U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the
Securities Exchange Act of 1934
DYNASIL CORPORATION OF AMERICA
(Name of Small Business Issuer in Its Charter)
New Jersey 22-1734088
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(State or Other Jurisdiction of (I.R.S. Identification
Incorporation or Organization) Number)
385 Cooper Road, West Berlin, New Jersey 08091
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(Address of Principal Executive Offices) (Zip Code)
(856) 767-4600
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(Issuer's Telephone Number)
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock $.001 Par Value
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(Title of Class)
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TABLE OF CONTENTS
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Part I
Item 1. Description of Business.................................................... 1
Item 2. Management's Discussion and Analysis or Plan of Operation.................. 6
Item 3. Description of Property.................................................... 9
Item 4. Security Ownership of Certain Beneficial Owners and Management............. 10
Item 6. Executive Compensation..................................................... 14
Item 7. Certain Relationships and Related Transactions............................. 15
Item 8. Description of Securities.................................................. 15
Part II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters.................................................. 17
Item 2. Legal Proceedings.......................................................... 18
Item 3. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................................... 18
Item 4. Recent Sales of Unregistered Securities.................................... 18
Item 5. Indemnification of Directors and Officers.................................. 18
Part F/S................................................................................. 23
Part III
Item 1. Index to Exhibits.......................................................... 24
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
Dynasil Corporation of America ("Dynasil", "we", or the "Company") was
incorporated in the State of New Jersey on October 20, 1960.
On April 22, 1996, the Company's articles of incorporation were amended to
reflect an increase in the authorized shares of common stock from 1,500,000 to
25,000,000, and a reduction of the par value of the common stock from $.10 to
$.001. On June 1, 1996, the Board of Directors also declared a three-for-two
stock split, effected in the form of a 50% stock dividend payable to
stockholders of record on April 30, 1996.
On October 16, 1996, the Board of Directors declared a two-for-one stock split
payable on November 1, 1996 to stockholders of record on October 1, 1996.
On September 30, 1997, we sold substantially all of the assets of our
wholly-owned subsidiary, Hibshman Corporation, to two individuals. As
consideration for the sale, the Company received a note receivable of $200,000
which was collected during fiscal year ended September 30, 1998. The sale
resulted in a loss of $194,453.
Business
We are primarily engaged in the manufacturing and marketing of customized
synthetic fused silica products. We also distribute fused quartz material that
we obtain from a variety of sources. Our products are used primarily as
components of optical instruments, lasers, analytical instruments,
semiconductor/electronic devices, spacecraft/aircraft components, and in devices
for the energy industry. These include:
o Optical components - lenses, prisms, reflectors, mirrors, filters,
optical flats
o Lasers - Beam Splitters, brewster windows, q-switches,
medical/industrial lasers, exciter systems
o Analytical Instruments - UV spectrophotometer cells, fire control
devices, reticle substrates, interferometer plates
o Energy - Laser/Tkamak fusion research isotope separation, solar cell
covers
o Semiconductor/Electronic - Microcircuit substrates, microwave devices,
photomasks, sputter plates, microlithography optics
o Spacecraft/Aircraft - Docking light covers, windows, re-entry heat
shields, ring laser gyros
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We have a two man sales force located in our corporate headquarters West Berlin,
New Jersey that handles all domestic sales. We also use manufacture
representatives in various foreign countries for international sales. Marketing
efforts include direct customer contact through sales visits, advertising in
trade publications and presentations at trade shows. Our products are
distributed through direct sales and delivered by commercial carriers.
We compete for business in the optics industry primarily with two other
manufacturers of synthetic fused silica and several distributors of their
products. The manufacturers are Corning Incorporated, Canton, NY and Heraeus
Quarzglas, Germany. Our principal competitive distributors include United Lens
Company, Inc., Southbridge, MA, Advanced Glass Industries, Rochester, NY and
Glass Fab, Inc., Rochester NY.
Market share in the optics industry is largely determined by a combination of
quality, price and speed of delivery. We believe that we are competitive in the
mid to high level quality markets. We feel that we do not compete as effectively
for the lower quality markets because our price is not competitive, or in the
very highest quality market because our manufacturing process is not currently
able to produce product of sufficient quality.
All of the fused silica that we manufacture is produced using a single
manufacturing process. The product is then graded to determine its quality. We
have been able to sell the higher quality material at a higher price, and with
higher profit margins. With respect to speed of delivery, we believe that we
perform as well as or better than our competitors.
The primary raw material used in our manufacturing process is silicon
tetrachloride, which we obtain from Teledyne Wah Chang. In the event we are
unable to obtain silicon tetrachloride from our current supplier, it is
available from Dow Chemical or Hemlock, Inc. at comparable prices.
We presently have over 150 customers, with 90% of our business being
concentrated in our top 40 customers. Our five largest customers, Heraeus
Amersil, Inc., Grimes Aerospace Company, Spectra Physics, VLOC, ESCO Products,
Inc., each accounted for approximately 6.9%, 5.5%, 5.5%, 5.3%, 5.1%,
respectively, of our total revenues during fiscal year 1998. Our four largest
customers, Grimes Aerospace Company, Mindrum Precision, Inc., Spectra Physics,
and Detector Electronics Corporation, each accounted for approximately 8.2%,
6.2%, 5.6% and 5.4%, respectively, of our revenues during the nine months ended
June 30, 1999. Generally, our customers provide purchase orders for a specific
quantity and quality of fused silica. These purchase orders generally are filled
with fused silica from inventory or manufacture to order. Orders are generally
filled over a period ranging from one month to one year. The loss of any of
these customers would likely have a material adverse effect on our business,
financial condition and results of operations.
Our business and financial condition would be materially adversely affected if
we do not attain substantial additional business from these customers, or if we
lose the business of any of these customers, and if we fail to attain
substantial additional business from other customers.
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We rely on trade secret and copyright laws to protect the proprietary
technologies that we may develop, but there can be no assurance that those laws
will provide us with sufficient protection, that others will not develop
technologies that are similar or superior to ours, or that third parties will
not copy or otherwise obtain or use our technologies without our authorization.
We have no patents or patent applications filed or pending.
Other than federal, state and local environmental laws, our manufacturing
process is not subject to direct governmental regulation. Dynasil's
manufacturing process, which includes storage of hazardous materials, is subject
to a variety of federal, state and local environmental rules and regulations. We
make extensive use of engineering consultants to provide the technical expertise
to help ensure that our equipment is in compliance with the environmental laws.
Waste water and ground water testing is conducted quarterly by an engineering
consultant, and the results are submitted directly to the appropriate regulating
agencies. We are permitted to dispose of our waste water through the Camden
County Municipal Utilities Authority. We have a permit to use an air scrubber
system, which is tested periodically. The next test of the scrubber system is
scheduled for November 1999. We do not have a pending notice of violations and
are aware of no potential violations. We train our employees in the proper
handling of hazardous materials. There are no buried storage tanks on our
property. A Phase I environmental audit, completed approximately two years ago,
did not disclose any conditions requiring remediation. Our environmental
compliance costs approximately $600,000 per year.
Our research and development activities primarily have involved changes to our
manufacturing process and the introduction of equipment with newer technology.
Improvements to our manufacturing process involved developing larger furnaces in
order to produce larger fused silica boules, and replacing existing furnaces
with higher quality equipment. We have spent approximately $1,300,000 to develop
the larger furnaces and upgrade existing furnaces. An additional $400,000 was
invested in additional glass processing equipment. Investigations into use of
purer raw material, alternative fuels and improved distribution systems have
been the primary emphasis of our research and development program. We have
collaborated with the University of Missouri to develop uses for scrap fused
silica, and with Northwestern University to develop methods to remelt scrap
material.
Our total work force consist of 24 employees; 3 administrative, 2 sales, and 19
shop personnel (including 2 part time employees).
The shop currently is non-union. The workforce had originally been members of
the Teamsters Union, but voluntarily decertified in the early 1980's. From then
until 1989 the workforce was represented by an "in-house" union. In 1989 this
representation was voted out and the shop became non-union.
Employee Benefit Plans
We have adopted a Stock Incentive Plan which provides for, among other
incentives, granting to officers, directors, employees and consultants options
to purchase shares of our common stock up to a total of 900,000 shares. The
900,000 shares consist of two separate plan approvals. The 1st plan
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was approved in February 1996 for 450,000 shares, restated to reflect the stock
splits of 1996. The seconded plan approval was January 1999 for an additional
450,000 shares. At June 30,1999, 497,723 shares of common stock were reserved
for issuance under the Stock Incentive Plans. Options granted under the Plans
are generally exercisable over a five year period. To date, options have been
granted at exercise prices ranging from $1.00 to $3.52 per share. At June 30,
1999, 113,277 options were outstanding.
We have adopted an Employee Stock Purchase Plan which permits substantially all
employees to purchase common stock. Employees have an opportunity to acquire
common stock at a purchase price of 65% of the fair market value of the shares.
To date, shares issued to employees have been restricted shares subject to the
holding periods of Rule 144. Under the plan, a total of 150,000 shares had been
reserved for issuance. Of these, 34,917 shares have been purchased by the
employees at purchase prices ranging from $.49 to $2.68 per share. During any
twelve month period, employees are limited to a total of $5,000 of stock
purchases.
The Company has a 401K Plan for the benefit of its employees. The Company did
not make a contribution for the years ended September 30, 1999, 1998 and 1997.
YEAR 2000
Year 2000 Readiness Disclosure
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These systems and
software products will need to accept four digit entries to distinguish 21st
century dates from 20th century dates. As a result, computer systems and/or
software used by many companies and governmental agencies may need to be
upgraded to comply with such Year 2000 requirements or risk system failure or
miscalculations causing disruptions of normal business activities.
State of Readiness: We have made an assessment of our Year 2000 readiness
of our operating, financial and administrative systems, including the hardware
and software that support our systems. Our assessment consisted of testing and
correcting our internally developed material software and contacting key vendors
to ensure their readiness. We have confirmed our Year 2000 compliance by
specific testing of our systems and by obtaining representations by third party
vendors of their Year 2000 compliance.
Costs: We have not incurred significant costs to date complying with Year
2000 requirements and we do not believe that we will incur significant costs for
these purposes in the foreseeable future. However, should products or systems
maintained by third parties or our systems fail to be Year 2000 compliant,
despite the representations of third parties and the testing of our systems, we
could incur expenses to remedy any problems. Such expenses could, but are not
expected to, have a material adverse effect on our business, results of
operations and financial condition.
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Risks: Our failure to identify and correct a Year 2000 problem could result
in an interruption of normal business activities and operations. Although there
is an inherent uncertainty in the Year 2000 issue, we believe the impact to our
business will not be material. Most of the equipment involved in delivering our
product to our clients does not make use of date information at all. We believe
our greatest risk to be suppliers and utilities whose Year 2000 programs are
outside of our control. A disruption caused by a utility or supplier whose
systems are not compliant may have a direct and negative effect on our business.
Contingency Plan: We have identified alternate sources for critical
supplies where alternate sources exist. To the best of our knowledge, our
internal systems are fully compliant. We have been advised by our principal
suppliers, particularly the utilities supplying electricity and gas, that they
believe their systems are also compliant.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following management's discussion and analysis should be read in
conjunction with our financial statements and the notes thereto appearing
elsewhere in this Form 10-SB.
Results of Operations
Comparison of Nine Months ended June 30, 1999 to Nine Months ended June 30, 1998
Revenues deceased to $2,021,887 for the nine months ended June 30, 1999
from $3,242,457 for the nine months ended June 30, 1998. The decrease of
$1,220,570 or 37.6% was primarily due to the slow down in both the semiconductor
and optics markets. The problems experienced by the Asian economy in late 1998
caused end users of our product to delay orders. This delay carried through most
of 1999. We just recently have begun seeing a reverse in that trend and quote
activity has increased.
Cost of sales consist primarily of facility and production costs, direct
labor, depreciation, waste management cost and supplies. Cost of sales decreased
to $1,735,582, or 85.8% of revenues, for the nine months ended June 30, 1999
from $2,152,336, or 66.4% of revenues, for the nine months ended June 30, 1998.
The decrease of $416,754 or 19.4% is directly related to the Company's response
to the decrease in revenues. We needed to reduce expenses in every area.
Manufacturing labor related expenses decreased $289,229 (33.7%), supplies
expenses decreased $71,707 (35.2%) and waste management expenses decreased
$145,128 (74%).
Gross Margin decreased to $286,305 for the nine months ended June 30, 1999
from $1,090,121 for the nine months ended June 30, 1998. As a percentage of
revenues, gross margin was 14.2% and 33.6% for the nine months ended June 30,
1999 and 1998 respectively. The decrease of $803,816 or 73.7% was a result of
the large revenue reduction and the Company's inability to reduce expenses
quickly, in response to the downturn in the market.
Selling, general and administrative expenses consist primarily of salaries,
insurance, outside professional fees, and advertising. Selling, general and
administrative expenses decreased to $479,216 for the nine months ended June 30,
1999 from $646,956 for the nine months ended June 30, 1998. As a percentage of
revenue, selling general and administrative expense for the nine months ended
June 30, 1999 and 1998 were 23.7% and 20.0% respectively. The decrease of
$167,740 or 25.9% was due primarily to a $72,958 reduction in advertising and a
$75,590 reduction in outside professional fees.
Interest expense includes interest related to our financing obligations
including bank loans, subordinated debentures and capital leases. Interest
expense increased to $146,729 for the nine months ended June 30, 1999 from
$142,783 for the nine months ended June 30, 1998. The increase is $3,946 or
2.8%.
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Net income decreased to a loss of $339,640 for the nine months ended June
30, 1999 from income of $308,382 for the nine months ended June 30, 1998. Basic
earnings per share decreased to a loss per share of $.15 for the nine months
ended June 30, 199 from an income per share of $.13 for the nine months ended
June 30, 1998. The decrease of $648,022, or $.28 per share, was primarily
related to the sharp decrease in revenues and the Company's initial slow
response to reduce expenses.
Comparison of Fiscal Year ended September 30, 1998 to Fiscal Year ended
September 30, 1997
Revenues increased to $3,981,395 for fiscal 1998 from $3,931,108 for fiscal
1997. The marginal increase of $50,287 or 1.3% reflects the beginning of the
slow down in the semiconductor and optics markets in mid 1998.
Cost of sales increased to $2,711,148, or 68.1% of revenues, for fiscal
1998 from $2,338,738, or 59.5% of revenues, for fiscal 1997. The increase of
$372,410, or 15.7% was primarily due to increases in manufacturing labor,
employee related expenses and depreciation. For fiscal 1998 manufacturing labor,
employee related expenses, and depreciation accounted for approximately 20.1%,
7.3% and 7.8% of revenues, respectively. For fiscal year 1997 manufacturing
labor, employee related expenses, and depreciation accounted for approximately
15.3%, 4.6% and 5.7%, respectively.
Gross margin decreased to $1,270,247, or 31.9% of revenues, for fiscal 1998
from $1,592,370, or 40.5% of revenue, for fiscal 1997. The decrease of $322,123,
or 20.2%, is related to increase in cost of sales, as discussed above.
Selling, general and administrative expenses decreased to $874,962, or
21.9% of revenue, for the fiscal 1998 from $952,977, or 24.2% of revenue, for
fiscal 1997. The decrease of $78,015, or 8.2%, was due primarily to decreases in
salary expense, outside professional fees, and travel expense aggregating
approximately $97,165, with an offsetting increase in amortization expense of
$23,052.
Interest Expense increased to $188,150, or 4.7% of revenue, for fiscal 1998
from $108,536, or 2.8% of revenue, for fiscal 1997. The increase of $79,614, or
73.3%, was due primarily to the additional debt we incurred in the later part of
fiscal 1997. See discussion of debt restructuring under Liquidity and Capital
Resources.
Net income from continuing operations decreased to $230,782, or 5.8% of
revenue, for fiscal 1998 from $529,684, or 13.5% of revenue, for fiscal 1997.
The decrease of $298,902, or 56.4% was primarily a result of increased cost of
sales.
The Company has no provisions for income taxes for either fiscal 1998 or
1997. As of September 30, 1998 we have approximately $598,000 of net operating
loss carryforwards to offset future taxable income for federal tax purposes
expiring in various years through 2009. In addition, the Company has
approximately $391,000 of net operating loss carryforwards to offset certain
future states' taxable income, expiring in various years through 2001.
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For fiscal 1997 we incurred a loss from discontinued operations of
$453,722. See note under Business Development concerning Hibshman Corporation.
In addition to the $194,453 loss on the sale of the assets, we incurred an
additional loss of $259,269 from operations of Hibshman Corporation.
Net income increased to $230,782, or 5.8% of revenue for fiscal 1998 from
$75,962, or 1.9% of revenue, for fiscal 1997.
Liquidity and Capital Resources
Net cash provided by operating activities decreased to $78,224 for the nine
months ended June 30, 1999 from $290,111 for the nine months ended June 30,
1998. The decrease was primarily due to the decrease in income before
depreciation offset by a decrease in Inventories. For the year ended September
30, 1998 our net cash provided from operating activities decreased to $271,064
from $548,970 for the year ended September 30, 1997. The decrease was primarily
due to an increase in Inventories and a decrease in Accounts Payable offset by
an increase in cash provided from discontinued operations.
Cash flows used in investing activities decreased to $5,333 for the nine
months ended June 30, 1999 from $307,839 for the nine months ended June 30,
1998. The decrease was due entirely because of reduced investments in property
and equipment. Cash flows used in investing activities decreased to $301,596 for
fiscal 1998 from $1,391,283 for fiscal 1997. The decrease was primarily due to
reduced investments in property and equipment. During fiscal 1997 the Company
had a major refurbishing project for all our furnaces that resulted in the high
expenditures for property and equipment.
Cash flows used in financing activities increased to $70,380 for the nine
months ended June 30,1999 from cash flows provided from financing activities of
$10,175 for the nine months ended June 30, 1998. The increase was primarily due
to reductions in obtaining outside financing. Cash flows provided from financing
activities decreased to $60,437 for fiscal 1998 from $754,021 for fiscal 1997.
The primary reason for the decrease was a reduction in proceeds from long term
debt.
In August 1997 the Company secured an additional $200,000 on an existing
mortgage. The funds were used for improvements to our furnaces. In August 1998
the Company consolidated all existing bank debt into a term loan of $1,300,000
and a Line of Credit of $300,000. In July 1999 the Line of Credit was revised to
$150,000. As of August 31, 1999, the term loan has an outstanding balance of
$1,213,333 and the line has a zero balance. We have various obligations under
two capital leases, which aggregate $107,994 as of August 31, 1999. The
indebtedness outstanding under the term loan is collateralized by all of our
assets. The obligations under the capital leases are collateralized by the
underlying equipment for each loan.
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During fiscal years 1998 and 1997 we generated $177,609 and $9,000,
respectively from the exercise of stock options owned by affiliates of the
Company. During fiscal years 1998 and 1997 we generated $11,694 and $2,753,
respectively, from shares purchased by employees through the Employee Stock
Purchase Plan.
The Company believes that its current cash and cash equivalent balances,
and net cash generated by operations, will be sufficient to meet its anticipated
cash needs for working capital for at least the next 12 months. Any business
expansion will require the Company to seek additional debt or equity financing.
ITEM 3. DESCRIPTION OF PROPERTY
Facilities
We own a property consisting of a one-story, masonry and steel,
office/manufacturing building containing approximately 15,760 square feet,
located at 385 Cooper Road, West Berlin, New Jersey, 08091. The building is
situated on a 3.686 acre site. It contains eight furnaces with attendant
pollution control systems, glass processing equipment, quality control functions
and administrative office space. We have received site plan approval to
construct four additional furnaces.
Leases
We lease office equipment and four storage containers at an annual total
lease obligation of $7,542. We also have entered into lease purchase agreements
for a lift truck, a retro-fit of a glass saw, and an ID slicing saw, for a total
annual lease obligation of $74,540.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Common Stock
of the Company as of September 30, 1999 by each person who was known by the
Company to beneficially own more than 5% of the common stock, by each director
and executive officer who owns shares of common stock and by all directors and
executive officers as a group:
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Title Name and Address No. of Shares and nature of Percent of
of Class of Beneficial Owner Beneficial Ownership(1) Class
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Common James Saltzman(2) 580,865 24.63%
621 East Germantown Pike
Suite 105
Plymouth Valley PA 19401
Common Gen. Charles J. Searock, Jr. (USAF Ret)(3) 90,496 3.85%
39 Tee Pee Court
Medford, NJ 08055
Common Jan Melles(4) 56,500 2.40%
9 Riverside Road
Laguna Niguel, CA 92677
Common Nathan Schwartz(5) 48,394 2.03%
621 East Germantown Pike
Suite 105
Plymouth Valley, PA 19401
Common Dr. Peter P. Bihuniak(6) 16,000 0.68%
631 Scenic Circle
Holland, OH 43528
Common Robert Lear(7) 173,236 7.37%
520 South York Road
Hatboro, PA 19040
Common Robert E. Hibshman, Sr.(8) 59,000 2.51%
19689 7th Ave. NE, Suite 182
Poulsbo, WA 98370-7576
Common John Kane(9) 15,425 0.66%
149 Plowshare Road
Norristown, PA 19403
Common Bruce Leonetti 100 0.00%
200 Birdwood Avenue
Haddonfield, NJ 08033
All Officers and Directors as a Group 1,040,015 42.76%
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(1) The numbers and percentages shown include shares of common stock issuable to
the identified person pursuant to stock options that may be exercised within 60
days. In calculating the percentage
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of ownership, such shares are deemed to be outstanding for the purpose of
computing the percentage of shares of common stock owned by such person, but are
not deemed to be outstanding for the purpose of computing the percentage of
share of common stock owned by any other stockholders. The number of shares
outstanding on September 30, 1999 was 2,344,944.
(2) Includes options to purchase 7,500 shares of the Company's common stock at
$1.00 per share, options to purchase 3,000 shares of the Company's common stock
at $3.52 per share, and options to purchase 3,000 shares of the Company's common
stock at $1.17 per share; also includes 567,365 shares owned by Saltzman
Partners.
(3) Includes options to purchase 3,000 shares of the Company's common stock at
$1.17 per share.
(4) Includes options to purchase 3,000 shares of the Company's common stock at
$3.52 per share, and options to purchase 3,000 shares of the Company's common
stock at $1.17 per share.
(5) Includes options to purchase 20,000 shares of the Company's common stock at
$1.50 per share, options to purchase 5,000 shares of the Company's common stock
at $1.50 per share, options to purchase 3,000 shares of the Company's common
stock at $4.25 per share, options to purchase 3,000 shares of the Company's
common stock at $3.52 per share, and options to purchase 3,000 shares of the
Company's common stock at $1.17 per share.
(6) Includes options to purchase 10,000 shares of the Company's common stock at
$3.00 per share, options to purchase 3,000 shares of the Company's common stock
at $3.52 per share, and options to purchase 3,000 shares of the Company's common
stock at $1.17 per share.
(7) Includes options to purchase 3,000 shares of the Company's common stock at
$3.52 per share, and options to purchase 3,000 shares of the Company's common
stock at $1.17 per share; also includes 167,236 shares owned by Penn Independent
Corporation.
(8) Includes options to purchase 3,000 shares of the Company's common stock at
$1.17 per share.
(9) Includes options to purchase 5,500 shares of the Company's common stock at
$2.65 per share.
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
All seven of our directors were elected to serve for one year at our Annual
meeting of the shareholders held on January 26, 1999, and will hold office until
their successors are elected at the next annual meeting of the shareholders.
Our executive officers and directors, and their ages at September 15, 1999,
are as follows:
Name Age Position
- ---- --- --------
James Saltzman 55 Chairman of the Board
Gen. Charles J. Searock, Jr. 63 President, CEO, Director
Jan Melles 59 Director
Nathan Schwartz 38 Director
Dr. Peter P. Bihuniak 50 Director
Mr. Robert Lear 54 Director
Mr. Robert E. Hibshman, Sr. 72 Director
Mr. John Kane 48 CFO, Secretary, Treasurer
Mr. Bruce Leonetti 45 Vice President
Mr. James Saltzman, Chairman, 55, has been a member of the Board since February
1998, and is a major shareholder in Dynasil Corporation. Mr. Saltzman, has been
the General Partner of Saltzman Partners, an investment firm, since 1982. Since
January 1997, Mr. Saltzman has served as Vice Chairman of Madison Monroe, Inc.,
a private company engaged in investments. He served as a director of Xyvision,
Inc., a publicly held company which develops, markets, integrates and supports
content management and publishing software, since 1992, and was Chairman of the
Board of such company from February 1994 to February 1995.
General Charles J. Searock, Jr. (USAF Ret), 63, has been a director of the
Corporation since February 1996 and currently serves as President and CEO.
General Searock retired from the United States Air Force having attained the
rank of Lieutenant General in 1993 after 36 years of active duty, having
received numerous military decorations. Prior to joining Dynasil, he was
executive Vice President of Aero Development Corporation from 1993 to 1996.
General Searock earned a BA in General Education from the University of Nebraska
in 1962, and a Masters degree in Management from Central Michigan University in
1975.
Jan Melles, 59, has been a member of the Board of Directors of the Company since
February 1996. Since 1993, Mr. Melles has been President and sole shareholder of
Photonics Investments, bv, which is engaged in investments in, and mergers and
acquisitions of, photonics companies. From 1988 to 1992, he served as Chief
Executive Officer of Melles Griot, Inc., a division of J. Bibby & Sons, PLC. Mr.
Melles co-founded Melles Griot, Inc. in 1969 and sold it to J. Bibby & Sons, PLC
in 1988. Mr. Melles also serves as a director of Excel Technology, Inc., a
publicly held company, and as a director of Gooch and Housego, PLC, a publicly
held company.
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Nathan Schwartz, 38, has been a member of the Board since February 1996. He is
an attorney and financial advisor, providing legal and financial advice to
numerous financial service clients since 1992. Mr. Schwartz earned a B.A. in
History from Kenyon College in 1982, an M.B.A. in Public/Private Management from
Columbia University in 1986, and a J.D. from the University of Pittsburgh in
1989.
Dr. Peter P. Bihuniak, 50, has been a member of the Board since February 1997.
He has held his current position of Vice President of Technology for SOLAREX
since 1997. From 1995 to 1997, he served as Director of Research and Development
of Pilkington, Libbey-Owens-Ford in Toledo, Ohio, directing invention and
development efforts for high performance glass. From 1988 to 1995, Mr. Bihuniak
served in various positions with PPG Industries, Inc., one of the major
producers of flat glass, fabricated glass and continuous-strand fiber glass in
the world, serving most recently as General Manager, Flat Glass Specialty
Products Division.
Robert Lear, 54, has been a member of the Board since February 1998. He is
President of Penn Independent Corporation, a property and casualty insurance
enterprise. Mr. Lear has been President and Chief Executive Officer of Penn
Independent since September 1996 and previously served as Executive Vice
President-Finance and Chief Financial Officer of that company for more than
seven years. He was Vice President-Finance and Chief Financial Officer of
Penn-America Group, Inc. from its formation in July 1993 until March 1995, and
still serves Penn-America Group, Inc. as a director. Prior to joining Penn
Independent, Mr. Lear had over 15 years of public accounting experience,
specializing in the insurance industry. Mr. Lear is a certified public
accountant.
Robert E. Hibshman, Sr., 72, has been a member of the Board since January 1999.
He founded Hibshman Optical Labs, Inc. which was purchased by his son, Robert E.
Hibshman Jr. and eventually sold to Dynasil Corporation as Hibshman Corporation.
Mr. Hibshman Sr. is currently retired and is occupied with property development
and investments.
John Kane, 48, Chief Financial Officer has been with Dynasil Corporation since
January 1997 and is a licensed Certified Public Accountant. For three years
prior to joining Dynasil Corporation he was an independent consultant, designing
accounting systems for the maritime industry.
Bruce Leonetti, 45, Vice President - Sales and Marketing has been with Dynasil
Corporation since January 1999. He was previously with the Company for 14 years
prior to 1993 when he left for a position as a development officer with the
University of Pennsylvania.
13
<PAGE>
<TABLE>
<CAPTION>
ITEM 6. EXECUTIVE COMPENSATION
Summary Compensation Table
- ---------------------------------------------------------------------------------------------------------------------------
Long Term Compensation
--------------------------------------
Annual Compensation Awards Payouts
---------------------------------------- ------------------------- ---------
Name and Year Salary ($) Bonus ($) Other Restricted Securities Long- All other
Principle Annual Stock Underlying Term compen-
Position Compen- Awards ($) Options Incentive sation ($)
sation ($) ($) Plans ($)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles J. 1999 122,703
Searock, ------------------------------------------------------------------------------------------------------------
President, 1998 124,797
CEO ------------------------------------------------------------------------------------------------------------
1997 88,054 16,250
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
John 1999 83,339 2,625
Kane, ------------------------------------------------------------------------------------------------------------
Secretary, 1998 88,289 1,118 6,000
Treasurer, ------------------------------------------------------------------------------------------------------------
CFO 1997 57,212 624 13,500
- ---------------------------------------------------------------------------------------------------------------------------
Bruce 1999 65,042
Leonetti,
VP
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Employment Agreements
We have entered into an employment agreement with Charles J. Searock, Jr., Chief
Executive Officer and President, which commenced on December 1, 1996 and will
continue for a three-year period, after which the agreement will automatically
renew for one-year terms, unless terminated by either party upon ninety days
written notice prior to the end of any term, or for cause. Under the employment
agreement, Mr. Searock has agreed to work for us full time, and receives an
annual base salary of $125,000, to be adjusted upwards or downwards based on our
profit and loss. Mr. Searock's agreement also provides for an annual bonus at
the discretion of our Board of Directors. The agreement also provides for a
401(k) pension plan, health insurance benefits and contains three-year
non-competition provisions that prohibit him from competing with us. In
addition, the agreement provides that if Mr. Searock is terminated without
cause, he will receive a severance consideration of one year's salary.
We have also entered into an employment agreement with John Kane, Chief
Financial Officer, Secretary and Treasurer, which commenced on January 20, 1997
and will continue for a three-year
14
<PAGE>
period, after which the agreement will automatically renew for one-year terms,
unless terminated by either party upon ninety days written notice prior to the
end of any term, or for cause. Under the employment agreement, Mr. Kane has
agreed to work for us full time, and receives an annual base salary of $85,000,
to be reviewed no less than annually. Mr. Kane's agreement also provides for an
annual bonus at the discretion of our Board of Directors. The agreement also
provides for a 401(k) pension plan, health insurance benefits and contains
eighteen month non-competition provisions that prohibit him from competing with
us.
We have also entered into an employment agreement with Bruce Leonetti, Vice
President of Marketing and Sales, which commenced on January 1, 1999 and will
continue for a three-year period, unless terminated for cause. Under the
employment agreement, Mr. Leonetti has agreed to work for us full time, and
receives an annual base salary of $89,000, with commissions based on the gross
dollar amount of product shipped. Mr. Leonetti's agreement also provides for an
annual bonus at the discretion of our Board of Directors. The agreements also
provide for a 401(k) pension plan, health insurance benefits and contain twenty
four month non-competition provisions that prohibit him from competing with us.
In addition, the agreement provides that if Mr. Leonetti is terminated without
cause, he will receive a severance consideration of three months' salary.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company paid consulting fees to Robert E. Hibshman, Jr., formerly President
of the Company and Chairman of the Board of Directors, in the amount of $38,140
during 1998 and $93,173 during 1997.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 25,000,000 shares
of common stock, par value $.001 per share ("Common Stock").
Common Stock
Holders of shares of Common Stock of the Company are entitled to cast one
vote for each share held at all shareholders meetings for all purposes,
including the election of directors, and to share equally on a per share basis
in such dividends as may be declared by the Board of Directors out of funds
legally available. Upon liquidation or dissolution, each outstanding share of
Common Stock will be entitled to share equally in the assets of the Company
legally available for distribution to shareholders after the payment of all
debts and other liabilities. Shares of Common Stock are not redeemable, have no
conversion rights and carry no preemptive or other rights to subscribe to or
purchase additional shares in the event of a subsequent offering. All
outstanding shares of Common Stock are and will be fully paid and non-
assessable, when issued.
15
<PAGE>
Non-Cumulative Voting
The Common Stock does not have cumulative voting rights which means that
the holders of more than fifty percent of the Common Stock voting for election
of directors can elect one hundred percent of the directors of the Company if
they choose to do so.
Dividends
There are no limitations or restrictions upon the right of the Board of
Directors to declare dividends out of any funds legally available
Effect of anti-takeover effects of New Jersey Shareholders Protection Act
The Company is subject to the provisions of the New Jersey Shareholders
Protection Act. The New Jersey Shareholders Protection Act provides that "no
resident domestic corporation shall engage in any business combination with any
interested stockholder of that resident domestic corporation for a period of
five years following that interested stockholder's stock acquisition date unless
that business combination is approved by the board of directors of that resident
domestic corporation prior to that interested stockholder's stock acquisition
date."
16
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
The Registrant's Common Stock is traded on the Over the Counter Bulletin Board
(BBOTC:DYSL). The symbol for the Company's Common Stock is "DYSL". The Company's
Common Stock has been traded publicly since April 22, 1981. The "high" and "low"
bid quotations for the Company's Common Stock for each quarterly period for the
fiscal years ended December 31, 1997 and December 31, 1998 were as follows:
Calendar Quarter High Bid Price Low Bid Price
---------------- -------------- -------------
1997
----
First $5.50 $3.75
Second 3.75 3.25
Third 4.25 3.25
Fourth 5.25 2.875
1998
----
First $6.00 $3.375
Second 4.00 2.00
Third 3.00 2.00
Fourth 2.00 0.875
The above listed quotes reflect inter-dealer prices without retail mark-up,
mark-down, or commissions and are not necessarily representations of actual
transactions or the true value of the Common Stock.
As of September 30, 1999, there were 2,344,944 shares of common stock
outstanding held by approximately 256 holders of record of the Common Stock of
the Company (plus a small number of additional shareholders whose stock is held
in street name and who have declined disclosure of such information).
The Company has paid no cash dividends since its inception. The Company
presently intends to retain any future earnings for use in its business and does
not presently intend to pay cash dividends in the foreseeable future. Holders of
the Common stock are entitled to share ratably in dividends when and as declared
by the Board of Directors out of funds legally available therefor.
17
<PAGE>
ITEM 2. LEGAL PROCEEDINGS
No material legal proceedings to which the Company or any of its property
is subject are pending, nor to the knowledge of the Company are any such legal
proceedings threatened.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In May 1996, the Company granted to a consultant, under a Consulting
Agreement, an option to purchase shares of the Company's common stock up to a
total of 20,000 shares. The option was exercisable through May 1998 at an
exercise price of $3.50 per share. In September 1996, such option was exercised
in its entirety for a total purchase price of $70,000.
In June 1996, the Company granted to another consultant, under a Consulting
Agreement, an option to purchase shares of the Company's common stock up to a
total of 5,000 shares. The option was exercisable through June 1997 at an
exercise price of $3.00 per share. In June 1996, such option was exercised in
its entirety for a total purchase price of $15,000.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The by-laws of the Company provide that every person who is or was a
director or officer, employee or agent of the Company, or any person who serves
or has served in any capacity with any other enterprise at the request of the
Company, shall be indemnified by the Company to the fullest extent permitted by
law. The Company shall indemnify the persons listed above against all expenses
and liabilities reasonably incurred by or imposed on them in connection with any
proceedings to which they have been or may be made parties, or any proceedings
in which they may have become involved by reason of being or having been a
director or officer of the Company, or by reason of serving or having served
another enterprise at the request of the Company, whether or not in the
capacities of directors or officers of the Company at the time the expenses or
liabilities are incurred.
New Jersey has enacted the following statutory indemnification provisions:
NJSA 14A:3-5. Indemnification of directors, officers and employees -
(1) As used in this section,
(a) "Corporate agent" means any person who is or was a director, officer,
employee or agent of the indemnifying corporation or of any constituent
corporation absorbed by the indemnifying corporation in a consolidation or
merger and any person who is or was a director, officer, trustee,
18
<PAGE>
employee or agent of any other enterprise, serving as such at the request of the
indemnifying corporation, or of any such constituent corporation, or the legal
representative of any such director, officer, trustee, employee or agent;
(b) "Other enterprise" means any domestic or foreign corporation, other
than the indemnifying corporation, and any partnership, joint venture, sole
proprietorship, trust or other enterprise, whether or not for profit, served by
a corporate agent;
(c) "Expenses" means reasonable costs, disbursements and counsel fees;
(d) "Liabilities" means amounts paid or incurred in satisfaction of
settlements, judgments, fines and penalties;
(e) "Proceeding" means any pending, threatened or completed civil,
criminal, administrative or arbitrative action, suit or proceeding, and any
appeal therein and any inquiry or investigation which could lead to such action,
suit or proceeding; and
(f) References to "other enterprises" include employee benefit plans;
references to "fines" include any excise taxes assessed on a person with respect
to an employee benefit plan; and references to "serving at the request of the
indemnifying corporation" include any service as a corporate agent which imposes
duties on, or involves services by, the corporate agent with respect to an
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner the person reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(2) Any corporation organized for any purpose under any general or special
law of this State shall have the power to indemnify a corporate agent against
his expenses and liabilities in connection with any proceeding involving the
corporate agent by reason of his being or having been such a corporate agent,
other than a proceeding by or in the right of the corporation, if
(a) such corporate agent acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation; and
(b) with respect to any criminal proceeding, such corporate agent had no
reasonable cause to believe his conduct was unlawful. The termination of any
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not of itself create a presumption that such
corporate agent did not meet the applicable standards of conduct set forth in
paragraphs 14A:3-5(2)(a) and 14A:3-5(2)(b).
(3) Any corporation organized for any purpose under any general or special
law of this State shall have the power to indemnify a corporate agent against
his expenses in connection with any proceeding by or in the right of the
corporation to procure a judgment in its favor which involves the
19
<PAGE>
corporate agent by reason of his being or having been such corporate agent, if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation. However, in such proceeding no
indemnification shall be provided in respect of any claim, issue or matter as to
which such corporate agent shall have been adjudged to be liable to the
corporation, unless and only to the extent that the Superior Court or the court
in which such proceeding was brought shall determine upon application that
despite the adjudication of liability, but in view of all circumstances of the
case, such corporate agent is fairly and reasonably entitled to indemnity for
such expenses as the Superior Court or such other court shall deem proper.
(4) Any corporation organized for any purpose under any general or special
law of this State shall indemnify a corporate agent against expenses to the
extent that such corporate agent has been successful on the merits or otherwise
in any proceeding referred to in subsections 14A:3-5(2) and 14A:3-5(3) or in
defense of any claim, issue or matter therein.
(5) Any indemnification under subsection 14A:3-5(2) and, unless ordered by
a court, under subsection 14A:3-5(3) may be made by the corporation only as
authorized in a specific case upon a determination that indemnification is
proper in the circumstances because the corporate agent met the applicable
standard of conduct set forth in subsection 14A:3-5(2) or subsection 14A:3-5(3).
Unless otherwise provided in the certificate of incorporation or bylaws, such
determination shall be made
(a) by the board of directors or a committee thereof, acting by a majority
vote of a quorum consisting of directors who were not parties to or otherwise
involved in the proceeding; or
(b) if such a quorum is not obtainable, or, even if obtainable and such
quorum of the board of directors or committee by a majority vote of the
disinterested directors so directs, by independent legal counsel, in a written
opinion, such counsel to be designated by the board of directors; or
(c) by the shareholders if the certificate of incorporation or bylaws or a
resolution of the board of directors or of the shareholders so directs.
(6) Expenses incurred by a corporate agent in connection with a proceeding
may be paid by the corporation in advance of the final disposition of the
proceeding as authorized by the board of directors upon receipt of an
undertaking by or on behalf of the corporate agent to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified as
provided in this section.
(7) (a) If a corporation upon application of a corporate agent has failed
or refused to provide indemnification as required under subsection 14A:3-5(4) or
permitted under subsections 14A:3-5(2), 14A:3-5(3) and 14A:3-5(6), a corporate
agent may apply to a court for an award of indemnification by the corporation,
and such court
(i) may award indemnification to the extent authorized under subsections
14A:3-5(2) and 14A:3-5(3) and shall award indemnification to the extent required
under subsection 14A:3-5(4),
20
<PAGE>
notwithstanding any contrary determination which may have been made under
subsection 14A:3-5(5); and
(ii) may allow reasonable expenses to the extent authorized by, and subject
to the provisions of, subsection 14A:3-5(6), if the court shall find that the
corporate agent has by his pleadings or during the course of the proceeding
raised genuine issues of fact or law.
(b) Application for such indemnification may be made
(i) in the civil action in which the expenses were or are to be incurred or
other amounts were or are to be paid; or
(ii) to the Superior Court in a separate proceeding. If the application is
for indemnification arising out of a civil action, it shall set forth reasonable
cause for the failure to make application for such relief in the action or
proceeding in which the expenses were or are to be incurred or other amounts
were or are to be paid.
The application shall set forth the disposition of any previous application
for indemnification and shall be made in such manner and form as may be required
by the applicable rules of court or, in the absence thereof, by direction of the
court to which it is made. Such application shall be upon notice to the
corporation. The court may also direct that notice shall be given at the expense
of the corporation to the shareholders and such other persons as it may
designate in such manner as it may require.
(8) The indemnification and advancement of expenses provided by or granted
pursuant to the other subsections of this section shall not exclude any other
rights, including the right to be indemnified against liabilities and expenses
incurred in proceedings by or in the right of the corporation, to which a
corporate agent may be entitled under a certificate of incorporation, bylaw,
agreement, vote of shareholders, or otherwise; provided that no indemnification
shall be made to or on behalf of a corporate agent if a judgment or other final
adjudication adverse to the corporate agent establishes that his acts or
omissions (a) were in breach of his duty of loyalty to the corporation or its
shareholders, as defined in subsection (3) of > N.J.S.14A:2-7, (b) were not in
good faith or involved a knowing violation of law or (c) resulted in receipt by
the corporate agent of an improper personal benefit.
(9) Any corporation organized for any purpose under any general or special
law of this State shall have the power to purchase and maintain insurance on
behalf of any corporate agent against any expenses incurred in any proceeding
and any liabilities asserted against him by reason of his being or having been a
corporate agent, whether or not the corporation would have the power to
indemnify him against such expenses and liabilities under the provisions of this
section. The corporation may purchase such insurance from, or such insurance may
be reinsured in whole or in part by, an insurer owned by or otherwise affiliated
with the corporation, whether or not such insurer does business with other
insureds.
21
<PAGE>
(10) The powers granted by this section may be exercised by the
corporation, notwithstanding the absence of any provision in its certificate of
incorporation or bylaws authorizing the exercise of such powers.
(11) Except as required by subsection 14A:3-5(4), no indemnification shall
be made or expenses advanced by a corporation under this section, and none shall
be ordered by a court, if such action would be inconsistent with a provision of
the certificate of incorporation, a bylaw, a resolution of the board of
directors or of the shareholders, an agreement or other proper corporate action,
in effect at the time of the accrual of the alleged cause of action asserted in
the proceeding, which prohibits, limits or otherwise conditions the exercise of
indemnification powers by the corporation or the rights of indemnification to
which a corporate agent may be entitled.
(12) This section does not limit a corporation's power to pay or reimburse
expenses incurred by a corporate agent in connection with the corporate agent's
appearance as a witness in a proceeding at a time when the corporate agent has
not been made a party to the proceeding.
Forward-Looking Statements
Certain statements made in this Form 10-SB are "forward looking statements".
Without limiting the generality of the foregoing, such information can be
identified by the use of forward-looking terminology such as "anticipate",
"will", "would", "expect", "intend", "plans to" or "believes", or other
variations thereon, or comparable terminology. Actual results, performance or
developments may differ materially from those expressed or implied by such
forward-looking statements as a result of market uncertainties or industry
factors. Some important factors that may cause actual results that differ
materially from those in any forward-looking statements may include the
availability of financing in the time frame required, market acceptance of the
Company's products and services, competitive pressures, and the ability to
attract and retain key executive sales and management personnel. The Company
disclaims any obligation or responsibility to update any such forward-looking
statements.
22
<PAGE>
PART F/S
23
<PAGE>
DYNASIL CORPORATION OF
AMERICA AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
TABLE OF CONTENTS
Page
----
Independent Auditors' Report 1
Financial Statements:
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Changes in Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6 - 19
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Dynasil Corporation of America and Subsidiaries
Berlin, New Jersey
We have audited the accompanying consolidated balance sheets of DYNASIL
CORPORATION OF AMERICA AND SUBSIDIARIES as of September 30, 1998 and 1997, and
the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of DYNASIL
CORPORATION OF AMERICA AND SUBSIDIARIES as of September 30, 1998 and 1997 and
the results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
HAEFELE, FLANAGAN & CO., p.c.
Moorestown, New Jersey
November 16, 1998
1
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS
1998 1997
---------- ----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 45,980 $ 16,075
Accounts receivable, net of allowance for doubtful
accounts of $10,883 for 1998 and 1997 345,176 598,926
Note receivable 0 21,667
Inventories 1,278,334 873,889
Prepaid expenses and other current assets 42,160 41,015
Net current assets of discontinued operations 0 221,952
---------- ----------
Total current assets 1,711,650 1,773,524
Property, Plant and Equipment, net 2,390,988 2,261,968
Other Assets 25,947 50,058
---------- ----------
Total Assets $4,128,585 $4,085,550
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
1998 1997
----------- -----------
<S> <C> <C>
Current Liabilities
Note payable to bank $ 0 $ 200,000
Current portion of long-term debt 137,414 432,773
Accounts payable 226,560 511,578
Accrued expenses 122,115 230,355
----------- -----------
Total current liabilities 486,089 1,374,706
Long-term Debt, net 1,882,515 1,384,908
Stockholders' Equity
Common Stock, $.0005 par value, 25,000,000 shares
authorized, 2,947,649 and 2,821,213 shares issued
for 1998 and 1997, respectively 1,474 1,411
Additional paid in capital 1,028,197 831,083
Retained earnings 1,689,613 1,458,831
----------- -----------
2,719,284 2,291,325
Less unearned compensation 0 (6,086)
Less 640,624 shares of treasury stock, at cost (959,303) (959,303)
----------- -----------
Total stockholders' equity 1,759,981 1,325,936
----------- -----------
Total Liabilities and Stockholders' Equity $ 4,128,585 $ 4,085,550
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Net sales $ 3,981,395 $ 3,931,108
Cost of sales 2,711,148 2,338,738
----------- -----------
Gross profit 1,270,247 1,592,370
Selling, general and administrative 874,962 952,977
----------- -----------
Income from continuing operations 395,285 639,393
Other income (expense)
Interest expense (188,150) (108,536)
Other income (expense), net 23,647 (1,173)
----------- -----------
(164,503) (109,709)
----------- -----------
Income from continuing operations
before provision for income taxes 230,782 529,684
Provision for income taxes 0 0
----------- -----------
Income from continuing operations 230,782 529,684
----------- -----------
Discontinued operations
Loss from discontinued operations, including
provision of $30,000 for operating losses
during phase out period in 1997, net of tax 0 (453,722)
----------- -----------
Net income $ 230,782 $ 75,962
=========== ===========
Basic net income per share
From continuing operations $ 0.10 $ 0.24
From discontinued operations 0 (0.21)
----------- -----------
Net income $ 0.10 $ 0.03
=========== ===========
Diluted net income per share
From continuing operations $ 0.10 $ 0.23
From discontinued operations 0 (0.20)
----------- -----------
Net income $ 0.10 $ 0.03
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
Additional
Paid-in Retained Unearned
Shares Amount Capital Earnings Compensation
--------- ------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Balance, October 1, 1996 1,404,356 $ 1,404 $ 788,837 $1,382,869 $ 0
2 for 1 stock split 1,404,356 0 0 0 0
Issuance of shares of common stock upon
exercise of stock options 3,000 1 8,999 0 0
Issuance of shares of common stock upon
exercise of stock warrants 250 1 749 0 0
Issuance of shares of common stock under
employee stock purchase plan 1,251 1 2,752 0 0
Issuance of shares of common stock under
employee stock compensation 8,000 4 29,746 0 (29,750)
Compensation expense 0 0 0 0 23,664
Net income 0 0 0 75,962 0
--------- ------- ---------- ---------- -------
Balance, September 30, 1997 2,821,213 1,411 831,083 1,458,831 (6,086)
Issuance of shares of common stock upon
exercise of stock options 116,000 58 177,552 0 0
Issuance of shares of common stock under
employee stock purchase plan 6,936 3 11,691 0 0
Issuance of shares of common stock under
stock bonus 500 0 1,873 0 0
Issuance of shares of common stock under
employee stock compensation 3,000 2 5,998 0 0
Compensation expense 0 0 0 0 6,086
Net Income 0 0 0 230,782 0
--------- ------- ---------- ---------- -------
Balance, September 30, 1998 2,947,649 $ 1,474 $1,028,197 $1,689,613 $ 0
========= ======= ========== ========== =======
<CAPTION>
Treasury Stock Total
----------------------- Stockholders'
Shares Amount Equity
------- ---------- -------------
<S> <C> <C> <C>
Balance, October 1, 1996 320,312 $(959,303) $1,213,807
2 for 1 stock split 320,312 0 0
Issuance of shares of common stock upon
exercise of stock options 0 0 9,000
Issuance of shares of common stock upon
exercise of stock warrants 0 0 750
Issuance of shares of common stock under
employee stock purchase plan 0 0 2,753
Issuance of shares of common stock under
employee stock compensation 0 0 0
Compensation expense 0 0 23,664
Net income 0 0 75,962
------- --------- ----------
Balance, September 30, 1997 640,624 (959,303) 1,325,936
Issuance of shares of common stock upon
exercise of stock options 0 0 177,610
Issuance of shares of common stock under
employee stock purchase plan 0 0 11,694
Issuance of shares of common stock under
stock bonus 0 0 1,873
Issuance of shares of common stock under
employee stock compensation 0 0 6,000
Compensation expense 0 0 6,086
Net Income 0 0 230,782
------- --------- ----------
Balance, September 30, 1998 640,624 $(959,303) $1,759,981
======= ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 230,782 $ 75,962
Adjustments to reconcile net income to net cash
provided by continuing operations
Loss from discontinued operations 0 453,722
Stock compensation expense 13,959 23,664
Depreciation and amortization 349,469 243,674
Allowance for doubtful accounts 0 (19,117)
(Increase) decrease in:
Accounts receivable 253,750 (160,041)
Inventories (404,445) (177,353)
Prepaid expenses and other current assets (1,145) (6,688)
Increase (decrease) in:
Accounts payable (285,018) 230,158
Accrued expenses (108,240) 119,366
----------- -----------
Net cash provided by continuing operations 49,112 783,347
----------- -----------
Net cash provided by (used) in discontinued operations 221,952 (234,377)
----------- -----------
Net cash provided by operating activities 271,064 548,970
----------- -----------
Cash flows from investing activities:
Purchases of property, plant and equipment (317,857) (1,331,434)
Increase in other assets (5,406) (38,182)
(Increase) decrease in note receivable 21,667 (21,667)
----------- -----------
Net cash used in investing activities (301,596) (1,391,283)
----------- -----------
Cash flows from financing activities:
Proceeds from (repayment of) note payable
to bank, net (200,000) 175,000
Repayment of long term debt (214,583) (383,482)
Proceeds from long term debt 285,716 950,000
Issuance of common stock 189,304 12,503
----------- -----------
Net cash provided by financing activities 60,437 754,021
----------- -----------
Net increase (decrease) in cash and cash equivalents 29,905 (88,292)
Cash and cash equivalents, beginning 16,075 104,367
----------- -----------
Cash and cash equivalents, ending $ 45,980 $ 16,075
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
Note 1 - Summary of Significant Accounting Policies
Nature of Continuing Operations
The Company is primarily engaged in the manufacturing and marketing of
customized fused silica products. The Company's products and services are used
in the optical lens and laser manufacturing industries, as well as in the
medical industry. Other applications include usage in the manufacturing of
analytical instruments and semi-conductors. The Company also serves as a
sub-contractor to the defense industry.
The Company's products and services are provided primarily in the United
States with some international activity.
Nature of Discontinued Operations
On September 30, 1997, the Company sold substantially all of the assets of
its wholly owned subsidiary, Hibshman Corporation. Hibshman Corporation provided
the value added service of shaping and super-polishing materials to customer
specifications through the use of miniature optics and custom micro-machining
primarily within the United States. The operating results of Hibshman
Corporation for the year ended September 30, 1997 have been treated as
discontinued operations.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Dynasil Corporation of America and its wholly-owned subsidiaries, Dynasil
International Incorporated and Hibshman Corporation. All significant
intercompany transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
6
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
Note 1 - Summary of Significant Accounting Policies (continued)
Inventories
Inventories are stated at the lower of average cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
Property, Plant and Equipment and Depreciation and Amortization
Property, plant and equipment are recorded at cost. Depreciation is
provided using the straight-line method for financial reporting purposes and
accelerated methods for income tax purposes over the estimated useful lives of
the respective assets. Maintenance and repairs are charged to expense as
incurred; major renewals and betterments are capitalized. When items of
property, plant and equipment are sold or retired, the related costs and
accumulated depreciation are removed from the accounts and any gain or loss is
included in income.
Other Assets
Other assets include deferred costs which are amortized using the
straight-line method over 7 years. Amortization expense for the years ended
September 30, 1998 and 1997 was $29,517 and $6,465.
Unearned Compensation
Compensation resulting from shares granted under the Company's employment
contracts is amortized to expense over the term of the contract and is adjusted
for changes in the market value of the common stock.
Advertising
The Company expenses all advertising as incurred. Advertising expense from
continuing operations for the years ended September 30, 1998 and 1997 was
$78,959 and $89,450.
7
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
Note 1 - Summary of Significant Accounting Policies (continued)
Income Taxes
Dynasil Corporation of America and its wholly-owned subsidiaries file a
consolidated federal income tax return.
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
Under the liability method prescribed by SFAS No. 109, a deferred tax asset or
liability is determined based on the differences between the financial statement
and tax basis of assets and liabilities as measured by the enacted tax rates
which will be in effect when these differences reverse. Tax credits are recorded
as a reduction in income taxes. Valuation allowances are provided if, it is more
likely than not, that some or all of the deferred tax assets will not be
realized.
Net Income Per Share
The Company has adopted SFAS No. 128, "Earnings per Share", effective
October 1, 1997. SFAS No. 128, which simplifies the standards for computing and
presenting earnings per share, replaces the previously reported primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options and warrants. Diluted earnings per share is very
similar to the previously reported primary earnings per share. Accordingly, net
earnings per share for all periods presented have been restated to conform to
the new standard.
Basic net earnings per share is computed using the weighted average number
of common shares outstanding. The dilutive effect of potential common shares
outstanding are included in diluted net earnings per share. The computations of
basic and diluted net earnings per share are as follows:
1998 1997
---------- ----------
Net income from continuing operations $ 230,782 $ 529,684
========== ==========
Basic weighted average shares 2,240,005 2,175,624
Effect of dilutive securities:
Common stock options 113,556 130,157
Common stock warrants -0- 4,114
---------- ----------
Dilutive potential common shares 2,353,561 2,309,895
========== ==========
8
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
Note 1 - Summary of Significant Accounting Policies (continued)
Net Income Per Share (continued)
1998 1997
---- ----
Net income per share from continuing operations
Basic $.10 $.24
Diluted $.10 $.23
Diluted net earnings per share excludes the impact of common stock warrants
of 1,892 for 1998 because the option's exercise prices were greater than the
average market price of the common shares and therefore, the effect would be
antidilutive.
Long-Lived Assets
On October 1, 1997, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" which establishes standards for the
impairment of long-lived assets and certain identifiable intangibles. The
company's policy is to record long-lived assets at cost, amortizing these costs
over the expected useful lives of related assets. In accordance with SFAS No.
121, these assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. Measurement of an impairment loss for long-lived assets and certain
identifiable intangibles to be disposed of are to be reported generally at the
lower of the carrying cost amount or fair value less cost to sell. Adoption of
SFAS No. 121 did not have a significant impact on the Company's financial
position or results of operations. For the years ended September 30, 1998 and
1997, there was no material impairment of the long-lived assets of the Company.
Stock Based Compensation
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock Based Compensation." The Company applies APB Opinion No.
25, "Accounting for Stock Issued to Employees" to account for its stock options
using the intrinsic value method. Under APB No. 25, no compensation cost has
been recognized in the financial statements for stock options granted. SFAS No.
123 requires companies using the intrinsic value method to make certain proforma
disclosures using the fair value method. Additional disclosures are included in
Note 9.
9
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
Note 1 - Summary of Significant Accounting Policies (continued)
Fair Value
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, accounts payable, and debt. The carrying
amounts of cash and cash equivalents, accounts receivable, and accounts payable
approximate fair value due to the short maturity of these instruments. Based on
borrowing rates currently available to the Company for bank loans with similar
terms and maturities, the Company's debt approximates its fair value.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents and
accounts receivable. The Company has not experienced any significant losses on
its cash and cash equivalents. The Company performs ongoing credit evaluations
of its customers and generally requires no collateral from its customers. The
Company maintains allowances for potential credit losses and has not experienced
any significant losses related to the collection of its accounts receivable.
New Accounting Pronouncement
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement requires companies to classify items of other
comprehensive income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a balance
sheet, and is effective for fiscal years beginning after December 15, 1997.
Management does not believe this statement will have a material impact on the
Company's financial statements.
Statement of Cash Flows
For the purpose of the statement of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less to be cash
equivalents.
Note 2 - Discontinued Operations
On September 30, 1997, the Company sold substantially all of the assets of
its wholly-owned subsidiary, Hibshman Corporation, to two individuals. As
consideration for the sale, the Company received a note receivable of $200,000
which was collected during the year ended September 30, 1998. The sale resulted
in a loss of $194,453. Hibshman Corporation recorded sales of $402,591 in 1997.
No income tax expense or benefits were recognized due to the Company's net
operating loss carryforwards.
10
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
Note 2 - Discontinued Operations (continued)
The components of the net assets of discontinued operations included in the
consolidated balance sheet as of September 30, 1997 are as follows:
Current assets
Cash and cash equivalents $ 32,234
Accounts receivable 70,855
Note receivable 200,000
Prepaid expenses and other current assets 10,150
Less current liabilities
Accounts payable (49,697)
Accrued expenses (41,590)
--------
Net current assets $221,952
========
Note 3 - Note Receivable
Note receivable as of September 30, 1998 and 1997 consists of the
following:
1998 1997
----- -------
Note receivable from officer with interest
at the prime rate plus 1%, (9.5% at
September 30, 1997), due on demand,
Unsecured, collected in 1998 $ -0- $21,667
===== =======
Interest income of $1,667 for the year ended September 30, 1997 was added
to the balance of the note.
Note 4 - Inventories
Inventories at September 30, 1998 and 1997 consisted of the following:
1998 1997
---------- --------
Raw Materials $ 43,658 $ 40,163
Work-in-Process 1,088,569 716,180
Finished Goods 146,107 117,546
---------- --------
$1,278,334 $873,889
========== ========
11
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
Note 5 - Property, Plant and Equipment
Property, plant and equipment at September 30, 1998 and 1997 consist of the
following:
1998 1997
---------- ----------
Land $ 261 $ 261
Building and improvements 2,449,751 1,985,821
Construction in progress 57,911 229,633
Machinery and equipment 2,762,167 2,607,539
Office furniture and fixtures 219,442 217,306
Transportation equipment 65,931 65,931
------------ ----------
5,555,463 5,106,491
Less accumulated depreciation 3,164,475 2,844,523
---------- ----------
$2,390,988 $2,261,968
========== ==========
Depreciation expense charged to continuing operations for the years ended
September 30, 1998 and 1997 was $319,952 and $237,209.
The Company capitalized interest of $10,874 and $37,788 during the years
ended September 30, 1998 and 1997 related to qualifying assets under
construction. Total interest incurred, including amounts capitalized during the
same periods, were $199,024 in 1998 and $148,056 in 1997.
Note 6 - Note Payable to Bank
During July 1998, management completed negotiations with Premier Bank to
consolidate all bank debt. In addition to the note described in Note 7 -
Long-term Debt for $1,292,778, the Company secured a $300,000 line of credit
agreement. The Note is due on demand with interest at the bank's base rate plus
1% (9.5% at September 30, 1998). At September 30, 1998, the Company has not
drawn on the line.
Note payable to bank at September 30, 1997 was provided under a $350,000
line of credit agreement with First Union National Bank and was due on demand
with interest at the bank's prime rate plus 1% (9.5% at September 30, 1997). The
note was secured by substantially all assets of the Company. The line of credit
agreement was repaid in 1998. The Agreements with First Union National Bank were
cross-collateralized and contained customary financial covenants. See Note 7.
12
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
Note 7 - Long-Term Debt
Long-term Debt at September 30, 1998 and 1997 consist of the following:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Subordinated debentures bearing interest at 10%
per annum payable semiannually, due June 1,
1998, unsecured, repaid in 1998 $ -0- $ 72,400
Subordinated debentures bearing interest at 10%
per annum payable semiannually, due June 1,
2002, unsecured 218,100 218,100
Subordinated debenture bearing interest at 12%
per annum payable semiannually, due
December 1, 2001, unsecured 350,350 350,350
Note payable to bank in monthly installments of
$16,429 plus interest at the bank's base rate plus
1.5% (10.00% at September 30, 1997), due May 2000,
secured by accounts receivable, inventory,
equipment, and general intangibles of the Company
and was cross-collateralized (See Note 6).
Refinanced in 1998 -0- 509,284
Mortgage note payable to bank in monthly
installments of $6,667 plus interest at the bank's
prime rate (9.50% at September 30, 1997), due July
2001, secured by first mortgage on Berlin, New
Jersey property. Refinanced in 1998. -0- 306,667
Mortgage note payable to bank in monthly
installments of $1,667 plus interest at the bank's
prime rate (9.50% at September 30, 1997), due
August 2007, secured by second mortgage on Berlin,
New Jersey property. Refinanced in 1998. -0- 198,333
</TABLE>
13
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
Note 7 - Long-Term Debt (continued)
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note payable to bank in monthly installments of
$7,222 plus interest at the bank's base rate plus
1.0% (9.50% at September 30, 1998), with the final
payment of $700,556 due August 2005, secured by
first mortgage on Berlin, New Jersey property and
all accounts receivable, inventory, equipment, and
general intangibles of the Company 1,292,778 -0-
Note payable to bank in monthly installments of
$4,426 plus interest at the bank's base rate plus
1.5% (10.00% at September 30, 1997), due May 2000,
secured by accounts receivable, inventory,
equipment, and general intangibles of Hibshman
Corporation and cross-Collateralized by Dynasil
Corporation (See Note 6). Repaid in 1998. -0- 119,496
Installment notes payable in total monthly
Installments of $5,415 in 1998 and $1,215 in 1997,
including interest rates of 9.5% and 12%, due July
2001, secured by equipment. 158,701 43,051
---------- ----------
2,019,929 1,817,681
Less current portion (137,414) (432,773)
---------- ----------
$1,882,515 $1,384,908
========== ==========
</TABLE>
The aggregate maturities of long-term debt as of September 30, 1998 are as
follows:
September 30, 2000 $ 142,977
September 30, 2001 138,302
September 30, 2002 655,114
September 30, 2003 86,664
Thereafter 859,458
----------
$1,882,515
==========
14
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
Note 7 - Long-term Debt (continued)
Subordinated Debenture Extension Agreement
On November 15, 1996, the maturity date of one Debenture in the amount of
$350,350 was extended to December 1, 2001. In consideration for the extension,
the Debenture holder is being paid an additional 2% interest on the unpaid
principal balance until December 1, 2001. In addition, the Debenture holder was
issued warrants to purchase 20,000 shares of the Company's common stock at an
exercise price of $4.00 per share, exercisable through June 1, 2002. See Note 9.
On April 15, 1997 the maturity date of certain Debentures in the amount of
$218,100 were extended to June 1, 2002. In consideration for the extension, the
Debenture holders were issued warrants to purchase 6,700 shares of the Company's
common stock at an exercise price of $3.00 per share, exercisable through June
1, 2002. See Note 9.
Note 8 - Income Taxes
The Company's provision for income taxes (benefit) for the years ended
September 30, 1998 and 1997 are as follows:
1998 1997
-------- --------
Current
Federal $ 39,300 $ 22,700
State 14,200 7,400
-------- --------
53,500 30,100
Deferred
Federal (39,300) (22,700)
State (14,200) (7,400)
-------- --------
$ -0- $ -0-
======== ========
The reasons for the difference between total tax expense and the amount
computed by applying the statutory federal income tax rates to income before
provision for income taxes at September 30, 1998 and 1997 are as follows:
1998 1997
-------- --------
Taxes at statutory rates applied to
income before provision for income taxes $63,100 $ 36,700
Increase (reduction) in tax resulting from:
Accounts receivable -0- (5,800)
Depreciation (22,600) (21,900)
15
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
Note 8 - Income Taxes (continued)
1998 1997
-------- --------
Inventories 1,700 23,800
Vacation pay 1,000 (7,900)
State income taxes 10,300 5,200
Net operating loss carryforwards (53,500) (30,100)
-------- --------
$ -0- $ -0-
======== ========
Deferred income taxes (benefit) reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, and the tax
effects of net operating losses that are available to offset future taxable
income. Significant components of the Company's deferred tax assets
(liabilities) at September 30, 1998 and 1997 are as follows:
1998 1997
-------- ---------
Inventories $ 70,100 $ 67,600
Vacation pay 8,500 7,200
Accounts receivable 4,300 4,300
Depreciation (141,600) (108,700)
Net operating loss carryforwards 211,600 292,500
Less valuation allowance (152,900) (262,900)
--------- ---------
$ -0- $ -0-
========= =========
A valuation allowance has been provided for those deferred tax assets which
management believes it is more likely than not that the tax benefit will not be
realized. At September 30, 1998, the Company has approximately $589,000 of net
operating loss carryforwards to offset future taxable income for federal tax
purposes expiring in various years through 2009. In addition, the Companies have
approximately $391,000 of net operating loss carryforwards to offset certain
future states' taxable income, expiring in various years through 2001.
Note 9 - Stockholders' Equity
Common Stock
On October 16, 1996, the Board of Directors declared a two-for-one stock
split payable on November 1, 1996 to stockholders of record on October 1, 1996.
All share and per share data have been restated for all periods presented to
reflect the stock split.
16
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
Note 9 - Stockholders' Equity (continued)
Stock Option Plans
The Company has a Stock Incentive Plan which provides for, among other
incentives, granting to officers, directors, employees and consultants options
to purchase shares of the Company's common stock up to a total of 450,000
shares, restated to reflect the stock split. At September 30, 1998, 71,723
shares of common stock are available for future purchases under the plan.
Options are generally exercisable over a five year period and expire through
2002. During the years ended September 30, 1998 and 1997, 46,777 and 51,000
shares were granted with exercise prices ranging from $2.65 to $3.52 per share
and $3.00 to $4.00 per share, respectively. During the years ended September 30,
1998 and 1997, 116,000 shares and 3,000 shares were issued under the plan for
aggregate purchase prices of $117,552 and $9,000, respectively.
A summary of stock option activity for the years ended September 30, 1998
and 1997 is presented below:
Options outstanding at October 1, 1996 $ 105,000
2 for 1 stock split - October 1, 1996 105,000
Granted in 1997 51,000
Exercised in 1997 under consulting agreement at
$3.00 per share (3,000)
---------
Options outstanding at September 30, 1997 258,000
Granted in 1998 46,777
Exercised in 1998 at prices ranging from $1.00
to $3.52 (116,000)
---------
Options outstanding at September 30, 1998 $ 188,777
=========
Options exercisable at September 30, 1998 $ 188,777
=========
At September 30, 1998 and 1997, the Company had warrants outstanding to
purchase 20,000 shares and 6,450 shares of the Company's common stock at
exercise prices of $4.00 and $3.00 per share, exercisable through June 1, 2002.
17
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
Note 9 - Stockholders' Equity (continued)
During the year ended September 30, 1997, a warrant was exercised to
purchase 250 shares of the Company's common stock at $3.00 per share for a total
purchase price of $750.
Stock-Based Compensation Plans
The Company accounts for all plans under APB Opinion No. 25, under which no
compensation cost has been recognized since all options granted during 1998 and
1997 have been granted at the fair market value of the Company's common stock.
Had compensation cost for these plans been determined in accordance with SFAS
No. 123, the Company's net income and net income per common share would have
been reduced as follows:
1998 1997
-------- ---------
Net income from continuing operations $169,504 $ 442,474
Net loss from discontinued operations -0- (453,722)
-------- ---------
Net income (loss) $169,504 $ (11,248)
======== =========
Basic net income (loss) per common share:
From continuing operations $ .07 $ .19
From discontinued operations -0- (.20)
-------- ---------
Net income (loss) per common share $ .07 $ (.01)
======== =========
Under SFAS No. 123, the fair value of each option was estimated on the date
of grant using the Black Scholes option-pricing model. Based on the assumptions
presented below, the weighted average fair value of options granted was $1.31
and $1.71 per option in 1998 and 1997.
1998 1997
---- ----
Expected life of option in years 5.0 5.0
Risk-free interest rate 6.0% 6.5%
Expected volatility 87.5% 58.7%
Dividend yield 0.0% 0.0%
The effects of applying SFAS No. 123 for the purpose of providing pro forma
disclosures may not be indicative of the effects on reported net income and net
income per share for future years, as the pro forma disclosures include the
effects of only those awards granted after October 1, 1996.
18
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
Note 9 - Stockholders' Equity (continued)
Employee Stock Purchase Plan
The Company also has an Employee Stock Purchase Plan which permits
substantially all employees to purchase common stock. Under the plan, a total of
150,000 shares have been reserved for issuance. Employees have the opportunity
to acquire common stock at a purchase price of 65% of the fair market value of
the shares. During any twelve month period, employees may not purchase more than
the number of shares for which the total purchase price exceeds $5,000. During
the years ended September 30, 1998 and 1997, 6,936 and 1,251 shares of common
stock were issued under the plan for aggregate purchase prices of $11,694 and
$2,753, respectively.
Note 10 - Profit Sharing Plan
The Company has a 401K Plan for the benefit of its employees. The Company
did not make a contribution for the years ended September 30, 1998 and 1997.
Note 11 - Related Party Transactions
The Company paid consulting fees to other stockholders/directors in the
amount of $38,140 and $103,077 during the years ended September 30, 1998 and
1997.
Note 12 - Supplemental Disclosure of Cash Flow Information
1998 1997
--------- ----------
Cash paid during the year for:
Interest $ 199,024 $ 148,056
========= ==========
Noncash investing and financing activities:
Acquisition of property, plant and equipment $ 448,972 $1,361,684
Equipment transferred from discontinued
operations -0- (30,250)
Debt incurred (131,115) (-0-)
--------- ----------
Cash paid for property and equipment $ 317,857 $1,331,434
========= ==========
During the year ended September 30, 1998, the Company refinanced its debt
as follows:
Proceeds from long-term debt $ 1,900,000
Debt refinanced (1,614,284)
-----------
Cash proceeds from long-term debt $ 285,716
===========
19
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARY
FINANCIAL STATEMENTS
(CONSOLIDATED)
Unaudited
FOR THE QUARTER ENDED JUNE 30, 1999
<PAGE>
DYNASIL CORPORATION OF AMERICA AND SUBSIDIARY
FOR THE QUARTER ENDED JUNE 30, 1999
Page
----
Consolidated Financial Statements:
Balance Sheet 1
Statement of Operations 2
Statement of Cash Flows 3
Schedule of Cost of Sales 4
Schedule of Factory Overhead Expenses 5
Schedule of Selling & Administrative Expenses 6
Debt Schedule 7
Consolidated Balance Sheet 8
<PAGE>
Page 1
DYNASIL CORPORATION
CONSOLIDATED BALANCE SHEET
30-Jun-99
ASSETS
- ------------------------------------------------------------------------
Current Assets
Cash 48,491
Accounts Receivable 362,237
Note Receivable
Inventory 993,994
Prepaid & Other Current Assets 31,507
---------
Total Current Assets 1,436,229
Property, Plant & Equipment - Net 2,128,661
Other Assets 20,613
=========
TOTAL ASSETS 3,585,503
=========
LIABILITIES & STOCKHOLDERS EQUITY
- ------------------------------------------------------------------------
Current Liabilities
Accounts Payable 94,440
Bank line of Credit 10,000
Accrued Expenses 121,173
Current Portion - Long Term Debt 137,412
---------
Total Current Liabilities 363,025
Long Term Debt 1,775,256
---------
TOTAL LIABILITIES 2,138,281
Stockholders' Equity
Common Stock 1,491
Additional Paid in Capital 1,055,062
Retained Earnings 1,689,612
Current Income (Loss) (339,640)
---------
2,406,525
Less: 640,624 Shares in Treasury - at Cost (959,303)
---------
Total Stockholders' Equity 1,447,222
=========
TOTAL LIABILITIES & EQUITY 3,585,503
=========
<PAGE>
Dynasil Corporation PAGE 2
Consolidated Statement Of Operations
For the quarter ended
<TABLE>
<CAPTION>
Quarter Y-T-D
30-Jun-99 30-Jun-99
------------------------------------- -------------------------------------
Poss (Neg) Poss (Neg)
Actual Budget Variance Actual Budget Variance
------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sales 751,926 1,056,359 (304,433) 2,021,887 2,763,891 (742,004)
Cost of Sales 538,523 757,926 219,403 1,735,582 2,036,937 301,355
------- --------- ---------- --------- --------- ----------
Gross Profit 213,403 298,433 (85,030) 286,305 726,954 (440,649)
28.38% 28.25% 14.16% 26.30%
Selling & Administrative 158,383 171,977 13,594 479,216 514,225 35,009
------- --------- ---------- --------- --------- ----------
Income (Loss) from Operations 55,020 126,456 (71,436) (192,911) 212,729 (405,640)
Other Income (Expense)
Interest Expense (48,917) (49,005) 88 (146,729) (153,910) 7,181
Other Income (Expense)
------- --------- ---------- --------- --------- ----------
Income (Loss) before Income Taxes 6,103 77,451 (71,348) (339,640) 58,819 (398,459)
Provision (Benefit) for Income Tax
------- --------- ---------- --------- --------- ----------
Net Income (Loss) 6,103 77,451 (71,348) (339,640) 58,819 (398,459)
======= ========= ========== ========= ========= ==========
Earnings per share 0.00 0.03 (0.03) (0.15) 0.03 (0.18)
Bookings 514,144 1,600,000 (1,085,856) 1,296,445 3,375,000 (2,078,555)
</TABLE>
<PAGE>
Dynasil Corporation PAGE 3
Consolidated Statement of Cash Flows
For the quarter ended
Quarter Y-T-D
30-Jun-99 30-Jun-99
--------- ---------
Cash flows from operating activities:
Net Income 6,103 (339,640)
Adjustments to reconcile net income (loss) to net cash
Depreciation 89,220 267,660
Amortization Expense 852 2,556
Allowance for doubtful accounts
(increase) Decrease in:
Receivables (72,584) (17,061)
Inventories 85,607 284,340
Prepaid expenses and other current assets 5,193 10,653
Other assets 2,778
Increase (Decrease) in:
Accounts payable (12,324) (132,120)
Accrued expenses 1,858 (942)
------- --------
Net cash provided by (used in) operating activities 103,925 78,224
------- --------
Cash flows from investing activities:
Acquisition of PP&E (7,645) (5,333)
------- --------
Net cash provided by (used in) investing activities (7,645) (5,333)
------- --------
Cash flows from financing activities:
Proceeds (payments) - shareholders 20,475 26,881
Proceeds (payments) - Bank Line of credit (65,000) 10,000
Proceeds (Payments) - long term debt (34,408) (107,261)
------- --------
Net cash provided by (used in) financing activities (78,933) (70,380)
------- --------
Net increase (Decrease) in cash 17,347 2,511
Cash - beginning of period 31,144 45,980
------- --------
Cash - end of period 48,491 48,491
======= ========
<PAGE>
Dynasil Corporation PAGE 4
Schedule of Cost of Sales
For the quarter ended
<TABLE>
<CAPTION>
Quarter Y-T-D
30-Jun-99 30-Jun-99
------------------------------------------ ------------------------------------------
Poss (Neg) Poss (Neg)
Actual Budget Variance Actual Budget Variance
--------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Beginning Inventory 1,079,601 1,287,000 207,399 1,278,334 1,287,000 8,666
Material 83,679 150,000 66,321 247,146 405,000 157,854
Labor 101,113 133,434 32,321 324,336 387,966 63,630
Factory Overhead (Page 7) 268,124 387,492 119,368 879,760 1,156,971 277,211
--------- --------- ------- --------- --------- -------
Total available for sale 1,532,517 1,957,926 425,409 2,729,576 3,236,937 507,361
Less: Ending inventory 993,994 1,200,000 206,006 993,994 1,200,000 206,006
--------- --------- ------- --------- --------- -------
Total Cost of Sales 538,523 757,926 219,403 1,735,582 2,036,937 301,355
========= ========= ======= ========= ========= =======
</TABLE>
<PAGE>
Dynasil Corporation PAGE 5
Schedule of Factory Overhead
For the quarter Ended
<TABLE>
<CAPTION>
Quarter Y-T-D
30-Jun-99 30-Jun-99
---------------------------------- -----------------------------------
Poss (Neg) Poss (Neg)
Actual Budget Variance Actual Budget Variance
------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Supervisors Salaries 14,110 16,549 2,439 47,312 51,396 4,084
Indirect Labor 7,031 13,520 6,489 26,327 39,187 12,860
Vacation/Holiday Pay 19,500 21,000 1,500 58,500 63,000 4,500
Payroll taxes - Factory 14,176 22,141 7,965 46,032 62,150 16,118
Medical Insurance - Factory 17,300 22,911 5,611 65,900 70,125 4,225
Key Life Insurance Expense 338 1,352 1,014 1,014 4,056 3,042
Factory Supplies - Manufacturing 21,790 33,000 11,210 61,491 96,000 34,509
Factory Supplies - Processing 10,729 15,900 5,171 35,517 47,700 12,183
Factory Supplies - Other 6,954 9,000 2,046 30,106 27,000 (3,106)
Factory Supplies - R&D 2,064 (2,064) 3,808 (3,808)
Repairs & Maintenance - Manufact. 9,126 9,000 (126) 22,698 27,000 4,302
Repairs & Maintenance - Proces. 2,586 6,000 3,414 8,876 18,000 9,124
Repairs & Maintenance - Other 7,837 15,000 7,163 31,402 45,000 13,598
Equipment Rental 555 600 45 1,562 1,800 238
Waste Management 16,426 33,000 16,574 50,685 99,000 48,315
Utilities 25,820 48,000 22,180 97,211 144,000 46,789
Depreciation Expense - Building 4,275 4,500 225 12,825 13,500 675
Depreciation Expense - Building Imp 49,500 48,000 (1,500) 148,500 144,000 (4,500)
Depreciation Expense - Equipment 33,000 33,000 99,000 99,000
Real Estate Taxes 3,900 3,900 11,700 11,700
General Insurance 6,934 11,019 4,085 27,334 33,057 5,723
Freight Out 7,811 11,100 3,289 25,348 33,300 7,952
Miscellaneous Expenses (13,638) 9,000 22,638 (33,388) 27,000 60,388
------- ------- ------- ------- --------- -------
268,124 387,492 119,368 879,760 1,156,971 277,211
======= ======= ======= ======= ========= =======
</TABLE>
<PAGE>
Dynasil Corporation PAGE 6
Schedule of Selling & Administrative Expenses
For the quarter ended
<TABLE>
<CAPTION>
Quarter Y-T-D
30-Jun-99 30-Jun-99
------------------------------------------ ------------------------------------------
Poss (Neg) Poss (Neg)
Actual Budget Variance Actual Budget Variance
------- ------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Administrative Salaries 50,907 55,299 4,392 160,298 164,074 3,776
Sales Salaries 46,368 30,287 (16,081) 124,243 85,847 (38,396)
Payroll Taxes - S&A 8,190 6,556 (1,634) 22,398 17,329 (5,069)
Medical Insurance - S&A 3,900 3,609 (291) 11,700 11,897 197
Key man life insurance 2,100 (2,100) 6,437 (6,437)
Travel 5,514 9,000 3,486 11,956 27,000 15,044
Meals & Entertainment 901 1,350 449 4,111 4,050 (61)
Auto Expense 330 330 341 990 649
Office Expense 5,283 6,000 717 25,734 18,000 (7,734)
Telephone 4,423 4,500 77 9,662 13,500 3,838
General Insurance 7,350 7,596 246 22,050 22,788 738
Computer Expense 1,200 1,200 1,747 3,600 1,853
Depreciation Expense 2,445 2,100 (345) 7,335 6,300 (1,035)
Consultant Expense 11,250 11,250 1,604 33,750 32,146
Legal and Audit Expense 7,800 7,800 23,838 23,400 (438)
Sales Commissions - Reps 7,500 7,500 6,126 22,500 16,374
Sales Expense 2,605 5,000 2,395 2,620 15,000 12,380
Investor Relations Expense 545 900 355 6,264 9,100 2,836
Contributions 300 300 299 900 601
Amortization Expense 852 900 48 2,556 2,700 144
Miscellaneous Expense 4,400 6,000 1,600 13,497 18,000 4,503
Advertising 4,800 4,500 (300) 14,400 13,500 (900)
------- ------- ------- ------- ------- -------
158,383 171,977 13,594 479,216 514,225 35,009
======= ======= ======= ======= ======= =======
</TABLE>
<PAGE>
Dynasil Corporation PAGE 7
Debt Schedule
30-Jun-99
<TABLE>
<CAPTION>
Current
Type of Debt Lender Term/Payoff Rate Balance Portion Long term
- ------------ ------ ----------- ---- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Mortgage Payable Premier Bank 7 years
(15 amortization)
- 8/05 Bank Base - 9.5% 1,227,778 86,664 1,141,114
Capitalized Lease CIT Group 5 years - 7/01 26,024 10,480 15,544
Capitalized Lease Specialized Grinding Systems 3 Years - 8/01 90,416 40,268 50,148
Subordinated Debentures Various individuals Due 6/02 218,100 @ 10% 568,450 568,450
Due 12/01 350,350 @ 12%
---------------------------------
Total Current and Long term debt 1,912,668 137,412 1,775,256
=================================
---------------------------------
Bank Line of Credit Premier Bank Demand Bank Base - 9.5% 10,000 10,000
=================================
</TABLE>
<PAGE>
Dynasil Corporation of America and Subsidiaries PAGE 8
Consolidating Balance Sheet
June 30, 1999
<TABLE>
<CAPTION>
Dynasil Dynasll Hibshman
Corporation International Corporation Eliminations Consolidated
----------- ------------- ----------- ------------ ------------
ASSETS
<S> <C> <C> <C> <C> <C>
Current assets
Cash and cash equivalents ................... 48,491 48,491
Accounts Receivable, net .................... 362,237 362,237
Note Receivable
Intercompany receivable ..................... 152,544 (152,544)
Inventories ................................. 993,994 993,994
Prepaid expenses and other current assets ... 31,507 31,507
--------- -------- -------- -------- ---------
Total current assets ..................... 1,588,773 (152,544) 1,436,229
Property, Plant and Equipment, net ............. 2,128,661 2,128,661
Investment in Subsidiaries ..................... 840,173 (840,173)
Other Assets ................................... 20,613 20,613
--------- -------- -------- -------- ---------
Total Assets ............................. 4,578,220 (992,717) 3,585,503
========= ======== ======== ======== =========
LIABILITIES
Current Liabilities
Note payable to bank ........................ 10,000 10,000
Current portion of long term debt ........... 137,412 137,412
Accounts payable ............................ 94,440 94,440
Intercompany payable ........................ 152,544 (152,544)
Accrued expenses ............................ 121,173 121,173
--------- -------- -------- -------- ---------
Total current liabilities ................ 363,025 152,544 (152,544) 363,025
Long-term Debt, net ............................ 1,775,256 1,775,256
Stockholders' Equity
Common Stock ................................ 1,491 100 437,500 (437,600) 1,491
Additional paid in capital .................. 1,055,062 517,117 (517,117) 1,055,062
Retained earnings ........................... 2,342,689 (152,644) (954,617) 114,544 1,349,972
--------- -------- -------- -------- ---------
3,399,242 (152,544) (840,173) 2,406,525
Less treasury stock at cost ................. (959,303) (959,303)
--------- -------- -------- -------- ---------
Total Stockholders' Equity ............... 2,439,939 (152,544) (840,173) 1,447,222
========= ======== ======== ======== =========
Total Liabilities and Stockholders' Equity 4,578,220 (992,717) 3,585,503
========= ======== ======== ======== =========
</TABLE>
<PAGE>
DYNASIL CORPORATION OF AMERICA
FINANCIAL STATEMENTS
(Unaudited)
FOR THE QUARTER ENDED JUNE 30, 1999
<PAGE>
DYNASIL CORPORATION OF AMERICA
FOR THE QUARTER ENDED JUNE 30, 1999
(Unaudited)
PAGE
----
Financial Statements:
Balance Sheet 1
Statement of Operations 2
Statement of Cash Flows 3
Notes to Financial Statements 4
<PAGE>
Dynasil Corporation of America PAGE 1
Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
June 30 June 30
1999 1998
--------- ---------
ASSETS
<S> <C> <C>
Current Assets
Cash 48,491 35,542
Accounts Receivable 362,237 497,501
Inventory 993,994 1,224,549
Other Current Assets 31,507 81,607
Net Current Assets - Discontinued Operation 5,214
--------- ---------
Total Current Assets 1,436,229 1,844,413
Property, Plant & Equipment - Net 2,128,661 2,322,172
Other Assets 20,613 33,732
--------- ---------
TOTAL ASSETS 3,585,503 4,200,317
========= =========
LIABILITIES & STOCKHOLDERS EQUITY
Current Liabilities
Note payable to bank 10,000 350,000
Current Portion - Long Term Debt 137,412 257,628
Accounts Payable 94,440 394,591
Accrued Expenses 121,173 137,467
Total Current Liabilities 363,025 1,139,686
--------- ---------
Long Term Debt 1,775,256 1,296,923
Stockholders' Equity
Common Stock, 25,000,000 shares authorized
shares outstanding 2,341,760 and 2,256,190 1,491 1,448
Additional Paid in Capital 1,055,062 1,051,594
Retained Earnings 1,349,972 1,669,969
--------- ---------
2,406,525 2,723,011
Less: 640,624 Shares in Treasury - at Cost (959,303) (959,303)
--------- ---------
Total Stockholders' Equity 1,447,222 1,763,708
--------- ---------
TOTAL LIABILITIES & EQUITY 3,585,503 4,200,317
========= =========
</TABLE>
<PAGE>
Dynasil Corporation of America PAGE 2
Statement Of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30 June 30
1999 1998 1999 1998
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Sales 751,926 1,006,457 2,021,887 3,242,457
Cost of Sales 538,523 707,573 1,735,582 2,152,336
--------- --------- --------- ----------
Gross Profit 213,403 298,884 286,305 1,090,121
28.38% 29.70% 14.16% 33.62%
Selling & Administrative 158,383 202,147 479,216 646,956
--------- --------- --------- ----------
Income (Loss) from Operations 55,020 96,737 (192,911) 443,165
Other Income (Expense)
Interest Expense (48,917) (49,504) (146,729) (142,783)
Other Income (Expense) 8,000 8,000
--------- --------- --------- ----------
Income (Loss) before Income Taxes 6,103 55,233 (339,640) 308,382
Provision (Benefit) for Income Tax
--------- --------- --------- ----------
Net Income (Loss) 6,103 55,233 (339,640) 308,382
========= ========= ========= ==========
Earnings per share:
Basic $ - $ 0.02 $ (0.15) $ 0.13
Diluted $ - $ 0.02 $ (0.15) $ 0.13
Weighted average shares outstanding 2,330,500 2,338,777 2,317,677 2,310,239
Bookings 514,144 493,094 1,296,445 2,979,060
</TABLE>
<PAGE>
Dynasil Corporation of America PAGE 3
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Quarter Y-T-D
30-Jun-99 30-Jun-99
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net Income 6,103 (339,640)
Adjustments to reconcile net income (loss) to net cash
Depreciation 89,220 267,660
Amortization Expense 852 2,556
Allowance for doubtful accounts
(increase) Decrease in:
Receivables (72,584) (17,061)
Inventories 85,607 284,340
Prepaid expenses and other current assets 5,193 10,653
Other assets 2,778
Increase (Decrease) in:
Accounts payable (12,324) (132,120)
Accrued expenses 1,858 (942)
------- --------
Net cash provided by (used in) operating activities 103,925 78,224
------- --------
Cash flows from investing activities:
Acquisition of PP&E (7,645) (5,333)
------- --------
Net cash provided by (used in) investing activities (7,645) (5,333)
------- --------
Cash flows from financing activities:
Proceeds (payments) - shareholders 20,475 26,881
Proceeds (payments) - Bank Line of credit (65,000) 10,000
Proceeds (Payments) - long term debt (34,408) (107,261)
------- --------
Net cash provided by (used in) financing activities (78,933) (70,380)
------- --------
Net increase (Decrease) in cash 17,347 2,511
Cash - beginning of period 31,144 45,980
------- --------
Cash - end of period 48,491 48,491
======= ========
</TABLE>
<PAGE>
Dynasil Corporation of America PAGE 4
Notes to Financial Statements
(Unaudited)
Basis of Presentation
In the opinion of management, the accompanying balance sheets and related
interim statements of income and cash flows include all adjustments (consisting
only of normal recurring items) necessary for their fair presentation in
conformity with generally accepted accounting principles. Preparing financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues, and expenses. Examples
include provisions for returns and bad debts and the length of product life
cycles and building lives. Actual results may differ from these estimates.
Interim results are not necessarily indicative of results for a full year. The
information included in these financial statements should be read in conjunction
with Management's Discussion and Analysis.
Inventories
Inventories consist of the following:
6/30/99 6/30/98
------- ---------
Raw Materials 14,253 32,605
Work-in-Process 849,704 1,035,831
Finished Goods 130,037 156,113
------- ---------
993,994 1,224,549
======= =========
Earnings Per Share
Earnings per share is computed on the basis of the weighted average number of
common shares outstanding plus the effect of outstanding stock options, using
the treasury stock method.
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
Exhibit No. Description of Document
- ----------- -----------------------
3.01 Restated Certificate of Incorporation of Registrant filed
April 1, 1969
3.02 Certificate of Amendment to the Certificate of Incorporation
of Registrant filed March 18, 1988
3.03 Certificate of Amendment to the Certificate of Incorporation
of Registrant filed April 7, 1989
3.04 Certificate of Amendment to the Certificate of Incorporation
of Registrant filed June 12, 1996
3.05 By-laws of Registrant
4.01 Form of Debenture
4.02 Subordinated Debenture Extension Agreement
4.03 Debenture Extension Warrant
10.01 Loan Agreement and associated documents dated July 10, 1998
with Premier Bank, for a $300,000 line of credit
10.02 Loan Agreement and associated documents dated July 10, 1998
with Premier Bank, for a $1,300,000 line of credit
10.03 1996 Stock Incentive Plan
10.04 1999 Stock Incentive Plan
10.05 Employee Stock Purchase Plan
21.01 List of Subsidiaries of Registrant
23.01 Consent of Haefele Flanagan & Co., P.C., Certified Public
Accountants
27.01 Financial Data Schedule
24
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
DYNASIL CORPORATION OF AMERICA
----------------------------------------
By: Charles J. Searock, Jr., President
Date: September 29, 1999
EXHIBIT 3.01
RESTATED CERTIFICATE OF INCORPORATION OF REGISTRANT
FILED APRIL 1, 1969
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
DYNASIL CORPORATION OF AMERICA
To: The Secretary of State
State of New Jersey
Pursuant to the provisions of Section 14A:9-5(3) through 14A:9-5(5),
Corporations, General, of the New Jersey Statutes, the undersigned corporation
desiring to amend and restate its Certificate of Incorporation hereby certifies
that:
(a) The name of the Corporation is DYNASIL CORPORATION OF AMERICA.
(b) The date this Restated Certificate was adopted by the Shareholders of
the Corporation was March 29, 1969.
(c) The number of shares outstanding at the time of the action of the
Shareholders was 81,889 shares of Common Stock, par value $5.00 per share, and
the number of Common Shares entitled to vote thereon was 81,889.
(d) In action taken by the Shareholders, the number of shares of Common
Stock voted in favor of the Restated Certificate of Incorporation was 63,857,
and the number of shares voted against the Restated Certificate of Incorporation
was 494.
(e) The Restated Certificate, including amendments, adopted by the
Shareholders, set forth in full, follows:
RESOLVED, That the Certificate of Incorporation of this Corporation,
as heretofore amended, be further amended as set forth below, and that
the Certificate of Incorporation shall, as amended, be restated as follows,
and henceforth the Certificate of Incorporation shall not include any prior
documents:
<PAGE>
[RESTATED CERTIFICATE OF INCORPORATION]
1. The name of the Corporation is DYNASIL CORPORATION OF AMERICA.
2. The purposes for which the Corporation is organized are to engage in any
and all activities within the purposes for which corporations may be
organized under the New Jersey Business Corporation Act.
3. The aggregate number of shares which the Corporation shall be authorized to
issue is One Million Five Hundred Thousand (1,500,000) shares of Common
Stock, par value Ten Cents ($.10) per share.
4. The registered office of the Corporation is Dynasil Corporation of America,
Cooper Road and Taunton Avenue, West Berlin Township, Camden County, New
Jersey, and the registered agent of the Corporation is Martin Saepoff.
5. The Board of Directors at the effective date of this Restated Certificate
of Incorporation consists of seven (7) 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:
Dr. Harold Berlin 352 S. 27th Street
Camden, New Jersey
Jack J. Dannenberg 1705 E. Willow Grove Ave.
Philadelphia, Pa.
George D. Keller 406 Rex Avenue
Philadelphia, Pa.
Raymond R. Leibovitz 326 E. Girard Avenue
Philadelphia, Pa.
Kurt H. Osberg 1421 W. Bristol Road
Hartsville, Pa.
George K. Porter, Jr. 12 Grisson Place
Maple Glen, Pa.
Martin Saepoff 31 Wagon Lane
Cherry Hill, New Jersey
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.
<PAGE>
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.
[END OF RESTATED CERTIFICATE OF INCORPORATION]
(f) Upon the effective date of the filing of the Restated Certificate of
Incorporation, certificates representing outstanding shares of Common Stock of
$5.00 par value will not have to be surrendered to the Company but will
represent the same number of shares of Common Stock of the par value of $.10 per
share. Each Shareholder of record at the close of business on the effective date
of the Restated Certificate will be mailed an additional certificate or
certificates representing in the aggregate nine shares of Common Stock of the
par value of $.10 per share for each share of Common Stock of the par value of
$5.00 per share held by him of record at the close of business on such effective
date.
(g) Upon the effective date of the filing of the Restated Certificate of
Incorporation, the aggregate par value of the Corporation's Common Stock will be
reduced in the following amount: $327,556. The manner in which the reduction
shall be effected shall be to transfer the amount of reduction to an appropriate
capital surplus account. The aggregate par value of the Corporation's Common
Stock after giving effect to the reduction is $81,889.
<PAGE>
IN TESTIMONY WHEREOF, the applicant has caused this Restated Certificate of
Incorporation to be signed by its President or Vice President and its Corporate
Seal, duly attested by its Assistant Secretary or Treasurer, to be hereunto
affixed this 29th day of March, 1969.
DYNASIL CORPORATION OF AMERICA
By
----------------------------------
(Corporate Seal) Attest
-----------------------------
FILED AND RECORDED
APRIL 1, 1969
[SIG ILLEGIBLE]
-------------------------
SECRETARY OF STATE
EXHIBIT 3.02
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION OF REGISTRANT
FILED MARCH 18, 1988
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION OF
DYNASIL CORPORATION OF AMERICA
------------------------------
(For Use by Domestic Corporations Only)
To: The Secretary of State
State of New Jersey "FEDERAL EMPLOYER IDENTIFICATION NO."
Pursuant to the provisions of Section 14A:9-2(4) and Section
14A:9-4(3), Corporations, General, of the New Jersey Statutes, the undersigned
corporation executes the following Certificate of Amendment to its Certificate
of Incorporation:
1. The name of the corporation is Dynasil Corporation of America.
2. The following amendment to the Certificate of Incorporation was
approved by the directors and thereafter duly adopted by the shareholders of the
corporation on the 27th day of February, 1988:
Resolved, that subject to the approval by the Shareholders of this
Corporation, a new Article 12 of the Certificate of Incorporation shall
be added stating in its entirety as follows:
(See Exhibit "A" attached hereto and made a part hereof)
3. The number of shares outstanding at the time of the adoption of the
amendment was 648,951. The total number of shares entitled to vote thereon was
648,951.
If the shares of any class or series are entitled to vote thereon as a class,
set forth below the designation and number of outstanding shares entitled to
vote thereon of each such class or series. (Omit if not applicable.)
4. The number of shares voting for and against such amendment is as
follows:
(If the shares of any class or series are entitled to vote as a class,
set forth the number of shares of each such class and series voting for
and against the amendment, respectively.)
<TABLE>
<CAPTION>
Number of Shares Voting For Amendment Number of Shares Voting Against Amendment
- ------------------------------------- -----------------------------------------
<S> <C>
573,225 700
</TABLE>
(If the amendment is accompanied by a reduction of stated capital, the
following clause may be inserted in the Certificate of Amendment, in lieu of
filing a Certificate of Reduction under Section 14A:7-19, Corporations, General,
of the New Jersey Statutes. Omit this clause if not applicable.)
5. The stated capital of the corporation is reduced in the following
amount: ________________. The manner in which the reduction is effected is as
follows:
The amount of stated capital of the corporation after giving effect to
the reduction is $______________. (Must be set forth in dollars.)
6. If the amendment provides for an exchange, reclassification or
cancellation of issued shares, set forth a statement of the manner in which the
same shall be effected. (Omit if not applicable.)
(Use the following only if an effective date, not later than 30 days
subsequent to the date of filing is desired.)
7. The effective date of this Amendment to the Certificate of
Incorporation shall be ________________.
Dated this 11th day of March, 1988.
DYNASIL CORPORATION OF AMERICA
------------------------------
(Corporate Name)
By /s/ Martin Saepoff*
-------------------------------
(Signature)
Martin Saepoff, President
-------------------------------
(Type or Print Name and Title)
(*May be executed by the chairman of the board, or the president, or a
vice-president of the corporation.)
Return to Secretary of State, CN 300, Trenton, N.J. 08625. Attn:
Corporation Filing.
Filing Fee $50.00
NOTE: No recording fees will be assessed.
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF INCORPORATION OF RECORDED AND FILED:
DYNASIL CORPORATION OF AMERICA
------------------------------
(Domestic Corporations Only)
FILED BY:
Alan Singer, Esquire
Wolf, Block, Schorr and Solis-Cohen
Twelfth Floor Packard Building
Philadelphia, PA 19102 ____________________
Recorder's Initials
TRANSACTION NO.:____________________
<PAGE>
EXHIBIT A
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.
EXHIBIT 3.03
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION OF REGISTRANT
FILED APRIL 7, 1989
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION OF
DYNASIL CORPORATION OF AMERICA
------------------------------
(For Use by Domestic Corporations Only)
To: The Secretary of State
State of New Jersey "FEDERAL EMPLOYER IDENTIFICATION NO." 22-1734088
Pursuant to the provisions of Section 14A:9-2(4) and Section
14A:9-4(3), Corporations, General, of the New Jersey Statutes, the undersigned
corporation executes the following Certificate of Amendment to its Certificate
of Incorporation:
1. The name of the corporation is Dynasil Corporation of America.
2. The following amendment to the Certificate of Incorporation was
approved by the directors and thereafter duly adopted by the shareholders of the
corporation on the 18th day of February, 1989:
Resolved, that ...a new Article 13 of the Certificate of Incorporation
shall be added, stating in its entirety as follows:
13. A director of the Corporation may not be removed without cause.
3. The number of shares outstanding at the time of the adoption of the
amendment was 520,781. The total number of shares entitled to vote thereon was
520,781.
If the shares of any class or series are entitled to vote thereon as a class,
set forth below the designation and number of outstanding shares entitled to
vote thereon of each such class or series. (Omit if not applicable.)
4. The number of shares voting for and against such amendment is as
follows:
(If the shares of any class or series are entitled to vote as a
class, set forth the number of shares of each such class and series
voting for and against the amendment, respectively.)
<TABLE>
<CAPTION>
Number of Shares Voting For Amendment Number of Shares Voting Against Amendment
- ------------------------------------- -----------------------------------------
<S> <C>
404,512 960
</TABLE>
(If the amendment is accompanied by a reduction of stated capital, the
following clause may be inserted in the Certificate of Amendment, in lieu of
filing a Certificate of Reduction under Section 14A:7-19, Corporations, General,
of the New Jersey Statutes. Omit this clause if not applicable.)
5. The stated capital of the corporation is reduced in the following
amount: ________________. The manner in which the reduction is effected is as
follows:
The amount of stated capital of the corporation after giving effect to
the reduction is $______________. (Must be set forth in dollars.)
6. If the amendment provides an exchange, reclassification or
cancellation of issued shares, set forth a statement of the manner in which the
same shall be effected. (Omit if not applicable.)
(Use the following only if an effective date, not later than 30 days
subsequent to the date of filing is desired.)
7. The effective date of this Amendment to the Certificate of
Incorporation shall be ________________.
Dated this Third day of April, 1989.
DYNASIL CORPORATION OF AMERICA
------------------------------
(Corporate Name)
By /s/ Martin Saepoff*
-------------------------------
(Signature)
Martin Saepoff, President
-------------------------------
(Type or Print Name and Title)
(*May be executed by the chairman of the board, or the president, or a
vice-president of the corporation.)
Return to Secretary of State, CN 300, Trenton, N.J. 08625. Attn:
Corporation Filing.
Filing Fee $50.00
NOTE: No recording fees will be assessed.
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF INCORPORATION OF RECORDED AND FILED:
DYNASIL CORPORATION OF AMERICA
------------------------------
(Domestic Corporations Only)
FILED BY:
Alan Singer, Esquire
Wolf, Block, Schorr and Solis-Cohen
Twelfth Floor Packard Building ____________________
15th & Chestnut Sts. Recorder's Initials
Philadelphia, PA 19102-2678
(215) 977-2224
TRANSACTION NO.:____________________
EXHIBIT 3.04
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION OR REGISTRANT
FILED JUNE 12, 1996
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF LONNA R. HOOKS
DYNASIL CORPORATION OF AMERICA Secretary of State
The undersigned corporation, organized under the laws of the State of New
Jersey, certifies the following to amend its Restated Certificate of
Incorporation, filed April 1, 1969, in accordance with Sections 14A:9-2(4) and
14A:9-4(3) of the New Jersey Statutes Annotated:
FIRST: The name of the Corporation is DYNASIL CORPORATION OF AMERICA.
SECOND: Paragraph 3 of the Restated Certificate of Incorporation is amended
in its entirety as follows:
3. The aggregate number of shares which the Corporation shall be
authorized to issue is Twenty Five Million (25,000,000) shares of Common
Stock, par value $.001 per share.
THIRD: The amendment to the Certificate of Incorporation was adopted by the
shareholders on April 22, 1996.
FOURTH: The number of shares entitled to vote on the amendment was 691,413.
FIFTH: The number of shares that voted for such Amendment was 456,716, and
the number of shares that voted against the Amendment was zero.
IN WITNESS WHEREOF, DYNASIL CORPORATION OF AMERICA has caused its duly
authorized officer to execute this certificate on May 8, 1996.
DYNASIL CORPORATION OF AMERICA
/s/ Robert E. Hibshman, Jr,
---------------------------------
By: Robert E. Hibshman, Jr, President
EXHIBIT 3.05
DYNASIL CORPORATION OF AMERICA
BY-LAWS
<PAGE>
DYNASIL CORPORATION OF AMERICA
BY-LAWS
(As Amended Through July 23, 1996)
ARTICLE I - OFFICES
Section 1. The registered office of the corporation shall be at 385 Cooper
Road, West Berlin, Camden County, New Jersey.
Section 2. The corporation may have such other offices either within or
without the state as the Board of Directors may designate or as the business of
the corporation may require from time to time.
ARTICLE II - SEAL
Section 1. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its creation and the words "Corporate Seal, New
Jersey".
ARTICLE III - SHAREHOLDERS' MEETINGS
Section 1. All meetings of the shareholders shall be held at the
corporation's registered office, or at such other place or places, either
within or without the State of New Jersey, as may from time to time be selected
by the Board of Directors.
<PAGE>
Section 2. Annual Meeting: The annual meeting of shareholders shall be held
on the second Saturday of February in each year if not a legal holiday, and if a
legal holiday, then on the next full business day following at 11:00 o'clock
A.M. when they shall elect, by a plurality vote, a Board of Directors, and
transact such other business as may properly be brought before the meeting.
If the annual meeting for election of directors is not held on the day
designated therefor, the directors shall cause the meeting to be held as soon
thereafter as convenient.
Section 3. Special Meetings: special meetings of the shareholders may be
called by the President or the Board of Directors, and shall be called at the
request in writing to the President by the holder or holders of not less than
ten percent of all the shares entitled to vote at a meeting.
Section 4. Notice of Shareholders' Meetings: written notice of the time,
place and purpose or purposes of every meeting of shareholders shall be given
not less than ten nor more than sixty days before the date of the meeting,
either personally or by mail, to each shareholder of record entitled to vote at
the meeting, unless a greater period of notice is required by statute in a
particular case.
When a meeting is adjourned to another time or place, it shall not be
necessary to give notice of the adjourned meeting if the time and place to which
the meeting is adjourned are announced at the meeting at which the adjournment
is taken
-2-
<PAGE>
and at the adjourned meeting only such business is transacted as might have been
transacted at the original meeting. However, if after adjournment the Board
fixes a new record date for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record on the new record date
entitled to notice.
Section 5. Waiver of Notice: Notice of a meeting need not be given to any
shareholder who signs a waiver of such notice, in person or by proxy, whether
before or after the meeting. The attendance of any shareholder at a meeting, in
person or by proxy, without protesting prior to the conclusion of the meeting
the lack of notice of such meeting, shall constitute a waiver of notice by him.
Whenever shareholders are authorized to take any action after the lapse of
a prescribed period of time, the action may be taken without such lapse if such
requirement is waived in writing, in person or by proxy, before or after the
taking of such action, by every shareholder entitled to vote thereon as at the
date of the taking of such action.
Section 6. Action by Shareholders Without Meeting: Any action required or
permitted to be taken at a meeting of shareholders may be taken without a
meeting if all the shareholders entitled to vote thereon consent thereto in
writing. The written consents of the shareholders shall be filed with the
minutes of proceedings of shareholders.
-3-
<PAGE>
Section 7. Fixing Record Date: For the purposes of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or allotment of any right, or for the purpose of
any other action, the Board may fix, in advance, a date as the record date for
any such determination of shareholders. Such date shall not be more than sixty
nor less than ten days before the date of such meeting, nor more than sixty days
prior to any other action.
If no record date is fixed, the record date for the determination of
shareholders entitled to notice of or to vote at any meeting of shareholders
shall be the close of business an the day next preceding the day on which notice
is given, or, if no notice is given, the day next preceding the day on which the
meeting is held; and the record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the resolution of
the Board relating thereto is adopted.
When a determination of shareholders of record entitled to notice of or to
vote at any meeting of shareholders, has been made as provided in this section,
such determination shall apply to any adjournment thereof, unless the Board
fixes a new record date under this section for the adjourned meeting,
-4-
<PAGE>
Section S. Voting List: The officer or agent having charge of the stock
transfer books for shares of the corporation shall make and certify a complete
list of shareholders entitled to vote at a shareholders' meeting or any
adjournment thereof. Such list shall be arranged alphabetically within each
class and series, with the address of, and the number of shares held by, each
shareholder; be produced at the time and place of the meeting; be subject to the
inspection of any shareholder during the whole time of the meeting; and be prima
facie evidence as to who are the shareholders entitled to examine such list or
vote at any meeting.
If the requirements of this section have not been complied with, the
meeting shall, on the demand of any shareholder in person or by proxy, be
adjourned until the requirements are complied with. Failure to comply with the
requirements of this section shall not affect the validity of any action taken
at such meeting prior to the making of any such demand.
Section 9. Quorum: Unless otherwise provided in the Certificate of
Incorporation or by statute, the holders of shares entitled to cast a majority
of the votes at a meeting shall constitute a quorum at such meeting. The
shareholders present in person or by proxy at a duly organized meeting may
continue to do business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum. Less than a quorum may adjourn.
-5-
<PAGE>
Whenever the holders of any class or series of shares are entitled to vote
separately on a specified item of business, the provisions of this section shall
apply in determining the presence of a quorum of such class or series for the
transaction of such specified item of business.
Section 10. Voting: Each holder of shares with voting rights shall be
entitled to one vote for each such share registered in his name, except as
otherwise provided in the Certificate of Incorporation. Whenever any action,
other than the election of directors, is to be taken by vote of the
shareholders, it shall be authorized by a majority of the votes cast at a
meeting of shareholders by the holders of shares entitled to vote thereon,
unless a greater plurality is required by statute or by the Certificate of
Incorporation.
Every shareholder entitled to vote at a meeting of shareholders or to
express consent or dissent without a meeting may authorize another person or
persons to act for him by proxy. Every proxy shall be executed in writing by the
shareholder or his agent. No proxy shall be valid after eleven months from the
date of its execution, unless a longer time is expressly provided therein, but
in no event shall a proxy be valid after three years from the date of execution.
Unless it is coupled with an interest, a proxy shall be revocable at will. A
proxy shall not be revoked by the death or incapacity of the shareholder but
such proxy shall continue in force until
-6-
<PAGE>
revoked by the personal representative or guardian of the shareholder. The
presence at any meeting of any shareholder who has given a proxy shall not
revoke such proxy unless the shareholder shall file written notice of such
revocation with the secretary of the meeting prior to the voting of such proxy.
Section 11. Election of Directors: At each election of directors every
shareholder entitled to vote at such election shall have the right to vote the
number of shares owned by him for as many persons as there are directors to be
elected and for whose election he has a right to vote. Directors shall be
elected by a plurality of the votes cast at the election, except as otherwise
provided by the Certificate of Incorporation.
Elections of directors need not be by ballot unless a shareholder demands
election by ballot at the election and before the voting begins.
Section 12. Inspectors of Election: The Board may, in advance of any
shareholders' meeting, appoint one or more inspectors to act at the meeting or
any adjournment thereof. If inspectors are not so appointed or shall fail to
qualify, the person presiding at the meeting may, and on the request of any
shareholder entitled to vote thereat, shall, make such appointment.
-7-
<PAGE>
Each inspector, before entering upon the discharge of his duties, shall
take and sign an oath faithfully to execute the duties of inspector at the
meeting with strict impartiality and according to the best of his ability. No
person shall be elected a director at a meeting at which he has served as an
inspector.
Section 13. Notification of Nominations: Nominations for the election of
directors may be made by the Board of Directors or a nominating or proxy
committee appointed by the Board of Directors or by any shareholder entitled to
vote In the election of directors generally. However, any shareholder entitled
to vote in the election of directors generally may nominate one or more persons
for election as directors at a meeting only if written notice of such
shareholder's intent to make such nomination or nominations has been given,
either by personal delivery or by United States mail, postage prepaid, to the
Secretary of the Corporation not later than (i) with respect to an election to
be held at an annual meeting of shareholders, 90 days in advance of such
meeting, and (ii) with respect to an election to be held at a special meeting
of shareholders for the election of directors, the close of business on the
seventh day following the date on which notice of such meeting is first given to
shareholders. Each such notice of such meeting shall set forth: (a) the name and
address of the shareholder who intends to make the nomination
-8-
<PAGE>
and of the person or persons to be nominated; (b) a representation that the
shareholder is a holder of record of stock of the Corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder; (d) such other
information regarding each nominee proposed by such shareholder as would have
been required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had the nominee been nominated,
or intended to be nominated, by the Board of Directors; and (e) the consent of
each nominee to serve as a director of the Corporation if so elected. The
chairman of the meeting may refuse to acknowledge the nomination of any person
not made in compliance with the foregoing procedure.
ARTICLE IV - DIRECTORS
Section 1. The business of this corporation shall be managed by its Board
of Directors,* in number. The directors need not be residents of this State or
shareholders in the corporation. They shall be elected by the shareholders.
- ------------
*Per Board minutes, 01/03/96, the number of Board members was increased from
three (3) to nine (9).
-9-
<PAGE>
at the annual meeting of shareholders of the corporation, and each director
shall be elected for the term of one year, and until his successor shall be
elected and shall qualify.
Section 2. Regular Meetings: Regular meetings of the Board shall be held
without notice immediately after the Annual Meeting of Shareholders at the
registered office of the Corporation, or at such other time and place as shall
be determined by the Board.
Section 3. Quorum: A majority of the entire Board, or of any committee
thereof, as then constituted, shall constitute a quorum for the transaction of
business, and the act of the majority present at a meeting at which a quorum is
present shall be the act of the Board or of the committee.
Section 4. Action Without Meeting: Any action required or permitted to be
taken pursuant to authorization voted at a meeting of the Board or any committee
thereof, may be taken without a meeting if, prior or subsequent to such action,
all members of the Board or of such committee, as the case may be, consent
thereto in writing and such written consents are filed, with the minutes of the
proceedings of the Board or committee.
Section 5. Special Meetings: Special meetings of the Board may be called by
the Chairman of the Board, the President or the majority of the Board on three
days notice to each director, either personally or by mail.
-10-
<PAGE>
Section 6. Waiver of Notice: Notice of any meeting need not be given to any
director who signs a waiver of notice, whether before or after the meeting.
The attendance of any director at a meeting without protesting prior to the
conclusion of the meeting the lack of notice of such meeting shall constitute a
waiver of notice by him. Neither the business to be transacted at, nor the
purposes of, any meeting of the Board need be specified in the notice or waiver
of notice of such meeting. Notice of an adjourned meeting need not be given if
the time and place are fixed at the meeting adjourning and if the period of
adjournment does not exceed ten days in any one adjournment.
Section 7. Powers of Directors: The Board of Directors shall have the
management of the business of the corporation. In addition to the powers and
authorities by these By-Laws expressly conferred upon them, the Board may
exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by these By-Laws directed or required to be
exercised or done by the shareholders.
Section 8. Compensation of Directors: The Board, by the affirmative vote of
a majority of directors in office and irrespective of any personal interest of
any of them, shall have authority to establish reasonable compensation of
directors for services to the corporation as directors, officers, or otherwise.
-11-
<PAGE>
Section 9. Executive Committee: If deemed advisable, the Board of
Directors, by resolution adopted by a majority of the entire Board, may appoint
from among its members an executive committee and one or more other committees,
each of which shall have at least* members. Each such committee shall have and
may exercise all the authority of the Board, except that no such committee
shall make, alter or repeal any By-Law of the corporation; elect or appoint any
director, or remove any officer or director; submit to shareholders any action
that requires shareholders' approval; or amend or repeal any resolution
theretofore adopted by the Board.
Action taken at a meeting of any such committee shall be reported to the
Board at its meeting following such committee meeting; except that, when the
meeting of the Board is held within two days after the committee meeting, such
report shall, if not made at the first meeting, be made to the Board at its
second meeting following such committee meeting.
ARTICLE V - OFFICERS
Section 1. The officers of the corporation shall consist of a President, a
Secretary, a Treasurer, and, if desired, a Chairman of the Board, one or more
Vice Presidents, and such other officers as may be required. They shall be
annually chosen by the Board of Directors and shall hold office
- -----------
* Per Board minutes, 07/23/96, "The Executive Committee shall have at least two
(2) members".
-12-
<PAGE>
for one year and until their successors are chosen and qualify. The Board may
also choose such employees and agents as it shall deem necessary, who shall hold
their offices for such terms and shall have authority and shall perform such
duties as from time to time shall be prescribed by the Board.
Any two or more offices may be held by the same person but no officer shall
execute, acknowledge, or verify any instrument in more than one capacity if such
instrument is required by law or by these By-Laws to be executed, acknowledged,
or verified by two or more officers.
Section 2. Salaries: The salaries of all officers,* of the corporation
shall be fixed by the Board of Directors.
Section 3. Removal: Any officer elected or appointed by the Board of
Directors may be removed by the Board with or without cause. An officer elected
by the shareholders may be removed, with or without cause, only by vote of the
shareholders but his authority to act as an officer may be suspended by the
Board for cause.
Section 4. President: The President shall be the chief executive officer of
the corporation; he shall preside at all meetings of the shareholders and
directors; he shall have general and active management of the business of the
corporation, shall see that all orders and resolutions of the
- --------------
* Per Board minutes, 07/23/96, "The salaries of all Officers of the
Corporation will be fixed by the Board of Directors.
-13-
<PAGE>
Board are carried into effect, subject, however, to the right of the directors
to delegate any specific powers, except such as may be by statute exclusively
conferred on the President, to any other officer or officers of the corporation.
He shall execute bonds. mortgages and other contracts requiring a seal, under
the seal of the corporation. He shall be EX-OFFICIO a member of all committees,
and shall have the general powers and duties of supervision and management
usually vested in the office of President of a corporation.
Section 5. Vice President: The Vice President, if one has been appointed,
shall be vested with all the powers and be required to perform all duties of the
President in his absence.
Section 6. Chairman of the Board: The Chairman of the Board, if one has
been appointed, shall exercise such powers and perform such duties as shall be
provided in the resolution proposing that a Chairman of the Board be elected.
Section 7. Secretary: The Secretary shall keep full minutes of all meetings
of the shareholders and directors; he shall be an EX-OFFICIO Secretary of the
Board of Directors; he shall attend all sessions of the Board, shall act as
clerk thereof, and record all votes and the minutes of all proceedings in a book
for that purpose; and shall perform like duties for the standing committees when
required. He shall give or cause to be given, notices of all meetings of the
-14-
<PAGE>
shareholders of the corporation and of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors at President,
under whose supervision he shall be.
Section 8. Treasurer: The Treasurer shall keep full and accurate accounts
of receipts and disbursements in books belonging to the corporation, and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation, in such depositories as may be designated by the Board of
Directors.
He shall disburse the funds of the corporation as may be ordered by the
Board, taking proper vouchers for such disbursements, and shall tender to the
President and directors, at the regular meetings of the Board, or whenever they
may require it, an account of all his transactions as Treasurer and of the
financial condition of the corporation, and shall submit a full financial report
at the annual meeting of the shareholders.
ARTICLE V1 - VACANCIES, RESIGNATION, REMOVAL
Section 1. Directors: Subject to further provision in the Certificate of
Incorporation, any directorship not filled at the annual. meeting and any
vacancy, however caused, occurring in the Board may be filled by the affirmative
vote of
-15-
<PAGE>
a majority of the remaining directors even though less than a quorum of the
Board, or by a sole remaining director. A director so elected by the Board shall
hold office until the next succeeding annual meeting of shareholders and until
his successor shall have been elected and qualified.
Section 2. Officers: Any vacancy occurring among the officers, however
caused, may be filled by the Board of Directors.
Section 3. Resignations: Any director or other officer may resign by
written notice to the corporation. The resignation shall be effective upon
receipt thereof by the corporation or at such subsequent time as shall be
specified in the notice of resignation.
Section 4. Removal: So long as the Certificate of Incorporation so
provides, 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.
ARTICLE VII - SHARE CERTIFICATE
Section 1. Form: The share certificates of the corporation shall be
numbered and registered in the transfer records of the corporation as they are
issued. They shall bear the corporate seal, or a facsimile thereof, and be
signed by the President and Secretary.
-16-
<PAGE>
Section 2. Transfers: All transfers of the shares of the corporation shall
be made upon the books of the corporation by the holder of the shares in person,
or by his legal representatives. Share certificates shall be surrendered,
properly endorsed and cancelled at the time of transfer.
Section 3. Loss of Certificates: In the event that a share certificate
shall be lost, destroyed or mutilated, a new certificate may be issued therefor
upon such terms and indemnity to the corporation as the Board of Directors may
prescribe.
ARTICLE VII - BOOKS AND ACCOUNTS
Section 1. The corporation shall keep books and records of account and
minutes of the proceedings of the shareholders, Board of Directors and executive
committee, if any. Such books, records and minutes may be kept outside this
State. The corporation shall keep at its registered office, or at the office of
a transfer agent in this State, a record or records containing the names and
addresses of all shareholders, the number, class and series of shares held by
each and the dates when they respectively became the owners of record thereof,
except that in the case of shares listed on a national securities exchange, the
records of the holders of such shares may be kept at the office of a transfer
agent within or without this State.
-17-
<PAGE>
Section 2. Inspection: Any person who shall have been a shareholder of
record of the corporation for at least six months immediately preceding his
demand, or any person holding or so authorized in writing by the holders of, at
least five percent of the outstanding shares of any class, upon at least five
days' written demand shall have the right for any proper purpose to examine in
person or by agent or attorney. during usual business hours, the minutes of the
proceedings of the shareholders and record of shareholders, and to make extracts
therefrom, at the places where the same are kept.
ARTICLE IX - MISCELLANEOUS PROVISIONS
Section 1. Monetary Disbursements. All checks or demands for money and
notes of the corporation shall be signed by such officer or officers as the
Board of Directors may from time to time designate.
Section 2. Fiscal Year: The fiscal year of the corporation shall begin on
the date selected from time to time by the Board of Directors.
Section 3. Dividends: The Board of Directors may declare and pay dividends
upon the outstanding shares of the corporation from time to time and to such
extent as they deem advisable, in the manner and upon the terms and conditions
provided by the statute and the Certificate of Incorporation.
-18-
<PAGE>
Section 4. Reserve. Before payment of any dividend there may be set aside
such sum or sums as the directors, from time to time, in their absolute
discretion, think proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive to
the interests of the corporation, and the directors may abolish any such reserve
in the manner in which it was created.
Section 5. Giving Notice: Whenever written notice is required to be given
to any person, it may be given to such person, either personally or by sending a
copy thereof through the mail. If notice is given by mail, the notice shall be
deemed to be given when deposited in the mail addressed to the person to whom it
is directed at his last address as it appears on the records of the corporation,
with postage prepaid thereon, or in the event no address is available the notice
shall be deemed to have been given when addressed to general delivery in the
area where the person is suspected of residing or when the company has made any
other reasonable attempt to give notice to such person. Such notice shall
specify the place, day and hour of the meeting and, in the case of a
shareholders' meeting, the general nature of the business to be transacted.
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<PAGE>
In computing the period of time for the giving of any notice required or
permitted by statute, or by the Certificate of Incorporation or these By-Laws or
any resolution of directors of shareholders, the day on which the notice is
given shall be excluded, and the day on which the matter noticed is to occur
shall be included.
ARTICLE X - INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Definitions: Certain terms used in this Article shall be defined
as follows or, where so indicated, shall include the following meanings in
addition to their normal and their statutory meanings:
a. "Corporate agent" means any person who is or was a director,
officer, employee or agent of the indemnifying corporation or of any
constituent corporation absorbed by the indemnifying corporation in a
consolidation or merger and any person who is or was a director, officer,
trustee, employee or agent of any other enterprise, serving as such at the
request of the indemnifying corporation, or of any such constituent
corporation, or the legal representative of any such director, officer,
trustee, employee or agent:
b. "Other enterprise" means any domestic or foreign corporation, other
than the indemnifying corporation, and any partnership, joint venture, sole
proprietorship, trust or other enterprise, whether or not far profit,
served by a corporate agent;
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<PAGE>
c. "Expenses" means reasonable costs, disbursements and counsel fees
actually incurred;
d. "Liabilities" means amounts paid or incurred in satisfaction of
settlements, judgments, fines and penalties;
e. "Criminal third party proceedings" shall mean any threatened,
pending or completed action or quasi-administrative proceeding or
investigation.
f. "Derivative action" shall mean any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor;
g. "Party" shall include the giving of testimony or similar
involvement, whether or not named as a party;
h. "Third party proceeding" shall mean any pending, threatened or
completed civil, criminal, administrative or arbitrative action, suit or
proceeding, and any appeal therein and any inquiry or investigation which
could lead to such action, suit or proceeding, other than an action by or
in the right of the corporation.
Section 2. Directors and Officers - Third Party Proceedings. The
corporation shall indemnify any director and any officer of the corporation who
was or is a party or is threatened to be made a party to any third party
proceeding by reason of the fact that he or she was or is a corporate agent
against his or her expenses and liabilities in connection with
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<PAGE>
which he or she shall I have been adjudged to be liable for negligence or
misconduct in the performance of his or her duty to the corporation unless and
only to the extent that the Superior Court of New Jersey or the court in which
such derivative action is or was pending shall determine upon application that,
despite the adjudication of liability but in view of all circumstances of the
case, he or she is fairly and reasonably entitled to indemnity for such items
which the court shall deem proper.
Section 4. Employees and Agents: A corporate agent other than a director or
officer of the corporation may be indemnified by the corporation or have his or
her expenses advanced in accordance with the procedures set forth in paragraphs
2, 3, 5, 6 and 7 of this Article. To the extent that a corporate agent has been
successful on the merits or otherwise in defense of any third party proceeding
or derivative action or in defense of any claim issue or matter therein, the
corporate agent shall be indemnified against his or her expenses in connection
therewith,
Section 5. Procedure for Effecting Indemnification. Indemnification under
paragraphs 2, 3 or 4 of this Article (unless ordered by a court, in which case
the expenses of the corporate agent in enforcing indemnification shall be added
to and be included in the final judgment against the corporation) shall be made
by the corporation only as authorized in the
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<PAGE>
specific case upon a determination that indemnification of the corporate agent
is required or proper in the circumstances because he or she has met the
applicable standard of conduct set forth in paragraph 2 or 3 of this Article or
has been successful on the merits or otherwise as set forth in paragraph 4 of
this Article and that the amount requested has been actually and reasonably
incurred. Such determination shall be made:
(a) By the Board of Directors or a committee thereof, acting by a
majority vote of a quorum consisting of directors who were not parties to
or otherwise involved in the third party proceeding or derivative action,
or
(b) If a quorum is not obtainable or, even if obtainable a majority
vote of a quorum of disinterested directors or committee thereof so
directed, by independent legal counsel in a written opinion.
Section 6. Independent Legal Counsel. Independent legal counsel may be
appointed by the Board of Directors, even if a quorum of disinterested directors
is not available, or by a person or committee designated by the Board of
Directors. Independent legal counsel shall not include any employee of the
corporation. If independent legal counsel shall determine in a written opinion
that indemnification is proper under this Article, indemnification shall be made
without further action of the Board of Directors.
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<PAGE>
Section 7. Advancing Expenses: Expenses incurred in defending a third party
proceeding or derivative action shall be paid on behalf of a director or
officer, and may be paid on behalf of any other corporate agent, by the
corporation in advance of the final disposition of the action as authorized in
the manner provided by paragraph 5 of this Article (except that the person(s)
making the determination thereunder need not make a determination on whether the
applicable standard of conduct has been met unless judicial determination has
been made with respect thereto or the person seeking indemnification has
conceded that he or she has not met such standard) upon receipt of an
undertaking by or on behalf of such person to repay such amount unless it shall
ultimately be determined that he or she is entitled to be indemnified by the
corporation as required in this Article or authorized by law. The financial
ability of any such person to make such repayment shall not be a prerequisite to
the making of an advance.
Section 8. Conditions. The corporation may impose reasonable conditions
upon any person seeking indemnification (including advanced expenses) under this
Article including, but not limited to, a condition to the effect that, except to
the extent differing interests compel another result, persons to be indemnified
under this paragraph may be required to share the same counsel and other
services.
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<PAGE>
Section 9. Insurance. The corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a corporate agent
against any expenses and liabilities asserted against him or her and incurred by
him or her by reason of his or her being or having been a corporate agent,
whether or not the corporation would have the power to indemnify him or her
against such expenses and liabilities under the provisions of this Article.
Section 10. Scope of Article. Each person who shall act as a corporate
agent shall be deemed to be doing so in reliance upon the rights of
indemnification provided in this Article.
The indemnification provided by this Article shall not be deemed exclusive
of any other right to which a person seeking indemnification may be entitled
under any statute, agreement, vote of disinterested directors, or otherwise,
regardless of whether the event giving rise to indemnification occurred before
or after the effectiveness thereof, both as to action taken in the official
capacity of such person and as to action in another capacity while holding his
or her office or position, and shall continue as to a person who has ceased to
be a corporate agent and shall inure to the benefit of his or her heirs and
personal representatives.
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<PAGE>
ARTICLE XI - AMENDMENTS
Section 1. The Board of Directors shall have the power to make, alter and
repeal these By-Laws, but By-Laws made by the Board may be altered or repealed,
and new By-Laws may be made, by the shareholders.
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EXHIBIT 4.01
FORM OF DEBENTURE
<PAGE>
REGISTERED REGISTERED
R41 $
DYNASIL CORPORATION OF AMERICA
10% SUBORDINATED DEBENTURE DUE JUNE 1, 1998
DYNASIL CORPORATION OF AMERICA, a New Jersey corporation (the "Company"), for
value received, hereby promises to pay to
SEE REVERSE FOR CERTAIN ABBREVIATIONS
or order on the first day of June, 1998, the principal amount of
DOLLARS
in such currency of the United States of America as at the time of payment
is legal tender for the payment of public and private debts, at the office or
agency of the Company maintained for that purpose in Camden County, New Jersey,
or whereever the Company's headquarters are located (the "Debenture Office"),
and to pay interest on the unpaid principal amount hereof from the date hereof
at the rate of 10% per annum in like coin or currency, payable at the Debenture
Office or, at the option of the Company, by checks deposited in the United
States mail, postage prepaid, on June 1 and December 1 in each year commencing
December 1, 1988, until the principal amount hereof shall have become due and
payment thereof shall have been made or duly provided for. All such payments of
interest will be due and made only to the registered holder hereof at the
holder's registered address at the close of business on the May 15 or November
15 immediately preceding the interest payment date, notwithstanding the
subsequent transfer or surrender for exchange of this Debenture.
1. This Debenture is one of a number of Debentures of like tenor in a
maximum authorized aggregate principal amount of $1,000,000 (or such increased
maximum amount as determined by the Company), each of which Debentures will be
issued in denominations of integral multiples of $100; however, no Debenture
will be issued in an aggregate principal amount of less than $100. After the
original issuance of Debentures, Debentures will be issued only in denominations
of $100 aggregate principal amount or integral multiples thereof. All such
Debentures mature on June 1, 1998 and bear interest payable at the same rate and
on the same dates as the interest on this Debenture.
2. The holder of this Debenture may, in person or by duly authorized
attorney, surrender the same at the Debenture Office and, within a reasonable
time thereafter, receive in exchange therefor a Debenture or Debentures, each in
the principal amount of $100 or an integral multiple thereof dated as of the
date to which interest has been paid on this Debenture (or, if the surrender of
this Debenture occurs between any May 15 or November 15 and the next succeeding
interest payment date, as of the business day immediately after such interest
payment date), and payable to such person or persons, or their order, as may be
designated by the registered holder hereof, for the same aggregate principal
amount as the unpaid principal amount of this Debenture. No charge will be
imposed by the Company in connection with any such exchange, provided such
exchange requests are reasonable, except that the Company may require as a
condition to such exchange the payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.
3. The Company has the right to prepay the Debentures in whole at any time,
or in part from time to time, on any date or dates after June 1, 1988, at 100%
of the principal amount to be so prepaid, together with interest accrued thereon
to the date fixed for such prepayment. In the event of each prepayment of this
Debenture or any part hereof, notice shall be given to the registered holder
hereof not less than thirty (30) days prior to the date fixed for such
prepayment. Upon such notice of any prepayment, the Company shall pay to the
registered holder hereof at the Debenture Office on the date specified in such
notice the principal amount hereof to be so prepaid and interest accrued thereon
to such date, and this Debenture or such part hereof as is so prepaid shall
cease to bear interest on and after the date of such prepayment. If less than
all the Debentures are to be prepaid at any time, the Company shall select the
particular Debenture, Debentures or portions thereof to be prepaid in such
manner as it, in its sole discretion, deems fair and appropriate. Such manner
may include, among others, selection at random from all, or reasonable
classifications of, Debentureholders.
4. The payment of the principal of and the interest on all the Debentures
is expressly subordinated in right of payment to the prior payment in full of
all "Superior Indebtedness". The term Superior Indebtedness shall be defined
herein to mean all indebtedness (other than the Debentures and any indebtedness
which by its specific terms is equal or subordinate in right of payment to the
Debentures) of the Company or any successor corporation or subsidiary, whether
outstanding on the date of the Debentures or thereafter created or incurred,
including all indebtedness for money borrowed, assumed or guaranteed, and any
modification thereof (but not including account and trade payables and accrued
expenses), all regardless of whether short or long term or whether evidenced by
a note or other evidence of indebtedness. No payment of principal or interest
can be made upon the Debentures at any time (before, upon or after the
maturity of an Superior Indebtedness) unless full payment of all amounts then
due for principal of (and premium, if any) and interest on all Superior
Indebtedness has been made or promised for. In the event of bankruptcy,
insolvency, dissolution, winding up, liquidation, reorganization or readjustment
or readjustment of the Company, or in the event the Debentures are declared due
and payable before their stated maturity because of an Event of Default (as
hereinafter defined), the payment of the principal of an interest on the
Debentures will be subordinated to the prior payment in full of all Superior
Indebtedness, and nothing shall be paid to the holders of the Debentures unless
all amounts due to the holders of all Superior Indebtedness have been paid or
provided for. In addition, no payment of principal or interest may be made on
the Debentures if, at the time of such payment or after giving effect thereto,
there exists or would exist a default under any Superior Indebtedness.
5. Upon the occurrence of an Event of Default (as hereinafter defined) and
the receipt by the Company of written notice from or consent of the registered
holders of not less than twenty-five percent (25%) of the total unpaid principal
amount of the Debentures then outstanding declaring the unpaid principal of this
Debenture and all the Debentures then outstanding to be due and payable, the
unpaid principal to this Debenture and all of the Debentures shall become
immediately due and payable together with all interest accrued thereon. The
registered holders of a majority of the then unpaid principal amount of the
Debentures then outstanding may waive any uncured or unwaived Event of Default
(existing or past), except only an Event of Default caused by default in the
payment of principal of or interest on the Debentures.
6. An "Event of Default" shall have occurred hereunder: (a) if the Company
shall default in the payment of any part of the principal of any Debenture when
and as the same shall become due and payable, whether at maturity, or otherwise;
or (b) if the Company shall default in the payment of any interest on any
Debenture when and as the same shall become due and payable and if such default
shall continue for a period of thirty (30) days; or (c) if the Company shall
default in the due performance or observance of any other of the covenants or
conditions contained in this Debenture an such default shall continue for a
period of sixty (60) days after written notice thereof, specifying such default
and requiring the same to be remedied, shall have been given to the Company by
the registered holders of not less than twenty-five percent (25%) of the total
unpaid principal amount of the Debentures then outstanding; or (d) if, by the
order of a court of competent juridiction, a receiver or liquidator or trustee
of the Company shall be appointed with respect to a substantial part of its
property and shall not have been discharged within one hundred eighty (180) days
or if, by decree of such a court, the Company shall be adjudicated insolvent and
such decree shall have continued undischarged and unstayed for one hundred
eighty (180) days after the entry thereof, or if a petition to reorganize the
Company pursuant to the Federal Bankrupcy Code or any other similar stature
applicable to the Company shall be filed against the Company and shall not be
dismissed within one hundred eighty (180) days after filing; or (e) if the
Company shall be adjudicated bankrupt or shall file a petition in voluntary
bankruptcy under any provisions of any bankruptcy law or shall consent to the
filing of any bankruptcy or reorganization petition against it under any such
law; or (f) if the Company shall make an assignment for the benefit of its
creditors or shall submit in writing its inability to pay its debts generally as
they become due, or shall consent to the appointment of a receiver or liquidator
or trustee or assignee in bankruptcy or insolvency of it or of all or a
substantial part of its property.
7. This Debenture is not, and is not intended to be, an Indenture; however,
it does contain all of the terms and provisions of this and all other
Debentures. There are no covenants, warranties, agreements, or undertakings
imposed upon or made by the Company except as expressly set forth in this
Debenture. This Debenture and all other Debentures may be modified by the
Company only with the consent of the registered holders of not less than 66 2/3%
of the then unpaid principal amount of the Debentures then outstanding.
Notwithstanding the foregoing, however, no such modification may, without the
consent of the registered holder of each outstanding Debenture affected thereby:
(i) change the fixed maturity of the principal of or interest on any Debenture,
or reduce the principal amount thereof, or reduce the rate of interest thereon,
or impair the right to institute suit for the enforcement of any such payment;
(ii) reduce the percentage of principal amount of outstanding Debentures, the
consent of the registered holders of which is required for any such
modification; or (iii) reduce the percentage of the principal amount of
outstanding Debentures required to waive certain defaults. The Company will
notify each registered holder of any modification of the Debentures.
8. Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Debenture and of indemnity satisfactory
to it, and upon reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender for cancellation of this Debenture if
mutilated or only partially destroyed, the Company will make and deliver to the
registered holder hereof a new Debenture of like tenor in lieu of this
Debenture. Any such new Debenture so delivered shall be dated as of the date to
which interest has been paid on this Debenture (unless the aforementioned
receipt by the Company occurs between May 15 or November 15 and the next
succeeding interest payment date, in which event the new Debenture shall be
dated as of the day immediately after such interest payment date).
9. No recourse shall be had for the payment of this Debenture against any
stockholder, officer, director or agent of the Company, either directly or
through the Company, by virtue of any suit or the enforcement of any assessment
or otherwise; any such liability of stockholders, directors, officers or agents
as such being released by the holder hereof by the acceptance hereof.
IN WITNESS WHEREOF, Dynasil Corporation of America has caused this
Debenture to be signed in its corporate name by its duly authorized officers and
this Debenture to be dated the __________ day of ___________ 19___ .
DYNASIL CORPORATION OF AMERICA
Attest: By
Secretary President
<PAGE>
Dynasil Corporation
of America
10% SUBORDINATED DEBENTURE
- --------------------------------------------------------------------------------
AMOUNT SHOWN
ON FACE HEREOF
- --------------------------------------------------------------------------------
DUE JUNE 1, 1998
----------------
INTEREST DUE
JUNE 1 AND DECEMBER 1
----------------
PRINCIPAL AND INTEREST PAYABLE
AT THE DEBENTURE OFFICE DEFINED
IN THE DEBENTURE
----------------
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this instrument, shall be constued as though they were written out in full
according to applicable laws of regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT -- ________________ Custodian _____________
(Cust) (Minor)
under Uniform Gifts to Minors Act
__________________________________
(State)
Additional abbreviations may also be used though not in the above list.
----------------
FOR VALUE RECEIVED the undersigned
hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please print or typewrite name and address including postal zip code of assignee
- --------------------------------------------------------------------------------
the within Debenture and all rights thereunder, hereby irrevocably
constituting and appointing
attorney
- -----------------------------------------------------------------------
to transfer said Debenture on the books of the Company, with full power of
substitution in the premises.
Dated:
-------------------------------
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the written instrument in every particular, without
alteration or enlargement or any change whatever.
EXHIBIT 4.02
SUBORDINATED DEBENTURE EXTENSION AGREEMENT
<PAGE>
SUBORDINATED DEBENTURE EXTENSION AGREEMENT
1 Date of Agreement. The date of this Agreement is the ______ day of
______________, 1997.
2 Parties.
2.1 DYNASIL CORPORATION OF AMERICA ("Dynasil"), with offices at 385 Cooper
Road, West Berlin, New Jersey, 08091; and
2.2 Debenture Holder, ("Holder") whose address is Holder Address.
3 Background.
3.1 On June 1, 1988, Dynasil issued a Ten Percent Subordinated Debenture in
the amount of $Debenture Amount (the "Debenture") to Holder registered as
Debenture# in the series of the Debenture.
3.2 Pursuant to the terms of the Debenture, it was to become due on June 1,
1998.
3.3 It is the purpose of this Agreement to extend the term of the Debenture
from June 1, 1998 to June 1, 2002, in consideration of the issuance to Holder of
warrants to purchase #Warrants shares of the common stock of Dynasil at an
exercise price of $3.00 per share, such warrants to have a term of April 15,
1997 to June 1, 2002.
4 Terms of the Debenture Extension.
4.1 Holder agrees that the Dynasil Corporation of America Ten Percent
Subordinated Debenture due June 1, 1998 registered as Debenture# in the name of
Debenture Holder, Holder Address, be and hereby is modified as follows:
Page 1 of 4
<PAGE>
4.1.1 All references to the maturity date of the Debenture shall be
modified so that the maturity date of the Debenture shall be June 1, 2002.
4.1.2 As consideration for the extension of the maturity date of the
Debenture, Dynasil will issue to Holder warrants (in the form appended hereto as
Exhibit "A") to purchase #Warrants shares of the common stock of Dynasil at an
exercise price of $3.00 per share, such warrants to be effective April 15, 1997
and to expire on June 1, 2002.
4.2 Except to the extent that the modification of the maturity date of the
Debenture as changed pursuant to this Agreement, require a change in the dates
set forth in the body of the Debenture, all other terms and conditions of the
Debenture not specifically set forth herein shall remain the same.
5 Notices. All notices, requests, and demands given to or made upon the
parties hereto shall, except as otherwise specified herein, be in writing
and be delivered or mailed to any such party at the address of such party
set forth in Section 2 "Parties" above. Any party may, by notice hereunder
to the other party, designate a changed address for such party. Any notice,
if mailed properly addressed, postage prepaid, registered or certified
mail, shall be deemed dispatched on the registered date or that stamped on
the certified mail receipt, and shall be deemed received the fifth business
day thereafter, or when it is actually received, whichever is sooner. All
references to hours of the day shall mean the official time in effect on
the date in question in the State of New Jersey.
6 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns, and
legal representatives.
Page 2 of 4
<PAGE>
7 Captions. Captions of the sections of this Agreement are for convenience
and reference only, and the words contained shall not be held to modify,
amplify, or aid in the interpretation of the provisions of this Agreement.
8 Situs. This Agreement shall be deemed to be an agreement made under the
laws of the State of New Jersey, and for all purposes it shall be construed
in accordance with and governed by the laws of the State of New Jersey.
9 Non-Waiver. No delay or failure by a party to exercise any right under this
Agreement, and no partial or single exercise of that right, shall
constitute a waiver of that or any other right, unless otherwise expressly
provided herein.
10 Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
11 Modification. This Agreement may not be and shall not be deemed or
construed to have been modified, amended, rescinded, canceled, or waived in
whole or in part, except by a written instrument signed by the parties
hereto.
12 Entire Agreement. This Agreement constitutes and expresses the entire
agreement and understanding between the parties hereto in reference to all
the matters referred to herein, and any previous discussions, promises,
representations, and understanding relative thereto are merged into the
terms of this Agreement and shall have no further force and effect.
Page 3 of 4
<PAGE>
Executed by each party on the date appearing next to the following
respective signatures.
DYNASIL CORPORATION OF AMERICA
______________________________ ___________________________________
DATE By:
______________________________ ___________________________________
DATE Debenture Holder
Page 4 of 4
EXHIBIT 4.03
DEBENTURE EXTENSION WARRANT
<PAGE>
VOID AFTER 5:00 P.M. EASTERN STANDARD TIME, ON JUNE 1, 2002.
NEITHER THIS WARRANT NOR THE WARRANT STOCK HAS BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THE COMPANY WILL NOT TRANSFER THIS WARRANT OR THE
WARRANT STOCK UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING SUCH
WARRANT OR SUCH WARRANT STOCK, AS THE CASE MAY BE, UNDER THE SECURITIES ACT OF
1933 AND APPLICABLE STATES SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER FROM
AN ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS AGENTS, STATING THAT IN
THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE SECURITIES LAWS,
OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OF
1933.
DYNASIL CORPORATION OF AMERICA
(a New Jersey corporation)
Warrant for the Purchase of #Warrants Shares
of Common Stock
par value $.001 per share
FOR VALUE RECEIVED, DYNASIL CORPORATION OF AMERICA ("Company"), a New Jersey
corporation, with offices at 385 Cooper Road, West Berlin, New Jersey,
08091-9145, hereby certifies that Debenture Holder or assigns ("Holder"), is
entitled, subject to the provisions of this Warrant, to purchase from the
Company up to #Warrants fully paid and non-assessable shares of Common Stock at
a price of $3.00 per share ("Exercise Price"), during the period set forth in
Section 1 below.
The term "Common Stock" means the Common Stock, par value $.001 per share, of
the Company as constituted on the date of this Warrant ("Base Date"), together
with any other equity securities that may be issued by the Company in respect
thereof or in substitution therefor. The number of shares of Common Stock to be
received upon the exercise of this Warrant may be adjusted from time to time as
hereinafter set forth. The shares of Common Stock deliverable or delivered upon
such exercise, as adjusted from time to time, are hereinafter referred to as
"Warrant Stock."
Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant certificate, and (in the
case of loss, theft or destruction) of satisfactory indemnification, and upon
surrender and cancellation of this Warrant certificate, if mutilated, the
Company shall execute and deliver a new Warrant certificate of like tenor and
date.
Section 1. Exercise of Warrant. This Warrant may be exercised, subject to the
requirements set forth below, in whole, or in part, at any time during the
period commencing one year from the date hereof and expiring at 5:00 p.m.
Eastern Standard Time until June 1, 2002 or, if such day is a day on which
banking institutions in Camden County, New Jersey are authorized by law to
close, then on the next succeeding day that shall not be such a day, by
presentation and surrender of this Warrant certificate to the Company at its
principal office, with the Warrant Exercise Form attached hereto duly executed
and
-1-
<PAGE>
accompanied by payment (by certified or official bank check payable to the order
of the Company, or by wire transfer to the Company) of the aggregate Exercise
Price for the number of shares specified in such form and instruments of
transfer, if appropriate, duly executed by the Holder. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant
certificate for cancellation, execute and deliver a new Warrant certificate
evidencing the rights of the Holder thereof to purchase the balance of the
shares purchasable hereunder. Upon receipt by the Company of this Warrant
certificate, together with the Exercise Price, at its office, in proper form for
exercise as described above, together with an agreement to comply with the
restrictions on transfer and related covenants contained herein and a
representation as to investment intent and any other matter required by counsel
to the Company, signed by the Holder (and if other than the original Holder
accompanied by proof, satisfactory to counsel for the Company, of the right of
such person or persons to exercise the Warrant), the Holder shall be deemed to
be the holder of record of the shares of Common Stock issuable upon such
exercise, even if the stock transfer books of the Company shall then be closed
or certificates representing such shares of Common Stock shall not have been
delivered to the Holder. The Holder shall pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
shares of Common Stock on exercise of this Warrant. The Company shall promptly
thereafter issue certificate(s) evidencing the Common Stock so purchased.
Section 2. Reservation of Shares. The Company shall at all times reserve for
issuance and delivery upon exercise of this Warrant all shares of Common Stock
or other shares of capital stock of the Company (and other securities) from time
to time receivable upon exercise of this Warrant. All such shares (and other
securities) shall be duly authorized and, when issued upon exercise, shall be
validly issued, fully paid and non-assessable.
Section 3. No Fractional Shares. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant, but the
Company shall pay the Holder an amount equal to the fair market value of such
fractional share of Common Stock in lieu of each fraction of a share otherwise
called for upon any exercise of this Warrant. For purposes of this Warrant, the
fair market value of a share of Common Stock shall equal the closing sale price
(or if not available the average of the closing bid and asked prices) on the
business day prior to exercise of this Warrant, or, if the Common Stock is then
not publicly traded, then the price determined in good faith by the Board of
Directors of the Company.
Section 4. Transfer.
4.1 Securities Laws. Neither this Warrant nor the Warrant Stock have been
registered under the securities act of 1933. The Company will not transfer this
Warrant or the Warrant Stock unless (i) there is an effective registration
covering such Warrant or such shares, as the case may be, under the Securities
Act of 1933 and applicable states securities laws, (ii) it first receives a
letter from an attorney, acceptable to the Company's board of directors or its
agents, stating that in the opinion of the attorney the proposed transfer is
exempt from registration under the Securities Act of 1933 and under all
applicable state securities laws, or (iii) the transfer is made pursuant to Rule
144 under the Securities Act of 1933.
4.2 Conditions to Transfer. Prior to any such proposed transfer, and as a
condition thereto, if such transfer is not made pursuant to an effective
registration statement under the Securities Act, the Holder
-2-
<PAGE>
will, if requested by the Company, deliver to the Company (i) an investment
covenant signed by the proposed transferee, (ii) an agreement by such transferee
that the restrictive investment legend set forth above be placed on the
certificate or certificates representing the securities acquired by such
transferee, (iii) an agreement by such transferee that the Company may place a
"stop transfer order" with its transfer agent or registrar, and (iv) an
agreement by the transferee to indemnify the Company to the same extent as set
forth in the next succeeding paragraph.
4.3 Indemnity. The Holder acknowledges that the Holder understands the meaning
and legal consequences of this Section, and the Holder hereby agrees to
indemnify and hold harmless the Company, its representatives and each officer
and director thereof from and against any and all loss, damage or liability
(including all attorneys' fees and costs incurred in enforcing this indemnity
provision) due to or arising out of (a) the inaccuracy of any representation or
the breach of any warranty of the Holder contained in, or any other breach of,
this Warrant, (b) any transfer of any of this Warrant or the Warrant Stock in
violation of the Securities Act, the Securities Exchange Act of 1934, as
amended, or the rules and regulations promulgated under either of such acts, (c)
any transfer of this Warrant or any of the Warrant Stock not in accordance with
this Warrant or (d) any untrue statement or omission to state any material fact
in connection with the investment representations or with respect to the facts
and representations supplied by the Holder to counsel to the Company upon which
its opinion as to a proposed transfer shall have been based.
Section 5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed in this
Warrant.
Section 6. Anti-Dilution Provisions.
6.1 Stock Splits, Dividends, Etc.
6.1.1 If the Company shall at any time subdivide its outstanding shares of
Common Stock (or other securities at the time receivable upon the exercise of
the Warrant) by recapitalization, reclassification or split-up thereof, or if
the Company shall declare a stock dividend or distribute shares of Common Stock
to its stockholders, the number of shares of Common Stock subject to this
Warrant immediately prior to such subdivision shall be proportionately
increased, and if the Company shall at any time combine the outstanding shares
of Common Stock by recapitalization, reclassification or combination thereof,
the number of shares of Common Stock subject to this Warrant immediately prior
to such combination shall be proportionately decreased. Any such adjustment and
adjustment to the Exercise Price pursuant to this Section shall be effective at
the close of business on the effective date of such subdivision or combination
or if any adjustment is the result of a stock dividend or distribution then the
effective date for such adjustment based thereon shall be the record date
therefor.
6.1.2 Whenever the number of shares of Common Stock purchasable upon the
exercise of this Warrant is adjusted, as provided in this Section, the Exercise
Price shall be adjusted to the nearest cent by multiplying such Exercise Price
immediately prior to such adjustment by a fraction (x) the numerator of which
shall be the number of shares of Common Stock purchasable upon the exercise
immediately
-3-
<PAGE>
prior to such adjustment, and (y) the denominator of which shall be the number
of shares of Common Stock so purchasable immediately thereafter.
6.2 Adjustment for Reorganization, Consolidation, Merger, Etc. In case of any
reorganization of the Company (or any other corporation, the securities of which
are at the time receivable on the exercise of this Warrant) after the Base Date
or in case after such date the Company (or any such other corporation) shall
consolidate with or merge into another corporation or convey all or
substantially all of its assets to another corporation, then, and in each such
case, the Holder of this Warrant upon the exercise as provided in Section 1 at
any time after the consummation of such reorganization, consolidation, merger or
conveyance, shall be entitled to receive, in lieu of the securities and property
receivable upon the exercise of this Warrant prior to such consummation, the
securities or property to which such Holder would have been entitled upon such
consummation if such Holder had exercised this Warrant immediately prior
thereto; in each such case, the terms of this Warrant shall be applicable to the
securities or property received upon the exercise of this Warrant after such
consummation.
6.3 Certificate as to Adjustments. In each case of an adjustment in the number
of shares of Common Stock receivable on the exercise of this Warrant, the
Company at its expense shall promptly compute such adjustment in accordance with
the terms of the Warrant and prepare a certificate executed by an officer of the
Company setting forth such adjustment and showing the facts upon which such
adjustment is based. The Company shall forthwith mail a copy of each such
certificate to each Holder.
6.4 Notices of Record Date, Etc. In case:
6.4.1 the Company shall take a record of the holders of its Common Stock
(or other securities at the time receivable upon the exercise of the Warrant)
for the purpose of entitling them to receive any dividend (other than a cash
dividend at the same rate as the rate of the last cash dividend theretofore
paid) or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities, or
to receive any other right; or
6.4.2 of any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company shall mail or cause to be mailed to
each Holder a notice specifying, as the case may be, (A) the date on which a
record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right, or
(B) the date on which such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up is to take place, and
the time, if any, to be fixed, as to which the holders of record of Common Stock
(or such other securities at the time receivable upon the exercise of this
Warrant) shall be entitled to exchange their shares of Common Stock (or such
other securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least
twenty (20) days prior to the date therein specified, and this Warrant may be
exercised prior to said date during the term of the Warrant.
Section 7. Legend and Stop Transfer Orders. Unless the shares of Warrant Stock
have been registered under the Securities Act, upon exercise of any of this
Warrant and the issuance of any of the shares of
-4-
<PAGE>
Warrant Stock, the Company shall instruct its transfer agent, if any, to enter
stop transfer orders with respect to such shares, and all certificates
representing shares of Warrant Stock shall bear on the face thereof
substantially the following legend, insofar as is consistent with New Jersey
law:
This certificate has not been registered under the Securities Act of 1933.
The Company will not transfer this certificate unless (i) there is an
effective registration covering the shares represented by this certificate
under the Securities Act of 1933 and all applicable state securities laws,
(ii) it first receives a letter from an attorney, acceptable to the board
of directors or its agents, stating that in the opinion of the attorney the
proposed transfer is exempt from registration under the Securities Act of
1933 and under all applicable state securities laws, (iii) the transfer is
made pursuant to Rule 144 under the Securities Act of 1933.
Section 8. Officer's Certificate. Whenever the number or kind of securities
purchasable upon exercise of this Warrant or the Exercise Price shall be
adjusted as required by the provisions hereof, the Company shall forthwith file
with its Secretary or Assistant Secretary at its principal office and with its
stock transfer agent, if any, an officer's certificate showing the adjusted
number of kind of securities purchasable upon exercise of this Warrant and the
adjusted Exercise Price determined as herein provided and setting forth in
reasonable detail such facts as shall be necessary to show the reason for and
the manner of computing such adjustments. Each such officer's certificate shall
be made available at all reasonable times for inspection by the Holder and the
Company shall, forthwith after each such adjustment, mail by certified mail a
copy of such certificate to the Holder.
Section 9. Notice. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt, if to the Holder, at
his/her address as shown on the books of the Company, and if to the Company, at
its principal office listed on the first page of this document. Any notice or
other communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which
shall be deemed given at the time of receipt thereof.
Section 10. Binding Effect. The provisions of this Warrant shall be binding upon
and inure to the benefit of (1) the parties hereto, (2) the successors and
assigns of the Company, (3) if the Holder is a corporation, partnership, or
other business entity, the successors and assignee of the Holder, and (4) if the
Holder is a natural person, the assignees, heirs, and personal representative of
the Holder.
Section 11. Pronouns. Any masculine personal pronoun shall be considered to
mean the corresponding feminine or neuter personal pronoun, as the context
requires.
DYNASIL CORPORATION OF AMERICA
a New Jersey corporation
By: Date:
----------------------------------------------------- ---------------
-5-
<PAGE>
WARRANT EXERCISE FORM
The undersigned, Debenture Holder, hereby irrevocably elect(s) to exercise the
within Warrant to the extent of purchasing ________ shares of Common Stock of
DYNASIL CORPORATION OF AMERICA and hereby makes payment of $________ in payment
therefor.
- ----------------------------- ----------------------------------------
Date Signature
----------------------------------------
Signature
(if jointly held)
EXHIBIT 10.01
LOAN AGREEMENT AND ASSOCIATED DOCUMENTS DATED JULY 10, 1998
WITH PREMIER BANK, FOR A $300,000 LINE OF CREDIT
<PAGE>
This instrument was prepared by:
Premier Bank
- ----------------------------------
(Name)
379 North Main Street
- ----------------------------------- [Premier Bank Logo]
(Address)
Doylestown, PA 18901
- ----------------------------------
to whom the recorded copy of this
instrument is to be returned.
MORTGAGE
THIS MORTGAGE MADE THIS 10th day of July, 1998, is between DYNASIL
CORPORATION OF AMERICA, INC. AND SUBSIDIARY, with an address of 385 COOPER ROAD,
WEST BERLIN, NJ (each jointly and severally, if more than one person, and
hereinafter referred to as "Mortgagor") and Premier Bank, the Mortgagee ("Bank")
with a mailing address of 379 N. Main Street, Doylestown, PA 18901-0818.
In consideration for and to secure payment and performance to Bank of all of the
Obligations, as that term is defined in subparagraphs (a) through (d) below,
Mortgagor has granted, bargained, sold, conveyed, released, assigned,
transferred, pledged, mortgaged and confirmed, and by these presents does hereby
grant, bargain, sell, convey, release, assign, transfer, pledge, mortgage and
confirm unto Bank, its successors and assigns, forever: ALL THAT CERTAIN real
estate situated in the County of Camden, State of New Jersey, known and
designated as 385 Cooper Road, Township of Berlin, conveyed to Mortgagor by Deed
dated 04/18, 1966, duly recorded in the office for recording of deeds in said
County on 04/21, 1966 at Deed Book 2884, Page 54, as the Premises are therein
described and, necessary, as more particularly described on Exhibit "A" attached
hereto and made a part hereof (hereinafter the "Premises")
Lot & Block 3, 4 & 1910.
THE PREMISES SHALL include all right, title and interest of Mortgagor in and to
all present and future structures, buildings and improvements located thereon,
together with all common areas, streets, lanes, alleys, passageways, passages,
ways, water courses, strips and gores of land, easements, estates, rights,
titles, interests, liberties, privileges, tenements, hereditaments and
appurtenances, whatsoever therunto belonging to or in any way made appurtenant
thereto; all leases and subleases of all or any part of the Premises and rights
of payment thereunder; the air space above and right to use the air space above,
and the drainage, crops, timber, agricultural, horticultural, mineral, water,
oil and gas rights with respect to the Premises, at law or in equity, all
machinery, apparatus, equipment, furniture, fixtures, including without
limitation, trade fixtures, goods, appliances and other property of every kind,
nature and description whatsoever, now or hereafter located in, on or about, or
attached to or used in connection with, the Premises, together with any and all
replacements and substitutions thereof and all accessories, parts or accessions
thereto now or hereafter owned by the Mortgagor or in which Mortgagor has or may
obtain any interest, and all awards, damages, payments and/or claims arising out
of any eminent domain or condemnation proceeding, damage or injury to any part
of the Premises and/or any buildings, structures, or improvements thereon (the
Premises, together with all of the foregoing, is hereinafter referred to as the
"Mortgaged Property");
TO HAVE AND TO HOLD the Mortgaged Property hereby conveyed or mentioned and
intended so to be, unto Bank, to its own use, forever.
PROVIDED, ALWAYS, that this instrument is upon the express condition that, if
Mortgagor promptly satisfied all of the Obligations, as hereinafter defined, in
accordance with the provisions of the Loan Documents, as hereinafter defined,
and this Mortgage, at the times and in the manner specified, without deduction,
fraud or delay, and if all the agreements, conditions, convenants, provisions
and stipulations contained therein and in this Mortgage and in the Loan
Documents are fully performed and complied with then this Mortgage and the
estate hereby granted shall cease, determine and become void.
As used in this Mortgage, "Obligations" means any or all of the following:
(a) The indebtedness, liabilities and obligations of Mortgagor to Bank,
including all present and future advances, arising under a certain
Note dated ___________________, 19___, in the original principal
amount of THREE HUNDRED THOUSAND DOLLARS AND 00/100 Dollars
($300,000.00), plus interest, costs and charges thereon, and/or any
amendment, modification, refinancing, renewal, substitution or
extension of the Note (hereinafter the "Note"), and all other
liabilities of Mortgagor to Bank described in any agreements,
documents and instruments executed in connection therewith
(hereinafter collectively referred to as the "Loan Documents");
(b) All other existing and future indebtedness, liabilities and
obligations of Mortgagor to Bank whether sole, joint or several,
matured or unmatured, direct or indirect, absolute or contingent, or
any nature whatsoever, and out of whatever transactions arising,
including, without limitation, any debt, liability or obligation owing
from Mortgagor to others which Bank may obtain by assignment or
otherwise, excepting only any indebtedness constituting "Consumer
Credit" as that term is defined in Regulation Z, 12 C.F.R. section
226.1 et seq.;
(c) The costs of curing any Event of Default set forth in this Mortgage or
in the Loan Documents which the Bank elects to cure; and
(d) The reasonable costs and expenses, including attorneys' fees incurred
by Bank in enforcing any
<PAGE>
of the obligations of Mortgagor specified in (a), (b) and (c)
above.
MORTGAGOR REPRESENTS, COVENANTS AND WARRANTS to and with Bank that, until the
Obligations secured hereby are fully paid and performed:
1. Payment and Performance. Mortgagor shall pay to Bank in accordance
with the terms of the Note, this Mortgage and the other Loan
Documents, the principal, interest and other sums therein and herein
set forth and shall perform and comply with all the agreements,
conditions, covenants, provisions and stipulations of the Note, this
Mortgage and the Loan Documents.
2. Warranty of Title. Mortgagor warrants that Mortgagor possesses good
and marketable fee simple title to the Premises, and has all power and
authority to mortgage the Mortgaged Property to Bank and to grant a
security interest therein in the manner set forth herein.
3. Maintenance of Mortgaged Property. Mortgagor shall keep and maintain
or cause to be kept and maintained the Mortgaged Property, including
all buildings and improvements now or at any time hereafter erected on
the Premises and the sidewalks and curbs abutting them, in good order
and condition and repair and shall abstain from and shall not permit
the commission of waste of, in or about the Mortgaged Property.
4. Insurance. Mortgagor shall keep the Mortgaged Property continuously
insured against fire and such other hazards in such amounts as may be
required by Bank from time to time. All policies and insurance shall
be issued by companies acceptable to Bank, and shall contain a
standard mortgagee clause, in favor of Bank, and shall provide for at
least thirty (30) days prior written notice of cancellation or
reduction in coverage to Bank, all of which policies are hereby
assigned to Bank as additional security for the Obligations. If Bank
shall become the owner of the Mortgaged Property or any part thereof
by foreclosure or otherwise, such policies, including all right, title
and interest of Mortgagor thereunder, shall become the property of
Bank. At least thirty (30) days prior to the expiration date of any
insurance policy, Mortgagor shall deliver to Bank satisfactory
evidence of the renewal of such insurance and the payment of all
premiums therefor. In the event of any loss, Mortgagor will give
immediate notice thereof to Bank and Bank may make proof of loss on
behalf of Mortgagor. Each insurance company concerned is hereby
authorized and directed to make payments under any such policies
directly to Bank, instead of Bank and Mortgagor jointly, and Mortgagor
hereby irrevocably appoints Bank as Mortgagor's attorney-in-fact to
endorse in Mortgagor's name any checks or drafts issued thereon. Bank
shall have the right to retain and apply the proceeds of any such
insurance, at its reasonable election, to reduction of the
Obligations, or to restoration and repair of the property damaged.
5. Taxes and Other Charges. Mortgagor shall pay when due and before
interest or penalties shall accrue thereon, all taxes, charges,
assessments and other governmental charges of any kind whatsoever
including electricity, water and sewer rents, levied or assessed
against the Mortgaged Property and will deliver receipts therefore to
Bank upon request, and shall pay when due all amounts secured by any
prior lien on the Mortgaged Property.
6. Inspection. Bank and any persons authorized by Bank shall have the
right at any time, upon reasonable notice to Mortgagor, to enter the
Premises at a reasonable hour to inspect and photograph its condition
and state of repair.
7. Declaration of No Set-Off. Within one (1) week after request to do so
by Bank, Mortgagor shall certify to Bank or to any assignee or
proposed assignee of this Mortgage, in writing duly acknowledged, the
amount of principal, interest and other charges then owing on the
Obligations and on any obligations secured by prior liens upon the
Mortgaged Property, if any, and whether there are any set-offs or
defenses against them.
8. Required Notices. Mortgagor shall notify Bank promptly of the
occurrence of any of the following:
(a) a fire or other casualty causing damage to all or any part of the
Mortgaged Property;
(b) receipt of notice of eminent domain proceedings or condemnation
of all or any part of the Mortgaged Property and Mortgagor hereby
grants Bank an irrevocable power of attorney to appear and act
for and on behalf of Mortgagor in any and all such proceedings;
(c) receipt of notice from any governmental authority relating to the
structure, use or occupancy of the Mortgaged Property or any real
property adjacent to the Mortgaged Property;
(d) a change in the occupancy of the Mortgaged Property;
(e) receipt of any notice from the holder of any lien or security
interest in all or any part of the Mortgaged Property; or
(f) commencement of any litigation affecting the Mortgaged Property.
9. Mortgage and Liens. Without the prior written consent of Bank,
Mortgagor will not create or permit to be created or filed against the
Mortgaged Property, any mortgage lien or other lien or security
interest superior or inferior to the lien of this Mortgage.
10. No Transfer. Without the prior written consent of Bank, Mortgagor will
not cause nor permit any transfer of legal or equitable title to,
beneficial interest in, or any estate or interest in the Mortgaged
Property, or any part thereof, voluntarily or by operation of law,
whether by sale, exchange, lease, conveyance, merger, consolidation,
the granting of any lien or security interest or otherwise, or any
agreement to do any of the foregoing.
11. Events of default. Any one or more of the following events shall
constitute an Event of Default hereunder:
(a) Failure of Mortgagor to make any payment of principal or interest
or any other sum promptly when due on any of the Obligations;
(b) Mortgagor's nonperformance of or noncompliance in any material
respect with any other agree-
<PAGE>
ments, conditions, covenants, provisions or stipulations
contained in the Note, this Mortgage or any of the Loan
Documents;
(c) Any signature, statement, representation or warranty made in the
Note, the Loan Documents or this Mortgage, or in any financial
statement, certificate, application, request or other document
furnished to Bank by Mortgagor at any time prior to, now or
hereafter, is not true and correct in any material respect when
made or delivered;
(d) The occurrence of any default under the Note or any of the Loan
Documents;
(e) The commencement by or against any Mortgagor of any proceeding
under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, the making by any Mortgagor of any
general assignment for the benefit of creditors, the failure of
any Mortgagor generally to pay debts as such debts become due, or
the taking of action by any Mortgagor in furtherance of any of
the foregoing; or
(f) The transfer or sale of any part of the Mortgaged Property or any
interest therein, without the Bank's prior written consent.
12. Remedies of Bank.
(c) Upon the occurrence of any Event of Default, the entire unpaid
balance of the Obligations, including interest as has accrued and
as may thereafter accrue thereon, and all other sums secured by
this Mortgage, shall become immediately due and payable, at the
option of Bank, without notice to or demand upon Mortgagor or any
other person; and thereupon, in addition to all other rights or
remedies available under the Note or any of the Loan Documents,
or at law or in equity, Bank may:
(i) forthwith bring an action of mortgage foreclosure hereon,
and may proceed to judgment and execution to recover the
balance due on the Obligations and any other sums that may
be due thereunder, including attorneys' fees, costs of suit
and costs of sale to the extent, if any, provided in the
Obligations and permitted by law; and
(ii) enter into possession of the Premises, with or without legal
action, lease the same, collect all rents and profits
therefrom and, after deducting all costs of collection and
administrative expenses, apply the net rents and profits to
the payment of taxes and other necessary maintenance and
operational costs (including agents' fees and attorneys'
fees) or on account of the Obligations, in such order and in
such amounts as Bank in its sole discretion may elect, and
Bank shall be liable to account only for rents and profits
actually received by Bank; and
(b) Any real estate sold hereunder or on any other judicial
proceedings, may be sold in one or more parcels, in such order
and manner as Bank, in its sold discretion, may elect.
13. Rights and Remedies Cumulative. The rights and remedies of Bank as
provided in the Note, this Mortgage and the Loan Documents shall be
cumulative and concurrent, may be pursued separately, successively or
together against Mortgagor, against the Mortgaged Property, or any
other person liable hereunder or thereunder, at the sole discretion of
Bank and may be exercised as often as occasion therefor shall arise.
The failure of Bank to exercise any right or remedy on any one or more
occasions shall in no event be construed as a waiver or release
thereof.
14. Mortgagor's Waivers. Mortgagor hereby waives and releases to the
extent permitted by law:
(a) All errors, defects and imperfections in any proceeding
instituted by Bank under the Note or this Mortgage, and/or Loan
Documents;
(b) All benefits that might accrue to Mortgagor by virtue of any
present or future law exempting the Mortgaged Property, or any
part of the proceeds arising from any sale thereof, from
attachment levy or sale on execution, or providing for any stay
of execution, exemption from civil process or extension of time
for payment; and
(c) Unless specifically required herein, all notices of Mortgagor's
default or of Bank's election to exercise, or Bank's actual
exercise of any option under the Note or this Mortgage.
15. Future Advances. Without limiting any other provisions of this
Mortgage, this Mortgage shall also secure additional loans or advances
hereafter made by Bank to or on behalf of Mortgagor. Neither contained
herein shall impose any obligation on the part of Bank to make any
such additional loan(s) to Mortgagor.
16. Communications. All communications required or permitted to be given
under this Mortgage, to be effective, shall be in writing, and shall
be hand delivered or sent by registered mail, postage prepaid, return
receipt requested, addressed to the addresses set forth above or at
such other address as the addressee may hereafter designate in writing
in the manner herein provided.
17. Severability. If for any reason whatsoever any part of this Mortgage
shall be declared void or invalid, by operation of law or otherwise,
in any jurisdiction, then as to such jurisdiction only, such part
shall be void and the remaining provisions of this Mortgage shall
remain in all other respects valid and enforceable, and such
invalidity shall not invalidate or render unenforceable such
provision in any other jurisdiction.
18. Binding Effect--Amendment. This Mortgage is binding upon and shall
inure to the benefit of Mortgagor and Bank, and their respective
successors and assigns. This Mortgage may not be changed or amended
except by agreement in writing signed by the party against whom
enforcement of the change or amendment is sought.
19. Applicable Law. The validity, construction, meaning and effect of the
provisions of this Mortgage shall be governed and determined by and
under the laws of the State of New Jersey.
<PAGE>
IN WITNESS WHEREOF, the Mortgagor has hereunto set his hand and seal the day and
year first above written. This instrument is intended to constitute an
instrument under seal.
<TABLE>
<CAPTION>
(INDIVIDUALS SIGN BELOW) (CORPORATIONS OR PARTNERSHIPS SIGN BELOW)
<S> <C>
Dynasil Corporation of America, Inc. and Subsidiary
- ------------------------------- --------------------------------------------------------
Name Name of Corp. or Partnership
By: /s/ Charles J. Searock, Jr.
- ------------------------------- ---------------------------------------------------
Name Charles J. Searock, Jr. Title President
By: /s/ John Kane
- ------------------------------- ---------------------------------------------------
Name John Kane, CFO Title
- ------------------------------- --------------------------------------------------------
Name Title
- ------------------------------- --------------------------------------------------------
ATTEST/WITNESS Affix Corp. Seal
</TABLE>
The undersigned, being authorized to do so, hereby certifies that the precise
address of the within name Mortgagee is 379 N. Main Street, Doylestown,
Pennsylvania 18901-0818.
By: /s/ Suzanne M. Hartshorne
-----------------------------------------
S.M.H.
The undersigned hereby acknowledges receipt without cost of a true and correct
copy of the within instrument on behalf of Mortgagor.
By: /s/ John Kane
-----------------------------------------
J.K.
ACKNOWLEDGMENT
STATE OF NEW JERSEY :
: SS
COUNTY OF :
On _______________________, 19______, before me, the undersigned, personally
appeared _______________________________________________________________________
known to me or satisfactorily proven to me to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged:
/ / that he/she/they executed the same for the purposes therein contained and
desire that it be recorded as such; or
/ / that they are the President/Vice President and the Treasurer/Assistant
Treasurer or Secretary/Assistant Secretary or General Partner of the
corporation/partnership named in the foregoing instrument and that, in such
capacities, being authorized so to do, executed the same for the purposes
therein contained by signing the name and affixing the seal of the said
corporation/partnership by themselves as such officers and desire that it
be recorded as such.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
-----------------------------------------
Notary Public
My Commission Expires:
MB4-8:88
<PAGE>
PREMIER BANK SECURITY AGREEMENT
(all personal property)
Doylestown, Pennsylvania
July 10, 1998
In consideration of any loans, extensions of credit or other financial
accommodations made or extended by PREMIER BANK, (hereinafter called "Bank"),
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged and intending to be legally bound, the undersigned
and the Bank hereby agree as follows:
1. Definitions. (A) The tern "Liabilities" shall include any and all
indebtedness, obligations and liabilities of every kind and description of the
undersigned to the Bank now or hereafter existing, arising directly between the
undersigned and the Bank or acquired outright, conditionally or as collateral
security from another by the Bank, absolute or contingent, primary or secondary,
joint and/or several, secured or unsecured, due or to become due, contractual or
tortious, liquidated or unliquidated, arising by operation of law or otherwise,
direct or indirect including, without limiting the generality of the foregoing,
indebtedness, obligations and liabilities to the Bank of the undersigned as a
member of any partnership, syndicate, association or other group, and whether
incurred by the undersigned as principal, surety, endorser, guarantor,
accommodation party or otherwise.
(B) The term "Collateral" shall mean, whether now owned or hereafter
acquired, each of the following:
(1) All of undersigned's tangible personal property, wheresoever
located, leased or furnished, or held by the undersigned for
sale or for lease or to be furnished under contracts of sale
or service, and all raw materials, components, tools, work in
process and materials used, produced or consumed in the
undersigned's business as now or hereafter conducted,
including all finished merchandise and all other tangible
personal property (i) held by others for sale on consignment
from the undersigned, or sold by the undersigned on a sale-or-
return, on-memorandum or on-approval basis, (ii) returned to
the undersigned by a purchaser following a sale by the
undersigned, or (iii) represented by a document of title; all
equipment, accessories, accessions and parts at any time
attached or added to items of inventory or used in connection
therewith, including packing and shipping materials, all of
which shall herein be deemed parts of the undersigned's
inventory.
(2) All accounts, accounts receivable, contract rights, all other
forms of obligations owing to the undersigned, chattel paper
and general intangibles (including, without limitation, all
existing and future rights, claims, benefits and proceeds
under insurance policies, customer lists, choses in action,
books, records, patents and patent applications, copyrights,
trademarks, tradenames, blueprints and plans, trade secrets,
sales contracts, licenses, formulas, tax and other types of
refunds, tax attributes including carryovers and carrybacks,
returned and unearned insurance premiums, claims, product
designs, drawings and technical data);
(3) All the specific items or units of equipment identified in any
exhibit attached hereto and made a part hereof, every other
item or unit of equipment or fixtures of the undersigned or in
which the undersigned may have any rights, whether now
existing or owned or hereafter created or acquired and
wheresoever located, all accessions, software, parts,
programs, accessories, licenses, patent rights, franchises,
substitutions and replacements and additional equipment now or
hereafter affixed to or used in connection with any of such
equipment, and all guarantees, warranties and other
undertakings of third parties (including insurers) held by or
otherwise running in favor of the undersigned in respect of
any of the foregoing;
(4) All instruments, documents of title, policies and certificates
of insurance, securities, bank deposits, deposit accounts,
checking accounts, cash and currency;
(5) All proceeds (including insurance proceeds) and products and
all accessions, substitutions and replacements of and to any
of the foregoing; and
(6) All ledger sheets, files, books, records, documents and
instruments (including, without limitation, computer programs,
tapes and related electronic data processing software)
("Books and Records") relating to any of the foregoing.
2. Security Interest. In order to secure the due and punctual payment
and performance of the Liabilities, the undersigned hereby grants to the Bank a
continuing security interest in, and a general lien upon and/or right of set-off
against, (a) the Collateral and (b) all property of the undersigned now or
hereafter in possession of the Bank or any affiliate of the Bank in any capacity
whatsoever, including but not limited to, any balance or share of any deposit,
trust or agency account, and the proceeds of such property may be applied at any
time and without notice to the Liabilities. The security interests granted
pursuant hereto are granted as security only and shall not subject the Bank to,
or transfer or in any way affect or modify, any obligation or liability of the
undersigned with respect to any of the Collateral or any transaction which gave
use thereto.
3. Further Assurances; Filings. At any time and from time to time, upon
the demand of the Bank, the undersigned will: (1) deliver and pledge to the
Bank, endorsed and/or accompanied by such instruments of assignment and transfer
in such form and substance as the Bank may request, any and all instruments,
documents and/or chattel paper as the Bank may specify in its demand; (2) give,
execute, deliver, file and/or record any notice, statement, instrument,
document, agreement or other papers that may be necessary or desirable, or that
the bank may request, in order to create, preserve, perfect, or validate any
security interest granted pursuant hereto or to enable the Bank to exercise and
enforce its rights hereunder or with respect to such security interest; (3) keep
and stamp or otherwise mark any and all documents and chattel paper and its
individual books and records relating to inventory, accounts and contractual
rights in such manner as the Bank may require; (4) permit representatives of the
Bank at any time to inspect its inventory and to inspect and make abstracts from
the undersigned's Books and Records pertaining to any of the Collateral. The
undersigned hereby irrevocably makes, constitutes and appoints the Bank (and any
of the Bank's officers, employees or agents designated by the Bank) as the
Bank's true and lawful attorney with the power (1) upon the occurrence of an
Event of Default hereunder, to notify the post office authorities to change the
address for delivery of the undersigned's mail to an address designated by the
Bank and to receive, open and distribute all mail addressed to the undersigned,
retaining all mail relating to the Collateral and forwarding all other mail to
the undersigned; (2) at any time and from time to time, to send notices to all
account debtors of the undersigned directing them to make full payment of their
obligations to the undersigned to the Bank; and (3) to sign and file one or more
financing statements under the Uniform Commercial Code naming the undersigned as
debtor and the Bank as secured party and indicating therein the types or
describing the items of Collateral herein specified. If the Bank considers such
necessary or desirable, the Bank may file a carbon, photographic or other
reproduction of this Agreement or any financing statement executed pursuant
hereto as a financing statement in any jurisdiction as permitting. Without the
prior written consent of the Bank the undersigned will not file or authorize or
permit to be filed in any jurisdiction any such financing or like statement in
which the Bank is not named as the sole secured party.
With respect to the Collateral, or any part thereof, which at any time
shall come into the possession or custody or under the control of the Bank or
any of its agents, associates or correspondents, for any purpose, the right is
expressly granted to the Bank, at its discretion, to transfer to or register in
the name of itself or its nominee any of the Collateral, and whether or not so
transferred or registered, to receive the income and dividends thereon,
including stock dividends and rights to subscribe, and to hold the same as a
part of the Collateral and/or apply the same as hereinafter provided; to
exchange any of the Collateral for other property upon the reorganization,
recapitalization or other readjustment of the undersigned and in connection
therewith to deposit any of the Collateral with any nominee or depository upon
such terms as it may determine; upon occurrence of an Event of Default hereunder
to vote the Collateral so transferred or registered and to exercise or cause its
nominee to exercise all or any powers with respect thereto with the same force
and effect as an absolute owner thereof; all without notice and without
liability except to account for property actually received by it.
The bank shall be deemed to have possession of any of the Collateral in
transit to or set apart for it or any of its agents, associates or
correspondents.
<PAGE>
4. Representations and Warranties. The undersigned represents and
warrants to the Bank, which representations and warranties shall be continuing
representations and warranties until the later of the occurrence of all of the
undersigned's Liabilities being satisfied in full or the Bank's no longer having
any duties to the undersigned, as follows:
(A) The sole place of business or chief executive office of the
undersigned (if the undersigned has more than one place of
business) or residence (if the undersigned has no place of
business) is located at the address set forth on the signature
page hereof. All other places of business of the undersigned or
other locations of Collateral, if any, are listed on the
signature page hereof.
(B) If a corporation, the undersigned is a corporation duly
organized and existing in good standing under the laws of its
jurisdiction of incorporation and qualified and licensed to do
business in those jurisdictions where the conduct of business
or ownership of properties requires such qualification; if a
partnership, it is duly organized and existing under the laws
of its jurisdiction of organization; and the undersigned has
the power and authority to own the Collateral, to enter into
and perform this Agreement and any other documents or
instruments executed in connection herewith, and to incur the
Liabilities.
(C) This Agreement and any other documents or instruments executed
in connection herewith have been duly authorized and/or
executed and delivered and constitute the legal, valid and
binding obligations of the undersigned, enforceable against the
undersigned in accordance with their terms; and this Agreement
and any other documents or instruments executed in connection
herewith do not and will not violate any law or the charter or
organizational documents or by-laws of the undersigned or any
other agreement or instrument to which the undersigned or any
of its property may be bound or subject.
(D) No consent or approval of any debt or equity holder of the
undersigned or of any public authority is necessary for the
validity of this Agreement or any document or instrument
executed in connection herewith.
(E) The undersigned is, or to the extent that certain of the
Collateral is to be acquired after the date hereof, will be,
the owner of the Collateral free from any adverse lien,
security interest or encumbrance.
(F) The undersigned has filed all federal, state and local tax
returns and other reports required to be filed and has paid or
made adequate provision for all such taxes, assessments and
other governmental charges.
(G) No Reportable Event (as such is defined in the Employee Income
Security Act of 1974, as amended ["ERISA"]) has occurred with
respect to, nor has there been terminated any plan subject to
ERISA and maintained for any employees of the undersigned or of
any member of the control group (as defined in ERISA) of which
the undersigned is a member.
(H) No representation, warranty or statement made by the
undersigned herein or in any certificate or document furnished
or to be furnished pursuant hereto contains or will contain any
untrue statement of a material fact or omits or will omit any
material fact necessary to make it not misleading.
5. Convenants. The undersigned hereby convenants and agrees as follows:
(A) The undersigned will defend the Collateral against all claims
and demands of all persons at any time claiming any interest
therein.
(B) The undersigned will provide the Bank with prompt written
notice of (i) any change in the chief executive office of the
undersigned or the office where the undersigned maintains books
and records pertaining to the Collateral, and (ii) the location
or movement of any Collateral to or at an address other than
one set forth on the signature page hereof, all such notices to
be received by the Bank at least 30 days prior to any such
change.
(C) The undersigned will promptly pay any and all taxes,
assessments and governmental charges upon the Collateral on the
date such taxes, assessments, and governmental charges are due
and payable, except to the extent that such taxes, assessments
and charges shall be contested in good faith by the undersigned
and adequate reserves are maintained therefor. Upon request of
the Bank, the undersigned shall deliver such receipts and
other proofs of payment as the Bank may desire.
(D) The undersigned will immediately notify the Bank of: (i) any
material adverse changes in its business, property or financial
condition; (ii) the occurrence of an Event of Default under
this Agreement; (iii) any seizure of the Collateral or any
claims of third parties to the Collateral; and (iv) the
institution of any litigation, governmental investigation or
administrative proceedings against or materially affecting the
undersigned.
(E) The undersigned will have and maintain insurance at all times
with respect to the Collateral against risks of fire (including
so-called extended coverage) and theft, and such other risks,
including business interruption, as the Bank may reasonably
require containing such terms, in such form and amounts, for
such periods and written by such companies as may be reasonably
satisfactory to the Bank, such insurance to be payable to the
Bank and the undersigned as their interest may appear. All
policies of insurance shall provide for not less than thirty
(30) days written minimum cancellation notice to the Bank, and
the undersigned shall furnish the Bank with certificates or
other evidence satisfactory to the Bank of compliance with the
foregoing insurance provisions.
(F) The undersigned will not sell or offer to sell or otherwise
assign, transfer or dispose of the Collateral or any interest
therein, without the written consent of the Bank; provided,
however, unless the Bank notifies the undersigned otherwise,
the undersigned may sell its inventory in the ordinary course
of its business.
(G) The undersigned will keep the Collateral free from any lien,
security interest or encumbrance except in favor of the Bank
and in good order and repair, reasonable wear and tear
excepted, and will not waste or destroy the Collateral or any
part thereof. The undersigned shall maintain its Books and
Records in accordance with generally accepted accounting
principles consistently applied, being the same accounting
principles which the undersigned used in preparation of the
last financial statements submitted to the Bank prior to the
execution of this Agreement.
(H) The undersigned will not use the Collateral in violation of any
law, statute, regulation or ordinance.
6. General Authority. The Bank at its discretion may, whether or not
any of the Liabilities be due, in its name or in the name of the undersigned or
otherwise, demand, sue for, collect or receive any money or property at any time
payable or receivable on account of or in exchange for, or make any compromise
or settlement deemed desirable with respect to, any of the Collateral, but shall
be under no obligation so to do, or the Bank may extend the time of payment,
arrange for payment in installments, or otherwise modify the terms of, or
release, any of the Collateral, without thereby incurring responsibility to, or
discharging or otherwise affecting any liability of, the undersigned or of any
other obligated party. The undersigned hereby irrevocably appoints the Bank its
true and lawful attorney, with full power of substitution, in the name of the
undersigned, the Bank or otherwise, for the sole use and benefit of the Bank at
the undersigned's expense, to exercise the foregoing powers to the extent
permitted by law. The undersigned hereby ratifies all acts of the attorney.
Neither the Bank nor its attorney will be liable for any acts or omissions or
for any error of judgment or mistake of fact or law. This power, being coupled
with an interest, is irrevocable until the Liabilities have been fully
satisfied. The Bank shall not be required to take any steps necessary to
preserve any rights against prior parties to any of the Collateral.
<PAGE>
7. Event of Default and Remedies. It shall be an event of default under
this Agreement upon the occurrence of any of the following events (an "Event of
Default"); if any sum payable upon any of the Liabilities shall not be paid when
due; or if the undersigned shall default in the performance of any of its
agreements herein or in any instrument or document delivered pursuant hereto; or
if the undersigned or any maker, drawer, acceptor, endorser, guarantor, surety,
accommodation party or other person liable upon or for any of the Liabilities or
Collateral ("Obligor") shall default in the performance of any Obligor's
agreement with the Bank, die, dissolve, or become insolvent (however such
insolvency may be evidenced), if a procedure or remedy supplementary to or in
enforcement of judgment shall be resorted to or commenced against, or with
respect to any property of, the undersigned, or any co-partnership or Obligor,
or if a petition in bankruptcy or for any relief under any law relating to the
relief of debtors, readjustment of indebtedness, reorganization, composition or
extension shall be filed, or any proceeding shall be instituted under any such
law, by or against the undersigned or any co-partnership or Obligor; or if any
governmental authority or any court at the instance thereof shall take
possession of any substantial part of the property of, or assume control over
the affairs or operations of, or a receiver shall be appointed for, or for any
substantial part of the property of, or a judgment, writ, or order of attachment
or garnishment shall be issued or made against any of the property of, the
undersigned or any co-partnership or Obligor, or if any indebtedness of the
undersigned or of any co-partnership or Obligor shall become due and payable by
acceleration of maturity thereof; or if the undersigned (if a corporation) or
any Obligor shall be dissolved or be a party to any merger or consolidation
without the written consent of the Bank.
Upon the occurrence of an Event of Default hereunder, unless and to the
extent that the Bank shall otherwise elect, all of the Liabilities shall become
and be due and payable forthwith. Upon the occurrence of any Event of Default
hereunder or in connection with any of the Liabilities (whether such default be
that of the undersigned or of any Obligor), the undersigned shall, at the
request of the Bank, assemble the Collateral at such place or places as the Bank
designates in its request. The Bank shall have the rights and remedies with
respect to the Collateral of a secured party under the Uniform Commercial Code
(whether or not the Code is in effect in the jurisdiction where the rights and
remedies are asserted). In addition, with respect to the Collateral, or any part
thereof, which shall then be or shall thereafter come into the possession or
custody of the Bank or any of its agents, associates or correspondents, the Bank
may sell or cause to be sold, leased or otherwise disposed of, in one or more
sales or parcels, at such price as the Bank may deem best, and for cash or on
credit or for future delivery, without assumption of any credit risk, all or any
of the Collateral, at any broker's board or a public or private sale, without
demand of performance or notice of intention to sell or of time or place of sale
(except such notice as is required by applicable statute and cannot be waived),
and the Bank or anyone else may be the purchaser of any or all of the Collateral
so sold and thereafter hold the same absolutely, free from any claim or right of
whatsoever kind, including any equity of redemption, of the undersigned, any
such demand, notice or right and equity being hereby expressly waived and
released. The undersigned will pay to the Bank all expenses (including expenses
for legal services of every kind) of, or incidental to, the enforcement of any
of the provisions hereof or of any of the Liabilities, or any actual or
attempted sale, or any exchange, enforcement, collection, compromise or
settlement of any of the Collateral or receipt of the proceeds thereof, and for
the care of the Collateral and defending or asserting the rights and claims of
the Bank in respect thereof, by litigation or otherwise, including expense of
insurance; and all such expenses shall be Liabilities within the terms of this
Agreement. The Bank, at any time, at its option, may apply the net cash receipts
from the Collateral to the payment of principal and/or interest on any of the
Liabilities, whether or not then due. Notwithstanding that the Bank, whether in
its own behalf and/or in behalf of another or others, may continue to hold
Collateral and regardless of the value thereof, the undersigned shall be and
remain liable for the payment in full, principal and interest, of any balance of
the Liabilities and expenses at any time unpaid.
The proceeds of any Collateral received by the Bank at any time before
or after an Event of Default, whether from a sale or other disposition of
Collateral or otherwise, or the Collateral itself, may be applied to the payment
in full or in part of such of the Liabilities, and in such order and manner as
the Bank may elect. The undersigned, to the extent of its rights in the
Collateral, waives and releases any rights to require the Bank to collect any or
all of the Liabilities from any of the Collateral under any theory of
marshalling of assets.
8. Right of Set-Off. In furtherance and not in limitation of any
provisions herein contained and in addition to the grant of security interest in
the same Collateral, the undersigned hereby agrees that any and all deposits or
other sums at any time claimed by or due from the Bank to the undersigned shall
at all times constitute security for the Liabilities and the Bank may exercise
any right of set-off against such deposits or other sums as may accrue or exist
under applicable law.
9. Miscellaneous.
(A) No failure on the part of the Bank to exercise, and no delay in
exercising, and no course of dealing with respect to, any
right, power or remedy under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the
Bank of any right, power or remedy under this Agreement
preclude any other right, power or remedy. The remedies in this
Agreement are cumulative and are not exclusive of any other
remedies provided by law. The undersigned hereby waives
presentment, notice of dishonor and protest of all instruments
included in or evidencing the Liabilities or the Collateral of
any and all other notices and demands whatsoever, whether or
not relating to such instruments. The undersigned also waives
trial by jury in any action on or with respect to this
Agreement.
(B) The Bank may assign, transfer and/or deliver to any transferee
of any of the Liabilities any or all of the Collateral and
thereafter shall be fully discharged from all responsibility
with respect to the Collateral so assigned, transferred and/or
delivered. Such transferee shall be vested with all the powers
and rights of the Bank hereunder with respect to such
Collateral, but the Bank shall retain all rights and powers
hereby given with respect to any of the Collateral not so
assigned, transferred or delivered.
(C) No provisions hereof shall be modified or limited except by a
written instrument expressly referring thereto and to the
provisions so modified or limited.
(D) The undersigned, if more than one, shall be jointly and
severally liable hereunder and all provisions hereof regarding
the Liabilities or Collateral of the undersigned shall apply to
any Liability or any Collateral of any or all of them.
(E) This Agreement shall be binding upon the heirs, executors,
administrators, assigns or successors of the undersigned; shall
constitute a continuing agreement, applying to all future as
well as existing transactions, whether or not of the character
contemplated at the date of this Agreement, and if all
transactions between the Bank and the undersigned shall be at
any time closed, shall be equally applicable to any new
transactions thereafter; and shall be construed according to
the laws of the Commonwealth of Pennsylvania. This Agreement
and the transactions contemplated hereby constitute commercial
activities of the undersigned. The undersigned expressly
submits and consents in advance to the jurisdiction of courts
located in the Commonwealth of Pennsylvania in any action or
proceeding commenced in such court, hereby waiving personal
service of the summons and complaint, or other process or
papers issued therein agreeing that service of such summons and
complaint or other process may be made by registered mail or
certified mail addressed to the undersigned at the address set
forth on the signature page hereof or other address used by the
undersigned in its business or by any other means or service
allowed by law. The exclusive choice of forum set forth in this
Agreement shall not be deemed to preclude the enforcement of
any judgment obtained in such forum or the taking of any action
under this Agreement to enforce same in any appropriate
jurisdiction. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the
purpose of determining the legal enforceability of any specific
provision. All prior agreements, understandings,
representations, warranties and negotiations, if any, are
merged into this Agreement.
Unless the context otherwise requires, all terms used herein
which are defined in the Uniform Commercial code shall have the
meanings therein stated.
<PAGE>
(F) The undersigned acknowledges receipt of an executed and
completed copy of this Agreement.
Dynasil Corporation of America, Inc.
and Subsidiary
----------------------------------------
Witness/Attest: (Name)
By: /s/ Charles J. Searock, Jr. By: /s/ John Kane
------------------------------- ----------------------------------------
Charles J. Searock, Jr. John Kane
Title: President Title: CFO
---------------------------- ----------------------------------------
Address: 385 Cooper Road
----------------------------------------
(Number and Street)
West Berlin, Camden Co., West Berlin, NJ
----------------------------------------
(City, County, State) 08091
(Location of Collateral, if different
from above Address):
----------------------------------------
(Number and Street)
----------------------------------------
(City, County, State)
PREMIER BANK
By: /s/ Suzanne M. Hartshorne
----------------------------------------
Suzanne M. Hartshorne
Title: Vice President
----------------------------------------
EXHIBIT FOR EQUIPMENT DESCRIPTION
1238-5 2-88
<PAGE>
Dynasil Corporation of America, Inc.
and Subsidiary
TERM AND CONDITIONS:
BORROWER agrees to provide Bank with annual audited financial statements and tax
returns, as well as quarterly compiled financial statements.
BORROWER also agrees to provide Bank with monthly agings of receivables and
payables as well as an inventory break-down including raw materials work in
progress and finished goods.
BORROWER agrees to provide evidence of payment in full of the note receivable
from Hibshman Pacific of $175,000.00 prior to disbursement of bank funds.
IN THE EVENT Dynasil Corporation extends a Rights Offering, the first
$200,000.00 is to be appplied directly to the principal outstanding term debt
with Premier Bank.
ADDITIONALLY, any use of proceeds of the Rights Offering in excess of $50,000
per three month period is to be approved by Bank in advance.
FINALLY, BORROWER is to submit to Bank to be approved by Bank, any projected use
of funds for capital improvements.
PREMIER BANK
/s/ Suzanne M. Hartshorne
----------------------------------------
Suzanne M. Hartshorne, Vice President
DYNASIL CORPORATION OF AMERICA,
INC, AND SUBSIDIARIES
/s/ John Kane
- ------------------------------------
John Kane, CFO
/s/ Charles J. Searock, Jr.
- ------------------------------------
Charles J. Searock, Jr., President
<PAGE>
Premier Bank (LOGO)
- ------------------------
LOAN AGREEMENT
THIS AGREEMENT is made this 10th day of July, 1998, by PREMIER BANK, (the
"Bank"), and the undersigned, DYNASIL CORPORATION OF AMERICA, INC. AND
SUBSIDIARY ("Borrower"), with its principal office at 385 COOPER ROAD, WEST
BERLIN, NJ 08091.
A. Credit Accommodations. Subject to the terms and conditions hereinafter set
forth, Bank agrees to extend to Borrower the following credit
accommodation(s) ("Credit Accommodations(s)"), which shall be evidenced by
promissory note(s) ("Note(s)"):
1. A Line of Credit, expiring on DEMAND, 19____, under which the Bank, in
its discretion, will make advances to Borrower from time to time and
Borrower may borrow, repay and reborrow from Bank subject to the following
terms:
a. Maximum outstanding principal amount of advances - $300,000.00.
b. Interest on the outstanding principal balance at the following
rate:
i. Bank's base rate of interest plus 0%.
ii. Interest payable (monthly/quarterly) commencing when billed,
19____.
iii. Borrower shall reduce the amount of the outstanding principal
under the Line of Credit to zero for one consecutive 30-day
period during each year after the date hereof while the Line
of Credit is in effect.
c. BORROWER ACKNOWLEDGES THAT THE LINE OF CREDIT AND ANY ADVANCE
THEREUNDER IS PROVIDED SOLELY AT BANK'S DISCRETION AND THE LINE OF
CREDIT MAY BE TERMINATED AT ANY TIME AND FOR ANY REASON WHATSOEVER.
2. A Term Loan subject to the following terms:
a. Principal amount - $ N/A.
b. Interest on the outstanding principal balance at the following
rate:
i. Bank's base rate of interest plus N/A%.
ii. Other rate terms - N/A
c. Payment terms:
i. Interest payable monthly commencing N/A, 19___.
ii. Principal payable in N/A consecutive (monthly/quarterly)
installments in the amount of $N/A each, or in the following
amounts, commencing, N/A, 19___, with a final installment in
the amount of the unpaid balance on N/A, 19___.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3. Borrower shall pay the following fees to Bank for the Credit
Accommodations: None
4. When interest hereunder is based on Bank's base rate, it shall be based
upon the rate of interest publicly announced from time to time by Bank in
Doylestown, Pennsylvania as its "Base Rate." The Bank's Base Rate is
defined as the then-published Wall Street Journal Prime Rate of Interest in
effect from time to time plus one percent. The applicable rate will change
when and as Bank changes its base rate.
5. Interest and any fees shall be calculated on the basis of a 360-day year
and the actual number of days elapsed.
6. A late fee will be charged on the portion of any payment made more than
twenty (20) days after it is due equal to five (5%) percent of the unpaid
amount or twenty-five ($25.00) dollars, whichever is greater.
B. Representations and Warranties. Borrower represents and warrants and, at
the request of Bank will provide a legal opinion (stating that subparagraph
1 of this Section is correct and that subparagraphs 2, 3, 4, and 5 are
correct to the best of counsel's knowledge), that:
1. Borrower is a (corporation) duly organized, validly existing and
in good standing under the laws of the state of its organization, and
has the necessary power and authority to enter into and perform this
Agreement, the Note(s) and all other documents required by Bank in
connection herewith; the execution and performance thereof have been duly
authorized by all necessary proceedings, and upon their execution and
delivery, they will be valid, binding and enforceable in accordance with
their terms; Borrower's execution and performance of this Agreement will
not violate any laws or regulations applicable to Borrower, any
organizational documents of Borrower or any agreements (including any
provisions of subordinated debt) to which Borrower is a party or by which
Borrower or any of its properties is bound; and any consents or approval
required in connection with this Agreement have been obtained.
2. The proceeds of the Credit Accommodation(s) will be used only in
connection with Borrower's business, for the following purposes: Support
cash flow needs.
3. All financial statements, statements as to ownership of Borrower and its
assets, and other statements and information delivered to Bank were
prepared in accordance with generally accepted accounting principles
consistently applied, are true and correct, disclose all presently
outstanding indebtedness or obligations of Borrower, including contingent
obligations and obligations under leases of property from others, and all
liens and encumbrances against its properties and assets; and there have
been no adverse changes in Borrower's financial condition or business since
the date of such statements.
4. There are no actions, suits, proceedings or claims pending or threatened
against Borrower or its property; and Borrower's business is in compliance
with all applicable laws and regulations.
5. Any debt of Borrower is not now and at closing hereunder will not be in
default under any provision thereof.
C. Conditions. The obligation of Bank to make the first advance under the
Credit Accommodation(s) shall be subject to Bank's receipt of the following
collateral security and/or duly executed documents, each in form and
substance satisfactory to Bank:
1. The Note(s) executed by Borrower.
2. A certificate as to Borrower's actions authorizing the Credit
Accommodation(s) (i.e., certified Board of Directors resolutions if
Borrower is a corporation; certified copy of partnership agreement if
Borrower is a partnership).
3. The following collateral security, subordination and guaranty documents
including any documents and actions required to perfect any collateral
security: 1st Lien on A/R, inventory, machinery & equipment, leasehold
improvements and 1st mortgage on 385 Cooper Road, West Berlin, NJ.
4. Bank shall have no obligation to make loans hereunder if any Event of
Default described in paragraph G hereof has occurred.
D. Affirmative Covenants. Borrower covenants and agrees that so long as there
is outstanding indebtedness of Borrower to Bank under the Credit
Accommodation(s) or otherwise, Borrower shall:
1. Maintain current assets in excess of current liabilities by at least
$------; maintain current assets of at least -----% of current liabilities;
maintain total liabilities in an amount not in excess of -----% of tangible
net worth; and maintain the following additional financial ratios: -----
---- such foregoing financial terms to be defined in accordance with
generally accepted accounting principles consistently applied.
2. Maintain free balances in demand deposit accounts at Bank in average
amounts calculated as follows: -----------------
3. Deliver to Bank financial statements, including a balance sheet and
income statement and such other financial statements and reports as
requested by Bank, within ninety (90) days of the end of each fiscal year
and within forty-five (45) days of the end of each fiscal quarter; and
permit representatives of Bank to examine and audit Borrower's (and its
subsidiaries) books and records and to inspect Borrower's facilities and
properties. All such reports shall be prepared in accordance with generally
accepted accounting principles consistently applied, certified by a public
accountant satisfactory to Bank. Upon written request of Bank, Borrower
will provide this information in consolidating as well as consolidated
form.
4. Notify Bank of any litigation, proceedings or events involving Borrower
which might have a material adverse effect on Borrower's financial
condition or business or the payment of its indebtedness under the Credit
Accommodation(s).
<PAGE>
5. Keep and maintain (and require subsidiaries to keep and maintain) all of
its property and assets in good order and repair and maintain fire, public
liability and other insurance in coverages and amounts customary for
Borrower's business or as Bank from time to time may require and deliver to
Bank certificates of all such insurance in effect; and cause all such
policies covering property given as security for the Credit
Accommodation(s) to have loss payee endorsements in favor of Bank and not
to be subject to cancellation unless thirty (30) days prior written notice
thereof shall have been received by Bank.
6. Pay (and require subsidiaries to pay) and discharge when due all taxes,
assessments or other governmental charges imposed on it or any of its
properties, unless the same are currently being contested in good faith by
appropriate proceedings and adequate reserves are maintained therefor.
E. Negative Covenants. So long as there is outstanding indebtedness of
Borrower to Bank under the Credit Accommodation(s) or otherwise, Borrower
and subsidiaries shall not, without the prior written consent of Bank:
1. Incur any indebtedness, including obligations under capitalized leases,
except indebtedness owing to Bank, existing indebtedness or trade
indebtedness arising in the ordinary course of business; guarantee or
otherwise become liable, directly or indirectly, for the indebtedness or
obligations of another party; make any loans or advances to others; or
create, permit or suffer the creation of any liens, security interests or
any other encumbrances on any of its property, real or personal, except
liens, security interests or encumbrances in favor of Bank or existing on
the date hereof and reported to Bank.
2. Convey, lease, sell, transfer or assign any assets except in the
ordinary course of business for value received; liquidate or discontinue
its normal operations with intention to liquidate; enter into any merger or
consolidation; or acquire assets or stock or other equity interest of
another entity except in the ordinary course of business.
3. Pay any dividends or make any for of withdrawal from capital, or make
any other distributions on, or repurchase, redeem or otherwise acquire, any
of its outstanding stock, partnership interests or other equity interests.
4. Sell, assign, transfer or dispose of any of its accounts or notes
receivable, with or without recourse, except to Bank.
5. Make loans or advances to others.
6. Become a guarantor, surety or otherwise liable for the debts or
obligations of others, except to Bank, and except as an endorser of checks
or drafts negotiated in the ordinary course of business.
7. Incur, create or assume any commitment to make any lease payments except
- - - - - - - - - -
__________________________________________________________________________.
Lease payments are defined as any direct or indirect payment or payments
whether as rent or otherwise, including fees, service or finance charges,
under any lease, rental or other arrangement for the use of property of any
other person and whether or not there is an option to purchase.
8. Enter into any sale-leaseback transactions.
9. Prepay any amounts not required or cause to be accelerated any amounts
on any outstanding indebtedness now existing or hereafter arising, except
to Bank.
10. Pay salaries, withdrawals or compensation to officers or partners of
Borrower in an amount exceeding $ - - - - - - - - - -
__________________________________________
in the aggregate per year.
11. Expend for fixed assets during any one fiscal year an amount in excess
of- - - - - - - - - -
_______________________________________________________________________
________________________ DOLLARS ($ - - - - - - - - - -
______________________________) other
than any fixed assets purchased with the proceeds of loans by Bank to
Borrower.
12. If Borrower is a corporation, sell, issue, or agree to sell or issue,
any shares (voting, non-voting, preferred or common of any class) or
Borrower, or purchase such shares except under such circumstances as will
in the opinion of Bank not result in a material adverse change in the
financial or business condition of Borrower or the value of any security
held by Bank.
F. Additional Collateral. As additional collateral security for the payment of
Borrower's indebtedness and obligations to Bank under the Credit
Accommodation(s) or otherwise, Borrower hereby grants to Bank a security
interest in and lien upon all funds, balances or other property of any kind
of Borrower, or in which Borrower has an interest, now or hereafter in the
possession, custody or control of Bank.
G. Default. Upon the occurrence of any of the following events of default,
Bank may declare the entire unpaid balance, principal and interest, of all
indebtedness of Borrower to Bank under the Credit Accommodation(s) or
otherwise to be immediately due and may exercise all available rights and
remedies under applicable law and agreements:
1. Failure to pay when due any principal or interest or any other sum
payable to Bank under the Credit Accommodation(s) or otherwise.
2. If any representation or warranty made herein or in connection herewith
or in any statement, certificate or other document furnished hereunder
proves to be or becomes false or untrue.
3. Default under any other provision contained herein or in any other
agreement or document executed or delivered in connection herewith and the
continuation of such default, unless cured to Bank's satisfaction, for
twenty (20) days.
4. Default by Borrower in the payment or performance of any material
obligation or indebtedness to another, whether now or hereafter incurred.
5. Any default by Borrower or by any guarantor or surety for Borrower under
the provisions of any note, security agreement, mortgage or other
instrument or agreement incorporated by reference into or executed in
connection with the Agreement or in connection with any other obligation of
Borrower or any guarantor or surety for Borrower to Bank.
6. The determination by an officer of Bank, in such officer's sole and
absolute discretion, that a material, adverse change in the business or
financial condition of Borrower, or of any guarantor or surety for
Borrower, has occurred.
7. If bankruptcy, insolvency, reorganization, receivership, arrangement or
other similar proceedings are commenced or filed by or against Borrower
under state or federal law; or if Borrower shall (i) become insolvent
(which term is defined for purposes thereof as failure to meets its
obligations as the same fall due); (ii) make an assignment for the benefit
of creditor; (iii) apply for, consent to or suffer the appointment of a
custodian, receiver or trustee for any part of its property or assets; or
(iv) fail to satisfy or appeal any material judgment or attachment within
thirty (30) days from the date of entry.
H. Miscellaneous. No consent or waiver under this Agreement shall be effective
unless in writing signed by the party granting the consent or waiver. No
waiver of any default shall be deemed a waiver of any default thereafter
occurring. This Agreement and all documents executed hereunder shall be
binding upon and shall inure to the benefit of all parties hereto and their
respective heirs, personal representatives, successors and assigns, may
only be modified or amended by a written document executed by the parties,
and shall be governed by Pennsylvania law. Borrower shall pay all fees and
costs incurred by Bank (including fees and costs of its legal counsel) in
connection with the creation and perfection of any collateral security
required hereunder or the collection or enforcement of the indebtedness and
collateral security hereunder. Bank is hereby irrevocably appointed
Borrower's attorney-in-fact to do all acts and things which Bank may
determine are necessary to perfect and continue perfected the security
interests created pursuant to this Agreement and to protect and facilitate
the collection of amounts due on any accounts receivable assigned to Bank
and any other property constituting security. Borrower will pay any stamp
taxes or any taxes in the nature thereof which may be payable in connection
with the execution and delivery of the promissory notes and other
documents. Borrower hereby forever indemnifies and saves Bank harmless
against any and all liability which Bank may incur or which may be assessed
against Bank with respect to such tax. The terms of any notes, security
agreements or other instruments executed pursuant to this Agreement are
expressed incorporated herein and made a part hereof; provided, however,
that in any case where a term or condition contained in such note, security
agreement, or other instrument cannot be construed (despite every effect to
do so) as consistent with the terms of this Agreement, this Agreement shall
govern. If any term of this Agreement shall be held to be invalid, illegal
or unenforceable, the validity of all other terms hereof shall in no way
be affected thereby. This Agreement shall be in full force and effect for a
term commencing on the date hereof and terminating at such time as Borrower
shall have satisfied in full or been released from all of Borrower's
liabilities and obligations to Bank hereunder.
I. Additional Terms. Borrower hereby agrees to the following additional terms
attached hereto and forming a part hereof:
[1. Additional Terms Schedule] See attached Term/Conditions
IN WITNESS WHEREOF, the undersigned have executed this Agreement the day and
year first above written.
<TABLE>
<S> <C>
Attest or Witness: Dynasil Corporation of America, Inc. and Subsidiary
------------------------------------------------------
[Name of Borrower]
By Charles J. Searock, Jr. By John Kane
----------------------- ---------------------------------------------------
Title: Charles J. Searock, Jr., Title: John Kane, CFO
President
PREMIER BANK
By Suzanne M. Hartshorne
--------------------------------------------------
Title: Suzanne M. Hartshorne, Vice President
</TABLE>
<PAGE>
PREMIER BANK (LOGO)
PROMISSORY NOTE
(JUDGMENT)
Doylestown, Pennsylvania
July 10, 1998
$300,000.00
FOR VALUE RECEIVED, each of the undersigned unconditionally promises to
pay to PREMIER BANK, (the "Bank"), or order, at its office at 379 N. Main
Street, Doylestown, PA, or at any other office of the Bank, the principal sum of
Three Hundred Thousand Dollars and 00/100 United States Dollars ($300,000.00),
together with interest in arrears on the unpaid principal balance from time to
time outstanding from the date hereof until the entire principal amount due
hereunder is paid in full at the rates hereinafter provided.
Principal shall be payable as follows:
/x/ If this box is checked, principal shall be payable on demand.
/ / If the box is checked, principal shall be payable in a single
payment on ___________________________.
/ / If this boxed is checked, principal shall be payable in / / monthly
/ / quarterly / / annual consecutive installments commencing
____________________ and on the same date of each installment period
thereafter, in the following amounts:______________________________
___________________________________________________________________
___________________________________________________________________
except that the last installment, payable on ______________________,
shall be in an amount equal to the principal balance then remaining
outstanding.
Interest shall be payable as follows until this Note is paid in full:
/x/ If this box is checked, monthly on the first day of each month
commencing when billed.
/ / If this box is checked, quarterly on the first day of each quarter
commencing _________________________________.
/ / If this box is checked, semi-annually on the first day of each six
months commencing __________________________.
Interest shall be calculated on the basis of the actual number of days
elapsed over a year of 360 days and shall be payable, before and after maturity
or judgment or entering of a verdict, at the following rate:
/ / If this box is checked, the interest rate shall be ________________
percent (_______%) per annum.
/x/ If this box is checked, the interest rate shall be the Prime Rate
(as defined below) plus zero percent (+ 0 % ) per annum.
Prime Rate means the floating rate of interest publicly announced from
time to time by the Bank in Doylestown, Pennsylvania as its "prime rate", with
the rate charged hereunder changing on the same day on which any change in the
Prime Rate is effective. The obligors under this Note hereby acknowledge that
the Prime rate is not tied by the Bank to any external rate of interest or index
and does not necessarily reflect the lowest rate of interest actually charged by
the Bank to any particular class or category of customer.
This Note may be prepaid in whole or in part at any time; provided that
(a) any prepayment shall include accrued interest to the date of prepayment on
the amount prepaid, and (b) if principal hereunder is payable in installments,
any principal prepaid shall be applied to installments in their inverse order of
maturity.
The Bank is hereby granted a continuing security interest in all
property of the undersigned now or hereafter in the possession of the Bank or
any of its affiliates in any capacity whatsoever, including, but not limited to,
any balance or share of any deposit, trust or agency account, as security for
the payment of this Note and any other liabilities of the undersigned to the
Bank, which security interest shall be enforceable and subject to all the
provisions of this Note, as if such property were specifically pledged hereunder
and the proceeds of such property may be applied at any time and without notice
to any of the undersigned's liabilities. Each of the undersigned hereby
authorizes the Bank to debit any deposit account maintained by any of the
undersigned with the Bank for accrued interest and principal, as and when due.
Such authorization shall not affect the undersigned's obligations to pay when
due all amounts payable hereunder whether or not there are sufficient funds
therefor in any such accounts. The foregoing shall be in addition to, and not in
limitation of, any rights of set-off the Bank may have.
The occurrence of any of the following events shall constitute an
Event of Default under this Note: (i) the failure to make any payments, whether
principal, interest or other payment, under any of the undersigned's
liabilities when the same is due, (ii) death of (if an individual), dissolution
(if a corporation or partnership), suspension of business for any reason or
insolvency (however such insolvency may be evidenced) of any obligor hereunder,
(iii) bankruptcy, insolvency, reorganization, receivership, arrangement or other
similar proceedings are commenced or filed by or against any obligor under state
or federal law; or any obligor shall (a) become insolvent (which term is defined
for purposes hereof as failure to meet its obligations as the same fall due);
(b) make an assignment for the benefit of creditors; or (c) apply for, consent
to or suffer the appointment of a custodian, receiver or trustee for any part of
its property or assets; (iv) the sale, lease, transfer or other disposition,
whether voluntary or involuntary, of all or a substantial part of any obligor's
assets or property, (v) the issuance of a writ, warrant, distraint or order of
attachment or garnishment against any obligor's property or assets, (vi) the
commencement of foreclosure proceedings or any proceedings for the enforcement
of money judgments against any obligor (vii) the occurrence of an event of
default as described and defined in any instrument securing the obligations
hereunder or any agreement under which this Note may be issued or any instrument
evidencing any indebtedness of any of the undersigned to the Bank and the
expiration of any period provided in such instrument to cure such default;
(viii) any of the undersigned shall fail to pay any indebtedness due to third
parties beyond any applicable grace period or (ix) any change shall occur in any
obligor's financial or business condition which, in the Bank's sole judgment, is
materially adverse. Upon the happening of any Event of Default, or upon demand,
if applicable, the holder hereof may declare the entire unpaid principal balance
under this Note and under any and all other liabilities of the undersigned to
the holder hereof immediately due and payable without notice, demand or
presentment and may exercise, without notice, demand or presentment, any of its
rights under any instruments securing the obligations hereunder. In the event
that the Bank or any subsequent holder of this Note shall exercise or endeavor
to exercise any of its remedies hereunder or under any instruments securing the
obligations hereunder, the undersigned shall pay on demand all reasonable costs
and expenses incurred in connection therewith, including, without limitation,
attorney's fees (which attorneys may be employees of the Bank), and the bank may
take judgment for all such amounts in addition to all other sums due hereunder.
Irrespective of the exercise or non-exercise of any of the aforesaid rights, if
any payment of principal or interest hereunder is not paid in full when the same
is due the undersigned shall pay to the holder a fee on such unpaid amount equal
to five percent (5%) of such late payment.
<PAGE>
Each of the undersigned waives presentment for payment, protest and
demand, and notice of protest, demand and/or dishonor and nonpayment of this
Note, notice of any event of default under any instrument securing the
obligations hereunder, except as specifically provided therein, and all other
notices or demand otherwise required by law that the undersigned may lawfully
waive. Each obligor expressly agrees that this Note, or any payment hereunder,
may be extended from time to time, without in any way affecting the liability of
any obligor. No unilateral consent or waiver by the Bank with respect to any
action or failure to act which, without consent, would constitute a breach of
any provision of this Note shall be valid and binding unless in writing and
signed by the Bank.
The rights and obligations of the undersigned and all provisions hereof
shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania.
Each of the undersigned hereby authorizes the Bank to date this Note as
of the date when the initial advance hereunder is made and to complete this Note
in any other particulars according to the terms of the Bank's understanding with
the undersigned. Any consent, agreement, instruction or request pertaining to
any matter under or in connection with this Note signed by any one of the
undersigned shall be binding upon all of them.
THE FOLLOWING SETS FORTH A WARRANT OF AUTHORITY FOR ANY ATTORNEY TO
CONFESS JUDGMENT AGAINST THE UNDERSIGNED. IN GRANTING THIS WARRANT OF ATTORNEY
TO CONFESS JUDGMENT AGAINST THE UNDERSIGNED, THE UNDERSIGNED, FOLLOWING
CONSULTATION WITH (OR DECISION NOT TO CONSULT) SEPARATE COUNSEL FOR THE
UNDERSIGNED AND WITH KNOWLEDGE OF THE LEGAL EFFECT HEREOF, HEREBY WAIVES ANY AND
ALL RIGHTS THE UNDERSIGNED HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY
FOR HEARING UNDER THE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE
COMMONWEALTH OF PENNSYLVANIA. IT IS SPECIFICALLY ACKNOWLEDGED THAT THE BANK HAS
RELIED ON THIS WARRANT OF ATTORNEY IN GRANTING THE FINANCIAL ACCOMMODATIONS
DESCRIBED HEREIN.
EACH OF THE UNDERSIGNED HEREBY EMPOWERS ANY PROTHONOTARY CLERK OF COURT
OR ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR ANY OF THE UNDERSIGNED IN ANY
AND ALL ACTIONS WHICH MAY BE BROUGHT HEREUNDER, AND CONFESS JUDGMENT AGAINST ANY
OF THE UNDERSIGNED FOR ALL OR ANY PART OF THE UNPAID PRINCIPAL BALANCE HEREUNDER
AND ACCRUED INTEREST, TOGETHER WITH OTHER EXPENSES INCURRED IN CONNECTION
THEREWITH AND ATTORNEYS' FEES OF 5% OF THE TOTAL OF THE FOREGOING SUMS, BUT IN
NO EVENT LESS THAN $3,000, AND FOR SUCH PURPOSE THE ORIGINAL OR ANY PHOTOCOPY OF
THIS NOTE SHALL BE A GOOD AND SUFFICIENT WARRANT OF ATTORNEY. SUCH AUTHORIZATION
SHALL NOT BE EXHAUSTED BY ONE EXERCISE THEREOF, BUT JUDGMENT MAY BE CONFESSED AS
AFORESAID FROM TIME TO TIME. EACH OF THE UNDERSIGNED HEREBY WAIVES ALL ERRORS
AND RIGHTS OF APPEAL AS WELL AS RIGHTS TO STAY OF EXECUTION AND EXEMPTION OF
PROPERTY IN ANY ACTION TO ENFORCE ITS LIABILITY HEREON. EACH OF THE UNDERSIGNED
CONSENTS TO THE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF PENNSYLVANIA
AND AGREES TO BUCKS COUNTY AS APPROPRIATE VENUE IN ANY SUIT OR ACTION HEREON.
If this Note is signed by more than one maker, the liability of each
shall be joint and several. EACH OF THE UNDERSIGNED HEREBY WAIVES TRIAL BY JURY
AND THE RIGHT TO INTERPOSE ANY COUNTERCLAIM OR OFFSET OF ANY NATURE OR
DESCRIPTION IN ANY LITIGATION RELATING TO THIS NOTE OR ANY LIABILITY HEREUNDER
OR ENFORCEMENT OR REMEDIES HEREUNDER. Any provision of this Note which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity of
enforceability of such provision in any other jurisdiction.
As used herein, the terms, "the undersigned" shall mean the undersigned
or any one or more of them; "liabilities" shall mean any and all debts and
obligations of the undersigned owed to the Bank whether such shall be primary,
direct, contingent, sole, joint or several, due or to become due, or that have
or may hereafter be contracted or incurred; and "obligor' shall mean each of the
undersigned and any co-signer, endorser, guarantor or surety of or for the
undersigned's liabilities.
Address: 385 Cooper Road Dynasil Corporation of America, Inc.
--------------- ---------------------------------------------
West Berlin, NJ and Subsidiary
---------------
/s/ Charles J. Searock, Jr.
---------------------------------------------
Charles J. Searock, Jr., President
/s/ John Kane
---------------------------------------------
John Kane, CFO
EXHIBIT 10.02
LOAN AGREEMENT AND ASSOCIATED DOCUMENTS DATED JULY 10, 1998
WITH PREMIER BANK, FOR A $1,300,000 LINE OF CREDIT
<PAGE>
This instrument was prepared by:
Premier Bank
- ----------------------------------------------
(Name)
379 North Main Street PREMIER BANK (LOGO)
- ---------------------------------------------- -----------------------
(Address)
Doylestown, PA 18901
- ----------------------------------------------
to whom the recorded copy of this instrument is to be returned.
MORTGAGE
THIS MORTGAGE MADE THIS 10th day of July, 1998, is between,
DYNASIL CORPORATION OF AMERICA, INC. AND SUBSIDIARY, with an address of 385
COOPER ROAD, WEST BERLIN, NJ (each jointly and severally, if more than one
person, and hereinafter referred to as "Mortgagor") and Premier Bank, the
Mortgagee ("Bank"), with a mailing address of 379 N. Main Street, Doylestown, PA
18901-0818.
In consideration for and to secure payment and performance to Bank of all of the
Obligations, as that term is defined in subparagraphs (a) through (d) below,
Mortgagor has granted, bargained, sold, conveyed, released, assigned,
transferred, pledged, mortgaged and confirmed, and by these presents does hereby
grant, bargain, sell, convey, release, assign, transfer, pledge, mortgage and
confirm unto Bank, its successors and assigns, forever: ALL THAT CERTAIN real
estate situated in the County of Camden, State of New Jersey, known and
designated as 385 Cooper Road, Township of Berlin, conveyed to Mortgagor by
Deed dated 04/18, 1966, duly recorded in the office for recording of deeds in
said County on 04/21, 1966 at Deed Book 2884, Page 54, as the Premises are
therein described and, if necessary, as more particularly described on Exhibit
"A" attached hereto and made a part hereof (hereinafter the "Premises");
Lot & Block 3, 4 & 1910.
THE PREMISES SHALL include all right, title and interest of Mortgagor in and to
all present and future structures, buildings and improvements located thereon,
together with all common areas, streets, lanes, alleys, passageways, passages,
ways, water courses, strips and gores of land, easements, estates, rights,
titles, interests, liberties, privileges, tenements, hereditaments and
appurtenances, whatsoever therunto belonging to or in any way made appurtenant
thereto; all leases and subleases of all or any part of the Premises and rights
of payment thereunder; the air space above and right to use the air space above,
and the drainage, crops, timber, agricultural, horticultural, mineral, water,
oil and gas rights with respect to the Premises, at law or in equity, all
machinery, apparatus, equipment, furniture, fixtures, including without
limitations, trade fixtures, goods, appliances and other property of every kind,
nature and description whatsoever, now or hereafter located in, on or about, or
attached to or used in connection with, the Premises, together with any and all
replacements and substitutions thereof and all accessories, parts or accessions
thereto now or hereafter owned by the Mortgagor or in which Mortgagor has or may
obtain any interest, and all awards, damages, payments and/or claims arising out
of any eminent domain or condemnation proceeding, damage or injury to any part
of the Premises and/or any buildings, structures, or improvements thereon (the
Premises, together with all of the foregoing, is hereinafter referred to as the
"Mortgaged Property");
TO HAVE AND TO HOLD the Mortgaged Property hereby conveyed or mentioned and
intended so to be, unto Bank, to its own use, forever.
PROVIDED, ALWAYS, that this instrument is upon the express condition that, if
Mortgagor promptly satisfied all of the Obligations, as hereinafter defined, in
accordance with the provisions of the Loan Documents, as hereinafter defined,
and this Mortgage, at the times and in the manner specified, without deduction,
fraud or delay, and if all the agreements, conditions, covenants, provisions and
stipulations contained therein and in this Mortgage and in the Loan Documents
are fully performed and complied with, then this Mortgage and the estate hereby
granted shall cease, determine and become void.
As used in this Mortgage, "Obligations" means any or all of the following:
(a) The indebtedness, liabilities and obligations of Mortgagor to
Bank, including all present and future advances, arising under a
certain Note dated ______________, 19____, in the original
principal amount of ONE MILLION THREE HUNDRED THOUSAND AND 00/100
Dollars ($1,300,000.00), plus interest, costs and charges thereon,
and/or any amendment, modification, refinancing, renewal,
substitution or extension of the Note (hereinafter the "Note"),
and all other liabilities of Mortgagor to Bank described in any
agreements, documents and instruments executed in connection
therewith (hereinafter collectively referred to as the "Loan
Documents");
(b) All other existing and future indebtedness, liabilities and
obligations of Mortgagor to Bank whether sole, joint or several,
matured or unmatured, direct or indirect, absolute or contingent,
or any nature whatsoever, and out of whatever transactions
arising, including, without limitation, any debt, liability or
obligation owing from Mortgagor to others which Bank may obtain by
assignment or otherwise, excepting only any indebtedness
constituting "Consumer Credit" as that term is defined in
Regulation Z, 12 C.F.R. Section 226.1 et seq.;
(c) The costs of curing any Event of Default set forth in this
Mortgage or in the Loan Documents which the Bank elects to cure;
and
(d) The reasonable costs and expenses, including attorneys' fees
incurred by Bank in enforcing any
<PAGE>
of the obligations of Mortgagor specified in (a), (b) and (c)
above.
MORTGAGOR REPRESENTS, COVENANTS AND WARRANTS to and with Bank that, until the
Obligations secured hereby are fully paid and performed:
1. Payment and Performance. Mortgagor shall pay to Bank in accordance
with the terms of the Note, this Mortgage and the other Loan
Documents, the principal, interest and other sums therein and herein
set forth and shall perform and comply with all the agreements,
conditions, covenants, provisions and stipulations of the Note, this
Mortgage and the Loan Documents.
2. Warranty of Title. Mortgagor warrants that Mortgagor possesses good
and marketable fee simple title to the Premises, and has all power and
authority to mortgage the Mortgaged Property to Bank and to grant a
security interest therein in the manner set forth herein.
3. Maintenance of Mortgaged Property. Mortgagor shall keep and maintain
or cause to be kept and maintained the Mortgaged Property, including
all buildings and improvements now or at any time hereafter erected on
the Premises and the sidewalks and curbs abutting them, in good order
and condition and repair and shall abstain from and shall not permit
the commission of waste of, in or about the Mortgaged Property.
4. Insurance. Mortgagor shall keep the Mortgaged Property continuously
insured against fire and such other hazards in such amounts as may be
required by Bank from time to time. All policies and insurance shall
be issued by companies acceptable to Bank, and shall contain a
standard mortgagee clause, in favor of Bank, and shall provide for at
least thirty (30) days prior written notice of cancellation or
reduction in coverage to Bank, all of which policies are hereby
assigned to Bank as additional security for the Obligations. If Bank
shall become the owner of the Mortgaged Property or any part thereof
by foreclosure or otherwise, such policies, including all right, title
and interest of Mortgagor thereunder, shall become the property of
Bank. At least thirty (30) days prior to the expiration date of any
insurance policy, Mortgagor shall deliver to Bank satisfactory
evidence of the renewal of such insurance and the payment of all
premiums therefor. In the event of any loss, Mortgagor will give
immediate notice thereof to Bank and Bank may make proof of loss on
behalf of Mortgagor. Each insurance company concerned is hereby
authorized and directed to make payments under any such policies
directly to Bank, instead of Bank and Mortgagor jointly, and Mortgagor
hereby irrevocably appoints Bank as Mortgagor's attorney-in-fact to
endorse in Mortgagor's name any checks or drafts issued thereon. Bank
shall have the right to retain and apply the proceeds of any such
insurance, at its reasonable election, to reduction of the
Obligations, or to restoration and repair of the property damaged.
5. Taxes and Other Charges. Mortgagor shall pay when due and before
interest or penalties shall accrue thereon, all taxes, charges,
assessments and other governmental charges of any kind whatsoever
including electricity, water and sewer rents, levied or assessed
against the Mortgaged Property and will deliver receipts therefore to
Bank upon request, and shall pay when due all amounts secured by any
prior lien on the Mortgaged Property.
6. Inspection. Bank and any persons authorized by Bank shall have the
right at any time, upon reasonable notice to Mortgagor, to enter the
Premises at a reasonable hour to inspect and photograph its condition
and state of repair.
7. Declaration of No Set-Off. Within one (1) week after request to do so
by Bank, Mortgagor shall certify to Bank or to any assignee or
proposed assignee of this Mortgage, in writing duly acknowledged, the
amount of principal, interest and other charges then owing on the
Obligations and on any obligations secured by prior liens upon the
Mortgaged Property, if any, and whether there are any set-offs or
defenses against them.
8. Required Notices. Mortgagor shall notify Bank promptly of the
occurrence of any of the following:
(a) a fire or other casualty causing damage to all or any part of the
Mortgaged Property;
(b) receipt of notice of eminent domain proceedings or condemnation
of all or any part of the Mortgaged Property and Mortgagor hereby
grants Bank an irrevocable power of attorney to appear and act
for and on behalf of Mortgagor in any and all such proceedings;
(c) receipt of notice from any governmental authority relating to the
structure, use or occupancy of the Mortgaged Property or any real
property adjacent to the Mortgaged Property;
(d) a change in the occupancy of the Mortgaged Property;
(e) receipt of any notice from the holder of any lien or security
interest in all or any part of the Mortgaged Property; or
(f) commencement of any litigation affecting the Mortgaged Property.
9. Mortgage and Liens. Without the prior written consent of Bank,
Mortgagor will not create or permit to be created or filed against the
Mortgaged Property, any mortgage lien or other lien or security
interest superior or inferior to the lien of this Mortgage.
10. No Transfer. Without the prior written consent of Bank, Mortgagor will
not cause nor permit any transfer of legal or equitable title to,
beneficial interest in, or any estate or interest in the Mortgaged
Property, or any part thereof, voluntarily or by operation of law,
whether by sale, exchange, lease, conveyance, merger, consolidation,
the granting of any lien or security interest or otherwise, or any
agreement to do any of the foregoing.
11. Events of default. Any one or more of the following events shall
constitute an Event of Default hereunder:
(a) Failure of Mortgagor to make any payment of principal or interest
or any other sum promptly when due on any of the Obligations;
(b) Mortgagor's nonperformance of or noncompliance in any material
respect with any other agree-
<PAGE>
ments, conditions, covenants, provisions or stipulations
contained in the Note, ???? Mortgage or any of the Loan
Documents;
(c) Any signature, statement, representation or warranty made in the
Note, the Loan Documents or this Mortgage, or in any financial
statement, certificate, application, request or other document
furnished to Bank by Mortgagor at any time prior to, now or
hereafter, is not true and correct in any material respect when
made or delivered;
(d) The occurrence of any default under the Note or any of the Loan
Documents;
(e) The commencement by or against any Mortgagor of any proceeding
under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, the making by any Mortgagor of any
general assignment for the benefit of creditors, the failure of
any Mortgagor generally to pay debts as such debts become due, or
the taking of action by any Mortgagor in furtherance of any of
the foregoing; or
(f) The transfer or sale of any part of the Mortgaged Property or any
interest therein, without the Bank's prior written consent.
12. Remedies of Bank.
(a) Upon the occurrence of any Event of Default, the entire unpaid
balance of the Obligations, including interest as has accrued and
as may thereafter accrue thereon, and all other sums secured by
this Mortgage, shall become immediately due and payable, at the
option of Bank, without notice to or demand upon Mortgagor or any
other person; and thereupon, in addition to all other rights or
remedies available under the Note or any of the Loan Documents,
or at law or in equity, bank may:
(i) forthwith bring an action of mortgage foreclosure hereon,
and may proceed to judgment and execution to recover the
balance due on the Obligations and any other sums that may
be due thereunder, including attorney's fees, costs of suit
and costs of sale to the extent, if any, provided in the
Obligations and permitted by law; and
(ii) enter into possession of the Premises, with or without legal
action, lease the same, collect all rents and profits
therefrom and, after deducting all costs of collection and
administrative expenses, apply the net rents and profits to
the payment of taxes and other necessary maintenance and
operational costs (including agents' fees and attorneys'
fees) or on account of the Obligations, in such order and in
such amounts as Bank in its sole discretion may elect, and
Bank shall be liable to account only for rents and profits
actually received by Bank; and
(b) Any real estate sold hereunder or on any other judicial
proceedings, may be sold in one or more parcels, in such order
and manner as Bank, in its sole discretion, may elect.
13. Rights and Remedies Cumulative. The rights and remedies of Bank as
provided in the Note, in this Mortgage and the Loan Documents shall
be cumulative and concurrent ? may be pursued separately, successively
or together against Mortgagor, against the Mortgaged Property, or any
other person liable hereunder or thereunder, at the sole discretion of
Bank, and may be exercised as often as occasion therefor shall arise.
The failure of Bank to exercise any right or remedy on any one or more
occasions shall in no event be construed as a waiver or release
thereof.
14. Mortgagor's Waivers. Mortgagor hereby waives and releases to the
extent permitted by law:
(a) All errors, defects and imperfections in any proceeding
instituted by Bank under the Note or this Mortgage, and/or the
Loan Documents;
(b) All benefits that might accrue to Mortgagor by virtue of any
present or future law exempting the Mortgaged Property, or any
part of the proceeds arising from any sale thereof, from
attachment, levy or sale on execution, on providing for any stay
of execution, exemption from civil process or extension of time
for payment; and
(c) Unless specifically required herein, all notices of Mortgagor's
default or of Bank's election to exercise, or Bank's actual
exercise of any option under the Note or this Mortgage.
15. Future Advances. Without limiting any other provisions of this
Mortgage, this Mortgage shal also secure additional loans or advances
hereafter made by Bank to or on behalf of Mortgagor. Nothing contained
herein shall impose any obligation on the part of bank to make any
such additional loan(s) to Mortgagor.
16. Communications. All communications required or permitted to be given
under this Mortgage, to be effective, shall be in writing, and shall
be hand delivered or sent by registered mail, postage prepaid, return
receipt requested, addressed to the addresses set forth above or at
such other address as the addressee may hereafter designate in writing
in the manner herein provided.
17. Severability. If for any reason whatsoever any part of this Mortgage
shall be declared void or invalid, by operation of law or otherwise,
in any jurisdiction, then as to such jurisdiction only, such part
shall be void and the remaining provisions of this Mortgage shall
remain in all other respects valid and enforceable, and such
invalidity shall not invalidate or render unenforceable such
provision in any other jurisdiction.
18. Binding Effect--Amendment. This Mortgage is binding upon and shall
inure to the benefit of Mortgagor and Bank, and their respective
successors and assigns. This Mortgage may not be changed or amended
except by agreement in writing signed by the party against whom
enforcement of the change or amendment is sought.
19. Applicable Law. The validity, construction, meaning and effect of the
provisions of this Mortgage shall be governed and determined by and
under the laws of the State of New Jersey.
<PAGE>
IN WITNESS WHEREOF, the Mortgagor has hereunto set his hand and seal the day and
year first above written. This instrument is intended to constitute an
instrument under seal.
(INDIVIDUALS SIGN BELOW) (CORPORATIONS OR PARTNERSHIPS SIGN BELOW)
Dynasil Corporation of America, Inc. and
Subsidiary
- ------------------------------- -----------------------------------------
Name Name of Corp. or Partnership
By: /s/ Charles J. Searock, Jr.
- ------------------------------- ------------------------------------
Name Charles J. Searock, Jr., President
By: /s/ John Kane
- ------------------------------- ------------------------------------
Name John Kane, CFO
- ------------------------------- -----------------------------------------
Name Title
- ------------------------------- -----------------------------------------
ATTEST/WITNESS Affix Corp. Seal
The undersigned, being authorized to do so, hereby certifies that the precise
address of the within name Mortgagee is 379 N. Main Street, Doylestown,
Pennsylvania 18901-0818.
By: /s/ Suzanne M. Hartshorne
-----------------------------------------
S.M.H.
The undersigned hereby acknowledges receipt without cost of a true and correct
copy of the within instrument on behalf of Mortgagor.
By: /s/ John Kane
-----------------------------------------
J.K.
ACKNOWLEDGMENT
STATE OF NEW JERSEY :
: SS
COUNTY OF :
On _______________________, 19______, before me, the undersigned, personally
appeared _______________________________________________________________________
known to me or satisfactorily proven to me to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged:
/ / that he/she/they executed the same for the purposes therein contained and
desire that it be recorded as such; or
/ / that they are the President/Vice President and the Treasurer/Assistant
Treasurer or Secretary/Assistant Secretary or General Partner of the
corporation/partnership named in the foregoing instrument and that, in such
capacities, being authorized so to do, executed the same for the purposes
therein contained by signing the name and affixing the seal of the said
corporation/partnership by themselves as such officers and desire that it
be recorded as such.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
-----------------------------------------
Notary Public
My Commission Expires:
<PAGE>
Premier Bank
379 N. Main Street
Doylestown, PA 18901
RE: Direct Checking Charge
With reference to my/our commercial term loan in the amount of $1,300,000.00,
please follow the ensuing instructions, which will remain in full force until
revoked by the undersigned.
This letter is your authorization to charge my/our checking account number 6619
at Premier Bank, Doylestown Branch, titled: Dynasil Corporation on a monthly
basis for principal and/or interest due. This procedure is to commence on August
- - Interest Only / September -. P+I.
Please send the detailed advice regarding said charge to me/us at the following
address:
385 Cooper Road
West Berlin, NJ 08091-9145
Very truly yours,
/s/ John Kane
- ----------------------
John Kane, CFO
- ----------------------
<PAGE>
Dynasil Corporation of America, Inc.
and Subsidiary
TERMS AND CONDITIONS:
BORROWER agrees to provide Bank with annual audited financial statements and tax
returns, as well as quarterly compiled financial statements.
BORROWER also agrees to provide Bank with monthly agings of receivables and
payables as well as an inventory break-down including raw materials work in
progress and finished goods.
BORROWER agrees to provide evidence of payment in full of the note receivable
from Hibshman Pacific of $175,000.00 prior to disbursement of bank funds.
IN THE EVENT Dynasil Corporation extends a Rights Offering, the first
$200,000.00 is to be applied directly to the principal outstanding term debt
with Premier Bank.
ADDITIONALLY, any use of proceeds of the Rights Offering in excess of $50,000
per three month period is to be approved by Bank in advance.
FINALLY, BORROWER is to submit to Bank to be approved by Bank, any projected use
of funds for capital improvements.
PREMIER BANK
/s/ Suzanne M. Hartshorne
----------------------------------------
Suzanne M. Hartshorne, Vice President
DYNASIL CORPORATION OF AMERICA,
INC., AND SUBSIDIARIES
/s/ John Kane
- --------------------------------------
John Kane, CFO
/s/ Charles J. Searock, Jr.
- --------------------------------------
Charles J. Searock, Jr., President
<PAGE>
Premier Bank (LOGO)
- ------------------------
LOAN AGREEMENT
THIS AGREEMENT is made this 10th day of July, 1998, by PREMIER BANK, (the
"Bank"), and the undersigned, DYNASIL CORPORATION OF AMERICA, INC. AND
SUBSIDIARY ("Borrower"), with its principal office at 385 COOPER ROAD, WEST
BERLIN, NJ.
A. Credit Accommodations. Subject to the terms and conditions hereinafter set
forth, Bank agrees to extend to Borrower the following credit
accommodation(s) ("Credit Accommodations(s)"), which shall be evidenced by
promissory note(s) ("Note(s)"):
1. A Line of Credit, expiring on N/A, 19____, under which the Bank, in its
discretion, will make advances to Borrower from time to time and Borrower
may borrow, repay and reborrow from Bank subject to the following terms:
a. Maximum outstanding principal amount of advances - $ N/A.
b. Interest on the outstanding principal balance at the following
rate:
i. Bank's base rate of interest plus N/A %.
ii. Interest payable (monthly/quarterly) commencing N/A, 19____.
iii. Borrower shall reduce the amount of the outstanding principal
under the Line of Credit to zero for one consecutive 30-day
period during each year after the date hereof while the Line
of Credit is in effect.
c. BORROWER ACKNOWLEDGES THAT THE LINE OF CREDIT AND ANY ADVANCE
THEREUNDER IS PROVIDED SOLELY AT BANK'S DISCRETION AND THE LINE OF
CREDIT MAY BE TERMINATED AT ANY TIME AND FOR ANY REASON WHATSOEVER.
2. A Term Loan subject to the following terms:
a. Principal amount - $1,300,000.00.
b. Interest on the outstanding principal balance at the following
rate:
i. Bank's base rate of interest plus 0%.
ii. Other rate terms - _____________________________________
c. Payment terms:
i. Interest payable monthly commencing August 1, 1998.
ii. Principal payable in 83 consecutive monthly installments in
the amount of $7,222.22* each, or in the following amounts,
commencing, September 1, 1998, with a final installment in the
amount of the unpaid balance on August 1, 2005.
* Principal payment based on 15 year amortization.
3. Borrower shall pay the following fees to Bank for the Credit
Accommodations: 1% on new money - $7,000.00
4. When interest hereunder is based on Bank's base rate, it shall be based
upon the rate of interest publicly announced from time to time by Bank in
Doylestown, Pennsylvania as its "Base Rate." The Bank's Base Rate is
defined as the then-published Wall Street Journal Prime Rate of Interest in
effect from time to time plus one percent. The applicable rate will change
when and as Bank changes its base rate.
5. Interest and any fees shall be calculated on the basis of a 360-day year
and the actual number of days elapsed.
6. A late fee will be charged on the portion of any payment made more than
twenty (20) days after it is due equal to five (5%) percent of the unpaid
amount or twenty-five ($25.00) dollars, whichever is greater.
B. Representations and Warranties. Borrower represents and warrants and, at
the request of Bank will provide a legal opinion (stating that subparagraph
1 of this Section is correct and that subparagraphs 2, 3, 4, and 5 are
correct to the best of counsel's knowledge), that:
1. Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the state of its organization, and has the
necessary power and authority to enter into and perform this Agreement, the
Note(s) and all other documents required by Bank in connection herewith;
the execution and performance thereof have been duly authorized by all
necessary proceedings, and upon their execution and delivery, they will be
valid, binding and enforceable in accordance with their terms; Borrower's
execution and performance of this Agreement will not violate any laws or
regulations applicable to Borrower, any organizational documents of
Borrower or any agreements (including any provisions of subordinated debt)
to which Borrower is a party or by which Borrower or any of its properties
is bound; and any consents or approval required in connection with this
Agreement have been obtained.
2. The proceeds of the Credit Accommodation(s) will be used only in
connection with Borrower's business, for the following purposes: Payoff
existing Term Loan with Premier and Line of Credit and Term with First
Union.
3. All financial statements, statements as to ownership of Borrower and its
assets, and other statements and information delivered to Bank were
prepared in accordance with generally accepted accounting principles
consistently applied, are true and correct, disclose all presently
outstanding indebtedness or obligations of Borrower, including contingent
obligations and obligations under leases of property from others, and all
liens and encumbrances against its properties and assets; and there have
been no adverse changes in Borrower's financial condition or business since
the date of such statements.
4. There are no actions, suits, proceedings or claims pending or threatened
against Borrower or its property; and Borrower's business is in compliance
with all applicable laws and regulations.
5. Any debt of Borrower is not now and at closing hereunder will not be in
default under any provision thereof.
C. Conditions. The obligation of Bank to make the first advance under the
Credit Accommodation(s) shall be subject to Bank's receipt of the following
collateral security and/or duly executed documents, each in form and
substance satisfactory to Bank:
1. The Note(s) executed by Borrower.
2. A certificate as to Borrower's actions authorizing the Credit
Accommodation(s) (i.e., certified Board of Directors resolutions if
Borrower is a corporation; certified copy of partnership agreement if
Borrower is a partnership).
3. The following collateral security, subordination and guaranty documents
including any documents and actions required to perfect any collateral
security: 1st Lien on A/R, inventory, machinery, equipment and leasehold
improvements and 1st mortgage on 385 Cooper Road, West Berlin, NJ.
4. Bank shall have no obligation to make loans hereunder if any Event of
Default described in paragraph G hereof has occurred.
D. Affirmative Covenants. Borrower covenants and agrees that so long as there
is outstanding indebtedness of Borrower to Bank under the Credit
Accommodation(s) or otherwise, Borrower shall:
1. Maintain current assets in excess of current liabilities by at least
$------; maintain current assets of at least -----% of current liabilities;
maintain total liabilities in an amount not in excess of -----% of tangible
net worth; and maintain the following additional financial ratios: -----
---- such foregoing financial terms to be defined in accordance with
generally accepted accounting principles consistently applied.
2. Maintain free balances in demand deposit accounts at Bank in average
amounts calculated as follows: -----------------
3. Deliver to Bank financial statements, including a balance sheet and
income statement and such other financial statements and reports as
requested by Bank, within ninety (90) days of the end of each fiscal year
and within forty-five (45) days of the end of each fiscal quarter; and
permit representatives of Bank to examine and audit Borrower's (and its
subsidiaries) books and records and to inspect Borrower's facilities and
properties. All such reports shall be prepared in accordance with generally
accepted accounting principles consistently applied, certified by a public
accountant satisfactory to Bank. Upon written request of Bank, Borrower
will provide this information in consolidating as well as consolidated
form.
4. Notify Bank of any litigation, proceedings or events involving Borrower
which might have a material adverse effect on Borrower's financial
condition or business or the payment of its indebtedness under the Credit
Accommodation(s).
<PAGE>
5. Keep and maintain (and require subsidiaries to keep and maintain) all of
its property and assets in good order and repair and maintain fire, public
liability and other insurance in coverages and amounts customary for
Borrower's business or as Bank from time to time may require and deliver to
Bank certificates of all such insurance in effect; and cause all such
policies covering property given as security for the Credit
Accommodation(s) to have loss payee endorsements in favor of Bank and not
to be subject to cancellation unless thirty (30) days prior written notice
thereof shall have been received by Bank.
6. Pay (and require subsidiaries to pay) and discharge when due all taxes,
assessments or other governmental charges imposed on it or any of its
properties, unless the same are currently being contested in good faith by
appropriate proceedings and adequate reserves are maintained therefor.
E. Negative Covenants. So long as there is outstanding indebtedness of
Borrower to Bank under the Credit Accommodation(s) or otherwise, Borrower
and subsidiaries shall not, without the prior written consent of Bank:
1. Incur any indebtedness, including obligations under capitalized leases,
except indebtedness owing to Bank, existing indebtedness or trade
indebtedness arising in the ordinary course of business; guarantee or
otherwise become liable, directly or indirectly, for the indebtedness or
obligations of another party; make any loans or advances to others; or
create, permit or suffer the creation of any liens, security interests or
any other encumbrances on any of its property, real or personal, except
liens, security interests or encumbrances in favor of Bank or existing on
the date hereof and reported to Bank.
2. Convey, lease, sell, transfer or assign any assets except in the
ordinary course of business for value received; liquidate or discontinue
its normal operations with intention to liquidate; enter into any merger or
consolidation; or acquire assets or stock or other equity interest of
another entity except in the ordinary course of business.
3. Pay any dividends or make any for or withdrawal from capital, or make
any other distributions on, or repurchase, redeem or otherwise acquire, any
of its outstanding stock, partnership interests or other equity interests.
4. Sell, assign, transfer or dispose of any of its accounts or notes
receivable, with or without recourse, except to Bank.
5. Make loans or advances to others.
6. Become a guarantor, surety or otherwise liable for the debts or
obligations of others, except to Bank, and except as an endorser of checks
or drafts negotiated in the ordinary course of business.
7. Incur, create or assume any commitment to make any lease payments except
- - - - - - - - - -
__________________________________________________________________________.
Lease payments are defined as any direct or indirect payment or payments
whether as rent or otherwise, including fees, service or finance charges,
under any lease, rental or other arrangement for the use of property of any
other person and whether or not there is an option to purchase.
8. Enter into any sale-leaseback transactions.
9. Prepay any amounts not required or cause to be accelerated any amounts
on any outstanding indebtedness now existing or hereafter arising, except
to Bank.
10. Pay salaries, withdrawals or compensation to officers or partners of
Borrower in an amount exceeding $ - - - - - - - - - -
__________________________________________
in the aggregate per year.
11. Expend for fixed assets during any one fiscal year an amount in excess
of- - - - - - - - - -
___________________________________________.____________________________
________________________ DOLLARS ($ - - - - - - - - - -
______________________________) other
than any fixed assets purchased with the proceeds of loans by Bank to
Borrower.
12. If Borrower is a corporation, sell, issue, or agree to sell or issue,
any shares (voting, non-voting, preferred or common of any class) of
Borrower, or purchase such shares except under such circumstances as will
in the opinion of Bank not result in a material adverse change in the
financial or business condition of Borrower or the value of any security
held by Bank.
F. Additional Collateral. As additional collateral security for the payment of
Borrower's indebtedness and obligations to Bank under the Credit
Accommodation(s) or otherwise, Borrower hereby grants to Bank a security
interest in and lien upon all funds, balances or other property of any kind
of Borrower, or in which Borrower has an interest, now or hereafter in the
possession, custody or control of Bank.
G. Default. Upon the occurrence of any of the following events of default,
Bank may declare the entire unpaid balance, principal and interest, of all
indebtedness of Borrower to Bank under the Credit Accommodation(s) or
otherwise to be immediately due and may exercise all available rights and
remedies under applicable law and agreements:
1. Failure to pay when due any principal or interest or any other sum
payable to Bank under the Credit Accommodation(s) or otherwise.
2. If any representation or warranty made herein or in connection herewith
or in any statement, certificate or other document furnished hereunder
proves to be or becomes false or untrue.
3. Default under any other provision contained herein or in any other
agreement or document executed or delivered in connection herewith and the
continuation of such default, unless cured to Bank's satisfaction, for
twenty (20) days.
4. Default by Borrower in the payment or performance of any material
obligation or indebtedness to another, whether now or hereafter incurred.
5. Any default by Borrower or by any guarantor or surety for Borrower under
the provisions of any note, security agreement, mortgage or other
instrument or agreement incorporated by reference into or executed in
connection with the Agreement or in connection with any other obligation of
Borrower or any guarantor or surety for Borrower to Bank.
6. The determination by an officer of Bank, in such officer's sole and
absolute discretion, that a material, adverse change in the business or
financial condition of Borrower, or of any guarantor or surety for
Borrower, has occurred.
7. If bankruptcy, insolvency, reorganization, receivership, arrangement or
other similar proceedings are commenced or filed by or against Borrower
under state or federal law; or if Borrower shall (i) become insolvent
(which term is defined for purposes thereof as failure to meet its
obligations as the same fall due); (ii) make an assignment for the benefit
of creditor; (iii) apply for, consent to or suffer the appointment of a
custodian, receiver or trustee for any part of property or assets; or (iv)
fail to satisfy or appeal any material judgment or attachment within thirty
(30) days from the date of entry.
H. Miscellaneous. No consent or waiver under this Agreement shall be effective
unless in writing signed by the party granting the consent or waiver. No
waiver of any default shall be deemed a waiver of any default thereafter
occurring. This Agreement and all documents executed hereunder shall be
binding upon and shall inure to the benefit of all parties hereto and their
respective heirs, personal representatives, successors and assigns, may
only be modified or amended by a written document executed by the parties,
and shall be governed by Pennsylvania law. Borrower shall pay all fees and
costs incurred by Bank (including fees and costs of its legal counsel) in
connection with the creation and perfection of any collateral security
required hereunder or the collection or enforcement of the indebtedness and
collateral security hereunder. Bank is hereby irrevocably appointed
Borrower's attorney-in-fact to do all acts and things which Bank may
determine are necessary to perfect and continue perfected the security
interests created pursuant to this Agreement and to protect and facilitate
the collection of amounts due on any accounts receivable assigned to Bank
and any other property constituting security. Borrower will pay any stamp
taxes or any taxes in the nature thereof which may be payable in connection
with the execution and delivery of the promissory notes and other
documents. Borrower hereby forever indemnifies and saves Bank harmless
against any and all liability which Bank may incur or which may be assessed
against Bank with respect to such tax. The terms of any notes, security
agreements or other instruments executed pursuant to this Agreement are
expressly incorporated herein and made a part hereof; provided, however,
that in any case where a term or condition contained in such note, security
agreement, or other instrument cannot be construed (despite every effort to
do so) as consistent with the terms of this Agreement, this Agreement shall
govern. If any term of this Agreement shall be held to be invalid, illegal
or unenforceable, the validity of all other terms hereof shall in no way
be affected thereby. This Agreement shall be in full force and effect for a
term commencing on the date hereof and terminating at such time as Borrower
shall have satisfied in full or been released from all of Borrower's
liabilities and obligations to Bank hereunder.
I. Additional Terms. Borrower hereby agrees to the following additional terms
attached hereto and forming a part hereof:
[1. Additional Terms Scheduled] See attached Term & Conditions.
IN WITNESS WHEREOF, the undersigned have executed this Agreement the day and
year first above written.
<TABLE>
<S> <C>
Attest or Witness: Dynasil Corporation of America, Inc. and Subsidiary
------------------------------------------------------
[Name of Borrower]
By John Kane By Charles J. Searock, Jr.
---------------------- ---------------------------------------------------
Title: John Kane, CFO Title: Charles J. Searock, Jr., President
PREMIER BANK
By Suzanne M. Hartshorne
--------------------------------------------------
Title: Suzanne M. Hartshorne, Vice President
</TABLE>
<PAGE>
[LOGO]
PROMISSORY NOTE
(JUDGMENT)
Doylestown, Pennsylvania
$1,300,000.00 July 10, 1998
FOR VALUE RECEIVED, each of the undersigned unconditionally promises to pay
to PREMIER BANK (the "Bank"), or order, at its office at 379 N. Main Street,
Doylestown, PA, or at any other office of the Bank, the principal sum of
ONE MILLION THREE HUNDRED THOUSAND DOLLARS AND ---------------------00/100
United States Dollars ($1,300,000.00), together with interest in arrears on the
unpaid principal balance from time to time outstanding from the date hereof
until the entire principal amount due hereunder is paid in full at the rates
hereinafter provided.
Principal shall be payable as follows:
[_] If this box is checked, principal shall be payable on demand.
[_] It this box is checked, principal shall be payable in a single payment
on _____________________, ___________.
[X] It this box is checked, principal shall be payable in
[X] monthly [_] quarterly [_] annual consecutive installments
commencing September 1, 1998 and on the same dale of each installment
period thereafter, in the following amounts:
$7,222.22 Principal Plus Interest
______________________________________________________________________
______________________________________________________________________
except that the last installment, payable on August 1, 2005, shall be
in an amount equal to the principal balance then remaining
outstanding.
Interest shall be payable as follows until this Note is paid in full:
[X] If this box is checked, monthly on the first day of each month
commencing August 1, 1998.
[_] If this box is checked, quarterly on the first day of each quarter
commencing ________________________________.
[_] If this box is checked, semi-annually on the first day of each six
months commencing__________________________.
Interest shall be calculated on the basis of the actual number of days
elapsed over a year of 360 days and shall be payable, before and after maturity
or judgment or entering of a verdict, at the following rate:
[_] If this box is checked, the interest rate shall be ___________ percent
(_____%) per annum.
[_] If this box is checked, the interest rate shall be the Prime Rate (as
defined below) plus zero percent (+0%) per annum.
Prime Rate means the floating rate of interest publicly announced from time
to time by the Bank In Doylestown, Pennsylvania as its "prime rate", with the
rate charged hereunder changing on the same day on which any change in the Prime
Rate is effective. The obligors under this Note hereby acknowledge that the
Prime Rate is not tied by the Bank to any external rate of interest or index and
does not necessarily reflect the lowest rate of interest actually charged by the
Bank to any particular class or category of customer.
This Note may be prepaid in whole or in part at any time; provided that (a)
any prepayment shall include accrued interest to the date of prepayment on the
amount prepaid, and (b) if principal hereunder is payable in installments, any
principal prepaid shall be applied to installments in their inverse order of
maturity.
The Bank is hereby granted a continuing security interest in all property
of the undersigned now or hereafter in the possession of the Bank or any of its
affiliates in any capacity whatsoever, including, but not limited to, any
balance or share of any deposit, trust or agency account, as security for the
payment of this Note and any other liabilities of the undersigned to the Bank,
which security interest shall be enforceable and subject to all the provisions
of this Note, as if such property were specifically pledged hereunder and the
proceeds of such property may be applied at any time and without notice to any
of the undersigned's liabilities. Each of the undersigned hereby authorizes the
Bank to debit any deposit account maintained by any of the undersigned with the
Bank for accrued interest and principal, as and when due. Such authorization
shall not affect the undersigned's obligations to pay when due all amounts
payable hereunder whether or not there are sufficient funds therefor in any such
accounts. The foregoing shall be in addition to, and not in limitation of, any
rights of set-off the Bank may have.
The occurrence of any of the following events shall constitute an Event of
Default under this Note: (i) the failure to make any payments, whether
principal, interest or other payment, under any of the undersigned's liabilities
when the same is due, (ii) death of (if an individual), dissolution (if a
corporation or partnership), suspension of business for any reason or insolvency
(however such insolvency may be evidenced) of any obligor hereunder, (iii)
bankruptcy, insolvency, reorganization, receivership, arrangement or other
similar proceedings are commenced or filed by or against any obligor under state
or federal law; or any obligor shall (a) become insolvent (which term is defined
for purposes hereof as failure to meet its obligations as the same fall due);
(b) make an assignment for the benefit of creditors; or (c) apply for, consent
to or suffer the appointment of a custodian, receiver or trustee for any part of
its property or assets; (iv) the sale, lease, transfer or other disposition,
whether voluntary or involuntary, of all or a substantial part of any obligor's
assets or property, (v) the issuance of a writ, warrant, distraint or order of
attachment or garnishment against any obligor's property or assets, (vi) the
commencement of foreclosure proceedings or any proceedings for the enforcement
of money judgments against any obligor, (vii) the occurrence of an event of
default as described and defined in any instrument securing the obligations
hereunder or any agreement under which this Note may be issued or any instrument
evidencing any indebtedness of any of the undersigned to the Bank and the
expiration of any period provided in such instrument to cure such default;
(viii) any of the undersigned shall fail to pay any indebtedness due to third
parties beyond any applicable grace period or (ix) any change shall occur in any
obligor's financial or business condition which, in the Bank's sole judgment, is
materially adverse. Upon the happening of any Event of Default, or upon demand,
if applicable, the holder hereof may declare the entire unpaid principal balance
under this Note and under any and all other liabilities of the undersigned to
the holder hereof immediately due and payable without notice, demand or
presentment and may exercise, without notice, demand or presentment, any of its
rights under any instruments securing the obligations hereunder. In the event
that the Bank or any subsequent holder of this Note shall exercise or endeavor
to exercise any of its remedies hereunder or under any instruments securing the
obligations hereunder, the undersigned shall pay on demand all reasonable costs
and expenses incurred in connection therewith, including, without limitation,
attorney's fees (which attorneys may be employees of the Bank), and the bank may
take judgment for all such amounts in addition to all other sums due hereunder.
Irrespective of the exercise or non-exercise of any of the aforesaid rights, if
any payment of principal or interest hereunder is not paid in full when the same
is due, the undersigned shall pay to the holder a fee on such unpaid amount
equal to five percent (5%) of such late payment.
<PAGE>
Each of the undersigned waives presentment for payment, protest and demand,
and notice of protest, demand and/or dishonor and nonpayment of this Note,
notice of any event of default under any instrument securing the obligations
hereunder, except as specifically provided therein, and all other notices or
demand otherwise required by law that the undersigned may lawfully waive. Each
obligor expressly agrees that this Note, or any payment hereunder, may be
extended from time to time, without in any way affecting the liability of any
obligor. No unilateral consent or waiver by the Bank with respect to any action
or failure to act which, without consent, would constitute a breach of any
provision of this Note shall be valid and binding unless in writing and signed
by the Bank.
The rights and obligations of the undersigned and all provisions hereof
shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania.
Each of the undersigned hereby authorizes the Bank to date this Note as of
the date when the initial advance hereunder is made and to complete this Note in
any other particulars according to the terms of the Bank's understanding with
the undersigned. Any consent, agreement, instruction or request pertaining to
any matter under or in connection with this Note signed by any one of the
undersigned shall be binding upon all of them.
THE FOLLOWING SETS FORTH A WARRANT OF AUTHORITY FOR ANY ATTORNEY TO CONFESS
JUDGMENT AGAINST THE UNDERSIGNED. IN GRANTING THIS WARRANT OF ATTORNEY TO
CONFESS JUDGMENT AGAINST THE UNDERSIGNED, THE UNDERSIGNED, FOLLOWING
CONSULTATION WITH (OR DECISION NOT TO CONSULT) SEPARATE COUNSEL FOR THE
UNDERSIGNED AND WITH KNOWLEDGE OF THE LEGAL EFFECT HEREOF, HEREBY WAIVES ANY AND
ALL RIGHTS THE UNDERSIGNED HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY
FOR HEARING UNDER THE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE
COMMONWEALTH OF PENNSYLVANIA. IT IS SPECIFICALLY ACKNOWLEDGED THAT THE BANK HAS
RELIED ON THIS WARRANT OF ATTORNEY IN GRANTING THE FINANCIAL ACCOMMODATIONS
DESCRIBED HEREIN.
EACH OF THE UNDERSIGNED HEREBY EMPOWERS ANY PROTHONOTARY, CLERK OF COURT OR
ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR ANY OF THE UNDERSIGNED IN ANY AND
ALL ACTIONS WHICH MAY BE BROUGHT HEREUNDER, AND CONFESS JUDGMENT AGAINST ANY OF
THE UNDERSIGNED FOR ALL OR ANY PART OF THE UNPAID PRINCIPAL BALANCE HEREUNDER
AND ACCRUED INTEREST, TOGETHER WITH OTHER EXPENSES INCURRED IN CONNECTION
THEREWITH AND ATTORNEYS' FEES OF 5% OF THE TOTAL OF THE FOREGOING SUMS, BUT IN
NO EVENT LESS THAN $3,000, AND FOR SUCH PURPOSE THE ORIGINAL OR ANY PHOTOCOPY OF
THIS NOTE SHALL BE A GOOD AND SUFFICIENT WARRANT OF ATTORNEY. SUCH AUTHORIZATION
SHALL NOT BE EXHAUSTED BY ONE EXERCISE THEREOF, BUT JUDGMENT MAY BE CONFESSED AS
AFORESAID FROM TIME TO TIME. EACH OF THE UNDERSIGNED HEREBY WAIVES ALL ERRORS
AND RIGHTS OF APPEAL AS WELL AS RIGHTS TO STAY OF EXECUTION AND EXEMPTION OF
PROPERTY IN ANY ACTION TO ENFORCE ITS LIABILITY HEREON. EACH OF THE UNDERSIGNED
CONSENTS TO THE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF PENNSYLVANIA
AND AGREES TO BUCKS COUNTY AS APPROPRIATE VENUE IN ANY SUIT OR ACTION HEREON.
If this Note Is signed by more than one maker, the liability of each shall
be joint and several. EACH OF THE UNDERSIGNED HEREBY WAIVES TRIAL BY JURY AND
THE RIGHT TO INTERPOSE ANY COUNTERCLAIM OR OFFSET OF ANY NATURE OR DESCRIPTION
IN ANY LITIGATION RELATING TO THIS NOTE OR ANY LIABILITY HEREUNDER OR
ENFORCEMENT OF REMEDIES HEREUNDER. Any provision of this Note which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
As used herein, the terms, "the undersigned" shall mean the undersigned or
any one or more of them; "liabilities" shall mean any and all debts and
obligations of the undersigned owed to the Bank whether such shall be primary,
direct, contingent, sale, joint or several, due or to become due, or that have
or may hereafter be contracted or incurred; and "obligor" shall mean each of the
undersigned and any co-signer, endorser, guarantor or surety of or for the
undersigned's liabilities.
Address: 385 Cooper Road Dynasil Corporation of America, Inc. and
West Berlin, NJ 08091 Subsidiary
/s/ Charles J. Searock, Jr.
----------------------------------------
Charles J. Searock, Jr., President
/s/ John Kane
----------------------------------------
John Kane, CFO
<PAGE>
[LOGO]
Dynasil Corporation of America Inc.
and Subsidiary
7-10-98
- --------------------------------------------- -----------------------
Name of Borrower Date
Certificate of Reliance
I, Suzanne M. Hartshorne, a Vice President
--------------------- --------------------
(Loan Officer) (Title of Officer)
hereby certify that in underwriting the loan granted on to
----------------------
the above Borrower in the amount of $300,000.00, PREMIER BANK has secured the
commitment or loan with a mortgage on real estate as an abundance of caution,
and for repayment of the loan, the Bank is relying primarily on:
(A) [X] the general credit of the borrower
(as evidenced by current financial statement)
(B) [X] the following other collateral:
1st Lien on A/R, inventory, machinery, equipment, leasehold
improvements.
1st mortgage on 385 Cooper Road, West Berlin, NJ
-----------------------------------------------------------------
(C) [_] the endorsement, guaranty or purchase commitment of
-----------------------------------------------------------------
-----------------------------------------------------------------
(D) [_] other facts as follows:
-----------------------------------------------------------------
-----------------------------------------------------------------
/s/ Suzanne M. Hartshorne, VP
-------------------------
Signature and Title
EXHIBIT 10.03
DYNASIL CORPORATION OF AMERICA
1996 STOCK INCENTIVE PLAN
1. Purpose.
The purpose of this Stock Incentive Plan (the "Plan") is to enable Dynasil
Corporation of America (the "Company") to attract and retain the services of
selected employees, officers, directors and other key contributors (including
consultants and nonemployee agents) of the Company or any subsidiary of the
Company. Notwithstanding the foregoing, grants to Non-Employee Directors (as
defined in subparagraph 11.1) of options or other awards under the Plan shall be
made solely in accordance with the provisions of paragraph 11.
2. Shares Subject to the Plan.
Subject to adjustment as provided below, the shares to be offered under the Plan
shall consist of Common Stock of the Company, and the total number of shares of
Common Stock that may be issued under the Plan shall not exceed 150,000 shares.
The shares issued under the Plan may be authorized and unissued shares or
reacquired shares. If an option granted under the Plan expires, terminates or is
canceled, the unissued shares subject to such option shall again be available
under the Plan. If shares sold or awarded as a bonus under the Plan or forfeited
to the Company or repurchased by the Company, the number of shares forfeited or
repurchased shall again be available under the Plan.
3. Effective Date and Duration of Plan.
3.1 Effective Date. The Plan shall become effective as of February 26, 1996.
3.2 Duration. The Plan shall continue in effect until all shares available
for issuance under the Plan have been issued and all restrictions on such shares
have lapsed. The Board of Directors may suspend or terminate the Plan at any
time except with respect to options and shares subject to restrictions then
outstanding under the Plan. Termination shall not affect any outstanding option,
any right of the Company to repurchase shares or the forfeitability of shares
issued under the Plan.
4. Administration.
4.1 Board of Directors. The Plan shall be administered by the Board of Directors
of the Company, which shall determine and designate from time to time the
individuals to whom awards shall be made, the amount of the awards and the other
terms and conditions of the awards. Subject to the provisions of the Plan, the
Board of Directors may from time to time adopt and amend rules and regulations
relating to administration of the Plan, advance the lapse of any waiting period,
accelerate any exercise date, waive or modify any restriction applicable to
shares (except those restrictions imposed by law) and make all other
determinations in the judgment of the Board of Directors necessary or desirable
for the administration of the Plan. The interpretation and construction of the
provisions of the Plan and related agreements by the Board of Directors shall be
final and conclusive. The Board of Directors may correct any defect or supply
any omission or
<PAGE>
reconcile any inconsistency in the Plan or in any related agreement in the
manner and to the extent it shall deem expedient to carry the Plan into effect,
and it shall be the sole and final judge of such expediency.
4.2 Committee. The Board of Directors may delegate to a "stock compensation
committee" of the Board of Directors or specified officers of the Company, or
both (the "Committee"), any or all authority for administration of the Plan. If
authority is delegated to a committee, all references to the Board of Directors
in the Plan shall mean and relate to the Committee except (i) as otherwise
provided by the Board of Directors, (ii) that only the Board of Directors may
amend or terminate the Plan as provided in paragraphs 3 and 15 and (iii) that a
Committee including officers of the Company shall not be permitted to grant
options to persons who are officers of the Company unless the officers who are
to be compensated abstain from voting.
5. Types of Awards; Eligibility.
The Board of Directors may, from time to time, take the following actions,
separately or in combination, under the Plan: (i) grant Incentive Stock Options,
as defined in Section 422A of the Internal Revenue Code of 1986, as amended (the
"Code"), as provided in paragraphs 6.1 and 6.2; (ii) grant options other than
Incentive Stock Options ("Non-Statutory Stock Options") as provided in
paragraphs 6.1 and 6.3; (iii) award stock bonuses as provided in paragraph 7;
(iv) sell shares subject to restrictions as provided in paragraph 8; (v) grant
cash bonus rights as provided in paragraph 11; and (vi) grant foreign qualified
awards as provided in paragraph 10. Any such awards may be made to employees,
including employees who are officers or directors, directors, and to
nonemployees (including consultants) who the Board of Directors believes have
made or will make an important contribution to the Company or its subsidiaries;
provided, however, that only employees of the Company, or its subsidiaries,
shall be eligible to receive Incentive Stock Options under the Plan. The Board
of Directors shall select the individuals to whom awards shall be made and shall
specify the action taken with respect to each individual to whom an award is
made. At the discretion of the Board of Directors, an individual may be given an
election to surrender an award in exchange for the grant of a new award.
6. Option Grants.
6.1 General Rules Relating to Options.
(a) Terms of Grant. The Board of Directors may grant options under the Plan.
With respect to each option grant, the Board of Directors shall determine the
number of shares subject to the option, the option price, the period of the
option, the time or times at which the option may be exercised and whether the
option is an Incentive Stock Option or a Non-Statutory Stock Option.
(b) Exercise of Options. Except as provided in paragraph 6.1(d) or as determined
by the Board of Directors, no option granted under the Plan may be exercised
unless at the time of such exercise the optionee is employed by or in the
service of the Company or any subsidiary of the Company (except for consultants)
and shall have been so employed or provided such service continuously since
2
<PAGE>
the date such option was granted. Absence on leave or on account of illness or
disability under rules established by the Board of Directors shall not, however,
be deemed an interruption of employment or service for this purpose. Unless
otherwise determined by the Board of Directors, vesting of options shall not
continue during an absence on leave (including an extended illness) or on
account of disability. Except as provided in paragraphs 6.1(d) and 12, options
granted under the Plan may be exercised from time to time over the period stated
in each option in such amounts and at such times as shall be prescribed by the
Board of Directors, provided that options shall not be exercised for fractional
shares. Unless otherwise determined by the Board of Directors, if the optionee
does not exercise an option in any one year with respect to the full number of
shares to which the optionee is entitled in that year, the optionee's rights
shall be cumulative and the optionee may purchase those shares in any subsequent
year during the term of the option.
(c) Nontransferabilily. Each Incentive Stock Option and, unless otherwise
determined by the Board of Directors, each other option granted under the Plan
by its terms shall be nonassignable and nontransferable by the optionee, either
voluntarily or by operation of law, except by will or by the laws of descent and
distribution of the state or country of the optionee's domicile at the time of
death, and each option by its terms shall be exercisable during the optionee's
lifetime only by the optionee.
(d) Termination of Employment or Service.
(i) General Rule. Unless otherwise determined by the Board of Directors, in the
event the employment or service of the optionee with the Company or subsidiary
terminates for any reason other than because of physical disability or death as
provided in subparagraphs 6.1(d)(ii) and (iii), the option may be exercised at
any time prior to the expiration date of the option or the expiration of 30 days
after the date of such termination, whichever is the shorter period, but only if
and to the extent the optionee was entitled to exercise the option at the date
of such termination.
(ii) Termination Because of Physical Disability. Unless otherwise determined by
the Board of Directors, in the event of the termination of employment or service
because of physical disability (as that term is defined in Section 22(e)(3) of
the Code), the option may be exercised at any time prior to the expiration date
of the option or the expiration of 12 months after the date of such termination,
whichever is the shorter period, but only if and to the extent the optionee was
entitled to exercise the option at the date of such termination.
(iii) Termination Because of Death. Unless otherwise determined by the Board of
Directors, in the event of the death of an optionee while employed by or
providing service to the Company or a parent or subsidiary, the option may be
exercised at any time prior to the expiration date of the option or the
expiration of 12 months after the date of such death, whichever is the shorter
period, but only if and to the extent the optionee was entitled to exercise the
option at the date of such termination and only by the person or persons to whom
such optionee's rights under the option shall pass by the optionee's will or by
the laws of descent and distribution of the state or country of domicile at the
time of death.
3
<PAGE>
(iv) Amendment of Exercise Period Applicable to Termination. The Board of
Directors, at the time of grant or at any time thereafter, may extend the 30 day
and 12-month exercise periods any length of time not later than the original
expiration date of the option, and may increase the portion of an option that is
exercisable, subject to such terms and conditions as the Board of Directors may
determine.
(v) Failure to Exercise Options. To the extent that the option of any deceased
optionee or of any optionee whose employment or service terminates is not
exercised within the applicable period, all further rights to purchase shares
pursuant to such option shall cease and terminate.
(d) Purchase of Shares. Unless the Board of Directors determines otherwise,
shares may be acquired pursuant to an option granted under the Plan only upon
receipt by the Company of notice in writing from the optionee of the optionee's
intention to exercise, specifying the number of shares as to which the optionee
desires to exercise the option and the date on which the optionee desires to
complete the transaction, and, if required in order to comply with the
Securities Act of 1933, as amended, containing a representation that it is the
optionee's present intention to acquire the shares for investment and not with a
view to distribution, and any other information the Board of Directors may
request. Unless the Board of Directors determines otherwise, on or before the
date specified for completion of the purchase of shares pursuant to an option,
the optionee must have paid the Company the full purchase price of such shares
in cash (including, with the consent of the Board of Directors, cash that may be
the proceeds of a loan from the Company) or, with the consent of the Board of
Directors, in whole or in part, in Common Stock of the Company valued at fair
market value, restricted stock, or other contingent awards denominated in either
stock or cash, deferred compensation credits, promissory notes and other forms
of consideration. The fair market value of Common Stock provided in payment of
the purchase price shall be determined by the Board of Directors. No shares
shall be issued until full payment therefor has been made. Each optionee who has
exercised an option shall immediately upon notification of the amount due, if
any, pay to the Company in cash amounts necessary to satisfy any applicable
federal, state and local tax withholding requirements. If additional withholding
is or becomes required beyond any amount deposited before delivery of the
certificates, the optionee shall pay such amount to the Company on demand. If
the optionee fails to pay the amount demanded, the Company may withhold that
amount from other amounts payable by the Company to the optionee, including
salary, subject to applicable law. Upon the exercise of an option, the number of
shares reserved for issuance under the Plan shall be reduced by the number of
shares issued upon exercise of the option, less the number of shares surrendered
in payment of the option exercise.
6.2 Incentive Stock Options. Incentive Stock Options shall be subject to the
following additional terms and conditions:
(a) Limitation on Amount of Grants. An Incentive Stock Option shall by its terms
prohibit the exercise of all options in excess of the amount provided for in
Section 422(d) of the Code. Should it be determined that any Incentive Stock
Option granted under the Plan inadvertently exceeds such maximum, such Incentive
Stock Option grant shall be deemed to be a grant of a Nonqualified Stock Option
to the extent, but only to the extent, of such excess.
4
<PAGE>
(b) Limitation on Grants to 10 Percent Shareholders. An Incentive Stock Option
may be granted under the Plan to an employee possessing more than 10 percent of
the total combined voting power of all classes of stock of the Company or of any
parent or subsidiary of the Company only if the option price is at least 110
percent of the fair market value of the Common Stock subject to the option on
the date it is granted, as described in paragraph 6.2(d), and the option by its
terms is not exercisable after the expiration of five years from the date it is
granted.
(c) Duration of Options. Subject to paragraphs 6.1(b) and 6-2(b), Incentive
Stock Options granted under the Plan shall continue in effect for the period
fixed by the Board of Directors, except that no Incentive Stock Option shall be
exercisable after the expiration of five years from the date it is granted.
(d) Option Price. The option price per share shall be determined by the Board of
Directors at the time of grant. Except as provided in paragraph 6.2(b), the
option price shall not be less than 100 percent of the fair market value of the
Common Stock covered by the Incentive Stock Option at the date the option is
granted. The fair market value shall be determined by the Board of Directors.
(e) Limitation on Time of Grant. No Incentive Stock Option shall be granted on
or after the fifth anniversary of the effective date of the Plan.
(f) Conversion of Incentive Stock Options. The Board of Directors may at any
time without the consent of the optionee convert an Incentive Stock Option to a
Non-Statutory Stock Option.
6.3 Non-Statutory Stock Options. Non-Statutory Stock Options shall be subject to
the following additional terms and conditions:
(a) Options Price. The option price for Non-Statutory Stock Options shall be
determined by the Board of Directors at the time of grant. The option price may
be less than the fair market value of the shares on the date of grant. The fair
market value of shares covered by a Non-Statutory Stock Option shall be
determined by the Board of Directors.
(b) Duration of Options. Non-Statutory Stock Options granted under the Plan
shall continue in effect for the period fixed by the Board of Directors.
7. Stock Bonuses.
The Board of Directors may award shares under the Plan as stock bonuses. Shares
awarded as a bonus shall be subject to the terms, conditions, and restrictions
determined by the Board of Directors. The restrictions may include restrictions
concerning transferability and forfeiture of the shares awarded, together with
such other restrictions as may be determined by the Board of Directors. The
Board of Directors may require the recipient to sign an agreement as a condition
of the award. The agreement may contain any terms, conditions, restrictions,
representations and warranties required by the Board of Directors. The
certificates representing the shares awarded shall bear any legends required by
the Board of Directors. The Company may require any recipient of a stock bonus
to pay
5
<PAGE>
to the Company in cash upon demand amounts necessary to satisfy any applicable
federal, state or local tax withholding requirements. If the recipient fails to
pay the amount demanded, the Company may withhold that amount from other amounts
payable by the Company to the recipient, including salary or fees for services,
subject to applicable law. Upon the issuance of a stock bonus, the number of
shares reserved for issuance under the Plan shall be reduced by the number of
shares issued.
8. Restricted Stock.
The Board of Directors may issue shares under the Plan for such consideration
(including promissory notes and services) as determined by the Board of
Directors, which consideration may be less than fair market value of the Common
Stock at the time of issuance. Shares issued under the Plan shall be subject to
the terms, conditions and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability, repurchase by
the Company and forfeiture of the share issued, together with such other
restrictions as may be determined by the Board of Directors. All Common Stock
issued pursuant to this paragraph 8 shall be subject to a purchase agreement,
which shall be executed by the Company and the prospective recipient of the
shares prior to the delivery of certificates representing such shares to the
recipient. The purchase agreement may contain any terms, conditions,
restrictions, representations and warranties required by the Board of Directors.
The certificates representing the shares shall bear any legends required by the
Board of Directors. The Company may require any purchaser of restricted stock to
pay to the Company in cash upon demand amounts necessary to satisfy any
applicable federal, state or local tax withholding requirements. If the
purchaser fails to pay the amount demanded, the Company may withhold that amount
from other accounts payable by the Company to the purchaser, including salary,
subject to applicable law. Upon the issuance of restricted stock, the number of
shares reserved for issuance under the Plan shall be reduced by the number of
shares issued.
9. Cash Bonus Rights.
9.1 Grant. The Board of Directors may grant cash bonus rights under the Plan in
connection with (i) options granted or previously granted; (ii) stock bonuses
awarded or previously awarded; and (iii) shares sold or previously sold under
the Plan. Cash bonus rights will be subject to rules, terms and conditions as
the Board of Directors may prescribe. The payment of a cash bonus shall not
reduce the number of shares of Common Stock reserved for issuance under the
Plan.
9.2 Cash Bonus Rights in Connection with Options. A cash bonus right granted in
connection with an option will entitle an optionee to a cash bonus when the
related option is exercised in whole or in part. If an optionee purchases shares
upon exercise of an option, the amount of the bonus shall be determined by
multiplying the excess of the total fair market value of the shares to be
acquired upon the exercise over the total option price for the shares by the
applicable bonus percentage.
9.3 Cash Bonus rights in Connection with Stock Bonus. A cash bonus right granted
in connection with a stock bonus will entitle the recipient to a cash bonus
payable when the stock bonus is awarded or restrictions if any, to which the
stock is subject lapse. If bonus stock awarded is subject to
6
<PAGE>
restrictions and is repurchased by the Company or forfeited by the holder, the
cash bonus right granted in connection with the stock bonus shall terminate and
may not be exercised. The amount and timing of payment of a cash bonus shall be
determined by the Board of Directors.
9.4 Taxes. The Company shall withhold from any cash bonus paid pursuant to
paragraph 10 the amount necessary to satisfy any applicable federal, state and
local withholding requirements.
10. Foreign Qualified Grants.
Awards under the Plan may be granted to such officers and employees of the
Company and its subsidiaries and such other persons described in paragraph 1
residing in foreign jurisdictions as the Board of Directors may determine from
time to time. The Board of Directors may adopt such supplements to the Plan as
may be necessary to comply with the applicable laws of such foreign
jurisdictions and to afford participants favorable treatment under such laws;
provided, however, that no award shall be granted under any such supplement with
terms which are more beneficial to the participants than the terms permitted by
the Plan.
11. Option Grants to Non-Employee Directors and Advisory Board Directors.
11.1 Initial Non-Discretionary Grants. Each person who is or becomes a
Non-Employee Director or Advisory Board Director after February 26, 1996 shall
be automatically granted an option to purchase 3,000 shares of Common Stock on
the date he or she becomes a Non-Employee Director. A "Non-Employee Director" is
a director who is not an employee of the Company or any of its subsidiaries and
has not been an employee of the Company or any of its subsidiaries within one
year of any date as of which a determination of eligibility is made, and has not
received either options, stock grants, discounted stock, or cash for services as
a Director within a twelve month period prior to such grant.
11.2 Annual Non-Discretionary Grants to Continuing Non-Employee Directors or
Advisory Board Directors. Each person who is or becomes a Continuing
Non-Employee Director or Advisory Board Director after February 26, 1996 shall
automatically annually receive, on the day of the Company's regular annual
meeting of its shareholders, a nondiscretionary grant of the option to purchase
up to 3,000 shares of the Company's Common Stock. A "Continuing Non-Employee
Director" is a Non-Employee Director or Advisory Board Director who continuously
serves as a Non-Employee Director of the Company during a period of time which
includes the date(s) upon which one or more annual shareholder meetings of the
Company are held.
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11.3 Exercise Price. The exercise price of any option granted pursuant to this
paragraph 11 shall be equal to the fair market value of the Common Stock as
determined in accordance with the procedure set forth in paragraph 6.2(d).
11.4 Term of Option. The term of each option granted pursuant to this paragraph
11 shall be 5 years from the date of grant.
11.5 "Complete Month". For all purposes of this paragraph 11, a complete month
shall be deemed to be the period which starts on the day of grant and ends on
the same day of the following calendar month, so that each successive "complete
month" ends on the same day of each successive calendar month (or, in respect of
any calendar month which does not include such a day, that "complete month"
shall end on the first day of the next following calendar month).
11.6 Termination as a Director. If an optionee ceases to be a director of the
Company for any reason, including death, all options granted pursuant to this
paragraph 11 may be exercised at any time prior to the expiration date of the
option or the expiration of 30 days (or 12 months in the event of death) after
the last day the optionee served as a director, whichever is the shorter period,
but only if and to the extent the optionee was entitled to exercise the option
as of the last day the optionee served as a director.
11.7 Nontransferabillty. Each option granted pursuant to this paragraph 11 by
its terms shall be nonassignable and nontransferable by the optionee, either
voluntarily or by operation of law, except by will or by the laws of descent and
distribution of the state or country of the optionee's domicile at the time of
death or pursuant to a qualified domestic relations order as defined under the
Code or Title I of the Employee Retirement Income Security Act of 1974.
12. Changes in Capital Structure.
If the outstanding Common Stock of the Company is hereafter increased or
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company or of another corporation by reason of any
recapitalization, reclassification, stock split, combination of shares or
dividend payable in shares, appropriate adjustment shall be made by the Board of
Directors in the number and kind of shares available for awards under the Plan.
In addition, the Board of Directors shall. make appropriate adjustment in the
number and kind of shares as to which outstanding options, or portions thereof
then unexercised shall be exercisable, so that the optionee's proportionate
interest before and after the occurrence of the event is maintained. The Board
of Directors may also require that any securities issued in respect of or
exchanged for shares issued hereunder that are subject to restrictions be
subject to similar restrictions. Notwithstanding the foregoing, the Board of
Directors shall have no obligation to effect any adjustment that would or might
result in the issuance or fractional shares, and any fractional shares resulting
from any adjustment may be disregarded or provided for in any manner determined
by the Board of Directors. Any such adjustments made by the Board of Directors
shall be conclusive.
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13. Effect of Liquidation or Reorganization.
13.1 Cash, Stock or Other Property for Stock. . Except as provided in paragraph
13.2, upon a merger, consolidation, acquisition of property or stock,
reorganization or liquidation of the Company, as a result of which the
stockholders of the Company receive cash, stock or other property in exchange
for or in connection with their shares of Common Stock, any option granted
hereunder shall terminate, but the optionee shall have the right during a 30-day
period immediately prior to any such merger, consolidation, acquisition of
property or stock, reorganization or liquidation to exercise his or her option
in whole or in part whether or not the vesting requirements applicable to the
option have been satisfied at the discretion of the Board of Directors.
13.2 Conversion of Options on Stock for Stock Exchange. If the stockholders of
the Company receive capital stock of another corporation ("Exchange Stock") in
exchange for their shares of Common Stock in any transaction involving a merger,
consolidation, acquisition of property or stock, separation or reorganization,
all options granted hereunder shall be converted into options to purchase shares
of Exchange Stock unless the Board of Directors, in its sole discretion,
determines that any or all such options granted hereunder shall not be converted
into options to purchase shares of Exchange Stock but instead shall terminate in
accordance with the provisions of paragraph 13.1. The amount and price of
converted options shall be determined by adjusting the amount and price of the
options granted hereunder in the same proportion as used for determining the
number of shares of Exchange Stock the holders of the Common Stock receive in
such merger, consolidation, acquisition of property or stock, separation or
reorganization.
14. Corporate Mergers, Acquisitions, Etc.
The Board of Directors may also grant options, stock bonuses and cash bonuses
and issue restricted stock under the Plan having terms, conditions and
provisions that vary from those specified in this Plan, provided that any such
awards are granted in substitution for, or in connection with the assumption of,
existing options, stock bonuses, cash bonuses and restricted stock granted,
awarded or issued by another corporation and assumed or otherwise agreed to be
provided for by the Company pursuant to or by reason of a transaction involving
a corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation to which the Company or a subsidiary is a party.
15. Amendment of Plan.
The Board of Directors may at any time, and from time to time, modify or amend
the Plan in such respect as it shall deem advisable because of changes in the
law while the Plan is in effect or for any other reason. Except as provided in
paragraphs 6.1(d), 12 and 13, however, no change in an award already granted
shall be made without the written consent of the holders of such award.
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16. Approvals.
The obligations of the Company under the Plan are subject to the approval of
state and federal authorities or agencies with jurisdiction in the matter. The
Company shall not be obligated to issue or deliver Common Stock under the Plan
if such issuance or delivery would violate applicable state or federal
securities laws.
17. Employment and Service Rights.
Nothing in the Plan or any award pursuant to the Plan shall: (a) confer upon any
employee any right to be continued in the employment of the Company or any
subsidiary or interfere in any way with the right of the Company or any
subsidiary by whom such employee is employed to terminate such employee's
employment at any time, for any reason, with or without cause, or to decrease
such employee's compensation or benefits, or (b) confer upon any person engaged
by the Company any right to be retained or employe by the company or to the
continuation, extension, renewal, or modification of any compensation, contract,
or arrangement with or by the Company.
18. Rights as a Shareholder.
The recipient of any award under the Plan shall have no rights as a shareholder
with respect to any Common Stock until the date of issue to the recipient of a
stock certificate for such shares. Except as otherwise expressly provided in the
plan, no adjustment shall be made for dividends or other rights for which the
record date occurs prior to the date such stock certificate is issued.
Date adopted by Board February, 26, 1996
Date Approved by Stockholders
--------------------, 1996
Date Last Amended by the Shareholders N/A
--------------------, 1996
10
DYNASIL CORPORATION OF AMERICA
1999 STOCK INCENTIVE PLAN
1. Purpose.
The purpose of this Stock Incentive Plan (the "Plan") is to enable Dynasil
Corporation of America (the "Company") to attract and retain the services of
selected employees, officers, directors and other key contributors (including
consultants and nonemployee agents) of the Company or any subsidiary of the
Company. Notwithstanding the foregoing, grants to Non-Employee Directors (as
defined in subparagraph 11.1) of options or other awards under the Plan shall be
made solely in accordance with the provisions of paragraph 11.
2. Shares Subject to the Plan.
Subject to adjustment as provided below, the shares to be offered under the Plan
shall consist of Common Stock of the Company, and the total number of shares of
Common Stock that may be issued under the Plan shall not exceed 150,000 shares.
The shares issued under the Plan may be authorized and unissued shares or
reacquired shares. If an option granted under the Plan expires, terminates or is
canceled, the unissued shares subject to such option shall again be available
under the Plan. If shares sold or awarded as a bonus under the Plan or forfeited
to the Company or repurchased by the Company, the number of shares forfeited or
repurchased shall again be available under the Plan.
3. Effective Date and Duration of Plan.
3.1 Effective Date. The Plan shall become effective as of January 26, 1999.
3.2 Duration. The Plan shall continue in effect until all shares available for
issuance under the Plan have been issued and all restrictions on such shares
have lapsed. The Board of Directors may suspend or terminate the Plan at any
time except with respect to options and shares subject to restrictions then
outstanding under the Plan. Termination shall not affect any outstanding option,
any right of the Company to repurchase shares or the forfeitability of shares
issued under the Plan.
4. Administration.
4.1 Board of Directors. The Plan shall be administered by the Board of Directors
of the Company, which shall determine and designate from time to time the
individuals to whom awards shall be made, the amount of the awards and the other
terms and conditions of the awards. Subject to the provisions of the Plan, the
Board of Directors may from time to time adopt and amend rules and regulations
relating to administration of the Plan, advance the lapse of any waiting period,
accelerate any exercise date, waive or modify any restriction applicable
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to shares, (except those restrictions imposed by law) and make all other
determinations in the judgment of the Board of Directors necessary or desirable
for the administration of the Plan. The interpretation and construction of the
provisions of the Plan and related agreements by the Board of Directors shall be
final and conclusive. The Board of Directors may correct any defect or supply
any omission or reconcile any inconsistency in the Plan or in any related
agreement in the manner and to the extent it shall deem expedient to carry the
Plan into effect, and it shall be the sole and final judge of such expediency.
4.2 Committee. The Board of Directors may delegate to a "stock compensation
committee" of the Board of Directors or specified officers of the Company, or
both (the "Committee"), any or all authority for administration of the Plan. If
authority is delegated to a committee, all references to the Board of Directors
in the Plan shall mean and relate to the Committee except (i) as otherwise
provided by the Board of Directors, (ii) that only the Board of Directors may
amend or terminate the Plan as provided in paragraphs 3 and 15 and (iii) that a
Committee including officers of the Company shall not be permitted to grant
options to persons who are officers of the Company unless the officers who are
to be compensated abstain from voting.
5. Types of Awards: Eligibility.
The Board of Directors may, from time to time, take the following actions,
separately or in combination, under the Plan: (i) grant Incentive Stock Options,
as defined in Section 422A of the Internal Revenue Code of 1986, as amended (the
"Code"), as provided in paragraphs 6.1 and 6.2; (ii) grant options other than
Incentive Stock Options ("Non-Statutory Stock Options") as provided in
paragraphs 6.1 and 6.3; (iii) award stock bonuses as provided in paragraph 7;
(iv) sell shares subject to restrictions as provided in paragraph 8; (v) grant
cash bonus rights as provided in paragraph 11; and (vi) grant foreign qualified
awards as provided in paragraph 10. Any such awards may be made to employees,
including employees who are officers or directors, directors, and to
nonemployees (including consultants) who the Board of Directors believes have
made or will make an important contribution to the Company or its subsidiaries;
provided, however, that only employees of the Company, or its subsidiaries,
shall be eligible to receive Incentive Stock Options under the Plan. The Board
of Directors shall select the individuals to whom awards shall be made and shall
specify the action taken with respect to each individual to whom an award is
made. At the discretion of the Board of Directors, an individual may be given an
election to surrender an award in exchange for the grant of a new award.
6. Option Grants.
6.1 General Rules Relating to Options.
(a) Terms of Grant. The Board of Directors may grant options under the Plan.
With respect to each option grant, the Board of Directors shall determine the
number of shares subject to the
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option, the option price, the period of the option, the time or times at which
the option may be exercised and whether the option is an Incentive Stock Option
or a Non-Statutory Stock Option.
(b) Exercise of Options. Except as provided in paragraph 6.1(d) or as determined
by the Board of Directors, no option granted under the Plan may be exercised
unless at the time of such exercise the optionee is employed by or in the
service of the Company or any subsidiary of the Company (except for consultants)
and shall have been so employed or provided such service continuously since the
date such option was granted. Absence on leave or on account of illness or
disability under rules established by the Board of Directors shall not, however,
be deemed an interruption of employment or service for this purpose. Unless
otherwise determined by the Board of Directors, vesting of options shall not
continue during an absence on leave (including an extended illness) or on
account of disability. Except as provided in paragraphs 6.1(d) and 12, options
granted under the Plan may be exercised from time to time over the period stated
in each option in such amounts and at such times as shall be prescribed by the
Board of Directors, provided that options shall not be exercised for fractional
shares. Unless otherwise determined by the Board of Directors, if the optionee
does not exercise an option in any one year with respect to the full number of
shares to which the optionee is entitled in that year, the optionee's rights
shall be cumulative and the optionee may purchase those shares in any subsequent
year during the term of the option.
(c) Nontransferability. Each Incentive Stock Option and, unless otherwise
determined by the Board of Directors, each other option granted under the Plan
by its terms shall be nonassignable and nontransferable by the optionee, either
voluntarily or by operation of law, except by will or by the laws of descent and
distribution of the state or country of the optionee's domicile at the time of
death, and each option by its terms shall be exercisable during the optionee's
lifetime only by the optionee.
(d) Termination of Employment or Service.
(i) General Rule. Unless otherwise determined by the Board of Directors, in the
event the employment or service of the optionee with the Company or subsidiary
terminates for any reason other than because of physical disability or death as
provided in subparagraphs 6.1(d)(ii) and (iii), the option may be exercised at
any time prior to the expiration date of the option or the expiration of 30 days
after the date of such termination, whichever is the shorter period, but only if
and to the extent the optionee was entitled to exercise the option at the date
of such termination.
(ii) Termination Because of Physical Disability. Unless otherwise determined by
the Board of Directors, in the event of the termination of employment or service
because of physical disability (as that term is defined in Section 22(e)(3) of
the Code), the option may be exercised at any time prior to the expiration date
of the option or the expiration of 12 months after the date of such termination,
whichever is the shorter period, but only if and to the extent the optionee was
entitled to exercise the option at the date of such termination.
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<PAGE>
(iii) Termination Because of Death. Unless otherwise determined by the Board of
Directors, in the event of the death of an optionee while employed by or
providing service to the Company or a parent or subsidiary, the option may be
exercised at any time prior to the expiration date of the option or the
expiration of 12 months after the date of such death, whichever is the shorter
period, but only if and to the extent the optionee was entitled to exercise the
option at the date of such termination and only by the person or persons to whom
such optionee's rights under the option shall pass by the optionee's will or by
the laws of descent and distribution of the state, or country of domicile at the
time of death.
(iv) Amendment of Exercise Period Applicable to Termination. The Board of
Directors, at the time of grant or at any time thereafter, may extend the 30 day
and 12-month exercise periods any length of time not later than the original
expiration date of the option, and may increase the portion of an option that is
exercisable, subject to such terms and conditions as the Board of Directors may
determine.
(v) Failure to Exercise Options. To the extent that the option of any deceased
optionee or of any optionee whose employment or service terminates is not
exercised within the applicable period, all further rights to purchase shares
pursuant to such option shall cease and terminate.
(d) Purchase of Shares. Unless the Board of Directors determines otherwise,
shares may be acquired pursuant to an option granted under the Plan only upon
receipt by the Company of notice in writing from the optionee of the optionee's
intention to exercise, specifying the number of shares as to which the optionee
desires to exercise the option and the date on which the optionee desires to
complete the transaction, and, if required in order to comply with the
Securities Act of 1933, as amended, containing a representation that it is the
optionee's present intention to acquire the shares for investment and not with a
view to distribution, and any other information the Board of Directors may
request. Unless the Board of Directors determines otherwise, on or before the
date specified for completion of the purchase of shares pursuant to an option,
the optionee must have paid the Company the full purchase price of such shares
in cash (including, with the consent of the Board of Directors, cash that may be
the proceeds of a loan from the Company) or, with the consent of the Board of
Directors, in whole or in part, in Common Stock of the Company valued at fair
market value, restricted stock, or other contingent awards denominated in either
stock or cash, deferred compensation credits, promissory notes and other forms
of consideration. The fair market value of Common Stock provided in payment of
the purchase price shall be determined by the Board of Directors. No shares
shall be issued until full payment therefor has been made. Each optionee who has
exercised an option shall immediately upon notification of the amount due, if
any, pay to the Company in cash amounts necessary to satisfy any applicable
federal, state and local tax withholding requirements. If additional withholding
is or becomes required beyond any amount deposited before delivery of the
certificates, the optionee shall pay such amount to the Company on demand. If
the optionee fails to pay the amount demanded, the Company may withhold that
amount from other amounts payable by the Company to the optionee, including
salary, subject to applicable law. Upon the exercise of an option, the number of
shares reserved
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<PAGE>
for issuance under the Plan shall be reduced by the number of shares issued upon
exercise of the option, less the number of shares surrendered in payment of the
option exercise.
6.2 Incentive Stock Options. Incentive Stock Options shall be subject to the
following additional terms and conditions:
(a) Limitation on Amount of Grants. An Incentive Stock Option shall by its terms
prohibit the exercise of all options in excess of the amount provided for in
Section 422(d) of the Code. Should it be determined that any Incentive Stock
Option granted under the Plan inadvertently exceeds such maximum, such Incentive
Stock Option grant shall be deemed to be a grant of a Nonqualified Stock Option
to the extent, but only to the extent, of such excess.
(b) Limitation on Grants to 10 Percent Shareholders. An Incentive Stock Option
may be granted under the Plan to an employee possessing more than 10 percent of
the total combined voting power of all classes of stock of the Company or of any
parent or subsidiary of the Company only if the option price is at least 110
percent of the fair market value of the Common Stock subject to the option on
the date it is granted, as described in paragraph 6.2(d), and the option by its
terms is not exercisable after the expiration of five years from the date it is
granted.
(c) Duration of Options. Subject to paragraphs 6.1(b) and 6.2(b), Incentive
Stock Options granted under the Plan shall continue in effect for the period
fixed by the Board of Directors, except that no Incentive Stock Option shall be
exercisable after the expiration of five years from the date it is granted.
(d) Option Price. The option price per share shall be determined by the Board of
Directors at the time of grant. Except as provided in paragraph 6.2(b), the
option price shall not be less than 100 percent of the fair market value of the
Common Stock covered by the Incentive Stock Option at the date the option is
granted. The fair market value shall be determined by the Board of Directors.
"Fair Market Value" shall be defined as the average 30 days' bid price of the
Common Stock as quoted on the NASDAQ OTC Bulletin Board, or such other
electronic quotation system or exchange as the Company's common stock is then
quoted.
(e) Limitation on Time of Grant. No Incentive Stock Option shall be granted on
or after the fifth anniversary of the effective date of the Plan.
(f) Conversion of Incentive Stock Options. The Board of Directors may at any
time without the consent of the optionee convert an Incentive Stock Option to a
Non-Statutory Stock Option.
6.3 Non Statutory Stock Options. Non-Statutory Stock options shall be subject to
the follow additional terms and conditions:
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<PAGE>
(a) Options Price. The option price for Non-Statutory Stock Options shall be
determined by the Board of Directors at the time of grant. The option price may
be less than, the Fair Market Value of the shares on the date of grant. The Fair
Market Value of shares covered by a Non-Statutory Stock Option shall be
determined by the Board of Directors.
(b) Duration of Options. Non-Statutory Stock Options granted under the Plan
shall continue in effect for the period fixed by the Board of Directors.
7. Stock Bonuses.
The Board of Directors may award shares under the Plan as stock bonuses.
Shares-awarded as a bonus shall be subject to the terms, conditions, and
restrictions determined by the Board of Directors. The restrictions may include
restrictions concerning transferability and forfeiture of the shares awarded,
together with such other restrictions as may be determined by the Board of
Directors. The Board of Directors may require the recipient to sign an agreement
as a condition of the award. The agreement may contain any terms, conditions,
restrictions, representations and warranties required by the Board of Directors.
Ile certificates representing the shares awarded shall bear any legends required
by the Board of Directors. The Company may require any recipient of a stock
bonus to pay to the Company in cash upon demand amounts necessary to satisfy any
applicable federal, state or local tax withholding requirements. If the
recipient fails to pay the amount demanded, the Company may withhold that amount
from other amounts payable by the Company to the recipient, including salary or
fees for services, subject to applicable law. Upon the issuance of a stock
bonus, the number of shares reserved for issuance under the Plan shall be
reduced by the number of shares issued.
8. Restricted Stock.
The Board of Directors may issue shares under the Plan for such consideration
(including promissory notes and services) as determined by the Board of
Directors, which consideration may be less than Fair Market Value Of the Common
Stock at the time of issuance. shares issued under the Plan shall be subject to
the terms, conditions and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability, repurchase by
the Company and forfeiture of the shares issued, together with such other
restrictions as may be determined by the Board of Directors. All Common Stock
issued pursuant to this paragraph 8 shall be subject to a purchase agreement,
which shall be executed by the Company and the prospective recipient of the
shares prior to the delivery of certificates representing such shares to the
recipient. The purchase agreement may contain any terms, conditions,
restrictions, representations and warranties required by the Board of Directors.
The certificates representing the shares shall bear any legends required by the
Board of Directors. The Company may require any purchaser of restricted stock to
pay to the Company in cash upon demand amounts necessary to satisfy any
applicable federal, state or local tax withholding requirements. If the
purchaser fails to pay the amount demanded, the Company may withhold that amount
from other accounts payable by the Company to the purchaser, including salary,
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<PAGE>
subject to applicable law. Upon the issuance of restricted stock, the number of
shares reserved for issuance under the Plan shall be reduced by the number of
shares issued.
9. Cash Bonus Rights.
9.1 Grant. The Board of Directors may grant cash bonus rights under the Plan in
connection with (i) options granted or previously granted; (ii) stock bonuses
awarded or previously awarded; and (iii) shares sold or previously sold under
the Plan. Cash bonus rights will be subject to rules, terms and conditions as
the Board of Directors may prescribe. The payment of a cash bonus shall not
reduce the number of shares of Common Stock reserved for issuance under the
Plan.
9.2 Cash Bonus Rights in Connection with Options. A cash bonus right granted in
connection with an option will entitle an optionee to a cash bonus when the
related option is exercised in whole or in part. If an optionee purchases shares
upon exercise of an option, the amount of the bonus shall be determined by
multiplying the excess of the total Fair Market Value of the shares to be
acquired upon the exercise over the total option price for the shares by the
applicable bonus percentage.
9.3 Cash Bonus Rights in Connection with Stock Bonus. A cash bonus right granted
in connection with a stock bonus will entitle the recipient to a cash bonus
payable when the stock bonus is awarded or restrictions if any, to which the
stock is subject lapse. If bonus stock awarded is subject to restrictions and is
repurchased by the Company or forfeited by the holder, the cash bonus right
granted in connection with the stock bonus shall terminate and may not be
exercised. The amount and timing of payment of a cash bonus shall be determined
by the Board of Directors.
9.4 Taxes. The Company shall withhold from any cash bonus paid pursuant to
paragraph 10 the amount necessary to satisfy any applicable federal, state and
local withholding requirements.
10. Foreign Qualified Grants.
Awards under the Plan may be granted to such officers and employees of the
Company and its subsidiaries and such other persons described in paragraph I
residing in foreign jurisdictions as the Board of Directors may determine from
time to time. The Board of Directors may adopt such supplements to the Plan as
may be necessary to comply with the applicable laws of such foreign
jurisdictions and to. afford participants favorable treatment under such laws;
provided, however, that no award shall be granted under any such supplement with
terms which are more beneficial to the participants than the terms permitted by
the Plan.
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11. Option Grants to Non-Employee Directors and Advisory Board Directors.
11.1 Initial Non-Discretionary Grants. Each person who is or becomes a
Non-Employee Director or Advisory Board Director after January 26, 1999 shall be
automatically granted an option to purchase 3,000 shares of Common Stock on the
date he or she becomes a Non-Employee Director. A "Non-Employee Director" is a
director who is not an employee of the Company or any of its subsidiaries and
has not been an employee of the Company or any of its subsidiaries within one
year of any date as of which a determination of eligibility is made, and has not
received either options, stock grants, discounted stock, or cash for services as
a Director within a twelve month period prior to such grant.
11.2 Annual Non-Discretionary Grants to Continuing Non-Employee Directors or
Advisory Board Directors. Each person who is or becomes a Continuing
Non-Employee Director or Advisory Board Director after January 26, 1999 shall
automatically annually receive, on the day of the Company's regular annual
meeting of its shareholders, a nondiscretionary grant of an option to purchase
3,000 shares of the Company's Common Stock. A "Continuing Non-Employee
Director" is a Non-Employee Director or Advisory Board Director who continuously
serves as a Non-Employee Director of the Company during a period of time which
includes the date(s) upon which one or more annual shareholder meetings of the
Company are held.
11.3 Annual Non-Discretionary Grants to Employee Board Members. Each person who
is or becomes an Employee Director after January 26, 1999 shall automatically
annually receive, on the day of the Company's regular annual meeting of its
shareholders, a non-discretionary grant of the option to purchase up to 3,000
shares of the Company's Common Stock. An "Employee Director" is an Employee
Director or Advisory Board Director who continuously serves as an Employee
Director of the Company during a period of time which includes the date(s) upon
which one or more annual shareholder meetings of the Company are held.
11.4 Exercise-Price. The exercise price of any option granted pursuant to this
paragraph 11 shall be equal to the Fair Market Value of the Common Stock as
determined in accordance with the procedure set forth in paragraph 6.2(d).
11.5 Term of Option . The term of each option granted pursuant to this paragraph
11 shall be 5 years from the date of grant.
11.6 "Complete Month". For all purposes of this paragraph 11, a complete month
shall be deemed to be the period which starts on the day of grant and ends on
the same day of the following calendar month, so that each successive "complete
month" ends on the same day of each successive calendar month (or, in respect of
any calendar month which does not include such a day, that "complete month"
shall end on the first day of the next following calendar month).
11.7 Termination as a Director. If an optionee ceases to be a director of the
Company for any reason, including death, all options granted pursuant to this
paragraph 11 may be exercised at any time prior to the expiration date of the
option or the expiration of 30 days (or 12 months
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in the event of death) after the last day the optionee served as a director,
whichever is the shorter period, but only if and to the extent the optionee was
entitled to exercise the option as of the last day the optionee served as a
director.
11.8 Nontransferability. Each option granted pursuant to this paragraph 11 by
its terms shall be nonassignable and nontransferable by the optionee, either
voluntarily or by operation of law, except by will or by the laws of descent and
distribution of the state or country of the optionee's domicile at the time of
death or pursuant to a qualified domestic relations order as defined under the
Code or Title I of the Employee Retirement Income Security Act of 1974.
12. Changes in Capital Structure.
If the outstanding Common Stock of the Company is hereafter increased or
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company or of another corporation by reason of any
recapitalization, reclassification, stock split, combination of shares or
dividend payable in shares, appropriate adjustment shall be made by the Board of
Directors in the number and kind of shares available for awards under the Plan.
In addition, the Board of Directors shall make appropriate adjustment in the
number and kind of shares as to which outstanding options, or portions thereof
then unexercised, shall be exercisable, so that the optionee's proportionate
interest before and after the occurrence of the event is maintained. The Board
of Directors may also require that any securities issued in respect of or
exchanged for shares issued hereunder that are subject to restrictions be
subject to similar restrictions. Notwithstanding the foregoing, the Board of
Directors shall have no obligation to effect any adjustment that would or might
result in the issuance or fractional shares, and any fractional shares resulting
from any adjustment may be disregarded or provided for in any manner determined
by the Board of Directors. Any such adjustments made by the Board of Directors
shall be conclusive.
13. Effect of Liquidation or Reorganization.
13.1 Cash Stock or Other Property for Stock . Except as provided in paragraph
13.2, upon a merger, consolidation, acquisition of property or stock,
reorganization or liquidation of the Company, as a result of which the
stockholders of the Company receive cash, stock or other property in exchange
for or in connection with their shares of Common Stock, any option granted
hereunder shall terminate, but the optionee shall have the right during a 30-day
period immediately prior to any such merger, consolidation, acquisition of
property or stock, reorganization or liquidation to exercise his or her option
in whole or in part whether or not the vesting requirements applicable to the
option have been satisfied at the discretion of the Board of Directors.
13.2 Conversion of Options on Stock for Stock Exchange. If the stockholders of
the Company receive capital stock of another corporation ("Exchange Stock") in
exchange for their shares of Common Stock in any transaction involving a merger,
consolidation, acquisition of
9
<PAGE>
property or stock, separation or reorganization, all options granted hereunder
shall be converted into options to purchase shares of Exchange Stock unless the
Board of Directors, in its sole discretion, determines that any or all such
options granted hereunder shall not be converted into options to purchase shares
of Exchange Stock but instead shall terminate in accordance with the provisions
of paragraph 13.1. The amount and price of converted options shall be determined
by adjusting the amount and price of the options granted hereunder in the same
proportion as used for determining the number of shares of Exchange Stock the
holders of the Common Stock receive in such merger, consolidation, acquisition
of property or stock, separation or reorganization.
14. Corporate Mergers, Acquisitions, Etc.
The Board of Directors may also grant options, stock bonuses and cash bonuses
and issue restricted stock under the Plan having terms, conditions and
provisions that vary from those specified in this Plan, provided that any such
awards are granted in substitution for, or in connection with the assumption of,
existing options, stock bonuses, cash bonuses and restricted stock granted,
awarded or issued by another corporation and assumed or otherwise agreed to be
provided for by the Company pursuant to or by reason of a transaction involving
a corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation to which the Company or a subsidiary is a party.
15. Amendment of Plan.
The Board of Directors may at any time, and from time to time, modify or amend
the Plan in such respect as it shall deem advisable because of changes in the
law while the Plan is in effect or for any other reason. Except as provided in
paragraphs 6.1(d), 12 and 13, however, no change in an award already granted
shall be made without the written consent of the holders of such award.
16. Approvals.
The obligations of the Company under the Plan are subject to the approval of
state and federal authorities or agencies with jurisdiction in the matter. The
Company shall not be obligated to issue or deliver Common Stock under the Plan
if such issuance or delivery would violate applicable state or federal
securities laws.
17. Employment and Service Rights.
Nothing in the Plan or any award pursuant to the Plan shall: (a) confer upon any
employee any right to be continued in the employment of the Company or any
subsidiary or interfere in any way with the right of the Company or any
subsidiary by whom such employee is employed to terminate such employee's
employment at any time, for any reason, with or without cause, or to decrease
such employee's compensation or benefits, or (b) confer upon any person engaged
10
<PAGE>
by the Company any right to be retained or employed by the company or to the
continuation, extension, renewal, or modification of any compensation, contract,
or arrangement with or by the Company.
18. Rights as a Shareholder.
The recipient of any award under the Plan shall have no rights as a shareholder
with respect to any Common Stock until the date of issue to the recipient of a
stock certificate for such shares. Except as otherwise expressly provided in the
plan, no adjustment shall be made for dividends or other rights for which the
record date occurs prior to the date such stock certificate is issued.
Date adopted by Board January 26, 1999
Date Approved by Stockholders January 26, 1999
Date Last Amended by the Shareholders N/A , 1999
11
EXHIBIT 10.05
EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
EMPLOYEE STOCK PURCHASE PLAN
1 Purpose. The Employee Stock Purchase Plan (the "Plan") has been adopted by
DYNASIL CORPORATION OF AMERICA ("the Company"), to foster continued cordial
employee relations, to encourage and assist its employees and the employees of
its affiliates (including officers and directors who are employees) in acquiring
a share ownership interest, and to help them provide for their future security.
For this purpose, there are being reserved for issuance under the Plan 50,000
Common Shares.
2 Eligibility. Any full-time employee of the Company or of any of its affiliates
is eligible to become a member of the Plan, provided such employee has completed
ninety days continuous service. The term "affiliates" as used in this Plan means
any corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company, if each of the corporations other than the last
corporation in the unbroken chain own shares possessing 50% or more of the total
combined voting power of all classes of shares in one of the other corporations
in such chain.
3 Maximum Shares to be Purchased. During any twelve (12) month period, an
Employee shall be prohibited from purchasing pursuant to the Employee Stock
Purchase Plan, more than that number of shares for which the total purchase
price is $5,000. This means, for example, if the purchase price is $5.00 per
share, then an employee may purchase no more than 1,000 shares during any twelve
(12) month period.
4 Purchase Price. The purchase price per Share shall be sixty five (65%) percent
of the Market Price of the Shares. For purposes of this calculation, "Market
Price" shall mean the average closing bid price per share as quoted on the OTC
Bulletin Board or the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ") for the five business days prior to the execution
of the request to purchase shares.
5 Administration of the Plan. The Plan shall be administered by such officers or
other employees of the Company as the Company may from time to time select, and
the persons so selected shall be responsible for the administration of the Plan.
All costs and expenses incurred in administering the Plan shall be paid by the
Company.
6 Modification and Termination. The Company expects to continue the Plan until
such time as 50,000 Common Shares have been sold. As future conditions cannot be
foreseen, the right is reserved by the Company to terminate the Plan at any time
in its entirety, or modify it from time to time by action of the Board of
Directors. The Company shall promptly give notice of any such modification or
termination to the members affected.
PAGE 1 - EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
7 Registration of Shares. The Board of Directors, in its sole discretion, shall
determine whether the Shares being issued pursuant to this Plan shall be issued
pursuant to the exemption from registration provided by Rule 701 of the
Securities Act of 1933, (the "Act") as amended, or shall be registered pursuant
to the terms of the Act. Nothing herein shall be construed to mean that the
Company shall have a duty to register such Shares, and purchasers may be
required to dispose of the Shares pursuant to Rule 144 of the Act.
PAGE 2 - EMPLOYEE STOCK PURCHASE PLAN
EXHIBIT 21.01
LIST OF SUBSIDIARIES OF REGISTRANT
Dynasil International Incorporated
Hibshman Corporation
EXHIBIT 23.01
CONSENT OF HAEFELE, FLANAGAN & CO., P.C.
CONSENT FOR INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report on Dynasil Corporation of America and
Subsidiaries dated November 16, 1998 in this Registration Statement on Form
10-SB of Dynasil Corporation of America.
HAEFELE, FLANAGAN & CO., p.c.
Certified Public Accountants
Maple Shade, New Jersey
September 24, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Dynasil
Corporation of America balance sheets as of September 30, 1998 and June 30, 1999
and statements of operations for the year ended September 30, 1998 and the
nine months ended June 30, 1999.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> SEP-30-1998 SEP-30-1999
<PERIOD-END> SEP-30-1998 JUN-30-1999
<CASH> 45,980 48,491
<SECURITIES> 0 0
<RECEIVABLES> 356,059 373,120
<ALLOWANCES> 10,883 10,883
<INVENTORY> 1,278,334 993,994
<CURRENT-ASSETS> 1,711,650 1,436,229
<PP&E> 5,555,463 5,560,796
<DEPRECIATION> 3,164,475 3,432,135
<TOTAL-ASSETS> 4,128,585 3,585,503
<CURRENT-LIABILITIES> 486,089 363,025
<BONDS> 1,882,515 1,775,256
0 0
0 0
<COMMON> 1,474 1,491
<OTHER-SE> 1,758,507 1,445,731
<TOTAL-LIABILITY-AND-EQUITY> 4,128,585 3,585,503
<SALES> 3,981,395 2,021,887
<TOTAL-REVENUES> 3,981,395 2,021,887
<CGS> 2,711,148 1,735,582
<TOTAL-COSTS> 3,562,463 2,214,798
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 188,150 146,729
<INCOME-PRETAX> 230,782 (339,640)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 230,782 (339,640)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 230,782 (339,640)
<EPS-BASIC> 0.10 (0.15)
<EPS-DILUTED> 0.10 (0.15)
</TABLE>
