Exhibit 10.1
PREFERRED STOCK PURCHASE AGREEMENT
DATED AS OF APRIL 6, 2006
BETWEEN
ENVIRONMENTAL TECTONICS CORPORATION
AND
H.F. LENFEST
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 CERTAIN DEFINITIONS..............................................1
ARTICLE 2 PURCHASE AND SALE OF PREFERRED STOCK.............................5
Section 2.1 Investments.................................................5
Section 2.2 Investment Commitment.......................................5
Section 2.3 Mechanics of Draw Downs.....................................6
Section 2.4 Settlements.................................................6
ARTICLE 3 BUYER'S REPRESENTATIONS AND WARRANTIES...........................7
Section 3.1 Investment Purpose..........................................7
Section 3.2 Accredited Buyer Status.....................................7
Section 3.3 Reliance on Exemptions......................................7
Section 3.4 Information.................................................7
Section 3.5 Governmental Review.........................................7
Section 3.6 Transfer or Resale..........................................7
Section 3.7 Authorization; Enforcement..................................8
Section 3.8 Residency...................................................8
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................8
Section 4.1 Organization and Qualification..............................8
Section 4.2 Authorization; Enforcement..................................8
Section 4.3 Capitalization..............................................9
Section 4.4 Issuance of Shares..........................................9
Section 4.5 No Conflicts...............................................10
Section 4.6 SEC Documents; Financial Statements........................10
Section 4.7 Absence of Certain Changes.................................11
Section 4.8 Absence of Litigation......................................11
Section 4.9 Patents, Copyrights, etc...................................11
Section 4.10 No Materially Adverse Contracts, Etc......................12
Section 4.11 Tax Status................................................12
Section 4.12 Certain Transactions......................................12
Section 4.13 Disclosure................................................12
Section 4.14 Acknowledgment Regarding the
Buyer's Purchase of Securities.........................................13
Section 4.15 No General Solicitation...................................13
Section 4.16 No Integrated Offering....................................13
Section 4.17 No Brokers................................................13
Section 4.18 Acknowledgment Regarding Securities.......................13
Section 4.19 Permits; Compliance.......................................13
Section 4.20 Environmental Matters.....................................13
Section 4.21 Title to Property.........................................14
Section 4.22 Insurance.................................................14
Section 4.23 Internal Accounting Controls..............................15
Section 4.24 Foreign Corrupt Practices.................................15
ARTICLE 5 COVENANTS.......................................................15
Section 5.1 Best Efforts...............................................15
Section 5.2 Form D; Blue Sky Laws......................................15
Section 5.3 Reporting Status...........................................15
Section 5.4 Use of Proceeds............................................15
Section 5.5 Reservation of Shares......................................15
Section 5.6 Listing....................................................16
Section 5.7 No Integration.............................................16
Section 5.8 Issuance of Draw Down Shares...............................16
Section 5.9 Legal Compliance...........................................16
ARTICLE 6 CONDITIONS TO DELIVERY OF DRAW DOWN.............................16
Section 6.1 Conditions Precedent to the Obligation
of the Company to Issue and Sell Draw Down Shares......................16
Section 6.2 Conditions Precedent to the Right
of the Company to Deliver a Draw Down Notice...........................16
Section 6.3 Documents Required to be Delivered
on each Draw Down Date.................................................17
Section 6.4 Draw Down Cancellation.....................................17
ARTICLE 7 TERMINATION.....................................................18
Section 7.1 Term; Termination by Mutual Consent........................18
Section 7.2 Termination by the Buyer...................................18
ARTICLE 8 INDEMNIFICATION.................................................18
ARTICLE 9 MISCELLANEOUS...................................................19
Section 9.1 Governing Law..............................................19
Section 9.2 Notices....................................................19
Section 9.3 Counterparts; Signatures by Facsimile......................20
Section 9.4 Headings...................................................20
Section 9.5 Severability...............................................20
Section 9.6 Entire Agreement; Amendments...............................20
Section 9.7 Successors and Assigns.....................................20
Section 9.8 Third Party Beneficiaries..................................21
Section 9.9 Survival...................................................21
Section 9.10 Further Assurances........................................21
Section 9.11 No Strict Construction....................................21
(ii)
EXHIBITS
EXHIBIT A - DRAW DOWN NOTICE
EXHIBIT B - REGISTRATION RIGHTS AGREEMENT
EXHIBIT C - STATEMENT WITH RESPECT TO SHARES
EXHIBIT D - OFFICER'S CERTIFICATE OF ENVIRONMENTAL TECTONICS
CORPORATION CERTIFYING A DRAW DOWN NOTICE
(iii)
THIS PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"), is entered into
as of the 6th day of April, 2006, by and between Environmental Tectonics
Corporation, a Pennsylvania corporation (the "Company"), and H.F. Lenfest, a
Pennsylvania resident (the "Buyer").
RECITALS
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company may issue and sell to the Buyer and the
Buyer shall purchase from the Company up to Fifteen Million Dollars (U.S.)
($15,000,000) of the Series B Preferred Stock (as defined below) from time to
time as provided herein; and
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") as promulgated
by the United States Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "Securities Act"), and/or upon such other exemption
from the registration requirements of the Securities Act as may be available
with respect to any or all of the investments to be made hereunder.
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
Section 1.1 "Agreement" shall have the meaning set forth in the preamble
of this Agreement.
Section 1.2 "Articles of Incorporation" shall have the meaning set forth
in Section 4.3.
Section 1.3 "Buyer" shall have the meaning set forth in the preamble of
this Agreement.
Section 1.4 "Bylaws" shall have the meaning set forth in Section 4.3.
Section 1.5 "Closing" shall have the meaning set forth in
Section 2.2(a).
Section 1.6 "Closing Date" shall mean the date on which the Closing
occurs.
Section 1.7 "Commitment Period" shall mean the period commencing on the
Effective Date and expiring on the earliest to occur of (i)
the date on which the Buyer shall have purchased Draw Down
Shares pursuant to this Agreement for an aggregate Purchase
Price of Fifteen Million Dollars (U.S.) ($15,000,000), (ii)
the date this Agreement is terminated pursuant to Article
VII, or (iii) the date occurring eighteen (18) months from
the Effective Date.
Section 1.8 "Common Stock" shall mean the Company's common stock, $0.05
par value per share.
Section 1.9 "Company" shall have the meaning set forth in the preamble
of this Agreement.
Section 1.10 "Company Permits" shall have the meaning set forth in
Section 4.19.
Section 1.11 "Control Person" shall have the meaning set forth in
Article VIII.
Section 1.12 "Conversion Price" shall equal the closing price for the
Company's Common Stock as reported on the American Stock
Exchange by Bloomberg Financial Markets for the trading date
immediately preceding the Effective Date or any Draw Down
Date, as the case may be, provided that the Conversion Price
shall not be less than the Floor Price.
Section 1.13 "Damages" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation,
reasonable attorneys' fees and disbursements and costs and
expenses of expert witnesses and investigation).
Section 1.14 "Draw Down" shall mean the process through which the Company
elects to exercise its right to tender a Draw Down Notice
requiring the Buyer to purchase a dollar amount of the
Company's Preferred Stock equal to the Investment Amount
specified in such Draw Down Notice, and at such price and on
such terms and conditions as are set forth in this
Agreement.
Section 1.15 "Draw Down Cancellation Notice" shall have the meaning
set forth in Section 6.4(a).
Section 1.16 "Draw Down Date" shall mean any business day during the
Commitment Period that a Draw Down Notice to sell Preferred
Stock to the Buyer is deemed delivered pursuant to
Section 2.3(b) hereof.
Section 1.17 "Draw Down Notice" shall mean a written notice to the Buyer
in the form attached hereto as Exhibit A setting forth the
Investment Amount that the Company intends to have the Buyer
invest in the Company, in exchange for shares of Preferred
Stock, pursuant to such Draw Down.
Section 1.18 "Draw Down Shares" shall mean all shares of Preferred
Stock issued or issuable pursuant to a Draw Down that has
occurred or may occur in accordance with the terms and
conditions of this Agreement.
Section 1.19 "Effective Date" shall mean the date on which this Agreement
is executed by the Company and the Buyer.
2
Section 1.20 "Environmental Laws" shall have the meaning set forth in
Section 4.20(a).
Section 1.21 "Event of Default" shall have the meaning set forth in
Section 7.2.
Section 1.22 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the regulations promulgated
thereunder.
Section 1.23 "Floor Price" shall mean $4.95 per share.
Section 1.24 "Hazardous Materials" shall have the meaning set forth in
Section 4.20.
Section 1.25 "Intellectual Property" shall have the meaning set forth in
Section 4.9.
Section 1.26 "Investment Amount" shall mean the aggregate dollar amount
(within the range specified in Section 2.3) of any Draw Down
Shares to be purchased by the Buyer with respect to any Draw
Down effected by the Company in accordance with Section 2.3
hereof.
Section 1.27 "Material Adverse Effect" shall mean any material adverse
effect on (i) the Securities, (ii) the assets, liabilities,
business, properties, operations, financial condition or
results of operations of the Company and its Subsidiaries,
if any, taken as a whole, (iii) the transactions
contemplated hereby or by the agreements or instruments to
be entered into in connection herewith or (iv) the authority
or the ability of the Company to perform its obligations
under the Transaction Documents (as defined below).
Section 1.28 "Maximum Draw Down Amount" with respect to any Draw Down
effected by the Company in accordance with Section 2.3
hereof shall mean the difference between Fifteen Million
Dollars (U.S.) ($15,000,000) and the aggregate Investment
Amount previously invested by the Buyer in the Company
pursuant to this Agreement.
Section 1.29 "Minimum Draw Down Amount" shall mean $1,000,000.
Section 1.30 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.31 "Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or
organization, including a government or political
subdivision or an agency or instrumentality thereof.
Section 1.32 "Preferred Stock" shall mean the Company's preferred stock,
$0.05 par value per share.
3
Section 1.33 "Principal Market" shall mean the Nasdaq National Market,
the Nasdaq SmallCap Market, the American Stock Exchange or
the New York Stock Exchange, whichever is at the time the
principal trading exchange or market for the Common Stock.
Section 1.34 "Registration Rights Agreement" shall mean the agreement
regarding the filing of the registration statement(s) for
the resale of the shares of Common Stock issuable upon
conversion of the Preferred Stock, entered into between the
Company and the Buyer as of the Closing Date and in the form
attached hereto as Exhibit B.
Section 1.35 "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.36 "Rule 144" shall mean Rule 144 promulgated under the
Securities Act (or a successor rule).
Section 1.37 "SEC" shall mean the United States Securities and Exchange
Commission.
Section 1.38 "SEC Documents" shall have the meaning set forth in
Section 4.6.
Section 1.39 "Section 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.40 "Securities" shall mean collectively the Draw Down Shares
and the shares of Common Stock issuable upon conversion of
the Draw Down Shares.
Section 1.41 "Securities Act" shall have the definition ascribed to it in
the recitals of this Agreement.
Section 1.42 "Settlement" shall mean the fulfillment by each of the Buyer
and the Company of their respective obligations, pursuant to
this Agreement, necessary to effect the sale and purchase of
Draw Down Shares pursuant to a Draw Down Notice.
Section 1.43 "Settlement Date" shall mean the date on which the Buyer
purchases Draw Down Shares pursuant to a Draw Down Notice.
Section 1.44 "Statement With Respect to Shares" shall mean the Statement
With Respect to Shares defining the rights and preferences
of the Draw Down Shares, approved by the Company's Board of
Directors and filed with the Secretary of State for the
Commonwealth of Pennsylvania, in the form attached hereto as
Exhibit C.
Section 1.45 "Subsidiaries" shall mean any corporation or other
organization, whether incorporated or unincorporated, in
which the Company owns, directly or
4
indirectly, any equity or other ownership interest and which
would be a "Significant Subsidiary" of the Company as
defined under Rule 1-02(w) of Regulation S-X promulgated
under the Securities Act.
Section 1.46 "Transaction Documents" shall mean this Agreement, the
Registration Rights Agreement and the Statement With Respect
to Shares.
ARTICLE 2
PURCHASE AND SALE OF PREFERRED STOCK
Section 2.1 Investments.
(a) Purchase and Sale of Preferred Stock. Subject to the terms
and conditions of this Agreement, the Company, at its sole and exclusive option,
may issue and sell to the Buyer, and the Buyer shall purchase from the Company,
up to Fifteen Million Dollars (U.S.) ($15,000,000) of the Company's Preferred
Stock, based on up to as many Draw Downs (each Draw Down subject to the Minimum
Draw Down Amount) as the Company, in its sole discretion, shall choose to
deliver during the Commitment Period.
(b) Draw Downs. Upon the terms and subject to the conditions set
forth herein, on any business day during the Commitment Period on which the
conditions set forth in Sections 6.1 and 6.2 hereof have been satisfied, the
Company may exercise a Draw Down by delivering a Draw Down Notice to the Buyer
in accordance with Section 2.3 hereof. The number of Draw Down Shares that the
Buyer shall be obligated to purchase pursuant to a Draw Down shall be determined
by dividing the Investment Amount specified in the Draw Down Notice by $1,000,
the stated value of each Draw Down Share. The aggregate number of shares of
Common Stock into which the Draw Down Shares shall be convertible shall be
determined by dividing the Investment Amount specified in the Draw Down Notice
by the Conversion Price for such Draw Down Shares; provided, however, that the
Conversion Price shall not be less than the Floor Price and the Company shall
not be permitted to deliver a Draw Down Notice to the Buyer at any time when the
trading price for the Company's Common Stock is less than the Floor Price.
Section 2.2 Investment Commitment.
(a) Investment Commitment Closing. The closing of this Agreement
(the "Closing") shall be deemed to occur when this Agreement and the
Registration Rights Agreement have been executed by both the Buyer and the
Company, and the other conditions set forth in Section 2.2(b) below have been
met.
(b) Conditions to the Buyer's Obligations. As a prerequisite to
the Closing and the Buyer's obligations hereunder, all of the following
conditions shall have been satisfied prior to or concurrently with the Company's
execution and delivery of this Agreement:
(i) the following documents shall have been delivered to
the Buyer: (A) the Registration Rights Agreement
(executed by the Company) (B) a Secretary's
certificate as to (I) the resolutions of the Audit
Committee of the Company's Board of Directors
authorizing this
5
transaction, (II) the Company's Articles of
Incorporation, and (III) the Company's Bylaws; and
(C) an Officer's Certificate in form and substance to
be agreed upon by the parties;
(ii) the Statement With Respect to Shares shall have been
filed with the Secretary of State of the Commonwealth
of Pennsylvania and shall be in full force and
effect;
(iii) the Company's Common Stock shall be listed for
trading and actually trading on the American Stock
Exchange or a Principal Market;
(iv) since the date of filing of the Company's most recent
SEC Document, no event that had or is reasonably
likely to have a Material Adverse Effect shall have
occurred; and
(v) the representations and warranties of the Company in
this Agreement shall be true and correct in all
material respects.
Section 2.3 Mechanics of Draw Downs.
(a) Draw Down Notice. On any business day during the Commitment
Period, provided that the trading price for the Company's Common Stock is
greater than or equal to the Floor Price, the Company may deliver a Draw Down
Notice to the Buyer, subject to the satisfaction of the conditions set forth in
Sections 6.2 and 6.3; provided, however, the Investment Amount for each Draw
Down as designated by the Company in the applicable Draw Down Notice shall not
be less than the Minimum Draw Down Amount.
(b) Date of Delivery of Draw Down Notice. A Draw Down Notice
shall be deemed delivered on (i) the business day it is received by facsimile or
otherwise (including electronic mail) by the Buyer if such notice is received
prior to 3:00 p.m., Philadelphia, Pennsylvania time, or (ii) the immediately
succeeding business day if it is received by facsimile or otherwise (including
electronic mail) after 3:00 p.m., Philadelphia, Pennsylvania time, on a business
day.
(c) Determination of Draw Down Shares Issuable. The number of
Draw Down Shares to be purchased by the Buyer with respect to any Draw Down
equal the quotient of (x) the Investment Amount, divided by (y) $1,000, the
stated value of each Drawn Down Share.
Section 2.4 Settlements. Subject to the provisions of Section 6.4, on
each Settlement Date the Company shall deliver a certificate representing the
Draw Down Shares to be purchased on such Settlement Date and, upon receipt of
such Draw Down Shares, the Buyer shall deliver the Investment Amount by wire
transfer of immediately available funds to an account designated by the Company.
6
ARTICLE 3
BUYER'S REPRESENTATIONS AND WARRANTIES
The Buyer represents and warrants to the Company that:
Section 3.1 Investment Purpose. As of the date hereof, the Buyer is
purchasing the Securities for his own account and not with a present view
towards the public sale or distribution thereof, except pursuant to sales
registered or exempted from registration under the Securities Act; provided,
however, that by making the representations herein, the Buyer does not agree to
hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption under the Securities Act.
Section 3.2 Accredited Buyer Status. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
Section 3.3 Reliance on Exemptions. The Buyer understands that the
Securities are being offered and sold to the Buyer in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
Section 3.4 Information. The Buyer has been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Securities which have been requested by
the Buyer or his advisors. The Buyer and his advisors, if any, have been
afforded the opportunity to ask questions of the Company. Neither such inquiries
nor any other due diligence investigation conducted by the Buyer or any of his
advisors or representatives shall modify, amend or affect the Buyer's right to
rely on the Company's representations and warranties contained in Section 4
below. The Buyer understands that his investment in the Securities involves a
significant degree of risk.
Section 3.5 Governmental Review. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
Section 3.6 Transfer or Resale. The Buyer understands that (i) except as
provided in the Registration Rights Agreement, the sale or resale of the
Securities has not been and is not being registered under the Securities Act or
any applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the Securities Act, (b) the Buyer shall have delivered to the
Company an opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration, (c) the Securities are sold or
transferred to an "affiliate" (as defined in Rule 144) of the Buyer who
7
agrees to sell or otherwise transfer the Securities only in accordance with this
Section 3.6 and who is an Accredited Buyer or (d) the Securities are sold
pursuant to Rule 144; (ii) any sale of such Securities made in reliance on Rule
144 may be made only in accordance with the terms of Rule 144 and further, if
Rule 144 is not applicable, any resale of such Securities under circumstances in
which the seller (or the person through whom the sale is made) may be deemed to
be an underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the Securities
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder (in each case, other than pursuant to the terms and
conditions of the Registration Rights Agreement). Notwithstanding the foregoing
or anything else contained herein to the contrary, the Securities may be pledged
as collateral in connection with a bona fide margin account or other lending
arrangement. In connection with any sale of Registrable Securities by the Buyer
pursuant to clause (a) above, the Buyer agrees to sell all such securities in
compliance with applicable prospectus delivery requirements.
Section 3.7 Authorization; Enforcement. This Agreement, and the
Registration Rights Agreement have been duly and validly authorized by Buyer.
This Agreement has been duly executed and delivered on behalf of the Buyer, and
this Agreement constitutes, and upon execution and delivery by the Buyer of the
Registration Rights Agreement, such agreement will constitute, valid and binding
agreements of the Buyer enforceable in accordance with their terms.
Section 3.8 Residency. The Buyer is a resident of the Commonwealth of
Pennsylvania.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer that:
Section 4.1 Organization and Qualification. The Company and each of its
Subsidiaries is a corporation duly organized and validly subsisting under the
laws of the jurisdiction in which it is incorporated, with full power and
authority (corporate and other) to own, lease, use and operate its properties
and to carry on its business as and where now owned, leased, used, operated and
conducted. Schedule 4.1 sets forth a list of all of the Subsidiaries of the
Company and the jurisdiction in which each is incorporated. The Company and each
of its Subsidiaries is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which its ownership or use of
property or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect.
Section 4.2 Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Statement With Respect to Shares and the Registration Rights
Agreement and to consummate the transactions contemplated hereby and thereby and
to issue the Securities, in accordance with the terms hereof and thereof, (ii)
the execution and delivery of this Agreement, the Statement With Respect to
Shares and the Registration Rights Agreement by the Company and the consummation
by it of the transactions
8
contemplated hereby and thereby (including without limitation, the issuance of
the Draw Down Shares and the issuance and reservation for the shares of Common
Stock issuable upon conversion of the Draw Down Shares) have been duly
authorized by the Audit Committee of the Company's Board of Directors or any
Committee thereof and no further consent or authorization of the Company, its
Board of Directors, or its shareholders is required by law, regulation or
regulatory body, (iii) this Agreement has been duly executed and delivered by
the Company, and (iv) this Agreement constitutes, and upon execution and
delivery by the Company of the Statement With Respect to Shares and the
Registration Rights Agreement, such agreements will constitute, a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms.
Section 4.3 Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 1,000,000 shares of Preferred Stock,
none of which are issued and outstanding, 20,000,000 shares of Common Stock, of
which 9,024,804 shares of Common Stock are issued and outstanding, 1,528,150
shares of Common Stock are reserved for issuance pursuant to the Company's stock
option plans, and 1,652,893 shares of Common Stock are reserved for issuance
pursuant to securities exercisable for, or convertible into or exchangeable for
shares of Common Stock. All of such outstanding shares of capital stock are, or
upon issuance will be, duly authorized, validly issued, fully paid and
nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the shareholders of the Company
or any liens or encumbrances imposed through the actions or failure to act of
the Company. Except as disclosed in Schedule 4.3, as of the Effective Date (i)
there are no outstanding options, warrants, scrip, rights to subscribe for,
puts, calls, rights of first refusal, agreements, understandings, claims or
other commitments or rights of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for any shares of capital
stock of the Company or any of its Subsidiaries, or arrangements by which the
Company or any of its Subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of its Subsidiaries, (ii) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of its or their securities
under the Securities Act (except the Registration Rights Agreement) and (iii)
there are no anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing rights to security
holders) that will be or could be triggered by the issuance of the Draw Down
Shares. The Company has furnished to the Buyer true and correct copies of the
Company's Articles of Incorporation as in effect on the date hereof (the
"Articles of Incorporation"), the Company's Bylaws as in effect on the date
hereof (the "Bylaws"), and the terms of all securities convertible into or
exercisable for Common Stock of the Company and the material rights of the
holders thereof in respect thereto.
Section 4.4 Issuance of Shares. The Draw Down Shares will be properly
issued pursuant to Regulation D and/or any applicable state law. When issued,
the Draw Down Shares shall be duly and validly issued, fully paid, and
nonassessable. Neither the sales of the Draw Down Shares pursuant to, nor the
Company's performance of its obligations under, this Agreement or the
Registration Rights Agreement will (i) result in the creation or imposition of
any liens, charges, claims or other encumbrances upon the Draw Down Shares or
any of the assets of the Company, or (ii) entitle the holders of outstanding
shares of capital stock to preemptive or other rights to subscribe to or acquire
shares of capital stock or other securities of the Company.
9
Section 4.5 No Conflicts. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation for issuance, as
applicable, of the Draw Down Shares and shares of Common Stock underlying the
Draw Down Shares) will not (i) conflict with or result in a violation of any
provision of the Articles of Incorporation or Bylaws or (ii) violate or conflict
with, or result in a breach of any provision of, or constitute a default (or an
event which with notice or lapse of time or both could become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and regulations of any self-regulatory organizations to
which the Company or its securities are subject) applicable to the Company or
any of its Subsidiaries or by which any property or asset of the Company or any
of its Subsidiaries is bound or affected. Neither the Company nor any of its
Subsidiaries is in violation of its Articles of Incorporation, Bylaws or other
organizational documents and neither the Company nor any of its Subsidiaries is
in default (and no event has occurred which with notice or lapse of time or both
could put the Company or any of its Subsidiaries in default) under, and neither
the Company nor any of its Subsidiaries has taken any action or failed to take
any action that would give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which any property or assets
of the Company or any of its Subsidiaries is bound or affected. The businesses
of the Company and its Subsidiaries, if any, are not being conducted, and shall
not be conducted so long as the Buyer owns any of the Securities, in violation
of any law, ordinance or regulation of any governmental entity the violation of
which would reasonably be expected to have a Material Adverse Effect. Except as
specifically contemplated by this Agreement and as required under the Securities
Act and any applicable state securities laws, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency, regulatory agency,
self-regulatory organization or stock market or any third party in order for it
to execute, deliver or perform any of its obligations under this Agreement or
the Registration Rights Agreement in accordance with the terms hereof or thereof
or to issue and sell the Draw Down Shares in accordance with the terms hereof
and to issue shares of Common Stock upon conversion of the Draw Down Shares.
Except as disclosed in Schedule 4.5, all consents, authorizations, orders,
filings and registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior to the date
hereof. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
Section 4.6 SEC Documents; Financial Statements. Since February 1, 2006,
the Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents (other than exhibits to such documents) incorporated by
reference therein, being hereinafter referred to as the "SEC Documents"). The
Company has delivered or made available to the Buyer true and complete copies of
the SEC Documents. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they
10
were filed with the SEC, contained any untrue statement of a material fact or
omitted 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. None of the statements made in any such SEC
Documents is, or has been, required to be amended or updated under applicable
law (except for such statements as have been amended or updated in subsequent
filings prior to the date hereof). As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with United States generally accepted
accounting principles, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they
may not include footnotes or may be condensed or summary statements) and fairly
present in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the financial statements of the Company
included in the SEC Documents, the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to November 25, 2005 and (ii) obligations under contracts
and commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in such financial
statements, which, individually or in the aggregate, are not material to the
financial condition or operating results of the Company.
Section 4.7 Absence of Certain Changes. Since November 25, 2005, there
has been no material adverse change and no material adverse development in the
assets, liabilities, business, properties, operations, financial condition or
results of operations of the Company or any of its Subsidiaries (other than
changes which have been disclosed in the SEC Documents filed since such date).
Section 4.8 Absence of Litigation. Other than as disclosed in the SEC
Documents, there is no action, suit, claim, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened against or affecting the Company or any of its
Subsidiaries, or their officers or directors in their capacity as such, that
could have a Material Adverse Effect.
Section 4.9 Patents, Copyrights, etc. The Company and each of its
Subsidiaries owns or possesses the requisite licenses or rights to use all
patents, patent applications, patent rights, inventions, know-how, trade
secrets, trademarks, trademark applications, service marks, service names, trade
names and copyrights ("Intellectual Property") necessary to enable it to conduct
its business as now operated (and, except as set forth in Schedule 4.9 hereof,
to the best of the Company's knowledge, as presently contemplated to be operated
in the future); there is no claim or action by any person pertaining to, or
proceeding pending, or to the Company's knowledge threatened, which challenges
the right of the Company or of a Subsidiary with respect to any Intellectual
Property necessary to enable it to conduct its business as now operated (and,
except as set forth in Schedule 4.9 hereof, to the best of the Company's
knowledge, as presently contemplated to be operated in the future); to the best
of the Company's knowledge, the
11
Company's or its Subsidiaries' current and intended products, services and
processes do not infringe on any Intellectual Property or other rights held by
any person; and the Company is unaware of any facts or circumstances which might
give rise to any of the foregoing. The Company and each of its Subsidiaries have
taken reasonable security measures to protect the secrecy, confidentiality and
value of their Intellectual Property.
Section 4.10 No Materially Adverse Contracts, Etc. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
Section 4.11 Tax Status. Except as set forth on Schedule 4.11, the
Company and each of its Subsidiaries has made or filed all federal, state and
foreign income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim. The Company has not executed a waiver with respect to
the statute of limitations relating to the assessment or collection of any
foreign, federal, state or local tax. Except as set forth on Schedule 4.11, none
of the Company's tax returns is presently being audited by any taxing authority.
Section 4.12 Certain Transactions. Except as disclosed in the SEC
Documents and except for arm's length transactions pursuant to which the Company
or any of its Subsidiaries makes payments in the ordinary course of business
upon terms no less favorable than the Company or any of its Subsidiaries could
obtain from third parties and other than the grant of stock options disclosed on
Schedule 4.3, none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors).
Section 4.13 Disclosure. All information relating to or concerning the
Company or any of its Subsidiaries set forth in this Agreement and provided to
the Buyer pursuant to Section 3.4 hereof and otherwise in connection with the
transactions contemplated hereby is true and correct in all material respects
and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or
exists, nor is the Company in possession of any information, with respect to the
Company or any of its Subsidiaries or its or their business, properties,
operations or financial conditions, which has not been publicly announced or
disclosed but under applicable law, rule or regulation, requires public
disclosure or announcement by the Company.
12
Section 4.14 Acknowledgment Regarding the Buyer's Purchase of Securities.
The Company acknowledges and agrees that the Buyer is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that the
Buyer is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and that any statement made by the Buyer or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is merely incidental
to the Buyer's purchase of the Securities and has not been relied upon by the
Company, its officers or directors in any way.
Section 4.15 No General Solicitation. Neither the Company nor any person
acting for the Company has conducted any "general solicitation," as such term is
defined in Regulation D, with respect to any of the Securities being offered
hereby.
Section 4.16 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration under the
Securities Act of the issuance of the Securities to the Buyer. The issuance of
the Securities to the Buyer will not be integrated with any other issuance of
the Company's securities (past, current or future) for purposes of any
shareholder approval provisions applicable to the Company or its securities.
Section 4.17 No Brokers. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments relating to this Agreement or the transactions contemplated
hereby.
Section 4.18 Acknowledgment Regarding Securities. The Company's executive
officers have studied and fully understand the nature of the Securities being
sold hereunder. The Audit Committee of the Company's Board of Directors has
determined in its good faith business judgment that the issuance of the
Securities hereunder and the consummation of the other transactions contemplated
hereby are in the best interests of the Company and its shareholders.
Section 4.19 Permits; Compliance. The Company and each of its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "Company
Permits"), and there is no action pending or, to the knowledge of the Company,
threatened regarding suspension or cancellation of any of the Company Permits.
Neither the Company nor any of its Subsidiaries is in conflict with, or in
default or violation of, any of the Company Permits. Since January 1, 2006,
neither the Company nor any of its Subsidiaries has received any notification
with respect to possible conflicts, defaults or violations of applicable laws.
Section 4.20 Environmental Matters.
(a) Except as set forth in Schedule 4.20, there are, with
respect to the Company or any of its Subsidiaries or any predecessor of the
Company, no past or present violations of Environmental Laws (as defined below),
releases of any material into the
13
environment, actions, activities, circumstances, conditions, events, incidents,
or contractual obligations which may give rise to any common law environmental
liability or any liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 or similar federal, state, local or
foreign laws and neither the Company nor any of its Subsidiaries has received
any notice with respect to any of the foregoing, nor is any action pending or,
to the Company's knowledge, threatened in connection with any of the foregoing.
The term "Environmental Laws" means all federal, state, local or foreign laws
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of chemicals, pollutants
contaminants, or toxic or hazardous substances or wastes (collectively,
"Hazardous Materials") into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued,
entered, promulgated or approved thereunder.
(b) Other than those that are or were stored, used or disposed
of in compliance with applicable law, no Hazardous Materials are contained on
any real property currently owned, leased or used by the Company or any of its
Subsidiaries, and no Hazardous Materials were released on any real property
previously owned, leased or used by the Company or any of its Subsidiaries
during the period the property was owned, leased or used by the Company or any
of its Subsidiaries, except in the normal course of the Company's or any of its
Subsidiaries' business.
(c) There are no underground storage tanks on or under any real
property owned, leased or used by the Company or any of its Subsidiaries that
are not in compliance with applicable law.
Section 4.21 Title to Property. The Company and its Subsidiaries have
good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in Schedule 4.21 or
such as would not have a Material Adverse Effect. Any real property and
facilities held under lease by the Company and its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as would not
have a Material Adverse Effect.
Section 4.22 Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business.
14
Section 4.23 Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's Board of Directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
Section 4.24 Foreign Corrupt Practices. Neither the Company, nor any of
its Subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any Subsidiary has, in the course of his
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.
ARTICLE 5
COVENANTS
Section 5.1 Best Efforts. The parties shall use their best efforts to
satisfy timely each of the conditions described in Sections 5 and 6 of this
Agreement.
Section 5.2 Form D; Blue Sky Laws. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to the Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Buyer pursuant
to this Agreement under applicable securities or "blue sky" laws of the states
of the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to the Buyer on or prior to
the Closing Date.
Section 5.3 Reporting Status. The Company's Common Stock is registered
under Section 12(b) of the Exchange Act. So long as the Buyer beneficially owns
any of the Securities, the Company shall timely file all reports required to be
filed with the SEC pursuant to the Exchange Act, and the Company shall not
terminate its status as an issuer required to file reports under the Exchange
Act even if the Exchange Act or the rules and regulations thereunder would
permit such termination.
Section 5.4 Use of Proceeds. The Company shall use the proceeds from the
sale of the Draw Down Shares for general working capital.
Section 5.5 Reservation of Shares. The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the full conversion of the Preferred Stock
issued pursuant to this Agreement.
15
Section 5.6 Listing. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon conversation of the Draw Down Shares
upon the American Stock Exchange or the applicable Principal Market, as the case
may be, and each other national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and, so long as the Buyer owns any of the
Securities, shall maintain, so long as any other shares of Common Stock shall be
so listed, such listing of all shares of Common Stock issuable upon conversion
of the Draw Down Shares.
Section 5.7 No Integration. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
Securities Act or cause the offering of Securities to be integrated with any
other offering of securities by the Company for the purpose of any shareholder
approval provision applicable to the Company or its securities. This covenant
shall not prohibit the Company from issuing shares of Common Stock upon
conversion of the Draw Down Shares.
Section 5.8 Issuance of Draw Down Shares. The sale and issuance of the
Draw Down Shares shall be made in accordance with the provisions and
requirements of Regulation D and any applicable state law.
Section 5.9 Legal Compliance. The Company shall conduct its business and
the business of its Subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities applicable to such businesses.
ARTICLE 6
CONDITIONS TO DELIVERY OF DRAW DOWN
NOTICES AND CONDITIONS TO SETTLEMENT
Section 6.1 Conditions Precedent to the Obligation of the Company to
Issue and Sell Draw Down Shares. The obligation hereunder of the Company to
issue and sell the Draw Down Shares to the Buyer incident to each Settlement is
subject to the satisfaction, at or before each such Settlement, of each of the
conditions set forth below.
(a) Accuracy of the Buyer's Representation and Warranties. The
representations and warranties of the Buyer shall be true and correct in all
material respects as of the date when made and as of the date of each such
Settlement as though made at each such time (except for representations and
warranties specifically made as of a particular date which shall be true and
correct in all material respects as of the date when made).
(b) Performance by the Buyer. The Buyer shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Buyer at or prior to such Settlement.
Section 6.2 Conditions Precedent to the Right of the Company to Deliver
a Draw Down Notice. The right of the Company to deliver a Draw Down Notice
hereunder is subject to the satisfaction, on the date of delivery of such Draw
Down Notice, of each of the following conditions:
16
(a) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the applicable Draw
Down Date as though made at such time (except for representations and warranties
specifically made as of a particular date which shall be true and correct in all
material respects as of the date when made).
(b) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to such date and be in compliance with the terms of all of the Transaction
Documents.
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby that prohibits or directly and adversely affects any
of the transactions contemplated by this Agreement, and no proceeding shall have
been commenced that may have the effect of prohibiting or adversely affecting
any of the transactions contemplated by this Agreement.
(d) Material Adverse Changes. Since the date hereof, no event
that had or is reasonably likely to have a Material Adverse Effect shall have
occurred.
(e) No Suspension of Trading In or Delisting of Common Stock.
The trading of the Common Stock shall not have been suspended by the SEC, the
American Stock Exchange or applicable Principal Market, as the case may be.
(f) Floor Price. The trading price of the Company's Common Stock
shall be equal to or greater than the Floor Price.
Section 6.3 Documents Required to be Delivered on each Draw Down Date.
The Buyer's obligation to purchase Draw Down Shares pursuant to a Draw Down
hereunder shall additionally be conditioned upon the delivery to the Buyer of a
certificate in substantially the form and substance of Exhibit D hereto,
executed by an executive officer of the Company and to the effect that all the
conditions to such Draw Down Notice shall have been satisfied as at the date of
each such certificate.
Section 6.4 Draw Down Cancellation.
(a) Mechanics of Draw Down Cancellation. If at any time during
the period between the date the Draw Down Notice is delivered to the Buyer and
the Settlement Agreement it is determined by the Company that prior to the
Settlement Date (i) any of the conditions precedent to a Draw Down set forth in
Section 6.1 and Section 6.2 shall no longer be satisfied as of the Settlement
Date then the Company shall cancel the Draw Down immediately by delivering
written notice to the Buyer (the "Draw Down Cancellation Notice").
17
(b) Effect of Draw Down Cancellation. If a Draw Down
Cancellation Notice has been delivered to the Buyer prior to the Settlement
Date, the Buyer shall not be obligated to purchase any Draw Down Shares pursuant
to the applicable Draw Down.
ARTICLE 7
TERMINATION
Section 7.1 Term; Termination by Mutual Consent. Subject to the
provisions of Section 7.2, the term of this Agreement shall run until the end of
the Commitment Period; provided that the right of the Company to effect any Draw
Downs under this Agreement may be terminated at any time by mutual consent of
the parties.
Section 7.2 Termination by the Buyer. The Buyer may terminate the right
of the Company to effect any Draw Downs under this Agreement if any of the
following events (each, an "Event of Default") shall occur:
(a) The Company is in default with respect to its obligations
under any Transaction Documents;
(b) The Company or any Subsidiary shall make an assignment for
the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for all or substantially all of its property or
business; or such a receiver or trustee shall otherwise be appointed;
(c) Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Company or any
Subsidiary;
(d) The Company shall fail to maintain the listing of the Common
Stock on the American Stock Exchange or applicable Principal Market, as the case
may be or trading in such Common Stock shall otherwise be halted or suspended
for a period of ten (10) consecutive Trading Days;
(e) The Company breaches any material representation or warranty
contained in this Agreement; or
(f) Since the date hereof, an event that had a Material Adverse
Effect shall have occurred.
ARTICLE 8
INDEMNIFICATION
The Company agrees to indemnify and hold harmless the Buyer, its partners,
affiliates, officers, directors, employees, and duly authorized agents, and each
Person or entity, if any, who controls the Buyer within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act (a "Control Person"),
from and against any Damages, joint or several, and any action in respect
thereof to which the Buyer, its partners, affiliates, officers, directors,
employees, duly authorized agents and Control Persons, becomes subject to,
resulting from,
18
arising out of or relating to any breach or alleged breach by the Company of any
representation or warranty or to the nonfulfillment of or failure to perform any
covenant or agreement on the part of Company contained in this Agreement or the
Registration Rights Agreement in any event as such Damages are incurred. The
Company and the Buyer hereby agree to resolve any claim for indemnification
under this Article 8 pursuant to the procedures for indemnification set forth in
Section 6 of the Registration Rights Agreement.
ARTICLE 9
MISCELLANEOUS
Section 9.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
applicable to agreements made and to be performed in the Commonwealth of
Pennsylvania (without regard to principles of conflict of laws). Both parties
irrevocably consent to the exclusive jurisdiction of the United States federal
courts and the state courts located in Pennsylvania with respect to any suit or
proceeding based on or arising under this Agreement, the agreements entered into
in connection herewith or the transactions contemplated hereby or thereby and
irrevocably agree that all claims in respect of such suit or proceeding may be
determined in such courts. Both parties irrevocably waive the defense of an
inconvenient forum to the maintenance of such suit or proceeding. Both parties
further agree that service of process upon a party mailed by first class mail
shall be deemed in every respect effective service of process upon the party in
any such suit or proceeding. Nothing herein shall affect either party's right to
serve process in any other manner permitted by law. Both parties agree that a
final non-appealable judgment in any such suit or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on such judgment or in any
other lawful manner.
Section 9.2 Notices. Any notices required or permitted to be given under
the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by confirmed facsimile transmission
and shall be effective five days after being placed in the mail, if mailed by
regular United States mail, or upon receipt, if delivered personally or by
courier (including a recognized overnight delivery service) or by facsimile, in
each case addressed to a party. The addresses for such communications shall be:
If to the Company:
Environmental Tectonics Corporation
125 James Way
Southampton, PA 18966
Attention: Chief Financial Officer
Facsimile: (215) 357-4000
19
With copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
260 S. Broad Street
Philadelphia, PA 19102
Attn: William W. Matthews, Esq.
Facsimile: (215) 568-6603
If to the Buyer:
To the address set forth immediately below the Buyer's name
on the signature pages hereto.
Each party shall provide notice to the other party of any
change in address.
Section 9.3 Counterparts; Signatures by Facsimile. This Agreement may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party. This Agreement, once executed by
a party, may be delivered to the other party hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
Section 9.4 Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
Section 9.5 Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
Section 9.6 Entire Agreement; Amendments. This Agreement, the
Registration Rights Agreement and the Exhibits and Schedules hereto contain the
entire agreement and understanding of the parties with respect to the matters
covered herein and therein and supersede all prior and contemporaneous
agreements, negotiations and understandings between the parties, both oral and
written relating to the subject matter hereof. The terms and conditions of all
Exhibits to this Agreement are incorporated herein by this reference and shall
constitute part of this Agreement as if fully set forth herein. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
Section 9.7 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Buyer. The Buyer may assign its rights
and obligations hereunder to any affiliate of Buyer.
20
Section 9.8 Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 9.9 Survival. The representations and warranties of the Company
and the agreements and covenants set forth in Article 3, 4, 5, 6, 8 and 9 shall
survive the Closing and each Settlement Date hereunder notwithstanding any due
diligence investigation conducted by or on behalf of the Buyer.
Section 9.10 Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 9.11 No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
[SIGNATURE PAGE FOLLOWS]
21
IN WITNESS WHEREOF, the parties hereto have caused this Preferred Stock
Purchase Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
ENVIRONMENTAL TECTONICS CORPORATION
By: /s/ Duane Deaner
-----------------------------
Name: Duane Deaner
Title: Chief Financial Officer
By: /s/ H.F. Lenfest
-----------------------------
H.F. Lenfest
RESIDENCE: Pennsylvania
ADDRESS: __________________________
__________________________
__________________________