THIS DOCUMENT IS A COPY OF THE FORM 10-KSB FILED ON DECEMBER 30, 1998 PURSUANT
TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________
FORM 10-KSB
_____________
X Annual Report Pursuant To Section 15(d) Of The Securities Exchange
Act Of 1934 For the fiscal year ended September 30, 1998
Transition Report Pursuant To Section 13 Or 15(d) Of The Securities
Exchange Act Of 1934 For the transition period from __________ to
__________
Commission file number 0-16152
Metrisa, Inc.
(Name of Registrant as Specified in Its Charter)
_____________
Delaware (781) 275-3300 04-2891557
(State or Other Jurisdiction (Registrant's Telephone (I.R.S. Employer
Incorporation or Organization) Number, Including Area Code) Identification No.)
25 Wiggins Avenue, Bedford, Massachusetts 01730
(Address of Principal Executive Offices) (Zip Code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Name of Each Exchange on
Title of Each Class Which Registered
None Not applicable
Securities Registered Pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.50 par value
(Title of Class)
Check whether the Registrant: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such other shorter period that the Registrant
was required to file such reports); and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
The Registrant's consolidated revenues for its fiscal year ended
September 30, 1998 were $8,252,450 The aggregate market
value of shares of the Common Stock held by non-affiliates,
based upon the average of the bid and ask prices for such stock
on December 1, 1998 was approximately $330,998. As of
December 1, 1998, 1,022,911 shares of Common Stock were
outstanding.
Transitional Small Business Disclosure Format Yes No X
PART I
This Annual Report on Form 10-KSB and the documents incorporated
herein by reference contain forward-looking statements that have been
made pursuant to the provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are based on
current expectations, estimates and projections about the Company's
industry, management's beliefs, and certain assumptions made by the
Company's management. Words such as "anticipates," "expects,"
"intends," "plans," "believes," "seeks," "estimates," variations of such
words and similar expressions are intended to identify such forward-
looking statements. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and assumptions
that are difficult to predict; therefore, actual results may differ materially
from those expressed or forecasted in any such forward-looking
statements. Unless required by law, the Company undertakes no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise. However, readers
should carefully review the risk factors set forth in other reports or
documents the Company files from time to time with the Securities and
Exchange Commission, particularly the Quarterly Reports on Form 10-Q
and any Current Reports on Form 8-K.
ITEM 1. DESCRIPTION OF BUSINESS.
BUSINESS OF METRISA, INC.
Metrisa, Inc. (the "Company") is a product development, manufacturing
and contract test services company which specializes in manufacturing
instruments and providing contract test services for measuring the
properties of a wide variety of materials, liquids and gases. The Company
operates its business through the Tytronics, Nametre, and Holometrix-
Micromet Divisions. The Company's Tytronics Division designs,
manufactures and markets on-line liquid and gas chemical analyzers for
specific applications and worldwide process and environmental markets.
The Company's Nametre Division also develops and manufactures in-line
and laboratory viscosity analyzers, for the process and environmental
markets. The Company's Holometrix-Micromet Instruments Division
designs, manufactures and distributes instruments which measure
thermophysical (temperature) properties and perform cure monitoring of a
broad range of materials. The Company's Holometrix-Micromet Testing
Services Division provides contract test and engineering services to
evaluate a number of temperature-related performance factors of virtually
any material. The Holometrix-Micromet Testing Services Division also
performs mechanical and physical properties testing.
On May 1, 1998, the Company (formerly Holometrix, Inc.) completed a
reorganization ("Reorganization") pursuant to which Tytronics
Incorporated ("Tytronics"), the majority owner of the Company, and
National Metal Refining Company ("Nametre"), the majority owned
subsidiary of the Company, were merged into the wholly-owned
subsidiary of the Company, Holometrix Acquisition Corp., which was
followed by the merger of Holometrix Acquisition Corp. into the
Company. As part of this Reorganization, Holometrix changed its name to
Metrisa, Inc., and effected a 50:1 reverse stock split of its issued and
outstanding capital stock. On February 13, 1998, Tytronics acquired the
assets of Micromet Instruments Inc. ("Micromet"), and thus Micromet was
also merged into Holometrix Acquisition Corp., but as part of Tytronics.
The Company's principal offices are located at 25 Wiggins Avenue,
Bedford, Massachusetts 01730; its telephone number is (781) 275-3300
and its facsimile number is (781) 275-3705. The Company is a Delaware
corporation, which was incorporated on October 23, 1985.
THE COMPANY'S STRATEGY
In order to expand its market presence and increase revenue, the Company
is exploring a variety of alternatives, falling into four primary categories:
1.) Enhanced Marketing and Sales Efforts. The Company is investing
additional resources, including new personnel, to expand its
worldwide marketing and selling effectiveness. Specific examples
include improved sales and marketing materials, broader trade
show and symposium participation, and expanded geographic
coverage.
2.) Product Development. The Company is continuing to invest in the
development of new products, and in upgrading its existing
products to have more competitive features, be easier to
manufacture, and have improved margins.
3.) Corporate Synergy. The Company's Holometrix-Micromet,
Nametre and Tytronics Divisions serve many common markets and
customers, including the polymer, petrochemical, paints and
coatings, and food markets. Complementary marketing and
distribution activities have begun.
4.) Strategic Relationships. The Company continues to seek strategic
relationships and licensing, investment and acquisition
opportunities with companies having complementary product lines
to those of the Company.
BUSINESS OF TYTRONICS DIVISION
The Company's Tytronics Division designs, manufactures and markets on-
line liquid and gas chemical analyzers for specific applications in
worldwide process and environmental markets. These devices measure
the concentrations of specific chemicals and are used in both process
control and environmental monitoring. Examples are the measurement of
acid and iron in steel pickling (preparation) lines, the measurement of
caustic concentration in gas scrubbers, the measurement of aluminum and
iron in potable water treatment and the measurement of ammonia and
nitrate in waste water treatment. Using the detection technologies of
titration (neutralization reaction), colorimetry (a color change or color
intensity differentiation) and spectrophotometry (a change measured in the
ultraviolet or infrared regions), the Tytronics Division focuses on
providing simple, reliable and cost-effective analytical instrumentation to
its markets worldwide.
Tytronics Division's Instruments
The Company's Tytronics Division analyzers are available for on-line
monitoring of many liquids and some gasses. Typical constituents
measured are aluminum, ammonia, chlorine, chromium, copper, cyanide,
fluoride, iron, phosphate, manganese, nitrite, nitrate and zinc. Lower
limits of measurement are at part per billion (ppb) levels, and upper limits
are often at percent levels. Methods are based upon published literature
methods and are adapted for use on Tytronics' family of analyzers. Over
1400 analyzers have been sold during the course of Tytronics' history for
varied applications. They operate in a wide variety of difficult, and
sometimes hazardous, process and environmental conditions.
The Tytronics Division's products deliver on-line analysis for process and
environmental monitoring reliably, simply and cost-effectively. On-line
analysis is often readily justified; benefits include improved yield, reduced
chemical consumption, reduced labor and increased sensitivity to
environmental concerns. The equipment provides accurate readings even
with background interference of sample color and turbidity. Little or no
filtering is used for most applications and the equipment measures both
low and high concentrations of chemicals. The interface is user-friendly,
with menu-driven software, and the units may be PC-linked to
communicate with a host computer.
The Tytronics Division's family of analyzers employs a patented
methodology to capture samples. This methodology is similar to use of an
overflow cup, except that siphon action drains the sample to a final
repeatable level (volume). This sampling method uses the reaction cell to
both capture the sample and accomplish the appropriate chemical reaction,
a significant reduction in complexity. Only a single highly reliable Teflon
valve connects to the process stream. Analyses are fully automatic in all
cases. Through menu-driven programming, the user can easily change the
frequency of analysis and calibration, and the outputs, as well as most
default values.
Tytronics Division's Products.
The Tytronics products can be classified into five product lines: Ion
Selective Electrode analyzers, titrators, colorimeters, spectrophotometers
and the Tytronics'r Sentinel.
Ion Selective Electrode Analyzers (FPA 200)
The FPA 200 Series delivers reliable measurements of selective ions.
Ion selective electrodes, which are the sensing technology employed,
are measurement devices sensitive to the presence of a particular ion.
The FPA 200 employs a patented sampling method which uses the
reaction cell to capture the sample, thus reducing complexity.
Titrators (FPA 300 and FPA 400)
The FPA 300 series delivers reliable on-line titration. The FPA 300
series titrates using a variety of electrodes, which sense the
maximum rate of microvoltage change in a particular chemical
reaction. The FPA 400 series adds the capacity to titrate to a color
endpoint, sensing the maximum rate of change of color in a chemical
solution. The colorimetric endpoint (maximum color change) is
sensed with light which is carried from and returned to the
source/detector by fiber optics. Colorimetric titration offers on-line
analytical capability at trace levels in applications such as monitoring
plant effluent and municipal water, and environmental analysis in
general.
Colorimeters (FPA 800)
The FPA 800 series delivers reliable on-line colorimetric analysis.
These analyzers are configured to make precise reagent additions
which, in combination with the chemical being measured, develop a
characteristic color. The color is developed by reaction following
well-established techniques. Direct colorimetry offers on-line
analytical capability at trace levels in applications such as monitoring
plant effluent and municipal water, and environmental analysis in
general.
Spectrophotometers (FPA 1000 and FPA 1100)
The FPA 1000 and 1100 series delivers reliable on-line photometric
(light source) analysis, offering on-line analytical capability at both
trace and higher levels. These spectrophotometers are applicable to
both process and environmental applications, and use well-
established spectrophotometric techniques of analysis.
Tytronics'r Sentinel
The Tytronics'r Sentinel series delivers simple, reliable and cost-
effective on-line colorimetric and ISE analysis, directed primarily at
the potable and waste water markets. Colorimetric analyzers are
configured to make precision reagent additions to develop a
characteristic color. Tytronics'r Sentinel offers multi-streaming;
analyzers can be expanded to analyze up to 6 separate sample
streams.
Tytronics Division's Markets
The Company's Tytronics Division's chemical analyzers are primarily sold
to the chemical/petrochemical/refinery and water treatment markets.
Within the chemical/petrochemical/refinery market, the Division's
instruments are used for both process control and effluent monitoring. In
the water treatment market, the Tytronics Division's products are used for
the control and monitoring of both potable water and waste water
treatment. A number of the Division's instruments are also sold to the
food, beverage and textile industries. Management believes (based on a
market study entitled Process Analyzer Market, 1994-1999, by PAI
Partners, Leonia, New Jersey, May 1995) that current markets for process
chemical analyzers total approximately one billion dollars annually.
BUSINESS OF NAMETRE DIVISION
The Company's Nametre Division specializes in developing and
manufacturing in-line and laboratory viscosity analyzers. These analyzers
are used to measure the viscosity (thickness and density) and
viscoelasticity (pliability) of a wide range of material and are sold into the
polymer manufacturing, petrochemical, food, paints and coatings and pulp
and paper markets. The Nametre Division is located at 101 Liberty Street,
Metuchen, NJ, 08840.
Nametre Division Products
The Nametre Division engages in the development, production and
distribution of viscosity analyzers under the trade names, "Viscolinerr"
and "Rheolinerr". The analyzers measure the viscosity and
viscoelasticity of a wide range of materials. Products are developed and
manufactured for both on-line process monitoring and control, and
laboratory use. The vast majority of analyzers sold are for in-line process
control. Such analyzers are used to provide manufacturers with viscosity
information, which is often critical to ensuring proper material formulation
and material production. Applications and markets that routinely use
viscosity analyzers include the polymer, petrochemical, food, paints and
coatings, and pulp and paper industries.
The Nametre Division has over thirty years of experience in the viscosity
measurement business. The basic technology underlying the Nametre
Division's analyzers is the use of an oscillating sensor that is inserted into
a stream of material in a process line (pipe or vessel). The sensor
oscillates at a constant amplitude. The viscosity of a product is then
determined on the basis of the electrical power needed to maintain the
oscillation amplitude in the presence of the viscous material. The
principles of measurement of the Viscoliner product are currently covered
by U.S. patents.
The Viscoliner product line consists of three different models: the 1810 for
in-line process monitoring and control, the 300 for paints and coatings and
the 1710 for laboratory analysis. The 1810 is an on-line viscometer that is
applicable to a wide range of materials and applications. It is
microprocessor controlled. The model 1810 is typically utilized in the
polymer market. Recent developments include PC based software,
"Viscontrol" for analyzer control, data acquisition and interface to factory
control systems.
The Viscoliner model 300 is also an on-line analyzer. It is similar to the
model 1810 in its concept of operation; however, it is configured primarily
for paint, ink and coatings applications.
The Viscoliner model 1710 is a laboratory version of the model 1810.
This instrument is used primarily for research, product development and
quality assurance. Applications include the full range of markets that
Nametre serves.
The Nametre Division's Markets
The Nametre Division's analyzers are sold primarily to product and
material manufacturers engaged in the production and use of plastics,
chemical, foods, paints, inks or coatings and paper and pulp. A number of
analyzers are also sold to government laboratories and universities.
Management believes (based on its internal calculations of the sales of
companies that it has identified as competitors) that the current market for
process viscosity totals approximately $20-$25 million annually.
Tytronics and Nametre Distribution
The Tytronics and Nametre Divisions market their products in the U.S.
and internationally through the combination of direct sales force and a
network of independent manufacturer's representatives and distributors.
The Divisions actively advertise their products in industry trade journals,
attend various U.S. and international trade shows and maintain a home
page on the World Wide Web to promote their products and services.
Current products are sold in North America directly from the Company's
offices in Bedford, Massachusetts, and Metuchen, New Jersey. Domestic
sales for both the Tytronics and Nametre Divisions amounted to
approximately 47% of the Divisions' total revenue for fiscal year 1998,
with international sales accounting for the balance of 53%. Domestic sales
and marketing for both the Tytronics and Nametre Divisions are handled
in-house by a staff of three professionals, supporting independent
manufacturers' representatives. Overseas sales (primarily to Africa,
Europe, the Far East and Latin America) are made through independent
distributors and sales agents, managed by two sales and marketing
professionals. In addition to the in-house sales managers, a Director and
Assistant Director of Sales and Marketing for the Tytronics and Nametre
Divisions are responsible for the sales and marketing activities of both
companies. Product visibility is maintained through active participation in
regional, national and international trade organizations, including
Instrument Society of America, American Water Works, Water
Environment Federation and the New England Water Works Association.
BUSINESS OF HOLOMETRIX-MICROMET DIVISION
Holometrix-Micromet Instruments Group
The Company's Holometrix-Micromet Instrument Division Group
engages in the development, production and distribution of instruments
under the trade names "Holometrix" and "Micromet". The Group
currently designs, manufactures and markets instruments that measure the
thermophysical properties and perform cure monitoring of a broad range
of materials for research, product development and quality-control
applications. Information about thermophysical and cure properties is
used to quantify the performance, quality, and/or composition of various
materials such as insulation, composites, plastics, and ceramics. In
addition to their importance in advanced materials development, the
Group's instruments are used as research tools to address worldwide
environmental issues, including energy conservation, plastics recycling
and nuclear waste disposal.
The Holometrix-Micromet Division has over 30 years of experience in
thermophysical (temperature) properties testing. The basic technology
underlying the Group's instruments is the application of heat energy to a
material under test and the measurement of the results of such an
application. The precise measurements and the containment of heat,
combined with equally precise temperature measurement and control, are
key elements in the design of nearly all of the Group's products. Many
instruments encompass microprocessor-controlled data collection and
analysis, resulting in the fully automated calculation of material properties,
such as thermal conductivity and specific heat. The nature of heat transfer
through a material, resulting from the application of energy, varies
depending on the material's type and composition. Therefore, a different
methodology is required to test different types of material. The Group
manufactures various instruments incorporating these different
methodologies.
The five Holometrix product lines consist of thirteen instrument models,
plus Holometrix' proprietary Q-LabTautomation software. Ongoing
development efforts have resulted in new instrument products that are
fully automated, incorporating either PC interface, or internal
microprocessors. Revenues are also derived from service and spare parts.
Holometrix Products
Heat Flow Meters
The Heat Flow Meter technique is an easy and rapid method for
testing the thermal conductivity and thermal resistance (R-value) of
insulation. This type of instrument is widely used in both the quality
control testing and the development of insulation products. Federal
trade rules require insulation manufacturers to measure the thermal
resistance (R Value) by the heat flow meter method, or similar
techniques, as part of the procedure for labeling their products. In
1996 the Company introduced the new Lambda 2000 Series of heat
flow meter products. These instruments contain an advanced
instrumentation and control concept for which a patent has recently
been allowed.
Guarded Heat Flow Meters
The Guarded Heat Flow meter method permits the testing of
moderate conductivity materials. Customers use these instruments to
establish safe operating temperatures and thermal efficiency of
products ranging from electronic and semiconductor components to
adhesives, and for heat transfer modeling of many industrial
processes, including injection molding of polymers. Thermal
conductivity data from these instruments is important to the plastics,
electronics, automotive, aerospace and food processing industries.
Guarded Hot Plates
These instruments are used primarily as research tools to measure
thermal conductivity in porous and solid materials over a wide range
of temperatures, environmental conditions and material types. This
technique is used to measure materials from cryogenic (very cold) to
very high temperatures.
Laserflash Instruments
These instruments utilize a sophisticated, high-performance Laser
Flash Thermal Diffusivity (speed of heat through material) (LFTD)
technique to measure both thermal diffusivity and specific heat from -
170 C to 2000 C. Data from these instruments is used by customers
to determine safe operating temperatures, quality assurance, design and
process control for composition, molding, heating or cooling rates, and
thermal performance analysis. Typical applications include the
characterization of materials for electronic, aerospace propulsion,
automotive materials and semiconductor material design and
manufacturing.
Micromet Products
Micromet has over 16 years experience in cure monitoring and dielectric
analysis of a wide range of polymer materials. The basic technology
underlying these instruments is the dielectric measurement of electrical
conductivity or ultrasonic measurement of sound speed in a material to
determine its state of cure and relative viscosity. Temperature control,
applications software and precise frequency control are all key elements in
the design of Micromet instruments. The determination of the state of
cure of a material is crucial to the design of processes for making
composite of plastic parts used in aerospace, automotive, and electronic
packaging applications. Typical users include process development and
quality control groups at large aerospace firms, composite material
developers and suppliers, and polymer material suppliers.
ICAM
The ICAM products are used for in-process monitoring and quality
control of molding processes for polymer and composite
manufacturing. Typical applications include monitoring large
structural parts for aerospace, automotive and other structural
composite applications.
System III
The System III line of instruments provide highly accurate evaluation
of cure properties of polymers. This product line primarily supports
product development and process development laboratories in the
plastics, aerospace, automotive and electronics markets.
Other
Other Holometrix and Micromet products include specialized
thermophysical property, cure monitoring and molding monitoring
instruments.
Holometrix-Micromet Testing Services Group
The Testing Services Group maintains a thermophysics laboratory which
provides contract test and engineering services to evaluate various
temperature-related performance factors of virtually any material. Testing
is generally performed to ASTM (American Society of Testing and
Materials) standards. In addition, insulation testing is provided under
NVLAP (the National Voluntary Laboratory Accreditation Program)
accreditation. NVLAP is supported by the National Institute of Standards
and Technology. The Testing Services Group also demonstrates the
capabilities of Holometrix instruments to potential customers, provides
significant input to outside technology steering groups which establish the
standards for industry instrument utilization, and provides valuable
technical and marketing input for product development. The Group's
experience and capabilities cover a broad scope of temperature range,
environmental conditions, sample size and property magnitude. In
addition to thermophysical testing of materials, the Group also offers
selected mechanical and moisture testing of materials.
The Group's testing capabilities complement the Company's customer
research and product development activities. Thermophysical testing of
materials is not a routine capability and competence for most material
development departments. Thus, testing service customers tend to be
repeat customers who use the Testing Services Group as a complement to
their capabilities.
Holometrix-Micromet Markets
Holometrix' thermophysical instruments and Micromet's cure monitoring
instruments are sold primarily to materials laboratories engaged in the
development, process development and testing of insulations, building
materials, advanced engineered materials, plastics and packaging
manufacturers, aerospace manufacturers and government laboratories. A
number of instruments are also sold to insulation manufacturing facilities.
Management believes (based on its internal calculations of the sales of
companies that it has identified as competitors) that current markets for
thermal conductivity instruments and testing services total approximately
$10 - $15 million annually. The Group has also identified engineered
materials, electronics and specialty plastics industries as promising
markets for the instruments. The Company markets its Holometrix-
Micromet products and services in the U.S. and internationally through the
combination of a direct sales force and a network of independent
distributors and sales agents. The Company actively advertises its
Holometrix-Micromet products in industry trade journals and also attends
various U.S. and international trade shows to promote its products and
services.
Holometrix-Micromet Distribution
Current products and test services are sold in North America directly from
the Company's offices in Bedford, Massachusetts. Domestic sales for the
Holometrix-Micromet Division amounted to 24% of total Company
revenue for fiscal year 1998. Domestic sales and marketing are handled
in-house by a staff of two professionals and an administrator. Overseas
sales (primarily to Europe and the Far East) are managed by one
professional through independent distributors and sales agents. In addition
to the internal sales force, testing services are sold by individual project
managers responsible for specific testing areas. Product visibility is
maintained through active participation in national and international trade
organizations, including the ASTM. Additional visibility is maintained
through advertising, exhibitions, informational mailings, technical
application notes and customer demonstrations.
In fiscal 1998, overseas sales accounted for approximately 31% of total
Holometrix-Micromet Division sales, compared to 31% also in fiscal
1997.
THE COMPANY'S CUSTOMERS
During fiscal 1998, the Company had total consolidated revenues of
approximately $8,252,450, compared to $7,974,919 in fiscal 1997. One
customer accounted for approximately 11% of sales in fiscal 1998.
THE COMPANY'S BACKLOG
As of September 30, 1998, the Company's backlog for products and
services totaled $722,000, as compared to $1,027,000 in backlog as of
September 30, 1997. The fiscal 1998 backlog consisted of $378,000 for
the Tytronics Division, $207,000 for the Holometrix-Micromet Division
and $137,000 for the Nametre Division. All backlog at September 30,
1998 is expected to be delivered before September 30, 1999.
THE COMPANY'S COMPETITION
The Company's competitive advantage lies in its ability to develop and
produce a broad spectrum of products in several different market niches.
Competitive factors include product performance, quality and reliability,
ease of use, marketing capability, service and support, and name
recognition. Competition is intense. The Company's Tytronics Division
Process Analyzer Products experience direct competition with Applicon
Instruments BV, FPM Analytics, Inc., Ionics, Inc., Polymetron and Seres.
The Tytronics Division's potable water and waste water analyzers
experience direct competition from ABB Kent-Taylor Ltd., Aztec, Bran &
Luebbe Inc., Dr. Bruno Lange GmbH, Hach Company, pHox, Polymetron,
Skalar Inc., and Seres. The Company's Holometrix-Micromet Instruments
Division experiences direct competition for its heat flow meters from
Anter Corporation and LaserComp Inc. Thermaflash has strong
competition from Sinku Riko in the Far East, Netzsch GmbH, Theta
Industries and Anter Inc. in Europe and North America. The Holometrix-
Micromet Testing Services Division competes as a broad-capability
independent laboratory performing thermal property studies. There are no
other known companies or laboratories that encompass the Division's
entire capabilities, however, many laboratories offer a subset of the
Division's services. Competitive contracts are awarded based on price,
testing capability and credibility of the test results. The following sample
laboratories compete in the market sectors indicated: Engineered Materials
- - Thermophysical Properties Research Laboratory Inc., Anter
Laboratories, Inc., The Edward Orton Jr. Ceramic Foundation, Southern
Research Institute, and Virginia Polytechnic Institute; Insulations -
Southern Research Institute, Sparrell Engineering Research Corporation,
and The Center for Applied Engineering; Government - Oak Ridge
National Laboratory and National Institute of Standards and Technology.
The Company's Nametre Division's major competitors are Brookfield
Engineering Laboratories, Solatron Transducers, MicroMotion Division of
Fisher Rosemount, Norcross Corporation and Dynatrol Division of
Automation Products, Inc. Management believes the Company competes
favorably in each of these areas. The Company can give no assurance that
its current or future products will remain or be competitive in these areas.
The market for scientific measuring instrumentation is also characterized
by extensive research and development and rapid technological change.
Development by others of new or improved products or technologies may
make the Company's products or proposed products obsolete or less
competitive. The Company may be required to devote substantial efforts
and financial resources to increase its existing product lines by developing
new products and services.
RESEARCH AND DEVELOPMENT
The Company expended approximately $663,100 and $626,700 or 8% of
sales, in fiscal 1998 and 1997, respectively, on research and development.
The Company expects that in fiscal 1999 its research and development
expenditures will be approximately 9% of sales.
THE COMPANY'S PATENTS AND PROPRIETARY TECHNOLOGY
The Company develops proprietary information and technology, including
software programs, in the course of its research and development
activities. Management believes that patent and copyright protection are
important, but less significant than the technical competence and creative
skills of the Company's personnel, the performance and reliability of the
Company's products and competitive marketing, pricing and customer
service.
The Company's Holometrix-Micromet Division has recently been issued a
patent which describes the unique control of its new Lambda 2000 Series
heat flow meter product line. The Nametre Division owns eight patents,
including patents that cover the basic transducer and electronics for
viscosity measurement, the method and apparatus for viscoelastic
measurements, and the transducer for high viscosity measurements in
extruders. The patents expire in various years from 2001 to 2011. The
Tytronics Division holds three patents, two in the area of sample capture
methodologies, and one for a particular form of spectrophotometric
calibration.
The Nametre Division owns or has applied for four trademarks. The
Tytronics Division holds a broad variety of worldwide trademarks, and
has copyrighted certain selected information. The Holometrix-Micromet
Division owns eight trademarks. The Company does not believe its
trademarks are material to the conduct of the business.
GOVERNMENTAL REGULATIONS
There is presently no material government regulation with respect to the
Company's businesses and its development of products. The extent to
which future governmental regulations may regulate the Company's
activities cannot be predicted, and the Company may be subject to
restrictions on allowable costs and profits on U.S. government contracts
and the export of its technology to other countries as it seeks to expand
further into foreign markets.
EMPLOYEES
As of September 30, 1998, the Company had 51 employees, 46 of whom
are employed full-time. Most of the Company's employees are highly
skilled and the Company's continued success will depend, in part, upon its
ability to attract and retain such skilled employees. The Company has
never experienced a work stoppage, none of its employees are represented
by a labor organization, and the Company considers its relations with its
employees to be good.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company occupies approximately 15,200 square feet of production,
research and development, engineering, administrative and service
facilities at 25 Wiggins Avenue in Bedford, Massachusetts. The Company
occupies this facility under a lease which expires September 30, 1999.
The Company's Nametre Division also leases approximately 4,000 square
feet of production, service, research and development and engineering
administrative space at 101 Liberty Street, Metuchen, New Jersey. The
Nametre Division occupies this facility on a month-to-month basis under
an operating lease. The Company's rental expense for fiscal 1998 was
approximately $107,740.
The Company considers these facilities to be reasonably insured and
adequate for its foreseeable needs and believes that similar facilities are
available in the Boston, Massachusetts and Metuchen, New Jersey
metropolitan areas at comparable rental rates.
Substantially all of the machinery and equipment used by the Company in
its operations is owned by the Company and management considers this
equipment to be in good condition. All of the machinery and equipment
owned by the Company is subject to a security interest in favor of Sirrom
Investments, Inc. ("Sirrom") and is subject to a senior security interest in
favor of Silicon Valley Bank, to which Sirrom's interest is subordinated.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the
Company is a party or to which any of their properties are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
No matters were submitted to a vote of stockholders during the
fourth quarter of the Company's 1998 fiscal year.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is not quoted in the over-the-
counter market. There currently does not exist an active trading market
for the Company's securities. The following table sets forth the range of
high and low bid quotations for the Company's Common Stock as reported
by the National Quotation Bureau of New Jersey.1
Fiscal Year 1997 Low High
First Quarter Ended December 31, 1996 $0.002 $0.002
Second Quarter Ended March 31, 1997 0.002 0.04
Third Quarter Ended June 30, 1997 0.005 0.02
Fourth Quarter Ended September 30, 1997 0.002 0.005
Fiscal Year 1998 Low High
First Quarter Ended December 31, 1997 $0.002 $0.01
Second Quarter Ended March 31, 1998 0.01 0.01
Third Quarter Ended June 30, 1998 0.01 0.1875
Fourth Quarter Ended September 30, 1998 0.0625 0.1875
____________________
1 Effective May 1, 1998, the Company adopted a 50 for 1 reverse stock
split of all shares of its issued and outstanding Common Stock. The
high and low bid quotations listed in the table for periods prior to the
third quarter ended June 30, 1998 have not been adjusted for this stock
split.
These quotations represent prices between dealers and do not
include retail markups, markdowns or commissions and may not
necessarily represent actual transactions. There were approximately 338
holders of record of the Company's outstanding capital stock as of
December 1, 1998.
Since its organization, the Company has not paid any cash
dividends on its capital stock. The Board of Directors does not
contemplate declaring any dividends in the near future. Any declarations
of dividends will be determined by the Board of Directors in light of the
conditions then existing, including the Company's earnings, its financial
condition and working capital needs, any agreements restricting the
payment of dividends, and other factors. Certain agreements with the
Company's financing sources include covenants which currently restrict
the Company from paying any cash dividends.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
SELECTED FINANCIAL DATA:
1998 1997
STATEMENT OF INCOME DATA
Net sales $8,252,450 $7,974,919
Net income $ 220,584 $ 103,071
Net income per Common share-basic and diluted $ 0.22 $ .12
Weighted average Common shares outstanding-
basic and diluted 1,022,911 862,070
CONSOLIDATED BALANCE SHEET DATA
Working capital $3,263,552 $1,460,041
Total assets $8,251,908 $5,046,695
Long-term obligations, excluding current $2,833,777 $ 937,249
Portion
Minority Interest 0 $ 232,206
Stockholders' Equity $2,778,539 $1,211,781
OVERVIEW
On May 1,1998, the Company (formerly Holometrix, Inc.)
completed a reorganization ("Reorganization") pursuant to which
Tytronics Incorporated ("Tytronics"), the majority owner of the Company,
and National Metal Refining Company ("Nametre"), the majority owned
subsidiary of the Company, were merged into the wholly-owned
subsidiary of the Company, Holometrix Acquisition Corp., which was
followed by the merger of Holometrix Acquisition Corp. into the
Company. As part of this Reorganization, Holometrix changed its name to
Metrisa, Inc., and effected a 50:1 reverse stock split of its issued and
outstanding capital stock. On February 13, 1998, Tytronics acquired the
assets of Micromet Instruments Inc. ("Micromet"), and thus Micromet was
also merged into Holometrix Acquisition Corp., but as part of Tytronics.
Although Metrisa is the surviving corporation, because the
shareholders of Tytronics obtained a majority of voting rights in Metrisa,
Tytronics is deemed to be the acquiring entity for accounting purposes.
Accordingly, the Reorganization has been accounted for as a
recapitalization of Tytronics and the acquisition by Tytronics of the
minority interests of Metrisa (formerly Holometrix) and Nametre under
the purchase method of accounting in accordance with Accounting
Principles Board Opinion No. 16, Business Combinations. The
accompanying financial statements reflect at the closing date, the
acquisition by Tytronics of the minority interest of Metrisa and Nametre
based on an independent valuation of Tytronics, Nametre, and Metrisa by
Fechtor Detwiler & Co., investment bankers.
A 50 to 1 reverse stock split was effected in May 1998 in
connection with the Company's Reorganization and resulting
recapitalization. In addition, the Company's Certificate of Incorporation
was amended to change its authorized common stock and par value to
2,000,000 shares with a $.50 par value. All net income per share
information and common stock information presented in the
accompanying consolidated financial statements and notes to the financial
statements have been retroactively restated to reflect the stock split and
recapitalization.
The accompanying consolidated financial statements have been
prepared in accordance with generally accepted accounting principles.
They include the accounts of Tytronics, and subsidiaries for the periods
ended September 30, 1997 and the accounts of Metrisa, Inc. including the
effects of the Reorganization from the closing date on, for the period
ended September 30, 1998.
Results of Operations
Year Ended September 30, 1998 as compared to Year Ended September 30, 1997
Net sales for the 1998 fiscal year totaled $8,252,450 as compared to
$7,974,919 in the comparable period of 1997, an increase of $277,531.
This approximately 4% increase is primarily due to the inclusion of the
sales of Micromet, substantially all of whose assets were acquired by
Tytronics in the second quarter of fiscal 1998, offset by a decrease in sales
of the Company's other divisions due to reduced sales to the Asian
countries.
Cost of sales decreased by $60,839, or 2% from $3,781,854 (47% of sales)
in fiscal 1997 to $3,721,015 (45% of sales) in the same period of fiscal
1998. This percentage decrease of 2% was a result of the change in mix of
product sales plus the inclusion of Micromet, whose instruments have
relatively low costs.
Selling, general and administrative expenses increased by $60,503, or 2%,
from $3,342,571 (42% of sales) to $3,403,074 (41% of sales). This
increase is primarily due to the amortization of the expenses of the
Reorganization as well as the inclusion of Micromet's selling, general and
administrative expenses, offset by reductions in other divisions.
Research and Development increased by $36,452, or 6%, from $626,654
(8% of sales) to $663,106 (also 8% of sales) as a result of the inclusion of
Micromet.
Income from operations was $465,255 for fiscal 1998, compared with
$223,840 for fiscal 1997, an increase of 108%. The increased income was
primarily a result of the return to profitability of the Holometrix division
from its fiscal 1997 loss, and the inclusion of Micromet's results.
Net income was $220,584 for fiscal 1998 compared to $103,071 for fiscal
1997, an increase of 114%. This increase in net income was a direct result
of the increase in income from operations offset by increased taxes in 1998
and a favorable minority interest from Holometrix in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
Total assets at September 30, 1998 increased to $8,207,908 from
$5,046,695, an increase of $3,161,213 or 63%. This increase was due to
the combination of an increase in cash as a result of obtaining
subordinated debt financing of $2,000,000 from Sirrom Investments, Inc.
("Sirrom"), the acquisition of the assets of Micromet of $358,000, and the
addition of goodwill associated with the Reorganization. Cash increased
by $1,533,336 primarily due to the subordinated debt financing of
$2,000,000 offset by the acquisition of Micromet, for an initial payment of
$150,000, and the expenses associated with the Reorganization. Accounts
receivable increased by $236,989 primarily due to increased sales for the
year, particularly those of fourth quarter. Inventories increased by
$110,655 reflecting the acquisition of Micromet for an initial payment of
$150,000, offset by inventory reductions in all other divisions. Other
current assets decreased by $103,336, and equipment and fixtures, net,
decreased by $70,339. Other assets increased by $1,497,908, resulting
from the goodwill associated with the Reorganization and the inclusion of
costs associated with the subordinated debt financing of $2,000,000.
Total liabilities at September 30, 1998 increased to $5,429,369 from
$3,834,914 on September 30, 1997, an increase of $1,594,455 or 42%.
This increase was primarily due to an increase in long-term debt of
$1,896,528, resulting from the $2,000,000 subordinated debt financing, an
increase in the current portion of long-term debt of $262,106, offset by a
decrease in accounts payable of $405,623. Accounts payable decreased
from $1,718,396 at September 30, 1997 to $1,312,773 at September 30,
1998 due to a combination of payments of extended payables present at
September 30, 1997, as well as a reclassification of certain accounts
payable to the current portion of long-term debt. The current portion of
long-term debt increased from $299,335 at September 30, 1997 to
$561,441 at September 30, 1998 due to the acquisition of Micromet and
the reclassification of certain accounts payable.
Operating cash flows were positive in fiscal 1998 amounting to $154,480,
as compared to $307,628 in fiscal 1997. Operating cash flows equals the
sum of net income of $220,584 plus deferred income taxes of $44,000 and
depreciation and amortization $308,177, plus decreases in inventory of
$247,345, and other current assets of $3,336, offset by increases in
accounts receivable of $236,989 and decreases of accounts payable and
accrued expenses of $431,973.
The Company funded increases of equipment and fixtures of $95,115
along with increases of other assets of $143,043. The increase in long-
term debt of $1,950,634 was due primarily to the Sirrom subordinated debt
financing of $2,000,000.
The net affect of these transactions was an increase in cash of $1,533,336,
providing cash at fiscal 1998 year-end of $2,469,053.
Notes Payable Line of Credit, Subordinated Debt Loan
As of September 30, 1997, the Company was a party to a Silicon Valley
Bank combined line credit and term loan of $1,500,000 secured by
substantially all of the assets of the Company. As of September 23,1998,
this line was increased to $1,750,000. Advances under this line cannot
exceed 75% of the Company's eligible accounts receivable plus 20% of
inventory, as defined. All outstanding amounts are payable on demand and
advances are contingent upon maintaining certain covenants relative to
profitability, liquidity and tangible net worth. As of September 30, 1998,
the Company was in compliance with all covenants and ratios on this line
of credit .
As of September 29,1998, the Company was party to a $2,000,000
subordinated debt financing agreement with Sirrom secured by
substantially all of the assets of the Company, but subordinated to the
Silicon Valley Bank financing. This loan is due in full September 30,
2003, with interest-only payments for the first two years.
Effect of Reorganization and Other Company Initiatives
The Company expects to continue to invest in enhanced sales and
marketing efforts, new product development, and the development of
strategic relationships, including licensing, acquisitions, mergers, or OEM
agreements. Management believes that operating capital and the line of
credit from Silicon Valley Bank, and the $2,000,000 subordinated debt
financing from Sirrom, will provide sufficient capital to maintain stable
Company operations throughout fiscal 1999. As of May 1, 1998, the
Company completed the Reorganization previously discussed, pursuant to
which Tytronics, Micromet and Nametre were merged into the wholly-
owned subsidiary of the Company, Holometrix Acquisition Corp., which
was followed by the merger of Holometrix Acquisition Corp. into the
Company. As part of the Reorganization, Holometrix changed its name to
Metrisa, Inc., and effected a 50 to 1 reverse stock split of its issued and
outstanding capital stock. Management believes that the Reorganization
will result in increased efficiencies for the Company and provide for more
stable Company operations. However, there can be no assurance that
additional or adequate profitability and operating funds will be generated
as a result of revenue increases or the Reorganization, or that strategic
relationships will materialize, or that additional funding, if required, can
be obtained on acceptable terms.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued
two new disclosure standards. Results of operations and financial position
will be unaffected by implementation of these new standards.
Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), establishes standards
for reporting and display of comprehensive income, its components, and
accumulated balances. Comprehensive income is defined to include all
changes in equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, SFAS No. 130 requires
that all items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise," establishes standards
for the way that public enterprises report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements
issued to the public. It also establishes standards for disclosures regarding
products and services, geographic areas, and major customers. SFAS No.
131 defines operating segments as components of an enterprise about
which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to allocate
resources and in assessing performance.
Both of these new standards are effective for financial statements
for periods beginning after December 15, 1997 and require comparative
information for earlier years to be restated. Management is evaluating the
impact these standards may have on the Company's financial statement.
The Company will adopt these new standards for the fiscal year ending
September 30, 1999.
In June 1998, The Financial Accounting Standard board issued
SFAS No. 133, "Accounting of Derivative Instruments and Hedging
Activities." SFAS No. 133 provides a comprehensive and consistent
standard for the recognition and measurement of derivatives and hedging
activities. The new standard requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS No. 133 is
effective for fiscal years beginning after June 15, 1999. The Company
will adopt the new standard for the fiscal year ending September 30, 2000.
Management is evaluating the impact of SFAS No. 133 may have on the
Company's financial statements.
Year 2000 ("Y2K")
The Company is aware of the issues related to the approach of the
Year 2000 and has assessed and investigated what steps must be taken to
ensure that its critical systems and equipment will function appropriately
after the turn of the century. The assessments included a review of what
systems and equipment need to be changed or replaced in order to function
correctly.
With the exception of remediation and implementation
consequences not known to the Company at this time, the Company
believes that all systems should be fully implemented by the end of the
fourth quarter of fiscal 1999.
As part of the Company's assessment of Y2K issues, consideration
was given to the possible impact upon the Company from using purchased
software, suppliers and outside service providers. The Company's efforts
with regard to Y2K issues are dependent in part upon information received
from such suppliers and vendors upon which the Company has reasonably
relied. While it is not possible for the Company to predict all future
outcomes and eventualities, the Company is not aware, at this time, of any
Y2K non-compliant situations with regard to any of its purchased software
or its use of suppliers and outside service providers.
The Company estimates that it will spend approximately $100,000
to fully implement its Y2K compliance program. All Y2K costs have
been and will continue to be funded from operations.
The Company has formulated a contingency plan to deal with Y2K
issues. However, due to the complexity and widespread nature of such
issues, the contingency planning process of necessity must be an ongoing
one requiring possible further modification as more information becomes
known regarding (1) the Company's own systems and facilities, and (2)
the status and changes therein of the Y2K compliance efforts of outside
suppliers and vendors. As significant Y2K uncertainties remain outside
the control of the Company, at this time the Company is unable to
determine a most reasonably likely worst case scenario.
ITEM 7. FINANCIAL STATEMENTS.
The Company's consolidated financial statements and the related
auditors' report are presented on pages F-1 through F-17. The financial
statements filed in this Item 7 are as follows:
Item Page
Reports of Independent Accountants F1
Consolidated Balance Sheets - September 30, 1998 and 1997 F2
Consolidated Statements of Income for the years ended F3
September 30, 1998 and 1997
Consolidated Statements of Stockholders' Equity for the years ended F4
September 30, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended F5
September 30, 1998 and 1997
Notes to Consolidated Financial Statements F6
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Company filed a report on Form 8-K dated September 24,
1998 relating to a change in the Company's independent accountants
which is incorporated herein by reference.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The following is a list of the directors and executive officers of
the Company as of December 1, 1998:
Name Age Position
John E. Wolfe 60 President and Director
John A. Hanna, Jr. 57 Treasurer & Chief Financial Officer
Richard Mannello 41 Vice President & General Manager
Linda E. Dousis 50 Vice President and Operations Manager
Joseph J. Caruso 55 Director
Joaquim S. S. Ribeiro 62 Director
Salvatore J. Vinciguerra 60 Director
Emile Sayegh 44 Vice President and Director
Edward J. Stewart, III 52 Director
Eric F. Mooney 67 Vice President
____________________
Each director is elected to hold office until the next annual meeting
of stockholders, and until his successor is elected and duly qualified.
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.
Mr. Wolfe joined the Company as a Director in November 1994 and
was elected President and Treasurer of the Company in February 1995.
From 1987 to May 1998, Mr. Wolfe was also President and Chief
Executive Officer and a director of Tytronics Incorporated, the Company's
former parent company. 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 on the Board of Trustees of Bryant College in
Smithfield, Rhode Island, and was recently Chairman of that Board. Mr.
Wolfe was also a past member of the Executive Committee of the M.I.T.
Enterprise Forum. Mr. Wolfe holds a B.S. in Electrical Engineering from
Worcester Polytechnic Institute, an S.M., as a Sloan Fellow, from the
Massachusetts Institute of Technology, and he has completed the
Advanced Management Program at the Harvard Business School.
Mr. Hanna joined the Company as Chief Financial Officer in
August, 1997. He was elected Treasurer in December 1997. Previously,
Mr. Hanna was Chief Financial Officer for the Danis Group from 1996 to
1997. Prior to 1996, Mr. Hanna was Treasurer of Alpha Industries, Inc.
from 1978 to 1996. Mr. Hanna holds a B.S. in Electrical Engineering
from Tufts University, an M.ENG. in Electrical Engineering from Yale
University, and an MBA in Finance from Boston University.
Mr. Mannello joined the Company as Director, Marketing, Sales and
Engineering in November 1995. He was elected Vice President and
General Manager in November 1996. Previously Mr. Mannello was
Manager of Marketing at Loral Infrared and Imaging Systems from 1990
to 1995. Prior to 1990, Mr. Mannello was Manager of Marketing for
Honeywell Electro-Optics Division. Mr. Mannello holds a Master of
Business Administration from Boston University and a B.S. in Optics
from the University of Rochester Institute of Optics.
Ms. Dousis has been Vice President and Operations Manager of the
Company since May of 1998. Ms. Dousis was first engaged by Nametre,
a former subsidiary of the Company, in 1984 as a management consultant.
In 1985, she joined Nametre in the position of General Manager, and was
promoted to President of Nametre in 1990. From 1976 to 1983, Ms.
Dousis was Vice President Finance/Administration/Systems and
Secretary/Treasurer of Rheometrics, Inc., where she was responsible for
finance, management information systems, and personnel. Ms. Dousis
was also responsible for the establishment and operations of Rheometrics,
GmbH, a wholly owned subsidiary of Rheometrics, Inc., as well as the
West Coast office of Rheometrics, Inc. Ms. Dousis' experience also
includes five years with Schoeffel Instrument Corp. a manufacturer of
liquid chromatography instrumentation, and industrial sales experience.
Mr. Caruso joined the Company as a Director in 1994, and was
engaged by the Company as Acting President from June 1993 until
January 1995. Mr. Caruso is also President of Bantam Group, Inc.
("Bantam"), a business advisory organization founded in 1986. He 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. In recent years, he has served as interim CEO for
companies in need of strategic change and has served as personal advisor
to numerous company presidents. Mr. Caruso is presently a member of
the board of directors of Micro E Corp., ACT Medical, Inc., Zentox Corp.
and Boston Restaurant Associates. Mr. Caruso holds a B.S. in Electrical
Engineering from Northeastern University and a Master of Business
Administration degree from the Harvard Business School.
Mr. Ribeiro joined the Company as a Director in 1994, and is a self-
employed management consultant. In 1992 and 1993, he served as vice-
chairman of Multibank Financial Corp., a public bank holding company
now part of BankBoston, and also as director and interim president of
HMO Central Massachusetts Health Care, now part of
Healthsource/Cygna Healthcare. From 1989 to 1992, he served as general
manager of the law firm of Bowditch & Dewey, LLP. Mr. Ribeiro holds a
B.S. in Aeromechanics from Worcester Polytechnic Institute and an
M.B.A. in Economics and Finance from Clark University.
Mr. Sayegh is one of the original founders of Tytronics Incorporated
and has twenty years of combined experience in both research and product
development. He has personally directed and designed many successful
products in the field of laboratory and process instrumentation.
Previously, he was employed by Orion Research as project leader and
principal engineer. Mr. Sayegh holds a Bachelor's Degree in Mechanical
Engineering from the College of Arts and Sciences, Lebanon, a B.S. in
Electrical Engineering from Northeastern University and has done
graduate studies in Computer Science.
Mr. Stewart served as a Director of the Company from 1988 through
1996. 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, and was formerly president of GWI Leasing Corporation
from 1980 to 1983. Mr. Stewart also serves on the board of directors of
approximately ten other companies. Mr. Stewart holds a Master of
Business Administration degree from Harvard Business School and an
Administrative Studies degree from Yale University.
Mr. Vinciguerra has been a Director of the Company since February
of 1995. He has been President and CEO of Goddard Industries, Inc. since
October of 1998. Prior to that he was President and Chief Operating
Officer of FerroFluidics Corporation from January of 1995 until June 1996
when he was appointed Chief Executive and director. 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, Saphikon Corporation and the Japan Society 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.
Dr. Mooney has over 40 years' experience in the field of process
analyzers in the chemical and water industries. His experience includes
work at Imperial Chemical Industries, Ltd., Managing and Technical
Director of Anacon Instruments Ltd., Director of Anacon, GmbH, and
Corporate Technical Director of Anacon, Inc. Dr. Mooney formed and
was President of Special Analysis Corporation until joining Tytronics in
1990. His academic positions include Senior Lecturer in Instrument
Spectroscopy at the University of Birmingham. Dr. Mooney is the author
of over 200 published papers and is a Senior Member of the Instrument
Society of America, a Fellow of the Royal Institute of Chemistry, a Fellow
of the American Chemical Society, and Vice Chairman of CITAC
(Committee for Traceability in Analytical Chemistry). He holds a B.Sc. &
Ph.D. from the University of London in the UK and a D.Sc. from the
University of Birmingham in the UK.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
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.
Each of Joseph J. Caruso, Edward J. Stewart, III, John A. Hanna,
Jr., Joaquim S.S. Ribeiro, Emile Sayegh and John E. Wolfe failed to
timely file a Form 5 for a single transaction relating to the fiscal year
ended September 30, 1998. 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.
DIRECTORS' COMPENSATION
The Company does not pay directors for their Board or
committee services; however, non-employee directors of the Company are
paid $750.00 per meeting attended in lieu of reimbursement for reasonable
expenses of attending Board meetings. In addition, non-employee
directors have, in the past, been granted options to purchase shares of the
Company's Common Stock. No such options were granted during fiscal
year 1998. During the fiscal year ended September 30, 1995, each of
Joaquim S.S. Ribeiro and Salvatore J. Vinciguerra were granted options to
purchase 3,000 shares of the Company's Common Stock at an exercise
price of $1.50 per share. Such options vest over a period of four years and
are exercisable for five years from the date of grant.
INDEMNIFICATION
The Company's Certificate of Incorporation includes a provision
that eliminates the personal financial liability of the Company's directors
to the Company or its stockholders for breach of duty as a director, except
in situations where there has been a breach of the duty of loyalty, a failure
to act in good faith, intentional misconduct or a knowing violation of the
law, an improper personal benefit derived by a director from a transaction
or a willful or negligent unlawful payment of dividends or unlawful
purchase or redemption of the Company's stock. In addition, the
Company's bylaws include provisions to indemnify its officers and
directors and other persons against expenses, judgments, fines and
amounts paid in settlement in connection with threatened, pending or
completed suits or proceedings against such person by reason of serving or
having served as officers, directors or in other capacities, except in relation
to matters with respect to which such persons shall be determined to not
have acted in good faith, lawfully or in the best interests of the Company.
With respect to matters as to which the Company's officers and directors
and others are determined to be liable for misconduct or negligence in
their performance of their duties, the Company's bylaws provide for
indemnification only to the extent that the Company determines that such
person acted in good faith and in a manner not opposed to the best
interests of the Company. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "Act") may be permitted to
directors, officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that in the opinion
of the SEC, such indemnification is against public policy as expressed in
the Act and is therefore unenforceable.
ITEM 10. 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, 1998, September 30,
1997 and September 30, 1996, of those persons who were (i) the
Company's Chief Executive Officer during the fiscal year ended
September 30, 1998, and (ii) other executive officers of the Company as of
September 30, 1998, who received total cash and bonus compensation in
excess of $100,000 (the "Named Officers") during fiscal year 1998.
Executive Compensation
Securities
Name and Other Restricted Underlying All Other
Principal Salary Bonus Comp. Stock Options/SARs Comp.
Position Year ($) ($) ($) Award (#) ($)
John E. Wolfe 1998 140,171 6,000 n/a n/a n/a n/a
President, CEO
Richard Mannello 1998 94,312 n/a n/a n/a n/a n/a
Vice President &
General Manager
Emile Sayegh 1998 99,045 5,500 n/a n/a n/a n/a
Vice President
Linda Dousis 1998 112,500 16,050 n/a n/a n/a n/a
Vice President &
Operations Manager
John E. Wolfe 1997 36,000 n/a n/a n/a n/a n/a
President, CEO
& Treasurer
Richard Mannello 1997 111,478 500 n/a n/a 300,000(1) n/a
Vice President &
General Manager
John E. Wolfe 1996 52,200 n/a n/a n/a n/a n/a
President, CEO
and Treasurer
(1) Represents the grant of options to purchase shares of the Company's
common stock which vest over a period of four years from the date of
grant.
The following table sets forth information concerning option
exercises during fiscal 1998 and the value of unexercised options as of
September 30, 1998. No options were granted and no options were
exercised during fiscal year 1998 by any of the Named Officers in the
compensation table.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
# of Unexercised $Value of Unexercised
Options at Options at
# Shares $ Sept. 30, 1998 Sept. 30, 1998
Name Acquired Value (Exercisable/ (Exercisable/
On Exercise Realized Unexercisable) Unexercisable)1
John E. Wolfe 0 $0 17,885/17,885 $0
Richard Mannello 0 0 6,000/6,000 $0
Emile Sayegh 0 0 7,868/7,868 $0
Linda Dousis 0 0 0 $0
____________________
1Value is based on the difference between option exercise price and the
fair market value at fiscal 1998 year-end, multiplied by the number of
shares underlying the option.
CONSULTING AGREEMENT
The Company and Bantam Group, Inc. 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 during fiscal 1998. Mr.
Caruso, a director of the Company, is also president of Bantam.
1991 STOCK PLAN
On March 26, 1991, the Board of Directors adopted the 1991
Stock Plan (the "1991 Plan"), which was approved by the stockholders on
March 25, 1992. The purpose of the 1991 Plan is to provide incentives to
officers, directors, employees and consultants of the Company. Under the
1991 Plan, officers and employees of the Company may be granted
"incentive stock options" ("ISO" or "ISOs"). Directors, officers,
employees and consultants of the Company may be granted options which
do not qualify as ISOs ("Non-Qualified Option" or "Non-Qualified
Options") and, in addition, such persons may be granted awards of stock in
the Company ("Awards") and opportunities to make direct purchases of
stock in the Company ("Purchases"). Options, Awards and Purchases are
referred to as "Stock Rights".
The 1991 Plan is administered by the Compensation Committee
("Committee"), currently consisting of Messrs. Stewart and Caruso. Mr.
Caruso is a former executive officer of the Company. Directors who are
members of the Committee are not eligible to participate in the 1991 Plan.
Subject to the terms of the 1991 Plan, the Committee has the
authority to determine the persons to whom Stock Rights shall be granted
(subject to certain eligibility requirements for grants of ISOs), the number
of shares covered by each such grant, the exercise or purchase price per
share, the time or times at which Stock Rights shall be granted, and other
terms and provisions governing the Stock Rights, as well as the
restrictions, if any, applicable to shares of Common Stock issuable upon
exercise of Stock Rights. The Committee also has the authority to
determine the duration and vesting rate of each option and whether
restrictions such as repurchase rights of the Company are to be imposed on
shares of stock subject to Stock Rights. The Committee has the authority
to interpret the 1991 Plan and to prescribe and rescind regulations
pertaining to it.
ISOs under the 1991 Plan may be granted to any employee of the
Company. As of September 30, 1998, the Company had 51 employees.
Only those officers and directors of the Company who are employees may
be granted ISOs under the 1991 Plan. In no event may the aggregate fair
market value (determined on the date of grant of an ISO) of Common
Stock for which ISOs granted to any employee are exercisable for the first
time by such employee during any calendar year (under all stock option
plans of the Company) exceed $100,000. Otherwise, there is no restriction
as to the maximum or minimum amount of options an employee may
receive. Non-Qualified Options, awards and purchases may be granted to
any director, officer, employee or consultant of the Company, other than
members of the Committee.
The exercise price per share of ISOs granted under the 1991 Plan
cannot be less than the fair market value per share of the Common Stock
on the date of grant, or, in the case of ISOs granted to employees holding
more than 10% of the total combined voting power of all classes of stock
of the Company, 110% of the fair market value per share of the Common
Stock on the date of grant. The exercise price per share of Non-Qualified
Options granted under the 1991 Plan cannot be less than the lesser of the
book value per share of Common Stock as of the end of the preceding
fiscal year, or 50% of the fair market value per share of Common Stock on
the date of grant.
The 1991 Plan requires that each option shall expire on the date
specified by the Committee, but not more than ten years from its date of
grant in the case of ISOs and ten years and one day in the case of Non-
Qualified Options. However, in the case of any ISO granted to an
employee owning more than 10% of the total combined voting power of
all classes of stock of the Company, such ISO shall expire on the date
specified by the Committee, but not more than five years from its date of
grant.
Stock Rights granted under the 1991 Plan provide for full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, or (b) at the discretion of the Committee, through
delivery of shares of Common Stock having a fair market value equal to,
as of the date of the exercise, the cash exercise price of the Stock Right, or
(c) at the discretion of the Committee, by delivery of the grantee's personal
recourse note bearing interest payable not less than annually at no less than
100% of the lowest applicable Federal rate, as defined in Section 1274(d)
of the Code, or (d) at the discretion of the Committee, by any combination
of (a), (b) and (c) above. By allowing at the discretion of the Committee,
payment of the exercise price by delivering shares of the Company, the
1991 Plan permits the "pyramiding" of shares. Pyramiding occurs when
the option holder in a series of successive transactions uses the shares
received upon the prior exercise of an option to purchase additional shares
under further outstanding options. A participant can thereby substantially
increase his equity ownership in the Company without a significant
contribution.
The 1991 Plan authorizes the grant of Stock Rights to acquire
125,000 shares of Common Stock. Pursuant to the terms of the 1991 Plan,
shares subject to options which for any reason expire or are terminated
unexercised as to such shares may again be the subject of a grant under the
1991 Plan.
No options or rights were granted under the 1991 Plan during the
1998 fiscal year and no options were canceled during fiscal 1998. As of
September 30, 1998, options to purchase 76,018 shares of Common Stock
were issued and unexercised and had been granted under the 1991 plan,
and no options granted under the 1991 Plan had been exercised.
In addition, the Company has outstanding certain options which were
originally granted to former directors and a consultant of Tytronics
Incorporated, the former parent of the Company. These options were converted
into options to purchase shares of the Company's Common Stock in connection
with the Reorganization and are not subject to the 1991 Plan. These options
include an option to purchase 18,512 shares of Common Stock held by each of
Joseph J. Caruso, a director of the Company and a former director of Tytronics
Incorporated, and Bantam Group, Inc. and an option to purchase 4,628 shares of
the Company's Common Stock held by Alan Robertson, a former director of
Tytronics Incorporated.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth as of November 1, 1998, to the
knowledge of the Company, the ownership of the Company's 1,022,911
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 executive officers, 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 Class1
Bantam Group, Inc.2 102,915 9.5%
50 Bay Colony Drive,
Westwood, MA 02090
Corning Partners II, L.P.3 64,793 6.0%
Joseph J. Caruso4 130,684 11.9%
Linda E. Dousis 38,177 3.7%
Joaquim S. S. Ribeiro5 39,460 3.7%
Emile Sayegh6 100,429 9.7%
Sirrom Investments, Inc.7 143,738 12.3%
Edward J. Stewart, III8 122,645 11.9%
Salvatore J. Vinciguerra7 3,000 *
John E. Wolfe9 172,360 16.3%
All Officers and Directors 645,151 58.2%
as a group (10 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, a Director of the Company, is also President of
Bantam Group, Inc., and has sole voting and investment power with
respect to the 102,915 shares of Common Stock beneficially owned by
Bantam Group, Inc.
3 Mr. Stewart is the managing general partner of the general partner
of Corning Partners II, L.P.
4Stated shares include 102,915 shares of Common Stock owned of record
by Bantam Group, Inc. 74,851 shares of Common Stock beneficially
owned by Mr. Caruso are issuable upon the exercise of currently
outstanding stock options or warrants.
53,000 shares of Common Stock beneficially owned by Mr. Ribeiro are
issuable upon the exercise of currently outstanding stock options.
67,968 shares of Common Stock beneficially owned by Mr. Sayegh are
issuable upon the exercise of currently outstanding stock options.
7Issuable upon the exercise of currently outstanding stock options or
warrants.
8Of the 122,645 shares of Common Stock beneficially owned by Mr.
Stewart, 64,793 shares and 41,653 shares, respectively, are owned of
record by Corning Partners II, L.P. and Corning Partners III, L.P. Mr.
Stewart is the managing general partner of the general partner of Corning
Partners II, L.P. and Corning Partners III, L.P. Includes 6,942 shares of
Common Stock issuable upon the exercise of currently outstanding
warrants.
9Of the 172,360 shares of Common Stock beneficially owned by
Mr. Wolfe, 31,769 shares are issuable upon the exercise of currently
outstanding stock options or warrants.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company and Bantam are parties to a month-to-month
consulting agreement unless terminated by either party on thirty days'
notice. Pursuant to this agreement, Bantam was paid $5,000 per month for
the fiscal years 1998 and 1997. Mr. Caruso, a Director of the Company, is
president of The Bantam Group, Inc.
Effective September 30, 1998, the Company entered into a Loan
Agreement (the "Loan Agreement") with Sirrom Investments, Inc.
("Sirrom") pursuant to which the Company borrowed $2,000,000 from
Sirrom pursuant to a Secured Promissory Note. In connection with the
Loan Agreement, the Company issued a stock purchase warrant to Sirrom
to purchase an aggregate of 143,738 shares of the Company's Common
Stock at an exercise price of $.50 per share. The warrant will expire if
unexercised on October 31, 2003.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) List of Exhibits: The following exhibits are filed as a part of this
Annual Report on Form 10-KSB or incorporated by reference.
3.01 Certificate of Incorporation, as amended, including Certificates of
Designation for the terms of the Series A and Series B Preferred Stock
(filed as exhibit 3.01 to Form 10-K dated December 27, 1991 and
incorporated by reference).
3.02 Bylaws (filed as Exhibit 3d to Registration Statement No. 33-13027-
B on Form S-18 and incorporated by reference).
10.01 1987 Stock Option Plan (filed as Exhibit 10f to Registration
Statement No. 33-13027-B on Form S-18 and incorporated by reference).
10.02 1991 Stock Plan, as amended (filed as exhibit 10.02 to Form 10-K
dated December 27, 1991 and incorporated by reference).
10.03 Form of Incentive Stock Option Agreement under 1991 Stock Plan
(filed as exhibit 10.03 to Form 10-K dated December 27, 1991 and
incorporated by reference).
10.04 Form of Non-qualified Stock Option Agreement under 1991 Stock
Plan (filed as exhibit 10.04 to Form 10-K dated December 27, 1991 and
incorporated by reference).
10.05 Lease dated October 1, 1991 between Holometrix, Inc. and
Springfield Institute for Savings (the "Lease") for the premises at 25
Wiggins Avenue, Bedford, Massachusetts (filed as exhibit 10.11 to Form
10-K dated December 27, 1991 and incorporated by reference).
10.06 First amendment of Lease dated August 19, 1993 between
Holometrix, Inc. and Opta Food Ingredients, Inc. (the successor in interest
to Springfield Institution for Savings), for the premises at 25 Wiggins
Avenue, Bedford, Massachusetts (filed as exhibit 10.12 to Form 10-KSB
dated December 27, 1995 and incorporated by reference).
10.07 Consulting Agreement between Holometrix, Inc., Corning Partners
II, L.P., Corning Partners III, L.P., and Bantam, dated June 7, 1993 (filed
as exhibit 10.21 to Form 10-KSB dated September 8, 1994 and
incorporated by reference).
10.08 Letter Agreement between Silicon Valley Bank and Holometrix,
Inc. dated December 22, 1994 (filed as exhibit 10.33 to Form 10-KSB
dated December 27, 1995, and incorporated herein by reference).
10.09 Promissory Note dated December 22, 1994 in the original principal
amount of $350,000 executed by Holometrix, Inc. (filed as exhibit 10.34
to Form 10-KSB dated December 27, 1995, and incorporated herein by
reference).
10.10 Loan Modification Agreement dated August 14, 1995 between
Holometrix, Inc. and Silicon Valley Bank (filed as exhibit 10.35 to Form
10-KSB dated December 27, 1995, and incorporated herein by reference).
10.11 Third Amendment of Lease between Opta Food Ingredients, Inc.
and Holometrix, dated September 30, 1996 (filed as exhibit 10.36 to Form
10-KSB dated December 29, 1996, and incorporated herein by reference).
10.12 Unconditional Guaranty dated July 24, 1997 issued by the
Company to Silicon Valley Bank (filed as Exhibit 10.37 to Form 10-KSB
dated December 29, 1997, and incorporated herein by reference).
10.13 Loan Agreement dated September 30, 1998 between Sirrom
Investments, Inc. and the Company (filed herewith).
10.14 Secured Promissory Note issued by the Company to Sirrom
Investments, Inc. dated September 30, 1998 (filed herewith).
10.15 Stock Purchase Warrant issued by the Company to Sirrom
Investments, Inc. dated September 30, 1998 (filed herewith).
10.16 Loan Modification and Assumption Agreement between the
Company and Silicon Valley Bank dated July 23, 1998 (filed herewith).
23 Consent of Ernst & Young LLP (filed herewith).
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K. The Company filed one Report on Form 8-K
dated September 24, 1998, during the Company's fiscal quarter ended
September 30, 1998, relating to a change in the Company's independent
accountants.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized:
METRISA, INC.
By: //JOHN E. WOLFE// Date: December 28, 1998
John E. Wolfe, President,
Chief Executive Officer
(Principal executive officer)
By: //JOHN A. HANNA, JR.// Date: December 28, 1998
John A. Hanna, Jr.,
Treasurer and Chief
Financial Officer
(Principal financial and accounting officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Name Capacity Date
//JOSEPH J. CARUSO// Director December 28, 1998
Joseph J. Caruso
//JOAQUIM S.S. RIBEIRO// Director December 28, 1998
Joaquim S.S. Ribeiro
//EMILE SAYEGH// Director December 28, 1998
Emile Sayegh
//EDWARD J. STEWART, III// Director December 28, 1998
Edward J. Stewart, III
//SALVATORE J. VINCIGUERRA// Director December 28, 1998
Salvatore J. Vinciguerra
//JOHN E. WOLFE// Director December 28, 1998
John E. Wolfe
This page intentionally left blank.
Report of Independent Accountants
To the Board of Directors and
Shareholders of Metrisa, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Metrisa,
Inc. and its subsidiaries at September 30, 1998, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audit. We conducted our
audit of these statements in accordance with generally accepted accounting
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
December 3, 1998
Metrisa, Inc.
Consolidated Balance Sheets
September 30
1998 1997
Assets
Current assets:
Cash and cash equivalents $ 2,469,053 $ 935,717
Accounts receivable, less allowance for
doubtful accounts of $78,500 and $65,000
in 1998 and 1997, respectively 1,926,602 1,689,613
Inventories:
Raw materials 858,241 577,207
Work-in-process 263,213 262,319
Finished goods 249,006 420,279
_________ _________
1,370,460 1,259,805
Prepaid expenses 65,481 90,365
Deferred taxes 6,000 50,000
Notes receivable 21,548 100,000
_________ _________
Total current assets 5,859,144 4,125,500
Equipment and fixtures, net 377,783 448,122
Other assets, net of accumulated amortization
of $332,541 and $189,818 in 1998 and 1997,
respectively 1,970,981 473,073
_________ ________
Total assets $8,207,908 $5,046,695
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to bank $ 213,059 $ 113,059
Accounts payable 1,312,773 1,718,396
Accrued expenses & other 508,319 534,669
Current portion of long-term debt 561,441 299,335
_________ _________
Total current liabilities 2,595,592 2,665,459
_________ _________
Long-term debt, less current portion 2,833,777 937,249
Minority interest in subsidiary - 232,206
Commitments
Stockholders' equity:
Preferred stock $1.00 par value, 10,000,000
shares authorized, 29,327 shares issued and
outstanding at September 30, 1997 - 29,327
Common stock, $.50 par value, 2,000,000 shares
authorized, 1,022,911 and 862,070 shares
issued at September 30, 1998
and 1997, respectively 511,456 431,035
Additional paid-in capital 2,455,069 1,085,727
Retained earnings 242,276 21,692
_________ __________
3,208,801 1,567,781
Less treasury stock, at cost, 238,312 and
224,460 shares held at September 30,
1998 and 1997, respectively (430,262) (356,000)
_________ _________
Total stockholders' equity 2,778,539 1,211,781
_________ _________
Total liabilities and stockholders' equity $8,207,908 $5,046,695
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
Metrisa, Inc.
Consolidated Statements of Income
Year ended September 30
1998 1997
Net sales $8,252,450 $7,974,919
Cost of sales 3,721,015 3,781,854
_________ _________
Gross profit 4,531,435 4,193,065
Operating expenses:
Selling, general and administrative 3,403,074 3,342,571
Research and development 663,106 626,654
_________ _________
4,066,180 3,969,225
_________ _________
Income from operations 465,255 223,840
Other income (expense):
Other income 25,806 14,776
Interest income 10,631 17,164
Interest expense (162,919) (144,480)
________ ________
(126,482) (112,540)
Income before income taxes and ________ ________
minority interest 338,773 111,300
Income taxes 100,844 41,000
________ ________
Income before minority interest 237,929 70,300
Minority interest in subsidiary 17,345 (32,771)
________ ________
Net income $ 220,584 $ 103,071
======== =========
Net income per common share-basic
and diluted $0.22 $0.12
Shares outstanding-basic and diluted 1,022,911 862,070
The accompanying notes are an integral part of these consolidated financial
statements.
<TABLE>
METRISA INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<CAPTION> Retained Total
Preferred Stock Common Stock Additional Earnings Stock
Par Value Par Value Paid-In (Accumulated Treasury Stock holders'
Shares Amount Shares Amount Capital Deficit) Shares Amount Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1996 29,327 $29,327 680,322 $340,161 $518,642 ($81,379) (224,460) ($356,000) $ 450,751
Sale of common stock - - 181,748 90,874 567,085 657,959
Net income for year - - - - - 103,071 103,071
______ ______ _______ _______ _________ _______ ________ ________
Balance, September 30, 1997 29,327 29,327 862,070 431,035 1,085,727 21,692 (224,460) (356,000) 1,211,781
Exchange preferred for common(29,327)(29,327) 149,276 74,638 1,119,502 - - - 1,164,813
Exercise of stock options 11,565 5,783 9,798 15,581
Repurchase of common stock (13,852) (74,852) (74,262)
Warrants issued 240,042 240,042
Net income for year 220,584 220,584
_______ _________
Balance, September 30, 1998 $1,022,911 $511,456 $2,455,069 $242,276 $(238,312)$(430,262) $2,778,539
========= ======= ========= ======= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Metrisa, Inc.
Consolidated Statements of Cash Flows
Year ended September 30
1998 1997
Operating activities
Net income $ 220,584 $ 103,071
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred income taxes 44,000 -
Depreciation and amortization 308,177 271,452
Minority interest - (32,771)
Gain on sale of equipment - (16,000)
Changes in operating assets and liabilities, net
of effects of purchase of subsidiaries:
Accounts receivable (236,989) 59,157
Notes receivable - (100,000)
Inventories 247,345 (92,646)
Other current assets 3,336 (70,067)
Accounts payable and accrued expenses (431,973) 185,432
________ ________
Net cash provided by operating activities 154,480 307,628
Investing activities
Additions to equipment and fixtures (95,115) (202,836)
Proceeds from sale of equipment - 16,000
Increase in other assets (143,043) (101,168)
Cash paid for Micromet acquisition (150,000) -
_________ ________
Net cash used in investing activities (388,158) (288,004)
Financing activities
Net increase (repayment) of line of credit
agreement 100,000 (170,941)
Proceeds from long-term debt 2,000,000 411,941
Principal payments on long-term debt (49,366) (107,478)
Net proceeds from sale of common stock 15,785 659,009
Expenses incurred for Reorganization (225,143)
Purchase of treasury stock (74,262) -
_________ _______
Net cash provided by financing activities 1,767,014 792,531
Net increase in cash and cash equivalents 1,533,336 812,155
Cash and cash equivalents at beginning of year 935,717 123,562
_________ _______
Cash and cash equivalents at end of year $ 2,469,053 $ 935,717
========= =======
The accompanying notes are an integral part of these consolidated financial
statements.
1. Nature of Business
Business
Metrisa, Inc. (the "Company") was incorporated in Delaware on October
1985, with principal offices located at 25 Wiggins Avenue, Bedford, MA
01730. Metrisa is comprised of three divisions, two located in Bedford, MA,
and one located in Metuchen, NJ. These divisions serve two broad markets,
the process/environmental markets, and the materials characterization market.
Tytronics manufactures and markets on-line liquid chemical analyzers to the
process and environmental industries; Nametre manufactures and markets on-
line viscosity analyzers to the process industries. Holometrix-Micromet
provides instrumentation and testing services for the measurement of thermal
properties and cure monitoring of composites for the automotive, aerospace,
and electronics packaging industries.
Reorganization
On May 1, 1998, the Company (formerly Holometrix, Inc.) completed the
reorganization ("Reorganization") pursuant to which Tytronics Incorporated
("Tytronics"), the majority owner of the Company, and National Metal
Refining Company ("Nametre"), the majority owned subsidiary of the
Company, were merged into the wholly-owned subsidiary of the Company,
Holometrix Acquisition Corp., followed by the merger of Holometrix
Acquisition Corp. into the Company. As part of the Reorganization,
Holometrix changed its name to Metrisa, Inc. and effected a 50:1 reverse stock
split of its issued and outstanding capital stock.
Although Metrisa is the surviving corporation, because the shareholders of
Tytronics obtained a majority of voting rights in Metrisa, Tytronics is deemed
to be the acquiring entity for accounting purposes. Accordingly, the
Reorganization has been accounted for as a recapitalization of Tytronics and
the acquisition by Tytronics of the minority interests of Metrisa and Nametre
was completed under the purchase method of accounting in accordance with
Accounting Principles Board Opinion No. 16, "Business Combinations." The
accompanying financial statements reflect at the closing date, the acquisition
by Tytronics of the minority interest of Metrisa and Nametre based on an
independent valuation of Tytronics, Nametre and Metrisa by an independent
investment banker .
2. Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Tytronics, and subsidiaries for the period ended September 30, 1997 and the
accounts of Tytronics, and subsidiaries, including the effects of the
Reorganization from the closing date for the period ended September
30,1998. The consolidated financial statements of Tytronics and subsidiaries
include the accounts of Tytronics and its majority owned subsidiary Holometrix
and Holometrix' majority owned and consolidated subsidiary Nametre acquired by
Holometrix on September 30, 1996 of which Tytronics owned 69% at September 30,
1997. All intercompany transactions and balances have been eliminated.
Revenue Recognition
Revenue for instrument sales is recognized when instruments are shipped.
Revenue for testing services is recognized as services are performed.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out (FIFO) method.
Equipment and Fixtures
Equipment and fixtures are stated at cost. Depreciation is computed using
straight-line and accelerated methods over the estimated useful lives of the
assets. Furniture and fixtures are depreciated over seven years, leasehold
improvements are thirty one and one half years or the life of the lease,
whichever is shorter, computers over four years and other machinery and
equipment over seven years. Upon retirement or disposition of equipment and
fixtures, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is reflected in income.
Equipment and fixtures consist of the following at September 30:
1998 1997
Furniture and fixtures $ 56,376 $ 50,756
Leasehold improvements 67,351 67,351
Machinery and equipment 797,900 708,405
Demonstration equipment 302,897 302,897
_________ _________
1,224,524 1,129,409
Accumulated depreciation (846,741) (681,287)
$ 337,783 $ 448,122
========= ==========
Depreciation expense was $165,454 and $173,357 for fiscal 1998 and 1997,
respectively.
Other Assets
Other assets include patent costs, trademarks, licensing agreements, various
deposits for office equipment and utilities and goodwill resulting from the
excess of cost over fair value of net assets acquired through acquisition and
the Reorganization, as well as the inclusion of financing costs associated with
the subordinated debt issuance. Costs related to patents and trademarks are
amortized using the straight-line method over 17 years. Costs related to
licensing agreements are amortized using the straight-line method over the
life of the agreements. Costs related to goodwill are amortized using the
straight-line method over 15 years. Financing costs are amortized using the
straight line method over five years.
Other assets consisted of the following at September 30:
1998 1997
Patents $ 346,470 $ 241,588
Goodwill 1,207,433 244,788
Licensing agreement 41,863 41,863
Trademarks 17,529 17,529
Financing costs 366,480 -
Deposits 323,747 117,123
_________ ________
2,303,522 662,891
Accumulated amortization (332,541) (189,818)
_________ ________
$ 1,970,981 $ 473,073
========= ========
Amortization expense was $142,723 and $69,701 in fiscal 1998 and 1997,
respectively.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
(FAS 109). Tax provisions and credits are recorded at statutory rates for
taxable items included in the consolidated statements of income regardless of
the period in which such items are reported for income tax purposes. Deferred
income taxes are recognized for temporary differences between financial
statement and income tax bases of assets and liabilities and net operating loss
carryforwards for which income tax benefits will be realized in future years.
Net Income per common share
Net income per common share is based on the weighted average number of
common shares and dilutive common share equivalents outstanding during the
periods presented. Basic earnings per share are calculated by dividing net
income by the weighted average shares outstanding. Diluted earnings per
share reflect the dilutive effect of stock options and warrants and are
presented only if the effect is not anti-dilutive. Had options and warrants
been included in the computation, shares for the diluted computation would
have increased by 638,855 and 471,522 as of September 30, 1998 and 1997,
respectively.
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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reported period. Actual results could differ from those estimates.
Concentrations of Credit Risk
Financial instruments which subject the Company to credit risk consist of cash
equivalents and trade accounts receivable. The risk with respect to cash
equivalents is minimized by the Company's policies in which investments are
placed with high credit quality financial institutions and the amount of
exposure to any one financial institution is monitored. The risk with respect
to trade accounts receivable is minimized by the credit worthiness of the
Company's customers, the diversity of its customer base and their dispersion
across a wide geographical area, as well as the Company's credit and
collection policies. The Company performs periodic credit evaluations of its
customers' financial condition and generally does not require collateral.
Credit losses have been within management's expectations. One distributor
accounted for approximately 11% and 13% of revenues in 1998 and 1997,
respectively. Sales to international customers represented approximately 45%
and 49% of revenues in 1998 and 1997, respectively.
Stock-Based Compensation
The Company grants stock options for a fixed number of shares to
employees with an exercise price equal to the fair value of the
shares at the date of the grant. The Company accounts for stock
option grants in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees",
which is based on the intrinsic value method of measuring stock-
based compensation. The Company has adopted the disclosure
only provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (FAS
123), which is based on the fair-value method of measuring stock-
based compensation.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued two new
disclosure standards. Results of operations and financial position will be
unaffected by implementation of these new standards.
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130"), establishes standards for reporting
and display of comprehensive income, its components, and accumulated
balances. Comprehensive income is defined to include all changes in equity
except those resulting from investments by owners and distributions to
owners. Among other disclosures, SFAS No. 130 requires that all items that
are required to be recognized under current accounting standards as
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which supersedes SFAS No. 14, "Financial Reporting for
Segments of a Business Enterprise," establishes standards for the way that
public enterprises report information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public. It
also establishes standards for disclosures regarding products and services,
geographic areas, and major customers. SFAS No. 131 defines operating
segments as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.
Both of these new standards are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Management is evaluating the impact these
standards may have on the Company's financial statement. The Company
will adopt these new standards for the fiscal year ending September 30, 1999.
In June 1998, The Financial Accounting Standard board issued
SFAS No. 133, "Accounting of Derivative Instruments and
Hedging Activities." SFAS No. 133 provides a comprehensive
and consistent standard for the recognition and measurement of
derivatives and hedging activities. The new standard requires that
an entity recognize all derivatives as either assets or liabilities in
the statement of financial position and measure those instruments
at fair value. SFAS No. 133 is effective for fiscal years beginning
after June 15, 1999. The Company will adopt the new standard
for the fiscal year ending September 30, 2000. Management is
evaluating the impact of SFAS No. 133 may have on the
Company's financial statements.
Reclassifications
Certain amounts in the 1997 financial statements have been reclassified to
conform to the 1998 presentation.
3. Business Combination
In February 1998, Tytronics acquired substantially all of the assets of
Micromet Instruments, Inc., a manufacturer of cure monitoring equipment,
valued at $358,000, plus acquisition costs, for a cash payment of $150,000
and issued a note payable of $208,000. This acquisition was accounted for
under the Purchase Method. No goodwill was recognized in this transaction
4. Notes Payable to Banks
As of September 30,1997, the Company was a party to a combined line of
credit and term loan of $1,500,000 with a bank collaterized by substantially all
of the assets of the Company. As of September 23,1998, this combined line
and term loan was increased to $1,750,000, of which $1,250,000 is for the line
of credit and $500,000 is for the term loan. As of September 30, 1998 and
1997, the combined amounts outstanding under this agreement were $582,058
and $607,058, respectively. Advances under this line cannot exceed 75% of
the company's eligible accounts receivable plus 20% of inventory, as defined.
These outstanding amounts are payable on demand and advances are
contingent upon maintaining certain covenants relative to profitability,
liquidity and tangible net worth. As of September 30,1998, the Company was
in compliance with all covenants and ratios of this line of credit.
At September 30, 1998 and 1997 the Company had unused line of credit of
$1,036,941 and $886,941, respectively.
5. Long-Term Debt
Long-term debt consisted of the following at September 30:
1998 1997
Notes payable to bank, principal and
interest payable monthly through July 1,
2001, bearing interest at 2% above prime
rate (10.25% at September 30, 1998) $ 368,999 $ 493,999
Subordinated promissory notes payable to a
shareholder, bearing interest payable
monthly at 10% per annum; principal
payable on November 23, 1999 450,000 493,999
Promissory note payable to shareholder, bearing
interest at 6% per annum, due in annual
installments through January 2, 1999 75,000 125,000
Promissory note to shareholder, bearing interest
at 10%, principal and interest are paid
quarterly through 1998 - 50,000
Subordinated note payable to Sirrom Capital due
2003 at 13.75% interest per annum 2,000,000 -
Note due to Geo-Centers for acquisition of
Micromet due 2000 bearing interest at 8.5%
per annum 208,166 -
Promissory note due to Amisco bearing interest
at 12%, due at December 1, 1999 139,448 -
153,605 117,585
_________ _________
3,395,218 1,236,584
less current portion 561,441 299,335
_________ _________
$2,833,777 $ 937,249
========= =========
In 1996, the Company extended repayment of a promissory note to a
shareholder to November 23, 1999.
As of September 30, 1998 and 1997, approximately $21,000 and $41,000,
respectively, was owed to the estate of a former shareholder.
The aggregate amounts of required principal payments on the Company's
long-term debt at September 30, 1998 are as follows:
1999 $ 561,441
2000 684,106
2001 335,671
2002 262,000
2003 and thereafter 1,552,000
_________
$3,395,218
=========
As of September 29,1998, the Company was a party to a $2,000,000
subordinated loan with an investment banking firm collateralized by
substantially all assets of the Company, second to the bank. This loan is due
in five years, with interest-only payments for the first two years. The
interest rate is 13.75%
In connection with the subordinated loan, the Company issued stock warrants
to the investment banking firm to purchase an aggregate of 143,738 shares of
the Company's common stock at an exercise price of $.50 per share. The
warrants will expire on October 31, 2003.
6. Certain Relationships and Related Transactions
The Company and Bantam Group, Inc. are parties to a month -to-month
consulting agreement unless terminated by either party on thirty days' notice.
Pursuant to this agreement, Bantam was paid $5,000 per month for the fiscal
years 1998 and 1997. Mr. Caruso, a director of the Company, is president of
Bantam Group, Inc.
7. Stockholders' Equity
Warrants
The Company granted warrants giving the holders the right to purchase
57,878 shares of common stock at a price of $2.61 per share, with an
expiration date of November 23, 2000. The Company granted additional
warrants giving the shareholders the right to purchase 106,936 shares of
common stock at $3.73 per share. These warrants also expire on November
23, 2000. The Company granted warrants to the president of the Company
giving him the right to purchase 1,453 shares of common stock at a price of
$3.73 per share. These warrants were exercised in November 1997.
Effective September 30, 1997 the Company conducted a private placement
selling 181,748 shares of common stock for $3.78 per share, receiving total
net proceeds of $657,959. In connection with the private placement, the
Company granted warrants to purchase an additional 181,748 shares of
common stock at a price of $4.86 per share. The warrants expire September
30, 2002.
The Company also granted warrants to purchase 6,942 shares of common
stock at a price of $3.78 per share in connection with a refinancing of notes
payable to a bank July 24, 1997. The warrants expire July 24, 2002. The
Company also granted warrants to purchase 23,943 shares of common stock at
a price of $2.51 per share in connection with consultant work on September
30, 1996. The warrants expire September 30, 2004.
Option Agreement
Under the 1991 Stock Plan ( the "1991 Plan") , officers and employees of the
Company may be granted "incentive stock options" (stock) ("ISO" or "ISOs").
Directors, officers, employees and consultants of the Company may be granted
options which do not qualify as ISOs ("Non-Qualified Option" or "Non-
Qualified Options") and, in addition, such persons may be granted awards of
stock in the Company ("Awards") and opportunities to make direct purchases
of stock in the Company ("Purchases").
The stock options are vested over a five year period, with 20% of the options
vested every year.
The exercise price per share of ISOs granted under the 1991 Plan cannot be
less than the fair market value per share of the Common Stock on the date of
grant, or, in the case of ISOs granted to employees holding more than 10% of
the total combined voting power of all classes of stock of the Company, 110%
of the fair market value per share of the Common Stock on the date of grant.
The exercise price per share of Non-Qualified Options granted under the 1991
Plan cannot be less than the lesser of the book value per share of Common
Stock as of the end of the preceding fiscal year, or 50% of the fair market
value per share of Common Stock on the date of grant.
The 1991 Plan requires that each option shall expire on the date specified by
the Committee, but not more than ten years from its date of grant in the case
of ISOs and ten years and one day in the case of Non-Qualified Options.
However, in the case of any ISO granted to an employee owning more than
10% of the total combined voting power of all classes of stock of the
Company, such ISO shall expire on the date specified by the Committee, but
not more than five years from its date of grant.
The 1991 Plan authorizes the grant of Stock Rights to acquire 125,000 shares
of Common Stock. Pursuant to the terms of the 1991 Plan, shares subject to
options which for any reason expire or are terminated unexercised as to such
shares may again be the subject of a grant under the 1991 Plan.
No options or rights were granted under the 1991 Plan during the 1998 fiscal
year and no options were canceled during fiscal 1998. As of September 30,
1998, options to purchase 76,018 shares of Common Stock were issued and
unexercised and had been granted under the 1991 plan, and no options
granted under the 1991 Plan had been exercised.
In addition, the Company has outstanding certain options which were
originally granted to former directors and a consultant of Tytronics
Incorporated, the former parent of the Company. These options were
converted into options to purchase shares of the Company's Common Stock in
connection with the Reorganization and are not subject to the 1991 Plan.
These options include an option to purchase 18,512 shares of Common Stock
held by a director of the Company and a former director of Tytronics
Incorporated, and 18,512 shares held by a consulting company, and an option to
purchase 4,628 shares of the Company's Common Stock held by a former director
of Tytronics Incorporated.
7. Stockholders' Equity (continued)
1998 1997
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
______ _________ ______ _________
Outstanding options at
beginning of year 118,018 $1.69 108,760 $1.52
Granted 4,628 $3.78 9,258 $3.78
Exercised (7,868) $1.30 -
Terminated (17,588) $2.92 -
Options due to Reorganization 20,480 $1.91
_______ _____ ________ _____
Outstanding options at end
of year 117,670 $1.77 118,018 $1.69
====== ======
Exercisable at end of year 84,212 $1.53 79,140 $1.45
====== ==== ======
Available for grant at end
of year 7,330 43,967
====== ======
The following table represents weighted average price and life information
about significant option groups outstanding at September 30, 1998:
Options Outstanding Options Exercisable
_______________________________________________________________
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life (years) Price Exercisable Price
$1.30-$2.50 108,414 4.2 $1.60 83,286 $1.51
$3.78 9,256 9.1 $3.78 926 $3.78
_______ ______
117,670 84,212
======= ======
The pro-forma net income, as if compensation cost for the Plans had been
determined based on the fair value at the grant date, in accordance with the
provisions of FAS 123, is not materially different from the actual reported net
income for the years ended September 30, 1998 and 1997.
The fair value of options at the date of grant were estimated using the
minimum value model with an estimated weighted average life of six years
from the date of grant, assuming a risk free interest rate of approximately 6%.
The Company does not intend to declare dividends on its common stock.
The effects on 1998 and 1997 pro forma net income of expensing the
estimated fair value of stock options are not necessarily representative of the
effects on reporting the results of operations for future years.
7. Stockholders' Equity (continued)
Preferred Stock
In conjunction with the Reorganization, 29,327 shares of Series A and Series
B preferred stock (collectively, preferred stock), outstanding at September 30,
1997 were exchanged for 149,276 shares of common stock.
Treasury Stock
At September 30, 1998 and 1997 the Company has 238,312 shares of common
stock and 0 shares of preferred stock held in treasury. As part of the
Reorganization, 17,395 shares were purchased back.
8. Profit-Sharing Plan
The Company sponsors a 401(k) profit-sharing plan ("Plan") covering all
employees of the Company having completed a minimum of six months of
service. The Plan permits participants to make elective contributions up to the
maximum limits allowed by the Internal Revenue Code Section 401(k), with a
matching employer contribution. Participants become fully vested in the
Company's matching contributions in their fifth year of service with the
Company.
The Plan also permits the employer to make fully vested discretionary
contributions to the plan allocated to participants' accounts based on their
relative compensation.
Employer contributions were $8,194 and $5,401 in 1998 and 1997, respectively.
9. Income Taxes
The provision for income taxes consisted of the following:
1998 1997
Current income taxes:
Federal $ 12,000 $ 58,000
State 42,000 33,000
______ ______
Total Current 54,000 91,000
______ ______
Deferred income taxes:
Federal 36,000 (50,000)
State 11,000 0
______ _______
Total Deferred 47,000 (50,000)
________ ________
Total Provision $101,000 $41,000
======== =======
At September 30, 1998, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $1,722,000 expiring through
2012. As of September 30, 1998, the Company has available research and
development credit carryforwards of approximately $25,500. Under Internal
Revenue Code Section 382, certain substantial changes in the Company's
ownership would result in an annual limitation on the amount of net operating
loss and credit carryforwards which could be utilized.
Deferred income taxes reflect the net effects of temporary differences between
the carrying amount of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. The net deferred tax assets are
attributable to the following temporary differences at September 30:
1998 1997
Deferred tax assets:
Accounts receivable allowances $32,000 $24,800
Depreciation 0 32,300
Inventory 38,000 8,200
Other accruals 36,000 64,700
Tax Credits 26,000 25,500
Net Operating loss carryforwards 586,000 721,000
AMT Credits 79,000 70,000
______ ______
797,000 946,500
Valuation Allowance (785,000) (856,500)
______ ______
12,000 90,000
Deferred tax liability:
Depreciation and amortization (6,000) (40,000)
_______ _______
Net deferred tax asset $ 6,000 $50,000
======= =======
As required by FAS 109, management of the Company has evaluated the positive
and negative evidence bearing upon the realizability of its deferred tax
assets. The Company has recorded a valuation allowance of $785,000 to offset
some of the net deferred tax assets as a result of the uncertainties surrounding
the realization of the assets. The Company reduced its valuation allowance by
$71,000 in 1998 based upon management's estimate of the amount of deferred tax
assets that were more likely than not to be realized.
A reconciliation of the federal statutory income tax rate and the effective
tax rate as a percentage of income (loss) before taxes and minority interest
for the years ended September 30 is as follows:
1998 1997
Federal statutory rate 34.00% 34.00%
State taxes, net of federal benefit 7.91% 7.40%
Intangibles 6.85% -
Other permanent differences 2.02% 6.11%
Change in valuation allowance (21.01%) 36.21%
Non-consolidated net operating losses (52.11%)
Other 5.23%
_____ _____
Effective tax rate 29.77% 36.84%
===== =====
10. Operating Leases
The Company leases its facilities in Bedford under a lease which expires in
October 1999 . The lease can be terminated by giving 90 days notice . The
lease can be extended for an additional three years. The basic rent was
$76,000 and $68,400 in fiscal 1998 and 1997, respectively. Future minimum
lease payments will be $83,600 for fiscal 1999.
11. Cash Flow information
Supplemental disclosure of cash flow information for years ended September 30
is as follows: 1998 1997
Interest paid 157,335 143,595
Income taxes paid 24,200 38,800
Supplemental disclosure of non-cash investing and financing activities
The Company issued warrants with a value of $240,000 to an investment
banking firm in fiscal year 1998.
The Company issued stock with a value of $1,165,000 to acquire the minority
interest of Holometrix and Nametre of $232,206. Goodwill of $1,112,445,was
created during this reorganization of the Company.
The Company purchased all of the assets of Micromet Instruments, Inc.
Information related to this transaction is as follows:
Net assets acquired $358,000
Less note payable 208,000
________
Cash paid for acquisition $150,000
12. Subsequent Events
In October, 1998, in conjunction with the investment of Sirrom Capital
Investment, the note payable of $208,000 for the purchase of Micromet
Instruments was paid.
EXHIBIT 10.13
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement"), dated as of the ____
day of September, 1998, is made and entered into on the terms and
conditions hereinafter set forth, by and between METRISA, INC., a
Delaware corporation ("Borrower"), and SIRROM INVESTMENTS,
INC., a Tennessee corporation ("Lender").
RECITALS:
WHEREAS, Borrower has requested that Lender make available
to Borrower a term loan in the original principal amount of Two Million
and No/100ths Dollars ($2,000,000) (the "Loan") on the terms and
conditions hereinafter set forth, and for the purpose(s) hereinafter set
forth; and
WHEREAS, in order to induce Lender to make the Loan to
Borrower, Borrower has made certain representations to Lender; and
WHEREAS, Lender, in reliance upon the representations and
inducements of Borrower, has agreed to make the Loan upon the terms
and conditions hereinafter set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the agreement of
Lender to make the Loan, the mutual covenants and agreements
hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Borrower and
Lender hereby agree as follows:
ARTICLE 1
THE LOAN
1.1 Evidence of Loan Indebtedness and Repayment. Subject
to the terms and conditions contained herein, the Lender shall make the
Loan to Borrower by wire transfer in immediately available funds. The
Loan shall be evidenced by a Secured Promissory Note in the original
principal amount of Two Million and No/100ths Dollars ($2,000,000),
dated as of the date hereof, executed by Borrower in favor of Lender (the
"Note"). The Loan shall be payable in accordance with the terms of the
Note. The Note, this Agreement and any other instruments and
documents executed by Borrower, any guarantor of Borrower, or any
shareholder, subsidiary or affiliate of Borrower ("Affiliates"), now or
hereafter evidencing, securing or in any way related to the indebtedness
evidenced by the Note are herein individually referred to as a "Loan
Document" and collectively referred to as the "Loan Documents." The
term "Obligations" as used herein shall refer to (a) the Loan to be made
concurrently or in connection with this Agreement, as evidenced by the
Note, and any renewals or extensions thereof, (b) the full and prompt
payment and performance of any and all other indebtednesses and other
obligations of Borrower to Lender, direct or contingent (including but not
limited to obligations incurred as endorser, guarantor or surety), however
evidenced or denominated, and however and whenever incurred,
including but not limited to indebtednesses incurred pursuant to any
present or future commitment of Lender to Borrower and (c) all future
advances made by Lender for taxes, levies, insurance and preservation of
the Collateral and all attorneys' fees, court costs and expenses of
whatever kind incident to the collection of any of said indebtedness or
other obligations and the enforcement and protection of the security
interest created hereby or by the other Loan Documents.
1.2 Processing Fee. Borrower shall pay Lender a processing
fee of Fifty Thousand Dollars ($50,000), Twenty-Five Thousand Dollars
($25,000) of which has previously been paid to Lender and Twenty-Five
Thousand Dollars ($25,000) of which shall be paid on the date the Loan
is funded by Lender. Upon Exercise of the Stock Purchase Warrant
issued pursuant to Section 4.1, Borrower will pay Lender a fee of Seventy
Thousand Four Hundred Thirty One Dollars ($70,431).
1.3 Prepayment. Borrower may prepay the indebtedness
evidenced by the Note in whole or in part at any time and from time to
time, without penalty or premium.
1.4 Purposes of Loan and Use of Proceeds. The purpose of
the Loan shall be to provide additional strategic acquisition and working
capital to Borrower.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Borrower's Representations. Borrower hereby represents
and warrants to Lender as follows:
(a) Corporate Status. Borrower is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware; and has the corporate power to own and
operate its properties, to carry on its business as now conducted
and to enter into and to perform its obligations under this
Agreement and the other Loan Documents to which it is a party.
Borrower is duly qualified to do business and in good standing
in each state in which a failure to be so qualified would have a
material adverse effect on Borrower's financial condition or its
ability to conduct its business in the manner now conducted.
(b) Subsidiaries. Borrower neither owns nor has an
interest in, directly or indirectly, any other corporation,
partnership, joint venture or other business organization
("Subsidiaries").
(c) Authorization. Borrower has full legal right,
power and authority to conduct its business and affairs. Borrower
has full legal right, power and authority to enter into and perform
its obligations under the Loan Documents, without the consent or
approval of any other person, firm, governmental agency or other
legal entity. The execution and delivery of this Agreement, the
borrowing hereunder, the execution and delivery of each Loan
Document to which Borrower is a party, and the performance by
Borrower of its obligations thereunder are within the corporate
powers of Borrower and have been duly authorized by all
necessary corporate action properly taken and Borrower has
received all necessary governmental approvals, if any, that are
required. The officer(s) executing this Agreement, the Note and
all of the other Loan Documents to which Borrower is a party are
duly authorized to act on behalf of Borrower.
(d) Validity and Binding Effect. This Agreement and
the other Loan Documents are the legal, valid and binding
obligations of the Borrower, enforceable in accordance with their
respective terms, subject to limitations imposed by bankruptcy,
insolvency, moratorium or other similar laws affecting the rights
of creditors generally or the application of general equitable
principles.
(e) Capitalization. As of the date hereof, the
authorized capital stock of Borrower consists solely of 2,000,000
shares of common stock, $0.50 par value per share ("Common
Stock"), of which 1,022,911 shares are issued and outstanding
(the "Shares") and 143,738 shares of which are reserved for
issuance upon exercise of the Stock Purchase Warrant dated as of
the date hereof and issued to Lender (the "Warrant") and
10,000,000 shares of Preferred Stock of which 0 are issued and
outstanding; provided, however, that the number of shares
reserved for issuance upon exercise of the Warrant may be
increased from time to time in accordance with the term of the
Warrant. Attached hereto as Schedule 2.1(e) as a table showing
the capitalization of Borrower, as of the date hereof, on a fully
diluted basis. As of the date hereof, Borrower does not have
outstanding any stock or securities convertible or exchangeable
for any shares of its Common Stock or containing any profit
participation features, and does not have outstanding any rights
or options to subscribe for or to purchase its Common Stock or
any stock appreciation rights or phantom stock plans, except as
set forth on Schedule 2.1(e) and the Warrant. Schedule 2.1(e)
accurately sets forth the following with respect to all outstanding
options and rights to acquire the Borrower's Common Stock: (i)
the total number of shares issuable upon exercise of all
outstanding options; (ii) the range of exercise prices for all such
outstanding options; (iii) the number of shares issuable, the
exercise price and the expiration date for each such outstanding
option; and (iv) with respect to all outstanding options, warrants
and rights to acquire Borrower's capital stock other than the
Warrant, the holder, the number of shares covered, the exercise
price and the expiration date. As of the date hereof, Borrower is
not subject to any obligation (contingent or otherwise) to
repurchase, redeem, retire or otherwise acquire any shares of its
capital stock or any warrants, options or other rights to acquire its
capital stock, except as set forth in the Warrant or on Schedule
2.1(e). As of the date hereof, all of the outstanding shares of
Borrower's capital stock are validly issued, fully paid and
nonassessable. Except as set forth on Schedule 2.1(e), there are
no statutory or contractual preemptive rights, rights of first
refusal, anti-dilution rights or any similar rights, held by
stockholders or option holders of Borrower, with respect to the
issuance of the Warrant or the issuance of the Common Stock
upon exercise of the Warrant and all such rights have been
effectively waived with regard to the issuance of the Warrant, the
exercise of the Warrant and the issuance of the Common Stock
upon exercise of the Warrant. Borrower has not violated any
applicable federal or state securities laws in connection with the
offer, sale or issuance of any of its capital stock, and the offer,
sale and issuance of the Warrant hereunder do not require
registration under the Securities Act of 1933, as amended, or any
applicable state securities laws. To the best of Borrower's
knowledge, there are no agreements among Borrower's
shareholders with respect to any other aspect of Borrower's
affairs, except as set forth on Schedule 2.1(e).
(f) Trademarks, Patents, Etc. Schedule 2.1(f) is an
accurate and complete list of all patents, trademarks, tradenames,
trademark registrations, service names, service marks, copyrights,
licenses, formulas and applications therefor owned by Borrower
or used or required by Borrower in the operation of its business,
title to each of which is, except as set forth in Schedule 2.1(f)
hereto, held by Borrower free and clear of all adverse claims,
liens, security agreements, restrictions or other encumbrances.
Except as set forth in Schedule 2.1(f), Borrower owns or
possesses adequate (and will use its best efforts to obtain as
expediently as possible any additional) licenses or other rights to
use all patents, trademarks, trade names, service marks, trade
secrets or other intangible property rights and know-how
necessary to entitle Borrower to conduct its business as presently
being conducted. There is no infringement action, lawsuit, claim
or complaint which asserts that Borrower's operations violate or
infringe the rights or the trade names, trademarks, trademark
registrations, service names, service marks or copyrights of others
with respect to any apparatus or method of Borrower or any
adversely held trademarks, trade names, trademark registrations,
service names, service marks or copyrights, and Borrower is not
in any way making use of any confidential information or trade
secrets of any person, except with the consent of such person.
Except as set forth in Schedule 2.1(f), Borrower has taken
reasonable steps to protect its proprietary information (except
disclosure of source codes pursuant to licensing agreements) and
is the lawful owner of the proprietary information free and clear
of any claim of any third party. As used herein, "proprietary
information" includes without limitation, (i) any computer
programming language, software (excluding software licensed
from third parties), hardware, firmware or related documentation,
inventions, technical and nontechnical data related thereto, and
(ii) other documentation, inventions and data related to patterns,
plans, methods, techniques, drawings, finances, customer lists,
suppliers, products, special pricing and cost information, designs,
processes, procedures, formulas, research data owned or used by
Borrower or marketing studies conducted by Borrower, all of
which Borrower considers to be commercially important and
competitively sensitive and which generally has not been
disclosed to third parties.
(g) No Conflicts. Consummation of the transactions
contemplated hereby and the performance of the obligations of
Borrower under and by virtue of the Loan Documents do not
conflict with, and will not result in any breach of, or constitute a
default or trigger a lien under, any mortgage, security deed or
agreement, deed of trust, lease, bank loan or credit agreement,
corporate charter or bylaws, agreement or certificate of limited
partnership, partnership agreement, license, franchise or any other
instrument or agreement to which Borrower is a party or by which
Borrower or its respective properties may be bound or affected or
to which Borrower has not obtained an effective waiver.
(h) Litigation. There are no actions, suits,
arbitrations, administrative hearings or other proceedings
pending, or, to the knowledge of Borrower threatened, against or
affecting Borrower or any of Borrower's property or involving
the validity or enforceability of any of the Loan Documents at law
or in equity, or before any governmental or administrative
agency. To Borrower's knowledge, Borrower is not subject to
any order, writ, injunction, decree or demand of any court or any
governmental authority.
(i) Financial Statements. The financial statements of
Tytronics (Borrower's predecessor) dated September 30, 1997,
and the interim financial statements of Borrower dated June 30,
1998, which are attached hereto as Schedule 2.1(i)(A), are true
and correct in all material respects, have been prepared on the
basis of generally accepted accounting principles consistently
applied, and fairly present the financial condition of Borrower as
of the date(s) thereof. No material adverse change has occurred
in the financial condition of Borrower since the date(s) thereof,
and no additional borrowings have been made by Borrower since
the date(s) thereof other than as set forth on Schedule 2.1(i)(B).
(j) Other Agreements; No Defaults. Borrower is not
a party to any indenture, loan or credit agreement, lease or other
agreement or instrument, or subject to any charter or corporate
restriction, that could have a material adverse effect on the
business, properties, assets, operations or conditions, financial or
otherwise, of Borrower, or the ability of Borrower to carry out its
obligations under the Loan Documents to which it is a party.
Borrower is not in default in any respect in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument material to
its business to which it is a party, including but not limited to this
Agreement and the other Loan Documents, and no other default
or event has occurred and is continuing that with notice or the
passage of time or both would constitute a default or event of
default under any of same.
(k) Compliance With Law. Borrower has obtained all
necessary licenses, permits and approvals and authorizations
necessary or required in order to conduct its business and affairs
as heretofore conducted and as hereafter intended to be
conducted. Borrower is in compliance with all laws, regulations,
decrees and orders applicable to it (including but not limited to
laws, regulations, decrees and orders relating to environmental,
occupational and health standards and controls, antitrust,
monopoly, restraint of trade or unfair competition), except to the
extent that any noncompliance, in the aggregate, cannot
reasonably be expected to have a material adverse effect on its
business, operations, property or financial condition and will not
materially adversely affect Borrower's ability to perform its
obligations under the Loan Documents.
(l) Debt. Schedule 2.1(l) is a complete and correct
list of all credit agreements, indentures, purchase agreements,
promissory notes and other evidences of indebtedness, guaranties,
capital leases and other instruments, agreements and
arrangements presently in effect providing for or relating to
extensions of credit (including agreements and arrangements for
the issuance of letters of credit or for acceptance financing) in
respect of which the Borrower or any of its properties is in any
manner directly or contingently obligated and the maximum
principal or face amounts of the credit in question that are
outstanding and that can be outstanding are correctly stated, and
all liens of any nature given or agreed to be given as security
therefor are correctly described or indicated in Schedule 2.1(l).
(m) Taxes. Borrower has filed or caused to be filed all
tax returns that are required to be filed (except for returns that
have been appropriately extended), and has paid, or will pay when
due, all taxes shown to be due and payable on said returns and all
other taxes, impositions, assessments, fees or other charges
imposed on it by any governmental authority, agency or
instrumentality, prior to any delinquency with respect thereto
(other than taxes, impositions, assessments, fees and charges
currently being contested in good faith by appropriate
proceedings, for which appropriate amounts have been reserved).
No tax liens have been filed against Borrower or any of its
property.
(n) Certain Transactions. Except as set forth on
Schedule 2.1(n) hereto, Borrower is not indebted, directly or
indirectly, to any of its shareholders, officers or directors or to
their respective spouses or children, in any amount whatsoever,
and none of said shareholders, officers or directors or any
members of their immediate families, are indebted to Borrower
or have any direct or indirect ownership interest in any firm or
corporation with which Borrower has a business relationship, or
any firm or corporation which competes with Borrower, except
that shareholders, officers and/or directors of Borrower may own
no more than 4.9% of outstanding stock of publicly traded
companies which may compete with Borrower. No shareholder,
officer or director or any member of their immediate families, is,
directly or indirectly, interested in any material contract with
Borrower. Borrower is not a guarantor or indemnitor of any
indebtedness of any other person, firm, corporation or other legal
entity.
(o) Small Business Concern. Borrower, together with
its "affiliates" (as that term is defined in Title 13, Code of Federal
Regulations, 121.103), is a "small business concern" within the
meaning of the Small Business Investment Act of 1958, as
amended, and the regulations promulgated thereunder. The
information set forth in the Small Business Administration Forms
480, 652 and Parts A and B of Form 1031 regarding Borrower
upon delivery, pursuant to Section 4.1 hereof, will be accurate
and complete. Borrower does not presently engage in, and it will
not hereafter engage in, any activities, and Borrower will not use
directly or indirectly, the proceeds from the Loan, for any purpose
for which a Small Business Investment Company is prohibited
from providing funds by the Small Business Investment Act and
the regulations thereunder, including Title 13, Code of Federal
Regulations 107.720.
(p) Statements Not False or Misleading. No
representation or warranty given as of the date hereof by
Borrower contained in this Agreement or any schedule attached
hereto or any statement in any document, certificate or other
instrument furnished or to be furnished by Borrower to Lender
pursuant hereto, taken as a whole, contains or will (as of the time
so furnished) contain any untrue statement of a material fact, or
omits or will (as of the time so furnished) omit to state any
material fact which is necessary in order to make the statements
contained therein not misleading.
(q) Margin Regulations. Borrower is not engaged in
the business of extending credit for the purpose of purchasing or
carrying margin stock. No proceeds received pursuant to this
Agreement will be used to purchase or carry any equity security
of a class which is registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended.
(r) Significant Contracts. Schedule 2.1(r) is a
complete and correct list of all contracts, agreements and other
documents pursuant to which Borrower receives revenues in
excess of $75,000 per fiscal year or has committed to make
expenditures in excess of $75,000 per fiscal year. Each such
contract, agreement and other document is in full force and effect
as of the date hereof and Borrower knows of no reason why such
contracts, agreements and other documents would not remain in
full force and effect pursuant to the terms thereof.
(s) Environment. Borrower has duly complied with,
and its business, operations, assets, equipment, property,
leaseholds or other facilities are in compliance with, the
provisions of all federal, state and local environmental, health,
and safety laws, codes and ordinances, and all rules and
regulations promulgated thereunder. Borrower has been issued
and will maintain all required federal, state and local permits,
licenses, certificates and approvals relating to (i) air emissions;
(ii) discharges to surface water or groundwater; (iii) noise
emissions; (iv) solid or liquid waste disposal; (v) the use,
generation, storage, transportation or disposal of toxic or
hazardous substances or wastes (which shall include any and all
such materials listed in any federal, state or local law, code or
ordinance and all rules and regulations promulgated thereunder as
hazardous or potentially hazardous); or (vi) other environmental,
health or safety matters. Borrower has not received notice of, or
knows of, or suspects facts which might constitute any violations
of any federal, state or local environmental, health or safety laws,
codes or ordinances, and any rules or regulations promulgated
thereunder with respect to its businesses, operations, assets,
equipment, property, leaseholds, or other facilities. Except in
accordance with a valid governmental permit, license, certificate
or approval, to Borrower's knowledge, there has been no
emission, spill, release or discharge into or upon (i) the air;
(ii) soils, or any improvements located thereon; (iii) surface water
or groundwater; or (iv) the sewer, septic system or waste
treatment, storage or disposal system servicing the premises, of
any toxic or hazardous substances or wastes at or from the
premises; and accordingly the premises of Borrower are free of all
such toxic or hazardous substances or wastes. There has been no
complaint, order, directive, claim, citation or notice by any
governmental authority or any person or entity with respect to
(i) air emissions; (ii) spills, releases or discharges to soils or
improvements located thereon, surface water, groundwater or the
sewer, septic system or waste treatment, storage or disposal
systems servicing the premises; (iii) noise emissions; (iv) solid or
liquid waste disposal; (v) the use, generation, storage,
transportation or disposal of toxic or hazardous substances or
waste; or (vi) other environmental, health or safety matters
affecting Borrower or its business, operations, assets, equipment,
property, leaseholds or other facilities. Borrower does not have
any indebtedness, obligation or liability (absolute or contingent,
matured or not matured), with respect to the storage, treatment,
cleanup or disposal of any solid wastes, hazardous wastes or other
toxic or hazardous substances (including without limitation any
such indebtedness, obligation, or liability with respect to any
current regulation, law or statute regarding such storage,
treatment, cleanup or disposal).
(t) Fees/Commissions. Borrower has not agreed to
pay any finder's fee, commission, origination fee (except for the
processing and commitment fees due pursuant to Section 1.2
hereof and a commission payable to Gateway Financial Group in
the amount of $60,000) or other fee or charge to any person or
entity with respect to the Loan and investment transactions
contemplated hereunder.
(u) ERISA. Borrower is in compliance in all material
respects with all applicable provisions of Title IV of the
Employee Retirement Income Security Act of 1974, Pub. L. No.
93-406, September 2, 1974, 88 Stat. 829, 29 U.S.C.A. 1001 et
seq. (1975), as amended form time to time ("ERISA"). Neither
a reportable event nor a prohibited transaction (as defined in
ERISA) has occurred and is continuing with respect to any
pension plan that is subject to the requirements of ERISA (a
"Plan"); no notice of intent to terminate a Plan has been filed nor
has any Plan been terminated; no circumstances exist which
constitute grounds entitling the Pension Benefit Guaranty
Corporation (together with any entity succeeding to or all of its
functions, the "PBGC") to institute proceedings to terminate, or
appoint a trustee to administer, a Plan, nor has the PBGC
instituted any such proceedings; neither Borrower nor any
commonly controlled entity (as defined in ERISA) has
completely or partially withdrawn from a multiemployer plan (as
defined in ERISA); Borrower and each commonly controlled
entity has met its minimum funding requirements under ERISA
with respect to all of its Plans and the present fair market value of
all Plan property exceeds the present value of all vested benefits
under each Plan, as determined on the most recent valuation date
of the Plan and in accordance with the provisions of ERISA and
the regulations thereunder for calculating the potential liability of
Borrower or any commonly controlled entity to the PBGC or the
Plan under Title IV or ERISA; and neither Borrower nor any
commonly controlled entity has incurred any liability to the
PBGC under ERISA.
(v) Title to Properties. Borrower has good,
indefeasible and insurable title to, or valid leasehold interests in,
all its real properties and good title to its other assets, free and
clear of all liens other than Permitted Liens (as defined in Section
3.15 hereof).
(w) Limited Offering of Note and Warrant. Neither
Borrower nor anyone acting on its behalf has offered the Note, the
Warrant or any similar securities for sale to, or solicited any offer
to buy any of the same from, or otherwise approached or
negotiated in respect thereof, with, any person other than Lender
and not more than 35 other institutional investors. Neither
Borrower nor anyone acting on its behalf has taken, or will take,
any action which would subject the issuance or sale of the Note
and Warrant to Section 5 of the Securities Act of 1933, as
amended, or the registration or qualification provisions of the
blue sky laws of any state.
(x) Registration Rights. Except as described in the
Warrant, Borrower is not under any obligation to register under
the Securities Act of 1933, as amended, or the Trust Indenture
Act of 1939, as amended, any of its presently outstanding
securities or any of its securities that may subsequently be issued.
(y) Employees. Borrower has no current labor
problems or disputes which have resulted or Borrower reasonably
believes could be expected to have a material adverse effect on
the operations, properties or financial condition of Borrower, or
Borrower's ability to perform its obligations hereunder.
(z) Issuance Taxes. All taxes imposed on Borrower
in connection with the issuance, sale and delivery of the Note, the
Warrant and the capital stock issuable upon exercise of the
Warrant have been or will be fully paid, and all laws imposing
such taxes have been or will be fully satisfied by Borrower.
(aa) Solvency. As of the date hereof and giving effect
to the making of the Loan, Borrower (i) has capital sufficient to
carry on its business and transactions and all business and
transactions in which it is about to engage and is able to pay its
debts as they mature, (ii) owns property having a value, both at
fair valuation and at present fair saleable value, greater than the
amount required to pay its probable liabilities (including
contingencies), and (iii) does not believe that it will incur debts
or liabilities beyond its ability to pay such debts or liabilities as
they mature.
(bb) Location of Properties, Places of Business. The
only jurisdictions in which Borrower maintains any tangible
personal property or carries on business are as listed in Schedule
2.1(bb) hereto. All billings for the supply of goods and services
by Borrower are made from, and require payment to be made to,
the chief executive office of the Borrower.
(cc) Year 2000 Compatibility. Borrower has reviewed
its financial accounting systems and other computer systems for
year 2000 compatibility and is taking all necessary steps to ensure
that such issues will not have a material adverse effect on
Borrower's business, operations, property or financial condition.
ARTICLE 3
COVENANTS AND AGREEMENTS
Borrower covenants and agrees that during the term of this
Agreement:
3.1 Payment of Obligations. Borrower shall pay the
indebtedness evidenced by the Note according to the terms thereof, and
shall timely pay or perform, as the case may be, all of the other
obligations of Borrower to Lender, direct or contingent, however
evidenced or denominated, and however and whenever incurred,
including but not limited to indebtedness incurred pursuant to any present
or future commitment of Lender to Borrower, together with interest
thereon, and any extensions, modifications, consolidations and/or
renewals thereof and any notes given in payment thereof.
3.2 Financial Statements and Reports. Borrower shall furnish
to Lender (a) as soon as practicable and in any event within one hundred
twenty (120) days after the end of each fiscal year of Borrower, an
audited balance sheet of Borrower as of the close of such fiscal year, an
audited statement of operations of Borrower as of the close of such fiscal
year and an audited statement of cash flows for Borrower for such fiscal
year, prepared in accordance with generally accepted accounting
principles consistently applied and accompanied by an unqualified audit
report prepared by an independent certified public accountant acceptable
to Lender showing the financial condition of Borrower at the close of
such fiscal year and the results of its operations during such fiscal year
and accompanied by a certificate of the President of Borrower, stating
that to the best of the knowledge of such officer, Borrower has kept,
observed, performed and fulfilled each covenant, term and condition of
this Agreement and the other Loan Documents during the preceding fiscal
year and that no Event of Default has occurred and is continuing (or if an
Event of Default has occurred and is continuing, specifying the nature of
same, the period of existence of same and the action Borrower proposes
to take in connection therewith), (b) within thirty (30) days of the end of
each calendar month, a status report indicating the financial performance
of Borrower during such month and the financial position of Borrower as
of the end of such month in the format required by Lender (which format
will be delivered to Borrower on a diskette), (c) within forty-five (45)
days of the end of each quarter, a balance sheet of Borrower as of the
close of such quarter and a statement of operations of Borrower as of the
close of such quarter, all in reasonable detail, and prepared substantially
in accordance with generally accepted accounting principles consistently
applied (except for the absence of footnotes and subject to year-end
adjustments), and (d) with reasonable promptness, such other financial
data, including without limitation, accounts receivable agings, as Lender
may reasonably request. Without Lender's prior written consent (except
as required by FASB), Borrower shall not modify or change any
accounting policies or procedures, including Borrower's fiscal year, in
effect on the date hereof.
3.3 Maintenance of Books and Records; Inspection.
Borrower shall maintain its books, accounts and records in accordance
with generally accepted accounting principles consistently applied, and
after reasonable notice from Lender permit Lender, its officers and
employees and any professionals designated by Lender in writing, at
Borrower's expense, to visit and inspect any of its properties, corporate
books and financial records, and to discuss its accounts, affairs and
finances with Borrower or the principal officers of Borrower during
reasonable business hours, all at such times as Lender may reasonably
request; provided that no such inspection shall materially interfere with
the conduct of Borrower's business.
3.4 Insurance. Without limiting any of the requirements of
any of the other Loan Documents, Borrower shall maintain, in amounts
customary for entities engaged in comparable business activities, (a) to
the extent required by applicable law, worker's compensation insurance
(or maintain a legally sufficient amount of self insurance against worker's
compensation liabilities, with adequate reserves, under a plan approved
by Lender, such approval not to be unreasonably withheld or delayed),
and (b) fire and "all risk" casualty insurance on its properties against such
hazards and in at least such amounts as are customary in Borrower's
business. Borrower will make reasonable efforts to obtain and maintain
public liability insurance in an amount, and at a cost, deemed reasonable
to the Borrower's Board of Directors. At the request of Lender, Borrower
will deliver forthwith a certificate specifying the details of such insurance
in effect.
3.5 Taxes and Assessments. Borrower shall (a) file all tax
returns and appropriate schedules thereto that are required to be filed
under applicable law, prior to the date of delinquency, (b) pay and
discharge all taxes, assessments and governmental charges or levies
imposed upon Borrower upon its income and profits or upon any
properties belonging to it, prior to the date on which penalties attach
thereto, and (c) pay all taxes, assessments and governmental charges or
levies that, if unpaid, might become a lien or charge upon any of its
properties; provided, however, that Borrower in good faith may contest
any such tax, assessment, governmental charge or levy described in the
foregoing clauses (b) and (c) so long as appropriate reserves in
accordance with generally accepted accounting principles are maintained
with respect thereto.
3.6 Corporate Existence. Borrower shall maintain its
corporate existence and good standing in the state of its incorporation,
and its qualification and good standing as a foreign corporation in each
jurisdiction in which such qualification is necessary pursuant to
applicable law.
3.7 Compliance with Law and Other Agreements. Except
where the failure to do so would not materially adversely affect
Borrower's operations, properties, financial condition or its ability to
fulfill its obligations under the Loan Documents, Borrower shall maintain
its business operations and property owned or used in connection
therewith in compliance with (a) all applicable federal, state and local
laws, regulations and ordinances governing such business operations and
the use and ownership of such property, and (b) all agreements, licenses,
franchises, indentures and mortgages to which Borrower is a party or by
which Borrower or any of its properties is bound. Without limiting the
foregoing, Borrower shall pay all of its indebtedness promptly in
accordance with the terms thereof.
3.8 Notice of Default; Perceived Breach. Borrower shall give
written notice to Lender of the occurrence of any default, event of default
or Event of Default under this Agreement or any other Loan Document
promptly upon the occurrence thereof.
3.9 Notice of Litigation. Borrower shall give notice, in
writing, to Lender of (a) any actions, suits or proceedings, instituted by
any persons whomsoever against Borrower or affecting any of the assets
of Borrower wherein the amount at issue is in excess of Fifty Thousand
and No/100ths Dollars ($50,000.00) and (b) any dispute, not resolved
within sixty (60) days of the commencement thereof, between Borrower
on the one hand and any governmental regulatory body on the other hand,
which dispute might materially interfere with the normal operations of
Borrower.
3.10 Conduct of Business. Borrower will continue to engage
in a business of the same general type and manner as conducted by it on
the date of this Agreement.
3.11 ERISA Plan. If Borrower has in effect, or hereafter
institutes, a Plan that is subject to the requirements of ERISA, then the
following warranty and covenants shall be applicable during such period
as any such Plan shall be in effect: (a) Borrower hereby warrants that no
fact that might constitute grounds for the involuntary termination of the
Plan, or for the appointment by the appropriate United States District
Court of a trustee to administer the Plan, exists at the time of execution
of this Agreement; (b) Borrower hereby covenants that throughout the
existence of the Plan, Borrower's contributions under the Plan will meet
the minimum funding standards required by ERISA and Borrower will
not institute a distress termination of the Plan; and (c) Borrower
covenants that it will send to Lender a copy of any notice of a reportable
event (as defined in ERISA) required by ERISA to be filed with the
Labor Department or the Pension Benefit Guaranty Corporation, at the
time that such notice is so filed.
3.12 Dividends, Distributions, Stock Rights, etc. Without the
prior written consent of Lender, Borrower shall not declare or pay any
dividend of any kind (other than stock dividends payable to all holders of
any class of capital stock), in cash or in property, on any class of the
capital stock of Borrower (except for the repurchase of the stock of
terminated employees (other than Jack Wolfe) which shall not exceed
$25,000 per year in the aggregate and the repurchase of the stock of J.
Michael Doherty and Martha Doherty in an amount not to exceed
$32,000), or purchase, redeem, retire or otherwise acquire for value any
shares of such stock, nor make any distribution of any kind in cash or
property in respect thereof, nor make any return of capital of
shareholders, nor make any payments in cash or property in respect of
any stock options, stock bonus or similar plan nor grant any preemptive
rights with respect to the capital stock of Borrower.
3.13 Guaranties; Loans; Payment of Debt. Without the prior
written consent of Lender, Borrower shall not guarantee nor be liable in
any manner, whether directly or indirectly, or become contingently liable
after the date of this Agreement in connection with the obligations or
indebtedness of any person or entity whatsoever, except for the
endorsement of negotiable instruments payable to Borrower for deposit
or collection in the ordinary course of business. Without the prior written
consent of Lender, Borrower shall not (a) make any loan, advance or
extension of credit to any person other than in the normal course of its
business, or (b) make any payment on any subordinated debt except in
accordance with subordination agreements in effect on the date hereof
and with respect to Permitted Liens as defined in Section 3.15, and other
than trade payables incurred in the ordinary course of Borrower's
business.
3.14 Debt. Without the prior written consent of Lender,
Borrower shall not create, incur, assume or suffer to exist indebtedness
of any description whatsoever, excluding:
(a) the indebtedness evidenced by the Note;
(b) the endorsement of negotiable instruments payable to
Borrower for deposit or collection in the ordinary course
of business;
(c) trade payables incurred in the ordinary course of business
(each of which, individually, does not exceed $75,000);
and
(d) the indebtedness listed on Schedule 2.1(l) hereto which
shall include debt senior to Lender in an amount not to
exceed $2.0 million.
(e) Commencing January 1, 1999, "Total Funded Long Term
Debt" (excluding current portion) in amounts less than the
product of 4.7 x Earnings Before Interest, Taxes,
Depreciation and Amortization, determined in accordance
with generally accepted accounting principles on a twelve
(12) month trailing basis ("EBITDA") at the end of each
fiscal quarter. Beginning January 1, 2001, Borrower shall
not be permitted to incur Total Funded Long Term Debt
in excess of 4.5 x EBITDA calculated in accordance with
the previous sentence.
3.15 No Liens. Without prior written consent of Lender,
Borrower shall not create, incur, assume or suffer to exist any lien,
security interest, security title, mortgage, deed of trust or other
encumbrance upon or with respect to any of its assets, now owned or
hereafter acquired, except the following permitted liens (the "Permitted
Liens"):
(a) liens in favor of Lender;
(b) liens for taxes or assessments or other governmental
charges or levies if not yet due and payable;
(c) liens on leased equipment granted in connection with the
leasing of such equipment in favor of the lessor of such
equipment;
(d) liens described on Schedule 2.1(l) hereto.
3.16 Mergers, Consolidations, Acquisitions and Sales. Without
the prior written consent of Lender, Borrower shall not (a) be a party to
any merger, consolidation or corporate reorganization, to the extent the
Borrower is not the surviving entity (b) sell, transfer, convey, or lease all
or any substantial part of its assets, nor (c) create any Subsidiaries nor
convey any of its assets to any Subsidiary. In the event that Borrower
shall acquire all or substantially all of the assets or stock of, or any
partnership or joint venture interest in, any other person, firm or entity,
and shall issue indebtedness to the sellers thereof (to the extent permitted
under Section 3.14), such indebtedness shall be subordinate to the Loan
on terms acceptable to Lender.
3.17 Transactions With Affiliates. Borrower shall not enter
into any transaction, including, without limitation, the purchase, sale or
exchange of property or the rendering of any service, with any affiliate,
except in the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon fair and reasonable terms
no less favorable to Borrower than Borrower would obtain in a
comparable arm's length transaction with a person not an affiliate. For
the purposes of this Section 3.17, "affiliate" shall mean a person,
corporation, partnership or other entity controlling, controlled by or under
common control with Borrower.
3.18 Employment Contracts. Without the prior written consent
of Lender, Borrower shall not (a) enter into any employment agreement
or other written compensation agreement that has a term of greater than
one year with any of Borrower's executive officers or (b) increase total
compensation paid to the executive officers of Borrower by more than ten
percent (12.5%) per year.
3.19 Environment. Borrower shall be and remain in
compliance with the provisions of all federal, state and local
environmental, health, and safety laws, codes and ordinances, and all
rules and regulations issued thereunder; notify Lender immediately of any
notice of a hazardous discharge or environmental complaint received
from any governmental agency or any other party; notify Lender
immediately of any hazardous discharge from or affecting its premises;
immediately contain and remove the same, in compliance with all
applicable laws; promptly pay any fine or penalty assessed in connection
therewith; permit Lender to inspect the premises, to conduct tests thereon,
and to inspect all books, correspondence, and records pertaining thereto;
and at Lender's request, and at Borrower's expense, provide a report of a
qualified environmental engineer, satisfactory in scope, form, and content
to Lender, and such other and further assurances reasonably satisfactory
to Lender that the condition has been corrected.
3.20 Landlord Consents. Borrower shall use its best efforts to
obtain a Landlord Consent and Subordination of Lien, in a form
reasonably satisfactory to Lender, from each landlord from whom
Borrower now or hereafter may lease space.
ARTICLE 4
CONDITIONS TO CLOSING
4.1 Closing of the Loan. The obligation of Lender to fund the
Loan on the date hereof (the "Closing Date") is subject to the fulfillment,
on or prior to the Closing Date, of each of the following conditions:
(a) Borrower shall have performed and complied in
all material respects with all of the covenants, agreements,
obligations and conditions required by this Agreement.
(b) Lender shall have received an opinion of the
Borrower's counsel, Bowditch & Dewey, dated the Closing Date,
in form and substance satisfactory to Lender's counsel, Caldwell
& Caldwell, P.C.
(c) Borrower shall have delivered to Lender a Note
executed by Borrower, in form and substance satisfactory to
Lender.
(d) Borrower shall have delivered to Lender a Stock
Purchase Warrant executed by Borrower, in form and substance
satisfactory to Lender, and the related Warrant Valuation Letter
executed by Borrower.
(e) Borrower shall have delivered to Lender a
Security Agreement and related UCC-1 Financing Statement(s),
executed by Borrower, each of which is in form and substance
satisfactory to Lender.
(f) Borrower shall have delivered to Lender a
Landlord's Consent and Subordination of Lien, executed by each
of Borrower's landlords, in form and substance satisfactory to
Lender.
(g) Borrower shall have delivered to Lender an
Intellectual Property Security Agreement executed by Borrower,
in form and substance satisfactory to Lender.
(h) Borrower shall have delivered to Lender an
Authorization Agreement for Pre-Authorized Payments (Debit)
executed by Borrower, in form and substance satisfactory to
Lender.
(i) Borrower shall have delivered to Lender the Small
Business Administration Forms 480, 652 and 1031 (Parts A and
B) completed by Borrower.
(j) Borrower shall have delivered to Lender the Small
Business Administration Economic Impact Assessment
completed by Borrower, in form and substance satisfactory to
Lender.
(k) Borrower shall have delivered to Lender an
Escrow Agreement, executed by Borrower, in form and substance
satisfactory to Lender.
(l) Borrower shall have delivered to Lender copies of
the corporate charter and other publicly filed organizational
documents of Borrower, certified by the Secretary of State or
other appropriate public official in the jurisdiction in which
Borrower is incorporated.
(m) Borrower shall have delivered to Lender certified
(as of the date of this Agreement) copies of all corporate action
taken by Borrower, including resolutions of its Board of
Directors, authorizing the execution, delivery and performance of
the Loan Documents.
(n) Borrower shall have delivered to Lender a
certificate as to the legal existence and good standing of the
Borrower, issued by the Secretary of State or other appropriate
public official in the jurisdiction in which the Borrower is
incorporated.
(o) Borrower shall have delivered to Lender
certificates of the Secretaries of State or other appropriate public
officials as to Borrower's qualification to do business and good
standing in each jurisdiction in which a failure to be so qualified
would have a material adverse effect on its financial condition or
its ability to conduct its business in the manner now conducted
and as hereafter intended to be conducted.
(p) Lender shall enter into a Subordination Agreement
with Silicon Valley Bank ("Senior Lender") on terms satisfactory
to Lender.
ARTICLE 5
DEFAULT AND REMEDIES
5.1 Events of Default. The occurrence of any of the following
shall constitute an Event of Default hereunder:
(a) Default in the payment of the principal of or
interest on the indebtedness evidenced by the Note in accordance
with the terms of the Note, which default is not cured within ten
(10) days;
(b) Any misrepresentation by Borrower, any
guarantor of the Loan, or any Affiliate as to any material matter
hereunder or under any of the other Loan Documents, or delivery
by Borrower of any schedule, statement, resolution, report,
certificate, notice or writing to Lender that is untrue in any
material respect on the date as of which the facts set forth therein
are stated or certified;
(c) Failure of Borrower, any guarantor of the Loan, or
any Affiliate to perform any of its obligations, covenants or
agreements under this Agreement, the Note or any of the other
Loan Documents;
(d) Borrower (i) shall generally not pay or shall be
unable to pay its debts as such debts become due, or (ii) shall
make an assignment for the benefit of creditors or petition or
apply to any tribunal for the appointment of a custodian, receiver
or trustee for it or a substantial part of its assets, or (iii) shall
commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation law
or statute of any jurisdiction, whether now or hereafter in effect,
or (iv) shall have had any such petition or application filed or any
such proceeding commenced against it that is not dismissed
within sixty (60) days, or (v) shall indicate, by any act or
intentional and purposeful omission, its consent to, approval of or
acquiescence in any such petition, application, proceeding or
order for relief or the appointment of a custodian, receiver or
trustee for it or a substantial part of its assets, or (vi) shall suffer
any such custodianship, receivership or trusteeship to continue
undischarged for a period of sixty (60) days or more;
(e) Borrower shall be liquidated, dissolved,
partitioned or terminated, or the charter thereof shall expire or be
revoked;
(f) A default or event of default shall occur under any
of the other Loan Documents and, if subject to a cure right, such
default or event of default shall not be cured within the applicable
cure period;
(g) Borrower shall default in the timely payment or
performance of any obligation now or hereafter owed to Lender
in connection with any other indebtedness of Borrower now or
hereafter owed to Lender;
(h) Borrower shall have defaulted and continue to be
in default in the timely payment of or performance of any
covenant relating to any other indebtedness or obligation, which
in the aggregate exceeds Twenty-Five Thousand and No/100ths
Dollars ($25,000.00) or materially adversely affects Borrower's
operations, properties or financial condition, including the
indebtedness owed to Senior Lender;
(i) Jack E. Wolfe shall not longer serve as an officer
or director of Borrower; and
(j) There shall have occurred a material adverse
change in Borrower's financial condition, properties or business.
With respect to any Event of Default described above that is
capable of being cured and that does not already provide its own cure
procedure (a "Curable Default"), the occurrence of such Curable Default
shall not constitute an Event of Default hereunder if such Curable Default
is fully cured and/or corrected within thirty (30) days (ten (10) days, if
such Curable Default may be cured by payment of a sum of money) of
notice thereof to Borrower given in accordance with the provisions
hereof; provided, however, that this provision shall not require notice to
Borrower and an opportunity to cure any Curable Default of which
Borrower has had actual knowledge for the requisite number of days set
forth.
5.2 Acceleration of Maturity; Remedies. Upon the
occurrence of any Event of Default described in subsection 5.1(d), the
indebtedness evidenced by the Note as well as any and all other
indebtedness of Borrower to Lender shall be immediately due and
payable in full; and upon the occurrence of any other Event of Default
described above, Lender at any time thereafter may at its option
accelerate the maturity of the indebtedness evidenced by the Note as well
as any and all other indebtedness of Borrower to Lender; all without
notice of any kind. Upon the occurrence of any such Event of Default
and the acceleration of the maturity of the indebtedness evidenced by the
Note:
(a) Lender shall be immediately entitled to exercise
any and all rights and remedies possessed by Lender pursuant to
the terms of the Note and all of the other Loan Documents; and
(b) Lender shall have any and all other rights and
remedies that Lender may now or hereafter possess at law, in
equity or by statute.
5.3 Remedies Cumulative; No Waiver. No right, power or
remedy conferred upon or reserved to Lender by this Agreement or any
of the other Loan Documents is intended to be exclusive of any other
right, power or remedy, but each and every such right, power and remedy
shall be cumulative and concurrent and shall be in addition to any other
right, power and remedy given hereunder, under any of the other Loan
Documents or now or hereafter existing at law, in equity or by statute.
No delay or omission by Lender to exercise any right, power or remedy
accruing upon the occurrence of any Event of Default shall exhaust or
impair any such right, power or remedy or shall be construed to be a
waiver of any such Event of Default or an acquiescence therein, and
every right, power and remedy given by this Agreement and the other
Loan Documents to Lender may be exercised from time to time and as
often as may be deemed expedient by Lender.
5.4 Proceeds of Remedies. Any or all proceeds resulting from
the exercise of any or all of the foregoing remedies shall be applied as set
forth in the Loan Document(s) providing the remedy or remedies
exercised, if none is specified, or if the remedy is provided by this
Agreement, then as follows:
First, to the costs and expenses, including without
limitation reasonable attorneys' fees and disbursements, incurred
by Lender in connection with the exercise of its remedies;
Second, to the expenses of curing the default that has
occurred, in the event that Lender elects, in its sole discretion, to
cure the default that has occurred;
Third, to the payment of the Obligations of Borrower,
including but not limited to the payment of the principal of and
interest on the indebtedness evidenced by the Note, in such order
of priority as Lender shall determine in its sole discretion; and
Fourth, the remainder, if any, to Borrower or to any other
person lawfully thereunto entitled.
ARTICLE 6
TERMINATION
6.1 Termination of this Agreement. This Agreement shall
remain in full force and effect until the payment in full by Borrower of
the Obligations, at which time Lender shall cancel the Note and deliver
it to Borrower; provided, however, that the indemnities provided in
Section 7.15 shall survive the termination of this Agreement.
ARTICLE 7
MISCELLANEOUS
7.1 Performance By Lender. If Borrower shall default in the
payment, performance or observance of any covenant, term or condition
of this Agreement, which default is not cured within the applicable cure
period, then Lender may, at its option, pay, perform or observe the same,
and all payments made or costs or expenses incurred by Lender in
connection therewith (including but not limited to reasonable attorneys'
fees), with interest thereon at the highest default rate provided in the
Note, shall be immediately repaid to Lender by Borrower and shall
constitute a part of the Obligations. Lender shall be the sole judge of the
necessity for any such actions and of the amounts to be paid.
7.2 Successors and Assigns Included in Parties. Whenever in
this Agreement one of the parties hereto is named or referred to, the heirs,
legal representatives, successors, successors-in-title and assigns of such
parties shall be included, and all covenants and agreements contained in
this Agreement by or on behalf of Borrower or by or on behalf of Lender
shall bind and inure to the benefit of their respective heirs, legal
representatives, successors-in-title and assigns, whether so expressed or
not.
7.3 Costs and Expenses. Borrower agrees to pay all
reasonable costs and expenses incurred by Lender in connection with the
making of the Loan, including but not limited to filing fees, recording
taxes and reasonable attorneys' fees, promptly upon demand of Lender.
Borrower further agrees to pay all premiums for insurance required to be
maintained by Borrower pursuant to the terms of the Loan Documents
and all of the out-of-pocket costs and expenses incurred by Lender in
connection with the collection of the Loan, amendment to the Loan
Documents, or prepayment of the Loan, including but not limited to
reasonable attorneys' fees, promptly upon demand of Lender.
7.4 Assignment. The Note, this Agreement and the other
Loan Documents may be endorsed, assigned and/or transferred in whole
or in part by Lender, and any such holder and/or assignee of the same
shall succeed to and be possessed of the rights and powers of Lender
under all of the same to the extent transferred and assigned. Lender may
grant participations in all or any portion of its interest in the indebtedness
evidenced by the Note, and in such event Borrower shall continue to
make payments due under the Loan Documents to Lender and Lender
shall have the sole responsibility of allocating and forwarding such
payments in the appropriate manner and amounts. Borrower shall not
assign any of its rights nor delegate any of its duties hereunder or under
any of the other Loan Documents without the prior written consent of
Lender.
7.5 Time of the Essence. Time is of the essence with respect
to each and every covenant, agreement and obligation of Borrower
hereunder and under all of the other Loan Documents.
7.6 Severability. If any provision(s) of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provisions to other persons or circumstances shall not
be affected thereby and shall be enforced to the greatest extent permitted
by law.
7.7 Interest and Loan Charges Not to Exceed Maximum
Allowed by Law. Anything in this Agreement, the Note or any of the
other Loan Documents to the contrary notwithstanding, in no event
whatsoever, whether by reason of advancement of proceeds of the Loan,
acceleration of the maturity of the unpaid balance of the Loan or
otherwise, shall the interest and other charges agreed to be paid to Lender
for the use of the money advanced or to be advanced hereunder exceed
the maximum amounts collectible under applicable laws in effect from
time to time. It is understood and agreed by the parties that, if for any
reason whatsoever the interest or loan charges paid or contracted to be
paid by Borrower in respect of the indebtedness evidenced by the Note
shall exceed the maximum amounts collectible under applicable laws in
effect from time to time, then ipso facto, the obligation to pay such
interest and/or loan charges shall be reduced to the maximum amounts
collectible under applicable laws in effect from time to time, and any
amounts collected by Lender that exceed such maximum amounts shall
be applied to the reduction of the principal balance of the indebtedness
evidenced by the Note and/or refunded to Borrower so that at no time
shall the interest or loan charges paid or payable in respect of the
indebtedness evidenced by the Note exceed the maximum amounts
permitted from time to time by applicable law.
7.8 Article and Section Headings; Defined Terms. Numbered
and titled article and section headings and defined terms are for
convenience only and shall not be construed as amplifying or limiting any
of the provisions of this Agreement.
7.9 Notices. Any and all notices, elections or demands
permitted or required to be made under this Agreement shall be in
writing, signed by the party giving such notice, election or demand and
shall be delivered personally, telecopied, or sent by certified mail or
overnight via nationally recognized courier service (such as Federal
Express), to the other party at the address set forth below, or at such other
address as may be supplied in writing and of which receipt has been
acknowledged in writing. The date of personal delivery or telecopy or
two (2) business days after the date of mailing (or the next business day
after delivery to such courier service), as the case may be, shall be the
date of such notice, election or demand. For the purposes of this
Agreement:
The Address of Lender is: Sirrom Investments, Inc.
Suite 200
500 Church Street
Nashville, TN 37219
Attention: Evelyn Mordechi
Telecopy No.: 615/726-1208
with a copy to: Caldwell & Caldwell, P.C.
Suite 200
500 Church Street
Nashville, TN 37219
Attention: Philip S. Clark, Esq.
Telecopy No.: 615/256-9958
The Address of Borrower is: Metrisa, Inc.
25 Wiggins Avenue
Bedford, MA 01790
Attention: Jack E. Wolfe
Telecopy No.: 781/275-9665
with a copy to: Bowditch & Dewey
311 Main Street
Worcester, MA 01608
Attention: David J. Brown, Esq.
Telecopy No.: 508/756-7636
7.10 Entire Agreement. This Agreement and the other written
agreements between Borrower and Lender represent the entire agreement
between the parties concerning the subject matter hereof, and all oral
discussions and prior agreements are merged herein; provided, if there is
a conflict between this Agreement and any other document executed
contemporaneously herewith with respect to the Obligations, the
provision of this Agreement shall control. The execution and delivery of
this Agreement and the other Loan Documents by Borrower were not
based upon any fact or material provided by Lender, nor was Borrower
induced or influenced to enter into this Agreement or the other Loan
Documents by any representation, statement, analysis or promise by
Lender.
7.11 Governing Law and Amendments. This Agreement shall
be construed and enforced under the laws of the State of Tennessee
applicable to contracts to be wholly performed in such State. No
amendment or modification hereof shall be effective except in a writing
executed by each of the parties hereto.
7.12 Survival of Representations and Warranties. All
representations and warranties contained herein or in any of the Loan
Documents or made by or furnished on behalf of Borrower in connection
herewith or in any Loan Documents shall survive the execution and
delivery of this Agreement and the other Loan Documents.
7.13 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties to this Agreement in
separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and
the same Agreement.
7.14 Construction and Interpretation. Should any provision of
this Agreement require judicial interpretation, the parties hereto agree that
the court interpreting or construing the same shall not apply a
presumption that the terms hereof shall be more strictly construed against
one party by reason of the rule of construction that a document is to be
more strictly construed against the party that itself or through its agent
prepared the same, it being agreed that Borrower, Lender and their
respective agents have participated in the preparation hereof.
7.15 General Indemnification. Borrower agrees to indemnify
Lender, its officers, directors, employees and agents (individually, an
"Indemnified Party" and collectively, the "Indemnified Parties") and each
of them and agrees to hold each of them harmless from and against any
and all losses, liabilities, damages, costs, expenses and claims of any and
every kind whatsoever (except those arising solely by reason of the gross
negligence or willful misconduct of an Indemnified Party) which may be
imposed on, incurred by, or asserted against the Indemnified Parties or
any of them arising by reason of any action or inaction or omission to any
act legally required of Borrower (including as required pursuant hereto
or pursuant to any other Loan Document).
7.16 Standard of Care; Limitation of Damages. Lender shall
be liable to Borrower only for matters arising from this Agreement or
otherwise related to the Obligations resulting from Lender's gross
negligence or willful misconduct, and liability for all other matters is
hereby waived. Lender shall not in any event be liable to Borrower for
special or consequential damages arising from this Agreement or
otherwise related to the Obligations.
7.17 Consent to Jurisdiction; Exclusive Venue. Borrower
hereby irrevocably consents to the jurisdiction of the United States
District Court for the Middle District of Tennessee and of all Tennessee
state courts sitting in Davidson County, Tennessee, for the purpose of any
litigation to which Lender may be a party and which concerns this
Agreement or the Obligations. It is further agreed that venue for any such
action shall lie exclusively with courts sitting in Davidson County,
Tennessee, unless Lender agrees to the contrary in writing.
7.18 Waiver of Trial by Jury. LENDER AND BORROWER
HEREBY KNOWINGLY AND VOLUNTARILY WITH THE
BENEFIT OF COUNSEL WAIVE TRIAL BY JURY IN ANY
ACTIONS, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS,
WHETHER IN CONTRACT OR TORT OR OTHERWISE, AT LAW
OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING
TO THIS AGREEMENT OR THE LOAN DOCUMENTS.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, or have caused this Agreement to be executed by their duly
authorized officers, as of the day and year first above written.
LENDER:
SIRROM INVESTMENTS, INC.,
a Tennessee corporation
By:_________________________
Title:_______________________
BORROWER:
METRISA, INC.,
a Delaware corporation
By:_________________________
Title:_______________________
Index of Schedules
Schedule 2.1(b) - Subsidiaries
Schedule 2.1(e) - Capitalization Table
Schedule 2.1(f) - Intellectual Property
Schedule 2.1(i)(A) and (B) - Financial Statements
Schedule 2.1(l) - Debt and Liens
Schedule 2.1(n) - Shareholder Loans
Schedule 2.1(q) - Significant Contracts
Schedule 2.1(aa) - Location of Properties and Place of Business
{J:\clients\bus\h2148\0100\00051660.TXT;1}
1
EXHIBIT 10.14
SECURED PROMISSORY NOTE
$2,000,000.00 September __, 1998
FOR VALUE RECEIVED, the undersigned, METRISA, INC., a
Delaware corporation ("Maker"), promises to pay to the order of
SIRROM INVESTMENTS, INC., a Tennessee corporation ("Payee";
Payee and any subsequent holder[s] hereof are hereinafter referred to
collectively as "Holder"), at the office of Payee at Sirrom Investments,
Inc., P.O. Box 30443, Nashville, TN 37241-0443, or at such other place
as Holder may designate to Maker in writing from time to time, the
principal sum of up to TWO MILLION AND NO/100THS DOLLARS
($2,000,000.00) or so much thereof as is disbursed hereunder, together
with interest on the outstanding principal balance hereof from the date
hereof at the rate of thirteen and three-quarters percent (13.75%) per
annum (computed on the basis of a 360-day year).
Interest only on the outstanding principal balance hereof shall be
due and payable monthly, in arrears, with the first installment being
payable on the first (1st) day of November, 1998, and subsequent
installments being payable on the first (1st) day of each succeeding
month thereafter until October 1, 2003 (the "Maturity Date"); provided,
that payments of principal (plus accrued and outstanding interest) shall
be made in accordance with the following schedule:
Date Principal
Due
October 1, 2000 $ 200,000
October 1, 2001 $ 250,000
October 1, 2002 $ 300,000
October 1, 2003 $1,250,000
The indebtedness evidenced hereby may be prepaid in whole or
in part, at any time and from time to time, without premium or penalty.
Any such prepayments shall be credited first to any accrued and unpaid
interest and then to the outstanding principal balance hereof.
Time is of the essence of this Note. It is hereby expressly agreed
that in the event that any Event of Default shall occur under and as
defined in that certain Loan Agreement of even date herewith, between
Maker and Payee (the "Loan Agreement"), which Event of Default is not
cured following the giving of any applicable notice and within any
applicable cure period set forth in the Loan Agreement, then, and in such
event, the entire outstanding principal balance of the indebtedness
evidenced hereby, together with any other sums advanced hereunder,
under the Loan Agreement and/or under any other instrument or
document now or hereafter evidencing, securing or in any way relating
to the indebtedness evidenced hereby, together with all unpaid interest
accrued thereon, shall, at the option of Holder and without notice to
Maker, at once become due and payable and may be collected forthwith,
regardless of the stipulated date of maturity. Upon the occurrence of any
Event of Default as set forth herein, at the option of Holder and without
notice to Maker, all accrued and unpaid interest, if any, shall be added to
the outstanding principal balance hereof, and the entire outstanding
principal balance, as so adjusted, shall bear interest thereafter until paid
at an annual rate (the "Default Rate") equal to the lesser of (i) the rate
that is three percentage points (3.0%) over existing rate in excess of the
above-specified interest rate, or (ii) the maximum rate of interest allowed
to be charged under applicable law (the "Maximum Rate"), regardless of
whether or not there has been an acceleration of the payment of principal
as set forth herein. All such interest shall be paid at the time of and as a
condition precedent to the curing of any such Event of Default.
In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker and any endorsers hereof agree to
pay to Holder an amount equal to all such costs, including without
limitation all reasonable attorneys' fees and all court costs.
Presentment for payment, demand, protest and notice of demand,
protest and nonpayment are hereby waived by Maker and all other
parties hereto. No failure to accelerate the indebtedness evidenced
hereby by reason of an Event of Default hereunder, acceptance of a past-
due installment or other indulgences granted from time to time, shall be
construed as a novation of this Note or as a waiver of such right of
acceleration or of the right of Holder thereafter to insist upon strict
compliance with the terms of this Note or to prevent the exercise of such
right of acceleration or any other right granted hereunder or by
applicable law. No extension of the time for payment of the
indebtedness evidenced hereby or any installment due hereunder, made
by agreement with any person now or hereafter liable for payment of the
indebtedness evidenced hereby, shall operate to release, discharge,
modify, change or affect the original liability of Maker hereunder or that
of any other person now or hereafter liable for payment of the
indebtedness evidenced hereby, either in whole or in part, unless Holder
agrees otherwise in writing. This Note may not be changed orally, but
only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
The indebtedness and other obligations evidenced by this Note
are further evidenced by (i) the Loan Agreement and (ii) certain other
instruments and documents, as may be required to protect and preserve
the rights of Maker and Payee, as more specifically described in the
Loan Agreement.
All agreements herein made are expressly limited so that in no
event whatsoever, whether by reason of advancement of proceeds
hereof, acceleration of maturity of the unpaid balance hereof or
otherwise, shall the amount paid or agreed to be paid to Holder for the
use of the money advanced or to be advanced hereunder exceed the
Maximum Rate. If, from any circumstances whatsoever, the fulfillment
of any provision of this Note or any other agreement or instrument now
or hereafter evidencing, securing or in any way relating to the
indebtedness evidenced hereby shall involve the payment of interest in
excess of the Maximum Rate, then, ipso facto, the obligation to pay
interest hereunder shall be reduced to the Maximum Rate; and if from
any circumstance whatsoever, Holder shall ever receive interest, the
amount of which would exceed the amount collectible at the Maximum
Rate, such amount as would be excessive interest shall be applied to the
reduction of the principal balance remaining unpaid hereunder and not to
the payment of interest. This provision shall control every other
provision in any and all other agreements and instruments existing or
hereafter arising between Maker and Holder with respect to the
indebtedness evidenced hereby.
This Note is intended as a contract under and shall be construed
and enforceable in accordance with the laws of the State of Tennessee,
except to the extent that federal law may be applicable to the
determination of the Maximum Rate.
Maker hereby irrevocably consents to the jurisdiction of the
United States District Court for the Middle District of Tennessee and of
all Tennessee state courts sitting in Davidson County, Tennessee, for the
purpose of any litigation to which Lender may be a party and which
concerns this Note or the indebtedness evidenced hereby. It is further
agreed that venue for any such action shall lie exclusively with courts
sitting in Davidson County, Tennessee, unless Holder agrees to the
contrary in writing.
HOLDER AND MAKER HEREBY KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COUNSEL WAIVE
TRIAL BY JURY IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR
COUNTER-CLAIMS, WHETHER IN CONTRACT OR TORT OR
OTHERWISE, AT LAW OR IN EQUITY, ARISING OUT OF OR IN
ANY WAY RELATING TO THIS AGREEMENT OR THE LOAN
DOCUMENTS.
As used herein, the terms "Maker" and "Holder" shall be deemed
to include their respective successors, legal representatives and assigns,
whether by voluntary action of the parties or by operation of law.
MAKER:
METRISA, INC.
a Delaware corporation
By:_________________________
Title:________________________
{J:\clients\bus\h2148\0100\00051648.TXT;1}
EXHIBIT 10.15
STOCK PURCHASE WARRANT
This STOCK PURCHASE WARRANT ("Warrant") is issued
this ____ day of September 1998, by METRISA, INC., a Delaware
corporation (the "Company"), to SIRROM INVESTMENTS, INC., a
Tennessee corporation (SIRROM INVESTMENTS, INC. and any
subsequent assignee or transferee hereof are hereinafter referred to
collectively as "Holder" or "Holders").
AGREEMENT:
1. Issuance of Warrant; Term. For and in consideration
of SIRROM INVESTMENTS, INC. making a loan to the Company in
an amount of Two Million and no/100ths Dollars ($2,000,000.00)
pursuant to the terms of a secured promissory note of even date
herewith (the "Note") and related loan agreement of even date herewith
(the "Loan Agreement"), and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Company hereby grants to Holder the right to purchase 143,738 shares
("Base Amount") of the Company's common stock (the "Common
Stock"), which the Company represents to equal 8.63% of the shares of
capital stock outstanding on the date hereof, calculated on a fully diluted
basis and assuming exercise of this Warrant.
The shares of Common Stock issuable upon exercise of this
Warrant are hereinafter referred to as the "Shares." This Warrant shall
be exercisable at any time and from time to time from the date hereof
until October 31, 2003 (the "Expiration Date").
2. Exercise Price. The exercise price (the "Exercise
Price") per share for which all or any of the Shares may be purchased
pursuant to the terms of this Warrant shall be Fifty Cents ($.50).
3. Exercise. This Warrant may be exercised by the Holder
hereof (but only on the conditions hereinafter set forth) in whole or in
part, upon delivery of written notice of intent to exercise to the
Company in the manner at the address of the Company set forth in
Section 14 hereof, together with this Warrant and payment to the
Company of the aggregate Exercise Price of the Shares so purchased.
The Exercise Price shall be payable, at the option of the Holder, (a) by
certified or bank check, (b) by the surrender of the Note or portion
thereof having an outstanding principal balance equal to the aggregate
Exercise Price or (c) by the surrender of a portion of this Warrant
where the Shares subject to the portion of this Warrant that is
surrendered have a fair market value equal to the aggregate Exercise
Price. In the absence of an established public market for the Common
Stock, fair market value shall be established by the Company's board
of directors in a commercially reasonable manner. Upon exercise of
this Warrant as aforesaid, the Company shall as promptly as
practicable, and in any event within fifteen (15) days thereafter, execute
and deliver to the Holder of this Warrant a certificate or certificates for
the total number of whole Shares for which this Warrant is being
exercised in such names and denominations as are requested by such
Holder. If this Warrant shall be exercised with respect to less than all
of the Shares, the Holder shall be entitled to receive a new Warrant
covering the number of Shares in respect of which this Warrant shall
not have been exercised, which new Warrant shall in all other respects
be identical to this Warrant. The Company covenants and agrees that
it will pay when due any and all state and federal issue taxes which may
be payable in respect of the issuance of this Warrant or the issuance of
any Shares upon exercise of this Warrant.
4. Covenants and Conditions. The above provisions are
subject to the following:
(a) Neither this Warrant nor the Shares have been
registered under the Securities Act of 1933, as amended
("Securities Act"), or any state securities laws ("Blue Sky
Laws"). This Warrant has been acquired for investment
purposes and not with a view to distribution or resale and may
not be sold or otherwise transferred without (i) an effective
registration statement for such Warrant under the Securities Act
and such applicable Blue Sky Laws, or (ii) an opinion of
counsel, which opinion and counsel shall be reasonably
satisfactory to the Company and its counsel, that registration is
not required under the Securities Act or under any applicable
Blue Sky Laws (the Company hereby acknowledges that
Caldwell & Caldwell, P.C. is acceptable counsel). Transfer of
the Shares shall be restricted in the same manner and to the
same extent as the Warrant and the certificates representing such
Shares shall bear substantially the following legend:
THE SHARES OF COMMON STOCK
REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY APPLICABLE STATE
SECURITIES LAW AND MAY NOT BE
TRANSFERRED UNTIL (I) A REGISTRATION
STATEMENT UNDER THE ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD
THERETO, OR (II) IN THE OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY,
REGISTRATION UNDER SUCH SECURITIES ACTS
AND SUCH APPLICABLE STATE SECURITIES
LAWS IS NOT REQUIRED IN CONNECTION WITH
SUCH PROPOSED TRANSFER.
The Holder hereof and the Company agree to execute such other
documents and instruments as counsel for the Company
reasonably deems necessary to effect the compliance of the
issuance of this Warrant and any shares of Common Stock
issued upon exercise hereof with applicable federal and state
securities laws.
(b) The Company covenants and agrees that all
Shares which may be issued upon exercise of this Warrant will,
upon issuance and payment therefor, be legally and validly
issued and outstanding, fully paid and nonassessable, free from
all taxes, liens, charges and preemptive rights, if any, with
respect thereto or to the issuance thereof. The Company shall
at all times reserve and keep available for issuance upon the
exercise of this Warrant such number of authorized but unissued
shares of Common Stock as will be sufficient to permit the
exercise in full of this Warrant.
(c) The Company covenants and agrees that it shall
not sell any shares of the Company's capital stock at a price per
share below the fair market value of such shares, without the
prior written consent of the Holder hereof (except in accordance
with the Company's stock option plans and currently outstanding
options and warrants, which in no event shall twelve and one
half percent (12.5%) of the Stock of the Borrower outstanding
on the date hereof). In the event that the Company sells shares
of Common Stock at a price per share below the fair market
value of such shares (a "Below Market Transaction"), without
the prior written consent of the Holder hereof, the Company
covenants and agrees that the number of shares issuable upon
exercise of this Warrant shall be equal to the product obtained
by multiplying the number of shares issuable pursuant to this
Warrant prior to the Below Market Transaction by a fraction,
the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to consummation
of the Below Market Transaction plus the number of shares of
Common Stock issued in the Below Market Transaction, and the
denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to the Below Market
Transaction plus the number of shares of Common Stock that
the aggregate consideration received by the Company in the
Below Market Transaction would purchase at fair market value.
For purposes of this subsection, Common Stock shall be
deemed to include that number of shares of Common Stock that
would be obtained assuming (i) the conversion of any securities
of the Company which, by their terms, are convertible into or
exchangeable for Common Stock, and (ii) the exercise of all
options to purchase or rights to subscribe for Common Stock or
securities which, by their terms, are convertible into or
exchangeable for Common Stock. In the absence of an
established public market for the securities sold by the Company
in a Below Market Transaction, fair market value shall be
established by the Company's board of directors in a
commercially reasonable manner.
5. Transfer of Warrant. Subject to the provisions of
Section 4 hereof, this Warrant may be transferred, in whole or in part,
to any person or business entity, by presentation of the Warrant to the
Company with written instructions for such transfer. Upon such
presentation for transfer, the Company shall promptly execute and
deliver a new Warrant or Warrants in the form hereof in the name of
the assignee or assignees and in the denominations specified in such
instructions. The Company shall pay all expenses incurred by it in
connection with the preparation, issuance and delivery of Warrants
under this Section.
6. Warrant Holder Not Shareholder; Rights Offering;
Preemptive Rights. Except as otherwise provided herein, this Warrant
does not confer upon the Holder, as such, any right whatsoever as a
shareholder of the Company. Notwithstanding the foregoing, if the
Company should offer to all of the Company's shareholders the right to
purchase any securities of the Company, then all shares of Common
Stock that are subject to this Warrant shall be deemed to be outstanding
and owned by the Holder and the Holder shall be entitled to participate
in such rights offering. The Company shall not grant any preemptive
rights with respect to any of its capital stock without the prior written
consent of the Holder.
7. Observation Rights. The Holder of this Warrant shall
receive notice of and be entitled to attend or may send a representative
to attend all meetings of the Company's Board of Directors in a non-
voting observation capacity and shall receive a copy of all
correspondence and information delivered to the Company's Board of
Directors, from the date hereof until such time as the indebtedness
evidenced by the Note has been paid in full; provided, that Holder shall
maintain the confidentiality of such information except for any
disclosures required by law.
8. Adjustment Upon Changes in Stock.
(a) If all or any portion of this Warrant shall be
exercised subsequent to any stock split, stock dividend,
recapitalization, combination of shares of the Company, or other
similar event, occurring after the date hereof, then the Holder
exercising this Warrant shall receive, for the aggregate Exercise
Price, the aggregate number and class of shares which such
Holder would have received if this Warrant had been exercised
immediately prior to such stock split, stock dividend,
recapitalization, combination of shares, or other similar event.
If any adjustment under this Section 8(a), would create a
fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, such fractional share shall be
disregarded and the number of shares subject to this Warrant
shall be the next higher number of shares, rounding all fractions
upward. Whenever there shall be an adjustment pursuant to this
Section 8(a), the Company shall forthwith notify the Holder or
Holders of this Warrant of such adjustment, setting forth in
reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated.
(b) If all or any portion of this Warrant shall be
exercised subsequent to any merger, consolidation, exchange of
shares, separation, reorganization or liquidation of the
Company, or other similar event, occurring after the date
hereof, as a result of which shares of Common Stock shall be
changed into the same or a different number of shares of the
same or another class or classes of securities of the Company or
another entity, or the holders of Common Stock are entitled to
receive cash or other property, then the Holder exercising this
Warrant shall receive, for the aggregate Exercise Price, the
aggregate number and class of shares, cash or other property
which such Holder would have received if this Warrant had
been exercised immediately prior to such merger, consolidation,
exchange of shares, separation, reorganization or liquidation, or
other similar event. If any adjustment under this Section 8(b)
would create a fractional share of Common Stock or a right to
acquire a fractional share of Common Stock, such fractional
share shall be disregarded and the number of shares subject to
this Warrant shall be the next higher number of shares, rounding
all fractions upward. Whenever there shall be an adjustment
pursuant to this Section 8(b), the Company shall forthwith notify
the Holder or Holders of this Warrant of such adjustment,
setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was
calculated.
9. Put Agreement.
(a) The Company hereby irrevocably grants and
issues to Holder the right and option to sell to the Company (the
"Put") this Warrant for a period of thirty (30) days immediately
prior to the Expiration Date, at a purchase price (the "Put
Price") equal to the Fair Market Value (as hereinafter defined)
of the shares of Common Stock issuable to Holder upon exercise
of this Warrant less the Exercise Price.
(b) Holder may exercise the Put by delivery of
written notice (the "Put Notice") of such exercise to the
Company in the manner and at the address of the Company set
forth in Section 14 hereof. The Company shall pay to Holder,
in cash or by wire transfer of immediately available funds, the
Put Price within thirty (30) days of the receipt of the Put Notice.
(c) For purposes of this Section 9, the Fair Market
Value of the shares of Common Stock of the Company issuable
pursuant to this Warrant shall be determined as follows:
(i) The Company and the Holder shall each
appoint an independent, experienced appraiser who is a
member of a recognized professional association of
business appraisers. The two appraisers shall determine
the value of the shares of Common Stock which would
be issued upon the exercise of the Warrant, assuming
that the sale would be between a willing buyer and a
willing seller, both of whom have full knowledge of the
financial and other affairs of the Company, and neither
of whom is under any compulsion to sell or to buy.
(ii) If the higher of the two appraisals is not
ten percent (10%) greater than the lower of the
appraisals, the Fair Market Value shall be the average of
the two appraisals. If the higher of the two appraisals is
equal to or greater than ten percent (10%) more than the
lower of the two appraisals, then a third appraiser shall
be appointed by the two appraisers, and if they cannot
agree on a third appraiser, the American Arbitration
Association shall appoint the third appraiser. The third
appraiser, regardless of who appoints him or her, shall
have the same qualifications as the first two appraisers.
(iii) The Fair Market Value after the
appointment of the third appraiser shall be the mean of
the three appraisals.
(iv) The fees and expenses of the appraisers
shall be paid one-half by the Company and one-half by
the Holder.
(d) Notwithstanding the foregoing, if the Common Stock is
traded on a national securities exchange or included in the
Nasdaq National Market, the Fair Market value will be the
average of the closing price of the Common Stock during the
twenty (20) trading days preceding the payment of the Put Price
(as listed in The Wall Street Journal).
10. Registration.
(a) The Company and the Holder of the Warrant and
the Shares agree that if at any time after the date hereof the
Company shall propose to file a registration statement with
respect to any of its Common Stock on a form suitable for a
secondary offering, it will give notice in writing to such effect
to the Holder(s) at least thirty (30) days prior to such filing,
and, at the written request of any such registered holder, made
within ten (10) days after the receipt of such notice, will include
therein at the Company's cost and expense (including the fees
and expenses of counsel to such Holder(s), but excluding
underwriting discounts, commissions and filing fees attributable
to the Shares included therein) such of the Shares as such
Holder(s) shall request; provided, however, that if the offering
being registered by the Company is underwritten and if the
representative of the underwriters certifies in writing that the
inclusion therein of the Shares would materially and adversely
affect the sale of the securities to be sold by the Company
thereunder, then the Company shall be required to include in the
offering only that number of securities, including the Shares,
which the underwriters determine in their sole discretion will
not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among all selling
shareholders according to the total amount of securities entitled
to be included therein owned by each selling shareholder, but in
no event shall the total amount of Shares included in the offering
be less than the number of securities included in the offering by
any other single selling shareholder unless all of the Shares are
included in the offering).
(b) Whenever the Company undertakes to effect the
registration of any of the Shares, the Company shall, as
expeditiously as reasonably possible:
(i) Prepare and file with the Securities and
Exchange Commission (the "Commission") a
registration statement covering such Shares and use its
best efforts to cause such registration statement to be
declared effective by the Commission as expeditiously as
possible and to keep such registration effective until the
earlier of (A) the date when all Shares covered by the
registration statement have been sold or (B) ninety (90)
days from the effective date of the registration statement;
provided, that before filing a registration statement or
prospectus or any amendment or supplements thereto,
the Company will furnish to each Holder of Shares
covered by such registration statement and the
underwriters, if any, copies of all such documents
proposed to be filed (excluding exhibits, unless any such
person shall specifically request exhibits), which
documents will be subject to the review of such Holders
and underwriters, and the Company will not file such
registration statement or any amendment thereto or any
prospectus or any supplement thereto (including any
documents incorporated by reference therein) with the
Commission if (A) the underwriters, if any, shall
reasonably object to such filing or (B) if information in
such registration statement or prospectus concerning a
particular selling Holder has changed and such Holder or
the underwriters, if any, shall reasonably object.
(ii) Prepare and file with the Commission
such amendments and post-effective amendments to such
registration statement as may be necessary to keep such
registration statement effective during the period
referred to in Section 10(b)(i) and to comply with the
provisions of the Securities Act with respect to the
disposition of all securities covered by such registration
statement, and cause the prospectus to be supplemented
by any required prospectus supplement, and as so
supplemented to be filed with the Commission pursuant
to Rule 424 under the Securities Act.
(iii) Furnish to the selling Holder(s) such
numbers of copies of such registration statement, each
amendment thereto, the prospectus included in such
registration statement (including each preliminary
prospectus), each supplement thereto and such other
documents as they may reasonably request in order to
facilitate the disposition of the Shares owned by them.
(iv) Use its best efforts to register and qualify
under such other securities laws of such jurisdictions as
shall be reasonably requested by any selling Holder and
do any and all other acts and things which may be
reasonably necessary or advisable to enable such selling
Holder to consummate the disposition of the Shares
owned by such Holder, in such jurisdictions; provided,
however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify
to transact business or to file a general consent to service
of process in any such states or jurisdictions.
(v) Promptly notify each selling Holder of
the happening of any event as a result of which the
prospectus included in such registration statement
contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein not
misleading and, at the request of any such Holder, the
Company will prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the
purchasers of such Shares, such prospectus will not
contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein
not misleading.
(vi) Provide a transfer agent and registrar for
all such Shares not later than the effective date of such
registration statement.
(vii) Enter into such customary agreements
(including underwriting agreements in customary form
for a primary offering) and take all such other actions as
the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such Shares
(including, without limitation, effecting a stock split or
a combination of shares).
(viii) Make available for inspection by any
selling Holder or any underwriter participating in any
disposition pursuant to such registration statement and
any attorney, accountant or other agent retained by any
such selling Holder or underwriter, all financial and
other records, pertinent corporate documents and
properties of the Company, and cause the officers,
directors, employees and independent accountants of the
Company to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement.
(ix) Promptly notify the selling Holder(s) and
the underwriters, if any, of the following events and (if
requested by any such person) confirm such notification
in writing: (A) the filing of the prospectus or any
prospectus supplement and the registration statement and
any amendment or post-effective amendment thereto
and, with respect to the registration statement or any
post-effective amendment thereto, the declaration of the
effectiveness of such documents, (B) any requests by the
Commission for amendments or supplements to the
registration statement or the prospectus or for additional
information, (C) the issuance or threat of issuance by the
Commission of any stop order suspending the
effectiveness of the registration statement or the
initiation of any proceedings for that purpose and (D) the
receipt by the Company of any notification with respect
to the suspension of the qualification of the Shares for
sale in any jurisdiction or the initiation or threat of
initiation of any proceeding for such purposes.
(x) Make every reasonable effort to prevent
the entry of any order suspending the effectiveness of the
registration statement and obtain at the earliest possible
moment the withdrawal of any such order, if entered.
(xi) Cooperate with the selling Holder(s) and
the underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing the
Shares to be sold and not bearing any restrictive legends,
and enable such Shares to be in such lots and registered
in such names as the underwriters may request at least
two (2) business days prior to any delivery of the Shares
to the underwriters.
(xii) Provide a CUSIP number for all the
Shares not later than the effective date of the registration
statement.
(xiii) Prior to the effectiveness of the
registration statement and any post-effective amendment
thereto and at each closing of an underwritten offering,
(A) make such representations and warranties to the
selling Holder(s) and the underwriters, if any, with
respect to the Shares and the registration statement as are
customarily made by issuers in primary underwritten
offerings; (B) use its best efforts to obtain "cold
comfort" letters and updates thereof from the
Company's independent certified public accountants
addressed to the selling Holders and the underwriters, if
any, such letters to be in customary form and covering
matters of the type customarily covered in "cold
comfort" letters by underwriters in connection with
primary underwritten offerings; (C) deliver such
documents and certificates as may be reasonably
requested (1) by the holders of a majority of the Shares
being sold, and (2) by the underwriters, if any, to
evidence compliance with clause (A) above and with any
customary conditions contained in the underwriting
agreement or other agreement entered into by the
Company; and (D) obtain opinions of counsel to the
Company and updates thereof (which counsel and which
opinions shall be reasonably satisfactory to the
underwriters, if any), covering the matters customarily
covered in opinions requested in underwritten offerings
and such other matters as may be reasonably requested
by the selling Holders and underwriters or their counsel.
Such counsel shall also state that no facts have come to
the attention of such counsel which cause them to believe
that such registration statement, the prospectus contained
therein, or any amendment or supplement thereto, as of
their respective effective or issue dates, contains any
untrue statement of any material fact or omits to state
any material fact necessary to make the statements
therein not misleading (except that no statement need be
made with respect to any financial statements, notes
thereto or other financial data or other expertized
material contained therein). If for any reason the
Company's counsel is unable to give such opinion, the
Company shall so notify the Holders of the Shares and
shall use its best efforts to remove expeditiously all
impediments to the rendering of such opinion.
(xiv) Otherwise use its best efforts to comply
with all applicable rules and regulations of the
Commission, and make generally available to its security
holders earnings statements satisfying the provisions of
Section 11(a) of the Securities Act, no later than forty-
five (45) days after the end of any twelve-month period
(or ninety (90) days, if such period is a fiscal year) (A)
commencing at the end of any fiscal quarter in which the
Shares are sold to underwriters in a firm or best efforts
underwritten offering, or (B) if not sold to underwriters
in such an offering, beginning with the first month of the
first fiscal quarter of the Company commencing after the
effective date of the registration statement, which
statements shall cover such twelve-month periods.
(c) After the date hereof, the Company shall not
grant to any holder of securities of the Company any registration
rights which have a priority greater than or equal to those
granted to Holders pursuant to this Warrant without the prior
written consent of the Holder(s).
(d) The Company's obligations under Section 10(a)
above with respect to each Holder of Shares are expressly
conditioned upon such Holder's furnishing to the Company in
writing such information concerning such holder and the terms
of such holder's proposed offering as the Company shall
reasonably request for inclusion in the registration statement.
If any registration statement including any of the Shares is
filed, then the Company shall indemnify each Holder thereof
(and each underwriter for such holder and each person, if any,
who controls such underwriter within the meaning of the
Securities Act) from any loss, claim, damage or liability arising
out of, based upon or in any way relating to any untrue
statement of a material fact contained in such registration
statement or any omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except for any such statement or
omission based on information furnished in writing by such
Holder of the Shares expressly for use in connection with such
registration statement; and such Holder shall indemnify the
Company (and each of its officers and directors who has signed
such registration statement, each director, each person, if any,
who controls the Company within the meaning of the Securities
Act, each underwriter for the Company and each person, if any,
who controls such underwriter within the meaning of the
Securities Act) and each other such holder against any loss,
claim, damage or liability arising from any such statement or
omission which was made in reliance upon information
furnished in writing to the Company by such holder of the
Shares expressly for use in connection with such registration
statement.
(e) For purposes of this Section 10, all of the Shares
shall be deemed to be issued and outstanding.
11. Certain Notices. In case at any time the Company shall
propose to:
(a) declare any cash dividend upon its Common
Stock;
(b) declare any dividend upon its Common Stock
payable in stock or make any special dividend or other
distribution to the holders of its Common Stock;
(c) offer for subscription to the holders of any of its
Common Stock any additional shares of stock in any class or
other rights;
(d) reorganize, or reclassify the capital stock of the
Company, or consolidate, merge or otherwise combine with, or
sell of all or substantially all of its assets to, another
corporation;
(e) voluntarily or involuntarily dissolve, liquidate or
wind up of the affairs of the Company; or
(f) redeem or purchase any shares of its capital stock
or securities convertible into its capital stock;
then, in any one or more of said cases, the Company shall give
to the Holder of the Warrant, by certified or registered mail, (i)
at least twenty (20) days' prior written notice of the date on
which the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, and (ii) in the case of such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, at least twenty (20) days'
prior written notice of the date when the same shall take place.
Any notice required by clause (i) shall also specify, in the case
of any such dividend, distribution or subscription rights, the
date on which the holders of Common Stock shall be entitled
thereto, and any notice required by clause (ii) shall specify the
date on which the holders of Common Stock shall be entitled to
exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding
up, as the case may be.
12. Rights of Co-Sale.
(a) Jack Wolfe (the "Management/Venture Capital
Shareholders") shall enter into any transaction that would result
in the sale by him of any Common Stock now or hereafter
owned by him unless prior to such sale such Management
Shareholder shall give written notice (the "Co-Sale Notice") to
Holder addressed and delivered as set forth in Section 14 hereof,
of its intention to effect such sale in order that Holder may
exercise its rights under this Section 12 as hereinafter described.
Such notice shall set forth (i) the number of shares to be sold by
such Management Shareholder, (ii) the principal terms of the
sale, including the price at which the shares are intended to be
sold, and (iii) an offer by such Management Shareholder to use
his best efforts to cause to be included with the shares to be sold
by him in the sale, on a share-by-share basis and on the same
terms and conditions, the Shares issuable or issued to Holder
pursuant this Warrant.
(b) If Holder has not accepted such offer in writing
within a period of ten (10) days from the date of receipt of the
Co-Sale Notice, then such Management Shareholder shall
thereafter be free for a period of ninety (90) days to sell the
number of shares specified in the Co-Sale Notice, at a price no
greater than the price set forth in the Co-Sale Notice and on
otherwise no more favorable terms to such Management
Shareholder than as set forth in Co-Sale Notice, without any
further obligation to Holder in connection with such sale. In the
event that such Management Shareholder fails to consummate
such sale within such ninety-day period, the shares specified in
Co-Sale Notice shall continue to be subject to this Section 12.
(c) If Holder accepts such offer in writing within ten-
day period, then such acceptance shall be irrevocable unless
such Management Shareholder shall be unable to cause to be
included in the sale the number of Shares of stock held by
Holder and set forth in the written acceptance. In that event,
such Management Shareholder and Holder shall participate in
the sale equally, with such Management Shareholder and Holder
each selling half the total number of such shares to be sold in the
sale.
13. Article and Section Headings. Numbered and titled
article and section headings are for convenience only and shall not be
construed as amplifying or limiting any of the provisions of this
Warrant.
14. Notice. Any and all notices, elections or demands
permitted or required to be made under this Warrant shall be in writing,
signed by the party giving such notice, election or demand and shall be
delivered personally, telecopied, or sent by certified mail or overnight
via nationally recognized courier service (such as Federal Express), to
the other party at the address set forth below, or at such other address
as may be supplied in writing and of which receipt has been
acknowledged in writing. The date of personal delivery or telecopy or
two (2) business days after the date of mailing (or the next business day
after delivery to such courier service), as the case may be, shall be the
date of such notice, election or demand. For the purposes of this
Warrant:
The Address of Holder is: Sirrom Investments, Inc.
Suite 200
500 Church Street
Nashville, TN 37219
Attention: Evelyn Mordechi
Telecopy No. 615/726-1208
with a copy to: Caldwell & Caldwell, P.C.
Suite 200
500 Church Street
Nashville, TN 37219
Attention: Philip S. Clark, Esq.
Telecopy No. 615/256-9958
The Address of Company is: Metrisa, Inc.
25 Wiggins Avenue
Bedford, MA 01790
Attention: Jack E. Wolfe
Telecopy No. 781/275-9665
with a copy to: Bowditch & Dewey
311 Main Street
Worcester, MA 01608
Attention: David J. Brown, Esq.
Telecopy No. 508/756-7636
15. Severability. If any provisions(s) of this Warrant or the
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Warrant and the
application of such provisions to other persons or circumstances shall
not be affected thereby and shall be enforced to the greatest extent
permitted by law.
16. Entire Agreement. This Warrant between the Company
and Holder represents the entire agreement between the parties
concerning the subject matter hereof, and all oral discussions and prior
agreement are merged herein.
17. Governing Law and Amendments. This Warrant shall
be construed and enforced under the laws of the State of Tennessee
applicable to contracts to be wholly performed in such State. No
amendment or modification hereof shall be effective except in a writing
executed by each of the parties hereto.
18. Counterparts. This Warrant may be executed in any
number of counterparts and be different parties to this Warrant in
separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and
the same Warrant.
19. Consent to Jurisdiction; Exclusive Venue. The
Company hereby irrevocably consents to the jurisdiction of the United
States District Court for the Middle District of Tennessee and of all
Tennessee state courts sitting in Davidson County, Tennessee, for the
purpose of any litigation to which Holder may be a party and which
concerns this Warrant. It is further agreed that venue for any such action
shall lie exclusively with courts sitting in Davidson County, Tennessee,
unless Holder agrees to the contrary in writing.
20. Waiver of Trial by Jury. HOLDER AND THE
COMPANY HEREBY KNOWINGLY AND VOLUNTARILY WITH
THE BENEFIT OF COUNSEL WAIVE TRIAL BY JURY IN ANY
ACTIONS, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS,
WHETHER IN CONTRACT OR TORT OR OTHERWISE, AT LAW
OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING
TO THIS WARRANT.
IN WITNESS WHEREOF, the parties hereto have set their
hands as of the date first above written.
COMPANY:
METRISA, INC.,
a Delaware corporation
By:_____________________________________
Title:____________________________________
HOLDER:
SIRROM INVESTMENTS, INC.,
a Tennessee corporation
By:______________________________________
Title:____________________________________
IN WITNESS WHEREOF, the parties hereto have executed or
caused this Warrant to be executed as of the date first above written for
the purpose of agreeing to the terms and conditions of Section 12
hereof.
MANAGEMENT SHAREHOLDERS:
________________________________________
Jack Wolfe
Please use auto paragraph numbering using levels. 1.
level 2; (a) level 3;
and (i) level 4. Thanks.
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1
EXHIBIT 10.16
SECOND LOAN MODIFICATION AGREEMENT
This Second Loan Modification Agreement is entered into as of
September 23, 1998, by and between METRISA, INC., formerly known as
Holometrix, Inc., successor by merger with, among others, Tytronics
Incorporated ("Borrower"), a Delaware corporation whose address is 25
Wiggins Avenue, Bedford, Massachusetts 01730, and SILICON VALLEY
BANK, a California-based bank ("Bank") with its principal place of
business at 3003 Tasman Drive, Santa Clara, CA 95054, and with a loan
production office located at Wellesley Office Park, 40 William Street, Suite
350, Wellesley, Massachusetts 02481, doing business under the name
"Silicon Valley East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other
indebtedness which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to, among other documents, (i) a certain Loan and
Security Agreement dated as of July 24, 1997, as amended by a certain Loan
Modification and Assumption Agreement dated as of July 23, 1998 (as
amended, the "Loan Agreement"), and (ii) a certain Promissory Note dated
July 24, 1997 (the "Note"). Capitalized terms used but not otherwise
defined herein shall have the same meaning as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to
as the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES.
Repayment of the Indebtedness is secured by the Collateral as described in
the Loan Agreement.
Hereinafter, the Loan Agreement, together with all other documents
securing repayment of the Indebtedness shall be referred to as the "Security
Documents". Hereinafter, the Security Documents, together with all other
documents evidencing or securing the Indebtedness shall be referred to as
the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modifications to Loan Agreement.
1. The Loan Agreement shall be amended by deleting
the following definition appearing in Section 1.1
thereof.
"Borrowing Base" means an amount equal to
the lesser of: (i) seventy percent (70.0%) of
Eligible Accounts as determined by Bank
with reference to the most recent Borrowing
Base Certificate delivered by Borrower,
increasing to seventy-five percent (75.0%) of
Eligible Accounts after the Borrower reports
two (2 ) consecutive profitable quarters, and
(ii) for Advances through September 30,
1997, the then existing Tangible Net Worth
of the Borrower, plus "Minority Interest" as
defined in the Borrower's balance sheet for
such period, and for Advances after
September 30, 1997, the then existing
Tangible Net Worth of the Borrower,
multiplied by 1. l.
and inserting in lieu thereof the following:
"Borrowing Base" means an amount equal
to: (i) seventy-five percent (75.0%) of
Eligible Accounts as determined by Bank
with reference to the most recent Borrowing
Base Certificate delivered by Borrower, plus
(ii) twenty percent (20.0%) of the value of
Borrower's Eligible Inventory (valued at the
lower of cost or wholesale fair market value)
as determined by Bank with reference to the
most recent Borrowing Base Certificate
delivered by Borrower, minus (iii) the then
outstanding principal balance of the Term
Loan.
2. The Loan Agreement shall be amended by deleting
the following definition appearing in Section 1.1
thereof:
`"Committed Revolving Line" means a credit
extension of up to One Million Dollars
($1,000,000.00).
and inserting in lieu thereof the following:
`"Committed Revolving Line" means a credit
extension of up to One Million Two Hundred
Fifty Thousand Dollars ($1 ,250,000,00).
3. The Loan Agreement shall be amended by inserting
after the definition of "Eligible Foreign Accounts"
appearing in Section 1.1 thereof the following new
definition:
`"Eligible Inventory" means that portion of
Borrower's Inventory that is located at
Borrower's principal place of business or
such other locations as are permitted under
Section 7.11 and that complies with the
representations and warranties set forth in
Section 5.5, but shall in any event exclude
used, returned or obsolete Inventory. For
purposes hereof, Inventory shall be limited to
raw materials and finished goods of the
Borrower.
4. The Loan Agreement shall be amended by deleting
the following definition appearing in Section 1.1
thereof:
`"Revolving Maturity Date" means
September 23. 1998.
and inserting in lieu thereof the following:
`"Revolving Maturity Date" means
September 23, 1999.
5. The Loan Agreement shall be amended by deleting
the following text appearing as Section 6.8 thereof:
"6.8 Quick Ratio. Borrower shall maintain as
of the last day of each of the following
periods, a ratio of Quick Assets to Current
Liabilities as follows: (a) Quarter ending June
30, 1997 - 0.50:1.0; (b) Months ending July
31, 1997, and August 31, 1997 - 0.35:1.0; (c)
Month ending October 31, 1997, and each
subsequent month which is not also a quarter
end - 0.40:1.0; and (d) Quarter ending
December 31 , 1997, and all subsequent
quarters - 0.70:1.0.
and inserting in lieu thereof the following:
6.8 Quick Ratio. Borrower shall maintain as
of the last day of each of the following
periods, a ratio of Quick Assets to Current
Liabilities as follows: (a) Quarter ending
September 30, 1998 - 0.70:1.0; (b) Quarter
ending December 31, 1998 - 0.60:1.0; (c)
Quarter ending March 31, 1999- 0.65:1.0; (d)
Quarter ending June 30, 1999 and for each
quarter thereafter - 0.70:1.0; and (e) Month
ending October 31, 1998, and each
subsequent month which is not also a quarter
end - 0.50: 1.0.
6. The Loan Agreement shall be amended by deleting
the following text appearing as Section 6.9 thereof:
6.9 Tangible Net Worth. Borrower shall
maintain as of the last day of each of the
following periods, a Tangible Net Worth as
follows: (a) Month ending June 30, 1997 -
$550,000.00; (b) Months ending July 31,
1997, and August 31, 1997 - $500,000.00; (c)
Quarter ending September 30, 1997, and each
subsequent quarter - $1,150,000.00; and (d)
Month ending October 31, 1997, and each
subsequent month which is not also a quarter
end - $900,000.00.
and inserting in lieu thereof the following
6.9 Tangible Net Worth. Borrower shall
maintain as of the last day of each of the
following periods, a Tangible Net Worth as
follows: (a) Quarter ending September 30,
1998, and each subsequent quarter -
$1,200,000.00; and (b) Month ending
October 31, 1998, and each subsequent
month which is not also a quarter end -
$900,000 00.
7. The Loan Agreement shall be amended by deleting
the following text appearing as Section 6.13 thereof:
6.13 Net Income. Borrower shall maintain
on the last day of each of the following
quarters, Net Income as follows: (a) Quarter
ending June 30,1997 - ($25,000.00); (b)
Quarter ending September 30, 1997 -
$150,000.00; (c) Quarter ending December
31, 1997 - ($75,000.00); (d) Quarter ending
March 31, 1998 - $1.00; and (e) Quarter
ending June 30 1998 - $50,000.00.
and inserting in lieu thereof the following:
6.13 Net Income. Borrower shall maintain
on the last day of each of the following
quarters, Net Income as follows: (a) Quarter
ending September 30, 1998 - $250,000.00;
(b) Quarter ending December 31, 1998 - -
($375,000.00); (c) Quarter ending March 31,
1999 - ($125,000.00); and (d) Quarter ending
June 30, 1999 and for each quarter thereafter -
$1.00.
8. The Loan Agreement shall be amended by deleting
the Compliance Certificate attached as Exhibit D to
the Loan Agreement and inserting in lieu thereof
Exhibit D attached to this Loan Modification
Agreement.
? 9. The Loan Agreement shall be amended by deleting
the Borrowing Base Certificate attached as Exhibit
C to the Loan Agreement and inserting in lieu
thereof Exhibit C attached to this Loan
Modification Agreement.
4. FACILITY FEE. Borrower shall pay to Bank a facility fee (the
"Facility Fee") equal to Ten Thousand Dollars ($10,000.00) which fee shall
be due on the date hereof and which shall be deemed fully earned as of the
date hereof.
5. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby
ratifies, confirms, and reaffirms all terms and conditions of all security or
other collateral granted to the Bank, and confirms that the indebtedness and
Obligations secured thereby includes, without limitation, the Indebtedness.
6. CONSISTENT CHANGES. The Existing Loan Documents are
hereby amended wherever necessary to reflect the changes described above.
7. NO DEFENSES OF BORROWER. Borrower agrees that it has no
defenses against the obligations to pay any amounts under the Indebtedness.
8. CONTINUING VALIDITY. Borrower understands and agrees that
in modifying the existing Indebtedness, Bank is relying upon Borrower's
representations, warranties, and agreements, as set forth in the Existing Loan
Documents. Except as expressly modified pursuant to this Loan
Modification Agreement, the terms of the Existing Loan Documents remain
unchanged and in full force and effect. Bank's agreement to modifications
to the existing Indebtedness pursuant to this Loan Modification Agreement
in no way shall obligate Bank to make any future modifications to the
Indebtedness. Nothing in this Loan Modification Agreement shall constitute
a satisfaction of the Indebtedness. It is the intention of Bank and Borrower
to retain as liable parties all makers and endorsers of Existing Loan
Documents, unless the party is expressly released by Bank in writing. No
maker, endorser, or guarantor will be released by virtue of this Loan
Modification Agreement. The terms of this paragraph apply not only to this
Loan Modification Agreement, but also to all subsequent loan modification
agreements.
9. JURISDICTION/VENUE. Borrower accepts for itself and in
connection with its properties, unconditionally, the non-exclusive
jurisdiction of any state or federal court of competent jurisdiction in the
Commonwealth of Massachusetts in any action, suit, or proceeding of any
kind against it which arises out of or by reason of this Loan Modification
Agreement; provided, however, that if for any reason Bank cannot avail
itself of the courts of the Commonwealth of Massachusetts, then venue shall
lie in Santa Clara County, California.
10. COUNTERSIGNATURE. This Loan Modification Agreement shall
become effective only when it shall have been executed by Borrower and
Bank (provided, however, in no event shall this Loan Modification
Agreement become effective until signed by an officer of Bank in
California),
This Loan Modification Agreement is executed as of the date first
written above.
BORROWER: BANK:
METRISA, INC., formerly known as SILICON VALLEY BANK,
doing Holometrix, Inc., successor doing business as
by merger with, doing business as among SILICON VALLEY EAST
others, Tytronics Incorporated
By:_______________________ By:____________________
Name:_____________________ Name:__________________
Title:______________________ Title:___________________
SILICON VALLEY BANK
By:____________________
Name:__________________
Title:___________________
(signed in Santa Clara
County, California)
- - 2 -
{J:\clients\bus\h2148\0100\00051663.TXT;1}
{J:\clients\bus\h2148\0100\00051663.TXT;1}
ERNST & YOUNG LLP
60 STATE STREET
BOSTON, MA 02109
December 28, 1998
Mr. John A. Hanna, Jr.
Treasurer and Chief Financial Officer
Metrisa, Inc.
25 Wiggins Avenue
Bedford, MA 01730
Dear Jack:
Enclosed is a manually signed copy of our opinion on the 1997 financial
statements of Tytronics Incorporated. Please retain this letter in your
files as evidence of our authorization to include the attached opinion and
our typed signature in your 1998 Annual Report on Form 10-K filed by
Metrisa, Inc. with the Securities and Exchange Commission under Regulation
S-T.
If you have any questions regarding the form or use of this opinion, please
call me at (617) 859-6458.
Sincerely,
John K. Haley
Partner
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and the related consolidated statements of income,
stockholders' equity and of cash flows and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,469,053
<SECURITIES> 0
<RECEIVABLES> 2,005,102
<ALLOWANCES> (78,500)
<INVENTORY> 1,370,460
<CURRENT-ASSETS> 5,859,144
<PP&E> 1,224,524
<DEPRECIATION> (846,741)
<TOTAL-ASSETS> 8,207,908
<CURRENT-LIABILITIES> 2,595,592
<BONDS> 2,833,777
0
0
<COMMON> 511,456
<OTHER-SE> 2,267,083
<TOTAL-LIABILITY-AND-EQUITY> 8,207,908
<SALES> 8,252,450
<TOTAL-REVENUES> 8,252,450
<CGS> 3,721,015
<TOTAL-COSTS> 3,721,015
<OTHER-EXPENSES> 4,066,180
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 126,482
<INCOME-PRETAX> 338,773
<INCOME-TAX> 100,844
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 17,345
<CHANGES> 0
<NET-INCOME> 220,584
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
