Exhibit 10.7
DEBENTURE PURCHASE AGREEMENT
OF
SIRROM CAPITAL CORPORATION
AND
ENVIRONMENTAL TECTONICS CORPORATION
TABLE OF CONTENTS
ARTICLE I - SALE AND PURCHASE OF DEBENTURES................... 1
Section 1.1 Description of Debentures................... 1
Section 1.2 Commitment; Closing Date.................... 2
Section 1.3 Processing Fee.............................. 2
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY.... 2
Section 2.1 Corporate Status............................ 2
Section 2.2 Capitalization.............................. 3
Section 2.3 Authorization............................... 4
Section 2.4 Validity and Binding Effect................. 5
Section 2.5 Other Transactions.......................... 5
Section 2.6 Litigation.................................. 5
Section 2.7 Financial Statements........................ 5
Section 2.8 SEC Reports................................. 6
Section 2.9 Absence of Changes.......................... 6
Section 2.10 No Defaults................................ 7
Section 2.11 Compliance With Law........................ 7
Section 2.12 Taxes...................................... 7
Section 2.13 Certain Transactions....................... 8
Section 2.14 Title to Property.......................... 8
Section 2.15 Intellectual Property...................... 8
Section 2.16 Accounting Matters......................... 9
Section 2.17 Distributions to Company.................. 10
Section 2.18 Prior Sales............................... 10
Section 2.19 Regulatory Compliance..................... 10
Section 2.20 1940 Act Compliance....................... 10
Section 2.21 Registration Rights....................... 10
Section 2.22 Environment............................... 11
Section 2.23 Insurance................................. 12
Section 2.24 Governmental Consents..................... 12
Section 2.25 Offering.................................. 12
Section 2.26 Manufacturing Rights...................... 12
Section 2.27 Employees................................. 12
Section 2.28 Fees/Commissions.......................... 13
Section 2.29 1940 Act Compliance....................... 13
Section 2.30 ERISA..................................... 13
Section 2.31 Disclosure................................ 14
Section 2.32 Survival.................................. 14
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PURCHASER.... 14
Section 3.1 Authorization.............................. 14
Section 3.2 Validity and Binding Effect................ 15
Section 3.3 Purchase for Investment.................... 15
Section 3.4 Survival................................... 15
ARTICLE IV - CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF PURCHASER..................................... 15
Section 4.1 Representations and Warranties............. 15
Section 4.2 Officer's Certificate...................... 15
Section 4.3 Satisfactory Proceedings................... 16
Section 4.4 Legal Opinion.............................. 16
Section 4.5 The Company's Existence and Authority...... 16
Section 4.6 Delivery of Operative Documents............ 16
Section 4.7 Sale of Preferred Stock.................... 17
Section 4.8 Closing of FUNB Financing.................. 17
Section 4.9 Required Consents.......................... 17
Section 4.10 Waiver of Conditions...................... 17
ARTICLE V - COVENANTS OF COMPANY............................. 17
Section 5.1 Use of Proceeds............................ 17
Section 5.2 Use of Proceeds from Settlement............ 18
Section 5.3 Payment of Debentures...................... 18
Section 5.4 Repurchase of Debenture.................... 18
Section 5.5 Corporate Existence, Etc................... 18
Section 5.6 Maintenance, Etc........................... 19
Section 5.7 Nature of Business......................... 19
Section 5.8 Insurance.................................. 19
Section 5.9 Taxes, Claims for Labor and Materials...... 19
Section 5.10 Compliance with Laws...................... 20
Section 5.11 ERISA Matters............................. 20
Section 5.12 Books and Records; Rights of Inspection... 20
Section 5.13 Reports................................... 21
Section 5.14 Limitations on Debt and Obligations....... 22
Section 5.15 Guaranties................................ 22
Section 5.16 Limitation on Liens....................... 23
Section 5.17 Restricted Payments....................... 24
Section 5.18 Investments............................... 24
Section 5.19 Mergers, Consolidations and Sales
of Assets.......................................... 25
Section 5.20 Transactions with Affiliates.............. 26
Section 5.21 Notice.................................... 27
Section 5.22 Observer Rights........................... 27
Section 5.23 Information............................... 27
Section 5.24 Further Assurances........................ 28
Section 5.25 Optional Redemptions of Debentures........ 28
ARTICLE VI - SUBORDINATION OF DEBENTURES..................... 28
Section 6.1 Subordination.............................. 28
ARTICLE VII - EVENTS OF DEFAULT; REMEDIES.................... 28
Section 7.1 Events of Default.......................... 28
Section 7.2 Notice to Holders.......................... 30
Section 7.3 Acceleration of Maturities................. 30
ARTICLE VIII - RESTRICTIONS ON TRANSFER...................... 31
Section 8.1 Legends; Restrictions on Transfer.......... 31
Section 8.2 Notice of Intention to Transfer;
Opinions of Counsel................................ 31
ARTICLE IX - AMENDMENTS, WAIVERS AND CONSENTS................ 32
Section 9.1 Consent Required........................... 32
Section 9.2 Solicitation of Debenture Holders.......... 32
Section 9.3 Effect of Amendment or Waiver.............. 32
ARTICLE X - INTERPRETATION OF AGREEMENT; DEFINITIONS......... 32
Section 10.1 Definitions............................... 32
Section 10.2 Accounting Principles..................... 36
Section 10.3 Directly or Indirectly.................... 36
ARTICLE XI - MISCELLANEOUS................................... 36
Section 11.1 Expenses, Stamp Tax Indemnity............. 36
Section 11.2 Powers and Rights Not Waived; Remedies
Cumulative......................................... 37
Section 11.3 Notices................................... 37
Section 11.4 Successors and Assigns.................... 38
Section 11.5 Survival of Covenants and Representations. 38
Section 11.6 Severability.............................. 38
Section 11.7 Governing Law............................. 38
Section 11.8 Captions; Counterparts.................... 39
DEBENTURE PURCHASE AGREEMENT
This DEBENTURE PURCHASE AGREEMENT (the "Agreement")
entered into the 27th day of March, 1997, by and between
ENVIRONMENTAL TECTONICS CORPORATION, a Pennsylvania corporation
(the "Company") and SIRROM CAPITAL CORPORATION, a Tennessee
corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company desires to obtain additional
capital for use in connection with its business through the issue
and sale of certain obligations, and Purchaser is willing to
purchase such obligations of the Company, on the terms and
conditions set forth herein.
NOW, THEREFORE, in mutual consideration of the premises
and the respective representations, warranties, covenants and
agreements contained herein, the parties agree as follows:
ARTICLE I - SALE AND PURCHASE OF DEBENTURES
Section 1.1 Description of Debentures.
(a) The Company has authorized the issue and sale
of $4,000,000 aggregate principal amount of its 12% Subordinated
Debentures due March 27, 2004 (the "Debentures"), to be dated the
date of issue, to bear interest from such date at the rate of 12%
per annum, payable quarterly by automatic debit on the first day
of each February, May, August and November in each year
(commencing May 1, 1997) and at maturity and to bear interest on
overdue principal (including any overdue required prepayment of
principal or optional prepayment of principal pursuant to
Section 5.24) and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest at the rate
of 13% per annum after maturity, whether by acceleration or
otherwise, until paid, to be expressed to mature on March 27,
2004, and to be substantially in the form attached hereto as
Exhibit A-1. Interest on the Debentures shall be computed on the
basis of a 360-day year of twelve 30-day months. The Debentures
are not subject to prepayment or redemption at the option of the
Company prior to their expressed maturity dates except on the
terms and conditions and in the amounts and with the premium, if
any, set forth in Section 5.24 of this Agreement. The term
"Debentures" as used herein shall include each Debenture
delivered pursuant to this Agreement. The terms which are
capitalized herein shall have the meanings set forth in Section
10 hereof unless the context shall otherwise require.
(b) Simultaneously with the purchase and sale of
the Debentures, the Company shall grant, issue, and deliver to
Purchaser its Stock Purchase Warrant, dated the date hereof and
substantially in the form attached hereto as Exhibit A-2 (the
"Warrant").
Section 1.2 Commitment; Closing Date.
Subject to the terms and conditions hereof and on the
basis of the representations and warranties hereinafter set
forth, the Company agrees to issue and sell to Purchaser, and
Purchaser agrees to purchase from the Company, Debentures in the
aggregated principal amount of $4,000,000 at a price of 100% of
the principal amount thereof.
Delivery of the Debentures will be made at the offices
of Xxxxxxxx & Xxx, PLC, 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx,
Xxxxxxxxx 00000, against payment therefor by federal funds wire
transfer in immediately available funds and to the accounts and
in the amounts in accordance with the Company's wire instructions
set forth on Exhibit B hereto, at 10:00 A.M., Nashville time, on
March 27, 1997, or such later date as the Company and Purchaser
shall agree (the "Closing Date"). The Debentures delivered to
Purchaser on the Closing Date will be delivered to Purchaser in
the form of a single registered Debenture for the full amount of
such purchase (unless different denominations are specified by
Purchaser), registered in Purchaser's name or in the name of such
nominee as Purchaser may specify and, with appropriate
insertions, in the form attached hereto as Exhibit A, all as
Purchaser may specify at least 24 hours prior to the date fixed
for delivery.
Section 1.3 Processing Fee.
The Company agrees to pay to Purchaser on or before the
Closing Date a processing fee in an amount equal to $80,000.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser
as follows:
Section 2.1 Corporate Status.
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania 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, the Debentures, the Preferred Stock Purchase
Agreement, the Warrant, the Registration Rights Agreement, the
Subordination Agreement between First Union National Bank, the
Company, and Purchaser, and any other document executed and
delivered by Purchaser in connection herewith or therewith
(collectively, the "Operative Documents"). The Company is
qualified to do business and is in good standing in each state or
other jurisdiction in which such qualification is necessary under
applicable provisions of law, except where the failure to so
qualify would not have a material adverse effect on the financial
condition or results of operations of the Company. The states or
other jurisdictions in which the Company is so qualified are set
forth on Schedule 2.1(a) hereto. A certified charter of the
Company and a good standing certificate for each state in which
it is qualified to do business are attached to Schedule 2.1(a).
(b) Schedule 2.1(b) sets forth a complete list of
each corporation, partnership, joint venture, limited liability
company or other business organization in which the Company owns,
directly or indirectly, any capital stock or other equity
interest (the "Subsidiary" or, collectively, the "Subsidiaries"),
or with respect to which the Company or any Subsidiary, alone or
in combination with others, is in a control position, which list
shows the jurisdiction of incorporation or other organization and
the percentage of stock or other equity interest of each
Subsidiary owned by the Company. Each Subsidiary is duly
organized, validly existing and in good standing under the laws
of the jurisdiction of incorporation or other organization as
indicated on Schedule 2.1(b), each has all requisite power and
authority and holds all material licenses, permits and other
required authorizations from government authorities necessary to
own its properties and assets and to conduct its business as it
is now being conducted, and is qualified to do business as a
foreign corporation (or business organization) and is in good
standing in every jurisdiction in which such qualification is
necessary under applicable provisions of law, except where the
failure to so qualify would not have a material adverse effect on
the financial condition or results of operations of the Company.
All of the outstanding shares of capital stock, or other equity
interest, of each Subsidiary owned, directly or indirectly, by
the Company have been validly issued, are fully paid and
nonassessable, and are owned by the Company free and clear of all
liens, charges, security interests or encumbrances. A certified
charter for each Subsidiary and good standing certificates for
each of the states in which each Subsidiary is qualified to do
business are attached to Schedule 2.1(b).
(c) Schedule 2.1(c) sets forth a complete list of
"affiliates," as that term is defined in Rule 405 of Regulation C
adopted under the Securities Act of 1933, as amended (the
"Securities Act"), with a brief statement describing the basis of
each affiliation.
Section 2.2 Capitalization.
(a) The authorized capital stock of the Company
consists of (i) 10,000,000 shares of common stock, par value
$.10 per share (the "Common Stock"), of which 2,962,784 shares
are issued and outstanding, and (ii) 1,000,000 shares of
undesignated preferred stock, with rights and preferences fixed
by the Board of Directors in accordance with the corporate laws
of the Commonwealth of Pennsylvania and the Company's Articles
of Incorporation, none of which are outstanding. All shares of
Common Stock outstanding have been validly issued and are fully
paid and nonassessable. There are no statutory or contractual
pre-emptive rights, rights of first refusal, antidilution rights
or any similar rights held by any party with respect to the
issuance of the Debentures. The offer, sale and issuance of the
Debentures do not require registration under the Securities Act
or any applicable state securities laws.
(b) The Company has not granted, or agreed to
grant or issue, any options, warrants or rights to purchase or
acquire from the Company any shares of capital stock of the
Company, and there are no contracts, commitments, agreements,
understandings, arrangements or restrictions as to which the
Company is a party, or by which it is bound, relating to any
shares of capital stock or other securities of the Company,
whether or not outstanding except for (i) the Debentures to be
issued pursuant to this Agreement, (ii) 314,164 shares of Common
Stock reserved for issuance pursuant to the Company's 1988 Stock
Option Plan, for which options to purchase 99,010 shares are
outstanding, (iii) a warrant to acquire 100,000 shares of Common
Stock held by Chase Manhattan Capital Corporation, and (iv) the
obligation to issue to Osprey Partners, in certain circumstances,
a warrant to purchase 125,000 shares of Common Stock.
Schedule 2.2 sets forth a summary of such options, warrants and
other rights to acquire capital stock of the Company.
Section 2.3 Authorization.
The Company has full legal right, power and authority
to enter into and perform its obligations under this Agreement
and any of the other Operative 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
issuance of the Debentures hereunder, the execution and delivery
of each other document in connection herewith or therewith to
which the Company is a party, and the performance by the Company
of its obligations hereunder and/or thereunder are within the
corporate powers of the Company and have been duly authorized by
all necessary corporate action properly taken, and have received
all necessary governmental approvals, if any were required. The
consummation of the transactions contemplated by this Agreement
and the fulfillment of the terms hereof do not and will not
contravene or conflict with the Articles of Incorporation or
Bylaws of the Company or any material agreement to which the
Company or any of its Subsidiaries is now a party or by which any
of them or their properties is bound, or constitute a default
thereunder; or results in the creation or imposition of any lien,
charge, security interest, or encumbrance of any nature upon any
of the property or assets of the Company or any of its
Subsidiaries pursuant to the terms of any such agreement or
instrument; or violates any provision of law or any applicable
judgment, ordinance, regulation or order of any court or
governmental agency. The officer(s) executing this Agreement,
the Debentures and any other document executed and delivered by
Purchaser in connection herewith or therewith, is duly authorized
to act on behalf of the Company.
Section 2.4 Validity and Binding Effect.
Each of the Operative Documents is the legal, valid and
binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency or other matters affecting
the rights of creditors generally and general principles of
equity.
Section 2.5 Other Transactions.
Except as disclosed on Schedule 2.5, there are no
outstanding loans, liens, pledges, security interests, agreements
or other financings upon which the Company or any Subsidiary is
obligated or by which the Company is bound. Consummation of the
transactions hereby contemplated and the performance of the
obligations of the Company under and by virtue of the Operative
Documents will not result in any breach of, or constitute a
default under, any material mortgage, security deed or agreement,
deed of trust, lease, bank loan or credit agreement, or any
corporate articles, certificate or bylaws, agreement or
certificate of limited partnership, partnership agreement,
limited liability company agreement, license, franchise or any
other material instrument or agreement to which the Company is a
party or by which the Company or its properties may be bound or,
to the knowledge of the Company, affected or to which the Company
has not obtained an effective waiver.
Section 2.6 Litigation.
Except as set forth on Schedule 2.6, there is no
litigation, arbitration, claim, proceeding or investigation
pending or threatened in writing which the Company or any
Subsidiary is a party or to which any of its respective
properties or assets is the subject which, if determined
adversely to the Company or such Subsidiary, would individually
or in the aggregate have a material adverse effect on the
financial position, results of operations or business of the
Company and its Subsidiaries, taken as a whole.
Section 2.7 Financial Statements.
The consolidated financial statements of the Company
and its Subsidiaries for the fiscal years ended February 25,
1994, February 24, 1995, and February 23, 1996, and the unaudited
consolidated financial statements as of the nine (9) months ended
November 29, 1996, which the Company previously has delivered to
Purchaser, fairly present the financial condition of the Company
and its Subsidiaries, as at the respective dates of and for the
periods referred to in such financial statements and have been
prepared in accordance with generally accepted accounting
principles ("GAAP") consistently followed throughout the periods
involved. The consolidated balance sheets and the related notes
fairly present the financial condition of the Company and its
consolidated Subsidiaries as of the respective dates thereof, and
the consolidated statements of income, cash flows and changes in
stockholders' equity and the related notes fairly present the
results of operations of the Company and its consolidated
Subsidiaries for the respective periods indicated. There has
been no material adverse change in the financial condition of the
Company and its Subsidiaries taken as a whole since November 29,
1996.
Section 2.8 SEC Reports.
The Company's Common Stock is listed on the American
Stock Exchange and has been duly registered with the Securities
and Exchange Commission ("SEC") under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Since February 26,
1993, the Company has filed all reports, registrations, proxy or
information statements and all other documents, together with any
amendments required to be made thereto, required to be filed with
the SEC under the Securities Act and the Exchange Act
(collectively, the "SEC Reports"). All SEC Reports since
February 26, 1995, have been timely filed. The Company
previously has furnished to Purchaser true copies of all the SEC
Reports, together with all exhibits thereto that Purchaser has
requested. As of their respective dates, the SEC Reports
complied (or will comply, as the case may be) in all material
respects with all rules and regulations promulgated by the SEC
and did not (or will not, as the case may be) contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
Section 2.9 Absence of Changes.
Since November 29, 1996, (i) neither the Company nor
any of its Subsidiaries have incurred any liabilities or
obligations, direct or contingent, or entered into any
transactions, not in the ordinary course business, that are
material to the Company, (ii) neither the Company nor any of its
Subsidiaries have purchased any of its outstanding capital stock
or declared, paid or otherwise made any dividend or distribution
of any kind on its capital stock, (iii) there has not been any
change in the capital stock, long-term debt or short-term debt of
the Company, and (iv) there has not been any material adverse
change, or any development involving a prospective material
adverse change, in or affecting the condition (financial or
otherwise), results of operations, business or prospects of the
Company or any Subsidiary, taken as a whole.
Section 2.10 No Defaults.
Except as set forth on Schedule 2.10 and except where a
default or event of default does not and would not constitute a
Material Adverse Event, no default or event of default by the
Company or any Subsidiary exists under this Agreement or any of
the other Operative Documents, or under any other instrument or
agreement to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary or its respective properties
may be bound or, to the knowledge of the Company, affected, and
no event has occurred and is continuing that with notice or the
passage of time or both would constitute a default or event of
default thereunder.
Section 2.11 Compliance With Law.
To the Company's knowledge, the Company and any
Subsidiary are in compliance with all laws, regulations, decrees
and orders applicable to them (including but not limited to the
Foreign Corrupt Practices Act, laws, regulations, decrees and
orders relating to environmental, occupational and health
standards and controls, antitrust, monopoly, restraint of trade
or unfair competition) to the extent that noncompliance, in the
aggregate, cannot reasonably be expected to cause a Material
Adverse Event.
Section 2.12 Taxes.
Except as set forth on Schedule 2.12, the Company and
its Subsidiaries have filed or caused to be filed all federal,
state and local income, excise and franchise tax returns required
to be filed (except for returns that have been appropriately
extended), and has paid, or provided for the payment of, 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), and the Company does not
know of any proposed assessment for additional taxes or any basis
therefor. No tax liens have been filed against the Company or
any of its properties. The Company's federal income tax
liability has been finally determined by the Internal Revenue
Service and satisfied for all taxable years up to and including
the taxable year ended February 24, 1995, or closed by applicable
statutes of limitation.
Section 2.13 Certain Transactions.
Except as set forth on Schedule 2.13(i) and except as
to indebtedness incurred in the ordinary course of business and
approved by the Board of Directors of the Company, neither the
Company nor any Subsidiary is indebted, directly or indirectly,
to any of its officers or directors, or to their respective
spouses or children, in excess of an aggregate amount of $60,000,
and none of the officers or directors or any members of their
immediate families are indebted to the Company or any Subsidiary
in excess of an aggregate amount of $60,000 or have any direct or
indirect ownership interest in any firm or corporation with which
the Company or any Subsidiary is affiliated or with which the
Company has a business relationship, or any firm or corporation
which competes with the Company or any Subsidiary, except that
officers and/or directors of the Company may own no more than
4.9% of the outstanding stock of any publicly traded company
which competes directly with the Company. Except as set forth on
Schedule 2.13(ii), no officer or director of the Company or any
Subsidiary or any member of their immediate families is, directly
or indirectly, interested in any material contract with the
Company or any Subsidiary. Except as set forth on
Schedule 2.13(iii), neither the Company nor any Subsidiary is a
guarantor or indemnitor of any indebtedness of any other person,
firm or corporation.
Section 2.14 Title to Property.
The Company and each Subsidiary has good and
marketable title to all of real and material personal property
owned by it, free and clear of all liens, security interests,
pledges, encumbrances, equities claims and restrictions of every
kind and nature whatsoever, except as disclosed on Schedule 2.14
and except for such liens, security interests, pledges,
encumbrances, equities claims and restrictions which are not in
the aggregate material to the business, operations or financial
condition of the Company and its Subsidiaries taken as a whole.
Any real property and buildings held under lease by the Company
or any Subsidiary are held under valid existing and enforceable
leases, except as disclosed on Schedule 2.14 or which are not
material and do not interfere with the use to be made of such
buildings or property by the Company.
Section 2.15 Intellectual Property.
Except as set forth in Schedule 2.15, the Company is
the lawful owner or has a valid right to use the proprietary
information used in its business free and clear of any claim,
right, trademark, patent or copyright protection of any third
party. As used herein, "proprietary information" includes
without limitation (i) any computer software and 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 the Company or any Subsidiary or
marketing studies conducted by the Company, all of which the
Company considers to be commercially important and competitively
sensitive and which generally has not been disclosed to third
parties other than customers in the ordinary course of business.
Except as set forth in Schedule 2.15, the Company has good and
marketable title to or has a valid right to use all patents,
trademarks, trade names, service marks, copyrights or other
intangible property rights, and registrations or applications for
registration thereof, owned by the Company or any Subsidiary or
used or required by the Company or any Subsidiary in the
operation of its business as presently being conducted. The
Company has no knowledge of any infringements or conflict with
asserted rights of others with respect to copyrights, patents,
trademarks, service marks, trade names, trade secrets or other
intangible property rights or know-how which could cause a
Material Adverse Event. To the Company's knowledge, no products
or processes of the Company infringe or conflict with any rights
of patent or copyright, or any discovery, invention product or
process, that is the subject of a patent or copyright application
or registration known to the Company. The Company has adopted
and follows such procedures as the Company deems necessary or
appropriate to provide reasonable protection of the Company's
trade secrets and proprietary rights in intellectual property of
all kinds. To the knowledge of the Company, no person employed
by or affiliated with the Company has employed or proposes to
employ any trade secret or any information or documentation
proprietary to any former employer, and to the knowledge of the
Company, no person employed by or affiliated with the Company has
violated any confidential relationship that such person may have
had with any third person, in connection with the development,
manufacture or sale of any product or proposed product or the
development or sale of any service or proposed service of the
Company.
Section 2.16 Accounting Matters.
The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted
accounting principles and to maintain assets accountability for
the assets of the Company and each of its Subsidiaries;
(iii) access to the assets of the Company and each of its
Subsidiaries are permitted only in accordance with management's
general or specific authorization; and (iv) the recorded
accountability for assets of the Company and each of its
Subsidiaries are compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
Section 2.17 Distributions to Company.
No Subsidiary of the Company is currently prohibited,
directly or indirectly, from paying any dividends to the Company,
from making any other distributions on such Subsidiary's capital
stock, from repaying to the Company any loans or advances to such
Subsidiary or from transferring any of such Subsidiary's property
or assets to the Company or any other Subsidiary of the Company.
Section 2.18 Prior Sales.
All offers and sales of the Company's capital stock
prior to the date hereof were at all relevant times (i) exempt
from the registration requirements of the Securities Act or were
registered under the Securities Act; and (ii) were duly
registered, and were the subject of an available exemption from
the requirements of all applicable state securities or Blue Sky
laws or met the requirements of such laws.
Section 2.19 Regulatory Compliance.
Except as set forth on Schedule 2.19, the conduct of
the business of the Company is not (and is not intended to be, as
hereinafter conducted) dependent on any license, permit or other
authorization of any federal, state or local regulatory body, and
except as set forth on Schedule 2.19, such business is not
subject to the regulation of any federal, state or local
government regulatory body by reason of the nature of the
business being conducted. All licenses, permits and
authorizations set forth on Schedule 2.19 are in full force and
effect.
Section 2.20 1940 Act Compliance.
The Company is an "eligible portfolio company" as such
term is defined in Section 2(a)(46) of the Investment Company Act
of 1940, as amended (the "Investment Company Act"), and the
issuance and sale by the Company of the Debentures does not
constitute a "public offering" as such term is used in Section
55(a)(1) thereof.
Section 2.21 Registration Rights.
Except as described in Schedule 2.21, the Company is
not under any obligation to register under the Securities Act 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.
Section 2.22 Environment.
The Company has duly complied, in all material
respects, with, and its business, operations, assets, equipment,
property, leaseholds or other facilities are in compliance, in
all material respects, with, the provisions of all federal, state
and local environmental, health, and safety laws, codes and
ordinances, and all rules and regulations promulgated thereunder.
The Company has been issued and will maintain all required
federal, state and local permits, licenses, certificates and
approvals relating to (1) air emissions; (2) discharges to
surface water or groundwater; (3) noise emissions; (4) solid or
liquid waste disposal; (5) 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 (6) other environmental, health or
safety matters. The Company 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, there has been no emission, spill, release or
discharge into or upon (1) the air; (2) soils, or any
improvements located thereon; (3) surface water or groundwater;
or (4) 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. There has been no
complaint, order, directive, claim, citation or notice by any
governmental authority or any person or entity with respect to
(1) air emissions; (2) 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; (3) noise emissions; (4) solid or
liquid waste disposal; (5) the use, generation, storage,
transportation or disposal of toxic or hazardous substances or
waste; or (6) other environmental, health or safety matters
affecting the Company or its business, operations, assets,
equipment, property, leaseholds or other facilities. The Company
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).
Section 2.23 Insurance.
The Company has maintained, and has caused each
Subsidiary to maintain, insurance coverage by financially sound
and reputable insurers with respect to their respective
properties and business in such forms and amounts and against
such risks, casualties and contingencies as are customary for
corporations of established reputation engaged in the same or a
similar business and owning and operating similar properties.
Section 2.24 Governmental Consents.
No consent, approval, qualification, order or
authorization of, or filing with, any local, state, or federal
governmental authority is required on the part of the Company in
connection with the Company's valid execution, delivery, or
performance of this Agreement or the offer, sale or issuance of
the Debenture by the Company.
Section 2.25 Offering.
Subject in part to the truth and accuracy of
Purchaser's representations set forth in this Agreement, the
offer, sale and issuance of the Debenture as contemplated by this
Agreement are exempt from the registration requirements of the
Securities Act, and neither the Company nor any authorized agent
acting on is behalf will take any action hereafter that would
cause the loss of such exemption.
Section 2.26 Manufacturing Rights.
The Company has not granted rights to manufacture,
produce, assemble, license, market, or sell its products to any
other person and is not bound by any agreement that affects the
Company's exclusive right to develop, manufacture, assemble,
distribute, market, or sell its products.
Section 2.27 Employees.
To the best of the Company's knowledge, there is no
strike, labor dispute or union organization activities pending or
threatened between it and its employees. None of the Company's
employees belongs to any union or collective bargaining unit. To
the best of its knowledge, the Company has complied in all
material respects with all applicable state and federal equal
opportunity and other laws related to employment. To the best of
the Company's knowledge, no employee of the Company is or will be
in violation of any judgment, decree, or order, or any term of
any employment contract, patent disclosure agreement, or other
contract or agreement relating to the relationship of any such
employee with the Company, or any other party because of the
nature of the business conducted or presently proposed to be
conducted by the Company or to the use by the employee of his or
her best efforts with respect to such business. The Company is
not a party to or bound by any currently effective employment
contract, deferred compensation agreement, bonus plan, incentive
plan, profit sharing plan, retirement agreement, or other
employee compensation agreement. The Company is not aware that
any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does
the Company have a present intention to terminate the employment
of any of the foregoing. Subject to general principles related
to wrongful termination of employees, the employment of each
officer and employee of the Company is terminable at the will of
the Company.
Section 2.28 Fees/Commissions.
The Company has not agreed to pay any finder's fee,
commission, origination fee (except for the processing fee due to
Purchaser pursuant to Section 1.3 hereof) or other fee or charge
to any person or entity with respect to the transactions
contemplated hereunder, except a fee of $529,981.23 payable to
Berwind Financial Group, L.P., and a fee of $75,000.00 payable to
First Union National Bank.
Section 2.29 1940 Act Compliance.
The Company is an "eligible portfolio company" as such
term is defined in Section 2(a)(46) of the Investment Company Act
of 1940, as amended (the "Investment Company Act"), and the
issuance and sale by the Company of the Preferred Stock does not
constitute a "public offering" as such term is used in Section
55(a)(1) thereof.
Section 2.30 ERISA.
Except as disclosed in Schedule 2.30, the Company 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, 00 Xxxx. 000,
00 X.X.X.X. Sections 1001 et seq. (1975), as amended from time to time
("ERISA"). Except as disclosed in Schedule 2.30, neither a
reportable event nor a prohibited transaction (as defined in
ERISA) has occurred and is continuing with respect to any
"pension plan" (as such term is defined in 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 the Company nor any commonly controlled
entity (as defined in ERISA) has completely or partially
withdrawn from a multiemployer plan (as defined in ERISA); The
Company 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 The Company
or any commonly controlled entity to the PBGC or the Plan under
Title IV or ERISA; and neither the Company nor any commonly
controlled entity has incurred any liability to the PBGC under
ERISA.
Section 2.31 Disclosure.
No representation or warranty given as of the date
hereof by the Company contained in this Agreement or any schedule
attached hereto or any statement in any document, certificate or
other instrument furnished or to be furnished to the Purchaser
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 herein or therein not misleading.
Section 2.32 Survival.
The representations and warranties of the Company
contained in this Agreement shall survive until this Agreement
terminates in accordance with Section 11.5 hereof.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents to the Company as
follows:
Section 3.1 Authorization.
Purchaser has full legal right, power and authority to
enter into and perform its obligations under this Agreement and
any other document executed and delivered by Purchaser in
connection herewith, without the consent or approval of any other
person, firm, governmental agency or other legal entity. The
execution and delivery of this Agreement and any other document
executed and delivered by Purchaser in connection herewith, and
the performance by Purchaser of its obligations hereunder and/or
thereunder are within the corporate powers of Purchaser, have
received all necessary governmental approvals, if any were
required, and do not and will not contravene or conflict with the
Charter or Bylaws of Purchaser. The officer(s) executing this
Agreement and any other document executed and delivered by
Purchaser in connection herewith, is duly authorized to act on
behalf of Purchaser.
Section 3.2 Validity and Binding Effect.
This Agreement and any other document executed and
delivered by Purchaser in connection herewith are the legal,
valid and binding obligations of the Purchaser, enforceable
against it in accordance with their respective terms.
Section 3.3 Purchase for Investment.
Purchaser is a registered investment company under the
Investment Company Act. Purchaser is acquiring the Debentures
for its own account, for investment, and not with a view to the
distribution or resale thereof, in whole or in part, in violation
of the Securities Act or any applicable state securities law, and
Purchaser has no present intention of selling, negotiating or
otherwise disposing of the Debentures; it being understood that
Purchaser intends to transfer and assign the Debentures and all
Purchaser's rights and obligations under this Agreement to one or
more wholly-owned Subsidiaries of Purchaser.
Section 3.4 Survival.
The representations and warranties of the Purchaser
contained in this Agreement shall survive until this Agreement
terminates in accordance with Section 11.5 hereof.
ARTICLE IV - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER
The obligation of Purchaser to purchase and pay for the
Debentures on the Closing Date shall be subject to the
fulfillment on or before the Closing Date of each of the
following conditions:
Section 4.1 Representations and Warranties.
The representations and warranties of the Company
contained in this Agreement and in any Schedule hereto or any
document or instrument delivered to Purchaser or its
representatives hereunder, shall have been true and correct when
made and shall be true and correct as of the Closing Date as if
made on such date, except to the extent such representations and
warranties expressly relate to a specific date. The Company
shall have duly performed all of the covenants and agreements to
be performed by it hereunder on or prior to the Closing Date.
Section 4.2 Officer's Certificate.
The Company shall have delivered to Purchaser a
certificate, dated the Closing Date, signed by a duly authorized
officer of the Company substantially in the form attached hereto
as Exhibit C.
Section 4.3 Satisfactory Proceedings.
All proceedings taken in connection with the
transactions contemplated by this Agreement, and all documents
necessary to the consummation thereof, shall be satisfactory in
form and substance to Purchaser and Purchaser's counsel, and the
Company shall have delivered to Purchaser a certificate, dated
the Closing Date, signed by the Secretary of the Company
substantially in the form attached hereto as Exhibit D.
Section 4.4 Legal Opinion.
Purchaser shall have received the opinion of Xxxxxxx &
Xxx, A Professional Corporation, counsel for the Company, dated
the Closing Date, addressed to Purchaser, in form and substance
satisfactory to Purchaser, and covering the matters set forth in
Exhibit E hereto.
Section 4.5 The Company's Existence and Authority.
The Company shall have delivered to Purchaser the
following certificates of public officials, in each case as of a
recent date:
(a) the Articles of Incorporation of the Company,
certified by the Secretary of State of Pennsylvania;
(b) a certificate of existence or good standing
of the Company in the State of Pennsylvania and as a foreign
corporation in each of the jurisdictions set forth in
Schedule 2.1(a);
(c) the Articles of Association and the
equivalent under applicable laws of a certificate of good
standing for ETC International Corporation.
Section 4.6 Delivery of Operative Documents.
The Company shall have delivered to Purchaser the
following executed documents simultaneously with the execution of
this Agreement:
(a) the Debenture;
(b) the Warrant;
(c) the Registration Rights Agreement between the
Company and the Purchaser; and
(d) the Subordination Agreement between First
Union National Bank ("FUNB"), the Company, and the Purchaser,
all of which shall be dated as of March 27, 1997.
Section 4.7 Sale of Preferred Stock.
The closing of the purchase and sale of 25,000 shares
of the Company's Series A Convertible Preferred Stock (the
"Series A Preferred Stock") shall have occurred simultaneously
with the closing hereunder.
Section 4.8 Closing of FUNB Financing.
The closing of the initial borrowing under the
Revolving Credit Agreement between the Company and FUNB, dated as
of March 27, 1997 (the "FUNB Facility") shall have occurred
simultaneously with the closing hereunder.
Section 4.9 Required Consents.
Any consents or approvals required to be obtained from
any third party, including any holder of indebtedness or any
outstanding security of the Company, and any amendments of
agreements which shall be necessary to permit the consummation of
the transactions contemplated hereby on the Closing Date, shall
have been obtained and all such consents or amendments shall be
satisfactory in form and substance to Purchaser and Purchaser's
counsel.
Section 4.10 Waiver of Conditions.
If on the Closing Date the Company fails to tender to
Purchaser the Debentures to be issued to Purchaser on such date
or if the conditions specified in this Article IV have not been
fulfilled, Purchaser may thereupon elect to be relieved of all
further obligations under this Agreement. Without limiting the
foregoing, if the conditions specified in this Article IV have
not been fulfilled, Purchaser may waive compliance by the Company
with any such condition to such extent as Purchaser, in
Purchaser's sole discretion, may determine. Nothing in this
Section 4.7 shall operate to relieve the Company of any of its
obligations hereunder or to waive any of Purchaser's rights
against the Company.
ARTICLE V - COVENANTS OF COMPANY
From and after the Closing Date and continuing so long
as any amount remains unpaid on any of the Debentures:
Section 5.1 Use of Proceeds.
The Company shall use the proceeds of the Debentures
only for the purposes set forth on Schedule 5.1 attached hereto.
Section 5.2 Use of Proceeds from Settlement.
On October 1, 1996, the Thai Trade Arbitration Council
rendered a judgment in favor of the Company in connection with a
trade dispute with the Royal Thai Air Force ("RTAF"). If the
Company completes services to be performed under its contract
with RTAF by June 30, 1997, the Company will be entitled to
payment of approximately $450,000 from RTAF. If the Company
completes the contract and receives at least $400,000 of amounts
due, the Company may use such amount to prepay the bridge notes
made by the Company in favor of (a) Xxxxxxx X. Xxxxxxxx dated
February 7, 1997, in the principal amount of $300,000,
(b) Xxxx X. Xxxxxxxx, M.D., dated January 8, 1997, in the
principal amount of $240,000, and (c) Xxxx X. Xxxxxxxx Profit-
Sharing Plan dated January 8, 1997, in the principal amount of
$60,000 (collectively, the "Bridge Notes"). The Company shall
not make any other payments of principal on the Bridge Notes
without the prior written consent of Purchaser.
Section 5.3 Payment of Debentures.
The Company shall pay the indebtedness evidenced by the
Debentures according to the terms thereof and shall timely pay or
perform all of the other obligations of the Company under this
Agreement.
Section 5.4 Repurchase of Debenture.
Neither the Company nor any Subsidiary or Affiliate,
directly or indirectly, may repurchase or make any offer to
repurchase any Debentures unless the offer has been made to
repurchase Debentures, pro rata, from all holders of the
Debentures at the same time and upon the same terms. In case the
Company repurchases or otherwise acquires any Debentures, such
Debentures shall immediately thereafter be canceled, and no
Debentures shall be issued in substitution therefor. Without
limiting the foregoing, upon the purchase or other acquisition of
any Debentures by the Company or any Subsidiary or Affiliate,
such Debentures shall no longer be outstanding for purposes of
any Section of this Agreement relating to the taking by the
holders of the Debentures of any actions with respect hereto,
including, without limitation, Sections 7.3 and 8.1.
Section 5.5 Corporate Existence, Etc.
The Company will preserve and keep in force and effect,
and will cause each Subsidiary to preserve and keep in force and
effect, its corporate existence and good standing in the state of
incorporation thereof, its qualification and good standing as a
foreign corporation in each jurisdiction where such qualification
is required by applicable law except where the failure to so
qualify would not have a material adverse effect on the financial
condition or results of operations of the Company and its
Subsidiaries, taken as a whole, and all licenses and permits
necessary to the proper conduct of its business.
Section 5.6 Maintenance, Etc.
The Company will maintain, preserve and keep, and will
cause each Subsidiary to maintain, preserve and keep, its
properties and assets which are used or useful in the conduct of
its business (whether owned in fee or pursuant to a leasehold
interest) in good repair and working order and from time to time
will make all necessary repairs, replacements, renewals and
additions so that at all times the efficiency thereof shall be
maintained.
Section 5.7 Nature of Business.
Neither the Company nor any Subsidiary will engage in
any business if, as a result, the general nature of the business,
taken on a consolidated basis, which would then be engaged in by
the Company and its Subsidiaries would be substantially changed
from the general nature of the business engaged in by the Company
and its Subsidiaries on the date of this Agreement.
Section 5.8 Insurance.
The Company will maintain, and will cause each
Subsidiary to maintain, insurance coverage by financially sound
and reputable insurers with respect to their respective
properties and business in such forms and amounts and against
such risks, casualties and contingencies as are customary for
corporations of established reputation engaged in the same or a
similar business and owning and operating similar properties.
Section 5.9 Taxes, Claims for Labor and Materials.
The Company will promptly pay and discharge, and will
cause each Subsidiary promptly to pay and discharge, (i) all
lawful taxes, assessments and governmental charges or levies
imposed upon the property or business of the Company or such
Subsidiary, respectively, (ii) all trade accounts payable in
accordance with usual and customary business terms, and (iii) all
claims for work, labor or materials, which if unpaid might become
a lien or charge upon any property of the Company or such
Subsidiary; provided the Company or such Subsidiary shall not be
required to pay any such tax, assessment, charge, levy, account
payable or claim if (i) the validity, applicability or amount
thereof is being contested in good faith by appropriate actions
or proceedings which will prevent the forfeiture or sale of any
property of the Company or such Subsidiary or any material
interference with the use thereof by the Company or such
Subsidiary, and (ii) the Company or such Subsidiary shall set
aside on its books, reserves deemed by it to be adequate with
respect thereto.
Section 5.10 Compliance with Laws.
Except where failure to do so does not and would not
constitute a Material Adverse Event, The Company shall maintain
its business operations and property owned or used in connection
therewith in compliance with (i) all applicable federal, state
and local laws, regulations and ordinances, and such laws,
regulations and ordinances of foreign jurisdictions, governing
such business operations and the use and ownership of such
property, and (ii) all agreements, licenses, franchises,
indentures and mortgages to which The Company is a party or by
which The Company or any of its properties is bound. Without
limiting the foregoing, The Company shall pay all of its
indebtedness promptly and substantially in accordance with the
terms thereof.
Section 5.11 ERISA Matters.
If the Company has in effect, or hereafter institutes,
a pension plan that is subject to the requirements 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. Section 1001
et seq. (1975), as amended from time to time ("ERISA"), then the
following covenants shall be applicable during such period as any
such plan (the "Plan") shall be in effect: (i) the Company
hereby covenants that throughout the existence of the Plan, the
Company's contributions under the Plan will meet the minimum
funding standards required by ERISA and the Company will not
institute a distress termination of the Plan; and (ii) the
Company covenants that it will send to Purchaser 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; provided, however, that the current violation of this
covenant as described in Schedule 2.30 shall not be a violation
of this Section 5.11 so long as such violation is cured within
ten (10) days of the date hereof.
Section 5.12 Books and Records; Rights of Inspection.
The Company will keep, and will cause each Subsidiary
to keep, proper books of record and account in which full and
correct entries will be made of all dealings or transactions of
or in relation to the business and affairs of the Company or such
Subsidiary, in accordance with generally accepted accounting
principles consistently maintained. The Company shall permit a
representative of Purchaser to visit any of its properties and
inspect its corporate books and financial records, and will
discuss its accounts, affairs and finances with a representative
of Purchaser, during reasonable business hours, at all such times
as Purchaser may reasonably request.
Section 5.13 Reports.
The Company will furnish to Purchaser the following:
(a) Monthly Statements. Within twenty-five (25)
days of the end of each month, beginning the month of April 1997,
monthly internal financial reports which at a minimum shall
consist of a balance sheet of the Company as of the close of such
month and related statements of income and cash flows for the
one-month period then ended, as well as any additional financial
reports for such period routinely prepared with respect to the
Company and the Subsidiaries;
(b) Quarterly Statements. As soon as available
and in any event within 45 days after the end of each quarterly
fiscal period (except the last) of each fiscal year, copies of:
(i) consolidated and consolidating balance
sheets of the Company and Subsidiaries as of the close of
the three month period then ended, setting forth in
comparative form the consolidated figures at the end of the
preceding fiscal year,
(ii) consolidated and consolidating
statements of income and retained earnings of the Company
and Subsidiaries for the three-month period then ended,
setting forth in comparative form the consolidated figures
for the corresponding period of the preceding fiscal year,
and
(iii) consolidated and consolidating
statements of cash flows of the Company and Subsidiaries for
the portion of the fiscal year ending with such three-month
period, setting forth in comparative form the consolidated
figures for the corresponding period of the preceding fiscal
year,
all in reasonable detail and accompanied by a certificate of an
authorized financial officer of Company that such financial
statements fairly represent the financial condition and results
of operations and cash flows of the Company at and for the
periods presented, subject to normal year end adjustment;
(c) Annual Statements. As soon as available and
in any event within 90 days after the close of each fiscal year
of the Company, copies of:
(i) consolidated and consolidating balance
sheets of the Company and Subsidiaries as of the close of
such fiscal year, and
(ii) consolidated and consolidating
statements of income and retained earnings and cash flows of
the Company and Subsidiaries for such fiscal year,
in each case setting forth in comparative form the consolidated
figures for the preceding fiscal year, all in reasonable detail
and accompanied by an unqualified report thereon of a firm of
independent public accountants of recognized national standing or
a firm reasonably acceptable to the Purchaser;
(d) Audit Reports. Promptly upon receipt
thereof, one copy of each interim or special audit made by
independent accountants of the books of the Company or any
Subsidiary;
(e) SEC and Other Reports. Promptly upon their
becoming available, one copy of each financial statement, report,
notice or proxy statement sent by the Company to stockholders
generally and of each periodic or current report, and any
registration statement or prospectus filed by the Company or any
Subsidiary with any securities exchange or the SEC or any
successor agency, and copies of any orders in any proceedings to
which the Company or any of its Subsidiaries is a party, issued
by any governmental agency, federal or state, having jurisdiction
over the Company or any of its Subsidiaries. The Company
specifically covenants to timely file each such item required to
be filed with the SEC and each state requiring securities laws
filings; and
(f) Requested Information. With reasonable
promptness, such other data and information as Purchaser or any
such institutional holder may reasonably request.
Section 5.14 Limitations on Debt and Obligations.
Except as to (i) indebtedness existing on the date
hereof and reflected on (a) the Company's unaudited balance sheet
as of November 29, 1996 and (b) Schedule 2.7, as the same
indebtedness may be extended or renewed (but not increased),
(ii) the indebtedness incurred pursuant to the Debentures,
(iii) accounts payable and other trade payables incurred in the
ordinary course of business, and (iv) obligations of the Company
pursuant to capitalized leases, (v) the FUNB Facility as extended
or renewed, but not to exceed $11,000,000 in principal amount;
neither the Company nor any Subsidiary shall incur additional
indebtedness in excess of $100,000 annually.
Section 5.15 Guaranties.
The Company will not, and will not permit any
Subsidiary to, become or be liable in respect of any Guaranty
except Guaranties by Company which are limited in amount to a
stated maximum dollar exposure and are incurred in compliance
with the provisions of this Agreement.
Section 5.16 Limitation on Liens.
Without the prior written consent of Purchaser, the
Company will not, and will not permit any Subsidiary to, create
or incur, or suffer to be incurred or to exist, any mortgage,
pledge, security interest, encumbrance, lien or charge of any
kind (collectively, "Liens") on its or their property or assets,
whether now owned or hereafter acquired, or upon any income or
profits therefrom, or transfer any property for the purpose of
subjecting the same to the payment of obligations in priority to
the payment of its or their general creditors, or acquire or
agree to acquire, or permit any Subsidiary to acquire, any
property or assets upon conditional sales agreement or other
title retention devices, except those Liens which exist as of the
date hereof as set forth on Schedule 2.14, and except:
the liens and security interests created or permitted
by the FUNB Credit Facility Operative Documents;
purchase money liens on and security interests in
equipment hereafter acquired securing Debt permitted by
Paragraph 5.13 of this Agreement, provided that such liens and
security interests attach only to the equipment so acquired and
do not encumber any other property of the Company or any
Subsidiary;
liens for taxes not yet payable or being contested in
good faith by appropriate proceedings and for which adequate
reserves have been provided on the books of the Company or a
Subsidiary;
mechanics', materialmen's, warehousemen's, carriers' or
other like liens arising in the ordinary course of business of
the Company or any Subsidiary, if any, arising with respect to
obligations which are not overdue for a period longer than thirty
(30) days or which are being contested in good faith by
appropriate proceedings and for which adequate reserves have been
provided on the books of the Company or a Subsidiary;
deposits or pledges to secure the performance of bids,
tenders, contracts, leases, public or statutory obligations,
surety or appeal bonds or other deposits or pledges for purposes
of a like general nature or given in the ordinary course of
business by the Company or any Subsidiary; and
other encumbrances consisting of zoning restrictions,
easements, restrictions on the use of real property or minor
irregularities in the title thereto, which do not arise in
connection with the borrowing of, or any obligation for the
payment of, money and which, in the aggregate, do not materially
detract from the value of the premises or the business,
properties or assets of the Company or any Subsidiary.
Section 5.17 Restricted Payments.
For so long as the Debentures are outstanding, the
Company will not, except as hereinafter provided:
(a) declare or pay any dividends, either in cash
or property, on any shares of its capital stock of any class
except (i) dividends or other distributions payable solely in
shares of capital stock of Company, and (ii) that the preferred
dividends on the Series A Preferred Stock may be paid provided no
Event of Default exists hereunder;
(b) directly or indirectly, or through any
Subsidiary, purchase, redeem or retire any shares of its capital
stock of any class or any warrants, rights or options to purchase
or acquire any shares of its capital stock (other than in
exchange for or out of the net proceeds to the Company from the
substantially concurrent issue or sale of other shares of capital
stock of the Company or warrants, rights or options to purchase
or acquire any shares of its capital stock; provided, however,
that the Company (i) may repurchase the warrant for 100,000
shares of Common Stock held by the Chase Manhattan Capital
Corporation and (ii) may effect the mandatory repurchase of the
Series A Convertible Preferred Stock in accordance with its
terms; or
(c) make any other payment or distribution,
either directly or indirectly or through any Subsidiary, in
respect of its capital stock.
Section 5.18 Investments.
The Company will not, and will not permit any
Subsidiary to, make any Investments outside the ordinary course
of business for the Company or any Subsidiary, without the prior
written consent of Purchaser, except:
(a) Investments in direct obligations of the
United States of America, or any agency or instrumentality of the
United States of America, the payment or guaranty of which
constitutes a full faith and credit obligation of the United
States of America, in either case maturing in twelve months or
less from the date of acquisition thereof;
(b) Investments in certificates of deposit
maturing within one year from the date of origin, issued by First
Union National Bank or a bank or trust company organized under
the laws of the United States or any state thereof, having
capital, surplus and undivided profits aggregating at least
$100,000,000 and whose long-term certificates of deposit are, at
the time of acquisition thereof by Company or a Restricted
Subsidiary, rated AA or better by Standard & Poor's Corporation
or Aa or better by Xxxxx'x Investors Service, Inc.;
(c) loans or advances in the usual and ordinary
course of business to officers, directors and employees for
expenses (including moving expenses related to a transfer)
incidental to carrying on the business of Company or any
Subsidiary; and
(d) receivables arising from the sale of goods
and services in the ordinary course of business of Company and
its Subsidiaries.
Section 5.19 Mergers, Consolidations and Sales of
Assets.
(a) The Company will not, and will not permit any
Subsidiary to (1) consolidate with or be a party to a merger or
share exchange with any other corporation or (2) sell, lease or
otherwise dispose of all or any substantial part (as defined in
paragraph (d) of this Section 5.18) of the assets of Company and
its Subsidiaries; provided, however, that:
(i) any Subsidiary may merge or consolidate
with or into the Company or any Wholly-owned Subsidiary so
long as in any merger or consolidation involving the
Company, the Company shall be the surviving or continuing
corporation;
(ii) the Company may consolidate or merger
with any other corporation if (A) the Company shall be the
surviving or continuing corporation, (B) at the time of such
consolidation or merger and after giving effect thereto, no
Default or Event of Default shall have occurred and be
continuing, and (C) after giving effect to such
consolidation or merger the Company would be permitted to
incur at least $1.00 of additional indebtedness under the
provisions of Section 5.13; and
(iii) any Subsidiary may sell, lease or
otherwise dispose of all or any substantial part of its
assets to the Company or any Wholly-owned Subsidiary.
(b) The Company will not permit any Subsidiary to
issue or sell any shares of stock of any class (including as
"stock" for the purposes of this Section 5.18, any warrants,
rights or options to purchase or otherwise acquire stock or other
Securities exchangeable for or convertible into stock) of such
Subsidiary to any Person other than the Company or a Wholly-owned
Subsidiary, except for the purpose of qualifying directors, or
except in satisfaction of the validly pre-existing preemptive
rights of minority shareholders in connection with the
simultaneous issuance of stock to the Company and/or a Subsidiary
whereby the Company and/or such Subsidiary maintain their same
proportionate interest in such Subsidiary.
(c) The Company will not sell, transfer or
otherwise dispose of any shares of stock in any Subsidiary
(except to qualify directors) or any indebtedness of any
Subsidiary, and will not permit any Subsidiary to sell, transfer
or otherwise dispose of (except to the Company or a Wholly-owned
Subsidiary) any shares of stock or any indebtedness of any other
Subsidiary, unless:
(1) simultaneously with such sale, transfer
or disposition, all shares of stock and all indebtedness of
such Subsidiary at the time owned by the Company and by
every other Subsidiary shall be sold, transferred or
disposed of as an entirety;
(2) the Board of Directors of the Company
shall have determined, as evidenced by a resolution thereof,
that the retention of such stock and indebtedness is no
longer in the best interests of the Company;
(3) such stock and Indebtedness is sold,
transferred or otherwise disposed of to a Person, for a cash
consideration and on terms reasonably deemed by the Board of
Directors to be adequate and satisfactory;
(4) the Subsidiary being disposed of shall
not have any continuing investment in the Company or any
other Subsidiary not being simultaneously disposed of; and
(5) such sale or other disposition does not
involve a substantial part (as hereinafter defined) of the
assets of the Company and its Subsidiaries taken as a whole.
(d) As used in this Section 5.18, a sale, lease
or other disposition of assets shall be deemed to be a
"substantial part" of the assets of the Company and its
Subsidiaries only if the book value of such assets, when added to
the book value of all other assets sold, leased or otherwise
disposed of by the Company and its Subsidiaries (other than in
the ordinary course of business) during the same twelve month
period ending on the date of such sale, lease or other
disposition, exceeds 15% of the consolidated net tangible assets
of the Company and its Subsidiaries determined as of the end of
the immediately preceding fiscal year.
Section 5.20 Transactions with Affiliates.
The Company will not, and will not permit any
Subsidiary to, enter into or be a party to any transaction or
arrangement with any officer, director or Affiliate (including,
without limitation, the purchase from, sale to or exchange of
property with, or the rendering of any service by or for, any
Affiliate), except in the ordinary course of and pursuant to the
reasonable requirements of the Company's or such Subsidiary's
business and upon fair and reasonable terms no less favorable to
Company or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person other than an Affiliate,
in each case as determined in good faith by a majority of the
disinterested directors of the Company.
Section 5.21 Notice.
The Company shall promptly upon the discovery thereof
give written notice to Purchaser of (i) the occurrence of any
default or Event of Default or event which, with the passage of
time, would constitute an Event of Default, under this Agreement,
(ii) the occurrence of any default or event of default under any
other agreement providing for indebtedness of the Company or any
Subsidiary or under a capitalized lease obligation, (iii) any
actions, suits or proceedings instituted by any Person against
the Company or a Subsidiary or materially affecting any of the
assets of the Company or any Subsidiary, and (iv) any dispute
between the Company or any Subsidiary, on the one hand, and any
governmental regulatory body, on the other hand, which dispute
might interfere with the normal operations of the Company or any
Subsidiary; provided, however, that Purchaser shall not be
required by this Agreement to disclose any such information
provided in (iii) or (iv) above to any third party other than
Purchaser's counsel and except to the extent compelled by law or
otherwise authorized by the Company.
Section 5.22 Observer Rights.
For so long as the Debentures shall remain outstanding,
provided that no nominee of the initial Purchaser is a director,
the Company shall invite one representative of Purchaser to
attend, at the Company's expense, all meetings of the Company's
Board of Directors and all committees of the Company's Board of
Directors in a nonvoting capacity and, in this respect, shall
give such representative copies of all notices and meeting agenda
in advance of such meetings and shall permit such representative
to review all documents and other materials provided to directors
at such meetings. The Company shall also provide Purchaser, in
advance, with copies of all actions proposed to be taken by the
Board of Directors in lieu of meeting.
Section 5.23 Information.
The Company will furnish to Purchaser such financial
data and other information relating to the business of the
Company as Purchaser may from time to time reasonably request.
In addition to the foregoing, no later than ninety (90) days
after the sale of the Debentures, the Company shall furnish
Purchaser a certificate, executed by the President of the
Company, itemizing the use of proceeds from the Debentures, and
the Company shall cooperate with Purchaser in connection with
post-closing review.
Section 5.24 Further Assurances.
The Company will take all actions reasonably requested
by Purchaser to effect the transactions contemplated by this
Agreement and the other Operative Documents.
Section 5.25 Optional Redemptions of Debentures.
The Debentures may not be redeemed, repaid or
repurchased by the Company at the option of the Company or any
Subsidiary or Affiliate at any time prior to the second
anniversary of the date of initial issuance of the Debentures.
On and after the second anniversary of the date of initial
issuance, the Debentures shall be subject to redemption, at the
Company's option, in whole at any time or in part from time to
time, provided that in case of each redemption at the Company's
option hereunder, the Company will give written notice thereof
to each holder of a Debenture to be redeemed not less than forty-
five (45) nor more than seventy-five (75) days prior to the date
fixed for such redemption (the "Redemption Date"), in each case
specifying the Redemption Date, the aggregate principal amount of
the Debentures to be redeemed on such date and the principal
amount of Debentures held by such holder to be redeemed on such
date. In the case of a redemption of part of the Debentures,
such redemption shall be effected pro rata among all holders of
Debentures.
ARTICLE VI - SUBORDINATION OF DEBENTURES
Section 6.1 Subordination.
The indebtedness evidenced by the Debentures, including
principal and interest, shall be subordinate and junior to the
prior payment of the indebtedness of the Company for borrowed
money only as set forth in that certain Subordination Agreement
dated as of March 27, 1997, between FUNB, the Company, and
Purchaser (such indebtedness described therein referred to herein
as, the "Senior Indebtedness"), and the indebtedness evidenced by
the Debentures shall be senior in right of payment to all other
indebtedness of the Company, which is expressly stated to be
subordinate or junior in any respect to other indebtedness of the
Company, including the Debentures.
ARTICLE VII - EVENTS OF DEFAULT; REMEDIES
Section 7.1 Events of Default.
The occurrence of any one of the following shall
constitute an "Event of Default" under this Agreement:
(a) Default shall occur in the payment of
interest on any Debenture when the same shall have become due; or
(b) Default shall occur in the making of any
payment of the principal of any Debenture or the premium, if any,
by the Company thereon at the expressed or any accelerated
maturity date or at any date fixed by the Company for prepayment;
or
(c) Default shall be made in the payment of the
principal of or interest on any indebtedness (other than the
Debentures) of the Company or any Subsidiary and such default
shall continue beyond the period of grace, if any, allowed with
respect thereto; or
(d) Default or the happening of any event shall
occur under any indenture, agreement, or other instrument under
which any indebtedness (other than the Debentures) of the Company
or any Subsidiary may be issued and such default or event shall
continue for a period of time sufficient to permit the
acceleration of the maturity of any such indebtedness of the
Company or any Subsidiary outstanding thereunder; or
(e) Default shall occur in the observance or
performance of any covenant or agreement contained in Section 5.3
or Sections 5.13 through 5.19 hereof; or
(f) Default shall occur in the observance or
performance of any other provision of this Agreement which is not
remedied within thirty (30) days after the earlier of (i) the
date on which the Company first obtains knowledge of such Default
and (ii) the date on which written notice thereof is given to the
Company by the holder of any Debenture; or
(g) Any representation or warranty made by the
Company herein, or made by the Company in any statement or
certificate furnished by the Company in connection with the
consummation of the issuance and delivery of the Debentures or
furnished by the Company pursuant hereto, is untrue in any
material respect as of the date of the issuance or making
thereof; or
(h) Final judgment or judgments for the payment
of money aggregating in excess of either (i) $100,000 in the
United States, the United Kingdom, Canada, or any other
jurisdiction in which the common law applies or (ii) $500,000 in
any other jurisdiction, is or are outstanding against the Company
or any Subsidiary or against any property or assets of either and
any one of such judgments has remained unpaid, unvacated,
unbonded or unstayed by appeal or otherwise for a period of
thirty (30) days from the date of its entry; or
(i) The Company or any Subsidiary becomes
insolvent or bankrupt, is generally not paying its debts as they
become due or makes an assignment for the benefit of creditors,
or the Company or any Subsidiary applies for or consents to the
appointment of a custodian, trustee, liquidator, or receiver for
the Company or such Subsidiary or for the major part of the
property of either; or
(j) A custodian, trustee, liquidator, or receiver
is appointed for the Company or any Subsidiary or for the major
part of the property of either and is not discharged within sixty
(60) days after such appointment; or
(k) Bankruptcy, reorganization, arrangement or
insolvency proceedings, or other proceedings for relief under any
bankruptcy or similar law or laws for the relief of debtors, are
instituted by or against the Company or any Subsidiary and, if
instituted against the company or any Subsidiary, are consented
to or are not dismissed within sixty (60) days after such
institution.
Section 7.2 Notice to Holders.
When any Event of Default described in the foregoing
Section 7.1 has occurred, or if the holder of any Debenture or of
any other evidence of indebtedness of the Company gives any
notice or takes any other action with respect to a claimed
default, the Company agrees to give notice within three (3)
Business Days of such event to all holders of the Debentures then
outstanding.
Section 7.3 Acceleration of Maturities.
When any Event of Default described in paragraph (a),
(b) or (c) of Section 7.1 has happened and is continuing, any
holder of any Debenture may, and when any Event of Default
described in paragraphs (d) through (i), inclusive, of said
Section 7.1 has happened and is continuing the holder or holders
of 50% or more of the principal amount of Debentures at the time
outstanding may, by notice to the Company, declare the entire
principal and all interest accrued on all Debentures to be, and
all Debentures shall thereupon become, forthwith due and payable,
without any presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived. When any Event
of Default described in paragraph (j) or (k) of Section 7.1 has
occurred, then all outstanding Debentures shall immediately
become due and payable without presentment, demand or notice of
any kind. Upon the Debentures becoming due and payable as a
result of any Event of Default as aforesaid, the Company will
forthwith pay to the holders of the Debentures the entire
principal and interest accrued on the Debentures. No course of
dealing on the part of any Debentureholder nor any delay or
failure on the part of any Debentureholder to exercise any right
shall operate as a waiver of such right or otherwise prejudice
such holder's rights, powers and remedies. The Company further
agrees, to the extent permitted by law, to pay to the holder or
holders of the Debentures all costs and expenses , including
reasonable attorneys' fees, incurred by them in the collection of
any Debentures upon any default hereunder or thereon.
ARTICLE VIII - RESTRICTIONS ON TRANSFER
Section 8.1 Legends; Restrictions on Transfer.
The Debenture has not been registered under the
Securities Act nor any state securities laws. Each Debenture
issued pursuant to this Agreement shall bear a legend in
substantially the following form:
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY
APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNLESS
(i) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS, OR
(ii) IN THE OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY REGISTRATION UNDER THE SECURITIES ACT OR SUCH APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
TRANSFER.
The provisions of this Article VIII shall be binding
upon all subsequent holders of the Debentures.
Section 8.2 Notice of Intention to Transfer; Opinions
of Counsel.
The Debentures shall not be transferable except upon
the conditions specified in this Article VIII. Each holder of
any Debenture, by acceptance thereof, agrees, prior to any
transfer of such Debenture, to give written notice to the Company
of such holder's intention to effect such transfer or conversion
and briefly describing the manner of the proposed transfer. Such
notice of intended transfer shall be accompanied by, if
applicable, a copy of the opinion of counsel to such holder
reasonably satisfactory to the Company, to the effect that
registration under the Securities Act of such Debenture, in
connection with such proposed transfer, is not required. If in
the opinion of such counsel, the proposed transfer of such
Debenture, may be effected without registration of such
Debenture, under the Securities Act, such holder shall be
entitled to transfer such Debenture in accordance with the terms
of the notice delivered by such holder to the Company. The
Company will promptly upon such transfer deliver new Debentures
not bearing a legend of the character set forth in Section 8.1,
unless in the opinion of such counsel subsequent disposition by
such holder may require registration under the Securities Act.
If the proposed transfer of such Debenture may not be affected
without registration of such Debenture under the Securities Act,
the holder thereof shall not be entitled to transfer such
Debenture in the absence of an effective registration statement.
ARTICLE IX - AMENDMENTS, WAIVERS AND CONSENTS
Section 9.1 Consent Required.
Any term, covenant, agreement or condition of this
Agreement may, with the consent of the Company, be amended or
compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively, if
the Company shall have obtained the consent in writing of the
holders of at least 50% in aggregate principal amount of
outstanding Debentures; provided that without the written consent
of the holders of all of the Debentures then outstanding, no such
waiver, modification, alteration or amendment shall be effective
(a) which will change the time of payment of the principal of or
the interest on any Debenture or reduce the principal amount
thereof or change the rate of interest thereon, (b) which will
change any of the provisions with respect to optional
prepayments, or (c) which will change the percentage of holders
of the Debentures required to consent to any such amendment,
modification or waiver of any of the provisions of this
Article VIII or Article VII.
Section 9.2 Solicitation of Debenture Holders.
The Company will not, directly or indirectly, pay or
cause to be paid by remuneration, whether by way of supplemental
or additional interest, fee or otherwise, to any holder of the
Debentures as consideration for or as an inducement to the
entering into by any holder of the Debentures of any waiver or
amendment of any of the terms and provisions of this Agreement
unless such remuneration is concurrently paid, on the same terms,
ratably to the holders of all of the Debentures then outstanding.
Section 9.3 Effect of Amendment or Waiver.
Any such amendment or waiver shall apply equally to all
of the holders of the Debentures and shall be binding upon them,
upon each future holder of any Debenture and upon the Company,
whether or not such Debenture shall have been marked to indicate
such amendment or waiver. No such amendment or waiver shall
extend to or affect any obligation not expressly amended or
waived or impair any right consequent thereon.
ARTICLE X - INTERPRETATION OF AGREEMENT; DEFINITIONS
Section 10.1 Definitions. Unless the context
otherwise requires, the terms hereinafter set forth when sued
herein shall have the following meanings and the following
definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined:
"Affiliate" shall mean any Person (other than a
Restricted Subsidiary) (a) which directly or indirectly through
one or more intermediaries controls, or is controlled by, or is
under common control with, the Company, (b) which beneficially
owns or holds 5% or more of any class of the Voting Stock of the
Company or (c) 5% or more of the Voting Stock (or in the case of
a Person which is not a corporation, 5% or more of the equity
interest) of which is beneficially owned or held by the Company
or a Subsidiary. The term "control" means possession, directly
or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise.
"Business Day" shall mean any day other than a
Saturday, Sunday, or other day on which banks in Tennessee are
authorized to close.
"Default" shall mean any event or condition, the
occurrence of which would, with the lapse of time or the giving
of notice, or both, constitute an Event of Default as defined in
Section 7.1.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended and any successor statute of
similar import, together with the regulations thereunder, in each
case as in effect from time to time. References to sections of
ERISA shall be construed to also refer any successor sections.
"Event of Default" shall have the meaning set forth in
Section 7.1 hereof.
"Guaranties" by any Person shall mean all obligations
(other than endorsements in the ordinary course of business of
negotiable instruments for deposit or collection) of such Person
guaranteeing, or in effect guaranteeing, any Indebtedness,
dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly,
including, without limitation, all obligations incurred through
an agreement, contingent or otherwise, by such Person: (a) to
purchase such Indebtedness or obligation or any property or
assets constituting security therefor, (b) to advance or supply
funds (i) for the purchase or payment of such Indebtedness or
obligation, (ii) to maintain working capital or other balance
sheet condition or (iii) otherwise to advance or make available
funds for the purchase or payment of such Indebtedness or
obligation, or (c) to lease property or to purchase Securities or
other property or services primarily for the purpose of assuring
the owner of such Indebtedness or obligation of the ability of
the primary obligor to make payment of the Indebtedness or
obligation, or (d) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in
respect thereof. For the purposes of all computations made under
this Agreement, a Guaranty in respect of any Indebtedness for
borrowed money shall be deemed to be Indebtedness equal to the
principal amount of such Indebtedness for borrowed money which
has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be
Indebtedness equal to the maximum aggregate amount of such
obligation, liability or dividend.
"Hazardous Substance" shall mean any hazardous or toxic
material, substance or waste, pollutant or contaminant which is
regulated under any statute, law, ordinance, rule or regulation
of any local, state, regional or Federal authority having
jurisdiction over the property of the Company and its
Subsidiaries or its use, including but not limited to any
material, substance or waste which is: (a) defined as a
hazardous substance under Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. Section 1317.1) as amended;
(b) regulated as a hazardous waste under Section 1004 or
Section 3001 of the Federal Solid Waste Disposal Act, as amended
by the Resource Conservation and Recovery Act (42 U.S.C. Section 6901
et seq.) as amended; (c) defined as a hazardous substance under
Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) as
amended; or (d) defined or regulated as a hazardous substance or
hazardous waste under any rules or regulations promulgated under
any of the foregoing statutes.
"Indebtedness" of any Person shall mean and include all
obligations of such Person which in accordance with generally
accepted accounting principles shall be classified upon a balance
sheet of such Person as liabilities of such Person, and in any
event shall include all (a) obligations of such Person for
borrowed money or which have been incurred in connection with the
acquisition of property or assets, (b) obligations secured by any
lien or other charge upon property or assets owned by such
Person, even though such Person has not assumed or become liable
for the payment of such obligations, (c) obligations created or
arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person,
notwithstanding the fact that the rights and remedies of the
seller, lender or lessor under such agreement in the Event of
Default are limited to repossession or sale or property,
(d) capitalized rentals, and (e) Guaranties of obligations of
others of the character referred to in this definition.
"Interest Charges" for any period shall mean all
interest and all amortization of debt discount and expense on any
particular Indebtedness for which such calculations are being
made. Computations of Interest Charges on a pro forma basis for
Indebtedness having a variable interest rate shall be calculated
at the rate in effect on the date of any determination.
"Investments" shall mean all investments, in cash or by
delivery of property made, directly or indirectly in any Person,
whether by acquisition of shares of capital stock, indebtedness
or other obligations or Securities or by loan, advance, capital
contribution or otherwise; provided, however that "Investments"
shall not mean or include routine investments in property to be
used or consumed in the ordinary course of business.
"Long-Term Lease" shall mean any lease of real or
personal property (other than a Capitalized Lease) having an
original term, including any period for which the lease may be
renewed or extended at the option of the lessor, of more than
three years.
"Material Adverse Event" shall mean any event or
circumstance, or set of events or circumstances, individually or
collectively, that reasonably could be expected to result in any
(i) adverse effect upon the validity or enforceability of any of
the Operative Documents, or (ii) material and adverse effect on
the financial condition of the Company as represented to
Purchaser herein or in any document delivered to Purchaser in
connection herewith, or (iii) default or potential default under
any of the Operative Documents.
"Multiemployer Plan" shall have the same meaning as in
ERISA.
"Person" shall mean an individual, partnership,
corporation, trust or unincorporated organization, and a
government or agency or political subdivision thereof.
"Plan" means a "pension plan", as such term is defined
in ERISA, established or maintained by the Company or any ERISA
Affiliate or as to which the Company or any ERISA Affiliate
contributed or is a member or otherwise may have any liability.
"Reportable Event" shall have the same meaning as in
ERISA.
"Restricted Investments" shall mean all Investments,
other than Investments described in clauses (i) through (iv) of
Section 5.17 hereof.
"Security" shall have the same meaning as in Section
2(1) of the Securities Act of 1933, as amended.
"Subsidiary" shall mean, as to any particular parent
corporation, any corporation of which more than 50% (by number of
votes) of the Voting Stock shall be owned by such parent
corporation and/or one or more corporations which are themselves
Restricted Subsidiaries of such parent corporation. The term
"Subsidiary" shall mean a Subsidiary of the Company.
"Voting Stock" shall mean Securities of any class or
classes the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate
directors (or Persons performing similar functions).
"Wholly-owned" when used in connection with any
Subsidiary shall mean a Subsidiary of which all of the issued and
outstanding shares of stock (except shares required as directors'
qualifying shares) and all Funded Debt or Current Debt shall be
owned by the Company and/or one or more of its Wholly-owned
Restricted Subsidiaries.
Section 10.2 Accounting Principles.
Where the character or amount of any asset or liability
or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be
made for the purposes of this Agreement, the same shall be done
in accordance with GAAP, to the extent applicable, except where
such principles are inconsistent with the requirements of this
Agreement.
Section 10.3 Directly or Indirectly.
Where any provision in this Agreement refers to action
to be taken by any Person, or which such Person is prohibited
from taking such provision shall be applicable whether the action
in question is taken directly or indirectly by such Person.
ARTICLE XI - MISCELLANEOUS
Section 11.1 Expenses, Stamp Tax Indemnity.
Whether or not the transactions herein contemplated
shall be consummated, the Company agrees to pay directly all of
Purchaser's out-of-pocket expenses in connection with the
entering into of this Agreement and the consummation of the
transactions contemplated hereby, including but not limited to
the reasonable fees, expenses and disbursements of Xxxxxxxx &
Xxx, PLC, Purchaser's counsel, the entering into of this
Agreement and the consummation of duplicating and printing cost
and charges for shipping the Debentures, adequately insured to
Purchaser at Purchaser's home office or at such other place as
Purchaser may designate, and so long as Purchaser hold any of the
Debentures, all such expenses relating to any amendments, waivers
or consents pursuant to the provisions hereof (whether or not the
same are actually executed and delivered), including, without
limitation, any amendments, waivers or consents resulting from
any work-out, restructuring or similar proceedings relating to
the performance by the Company of its obligations under this
Agreement and the Debentures. The Company also agrees that it
will pay and save Purchaser harmless against any and all
liability with respect to stamp and other taxes, if any, which
may be payable in connection with the execution and delivery of
this Agreement or the Debentures, whether or not any Debentures
are then outstanding. The Company agrees to protect and
indemnify Purchaser against any liability for any and all
brokerage fees and commissions payable or claimed to be payable
to any Person in connection with the transactions contemplated by
this Agreement.
Section 11.2 Powers and Rights Not Waived; Remedies
Cumulative.
No delay or failure on the part of the holder of any
Debenture in the exercise of any power or right shall operate as
a waiver thereof; nor shall any single or partial exercise of the
same preclude any other of further exercise thereof, or the
exercise of any other power or right, and the rights and remedies
of the holder of any Debenture are cumulative to and are not
exclusive of any rights or remedies any such holder would
otherwise have, and no waiver or consent, given or extended
pursuant to Article VIII hereof, shall extend to or affect any
obligation or right not expressly waived or consented to.
Section 11.3 Notices.
All communications provided for hereunder shall be in
writing and shall be delivered personally, or mailed by
registered mail, or by prepaid overnight air courier, or by
facsimile communication, in each case addressed:
If to Purchaser: Tandem Capital, Inc.
000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxx
with a copy to: Xxxxxxxx & Xxx, PLC
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx I.N. XxXxxxxx, Esq.
If to the Company: Environmental Tectonics Corporation
000 Xxxxx Xxx
Xxxxxxxxxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx
with a copy to: Xxxxxxx & Xxx, A Professional
Corporation
One Glenhardie Corporate Center
0000 Xxxxxxxx Xxxx
X.X. Xxx 000
Xxxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
or such other address as Purchaser or the subsequent holder of
any Debenture initially issued to Purchaser may designate to the
Company in writing, or such other address as the Company may in
writing designate to Purchaser or to a subsequent holder of the
Debenture initially issued to Purchaser, provided, however, that
a notice sent by overnight air courier shall only be effective if
delivered at a street address designated for such purpose by such
person and a notice sent by facsimile communication shall only be
effective if made by confirmed transmission at a telephone number
designated for such purpose by such person or, in either case, as
Purchaser or a subsequent holder of any Debentures initially
issued to Purchaser may designate to the Company in writing or at
a telephone number herein set forth in the case of the Company.
Section 11.4 Successors and Assigns.
This Agreement, the Debentures and the other Operative
Documents may be endorsed, assigned and/or transferred in whole
or in part by Purchaser, and any such holder and/or assignee of
the same shall succeed to and be possessed of the rights and
powers of Purchaser under all of the same to the extent
transferred and assigned. The Company shall not assign any of
its rights nor delegate any of its duties under this Agreement or
any of the other Operative Documents by operation of law or
otherwise without the prior express written consent of Purchaser,
and in the event the Company obtains such consent, this Agreement
and the other Operative Documents shall be binding upon such
assignee.
Section 11.5 Survival of Covenants and
Representations.
All covenants, representations and warranties made by
the Company herein and in any certificates delivered pursuant
hereto, whether or not in connection with the Closing Date, shall
survive the closing and the delivery of this Agreement and the
Debentures.
Section 11.6 Severability.
Should any part of this Agreement for any reason be
declared invalid or unenforceable, such decision shall not affect
the validity of any remaining portion, which remaining portion
shall remain in force and effect as if this Agreement had been
executed with the invalid or unenforceable portion thereof
eliminated and it is hereby declared the intention of the parties
hereto that they would have executed the remaining portion of
this Agreement without including therein any such part, parts or
portion which may for any reason, be hereafter declared invalid
or unenforceable.
Section 11.7 Governing Law.
This agreement and the Debentures issued and sold
hereunder shall be governed by and construed in accordance with
Tennessee law, without regard to its conflict of law rules.
Section 11.8 Captions; Counterparts.
The descriptive headings of the various Sections or
parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions
hereof. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
* * *
IN WITNESS WHEREOF, the parties hereto have caused this
Debenture Purchase Agreement to be executed and delivered by
their duly authorized officers as of the date first written
above.
COMPANY: ENVIRONMENTAL TECTONICS
CORPORATION:
By:/s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx
Chief Financial Officer
PURCHASER: SIRROM CAPITAL CORPORATION
By:/s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: Vice President
