Exhibit 10.8
PREFERRED STOCK PURCHASE AGREEMENT
OF
SIRROM CAPITAL CORPORATION
AND
ENVIRONMENTAL TECTONICS CORPORATION
Table of Contents
ARTICLE I. - SALE AND PURCHASE OF STOCK
Section 1.1. Description of Preferred Stock.................. 1
Section 1.2. Commitment; Closing Date........................ 1
Section 1.3. Processing Fee.................................. 2
ARTICLE II. - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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. Contracts and Other Commitments................. 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. Registration Rights............................ 10
Section 2.21. Environment.................................... 10
Section 2.22. Insurance...................................... 11
Section 2.23. Governmental Consents.......................... 11
Section 2.24. Offering....................................... 12
Section 2.25. Manufacturing Rights........................... 12
Section 2.26. Employees...................................... 12
Section 2.27. Fees/Commissions............................... 13
Section 2.28. 1940 Act Compliance............................ 13
Section 2.29. ERISA.......................................... 13
Section 2.30. Disclosure..................................... 14
Section 2.31. Survival...................................... 14
ARTICLE III. - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 3.1. Authorization................................... 14
Section 3.2. Validity and Binding Effect..................... 14
Section 3.3. Accredited Investor Status; Purchase for
Investment.................................................... 15
Section 3.4. Survival........................................ 15
ARTICLE IV. - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
PURCHASER
Section 4.1. Representations and Warranties................. 16
Section 4.2. Officer's Certificate.......................... 16
Section 4.3. Satisfactory Proceedings....................... 16
Section 4.4. Statement With Respect to Shares............... 16
Section 4.5. Registration Rights Agreement.................. 16
Section 4.6. Sale of Subordinated Debentures................ 17
Section 4.7. Closing of FUNB Financing...................... 17
Section 4.8. Legal Opinion.................................. 17
Section 4.9. The Company's Existence and Authority.......... 17
Section 4.10. Required Consents............................. 17
Section 4.11. Waiver of Conditions.......................... 18
ARTICLE V. - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
COMPANY
Section 5.1. Representations and Warranties................. 18
Section 5.2. Qualifications................................. 18
ARTICLE VI. - COVENANTS OF COMPANY
Section 6.1. Use of Proceeds................................ 18
Section 6.2. Repurchase of Preferred Stock.................. 18
Section 6.3. Corporate Existence, Etc....................... 19
Section 6.4. Maintenance, Etc............................... 19
Section 6.5. Nature of Business............................. 19
Section 6.6. Insurance...................................... 19
Section 6.7. Taxes, Claims for Labor and Materials.......... 19
Section 6.8. Compliance with Laws........................... 20
Section 6.9. ERISA Matters.................................. 20
Section 6.10. Books and Records; Rights of Inspection....... 20
Section 6.11. Reports....................................... 21
Section 6.12. [Reserved].................................... 22
Section 6.13. Board of Directors; Observer Rights........... 22
Section 6.14. [Reserved].................................... 23
ARTICLE VII. - AMENDMENTS, WAIVERS AND CONSENTS
Section 7.1. Consent Required............................... 23
Section 7.2. Effect of Amendment or Waiver.................. 23
ARTICLE VIII. - INTERPRETATION OF AGREEMENT; DEFINITIONS
Section 8.1. Definitions.................................... 23
Section 8.2. Accounting Principles.......................... 24
Section 8.3. Directly or Indirectly......................... 24
ARTICLE IX. - MISCELLANEOUS
Section 9.1. Expenses, Stamp Tax Indemnity.................. 24
Section 9.2. Powers and Rights Not Waived; Remedies
Cumulative................................................... 25
Section 9.3. Notices........................................ 25
Section 9.4. Successors and Assigns......................... 26
Section 9.5. Survival of Covenants and Representations...... 26
Section 9.6. Severability................................... 27
Section 9.7. Governing Law.................................. 27
Section 9.8. Captions; Counterparts......................... 27
Section 9.9. Entire Agreement............................... 27
PREFERRED STOCK PURCHASE AGREEMENT
This PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement")
entered into the 27th day of March, 1997, is 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 of the Company, 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 STOCK
Section 1.1. Description of Preferred Stock.
The Company has authorized the issue and sale of 25,000
shares of its Series A Convertible Preferred Stock (the
"Preferred Stock") having the rights and preferences set forth in
the Company's Statement With Respect to Shares attached as
Exhibit A (the "Statement With Respect to Shares") hereto for a
purchase price of $100 per share, or an aggregate purchase price
of $2,500,000.00. The Statement With Respect to Shares shall be
filed with the Secretary of State of Pennsylvania on or before
the Closing Date (as defined below). The terms which are
capitalized herein shall have the meanings set forth in Section 8
hereof unless the context shall otherwise require.
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, 25,000 shares of Preferred
Stock for an aggregate purchase price of $2,500,000.
Delivery of a single certificate representing the Preferred
Stock 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 stock certificate to be
delivered to Purchaser on the Closing Date will be registered in
Purchaser's name or in the name of such nominee 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 $50,000.
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 Registration Rights Agreement between the
Company and Purchaser dated of even date herewith (the
"Registration Rights Agreement") 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 result 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," of the Company 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, of which 2,962,784 shares are issued and outstanding,
and (ii) 1,000,000 shares of undesignated preferred stock, with
rights and preferences to be fixed by the Board of Directors in
accordance with the corporate laws of the Commonwealth of
Pennsylvania and the Company's Articles of Incorporation, and of
which, as of the Closing, 25,000 shall have been designated as
"Series A Convertible Preferred Stock," bearing the rights,
preferences and limitations set forth in the Statement With
Respect to Shares and 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 Preferred Stock. The offer, sale
and issuance of the Preferred Stock 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 securities outstanding which are convertible into or
exchangeable for shares of Common Stock, or 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 conversion privileges of the Preferred Stock to be issued
pursuant to this Agreement, with respect to which 416,666.67
shares of Common Stock have been reserved for issuance upon
conversion, (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.
(c) The Preferred Stock that is being purchased by the
Purchaser, when issued, sold, and delivered in accordance with
the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other
than restrictions on transfer under this Agreement and under
applicable state and federal securities laws. The Common Stock
issuable upon conversion of the Preferred Stock being purchased
under this Agreement has been duly and validly reserved for
issuance and, upon issuance in accordance with the terms of the
Statement With Respect to Shares and this Agreement, will be duly
and validly issued, fully paid, and nonassessable and will be
free of restrictions on transfer other than restrictions on
transfer under this Agreement and under applicable state and
federal securities laws.
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 and
the Operative Documents, the issuance of the Preferred Stock
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, 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 Operative
Documents 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.
Section 2.5. Contracts and Other Commitments.
Except as disclosed on Schedule 2.5, the Company and its
Subsidiaries do not have and are not bound by any contract,
agreement, lease, commitment, loans, liens, pledges, security
interests upon which the Company or any Subsidiary is obligated
or by which the Company is bound other than (i) contracts for the
purchase of supplies and services that were entered into in the
ordinary course of business and that do not involve more than
$50,000, and do not extend for more than one (1) year beyond the
date hereof, (ii) sales contracts entered into in the ordinary
course of business, and (iii) contracts terminable at will by the
Company on more than thirty (30) days' notice without cost or
liability to the Company and that do not involve any employment
or consulting arrangement and are not material to the conduct of
the Company's business. 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 or 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 in 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 heretofore
delivered to Purchaser, fairly present the financial condition of
the Company and its Subsidiaries as at the effective 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 condition, financial or
otherwise, 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"). Since February 26, 1995, the
Company has timely filed all SEC Reports. The financial
statements contained in the SEC Reports fairly presented the
financial position of the Company as of the dates mentioned and
the results of operations, changes in stockholders' equity and
changes in financial position or cash flows for the periods then
ended in conformity with GAAP applied on a consistent basis
throughout the periods involved. 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.
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 is in compliance
with all laws, regulations, decrees and orders applicable to it
(including but not limited to laws, regulations, decrees and
orders relating to environmental, occupational and health
standards and controls, antitrust, monopoly, restraint of trade
or unfair competition) 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 1%
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. 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 of its 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 or has a valid right to use to 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 follows such
procedures as the Board of Directors of the Company deem
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) duly registered or
were the subject of an available exemption from the requirements
of all applicable state securities or Blue Sky 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. Registration Rights.
Except as described in Schedule 2.20, 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 2.21. 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 a material violation 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 material 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 2.22. 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 2.23. 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, the offer, sale or issuance of the Preferred
Stock by the Company or the issuance of Common Stock upon
conversion of the Preferred Stock, except (i) the filing of the
Statement with Respect to Shares with the Secretary of State of
the Commonwealth of Pennsylvania, and (ii) such filings as have
been made prior to the Closing, except any notices of sale
required to be filed with the Securities and Exchange commission
under Regulation D of the Securities Act or such post-closing
filings as may be required under applicable state securities
laws, which will be timely filed within the applicable periods
therefor.
Section 2.24. 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 Preferred Stock 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 2.25. 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 2.26. 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 except as
disclosed in Schedule 2.26. 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 2.27. Fees/Commissions.
The Company has not agreed to pay any finder's fee,
commission, origination fee (except for the processing 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 payable to
First Union National Bank.
Section 2.28. 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 2.29. ERISA.
Except as disclosed in Schedule 2.29, the Borrower is in
compliance in all material respects with all applicable
provisions of Title IV of the Employee Retirement Income Security
Act of 1974, Pub. L. No. 93-406, September 2, 1974, except as
disclosed in Schedule 2.29, 88 Stat. 829, 29 U.S.C.A. Section 1001 et
seq. (1975), as amended from time to time ("ERISA"). Neither a
reportable event nor a prohibited transaction (as defined in
ERISA) has occurred and is continuing with respect to any
"pension plan" (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 Borrower nor any commonly controlled
entity (as defined in ERISA) has completely or partially
withdrawn from a multiemployer plan (as defined in ERISA);
Borrower and each commonly controlled entity has met its minimum
funding requirements under ERISA with respect to all of its Plans
and the present fair market value of all Plan property exceeds
the present value of all vested benefits under each Plan, as
determined on the most recent valuation date of the Plan and in
accordance with the provisions of ERISA and the regulations
thereunder for calculating the potential liability of Borrower or
any commonly controlled entity to the PBGC or the Plan under
Title IV or ERISA; and neither Borrower nor any commonly
controlled entity has incurred any liability to the PBGC under
ERISA.
Section 2.30. 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 2.31. Survival.
The representations and warranties of the Company contained
in this Agreement shall survive until this Agreement terminates
in accordance with Section 9.5 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, the
Registration Rights 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 Articles of
Incorporation 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. Accredited Investor Status; Purchase for
Investment.
In connection with the sale to Purchaser of the Preferred
Stock:
(a) Purchase for Investment. Purchaser is acquiring
the Preferred Stock for its own account as principal, 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, distributing or otherwise disposing
of the Preferred Stock.
(b) No Registration; Rule 144. (i) The Preferred
Stock has not been registered under the Securities Act, and the
shares of Preferred Stock are "restricted" securities, as defined
in Rule 144; (ii) the shares of Preferred Stock may not be resold
unless they are registered under the Securities Act or unless an
exemption from registration is available; (iii) Purchaser
understands that the availability of Rule 144 for the sale and
transfer of the Preferred Stock is limited, and that certain
conditions and events must exist before Purchaser would be able
to utilize Rule 144 in connection with the sale or other
disposition of the Preferred Stock.
(c) Investment Company; Information. Purchaser is an
investment company registered under the Investment Company Act
and, to the knowledge of Purchaser, has received the financial
and other information which it has requested from the Company.
The Company has made available to Purchaser the opportunity to
ask questions and receive answers from the Company concerning the
terms and conditions of the offering of the Preferred Stock
hereunder and to obtain any additional information necessary to
verify the accuracy of any information contained in this
Agreement or furnished as above stated.
(d) Transfer to Subsidiary. Notwithstanding anything
in this Section 3.3 to the contrary, Purchaser may transfer and
assign to its rights and obligations under this Agreement to one
or more of its wholly-owned Subsidiaries, provided that any such
Subsidiary shall have executed an investment letter containing
the representations, and warranties contained in this
Section 3.3.
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 9.5 hereof.
ARTICLE IV. - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
PURCHASER
The obligation of Purchaser to purchase and pay for the
Preferred Stock 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 the Chief Financial 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. Statement With Respect to Shares.
The Statement With Respect to Shares shall have been filed
with the Office of the Secretary of State of the Commonwealth of
Pennsylvania.
Section 4.5. Registration Rights Agreement.
The Company shall have executed and delivered to the
Purchaser the Registration Rights Agreement.
Section 4.6. Sale of Subordinated Debentures.
The closing with respect to the sale by the Company and the
purchase by the Purchaser of $4,000,000 of the Company's 12%
subordinated debentures due March 27, 2004, shall occur
simultaneously with the sale of the Preferred Stock by the
Company to the Purchaser.
Section 4.7. 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 4.8. 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 4.9. 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:
DMS the Articles of Incorporation of the Company, as
amended by the Statement With Respect to Shares, certified by the
Secretary of State of Pennsylvania;
(b) a certificate of existence or good standing of the
Company in the Commonwealth 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 good standing certificate of ETC
International Corporation.
Section 4.10. 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 4.11. Waiver of Conditions.
If on the Closing Date the Company fails to tender to
Purchaser the Preferred Stock 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. - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
COMPANY
Section 5.1. Representations and Warranties.
The representations and warranties of the Purchaser
contained in Section 3 shall be true on and as of the Closing
Date with the same effect as though such representations and
warranties had been made on and as of the date of the Closing
Date.
Section 5.2. Qualifications.
All authorizations, approvals, or permits, if any, of any
governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful
issuance and sale of the Preferred Stock pursuant to this
Agreement shall be duly obtained and effective as of the Closing
Date.
ARTICLE VI. - COVENANTS OF COMPANY
From and after the Closing Date and continuing so long as
Purchaser holds the Preferred Stock:
Section 6.1. Use of Proceeds.
The Company shall use the proceeds of the sale of the
Preferred Stock only for the purposes set forth on Schedule 6.1
attached hereto.
Section 6.2. Repurchase of Preferred Stock.
Neither the Company nor any Subsidiary or Affiliate,
directly or indirectly, may repurchase or make any offer to
repurchase any Preferred Stock and the Preferred Stock may only
be redeemed in accordance with its terms.
Section 6.3. 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 all
licenses and permits necessary to the proper conduct of its
business.
Section 6.4. 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 6.5. 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 6.6. 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 6.7. 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 6.8. Compliance with Laws.
Except where failure to do so does not and would not
constitute a Material Adverse Event, 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 Company is a party or by which
Company or any of its properties is bound. Without limiting the
foregoing, Company shall pay all of its indebtedness promptly and
substantially in accordance with the terms thereof.
Section 6.9. ERISA Matters.
If Borrower has in effect, or hereafter institutes, a
pension plan that is subject to the requirements of ERISA, then
the following covenants shall be applicable during such period as
any Plan shall be in effect: (i) Borrower hereby covenants that
throughout the existence of the Plan, Borrower's contributions
under the Plan will meet the minimum funding standards required
by ERISA and Borrower will not institute a distress termination
of the Plan; and (ii) Borrower covenants that it will send to
Lender a copy of any notice of any "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 6.9 so long as such violation
is cured within ten (10) days of the date hereof.
Section 6.10. 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 6.11. Reports.
The Company will furnish to Purchaser the following
(provided, that this obligation shall be deemed satisfied if the
Company delivers the following to the Purchaser in connection
with that certain Debenture Purchase Agreement by and between the
Company and Purchaser of even date herewith):
(a) Monthly statements. Within twenty-five (25) days
of the end of each month, beginning for 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 for
the corresponding period 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 present the financial condition and results of
operations and cash flows of the Company and for the periods
presented subject to normal par and 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 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 6.12. [Reserved].
Section 6.13. Board of Directors; Observer Rights.
(a) Effective upon the closing of the transactions
pursuant to Section 1.2 hereof, and for so long as the initial
Purchaser or any Affiliate owns at least 33 1/3% of the original
number of shares of Preferred Stock sold hereby, (i) the size of
the Board of Directors of the Company shall be increased to six
(6) directors and shall remain at such size, and (ii) the Company
agrees to include a nominee of the initial Purchaser in
management's slate of nominees to be elected to the Board of
Directors and to recommend to the stockholders the election of
such nominee.
(b) For so long as the Preferred Stock shall remain
outstanding and is owned by Purchaser or any Affiliate, 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 6.14. [Reserved].
ARTICLE VII. - AMENDMENTS, WAIVERS AND CONSENTS
Section 7.1. 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% of the outstanding Preferred Stock.
Section 7.2. Effect of Amendment or Waiver.
Any such amendment or waiver shall apply equally to all of
the holders of the Preferred Stock and shall be binding upon
them, upon each future holder of any Preferred Stock and upon the
Company. No such amendment or waiver shall extend to or affect
any obligation not expressly amended or waived or impair any
right consequent thereon.
ARTICLE VIII. - INTERPRETATION OF AGREEMENT; DEFINITIONS
Section 8.1. 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 (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.
"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.
"Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, and a government or agency
or political subdivision thereof.
"Rule 144" shall mean Rule 144 as promulgated by the SEC
under the Securities Act, as such Rule may be amended from time
to time, or any similar successor rule that may be promulgated by
the SEC.
"Security" shall have the same meaning as in Section 2(1) of
the Securities Act of 1933, as amended.
The term "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.
Section 8.2. 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 8.3. 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 IX. - MISCELLANEOUS
Section 9.1. 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 so long as Purchaser holds any of the Preferred Stock, 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. 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 issuance of the
Preferred Stock, whether or not any shares of Preferred Stock 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 9.2. Powers and Rights Not Waived; Remedies
Cumulative.
No delay or failure on the part of the holder of any
Preferred Stock 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 Preferred Stock 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 XI hereof, shall extend to or
affect any obligation or right not expressly waived or consented
to.
Section 9.3. 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, Xxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx I.N. XxXxxxxx, Esq.
If to the Company: Environmental Tectonics Corporation
000 Xxxxx Xxx
Xxxxxxxxxxx, Xxxxxxxxxxxx 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, Xxxxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
or such other address as Purchaser or the subsequent holder of
any Preferred Stock 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 Preferred Stock 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 Preferred Stock 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 9.4. Successors and Assigns.
This Agreement 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 9.5. 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 Closing
Date.
Section 9.6. 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 9.7. Governing Law.
This agreement and the Preferred Stock issued and sold
hereunder shall be governed by and construed in accordance with
Tennessee law, without regard to its conflict of law rules.
Section 9.8. 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.
Section 9.9. Entire Agreement.
This Agreement constitutes the entire agreement of the
parties with regard to the sale of the Preferred Stock.
* * *
IN WITNESS WHEREOF, the parties hereto have caused this
Preferred Stock 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
