_______________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
__________
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
HOLOMETRIX, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check Appropriate Box)
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-(6)(i)(3)
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which
transaction applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act
Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
_______________________________________________________________________
HOLOMETRIX, INC.
25 WIGGINS AVENUE, BEDFORD, MA 01730-2323
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
HOLOMETRIX, INC.
The undersigned stockholder of Holometrix, Inc. (the "Company")
hereby appoints John E. Wolfe and Harold H. Leach, and each of
them, with full power of substitution, proxies for the undersigned
and authorizes them to represent and vote, as designated, all of
the shares of stock of the Company which the undersigned may be
entitled to vote at the annual meeting of the stockholders of the
Company to be held at the offices of the Company, 25 Wiggins
Avenue, Bedford, Massachusetts on Thursday, March 14, 1996, and at any
adjournment or postponement of such meeting, for the following
purposes and with discretionary authority as to any other matter
that may properly come before the meeting, all in accordance with
and as described in the Notice and accompanying Proxy Statement.
If no direction is given, this proxy will be voted FOR proposals 1
and 2.
Proposal (1): Fix the number of Directors at five.
FOR ___ AGAINST ___ ABSTAIN ___
Elect Directors
___ Grant AUTHORITY to vote for all ___ WITHHOLD AUTHORITY
nominees (except as otherwise to vote for all nominees
specified below).
Director Nominees: Joseph J. Caruso, Joaquim S. S. Ribeiro,
Edward J. Stewart, III, John E. Wolfe and
Salvatore Vinciguerra
(INSTRUCTIONS: To withhold authority to vote for any
nominees print the name of such nominees on the space
provided below).
------------------------------------------------------
Proposal (2): Approval of the selection of BDO Seidman as
independent auditors.
FOR ___ AGAINST ___ ABSTAIN ___
Date:___________________________________, 1996
_________________________________________
_________________________________________
(Signature of Stockholder)
Please sign exactly as your name
appears. If acting as attorney,
executor, trustee or in other
representative capacity, sign name
and title.
HOLOMETRIX, INC.
25 Wiggins Avenue, Bedford, MA 01730-2323
February 16, 1996
Dear Stockholder:
On behalf of our entire Board of Directors, I cordially invite
you to attend our Annual Meeting of Stockholders on Thursday, March
14, 1996. Information concerning the formal matters to be acted on
at the meeting is contained in the accompanying Notice of Meeting and
Proxy Statement. We are also enclosing the 1995 Annual Report along
with this Proxy Statement; it describes our instrumentation and
testing services businesses. At the meeting, we plan to discuss the
results of our operations during fiscal year 1995 and our expectations
for the Company in fiscal year 1996. We will also answer any questions
you may have.
We look forward to personally greeting as many of our
----------
shareholders as will be able to attend the meeting. Whether or not you
expect to attend the meeting, please take a moment now to complete,
sign and date the enclosed proxy and return it in the postage-paid
envelope we have provided. If you attend the meeting, you may vote in
person if you wish, even though you have previously returned your
proxy, provided you give written notice of the revocation of your proxy
to the Corporate Secretary.
Thank you for your interest in Holometrix; it is appreciated.
-------------------------------------------------------------
I look forward to seeing you at our annual meeting.
---------------------------------------------------
Sincerely yours,
/s/ John E. Wolfe
John E. Wolfe
President and Chief Executive Officer
HOLOMETRIX, INC.
25 Wiggins Avenue, Bedford, Massachusetts 01730-2323
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On March 14, 1996
Notice is hereby given that the Annual Meeting of Stockholders of
Holometrix, Inc. (the "Company") will be held on Thursday, March
14, 1996, at 11:30 a.m., at the offices of the Company, 25
Wiggins Avenue, Bedford, Massachusetts, to consider and act upon
the following matters:
1. To fix the number of directors at five and to elect five
directors to hold office for the ensuing year.
2. To approve the selection by the Board of Directors of BDO
Seidman, LLP as the Company's independent auditors for the
___
fiscal year ending September 30, 1996.
3. To transact such other business as may properly come before
the meeting or any adjournments of the meeting.
Stockholders of record of the Company as of the close of business
on February 1, 1996 are entitled to notice of and to vote at the
meeting and any adjournment thereof.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors
/s/ Harold H. Leach
Harold H. Leach, Secretary
Bedford, Massachusetts
February 16, 1996
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVE-
LOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE
AFFIXED IF MAILED IN THE UNITED STATES.
HOLOMETRIX, INC.
25 Wiggins Avenue, Bedford, Massachusetts 01730-2323
PROXY STATEMENT
for
Annual Meeting of Stockholders to be held March 14, 1996
The Annual Meeting of Stockholders of Holometrix, Inc., a
Delaware corporation (the "Company"), will be held Thursday, March 14,
1996, for the purposes set forth in the accompanying Notice of Annual
Meeting. This statement is furnished in connection with the
solicitation of proxies by the Board of Directors to be used at such
meeting and at any and all adjournments thereof and is first being sent
to stockholders on or about February 16, 1996. Any stockholder
executing and returning a proxy in the enclosed form has the power to
revoke such proxy at any time prior to the voting thereof by written
notice to the Company, by executing a later dated proxy or by appearing
and voting at the meeting.
At the Annual Meeting action is to be taken on (a) the election
of a Board of Directors; (b) the ratification of the selection of
independent accountants, and (c) transaction of such other business
as may properly come before the meeting.
All shares represented at the meeting by proxies in the
accompanying form will be voted provided that such proxies are properly
signed. In cases where a choice is indicated, the shares represented
will be voted in accordance with the specifications so made. In cases
where no specifications are made, the shares represented will be voted
for the election of directors and for the ratification of the selection
of independent accountants.
The Company will pay all costs of soliciting proxies in the
accompanying form. Solicitation will be made by mail, and officers and
regular employees of the Company may also solicit proxies by telephone
or personal interview. The Company expects to request brokers and
nominees who hold stock in their names to furnish this proxy material
to their customers and to solicit proxies from them, and will reimburse
such brokers and nominees for their out-of-pocket and reasonable
clerical expenses in connection therewith.
VOTING RIGHTS
The Board of Directors has fixed February 1, 1996 as the record
date for determination of stockholders entitled to vote at the Annual
Meeting. At the close of business on February 1, 1996 there were
outstanding and entitled to vote 16,296,878 shares of Common Stock of
the Company. Each share of Common Stock is entitled to one vote. A
majority of the outstanding shares of Common Stock entitled to vote
will constitute a quorum for the transaction of business at the Annual
Meeting. The affirmative vote of a plurality of the shares of Common
Stock present or represented at the meeting is required for the
election of directors. Abstentions and broker non-votes will be
counted for purposes of determining whether a quorum is present at the
meeting; however, an abstention from voting or a broker non-vote has no
effect on the election of directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of December 15, 1995, to the
knowledge of the Company, the ownership of the Company's 16,296,878
outstanding shares of Common Stock by (i) each person who is known by
the Company to own of record or beneficially more than five percent
(5%) of the outstanding shares of the Company's Common Stock, (ii) each
of the Company's Directors, and (iii) all Directors and officers as a
group. Except as otherwise indicated, to the knowledge of the Company,
the stockholders listed below have sole voting and investment power
with respect to the shares indicated.
Name and Address Number of Shares Percentage
of Beneficial Owner Beneficially Owned of Class(1)
-------------------- ------------------ -----------
Tytronics Incorporated(2) 8,960,244 54.9%
25 Wiggins Avenue
Bedford, MA 01730-2323
Bantam Group, Inc.(3) 1,435,000 8.8%
50 Bay Colony Drive
Westwood, MA 02090
John E. Wolfe 200,000(4) 1.2%
Joaquim S.S. Ribeiro 150,000(4) *
Salvatore J. Vinciguerra 150,000(4) *
All Officers and Directors as a 10,895,244 66.9%
group (4 persons)
* Less than 1%
(1) Pursuant to the rules of the Securities and Exchange Commission,
shares of Common Stock which an individual or group has a right
to acquire within 60 days of this statement pursuant to the
exercise of presently exercisable or outstanding options,
warrants or conversion privileges are deemed to be outstanding
for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be outstanding for
the purpose of computing the percentage ownership of any other
person shown in the table.
(2) Joseph J. Caruso, Edward J. Stewart and John E. Wolfe, directors
of the Company, are also directors of Tytronics Incorporated.
(3) Joseph J. Caruso, a director of the Company, is also president of
Bantam Group, Inc., and has sole voting and investment power with
respect to the 1,435,000 shares of Common Stock owned by Bantam
Group, Inc.
(4) Issuable upon the excercise of currently outstanding stock options.
Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), requires the Company's directors and officers,
and persons who own more than 10% of a registered class of the
Company's equity securities, to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange
Commission (the "SEC"). Such persons are required by SEC regulations
to furnish the Company with copies of all Section 16(a) forms they file.
All requirements for officers and directors of the Company to file
Section 16(a) reports have been met for the fiscal year ended September
30, 1995. The information set forth above is based solely on the
Company's review of the copies of such forms received by it or written
representations from certain reporting persons.
ELECTION OF DIRECTORS
The persons named in the proxy will vote, as permitted by the
By-laws of the Company, to fix the number of directors at five and to
elect as directors the five nominees named below, unless authority to
vote for the election of directors is withheld by marking the proxy to
that effect or the proxy is marked with the names of directors as to
whom authority to vote is withheld. The proxy may not be voted for
more than five directors. All of the nominees are presently directors
of the Company.
Each director will be elected to hold office until the next
annual meeting of stockholders and until his successor is elected and
qualified. If a nominee becomes unavailable, the person acting under
the proxy may vote the proxy for the election of a substitute. It is
not presently contemplated that any of the nominees will be unavailable.
The following table sets forth the name of each nominee and the
positions and offices held by him, his age, the year in which he became
a director of the Company, his principal occupation and business
experience for the last five years, the names of other companies in
which he serves as a director and the number of shares of Common
Stock of the Company which he reported were beneficially owned by him
as of December 15, 1995:
Common Stock
Beneficially Percentage of
Name, Age, Principal Occupation, Business Owned Directly Common Stock
Experience and Directorships or Indirectly Outstanding
----------------------------------------- -------------- -------------
Joseph J. Caruso, age 52 1,435,000(1) 8.5%
Mr. Caruso has been a Director of the Company since
November of 1994 and was Acting President of the
Company from June of 1993 until February of 1995.
Mr. Caruso is also President of Bantam Group, Inc.,
a business advisory organization founded in 1986.
Mr. Caruso has twenty years of general management,
marketing, and financial experience in several high
technology companies, including marketing, manufacturing
and financial roles at Teradyne, Inc., a manufacturer
of automatic test systems, corporate planning at
Autex, Inc., a provider of block trading information
for brokers and institutions, and President and CEO
of Cyborg Corporation, a supplier of laboratory
and factory automation systems. Mr. Caruso is
presently a member of the board of directors of
Corion Corporation, a manufacturer of optics
components, Haymarket Bank, Tytronics Incorporated,
a manufacturer of process monitoring
instrumentation and Boston Restaurant Associates,
owner and operator of Italian restaurants and
pizzerias. Mr. Caruso holds a B.S. in Electrical
Engineering from Northeastern University and a
Master of Business Administration degree from
The Harvard Business School.
Joaquim S. S. Ribeiro, age 59 150,000(2) *
Mr. Ribeiro has been a Director of the Company since
November of 1994. Mr. Ribeiro is a self-employed
management consultant, and is a director of Central
Massachusetts Health Care, Inc. ("CMHC"), and the
Bank of Boston - Worcester, Massachusetts regional
board. From 1992 to 1993, he served as vice-chairman
of Multibank Financial Corp., a public bank holding
company now part of Bank of Boston, and as interim
president of CMHC. From 1989 to 1992, he served as
general manager of the law firm of Bowditch and Dewey,
and previously was vice president and treasurer of
the Worcester Polytechnic Institute. Mr. Ribeiro
holds a B.S. in Aeromechanics from Worcester Polytechnic
Institute and a Master of Business Administration in
Economics and Finance from Clark University.
Edward J. Stewart, III, age 49 -- --
Mr. Stewart has served as a Director of the Company
since January of 1988. Since 1994, Mr. Stewart
has served as general partner of Kestrel Venture
Management, a venture capital firm, and from 1983
to 1994 Mr. Stewart served as the President
of Corning Capital Corporation, a venture
capital firm. Mr. Stewart also serves on the
board of directors of approximately 10 other
companies. Mr. Stewart holds a Master of
Business Administration degree from The Harvard
Business School and an Administrative Studies
degree from Yale University.
Common Stock
Beneficially Percentage of
Name, Age, Principal Occupation, Business Owned Directly Common Stock
Experience and Directorships or Indirectly Outstanding
----------------------------------------- -------------- -------------
Salvatore J. Vinciguerra, age 57 150,000(3) *
Mr. Vinciguerra has been a Director of the Company
since February of 1995. He has been President and
Chief Operating Officer of Ferrofluidics Corporation
since January of 1995. From 1991 until 1994, Mr.
Vinciguerra served as President and Chief Executive
Officer of Staveley, Inc., the U.S. operating arm of
Staveley Industries, plc. From 1985 until 1989, he served
as President and Chief Operating Officer of Instron
Corporation, which he initially had joined in 1969.
Mr. Vinciguerra is also a member of the board of
directors of Lytron Corporation, the Japan Society of
Boston and Children's Museum of Boston. Mr. Vinciguerra
holds a B.S. in Engineering from Princeton University and
a Master of Business Administration degree from The
Harvard Business School.
John E. Wolfe, age 57 200,000(3) 1.2%
Mr. Wolfe joined the Company as a Director in November
of 1994 and was elected President and Treasurer of the
Company in February of 1995. Since 1987, Mr. Wolfe
has also been President, Chief Executive Officer and a
director of Tytronics Incorporated, a manufacturer and
marketer of on-line chemical analyzers for the process and
environmental markets. Previously, Mr. Wolfe was employed
by EG&G'S Fluid Components Technology Group, serving as
Senior Vice President, Western Hemisphere Operations, and
Vice President and General Manager, Engineered Products
Division. Mr. Wolfe is also a Director of Colorado MEDTech,
in Boulder, Colorado, a publicly held medical products
company. He is also Chairman of the Board of Trustees of
Bryant College in Smithfield, Rhode Island, and a member
of the Executive Committee of the M.I.T. Enterprise Forum
of Cambridge. Mr. Wolfe holds a B.S. in Electrical Engineering
from Worcester Polytechnic Institute, [and] an S.M. from the
Massachusetts Institute of Technology as a Sloan Fellow, and
he has completed the Advanced Management Program at the
Harvard Business School.
* Less than 1%
(1) Mr. Caruso is the president of Bantam Group, Inc. and may therefore
be deemed to share beneficial ownership of the 1,435,000 shares
owned by Bantam Group, Inc.
(2) Issuable upon the exercise of currently outstanding stock options.
(3) Issuable upon the exercise of currently outstanding stock options.
Information as to Other Executive Officers
Executive officers are elected by the Board of Directors and hold
office until their successors are chosen and qualified, subject to
earlier removal by the Board of Directors. Currently there are no
executive officers of the Company other than those who will serve as
directors.
Board Meetings and Committees of the Board
The Board of Directors met five times during fiscal 1995. No
director attended fewer than 75% of the total number of meetings of the
Board and Committees on which such director served.
Audit Committee
Messrs. Ribeiro and Vinciguerra constitute the membership of the
Board's Audit Committee, which was established in fiscal 1995. The
Audit Committee met one time during fiscal year 1995.
The Audit Committee (1) recommends to the Board of Directors the firm
of independent accountants which is to be engaged to audit the books of
account and other corporate records of the Company, (2) reviews with
the independent accountants the scope of their audit with particular
emphasis on the areas to which either the Committee or the independent
accountants believe special attention should be directed, (3) reviews
the recommendations of the independent accountants regarding internal
controls and other matters, and (4) makes reports, whenever deemed
advisable, to the Board of Directors with respect to the internal
control and accounting practices of the Company.
Compensation Committee
Messrs. Caruso and Stewart constitute the membership of the
Board's Compensation Committee, which was established in fiscal 1995.
The Compensation Committee met one time during fiscal year 1995. The
Compensation Committee reviews and recommends changes in the salaries
of officers and employees, and advises upon the compensation and stock
option plans in which the directors, officers and employees of the
Company are eligible to participate.
Board of Directors Compensation
During fiscal 1995, the Company did not pay directors for their
Board or Committee services. However, the Company pays non-employee
directors the sum of $1,000 per year in lieu of expense reimbursement
associated with attending directors' meetings. In addition,
non-employee directors have, in the past, been granted options to
purchase shares of the Company's Common Stock. During fiscal year
ended September 30, 1995, each of Joaquim S.S. Ribeiro and Salvatore J.
Vinciguerra were granted options to purchase 150,000 shares of the
Company's Common Stock at an exercise price of $.03 per share. Such
options vest over a period of four years and are exercisable for five
years from the date of grant.
Executive Compensation
The following table sets forth certain information with respect
to the annual and long-term compensation for services in all capacities
to the Company for the fiscal years ended September 30, 1995, September
30, 1994 and September 30, 1993, of those persons who were (i) the
Company's chief executive officer during the fiscal year ended
September 30, 1995 and (ii) other executive officers of the Company,
as of September 30, 1995, who received total cash and bonus
compensation in excess of $100,000 (the "Named Officers") during fiscal
1995.
Name and Other Restricted
Principal Compen- Stock
Position Year Salary($) Bonus($) sation($)1 Award($)
--------- ---- --------- -------- ---------- ----------
John E. Wolfe 1995 33,333 0 0 n/a
President, CEO
and Treasurer
Joseph J. Caruso 1995 0 0 36,000 n/a
Acting President
and CEO
Joseph J. Caruso 1994 0 0 60,000 n/a
Acting President
and CEO
Joseph J. Caruso 1993 0 40,000 20,000 n/a
Acting President
and CEO
_____________
1Includes consulting fees paid and accrued to Bantam Group, Inc. Mr. Caruso
is President of Bantam Group, Inc.
Securities
Name and Underlying All Other
Principal Options/ Compen-
Position SARs(#)2 sation
---------- ----------- ----------
John E. Wolfe 200,000 n/a
President, CEO
and Treasurer
Joseph J. Caruso n/a n/a
Acting President
and CEO
Joseph J. Caruso n/a n/a
Acting President
and CEO
Joseph J. Caruso n/a n/a
Acting President
and CEO
-----
2 Represents the grant of an option to purchase 200,000 shares of the
Company's common stock which vests over a period of four years.
The following table sets forth information concerning options
granted during the fiscal year ended September 30, 1995 under the
Company's 1987 and 1991 Plans to the executives named in the Summary
Compensation Table above. The Company did not grant any stock options
during fiscal year 1994 or appreciation rights during fiscal year 1994.
Options Grants in Last Fiscal Year
Individual Grants
Percentage of Total
Shares Subject to Options Granted to Exercise Expiration
Name Options Granted Employees in FY 1995 Price Date
---- ----------------- -------------------- -------- ----------
John E. Wolfe 200,0001 100% $0.03 April 20,
2000
Joseph J. Caruso 0 n/a n/a n/a
_____________
1 Option grant vests over four years with 1/5 of the shares subject to the
grant vested upon grant and 1/5 vested annually thereafter.
The following table sets forth information concerning option exercises
during fiscal 1995 and the value of unexercised options as of September
30, 1995. No options were exercised during fiscal year 1995 by any of
the Company's executive officers named in the compensation table.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
# Unexercised Options
# Shares at Sept. 30, 1995
Acquired on (Exercisable/
Name Exercise $ Value Realized Unexercisable)
---- ----------- ---------------- ---------------------
John E. Wolfe 0 $0 200,000/200,000
Joseph J. Caruso 0 $0 0
___________
$Value of Unexercised
Options at Sept. 30, 1995
(Exercisable/
Name Unexercisable)1
---- --------------------------
John E. Wolfe $0
Joseph J. Caruso $0
------------
1 Value is based on the difference between option exercise price and
the fair market value at fiscal 1995 year end, multiplied by the number
of shares underlying the option.
INTEREST OF MANAGEMENT AND OTHERS IN
CERTAIN TRANSACTIONS AND RELATIONSHIPS
In July 1992, the Company entered into a Stock Purchase and Settlement
Agreement (the "Agreement") with Corning Partners III, L.P. and Norman
Priebatsch, two former 5% stockholders of the Company, pursuant to
which Corning Partners III, L.P. purchased 1,000,000 shares of Series B
Preferred Stock from Mr. Priebatsch at a purchase price of $.15 per share
for an aggregate consideration of $150,000 and the Company purchased Mr.
Priebatsch's remaining 250,000 shares of Series B Preferred Stock in
exchange for a Term Unsecured Promissory Note due August 31, 1994 in the
principal amount of $50,000 (the "Note"). Principal and interest on the
Note were payable in twenty-five, equal, monthly installments beginning
August 15, 1992. In consideration for the Note, Mr. Priebatsch also agreed
to release any and all claims he might have had against the Company
relating to his purchase of the Series B Preferred Stock in April, 1991 and
to the termination of his prior employment relationship with the Company.
Pursuant to the Agreement, the option granted to Mr. Priebatsch under the
Company's 1991 Stock Plan to purchase 600,000 shares of Common Stock of the
Company was also canceled. Edward J. Stewart, III, a director of the
Company, was the president and a director of Corning Capital Corporation,
the management company serving Corning Partners III, L.P., and managing
general partner of the sole general partner of Corning Partners III, L.P.
In October, 1993, an agreement between Mr. Priebatsch and the Company was
negotiated to allow the Company to pay the remaining $24,300 outstanding
debt at a reduced monthly rate with interest at prime plus 4%. On
September 26, 1994, the remaining balance of the debt to Mr. Priebatsch
was paid in full.
The Company and Bantam Group, Inc. ("Bantam") are parties to a
consulting agreement effective June 6, 1993, which continues month-to-month
unless terminated by either party on thirty days' notice. Pursuant to this
Agreement, Bantam was paid $5,000 per month through January 1995 and $2,000
per month thereafter. Bantam was also paid a one-time bonus of $40,000 in
1993 based on the Company's level of profitability and cash flow. In
addition, the agreement calls for the issuance of 800,000 shares of the
Company's Common Stock plus the reimbursement of any tax liability arising
from the issuance of the stock. The 800,000 shares were issued to
Bantam in December 1993. Mr. Caruso, a director of the Company, is
president of Bantam.
On September 30, 1994 in anticipation of the agreement with Tytronics
Incorporated ("Tytronics") described below, the Board of Directors voted to
purchase 1,141,113 shares of the Company's Common Stock from Dhananjay G.
Wadekar, a former director and 5% stockholder of the Company, for an
aggregate consideration of $3,500, and to purchase 795,166 shares of Common
Stock from Douglas B. Flint, a former director and 5% stockholder of the
Company, for an aggregate consideration of $2,500. On November 4, 1994,
Mr. Wadekar and Mr. Flint resigned from the Company's Board of Directors.
Pursuant to a Conversion of Debt and Contribution to Capital Agreement
dated November 10, 1994 between the Company and Corning Partners, III,
L.P., Corning Partners III, L.P. converted $315,000 of existing promissory
notes, plus $59,205 of accrued interest on all such outstanding notes, into
1,663,140 shares of the Company's Common Stock. Also on November 10, 1994,
the Company entered into an Accrued Interest Conversion Agreement with Mr.
Henry, pursuant to which Mr. Henry converted interest on $50,000 of the 10%
subordinated notes then held by Mr. Henry, totaling $8,292, into 36,860
shares of the Company's Common Stock.
Pursuant to a Purchase Agreement dated November 29, 1994 (the "Purchase
Agreement"), Tytronics acquired all of the Common Stock of the Company
owned by Corning Partners II, L.P., Corning Partners III, L.P., Bayard
Henry, and Edward J. Stewart, III, consisting of an aggregate 8,960,244
shares of the Company's Common Stock at the time representing 53% of the
shares of the Company's outstanding voting securities. In connection with
the Purchase Agreement, Tytronics also acquired $220,000 of the 10% Demand
Subordinated Notes of the Company then held by Corning Partners III, L.P.
and Mr. Henry. In addition, pursuant to a Loan Agreement dated November
29, 1994 (the "Loan Agreement"), the Company paid $55,000 to Tytronics
which was used to retire a portion of the $220,000 10% Demand Subordinated
Notes acquired from previous holders, and the $165,000 balance of these
notes was converted into a 3-year note, with annual principal payments of
$55,000, plus interest at 10% per annum, due October 31 of each year.
Pursuant to the Loan Agreement, Tytronics also provided the Company with
a $150,000 demand loan, the proceeds of which were used to pay the
remaining indebtedness owned Corning Partners II, L.P., Corning Partners
III, L.P., and Mr. Henry.
As a result of the transaction described above, all previously
outstanding shares of the Company's Series A and B Preferred Stock were
converted into Common Stock, and all of the Company's indebtedness to the
Corning partnerships and Mr. Henry were either converted to Common Stock,
paid in full, or purchased by Tytronics. As of September 30, 1995, the
Company had outstanding notes payable to Tytronics totalling $165,000, of
which $55,000 is a current liability and $110,000 is a long-term liability
on the Company's balance sheet at September 30, 1995. Immediately prior to
the effectiveness of the Purchase Agreement with Tytronics, the Corning
partnerships and Messrs. Stewart and Henry effectively held 8,960,244
shares of the Company's Common Stock, or 53% of the Company's then
outstanding voting securities, which were exchanged for 30,000 shares of
Tytronics common stock, $.01 par value. In connection with the transaction
described above, Joseph J. Caruso, Joaquim S.S. Ribeiro, and John E. Wolfe
were elected as directors of the Company.
The Company and Tytronics, the owner of approximately 54.9% of the
Company's outstanding Common Stock, share operating facilities at 25
Wiggins Avenue, Bedford, Massachusetts. The Company and Tytronics allocate
rental expense associated with the facility based on the square footage
occupied by each company. This arrangement currently results in the
payment by Tytronics to the Company of approximately $3,000 per month for
the occupancy by Tytronics of a portion of the Company's leased facilities.
The Company and Tytronics also share other operating and administrative
costs based on estimated usage. During the fiscal year ended September 30,
1995, this informal agreement resulted in the payment of approximately
$68,000 by the Company to Tytronics for such operating and administrative
costs.
During the fiscal year ended September 30, 1995, the Company and
Tytronics were also parties to various informal working capital agreements
pursuant to which Tytronics provided working capital financing to the
Company on a short-term basis. Such working capital advances are limited
by the Company's Silicon Valley Bank agreement to $25,000 at any one time.
These advances are payable on demand with 10% interest due from Tytronics
under these arrangements. No amount was due to Tytronics by the Company
under these arrangements as of fiscal year end, September 30, 1995.
APPROVAL OF AUDITORS
The Board of Directors has selected the firm of BDO Seidman LLP,
---
independent public accountants, as auditors of the Company for the fiscal
year ending September 30, 1996 and is submitting the selection to
stockholders for approval. Representatives of BDO Seidman LLP are expected
---
to be present at the Annual Meeting of Stockholders. They will have an
opportunity to make a statement if they desire to do so and will also be
available to respond to appropriate questions from stockholders.
On September 27, 1994, the Company terminated its client-auditor
relationship with Deloitte & Touche LLP. The principal reason for
terminating the relationship was that the relatively small size of the
Company had made it increasingly difficult for Deloitte & Touche LLP to
serve as auditor on a cost-effective basis. The decision to change
accountants from Deloitte & Touche LLP to BDO Seidman was approved by the
Board of Directors. The Deloitte & Touche LLP reports on the financial
statements of the Company for the years ended September 30, 1993 and 1992
did not contain an adverse opinion or a disclaimer of opinion, nor were
such reports qualified or modified as to audit scope or accounting
principles. Their reports did, however, include an explanatory paragraph
referring to an uncertainty as to the Company's ability to continue as a
going concern, as a result of its recurring operating losses, net
stockholders' deficiency, and inability to meet its loan agreement
covenants and financing needs.
During the fiscal year ended September 30, 1993, and through September
27, 1994, the date the relationship ceased, there were no "disagreements
between the Company and Deloitte & Touche LLP" or "reportable events" as
defined in Item 304 of Regulation S-K. During the audit of the year ended
September 30, 1992, Deloitte & Touche LLP advised the Board of Directors
that an environment existed within the Company whereby former senior
management overrode internal control systems in place, resulting in
revenues and earnings being recognized in incorrect periods (interim
quarters and year-end) and representing a "reportable event." The Board
conducted an investigation, agreed with Deloitte & Touche LLP, corrected
the errors, and took corrective action with senior management. The Company
has authorized Deloitte & Touche LLP to respond fully to the inquiries of
any successor accountant with respect to the matters described above.
OTHER MATTERS
The Board of Directors does not know of any other matters which may
come before the meeting. However, if any other matters are properly
presented to the meeting, it is the intention of the persons named in the
accompanying proxy to vote, or otherwise to act, in accordance with their
judgment on such matters.
Proposals of stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders must be received by the Company at its principal
office in Bedford, Massachusetts, not later than September 19, 1996 for
inclusion in the proxy statement for that meeting.
