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Exhibit 10(5)
NOTE CONVERSION AGREEMENT
This Note Conversion Agreement (this "Agreement") is entered
this 15th day of May, 1998, by and between Sentex Sensing Technology, Inc., a
New Jersey corporation ("Sentex"), and Clarion Capital Corporation, a Delaware
corporation ("Clarion").
W I T N E S S E T H :
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WHEREAS, on November 30, 1996, Sentex issued to Clarion (i) a
promissory note in the aggregate principal amount of $473,164.00 (the "Class A
Convertible Note"), which is exchangeable, under certain conditions, into
8,419,288 common shares, no par value, of Sentex (the "Common Shares") and (ii)
a promissory note in the aggregate principle amount of $136,414.00 (the "Clarion
Note" and together with the Class A Convertible Note, the "Convertible Notes"),
which such Clarion Note is exchangeable, under certain conditions, into
7,031,649 Common Shares;
WHEREAS, the Board of Directors of Sentex has determined that
it is in the best interest of Sentex to permit Clarion to convert the
Convertible Notes into 15,450,937 Common Shares (the "Principal Shares"),
without regard to the actual restrictions contained on such Convertible Notes;
and
WHEREAS, Sentex and Clarion have agreed that Clarion is
entitled to receive 1,118,469 Common Shares in satisfaction of all interest due
under the Convertible Notes through the date hereof (the "Interest Shares" and
together with the Principle Shares, the "Converted Shares"); and
WHEREAS, Clarion has determined that it desires to convert the
Convertible Note into the Principal Shares and accept the Interest Shares in
lieu of all other claims for interest under the Convertible Notes;
NOW, THEREFORE, in consideration of the premises and of the
mutual promises and covenants set forth herein, the parties agree to the
following:
1. CONVERSION OF NOTES. Clarion hereby surrenders to the
custody of Sentex the Convertible Notes, together with all interest accrued
thereon in exchange for Converted Shares. Sentex hereby issues to Clarion the
converted Shares in exchange for the Convertible Notes and Clarion's claim for
all accrued interest due thereon.
2. REPRESENTATIONS AND WARRANTIES OF CLARION. Clarion
represents and warrants to Sentex that (i) Clarion is duly organized, validly
existing, and in good standing in the State of Delaware and is licensed to do
business and in good standing in the State of Ohio; (ii) Clarion has the full
power and authority to execute, deliver and perform its obligations under this
Agreement; (iii) Clarion has taken such action as is necessary to authorize the
execution, delivery and performance of this Agreement; (iv) neither the
execution nor the performance of this Agreement will conflict with, be a
violation of, or cause a breach of any agreement to which Clarion is a party;
(v) from November 30, 1996 through the date hereof, Clarion has been the only
holder of the Convertible Notes; and (vi) no third party has any right or claim
to payments or other performance due under the either Convertible Note. These
representations and warranties shall survive the performance of this Agreement.
Clarion shall indemnify and hold Sentex harmless from and against any and all
losses, liabilities, damages, costs and expense asserted against, imposed upon
or incurred or suffered by Sentex as a result of any inaccuracy in these
representations or warranties; provided Clarion shall have the right to control
the defense of any claim by a third party.
3. REPRESENTATIONS AND WARRANTIES OF SENTEX. Sentex represents
and warrants to Sentex that (i) Sentex is duly organized validly existing; (ii)
Sentex has the full power and authority to
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execute, deliver and perform its obligations under this Agreement; (iii) Sentex
has taken such action as is necessary to authorize the execution, delivery and
performance of this Agreement; (iv) neither the execution nor the performance of
this Agreement will conflict with, be a violation of, or cause a breach of any
agreement to which Sentex is a party; and (v) the Conversion Shares have been
duly authorized are fully paid and nonassessable. These representations and
warranties shall survive the performance of this Agreement. Sentex shall
indemnify and hold Clarion harmless from and against any and all losses,
liabilities, damages, costs and expense asserted against, imposed upon or
incurred or suffered by Clarion as a result of any inaccuracy in these
representations or warranties; provided Sentex shall have the right to control
the defense of claim by a third party.
4. SECURITIES FILINGS. Clarion shall be responsible to make a
file, at its own expense, all filing required by the Securities and Exchange
Commission.
5. TERMINATION OF AGREEMENTS. Effective upon the disposition
of the Converted Shares by Clarion to any third party that is not an affiliate
or associate of Clarion, all of Clarion's rights and obligations and all of
Sentex's rights and obligations (as such rights and obligations relate to
Clarion) under the Participation Rights Agreement, dated November 29, 1996 and
the Board Representation Agreement, dated November 29, 1996, shall automatically
terminate.
6. MUTUAL RELEASE.
(a) Except as provided for in Section 6(b), upon the
disposition of the Converted Shares by Clarion, each of
Clarion and Sentex, on its own behalf and on behalf of its,
successors, and assigns, hereby waives, releases, discharges
and forever holds harmless the other, its shareholders,
directors, officers, agents and employees, and anyone
connected with any such entity from any and all claims,
demands, rights and causes of action of whatsoever kind and
nature that Clarion or Sentex, as the case may be, may have
relating to the action taken by either of them in connection
with Clarion's its investment in Sentex or its associate's
representation on the Board of Directors of Sentex, including
any claim in contract, or tort, or under any federal or state
statute, including without limitation federal or state
securities laws.
(b) Notwithstanding anything in this Section 6 to the
contrary, Seller nor Buyer releases the other from any claim
relating to fraud, intentional misrepresentation or the
misappropriation of property, or from any claim that may arise
under this Agreement.
7. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements with respect to such subject matter.
8. BINDING EFFECT ASSIGNMENT. The provisions of this Agreement
are binding upon and inure to the benefit of the parties hereto and their
respective successors. This Agreement may not be assigned by either party
without the prior written consent of the other party.
9. APPLICABLE LAW. This Agreement shall be governed and
construed exclusively in accordance with the laws of the State of New Jersey,
without regard to principles of conflicts of laws.
10. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original for all purposes, and
all of which together shall constitute one agreement.
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IN WITNESS WHEREOF, the parties hereto have set their hands to
this Agreement on the date first written above.
SENTEX SENSING TECHNOLOGY, INC.
/s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx, Chairman and President
CLARION CAPITAL CORPORATION
/s/ Xxxxx Xxxxx
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Xxxxx Xxxxx, Chairman
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