Exhibit 3(i).1
Statement With Respect to Shares
of
Series B Cumulative Convertible Preferred Stock
of
Environmental Tectonics Corporation
Pursuant to Section 1522(b) of the
Business Corporation Law of the Commonwealth of Pennsylvania
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In compliance with the requirements of 15 Pa.C.S. Section 1522(b) (relating
to statements with respect to shares), Environmental Tectonics Corporation, a
Pennsylvania corporation (the "CORPORATION"), desiring to state the designation
and voting rights, preferences, limitations, and special rights, if any, of a
class or series of its shares, hereby states that:
FIRST: The name of the Corporation is Environmental Tectonics Corporation.
SECOND: The resolution amending the Articles of Incorporation of the
Corporation under 15 Pa. C.S. Section 1522(b) (relating to divisions and
determinations by the board), set forth in full, is as follows:
WHEREAS, the Articles of Incorporation of the Corporation authorizes
Preferred Stock consisting of 1,000,000 shares issuable from time to time in one
or more series; and
WHEREAS, the Board of Directors of the Corporation (or an authorized
committee thereof) is authorized, subject to limitations prescribed by law and
by the Articles of Incorporation to establish and fix the number of shares to be
included in any series of Preferred Stock and the par value, designation,
rights, preferences and limitations of the shares of such series; and
WHEREAS, the Board of Directors intends to establish a new series of
Preferred Stock, called Series B Cumulative Convertible Preferred Stock.
NOW, THEREFORE, BE IT RESOLVED, that pursuant to Article 6 of the
Corporation's Articles of Incorporation, the designation, rights, preferences,
powers, restrictions and limitations applicable to the Series B Preferred Stock
be and hereby are set forth below:
1. Designation. The designation of this series, which consists of 15,000
shares of Preferred Stock, $0.05 par value per share, is the Series B Cumulative
Convertible Preferred Stock (the "SERIES B PREFERRED STOCK") and the stated
value shall be One Thousand U.S. Dollars ($1,000.00) per share (the "STATED
VALUE").
2. Certain Definitions. For purposes of this Statement With Respect to
Shares, the following terms shall have the following meanings:
"COMMON STOCK" means the common stock of the Corporation, $0.05 par
value per share.
"COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the number
of shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to Section 7(c)(ii)
hereof regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any shares of Common Stock owned or held
by or for the account of the Company.
"CONVERSION DATE" means, for any Optional Conversion (as defined
below), the date specified in the notice of conversion in the form attached
hereto (the "NOTICE OF CONVERSION"), so long as a copy of the Notice of
Conversion is faxed (or delivered by other means resulting in notice) to the
Corporation before 4:59 p.m., Philadelphia, Pennsylvania time, on the Conversion
Date indicated in the Notice of Conversion; provided, however, that if the
Notice of Conversion is not so faxed or otherwise delivered before such time,
then the Conversion Date shall be the date the Holder faxes or otherwise
delivers the Notice of Conversion to the Corporation.
"CONVERSION PRICE" means, with respect to each share of Series B
Preferred Stock, the Market Price as of the Issue Date of such share of Series B
Preferred Stock, provided that such Conversion Price shall not be less than the
Floor Price, and shall be subject to adjustment as provided herein.
"CONVERTIBLE SECURITIES" means any stock or securities other than
Options directly or indirectly convertible into or exchangeable for Common
Stock.
"EXCLUDED SECURITIES" means any shares of Common Stock issued or
issuable by the Corporation (i) in connection with any employee benefit plan
which has been approved by the Board of Directors of the Corporation, pursuant
to which the Corporation's securities may be issued to any employee, officer,
director, consultant or advisor for services provided to the Corporation, (ii)
upon conversion of the Series B Preferred Stock, (iii) in connection with a
strategic partnership or joint venture in which there is a significant
commercial relationship with the Corporation and in which the primary purpose of
which is not to raise capital, (iv) pursuant to a bona fide firm commitment
underwritten public offering with a nationally recognized underwriter which
generates gross proceeds in excess of $30,000,000, and (v) upon conversion of
any Options or Convertible Securities which are outstanding on the day
immediately preceding the date hereof, provided that the terms of such Options
or Convertible Securities are not amended, modified or changed on or after the
date hereof.
"FLOOR PRICE" shall mean $4.95 per share.
"MARKET PRICE" means, (i) the closing price for the shares of Common
Stock as reported on the American Stock Exchange ("AMEX") by Bloomberg Financial
Markets ("BLOOMBERG") on the trading day immediately preceding such date, or
(ii) if the AMEX is not the principal trading market for the shares of Common
Stock, the closing sale price reported by Bloomberg on the principal trading
market for the Common Stock for such date, or (iii) if the foregoing do not
apply, the last sale price of such security in the over-the-counter market on
the pink sheets or bulletin board for such security as reported by Bloomberg, or
if no sale price is so reported for such security, the last bid price of such
security as reported by Bloomberg, or (iv) if
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market value cannot be calculated as of such date on any of the foregoing bases,
the Market Price shall be determined in good faith by the Corporation's Board of
Directors.
"OPTIONS" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
3. Dividends.
(a) Accruing Dividends. From and after the date on which each share
of Series B Preferred Stock is issued (with respect to each such share, the
"ISSUE DATE"), the holder of such shares of Series B Preferred Stock (each a
"HOLDER" and collectively, the "HOLDERS") shall be entitled to receive, out of
funds legally available therefor, cumulative dividends at a rate of six percent
(6%) per annum of the Stated Value on each share of Series B Preferred Stock
(the "ACCRUING DIVIDENDS") in preference to the holders of Common Stock or any
other series of Preferred Stock. The Accruing Dividends shall accrue on each
issued and outstanding share of Series B Preferred Stock from the Issue Date,
from day to day, whether or not earned or declared, and shall be cumulative. The
Corporation shall pay the Holder the Accruing Dividends quarterly to the extent
that the Corporation has funds legally available therefor; provided, however,
that the Corporation may, at its option, defer the payment of Accruing Dividends
until a subsequent date, up to and including April 6, 2012.
(b) The Holders shall be entitled to receive, if and when declared by
the Board of Directors and paid by the Corporation, any dividends paid with
respect to the Common Stock (other than any dividends paid in additional shares
of Common Stock). In the case of any such dividend, each Holder shall be
entitled to receive an amount per share of Series B Preferred Stock held by such
Holder as of the record date for such dividend equal to the product of: (i) the
amount of the dividend payable with respect to one share of Common Stock and
(ii) the number of shares of Common Stock that would be issued to a Holder if
one share of Series B Preferred Stock were converted by the Holder on the record
date.
4. Conversion.
(a) Conversion at the Option of the Holder. Subject to the
limitations on conversions contained in Section 4(c), each Holder may, at any
time after April 6, 2009 and from time to time, convert (an "OPTIONAL
CONVERSION") each of its shares of Series B Preferred Stock into a number of
fully paid and nonassessable shares of the Common Stock determined by dividing
the Stated Value by the Conversion Price for such shares of Series B Preferred
Stock.
(b) Mechanics of Conversion. In order to effect an Optional
Conversion, a Holder shall: (x) fax (or otherwise deliver) a copy of the fully
executed Notice of Conversion to the Corporation or the transfer agent for the
Common Stock and (y) surrender or cause to be surrendered the original
certificates representing the Series B Preferred Stock being converted (the
"PREFERRED STOCK CERTIFICATES"), duly endorsed, along with a copy of the Notice
of Conversion as soon as practicable thereafter to the Corporation or the
transfer agent. Upon receipt by the Corporation of a facsimile copy of a Notice
of Conversion from a Holder, the Corporation shall promptly send, via facsimile,
a confirmation to such Holder stating that the Notice of Conversion has been
received, the date upon which the Corporation expects to deliver
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the Common Stock issuable upon such conversion and the name and telephone number
of a contact person at the Corporation regarding the conversion. The Corporation
shall not be obligated to issue shares of Common Stock upon a conversion unless
either the Preferred Stock Certificates are delivered to the Corporation or the
transfer agent as provided above, or the Holder notifies the Corporation or the
transfer agent that such Preferred Stock Certificates have been lost, stolen or
destroyed and delivers the documentation to the Corporation required by Section
11(b) hereof.
(i) Delivery of Common Stock Upon Conversion. Upon the
surrender of Preferred Stock Certificates accompanied by a Notice of Conversion,
the Corporation shall, no later than the later of (a) the third business day
following the Conversion Date and (b) the second business day following the date
of such surrender (or, in the case of lost, stolen or destroyed certificates,
after provision of indemnity pursuant to Section 11(b)) (the "DELIVERY PERIOD"),
issue and deliver to the Holder or its nominee (x) that number of shares of
Common Stock issuable upon conversion of such shares of Series B Preferred Stock
being converted and (y) a certificate representing the number of shares of
Series B Preferred Stock not being converted, if any. In addition, the
Corporation shall also pay the Holder at such time any accrued and unpaid
Accruing Dividends on the shares of Series B Preferred Stock that are being
converted. If the Corporation's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program, and
so long as the certificates therefor do not bear a legend and the Holder thereof
is not then required to return such certificate for the placement of a legend
thereon, the Corporation shall cause its transfer agent to electronically
transmit the Common Stock issuable upon conversion to the Holder by crediting
the account of the Holder or its nominee with DTC through its Deposit Withdrawal
Agent Commission system ("DTC TRANSFER"). If the aforementioned conditions to a
DTC Transfer are not satisfied, the Corporation shall deliver to the Holder
physical certificates representing the Common Stock issuable upon conversion.
Further, a Holder may instruct the Corporation to deliver to the Holder physical
certificates representing the Common Stock issuable upon conversion in lieu of
delivering such shares by way of DTC Transfer.
(ii) No Fractional Shares. If any conversion of Series B
Preferred Stock would result in the issuance of a fractional share of Common
Stock, such fractional share shall be disregarded, and the number of shares of
Common Stock issuable upon conversion of the Series B Preferred Stock shall be
rounded off to the nearest whole number of shares.
(iii) Conversion Disputes. In the case of any dispute with
respect to a conversion, the Corporation shall promptly issue such number of
shares of Common Stock as are not disputed in accordance with subparagraph (i)
above. If such dispute involves the calculation of the Conversion Price, the
Corporation shall submit the disputed calculations to an independent outside
accountant within two (2) business days of receipt of the Notice of Conversion.
The accountant, at the Corporation's expense, shall review the calculations and
notify the Corporation and the Holder of the results. The accountant's
calculation shall be deemed conclusive, absent manifest error. The Corporation
shall then issue the appropriate number of shares of Common Stock in accordance
with subparagraph (i) above no later than two (2) business days from the date it
receives the determination from the independent outside accountant.
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(c) Limitations on Conversions. The conversion of shares of Series B
Preferred Stock shall be subject to the following limitation: If the Corporation
is prohibited under the rules and regulations of the AMEX, or the rules or
regulations of any other securities exchange on which the Common Stock is then
listed or traded, from issuing a number of shares of Common Stock upon
conversion of Series B Preferred Stock in excess of a prescribed amount (the
"CAP AMOUNT"), then the Corporation shall not issue shares of Common Stock upon
conversion of Series B Preferred Stock in excess of the Cap Amount. The Cap
Amount shall be allocated pro rata to the Holders as provided in Section 11(c).
(d) Required Conversion at Maturity. Subject to the limitations set
forth in Section 4(c), each share of Series B Preferred Stock issued and
outstanding on April 6, 2012 automatically shall be converted into shares of
Common Stock on such date in accordance with the conversion formulas set forth
in Section 4(a) (the "REQUIRED CONVERSION AT MATURITY"). If the Required
Conversion at Maturity occurs, the Corporation and the holders of Series B
Preferred Stock shall follow the applicable conversion procedures set forth in
Section 4(b); provided, however, that the holders of Series B Preferred Stock
are not required to deliver a Notice of Conversion to the Corporation or its
transfer agent. The Corporation shall pay the Holder at the time of the Required
Conversion at Maturity any accrued and unpaid Accruing Dividends on the shares
of Series B Preferred Stock that are being converted.
5. Rank. The Series B Preferred Stock shall rank (i) prior to the Common
Stock; (ii) prior to any class or series of capital stock of the Corporation
hereafter created that does not, by its terms, rank senior to or pari passu with
the Series B Preferred Stock (collectively with the Common Stock, "JUNIOR
SECURITIES"); (iii) Pari Passu with any class or series of capital stock of the
Corporation hereafter created that, by its terms, ranks on parity with the
Series B Preferred Stock (the "PARI PASSU SECURITIES"); and (iv) junior to any
class or series of capital stock of the Corporation hereafter created that, by
its terms, ranks senior to the Series B Preferred Stock (collectively, the
"SENIOR SECURITIES"), in each case as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary.
6. Liquidation Preference.
(a) If the Corporation shall commence a voluntary case under the U.S.
Federal bankruptcy laws or any other applicable bankruptcy, insolvency or
similar law, or consent to the entry of an order for relief in an involuntary
case under any law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the U.S. Federal bankruptcy laws or any other
applicable bankruptcy, insolvency or similar law resulting in the appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of ninety (90) consecutive
days and, on account of any such event, the Corporation shall liquidate,
dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve
or wind up (a "LIQUIDATION EVENT"), no distribution shall be made to the holders
of any shares of Junior Securities upon
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liquidation, dissolution or winding up of the Corporation unless prior thereto
the Holders shall have received the Liquidation Preference (as defined below)
with respect to each share of Series B Preferred Stock then outstanding. Any
acquisition of the Corporation by means of a merger or other form of corporate
reorganization in which all outstanding shares of Common Stock are exchanged for
securities or other consideration issued by the acquiring corporation or its
subsidiary or the effectuation by the Corporation or its shareholders of a
transaction or series of related transactions in which more than 50% of the
voting power is disposed of, shall be deemed a Liquidation Event. In such event,
the Holders will be entitled to receive in preference to the holders of Junior
Securities, the Liquidation Preference with respect to shares of Series B
Preferred Stock in the form of cash, securities or other property as is payable
in connection with the transaction deemed to be a Liquidation Event. In the
event that the Corporation sells, conveys or disposes of all or substantially
all of its assets, the Holders will be entitled to receive, prior to the holders
of the Junior Securities, if and when the Board of Directors declares a
distribution of the consideration received by the Corporation in such asset
sale, the Liquidation Preference with respect to the shares of Series B
Preferred Stock. If, upon the occurrence of a Liquidation Event, the assets and
funds available for distribution among the Holders and holders of Pari Passu
Securities shall be insufficient to permit the payment to such holders of the
preferential amounts payable thereon, then the entire assets and funds of the
Corporation legally available for distribution to the Series B Preferred Stock
and the Pari Passu Securities, if any, shall be distributed ratably among such
shares in proportion to the ratio that the Liquidation Preference payable on
each such share bears to the aggregate Liquidation Preference payable on all
such shares.
(b) The "LIQUIDATION PREFERENCE" with respect to a share of Series B
Preferred Stock means an amount equal to the Stated Value thereof plus any
accrued and unpaid dividends thereon, including the Accruing Dividends. The
Liquidation Preference with respect to any Pari Passu Securities shall be as set
forth in the Statement With Respect to Shares filed in respect thereof.
7. Adjustments to the Conversion Price. The Conversion Price shall be
subject to adjustment from time to time as follows:
(a) Stock Splits, Stock Dividends, Etc. If, at any time on or after
the date hereof, the number of outstanding shares of Common Stock is increased
by a stock split, stock dividend, combination, reclassification or other similar
event, the Conversion Price for each share of Series B Preferred Stock shall be
proportionately reduced, or if the number of outstanding shares of Common Stock
is decreased by a reverse stock split, combination or reclassification of
shares, or other similar event, the Conversion Price for each share of Series B
Preferred Stock shall be proportionately increased.
(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time
after the date hereof, there shall be (i) any reclassification or change of the
outstanding shares of Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination), (ii) any consolidation or merger of the
Corporation with any other entity (other than a merger in which the Corporation
is the surviving or continuing entity and its capital stock is unchanged), (iii)
any sale or transfer of all or substantially all of the assets of the
Corporation or (iv) any share exchange pursuant to which
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all of the outstanding shares of Common Stock are converted into other
securities or property (each of (i) - (iv) above being a "CORPORATE CHANGE"),
and, if such Corporate Change is not a Liquidation Event pursuant to the terms
of Section 6(a), then the Holders shall thereafter have the right to receive
upon conversion, in lieu of the shares of Common Stock otherwise issuable, such
shares of stock, securities and/or other property as would have been issued or
payable in such Corporate Change with respect to or in exchange for the number
of shares of Common Stock which would have been issuable upon conversion had
such Corporate Change not taken place, and in any such case, appropriate
provisions (in form and substance reasonably satisfactory to the Holders of a
majority of the Series B Preferred Stock then outstanding) shall be made with
respect to the rights and interests of the Holders to the end that the economic
value of the shares of Series B Preferred Stock are in no way diminished by such
Corporate Change and that the provisions hereof (including, without limitation,
in the case of any such consolidation, merger or sale in which the successor
entity or purchasing entity is not the Corporation, an immediate adjustment of
the Conversion Price for each share of Series B Preferred Stock so that the
Conversion Price immediately after the Corporate Change reflects the same
relative value as compared to the value of the surviving entity's common stock
that existed between the Conversion Price and the value of the Common Stock
immediately prior to such Corporate Change).
(c) Adjustment of Conversion Price upon Dilutive Issuance.
(i) If and whenever after the date hereof, the Corporation
issues or sells, or in accordance with this Section 7(c) is deemed to have
issued or sold, any shares of Common Stock (including the issuance or sale of
shares of Common Stock owned or held by or for the account of the Corporation,
but excluding shares of Common Stock deemed to have been issued or sold by the
Corporation in connection with any Excluded Security) for a consideration per
share (the "NEW SECURITIES ISSUANCE PRICE") less than a price (the "APPLICABLE
PRICE") equal to the applicable Conversion Price for a share of Series B
Preferred Stock in effect immediately prior to such issue or sale (the
foregoing, a "DILUTIVE ISSUANCE"), then immediately after such issue or sale,
the Conversion Price for such share of Series B Preferred Stock then in effect
shall be reduced to a price equal to the product of (x) the Conversion Price for
such share of Series B Preferred Stock in effect immediately prior to such issue
or sale and (y) the quotient of (1) the sum of (I) the product of the Applicable
Price and the number of shares of Common Stock Deemed Outstanding immediately
prior to such issue or sale and (II) the consideration, if any, received by the
Corporation upon such issue or sale, divided by (2) the product of (I) the
Applicable Price multiplied by (II) the number of shares of Common Stock Deemed
Outstanding immediately after such issue or sale; provided, however, that the
Conversion Price shall not be adjusted such that it is less than the Floor
Price;
(ii) For purposes of determining the adjusted Conversion Price
under Section 7(c)(i), the following shall be applicable:
(A) Issuance of Options. If at any time after the date
hereof the Corporation in any manner grants or sells any Options and the lowest
price per share for which one share of Common Stock is issuable upon the
exercise of any such Option or upon conversion or exchange or exercise of any
Convertible Securities issuable upon exercise of such Option is less than the
Applicable Price, then such share of Common Stock shall be deemed to be
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outstanding and to have been issued and sold by the Corporation at the time of
the granting or sale of such Option for such price per share. For purposes of
this Section 7(c)(ii)(A), the "lowest price per share for which one share of
Common Stock is issuable upon the exercise of any such Option or upon conversion
or exchange or exercise of any Convertible Securities issuable upon exercise of
such Option" shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by the Corporation with respect to any one share
of Common Stock upon granting or sale of the Option, upon exercise of the Option
and upon conversion or exchange or exercise of any Convertible Security issuable
upon exercise of such Option. No further adjustment of the Conversion Price
shall be made upon the actual issuance of such Common Stock or of such
Convertible Securities upon the exercise of such Options or upon the actual
issuance of such Common Stock upon conversion or exchange or exercise of such
Convertible Securities.
(B) Issuance of Convertible Securities. If at any time
after the date hereof the Corporation in any manner issues or sells any
Convertible Securities and the lowest price per share for which one share of
Common Stock is issuable upon such conversion or exchange or exercise thereof is
less than the Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Corporation at the
time of the issuance or sale of such Convertible Securities for such price per
share. For the purposes of this Section 7(c)(ii)(B), the "price per share for
which one share of Common Stock is issuable upon such conversion or exchange or
exercise" shall be equal to the sum of the lowest amounts of consideration (if
any) received or receivable by the Corporation with respect to any one share of
Common Stock upon the issuance or sale of the Convertible Security and upon the
conversion or exchange or exercise of such Convertible Security. No further
adjustment of the Conversion Price shall be made upon the actual issuance of
such Common Stock upon conversion or exchange or exercise of such Convertible
Securities, and if any such issue or sale of such Convertible Securities is made
upon exercise of any Options for which adjustment of the Conversion Price had
been or are to be made pursuant to other provisions of this Section 7, no
further adjustment of the Conversion Price shall be made by reason of such issue
or sale.
(C) Change in Option Price or Rate of Conversion. If the
purchase price provided for in any Options issued after the date hereof, the
additional consideration, if any, payable upon the issue, conversion, exchange
or exercise of any Convertible Securities issued after the date hereof, or the
rate at which any Convertible Securities are convertible into or exchangeable or
exercisable for Common Stock changes at any time, the Conversion Price in effect
at the time of such change shall be adjusted to the Conversion Price which would
have been in effect at such time had such Options or Convertible Securities
provided for such changed purchase price, additional consideration or changed
conversion rate, as the case may be, at the time initially granted, issued or
sold. For purposes of this Section 7(c)(ii)(C), if the terms of any Option or
Convertible Security that was outstanding as of the date hereof are changed in
the manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the
date of such change. No adjustment shall be made if such adjustment would result
in an increase of the Conversion Price then in effect.
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(D) Calculation of Consideration Received. In case any
Option is issued in connection with the issue or sale of other securities of the
Corporation, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $0.01. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be deemed
to be the gross amount received by the Corporation therefor. If any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Corporation will be the Market Price of such securities on the
date of receipt. If any Common Stock, Options or Convertible Securities are
issued to the owners of the non-surviving entity in connection with any merger
in which the Corporation is the surviving entity, the amount of consideration
therefor will be deemed to be the fair value of such portion of the net assets
and business of the non-surviving entity as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be. The fair value of
any consideration other than cash or securities will be determined by the
Corporation's Board of Directors.
(E) Record Date. If the Corporation takes a record of the
holders of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (B) to subscribe for or purchase Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(d) Notice of Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 7,
the Corporation shall promptly compute such adjustment or readjustment and
prepare and furnish to each Holder a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based.
(e) Restrictions on Adjustments to the Conversion Price. The
Conversion Price shall not be reduced below the Floor Price.
8. Redemption.
(a) The Corporation shall have the right, at any time and from time
to time, to redeem some or all of the shares of Series B Preferred Stock out of
funds lawfully available therefor at a price equal to the Stated Value plus any
accrued and unpaid dividends thereon, including any Accruing Dividends (the
"REDEMPTION PRICE"), upon delivery of a Redemption Notice to the Holders. The
date on which the Corporation effects any redemption of shares of Series B
Preferred Stock pursuant to this Section 8(a) is referred to herein as a
"REDEMPTION DATE". Notwithstanding the foregoing, the Corporation shall redeem
shares of Series B Preferred Stock with an aggregate redemption price of at
least $1,000,000 on each Redemption Date (other than with respect to a
Redemption Date on which all of the remaining outstanding shares of
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Series B Preferred Stock are redeemed). In the event that the Corporation elects
to redeem less than all of the outstanding shares of Series B Preferred Stock,
such redemption shall be effected pro rata among the Holders.
(b) Redemption Notice. To exercise its redemption right hereunder,
the Corporation shall deliver written notice of its election of effect a
redemption (each, a "REDEMPTION NOTICE") to each holder of record of Series B
Preferred Stock by mail, postage prepaid, at its post office address last shown
on the records of the Corporation, not less than ten (10) or more than thirty
(30) days prior to each Redemption Date. Each Redemption Notice shall state:
(i) the number of shares of Series B Preferred Stock held by
the Holder that the Corporation shall redeem on the Redemption Date specified in
the Redemption Notice;
(ii) the Redemption Date and the Redemption Price;
(iii) the date upon which the Holder's right to convert such
shares terminates (as determined in accordance with Section 4(a)); and
(iv) that the holder is to surrender to the Corporation, in the
manner and at the place designated, his, her or its Preferred Stock Certificates
representing the shares of Series B Preferred Stock to be redeemed.
(c) Surrender of Certificates; Payment. On or before the applicable
Redemption Date, each Holder (unless such Holder has exercised his, her or its
right to convert such shares as provided in Section 4(a) hereof) shall surrender
the Preferred Stock Certificates representing the shares of Series B Preferred
Stock that are subject to a Redemption Notice to the Corporation, in the manner
and at the place designated in the Redemption Notice, and thereupon the
Redemption Price for such shares shall be payable to the order of the person
whose name appears on such Preferred Stock Certificates as the owner thereof,
and each surrendered certificate shall be canceled and retired. In the event
less than all of the shares of Series B Preferred Stock represented by a
Preferred Stock Certificate are redeemed, a new certificate representing the
unredeemed shares of Series B Preferred Stock shall promptly be issued to such
Holder.
(d) Rights Subsequent to Redemption. If the Redemption Notice shall
have been duly given, and if on the applicable Redemption Date the Redemption
Price payable upon redemption of the shares of Series B Preferred Stock to be
redeemed on such Redemption Date is paid or tendered for payment or deposited
with an independent payment agent so as to be available therefor, then
notwithstanding that the certificates evidencing any of the shares of Series B
Preferred Stock so called for redemption shall not have been surrendered,
dividends with respect to such shares of Series B Preferred Stock shall cease to
accrue after such Redemption Date and all rights with respect to such shares
shall forthwith after the Redemption Date terminate, except only the right of
the holders to receive the Redemption Price without interest upon surrender of
their Preferred Stock Certificates therefor.
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(e) Redeemed or Otherwise Acquired Shares. Any shares of Series B
Preferred Stock which are redeemed or otherwise acquired by the Corporation
shall be automatically and immediately canceled and shall not be reissued, sold
or transferred. Neither the Corporation nor any of its subsidiaries may exercise
any voting or other rights granted to the holders of Series B Preferred Stock
following redemption.
9. Voting Rights. The Holders shall be entitled to vote with the holders
of Common Stock, voting together as one class, on all matters submitted to a
vote of the holders of Common Stock, and each share of Series B Preferred Stock
shall be entitled to a number of votes equal to the number of shares of Common
Stock into which each such share is convertible as of the record date for the
applicable vote. To the extent that under the Pennsylvania Business Corporation
Law the vote of the Holders, voting separately as a class or series, as
applicable, is required to authorize a given action of the Corporation, the
affirmative vote or consent of the Holders of at least a majority of the then
outstanding shares of the Series B Preferred Stock represented at a duly held
meeting at which a quorum is present or by written consent of the Holders of at
least a majority of the then outstanding shares of Series B Preferred Stock
shall constitute the approval of such action by the class.
10. Protective Provisions. So long as any shares of Series B Preferred
Stock are outstanding, the Corporation shall not, without first obtaining the
approval (by vote or written consent) of the Holders of a majority of the then
outstanding shares of Series B Preferred Stock (i) amend the rights, preferences
or privileges of the Series B Preferred Stock set forth in this Statement With
Respect to Shares; (ii) create any new class or series of capital stock having a
preference over the Series B Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation (as previously defined
in Section 5 hereof, "SENIOR SECURITIES"); or (iii) redeem, or declare or pay
any dividend or other distribution on account of, any shares of Common Stock
(other than pursuant to the terms of any stock option plan for directors,
officers, employees, advisors or constituents approved by the Board of
Directors). Notwithstanding the foregoing, no consent or approval of the Holders
will be required for, and the Board of Directors is expressly authorized to
provide for, the issuance of shares of Preferred Stock other than the Series B
Preferred Stock in series and, by filing a certificate pursuant to the
applicable law of the Commonwealth of Pennsylvania, to establish from time to
time the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and any qualifications, limitations or restrictions thereon, which such series
may, without the consent of the Holders, be Junior Securities or Pari Passu
Securities.
11. Miscellaneous.
(a) Cancellation of Series B Preferred Stock. If any shares of Series
B Preferred Stock are converted pursuant to Section 4, the shares so converted
shall be canceled, shall return to the status of authorized, but unissued
Preferred Stock of no designated series, and shall not be issuable by the
Corporation as Series B Preferred Stock.
(b) Lost or Stolen Certificates. Upon receipt by the Corporation of
(i) evidence of the loss, theft, destruction or mutilation of any Preferred
Stock Certificate(s) and (ii) (y) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to the
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Corporation, or (z) in the case of mutilation, upon surrender and cancellation
of the Preferred Stock Certificate(s), the Corporation shall execute and deliver
new Preferred Stock Certificate(s) of like tenor and date. However, the
Corporation shall not be obligated to reissue such lost or stolen Preferred
Stock Certificate(s) if the Holder contemporaneously requests the Corporation to
convert such Series B Preferred Stock.
(c) Allocation of Cap Amount. The initial Cap Amount shall be
allocated pro rata among the Holders (if more than one) based on the number of
shares of Series B Preferred Stock issued to each Holder. Each increase to the
Cap Amount shall be allocated pro rata among the Holders (if more than one)
based on the number of shares of Series B Preferred Stock held by each Holder at
the time of the increase in the Cap Amount. In the event a Holder shall sell or
otherwise transfer any of such Holder's shares of Series B Preferred Stock, each
transferee shall be allocated a pro rata portion of such transferor's Cap
Amount. Any portion of the Cap Amount that remains allocated to any person or
entity which does not hold any Series B Preferred Stock shall be allocated to
the remaining Holders pro rata based on the number of shares of Series B
Preferred Stock then held by such Holders.
(d) Status as Stockholder. Upon submission of a Notice of Conversion
by a Holder, (i) the shares covered thereby (other than the shares, if any,
which cannot be issued because their issuance would exceed such Holder's
allocated portion of the Cap Amount) shall be deemed converted into shares of
Common Stock and any accrued and unpaid Accruing Dividends thereon and (ii) the
Holder's rights as a holder of such converted shares of Series B Preferred Stock
shall cease and terminate, excepting only the right to receive certificates for
such shares of Common Stock and to any remedies provided herein or otherwise
available at law or in equity to such Holder because of a failure by the
Corporation to comply with the terms of this Statement With Respect to Shares.
******
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NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series B Preferred Stock)
The undersigned hereby irrevocably elects to convert ____________ shares of
Series B Preferred Stock, represented by stock certificate No(s). ___________
(the "PREFERRED STOCK CERTIFICATES"), into shares of common stock ("COMMON
STOCK") of Environmental Tectonics Corporation (the "CORPORATION") according to
the conditions of the Statement With Respect to Shares of Series B Cumulative
Convertible Preferred Stock, as of the date written below. If securities are to
be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto. No fee will be charged
to the holder for any conversion, except for transfer taxes, if any. A copy of
each Preferred Stock Certificate is attached hereto (or evidence of loss, theft
or destruction thereof).
[The Corporation shall electronically transmit the Common Stock issuable
pursuant to this Notice of Conversion to the account of the undersigned or its
nominee (which is _________________) with DTC through its Deposit Withdrawal
Agent Commission System ("DTC TRANSFER").]
The undersigned acknowledges that all offers and sales by the undersigned of the
securities issuable to the undersigned upon conversion of the Series B Preferred
Stock may only be made pursuant to registration of the Common Stock under the
Securities Act of 1933, as amended (the "ACT"), or pursuant to an exemption from
registration under the Act.
[ ] [In lieu of receiving the shares of Common Stock issuable pursuant to this
Notice of Conversion by way of DTC Transfer, the undersigned hereby
requests that the Corporation issue and deliver to the undersigned physical
certificates representing such shares of Common Stock.]
Date of Conversion:____________________
Conversion Price:_______________________
Number of Shares of Common
Stock to be Issued:____________________
[Holder]
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Address: _____________________________
_____________________________
******
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THIRD: With respect to the Series B Preferred Stock, the aggregate number
of shares of such class or series established and designated by (a) such
resolutions, (b) all prior statements, if any, filed under 15 Pa. C.S. Section
1522 or corresponding provisions of prior law with respect thereto, and (c) any
other provision of the Articles of Incorporation is 15,000 shares.
FOURTH: The resolution was adopted by the Audit Committee of the Board of
Directors on April 6, 2006.
FIFTH: The resolution shall be effective upon the filing of this Statement
With Respect to Shares in the Department of State.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned has caused this Statement With Respect
to Shares to be signed by a duly authorized officer this 6th day of April, 2006.
ENVIRONMENTAL TECTONICS CORPORATION,
a Pennsylvania corporation
By: /s/ Duane Deaner
-----------------------------
Name: Duane Deaner
Title: Chief Financial Officer