Agreement
THIS AGREEMENT is made as of the last date written below, by and between
Envirometrics, Inc. (hereinafter, "Company"), a Delaware corporation with its
principal office in Charleston, South Carolina and PRECISION SOUTHEAST, INC., a
South Carolina corporation (hereinafter, "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 $124,378; 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 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. 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,
Sixty-two Thousand One Hundred Eighty-nine (62,189) shares of Preferred Stock of
the Company described below (the "Securities") in exchange for the consideration
provided for below.
2. 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, if any, 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.
3. 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.
4. 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.
7. 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 12,438 $2.36 $29,353.68
6/15/05-6/14/06 12,438 $2.42 $30,099.96
6/15/06-6/14/07 12,438 $2.48 $30,846.24
6/15/07-6/14/08 12,438 $2.54 $31,592.52
6/15/08-6/14/09 12,437 $2.60 $32,336.20
62,189 $154,228.60
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 $161,691.40). Any put
options hereunder not exercised by June 14, 2009 shall expire on that date.
8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. 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.
15. 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.
16. 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.
17. 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.
18. 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.
19. 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.
20. 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.
21. 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.
22. 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:
Precision Southeast, Inc.
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000-0000
Attn.: S. Xxxxxxx Xxxxxxxx, President
23. 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.
24. 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.
PRECISION SOUTHEAST, INC ("Investor")
By:____________________________________
S. Xxxxxxx 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
