SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Earliest Event Reported
April 6, 2006
Environmental Tectonics Corporation
(Exact name of registrant as specified in its charter)
Pennsylvania
(State or other jurisdiction of incorporation of organization)
1-10655 23-1714256
(Commission File Number) (IRS Employer Identification Number)
County Line Industrial Park
Southampton, Pennsylvania 18966
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 355-9100
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c)under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES.
ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION.
On April 6, 2006, Environmental Tectonics Corporation ("ETC") entered into
a Preferred Stock Purchase Agreement (the "Purchase Agreement") with H.F.
Lenfest ("Lenfest"), pursuant to which, among other things, ETC sold 3,000
shares of its newly-created class of Series B Convertible Preferred Stock (the
"Preferred Stock") to Lenfest for $3,000,000 (the "Initial Draw Down"). A copy
of the Purchase Agreement is included as Exhibit 10.1 to this Current Report on
Form 8-K and is incorporated herein by reference.
In addition to the Initial Draw Down, under the terms of the Purchase
Agreement, ETC may draw down funds until October 6, 2007 by selling additional
shares of Preferred Stock to Lenfest. The draw downs are required to be in
increments of at least $1,000,000 and the aggregate total of all draw downs,
including the Initial Draw Down, cannot exceed $15,000,000. Assuming that ETC is
not then in default of its obligations under the Purchase Agreement and that the
closing price for ETC's common stock on the American Stock Exchange (the "AMEX")
is $4.95 (the "Floor Price") or greater, Lenfest will be required to tender the
funds to ETC upon Lenfest's receipt of a draw down request. ETC may not deliver
a draw down request to Lenfest at any time in which the closing price for its
common stock is less than the Floor Price. The Floor Price is equal to the
closing price for ETC's common stock on April 5, 2006, the trading day
immediately prior to the signing of the Purchase Agreement and the Initial Draw
Down.
The conversion price for converting the Preferred Stock into shares of
ETC's common stock is set with respect to the shares of Preferred Stock issued
in connection with a specific draw down based on the closing price for ETC's
common stock on the trading day immediately prior to the draw down. For example,
the Preferred Stock issued in the Initial Draw Down is convertible into 606,060
shares of ETC common stock based upon a conversion price of $4.95.
In connection with the Purchase Agreement, ETC amended its Articles of
Incorporation on April 6, 2006 by filing a Statement With Respect to Shares for
the Preferred Stock with the Department of State for the Commonwealth of
Pennsylvania. The Statement With Respect to Shares contains the following terms:
Security: Series B Cumulative Convertible Preferred Stock.
Amount: Up to $15,000,000 (subject to a minimum draw
down of $1,000,000).
Offering Period: 18 months from the signing of the Purchase
Agreement.
Liquidation Upon liquidation, dissolution or winding up of
Preference: ETC, the Preferred Stock shall have the right to
receive the original investment amount plus
accrued dividends.
Dividends: 6% per annum; payable on a quarterly basis but
deferrable at the option of ETC until the end of
the sixth year following the signing of the
Purchase Agreement.
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Conversion To be set based on the closing price for
Price: ETC's common stock on AMEX on the trading day
immediately prior to each draw down; provided
that the conversion price shall not be less than
the Floor Price.
Conversion By Lenfest. Lenfest may convert the
Preferred Stock into shares of ETC common stock
beginning at the end of the third year following
the signing of the Purchase Agreement.
Automatic Conversion. The Preferred Stock will
automatically convert into shares of ETC's
common stock at the end of the sixth year
following the signing of the Purchase Agreement.
Anti-dilution Weighted-average protection for issuances of
Protection: ETC's common stock or securities convertible
into ETC's common stock at prices below the
conversion price(s) of the Preferred Stock.
Redemption ETC may redeem the Preferred Stock in increments
Right: of $1,000,000 at any time following issuance.
Voting Rights: The Preferred Stock will vote with the ETC
common stock on an as converted basis.
A copy of the Statement With Respect to Share is included as Exhibit 3(i).1
to this Current Report on Form 8-K and is incorporated herein by reference.
ETC granted Lenfest certain demand and "piggy back" registration rights
pursuant to a Registration Rights Agreement with respect to the shares of common
stock issuable upon conversion of the Preferred Stock. A copy of the
Registration Rights Agreement is included as Exhibit 10.2 to this Current Report
on Form 8-K and is incorporated herein by reference.
As Lenfest is a related party as defined by Regulation S-K, ETC's Audit
Committee, comprised of Howard Kelley, Alan Mark Gemmill and Dr. George
Anderson, each of whom is an independent director as defined by the AMEX rules
and applicable securities laws, approved the terms and conditions of the
Purchase Agreement.
ETC is relying on the exemption to the registration requirements of the
Securities Act of 1933, as amended (the "Act"), set forth in Section 4(2) of the
Act and Regulation D promulgated thereunder with respect to the issuance and
sale of the Preferred Stock pursuant to the Purchase Agreement and the issuance
of the common stock upon the conversion of such shares of Preferred Stock.
ETC issued a press release on April 7, 2006 announcing its agreement with
Lenfest under the Purchase Agreement and the sale of the Preferred Stock in the
Initial Draw Down. A copy of the press release is included as Exhibit 99.1 to
this Current Report on Form 8-K and is incorporated herein by reference.
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ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits
3(i).1 Statement With Respect to Shares of Series B Convertible
Preferred Stock
10.1 Preferred Stock Purchase Agreement, dated as of April 6,
2006, between ETC and H. F. Lenfest
10.2 Registration Rights Agreement, dated as of April 6, 2006,
by and between ETC and H. F. Lenfest
99.1 Press Release, dated April 7, 2006
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENVIRONMENTAL TECTONICS CORPORATION
Registrant
Date: April 7, 2006 By: /s/ Duane D. Deaner
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Duane D. Deaner
Chief Financial Officer
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Exhibit Index
3(i).1 Statement With Respect to Shares of Series B Convertible
Preferred Stock
10.1 Preferred Stock Purchase Agreement, dated as of April 6,
2006, between ETC and H. F. Lenfest
10.2 Registration Rights Agreement, dated as of April 6, 2006,
by and between ETC and H. F. Lenfest
99.1 Press Release, dated April 7, 2006
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