0001260415-12-000024.txt : 20120705 0001260415-12-000024.hdr.sgml : 20120704 20120705092355 ACCESSION NUMBER: 0001260415-12-000024 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20120629 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20120705 DATE AS OF CHANGE: 20120705 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-35011 FILM NUMBER: 12947104 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 8-K 1 dysl8k-062912.txt DYNASIL CORPORATION OF AMERICA FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): June 29, 2012 ------------------ Dynasil Corporation of America ------------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 000-27503 22-1734088 ----------- ----------- ---------- (State or other (Commission File (IRS Employer jurisdiction of Number) Identification No.) incorporation) 44 Hunt Street, Watertown, MA 02472 ------------------------------------------------------------ (Address of principal executive offices) (617)-668-6855 ------------------------------------------------------------ (Registrant's telephone number, including area code) Not Applicable ______________________________________________ (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d- 2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e- 4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01 Entry into a Material Definitive Agreement. Waiver Letter and Amendment under Loan Agreement As disclosed in the Company's Form 10-Q filed May 15, 2012 for the period ended March 31, 2012, due to the incurrence of the Entine Indebtedness (see below), together with the delay in collections relating to the processing of the Company's invoices with governmental customers and the increased spending on commercialization and R&D activities, the Company then believed it would not satisfy certain financial covenants as of June 30, 2012 under the Loan and Security Agreement with Sovereign Bank, N.A. (the "Lender"), dated July 7, 2010, as amended on April 1, 2011 and April 12, 2012 (the "Original Loan Agreement"). As disclosed in the Company's Form 8-K filed on June 8, 2012, the Company has incurred indebtedness in favor of certain entities affiliated with Dr. Gerald Entine (together, "Entine") in the aggregate principal amount of $1,857,546 (the "Entine Indebtedness"). The Company incurred the Entine Indebtedness in satisfaction of its obligation to repurchase certain shares of Dynasil common stock from Entine pursuant to a put right exercised by Dr. Entine on February 12, 2012. On June 29, 2012, the Company entered into a letter agreement (the "Waiver Letter") with the Lender as well as Amendment No. 3 (the "Amendment") to the Original Loan Agreement. Under the Waiver Letter, the Lender agreed to waive non-compliance by the Company with certain financial covenants under the Original Loan Agreement as of June 30, 2012, subject to the Company's compliance with the terms of the Amendment, including completing the Required Capital Raise on or before September 30, 2012 and applying the proceeds as described below. The Company is currently seeking alternative financing sources that will satisfy the Required Capital Raise on or before September 30, 2012, however, there is no guarantee that the Company will be able to complete any such financing in accordance with the terms of the Amendment. If the Company is unable to satisfy the Required Capital Raise prior to September 30, 2012, or otherwise fails to comply with the terms of the Amendment, it will be in default under the Original Loan Agreement. The Amendment also made certain other changes to the Original Loan Agreement, including certain financial covenants, limitations on capital expenditures and the termination of the Company's acquisition line of credit, in each case as described in more detail below. The Amendment did not change the interest rates on outstanding indebtedness under the Original Loan Agreement. This summary of the terms and conditions of the Waiver Letter and the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Waiver Letter and the Amendment, which are filed as Exhibits 10.1 and 10.2 to this Current Report on Form 8-K. o Required Capital Raise on or before September 30, 2012 Under the Amendment, the Company agreed with the Lender that the Company would raise, on or before September 30, 2012, at least $2,000,000 in gross proceeds from the sale of its capital stock and/or the incurrence of new indebtedness which is subordinated to the indebtedness in favor of the Lender, on terms and conditions acceptable to the Lender in its sole discretion (the "Required Capital Raise"). The proceeds of the Required Capital Raise must first be used to repay all amounts outstanding under the Entine Indebtedness by September 30, 2012, and thereafter for general working capital needs. o Amendment to Leverage Ratio Covenants For the Consolidated Maximum Leverage Ratio (Consolidated Total Funded Debt to Consolidated EBITDA, as defined in the Amendment), the Amendment (i) revised the required ratio for September 30, 2012 from 3.25x to 4.5x; (ii) revised the required ratio for December 31, 2012 from 3.00x to 4.5x; and (iii) revised the required ratio for March 31, 2013 and for each rolling four quarters thereafter from 3.00x to 4.0x. The Amendment also includes a new Consolidated Maximum Adjusted Leverage Ratio covenant, which is Consolidated Total Funded Debt (excluding subordinated debt) to Consolidated EBITDA, as defined in the Amendment. The Amendment requires the Company to maintain a Consolidated Maximum Adjusted Leverage Ratio equal to or less than (i) 3.25x to 1.00x for each of the rolling four quarter periods ending on September 30, 2012 and December 31, 2012, and (ii) 3.00x to 1.00x for each rolling four quarter period ending on or after March 31, 2013. For the purposes of calculating both the Consolidated Maximum Leverage Ratio and the Consolidated Maximum Adjusted Leverage Ratio, Consolidated EBITDA (as defined in the Amendment) will be (i) at September 30, 2012, the actual Consolidated EBITDA for the 3 months then ended times 4; (ii) at December 31, 2012, the actual Consolidated EBITDA for the 6 months then ended times 2; and (iii) at March 31, 2013, the actual Consolidated EBITDA for the 9 months then ended times 4/3 (provided that the add-backs for costs are not annualized). o Amendment to Fixed Charge Coverage Ratio Covenants For the Consolidated Fixed Charge Coverage Ratio, the Amendment (i) revised the required ratio for September 30, 2012 from 1.10x to 1.00x; (ii) revised the required ratio for December 31, 2012 from 1.20x to 1.00x; (iii) revised the required ratio for March 31, 2013 from 1.20x to 1.05x; (iv) revised the required ratio at 6/30/13 from 1.20x to 1.10x; and (v) did not change the required ratio at September 30, 2013 (remained at 1.20x). The Consolidated Fixed Charge Coverage Ratio is defined as Consolidated EBITDA (as defined in the Amendment) for the applicable period divided by the sum of (a) the Company's consolidated interest expense for such period, plus (b) the aggregate principal amount of scheduled payments on the Company's indebtedness made during such period (excluding any repayment of the Entine Indebtedness), plus (c) the sum of all cash dividends and other cash distributions to the Company's shareholders during such period, plus (d) the sum of all taxes paid in cash by the Company during such period, less (e) up to $75,000 paid to the IRS, to the extent characterized as interest expense, in connection with certain historical tax filings (the "IRS Payments"). For the purposes of calculating the Consolidated Fixed Charge Coverage Ratio, Consolidated EBITDA will be (i) at September 30, 2012, the actual Consolidated EBITDA for the 3 months then ended times 4; (ii) at December 31, 2012, the actual Consolidated EBITDA for the 6 months then ended times 2; and (iii) at March 31, 2013, the actual Consolidated EBITDA for the 9 months then ended times 4/3 (provided that the add-backs for Entine Indebtedness repayment and the IRS Payments are not annualized). o Restriction on Capital Expenditures For the fiscal year ending September 30, 2012, the Amendment reduced the limitation on the Company's capital expenditures from $3.25 million to $2.25 million and for fiscal years ending September 30, 2013 and each fiscal year thereafter, the Amendment raised the limitation on the Company's capital expenditures from $2.00 million to $2.25 million o Termination of Acquisition Line of Credit The Amendment also accelerated the termination date of the Company's $5 million acquisition line of credit to June 29, 2012, which will prohibit the Company from drawing down the approximately $1 million of previously available undrawn funds. Item 9.01 Financial Statements and Exhibits. (d) Exhibits Exhibit Description Number ------------------------------------------------------------- 10.1 Amendment No. 3 to Loan and Security Agreement, dated as of June 29, 2012, between Dynasil Corporation of America and Sovereign Bank, N.A. 10.2 Waiver of Default Letter, dated as of June 29, 2012, from Sovereign Bank, N.A. to Dynasil Corporation of America. 10.3 Loan and Security Agreement, dated as of July 7, 2010, by and between Sovereign Bank, N.A., as Lender, and Dynasil Corporation of America, as Company (filed as Exhibit 10.1 to Dynasil's current report on 8-K dated July 14, 2010 and incorporated herein by reference). 10.4 Amendment No. 1 to Amended and Restated Loan and Security Agreement, dated as of April 12, 2012, by and between Sovereign Bank, N.A., as Lender, and Dynasil Corporation of America, as Company (filed as Exhibit 10.1 to Dynasil's current report on Form 10-Q for the period ending March 31, 2011, dated May 16, 2011 and incorporated herein by reference). 10.5 Amendment No. 2 to Amended and Restated Loan and Security Agreement, dated as of April 12, 2012, by and between Sovereign Bank, N.A., as Lender, and Dynasil Corporation of America, as Company (filed as Exhibit 10.1 to Dynasil's current report on Form 8-K dated April 16, 2012 and incorporated herein by reference). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. DYNASIL CORPORATION OF AMERICA Date: July 5, 2012 By: /s/ Richard Johnson Name: Richard Johnson Title: Chief Financial Officer Exhibit Index Exhibit Description Number ------------------------------------------------------------- 10.1 Amendment No. 3 to Loan and Security Agreement, dated as of June 29, 2012, between Dynasil Corporation of America and Sovereign Bank, N.A. 10.2 Waiver of Default Letter, dated as of June 29, 2012, from Sovereign Bank, N.A. to Dynasil Corporation of America. 10.3 Loan and Security Agreement, dated as of July 7, 2010, by and between Sovereign Bank, N.A., as Lender, and Dynasil Corporation of America, as Company (filed as Exhibit 10.1 to Dynasil's current report on 8-K dated July 14, 2010 and incorporated herein by reference). 10.4 Amendment No. 1 to Amended and Restated Loan and Security Agreement, dated as of April 12, 2012, by and between Sovereign Bank, N.A., as Lender, and Dynasil Corporation of America, as Company (filed as Exhibit 10.1 to Dynasil's current report on Form 10-Q for the period ending March 31, 2011, dated May 16, 2011 and incorporated herein by reference). 10.5 Amendment No. 2 to Amended and Restated Loan and Security Agreement, dated as of April 12, 2012, by and between Sovereign Bank, N.A., as Lender, and Dynasil Corporation of America, as Company (filed as Exhibit 10.1 to Dynasil's current report on Form 8-K dated April 16, 2012 and incorporated herein by reference). EX-10 2 dysl8k062912-ex10.1.txt EXHIBIT 10.1 AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT Amendment No. 3 (the "Amendment"), dated as of June 29, 2012 (the "Effective Date"), to a certain Loan and Security Agreement by and between SOVEREIGN BANK, N.A. (f/k/a Sovereign Bank), a national banking association ("Lender"), with an address at 3 Terry Drive, Suite 102, Newtown, Pennsylvania 18940, and DYNASIL CORPORATION OF AMERICA, a Delaware corporation ("Borrower"). BACKGROUND WHEREAS, the Lender and the Borrower made, executed and delivered a Loan and Security Agreement, dated July 7, 2010, as amended by a certain Amendment No. 1 to Loan and Security Agreement dated as of April 1, 2011 and a certain Amendment No. 2 to Loan and Security Agreement effective as of March 31, 2012 (the "Original Loan Agreement"); and WHEREAS, the Lender has agreed to waive, pursuant to the terms and provisions of a letter agreement dated as of the date hereof between Borrower and Lender (the "Waiver Letter"), certain defaults by the Borrower under the Original Loan Agreement so long as this Amendment is executed and delivered by the Borrower. NOW, THEREFORE, in consideration of the mutual promises herein contained, and each intending to be legally bound hereby, the parties hereto hereby agree as follows: 1. Except as expressly defined herein, all terms used herein shall have the meanings ascribed to them in the Original Loan Agreement. This Amendment is intended to amend the Original Loan Agreement and the Original Loan Agreement shall be so amended from and as of the Effective Date. 2. Subsection 1(a) of the Original Loan Agreement is hereby amended so that the following definitions shall be amended and restated to read in their entireties as follows: ""Consolidated EBITDA" shall mean, for the Borrower and its Subsidiaries on a consolidated basis, without duplication, with respect to any fiscal measurement period, the sum of (a) net income (or loss) for that period, plus (b) the aggregate closing costs and similar costs and expenses incurred in connection with the consummation of the transactions contemplated by this Agreement, plus (c) any other non-recurring or unusual expense or loss acceptable to Lender in its sole discretion, minus (d) any non-recurring gain included in such net income, plus (e) Interest Expense for that period, plus (f) the aggregate amount of federal, state and foreign taxes on or measured by income for that period (whether or not payable during that period), plus (g) depreciation and amortization expense for that period, plus (h) non-cash stock compensation expenses in an aggregate amount not exceeding $1,000,000.00 in any fiscal year, plus (i) the aggregate reasonable transaction costs and expenses incurred in connection with the consummation of any Permitted Acquisition (so long as such Permitted Acquisition was approved by the Lender in accordance with the terms and provisions of this Agreement and actually consummated by the Borrower), plus (j) the aggregate reasonable transaction costs and expenses incurred in connection with the preparation, execution and delivery of the Amendment No. 3 to Loan and Security Agreement between Borrower and Lender dated as of June 29, 2012, plus (k) the aggregate reasonable transaction costs and expenses incurred in connection with the completion of the Required Capital Raise, and in the case of items (b) - (k), only to the extent included in determining net income for that period, in each case as determined in accordance with GAAP. "Consolidated Fixed Charges" shall mean with respect to Borrower and its Subsidiaries on a consolidated basis, without duplication, for any fiscal measurement period, the sum of (a) the Interest Expense for such period, plus (b) the aggregate principal amount of scheduled payments on any Indebtedness of Borrower or any Subsidiary (including without limitation all Capital Lease Obligations and the Loans but excluding any principal payments made with respect to the Entine Note) made during such period, plus (c) the sum of all cash dividends and other cash distributions to shareholders or other equity owners paid by Borrower during such period, plus (d) the sum of all taxes paid in cash by Borrower during such period, less (e) to the extent included in Interest Expense for, or taxes paid in cash by Borrower during, such period, up to $75,000.00 in the aggregate of interest and penalties paid by Borrower during such period in connection with the late federal income tax filing made by Borrower for the periods ending on September 30, 2008, September 30, 2009 and September 30, 2010." 3. Subsection 1(a) of the Original Loan Agreement is hereby further amended to add the following definitions thereto in the appropriate alphabetical order: ""Additional Ramp-up Period" shall have the meaning specified in subsection 13(b) hereof. "Consolidated Maximum Adjusted Leverage Ratio" shall mean with respect to Borrower and its Subsidiaries on a consolidated basis, without duplication, for any fiscal measurement period, the ratio of (i) Consolidated Total Funded Debt (excluding any Indebtedness subordinated to all Indebtedness owed by Borrower to Lender on terms and conditions which are acceptable to Lender in its sole discretion) to (ii) Consolidated EBITDA. "Entine Note" shall mean, collectively, those three (3) promissory notes, each dated as of June 7, 2012, in the original aggregate principal amount of $1,857,546.00, executed by the Borrower in favor of the Gerald Entine 1998 Family Trust, the Victoria Beth Entine Trust and the Oliver Andrew Entine Trust. "Required Capital Raise" shall mean the receipt by Borrower, after June 29, 2012 and on or before September 30, 2012, of at least $2,000,000.00 in gross proceeds from the sale of its Capital Stock and/or the incurrence of Indebtedness which is subordinated to all Indebtedness owed by Borrower to Lender on terms and conditions acceptable to Lender in its sole discretion (including without limitation a prohibition on the making of any principal payments on such subordinated Indebtedness until all Indebtedness owed by Borrower to Lender is indefeasibly paid in full). The proceeds of the Required Capital Raise shall be used by Borrower first to repay all amounts outstanding under the Entine Note and then to fund general working capital needs of Borrower." 4. Subsection 2(c) of the Original Loan Agreement is hereby amended so that all references to "Termination Date" set forth therein shall be changed to "June 29, 2012." 5. Subsection 12(b) of the Original Loan Agreement is hereby amended and restated to read in its entirety as follows: "(b) Indebtedness. Neither Borrower nor any Guarantor shall create, incur, assume or become obligated (directly or indirectly), for any loans or other Indebtedness for borrowed money other than the Loans, except that Borrower and the Guarantors, in the aggregate, may: (i) maintain the present indebtedness listed on Schedule 10(m) hereto; (ii) incur unsecured indebtedness to trade creditors in the ordinary course of business on standard terms; (iii) incur purchase money Indebtedness and Capital Lease Obligations, provided that the amount of such purchase money Indebtedness and Capital Lease Obligations shall not exceed, at any time, $1,000,000.00, in the aggregate, (iv) the Indebtedness represented by the promissory note referred to in subsection 12(e)(v) hereof, and (vi) incur Indebtedness which is part of the Required Capital Raise." 6. Subsection 12(e)(v) of the Original Loan Agreement is hereby amended and restated to read in its entirety as follows: "(v) enter into any other transaction outside the ordinary course of its business, including, without limitation, any purchase, redemption or retirement of any shares of any class of its stock or any other equity interest (other than, so long as no Default or Event of Default has occurred and is then continuing, or will be triggered thereby, Borrower shall be permitted to (A) repurchase up to one million shares of its common stock at a price of $2.00 per share during the period between July 1, 2010 and June 30, 2012, or issue a promissory note in lieu of such repurchase until such repurchase is consummated, as required pursuant to the terms and provisions of the RMD Acquisition Agreement), and (B) repurchase or redeem all or any of Borrower's Series C Preferred Stock, $.001 par value), or any issuance of any shares of, or warrants or other rights to receive or purchase any shares of, any class of its stock or any other equity interest (other than pursuant to an employee equity compensation plan maintained by Borrower or in conjunction with the Required Capital Raise)." 7. Section 13 of the Original Loan Agreement is hereby amended and restated to read in its entirety as follows: "13. FINANCIAL COVENANTS. Borrower shall maintain and keep in full force and effect each of the financial covenants set forth below: (a) Consolidated Maximum Leverage Ratio. Borrower shall maintain at all times a Consolidated Maximum Leverage Ratio which is equal to or less than (i) 3.00 to 1.00 for any period ended on or before December 31, 2011, (ii) 3.75 to 1.00 for the rolling four quarter period ending on March 31, 2012, (iii) 3.25 to 1.00 for the rolling four quarter period ending on June 30, 2012, and (iv) 4.50 to 1.00 for each of the rolling four quarter periods ending on September 30, 2012 and December 31, 2012, and (v) 4.00 to 1.00 for each rolling four quarter period ending on or after March 31, 2013. Borrower's compliance with this covenant shall be tested on a rolling four (4) quarters basis as of the last day of each quarter of each Fiscal Year of Borrower. Notwithstanding anything to the contrary set forth herein, for the purposes of determining the Consolidated Maximum Leverage Ratio at any time during the Ramp-up Period, the denominator of such ratio (for the avoidance of doubt, such denominator includes all items set forth in clause (ii) of the definition of SConsolidated Maximum Leverage Ratio") shall be determined as follows: (x) at September 30, 2010, on the basis of the fiscal quarter then ended, times 4; (y) at December 31, 2010, on the basis of the six (6) months then ended, times 2; and (z) at March 31, 2011, on the basis of the nine months then ended, times 4/3. Borrower and Lender hereby agree that, for purposes of calculating Consolidated Maximum Leverage Ratio hereunder during the Ramp-up Period, the amounts set forth in clauses (b), (c), (d) and (i) of the definition of "Consolidated EBITDA" shall not be annualized for any period. In addition, notwithstanding anything to the contrary set forth herein, for the purposes of determining the Consolidated Maximum Leverage Ratio at any time during the Additional Ramp-up Period, the denominator of such ratio (for the avoidance of doubt, such denominator includes all items set forth in clause (ii) of the definition of "Consolidated Maximum Leverage Ratio") shall be determined as follows: (a) at September 30, 2012, on the basis of the fiscal quarter then ended, times 4; (b) at December 31, 2012, on the basis of the six (6) months then ended, times 2; and (c) at March 31, 2013, on the basis of the nine months then ended, times 4/3. Borrower and Lender hereby agree that, for purposes of calculating Consolidated Maximum Leverage Ratio hereunder during the Additional Ramp-up Period, (1) the amounts set forth in clauses (c), (d), (i), (j) and (k) of the definition of "Consolidated EBITDA" shall not be annualized for any period. (b) Consolidated Fixed Charge Coverage Ratio. Borrower shall maintain at all times a Consolidated Fixed Charge Coverage Ratio of not less than (i) 1.20 to 1.00 for any period ended on or before December 31, 2011 or on or after September 30, 2013, (ii) 0.90 to 1.00 for the rolling four quarter period ending on March 31, 2012, (iii) 1.05 to 1.00 for the rolling four quarter period ending on June 30, 2012, (iv) 1.00 to 1.00 for each of the rolling four quarter periods ending on September 30, 2012 and December 31, 2012, (v) 1.05 to 1.00 for the rolling four quarter period ending on March 31, 2013, and (vi) 1.10 to 1.00 for the rolling four quarter period ending on June 30, 2013. Compliance with this covenant shall be tested on a rolling four (4) quarters basis as of the last day of each quarter of each Fiscal Year of Borrower. Notwithstanding anything to the contrary set forth herein, for the purposes of determining the Consolidated Fixed Charge Ratio at any time prior to June 30, 2011 (the "Ramp-up Period"), the numerator (for the avoidance of doubt, such numerator includes all items set forth in clause (i) of the definition of "Consolidated Fixed Charge Coverage Ratio") and the denominator of such ratio (for the avoidance of doubt, such denominator includes all items set forth in clause (ii) of the definition of "Consolidated Fixed Charge Coverage Ratio") shall be determined as follows: (x) at September 30, 2010, on the basis of the fiscal quarter then ended, times 4; (y) at December 31, 2010, on the basis of the six (6) months then ended, times 2; and (z) at March 31, 2011, on the basis of the nine months then ended, times 4/3. Borrower and Lender hereby agree that, for purposes of calculating Consolidated Fixed Charge Ratio hereunder during the Ramp-up Period, the amounts set forth in clauses (b), (c), (d) and (i) of the definition of "Consolidated EBITDA" shall not be annualized for any period. In addition, notwithstanding anything to the contrary set forth herein, for the purposes of determining the Consolidated Fixed Charge Ratio at any time on or after September 30, 2012 but prior to June 30, 2013 (the "Additional Ramp-up Period"), the numerator (for the avoidance of doubt, such numerator includes all items set forth in clause (i) of the definition of "Consolidated Fixed Charge Coverage Ratio") and the denominator of such ratio (for the avoidance of doubt, such denominator includes all items set forth in clause (ii) of the definition of "Consolidated Fixed Charge Coverage Ratio") shall be determined as follows: (a) at September 30, 2012, on the basis of the fiscal quarter then ended, times 4; (b) at December 31, 2012, on the basis of the six (6) months then ended, times 2; and (c) at March 31, 2013, on the basis of the nine months then ended, times 4/3. Borrower and Lender hereby agree that, for purposes of calculating Consolidated Fixed Charge Ratio hereunder during the Additional Ramp-up Period, (1) the amounts set forth in clauses (c), (d), (i), (j) and (k) of the definition of "Consolidated EBITDA" shall not be annualized for any period. (c) Unfunded Capital Expenditures. During the Fiscal Year of the Borrower ending on September 30, 2011, Borrower shall not incur Unfunded Capital Expenditures in excess of $2,000,000.00 in the aggregate (tested as of the last day of each fiscal quarter of such Fiscal Year on a year-to-date basis). During each Fiscal Year of the Borrower ending after September 30, 2011, Borrower shall not incur Unfunded Capital Expenditures in excess of $2,250,000.00 in the aggregate (tested as of the last day of each fiscal quarter ended after September 30, 2011 on a year-to-date basis). (d) Minimum Liquidity. At all times, Borrower shall maintain aggregate minimum cash balances of not less than $1,000,000.00 in accounts maintained by the Borrower with the Bank (to be verified in writing by Borrower as of the last day of each fiscal quarter of each Fiscal Year). (e) Consolidated Maximum Adjusted Leverage Ratio. Borrower shall maintain at all times a Consolidated Maximum Adjusted Leverage Ratio which is equal to or less than (i) 3.25 to 1.00 for each of the rolling four quarter periods ending on September 30, 2012 and December 31, 2012, and (iii) 3.00 to 1.00 for each rolling four quarter period ending on or after March 31, 2013. Borrower's compliance with this covenant shall be tested on a rolling four (4) quarters basis as of the last day of each quarter of each Fiscal Year of Borrower. Notwithstanding anything to the contrary set forth herein, for the purposes of determining the Consolidated Maximum Adjusted Leverage Ratio at any time during the Additional Ramp-up Period, the denominator of such ratio (for the avoidance of doubt, such denominator includes all items set forth in clause (ii) of the definition of "Consolidated Maximum Adjusted Leverage Ratio") shall be determined as follows: (a) at September 30, 2012, on the basis of the fiscal quarter then ended, times 4; (b) at December 31, 2012, on the basis of the six (6) months then ended, times 2; and (c) at March 31, 2013, on the basis of the nine months then ended, times 4/3. Borrower and Lender hereby agree that, for purposes of calculating Consolidated Maximum Adjusted Leverage Ratio hereunder during the Additional Ramp-up Period, (1) the amounts set forth in clauses (c), (d), (i), (j) and (k) of the definition of "Consolidated EBITDA" shall not be annualized for any period." 8. Section 14 of the Original Loan Agreement is hereby amended to add subsections (q) and (r) thereto which shall read in their entirety as follows: "(q) Required Capital Raise. Borrower shall fail, for any reason, to complete the Required Capital Raise on or before September 30, 2012. (r) Entine Note. Any default shall occur under the Entine Note or any Indebtedness evidenced by the Entine Note shall be outstanding after September 30, 2012." 9. All representations, warranties and covenants of the Borrower contained in the Original Loan Agreement are hereby ratified and confirmed by the Borrower without condition as if made anew upon the execution of this Amendment and are hereby incorporated by reference. All representations, warranties and covenants of the Borrower, whether hereunder, or contained in the Original Loan Agreement or in any Other Agreement shall remain in full force and effect until all amounts due under the Original Loan Agreement, as amended herein, the Notes, and each Other Agreement are satisfied in full. 10. Except as modified by the terms hereof, all terms, provisions and conditions of the Original Loan Agreement are in full force and effect and are hereby incorporated by reference as if set forth herein. This Amendment and the Original Loan Agreement shall be deemed as complementing and not restricting the Lender's rights hereunder or thereunder. If there is any conflict or discrepancy between the provisions of this Amendment and any provision of the Original Loan Agreement, the terms and provisions of this Amendment shall control and prevail. 11. The Borrower hereby represents, warrants and certifies to the Lender, after giving effect to the Waiver Letter, that no Default or Event of Default has occurred and is presently existing under the Loan Documents. 12. Pursuant to the terms of the Original Loan Agreement, as amended herein, the Borrower has provided to the Lender, as security for the payment of all Loans now or in the future made by the Lender to the Borrower and for the payment or other satisfaction of all other Liabilities, a first priority, perfected security interest in the Collateral. The Borrower hereby ratifies and confirms the liens and security interests granted under the Original Loan Agreement and the Other Agreements; and further ratifies and confirms, without condition, that the perfected status and priority of such liens and security interests shall not be affected in any way by the amendments to the Original Loan Agreement as set forth herein. 13. In order to induce the Lender to enter into this Amendment, the Borrower shall first satisfy the following conditions precedent: (a) The Borrower shall have executed (and/or caused to be executed), and delivered to the Lender the following: (i) this Amendment; (ii) the Waiver Letter (iii) a Confirmation of Guarantee duly executed by each of Optometrics Corporation, Evaporated Metal Films Corp., Radiation Monitoring Devices, Inc., RMD Instruments Corp. and Dynasil Biomedical Corp. (collectively, the "Guarantors"), in form and substance satisfactory to the Lender in its sole discretion (the "Confirmation of Guarantee"); and (iv) such other documents and instruments as the Lender may reasonably request. (b) The Borrower shall also deliver to the Lender the following: (i) payment in full of a non-refundable waiver fee in the amount of $31,101.19; and (ii) any and all other documents, agreements and certificates reasonably requested by the Lender to carry out the intentions of this Amendment. 14. This Amendment (a) shall be construed and enforced in accordance with the laws of the State of New Jersey; (b) shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors and assigns; (c) may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument; and (d) may only be amended or modified pursuant to a writing signed by the parties hereto. 15. The Borrower hereby agrees that it will pay or cause to be paid, or reimburse the Lender for, all of the costs and expenses incurred by the Lender in connection with negotiation, preparation and enforcement of this Amendment and the transactions contemplated herein, including without limitation the fees and out-of-pocket expenses of the Lender's legal counsel. 16. The Borrower hereby waives any and all rights which it may have to a jury trial in connection with any litigation commenced or against the Lender with respect to the right and obligations of the parties hereto. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the undersigned have caused this Amendment to be executed and delivered by their respective officers thereunto duly authorized. DYNASIL CORPORATION OF AMERICA By:___________________________________ _ Name: Richard Johnson Title: Chief Financial Officer SOVEREIGN BANK, N.A. By:___________________________________ _ Name: Daniel Vereb Title: Senior Vice President 8602605v3 EX-10 3 dysl8k062912-ex10.2.txt EXHIBIT 10.2 [LOGO] SOVEREIGN - SANTANDER June 29, 2012 Dynasil Corporation of America 239 Cherry Street Ithaca, New York 14850 Attention: Richard Johnson, Chief Financial Officer. Re: Loan and Security Agreement, dated July 7, 2010, between Sovereign Bank, N.A. and Dynasil Corporation of America Dear Richard: Sovereign Bank, N.A., a national banking association (the "Lender"), and Dynasil Corporation of America, a Delaware corporation (the "Borrower"), made, executed and delivered a Loan and Security Agreement, dated July 7, 2010 (as amended, modified or supplemented prior to the date hereof, the "Loan Agreement"). All capitalized terms utilized herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Agreement. The Borrower has informed the Lender that the Borrower has, in violation of Section 12(b) of the Loan Agreement, incurred certain indebtedness which is evidenced by certain promissory notes dated as of June 7, 2012, in the original principal amounts totaling $1,857,546.00, executed by the Borrower in favor of certain entities affiliated with Dr. Gerald Entine (the "Entine Indebtedness"). In addition, the Borrower has informed the Lender that the Borrower will not be in compliance, for the fiscal quarter of the Borrower ending on June 30, 2012, with the requirements of the Consolidated Maximum Leverage Ratio covenant set forth in Section 13(a) of the Loan Agreement or with the requirements of the Consolidated Fixed Charge Coverage Ratio covenant set forth in Section 13(b) of the Loan Agreement. Subject to execution and delivery by the Borrower of an Amendment No. 3 to Loan and Security Agreement in the form attached hereto as Exhibit A (the "Required Amendment") and compliance by the Borrower with the terms thereof, the Lender hereby agrees to waive (i) the Event of Default caused by the Borrower's breach of Section 12(b) of the Loan Agreement resulting from the incurrence by the Borrower of the Entine Indebtedness, (ii) compliance by the Borrower with the requirements of the Consolidated Maximum Leverage Ratio covenant set forth in Section 13(a) of the Loan Agreement for the fiscal quarter of the Borrower ending on June 30, 2012, and (ii) compliance by the Borrower with the requirements of the Consolidated Fixed Charge Coverage Ratio covenant set forth in Section 13(b) of the Loan Agreement for the fiscal quarter of the Borrower ending on June 30, 2012. The waiver by the Lender of compliance by the Borrower with the provisions of Section 12(b) of the Loan Agreement shall be specific with respect to the incurrence of the Entine Indebtedness, as set forth herein. The waiver by the Lender of compliance by the Borrower with the Consolidated Maximum Leverage Ratio covenant and the Consolidated Fixed Charge Coverage Ratio covenant shall be specific for the fiscal quarter of the Borrower ending on June 30, 2012 only. Such waivers shall not be construed to be, or operate as, a waiver of any other right of the Lender arising under the Loan Agreement or any other Other Agreement, nor shall they preclude any other present or future exercise of the rights granted to the Lender under the Loan Agreement or any other Other Agreement upon the failure of the Borrower to comply with any other term, covenant or condition contained in the Loan Agreement or in any other Other Agreement or the occurrence of any other Event of Default, including without limitation any Event of Default arising as a result of the Borrower's failure to comply with the Consolidated Maximum Leverage Ratio covenant or the Consolidated Fixed Charge Coverage Ratio covenant for any fiscal period other than the fiscal quarter ending on June 30, 2012. This will also confirm that the Borrower has agreed to be responsible for paying or reimbursing the Lender, immediately upon demand, for all fees and expenses incurred by the Lender in connection with the requested waivers granted herein, including without limitation fees of legal counsel. If you have any questions concerning the foregoing, please contact me immediately. Unless I hear from you to the contrary, I will assume that the foregoing accurately reflects the understanding which has been reached between the Lender and the Borrower with respect to the subject matter hereof. Please note that the waivers set forth herein shall automatically expire and be deemed to be of no force and effect if the Borrower fails to return to the Lender, on or before June 30, 2012, a countersigned copy of this letter and a fully executed copy of the Required Amendment. Sincerely, SOVEREIGN BANK, N.A. By: ___________________________ Name: Daniel Vereb Title: Senior Vice President Accepted and agreed to this ____ day of June, 2012. DYNASIL CORPORATION OF AMERICA By: __________________________ Name: Richard Johnson Title: Chief Financial Officer EXHIBIT A FORM OF AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT See attached. 8602631v2