-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wy7f3OWlsIus3k73np5RlaIlgzo8BvoPeT+uA/ZEAm7O0e4bA3qetyTLT1NTJRzh BKRPZGQdYIG1ZrH1kYyJaw== 0001260415-05-000042.txt : 20050516 0001260415-05-000042.hdr.sgml : 20050516 20050513174256 ACCESSION NUMBER: 0001260415-05-000042 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20050516 DATE AS OF CHANGE: 20050513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DYNASIL CORP OF AMERICA CENTRAL INDEX KEY: 0000030831 STANDARD INDUSTRIAL CLASSIFICATION: GLASS, GLASSWARE, PRESSED OR BLOWN [3220] IRS NUMBER: 221734088 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-27503 FILM NUMBER: 05830828 BUSINESS ADDRESS: STREET 1: 385 COOPER RD CITY: WEST BERLIN STATE: NJ ZIP: 08091 BUSINESS PHONE: 8567674600 MAIL ADDRESS: STREET 1: 385 COOPER RD CITY: WEST BERLIN STATE: NJ ZIP: 08091 10QSB 1 dyn10qsb0305.txt DYNASIL CORPORATION OF AMERICA FORM 10QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB (Mark One) XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - --- ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005 TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - --- ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO ______. Commission file number 000-27503 ____________________ DYNASIL CORPORATION OF AMERICA - ------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) New Jersey 22-1734088 -------------- ------------------------------- (State or other jurisdiction (IRS Employer Identification No.) of incorporation) 385 Cooper Road, West Berlin, New Jersey, 08091 ---------------------------------------------------------- (Address of principal executive offices) (856) 767-4600 -------------------------------------------------- (Registrant's telephone number, including area code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days) Yes XX No ---- ---- The Company had 3,748,898 shares of common stock, par value $.0005 per share, outstanding as of May 9, 2005. 1 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES INDEX PAGE PART 1. FINANCIAL INFORMATION - ---- ITEM 1. FINANCIAL STATEMENTS DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES ----------------------------------------------- CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2005 AND SEPTEMBER 30, 2004 3 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2005 AND 2004 4 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31, 2005 AND 2004 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 9 ITEM 3. CONTROLS AND PROCEDURES 13 PART II. OTHER INFORMATION 13 ITEM 1. LEGAL PROCEEDINGS 13 ITEM 2. CHANGES IN SECURITIES 13 ITEM 3. DEFAULTS ON SENIOR SECURITIES 13 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 13 ITEM 5. OTHER INFORMATION 13 ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 14 SIGNATURES 14 2 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS UNAUDITED) ASSETS March 31 September 30 2005 2004 ---------- ---------- Current assets Cash and cash equivalents $ 412,839 $ 254,908 Accounts receivable 770,692 309,276 Inventory 861,132 369,813 Other current assets 123,773 16,656 ---------- ---------- Total current assets 2,168,436 950,653 Property, Plant and Equipment, net 777,365 419,718 Other Assets Deferred financing costs 18,595 3,321 Intangibles 78,414 0 ---------- ---------- Total Other Assets 97,009 3,321 ---------- ---------- Total Assets $3,042,810 $1,373,692 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Note payable to bank- Line of credit $250,000 $ 0 Current portion - long-term debt 155,746 120,000 Accounts payable 313,029 184,214 Accrued expenses 331,261 114,959 ---------- ---------- Total current liabilities 1,050,036 419,173 Long-term Debt, net 714,454 488,889 Stockholders' Equity Common Stock, $.0005 par value, 25,000,000 shares authorized, 4,553,538 and 4,050,180 shares issued, 3,743,378 and 3,240,020 shares outstanding 2,277 2,025 Preferred Stock, $1 per share, Series A 10% Cumulative, 690,000 0 Convertible. 700,000 shares authorized, issued and outstanding Additional paid in capital 1,343,421 1,239,736 Retained earnings 228,964 210,211 ---------- ---------- 2,264,662 1,451,972 Less 810,160 shares in treasury - at cost (986,342) (986,342) ---------- ---------- Total stockholders' equity 1,278,320 465,630 ---------- ---------- Total Liabilities and Stockholders' Equity $3,042,810 $1,373,692 ========== ==========
3 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Six Months Ended March 31 March 31 2005 2004 2005 2004 ---------- --------- ---------- --------- Sales $1,097,026 $ 594,469 $1,878,212 $1,216,963 Cost of Sales 816,113 457,361 1,396,799 919,907 ---------- --------- ---------- --------- Gross profit 280,913 137,108 481,413 297,056 Selling, general and administrative 256,977 175,923 443,698 354,502 ---------- --------- ---------- --------- Income (Loss) from Operations 23,936 ( 38,815) 37,715 ( 57,446) Other income (expense) Interest expense - net (11,259) ( 8,058) (18,962) ( 15,459) ---------- --------- ---------- --------- Income (Loss) before Income Taxes 12,677 (46,873) 18,753 ( 81,783) Income Tax 0 0 0 0 ---------- --------- ---------- --------- Net income (loss) $12,677 ($46,873) 18,753 ($72,905) ========== ========= ========== ========== Net income (loss) per share Basic $0.00 ( $0.02) $0.01 ( $0.03) Diluted $0.00 ( $0.02) $0.00 ( $0.03) Weighted average shares outstanding 3,522,410 2,238,830 3,454,382 2,238,542
4 DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended March 31 2005 2004 ---------- ----------- Cash flows from operating activities: Net income (loss) $ 18,753 ($72,905) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 74,215 78,750 Amortization expense 1,999 1,704 Allowance for doubtful accounts 4,496 -0- (Increase) decrease in: Accounts receivable (155,451) (119,806) Inventories (62,448) 43,853 Prepaid expenses and other current assets (9,595) ( 1,443) Other assets 3,925 Increase (decrease) in: Accounts payable 52,632 66,171 Accrued expenses 89,678 ( 6,715) --------- ---------- Net cash provided by (used in) operating activities 14,279 ( 6,466) --------- ---------- - ---------- Cash flows from investing activities: Acquisition of property, plant and equipment (21,287) -0- Cash paid for acquisition of Optometrics LLC assets (700,000) -0- Cash for acquisition costs to date (67,976) -0- --------- ---------- Net cash provided by (used in)investing activities (789,263) -0- --------- ---------- Cash flows from financing activities: Issuance of common stock 35,538 260 Issuance of preferred stock 690,000 -0- Proceeds from short-term debt 102,143 -0- Proceeds from long-term debt 183,106 -0- Payments on long-term debt (60,599) ( 92,040) Deferred financing costs incurred (17,273) -0- --------- ---------- Net cash provided by (used in) financing activities 932,915 ( 91,780) --------- ---------- Net increase(decrease) in cash 157,931 ( 98,246) Cash - beginning of period 254,908 323,321 --------- ---------- Cash - end of period $ 412,839 $ 225,075 ========= ===========
Supplemental Disclosure of cash flow information: Non-cash investing and financing activities: Acquisition of Optometrics LLC Fair market value of current assets acquired $ 918,067 Property, plant and equipment 410,575 Intangibles 78,414 Fair market value of liabilities assumed (529,110) Acquisition costs incurred (109,546) Issuance of 300,000 common stock shares to sellers (68,400) Net Cash paid for Optometrics LLC $ 700,000 5 Supplemental Disclosures of Cash Flow Information (continued): The Company issued 700,000 shares of preferred stock, valued at $1.00 per share, and received cash of $700,000. The Company incurred stock issuance costs of $10,000 for a net proceeds of $690,000, of which $600,000 was used to fund the acquisition of Optometrics, LLC. In connection with the acquisition of Optometrics, LLC, the Company also obtained total debt proceeds of $550,000, of which $100,000 funded the balance of the cash payment to the sellers, $67,976 funded the acquisition costs, $264,751 paid off the debt of Optometrics, LLC, $17,273 paid the deferred financing fees, and $100,000 was used for general working capital purposes. DYNASIL CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 - Basis of Presentation The consolidated balance sheet as of September 30, 2004 was audited and appears in the Form 10-KSB previously filed by the Company. The consolidated balance sheet as of March 31, 2005 and the consolidated statements of operations and cash flows for the three months and six months ended March 31, 2005 and 2004, and the related information contained in these notes have been prepared by management without audit. In the opinion of management, all adjustments (which include only normal recurring items) necessary to present fairly the financial position, results of operations and cash flows in conformity with generally accepted accounting principles as of March 31, 2005 and for all periods presented have been made. Interim operating results are not necessarily indicative of operating results for a full year. On March 8, 2005, Dynasil Corporation of America acquired the operating assets and assumed certain liabilities of Optometrics LLC, a worldwide supplier of optical components. The assets acquired from Optometrics LLC will be operated under the Optometrics Corporation name. The financial statements in this report include the Optometrics Corporation results of operations from March 9, 2005 through March 31, 2005. Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's September 30, 2004 Annual Report on Form 10-KSB previously filed by the Company with the Securities and Exchange Commission. Note 2 - Business Acquisition On March 8, 2005, the Company, through its newly formed wholly owned subsidiary, Optometrics Corporation, completed its acquisition of substantially all of the assets of Optometrics, LLC, a worldwide supplier of optical components for a total purchase price of $877,946. Cash of $700,000 was paid by the Company and 300,000 shares of the Company's common stock were issued to the former owners of Optometrics, LLC, valued at $0.23 per share, or $68,400. Acquisition costs of $109,546 were incurred. The business acquisition was recorded under the purchase method of accounting which requires the total consideration be allocated to the assets acquired and liabilities assumed based on their fair values. The fair value of tangible and intangible assets acquired and liabilities assumed were established based on the unaudited March 8, 2005 balance sheet of Optometrics, LLC, as well as certain assumptions made regarding fair values. 6 The excess of the purchase price over the fair value of the net assets acquired will be allocated to goodwill. The preliminary purchase price allocation is not yet finalized, and as such, for purposes of these interim financial statements, the excess is classified as intangibles. The Company expects to finalize the allocation within the third quarter of fiscal 2005. The results of operations of Optometrics Corporation has been included in the consolidated financial statements from March 9, 2005, the date of acquisition. The preliminary allocation of purchase price as of March 9, 2005 is summarized below: Cash and cash equivalents $ 50,585 Accounts receivable 310,461 Inventories 428,871 Prepaid expenses and other current assets 128,150 Property and equipment 410,575 Intangibles 78,414 Current liabilities assumed (242,449) Long-term debt liabilities assumed (286,661) Total purchase price $877,946 Note 3 - Debt On March 8, 2005, the Company entered into credit agreements totaling $700,000 with Citizens Bank in connection with the acquisition of Optometrics, LLC of which the initial borrowing was $550,000. The terms of the Credit Agreements provide the Company with a $300,000 term loan (the "Term Loan") and a $400,000 revolving credit facility (the "Line of Credit"). The proceeds have been used to payoff the debt of the former Optometrics LLC, to fund the acquisition, and for general working capital purposes. Borrowings under the line of credit bear interest at a variable rate equal to Citizens Bank's prime rate plus 0.5%. Initial borrowing on the Line of Credit was $250,000. Outstanding borrowings under the Term Loan require monthly payments of $5,834.78 over a five year term which started March 9 and ends March 2011 at a fixed interest rate of 6.25%. As part of the credit agreement, the Company is required to comply with certain financial covenants measured annually regarding the liabilities to equity ratio and debt service coverage for Optometrics Corporation. The performance of the obligations is secured by the assets of Optometrics Corporation with a corporate guarantee by the Company and a second lien on the Company's New Jersey assets excluding the real estate. Note 4 - Convertible Preferred Stock On March 8, 2005, the Company completed a private placement of 700,000 shares of Series A 10% Cumulative Convertible preferred stock for cash proceeds of $700,000. The stock was sold at a price of $1.00 per share. Total expenses for the stock placement were $10,000. Each share of preferred stock carries a 10% per annum cumulative dividend payable quarterly and is convertible to 2.2222 shares of common stock at any time by holders, subject to adjustment for certain subsequent sales of common stock or securities convertible into or exchangeable for common stock, and is callable starting March 9, 2007 by the Company at a redemption price of $1.00 per share. Proceeds from the stock sale were used to acquire the assets of Optometrics LLC and for working capital. Note 5 - Inventories Inventories are stated at the lower of average cost or market. Cost is determined using the first-in, first-out (FIFO) method. Inventories consist primarily of raw materials, work-in- process and finished goods. The Company evaluates inventory levels and expected usage on a periodic basis and records adjustments for impairments as required. 7 Inventories consisted of the following: March 31, 2005 September 30, 2004 ----------------- ------------------ Raw Materials $282,933 $148,278 Work-in-Process 314,079 114,170 Finished Goods 264,120 107,365 ------- ------- $861,132 $369,813 ======= ======= Note 6 - Net Income Per Share Basic net income per share is computed using the weighted average number of common shares outstanding. The dilutive effects of potential common shares outstanding are included in diluted net earnings per share. For periods with a net loss, diluted net earnings per share exclude the impact of potential common shares since they would have resulted in an antidilutive effect. Note 7 - Stock Based Compensation The Company has adopted the disclosure provisions of SFAS No. 148 and continues to account for stock-based compensation using the intrinsic value method. Accordingly, no compensation cost has been recognized in the financial statements for stock options issued to employees since the options were granted at the quoted market price or higher on the date of grant. Stock options granted to consultants and other non-employees are reported at fair value in accordance with SFAS No. 123. The pro forma disclosures of net loss and net loss per common share required by SFAS No. 123 are shown below. Six months ended March 31, 2005 March 31, 2004 ----------- ------------- Net income (loss), as reported $ 18,753 ( $ 72,905) Add: Stock-based employee compensation expense included in reported net income -0- -0- Less: Total stock-based employee compensation expense determined under fair value based method for all options (153) -0- ----------- ------------- Pro forma net profit (loss) $ 18,600 ( $72,905) =========== =========== Actual net profit (loss) per common share $ 0.01 ($ 0.03) Pro forma net profit (loss) per common share $ 0.01 ($ 0.03) During the six months ended March 31, 2005, 433,459 stock options were granted at prices ranging from $0.40 to $0.65 per share and no options were exercised. During the six months ended March 31, 2004, no stock options were granted or exercised. The Company cancelled 45,000 and 132,000 options during the six months ended March 31, 2005 and 2004, respectively. Compensation expenses relating to non-employee stock options granted during the six months ended March 31, 2005 and 2004 were $-0-. During the six months ended March 31, 2005, The Company issued 158,360 shares of common stock valued at $0.14 to $0.45 per share to the Board of Directors in satisfaction of accrued and 2005 directors' fees totaling $25,217. 8 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Overview On March 8, 2005, Dynasil Corporation of America acquired the operating assets and assumed certain liabilities of Optometrics LLC, a worldwide supplier of optical components including diffraction gratings, lenses, thin film filters, laser optics, monochromators, and specialized optical systems. The assets acquired from Optometrics LLC will be operated under the Optometrics Corporation name. The financial statements in this report include the Optometrics results of operations for the 23 day period from March 9, 2005 through March 31, 2005. The results from time periods previous to March 9, 2005 do not include Optometrics results. For calendar year 2004, Optometrics LLC had revenues of $3.06 Million, EBITDA of $379,966, and net income before taxes of $257,610. The Optometrics assets were purchased for $700,000 in cash, 300,000 shares of Dynasil common stock valued at $68,400, and repayment of Optometrics LLC loans totaling $264,750. The acquisition was funded by $700,000 of proceeds from a private placement by the Company of 700,000 shares of a new series of convertible preferred stock as well as bank loans. The Optometrics acquisition is expected to double Dynasil's revenues and significantly enhance profitability. Revenues for the 2nd quarter ended March 31, 2005 were $1,097,026, an increase of 85% over revenues of $594,469 for the quarter ended March 31, 2004. Revenues for the six months ended March 31, 2005 were $1,878,212, an increase of 54% over the six months ended March 31, 2004. The net profit for the quarter ended March 31, 2005 was $12,677, or less than $0.01 per share, compared with a net loss of $46,873, or a negative $.02 per share, for the quarter ended March 31, 2004. The net profit for the six months ended March 31, 2005 was $18,753, or $0.01 per share, compared with a net loss of $72,905, or a loss of $0.03 per share for the six months ended March 31, 2004. The Company continues to focus on management's strategy of profitable growth from its optical materials business and by pursuing acquisitions. Results of Operations Revenues for the three months ended March 31, 2005 were $1,097,026, an increase of 85% over revenues of $594,469 for the three months ended March 31,2004. Revenues for the six- months ended March 31, 2005 were $1,878,212 an increase of 54% over revenues of $1,216,963 for the six-months ended March 31,2004. Excluding Optometrics results, revenues were up 48% for the quarter ended March 31, 2005 versus the same quarter in 2004. Management believes that the revenue improvement comes from improved economic conditions in the Company's markets combined with aggressive pricing to win several high volume jobs and active pursuit of new business. The addition of new optical glasses to our product line in 2004 contributed to increased sales. Additionally, the 23 days of sales for Optometrics Corporation contributed to the increase in sales. Cost of sales for the three months ended March 31, 2005 was $816,113, or 74.4% of sales, an increase of $358,752 over the three months ended March 31, 2004 of $457,361, or 76.9% of sales. Cost of sales for the six-months ended March 31, 2005 was $1,396,799, or 74.4% of sales, an increase of $476,892 over the six-months ended March 31, 2004 of $919,907 or 75.6% of sales. The slight decrease in cost of sales as a percentage of sales resulted from higher manufacturing volumes and higher Optometrics margins that partially offset the pricing used to win two high volume jobs. The higher cost of sales in dollars comes from higher sales volume and the addition of Optometrics. 9 Gross profit for the three months ended March 31, 2005 was $280,913, or 25.6% of sales, an increase of $143,805 over the three months ended March 31, 2004 of $137,108, or 23.1% of sales. Gross profit for the six months ended March 31, 2005 was $481,413, or 25.6% of sales, an increase of $184,357 over the six months ended March 31, 2004 of $297,056, or 24.4% of sales. Selling, general and administrative ("SG&A") expenses for the three months ended March 31, 2005 were $256,977 or 23.4% of sales, an increase of $81,054 over the three months ended March 31, 2004 of $175,923, or 29.6% of sales. SG&A expenses for the six months ended March 31, 2005 were $443,698, or 23.6% of sales, an increase of $89,196 over the six months ended March 31, 2004 of $354,502, or 29.1% of sales. The largest increase in SG&A dollars came from the addition of Optometrics Corporation. The year to date SG&A expenses as a percentage of sales decreased from 29.6% in 2004 to 23.4% in 2005. The combination of Dynasil and Optometrics selling efforts is expected to further improve the sales and marketing efficiency for both companies. Mr. Craig T. Dunham joined The Company to replace Mr. John Kane as President and CEO effective October 1, 2004. Mr. Kane left The Company in early December and the management transition added costs estimated at $32,400 for the six month period. Mr. Francis Ciancarelli replaced Mr. Paul Roehrenbeck as Vice President of Sales and Marketing late in the second quarter and the transition added $15,000 of extra cost. Mr. Ciancarelli brings 17 years of sales and marketing leadership experience from Precision Electronic Glass which serves a similar customer base and we are very pleased to have him join the Company. Net interest expense for the three months ended March 31, 2005 was $11,259, an increase of $3,201 over the three months ended March 31, 2004 of $8,058. Interest expense for the six months ended March 31, 2005 was $18,962, an increase of $3,503 over the six months ended March 31, 2004 of $15,459. The increase in interest expense is primarily related to the additional interest payments resulting from the indebtedness incurred in connection with the Optometrics acquisition and the higher prime rate which impacts the Company's variable interest rate payments. Net income for the three months ended March 31, 2005 was $12,677, or less than $.01 in basic earnings per share, an increase of $59,550 over the net loss for the three months ended March 31, 2004 of $46,873, or $.02 in basic loss per share. Net income for the six months ended March 31, 2005 was $18,753, or $.01 in basic earnings per share, an increase of $91,658 over the six months ended March 31, 2004 of net loss of $72,905, or $.03 in basic loss per share. Management is pleased to complete a second profitable quarter for the Company (excluding Optometrics) after several challenging years. Optometrics is expected to contribute significant additional profitability to the Company. The Company had no provisions for income taxes for the quarters ended March 31, 2005 and 2004. As of September 30, 2004, the Company had approximately $1,200,000 of net operating loss carryforwards to offset future income for federal tax purposes expiring in various years through 2020. In addition, the Company has approximately $620,000 of net operating loss carryforwards to offset certain future New Jersey taxable income, expiring in various years through 2012. Liquidity and Capital Resources Cash increased by $157,931 for the six months ended March 31,2005. The primary sources of cash were the net proceeds from the preferred stock issuance of $690,000 plus new bank debt financing obtained in connection with the Optometrics acquisition. The primary use of cash was for the Optometrics acquisition. On March 8, 2005, two loans with Citizens Bank were completed as 10 part of the Optometrics acquisition. Both loans are secured by the assets of Optometrics Corporation and guaranteed by the Company, which guaranty is itself secured by a second lien on the Company's assets excluding real estate. The financing included a $300,000 term loan for five years at a 6.25% fixed interest rate. A line of credit with maximum borrowing of $400,000 was completed with initial borrowing of $250,000 at Citizens Bank's prime rate plus 0.5%. The Company believes that its current cash and cash equivalent balances, along with the net cash generated by operations, are sufficient to meet its anticipated cash needs for working capital for at least the next 12 months. There are currently no plans for any major capital expenditures in the next six to nine months. Any major business expansion or acquisition likely will require the Company to seek additional debt or equity financing. Optometrics Acquisition Management was pleased that the acquisition of Optometrics LLC closed on March 8, 2005. Optometrics LLC now operates as Optometrics Corporation, a wholly owned subsidiary of The Company. The transaction occurred as planned with Dynasil's purchase of the assets of Optometrics LLC, entry into a long term facility lease and entry into employment agreements with the two principals of Optometrics LLC. With regret, we acknowledge the passing of Mr. Frank Denton, one of the two principals of Optometrics LLC. Mr. Denton was in the process of reducing his work schedule before his passing and Management is confident that the Company has the resources to continue to operate effectively. As planned, Ms. Laura Lunardo became Chief Financial Officer of the Company and Chief Operating Officer of Optometrics Corporation effective March 9, 2005. Ms. Lunardo had been leading the day to day operations of Optometrics for some time and her long term financial experience brings needed CFO leadership skills to the Company. Critical Accounting Policies and Estimates There have been no material changes in our critical accounting policies or critical accounting estimates since September 30, 2004, nor have we adopted an accounting policy that has or will have a material impact on our consolidated financial statements. For further discussion of our accounting policies see Footnote 1 " Summary of Significant Accounting Policies" in this Quarterly Report on Form 10-QSB and the Notes to Consolidated Financial Statements in our Annual Report on Form 10-KSB for the fiscal year ended September 30, 2004. The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following: Revenue Recognition Revenue from sales of products is recognized at the time title and the risks and rewards of ownership pass. This is when the products are shipped per customers' instructions, the sales price is fixed and determinable, and collections are reasonably assured. Valuation of Long-Lived Assets We assess the recoverability of long-lived assets whenever we determine that events or changes in circumstances indicate that their carrying amount may not be recoverable. Our assessment is primarily based upon our estimate of future cash flows associated with these assets. These valuations contain certain 11 assumptions concerning estimated future revenues and future expenses. We have determined that there is no indication of impairment of any of our assets. However, should our operating results deteriorate, we may determine that some portion of our long-lived assets are impaired. Such determination could result in non-cash charges to income that could materially affect our financial position or results of operations for that period. Estimating Allowances for Doubtful Accounts Receivable We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer's current credit worthiness, as determined by our review of their current credit information. We continuously monitor collections and payments from our customers and maintain a provision for estimated credit losses based upon our historical experience and any specific customer collection issues that we have identified. While such credit losses have historically been minimal, within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. A significant change in the liquidity or financial position of any of our significant customers could have a material adverse effect on the collectibility of our accounts receivable and our future operating results. Valuation of Deferred Tax Assets We regularly evaluate our ability to recover the reported amount of our deferred income taxes considering several factors, including our estimate of the likelihood of The Company generating sufficient taxable income in future years during the period over which temporary differences reverse. The Company's deferred tax assets are currently fully reserved. Recent Accounting Pronouncements There were no accounting pronouncements issued since the date of the Company's most recent Form 10-QSB filing. Forward-Looking Statements The statements contained in this Quarterly Report on Form 10-QSB which are not historical facts, including, but not limited to, certain statements found under the captions "Results of Operations", "Liquidity and Capital Resources" and "Optometrics Acquisition" above, are forward-looking statements that involve a number of risks and uncertainties. The actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are the risks and uncertainties discussed in this Quarterly Report on Form 10-QSB, including, without limitation, the portions of such reports under the captions referenced above, and the uncertainties set forth from time to time described in this and the Company's other filings with the Securities and Exchange Commission, and other public statements. Such risks and uncertainties include, without limitation, seasonality, interest in the Company's products, customer acceptance of new products, general economic conditions, market trends, costs and availability of raw materials and management information systems, competition, litigation, need for additional financing, the effect of governmental regulation and other matters. The Company disclaims any intention or obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. 12 ITEM 3 CONTROLS AND PROCEDURES Based on his most recent informal evaluation, which was completed during the period covered within this Form 10-QSB, the Company's President/chief executive officer believes the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a-14 and 15d-14) are effective. There were not any significant changes in the Company's internal controls or no other facts that could significantly affect these controls subsequent to the date of this evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. The Company is presently unable to provide segregation of duties within itself as a means of internal control. As a result, the Company is presently relying on overriding management reviews, and assistance from its board of directors and Audit Committee in providing short-term review procedures until such time as additional funding is provided to hire additional executives to segregate duties within the Company. PART II OTHER INFORMATION - ------------------ ITEM 1 LEGAL PROCEEDINGS NONE ITEM 2 CHANGES IN SECURITIES On March 8, 2005, the Company sold 700,000 shares of a Series A 10% Cumulative Convertible Preferred Stock for $700,000 in a private placement. Each share was sold for $1 and is convertible to 2.2222 shares of common stock at any time by the holders. See the Company's 8K report dated March 14, 2005 for additional information. ITEM 3 DEFAULTS ON SENIOR SECURITIES NONE ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS NONE ITEM 5 OTHER INFORMATION The information presented in Items 1 and 2 of Part I of this Report is incorporated herein by reference. On May 13, 2005, the Company issued a press release announcing its financial results for its second quarter ending March 31, 2005. A copy of this press release is attached as Exhibit 99 to this Report on Form 10-QSB. This information is being furnished pursuant to Item 5 of Part II of Form 10-QSB and shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. 13 ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits and index of Exhibits 31.1(a) and (b) Rule 13a-14(a)/15d-14(a) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Section 1350 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished but not filed for purposes of the Securities Exchange Act of 1934) 3.06 Restated Certificate of Incorporation of Dynasil Corporation of America dated May 6, 2005. 10.10 Employment Agreement of Laura Lunardo effective March 8, 2005. 10.11 Accepted Employment offer of Francis Ciancarelli dated March 28, 2005. 10.12 Loan Agreement dated March 8, 2005 with Citizen's Bank for a $400,000 revolving line of credit. 10.13 Note dated March 8, 2005 with Citizen's Bank for a $300,000 term loan. 99.1 Press release, dated May 13, 2005, issued by Dynasil Corporation of America announcing its financial results for the second quarter ending March 31, 2005. (b) Reports on Form 8-K - On 3/14/05, a current report for Items 2 and 3 for the completion of the Optometrics registration and sale of Preferred Stock. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DYNASIL CORPORATION OF AMERICA BY: /s/ Craig T. Dunham DATED: May 14, 2005 --------------------------------- -------------------- Craig T. Dunham, President and CEO 14 EX-3 2 ex3-6.txt EXHIBIT 3.06 NEW JERSEY DIVISION OF REVENUE RESTATED CERTIFICATE OF INCORPORATION of DYNASIL CORPORATION OF AMERICA To: Treasurer, State of New Jersey Pursuant to the provisions of Sections 14A:7-2(4) and 14A:9-5, Corporations, General, of the New Jersey Statutes, the undersigned corporation hereby executes the following Restated Certificate of Incorporation: Dated: May 6, 2005 1. The name of the corporation is Dynasil Corporation of America. 2. The purposes for which the Corporation is organized are to engage in any and all activities within the purposes for which corporations may be organized under the New Jersey Business Corporation Act. 3. The Corporation is authorized to issue an aggregate of 35,000,000 shares, consisting of two classes, as follows: One class of stock shall be 25,000,000 authorized shares of Common Stock, par value $0.0005 per share. The other class of stock shall be 10,000,000 authorized shares of Preferred Stock, par value $0.001. The Preferred Stock, or any series thereof, shall have such designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as shall be expressed in the resolution or resolutions providing for the issue of such stock adopted be the board of directors and may be made dependent upon facts ascertainable outside such resolution or resolutions of the board of directors, provided that the matter in which such facts shall operate upon such designations, preferences, rights and qualifications; limitations or restrictions of such class or series of stock is clearly and expressly set forth in the resolution or resolutions providing for the issuance of such stock by the board of directors and filed pursuant to Section 14A:7-2(4) of the New Jersey Business Corporation Act. 4. The registered office of the Corporation is Dynasil Corporation of America, Cooper Road and Taunton Avenue, West Berlin Township, Camden County, New Jersey 08009 and the registered agent of the Corporation is Craig T. Dunham. 5. The Board of Directors at the effective date of this Restated Certificate of Incorporation consists of three (3) members elected by the Shareholders of the Corporation for a term of one (1) year and until their respective successors are duly elected and qualified. The names and addresses of the Board of Directors at the effective date of this Restated Certificate of Incorporation are: James Saltzman 1508 Gypsy Hill Road, Gwynedd, PA 19437 Craig T. Dunham 385 Cooper Road, West Berlin, NJ 08091 David Manzi 315 Richard Mine Road, Wharton, NJ 07885 6. The duration of the Corporation is and shall be perpetual. 7. Any directorship to be filled by reason of an increase in the number of Directors may be filled either by the Board of Directors or by the Shareholders at an annual meeting or at a special meeting of Shareholders called for that purpose. 8. The Board of Directors shall have the power to remove Directors for cause and to suspend Directors pending a final determination that cause exists for removal. 9. Advance notice of shareholder nominations for the election of Directors shall be given in the manner provided in the Bylaws of the Corporation. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80 percent of the voting power of all the shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or repeal this Article 9 to adopt any provision inconsistent therewith. 10. Any action required or permitted to be taken by the holders of the Common Stock of the Corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders. Except as otherwise required by law, special meetings of shareholders of the Corporation may be called only by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors or as otherwise provided in the Bylaws of the Corporation. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80 percent of the voting power of all the shares of the Corporation entitled to vote generally in the election of directors voting together as a single class, shall be required to alter, amend or repeal this Article 10 or to adopt any provision inconsistent therewith. 11. The vote of shareholders of the Corporation required to approve any Business Combination shall be as set forth in this Article 11. The term "Business Combination" shall have the meaning ascribed to it in (a)(B) of this Article; each other capitalized term used in this Article shall have the meaning ascribed to it in (c) of this Article. (a)(A) In addition to any affirmative vote required by law or the Certificate of Incorporation, and except as otherwise expressly provided in (b) of this Article 11, a Business Combination shall not be consummated without the affirmative vote of the holders of at least 80 percent of the combined voting power of the then outstanding shares of stock of all classes and series of the Corporation entitled to vote generally in the election of directors ("Voting Stock"), in each case voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or by the Certificate of Incorporation or in any agreement with any national securities exchange or otherwise. (B) The term "Business Combination" as used in this Article 11 shall mean: (1) any merger or consolidation of the Corporation or any Subsidiary with (i) any Interested Shareholder or (ii) any other corporation or entity (whether or not itself an Interested Shareholder) which is, or after each merger or consolidation would be, an Affiliate of an Interested Shareholder; or (2) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate of any Interested Shareholder of all or a Substantial Part of the assets of the Corporation or any Subsidiary; or (3) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Shareholder or any Affiliate of any Interested Shareholder in exchange for cash, securities or other property (or a combination thereof), other than the issuance of securities upon the conversion of convertible securities of the Corporation or any Subsidiary which were not acquired by such Interested Shareholder (or such Affiliate) from the Corporation or a Subsidiary; or (4) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Shareholder or any Affiliate of any Interested Shareholder; or (5) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) which in any such case has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class or series of stock or securities convertible into stock of the Corporation or any Subsidiary which is directly or indirectly beneficially owned by any Interested Shareholder or any Affiliate of any Interested Shareholder; (b) The provision of (a) of this Article 11 shall not be applicable to any Business Combination in respect of which all of the conditions specified in either of the following paragraphs A and B are met, and such Business Combination shall require only such affirmative vote as is required by law and any other provision of the Certificate of Incorporation: (A) Such Business Combination shall have been approved by a majority of the Disinterested Directors, which term, in this Article, refers to the Disinterested Director if there is only one; (B) Each of the six conditions specified in the following clauses (1) through (6) shall have been met: (1) the aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination (the "Consummation Date" of any consideration other than cash to be received by holders of Common Stock in such Business Combination shall be at least equal to the higher of the following: (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of Common Stock beneficially owned by the Interested Shareholder which were acquired beneficially by such Interested Shareholder (x) within the two year period immediately prior to the Announcement Date or (y) in the transaction in which it became an Interested Shareholder, whichever is higher (adjusted to reflect the occurrence of any reclassification, recapitalization, stock split, reverse stock split, stock dividend or other adjustment in the number of outstanding shares of Common Stock between the date of acquisition by the Interested Shareholder and the Consummation Date); or (ii) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Shareholder became an Interested Shareholder (the Determination Date), whichever is higher; and (2) the aggregate amount of the cash and the Fair Market Value as of the Consummation Date of any consideration other than cash to be received per share by holders of shares of any other class or series of Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements of this clause (B)(2) shall be required to be met with respect to every class and series of such outstanding Voting Stock, whether or not the Interested Shareholder beneficially owns any shares of a particular class or series of Voting Stock): (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of such class or series of Voting Stock beneficially owned by the Interested Shareholder which were acquired beneficially by such Interested Shareholder (x) within the two-year period immediately prior to the Announcement Date or (y) in the transaction in which it became an Interested Shareholder, whichever is higher; (ii) (if applicable) the highest preferential amount per share to which the holders of shares of such class or series of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; and (iii) the Fair Market Value per share of such class or series of Voting Stock on the Announcement Date or the Determination Date, whichever is higher; and (3) the consideration to be received by holders of a particular class or series of outstanding Voting Stock (including Common Stock) shall be in cash or in the same form as was previously paid in order to acquire beneficially shares of such class or series of Voting Stock that are beneficially owned by the Interested Share holder and if the Interested Shareholder beneficially owns shares of any class or series of Voting Stock that were acquired with varying forms of consideration, the form of consideration to be received by holders of such class or series of Voting Stock shall be either cash or the form used to acquire beneficially the largest number of shares of such class or series of Voting Stock beneficially acquired by it prior to the Announcement Date; and (4) after such Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combination: (i) except as approved by a majority of the Disinterested Directors, there shall have been no failure to declare and pay at the regular dates therefore the full amount of any dividends (whether or not cumulative) payable on any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation; (ii) there shall have been (x) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Disinterested Directors, and (y) an increase in such annual rate of dividends (as necessary to prevent any such reduction ) in the event of any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate was approved by a majority of the Disinterested Directors; and (iii) such Interested Shareholder shall not have become the beneficial owner of any additional shares of Voting Stock except as part of the transaction in which it became an Interested Shareholder; and (5) after such Interested Shareholder has become an Interested Shareholder such Interested Shareholder shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise; and (6) a proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1984 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to public shareholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). (c) For the purposes of this Article 11: (A) A "person" shall mean any individual, firm, corporation or other entity. (B) "Interested Shareholder" shall mean any person (other than the Corporation or any Subsidiary and except as provided below) who or which: (1) is the beneficial owner, directly or indirectly, of more than 20 percent of the combined voting power of the then outstanding shares of Voting Stock; or (2) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question, except as provided below, was the beneficial owner, directly or indirectly, of 20 percent or more of the combined voting power of the then outstanding shares of Voting Stock; or (3) is an assignee of any shares of Voting Stock that were at any time within the two-year period immediately prior to the date in question, except as provided below, beneficially owned by any Interested Shareholder, if such assignment shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. Notwithstanding the above, a person who or which would otherwise be an Interested Shareholder within the meaning of subparagraphs (1), (2), or (3) of this paragraph (B), shall not be deemed to be an Interested Shareholder if that person was the beneficial owner of 10 percent or more of the combined voting power of the then outstanding shares of voting stock on the effective date of this Article 11. (C) A person shall be a "beneficial owner" of any Voting Stock: (1) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or (2) which such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote or direct the vote pursuant to any agreement, arrangement or understanding; or (3) which are beneficially owned, directly or indirectly, by an other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. (D) For the purposes of determining whether a person is an Interested Shareholder pursuant to (c)(B) of this Article 11, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of (c)(C) of this Article but shall not include any other shares of Voting Stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (E) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1984, as in effect on February 1, 1986. (F) "subsidiary" means any corporation of which more than 50 percent of the combined voting power of the then outstanding shares of stock entitled to vote generally in the election of directors is owned, directly or indirectly, by the Corporation or by a Subsidiary or by the Corporation and one or more Subsidiaries; provided, however, that for the purpose of the definition of Interested Shareholder set forth in (c)(B) of this Article 11, the term "Subsidiary" shall mean only a corporation of which a majority of the combined voting power of the then outstanding shares of stock entitled to vote generally in the election of directors is owned, directly or indirectly, by the Corporation. (G) "Disinterested Director" means any member of the Board of Directors of the Corporation who is unaffiliated with, and not a nominee of, the Interested Shareholder and was a member of the Board prior to the time that the Interested Shareholder became and Interested Shareholder, and any successor of a Disinterested Director who is unaffiliated with, and not a nominee of, the Interested Shareholder and who is recommended to succeed a Disinterested Director by a majority of Disinterested Directors then on the Board of Directors. (H) "Fair Market Value" means: (1) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the principal United States securities exchange registered under the Securities Exchange Act of 1984 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing sales price or bid quotation with respect, to a share of such stock during the 30-day period preceding the date in question as quoted by the National Association of Securities Dealers. Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Disinterested Directors in good faith; and (2) in the case of stock of any class or series which is not traded on any United States registered securities exchange nor in the over the counter market or in the case of property other than cash or stock the fair market value of such property on the date in question as determined by a majority of the Disinterested Directors in good faith. The Fair Market Value of stock of any class of the Corporation shall be adjusted to reflect the occurrence of any reclassification, recapitalization, stock split, reverse stock split, stock dividend or other adjustment in the number of shares outstanding between the date in question and the Consummation Date. (I) In the event of any Business Combination in which the Corporation survives, the phrase "other consideration to be received" as used in (b)(B)(1) and (2) of this Article 11 shall include the shares of Common Stock and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares. (J) "Announcement Date" means the date of first public announcement of the proposed Business Combination. (K) "Determination Date" means the date on which the Interested Shareholder became an Interested Shareholder. (L) "Substantial Part" means more than 10 percent of the book value of the total assets of the entity in question, as of the end of its most recent fiscal year ending prior to the Consummation Date. (d) A majority of the Disinterested Directors of the Corporation shall have the right and power to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article 11 including, without limitation (A) whether a person is an Interested Shareholder, (B) the number of shares of Voting Stock beneficially owned by any person (C) whether a person is an Affiliate or Associate of another person and (D) whether the requirements of (b) of this Article 11 have been met with respect to any Business Combination. The good faith determination of a majority of the Disinterested Directors on such matters shall be conclusive and binding for all purposes of this Article 11. (e) Nothing contained in this Article 11 shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law. (f) Notwithstanding anything contained in the Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80 percent of the voting power of the Voting Stock, voting together as a single class, shall be required to alter, amend, or repeal this Article 11 or to adopt any provision inconsistent herewith. 12. A director or officer of the Corporation shall not be personally liable to the Corporation or its shareholders for damages for breach of any duty owed to the Corporation or its shareholders, except that this Article 12 shall not relieve a director or officer from liability for any breach of duty based upon an act or omission (i) in breach of such person's duty of loyalty to the Corporation or its shareholders, or (ii) not in good faith or involving a knowing violation of law, or (iii) resulting in receipt by such person of an improper personal benefit. If the New Jersey Business Corporation Act is amended after approval by the shareholders of this Article 12 to authorize corporate action further eliminating or limiting the personal liability of directors or officers, then the liability of a director and/or officer of the Corporation, as the case may be, shall, without further corporate action, be eliminated or limited to the fullest extent permitted by the New Jersey Business Corporation Act as so amended. Any repeal or modification of the foregoing paragraph by the shareholders of the Corporation or otherwise shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such repeal or modification. 13. Article 13 A director of the Corporation may not be removed without cause. 14. Anything in paragraphs 14A:9-2(4)(c), 14A:10-3(2), 14A:10- 11(1)(c), 14A:12-4(4) or elsewhere in the New Jersey Business Corporation Act (the "Act" to the contrary notwithstanding, the Corporation hereby adopts the majority voting requirement prescribed in paragraph 14A:5-11 of the Act as that which shall be required to authorize any action, other than the election of directors, that is to be taken by vote of the shareholders of the Corporation. 15. Series A 10% Cumulative Convertible Preferred Stock A series of cumulative convertible preferred shares designated "Series A 10% Cumulative Convertible Preferred Stock" is established. The Series A 10% Cumulative Convertible Preferred Stock shall have a par value of $.001 per share. When issued for a price in excess of that amount, the shares of Series A 10% Cumulative Convertible Preferred Stock shall be fully paid and nonassessable. The Series A 10% Cumulative Convertible Preferred Stock shall consist of 700,000 preferred shares, which the Board of Directors may increase only in connection with a stock split or decrease from time to time but not below the number of shares of Series A 10% Cumulative Convertible Preferred Stock then outstanding. On redemption, conversion, or other reacquisition of any of the Series A 10% Cumulative Convertible Preferred Stock, the reacquired shares shall be cancelled and shall become part of the authorized and unissued preferred stock but shall not be authorized and unissued Series A 10% Cumulative Convertible Preferred Stock. The rights, preferences, designations and limitations of the Series A 10% Cumulative Convertible Preferred Stock are as follows: Priority (a) The Series A 10% Cumulative Convertible Preferred Stock shall be senior to any other class or series of preferred shares in respect of (1) payment of dividends; (2) payment on dissolution, liquidation or winding up and (3) redemption, except for any class or series that the Board of Directors shall specifically state is on a parity with shares of the Series A 10% Cumulative Convertible Preferred Stock. Dividend Rate and Payment Dates (b) Holders of shares of Series A 10% Cumulative Convertible Preferred Stock shall be entitled to receive dividends when, as and if declared by the Board of Directors at the rate of ten percent (10%) per annum of the amount paid for each share, and no more. Except for the first dividend, dividends shall be payable quarterly on the last day of March, June, September and December in each year for the quarterly period ending on that date. The first dividend shall be payable on June 30, 2005 and shall be the sum of the dividend payable for the quarter ended on that date and a dividend prorated at such annual rate for the period from the date of issue and March 31, 2005. Priority and Cumulative Rights (c) Dividends on the Series A 10% Cumulative Convertible Preferred Stock shall be cumulative from the date of issuance; provided, however, that accumulations of dividends shall not bear interest. In no event, so long as any shares of the Series A 10% Cumulative Convertible Preferred Stock are outstanding, shall the Corporation pay or declare any cash or property dividends, distribute any of its assets, or purchase or acquire for value any shares of the Corporation unless and until all dividends on the Series A 10% Cumulative Convertible Preferred Stock for all prior periods and for the then current quarterly period have been paid or have been declared and a sum sufficient for payment has been set apart. This subparagraph shall not prohibit the declaration and payment of any dividend on Common Stock payable in Common Stock. Preferences on Dissolution, Liquidation, or Winding Up (d) On any voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, before any payment or other distribution, whether in cash, property or otherwise, shall be made to the holders of any other shares of the Corporation, the holders of the Series A 10% Cumulative Convertible Preferred Stock shall be entitled to receive for each share of Series A 10% Cumulative Convertible Preferred Stock they hold the sum of $1.00 plus an amount equal to all unpaid dividends accrued to the date established for payment of the distribution, and no more. For the purpose of this Subparagraph (d), dividends shall be deemed to accrue on a daily basis. The merger or consolidation of the Corporation into or with any other corporation, the merger of any other corporation into the Corporation, or the sale, lease, or conveyance of all or substantially all of the property or business of the Corporation shall not be deemed to be a dissolution, liquidation, or winding up for purposes of this Subparagraph (d). If, on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the assets of the Corporation are insufficient to permit full payment to the holders of the Series A 10% Cumulative Convertible Preferred Stock as provided in this Subparagraph, then the holders of the Series A 10% Cumulative Convertible Preferred Stock shall share ratably in any distribution of assets in proportion to the full amounts to which they would otherwise be respectively entitled. Redemption (e) The Corporation shall not redeem or repurchase any other class or series of Preferred Stock or Common Stock unless and until all shares of the Series A 10% Cumulative Convertible Preferred Stock have been redeemed. Commencing on and after the second anniversary of their issuance, shares of Series A 10% Cumulative Convertible Preferred Stock may be redeemed at any time or periodically, in whole or in part, at the option of the Corporation by the vote of its Board of Directors. The shares of the Series A 10% Cumulative Convertible Preferred Stock shall be redeemed on the following conditions: Redemption Price (1) The redemption price shall be $1.00 per share plus any accrued and unpaid dividends to the redemption date. For the purpose of this Subparagraph, dividends shall be deemed to accrue on a daily basis. Partial Redemption (2) If the Corporation redeems less than all of the outstanding shares of Series A 10% Cumulative Convertible Preferred Stock, the redemption may be pro rata, by lot or in any equitable manner that the Board of Directors in its discretion shall determine. Notice (3) Written notice of redemption shall be given to each holder of record of the shares of Series A 10% Cumulative Convertible Preferred Stock to be redeemed. The notice of redemption shall be given by first class mail to each holder's address as it shall appear on the stock books of the Corporation. In addition, the Corporation may give notice by any other method or in any other fashion, including by telephone, facsimile, email or the like, as the Board of Directors shall deem necessary, appropriate, convenient or reasonable under the circumstances. Such notice of redemption shall be given at least thirty (30) days and not more than sixty (60) days before the date fixed for redemption. Each notice shall specify the shares of stock to be redeemed, the redemption price, the date fixed for redemption, the place for payment of the redemption price and for surrender of the certificate representing the shares to be redeemed, and, if less than all of the shares of the holder are to be redeemed, the number of the holder's shares to be redeemed. No defect in the notice nor any defect in the mailing of it shall alone affect the validity of the proceedings for redemption except as to any holder to whom the Corporation has failed to mail the notice. Deposit (4) On or before the date fixed for the redemption of any shares of Series A 10% Cumulative Convertible Preferred Stock, the Corporation shall deposit sums sufficient to redeem the shares in a trust fund or escrow account for the benefit of the respective holders of the shares. This deposit shall be made with one or more banks or trust companies, each having capital and surplus of at least $ 5,000,000 and doing business in any city in the United States in which the Corporation or any of its subsidiaries shall have an office or conduct operations, with any bank, trust company or other person, firm or entity in the United States duly appointed and acting as transfer agent for any shares of the capital stock the Corporation or with any other person, firm or entity the Board of Directors reasonably believes capable of assisting the Corporation in effecting the redemption (singly, a "depositary"). The deposit shall be accompanied by irrevocable instructions authorizing the depositary to (a) deliver in the Corporation's name, place and stead the notice of redemption, or to complete the delivery if previously commenced, and (b) pay on or after the date fixed for redemption to the holders of the shares being redeemed the redemption price of the shares on surrender of the certificates representing those shares. From and after the time of the deposit those shares shall be considered redeemed. The holders who are entitled to payment for the redemption of their shares shall be evidenced by a list certified by the President or Vice President and the Secretary or an Assistant Secretary of the Corporation. Dividends on the shares being redeemed shall cease to accrue after the date of redemption. The deposit shall constitute full payment of the redemption price to the holders of the shares being redeemed. Those shares shall no longer be considered outstanding, and the holders of them shall cease to be shareholders with respect to those shares. The holders of the shares being redeemed shall have no rights with respect to the shares except the right to receive from the depositary (or its successor) payment of the redemption price of the shares, without interest, on surrender of the certificates representing those shares. Funds deposited that are not required for redemption of the shares because of the conversion of those shares prior to the date fixed for conversion shall be returned to the Corporation. Funds deposited and unclaimed at the end of six years shall be repaid to the Corporation, and any holder of shares of Series A 10% Cumulative Convertible Preferred Stock called for redemption shall subsequently look only to the Corporation for payment. Certificates for Unredeemed Shares (5) If less than all of the shares of Series A 10% Cumulative Convertible Preferred Stock are redeemed, the Corporation shall issue one or more new certificates representing the unredeemed shares. No Sinking Fund (f) The Corporation shall not be obligated to make payments into or to maintain any sinking fund for shares of the Series A 10% Cumulative Convertible Preferred Stock. Conversion Rights (g) At any time after issuance and prior to the date fixed for their redemption, the holder of any shares of Series A 10% Cumulative Convertible Preferred Stock may convert the shares Series A 10% Cumulative Convertible Preferred Stock into shares of the Corporation's common stock. Shares of Series A 10% Cumulative Convertible Preferred Stock shall be convertible on the following terms: Conversion Ratio and Conversion Price (1) On exercise of the option to convert, the holder shall be entitled to receive 2.2222 shares of Common Stock for each share of Series A 10% Cumulative Convertible Preferred Stock converted (the "Conversion Ratio"). The Conversion Ratio is intended to be the equivalent of a conversion exercise price of $.45 per share (the "Conversion Price") Exercise of Conversion Rights (2) The conversion rights may be exercised at any time from and after the date of issuance and prior to the close of business on the day fixed for redemption. The holder of the convertible shares shall exercise the option to convert by delivering a written notice electing to convert the shares to common shares and surrendering the share certificate or certificates for the shares of Series A 10% Cumulative Convertible Preferred Stock to be converted to the Corporation's office, the depositary or the office of the transfer agent for shares of the Corporation's common stock. The certificates surrendered shall be duly endorsed or assigned to the Corporation. Conversion of the shares shall be deemed effective immediately before the close of business on the date on which the shares are surrendered, which shall be the conversion date. On the conversion date, or as soon as practicable after that date, the Corporation shall deliver to the holder of the shares surrendered, or to another person designated by the holder in writing, a certificate for the number of full shares of Common Stock deliverable on the conversion as provided herein plus a certificate for any fractional share of Common Stock that is deliverable or an amount of cash instead of the fractional share as provided below. Antidilution Provision (3) The number of shares of Common Stock to be issued as provided in this Subparagraph shall be adjusted by appropriate amendment to account for any and all increases or reductions in the number of outstanding shares of Common Stock that may have accrued since the date of the first issuance of shares of the Series A 10% Cumulative Convertible Preferred Stock because of a split, share dividend, combination, reclassification, merger, consolidation, other capital change or reorganization or other transaction affecting the number of outstanding common shares. This adjustment shall be made to fairly and equitably preserve as far as reasonably possible the original conversion rights of the Series A 10% Cumulative Convertible Preferred Stock. If an adjustment is required, no notice of redemption shall be given until the amendment and adjustment has been accomplished. On payment of a dividend, any adjustment made pursuant to this subparagraph shall become effective immediately after the opening of business on the day following the record date for the determination of shareholders entitled to receive the dividend. In the case of a subdivision, combination, reclassification or other transaction an adjustment made pursuant to this subparagraph shall become effective immediately after the opening of business on the day following the day on which the respective action becomes effective. Any adjustment required by this subparagraph shall be made so that the holder of any share of Series A 10% Cumulative Convertible Preferred Stock subsequently surrendered for conversion shall be entitled to receive the number of shares of Common Stock or other securities of the Corporation that the holder would have owned or been entitled to receive after occurrence of the corporate action if the share of Series A 10% Cumulative Convertible Preferred Stock had been converted immediately before the occurrence of the corporate action. Fractional Shares (4) The Corporation may, but shall not be required to, deliver fractional shares of Common Stock on conversion of shares of the Series A 10% Cumulative Convertible Preferred Stock. Instead of any fractional share of Common Stock that would otherwise be deliverable on conversion, the Corporation may pay an amount in cash equal to the current market value of the fractional share, computed on the basis of the market price on the last business day before the conversion date, as defined above. For purposes of this Subparagraph, the "market price" on any business day shall be the closing bid price for each share of Common Stock in the over-the counter market as furnished by a member of the National Association of Securities Dealers selected from time to time by the Corporation for that purpose or, if the shares of Common Stock are listed or admitted to trading on any national securities exchange, the reported closing price for each share of Common Stock on that exchange. Reservation of Common Shares for Conversion (5) The Corporation shall at all times reserve and keep available from its authorized but unissued common shares solely for effecting conversion of its Series A 10% Cumulative Convertible Preferred Stock the full number of shares of Common Stock deliverable on conversion of all Series A 10% Cumulative Convertible Preferred Stock. Merger or Sale of Corporate Assets (6) On any capital reorganization, reclassification of the shares, consolidation, merger, or sale or conveyance of all or substantially all of the assets of the Corporation to another corporation, each share of Series A 10% Cumulative Convertible Preferred Stock shall be convertible into the number of shares or other securities or property to which the number of shares of Common Stock that would have been deliverable on conversion of the shares of Series A 10% Cumulative Convertible Preferred Stock immediately before the corporate action, would be entitled. Appropriate adjustment, as determined by the Board of Directors, shall be made with respect to the subsequent rights and interests of the holders of the shares of Series A 10% Cumulative Convertible Preferred Stock so that all provisions of this Subparagraph shall remain applicable as much as is practicable in relation to any shares or other property subsequently deliverable on conversion of the shares of Series A 10% Cumulative Convertible Preferred Stock. Further Adjustments to the Conversion Ratio (7) The Conversion Ratio shall be further adjusted periodically as follows: If any shares of Series A 10% Cumulative Convertible Preferred Stock are outstanding and the Corporation issues securities (including evidences of indebtedness) or rights, options or warrants (excluding up to a maximum of 5% of the Corporation's outstanding shares if issued under the Corporation's Employee Stock Purchase Plan or 1999 Stock Incentive Plan) that entitle the holder(s) thereof to convert into, exchange for or purchase shares of Common Stock at a price that is less than the Conversion Price in effect on the date of issuance of such securities, rights, options or warrants, the Conversion Ratio in effect shall be adjusted as of the day of such issuance as follows. The Conversion Ratio in effect on the date of issuance of such securities, rights, options or warrants shall be multiplied by a fraction the numerator of which shall be the product of multiplying (i) the sum of the number of shares of Common Stock outstanding on that issuance date and the number of shares issuable on exercise of all then outstanding shares of Series A 10% Cumulative Convertible Preferred Stock by (ii) the Conversion Price in effect on that date and the denominator of which shall be the sum of (i) multiplying the number of shares of Common Stock outstanding on that issuance date by the Conversion Price in effect on that date and (ii) multiplying the number of shares issuable on exercise of the securities, rights, options or warrants so issued by the conversion, exchange or purchase price applicable to such securities, rights, options or warrants. To the extent that the securities, rights, options or warrants are not converted, exchanged or exercised before they expire, the Conversion Ratio shall be readjusted as of the close of business on the applicable expiration date to the Conversion Ratio that would then be in effect based on the number of shares of Common Stock actually delivered on conversion, exchange or exercise of the securities, rights, options or warrants. Anything herein to the contrary notwithstanding, the Board of Directors of the Corporation shall be authorized to make such interpretations of or adjustments to the foregoing as the Board of Directors shall in good faith determine to be necessary or desirable to give effect to the foregoing. No Adjustment When Same Action Taken for Series A 10% Cumulative Convertible Preferred Stock (8) No adjustment in the Conversion Ratio for shares of Series A 10% Cumulative Convertible Preferred Stock shall be made if, at the same time that the Corporation takes an action that would otherwise require adjustment under this subparagraph (g), the Corporation takes the same action with respect to the shares of Series A 10% Cumulative Convertible Preferred Stock in the same proportion as if each share of Series A 10% Cumulative Convertible Preferred Stock had been converted (i) at the then applicable Conversion Ratio immediately before the date of such action or (ii) immediately before the occurrence of the subdivision, combination, or reclassification. Adjustments Only as Provided (9) Except as otherwise provided herein, no adjustment in the Conversion Ratio shall be made because of the issuance of shares of Common Stock, the issuance of any securities convertible into or exchangeable for shares of Common Stock, the issuance of any securities carrying the right to purchase any shares of Common Stock or securities convertible into or exchangeable for those shares, or any other reason. Minimum Adjustment (10) No adjustment in the Conversion Ratio shall be required unless the adjustment requires an increase or decrease of at least one percent (1%) of the Conversion Ratio. However, any adjustments that are not required to be made because of the preceding sentence shall be carried forward and taken into account in any subsequent adjustment. All calculations relating to fractional shares made pursuant to this subparagraph (g) shall be made to the nearest hundredth of a share. Statements and Notification of Adjustments (11) As soon as possible after the Conversion Ratio is adjusted, the Corporation shall maintain at its office and shall file with its transfer agent for shares of its Common Stock a statement, signed by the President and the Secretary or Assistant Secretary of the Corporation, detailing the facts requiring the adjustment and specifying the Conversion Ratio after the adjustment. The transfer agent shall be under no duty or responsibility concerning the statement except to exhibit it to any holder of shares of Series A 10% Cumulative Convertible Preferred Stock desiring to inspect it. In addition, for adjustments made while any shares of Series A 10% Cumulative Convertible Preferred Stock are outstanding, the Corporation shall state that an adjustment has been made and shall give the adjusted Conversion Ratio in the next annual report to the shareholders. The annual report shall be mailed to all holders of record of Series A 10% Cumulative Convertible Preferred Stock on the record date used for mailing the annual report to holders of shares of Common Stock. Notice of Corporate Action and Record Date (12) In addition to any other notice required herein, the Corporation shall cause to be mailed to the transfer agent for shares of the Common Stock and to the holders of record of the outstanding shares of Series A 10% Cumulative Convertible Preferred Stock, a notice of the taking of a record if the Corporation takes a record of the holders of its Common Stock for the following purposes: (i) to entitle them to receive a dividend or any other distribution payable other than in cash out of current or retained earnings; (ii) to entitle them to subscribe for or purchase shares of any class or receive any other rights; (iii) to effect any merger, consolidation, or reorganization of the Corporation; (iv) to reclassify its shares other than by subdivision, combination, or alteration of the par value of the shares of Common Stock outstanding; (v) to transfer all or substantially all of its assets; or (vi) to take any other action that would require an adjustment to the conversion ration under this subparagraph (g). The notice shall state the date on which the record is to be taken, the purpose for which the record is taken, the date on which the respective corporate action is to be effective, and fix the date by which holders of record of the shares of Common Stock shall be entitled to exchange their shares for securities or other property deliverable on the occurrence of the respective corporate action. The notice shall be mailed at least thirty (30) days before any of the dates that are required to be specified in the notice. The Corporation shall additionally mail a notice of all shareholder meetings and any accompanying proxy statement to the holders of Series A 10% Cumulative Convertible Preferred Stock at the same time the notice and proxy statement is mailed to the holders of Common Stock. If any action is taken by means of consent, notice of that action by consent shall be sent to the holders of Series A 10% Cumulative Convertible Preferred Stock at least thirty (30) days before the effective date of the consent. Failure to give or receive any notice required by this subparagraph, or any defect in a notice, shall not affect the legality or validity of the corporate action. However, the failure or defect shall not affect the rights of the holders of Series A 10% Cumulative Convertible Preferred Stock to obtain an appropriate remedy to account for the failure or defect. Voting Rights (h) The holders of Series A 10% Cumulative Convertible Preferred Stock shall have no voting rights except as otherwise may be required by the New Jersey Business Corporation Act. One Vote and Class Voting (i) On any matter on which the holders of the shares of the Series A 10% Cumulative Convertible Preferred Stock shall be entitled to vote, they shall be entitled to one vote for each share held. The holders of the shares of the Series A 10% Cumulative Convertible Preferred Stock shall vote only as a separate class; their votes shall not be counted together with those of the holders of any other class or series of shares of the Corporation. 16. The effective date of this Certificate shall be May 5, 2005. Dated this 6th day of May, 2005. DYNASIL CORPORATION OF AMERICA By Name: Craig T. Dunham Title: President CERTIFICATE REQUIRED TO BE FILED WITH THE RESTATED CERTIFICATE of INCORPORATION Pursuant to N.J.S.A.14A:9-5 (5), the undersigned corporation hereby executes the following certificate: 1. Name of Corporation: DYNASIL CORPORATION OF AMERICA 2. Restated Certificate of Incorporation was adopted on the 26th day of April, 2005. 3. This Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Certificate of Incorporation of this corporation as heretofore amended or supplemented and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation. Dated this 6th day of May, 2005. DYNASIL CORPORATION OF AMERICA By /s/ Craig T. Dunham Name: Craig T. Dunham Title: President EX-10 3 ex10-10.txt EXHIBIT 10.10 -6- DYNASIL CORPORATION OF AMERICA AGREEMENT OF EMPLOYMENT THIS AGREEMENT is effective as of the closing of Optometrics LLC ("Optometrics LLC") operating asset sale to Dynasil Corporation of America (the "Closing Date"), by and between DYNASIL CORPORATION OF AMERICA, a New Jersey corporation with offices at 385 Cooper Road, West Berlin, New Jersey, 08091, for itself and/or on behalf of any of its wholly-owned subsidiaries (collectively, the "Company") and LAURA LUNARDO ("Employee"), whose address is One Bennetts Crossing, Ayer, Massachusetts 01432. 1. Employment. Effective at the Closing Date (the "Effective Date"), the Company agrees to employ Employee as Chief Operating Officer of the Company's subsidiary ("Optometrics") that acquires the operating assets of Optometrics LLC and Chief Financial Officer of the Company, with such duties as are customary for such positions; however, the parties agree that Employee's title and location of employment (8 Nemco Way, Ayer, MA) will not be changed during the Term of this Agreement. Employee shall perform these duties subject to the direction and supervision of the President and CEO and Board of Directors of the Company. Employee accepts such continued employment and agrees to devote her full time and skills to the conduct of the Company's and Optometrics' businesses, performing to the best of Employee's abilities such duties as may be reasonably requested by the Company. Employee agrees to serve the Company diligently and faithfully so as to advance the Company's best interests and agrees to not take any action in conflict with its best interests. Company acknowledges that Employee may be unavailable for overnight travel during the months of January through June and such unavailability shall not be cause for termination of this Agreement or of Employee's employment relationship with Company. 2. Term. (a) The term of employment of Employee hereunder shall be for a period of two (2) years commencing on the Closing Date, subject to the conditions set forth herein. (b) This Agreement may be renewed at the end of the initial Term by mutual written agreement of the parties for additional terms of one (1) year each; provided, however, either party may terminate this Agreement at the end of a term by providing written notice to the other party no later than ninety (90) days prior to the expiration of the then current term. (c) Employee may terminate this Agreement within thirty (30) days after the event of a significant diminution in Employee's executive responsibilities. 3. Compensation. (a) Base Salary. Employee shall receive as base salary, during the Term of this Agreement, the sum of Ninety Thousand Dollars ($90,000) per annum payable for the first year and Ninety Five Thousand Dollars ($95,000) per annum for the subsequent years in accordance with the Company's regular payroll schedule. (b) Bonus. In each year of the Term of this Agreement, the Company agrees to pay Employee an annual performance bonus equal to four percent (4%) of Optometrics' net income for each fiscal year ending after the Closing Date (prorated for the first and last fiscal years ending after the Closing Date so long as the Closing Date occurs after December 31, 2004). This bonus will be payable not later than thirty (30) days after receipt of the Company's audited financial statements for its fiscal year. The amount of such bonus shall be paid to Employee two-thirds in cash and one-third in shares of the Company's common stock. (c) Other Bonus. Employee will also be eligible for such cash or stock bonuses, stock options and other incentives for meeting or exceeding profit goals and objectives as shall be determined in their discretion by the Company's President and CEO and/or its Board of Directors. (d) Reimbursement for Expenses. Employee will receive reimbursement from the Company for expenses reasonably incurred by Employee on behalf of the Company in accordance with the Company's normal policies with respect to expense reimbursements. (e) Annual Review. Notwithstanding any other provision of this Agreement, Employee will be entitled to receive from the Company's Board of Directors (or committee thereof) an annual review of her and the Company's performance within ninety (90) days after the end of each anniversary of the Effective Date of this Agreement and the opportunity to negotiate increases in the compensation and benefit provisions of this Agreement payable to the Employee starting with any renewal of this Agreement. (f) Severance. In the event this Agreement terminates for any reason other than "Cause" as set forth in paragraph 5(a) of this Agreement, the Company will make a severance payment to Employee of fifty percent (50%) of her base salary at the time of termination (payable in accordance with the Company's regular payroll schedule) and continue her health insurance for an additional twelve months. The Company also will make the same payment to and continuation of health insurance for Employee if Employee resigns within thirty (30) days for the reasons set forth in paragraph 2(c) of this Agreement. Otherwise, the Company will have no obligation to make any severance payments to or for Employee hereunder. Notwithstanding the foregoing, Employee agrees that during any period during which amounts payable pursuant to this paragraph 2(f) of this Agreement, Employee shall diligently seek suitable new employment and that amounts and benefits payable pursuant to this paragraph 2(f) shall terminate once Employee has commenced such new employment. 4. Other Benefits During the Employment Period. (a) Employee shall receive all other benefits substantially similar to those generally currently available to executives or employees of Optometrics LLC (collectively, "Benefits"). The Benefits currently include, inter alia, health insurance, dental insurance, life insurance, supplemental individual long-term disability insurance, disability insurance and participation in Optometrics' LLC profit sharing plan. (b) The Company shall furnish Employee with such working facilities and other services as are suitable to Employee's positions and adequate to the performance of her duties under this Agreement. (c) Employee shall be entitled to five weeks paid vacation per calendar year in accordance with the Company's policies then in effect regarding vacations. (d) Employee shall be entitled to (i) sole use of a Company car with all normal related expenses paid by the Company consistent with the past practices of Optometrics. (e) The Company shall contribute 9% of the Employee's gross salary to a 401k plan unless that amount is limited by government regulations. (f) The Company shall pay for Employee's: (i) an annual health club membership costing approximately $350 per year: (ii) membership fees for the International Management Accountants; and (iii) home internet connection. 5. Termination. This Agreement is subject to termination prior to the expiration of its initial term or any extended term for only the following reasons: (a) Termination for Cause. The Company and Employee agree that no future or further salary or other benefits (except for insurance benefits for disability or death and health insurance shall continue pursuant to the Company's policies, if any, for terminated employees or as provided by law) will be payable to or for the Employee by the Company and the employment relationship between the parties will terminate immediately following the occurrence of any one or more of the following events: (i) Employee violates any of the terms or conditions of this Agreement in any material respect and such violation is not corrected within fifteen (15) days after notice thereof is provided to Employee; (ii) Employee commits a felony, gross misdemeanor, act of dishonesty or moral turpitude or violates in any material way any of the rules, regulations or policies of the Company; or (iii) Employee engages in a general course of conduct of non- cooperation, gross negligence or other gross misconduct materially and adversely affecting the welfare, continuity or future of the Company's business (b) Death or Disability. If Employee dies or becomes totally and permanently disabled during the term of employment, the parties agree that the employment relationship and this Agreement will terminate automatically. "Total disability" means the inability of Employee, resulting from sickness, disease, injury or physical or mental illness, to perform in all material respects all of the services pertaining to her employment under this Agreement. Such total disability will be deemed "permanent" if Employee has not recovered and returned to render the full services of her employment hereunder within six (6) months of becoming totally disabled. 6. Key Person Insurance. Employee agrees that during the term of this Agreement, the Company may purchase key person life insurance covering the life of Employee in the amount of $500,000, with the Company to be named as the sole beneficiary. The Company shall pay the premiums on such policy as they become due out of the funds of the corporation. Employee represents and warrants that Employee has no knowledge of any condition which would prevent such key person life insurance from being obtained at rates for a healthy female of her age. For purposes of such key person insurance, Employee agrees to submit to reasonable medical examinations and shall cooperate with reasonable information requests. 7. Confidential Information/Trade Secrets. Employee acknowledges that during the course and as a result of her employment hereunder and previously with Optometrics LLC, Employee has received or had access to, or contributed to the production of, Confidential Information or Trade Secrets. Confidential Information or Trade Secrets means information that is proprietary to or in the unique knowledge of Company (including information discovered or developed in whole or in part by Employee); or information that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Confidential Information shall also include all terms and conditions of this Agreement. Employee understands and acknowledges that all such information that she has previously obtained or will obtain in the course of Employee's employment with the Company constitutes Confidential Information or Trade Secrets. In particular, Employee agrees that this information includes among other things, procedures, manuals, confidential reports, lists of clients, customers, suppliers, or products, and information concerning the prices of charges paid by the Company's customers to the Company, or by the Company to its suppliers. Employee further acknowledges and appreciates that any Confidential Information or Trade Secrets constitute valuable assets of the Company, that the Company intends any such information to remain secret and confidential. Employee therefore specifically agrees that except to the extent required by Employee's duties to the Company or as permitted by the express written consent of the Company's President and CEO or its Board of Directors, Employee shall never, either during employment with the Company or for a period of five (5) years thereafter, directly or indirectly use, discuss or disclose any of its Confidential Information or Trade Secrets or otherwise use such information to her own or a third party's benefit. 8. Return of Property. Employee agrees that upon the termination of her employment with the Company that she will immediately return to the Company the originals and all copies of any and all documents (including computer data, disks, programs, or printouts) that contain any customer information, financial information, product information, or other information that in any way relates to the Company, its products or services, clients, suppliers or other aspects of its business(es). Employee further agrees to not retain any summary of such information. 9. Non-competition. Employee understands and agrees that, in the performance of her duties under this Agreement and as a result of her previous employment by Optometrics LLC, Employee may at times meet with the Company's customers and/or suppliers and that, as a consequence of using or associating herself with the Company's name, goodwill and professional reputation, Employee's employment will place her in a position where Employee can further develop personal and professional relationships with the Company's current and prospective customers and/or suppliers. Employee further acknowledges that in the performance of her duties under this Agreement and as a result of her previous employment by Optometrics LLC, Employee has been and will continue to be provided with certain specialized skills, training and/or know-how, as well as possess the Confidential Information or Trade Secrets referred to above. Employee understands and agrees that this goodwill and reputation, as well as Employee's skills, training, know-how and knowledge of Confidential Information or Trade Secrets could be used to compete with the Company. Accordingly, Employee agrees that, during the course of Employee's employment with Company and for (15) months from the date of Employee's termination of employment (whether voluntarily or involuntarily) or the termination of this Agreement at the end of any term, Employee shall not directly or indirectly, individually or with others: (a) Compete with the Company in the design, development, manufacture or sale of any of its then current or development-stage products or services. (b) Cause or attempt to cause any existing customer of the Company to divert, terminate, limit, modify adversely or not enter into any business relationship with the Company. (c) Solicit, employ or contract with any of Company's or any of its subsidiaries' employees. The term "employ" for purposes of this paragraph means to enter into an arrangement for services as a full-time or part- time employee, independent contractor, agent or otherwise. Employee further agrees during the above-stated fifteen (15) month period to inform any new person, firm or entity with whom Employee proposes to enter into an employment or a business relationship, before accepting such employment or entering into such a relationship, of the restrictions on Employee set forth in Paragraphs 7, 8 and 9 of this Agreement. 10. Consideration. Employee and Company agree that the provisions of this Agreement are reasonable and necessary for the protection of Company. 11. Remedies for Breach. Each party acknowledges that breach by the other party of the provisions of this Agreement will cause the first party irreparable harm that is not fully remedied by monetary damages. Accordingly, each party agrees that the other party shall, in addition to any relief afforded by law, be entitled to injunctive relief. Each party agrees that both damages at law and injunctive relief shall be proper modes of relief and are not to be considered alternative remedies. Furthermore, each party agrees that all actions, suits or proceedings arising under or relating to this Agreement may be brought only in a court of general jurisdiction in and for Middlesex County, Massachusetts or the United States District Court for the District of Massachusetts, to the jurisdiction and venue of which each party hereto consents and waives the right to argue forum non conveniens. 12. General Provisions. The parties acknowledge and agree as follows: (a) This Agreement contains the entire understanding of the parties with regard to all matters contained herein. There are no other agreements, conditions, or representations, oral or written, express or implied, with regard to such matters. This Agreement supersedes and replaces any prior agreement between the parties generally relating to the same subject matter. (b) This Agreement may be amended or modified only by a writing signed by all parties. (c) Waiver by either Company or Employee of a breach of any provision, term or condition hereof shall not be deemed or construed as a further or continuing waiver thereof or a waiver of any breach of any other provision, term or condition of this Agreement. (d) The rights and obligations of Company hereunder may be transferred or assigned to any successor or assign of Company. The term "Company" as used herein is intended to include Dynasil Corporation of America, its successors and/or assigns, if any. No assignment of this Agreement shall be made by Employee, and any purported assignment shall be null and void. (e) Employee's obligations under Paragraphs 7, 8 and 9 of this Agreement shall survive any change in Employee's employment status with Company, by promotion or otherwise, or the termination of Employee's employment with Company. (f) If any Court finds any provision or part of this Agreement to be unreasonable, in whole or in part, such provision shall be deemed and construed to be reduced to the maximum duration, scope or subject matter allowable under applicable law. Any invalidation of any provision or part of this Agreement will not invalidate any other part of this Agreement. (g) This Agreement will be construed and enforced in accordance with the laws and legal principles of the Commonwealth of Massachusetts. (h) This Agreement may be executed in any number of counterparts, including counterparts transmitted by telecopier or facsimile, any one of which shall constitute an original of this Agreement. When counterparts of facsimile copies have been executed by all parties, they shall have the same effect as if the signatures to each counterpart or copy were upon the same document and copies of such documents shall be deemed valid as originals. The parties agree that all such signatures may be transferred to a single document upon the request of any party. This Agreement is intended to be a legally binding document fully enforceable in accordance with its terms. DYNASIL CORPORATION OF AMERICA By: Craig T. Dunham President and CEO EMPLOYEE: Laura Lunardo EX-10 4 ex10-11.txt EXHIBIT 10.11 March 28, 2005 Mr. Francis M. Ciancarelli 2451 Magnolia Road Vineland, NJ 08361-6679 USA Dear Fran: I am pleased to offer you the position of Vice President- Sales and Marketing for Dynasil Corporation. This position will have direct responsibility for Dynasil Sales/ Marketing as well as dotted line responsibility for Optometrics Sales/ Marketing. The following outlines the details of compensation and benefits: 1) Base salary of $80,000 per year which will be paid weekly. 2) Annual incentive bonus with a target payout of 10% of base salary and a maximum payout of 15% of base salary. The payout goals would be mutually agreeable goals including sales, profitability, and potentially other key business goals. Goals would be set for each fiscal year prior to the start of the year with an annual payout within the quarter following the end of the fiscal year. For the 2005 fiscal year ending September 30, 2005, a payout of at least 10% would be guaranteed. 3) Standard Dynasil benefit package which includes medical insurance after a 90 day waiting period, short term disability, the purchase of Dynasil shares at 85% of market price, a small amount of life insurance, and other benefits. 4) Stock options to purchase 185,000 shares at the market price when this agreement is completed. The Board of Directors will evaluate the award of additional options on an annual basis. 5) Three weeks of vacation which will be prorated for the first year plus standard Dynasil holidays. 6) A weekly car allowance of $112.50 per week as well as a company supplied cell phone and computer. 7) Participate in Quarterly Board of Directors meetings to provide a sales and marketing update. A requirement for employment is signing an insider trading and confidentiality agreement. Employee further agrees that for a period of two (2) years subsequent to Dynasil employment, he shall not directly or indirectly cause or attempt to cause any existing customer of the Company to divert, terminate, limit, modify adversely or not enter into any business relationship with the Company. If you are in agreement with the terms as outlined above, please sign where indicated and return the original. I am looking forward to you joining Dynasil on a permanent basis. Sincerely, Craig T. Dunham Agreed to:_/s/ F.M. Ciancarelli Date:3/31/05 President and CEO Francis M. Ciancarelli EX-10 5 ex10-12.txt EXHIBIT 10.12 REVOLVING CREDIT AGREEMENT AGREEMENT made as of the 8th day of March, 2005, by and between CITIZENS BANK OF MASSACHUSETTS, a state-chartered bank having its principal place of business at 28 State Street, Boston, Massachusetts 02109 (the "Lender"), and OPTOMETRICS CORPORATION, a Delaware corporation, having its principal place of business at 8 Nemco Way, Ayer, Massachusetts 01432 (the "Borrower"). I. GENERAL TERMS Section 1.01. Revolving Loans; Use of Proceeds (a) Subject to the terms and conditions hereinafter set forth, the Lender will make revolving line of credit loans ("Revolving Loans") to the Borrower in such amounts as Borrower may request from time to time at the address of the Lender set forth above in an aggregate principal amount not to exceed the lesser of (a) Four Hundred Thousand and 00/100 Dollars ($400,000.00) (the "Maximum Credit") or (b) the Borrowing Base (as hereinafter defined) then in effect on any Business Day (as hereinafter defined) prior to the first to occur of (x) January 31, 2006 (the "Maturity Date") or (y) the earlier termination of this Agreement pursuant to Article V of this Agreement. (b) The proceeds of the Revolving Loans shall be used by the Borrower (a) to pay off an existing line of credit from the Lender to Optometrics LLC, a Massachusetts limited liability company (the "Seller"), in connection with the Borrower's acquisition of all or substantially all of the assets of the Seller and (b) the remainder for working capital purposes. Section 1.02. Secured Revolving Credit Note; Payments of Principal and Interest (a) The Revolving Loans shall be evidenced by that certain Secured Revolving Credit Note of even date herewith (the "Note") made by the Borrower in favor of the Lender. (b) The Borrower shall repay in full all amounts due under the Note upon the first to occur of (i) the Maturity Date (unless the same is extended by Lender in its sole discretion) or (ii) an acceleration under Article V of this Agreement following an Event of Default. The Borrower shall repay the aggregate principal amount of all Revolving Loans from the Lender to the Borrower outstanding at any time (the "Aggregate Revolving Loans") in part from time to time in such principal amounts as may be necessary to ensure that the Aggregate Revolving Loans at no time exceed the lesser of the Maximum Credit or the Borrowing Base then in effect, as reflected in the Borrowing Base Certificate (as hereinafter defined most recently provided to the Lender or any information determined by the Lender in the interim. Notwithstanding the definition of "Maximum Credit" set forth above, nothing contained in this Agreement shall be construed to obligate the Lender to make any Revolving Loan after the Maturity Date or earlier termination of this Agreement pursuant to Article V; further, nothing herein shall be construed to obligate the Lender to make any Revolving Loan in excess of the Borrowing Base; but in either such case the Lender may choose to do so and all Revolving Loans shall in any event be secured by the Collateral (as defined in the Security Agreement (as hereinafter defined)). (c) The Borrower will pay interest on the principal amount of the Aggregate Revolving Loans outstanding from time to time, from the date of the initial Revolving Loan until payment of all Revolving Loans and the Note in full such interest to be payable monthly in arrears on the first (1st) day of each calendar month, commencing April 1, 2005, and on the date of payment of the Revolving Loans in full. All Revolving Loans shall bear interest at a fluctuating rate of interest equal to the Citizens Bank of Massachusetts Prime Rate (as announced from time to time) plus one-half of one percent (0.50%) per annum. Interest shall be calculated on the basis of actual days elapsed and a 360-day year. Section 1.03. Requests for Revolving Loans; Notations Reflecting Revolving Loans (a) The Borrower will give the Lender telephonic or written notice by no later than 3:00 p.m. on any Business Day on which it requests a Revolving Loan, specifying the amount and date of each Revolving Loan requested. (b) The Borrower hereby irrevocably authorizes the Lender to make or cause to be made on the books of the Lender, at or following the time of making of any Revolving Loan and of receiving any payment of principal, an appropriate and accurate notation reflecting such transaction and the then aggregate unpaid principal balance of the Revolving Loans. The amount so noted, and other regular entries by the Lender on its books with respect to interest and other charges, shall constitute evidence as to the amount owed by the Borrower with respect to principal of the Revolving Loan and with respect to interest and other charges. Section 1.04. Late Fee; Default Interest (a) If any billed amount of principal and/or interest is not paid in full within five (5) days after the same is due, Borrower shall pay to Lender a late fee on such unpaid amount equal to five percent (5%) of such late payment. (b) During any period in which an Event of Default is existing, the interest rate under the Note shall be the Citizens Bank of Massachusetts Prime Rate plus two and one-half percent (2.5%) per annum, until full payment of all principal, interest, expenses and costs of collection, if any, due hereunder are received by the Lender. Section 1.05. Security for the Note The Note and the Borrower's obligations hereunder shall be secured by (a) a first priority security interest in all of the Borrower's personal property pursuant to the terms of a Security Agreement of even date (the "Security Agreement"), and (b) an unconditional and continuing guaranty by Dynasil Corporation of America, a New Jersey corporation (the "Guarantor"), the one hundred percent (100%) stockholder of the Borrower. All agreements and instruments described in this Section 1.05, together with any and all other agreements and instruments heretofore or hereafter securing the Note, are sometimes hereinafter referred to collectively as the "Security Documents" and individually as a "Security Document". Section 1.06. Definitions "Borrowing Base" shall mean the sum of (i) eighty percent (80%) of Borrower's Eligible Receivables from time to time, plus (ii) thirty percent (30%) of Eligible Inventory up to $200,000.00. "Borrowing Base Certificate" shall mean the borrowing base certificate, in the form of Exhibit A attached hereto and made a part hereof, that the Borrower shall complete and deliver to the Lender pursuant to which the Borrower shall substantiate that the Aggregate Revolving Loans do not exceed the lesser of the Maximum Credit or the Borrowing Base. "Business Day" shall mean any day other than a Saturday, Sunday or other day when commercial banks are authorized or required to be closed in Boston, Massachusetts. "Eligible Inventory" shall mean the aggregate of the lower of cost or Market Value of all of the Iinventory of the Borrower, expressly excluding Inventory that constitutes work-in- process, which (i) is owned solely by the Borrower and with respect to which the Borrower has good, valid and marketable title; (ii) is stored at the chief executive office or any other place of business of the Borrower; (iii) is subject to a valid, enforceable, first priority security interest in favor of the Lender; and (iv) otherwise conforms to the warranties contained herein and which at all times continues to be acceptable to the Lender in its sole discretion, which discretion shall be exercised in a commercially reasonable manner. "Eligible Receivables" shall mean the aggregate face amount (less the aggregate amount of all returns, discounts, claims, credits, charges and allowances of any nature and all reserves for slow paying accounts or foreign sales) of such of the Borrower's trade accounts receivable for goods sold and/or services rendered by the Borrower in the ordinary course of its business, on terms usual to the business of the Borrower ("Receivables"), which shall be deemed by the Lender in its sole discretion to be eligible. In determining whether a Receivable shall be eligible, (i) the subject goods have been shipped or delivered to (and accepted by) an account debtor on an absolute final sale basis and not on consignment, on approval or on a sale-or-return basis or subject to any other repurchase or return agreement, or on an open account basis, or on a "bill and hold" or a delayed billing basis and no part of the subject goods has been returned, rejected, lost or damaged or, in the case of services, the services have been performed by the Borrower and accepted by the account debtor; the account is not evidenced by chattel paper or an instrument of any kind unless such chattel paper or instrument has been delivered to the Lender and endorsed or assigned to the Lender's order; and said account debtor is not insolvent or the subject of any bankruptcy or insolvency proceeding of any kind and (ii) the Receivable shall be a valid, legally enforceable obligation of the account debtor thereunder Without limiting the discretion of the Lender to determine which Receivables are eligible, the following shall be deemed ineligible: (a) those Receivables due from any affiliates of the Borrower, including, without limitation, any of its officers, directors, stockholders, employees or agents; (b) those Receivables that are due from suppliers or other vendors of the Borrower; (c) those Receivables that are being disputed by the account debtor; (d) those Receivables that are due from a person or entity that is the subject of a voluntary or involuntary bankruptcy, insolvency, reorganization, liquidation or other debt relief or adjustment proceeding, including an assignment for the benefit of its creditors; (e) those Receivables that are more than ninety (90) days past due from date of invoice; (f) those Receivables that are due from any governmental entity subject to specific legal assignment laws or rules; (g) those Receivables that are due from any person, entity or debtor located outside of the United States unless such Receivables are fully insured and evidence of such insurance is presented to and found acceptable to the Lender; (h) those Receivables that represent progress billings; and (i) those Receivables that have been designated, by notice to the Borrower, by the Lender in its sole discretion as unacceptable for any reason (including, without limitation, breach of any warranty of the Borrower with respect thereto; claims or disputes relating thereto; bankruptcy, insolvency, suspension of business, making of an assignment for the benefit of creditors by or appointment of a receiver for, the account debtor; or any other circumstances as a result of which the Lender believes that collection thereof may be doubtful or that the same are not suitable as a basis for borrowing under this Agreement); PROVIDED THAT if at any time twenty-five percent (25%) or more of the aggregate amount of the Receivables due from any account debtor are unpaid in whole or in part more than ninety (90) days from the respective dates of invoices, from and after such time none of the Receivables (then existing or thereafter arising) due from such account debtor shall be deemed to be Eligible Receivables until such time as all Receivables due from such account debtor are (as a result of actual payments received thereon) no more than ninety (90) days from the date of invoice. "Inventory" shall mean all goods now owned or hereafter acquired by a person and intended for sale, including, without limitation, raw materials, work-in-process, and finished goods, which would, in accordance with generally accepted accounting principles, be classified as inventory of a person conducting a business the same as or similar to that of such person. "Market Value" shall mean the aggregate price at which Eligible Inventory is offered for sale to customers of the Borrower, as reflected on an ongoing inventory thereof, as determined by the Lender and as such ongoing inventory is reduced by sales, markdowns, obsolescence and shrinkage. II. REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Lender (which representations and warranties shall survive the delivery of the Note and the making of the Loan) that: Section 2.01. Since February 18, 2005, there has been no material adverse change in the financial condition of the Borrower or the Guarantor and since that date no dividends or other distributions have been declared or paid or made to the stockholders of the Borrower of the Guarantor except as may be otherwise stated in a letter of the Borrower to the Lender dated the date of this Agreement and acknowledged in writing by the Lender. Section 2.02. The Borrower (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, (b) has the corporate power and authority to own its properties and to carry on business as now being conducted and is qualified to do business in every jurisdiction where such qualification is necessary, including, without limitation, the Commonwealth of Massachusetts, and (c) has the corporate power to execute and deliver, and perform its obligations under this Agreement, the Note and the Security Documents. Section 2.03. The execution and delivery and performance by the Borrower of its obligations under this Agreement, the Note and each of the Security Documents have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or other agency of government, the corporate charter or by-laws of the Borrower or any indenture, agreement or other instrument to which it is a party, or by which it is bound, or be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or except as may be provided by this Agreement, result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Borrower pursuant to, any such indenture, agreement or instrument. The Borrower is not required to obtain any consent, approval or authorization from, or to file any declaration or statement with, any governmental instrumentality or other agency in connection with or as a condition to the execution, delivery or performance of this Agreement, the Note or the Security Documents. Section 2.04. There is no action, suit or proceeding at law or in equity or by or before any governmental instrumentality or other agency now pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower which, if adversely determined, would have a material adverse effect on the business, operations, properties, assets or condition, financial or otherwise, of the Borrower. Section 2.05. The Borrower is not a party to any agreement or instrument or subject to any charter or other corporate restriction adversely affecting its business, properties or assets, operations or conditions, financial or otherwise. The Borrower is not in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party. Section 2.06. Except for equipment that is leased, the Borrower has good title to all of its properties and assets, free and clear of all mortgages, security interests, restrictions, liens and encumbrances of any kind, except liens permitted hereunder and restrictions, easements and minor irregularities in title which do not and will not interfere with the occupation, use and enjoyment by the Borrower of such properties and assets in the normal course of its business as presently conducted or materially impair the value of such properties and assets for the purpose of such business. Section 2.07. The Borrower has no subsidiaries. Section 2.08. Any borrowings made by the Borrower under this Agreement do not and will not render the Borrower insolvent; the Borrower is not contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidating of all or a major portion of its property, and the Borrower has no knowledge of any person contemplating the filing of any such petition against it, including the properties and assets reflected in the financial statements referred to in Section 2.01 hereof. Section 2.09. No statement of fact made by or on behalf of the Borrower in this Agreement or in any certificate or schedule furnished to the Lender pursuant hereto, contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained therein or herein not misleading. There is no fact presently known to the Borrower which has not been disclosed to the Lender which materially affects adversely, nor as far as the Borrower can foresee, will materially affect adversely the property, business, operations or condition (financial or otherwise) of the Borrower. Section 2.10. The Borrower has filed all federal, state and local tax returns required to be filed and has paid or made adequate provision for the payment of all federal, state and local taxes, charges and assessments. Section 2.11. Except as otherwise disclosed to the Lender, the Borrower does not have a profit sharing, pension or other similar plan providing for a program of deferred compensation to any employee except as disclosed to the Lender. With respect to such plan, Borrower covenants and agrees to cause to be paid when due all amounts necessary to fund in accordance with its terms such plan and will take no action which could result in liability to the Pension Benefit Guaranty Corporation, or any of its successors or assigns, or to the entity which provides funds for such plan. II. CONDITIONS OF MAKING REVOLVING LOANS The obligation of the Lender to make the Revolving Loans hereunder is subject to the following conditions precedent: Secion 3.01. The representations and warranties set forth in Article II hereof shall be true and correct on and as of the date hereof and the dates the Revolving Loans are requested and made. Secion 3.02. The Borrower will open and maintain with the Lender an account that will be the principal depository of the Borrower's funds. Advances of Revolving Loans will be made by the Lender to the Borrower upon telephonic request to credit such advance to the Borrower's account made by an officer of the Borrower who has been duly authorized by its board of directors and whose name, along with a certified copy of such resolutions, has been transmitted to the Bank. Such request shall be confirmed in writing by the Lender's receipt, within two (2) business days thereafter, of a request for advance in the form of Exhibit B attached hereto, signed by a duly authorized officer of the Borrower indicating the date and amount of the advance requested and acknowledging the principal balance outstanding on the Revolving Loan as of the said date after taking into consideration the amount of the advance as so requested. Secion 3.03. No Event of Default as specified in Article VI hereof, nor any event which upon notice or lapse of time or both would constitute such an Event of Default, shall have occurred. III. AFFIRMATIVE COVENANTS The Borrower covenants and agrees that, from the date hereof and until payment in full of the principal of, and interest on, the Note and any other indebtedness of the Borrower to the Lender, whether now existing or arising hereafter, the Borrower will: Section 4.01. (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its corporate existence, rights, licenses, permits and franchises and comply with all laws and regulations applicable to it; at all times maintain, preserve and protect all franchises and trade names and preserve all the remainder of its property used or useful in the conduct of its business and keep the same in good repair, working order and condition, and from time to time, make, or cause to be made, all needful and proper repairs, renewals, replacements, betterments and improvements thereto, so that the business carried on in connection therewith may be properly and advantageously conducted at all times; and keep its insurable properties adequately insured at all times, by financially sound and reputable insurers, to such extent and against such risks, including fire and other risks insured against by extended coverage, and maintain liability and such other insurance as is customarily maintained by companies engaged in similar businesses, all as may be approved by the Lender. (b) Comply with all applicable laws and regulations, whether now in effect or hereafter enacted or promulgated by any governmental authority having jurisdiction over the Borrower. Section 4.02. Pay and discharge or cause to be paid and discharged all taxes, assessments and governmental charges or levies imposed upon it or upon its respective income and profits or upon any of its property, real, personal or mixed, or upon any part thereof, before the same shall become in default, as well as all lawful claims for labor, materials and supplies or otherwise, which, if unpaid, might become a lien or charge upon such properties or any part thereof; provided, however, that the Borrower shall not be required to pay and discharge or cause to be paid and discharged any such tax, assessment, charge, levy or claim so long as the validity thereof shall be contested in good faith by appropriate proceedings and it shall have set aside on its books adequate reserves with respect to any such tax, assessment, charge, levy or claim, so contested; and provided, further, that payment with respect to any such tax, assessment, charge, levy or claim shall be made before any of its property shall be seized or sold in satisfaction thereof. Section 4.03. Give prompt written notice to the Lender of any proceedings instituted against it by or in any Federal or state court or before any commission or other regulatory body, whether Federal, state or local, which, if adversely determined, would have an adverse effect upon its business, operations, properties, assets, or condition, financial or otherwise. Section 4.04. Furnish to the Lender the following which shall be satisfactory to the Lender: (a) Within one hundred twenty (120) days of the end of each fiscal year, consolidated audited financial statements of the Guarantor with consolidating schedules showing the Borrower, certified by Haefele, Flanagan & Co., p.c., or other independent certified public accountants selected by the Guarantor and acceptable to the Lender, the form of such certification to be also satisfactory to the Lender, showing the financial condition of the Guarantor at the close of such fiscal year, the results of operations during such year and containing a statement to the effect that such accountants have examined the provisions of the Agreement and that none of the Events of Default, as specified in Article VI hereof, nor any event which upon notice or lapse of time or both would constitute such an Event of Default, has occurred. (b) Within thirty (30) days after the end of each quarter in each such fiscal year, (1) a borrowing base certificate as of the end of such quarterly period and (2) an accounts receivable aging; in each case as of the end of such quarterly period, in form and substance satisfactory to the Lender and certified by the Borrower's chief financial officer. (c) Within forty-five (45) days after the end of each quarter in each such fiscal year, balance sheets and statements of income and surplus, together with supporting schedules, prepared by the Borrower and certified by its chief financial officer, such balance sheets to be as of the close of such quarter and such statements of income and surplus to be for the period from the beginning of the then current fiscal year to the end of such quarter, in each case subject to audit and year-end adjustments. (d) Concurrently with the delivery of the annual audited financial statements required by this Section 4.04, a certificate in the form attached hereto as Exhibit C by the President or chief financial officer of the Borrower (i) calculating, setting forth and certifying as to the accuracy of the amounts required to be calculated under Sections 4.09 and 4.10 hereof, and (ii) certifying as to the fact that he has examined the provisions of this Agreement and that none of the Events of Default, as specified in Article VI hereof, nor any event which upon notice or lapse of time, or both, would constitute such an Event of Default, has occurred and is continuing. (e) Promptly, from time to time such other information regarding its operations, assets, business, affairs and financial condition, as the Lender may reasonably request. To the extent any of the information of the Borrower or the Guarantor delivered to the Lender pursuant to this subsection (e) constitutes material non-public information, the Lender shall treat the same as such. Section 4.05. Permit agents or representatives of the Lender to inspect, at reasonable hours and upon reasonable notice, its books and records and to make abstracts or reproductions thereof. Section 4.06. Promptly advise the Lender of any material adverse change in its condition, financial or otherwise, or of the occurrence of any Event of Default by the Borrower of the type described in Article VI hereof, or of the occurrence of any event which upon notice or lapse of time or both would constitute such an Event of Default. Section 4.07. Maintain a standard system of accounting in accordance with generally accepted accounting principles. Section 4.08. Maintain a Debt Coverage Ratio of not less than 1.25 to 1.00, which Debt Coverage Ratio, on a stand-alone basis, on an annual basis as at the end of each fiscal year of the Borrower. "Debt Coverage Ratio" shall mean earnings before interest, taxes, depreciation and amortization Less cash taxes, unfinanced capital expenditures and distributions Divided by actual interest expense and current maturities of long-term debt. Section 4.09. Maintain a ratio of its total liabilities to its Net Worth of less than or equal to 2.50 to 1.00, on a stand- alone basis, which shall be tested on an annual basis as at the end of each fiscal year determined in accordance with generally accepted accounting principles consistently applied. "Net Worth" shall be defined as the excess of the Borrower's total assets over its total liabilities computed in accordance with generally accepted accounting principles consistently applied, plus the amount of any indebtedness of the Borrower which shall be subordinated to the Loan on terms satisfactory to the Lender. Section 4.10. Use the Lender as the principal depository of its corporate funds. IV. NEGATIVE COVENANTS The Borrower covenants and agrees that, until payment in full of the principal of, and interest on, the Note and any other indebtedness of the Borrower to the Lender, whether now existing or arising hereafter, unless the Lender shall otherwise consent in writing, it will not, directly or indirectly: Section 5.01. Incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any indebtedness or liability, except: (a) indebtedness to the Lender; (b) indebtedness to equipment lessors for equipment leases in existence on the date hereof; (c) indebtedness incurred after the date hereof to a lender , other than the Lender, in excess of the aggregate amount of Fifty Thousand and 00/100 Dollars ($50,000.00) outstanding at any one time, without the prior written consent of the Lender; and (d) indebtedness with respect to trade obligations and other normal accruals in the ordinary course of business not yet due and payable, or with respect to which it is contesting in good faith the amount or validity thereof by appropriate proceedings, and then only to the extent it has set aside on its books adequate reserves therefor. Section 5.02. Create, incur, assume or suffer to exist any mortgage, security interest, pledge, lien, charge or other encumbrance of any nature whatsoever on or in any of its assets, now or hereafter owned, other than: (a) liens securing the payment of taxes, either not yet due or the validity of which is being contested in good faith by appropriate proceedings, and as to which it shall have set aside on its books adequate reserves; (b) deposits under worker's compensation, unemployment insurance and social security laws, or to secure the performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, or to secure statutory obligations or surety or appeal bonds, or to secure indemnity, performance or other similar bonds in the ordinary course of business; (c) liens imposed by law, such as carriers', warehousemen's or mechanics' liens, incurred by it in good faith in the ordinary course of business, and liens arising out of a judgment or award against it with respect to which it shall currently be prosecuting an appeal, a stay of execution pending such appeal having been secured; (d) liens to secure the indebtedness, but only the indebtedness, permitted pursuant to Sections 5.01 (b) and (c) above; and (e) liens in favor of the Lender. Section 5.03. Guarantee, endorse or otherwise in anyway become or be responsible for obligations of any other person, except endorsements of negotiable instruments for collection in the ordinary course of business. Section 5.04. Sell, lease, transfer or otherwise dispose of its properties, assets, rights, licenses and franchises to any person, except in the ordinary course of its business and except for obsolete assets, or turn over the management of, or enter a management contract with respect to, such properties, assets, rights, licenses and franchises. Section 5.05. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real, personal or mixed, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property, without the prior written consent of the Lender, which consent shall not be unreasonably withheld, delayed or conditioned. Section 5.06. Purchase, invest in or otherwise acquire or hold securities, including, without limitation, capital stock and evidences of indebtedness of, or make Loan or advances to, or enter into any arrangement for the purpose of providing funds or credit to, any other person, except (i) ordinary and necessary travel and business expense advances to employees of the Borrower and (ii) investments in short-term obligations of the United States or certificates of deposit of the Lender. Section 5.07. Dissolve, liquidate, consolidate with or merge with, or otherwise acquire all or substantially all of the assets or properties of, any person or entity without the prior written consent of the Lender, which consent shall not be unreasonably withheld, delayed or conditioned, or Craig T. Dunham or Laura Lunardo cease to be employed by either the Borrower or the Guarantor. Section 5.08. Declare or pay any dividends, or make any distribution of cash or property, or both, to holders of shares of its capital stock, if after giving effect thereto any of the foregoing would result in a breach, default or Event of Default under this Agreement, or directly or indirectly, redeem, purchase or otherwise acquire for a consideration, any shares of its capital stock, of any class. Section 5.09. Engage, directly or indirectly, in a business substantially different from the business now being conducted. Section 5.10. Sell, assign, discount or dispose in anyway of any accounts receivable, promissory notes or trade acceptances held by the Borrower, with or without recourse, except for collection (including endorsements) in the ordinary course of business. V. DEFAULTS In each case of happening of any of the following events (each of which is herein and in the Term Note sometimes called an "Event of Default"): (a) any representation or warranty made herein, or in any report, certificate, financial statement or other instrument furnished in connection with this Agreement, or the borrowing hereunder, shall prove to be false or misleading in any material respect; (b) default in the payment when due of any principal or interest on the Note within ten (10) days of when the same is due; (c) default in the payment of any installment of the principal of, or interest on, (i) that certain Note (SBA Form 147) in the original principal amount of Three Hundred Thousand and 00/100 Dollars ($300,000.00) executed by the Borrower in favor of the Lender or (ii) any other indebtedness of the Borrower to the Lender (other than the Note) for more than five (5) days after the date when the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment or by acceleration or otherwise; (d) default in the due observance or performance of any covenant, condition or agreement (other than those contained in (a), (b) or (c) above) contained herein and the same shall continue unremedied for five (5) days after notice thereof shall have been given to the Borrower or the occurrence of an event of default as defined or described in the Note or in any of the Security Documents; (e) default with respect to any evidence of indebtedness of the Borrower (other than to the Lender) in a material amount, if the effect of such default is to accelerate the maturity of such indebtedness or to permit the holder thereof to cause such indebtedness to become due prior to the stated maturity thereof, or if any indebtedness of the Borrower (other than to the Lender) is not paid, when due and payable, whether at the due date thereof or a date fixed for prepayment or otherwise, provided that the foregoing shall not be a default so long as the validity thereof shall be contested in good faith by appropriate proceedings and the Borrower shall have set aside on its books adequate reserves, in the sole judgment of the Lender, with respect to any such material indebtedness and provided, further, that payment with respect to such indebtedness shall be made before any of the Borrower's assets or properties shall have been seized or sold in satisfaction thereof; (f) the Borrower or the Guarantor shall (i) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of it or any of its property, (ii) admit in writing its inability to pay its debts as they mature, (iii) make a general assignment for the benefit of creditors, (iv) have an order of relief entered against it or insolvent or be the subject of an order for relief under Title 11 of the United States Code or (v) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law or if corporate action shall be taken for the purpose of effecting any of the foregoing; (g) an order, judgment or decree shall be entered, without the application, approval or consent of the Borrower or the Guarantor by any court of competent jurisdiction, approving a petition seeking reorganization of either the Borrower or the Guarantor or appointing a receiver, trustee, custodian or liquidator of the Borrower or the Guarantor or of all or a substantial part of the assets of the Borrower or the Guarantor, and such order, judgment or decree shall continue unstayed and in effect for any period of thirty (30) days; (h) final judgment for the payment of money in excess of an aggregate of One Hundred Thousand Dollars ($100,000) shall be rendered against the Borrower or the Guarantor, and the same shall remain undischarged for a period of ten (10) consecutive days, during which execution shall not be effectively stayed; (i) the occurrence of any attachment of any deposits or other property of the Borrower or the Guarantor in the hands or possession of the Lender, or the occurrence of any attachment of any other property of the Borrower or the Guarantor in an amount exceeding Ten Thousand Dollars ($10,000) which shall not be discharged within thirty (30) days of the date of such attachment; then and in every such Event of Default and at any time thereafter during the continuance of such event, the Note and any and all other indebtedness of the Borrower to the Lender, shall, at the option of the Lender, immediately become due and payable, both as to principal and interest, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Note or other evidence of such indebtedness to the contrary notwithstanding. VI. MISCELLANEOUS Section 7.01. This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto, shall survive the making by the Lender of the Loan, the execution and delivery to the Lender of the Note, and shall continue in full force and effect so long as the Note and any other indebtedness of the Borrower to the Lender is outstanding and unpaid. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements in this Agreement contained, by or on behalf of the Borrower, shall inure to the benefit of the respective successors and assigns of the Lender. Section 7.02. The Borrower will reimburse the Lender upon demand for all out-of-pocket costs, charges and expenses of the Lender (including reasonable fees and disbursements of counsel to the Lender) in connection with (i) the preparation, execution and delivery of this Agreement, the Note and any security instrument securing the Note, (ii) the making of the Loan, (iii) any amendments, modifications, consents or waivers in respect thereof and (iv) any enforcement thereof. Section 7.03. This Agreement and the Note shall be construed in accordance with and governed by the laws of the Commonwealth of Massachusetts. It is intended by the parties that this Agreement take effect as a seal instrument. Section 7.04. No modification or waiver of any provision of this Agreement, or of the Note, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. No notice to, or demand, on the Borrower, in any case, shall entitle the Borrower to any other or future notice or demand in the same, similar or other circumstances. Section 7.05. Neither any failure nor any delay on the part of the Lender in exercising any right, power or privilege hereunder, or under the Note, or any other instrument given as security therefor, shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or future exercise, or the exercise of any other right, power or privilege. Section 7.06. All notices, requests, demands and other communications provided for hereunder shall be in writing (including telegraphic communication) and mailed or telegraphed or delivered to the applicable party at the addresses indicated above or, as to each party, at such other address as shall be designated by such parties in a written notice to the other party complying as to delivery with the terms of this Section. All such notices, requests, demands and other communication shall, when mailed or telegraphed, respectively, be effective when deposited in the mails or delivered to the telegraph company, respectively, addressed as aforesaid. Section 7.07. This Agreement shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender. Section 7.08. The Borrower, to the extent that it may lawfully do so, waives trial by jury in any action brought on or with respect to this Agreement, the Note, the Security Documents meets or any other agreements executed in connection herewith. [SPACE INTENTIONALLY LEFT BLANK; SIGATURE PAGE FOLLOWS] Section 7.09. Any Article and Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. As used in this Agreement, the term "person" shall include any individual, corporation, partnership, joint venture, trust, or unincorporated organization, or a government or any agency or political subdivision thereof. IN WITNESS WHEREOF, the Lender and the Borrower have caused this Agreement to be duly executed by their duly authorized officers, all as of the day and year first above written. Lender: CITIZENS BANK OF MASSACHUSTTS By:________________________________ Rose Lee Askin, Vice President Borrower: OPTOMETRICS CORPORATION By:________________________________ Craig T. Dunham, President EX-10 6 ex10-13.txt EXHIBIT 10.13 SBA Form 147 (06/03/02) Version 4.1 Page 1 / 6 U.S. Small Business Administration Note SBA Loan # EXP 856-356-4010 SBA Loan Optometrics Corporation Name Date March 8, 2005 Loan Amount $300,000.00 Interest Six and one-quarter (6.25%) Rate Borrower Optometrics Corporation Operating Optometrics Corporation Company Lender CITIZENS BANK OF MASSACHUSETTS 1. PROMISE TO PAY: In return for the Loan, Borrower promises to pay to the order of Lender the amount of THREE HUNDRED THOUSAND DOLLARS AND NO CENTS ($300,000.00), interest on the unpaid principal balance, and all other amounts required by this Note. 2. DEFINITIONS: "Collateral" means any property taken as security for payment of this Note or any guarantee of this Note. "Guarantor" means each person or entity that signs a guarantee of payment of this Note. "Loan" means the loan evidenced by this Note. "Loan Documents" means the documents related to this loan signed by Borrower, any Guarantor, or anyone who pledges collateral. "SBA" means the Small Business Administration, an Agency of the United States of America. 3. PAYMENT TERMS: Borrower must make all payments at the place Lender designates. The payment terms for this Note are: NOTE TERMS: Maturity: This Note will mature in 5 years from date of the Note. Repayment Terms: The interest rate is 6.25% per year. Borrower must pay principal and interest payments of $5,834.78 every month, beginning one (1) month from the month this Note is dated; payments must be made on the eight (8th) calendar day in the months they are due. Lender will apply each installment payment first to pay interest accrued to the day Lender receives the payment, then to bring principal current, then to pay any late fees, and will apply any remaining balance to reduce principal. If SBA purchases the guaranteed portion of the unpaid principal balance, the interest rate becomes fixed at the rate in effect at the time of the earliest uncured payment default. If there is no uncured payment default, the rate becomes fixed at the rate in effect at the time of purchase. All remaining principal and accrued interest is due and payable 5 years from the date of the Note. Loan Prepayment: Notwithstanding any provision in this Note to the contrary: Borrower may prepay this Note. Borrower may prepay 20 percent or less of the unpaid principal balance at any time without notice. If Borrower prepays more than 20 percent and the Loan has been sold on the secondary market, Borrower must: a. Give Lender written notice; b. Pay all accrued interest; and c. If the prepayment is received less than 21 days from the date Lender receives the notice, pay an amount equal to 21 days' interest from the date lender receives the notice, less any interest accrued during the 21 days and paid under subparagraph b., above. If Borrower does not prepay within 30 days from the date Lender receives the notice, Borrower must give Lender a new notice. Additional payment charges apply. When in any one of the first three years from the date of initial disbursement Borrower voluntarily prepays the outstanding principal balance of the loan due to refinancing with any bank or financial institution other than the Lender, Borrower must pay to Lender a prepayment fee for that year as follows: a. During the first year after the date of initial disbursement, 3% of the total prepayment amount; b. During the second year after the date of initial disbursement, 2% of the total prepayment amount; and c. During the third year after the date of initial disbursement, 1% of the total prepayment amount. Late Charge: If a payment on this Note is more than 15 days late, Lender may charge Borrower a late fee of up to 3% of the unpaid portion of the regularly scheduled payment. 4. DEFAULT: Borrower is in default under this Note if Borrower does not make a payment when due under this Note, or if Borrower or Operating Company: A. Fails to do anything required by this Note and other Loan Documents; B. Defaults on any other loan with Lender; C. Does not preserve, or account to Lender's satisfaction for, any of the Collateral or its proceeds; D. Does not disclose, or anyone acting on their behalf does not disclose, any material fact to Lender or SBA; E. Makes, or anyone acting on their behalf makes, a materially false or misleading representation to Lender or SBA; F. Defaults on any loan or agreement with another creditor, if Lender believes the default may materially affect Borrower's ability to pay this Note; G. Fails to pay any taxes when due; H. Becomes the subject of a proceeding under any bankruptcy or insolvency law; I. Has a receiver or liquidator appointed for any part of their business or property; J. Makes an assignment for the benefit of creditors; K. Has any adverse change in financial condition or business operation that Lender believes may materially affect Borrower's ability to pay this Note; L. Reorganizes, merges, consolidates, or otherwise changes ownership or business structure without Lender's prior written consent; or M. Becomes the subject of a civil or criminal action that Lender believes may materially affect Borrower's ability to pay this Note. 5. LENDER'S RIGHTS IF THERE IS A DEFAULT: Without notice or demand and without giving up any of its rights, Lender may: A. Require immediate payment of all amounts owing under this Note; B. Collect all amounts owing from any Borrower or Guarantor; C. File suit and obtain judgment; D. Take possession of any Collateral; or E. Sell, lease, or otherwise dispose of, any Collateral at public or private sale, with or without advertisement. 6. LENDER'S GENERAL POWERS: Without notice and without Borrower's consent, Lender may: A. Bid on or buy the Collateral at its sale or the sale of another lienholder, at any price it chooses; B. Incur expenses to collect amounts due under this Note, enforce the terms of this Note or any other Loan Document, and preserve or dispose of the Collateral. Among other things, the expenses may include payments for property taxes, prior liens, insurance, appraisals, environmental remediation costs, and reasonable attorney's fees and costs. If Lender incurs such expenses, it may demand immediate repayment from Borrower or add the expenses to the principal balance; C. Release anyone obligated to pay this Note; D. Compromise, release, renew, extend or substitute any of the Collateral; and E. Take any action necessary to protect the Collateral or collect amounts owing on this Note. 7. WHEN FEDERAL LAW APPLIES: When SBA is the holder, this Note will be interpreted and enforced under federal law, including SBA regulations. Lender or SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Note, Borrower may not claim or assert against SBA any local or state law to deny any obligation, defeat any claim of SBA, or preempt federal law. 8. SUCCESSORS AND ASSIGNS: Under this Note, Borrower and Operating Company include the successors of each, and Lender includes its successors and assigns. 9. GENERAL PROVISIONS: A. All individuals and entities signing this Note are jointly and severally liable. B. Borrower waives all suretyship defenses. C. Borrower must sign all documents necessary at any time to comply with the Loan Documents and to enable Lender to acquire, perfect, or maintain Lender's liens on Collateral. D. Lender may exercise any of its rights separately or together, as many times and in any order it chooses. Lender may delay or forgo enforcing any of its rights without giving up any of them. E. Borrower may not use an oral statement of Lender or SBA to contradict or alter the written terms of this Note. F. If any part of this Note is unenforceable, all other parts remain in effect. G. To the extent allowed by law, Borrower waives all demands and notices in connection with this Note, including presentment, demand, protest, and notice of dishonor. Borrower also waives any defenses based upon any claim that Lender did not obtain any guarantee; did not obtain, perfect, or maintain a lien upon Collateral; impaired Collateral; or did not obtain the fair market value of Collateral at a sale. 10. STATE-SPECIFIC PROVISIONS: NONE 11. BORROWER'S NAME(S) AND SIGNATURE(S): By signing below, each individual or entity becomes obligated under this Note as Borrower. ATTEST/WITNESS: Optometrics Corporation By: Craig T. Dunham, President EX-31 7 dynex31a.txt EXHIBIT 31 EXHIBIT 31.1 (a) CERTIFICATION PURSUANT TO RULE 13a-14(a)/15D-14(a) and SECTION 302 OF THE SARBANES-OXLEY ACT I, Craig Dunham, the President and Chief Executive Officer of Dynasil Corporation of America, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Dynasil Corporation of America; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s)and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the small business issuer and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and -1- 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: May 14, 2005 /s/ Craig T Dunham ------------------ --------------------------- Craig T Dunham President and Chief Executive Officer -2- EX-32 8 dynex31b.txt EXHIBIT 31 EXHIBIT 31.1 (b) CERTIFICATION PURSUANT TO RULE 13a-14(a)/15D-14(a) and SECTION 302 OF THE SARBANES-OXLEY ACT I, Laura Lunardo, Chief Financial Officer of Dynasil Corporation of America, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Dynasil Corporation of America; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s)and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the small business issuer and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and -1- 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: May 14, 2005 /s/ Laura Lunardo ----------------------------- Laura Lunardo Chief Financial Officer -2- EX-32 9 dynex32-1.txt EXHIBIT 32 EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C.SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of DYNASIL CORPORATION OF AMERICA (the "Company") on Form 10QSB for the period ended March 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Craig T Dunham, President and Chief Executive Officer of The Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of The Company. /s/ Craig T Dunham ------------------- Craig T Dunham President and Chief Executive Officer /s/ Laura Lunardo ------------------- Laura Lunardo Chief Financial Officer May 14, 2005 EX-99 10 dyn051305ex99-1.txt EXHIBIT 99 - PRESS RELEASE Contact: Craig Dunham Dynasil Corporation of America Phone: (856) 767-4600 Email: cdunham@Dynasil.com Dynasil Announces Second Quarter Fiscal Year 2005 Results WEST BERLIN, N.J.-May 13, 2005--Dynasil Corporation of America (OTCBB: DYSL), fabricator of optical blanks from synthetic fused silica, fused quartz, and other optical materials for the semi- conductor, laser, space and optical components industries, and through its subsidiary, Optometrics Corporation, a worldwide supplier of optical components including diffraction gratings, thin film filters, laser optics, monochromators, and specialized optical systems, announced results of operations for the 2nd quarter ended March 31, 2005. As previously announced, the acquisition of the assets of Optometrics LLC was completed on March 8, 2005. The results for the quarter and 6 months ended March 31, 2005 include 23 days of Optometrics' results of operations from March 9, 2005 through March 31, 2005. For calendar year 2004, Optometrics LLC had revenues of $3.06 Million, EBITDA of $380,000, and net income before taxes of $258,000. The addition of Optometrics is expected to approximately double Dynasil's revenues as well as add significant profitability. Revenues for the quarter ended March 31, 2005 were $1,097,026, an increase of 85% over revenues of $594,469 for the quarter ended March 31, 2004. The net profit for the quarter ended March 31, 2005 was $12,677, or a positive $.00 per share, compared with a net loss of $46,873, or a negative $.02 per share, for the quarter ended March 31, 2004. Excluding the impact of Optometrics, Dynasil's historic business delivered a sales increase of 48% and a second consecutive profitable quarter. The Company is pleased to have strengthened its management team during the quarter with the addition of Laura Lunardo as CFO and Chief Operating Officer of Optometrics Corporation as well as Fran Ciancarelli becoming Vice President- Sales and Marketing. Revenues for the 6 months ended March 31, 2005 were $1,878,212 an increase of 54% over revenues of $1,216,963 for the 6 months ended March 31, 2004. The net profit for the 6 months ended March 31, 2005 was $18,753, or a positive $0.01 per share, compared with a net loss of $72, 905, or a negative $0.03 per share, for the 6 months ended March 31, 2004. "The completion of the Optometrics acquisition and the anticipated benefits from combining the two companies is expected to add significantly to Dynasil profitability," said Craig T. Dunham, President and CEO. "Dynasil's historic business has been improved to be profitable for the last two quarters and I am excited about the benefits from the addition of Optometrics" added Mr. Dunham. About Dynasil: Founded in 1960, Dynasil Corporation of America is a fabricator of optical blanks from synthetic fused silica, fused quartz and other optical materials as well as optical components and specialized optical systems. This news release may contain forward-looking statements usually containing the words "believe," "expect," or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act. Future results of operations, projections, and expectations, which may relate to this release, involve certain risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, the factors detailed in the Company's Annual Report or Form 10-KSB and in the Company's other Securities and Exchange Commission filings, continuation of existing market conditions and demand for our products. DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS UNAUDITED) ASSETS March 31 September 30 2005 2004 ---------- ---------- Current assets Cash and cash equivalents $ 412,839 $ 254,908 Accounts receivable 770,692 309,276 Inventory 861,132 369,813 Other current assets 123,773 16,656 ---------- ---------- Total current assets 2,168,436 950,653 Property, Plant and Equipment, net 777,365 419,718 Other Assets Deferred financing costs 18,595 3,321 Intangibles 78,414 0 ---------- ---------- Total Other Assets 97,009 3,321 ---------- ---------- Total Assets $3,042,810 $1,373,692 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Note payable to bank- Line of credit $250,000 $ 0 Current portion - long-term debt 155,746 120,000 Accounts payable 313,029 184,214 Accrued expenses 331,261 114,959 ---------- ---------- Total current liabilities 1,050,036 419,173 Long-term Debt, net 714,454 488,889 Stockholders' Equity 1,278,320 465,630 ---------- ---------- Total Liabilities and Stockholders' Equity $3,042,810 $1,373,692 ========== ========== DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Three Months Ended Six Months Ended March 31 March 31 2005 2004 2005 2004 Sales $1,097,026 $594,469 $1,878,212 $1,216,963 Cost of Sales 816,113 457,361 1,396,799 919,907 ---------- -------- --------- --------- Gross Profit 280,913 137,108 481,413 297,056 Selling, general and 256,977 175,923 443,698 354,502 administrative ---------- -------- --------- --------- Income (Loss) from Operations 23,936 (38,815) ( 37,715) (57,446) Interest expense - net (11,259) (8,058) (18,962) (15,459) ---------- -------- --------- --------- Income (Loss) before Income 12,677 (46,873) 18,753 (72,905) Taxes Income Taxes 0 0 0 0 ---------- -------- --------- --------- Net Income (Loss) $12,677 $(46,873) $18,753 $(72,905) ---------- -------- --------- --------- Net Income (Loss) per share Basic $0.00 ($ 0.02) $0.01 ($0.03) Diluted $0.00 ($ 0.02) $0.00 ($0.03) -----END PRIVACY-ENHANCED MESSAGE-----