comprised of the industrial
hygiene laboratory for the third quarter of 2000 amounted to $82,000 which was
$3,300 (3.96%) lower than the $85,300 reported for the first quarter of 1999.
Consultative direct service costs decreased by 40.7% or $38,500 to $56,000 for
the first quarter of 2000 as compared to $94,400 reported for the first quarter
of 1999 due to the decrease in Consultative Service revenue noted above.
Laboratory direct service costs decreased by .20% or $100 to $81,100 for the
first quarter of 2000 as compared to $81,200 reported for the first quarter of
1999. The reduced costs are attributable to decreased operating expense's over
the lower revenue base noted above..
The gross loss for the first quarter ended March 31,2000 decreased by $115,400
a decrease of 104.9%, to ($5,400) as compared to $110,000 for the three months
ended March 31, 1999.
The Company reported a (4.1%) gross margin for the first quarter of 2000 as
compared to a 38.5% margin for the first quarter in 1999. The reason for the
decrease in gross margin is related to the fixed cost nature of the laboratory
activities and the decreased revenue for both segments of operations.
Percentage comparisons of gross margins reported by the company are as follows:
Period Total Consultative Laboratory
1st Quarter 2000 (4.1%) (12.6%) 1.1%
1st Quarter 1999 38.5% 52.9% 4.8%
Operating expenses amounted to $133,767 for the three months ended March 31,
2000, as compared to $106,900 reported for the three months ended March 31,
1999. Sales and marketing expenses were approximately the same for both
reporting periods. General and administrative costs increased by $31,000 to
$115,800 for the three months ended March 31, 2000, as compared to $84,900
reported for the three months ended March 31, 1999. Legal and auditing expenses
in connection with the filing of Forms 10-KSB for the years ended 1996, 1997,
1998, and 1999 amounted to $33,600 for the first quarter of 2000. Depreciation
and amortization costs decreased overall by $4,200 due to older equipment being
fully depreciated and not replaced.
The Company incurred an operating loss of $139,100 for the three months ended
March 31, 2000 as compared to an operating income of $5,900 for the three months
ended March 31, 1999. The significant deterioration is due to the decrease in
revenue generation for 2000 as compared to 1999 and the additional expense of
the audits in connection with the filing of Forms 10-KSB for the years ended
1996, 1997, 1998, and 1999.
Interest income for the quarter ended March 31,2000 was $800 compared to $1,800
of interest income recorded for the quarter ended March 31,1999.
A net loss was recorded for the first quarter ended March 31, 2000 of $139,200
which is $165,700 lower than net income reported for the first quarter ended
March 31, 1999 of $26,500.
FINANCIAL CONDITION
The independent auditor's report stated that the Company has suffered from
recurring losses from operations and decreases in working capital and
stockholders' equity. This raises substantial doubt about the Company's ability
to continue as a going concern. The Company's financial condition deteriorated
during the first quarter ended March 31, 2000 over 1999 due to decreased
operating activity in the first quarter of 2000 and additional professional
services incurred in the first quarter to complete the audits of the Company's
financial statements for the years 1996, 1997, 1998, and 1999. The Company is
experiencing severe cash flow constraints.
Working capital deficiency at March 31, 2000 amounted to $291,400. Cash
decreased by approximately $60,000 and trade accounts receivable decreased by
approximately $80,000.
The Company does not have adequate assets to meet its obligations. Approximately
$80,000 (representing 100%) of debt in connection with the Small Business
Administration is expected to be paid from the proceeds of the sale of the
consultative operations. As part of that agreement, the Company also will
receive some cash flow based on revenue from certain existing customer contracts
transferred.
In addition, $69,304 of accrued dividends on preferred shares were converted
into common shares during April 2000.
The Company expects to eliminate a minimum of $53,000 in trade payables related
to vendor amounts greater than three years old.
The Company anticipates payment of monies in excess of $100,000 of accrued
professional fees at March 31, 2000 will be from the anticipated $2,000,000
capital raise required to successfully complete the merger with The Catapult
Group, Inc. There are no agreements in place at the current date with any
funding sources.
RECENT DEVELOPMENTS
Due to the lack of synergy between current operations of Envirometrics and the
operations of The Catapult Group, and the poor financial performance experienced
in recent months from these operations, the Board of Directors authorized Mr.
Elliott to explore the sale of current operations with interested buyers. In the
normal course of business, Azimuth, Inc. (the remaining operating subsidiary of
Envirometrics) has operated as two units (i) the Consultative Business and (ii)
the Laboratory Business. See Envirometrics, Inc. 1999 Form 10-KSB, for the
definitions of the Consultative Business and the Laboratory Business. For ease
of disposition the two units were sold separately to different buyers.
Since October 1999, revenues of the Azimuth subsidiary have been down
beyond the normal cyclical down-turn experienced in this market during the
winter months. This coupled with Mr. Bennett leaving (see Envirometrics 1999
Report on Form 10-KSB--Item I: Description of Business--Post "Turnaround" Phase)
and the lack of synergy between the historical Envirometrics' operations with
those of The Catapult Group, prompted the decision by the Board of Directors of
Envirometrics to act to dispose of current operations in the Environmental,
Health and Safety market. As of May 12, 2000 the following is the status of
the disposition outlined by business unit, (i) the Consultative Business and
(ii) the Laboratory Business.
The Consultative Business
On April 24, 2000 Azimuth Inc. ("Seller") and Envirometrics signed an agreement
with Richard D. Bennett ("RDB") and Risk Technologies, LLC ("Purchaser") for the
sale of certain assets of Azimuth pertaining to the Consultative Business
("Agreement"). The assets include equipment used in the Consultative Business,
current and former Consultative Business clients, the Azimuth name, certain work
in process and the good will of the Consultative Business ("Assets").
The purchase price for the Assets is $100,000, payable at closing as the
assumption of two U.S. Small Business Administration ("SBA") notes totaling
approximately $80,000 and a Promissory Note from the Purchaser, co-signed and
guaranteed by RDB. The assumption of the SBA notes and the Promissory Note equal
the purchase price of $100,000. The SBA notes expire in 2005 and the Promissory
Note will pay out on the first anniversary after closing. The financial
obligations outlined in the Agreement are secured by up to 300,000 shares of
RDB's common stock of Envirometrics. This transaction closed on April 26, 2000.
The Laboratory Business
On April 6, 2000 Envirometrics entered into a non-binding letter of intent to
sell certain assets of Azimuth pertaining to the Laboratory Business to a
prospective buyer. The buyer is an independent third party having no affiliation
with Envirometrics. The assets include certain equipment pertaining to the
Laboratory Business, current and former Laboratory Business clients and certain
work in process ("Lab Assets").
The proposed purchase price for the Lab Assets is $25,000 cash at closing and a
10% commission paid on Laboratory Business clients which continue to send
laboratory analytical work to the prospective buyer. The commission is capped at
$40,000 per year for two years with a minimum guaranteed fee of $30,000 over the
two year term of the commission period. The commission payments will be secured
by a first security interest in the equipment and the accounts receivable
generated from the Laboratory Business clients. This transaction closed on May
8, 2000.
GENERAL OVERVIEW
During the course of the "Turnaround" phase (see Envirometrics, Inc. 1999
10-KSB, Item 1: Description of Business), the Company has explored alternative
plans for growth to include the identification of companies in other markets
which had greater growth potential than the Environmental, Health and Safety
market. This process was begun with a view to keeping all options open for the
future of the Company. In September 1999, the Company was introduced to The
Catapult Group, Inc. (The Catapult Group), a Georgia corporation. The Catapult
Group is an Internet integration firm offering intelligent end-to-end e-business
solutions to large and middle-market organizations. These solutions range from
strategic e-business planning and application development to marketing and
communications services for Internet enterprises. The Catapult Group was looking
to enter the public market without incurring the cost of an expensive Initial
Public Offering and was exploring the avenue of a reverse merger with a company
whose securities were already traded publicly. In February 2000, the Company and
The Catapult Group reached terms that each felt were fair to the parties and
entered into a non-binding agreement ("Agreement") to acquire The Catapult Group
(See Item 13: Exhibits, Lists and Reports on Form 8K--Plan and Agreement to
Exchange Stock). On March 8, 2000, the Agreement became binding on the
transaction parties. Consummation of the Agreement is still subject to certain
specific, as well as additional customary, conditions to closing (e.g., the
pre-closing completion of a $2 million private placement for provision of
working capital funds by The Catapult Group).
The acquisition of The Catapult Group, if consummated, will be transacted as a
stock exchange whereby the shareholders of The Catapult Group will receive
shares of the Company. The Catapult Group will become a wholly-owned subsidiary
of the Company. The Catapult Group shareholders and option holders as a group
will end up with 90% ownership of the outstanding stock of the Company. The
Company will change its name from Envirometrics, Inc. to The Catapult Group,
Inc. after closing. The transaction will involve the reverse split of the
pre-closing shares of the Company so that current Company shareholders and
option holders, after issuance of common shares to The Catapult Group
shareholders and reserving shares for their option holders, will hold 10% of the
outstanding stock. It is anticipated that the Agreement will close on or about
June 15, 2000.
On May 8, 2000, the Company filed a preliminary Information Statement with the
Securities and Exchange Commission. It is expected that a definative Information
Statement will be filed on May 18, 2000, and subsequently mailed to the
shareholders of Envirometrics relating to the request for Written Consent for
authorizing (a) the acquisition of The Catapult Group, Inc., including (i) the
reverse split of current outstanding common stock, (ii) the amendment of the
Articles of Incorporation to change the name of the Corporation to The Catapult
Group, Inc. and (iii) the consummation of the Plan and Agreement to exchange
stock in connection with the acquisition of The Catapult Group, Inc. and (b) the
amendment of the Articles of Incorporation to increase the authorized shares of
Common Stock from 10 million to 20 million shares.
This 10-QSB contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the safe harbors created thereby. Investors are cautioned that certain
statements in this 10-QSB are "forward looking statement" within the meaning of
the Private Securities Litigation Reform Act of 1995 and involve known and
unknown risks, uncertainties and other factors. Such uncertainties and risks
include, among others, certain risks associated with the closing of the The
Catapult Group transaction described herein, government regulation, and general
economic and business conditions. Actual events, circumstances, effects and
results may be materially different from the results, performance or
achievements expressed or implied by the forward-looking statements.
Consequently, the forward-looking statements contained herein should not be
regarded as representations by the Company or any other person that the
projected outcomes can or will be achieved.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 3. Defaults upon Senior Securities
Dividends on Preferred Shares
- -----------------------------
In March 2000, outstanding shares of Envirometrics convertible preferred stock,
all of Series A and B and two thirds (2/3) of Series C, along with accrued
dividends at that date were converted to 1,676,053 shares of Envirometrics
Common Stock.
Item 5. Other Information
Re-listing on Over The Counter Bulletin Board
- ---------------------------------------------
On January 28, 2000 the Company brought its filings with the SEC current, thus
meeting the requirements for re-listing on the OTCBB. One of the Company's
market makers submitted the neceessary documentation to have the Company's
common stock re-listed on OTCBB and on March 21, 2000 the Company's common stock
began trading again on OTCBB.
ProForma Financial Information
- ------------------------------
ENVIROMETRICS, INC.
AND THE CATAPULT GROUP, INC.
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma condensed financial information relates to the
merger, which will be accounted for as a purchase transaction. The following pro
forma condensed financial information has been prepared based upon the net
monetary assets of Envirometrics, Inc. acquired and the historical consolidated
financial statements of The Catapult Group, Inc., giving effect to the
combination.
In the financial statements of the Company, the acquisition is accounted for as
a reverse purchase of the assets and liabilities of Envirometrics, Inc. by The
Catapult Group, Inc. The accounting treatment applied in the reverse acquisition
differs from the legal form of the transaction and the continuing legal entity
is Envirometrics, Inc.
The pro forma condensed financial information does not purport to present the
financial condition and results of operations of Envirometrics, Inc. and The
Catapult Group, Inc. had the Merger actually been completed as of the dates
indicated. In addition, the pro forma condensed financial information is not
necessarily indicative of the future results of operations and should be read in
connection with the historical consolidated financial statements and the notes
thereto of Envirometrics, Inc. and The Catapult Group, Inc., respectively.
THE CATAPULT GROUP, INC. (formerly ENVIROMETRICS, INC. AND SUBSIDIARIES)
PROFORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
<TABLE>
<CAPTION>
Actual Adjustments Pro Forma
--------------- --------------- ---------------
ASSETS
<S> <C> <C> <C>
Current Assets
Cash and cash
equivalents $ 14,842 $ 44,423 (1) $ 59,265
Trade receivables, less
allowance for doubtful accounts
of $5,000 in 2000 and 1999 339,030 50,348 (1) 389,378
Other net monetary assets 155,000 (2) 155,000
Prepaid expenses 3,000 16,172 (1) 19,172
------------- ------------ -------------
Total Current Assets 356,872 265,943 622,815
------------- ------------ -------------
Property and Equipment
Furniture and equipment 70,086 - 70,086
Less accumulated depreciation (17,569) - (17,569)
------------- ------------ -------------
52,517 - 52,517
------------- ------------ -------------
Other Assets
Deposits 4,942 10,765 (1) 15,707
Goodwill, net of accumulated
amortization of $23,381 479,484 - 479,484
------------- ------------ -------------
484,426 10,765 495,191
------------- ------------ -------------
TOTAL $ 893,815 $ 276,708 $ 1,170,523
============= ============ =============
<FN>
See Notes to Consolidated Proforma Financial Statements
</FN>
<PAGE>
Actual Adjustments Pro Forma
--------------- --------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 500,000 $ $ 500,000
Current maturities of long-term debt - 19,154 (1) 19,154
Accounts payable 114,741 191,843 (1) 306,584
Accrued expenses and other 62,392 (69,304) (3) 102,229
109,141 (1)
------------- ------------ -------------
Total Current Liabilities 677,133 250,834 927,967
------------- ------------ -------------
Redeemable Preferred Stock,
Par value $.001; authorized 2,500,000
shares; issued 1999 - 24,959 717,995 (1) 49,918
(668,077) (3)
------------- ------------ -------------
- 49,918 49,918
------------- ------------ -------------
Common Stock and Accumulated Deficit
Common stock, par value $.001;
authorized 10,000,000 shares;
issued 1999 - 6,168,838 shares 60,000 (60,000) (6) 6,169
5,616 (6)
3,852 (1)
148 (4)
25 (4)
1,503 (4)
(4,975) (5)
Additional paid-in capital 554,930 54,384 (6) 707,324
69,156 (3)
(25) (4)
(765,277) (1)
666,574 (3)
4,975 (5)
Accumulated deficit (398,248) - (419,028)
-------------- ------------ -------------
216,682 (24,044) 192,638
-------------- ------------ -------------
$ 893,815 $ 276,708 $ 1,170,523
============== ============ =============
<FN>
See Notes to Consolidated Proforma Financial Statements
</FN>
</TABLE>
<PAGE>
THE CATAPULT GROUP, INC. (formerly Envirometrics, Inc.)
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
QUARTER ENDED MARCH 31,2000
<TABLE>
<CAPTION>
CATAPULT ADJUSTMENTS CONSOLIDATED
-------- ----------- ------------
<S> <C> <C> <C>
Service Revenue $ 575,557 $ - $ 575,557
- ---------------
Direct Service Costs 208,532 - 208,532
- -------------------- ------------ ----------- -------------
Gross Profit 367,025 - 367,025
------------ ----------- -------------
Operating Expenses
- ------------------
Sales and marketing 82,740 - 82,740
General and administrative 243,961 - 243,961
Depreciation and amortization 11,419 - 11,419
------------ ----------- -------------
338,120 - 338,120
------------ ----------- -------------
Operating Income 28,905 - 28,905
------------ ----------- -------------
Other Income (Expense)
- ----------------------
Interest income - - -
Interest expense (8,125) - (8,125)
----------- ----------- -------------
Net Income (Loss) $ 20,780 $ - $ 20,780
- ----------------- =========== =========== =============
Net Income (Loss) Per Common Share $ 0.003 n/a 0.003
- --------------------------- =========== =========== =============
Weighted average number of common shares
outstanding 6,000,000 (17,852) $ 5,982,148
=========== =========== =============
<FN>
See Notes to Consolidated Proforma Financial Statements
</FN>
</TABLE>
<PAGE>
THE CATAPULT GROUP, INC. (formerly ENVIROMETRICS, INC. AND SUBSIDIARIES)
NOTES TO UNAUDITED PROFORMA CONDENSED FINANCIAL STATEMENTS
The unaudited pro forma condensed financial statements have been prepared
combining the net monetary assets purchased of Envirometrics, Inc. and The
Catapult Group, Inc. and adjusting such combined balances to conform to the
accounting policies of the two companies.
The following describes adjustments and other items relevant to the pro forma
financial statements.
(1) Net deficiency in monetary assets acquired amounted to $24,044 at March
31, 2000. This is due to the net use of cash approximating $60,000 and
significant decrease of approximately $80,000 in trade accounts receivable from
December 31, 1999.
(2) Net monetary assets acquired included $155,000 from the disposition of
the Envirometrics, Inc. operations.
(3) Included in the transaction is the conversion of 328,559 preferred
shares into 1,502,793 common shares of Envirometrics, Inc. before the reverse
split.
(4) Accrued dividends on Envirometrics, Inc. preferred stock converted into
173,261common shares of Envirometrics, Inc. before the reverse split.
(5) The holders of Envirometrics, Inc. common shares participated in a
reverse split transaction and were issued one share of Envirometrics, Inc.
common stock for every ten shares held.
(6) Recapitalization. The weighted average number of shares outstanding was
calculated assuming Envirometrics shares were exchanged for all of the
outstanding shares of The Catapult Group at January 1, 2000 and that 5,616,016
new shares of Envirometrics, Inc. common stock was issued.
(7) Loss per Common Share. Loss per common share is based upon the weighted
average number of common shares outstanding. The calculation also assumes that
holders of Envirometrics, Inc. common shares participated in a reverse split
transaction and were issued one share of Envirometrics, Inc. common stock for
every ten shares held.
The holders of the preferred stock of Envirometrics, Inc. converted 328,559
preferred shares and $69,304 of amounts in accrued dividends on the preferred
shares at March 31, 2000, into 1,676,053 common shares at April 17, 2000. These
were assumed converted at March 31, 2000 in the calculation of weighted average
number of shares outstanding at March 31, 2000.
(8) Impairment of long-lived assets. The Company reviews long-lived assets
for impairment whenever events or changes in business circumstances indicate the
carrying value of the assets may not be fully recoverable. The Company performs
undiscounted cash flow analyses to determine if impairment exists. Based on a
review performed for the quarter ended March 31, 2000, no impairment existed
that would require adjustment to or disclosure in the pro forma financial
statements.
Note 1. Proforma Financial Condition and Plan of Operation
Prior to the closing of and in accordance with the Exchange Agreement, The
Catapult Group shall have obtained a financing commitment for Two Million
Dollars ($2,000,000) in net proceeds or such lesser amount as may be agreed to
by Envirometrics and The Catapult Group, from a third party investor(s) upon
terms and conditions satisfactory to Envirometrics and The Catapult Group.
Though this condition is a condition precedent to closing the Acquisition, it
may be waived in whole or in part by Envirometrics and The Catapult Group. If
The Catapult Group is successful in obtaining up to the $2,000,000 capital
raise, the proceeds will be used (i) to payoff the notes payable ($500,000)
related to the acquisition of i2o, Inc., (ii) for the acquisition of related
companiew (up to $600,000) and (iii) working capital to fund personnel and other
costs associated with the execution of The Catapult Group business plans (up to
$900,000).
The pro forma consolidated balance sheet presents negative working capital
in the amount of $305,200. Included in this is the aforementioned $500,000 in
notes payable, $250,000 of which is currently in default. Without the capital
raise mentioned above or the obtaining of additional financing it is doubtful
that there will be sufficient resources to meet obligations as they become due.
Note 2. Results of Operations and Management's Plans
Envirometrics' plan to exchange stock with The Catapult Group, Inc. contemplates
a shift in business strategy to Internet strategy consulting. Traditionally, the
Catapult Group has provided end-to-end Internet solutions to its customers.
Moving forward, the company will continue to provide these services and focus
strongly on the technology auditing aspects of internet strategy, quality
assurance and project management and control.
The Catapult Group, Inc. is currently completing a development project for an
online telecommunications product and service marketplace company. Revenues for
the development of this project during the first quarter of 2000 were
approximately $150,000. The customer intends to launch this site in May 2000,
and seek additional funding for ongoing development. Although continued revenue
is conditional on available funding, The Catapult Group, Inc. contemplates the
provision of services in future phases of this project.
The Catapult Group is also a vendor in good standing with a very large
communications corporation. Project development revenues from work for this
customer were approximately $126,200 during the first quarter of 2000. At
present, however, there are no projects ongoing for this customer.
The Catapult Group, Inc. intends to focus its service offering on the consulting
aspects of Internet strategy. Elements of this operating segment include
Internet technology architecture development, technology auditing, quality
assurance and project management services. In the early part of the second
quarter 2000, The Catapult Group, Inc.has secured approximately 5 agreements for
technology blueprint projects with estimated revenues that average approximately
$25,000 per project. The company believes that the growing importance of
planning and control in the Internet market will lead to increased activity in
this operating segment.
Although The Catapult Group, Inc. was profitable during the first quarter of
2000, a downturn in revenues and business activity is contemplated in the short
term as the company completes the transition to the public market and effects a
shift in strategy to a pure consulting model.The company anticipates losses
during the second and third quarters of 2000 with a return to profitability late
in the fourth quarter or in early 2001. The Catapult Group, Inc. intends to
secure working capital to support ongoing activities and to build the
infrastructure necessary to implement the company's business plan.
Item 6. Exhibits and Reports
- -----------------------------
(a) The following exhibits are filed along with this Report on Form 10-QSB:
Number Description of Exhibit
- ------ ----------------------
10.1 Preferred Stock Conversion Agreement: Ten State Street, LLP
10.2 Preferred Stock Conversion Agreement: Walter H. Elliott, III
10.3 Preferred Stock Conversion Agreement: Shakespeare Partners
10.4 Preferred Stock Conversion Agreement: Precision Southeast, Inc.
10.5 Preferred Stock Conversion Agreement: Elsie L. Rose
10.6 Preferred Stock Conversion Agreement: United States Company, Inc.
10.7 Asset Purchase Agreement between Registrant and Risk Technologies, LLC
dated April 26, 2000.
10.8 Asset Purchase Agreement between Registrant and GAL Services, Inc
dated May 08, 2000.
<PAGE>
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 thereunto duly authorized.
ENVIROMETRICS, INC.
Date: May 15, 2000 Walter H. Elliott, III
_______________________
Walter H. Elliott, III
President and CEO
March 24, 2000
Mr. Timothy Scrantom
Ten State Street, L.L.P.
10 State Street
Charleston, South Carolina 29401
Envirometrics, Inc.
9229 University Boulevard
Charleston, SC 29401
Re: 20,032 Shares of Series B Preferred Stock of Envirometrics, Inc. (the
"Company") Held By Ten State Street, L.L.P.
Ladies and Gentlemen:
Pursuant to our Agreement of June30, 1998, (the "Agreement," Paragraphs 10-24 of
which are fully incorporated herein by reference and ratified and reaffirmed in
their entirety by the undersigned), we hereby notify you of our intent to
convert the above-referenced shares of Preferred Stock (the "Preferred Stock")
to Envirometrics Common Stock (the "Common Stock") at a ratio of 5 shares of
Common Stock for one share of Preferred Stock. Kindly effect this conversion on
the tenth day following your receipt of this notice or as soon thereafter as
practicable.
We are enclosing herewith any Certificate(s) we hold representing the Preferred
Stock. If you are holding any Certificate(s) representing the Preferred Stock,
you are hereby instructed to cancel same upon the issuance of the Common Stock
to us.
With regard to any dividends which have accrued on the Preferred Stock, you are
hereby instructed to issue Common Stock to us in lieu of such accruals at a
price of $0.40 per share. We understand that no fractional shares will be
issued, and shares will be rounded off to the nearest whole number.
We represent that: (a) we have familiarized ourselves with the affairs of the
Company, and we are aware of the Agreement for the Exchange of Stock (the
"Catapult Agreement") between the Company and The Catapult Group, Inc. of
Atlanta, GA; (b) we have received and reviewed a copy of the Catapult press
release dated March 13, 2000 which refers to the Catapult Agreement; and (c) we
are aware that the Company intends to effect a split of the Common Stock prior
to the closing of the Catapult Agreement at a ratio of one new share of Common
Stock being issued for every ten shares then outstanding.
Sincerely yours,
March 20, 2000
Mr. Walter H. "Skip" Elliott, III
205 Walnut Hill Drive
Summerville, SC 29485
Envirometrics, Inc.
9229 University Boulevard
Charleston, SC 29401
Re: 8,835 Shares of Series B Preferred Stock of Envirometrics, Inc. (the
"Company") Held By Walter H. Elliott, III
Ladies and Gentlemen:
Pursuant to our Agreement of June 30, 1998, (the "Agreement", Paragraphs 10-24
of which are fully incorporated herein by reference and ratified and reaffirmed
in their entirety by the undersigned), we hereby notify you of our intent to
convert the above-referenced shares of Preferred Stock (the "Preferred Stock")
to Envirometrics Common Stock (the "Common Stock") at a ratio of 5 shares of
Common Stock for one share of Preferred Stock. Kindly effect this conversion on
the tenth day following your receipt of this notice or as soon thereafter as
practicable.
I am enclosing herewith any Certificate(s) I hold representing the Preferred
Stock. If you are holding any Certificate(s) representing the Preferred Stock,
you are hereby instructed to cancel same upon the issuance of the Common Stock
to me.
With regard to any dividends which have accrued on the Preferred Stock, you are
hereby instructed to issue Common Stock to me in lieu of such accruals at a
price of $0.40 per share. I understand that no fractional shares will be issued,
and shares will be rounded off to the nearest whole number.
I represent that I have familiarized myself with the affairs of the Company, and
I am aware of the Agreement for the Exchange of Stock (the "Catapult Agreement")
between the Company and The Catapult Group, Inc. of Atlanta, GA and that the
Company intends to effect a split of the Common Stock prior to the Closing
thereof at a ratio of one new share of Common Stock being issued for every ten
shares then outstanding; and, further, that I have had sufficient opportunity to
have the Catapult Agreement reviewed by counsel of my choice and I am fully
familiar with the terms thereof.
Sincerely yours,
Walter H. Elliott, III
March 31, 2000
Mr. H. E. "Skipper" Igoe
Shakespeare Partners
33 Frenchmans Key
Williamsburg, VA 23185
Envirometrics, Inc.
9229 University Boulevard
Charleston, SC 29401
Re: 49,919 Shares of Series C Preferred Stock of Envirometrics, Inc. (the
"Company") Held By Shakespeare Partners.
Ladies and Gentlemen:
Pursuant to our Agreement of June 30, 1998, (the "Agreement," Paragraphs 10-24
of which are fully incorporated herein by reference and ratified and reaffirmed
in their entirety by the undersigned), we hereby notify you of our intent to
convert the above-referenced shares of Preferred Stock (the "Preferred Stock")
to Envirometrics Common Stock (the "Common Stock") at a ratio of 5 shares of
Common Stock for one share of Preferred Stock. Kindly effect this conversion on
the tenth day following your receipt of this notice or as soon thereafter as
practicable.
We are enclosing herewith any Certificate(s) we hold representing the Preferred
Stock. If you are holding any Certificate(s) representing the Preferred Stock,
you are hereby instructed to cancel same upon the issuance of the Common Stock
to us.
With regard to any dividends which have accrued on the entire Preferred Stock,
you are hereby instructed to issue Common Stock to us in lieu of such accruals
at a price of $0.40 per share. We understand that no fractional shares will be
issued, and shares will be rounded off to the nearest whole number.
We represent that: (a) we have familiarized ourselves with the affairs of the
Company, and we are aware of the Agreement for the Exchange of Stock (the
"Catapult Agreement") between the Company and The Catapult Group, Inc. of
Atlanta, GA; (b) we have received and reviewed a copy of the Catapult press
release dated March 13, 2000 which refers to the Catapult Agreement; and (c) we
are aware that the Company intends to effect a split of the Common Stock prior
to the closing of the Catapult Agreement at a ratio of one new share of Common
Stock being issued for every ten shares then outstanding.
Sincerely yours,
March 10, 2000
Mr. S. Richard Averette
President
Precision Southeast, Inc.
P.O. Box 1405
Myrtle Beach, South Carolina 29578
Envirometrics, Inc.
9229 University Boulevard
Charleston, SC 29401
Re: 65,875 Shares of Series B Preferred Stock of Envirometrics, Inc. (the
"Company") Held By S. Richard Averette
Ladies and Gentlemen:
Pursuant to our Agreement of June 30, 1998, (the "Agreement," Paragraphs 10-24
of which are fully incorporated herein by reference and ratified and reaffirmed
in their entirety by the undersigned), we hereby notify you of our intent to
convert the above-referenced shares of Preferred Stock (the "Preferred Stock")
to Envirometrics Common Stock (the "Common Stock") at a ratio of 5 shares of
Common Stock for one share of Preferred Stock. Kindly effect this conversion on
the tenth day following your receipt of this notice or as soon thereafter as
practicable.
We are enclosing herewith any Certificate(s) we hold representing the Preferred
Stock. If you are holding any Certificate(s) representing the Preferred Stock,
you are hereby instructed to cancel same upon the issuance of the Common Stock
to us.
With regard to any dividends which have accrued on the Preferred Stock, you are
hereby instructed to issue Common Stock to us in lieu of such accruals at a
price of $0.40 per share. We understand that no fractional shares will be
issued, and shares will be rounded off to the nearest whole number.
We represent that we have familiarized ourselves with the affairs of the
Company, and we are aware of the Agreement for the Exchange of Stock (the
"Catapult Agreement") between the Company and The Catapult Group, Inc. of
Atlanta, GA and that the Company intends to effect a split of the Common Stock
prior to the Closing thereof at a ratio of one new share of Common Stock being
issued for every ten shares then outstanding; and, further, that we have had
sufficient opportunity to have the Catapult Agreement reviewed by counsel of our
choice and are fully familiar with the terms thereof.
Sincerely yours,
March 24, 2000
Ms. Elsie L. Rose
Rose, Sanderson, & Creasy, LLC
1051 Technology Park Drive
Glen Allen, VA 23060
Envirometrics, Inc.
9229 University Boulevard
Charleston, SC 29401
Re: 2,250 Shares of Series B Preferred Stock of Envirometrics, Inc. (the
"Company") Held By Elsie L. Rose.
Ladies and Gentlemen:
Pursuant to our Agreement of June 30, 1998, (the "Agreement,") Paragraphs
10-24 of which are fully incorporated herein by reference and ratified and
reaffirmed in their entirety by the undersigned), we hereby notify you of
our intent to convert the above-referenced shares of Preferred Stock (the
"Preferred Stock") to Envirometrics Common Stock (the "Common Stock") at a
ratio of 5 shares of Common Stock for one share of Preferred Stock. Kindly
effect this conversion on the tenth day following your receipt of this
notice or as soon thereafter as practicable.
We are enclosing herewith any Certificate(s) we hold representing the Preferred
Stock. If you are holding any Certificate(s) representing the Preferred Stock,
you are hereby instructed to cancel same upon the issuance of the Common Stock
to us.
With regard to any dividends which have accrued on the Preferred Stock, you are
hereby instructed to issue Common Stock to us in lieu of such accruals at a
price of $0.40 per share. We understand that no fractional shares will be
issued, and shares will be rounded off to the nearest whole number.
We represent that: (a) we have familiarized ourselves with the affairs of the
Company, and we are aware of the Agreement for the Exchange of Stock (the
"Catapult Agreement") between the Company and The Catapult Group, Inc. of
Atlanta, GA; (b) we have received and reviewed a copy of the Catapult press
release dated March 13, 2000 which refers to the Catapult Agreement; and (c) we
are aware that the Company intends to effect a split of the Common Stock prior
to the closing of the Catapult Agreement at a ratio of one new share of Common
Stock being issued for every ten shares then outstanding.
Sincerely yours,
March 24, 2000
Ms. Elsie L. Rose
United States Company, Inc.
1051 Technology Park Drive
Glen Allen, VA 23060
Envirometrics, Inc.
9229 University Boulevard
Charleston, SC 29401
Re: 111,648 Shares of Series B Preferred Stock of Envirometrics, Inc. (the
"Company") Held By United States Company, Inc.
Ladies and Gentlemen:
Pursuant to our Agreement of June 30, 1998, (the "Agreement," Paragraphs 10-24
of which are fully incorporated herein by reference and ratified and reaffirmed
in their entirety by the undersigned), we hereby notify you of our intent to
convert the above-referenced shares of Preferred Stock (the "Preferred Stock")
to Envirometrics Common Stock (the "Common Stock") at a ratio of 5 shares of
Common Stock for one share of Preferred Stock. Kindly effect this conversion on
the tenth day following your receipt of this notice or as soon thereafter as
practicable.
We are enclosing herewith any Certificate(s) we hold representing the Preferred
Stock. If you are holding any Certificate(s) representing the Preferred Stock,
you are hereby instructed to cancel same upon the issuance of the Common Stock
to us.
With regard to any dividends which have accrued on the Preferred Stock, you are
hereby instructed to issue Common Stock to us in lieu of such accruals at a
price of $0.40 per share. We understand that no fractional shares will be
issued, and shares will be rounded off to the nearest whole number.
We represent that: (a) we have familiarized ourselves with the affairs of the
Company, and we are aware of the Agreement for the Exchange of Stock (the
"Catapult Agreement") between the Company and The Catapult Group, Inc. of
Atlanta, GA; (b) we have received and reviewed a copy of the Catapult press
release dated March 13, 2000 which refers to the Catapult Agreement; and (c) we
are aware that the Company intends to effect a split of the Common Stock prior
to the closing of the Catapult Agreement at a ratio of one new share of Common
Stock being issued for every ten shares then outstanding.
Sincerely yours,
4.24.00
4
4.24.00
AGREEMENT
THIS AGREEMENT ( hereinafter the "Agreement") is made and entered into as
of the ___day of April, 2000, by and among AZIMUTH, INCORPORATED ("Seller"), a
South Carolina corporation having its principal place of business in Charleston,
South Carolina; ENVIROMETRICS, INC. ("EVRM"), a Delaware corporation having its
principal place of business in Charleston, South Carolina, and sole shareholder
of Seller; RICHARD D. BENNETT ("RDB"), an individual residing in Mount Pleasant,
South Carolina; and RISK TECHNOLOGIES, LLC a sole member limited liability
company formed under the laws of South Carolina ("Purchaser").
Background
Seller is engaged, inter alia, in the business of Industrial Safety and
Hygiene consulting at its office at 9229 University Boulevard, Charleston, SC
(the "Premises"), which business is expressly identified and segregated as
Seller's Consultative Business (the "Consultative Business") on Seller's
internal financial statements; and,
RDB was previously employed by Seller as its President and by EVRM as its
Senior Vice President under an employment agreement (the "Employment Agreement")
which contains provisions regarding nondisclosure and noncompetition by RDB from
which Purchaser and RDB wish to be released; and,
Seller desires to sell to the Purchaser and the Purchaser desires to
purchase from Seller, subject to the terms and conditions herein, its tangible
and intangible assets used in the Consultative Business which are described
below; and
EVRM is the lessee of the Premises, and Purchaser wishes to sublease an
area of the Premises for a period of time following the Closing hereof as
described below.
Agreement
In consideration of the mutual promises contained below and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I - PURCHASE AND SALE OF ASSETS
1.01 The Assets. At Closing the Seller hereby agrees to sell, convey,
transfer, assign, set over and deliver to the Purchaser, and the Purchaser
agrees to purchase and accept, the following assets (the "Assets"):
a. All of the equipment described in Exhibit "A" attached hereto;
b. The list of current and former Consultative Business clients attached
hereto as Exhibit "B" (the "Consultative Business Clients");
c. The "Azimuth" name and any service marks, logos, and trademarks for
"Azimuth" and Occupational Healthguard"; provided, however, that Seller
shall be permitted to retain the name "Azimuth" as its corporate name so
long as it adheres to the provisions below regarding noncompetition with
Purchaser;
d. Those segments or portions of outstanding contracts between Seller and
Consultative Business Clients which have yet to be performed ("Incomplete
Contract Segments"); and all outstanding proposals for prospective
engagements ("Outstanding Proposals"). All of the foregoing are listed and
described in Exhibit "C" attached hereto. Purchaser agrees to assume
Seller's obligations under such contracts and proposals and to discharge
such obligations on a timely basis with a high degree of professionalism,
diligence and skill; provided, however, that Seller shall retain its
contract with Owens Corning, Anderson, SC plant (Job #98-069, commenced
8/17/98) and same shall not be conveyed to, nor assumed by, Purchaser under
this Agreement; and, provided further, all amounts which have been prepaid
to Seller, if any, shall be credited to Purchaser at Closing to the extent
that such prepayment is for work not yet completed on the Closing Date.
e. All records and files in Seller's possession of Consultative Business
Clients which have given Seller written instructions to release same to
Purchaser. Purchaser will keep and maintain such records and files in
safekeeping and make them available to Seller to the extent Seller, or
Seller's parent, successor or insurance company may require same to respond
to claims.
f. The good will of the Consultative Business.
No assets which are not explicitly described above are included in this
Agreement, and specifically excluded are Seller's laboratory and all assets,
clients, records and business related thereto (collectively, the "Laboratory
Business"). The Assets are being sold "as is" and "where is," and Seller makes
no express or implied representation or warranty whatever in regard thereto,
including warranty of merchantability, fitness for a particular purpose or any
other warranty of any nature, all which are hereby expressly disclaimed by
Seller to the maximum extent permitted by the laws of the State of South
Carolina.
1.02 Purchase Price. The purchase price for the Assets (the "Purchase
Price") shall be One Hundred Thousand Dollars ($100,000.00), payable at Closing
as follows:
a. Purchaser's and RDB's assumption of and agreement to pay the two
promissory notes to the U.S. Small Business Administration described in
Exhibit "D" attached hereto (the "SBA Loans") having combined balances of
approximately Eighty-five Thousand Dollars ($85,000.00). Such assumption
shall be as of the May 1, 2000 payment; and,
b. A Promissory Note from Purchaser to Seller, co-signed and guaranteed by
RDB in the principal amount of the difference between the combined
outstanding balances of the SBA Loans and the Purchase Price, minus a
credit of $100.00 to Purchaser for the proration of personal property taxes
related to the Assets as set forth below, with principal and accrued
interest payable not later than on the first anniversary of Closing.
Interest shall accrue at a rate equal to the lowest interest rate being
quoted on the Closing Date by Wachovia Bank, Charleston, South Carolina for
short term, unsecured loans to its best customers plus one per cent (1%).
Purchaser's and RDB's agreement assuming the SBA Loans shall indemnify and
hold harmless Seller, EVRM and Dr. and Mrs. Charles E. Feigley from any further
obligation or liability thereon. Purchaser shall make its best efforts to obtain
the release of Seller from its liability under the SBA Loans as well as a
release of Dr. and Mrs. Feigley and the collateral Dr. and Mrs. Feigley have
pledged as security for the SBA Loans. Seller will cooperate with Purchaser in
this regard.
1.03 Security Agreement.
a. Pledge of Stock. The obligations of Purchaser and RDB under Section 1.02
(a) and (b) above shall be secured by a first security interest granted to
EVRM in One Hundred Thousand (100,000) shares of EVRM common stock owned by
RDB (the "Shares"), the certificates for which shall be delivered at
Closing to Seller with stock powers duly endorsed in blank by RDB.
b. Pledge of Additional Stock. If Seller, Dr. and Mrs. Feigley and their
collateral are not released from liability under the SBA loans by ninety
(90) days after Closing RDB will provide a first security interest in an
additional Two Hundred Thousand (200,000) of such shares (the "Additional
Shares") as collateral for EVRM's security interest. At Closing, the
certificate(s) representing the Additional Shares with stock powers duly
endorsed in blank shall be deposited with a mutually acceptable escrow
agent which will either return them to RDB upon such release of Seller, the
Feigleys and their collateral or deliver them to Seller at the expiration
of the ninety day period if such releases have not been obtained.
c. RDB may notify EVRM at the end of any calendar quarter following Closing
if the "bid" price for EVRM Common Stock for each trading day of such
quarter on the OTC-BB or such recognized exchange on which the Shares and
Additional Shares (collectively, the "Pledged Securities") were traded was
such that the average of their "bid" prices on each day of such quarter
bore a ratio to the combined outstanding balances as of the last day of
such quarter, including accrued interest, of the SBA Loans (for which such
releases have not been obtained) and the Promissory Note provided for in
Section 1.02 (b) above (collectively, the "Outstanding Loans Balance"),
which was in excess of 3 to 2. Such notice will contain such daily "bid"
prices of the EVRM Common Stock and the Outstanding Loans Balance. After
verification of the data contained in such notice, EVRM will deliver an
amount of the Pledged Securities to RDB having a value equal to (a) their
average daily "bid" price for that quarter minus (b) the Outstanding Loans
Balance multiplied by the fraction, 3/2.
d. At Closing, RDB shall execute a security agreement in favor of EVRM
containing the foregoing terms, as well as such other terms and provisions
as are usual and customary in such security and stock pledge agreements in
addition to a UCC-1 Financing Statement containing the requisite
information regarding the security interest. Such agreement shall provide
that, absent a default therein or in the obligations which it secures, RDB
shall retain his rights to all cash dividends and his rights to vote the
Pledged Securities in addition to his right to execute any waivers or
consents with respect thereto.
1.04 Closing. The Closing of this Agreement shall be the consummation of
all transactions contemplated hereby to be performed at Closing and shall take
place at 2:00 p.m. on April 26, 2000, at the Premises or at such other time and
place as Seller and Purchaser may mutually agree in writing (the "Closing
Date").
ARTICLE II - REPRESENTATIONS AND WARRANTIES
2.01 Representations and Warranties of the Seller. Seller and EVRM hereby
represent and warrant to the Purchaser as follows:
a. Formation and Organization. Seller is a corporation duly formed and
validly existing and in good standing under the laws of the State of South
Carolina.
b. Authority, Binding Effect. Seller and EVRM have the authority to own
property and carry on business, to execute and deliver this Agreement and
the other instruments and documents required or contemplated hereby, to
perform the obligations hereunder, and to consummate this Agreement. This
Agreement has been duly executed and delivered by Seller and EVRM and
constitutes a legal, valid, and binding obligation enforceable in
accordance with its terms and the other agreements required or contemplated
hereby to be executed by the Seller, subject only to its ratification by
Seller's and EVRM's Boards of Directors.
c. Title to the Assets. Seller has good and marketable title to the Assets
and shall convey same to Purchaser at Closing, free and clear of all liens,
claims, encumbrances, charges, restrictions and other burdens, except as
disclosed in this Agreement and expressly assumed by Purchaser pursuant to
the terms of this Agreement; provided, that any file or record referred to
in Section 1.01 (e) above will be conveyed to Purchaser if, as and when the
written instructions therefor are received by Seller, for a period of
Ninety (90) days following Closing. After that time, Seller shall have no
further obligation to Purchaser in this regard.
d. Right to Use of Name. Seller has good title and possesses complete
ownership of the trade name "Azimuth," free and clear of all claims,
charges, liens, encumbrances or restrictions.
e. Absence of Violations, Compliance. To the best of the knowledge of
Seller, the use of the Assets in its Consultative Business does not
constitute a violation of any applicable zoning, building, environmental or
other ordinances, regulations, codes or other laws. Seller currently
complies in all material respects with all other laws applicable to it and
its business, properties and relationships.
f. Consents. To the best of the Seller's knowledge, no third party consent
or agreements of any party, judicial, governmental, creditor, lender or
otherwise, is necessary for the execution and delivery of this Agreement
and the other instruments and documents required or contemplated hereby
other than the consent of the landlord of the Premises to the Sublease (as
described below).
g. Litigation. There is no litigation, claim, arbitration, governmental
investigation or other proceeding pending or threatened which affects the
Assets or which may impair the ability of Seller to perform the obligations
contained in this Agreement, including any claim by any client of the
Consultative Business regarding unsatisfactory work by Seller.
h. Payment of Taxes and Wages. Seller has properly filed all returns that
are required to be filed by it which relate to the Assets with any
government authority, and all compensation, employment and other taxes and
withholding, fees, and other governmental charges related thereto have or
will be paid by Seller except the personal property taxes related to the
Assets which are due in December, 2000. For the purposes of this Agreement,
the sum of One Hundred Dollars ($100.00) shall be deemed to be a fair
proration of Seller's portion of such taxes.
i. Material Accuracy. None of the agreements, covenants, representations or
warranties contained in this Agreement or in any Exhibit hereto pursuant to
this Agreement contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
2.02 Representations and Warranties of Purchaser. The Purchaser hereby
represents and warrants to Seller as follows:
a. Formation and Organization. Purchaser is a limited liability company
duly formed and validly existing and in good standing under the laws of the
State of South Carolina, and RDB is its sole member.
b. Authority, Binding Effect. Purchaser has the authority to own property
and carry on business, to execute and deliver this Agreement and the other
instruments and documents required or contemplated hereby, to perform the
obligations hereunder, and to consummate this Agreement. This Agreement has
been duly executed and delivered by Purchaser and constitutes a legal,
valid, and binding obligation enforceable in accordance with its terms and
the other agreements required or contemplated hereby to be executed by the
Purchaser.
c. Litigation. There is no litigation, claim, obligation, proceeding,
investigation pending or threatened or any other thing which may impair the
Purchaser's ability to perform any of its obligations contained in this
Agreement.
ARTICLE III - COVENANTS
3.01 Covenants of the Seller and EVRM.
a. Sublease. EVRM hereby agrees to sublease to Purchaser approximately
1,000 square feet of office space in the Premises (the "Sublease") on a
week-to-week basis at a rental of One Hundred Seventy Dollars ($170.00) per
week commencing on the day of Closing and payable on the first day of each
week thereafter. The Sublease will be revocable by either party upon one
week's notice to the other. Such rent and sublease shall be entirely net to
EVRM which will have no responsibility whatever thereunder for any services
to Purchaser except the provision of electricity, water and HVAC. Purchaser
agrees to be responsible for all other expenses associated with the
Sublease.
b. Use of Certain Telephone Numbers. Seller agrees to allow Purchaser to
use existing Azimuth telephone numbers, including the existing toll free
telephone number, during the term of the Sublease. Purchaser will reimburse
Seller for any costs incurred under such agreement. The parties acknowledge
that the toll free number is currently in use by the Laboratory Business as
are two of the local numbers, and another number is the main corporate
number for EVRM and is listed on its 10-K's. At such time as EVRM and the
Laboratory Business no longer need their telephone and telefax numbers,
EVRM will use its best efforts to transfer them to Purchaser as soon
thereafter as practicable. Any unrecovered deposits will be reimbursed by
Purchaser. In the meantime, should Purchaser so elect, EVRM will use its
best efforts to transfer the number (843) 569-8792 to Purchaser. Should
Purchaser terminate the sublease, Seller agrees to transfer incoming calls
for Purchaser to a number provided to Seller and to provide such number to
caller for future use.
c. Release. Effective upon Closing, Seller and EVRM forever release and
discharge Purchaser and RDB, individually, from and against any and all
claims, demands, counterclaims, actions, costs, causes of action, damages,
debts, obligations and liabilities of whatever nature arising out of the
Employment Agreement or out of RDB's relationship with Seller and EVRM up
to and including the date of this Agreement. This release is subject to the
Closing of this Agreement.
d. Noncompetition. For a period of Three (3) years following Closing within
the State of South Carolina, neither Seller nor EVRM shall, directly or
indirectly, (i) engage in the Industrial Safety and Hygiene consulting
business; (ii) solicit in competition with the Purchaser any Consultative
Business Clients or accept Industrial Safety and Hygiene consulting
business from any of them; or (iii) without the consent of the Purchaser,
solicit any person who is or has been employed by the Purchaser or
encourage any such person to leave the employ of the Purchaser.
e. Notwithstanding any provision herein to the contrary:
(i) Nothing herein is intended, nor shall it be deemed, to impair or
prevent in any way whatsoever Seller's continued, unfettered
engagement in the Laboratory Business, including the performance of
laboratory services for Consultative Business Clients. Seller may
continue to use the name "Azimuth Laboratories" in its conduct of such
business.
(ii) Should Seller convey all or any portion of the Laboratory
Business, it will not convey the use of the name, "Azimuth
Laboratories" for a period of longer than six months from the Closing
of such transaction, and it will make its best efforts to acquire a
noncompetitive agreement from the purchaser(s) in such transaction
preventing such purchaser(s) from competing with the Consultative
Business.
3.02 Covenants of the Purchaser.
a. Sublease. Purchaser agrees to abide by the terms of the sublease as set
forth in Paragraph 3.01(a) above.
b. Release. Effective upon Closing, Purchaser and RDB forever release and
discharge Seller and EVRM, and their respective directors, officers and
representatives, from and against any and all claims, demands,
counterclaims, actions, costs, causes of action, damages, debts,
obligations and liabilities of whatever nature arising out of the
Employment Agreement or out of RDB's relationship with Seller and EVRM up
to and including the date of this Agreement. This release is subject to the
Closing of this Agreement.
c. Noncompetition. For a period of Three (3) years following Closing within
the State of South Carolina, neither Purchaser nor RDB shall, directly or
indirectly, (i) engage in any business competitive with an Industrial
Safety and Hygiene laboratory business; (ii) solicit in competition with
the Laboratory Business any clients of the Laboratory Business or accept
Industrial Safety and Hygiene laboratory business from any of them; or
(iii) without the consent of Seller and EVRM, solicit any person who is or
has been employed by either of them or encourage any such person to leave
the employ of either of them (iv) use the name "Azimuth" as a trade name in
conjunction with the word "laboratory" or "laboratories."
d. Receivables, Revenues and Revenue Sharing.
(i) Notice. At Closing, or as soon thereafter as is practicable,
Seller will notify all Consultative Business Client accounts
receivable of this transaction.
(ii) Receivables. All amounts due, as of Closing, for completed
contracts and completed segments of outstanding contracts between
Seller and Consultative Business Clients shall be receivables which
belong to Seller and Seller shall invoice such Clients accordingly at
or prior to Closing. So long as such invoice, or any portion thereof,
remains outstanding, Purchaser will pay to Seller all revenues which
Purchaser receives from such invoiced Client until such invoice is
paid in full, at which time Seller shall assign to Purchaser so much
of such account receivable as remains unpaid by such Client.
(iii) Until August 18, 2000 Purchaser shall pay to EVRM, upon receipt,
(a) seven and one-half per cent (7.5%) of all gross revenues which
result from Incomplete Contact Segments or Outstanding Proposals,
excluding PHT, PHTS and PHT Members.
(iv) Purchaser shall submit to EVRM at the beginning of each month
following Closing a report of receivables and receipts from
Consultative Business Clients for the preceding month, each of which
shall include: copies of all invoices to, and a breakdown of all
receipts from, Consultative Business Clients for the preceding month;
a breakdown of Purchaser's payments to EVRM the preceding month; and
such other information as EVRM may reasonably request. EVRM or its
representatives may inspect all records related to Purchaser's
revenues at any time during normal business hours upon 2 days notice.
For purposes of this Agreement, any outstanding invoice for revenues
included in (iii) above which is less than forty-five days old on
August 18, 2000 shall be deemed to have been paid in full prior to
that date, and the related percentage shall be paid to EVRM at that
time.
e. Engagement of Seller's Employees. Purchaser agrees to engage Gary
Eargle, Terry Sherril, and Jim Brown as employees upon the same terms they
are currently employed by Seller for a period of at least six months
following Closing, provided that any such employment may be terminated for
cause, and that those employees will enter into reasonable employment
agreements with Purchaser.
f. Release of Third Parties. At Closing, EVRM will execute a release,
prepared by Purchaser and in form and substance approved by EVRM prior to
Closing, of PHT and PHTS from liability resulting from their engagement of
Purchaser.
ARTICLE IV - MISCELLANEOUS
For purposes of this Article IV, the word "party" shall be deemed to
include EVRM and Seller jointly and severally, as the applicable context may
require, on the one hand, and Purchaser and RDB, jointly and severally, as the
applicable context may require, on the other.
4.01 Survival of Representations. The following shall survive the Closing:
(a) all representations and warranties contained herein; (b) all provisions
containing covenants to be performed subsequent to the Closing.
4.02 Injunctive Relief; Costs of Actions. The parties agree that failure by
Purchaser or RDB on the one hand, or Seller or EVRM on the other, to comply with
the provisions of Section 3.01(d) or 3.02(c) of this Agreement will cause
irreparable damage to the other party that may not be compensated adequately by
monetary damages. Accordingly, the parties agree that, in the event of breach or
threatened breach of the terms of either provision, the non-defaulting party
shall be entitled to injunctive or other preliminary or equitable relief in
addition to such other remedies as may be available to it for such breach or
threatened breach, including damages. In the event of any action at law or in
equity to enforce the provisions of this Agreement, the unsuccessful party shall
pay to the other all costs and expenses so incurred, including attorneys' fees.
4.03 Brokerage Fees. The parties each represent and warrant that no
statement or representation has been made to anyone which would incur liability
for any broker's or finder's fees or commissions payable in connection with this
Agreement. If any finder's fee or brokerage or other commission is claimed by
any person to be due on the basis of any statement or representation alleged to
have been made by any party, that party alleged to have so made the statement or
representation shall indemnify and hold harmless the other party from and
reimburse the other party for any loss, cost, expense, or liability in
connection with any such claim.
4.04 Expenses. The parties shall pay their own expenses incurred in
connection with this Agreement, including the fees of any attorneys,
accountants, consultants or others engaged by it.
4.05 Notices. All notices and other communications to be given hereunder
shall be in writing and shall be deemed to have been given when personally
delivered, or mailed by certified mail, return receipt requested, postage
prepaid, addressed as follows:
a. If to the Seller or EVRM: Envirometrics, Inc.
9229 University Blvd.
Charleston, SC 29406
b. If to the Purchaser or RDB: Risk Technologies, LLC and
Richard D. Bennett
2059 Emerald Terrace
Mount Pleasant, SC 19464
Communications sent by other means shall be deemed operative only upon actual
receipt. Addresses may be changed by either party upon written notice to the
other given as provided herein.
4.06 Binding Effect. All of the terms of this Agreement shall be binding
upon and shall inure to the benefit of the respective successors and assigns of
the parties hereto.
4.07 Assignment. This Agreement may not be assigned by either party without
the consent of the other party; provided, (1) Seller may assign its rights
hereunder to EVRM, and (2) Seller may assign its rights to enforce the
provisions of Section 3.02(c) above to a purchaser of the Laboratory Business
provided that, as a condition of such assignment, the purchaser of the
Laboratory Business agrees and covenants to be bound to noncompetitive covenants
identical to those contained in Section 3.01(d) and Seller assigns the right of
enforcement of same, including enforcement rights identical to those contained
in Section 4.02, to Purchaser.
4.08 Choice of Laws. This Agreement shall be construed and enforced in
accordance with the laws of the State of South Carolina.
4.09 Waiver. The waiver of any right under this Agreement by any party
hereto in any particular instance or instances shall not, unless so specified by
such party, be construed as or constitute a continuing waiver.
4.10 Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties. There are no representations or warranties made by
any party hereto and relied upon by any other party hereto except as set forth
herein.
4.11 Severability. If any one or more of the provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions hereof shall not be affected thereby.
4.12 Amendment. This Agreement may not be amended or supplemented except by
a writing signed by the party against whom such amendment or supplementation is
sought to be enforced.
THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK
4.13 Availability of Representation by Independent Counsel. The Purchaser
and RDB confirm and acknowledge that they have been represented by independent
counsel who has reviewed this Agreement and advised them regarding its
provisions.
4.14 Parties. The terms "Seller" and "Purchaser" herein shall mean and
include any successors-in-interest of either party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective authorized signatories as of the date first above written.
Azimuth, Incorporated 'Seller'
____________________________ By: ________________________________
Witness Walter H. Elliott III, Chief Executive Officer
Envirometrics, Inc. 'EVRM'
____________________________ By: ________________________________
Witness Walter H. Elliott III, Chief Executive Officer
Risk Technologies, LLC 'Purchaser'
____________________________ By:___________________________________
Witness Richard D. Bennett, Sole Member
____________________________ ____________________________________
Witness Richard D. Bennett 'RDB'
5.8.00
AGREEMENT
THIS AGREEMENT ( hereinafter the "Agreement") is made and entered into as
of the ___day of May, 2000, by and among AZIMUTH, INCORPORATED ("Azimuth"), a
South Carolina corporation having its principal place of business in Charleston,
South Carolina; ENVIROMETRICS, INC. ("EVRM"), a Delaware corporation having its
principal place of business in Charleston, South Carolina, and sole shareholder
of Azimuth; and GAL Services, Inc., a New York corporation having its principal
place of business in East Syracuse, New York ("GSI").
Background
Azimuth is engaged, inter alia, in the business of operating an Industrial
Safety and Hygiene laboratory which business is expressly identified and
segregated as Azimuth's Laboratory Business (the "Laboratory Business") on
Azimuth's internal financial statements; and,
Azimuth desires to sell, certain assets, and lease others, to GSI, and GSI
desires to purchase and lease the said assets from Azimuth, subject to the terms
and conditions herein.
Agreement
In consideration of the mutual promises contained below and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I - PURCHASE AND SALE OF ASSETS
1.01 The Sold Assets. At Closing Azimuth hereby agrees to sell, convey,
transfer, assign, set over and deliver to GSI, and GSI agrees to purchase and
accept, the following assets (the "Sold Assets"):
a. The list of current and former Laboratory Business clients (the
"Laboratory Business Clients") attached hereto as Exhibit "A";
b. A license to use the name "Azimuth Laboratories" for so long as may be
necessary to effect an orderly transition of the Laboratory Business
Clients but not longer than six months from Closing, provided that such
license is non-exclusive to the extent that the use of the name "Azimuth"
may be used by Azimuth's consultative business so long as such use does not
include the term "Laboratory" or "Laboratories"; and, provided further,
that Azimuth shall be permitted to retain the name "Azimuth" as its
corporate name so long as it adheres to the provisions below regarding
noncompetition with GSI;
c. Those outstanding assignments from Laboratory Business Clients upon
which work has begun but which remain unfinished and uninvoiced at Closing,
if any ("Work in Process") provided that none of the Work in Process will
have been received by Azimuth more than Seven days prior to closing. GSI
agrees to assume Azimuth's remaining obligations under such assignments;
d. All records and files in Azimuth's possession of Laboratory Business
Clients which have given Azimuth written instructions to release same to
GSI (except that records and files relating to Work in Process and
proposals outstanding at Closing will be delivered to GSI at Closing). GSI
will keep and maintain such records and files in safekeeping and make them
available to Azimuth to the extent Azimuth, or Azimuth's parent, successor
or insurance company may require same to respond to future claims.
No assets which are not explicitly described above are included in the Sold
Assets, and specifically excluded are Azimuth's consultative business and the
assets, clients, records and business related thereto (collectively, the
"Consultative Business"). It is acknowledged by Azimuth that GSI is not assuming
any liability of Azimuth other than that expressly described in Section 1.01
(c).
1.02 Purchase Price. The purchase price for the Sold Assets (the "Purchase
Price") shall consist of Twenty-five Thousand Dollars ($25,000.00), payable at
Closing.
1.03 Allocation of Purchase Price. The Purchase Price will be allocated
among the various Assets as GSI, in its discretion, may elect, in conformity
with GAAP.
1.05 Closing. The Closing of this Agreement shall be the consummation of
all transactions contemplated hereby to be performed at Closing and shall take
place at the offices of Azimuth or at such other place as Azimuth and GSI may
mutually agree in writing either (a) within two business days of notice by
Azimuth to GSI of its readiness to close within two business days, or (b) at
12:00 Noon May 8, 2000, whichever is sooner. GSI will have access to the
Laboratory facilities for 7 days after Closing to remove any Leased Assets.
The obligation of GSI to close this transaction is conditioned upon the
following:
(a) the representations and warranties set forth in Section 3.01 shall be
true and correct in all material respects at and as of the Closing Date;
(b) Azimuth shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing.
ARTICLE II - LEASE OF ASSETS
At Closing, Azimuth hereby agrees to lease to GSI, and GSI hereby agrees to
rent from Azimuth, all of the equipment described in Exhibit "B" attached hereto
(the "Leased Assets") upon the following terms and conditions:
2.01 Rent. The rent (the "Rent") which GSI shall pay to Azimuth for the
Leased Assets shall consist of, and be payable according to, the following:
a. Base Rent, which shall be Ten percent (10%) of all Gross Revenues
received by GSI from Laboratory Business Clients during the first two years
following Closing except as set forth below. The Base Rent will be paid on
the 15th day of each month following GSI's receipt of payment from clients
on the applicable revenues. "Gross Revenues" shall be exclusive of any
deductions for taxes or any other charges other than costs associated with
subcontracted analytical work. GSI shall use its commercially reasonable
efforts to acquire the business of Laboratory Business Clients and will
perform its obligations to them on a timely basis with a degree of
professionalism and skill that meets generally accepted standards of the
industry. Such standards will not obligate GSI to maintain an office in
South Carolina. Azimuth shall assist GSI in the notification of Laboratory
Business Clients of the transaction contemplated hereby. GSI's obligations
to pay Base Rent shall terminate if and when the Base Rent paid into escrow
(as provided below) and to Azimuth cumulatively (the "Cumulative Base
Rent") equals Forty Thousand Dollars ($40,000.00) per year during each of
the two years following the Closing Date. If at the end of such two year
period the Cumulative Base Rent is less than $30,000.00, GSI shall continue
to pay into escrow and/or to Azimuth, as required by Section 2.02 below,
ten percent (10%) of Gross Revenue received from Laboratory Business
Clients over the five years following such two year period until such
Cumulative Base Rent equals $30,000.00. If the Cumulative Base Rent at the
end of such seven years is less than $30,000 (the "Minimum Base Rent"), GSI
shall pay the difference between the Minimum Base Rent and the Cumulative
Base Rent into escrow and/or to Azimuth, as required by Section 2.02 below,
in one lump sum payment at that time, unless the Minimum Base Rent
requirement has been eliminated as provided in Section 2.02 below.
b. Additional Rent, consisting of (i) twenty-five per cent (25%) of Gross
Revenues received by GSI on non-Lead analysis Work in Process and (ii) ten
per cent (10%) of Gross Revenues received by GSI on Lead analysis Work in
Process, both payable monthly as above.
2.02 Liens. The parties acknowledge that the Leased Assets are subject to
security interests of the U. S. Small Business Administration (the "Liens")
evidenced by UCC 1 Financing Statements ## 90-026761, continued at 95-0217 and
90-026762, continued at 95-0217 on file with the Secretary of State of the State
of South Carolina. Notwithstanding anything to the contrary herein, so long as
the Liens are outstanding, GSI will pay all Rent into escrow with the law firm
of Wood and Smith, P.C., Syracure, New York as escrow agent. If a proceeding is
commenced to foreclose either or both of the Liens, Azimuth shall be required to
offer to the lienholder, prior to the seizure of any of the Leased Assets, all
of the funds then in the escrow account, up to a maximum of $35,000.00, in
exchange for termination of the Liens. If the lienholder refuses such offer and
seizes the Leased Assets and the funds then in escrow are equal to or greater
than $35,000.00, then the escrow will terminate, and: (a) GSI will receive the
first $35,000.00 of the escrowed funds; (b) Azimuth will receive the balance;
(c) thereafter, Rent will be paid directly to Azimuth according to the terms of
Section 2.01 above. If the lienholder refuses such offer and seizes the Leased
Assets and the funds then in escrow are less than $35,000.00, then the escrow
will terminate, and: (a) GSI will receive all of the escrowed funds; (b) ensuing
Rent will accrue to the account of GSI until it, together with the escrowed
funds paid to GSI, equals $35,000.00; and, (c) thereafter, Rent will be paid
directly to Azimuth according to the terms of Section 2.01 above; except that
(d) the Minimum Base Rent requirement will be extinguished.
Upon termination of the Liens, at GSI's election, (a) the lease of the
Leased Assets provided for herein shall remain in effect until the last rental
payment due thereunder, upon which title to the Leased Assets will pass to GSI;
or, (b) title to the Leased Assets will thereupon pass to GSI upon its payment
of $1.00 to Azimuth, and all ensuing rental payments to Azimuth will become
referral fees. At Closing, Azimuth will deposit a Bill of Sale for the Leased
Assets in the form attached hereto as Exhibit C which will be released to GSI
when title to the Leased Assets passes to GSI.
2.03 Condition of Assets; Net Lease. The Leased Assets are leased "as is"
and "where is," and Seller makes no express or implied representation or
warranty whatever in regard thereto, including warranty of merchantability,
fitness for a particular purpose or any other warranty of any nature, all which
are hereby expressly disclaimed by Seller to the extent permitted by the laws of
the State of South Carolina. The lease of the Leased Assets shall be absolutely
net to Azimuth. Any expenses in connection with the Leased Assets, including all
maintenance, repairs, taxes (except year 2000 ad valorem taxes as set forth in
Section 3.01 below) and insurance, and there shall be no deduction or setoff of
any nature against the Rent except as may be expressly set forth herein.
2.04 Security Agreement. The obligations of GSI hereunder will be secured
by a first security interest in the accounts receivable from Laboratory Business
Clients and the proceeds therefrom. At Closing, Purchaser shall execute a
security agreement in favor of EVRM containing the foregoing terms, as well as
such other terms and provisions as are usual and customary in such security
agreements in addition to a UCC-1 Financing Statement containing the requisite
information regarding the security interest.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of Azimuth. For purposes of this
Agreement the terms "Sold Assets" and "Leased Assets" shall be referred to
collectively as the "Assets." Azimuth hereby represents and warrants to GSI,
which warranties shall be true and correct on the Closing Date, as follows:
a. Formation and Organization. Azimuth is a corporation duly formed and
validly existing and in good standing under the laws of the State of South
Carolina.
b. Authority, Binding Effect. Azimuth has the authority to own property and
carry on business, to execute and deliver this Agreement and the other
instruments and documents required or contemplated hereby, to perform the
obligations hereunder, and to consummate this Agreement. This Agreement has
been duly executed and delivered by Azimuth and constitutes a legal, valid,
and binding obligation enforceable in accordance with its terms as will any
other documents required or contemplated hereby to be executed by Azimuth,
subject only to its ratification by Azimuth's and EVRM's Boards of
Directors.
c. Title to the Assets. Azimuth has good and marketable title to the Sold
and Leased Assets, and at Closing, they shall be free and clear of all
liens, claims, encumbrances, charges, restrictions and other burdens,
except as disclosed in this Agreement; provided, that any file or record
referred to in Section 1.01 (e) above will be conveyed to GSI when such
written instructions therefor are received by Azimuth, for a period of
Ninety (90) days following Closing. After that time Azimuth shall have no
further obligation to GSI in this regard.
d. Right to Use of Name. Azimuth has good title and possesses complete
ownership of the trade name "Azimuth," free and clear of any claims,
charges, liens, encumbrances or restrictions which would interfere with
Azimuth's obligations hereunder.
e. Absence of Violations, Compliance. To the best of the knowledge of
Azimuth, after diligent inquiry, the use of the Assets in its Laboratory
Business does not constitute a violation of any applicable zoning,
building, environmental or other ordinances, regulations, codes or other
laws. Azimuth complies in all material respects with all other laws
applicable to it and its business, properties and relationships including
without limitation any negligent, or wrongful acts or omissions arising on
or before the Closing and, at Closing, will have complied with any
applicable bulk transfer laws.
f. Consents. No third party consent or agreements of any party, judicial,
governmental, creditor, lender or otherwise, is necessary for the execution
and delivery of this Agreement and the other instruments and documents
required or contemplated hereby.
g. Litigation. There is no litigation, claim, arbitration, governmental
investigation or other proceeding pending or threatened which affects the
Assets or which may impair the ability of Azimuth to perform the
obligations contained in this Agreement.
h. Payment of Taxes and Proration. Azimuth has properly filed all returns
that are required to be filed by it which relate to the Assets with any
government authority, and all taxes, fees, and other governmental charges
related thereto have or will be paid by Azimuth except the personal
property taxes related to the Assets which are due in December, 2000 and
which shall be paid by Azimuth.
i. Indemnity of GSI. Azimuth hereby indemnifies and holds GSI harmless from
any claims of any nature related to or arising out of: (i) any liabilities
of Azimuth; (ii) any responsibility for the disposal of any waste or
hazardous chemicals, including all costs and attorneys fees in connection
therewith,
j. Financial Statements. The financial statements of the Laboratory
Business attached hereto as Exhibit "D" are true and correct, and none of
the assets contained in the most recent balance sheet thereof has been sold
or otherwise conveyed by Azimuth; nor has Azimuth or EVRM made a
distribution or paid a dividend within the past twelve months.
k. Material Accuracy. None of the agreements, covenants, representations or
warranties contained in this Agreement or in any Exhibit hereto pursuant to
this Agreement contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
3.02 Representations and Warranties of GSI. GSI hereby represents and
warrants to Azimuth as follows:
a. Formation and Organization. GSI is a corporation duly formed and validly
existing and in good standing under the laws of the State of New York.
b. Authority, Binding Effect. GSI has the authority to own property and
carry on business, to execute and deliver this Agreement and the other
instruments and documents required or contemplated hereby, to perform the
obligations hereunder, and to consummate this Agreement. This Agreement has
been duly executed and delivered by GSI and constitutes a legal, valid, and
binding obligation enforceable in accordance with its terms as will any
other documents required or contemplated hereby to be executed by GSI
subject only to ratification by GSI's Board of Directors.
c. Litigation. There is no litigation, claim, obligation, proceeding,
investigation pending or threatened or any other thing which may impair
GSI's ability to perform any of its obligations contained in this
Agreement.
ARTICLE IV - COVENANTS
4.01 Covenants of Azimuth.
a. Documents at Closing. At Closing, Azimuth will provide the following
documents to GSI:
(i) Bills of Sale for the Sold Assets and the Leased Assets, the
latter of which is to be deposited with the said escrow agent;
(ii) Ratification of this Agreement by Azimuth's and EVRM's Board of
Directors and appropriate authorizations of its signatories, and such
other authorizations as may be required to validate the transactions
contemplated hereby;
(iii) Written opinion of Azimuth's counsel in the form attached hereto
as Exhibit "E";
b. Noncompetition. For a period of Three (3) years following Closing within
the State of South Carolina, neither Azimuth nor EVRM shall, directly or
indirectly, (i) engage in the Industrial Safety and Hygiene laboratory
business; (ii) solicit in competition with GSI any Laboratory Business
Clients or accept business from any of them in competition with GSI; or
(iii) without the consent of GSI, solicit any person who is or has been
employed by GSI or encourage any such person to leave the employ of GSI.
c. Notwithstanding any provision herein to the contrary:
(i) Nothing herein is intended, nor shall it be deemed, to impair
Azimuth's continued engagement in the Consultative Business, including
the performance of consultative services for Laboratory Business
Clients.
(ii) Should Azimuth convey all or any portion of the Consultative
Business, it will acquire a noncompetitive agreement from the
purchaser(s) in such transaction preventing such purchaser(s) from
competing with the Laboratory Business in South Carolina for a three
year period and which will include a provision permitting Azimuth to
assign the right to enforce such provision. Azimuth hereby assigns its
rights to enforce such provision to GSI, effective at Closing.
4.02 Covenants of GSI.
a. Noncompetition. For a period of Three (3) years following Closing within
the State of South Carolina, GSI shall not, directly or indirectly; (i)
engage in any business competitive with an Industrial Safety and Hygiene
consultative business; (ii) solicit in competition with the Consultative
Business any Consultative Business Clients or accept Industrial Safety and
Hygiene consulting business from any of them; or (iii) without the consent
of Azimuth, solicit any person who is or has been employed by the
Consultative Business or a purchaser thereof or encourage any such person
to leave the employ thereof.
b. Reporting. GSI shall submit to EVRM at the beginning of each month
following Closing a report of receivables and receipts from Laboratory
Business Clients for the preceding month, each of which shall include:
copies of all invoices to, and a breakdown of all receipts from, Laboratory
Business Clients for the preceding month; a breakdown of GSI's payments of
Rent for the preceding month; and such other information as EVRM may
reasonably request. EVRM or its representatives may inspect all records
related to GSI's revenues at any time during normal business hours upon 2
days notice.
ARTICLE V - MISCELLANEOUS
For purposes of this Article V, the word "party" shall be deemed to include
EVRM and Azimuth jointly and severally, as the applicable context may require,
on the one hand, and GSI on the other.
5.01 Survival of Representations. The following shall survive the Closing:
(a) all representations and warranties contained herein; (b) all provisions
containing covenants to be performed subsequent to the Closing.
5.02 Injunctive Relief; Costs of Actions. The parties agree that failure by
GSI on the one hand, or Azimuth or EVRM on the other, to comply with the
provisions of 4.02(a) or Section 4.01(b) of this Agreement, respectively, will
cause irreparable damage to the other party that may not be compensated
adequately by monetary damages. Accordingly, the parties agree that, in the
event of breach or threatened breach of the terms of either provision, the
non-defaulting party shall be entitled to injunctive or other preliminary or
equitable relief in addition to such other remedies as may be available to it
for such breach or threatened breach, including damages. In the event of any
action at law or in equity to enforce the provisions of this Agreement, the
unsuccessful party shall pay to the other all costs and expenses so incurred,
including attorneys' fees.
5.03 Brokerage Fees. The parties each represent and warrant that no
statement or representation has been made to anyone which would incur liability
for any broker's or finder's fees or commissions payable in connection with this
Agreement. If any finder's fee or brokerage or other commission is claimed by
any person to be due on the basis of any statement or representation alleged to
have been made by any party, that party alleged to have so made the statement or
representation shall indemnify and hold harmless the other party from and
reimburse the other party for any loss, cost, expense, or liability in
connection with any such claim.
5.04 Expenses. The parties shall pay their own expenses incurred in
connection with this Agreement, including the fees of any attorneys,
accountants, consultants or others engaged by them.
5.05 Notices. All notices and other communications to be given hereunder
shall be in writing and shall be deemed to have been given when personally
delivered, or mailed by certified mail, return receipt requested, postage
prepaid, addressed as follows:
a. If to Azimuth or EVRM: Envirometrics, Inc.
9229 University Blvd.
Charleston, SC 29406
b. If to GSI:
GAL Services, Inc. d/b/a/ Galson Laboratories
6601 Kirkville Road
East Syracuse, NY 13057-0369
Communications sent by other means shall be deemed operative only upon actual
receipt. Addresses may be changed by either party upon written notice to the
other given as provided herein.
5.06 Binding Effect. All of the terms of this Agreement shall be binding
upon and shall inure to the benefit of the respective successors and assigns of
the parties hereto.
5.07 Assignment. This Agreement may not be assigned by either party without
the consent of the other party, whose consent will not be unreasonably withheld;
provided, Azimuth may assign its rights to enforce the provisions of Section
4.02 above to a purchaser of the Consultative Business, including the
enforcement rights set forth in Section 5.02 above.
5.08 Choice of Laws. This Agreement shall be construed and enforced in
accordance with the laws of the State of South Carolina without regard to its
conflicts of laws provisions.
5.09 Waiver. The waiver of any right under this Agreement by any party
hereto in any particular instance or instances shall not, unless so specified by
such party, be construed as or constitute a continuing waiver.
5.10 Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties. There are no representations or warranties made by
any party hereto and relied upon by any other party hereto except as set forth
herein.
5.11 Severability. If any one or more of the provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions hereof shall not be affected thereby.
5.12 Amendment. This Agreement may not be amended or supplemented except by
a writing signed by the party against whom such amendment or supplementation is
sought to be enforced.
5.13 Parties. The terms "EVRM," "Azimuth" and "GSI" herein shall mean and
include any successors-in-interest of either party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective authorized signatories as of the date first above written.
Azimuth, Incorporated 'Azimuth'
__________________________ By: ________________________________
Witness Walter H. Elliott III, Chief Executive Officer
Envirometrics, Inc. 'EVRM'
__________________________ By: ________________________________
Witness Walter H. Elliott III, Chief Executive Officer
GAL Services, Inc. d/b/a/ Galson Laboratories
'GSI'
__________________________ By:_________________________________
Witness F. Joseph Unangst, President
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