Agreement
THIS AGREEMENT is made as of the last date written below, by and between
Envirometrics, Inc. (hereinafter, the "Company"), a Delaware corporation with
its principal office in Charleston, South Carolina and THE UNITED STATES
COMPANY, a Virginia corporation (hereinafter, the "Investor");
Recitals
On January 1, 1997 the Parties and others entered into an agreement
(hereinafter the "Trico Assignment," a copy of which is attached hereto as
Exhibit "A") under which Investor accepted (a) as a mode of payment, or partial
payment, for certain obligations of Company to it an assignment to it of
proceeds due to Company under a promissory note dated July 26, 1996 from Trico
Engineering Consultants, Inc. (the "Trico Note"); and, (b) as security for such
payment, the assignment to it of a portion of a Security Agreement, Pledge
Agreement and Guaranty Agreement, (collectively the "Trico Security Documents")
which collateralize the Trico Note; and,
In December, 1996 the Parties and others entered into an agreement which
was amended on May 1, 1998 (hereinafter, as amended, the "Xxxxxx Assignment", a
copy of which, together with its amendment, is attached hereto as Exhibit "B")
under which each assignee thereunder accepted: (a) as a mode of partial payment
for certain obligations of Company to it an assignment to it of proceeds due to
Company under a promissory note dated December 19, 1996 from Xxxxx X. Xxxxxx of
Richmond, VA (the "Xxxxxx Note"); and, (b) as security for such payment, the
assignment to it of a mortgage, lease assignment and security agreement
(collectively, the "Xxxxxx Security Documents") which collateralize the Xxxxxx
Note. The Trico Assignment and the Xxxxxx Assignment are referred to below
collectively as the "Assignments", and the "Trico Security Documents" and the
"Xxxxxx Security Documents" are referred to below collectively as the "Security
Documents;" and,
On May 1, 1998, the Parties, Azimuth, Inc. and others entered into an
Assignment of Proceeds and Security Agreement (hereinafter the "Azimuth
Agreement", a copy of which is attached hereto as Exhibit "C") under which each
secured party thereunder accepted as partial security for the aforesaid
obligations a security interest in the outstanding stock and the assets of
Azimuth, Inc.; and,
The Assignments and the Azimuth Agreement were intended by the Parties to
pay (or partially pay) and collateralize certain amounts due from Company to
Investor, which amounts, together with accrued interest and any other amounts
owing from Company to Investor had an outstanding balance as of April 30, 1998
of $223,295.00; and,
Company's financial circumstances are such that the elimination of the
Company's indebtedness to Investor by its conversion to equity as provided
below, the termination by Investor of its interest in the Assignments and the
Azimuth Agreement, together with concessions by other secured creditors, will
enable Company to significantly improve its overall financial situation,
including the mediation of its unsecured debt; and,
Investor is willing to cancel the Company's indebtedness to it and
relinquish its rights as aforesaid in exchange for certain preferred stock and
other obligations of Company as expressed herein.
NOW, THEREFORE, for and in consideration of the mutual obligations
expressed herein and other valuable consideration, the Parties agree as follows:
1. Payment to Investor. Company will pay to Investor the sum of Sixteen
Thousand and 00/100 Dollars ($16,000.00) as follows:
(a) Company will pay to Investor Eight Thousand and 00/100 Dollars
($8,000.00) at such time as either the Xxxxxx Note or the Trico Note or both of
them are refinanced by Company, which is anticipated by the Company to occur not
more than sixty (60) days from the execution hereof;
(b) Company will pay to Investor an additional Eight Thousand and 00/100
Dollars ($8,000.00) on the ninetieth day following the execution hereof, or upon
the closing of the transaction contemplated by the letter of intent dated June
26, 1998 (a specimen copy, deleting the name of the signatory, of which is
attached hereto as Exhibit "D"), whichever is sooner;
2. Purchase and Sale of Securities. As soon as practicable after the
execution hereof, the Company agrees to issue to Investor, and Investor agrees
to accept, One Hundred Eleven Thousand Six Hundred Forty-eight (111,648) shares
of Preferred Stock of the Company described below (the "Securities") in exchange
for the consideration provided for below.
3. Release and Termination. The Parties hereby terminate the Assignments
and the Azimuth Agreement as they pertain to any rights and obligations between
them and further agree that the Assignments and the Azimuth Agreement are, as of
this day, canceled, void and of no further effect to the extent of any such
rights and obligations, and Investor hereby releases and relinquishes any claims
and rights of whatever nature which it may have to the "Collateral", as defined
by Section 2 of each Assignment, and to the "Pledged Securities" and the
"Secured Assets" as defined by the Azimuth Agreement, and any other rights
thereunder. Contemporaneously with its execution hereof, Investor is executing
such UCC termination statements as may be necessary to effectively terminate, as
a matter of record, any of its rights under, or interest in, the Assignments and
the Azimuth Agreement. All prior indebtedness of the Company to the Investor and
all instruments evidencing same are hereby canceled and declared void and of no
effect, and Investor hereby and forever releases and discharges the Company from
all prior indebtedness to Investor, including but not limited to all Promissory
Notes from Company to Investor, the original copy(ies) of which Investor shall
deliver to Company, as soon as practicable following the execution hereof,
marked "Satisfied" and executed by an authorized signatory of Investor.
4. Consent. Investor hereby consents to and ratifies the modification,
release, cancellation and/or termination of the Trico Note; the Xxxxxx Note; the
Security Documents; the Azimuth Agreement and/or either or both of the
Assignments, between Company and any of the other Parties thereto.
5. Preference, Par Value, Preemptive and Voting Rights. The Securities,
together with the other outstanding preferred stock of the Company except for
the preferred stock originally issued to Zellweger Analytics, Inc., will have an
absolute preference in liquidation of company assets over all shareholders of
Common Stock of the Company and unsecured creditors. The preferred stock issued
to Zellweger Analytics, Inc. shall have a prior claim in any liquidation unless
same has been converted to Common Stock of the Company. The Securities will be
without nominal or par value, and, except as may otherwise be required by law,
shall not entitle the holder to any preemptive rights to subscribe to any class
of shares issued or which may be issued nor to vote at Stockholders' meetings of
the Company, nor to participate in profits beyond their fixed, annual
preferential dividend rate.
5. Dividend. The Securities shall bear and pay a preferred dividend rate of
Fourteen Cents ($0.14) per share, per annum, payable to the holder at the end of
each calendar quarter, commencing on June 15, 1999. This amount shall accrue for
the first year (6/15/98 - 6/14/99) and be divided equally among and added to the
quarterly payments of the second year (6/15/99 - 6/14/00).
6. Conversion to Common Stock. The Investor shall have the right, which the
Investor may exercise at any time on or before June 14, 2009 (the "Maturity
Date") to convert all or a portion of the Securities into shares of Company's
Common Stock, upon Sixty (60) days prior notice to Company of (i) the Investor's
intention to so convert, and (ii) the amount of the Securities to be converted.
At all times up until the Maturity Date: (a) the conversion ratio shall be one
share of the Securities for five shares of Common Stock of the Company; and (b)
the Investor may, from time to time, elect to convert less than all of the
Securities owned by it without impairment of its right to convert other portions
of the balance thereof.
8. Put Option. As an alternative to the conversion into Common Stock as set
forth above, the Investor is hereby granted the right to put the Securities back
to the Company, upon Sixty (60) days prior notice to Company, in exchange for a
cash payment in accordance with the following schedule:
Date # of Shares Per Share Price Cash to Investor
6/15/04-6/14/05 22,329 $2.36 $52,696.44
6/15/05-6/14/06 22,329 $2.42 $54,036.18
6/15/06-6/14/07 22,329 $2.48 $55,375.92
6/15/07-6/14/08 22,329 $2.54 $56,715.66
6/15/08-6/14/09 22,332 $2.60 $58,063.20
111,648 $276,887.40
Shares not put to the Company in any given year may be carried forward to
following years (until 6/14/09) and put to the Company at the Per Share Price
stated above for the period in which the put is exercised for such Securities.
(For example, all of the Securities may be put to the Company on 6/14/08 at a
price of $2.60 per share for a total redemption price of $290,284.80). Any put
options hereunder not exercised by June 14, 2009 shall expire on that date.
9. Call Option. The Company shall have the right to redeem all or any
portion of the Securities not yet converted or put to the Company upon Sixty
(60) days prior notice to the holder according to the following schedule:
Date Per Share Price
6/15/98-6/14/99 $2.00
6/15/99-6/14/00 $2.06
6/15/00-6/14/01 $2.12
6/15/01-6/14/02 $2.18
6/15/02-6/14/03 $2.24
6/15/03-6/15/04 $2.30
6/15/04-6/14/05 $2.36
6/15/05-6/14/06 $2.42
6/15/06-6/14/07 $2.48
6/15/07-6/14/08 $2.54
6/15/08-6/14/09 $2.60
Any Securities not (a) converted to common stock or put to the Company by
the Maturity Date, or (b) not tendered back to the Company in response to a call
by the date so specified in such notice of call will not be entitled thereafter
to any dividend, conversion or other rights.
10. Piggyback Registration of Common Stock. In the event that the Company
at any time subsequent to the date any Common Stock is issued to the Investor
hereunder proposes to file a registration statement (other than a registration
statement on a Form S-8 of Form S-14, or forms similar thereto in effect at the
time of such filing) under the Securities Act of 1933 (as then in effect or any
similar statute then in effect), in connection with a proposed public offering
of securities, the Company agrees to immediately notify the Investor in writing,
at least thirty (30) days prior to such proposed filing date of such
registration statement. Within 30 days following delivery of such notice, the
Investor may request that the Company include in such contemplated registration
statement any shares of Common Stock owned (or to be owned on such date pursuant
to an anticipated conversion) by the Investor pursuant to this Stock
Subscription and Conversion Agreement. Upon receipt of such notice, the Company
will cause the shares of Common Stock made the subject of such request to be
covered by the Company.
The Company will pay all expenses reasonably incurred by it and the
Investor (including the Investor's attorney's fees, commissions and fees of
underwriters or brokers with respect to the shares of the stock to be registered
and sold by the Investor) in connection with the registration statement and any
post-effective amendment thereto and in connection with qualifying the
securities covered by the registration statement under the Blue Sky or other
state securities' laws.
The Investor shall furnish the Company and the Company shall furnish the
Investor such documents, including selling notices and opinions of counsel, as
are typically and reasonable requested and delivered by an issuer and selling
shareholder in a "piggyback" registration transaction of the type outlined
above. The Investor and the Company, respectively, agree to provide such
documentation and information on a timely basis to permit the registration
statement covering the common shares of stock owned by the Investor to become
effective on a prompt and orderly basis.
11. Limitation on Sale of Securities. The Investor agrees to limit the
number of registered shares it may sell following registration to no more than
25,000 shares during any calendar quarter for the first Two years following
registration.
12. Investor's Representations and Warranties. The Investor understands
that the Securities are being issued without registration under the Federal
Securities Act of 1933, as amended. Therefore, the Investor hereby makes the
representations and warranties set forth herein to the Company and to each party
assisting the Company in the transaction and understands that each such person
or entity is materially relying upon such representations and warranties.
13. Investor Representation of Risk Understanding. The Securities are being
acquired for the Investor's own account, for investment, and not with the view
to, or for resale in connection with any distribution or public offering thereof
within the meaning of the Securities Act of 1933, as amended, or the securities
or blue-sky laws of any state. Without limiting the effect or validity of
certain "piggyback" registration rights, the Investor understands that there is
no public market for the Securities and that none is likely to develop in the
foreseeable future. The Investor understands that these substantial restrictions
on transferability mean that the Investor must bear the economic risk of this
investment for an indefinite period of time because, among other reasons, the
Securities have not been registered under the 1933 Act, or the securities laws
of any state, and therefore can not be sold, pledged, assigned or otherwise
disposed of unless they are subsequently registered under the Act and applicable
state securities laws or an exemption from such registration is available. In
the event that the Investor requests the opinion of counsel concerning the
transferability of the Securities, the Investor shall pay all costs, including,
without limitation, reasonable attorney's fees, related to such opinion.
14. Investor Access to Information. During the negotiation of the
transaction contemplated hereby, the Investor and its representatives have been
afforded access to information concerning the Company and the contemplated
transaction and further have been afforded the opportunity to ask such questions
of the officers of the Company concerning the business, operations, financial
condition, assets, liabilities, and prospects and other relevant matters as they
have deemed necessary or desirable, and the Investor hereby confirms that it has
been given information in order to evaluate the merits and risks of the
prospective investment contemplated hereby.
15. Investor Performance of Due Diligence. The Investor and its
representatives have been solely responsible for their own "due diligence"
investigation of this investment, for their own analysis of the merits and risks
of this investment and for their own analysis of the fairness and desirability
of the terms of this investment. In taking any action or performing any role
relative to the arranging of the proposed investment, the Investor has acted
solely in its own interest and neither the Investor nor any of the Investor's
officers or employees has acted as an agent of the Company.
16. Investor Recognition of Income Tax Consequences. The Investor further
recognizes that provisions of the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder, may be changed by legislative and/or
administrative action or interpreted by courts of law in a manner to deprive the
Investor of any contemplated tax benefits of the investment contemplated hereby.
17. Investor Restrictions on Stock Transfer. Since the Investor is not
acquiring the Securities with any view to subsequent distribution, the Investor
understands that the stock certificates which will be issued shall bear the
following or a substantially similar legend restricting the transfer:
"The Securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), and are "restricted
shares" as that term is defined in Rule number 144 of the Act. The shares may
not be offered for sale, sold or otherwise transferred except pursuant to an
effective registration statement under the Act or pursuant to an exemption from
registration under the Act, the availability of which is established to the
satisfaction of the Company."
When issued, the Securities will be free and clear of any liens, security
interests encumbrances, claims and rights of others of any kind and nature.
The Investor understands and agrees that it may (subject to the other
provisions of this Agreement) transfer all or any portion of the Securities (the
"Offered Interest") to a third party (the "Transferee") only if the Investor
first gives the Company the right of first refusal as herein provided to
purchase the Offered Interest at the price and on terms no less favorable than
those offered to or by such Transferee and only during the period herein set
forth. Such right of first refusal shall be set forth in a written notice
containing the terms and conditions of the proposed transfer to the Transferee
(the "Offer Notice") with a copy of the offer by the Transferee attached
thereto. The Company shall have the option for a period of 30 days after its
receipt of the Offer Notice to purchase upon the terms and conditions contained
in the Offer Notice, all but not less than all of the Offered Interest, by
delivering written notice thereof, (the "Acceptance Notice") to the Investor
prior to the expiration of such 30-day period. If the Company elects to purchase
the Offered Interest, settlement shall be held at the principal office of the
Company or at such mutually agreeable location within 30 days of receipt of the
Acceptance Notice. If the Company does not elect to purchase all of the Offered
Interest within 30 days after receipt of the Offer Notice, the Investor shall
have the right to transfer the Offered Interest to the Transferee upon the terms
and conditions contained in the Offer Notice, provided that prior to any
transfer of the Offered Interest, the Transferee expressly assumes in writing
all of the Investor's obligations under this Agreement and agrees in writing
with the Company to be governed by the provisions of this Agreement, and further
provided that settlement occurs within 75 days of delivery of this Offer Notice.
The foregoing notwithstanding, the Investor shall have the right, from time to
time, to transfer all or any portion of the Securities among a parent,
subsidiary or affiliated companies without having to first offer the Securities
to the Company or otherwise complying with the foregoing paragraph.
18. Investor is an Accredited Investor Within the Meaning of Rule 501 of
the Securities Act of 1933. The Investor and its officers represent and warrant
(i) that they have knowledge and experience in business and financial matters to
utilize the information given to them in connection with this investment in
order for the Investor to evaluate the risks of the investment and to make an
informed investment decision, and (ii) that the Investor has the financial
strength to bear the risks of the investment including the possible total loss
of the investment.
19. Investor Agrees to Hold Company Harmless. In consideration of issuance
of the Securities to the Investor, the Investor, for itself and its officers,
hereby:
(a) releases and forever discharges the Company and each of its affiliates,
employees, officers, directors, shareholders, agents or representatives, of and
from (i) any and all actions and causes of actions, claims and demands
whatsoever, whether known or unknown and whether or not founded in fact, in law
or in equity (other than with respect to material misstatements of fact made to
the Investor by the Company and with respect to material omissions to state a
fact when requested by the Investor), and (ii) any and all manner of suits,
debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, controversies, agreements, promises, trespasses, damages, judgments,
executions, claims and demands whatsoever in law or in (other than with respect
to material misstatements of fact made to the Investor by the Company and with
respect to material omissions to state a fact when requested by the Investor),
upon or by reason of any matter, cause or thing whatsoever arising out of or in
connection with the Investor's acquisition or ownership of the Securities, to
the extent that the same arises from or is related to claims under state or
federal securities laws or resulting from any action, suit, proceeding, demand,
assessment, judgment, cost or expense incident to any of the foregoing, and
covenants and agrees with the Company and each of its affiliates, employees,
officers, directors, shareholders, agents or representatives that neither the
Investor nor its successors will ever (i) except as allowed herein, institute
any suit or action at law or otherwise against the Company or its affiliates,
employees, officers, directors, shareholders, agents or representatives, or,
(ii) except as allowed herein, institute, prosecute, or in any way aid in the
institution or prosecution of any claim, demand, action or cause of action for
damages, costs, loss of services, expense or compensation for and on account of
any damages, loss or injury either to person or property, or both, or breach of
any contract or agreement, whether developed or undeveloped, resulting or to
result, known or unknown, or by reason of any matter, cause or thing whatsoever
arising out of or in connection with the Investor's acquisition of the
Securities, to the extent that such arises from or is related to claims under
state or federal securities laws, or resulting from any action, suit,
proceeding, demand, assessment, judgment, cost or expenses incident to any of
the foregoing; and
(b) without limiting the indemnification provisions contained in the
Promissory Note or related Security Agreement, agrees to indemnify and hold free
and harmless the Company from and against all costs, expense, claims, damages
and liabilities (to the extent the Investor has benefited financially by the
action resulting in such costs, expenses, claims, damages or liabilities),
whether accrued, absolute, contingent or otherwise arising out of or in
connection with the acquisition of the Securities, to the extent that such
arises from or is related to claims under state or federal securities laws, or
resulting from any action, suit, proceeding, demand, assessment, judgment, cost
or expenses incident to any of the foregoing, and the Investor agrees to pay
upon request all fees and expenses including but not limited to, reasonable
attorney's fees, associated with any of the above.
20. Availability of Representation by Independent Counsel. The Investor
confirms and acknowledges that it has had full opportunity to be represented by
independent counsel of its choice to review the investment solely from the point
of view of the Investor.
21. Applicable Law. This Agreement shall be governed in all respects by the
laws of the state of South Carolina without reference to the choice of law
principles thereof, and the Parties hereto submit to exclusively to the in
personam jurisdiction of the courts in Charleston, South Carolina for the
resolution of any disputes which may arise herefrom.
22. Binding Effect. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the Parties and their
successors, legal representatives and assigns.
23. Notice. Any notice or other communication required or permitted
hereunder shall be in writing and shall be sufficiently given if delivered in
person or sent by telex, facsimile, telecopy, registered or certified mail with
postage prepaid, Federal Express or Express Mail, addressed as follows:
If to the Company:
Envirometrics, Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
If to the Investor:
The United States Company
000 X. Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Attn: Xx. Xxxxxxx X. Xxxxxxxx, President
24. Severability. If any provision of this Agreement or application thereof
to anyone or under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provisions of this Agreement that can be given effect without
the invalid or unenforceable provision or application and shall not invalidate
or render unenforceable the invalid or unenforceable provision in any other
jurisdiction or under any other circumstance.
25. Entire Agreement. This agreement constitutes the entire agreement by
and between the Parties pertaining to the subject matter hereof and supersedes
all prior and contemporaneous understandings of the Parties.
IN WITNESS WHEREOF, the Investor has hereunto caused its authorized officer
to execute this instrument and affix its seal as of this 30th day of June, 1998.
THE UNITED STATES COMPANY ("Investor")
By:____________________________________
Xxxxxxx X. Xxxxxxxx, President
The provisions of the foregoing subscription agreement are accepted and
consented to by us as of this 30th day of June, 1998.
ENVIROMETRICS, INC. ("Company")
By: ____________________________
Xxxxxx X. Xxxxxxx, III, President and CEO
