MASTER EXCHANGE AGREEMENT
This
Master Exchange Agreement (this “Agreement”)
is
dated as of January 24, 2007 by and among FP Technology, Inc., a
Delaware corporation (the “Company”),
and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser”
and
collectively the “Purchasers”).
WHEREAS:
A. Pursuant
to a Securities Purchase Agreement, dated March 29, 2006 (the “Original
Purchase Agreement”),
by
and among each of the Purchasers (or their predecessors in interest) and the
Company’s predecessor, AFG Enterprises USA, Inc., the Purchasers acquired
(i) Senior Secured Nonconvertible Notes Due 2011 in the aggregate principal
amount of $50,000,000 (the “Outstanding
Notes”)
issued
under an Indenture with The Bank of New York dated March 29, 2006 (the
“Outstanding
Indenture”);
and
(ii) Warrants to purchase an aggregate of 6,250,000 shares at an exercise price
currently set at $8.00 per share (the “Outstanding
SPA Warrants”).
B. Pursuant
to a letter agreement, dated April 4, 2006, by and between Xxxxxx & Xxxxxxx,
LLC and the Company’s predecessor, AFG Enterprises USA, Inc., Xxxxxx &
Xxxxxxx, LLC acquired Warrants to purchase an aggregate of 625,000 shares at
an
exercise price currently set at $8.00 per share (the “Outstanding
Xxxxxx Warrants”
and,
together with the Outstanding SPA Warrants, the “Outstanding
Warrants”
and,
together with the Outstanding SPA Warrants and the Outstanding Notes, the
“Outstanding
Securities”).
C. The
Outstanding Securities are currently obligations of the Company.
D. Subject
to the terms and conditions set forth in this Agreement and pursuant to Section
3(a)(9) of the Securities Act of 1933, as amended (the “Securities
Act”),
the
Company desires to exchange all of the Outstanding SPA Warrants and Outstanding
Notes in the aggregate for (i) $45,000,000 in cash plus accrued interest on
the
Outstanding Notes through the Closing (the “Cash
Component”),
(ii) new Senior Secured Convertible Notes Due 2009 in an initial principal
amount of $5,600,000 (the “New
Notes”)
under
an indenture in the form attached hereto as Exhibit
B
(the
“New
Indenture”),
(iii)
Warrants to purchase an aggregate of 1,214,285 shares of Common Stock at an
exercise price of $7.00 per share in the form attached hereto as Exhibit
C
(the
“New
Warrants”),
and
(iv) 1,500,000 fully-paid shares of Common Stock (the “New
Shares”
and,
together with the Cash Component, New Notes and New Warrants, the “Exchange
Consideration”).
E. (i)
Except as otherwise set forth in the New Indenture, the New Notes will be senior
to all outstanding and future indebtedness of the Company and (ii) secured
by a
perfected security interest in all of the assets of the Company as evidenced
by
(and as defined in) the Security Agreement in favor of The Bank of New York
in
the form attached hereto as Exhibit
D
(the
“Security
Agreement”),
which
security interest shall be senior to all other security interests
therein.
F. On
the
Closing Date, the Company shall obtain a letter of credit from Xxxxx Fargo
Bank,
National Association in favor of The Bank of New York, as trustee under the
New
Indenture, in a stated amount of $1,344,000, in respect of approximately two
years of interest payments payable under the New Notes.
G. At
the
Closing, the parties hereto are executing and delivering a Registration Rights
Agreement, substantially in the form attached hereto as Exhibit
E
(the
“Registration
Rights Agreement”),
pursuant to which the Company will provide certain registration rights in
respect of the Underlying Shares under the Securities Act and the rules and
regulations promulgated thereunder.
H. The
Purchasers desire to receive the Exchange Consideration and the benefits of
the
other Transactions Documents in exchange for their Outstanding Notes and
Outstanding SPA Warrants, as more fully described in this Agreement.
I. At
the
Closing, Xxxxxx & Xxxxxxx LLC will surrender to the Company for cancellation
the Outstanding Xxxxxx Warrants, and will receive from the Company new warrants
to purchase 71,429 shares of Common Stock at an exercise price $7.00 per share.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and each Purchaser agree as
follows:
ARTICLE
I
DEFINITIONS
1.1 Definitions.
In
addition to the terms defined elsewhere in this Agreement: (a) capitalized
terms
that are not otherwise defined herein have the meanings given to such terms
in
the Notes (as defined herein), and (b) the following terms have the meanings
indicated in this Section 1.1:
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 144 under the Securities
Act.
With
respect to a Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as such Purchaser will
be deemed to be an Affiliate of such Purchaser.
“Closing”
means
the closing of the exchange of Exchange Consideration for Outstanding Securities
pursuant to Section 2.1.
“Closing
Date”
means
no later than two Trading Days following the date when all of the Transaction
Documents have been executed and delivered by the applicable parties thereto
and
all conditions precedent to each of the parties’ obligations set forth in
Section 2.3 have been satisfied or waived.
“Commission”
means
the U.S. Securities and Exchange Commission.
“Common
Stock”
means
the common stock of the Company, par value $0.001 per share, and any other
class
of securities into which such securities may hereafter have been reclassified,
changed into or exchanged for.
“Common
Stock Equivalents”
means
any securities of the Company which would entitle the holder thereof to acquire
at any time Common Stock, including, without limitation, any debt, preferred
stock, rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise entitles
the
holder thereof to receive, Common Stock.
“Company
Counsel”
means
Xxxxxxxx & Xxxxxxxx LLP, with offices located at 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
“Conversion
Price”
shall
have the meaning ascribed to such term in the New Notes.
“Escrow
Account”
shall
have the meaning ascribed to such term in the Outstanding
Indenture.
“Escrow
Account Disbursement Instructions”
means
the Escrow Account Disbursement Instructions attached hereto as Exhibit
K.
“Evaluation
Date”
shall
have the meaning ascribed to such term in Section 3.1(q).
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“GAAP”
shall
have the meaning ascribed to such term in Section 3.1(h).
“Intellectual
Property Rights”
shall
have the meaning ascribed to such term in Section 3.1(n).
“L/C
Bank”
shall
have the meaning ascribed to such term in the New Indenture.
“Letter
of Credit”
shall
have the meaning ascribed to such term in the New Indenture.
“Liens”
means
a
lien, charge, security interest, encumbrance, right of first refusal, preemptive
right or other restriction.
“Material
Adverse Effect”
means
any material adverse effect on the business, properties, assets, operations,
results of operations, condition (financial or otherwise) or prospects of the
Company, or on the transactions contemplated hereby and the other Transaction
Documents or by the agreements and instruments to be entered into
in
connection
herewith or therewith, or on the authority or ability of the Company to perform
its obligations under the Transaction Documents on a timely basis.
“Material
Permits”
shall
have the meaning ascribed to such term in Section 3.1(l).
“Person”
means
an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
“Proceeding”
means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
“Purchaser
Party”
shall
have the meaning ascribed to such term in Section 4.9.
“Registration
Rights Agreement”
means
the Registration Rights Agreement in the form attached hereto as Exhibit
E.
“Required
Approvals”
shall
have the meaning ascribed to such term in Section 3.1(e).
“Required
Minimum”
means,
as of any date, the maximum aggregate number of shares of Common Stock then
issued or potentially issuable in the future pursuant to the Transaction
Documents, including any Underlying Shares issuable upon conversion in full
of
all Notes, ignoring any conversion limits set forth therein, and assuming that
the Conversion Price is at all times on and after the date of determination
75%
of the then Conversion Price on the Trading Day immediately prior to the date
of
determination.
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such
Rule.
“SEC
Reports”
shall
have the meaning ascribed to such term in Section 3.1(h).
“Securities”
means
the New Shares, New Notes, New Warrants and Underlying Shares.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Short
Sales”
shall
include all “short sales” as defined in Rule 200 of Regulation SHO under the
Exchange Act (but shall not be deemed to include the location and/or reservation
of borrowable shares of Common Stock) and all types of direct and indirect
stock
pledges, forward sale contracts, options, puts, calls, swaps and similar
arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated
brokers.
“Trading
Day”
means
a
day on which the Common Stock is traded on a Trading Market.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the NASDAQ Global Select Market, the NASDAQ
Global Market, the American Stock Exchange, the New York Stock Exchange, or
the
OTC Bulletin Board.
“Transaction
Documents”
means
this Agreement, the New Notes, the New Indenture, the New Warrants, the Security
Agreement, the Registration Rights Agreement, and any other documents or
agreements executed in connection with the transactions contemplated
hereunder.
“Underlying
Shares”
means
(i) the New Shares, (ii) the shares of Common Stock issuable upon exercise
of
the New Warrants, and (iii) the shares of Common Stock issuable upon conversion
of the New Notes.
ARTICLE
II
EXCHANGE
AND CLOSING
2.1 Closing.
On the
Closing Date, upon the terms and subject to the conditions set forth herein,
the
Company shall issue and pay to each Purchaser, in exchange for such Purchaser’s
Outstanding Securities specified in Exhibit
A,
such
amount of Exchange Consideration specified in Exhibit
A
for such
Purchaser. The Closing shall occur at the offices of Company Counsel.
2.2 Deliveries.
(a) Company
Deliverables.
At the
Closing, the Company shall deliver or cause to be delivered to each
Purchaser:
(i) this
Agreement duly executed by the Company;
(ii) the
Cash
Consideration specified for such Purchaser in Exhibit
A;
(iii) the
New
Indenture, duly executed by the Company and The Bank of New York, as trustee
thereunder;
(iv) the
New
Notes and New Warrants, in such amounts specified for such Purchaser in
Exhibit
A,
duly
registered in the name of such Purchaser (or such other name specified in
writing by the Purchaser prior to the Closing);
(v) a
copy of
irrevocable instructions to the Company’s common stock transfer agent in the
form attached hereto as Exhibit
F
(the
“Transfer
Agent Instructions”)
instructing the transfer agent to deliver, on an expedited basis, certificates
representing the number of New Shares specified for such Purchaser
(vi) in
Exhibit
A,
duly
registered in the name of such Purchaser (or such other name specified in
writing by the Purchaser prior to the Closing);
(vii) the
Registration Rights Agreement duly executed by the Company;
(viii) the
Security Agreement duly executed by the Company;
(ix) the
opinion of Company Counsel, dated as of the Closing Date, in substantially
the
form attached hereto as Exhibit
G
and
reasonably satisfactory to Purchasers;
(x) a
certificate, executed by the Secretary of the Company, dated as of the Closing
Date, in the form attached hereto as Exhibit
H;
and
(xi) a
letter
or certificate from the Company’s transfer agent certifying the number of shares
of Common Stock outstanding as of a date within seven (7) days of the Closing
Date.
(b) Purchaser
Deliverables.
At the
Closing, each Purchaser shall deliver or cause to be delivered to the
Company:
(i) this
Agreement duly executed by such Purchaser;
(ii) originals
of the Outstanding Notes and Outstanding SPA Warrants held by each Purchaser
(as
set forth for each Purchaser in Exhibit
A)
or
affidavit of loss thereof in such form reasonably acceptable to the Company,
along with such additional documentation as the Company may reasonably request
in order to effect the transfer of such securities to the Company;
(iii) the
Registration Rights Agreement duly executed by such Purchaser; and
(iv) the
Investor Questionnaire completed and executed by such Purchaser.
(c) Delivery
of Transfer Agent Instructions.
The
Company shall have delivered to the Transfer Agent the Transfer Agent
Instructions in the form of Exhibit
F,
and
shall have obtained the acknowledgment thereof from the Transfer
Agent.
2.3 Closing
Conditions.
(a) Conditions
to Obligations of the Company.
The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:
(b) the
accuracy in all respects when made and on the Closing Date of those
representations and warranties of the Purchasers contained herein (to the extent
such representations or warranties are by their terms qualified by materiality
or Material Adverse Effect) and in all material respects of those
representations and warranties not so qualified;
(i) all
obligations, covenants and agreements of the Purchasers required to be performed
at or prior to the Closing Date shall have been performed or waived;
and
(ii) the
delivery by the Purchasers of the items set forth in Section 2.2(b) of this
Agreement.
(c) Conditions
to Obligations of the Purchasers.
The
respective obligations of each Purchaser hereunder in connection with the
Closing are subject to the following conditions being met:
(i) the
accuracy in all respects on the Closing Date of the representations and
warranties of the Company contained herein (to the extent such representations
or warranties are by their terms qualified by materiality or Material Adverse
Effect) and in all material respects of those representations and warranties
not
so qualified;
(ii) all
obligations, covenants and agreements of the Company required to be performed
at
or prior to the Closing Date shall have been performed or waived;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;
(iv) the
Company shall have delivered to The Bank of New York, as Collateral Agent under
the Security Agreement, appropriate financing statements on Form UCC-1 in form
for filing under the Uniform Commercial Code or other applicable local law
of
each jurisdiction in which the filing of a financing statement or giving of
notice may be required, or reasonably requested by the Collateral Agent, to
perfect the security interests intended to be created by the Security Agreement;
(v) Xxxxxx
& Xxxxxxx, LLC shall have surrendered to the Company for cancellation the
Outstanding Xxxxxx Warrants, and the Company shall have issued to Xxxxxx &
Xxxxxxx LLC or its assignee new warrants to purchase 71,429 shares of Common
Stock at an exercise price of $7.00 per share; and
(vi) the
issuance of the Letter of Credit (subject to escrow arrangements to be released
by the L/C Bank upon confirmation of receipt by the L/C Bank of the funds
referred to in paragraph 6 of the Escrow Account
(vii) Disbursement
Instructions attached hereto as Exhibit
K).
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
3.1 Representations
and Warranties of the Company.
Except
as set forth in the SEC Reports, the Company hereby makes the representations
and warranties set forth below to each Purchaser.
(a) Subsidiaries.
The
Company has no subsidiaries and does not own, directly or indirectly, any
capital stock or other equity interests of any other entity.
(b) Organization
and Qualification.
The
Company is an entity duly organized, validly existing and in good standing
under
the laws of the State of Delaware, and has the requisite power and authority
to
own and use its properties and assets and to carry on its business as currently
conducted. The Company is not in violation or default of any of the provisions
of its certificate of incorporation or bylaws. The Company is duly qualified
to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it causes such qualification to be required, except where
the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in a Material Adverse Effect, and
no
Proceeding has been instituted in any such jurisdiction revoking, limiting
or
curtailing or seeking to revoke, limit or curtail such power and authority
or
qualification.
(c) Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by each of the Transaction Documents
and otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents by the Company
and
the consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no further
action is required by the Company, its board of directors or its stockholders
in
connection therewith other than in connection with the Required Approvals.
Each
Transaction Document has been (or upon delivery will have been) duly executed
by
the Company and, when delivered in accordance with the terms hereof and thereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of
general application affecting enforcement of creditors’ rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
(d) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the other transactions contemplated
hereby and thereby do not and will not: (i) conflict with or violate any
provision of the Company’s certificate of incorporation or bylaws, or
(ii)
(e) conflict
with, or constitute a default (or an event that with notice or lapse of time
or
both would become a default) under, result in the creation of any Lien upon
any
of the properties or assets of the Company, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company debt or otherwise) or other understanding
to
which the Company is a party or by which any property or asset of the Company
is
bound or affected, or (iii) subject to the Required Approvals, conflict with
or
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which
the
Company is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company is bound or
affected; or (iv) result in a violation of the rules and regulations of
the
OTC
Bulletin Board applicable
to the Company or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected and the Company has no knowledge of any facts
or circumstances which would reasonably lead to delisting or suspension of
the
Common Stock by the OTC Bulletin Board in the foreseeable future.
(f) Filings,
Consents and Approvals.
The
Company is not required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court
or
other federal, state, local or other governmental authority or other Person
in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) filings required pursuant to Section
4.6,
(ii) the filing with the Commission of a registration statement covering the
resale of the Underlying Shares, if applicable, (iii) the notice and/or
application(s), if any, required by each applicable Trading Market for the
issuance and sale of the Notes and the listing of the Underlying Shares for
trading thereon in the time and manner required thereby and (iv) the filing of
Form D with the Commission and such filings as are required to be made under
applicable state securities laws (collectively, the “Required
Approvals”).
(g) Issuance
of the Securities.
The
Securities are duly authorized and, when issued and paid for in accordance
with
the applicable Transaction Documents, will be duly and validly issued, fully
paid and nonassessable, free and clear of all Liens imposed by the Company,
other than restrictions on transfer provided for in the Transaction Documents.
The Underlying Shares, when issued in accordance with the terms of the
Transaction Documents, will be validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company. The Company has reserved
from its duly authorized capital stock a number of shares of Common Stock for
issuance of the Underlying Shares at least equal to the Required Minimum on
the
date hereof.
(h) Capitalization.
Except
as set forth on Schedule
3.1(g),
the
capitalization of the Company is as set forth in the SEC Reports. The Company
has not issued any capital stock since its most
recently filed periodic report under the Exchange Act. No
Person
has any right of first refusal, preemptive right, right of participation, or
any
similar right to participate in the transactions contemplated by the
Transaction
(i) Documents.
Except (i) for the Outstanding Notes and Outstanding Warrants, (ii) the
instruments identified on Schedule 3.1(g), and (iii) as a result of the
transactions contemplated by this Agreement, there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into
or
exercisable or exchangeable for, or giving any Person any right to subscribe
for
or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company is or may become bound
to
issue additional shares of Common Stock or Common Stock Equivalents. The
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under such
securities. All of the outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for
the
issuance and sale of the Securities. There are no stockholders agreements,
voting agreements or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s stockholders. Other than as would
reasonably not be expected to have a Material Adverse Result and as set forth
in
Schedule
3.1(g),
(i)
there are no outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing Indebtedness
of the Company or by which the Company is or may become bound; (ii) there are
no
financing statements securing obligations in any material amounts, either singly
or in the aggregate, filed in connection with the Company; (iii) except for
the
Outstanding Notes and the Outstanding Warrants, there are no outstanding
securities or instruments of the Company which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company is or may become bound to redeem a security
of
the Company; (iv) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance
of
the Exchange Consideration; (v) the Company does not have any stock appreciation
rights or “phantom stock” plans or agreements or any similar plan or agreement;
and (vi) the Company has no liabilities or obligations required to be disclosed
in the SEC Documents but not so disclosed in the SEC Documents.
(j) SEC
Reports; Financial Statements.
Except
as set forth on Schedule
3.1(h),
the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required
by
law to file such material) (the foregoing materials, including the exhibits
thereto and documents incorporated by reference therein, being collectively
referred to herein as the “SEC
Reports”)
on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC
(k) Reports
prior to the expiration of any such extension. As of their respective dates,
the
SEC Reports complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
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 the light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and
the
rules and regulations of the Commission with respect thereto as in effect at
the
time of filing. Such financial statements have been prepared in accordance
with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”)
(except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP) and fairly present in all material respects the
financial position of the Company as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in
the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
No other information provided by or on behalf of the Company to the Purchasers
which is not included in the SEC Documents contains any untrue statement of
a
material fact or omits to state any material fact necessary in order to make
the
statements therein, in the light of the circumstance under which they are or
were made, not misleading.
(l) Indebtedness
and Other Contracts.
Except
as disclosed in Schedule
3.1(i),
the
Company (i) has no outstanding Indebtedness (as defined below), (ii) is not
a
party to any contract, agreement or instrument, the violation of which, or
default under which, by the other party(ies) to such contract, agreement or
instrument would result in a Material Adverse Effect, (iii) is not in violation
of any term of or in default under any contract, agreement or instrument
relating to any Indebtedness, except where such violations and defaults would
not result, individually or in the aggregate, in a Material Adverse Effect,
and
(iv) is not a party to any contract, agreement or instrument relating to any
Indebtedness, the performance of which, in the judgment of the Company's
officers, has or is expected to have a Material Adverse Effect. Schedule
3.1(i)
provides
a detailed description of the material terms of any such outstanding
Indebtedness. For purposes of this Agreement: (x) “Indebtedness”
of
any
Person means, without duplication (A) all indebtedness for borrowed money,
(B)
all obligations issued, undertaken or assumed as the deferred purchase price
of
property or services (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising
under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession
(m) or
sale
of such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable
for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses
(A)
through (G) above; (y) “Contingent
Obligation”
means,
as to any Person, any direct or indirect liability, contingent or otherwise,
of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) “Person”
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
(n) Material
Changes.
Since
the date of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in the SEC Reports, (i) there has
been
no event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent
with
past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans.
The Company does not have pending before the Commission any request for
confidential treatment of information. The Company has not taken any steps
to
seek protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. The Company is not as of the date hereof,
and after giving effect to the transactions contemplated hereby to occur at
the
Closing will not be, Insolvent (as defined below). For purposes of this Section
3(j), “Insolvent”
means
(i) the present fair saleable value of the Company's assets is less than the
amount required to pay the Company's total Indebtedness (as defined in Section
3(i)), (ii) the Company is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured, (iii) the Company
(o) intends
to incur or believes that it will incur debts that would be beyond its ability
to pay as such debts mature or (iv) the Company has unreasonably small capital
with which to conduct the business in which it is engaged as such business
is
now conducted and is proposed to be conducted. Except for the issuance of the
Securities contemplated by this Agreement or as set forth in the SEC Reports,
no
event, liability or development has occurred or exists with respect to the
Company or its business, properties, operations or financial condition, that
would be required to be disclosed by the Company under applicable securities
laws at the time this representation is made that has not been publicly
disclosed one Trading Day prior to the date that this representation is
made.
(p) Litigation.
There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting
the
Company or any of its properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an “Action”)
which
(i) adversely affects or challenges the legality, validity or enforceability
of
any of the Transaction Documents, the Outstanding Notes, Outstanding Warrants
or
the Securities or (ii) could, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any director or officer thereof is or has been the subject of any
Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has not been,
and
to the knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company. The Commission has not issued any stop
order
or other order suspending the effectiveness of any registration statement filed
by the Company under the Exchange Act or the Securities Act. None of the
Company’s employees is a member of a union that relates to such employee’s
relationship with the Company, and the Company is not a party to any collective
bargaining agreement, and the Company believes that its relationships with
its
employees are good. No executive officer, to the knowledge of the Company,
is,
or is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement
or
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does
not
subject the Company to any liability with respect to any of the foregoing
matters. The Company is in compliance with all U.S. federal, state, local and
foreign laws and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except where the failure
to be in compliance could not, individually or in the aggregate, reasonably
be
expected to have a Material Adverse Effect.
(q) Labor
Relations.
No
material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company which could reasonably
be
expected to result in a Material Adverse Effect. No executive officer of the
Company (as defined in Rule 501(f) of the 0000 Xxx) has notified the
Company
(r) that
such
officer intends to leave the Company or otherwise terminate such officer's
employment with the Company.
(s) Regulatory
Permits.
The
Company possesses all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities necessary
to
conduct its business as described in the SEC Reports, except where the failure
to possess such permits could not have or reasonably be expected to result
in a
Material Adverse Effect (“Material
Permits”),
and
the Company has not received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(t) Title
to Assets.
The
Company has good and marketable title in fee simple to all real property owned
by it that is material to the businesses of the Company, and good and marketable
title in all personal property owned by it that is material to the business
of
the Company, in each case free and clear of all Liens except for Liens as do
not
materially affect the value of such property and do not interfere with the
use
made and proposed to be made of such property by the Company and Liens for
the
payment of federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties. Any real property and facilities held
under
lease by the Company is held by it under valid, subsisting and enforceable
leases of which the Company is in compliance.
(u) Patents
and Trademarks.
The
Company has, or has rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, trade secrets, inventions,
copyrights, licenses and other intellectual property rights similar rights
necessary or material for use in connection with its businesses as described
in
the SEC Reports (collectively, the “Intellectual
Property Rights”).
The
Company has not received any notice (written or otherwise) that the Intellectual
Property Rights used by the Company violates or infringes upon the rights of
any
Person. There is no claim, action or proceeding being made or brought, or to
the
knowledge of the Company, being threatened, against the Company regarding its
Intellectual Property Rights. To the knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights of
others. The Company has taken reasonable security measures to protect the
secrecy, confidentiality and value of all of its intellectual
properties.
(v) Insurance.
The
Company is insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are prudent and customary in the
businesses in which the Company is engaged. The Company has not been refused
any
insurance coverage sought or applied for. To the knowledge of the Company,
such
insurance contracts and policies are accurate and complete. The Company has
no
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 without a
significant increase in cost.
(w) Transactions
With Affiliates and Employees.
Except
as set forth in the SEC Reports filed at least ten Trading Days prior to the
date hereof, none of the officers or directors of the Company and, none of
the
employees of the Company is presently a party to any transaction with the
Company (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner, in each case in excess of $60,000
other than (i) for payment of salary or consulting fees for services rendered,
and (ii) reimbursement for expenses incurred on behalf of the
Company.
(x) Xxxxxxxx-Xxxxx;
Internal Accounting Controls.
The
Company is in material compliance with all provisions of the Xxxxxxxx-Xxxxx
Act
of 2002 which are applicable to it as of the Closing Date. The
Company maintains a system of internal accounting controls sufficient 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
GAAP 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. The Company has established disclosure controls and procedures
(as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that material
information relating to the Company is made known to the certifying officers
by
others within those entities, particularly during the period in which the
Company’s most recently filed periodic report under the Exchange Act, as the
case may be, is being prepared. The Company’s certifying officers have evaluated
the effectiveness of the Company’s controls and procedures as of the date prior
to the filing date of the most recently filed periodic report under the Exchange
Act (such date, the “Evaluation
Date”).
The
Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company’s internal controls (as such term is defined in Item
307(b) of Regulation S-K under the Exchange Act) or, to the knowledge of the
Company, in other factors that could significantly affect the Company’s internal
controls.
(y) Certain
Fees.
No
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or
on
behalf of other
(z) Persons
for fees of a type contemplated in this Section that may be due in connection
with the transactions contemplated by the Transaction Documents.
(aa) Private
Placement.
Assuming the accuracy of the Purchasers representations and warranties set
forth
in Section 3.2, no registration under the Securities Act is required for the
offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder does
not
contravene the rules and regulations of the Trading Market.
(bb) Investment
Company.
The
Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
The Company shall conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(cc) Listing
and Maintenance Requirements.
The
Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange
Act, and the Company has taken no action designed to, or which to its knowledge
is likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification
that
the Commission is contemplating terminating such registration. The Company
has
not, in the 12 months preceding the date hereof, received notice from any
Trading Market on which the Common Stock is or has been listed or quoted to
the
effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
(dd) Application
of Takeover Protections.
The
Company and its Board of Directors have taken all necessary action, if any,
in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s Certificate of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a result
of the Purchasers and the Company fulfilling their obligations or exercising
their rights under the Transaction Documents, including without limitation
as a
result of the Company’s issuance of the Securities and the Purchasers’ ownership
of the Securities.
(ee) Disclosure.
The
Company confirms that neither it nor any other Person acting on its behalf
has
provided any of the Purchasers or their agents or counsel with any information
that constitutes or might constitute material, nonpublic information. Each
press
release issued by the Company during the twelve (12) months preceding the date
of this Agreement did not at the time of release contain any untrue statement
of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. The Company understands
and confirms that the Purchasers will rely on
(ff) the
foregoing representations and covenants in effecting transactions in securities
of the Company. All disclosure provided to the Purchasers regarding the Company,
its business and the transactions contemplated hereby furnished by or on behalf
of the Company with respect to the representations and warranties made herein
are true and correct with respect to such representations and warranties and
do
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2 hereof.
(gg) No
Integrated Offering.
Assuming
the accuracy of the Purchasers’ representations and warranties set forth in
Section 3.2, 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 cause this offering of the Securities to be integrated
with prior offerings by the Company for purposes of the Securities Act or any
applicable shareholder approval provisions, including, without limitation,
under
the rules and regulations of any Trading Market on which any of the securities
of the Company are listed or designated.
(hh) Form
SB-2 Eligibility.
The
Company is eligible to register the resale of the Underlying Shares for resale
by the Purchaser on Form SB-2 promulgated under the Securities Act.
(ii) Tax
Status.
Except
as set forth in Schedule 3.1(aa), the Company (i) has made or filed all foreign,
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) 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 (iii) has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to
the
periods to which such returns, reports or declarations apply. Except as set
forth in Schedule 3.1(aa), there are no unpaid taxes in any amount (other than
an aggregate immaterial 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.
(jj) No
General Solicitation.
Neither
the Company nor any person acting on behalf of the Company has offered or sold
any of the Securities by any form of general solicitation or general advertising
within the meaning of Regulation D promulgated under the Securities Act.
The Company has offered the Securities for sale only to the Purchasers and
certain other “accredited investors” within the meaning of Rule 501 under the
Securities Act.
(kk) Foreign
Corrupt Practices.
Neither
the Company, nor to the knowledge of the Company, any agent or other person
acting on behalf of the Company, has (i) directly or indirectly, used any funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate funds,
(iii) made any unlawful bribe, rebate, payoff, influence payment, kickback
or other unlawful payment to any foreign or domestic government official or
employee, (iv) failed to disclose fully any contribution made by the
Company (or made by any person acting on its behalf of which the Company is
aware) which is in violation of law, or (v) violated in any material
respect any provision of the Foreign Corrupt Practices Act of 1977, as
amended.
(ll) Accountants.
To the
knowledge of the Company, the Company’s accountants are a registered public
accounting firm as required by the Exchange Act and the rules and regulations
promulgated thereunder.
(mm) Acknowledgment
Regarding Purchasers’ Purchase of Securities.
The
Company acknowledges and agrees that each of the Purchasers is acting solely
in
the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated thereby. The Company further
acknowledges that no Purchaser is 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 any advice given by any Purchaser or any
of
their respective representatives or agents in connection with this Agreement
and
the transactions contemplated hereby is merely incidental to the Purchasers’
participation in the transactions contemplated by this Agreement. The Company
further represents to each Purchaser that the Company’s decision to enter into
this Agreement has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its
representatives.
(nn) Acknowledgement
Regarding Purchasers’ Trading Activity.
Anything in this Agreement or elsewhere herein to the contrary notwithstanding
(except for Section 4.12 and Section 3.2(f) hereof), it is understood and agreed
by the Company (i) that none of the Purchasers have been asked to agree, nor
has
any Purchaser agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities issued
by the Company or to hold the Securities for any specified term; (ii) that
past
or future open market or other transactions by any Purchaser, including Short
Sales, and specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing of this or future private
placement transactions, may negatively impact the market price of the Company’s
publicly-traded securities; (iii) that any Purchaser, and counter parties in
“derivative” transactions to which any such Purchaser is a party, directly or
indirectly, presently may have a “short” position in the Common Stock, and (iv)
that each Purchaser shall not be deemed to have any affiliation with or control
over any arm’s length counter-party in any “derivative” transaction.
The
Company further understands and acknowledges that (a) one or more Purchasers
may
engage in hedging activities at various times during the period that
the
(oo) Securities
are outstanding, including, without limitation, during the periods that the
value of the Underlying Shares deliverable with respect to Securities are being
determined and (b) such hedging activities (if any) could reduce the value
of
the existing stockholders’ equity interests in the Company at and after the time
that the hedging activities are being conducted. The Company acknowledges
that such aforementioned hedging activities do not constitute a breach of any
of
the Transaction Documents.
(pp) Manipulation
of Price.
The Company has not, and to its knowledge no one acting on its behalf has,
(i)
taken, directly or indirectly, any action designed to cause or to result in
the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or, paid any compensation for soliciting purchases of, any of the
Securities (other than for the placement agent’s placement of the Securities),
or (iii) paid or agreed to pay to any person any compensation for soliciting
another to purchase any other securities of the Company.
(qq) Environmental
Laws.
The
Company (i) is in compliance with any and all Environmental Laws (as hereinafter
defined), (ii) has received all permits, licenses or other approvals required
of
it under applicable Environmental Laws to conduct its businesses and (iii)
is in
compliance with all terms and conditions of any such permit, license or approval
where, in each of the foregoing clauses (i), (ii) and (iii), the failure to
so
comply could be reasonably expected to have, individually or in the aggregate,
a
Material Adverse Effect. As used in this Agreement, “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.
3.2 Representations
and Warranties of the Purchasers.
Each
Purchaser hereby, for itself and for no other Purchaser, represents and warrants
as of the date hereof and as of the Closing Date to the Company as
follows:
(a) Organization;
Authority.
Such
Purchaser is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with full right,
corporate or partnership power and authority to enter into and to consummate
the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution, delivery and
performance by such Purchaser of the transactions contemplated by this Agreement
have
(b) been
duly
authorized by all necessary corporate or similar action on the part of such
Purchaser. Each Transaction Document to which it is a party has been duly
executed by such Purchaser, and when delivered by such Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding obligation
of such Purchaser, enforceable against it in accordance with its terms, except
(i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
(c) Outstanding
Notes.
Such
Purchaser is the holder of Outstanding Notes in the face amount as set forth
opposite such Purchaser’s name on Exhibit
A
hereto,
and such Purchaser has not transferred any legal or beneficial interest in
such
Outstanding Notes or any portion thereof to any other party.
(d) Own
Account.
Such
Purchaser understands that the Securities are “restricted securities” and have
not been registered under the Securities Act or any applicable state securities
law and, other than, with respect to Portside Growth and Opportunity Fund (a
Purchaser) (“Portside”),
the
transactions contemplated by that certain Share Purchase Agreement (the
“Portside
SPA”)
dated
the date hereof entered into by Portside, such Purchaser is acquiring the
Securities as principal for its own account and not with a view to or for
distributing or reselling such Securities or any part thereof in violation
of
the Securities Act or any applicable state securities law, has no present
intention of distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no arrangement or
understanding with any other persons regarding the distribution of such
Securities (this representation and warranty not limiting such Purchaser’s right
to sell the Securities pursuant to an effective registration statement or
otherwise in compliance with applicable federal and state securities laws)
in
violation of the Securities Act or any applicable state securities law. Such
Purchaser is acquiring the Securities hereunder in the ordinary course of its
business. Other than, with respect to Portside, the transaction contemplated
by
the Portside SPA, such Purchaser does not have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the
Securities.
(e) Purchaser
Status.
At the
time such Purchaser was offered the Securities, it was, and at the date hereof
it is, and on each date on which it converts any Notes it will be either: (i)
an
“accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or
(a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as
defined in Rule 144A(a) under the Securities Act. Except as set forth on
Schedule 3.2(d),
such
Purchaser is not required to be registered as a broker-dealer under Section
15
of the Exchange Act.
(f) Experience
of Such Purchaser.
Such
Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters
so as
to be capable of evaluating the merits and risks of the
(g) prospective
investment in the Securities, and has so evaluated the merits and risks of
such
investment. Such Purchaser is able to bear the economic risk of an investment
in
the Securities and, at the present time, is able to afford a complete loss
of
such investment. Such Purchaser acknowledges that it has had the opportunity
to
review the Company’s Form 10-QSB filed with the SEC on November 14, 2006. Such
Purchaser further acknowledges that it is an existing security holder of the
Company and that, to the best of its knowledge, no commission or other
remuneration will be paid or given directly or indirectly for soliciting the
transactions contemplated by this Agreement.
(h) General
Solicitation.
Such
Purchaser is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in
any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar or any other general solicitation or general
advertisement.
(i) Short
Sales and Confidentiality Prior to The Date Hereof.
Other
than the transaction contemplated hereunder and, other than with respect to
Portside, the transactions contemplated by the Portside SPA, such Purchaser
has
not directly or indirectly, nor has any Person acting on behalf of or pursuant
to any understanding with such Purchaser, executed any disposition, including
Short Sales, in the securities of the Company during the period commencing
from
the time
that such Purchaser first received a term sheet from the Company or any other
Person setting forth the material terms of the transactions contemplated
hereunder until the date hereof (“Discussion
Time”).
Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such
Purchaser’s assets and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other portions
of
such Purchaser’s assets, the representation set forth above shall only apply
with respect to the portion of assets managed by the portfolio manager that
made
the investment decision to participate in the transactions contemplated by
this
Agreement. Other than to other Persons party to this Agreement, such Purchaser
has maintained the confidentiality of all disclosures made to it in connection
with this transaction (including the existence and terms of this transaction).
The
Company acknowledges and agrees that each Purchaser does not make or has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section
3.2.
ARTICLE
IV
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
4.2 The
Securities may only be disposed of in compliance with state and federal
securities laws. Other than a transfer of Securities pursuant to an effective
registration statement or Rule 144, to the Company or to an affiliate of a
Purchaser or in connection with a pledge as contemplated in Section 4.1(b),
as a
condition of transfer, any such transferee shall agree in writing to be bound
by
the terms of this Agreement and shall have the rights of a Purchaser under
this
Agreement.
(a) The
Purchasers agree to the imprinting, so long as is required by this Section
4.1(b), of a legend on any of the Securities in the following form:
[NEITHER]
THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON
CONVERSION OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES. [THE PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF
PURSUANT TO SECTION ___ OF THIS NOTE.]
The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, such Purchaser may
transfer pledged or secured Securities to the pledgees or secured parties.
Such
a pledge or transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or pledgor shall
be
required in connection therewith. Further, no notice shall be required of such
pledge. At the appropriate Purchaser’s expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of
the
Securities.
Certificates
evidencing the Underlying Shares shall not contain any legend (including the
legend set forth in Section 4.1(b) hereof): (i) while a registration statement
covering the resale of such security is effective under the Securities Act,
or
(ii) following any sale of such Underlying Shares pursuant to Rule 144, or
(iii)
if such Underlying Shares are eligible for sale under Rule 144(k), or (iv)
if
such legend is not required under applicable requirements of the Securities
Act
(including judicial interpretations and pronouncements issued by the staff
of
the Commission). The Company shall cause its counsel to issue a legal opinion
to
the Company’s transfer agent promptly after the Effective Date if required by
the Company’s transfer agent to effect the removal of the legend hereunder. If
all or any portion of a Note is converted at a time when there is an effective
registration statement to cover the resale of the Underlying Shares, or if
such
Underlying Shares may be sold under Rule 144(k) or if such legend is not
otherwise required under applicable requirements of the Securities Act
(including judicial interpretations thereof) then such Underlying Shares shall
be issued free of all legends.
(b) Each
Purchaser, severally and not jointly with the other Purchasers, agrees that
the
removal of the restrictive legend from certificates representing Securities
as
set forth in this Section 4.1 is predicated upon the Company’s reliance that the
Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom.
4.3 Acknowledgment
of Dilution.
The
Company acknowledges that the issuance of the Securities may result in dilution
of the outstanding shares of Common Stock, which dilution may be substantial
under certain market conditions. The Company further acknowledges that its
obligations under the Transaction Documents, including without limitation its
obligation to issue the Underlying Shares pursuant to the Transaction Documents,
are unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution
or any claim the Company may have against any Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the other
stockholders of the Company.
4.4 Furnishing
of Information.
As long
as any Purchaser owns Securities, the Company covenants to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act. As long as any Purchaser owns Securities, if
the
Company is not required to file reports pursuant to the Exchange Act, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) such information as is required for the Purchasers to sell
the
Securities under Rule 144. The Company further covenants that it will take
such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell such Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.
4.5 Integration.
The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that
4.6 would
be
integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the Securities
to the Purchasers or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading
Market.
4.7 Conversion
Procedures.
The
form of Notice of Conversion included in the Notes sets
forth the totality of the procedures required of the Purchasers in order to
convert the Notes. No additional legal opinion or other information or
instructions shall be required of the Purchasers to convert their Notes. The
Company shall honor conversions of the Notes and shall deliver Underlying Shares
in accordance with the terms, conditions and time periods set forth in the
Transaction Documents.
4.8 Securities
Laws Disclosure; Publicity.
The
Company shall, by 8:30 a.m. Eastern time on the Trading Day following the date
hereof, issue a Current Report on Form 8-K disclosing the material terms of
the
transactions contemplated hereby and shall attach the Transaction Documents
thereto. The Company and each Purchaser (but the Purchasers shall not be
required to consult with each other) shall consult with each other in issuing
any other press releases with respect to the transactions contemplated hereby,
and neither the Company nor any Purchaser shall issue any such press release
or
otherwise make any such public statement without the prior consent of the
Company, with respect to any press release of any Purchaser relating to the
Company or the Securities, or without the prior consent of each Purchaser,
with
respect to any press release of the Company, which consent shall not
unreasonably be withheld, except if such disclosure is required by law, in
which
case the disclosing party shall promptly provide the other party with prior
notice of such public statement or communication. In the event of a breach
of
the foregoing covenant by the Company or its officers, directors, employees
or
agents, on the one hand, or any Purchaser or its officers, directors, employees
or agents, on the other hand, in addition to any other remedy provided herein
or
in the Transaction Documents, the non-breaching party shall have the right
to
make a public disclosure, in the form of a press release, public advertisement
or otherwise, of such material, nonpublic information without the prior approval
by other party, solely to correct any misstatements or material omissions made
in breach of the foregoing covenant. Notwithstanding the foregoing, the Company
shall not publicly disclose the name of any Purchaser, or include the name
of
any Purchaser in any filing with the Commission or any regulatory agency or
Trading Market, without the prior written consent of such Purchaser, except
(i)
as required by federal securities law in connection with the registration
statement contemplated by the Registration Rights Agreement, (ii) to the extent
such disclosure is required by law or Trading Market regulations or (iii) in
the
Form 8-K in the first sentence of this paragraph.
4.9 Shareholder
Rights Plan.
No
claim will be made or enforced by the Company or, to the knowledge of the
Company, any other Person that any Purchaser is an “Acquiring Person” under any
shareholder rights plan or similar plan or arrangement in effect or hereafter
adopted by the Company, or that any Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving Securities
under the Transaction Documents or under any other agreement between the Company
and the Purchasers. The Company shall conduct its business in a manner so that
it will not become subject to the Investment Company Act.
4.10 Non-Public
Information.
The
Company covenants and agrees that neither it nor any other Person acting on
its
behalf will provide any Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Purchaser shall have executed a written agreement regarding
the confidentiality and use of such information. The Company understands and
confirms that each Purchaser shall be relying on the foregoing representation
in
effecting transactions in securities of the Company.
4.11 Indemnification
of Purchasers.
Subject
to the provisions of this Section 4.9, the Company will indemnify and hold
each
Purchaser and its directors, officers, shareholders, members, partners,
employees and agents (and any other Persons with a functionally equivalent
role
of a Person holding such titles notwithstanding a lack of such title or any
other title), each Person who controls such Purchaser (within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents, members, partners or employees (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling
person (each, a “Purchaser
Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result
of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against a Purchaser, or
any
of them or their respective Affiliates, by any third party who is not an
Affiliate of such Purchaser, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is based upon
a
breach of such Purchaser’s representations, warranties or covenants under the
Transaction Documents or any agreements or understandings such Purchaser may
have with any such stockholder or any violations by the Purchaser of state
or
federal securities laws or any conduct by such Purchaser which constitutes
fraud, gross negligence, willful misconduct or malfeasance with respect to
the
Outstanding Notes or Outstanding Warrants). If any action shall be brought
against any Purchaser Party in respect of which indemnity may be sought pursuant
to this Agreement, such Purchaser Party shall promptly notify the Company in
writing, and the Company shall have the right to assume the defense thereof
with
counsel of its own choosing (which counsel shall have been consented to by
each
Purchaser Party). The Company will not settle any such action without receiving
the consent of each Purchaser Party which consent shall not be unreasonably
withheld. Any Purchaser Party shall have the right to employ separate counsel
in
any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Purchaser Party except
to the extent that (i) the employment thereof has been specifically authorized
by the Company in writing, (ii) the Company has failed after a reasonable period
of time to assume such defense and to employ counsel or (iii) in such action
there is, in the reasonable opinion of such separate counsel, a material
conflict on any material issue between the position of the Company and the
position of such Purchaser Party. The Company will not be liable to any
Purchaser Party under this Agreement (i) for any settlement by a Purchaser
Party
effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (ii) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser
Party’s
4.12 breach
of
any of the representations, warranties, covenants or agreements made by the
Purchasers in this Agreement or in the other Transaction Documents.
4.13 Reservation
and Listing of Securities.
(a) The
Company shall maintain a reserve from its duly authorized shares of Common
Stock
for issuance pursuant to the Transaction Documents in such amount as may be
required to fulfill its obligations in full under the Transaction
Documents.
(b) If,
on
any date, the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than the Required Minimum on such date, then
the
Board of Directors of the Company shall use commercially reasonable efforts
to
amend the Company’s certificate or articles of incorporation to increase the
number of authorized but unissued shares of Common Stock to at least the
Required Minimum at such time, as soon as possible and in any event not later
than the 90th day after such date.
(c) The
Company shall, if applicable: (i) in the time and manner required by the Trading
Market, prepare and file with such Trading Market an additional shares listing
application covering a number of shares of Common Stock at least equal to the
Required Minimum on the date of such application, (ii) take all steps necessary
to cause such shares of Common Stock to be approved for listing on the Trading
Market as soon as possible thereafter, (iii) provide to the Purchasers evidence
of such listing, and (iv) maintain the listing of such Common Stock on any
date
at least equal to the Required Minimum on such date on such Trading Market
or
another Trading Market.
(d) In
the
event that the Company shall after the date hereof apply to have its shares
of
Common Stock listed on any Trading Market other than the Trading Market on
which
such shares are listed on the date hereof, the Company shall take all action
necessary to obtain the approval of its stockholders providing for the Company's
issuance of all of the shares of Common Stock issued and issuable pursuant
hereto (including, without limitation, for purposes hereof shares issuable
upon
conversion of Notes issued as provided for in Section 9.01(l) of the Indenture)
upon conversion or exercise, as applicable, of the Securities, pursuant to
the
rules or regulations of such Trading Market (including, without limitation,
NASDAQ Marketplace Rule 4350(i)), if necessary to obtain the listing thereon
of
all such shares of Common Stock upon conversion or exercise, as applicable
of
such Securities, to the extent such convertible or exercisable Securities remain
outstanding at the time of the application to list shares of Common Stock on
any
such Trading Market. If the Company should determine that no such stockholder
approval is necessary to obtain the listing of all such shares of Common Stock
on such Trading Market, the Company shall provide the holders of such Securities
with an opinion of counsel to such effect.
4.14 Equal
Treatment of Purchasers.
No
consideration shall be offered or paid to any person to amend or consent to
a
waiver or modification of any provision of any of the
4.15 Transaction
Documents unless the same consideration is also offered to all of the parties
to
the Transaction Documents. Further, the Company shall not make any payment
of
principal or interest on the Notes in amounts which are disproportionate to
the
respective principal amounts outstanding on the Notes at any applicable time.
For clarification purposes, this provision constitutes a separate right granted
to each Purchaser by the Company and negotiated separately by each Purchaser,
and is intended for the Company to treat the Purchasers as a class and shall
not
in any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or
otherwise.
4.16 Short
Sales and Confidentiality After the Date Hereof.
Each
Purchaser severally and not jointly with the other Purchasers covenants that
neither it nor any affiliates acting on its behalf or pursuant to any
understanding with it will execute any Short Sales during the period after
the
Discussion Time and ending at the time that the transactions contemplated by
this Agreement are first publicly announced as described in Section 4.6. Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company as described in Section 4.6, such Purchaser will
maintain the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction). Each
Purchaser understands and acknowledges, severally and not jointly with any
other
Purchaser, that the Commission currently takes the position that coverage of
short sales of shares of the Common Stock “against the box” prior to the
Effective Date of a registration statement covering the resale of some or all
of
the Underlying Shares is a violation of Section 5 of the Securities Act, as
set
forth in Item 65, Section 5 under Section A, of the Manual of Publicly Available
Telephone Interpretations, dated July 1997, compiled by the Office of Chief
Counsel, Division of Corporation Finance. Notwithstanding the foregoing, no
Purchaser makes any representation, warranty or covenant hereby that it will
not
engage in Short Sales in
the
securities of the Company after the time that the transactions contemplated
by
this Agreement are first publicly announced as described in Section 4.6.
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Purchaser’s assets, the covenant set forth above
shall only apply with respect to the portion of assets managed by the portfolio
manager that made the investment decision to participate in the transactions
contemplated by this Agreement.
4.17 Form
D; Blue Sky Filings. The
Company agrees to timely file a Form D with respect to the Securities as
required under Regulation D and to provide a copy thereof, promptly upon request
of any Purchaser. The Company shall, on or before or after the Closing Date,
take such action as the Company shall reasonably determine is necessary in
order
to obtain an exemption for, or to qualify the Securities for, sale to the
Purchasers at the Closing under applicable securities or “Blue Sky” laws of the
states of the United States, and shall provide evidence of such actions promptly
upon request of any Purchaser.
4.18 Termination
of Original Agreements.
The
Company and each Purchaser, severally and not jointly, agrees that, effective
upon the Closing and without further action by
4.19 any
of
the parties hereto, each of the “Transaction Documents” as defined in the
Original Purchase Agreement, including without limitation the Outstanding
Indenture, Outstanding Notes and Outstanding Warrants, shall be terminated
in
their entirety, and neither the Company nor any Purchaser shall have any further
rights under any of them. In addition, each Purchaser hereby acknowledges and
agrees that Section 4(o) of the Original Purchase Agreement (entitled “Right of
Participation in Additional Issuances of Securities”) shall not be applicable to
any of the transactions contemplated by this Agreement.
4.20 Letter
of Credit.
Contemporaneously with the Closing, the Company shall obtain an irrevocable
letter of credit in the amount of $1,344,000 issued in favor of the Trustee
on
behalf of the Purchasers, substantially in the form of Exhibit G to the
Indenture.
4.21 Acknowledgment
of Purchasers.
By
executing a counterpart of this Agreement, (a) each Purchaser acknowledges
that (i) with respect to amounts other than principal and interest on the
Outstanding Notes, all amounts due under the Outstanding Indenture by the
Company to the Purchasers have been paid in full, and (ii) in consideration
of
the execution and deliver of this Agreement and notwithstanding the terms of
Section 4.01 of the Outstanding Indenture, the Outstanding Notes have been
satisfied (subject to the payment by The Bank of New York provided for below),
and all conditions precedent under the Outstanding Indenture relating to the
satisfaction and discharge thereof have been complied with or are deemed to
have
been complied with (subject to the payment by The Bank of New York provided
for
below), and (b) each Purchaser shall be deemed to have consented to the
satisfaction and discharge of the Outstanding Indenture at Closing. The
Purchasers and the Company hereby instruct The Bank of New York, as trustee
under the Outstanding Indenture, (x) to execute the Satisfaction and
Discharge Agreement in the form attached hereto as Exhibit
J
relating
to the Outstanding Indenture and (y) to immediately pay the funds in the
Escrow Account to the parties listed in the Escrow Account Disbursement
Instructions attached hereto as Exhibit
K
in the
amounts and manner set forth therein.
4.22 Confirmation
from Trident Growth Fund, L.P..
Promptly after the Closing Date, the Company agrees to use its best efforts
to
obtain a written confirmation from Trident Growth Fund L.P. to the effect that
the New Indenture and the exchange of the Outstanding Notes for the New Notes
contemplated hereunder constitutes a "refinancing" as contemplated under
Section 14(a) of the Intercreditor and Subordination Agreement dated as of
March 29, 2006 by and among Trident Growth Fund, L.P., AFG Enterprises USA,
Inc., and FP Technology Holdings, Inc. in favor of the holders of the Senior
Indebtedness (as defined therein), and that the holders of the New Notes shall
have the same rights under such agreement as the holders of the Outstanding
Notes.
ARTICLE
V
MISCELLANEOUS
5.1 Termination.
This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations
between the Company and the other Purchasers, by written notice to the other
parties, if the
5.2 Closing
has not been consummated on or before January 31, 2007; provided,
however,
that no
such termination will affect the right of any party to xxx for any breach by
the
other party (or parties).
5.3 Fees
and Expenses.
Except
as expressly set forth in the Transaction Documents to the contrary, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to
the
negotiation, preparation, execution, delivery and performance of this Agreement.
The
Company agrees to pay Radcliffe SPC, Ltd. for and on behalf of the Class A
Segregated Portfolio (a
Purchaser) for costs and expenses of Xxxxxxx Xxxx & Xxxxx LLP incurred in
connection with the transactions contemplated by the Transaction Documents.
The
Company shall pay all transfer agent fees, stamp taxes and other taxes and
duties levied in connection with the delivery of any Securities.
5.4 Entire
Agreement.
The
Transaction Documents, together with the exhibits and schedules thereto, contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
5.5 Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number set forth on the signature
pages attached hereto (confirmation of receipt received) prior to 5:30 p.m.
(New
York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile
(confirmation of receipt received) at the facsimile number set forth on the
signature pages attached hereto on a day that is not a Trading Day or later
than
5:30 p.m. (New York City time) on any Trading Day, (c) the 2nd
Trading
Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom
such
notice is required to be given. The address for such notices and communications
shall be as set forth on the signature pages attached hereto.
5.6 Amendments;
Waivers.
No
provision of this Agreement may be waived, modified, supplemented or amended
except in a written instrument signed, in the case of an amendment, by the
Company and each Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall
be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof,
nor
shall any delay or omission of either party to exercise any right hereunder
in
any manner impair the exercise of any such right.
5.7 Headings.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The
5.8 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.
5.9 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of each Purchaser. Any Purchaser may assign any or all of its rights
under this Agreement to any Person to whom such Purchaser assigns or transfers
any Securities, provided such transferee agrees in writing to be bound, with
respect to the transferred Securities, by the provisions hereof that apply
to
the “Purchasers”.
5.10 No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set
forth
in Section 4.9.
5.11 Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of the Transaction Documents shall be governed by and construed and enforced
in
accordance with the internal laws of the State of New York, without regard
to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively
in
the state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect
to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. The parties hereby waive all rights to a trial by jury. If
either party shall commence an action or proceeding to enforce any provisions
of
the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys’ fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.12 Survival.
The
covenants and other agreements contained herein shall survive the Closing and
the delivery, and conversion of the Securities, as applicable. The
representations and
5.13 warranties
contained herein shall survive the Closing and the delivery, and conversion
of
the Securities, as applicable.
5.14 Execution.
This
Agreement may be executed in two or more counterparts, all of which when taken
together 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, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of
the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original
thereof.
5.15 Severability.
If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
5.16 Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) the Transaction Documents, whenever any Purchaser
exercises a right, election, demand or option under a Transaction Document
and
the Company does not timely perform its related obligations within the periods
therein provided, then such Purchaser may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company, any relevant
notice, demand or election in whole or in part without prejudice to its future
actions and rights; provided,
however,
in the
case of a rescission of a conversion of a Note, the Purchaser shall be required
to return any shares of Common Stock subject to any such rescinded conversion
notice.
5.17 Replacement
of Securities.
If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement
Securities.
5.18 Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, each of the Purchasers and the Company
will
be entitled to specific performance under the Transaction Documents. The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance
of
any such obligation the defense that a remedy at law would be adequate.
5.19 Payment
Set Aside.
To the
extent that the Company makes a payment or payments to any Purchaser pursuant
to
any Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement
or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation,
any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full
force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
5.20 Independent
Nature of Purchasers’ Obligations and Rights.
The
obligations of each Purchaser under any Transaction Document are several and
not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association,
a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents.
Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out
of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. The Company has
elected to provide all Purchasers with the same terms and Transaction Documents
for the convenience of the Company and not because it was required or requested
to do so by the Purchasers.
5.21 Liquidated
Damages.
The
Company’s obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of the Company
and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security
pursuant to which such partial liquidated damages or other amounts are due
and
payable shall have been canceled.
5.22 Construction.
The
parties agree that each of them and/or their respective counsel has reviewed
and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto.
(Signature
Pages Follow)
IN
WITNESS WHEREOF, the parties hereto have caused this Master Exchange Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
|
|
Address
for Notice:
|
|
By:
/s/Xxxxxxx Peary__
Name:
Xxxxxxx Xxxxx
Title:
Chief Financial Officer
|
000
Xxxxx Xxxxxx
Xxxxxx,
Xxxxxxxxxxxxx 00000
Facsimile:
(000) 000-0000
Attention:
Chief Executive Officer
|
|
With
a copy to (which shall not constitute notice):
|
Xxxxxxxx
& Xxxxxxxx LLP
000
Xxxx Xxxxx Xxxxxx
Xxxxx
0000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile:
(000) 000-0000
Attention:
Xxxxx X. Xxxxxxx, Esq.
|
[SIGNATURE
PAGES FOR PURCHASERS FOLLOW]
[PURCHASER
SIGNATURE PAGES TO MASTER EXCHANGE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Master Exchange Agreement
to
be duly executed by their respective authorized signatories as of the date
first
indicated above.
Name
of
Purchaser:
_____________________________________________________________
Signature
of Authorized Signatory of Purchaser:
______________________________________
Name
of
Authorized Signatory:
____________________________________________________
Title
of
Authorized Signatory:
_____________________________________________________
Email
Address of
Purchaser:_______________________________________________________
Address
for Notice of Purchaser:
Address
for Delivery of Securities for Purchaser (if not same as above):
Principal
Amount of Outstanding Note:
EIN
Number:
Wire
Transfer Instructions:
[SIGNATURE
PAGES FOR PURCHASERS CONTINUE]
EXHIBIT
A
Exchange
of Securities
|
Name
of Purchaser
|
Outstanding
Notes
($
Face Amount)
|
Outstanding
Warrants
(#
Shares)
|
Cash
Component ($) (w/o accrued interest)
|
New
Notes
($
Face Amount)
|
New
Warrants
(#
Shares)
|
New
Shares
(#
Shares)
|
|
X.X.
Xxxxxx Securities Inc.
|
$
13,500,000
|
1,687,500
|
$
12,150,000
|
$
1,512,000
|
327,857
|
405,000
|
|
Radcliffe
SPC, Ltd. for and on behalf of the Class A Segregated
Portfolio
|
$
8,750,000
|
1,093,750
|
$
7,875,000
|
$
980,000
|
212,500
|
262,500
|
|
Context
Offshore Advantage Fund, Ltd.
|
$
3,100,000
|
387,500
|
$
2,790,000
|
$
347,200
|
75,286
|
93,000
|
|
Context
Advantage Fund, LP
|
$
900,000
|
112,500
|
$
810,000
|
$
100,800
|
21,857
|
27,000
|
|
Wolverine
Convertible Arbitrage Fund Trading Limited
|
$
1,000,000
|
125,000
|
$
900,000
|
$
112,000
|
24,286
|
30,000
|
|
Portside
Growth and Opportunity Fund
|
$
2,000,000
|
250,000
|
$
1,800,000
|
$
224,000
|
48,571
|
60,000
|
|
Xxxxxx
Xxxxx Capital, LP
|
$
2,000,000
|
250,000
|
$
1,800,000
|
$
224,000
|
48,571
|
60,000
|
|
Cheyne
Fund LP
|
$
4,400,000
|
550,000
|
$
3,960,000
|
$
492,800
|
106,857
|
132,000
|
|
Cheyne
Leverage Fund
|
$
3,600,000
|
450,000
|
$
3,240,000
|
$
403,200
|
87,429
|
108,000
|
|
Cranshire
Capital, LP
|
$
500,000
|
62,500
|
$
450,000
|
$
56,000
|
12,143
|
15,000
|
|
JMG
Capital Partners, LP
|
$
3,375,000
|
421,875
|
$
3,037,500
|
$
378,000
|
81,964
|
101,250
|
|
JMG
Triton Offshore Fund, Ltd.
|
$
3,375,000
|
421,875
|
$
3,037,500
|
$
378,000
|
81,964
|
101,250
|
|
Plexus
Fund Limited
|
$
2,500,000
|
312,500
|
$
2,250,000
|
$
280,000
|
60,714
|
75,000
|
|
Smithfield
Fiduciary LLC
|
$
1,000,000
|
125,000
|
$
900,000
|
$
112,000
|
24,286
|
30,000
|
|
Xxxxxx
& Xxxxxxx, LLC (not a Purchaser)
|
N/A
|
625,000
|
N/A
|
N/A
|
71,429
|
150,000
|
|
TOTAL
|
$50,000,000
|
6,875,000
|
$45,000,000
|
$5,600,000
|
1,285,714
|
1,650,000
|
EXHIBIT
B
Form
of
New Indenture
(including
New Notes)
[Filed
as Exhibit 99.2 to Form 8-K filed on January 25, 2007]
EXHIBIT
C
Form
of
New Warrants
[Filed
as Exhibit 99.3 to Form 8-K filed on January 25, 2007]
EXHIBIT
D
Form
of
Security Agreement
[Filed
as Exhibit 99.4 to Form 8-K filed on January 25, 2007]
EXHIBIT
E
Form
of
Registration Rights Agreement
[Filed
as Exhibit 99.5 to Form 8-K filed on January 25,
2007]
EXHIBIT
F
IRREVOCABLE
TRANSFER AGENT INSTRUCTIONS
January
___, 2007
Corporate
Stock Transfer
0000
Xxxxxx Xxxxx Xxxxx Xxxxx
Xxxxx
000
Xxxxxx,
XX 00000
Ladies
and Gentlemen:
Reference
is made to that certain Master Exchange Agreement, dated as of January ___,
2007
(the “Agreement”),
by
and among FP Technology, Inc., a Delaware corporation (the “Company”),
and
the “Purchasers” identified on the signature pages thereto (the “Purchasers”),
pursuant to which the Company is issuing to the Purchasers an aggregate of
1,500,000 shares of the Company’s common stock (the “Common
Stock”),
par
value $0.001 per
share.
This
letter shall serve as our authorization and direction to you to issue shares
of
Common Stock (the “Shares”)
on an
expedited basis to each Investor in the amounts set forth on Annex
A
to the
this letter. Tax identification numbers for each investor and addresses for
delivery of share certificates are provided on Annex A.
The
certificates evidencing the Shares shall each bear the following legend:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS, AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION OF
THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER
LOAN SECURED BY SUCH SECURITIES.
Please
execute this letter in the space indicated to acknowledge your agreement
to act
in accordance with these instructions. Should you have any questions concerning
this matter, please contact me at (000) 000-0000.
Very
truly yours,
By:
Name: Xxxxxxx
Xxxxx
Title: Chief
Financial Officer
THE
FOREGOING INSTRUCTIONS ARE
ACKNOWLEDGED
AND AGREED TO
this
_____ day of January, 2007
CORPORATE
STOCK TRANSFER
By:
Name:
Title:
ANNEX
A
|
Name
of Purchaser
|
#
Shares of Common Stock
|
Address
for Delivery of Share Certificates
|
Tax
ID Number
|
|
X.X.
Xxxxxx Securities Inc.
|
405,000
|
||
|
Radcliffe
SPC, Ltd.
|
262,500
|
||
|
Context
Convertible Arbitrage Offshore, LTD
|
93,000
|
||
|
Context
Convertible Arbitrage Fund, LP
|
27,000
|
||
|
Wolverine
Convertible Arbitrage Fund Trading Limited
|
30,000
|
||
|
Xxxxxx
Xxxxx Capital, LP
|
60,000
|
||
|
Cheyne
Fund LP
|
132,000
|
||
|
Cheyne
Leverage Fund
|
108,000
|
||
|
Cranshire
Capital, LP
|
15,000
|
||
|
JMG
Capital Partners, LP
|
101,250
|
||
|
JMG
Triton Offshore Fund, Ltd.
|
101,250
|
||
|
Plexus
Fund Limited
|
75,000
|
||
|
Smithfield
Fiduciary LLC
|
30,000
|
||
|
NMPP,
Inc.
|
60,000
|
||
|
TOTAL
|
1,500,000
|
EXHIBIT
G
Form
of
Company Counsel Opinion
January
24, 2007
The
Purchasers under the Exchange Agreement (as defined below)
The
Bank
of New York, as Trustee and Collateral Agent under the Indenture (as defined
below)
Ladies
and Gentlemen:
We
have
acted as special counsel to FP Technology, Inc. (successor in interest to
AFG Enterprises USA, Inc.), a corporation organized under the laws of the
State
of Delaware (the “Company”),
in
connection with the issuance and sale by the Company of its Senior Secured
Convertible Notes Due 2009 (the “Notes”).
The
Notes are to be issued pursuant to the Indenture, dated as January 24, 2007
(the
“Indenture”)
by and
between the Company and The Bank of New York, as trustee (the “Trustee”). The
Notes will be issued and sold pursuant to the Master Exchange Agreement (the
“Exchange
Agreement”)
dated
as of January 24, 2007, among the Company and the purchasers signatory thereto
(the “Purchasers”). This opinion is furnished to you pursuant to
Section 2.2(a)(ix) of the Exchange Agreement.
In
rendering this opinion, we have examined originals or copies of the following
documents, all dated as of January 24, 2007 unless otherwise indicated
(collectively, other than the Financing Statement (as defined below), the
“Documents”):
1.
Indenture;
2. the
Notes;
3. the
Warrants (as defined in the Exchange Agreement);
4. the
Exchange Agreement;
5. the
Registration Rights Agreement by and between the Company and the Initial
Purchasers (the “Registration
Rights Agreement”);
6. the
Security Agreement by and between the Company and the Collateral Agent (the
“Security
Agreement”);
7. the
Satisfaction and Discharge Agreement by and between the Company and the Trustee;
and
8. the
irrevocable instructions from the Company to the common stock transfer agent
for
the Company regarding the certificates for Common Stock to be issued to the
Purchasers on the closing date under the Exchange Agreement;
9. the
UCC-1
financing statement naming the Company as debtor and the Collateral Agent
as
secured party, for filing with the Delaware Secretary of State (the
“Financing
Statement”).
The
transactions contemplated by the Documents are herein called the “Transactions”.
In
addition, we have examined such records, documents, certificates of public
officials and of the Company, made such inquiries of officials of the Company,
and considered such questions of law as we have deemed necessary for the
purpose
of rendering the opinions set forth herein. Unless otherwise defined herein,
terms defined in the Indenture shall have the same meanings herein.
We
have
assumed the genuineness of all signatures and the authenticity of all items
submitted to us as originals and the conformity with originals of all items
submitted to us as copies. In making our examination of the Documents, we
have
assumed that each party to one or more of the Documents other than the Company
has the power and authority to execute and deliver, and to perform and observe
the provisions of, the Documents, and has duly authorized, executed and
delivered such Documents, and that such Documents constitute the legal, valid
and binding obligations of such party enforceable against each party thereto
(other than the Company), in accordance with their terms.
The
opinions expressed herein are based upon our review only of those statutes,
rules and regulations which, in our experience, are normally applicable to
parties such as the Company and to transactions of the type contemplated
by the
Documents.
Our
opinions with respect to Delaware law set forth in paragraph (h) below are
based
solely on a review of provisions of the Delaware Uniform Commercial Code
(the
“DUCC”)
as set
forth in the CCH Secured Transactions Guide, as updated through changes
accompanying that Guide’s January 10, 2007 Report Letter, without consideration
or review of any decision, rule, regulation, opinion, interpretation or advice
of any court, legislative body, governmental unit (as defined in DUCC Section
9-102) of the State of Delaware, or of any other matter.
We
express no opinion as to (i) whether the Financing Statement was duly filed,
(ii) creation of any security interest created by the Documents, except as
set
forth in paragraph (f) below, (iii) the perfection of any security interest
created by the Documents, except as set forth in paragraph (h) below, (iv)
the
priority of any security interest, (v) the state of title to the collateral
described in the Documents or the Financing Statement, and (vi) a security
interest in any such collateral to the extent the creation, attachment,
perfection or enforcement thereof is prohibited or restricted (by a requirement
of consent or otherwise) by
agreement
or by law, except to the extent rules provided in the New York Uniform
Commercial Code (the “NYUCC”)
Sections 9-406 through 9-409 apply and are given effect.
Our
opinion in paragraph (a) below as to the qualification and good standing
of the
Company is based solely on certificates of public officials in the state
named
in that paragraph. We have made no independent investigation as to whether
those
certificates are accurate or complete, but we have no knowledge of any such
inaccuracy or incompleteness.
Whenever
our opinion herein with respect to the existence or absence of facts is
indicated to be based on our knowledge, it is intended to signify that, in
the
course of our representation of the Company in connection with the matter
described in the first paragraph hereof, we have not acquired actual knowledge
of the existence or absence of such facts. We have not undertaken any
independent investigation to determine the existence or absence of such facts,
and no inference as to our knowledge of the existence or absence of such
facts
should be drawn from the fact of our representation of the Company.
We
have
assumed for purposes of our opinions that, at all times relevant to our
opinions, the Company has the power to transfer “rights” in the collateral
described in the Security Agreement (the “Collateral”).
For
purposes of the opinion expressed in paragraph (k) below, we have assumed
that
the Holders are not acquiring the Notes with the present intention of
distributing the same other than in compliance with the requirements, if
any, of
all applicable state and federal securities laws.
Our
opinion in paragraph (j) below is based on a review of those laws and
regulations which, in our experience, are normally applicable to transactions
of
the type contemplated by the Exchange Agreement and to business corporations
generally and not applicable because of the nature of the assets or business
of
the Company.
The
opinions hereinafter expressed are subject to the following qualifications
and
exceptions:
| (1) |
The
effect of
bankruptcy, insolvency, reorganization, arrangement, moratorium
or other
similar laws relating to or affecting the rights of creditors generally,
including, without limitation, laws relating to fraudulent transfers
or
conveyances, preferences and equitable subordination.
|
| (2) |
With
respect to the
opinions set forth below, limitations imposed by general principles
of
equity upon the availability of equitable remedies or the enforcement
of
provisions of the Documents; and the effect of judicial decisions
which
have held that certain provisions are unenforceable where their
enforcement would violate the implied covenant of
good
faith and fair dealing, or would be commercially unreasonable,
or where a
default under the Documents is not
material.
|
| (3) |
Certain
provisions of the Documents may be unenforceable in whole or in
part under
the laws of the State of New York, but, in our opinion, such laws do
not make the remedies afforded by the Documents inadequate for
the
practical realization of the principal benefits intended to be
afforded by
the Documents.
|
| (4) |
The
effect of
judicial decisions permitting the introduction of extrinsic evidence
to
supplement the terms or aid in the interpretation of the
Documents.
|
| (5) |
Except
to the extent encompassed by an opinion set forth below with respect
to
the Company, we express no opinion as to the effect on the opinions
expressed herein of (1) the compliance or non-compliance of any party
to the Documents with any law, regulation or order applicable to
it, or
(2) the legal or regulatory status or the nature of the business of
any such party.
|
| (6) |
Except
as set forth in paragraphs (i) and (k) below, we express no opinion
as to
compliance or noncompliance of any persons with applicable federal
or
state securities laws or as to the effect of noncompliance on the
opinions
rendered herein.
|
| (7) |
The
enforceability
under the Security Agreement by the Collateral Agent, as agent
for the
Secured Parties, of the Collateral consisting of rights under contracts
may be subject to the terms of those contracts or other contracts
(except,
as to assignment, to the extent overridden by Sections 9-406 -
9-408 of
the NYUCC) among the Company and other parties thereto and claims
or
defenses of such other parties against the Company.
|
| (8) |
Our
opinions with
respect to security interests in “proceeds” (as defined in NYUCC
§ 9-102 and DUCC § 9-102) are limited to the extent set forth in
NYUCC § 9-315 and DUCC §
9-315.
|
| (9) |
The
effect of any
provision of the Documents waiving or varying the rules referred
to in
NYUCC § 9-602 and DUCC § 9-602, or disclaiming or limiting the
obligations of good faith, diligence, reasonableness and care prescribed
in NYUCC § 1-102(3) and DUCC § 1-102(3).
|
| (10) |
Our
opinions with
respect to security interests are limited to Article 9 of the NYUCC
and
Article 9 of the DUCC and security interests subject thereto, and
therefore such opinions do not address (i) laws of jurisdictions
(other
than the State of New York and the State of Delaware (to the extent
set
forth in paragraph (h)) and (ii) collateral of a type not subject
to such
statutes.
|
| (11) |
We
express no
opinion as to the enforceability of provisions of the Documents
(i)
providing for indemnification to the extent such indemnification
is
against public policy; (ii) which purport to transfer governmental
permits, licenses or other authorizations, or claims against governmental
entities, the transfer of which is restricted by law except to
the extent
overridden by Sections 9-406 or 9-408 of the NYUCC, or (iii) imposing
or
which are construed as effectively imposing penalties or
forfeitures.
|
| (12) |
We
do not express
any opinion as to (i) any collateral other than the Collateral,
(ii) any
collateral that constitutes a “commercial tort claim” (as defined in
Section 9-102 (13)(A) of the NYUCC), or (iii) any consumer
laws.
|
| (13) |
We
express no
opinion with regard to the effectiveness of any description of
collateral
in the Security Agreement such as “all property of the debtor” or any type
of similar super generic description, nor do we express any opinion
as to
the attachment, perfection or priority of any security interest
arising as
a result thereof.
|
| (14) |
We
express no
opinion as to Section 1(a) of the Security Agreement to the extent
that it
provides that the Collateral Agent may determine the meaning of
provisions
of the NYUCC.
|
| (15) |
We
express no
opinion as to the circumstances under which rights of setoff may
be
exercised.
|
| (16) |
We
express no
opinion as to the rights of any third party
beneficiaries.
|
Based
upon and subject to the foregoing, we are of the opinion that:
(a) The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware.
(b) The
Company has the corporate power and authority to execute and deliver, and
to
perform and observe the provisions of, the Documents.
(c) Those
Documents to which the Company is a party have each been duly authorized,
executed and delivered by the Company. Each of the Documents to which the
Company is a party constitutes the valid and binding obligations of the Company,
enforceable against the Company in accordance with its terms.
(d) The
execution, delivery and performance by the Company of the Documents to which
it
is a party are not in violation of its Certificate of Incorporation and
Bylaws.
(e) Except
as
may be required in connection with the disposition of securities by laws
affecting the offering and sale of securities generally, no registration
with,
consent or
(f) approval
of, notice to, or other action by, any governmental entity is required on
the
part of the Company for the execution, delivery or performance by the Company
of
the Documents to which it is a party, or if required, such registration has
been
made, such consent or approval has been obtained, such notice has been given
or
such other appropriate action has been taken.
(g) The
Security Agreement is effective to create in favor of the Collateral Agent
for
the benefit of the Secured Parties an enforceable security interest in the
rights of the Company in the Collateral, as security for the obligations
of the
Company as described in Section 3 of the Security Agreement (the
“Security
Agreement Obligations”).
(h) The
Financing Statement is in appropriate form for filing as a financing statement
with the Secretary of the State of Delaware pursuant to the DUCC.
(i) Upon
the
filing of the Financing Statement with the Office of the Secretary of State
of
the State of Delaware, the Collateral Agent, for the benefit of the Secured
Parties, will have a perfected security interest securing the Security Agreement
Obligations in the rights of the Company in that part of the collateral under
the Security Agreement in which a security interest can be perfected by the
filing of a financing statement in the State of Delaware naming the Company
as
debtor.
(j) The
Company is not an “investment company” under the Investment Company Act of 1940,
as amended.
(k) The
execution and delivery of the Documents to which the Company is a party by
the
Company and the performance by the Company of its obligations thereunder
will
not violate any federal or New York State statute or regulation applicable
to
the Company or any provision of the Delaware General Corporate Law applicable
to
the Company.
(l) No
registration of the Notes, the Warrants or the shares of Common Stock to
be
issued to the Purchasers on the closing date (the “Issued Common Stock”)
(or,
when
issued, the Conversion Shares (as that term is defined in the Indenture)
or the
Common Stock to be issued upon exercise of the Warrants) under
the
Securities Act of 1933, as amended (the “Securities
Act”)
is
required for the offer and sale thereof in the manner contemplated by the
Documents and by the procedures, legends, agreements and representations
contained in, described in or referred to in the foregoing documents with
respect to certain restrictions relating to the offer, issuance, sale or
delivery thereof, assuming the accuracy of the representations and warranties
and certifications of, and compliance with the Documents by, the Company
and the
accuracy of the representations and warranties deemed to be made by the
Purchasers as described in the Exchange Agreement.
(m) The
shares of Issued Common Stock (and, when issued, the Conversion Shares and
the
Common Stock to be issued upon exercise of the Warrants) have been duly
authorized, and upon delivery to the Purchasers in accordance with the terms
of
the Exchange Agreement and the other Documents, will be validly issued, fully
paid and nonassessable. The shares of Issued Common Stock, the Conversion
Shares
and the Common Stock to be issued upon exercise of the Warrants have been
reserved for issuance by appropriate corporate action. None of the issuance
of
the shares of Issued Common Stock, the Notes or the Warrants (or, when issued,
the Conversion Shares (as that term is defined in the Indenture) or the Common
Stock to be issued upon exercise of the Warrants) is subject to preemptive
rights of other parties under the terms of the Certificate of Incorporation
and
By-laws of the Company and the agreements referred to Exhibit D to the Officer’s
Certificate, a copy of which is attached hereto.
(n) No
authorization, approval or consent of any New York State or federal court
or
governmental authority or agency is required to be obtained by the Company
in
connection with the transactions contemplated by the Documents, or if required,
such registration has been made, such consent or approval has been obtained,
such notice has been given or such other appropriate action has been taken.
(o) Neither
the consummation of the transactions contemplated hereby nor the sale, issuance,
execution or delivery of the Notes will violate Regulation T, U or X of the
Board of Governors of the Federal Reserve System.
(p) The
execution, delivery and performance of the Documents by the Company will
not
violate or result in a material breach of any of the terms of or constitute
a
material default under or (except as contemplated in the Documents) result
in
the creation of any lien, charge or encumbrance on any property or assets
of the
Company, pursuant to the terms of any indenture, mortgage, deed of trust
or
other agreement or order or decree of any court or government entity described
on Exhibit D to the Officer’s Certificate, a copy of which is attached
hereto. As to agreements which by their terms are or may be governed by the
laws
of a jurisdiction other than New York, we assume that such agreements are
governed by the law of New York for purposes of the opinion expressed in
this
paragraph. In addition, we exclude from the scope of such opinion any potential
violation of financial covenants contained in such agreements.
(q) To
our
knowledge, except as disclosed in the Exchange Agreement, there is no pending
or
threatened action, suit or proceeding before any court or governmental agency
or
authority or arbitrator involving the Company (i) that purports to affect
the
legality, validity or enforceability of the Documents or (ii) as to which
there
is a probability of an adverse determination, and which, if adversely
determined, would be likely in our judgment to have a Material Adverse Effect
(as defined in the Exchange Agreement) on the Company.
(r) We
advise
you that the continued perfection of the security interest referred to in
paragraph (k) above will depend upon the filing of periodic continuation
statements relating to the Financing Statements in accordance with the DUCC.
We
express no opinion as to the effect of the failure to file any such continuation
statement, of the filing of any amendment of or termination statement for
any
financing statement, of any change in the name of the Company, form of
organization, jurisdiction of organization, or other circumstance set forth
in
NYUCC §§ 9-316, 9-507 and 9-508, or DUCC §§ 9-316, 9-507 and 9-508, or of any
change in the characterization of any collateral for purposes of the NYUCC
or
DUCC.
We
express no opinion as to matters governed by any laws other than the substantive
laws of the State of New York, the Delaware General Corporation Law, the
DUCC and the federal laws of the United States (without reference to
choice-of-law rules), and regulations relating thereto, which are in effect
on
the date hereof. We express no opinion as to the New York choice of law
provision contained in the Documents.
This
opinion is furnished by us to the Purchasers and to the Trustee, solely for
the
benefit of the Purchasers. Neither this letter nor any opinion expressed
herein
may be relied upon, nor may copies be delivered or disclosed to, any other
person or entity without our prior written consent.
Very
truly yours,
EXHIBIT
H
SECRETARY’S
CERTIFICATE
January
24, 2007
The
undersigned does hereby certify that he is the Secretary of FP Technology,
Inc.,
a Delaware corporation (the “Company”),
and
in his capacity as Secretary of the Company is authorized to execute and deliver
this Certificate by and on behalf of the Company, and hereby further certifies
as follows:
1. This
Certificate is furnished pursuant to Section 2.2(a)(x) of that certain Master
Exchange Agreement dated as of January 24, 2007 (the “Exchange Agreement”), and
entered into by and among the Company and the purchasers identified on the
signature pages thereto (the “Purchasers”). Capitalized terms used herein but
not otherwise defined shall have the meanings given to them in the Exchange
Agreement.
2. Attached
hereto as Exhibit
A
is a
true, correct and complete copy of the Articles of Incorporation of the Company
as in effect on the date hereof.
3. Attached
hereto as Exhibit
B
is a
true, correct and complete copy of the Bylaws of the Company as in effect on
the
date hereof.
4. Attached
hereto as Exhibit
C
is a
true, correct and complete copy of resolutions duly adopted by the Board of
Directors of the Company on January 18, 2007 (the “Resolutions”), authorizing,
inter
alia,
the
entry by the Company of the Transaction involving the exchange of the CAP Notes
and Old Warrants for the Cash Component, Convertible Notes, New Warrants and
New
Shares (as such terms are defined in the Resolutions). Such resolutions have
not
been altered, amended, rescinded or modified since their adoption and remain
in
full force and effect as of the date hereof and such resolutions are the only
resolutions adopted by the Board of Directors of the Company which relate to
any
of the matters referred to therein.
5. As
of the
date hereof, the person named below is the duly qualified, appointed and acting
officer of the Company, holding the office set forth opposite his name, and
the
signatures set forth opposite his name and office is his genuine or facsimile
signature:
Name Title Signature
Xxxxxxx Xxxxxxx Chairman ____________________
Xxxxxxx
Xxxxx Chief
Executive Officer ____________________
Xxxxxxx
Xxxxx Chief
Financial Officer, ____________________
Secretary
6. This
Certificate is furnished on behalf of the Company without any personal liability
of the Secretary of the Company.
[Signature
page follows]
IN
WITNESS WHEREOF, I have hereunto signed my name on this 24th
day of
January, 2007.
By:
/s/ Xxxxxxx Xxxxx
Name:
Xxxxxxx Xxxxx
Title:
Secretary
EXHIBIT
I
IRREVOCABLE
TRANSFER AGENT INSTRUCTIONS
FP
TECHNOLOGY, INC.
January
,
2007
Corporate
Stock Transfer
0000
Xxxxxx Xxxxx Xxxxx Xxxxx
Xxxxx
000
Xxxxxx,
XX 00000
Ladies
and Gentlemen:
Reference
is made to that certain Master Exchange Agreement, dated as of
January ____, 2007 (the "Agreement"),
by
and among FP Technology, Inc., a Delaware corporation (the "Company"),
and
the “Purchasers” identified on the signature pages thereto (the "Purchasers"),
pursuant to which the Company is issuing to the Purchasers (i) senior
secured convertible notes (the “Convertible
Notes”),
which
shall be convertible into the Company's common stock (the "Common
Stock"),
par
value $0.001 per
share
(which, as converted, shall collectively be, the "Conversion
Shares")
and
(ii) warrants (the "Warrants")
to
acquire shares of Common Stock of the Company (the “Warrant
Shares”).
This
letter shall serve as our authorization and direction to you (provided that
you
are the transfer agent of the Company at such time) to issue (i) Conversion
Shares upon exercise of the Convertible Notes to or upon the order of a
Purchaser from time to time upon delivery to you of a copy of a properly
completed and duly executed Conversion Notice, in the form attached hereto
as
Exhibit
I,
and
(ii) Warrant Shares upon exercise of the Warrants, to or upon the order of
a Purchaser from time to time upon delivery to you of a properly completed
and
duly executed Exercise Notice, in the form attached hereto as Exhibit
II,
which
has been acknowledged by the Company as indicated by the signature of a duly
authorized officer of the Company thereon.
You
acknowledge and agree that so long as you have previously received
(a) written confirmation from legal counsel to the Company that either (i)
a registration statement covering resales of the Conversion Shares or the
Warrant Shares, as applicable, has been declared effective by the Securities
and
Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "1933 Act"), or (ii) that sales of the
Conversion Shares or the Warrant Shares, as applicable, may be made in
conformity with Rule 144 under the 1933 Act, and (b) if applicable, a copy
of
such registration statement, then, within three (3) business days after
your
receipt of a notice of transfer, a Conversion Notice or the Exercise Notice,
you
shall issue the certificates representing Conversion Shares or Warrant
Shares,
as applicable, and such certificates shall not bear any legend restricting
transfer of the Conversion Shares or the Warrant Shares, as applicable,
thereby
and should not be subject to any stop-transfer restriction; provided,
however, that if such Conversion Shares or Warrant Shares are
not
registered for resale under the 1933 Act or able to be sold under Rule
144, then
the certificates for such Conversion Shares or Warrant Shares shall bear
the
following legend:
THE
SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933,
AS
AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM,
THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT
TO RULE
144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
A
form of
written confirmation from legal counsel to the Company that a registration
statement covering resales of the Conversion Shares or Warrant Shares has been
declared effective by the SEC under the 1933 Act is attached hereto as
Exhibit
II.
Please
execute this letter in the space indicated to acknowledge your agreement to
act
in accordance with these instructions. Should you have any questions concerning
this matter, please contact me at (000) 000-0000.
Very
truly yours,
FP
TECHNOLOGY, INC.
By:
___________________________
Name: Xxxxxxx
Xxxxx
Title: Chief
Financial Officer
THE
FOREGOING INSTRUCTIONS ARE
ACKNOWLEDGED
AND AGREED TO
this
____
day of January, 2007
CORPORATE
STOCK TRANSFER
By:
Name:
Title:
Enclosures
EXHIBIT
I
CONVERSION
NOTICE
If
you
want to convert this Note into Common Stock of the Company, check the
box:
To
convert only part of this Note, state the Principal Amount to be converted
(which must be either the Outstanding Principal Amount or an integral multiple
of $500):
$
If
you
want the stock certificate made out in another person's name, fill in the form
below:
(Insert
other person's social security or tax ID no.)
(Print
or
type other person's name, address and zip code)
|
Date:
|
Signed:
|
(Sign
exactly as your name appears on the other side of this Note
EXHIBIT
II
EXERCISE
NOTICE
TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT
TO PURCHASE COMMON STOCK
FP
TECHNOLOGY, INC.
The
undersigned holder hereby exercises the right to purchase _________________
of
the shares of Common Stock (“Warrant
Shares”)
of FP
Technology, Inc., a Delaware corporation (the “Company”),
evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.
1.
Form
of Exercise Price. The Holder intends that payment of the Exercise Price shall
be made as:
___________ a
“Cash
Exercise”
in
respect of ___________ Warrant Shares; and/or
___________ a
“Cashless
Exercise”
in
respect of ____________ Warrant Shares.
2.
Payment of Exercise Price. In the event that the holder has elected a Cash
Exercise in respect of some or all of the Warrant Shares to be issued pursuant
hereto, the holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the
Warrant.
3.
Delivery of Warrant Shares. The Company shall deliver to the holder __________
Warrant Shares in accordance with the terms of the Warrant.
Date:
_______________ __, ______
Name
of
Registered Holder
By:
Name:
Title:
ACKNOWLEDGMENT
The
Company hereby acknowledges this Exercise Notice and hereby directs Corporate
Stock Transfer to
issue
the above indicated number of shares of Common Stock in accordance with the
Irrevocable Transfer Agent Instructions dated January , 2007 from the Company
and acknowledged and agreed to by Corporate Stock Transfer.
FP
TECHNOLOGY, INC.
By:
Name:
Title:
EXHIBIT
III
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
Corporate
Stock Transfer
0000
Xxxxxx Xxxxx Xxxxx Xxxxx
Xxxxx
000
Xxxxxx,
XX 00000
Re: FP
Technology, Inc.
Ladies
and Gentlemen:
[We
are][I am] counsel to FP Technology, Inc., a Delaware corporation (the
"Company"),
and
have represented the Company in connection with that certain Master Exchange
Agreement (the "Exchange
Agreement")
entered into by and among the Company and the “Purchasers” identified on the
signature pages thereto, pursuant to which (i) the Company issued to the
Purchasers senior secured convertible notes (the "Notes")
convertible into the shares of Company's common stock (the "Common
Stock"),
$0.001 par value per share and (ii) the Company issued to the Purchasers
and to Xxxxxx & Xxxxxxx, LLC warrants exercisable for shares of Common Stock
(the "Warrants").
Pursuant to the Exchange Agreement, the Company also has entered into a
Registration Rights Agreement with the Purchasers (the "Registration
Rights Agreement")
pursuant to which the Company agreed, among other things, to register the
Transfer Restricted Securities (as defined in the Registration Rights
Agreement), including the shares of Common Stock issuable upon conversion of
the
Notes or exercise of the Warrants, under the Securities Act of 1933, as amended
(the "1933
Act").
In
connection with the Company's obligations under the Registration Rights
Agreement, on ____________ ___, 200_, the Company filed a Registration Statement
on Form S-[3][1] (File No. 333-_____________) (the "Registration
Statement")
with
the Securities and Exchange Commission (the "SEC")
relating to the Transfer Restricted Securities which names each of the
Purchasers as a selling shareholder thereunder.
In
connection with the foregoing, [we][I] advise you that a member of the SEC's
staff has advised [us][me] by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at
[ENTER
TIME OF EFFECTIVENESS]
on
[ENTER
DATE OF EFFECTIVENESS]
and
[we][I] have no knowledge, after telephonic inquiry of a member of the SEC's
staff, that any stop order suspending its effectiveness has been issued or
that
any proceedings for that purpose are pending before, or threatened by, the
SEC
and the Transfer Restricted Securities are available for resale under the 1933
Act pursuant to the Registration Statement.
This
letter shall serve as our standing opinion to you that the shares of Common
Stock are freely transferable by the Purchasers pursuant to the Registration
Statement. You need not require further letters from us to effect any future
legend-free issuance or reissuance of the
shares
of
Common Stock to the Purchasers as contemplated by the Company's Irrevocable
Transfer Agent Instructions dated January , 2007. This letter shall serve as
our
standing opinion with regard to this matter.
Very
truly yours,
[ISSUER'S
COUNSEL]
By:_____________________
CC: [LIST
NAMES OF PURCHASERS]
EXHIBIT
J
Execution
Copy
SATISFACTION
AND DISCHARGE AGREEMENT
THIS
SATISFACTION AND DISCHARGE AGREEMENT, dated as of January 24, 2007
(this “Agreement”),
between FP TECHNOLOGY, INC. (the “Company”)
and
THE BANK OF NEW YORK, in its capacity as Trustee under the Indenture (as
such
term is defined below) (in such capacity the “Trustee”);
in
its capacity as Depositary under the Deposit Agreement (as such term is defined
below) (in such capacity the “Depositary”);
and
in its capacity as Escrow Agent under the Escrow Agreement (as such term
is
defined below) (in such capacity the “Escrow
Agent”)
(each,
a “Party”,
and,
collectively, the “Parties”).
RECITALS
A.
Pursuant
to a Securities Purchase Agreement, dated March 29, 2006 (the “Purchase
Agreement”),
by
and among each of the Purchasers (as such Term is defined in the Master Exchange
Agreement defined below), or their predecessors in interest, and the Company’s
predecessor, AFG Enterprises USA, Inc., the Purchasers acquired (i) Senior
Secured Nonconvertible Notes Due 2011 in the aggregate principal amount of
$50,000,000 (the “Notes”)
issued
under an Indenture with The Bank of New York dated March 29, 2006 (the
“Indenture”);
and
(ii) Warrants to purchase an aggregate of 6,875,000 shares at an exercise
price currently set at $8.00 per share (together with the Notes, the
“Outstanding
Securities”).
B. Pursuant
to a Deposit Agreement, dated March 29, 2006 (the “Deposit
Agreement”),
by
and among the Company’s predecessor, AFG Enterprises USA, Inc., and THE BANK OF
NEW YORK, as Depositary, the latter accepted custody of the Global Notes
(as
such term is defined in the Deposit Agreement) and agreed to record any transfer
of Book-Entry Interests (as such term is defined in the Deposit Agreement)
by
Registered Owners (as such term is defined in the Deposit Agreement) related
to
the Outstanding Securities.
C. Pursuant
to an Escrow Agreement, dated March 29, 2006 (the “Escrow
Agreement”),
by
and among the Company’s predecessor, AFG Enterprises USA, Inc., and THE BANK OF
NEW YORK, as Escrow Agent, the Escrow Agent agreed to hold in escrow the
Escrow
Property (as such term is defined in the Escrow Agreement).
D. The
Outstanding Securities are obligations of the Company.
E. The
Purchasers desire to exchange all of the Outstanding Securities for other
securities and certain additional consideration pursuant to a Master Exchange
Agreement to be entered into by the Company and the Purchasers (the
“Master
Exchange Agreement”)
simultaneously with this Satisfaction and Discharge Agreement.
F. In
connection with the transactions contemplated by the Master Exchange Agreement,
the Parties wish to acknowledge the satisfaction and discharge of the Indenture,
and the termination of the Deposit Agreement and the Escrow
Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of
which
are hereby acknowledged, the Parties agree as follows:
1. The
Trustee acknowledges that the Company has paid or caused to be paid all sums
payable to The Bank of New York under the Indenture, the Deposit Agreement,
the
Escrow Agreement, including The Bank of New York’s fees and expenses arising
therefrom.
2. Pursuant
to the provisions of Article IV of the Indenture and in consideration of
the
execution and delivery of the Master Exchange Agreement, and pursuant to
the
agreement and instructions of the Purchasers set forth in Section 4.16 of
the
Master Exchange Agreement, the Parties hereby acknowledge the satisfaction
and
discharge of the Indenture. Except as expressly provided in the Indenture,
none
of the Parties shall have any further rights, obligations or liabilities
under
the Indenture.
3. Pursuant
to Section 4.12 of the Deposit Agreement, and simultaneously with the
satisfaction and discharge of the Indenture, the Depositary acknowledges
the
satisfaction and discharge of the Deposit Agreement and agrees to simultaneously
return the Global Notes held by it to the Company for their immediate
cancellation.
4. The
Escrow Agent hereby acknowledges instruction by the Company and the Purchasers
to release and distribute the Escrow Property under the Escrow Agreement
pursuant to the instructions set forth in Exhibit K to the Master Exchange
Agreement. The Escrow Agent agrees to make such distributions on the date
hereof
in accordance with such instructions. Based on the foregoing, the parties
agree
and acknowledge the termination, satisfaction and discharge of the Escrow
Agreement.
5. In
connection herewith, The Bank of New York is entitled to all rights, privileges,
protections, benefits, immunities and indemnities provided to it as Trustee
under the Indenture, Depositary under the Deposit Agreement and Escrow Agent
under the Escrow Agreement.
6. Each
Party represents and warrants that this Agreement has been duly authorized,
executed and delivered by such Party.
7. This
Agreement shall be governed by and construed in accordance with the law of
the
State of New York.
8. This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed an original and all of which together shall constitute one and the
same
agreement. This Agreement may not be modified or amended except by a writing
executed and delivered by the Parties.
[Signature
pages follow]
IN
WITNESS WHEREOF, the Parties have executed and delivered this Agreement,
as of
the day and year first above written.
|
FP
TECHNOLOGY, INC.
|
||
|
By:
|
||
|
Name:
Title:
|
||
|
THE
BANK OF NEW YORK, as Trustee under the Indenture
|
||
|
By:
|
||
|
Name:
Title:
|
||
|
THE
BANK OF NEW YORK, as Depositary under the Deposit
Agreement
|
||
|
By:
|
||
|
Name:
Title:
|
||
|
THE
BANK OF NEW YORK, as Escrow Agent under the Escrow
Agreement
|
||
|
By:
|
||
|
Name:
Title:
|
||
EXHIBIT
K
ESCROW
ACCOUNT DISBURSEMENT INSTRUCTIONS
These
Escrow Account Disbursement Instructions set forth the transfers of funds
out of
the Escrow Account to occur in connection with the Closing under the Master
Exchange Agreement (the “Exchange
Agreement”),
dated
as of January 24, 2007, among FP Technology, Inc. (“FPT”)
and
the purchasers identified on the signature pages thereto. Terms capitalized
but
not defined herein shall have the definitions assigned to them in the Exchange
Agreement.
TRANSFERS
OUT OF THE ESCROW ACCOUNT AT THE CLOSING:
| 1. |
Transfer
of US$167,587.50 representing accrued and unpaid interest on the
Outstanding Notes up to but not including January 24, 2007 to the
Purchasers, as holders of the Outstanding Notes, to the accounts
of the
Purchasers by wire transfer as set forth on the signature page of
each
Purchaser to the Exchange Agreement.
|
| 2. |
Transfer
of US$45,000,000 representing principal of the Outstanding Notes
to the
Purchasers, as holders of the Outstanding Notes, on a pro rata basis
to
the accounts of the Purchasers by wire transfer as set forth on the
signature page of each Purchaser to the Exchange
Agreement.
|
|
3.
|
Transfer
of $14,124.60 to Xxxxx, Xxxxxx & Xxxxxx LLP by wire transfer, for fees
and expenses as counsel to BNY as Trustee under the Outstanding
Indenture.
|
Wire
transfer information for Xxxxx, Xxxxxx & Xxxxxx LLP:
Bank: The
Bank
of New York
Xxx
Xxxx
Xxxxxx
Xxx
Xxxx,
XX 00000
ABA
No.:
Account:
Xxxxx,
Xxxxxx & Xxxxxx, LLP
Attorney
Professional Account No.:
|
4.
|
Transfer
of US$46,228.30 to Xxxxxxx Xxxx & Xxxxx LLP by wire transfer, for fees
and expenses as counsel to Radcliffe SPC, Ltd. for and on behalf
of the
Class A Segregated Portfolio.
|
Wire
transfer information for Xxxxxxx Xxxx & Xxxxx LLP:
Bank: Citibank
N.A.
000
Xxxx
00xx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
ABA
No.:
Account: Xxxxxxx
Xxxx & Xxxxx Attorney Business Account
Account
No.:
|
5.
|
Transfer
of US$1,414,736 to Xxxxx Fargo Bank, NA by wire transfer, as collateral
to
be held by the L/C Bank (as defined in the New
Indenture).
|
Wire
transfer information for Xxxxx Fargo Bank, NA:
Bank: Xxxxx
Fargo Bank, NA
ABA
No.:
Account
#:
Account
Name: Xxxxx Fargo Brokerage Services
Further
Credit Account #:
Further
Credit Account Name: FP Technology Collateral Acct
|
6.
|
Transfer
of US$16,500 to Xxxxx Fargo Bank, NA by wire transfer, for issuance
fees
for the Letter of Credit (as defined in the New
Indenture).
|
Wire
transfer information for Xxxxx Fargo Bank, NA:
Bank: Xxxxx
Fargo Bank, NA
ABA
No.:
Account
#:
Account
Name: Wires In Process
Reference:
|
7.
|
Transfer
of remaining Escrow Account balance to FPT by wire
transfer:
|
Wire
transfer information for FPT:
Bank: Xxxxx
Fargo, NA
00
Xxxxx
0xx
Xxxxxx
Xxxxxxxxxxx,
XX 00000
ABA
No.:
Account:
FP
Technology Holdings, Inc.
Account
No.:
SCHEDULE
3.1(g)
Capitalization
The
Company agreed to issue to Trident Growth Fund L.P. stock options, pursuant
to
that certain Consulting Agreement entered into between the Company and Trident
Growth Fund L.P. dated September 1, 2006, to acquire up to 1,000,000 shares
of
Common Stock at an exercise price of $7.00 per share and an expiration date
of
five years. Such shares will be reduced to 600,000 shares in the event the
12%
Senior Secured Convertible Debenture No. 1, dated September 13, 2005, in
the
initial principal amount of $2,000,000, issued to Trident Growth Fund L.P.
is
repaid in full prior to September 12, 2007.
SCHEDULE
3.1(h)
SEC
Reports
The
Company’s predecessor was AFG Enterprises USA, Inc. (“AFG”). In November 2002,
AFG (under its prior name, In Store Media Systems, Inc.) filed for
reorganization under Chapter 11 of the United States Bankruptcy Code. From
that
date until April 2005, AFG was unable to complete and file its quarterly
reports
on Form 10-QSB and Annual Reports on Form 10-KSB. During such time AFG filed
on
Form 8-K the monthly reports delivered to the Bankruptcy Trustee, including
monthly financial statements. In April and May 2005, AFG made all of the
missing
periodic filings with the SEC and has since timely made all of its filings
with
the SEC. The Form 8-K filed by the Company on January 23, 2007 reporting
its
Consulting Agreement with Trident Growth Fund L.P. was filed late.
SCHEDULE
3.1(i)
Indebtedness
and Other Contracts
1. 12%
Senior Secured Convertible Debenture No. 1, dated September 13, 2005, in
the
initial principal amount of $2,000,000, issued to Trident Growth Fund L.P.
2. Amended
and Restated Unsecured Promissory Note, dated as of September 13, 2005, with
a
current principal amount of $250,000, issued to General Motors
Corporation.
SCHEDULE
3.1(aa)
Tax
Status
None.
SCHEDULE
3.2(d)
Purchaser
Status (broker-dealer)
X.X.
Xxxxxx Securities Inc. is, or is affiliated with, a broker-dealer.
EXHIBITS
Exhibit
A Exchange
of Securities
Exhibit
B Form
of
New Indenture (including New Notes)
Exhibit
C Form
of
New Warrants
Exhibit
D Form
of
Security Agreement
Exhibit
E Form
of
Registration Rights Agreement
Exhibit
F Form
of
Transfer Agent Instructions
Exhibit
G Form
of
Company Counsel Opinion
Exhibit
H Form
of
Secretary’s Certificate
Exhibit
I Form
of
Transfer Agent Certificate
Exhibit
J Form
of
Satisfaction and Discharge Agreement
Exhibit
K Escrow
Account Disbursement Instructions
SCHEDULES
Schedule
3.1(g) Capitalization
Schedule
3.1(h) SEC
Reports not Timely Made
Schedule
3.1(i) Indebtedness
and Other Contracts
Schedule
3.1(aa) Tax
Status
Schedule
3.2(d) Purchasers
Registered as Broker-Dealers
