EXHIBIT 99.13
THIS SECURITY HAS 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. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITY AS PERMITTED BY
THE SECURITIES PURCHASE AGREEMENT PURSUANT TO WHICH THE SECURITIES WERE ISSUED.
Original Issue Date: September 13, 2005
No. 1 $2,000,000
12% SENIOR SECURED CONVERTIBLE DEBENTURE
This 12% Senior Secured Convertible Debenture (this "Debenture") is a duly
authorized and issued 12% Senior Secured Convertible Debenture of FP TECHNOLOGY
HOLDINGS, Inc., a Delaware corporation, having its principal place of business
located at 00 Xxxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxx 00000 (the "Company"), for
the principal amount of $2,000,000, issued in connection with that certain
Purchase Agreement (as defined below) of even date herewith entered into by and
among the Company and the Holder.
FOR VALUE RECEIVED, the Company promises to pay to TRIDENT GROWTH FUND,
L.P., a Delaware limited partnership, having its principal place of business
located at 000 Xxxxxx, Xxxxxxx, Xxxxx 00000, or its registered assigns (the
"Holder"), the principal sum of $2,000,000 on the earlier of (a) September 13,
2006; (b) the consummation of a Change of Control Transaction; or (c) the
Effective Date (the "Maturity Date"), and to pay interest to the Holder on the
then outstanding principal amount of this Debenture in accordance with the
provisions hereof. This Debenture is subject to the following additional
provisions:
Section 1. Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Debenture: (a) capitalized terms not otherwise defined
herein have the meanings given to such terms in the Purchase Agreement, and (b)
the following terms shall have the following meanings:
12% Senior Secured Convertible Debenture (FP Technology Holdings, Inc.), Page 1
"Bankruptcy Event" means any of the following events: (a) the
Company or any Subsidiary (as such term is defined in Rule 1.02(s) of
Regulation S-X) thereof commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction relating to the Company or any Subsidiary thereof; (b) there
is commenced against the Company or any Subsidiary thereof any such case
or proceeding that is not dismissed within 60 days after commencement; (c)
the Company or any Subsidiary thereof is adjudicated insolvent or bankrupt
or any order of relief or other order approving any such case or
proceeding is entered; (d) the Company or any Subsidiary thereof suffers
any appointment of any custodian or the like for it or any substantial
part of its property that is not discharged or stayed within 60 days; (e)
the Company or any Subsidiary thereof makes a general assignment for the
benefit of creditors; (f) the Company or any Subsidiary thereof calls a
meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; (g) the Company or any
Subsidiary thereof, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or takes
any corporate or other action for the purpose of effecting any of the
foregoing; or (h) an application for the appointment of a receiver or
liquidator for the Company or any of its material assets.
"Capital Lease" means any lease of property (real, personal or
mixed) which, in accordance with GAAP, should be capitalized on the
lessee's balance sheet or for which the amount of the asset and liability
thereunder as if so capitalized should be disclosed in a note to such
balance sheet.
"Cash Flow" means an amount equal to (i) the Company's Consolidated
EBITDA, minus (ii) the Company's Consolidated non-financed Capital
Expenditures.
"Consolidated EBITDA" means, for any Person for any period:
(i) the consolidated net income of such Person and its
Consolidated Subsidiaries for such period (after Income Taxes), calculated
in accordance with GAAP, but excluding:
(A) any gain arising from the sale of capital assets,
(B) any gain arising from any write-up of assets,
(C) earnings of any other Person, substantially all of
the assets of which have been acquired by such Person or its Consolidated
Subsidiaries in any manner, to the extent that such earnings were realized
by such other Person prior to the date of such acquisition.
(D) earnings of any Person in which the Person or its
Consolidated Subsidiaries has an ownership interest (other than wholly
owned Subsidiaries of such Person ), unless such earnings have actually
been received by the Person or its Consolidated Subsidiaries in the form
of cash distributions,
12% Senior Secured Convertible Debenture (FP Technology Holdings, Inc.), Page 2
(E) earnings of any Person to which assets of the Person
or its Consolidated Subsidiaries shall have been sold, transferred or
disposed of, or into which the Person shall have merged, to the extent
that such earnings arise prior to the date of such transaction,
(F) any gain arising from the acquisition of any
securities of such Person or any of its Consolidated Subsidiaries, and
(G) any extraordinary gain realized by such Person or
any of its Consolidated Subsidiaries during such period.
(ii) plus the following, but only in each case to the extent
incurred by the Company and its Consolidated Subsidiaries during such
period and deducted in the calculation above for such period,
(A) all income and franchise taxes,
(B) all Interest Expense,
(C) all depreciation expense, and
(D) all amortization expense.
"Current Assets" means, at any particular time, all amounts which,
in conformity with GAAP, would be included as current assets on a
consolidated balance sheet of the Company and its Subsidiaries; provided
however, there shall be excluded therefrom (a) all prepaid expenses of
every type and nature, (b) all amounts due from partners, officers,
stockholders or other Affiliates, and all loans due from employees, and
(c) all deferred charges.
"Current Liabilities" means, at any particular time, all amounts
(including deferred taxes) which, in conformity with GAAP, would be
included as current liabilities on a consolidated balance sheet of the
Company and its Subsidiaries.
"Current Ratio" means the ratio of Current Assets to Current
Liabilities.
"Dallas Courts" shall have the meaning set forth in Section 7(e).
"Debenture Register" shall have the meaning set forth in Section
2(b).
"Event of Default" shall have the meaning set forth in Section 6.
12% Senior Secured Convertible Debenture (FP Technology Holdings, Inc.), Page 3
"GAAP" mean generally accepted accounting principles.
"Interest Expense" means, with respect to any Person and for any
period (without duplication), all interest on that Person's Debt, whether
paid in cash or accrued as a liability and payable in cash during any
subsequent period (including, without limitation, the interest component
of Capital Leases), as determined by GAAP.
"Late Fees" shall have the meaning set forth in the second paragraph
to this Debenture.
"Liabilities" mean all liabilities, obligations and indebtedness of
any and every kind and nature (including, without limitation, lease
obligations, accrued interest, charges, expenses, attorneys' fees and
other sums) chargeable to the Company and made to or for the benefit of
the Company, whether arising under this Debenture or arising under the any
of the Transaction Documents, whether heretofore, now or hereafter owing,
arising, due or payable from Company to the Holder and however evidenced,
credited, incurred, acquired or owing, whether primary, secondary, direct,
contingent, fixed, or otherwise, including obligation of performance.
"Net Income" or "Net Loss" means, with respect to any Person for any
period, the net income or net loss of such Person determined in accordance
with GAAP, after payment of income Taxes but excluding any extraordinary
or non-recurring items.
"Original Issue Date" shall mean the date of the first issuance of
this Debenture regardless of the number of transfers of this or any
portion of this Debenture and regardless of the number of instruments
which may be issued to evidence such Debenture or Debentures.
"Purchase Agreement" means the Securities Purchase Agreement, dated
as of September 13, 2005, to which the Company and the original Holder are
parties, as amended, modified or supplemented from time to time in
accordance with its terms.
Section 2. Interest.
a) Payment of Interest in Cash. The Company shall pay interest, in
cash, to the Holder on the then outstanding principal amount of this
Debenture at the rate of 12% per annum, payable in cash via wire transfer
monthly, in arrears, on the last day of each month for the period
beginning on the Initial Issuance Date and ending on the Maturity Date or
such earlier or later time when this Debenture is paid or prepaid in full
(except that, if any such date is not a Business Day, then such payment
shall be due on the next succeeding Business Day) (each such date, an
"Interest Payment Date"), subject to the conversion rights of Xxxxxx as
stated herein.
12% Senior Secured Convertible Debenture (FP Technology Holdings, Inc.), Page 4
b) Interest Calculations. Interest shall be calculated on the basis
of a 360-day year and shall accrue daily commencing on the Original Issue
Date until payment in full of the principal sum, together with all accrued
and unpaid interest and other amounts which may become due hereunder, has
been made. Interest hereunder will be paid to the Person in whose name
this Debenture is registered on the records of the Company regarding
registration and transfers of Debentures (the "Debenture Register").
c) Late Fee. All overdue accrued and unpaid interest to be paid
hereunder shall entail a late fee at the rate of 18% per annum (or such
lower maximum amount of interest permitted to be charged under applicable
law) ("Late Fee") which will accrue daily, from the date such interest is
due hereunder through and including the date of payment.
d) Prepayment. The Company may prepay all or any portion of the then
outstanding principal amount of this Debenture without any prepayment
premium or discount by providing Holder not less than 90 days prior
written notice, such outstanding principal balance remaining subject to
Xxxxxx's conversion rights hereunder until the actual prepayment is made
following such notice period.
Section 3. Conversion Right; Adjustments.
The Holder of this Debenture shall have the right, at Xxxxxx's
option, upon the earlier to occur of (i) an Event of Default hereunder; or
(ii) the six month anniversary of the Original Issue Date, to convert all,
or, in multiples of $50,000, any part of this Debenture into such number
of fully paid and nonassessable shares of Common Stock as shall be
provided herein. The Holder of this Debenture may exercise the conversion
right by giving written notice (a "Conversion Notice") to the Company of
the exercise of such right and stating the name or names in which the
stock certificate or stock certificates for the shares of Common Stock are
to be issued and the address to which such certificates shall be
delivered. The Conversion Notice shall be accompanied by this Debenture.
The number of shares of Common Stock that shall be issuable upon
conversion of the Debenture shall equal the then outstanding principal
amount of this Debenture plus all accrued and unpaid interest due and
payable on the Debenture on the Conversion Date (defined below) or a
portion thereof (in the discretion of the Holder) divided by the
Conversion Price (as defined below) in effect on the date the Conversion
Notice is given. Conversion shall be deemed to have been effected on the
date the Conversion Notice is delivered to the Company (each, a
"Conversion Date"). Within 10 business days after a Conversion Date, the
Company shall issue and deliver by hand against a signed receipt therefor
or by reputable overnight delivery carrier to the address designated in
the Conversion Notice, a stock certificate or stock certificates of the
Company representing the number of shares of Common Stock to which Holder
is entitled and a check or cash in payment of all interest accrued and
unpaid under the Debenture being converted up to and including the
Conversion Date. If a stock certificate or stock certificates are not
delivered within 10 business days after a Conversion Date, the Company
shall pay and/or grant to Holder 0.1% (on a Fully Diluted Basis) of the
Company's Common Stock per day until such certificates are delivered. The
conversion rights will be governed by the following provisions:
12% Senior Secured Convertible Debenture (FP Technology Holdings, Inc.), Page 5
a) Conversion Price. On the issue date hereof and until such time as an
adjustment shall occur, the Conversion Price shall be equal to:
(i) 80% of the average price per share of the Common Stock and
Common Stock Equivalents sold to any Person in the first Qualifying
Transaction to be consummated following the Original Issue Date
(determined by dividing the total number of shares of Common Stock issued
plus shares issuable under Common Stock Equivalents in such Qualifying
Transaction, by the aggregate consideration received by the Company plus
all consideration to be received upon exercise or conversion of all Common
Stock Equivalents issued in such Qualifying Transaction). With respect to
determining the price paid per share in any asset purchase, only shares of
Common Stock actually issued and outstanding shall be used in determining
such per share calculation; or
(ii) if no Qualifying Transaction has occurred on or by the
Conversion Date, $.01 per share.
Notwithstanding the foregoing, the parties agree that the Conversion
Price shall be adjusted down from the determination resulting from the
foregoing formula by mutual agreement of the parties in the event that any
convertible securities are sold to investors in any Qualifying
Transaction, the parties hereby recognizing that the issuance thereof,
even at an exercise or conversion price above the Conversion Price, would
increase the value of the securities issued to such investors and thus
entitle Holder to a greater number of shares of Common Stock upon
conversion hereof. The parties agree to negotiate such determination in
good faith.
b) Adjustment for Issuance of Shares at less than the Conversion
Price.
(i) If and whenever any Additional Common Stock (as herein
defined) shares shall be issued by the Company (the "Stock Issue Date")
for a consideration per share less than the Conversion Price, then in each
such case the initial Conversion Price shall be reduced to a new
Conversion Price in an amount equal to the consideration per share
received by the Company for the additional shares of Common Stock then
issued, and accordingly, the number of shares issuable to Holder upon
conversion shall be proportionately increased as a result thereof; and, in
the case of shares issued without consideration, the initial Conversion
Price shall be reduced in amount and the number of shares issued upon
conversion shall be increased in an amount so as to maintain for the
Holder the right to convert this Debenture into shares equal in amount to
the same percentage interest in the Common Stock of the Company as existed
for the Holder immediately preceding the Stock Issue Date.
12% Senior Secured Convertible Debenture (FP Technology Holdings, Inc.), Page 6
(ii) Consideration for Shares. In case of the issuance of
Additional Common Stock for a consideration part or all of which shall be
cash, the amount of the cash consideration therefor shall be deemed to be
the amount of the cash received by Company for such shares. In case of the
issuance of any shares of Additional Common Stock for a consideration part
or all of which shall be other than cash, the amount of the consideration
therefor, other than cash, shall be deemed to be the then fair market
value of the property received as determined by an investment banking firm
selected by Xxxxxx.
(iii) Reclassification of Shares. In case of the
reclassification of securities into shares of Common Stock, the shares of
Common Stock issued in such reclassification shall be deemed to have been
issued for a consideration other than cash. Shares of Additional Common
Stock issued by way of dividend or other distribution on any class of
stock of the Company shall be deemed to have been issued without
consideration.
(iv) Split up or Combination of Shares. In case issued and
outstanding shares of Common Stock shall be subdivided or split up into a
greater number of shares of the Common Stock, the Conversion Price shall
be proportionately decreased, and in case issued and outstanding shares of
Common Stock shall be combined into a smaller number of shares of Common
Stock, the Conversion Price shall be proportionately increased, such
increase or decrease, as the case may be, becoming effective at the time
of record of the split-up or combination, as the case may be.
(v) The term "Additional Common Stock" herein shall mean,
other than with respect to an Exempt Issuance, in the most broadest sense
all shares of Common Stock or Common Stock Equivalents hereafter issued by
the Company (including, but not limited to Common Stock held in the
treasury of the Company, except Common Stock issued upon the conversion or
exercise of any security purchased in connection with the Purchase
Agreement.
c) Adjustment for Mergers, Consolidations, Etc..
(i) In the event of distribution to all Common Stock holders
of any stock, indebtedness of the Company or assets (excluding cash
dividends or distributions from retained earnings) or other rights to
purchase securities or assets, then, after such event, this Debenture will
be convertible into the kind and amount of securities, cash and other
property which the holder of the Debenture would have been entitled to
receive if the holder owned the Common Stock issuable upon conversion of
the Debenture immediately prior to the occurrence of such event.
12% Senior Secured Convertible Debenture (FP Technology Holdings, Inc.), Page 7
(ii) In case of any capital reorganization, reclassification
of the stock of the Company (other than a change in par value or as a
result of a stock dividend, subdivision, split up or combination of
shares), this Debenture shall be convertible into the kind and number of
shares of stock or other securities or property of the Company to which
the holder of the Debenture would have been entitled to receive if the
holder owned the Common Stock issuable upon conversion of the Debenture
immediately prior to the occurrence of such event. The provisions of the
foregoing sentence shall similarly apply to successive reorganizations,
reclassifications, consolidations, exchanges, leases, transfers or other
dispositions or other share exchanges.
d) Notice of Adjustment. In the event the Company shall propose to
take any action which shall result in an adjustment in the Conversion
Price, the Company shall give notice to the Holder, which notice shall
specify the record date, if any, with respect to such action and the date
on which such action is to take place. Such notice shall be given on or
before the earlier of 10 days before the record date or the date which
such action shall be taken. Such notice shall also set forth all facts (to
the extent known) material to the effect of such action on the Conversion
Price and the number, kind or class of shares or other securities or
property which shall be deliverable or purchasable upon the occurrence of
such action or deliverable upon conversion of this Debenture.
Additionally, following completion of an event wherein the Conversion
Price shall be adjusted, the Company shall furnish to the holder of this
Debenture a statement, signed by an authorized officer of the Company of
the facts creating such adjustment and specifying the resultant adjusted
Conversion Price then in effect.
e) Reservation of Shares. The Company warrants and agrees that it
shall at all times reserve and keep available, free from preemptive
rights, sufficient authorized and unissued shares of Common Stock to
effect conversion of this Debenture.
f) Registration Rights. The Holder has certain rights with respect
to the registration of shares of Common Stock issued upon the conversion
of this Debenture, such rights being specifically set forth in the
Purchase Agreement entered into by and between Holder and the Company on
the date hereof.
12% Senior Secured Convertible Debenture (FP Technology Holdings, Inc.), Page 8
g) Exercise Limitations. At any time after the Common Stock is
registered under Section 12 of the Exchange Act, the Holder shall not have
the right to convert any portion of this Debenture, pursuant to Section 3
or otherwise, to the extent that after giving effect to such issuance
after exercise, the Holder (together with the Holder's affiliates), as set
forth on the applicable Conversion Notice, would beneficially own in
excess of 4.99% (or as applicable, 9.99%) of the number of shares of the
Common Stock outstanding immediately after giving effect to such issuance.
For purposes of the foregoing determination, the number of shares of
Common Stock beneficially owned by the Holder and its affiliates shall
include the number of shares of Common Stock issuable upon such conversion
of this Debenture less the number of shares of Common Stock which would be
issuable upon (A) conversion of the remaining, unexercised portion of this
Debenture and (B) exercise or conversion of the unexercised or unconverted
portion of any other Securities (including, without limitation, any other
Debentures or Warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by the
Holder. Except as set forth in the preceding sentence, for purposes of
this Section 3(g), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act. To the extent that the limitation
contained in this Section 3(g) applies, the determination of whether this
Debenture is convertible (in relation to other securities owned by the
Holder) and of which a portion of this Debenture is convertible shall be
in the sole discretion of Holder. For purposes of this Section 3(g), in
determining the number of outstanding shares of Common Stock, the Holder
may rely on the number of outstanding shares of Common Stock as reflected
in (x) Schedule 3.1(g) to the Purchase Agreement, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company's Transfer Agent setting forth the number of shares of Common
Stock outstanding. Upon the written or oral request of the Holder, the
Company shall within two Business Days confirm orally and in writing to
the Holder the number of shares of Common Stock then outstanding. The
provisions of this Section 3(g) may be waived by the Holder upon, at the
election of the Holder, not less than 61 days' prior notice to the
Company, and the provisions of this Section 3(g) shall continue to apply
until such 61st day (or such later date, as determined by the Holder, as
may be specified in such notice of waiver).
Section 4. Registration of Transfers and Exchanges.
a) Different Denominations. This Debenture is exchangeable for an
equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No
service charge will be made for such registration of transfer or exchange.
b) Investment Representations. This Debenture has been issued
subject to certain investment representations of the original Holder set
forth in the Purchase Agreement and may be transferred or exchanged only
in compliance with the Purchase Agreement and applicable federal and state
securities laws and regulations.
c) Reliance on Debenture Register. Prior to due presentment to the
Company for transfer of this Debenture, the Company and any agent of the
Company may treat the Person in whose name this Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose
of receiving payment as herein provided and for all other purposes,
whether or not this Debenture is overdue, and neither the Company nor any
such agent shall be affected by notice to the contrary.
Section 5. Negative Covenants. So long as any portion of this Debenture is
outstanding, without the prior written consent of the Holder, which
consent may be withheld in the sole discretion of the Holder, the Company
will not and will not permit any of its Subsidiaries to directly or
indirectly:
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a) Indebtedness. Other than equipment leases of up to $25,000 in the
aggregate for any 12 month period, enter into, create, incur, assume or
suffer to exist any indebtedness or Liens, on or with respect to any of
its property or assets now owned or hereafter acquired or any interest
therein or any income or profits therefrom that is senior to, or pari
passu with, in any respect, the Company's obligations under the
Debentures; provided, however, that this provision shall not prevent the
Company from entering into any transaction, the purpose of which is to
repay this Debenture, provided all proper notices are given in accordance
herewith;
b) Repayment of Indebtedness. Repay any principal due and owing on
any promissory notes, debentures, or other forms of indebtedness, other
than (i) periodic interest payments due and owing thereunder; (ii)
repayment due of any principal amount or interest due or becoming due
under this Debenture; and (iii) repayment of the indebtedness set forth in
Schedule 4.9 to the Purchase Agreement; provided, nothing contained in
this section shall prohibit the Company from making any payments with
respect to trade payables made in the ordinary course of the Company's
business;
c) Repayment of Shares. Repay, repurchase or offer to repay,
repurchase or otherwise acquire more than a de minimus number of shares of
its Common Stock or other equity securities or as otherwise permitted by
the Transaction Documents;
d) Bylaws. Amend its certificate of incorporation, bylaws or other
charter documents so as to adversely affect any rights of the Holder in
its capacity as a holder of the Debentures;
e) Loans and Investments. Lend or advance money, credit or property
to any person or entity, or invest in (by capital contribution or
otherwise), or purchase or repurchase the stock or indebtedness or assets
or properties of any person or entity, or agree to do any of the
foregoing, other than in the ordinary course of business;
f) Guarantees. Assume, endorse or otherwise become or remain liable
in connection with the obligations (including accounts payable) of any
other person or entity, other than in the ordinary course of business.
g) Sale of Assets, Dissolution, Etc. Transfer, sell, assign, lease
or otherwise dispose of any of its properties or assets, or any assets or
properties necessary or desirable for the proper conduct of its business,
or transfer, sell, assign or otherwise dispose of any of its accounts, or
contract rights to any person or entity, or change the nature of its
business, wind-up, liquidate or dissolve, or agree to any of the
foregoing, other than in the ordinary course of business;
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h) Acquisition of Assets. Agree to purchase, acquire, or lease of
any assets of any Person, other than in the ordinary course of business;
i) Compensation. Increase the compensation of any of its officers or
consultants making more than $100,000 per year, hire any relative of any
officer, director or shareholder of the Company, or pay a bonus to any
such person.
j) Subsidiaries. Establish or form a partially or wholly owned
Subsidiary. Sell, transfer or assign any interest in the Company's
existing Subsidiaries.
k) No Further Issuance of Securities. Other than in accordance
herewith, create, issue or permit the issuance of any additional
securities of the Company or of any of its Subsidiaries (including with
respect to any Qualifying Transaction), if any, or any rights, options or
warrants to acquire any such securities and in the event that Company
desires to issue securities with preferences or rights greater than that
which the Common Stock has, the Holder will have the option of converting
into such stock in lieu of the Common Stock hereby;
l) No Dividends; No Redemption. Declare any dividend, pay or set
aside for payment any dividend or other distribution, in cash, stock, or
other property, or make any payment to any related parties, including to
any preferred stockholders, as a dividend, redemption, or otherwise, other
than the payment of salaries in the ordinary course of business.
m) Stock Splits. Undertake a reverse or forward stock split or
reclassification of the Common Stock; or
n) Agreement. Enter into any agreement obligating the Company to
undertake any of the matters set forth in this Section 5.
Section 6. Affirmative Covenants. So long as any portion of this Debenture
is outstanding and unless the Holder otherwise consents in writing, which
consent may be withheld in the sole discretion of the Holder, the Company will:
a) Taxes and Liens. Promptly pay, or cause to be paid, all taxes,
assessments and other governmental charges which may lawfully be levied or
assessed upon the income or profits of the Company, or upon any property,
real, personal or mixed, belonging to the Company, or upon any part
thereof, and also any lawful claims for labor, material and supplies which
if unpaid, might become a lien or charge against any such property;
provided, however, the Company shall not be required to pay any such tax,
assessment, charge, levy or claim so long as the validity thereof shall be
actively contested in good faith by proper proceedings; but, provided
further that any such tax, assessment, charge, levy or claim shall be paid
or bonded in a manner satisfactory to the Holder upon the commencement of
proceedings to foreclose any lien securing the same.
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b) Business and Existence. Do or cause to be done all things
necessary to preserve and to keep in full force and effect any licenses
necessary to the business of the Company, its corporate existence and
rights of its franchises, trade names, trademarks, and permits which are
reasonably necessary for the continuance of its business; and continue to
engage principally in the business currently operated by the Company.
c) Insurance and Properties. Keep its business and properties
insured at all times with responsible insurance companies and carry such
types and amounts of insurance as are required by all federal, state and
local governments in the areas which the Company does business and as are
usually carried by entities engaged in the same or similar business
similarly situated. In addition, the Company shall maintain in full force
and effect policies of liability insurance in amounts at least equal to
that currently in effect.
d) Maintain Property and Assets. Maintain its property and assets in
good order and repair and, from time to time, make all needed and proper
repairs, renewals, replacements, additions and improvements thereto, so
that the business carried on may be properly and advantageously conducted
at all times in accordance with prudent business management, and maintain
annually adequate reserves for maintenance thereof.
e) True Books. Keep true books of record and account in which full,
true and correct entries will be made of all of its dealings and
transactions, and set aside on its books such reserves as may be required
by GAAP, consistently applied, with respect to all taxes, assessments,
charges, levies and claims referred to in (a) above, and with respect to
its business in general, and include such reserves in interim as well as
year-end financial statements.
f) Right of Inspection. Permit any person designated by the Holder,
at the Holder's expense, to visit and inspect any of the properties, books
and financial reports of the Company, all at such reasonable times upon
three (3) Business Days prior notice to Company, and as often as the
Holder may reasonably request, provided the Holder does not unreasonably
interfere with the daily operations of the Company and Holder executes a
confidentiality agreement.
g) Observance of Laws. Conform to and duly observe all laws,
regulations and other valid requirements of any regulatory authority with
respect to the conduct of its business except those that would not cause a
Material Adverse Effect, as determined in the reasonable discretion of the
Holder.
h) Company's Knowledge of Default. Upon an officer or director of
the Company obtaining knowledge of, or threat of, an Event of Default
hereunder, cause such officer to promptly, within no more than five (5)
Business Days, deliver to the Holder notice thereof specifying the nature
thereof, the period of existence thereof, and what action the Company has
taken and/or proposes to take with respect thereto.
12% Senior Secured Convertible Debenture (FP Technology Holdings, Inc.), Page 12
i) Notice of Proceedings. Upon an officer or director of the Company
obtaining knowledge of any material litigation, dispute or proceedings
being instituted or threatened against the Company, or any attachment,
levy, execution or other process being instituted against any assets of
the Company, cause such officer to promptly, within no more than five (5)
Business Days, give the Holder written notice of such litigation, dispute,
proceeding, levy, execution or other process.
j) Certificate of Covenant Compliance Within 30 days of the last day
of each March, June, September and December, the Company will issue a
Certificate of Covenant Compliance, executed by either the Chief Executive
Officer or Chief Financial Officer in the form of Exhibit A attached
hereto. If the Company is not in compliance with the covenants specified
in this Section 5, the Company will modify the Certificate of Covenant
Compliance by stating the exception and providing a detailed explanation
of the non-compliance.
k) Payment of Xxxxxx's Expenses. If at any time or times hereafter,
Xxxxxx employs counsel in connection with the execution and consummation
of the transactions contemplated by this Debenture or to commence, defend
or intervene, file a petition, complaint, answer, motion or other
pleading, or to take any action in or with respect to any suit or
proceeding (bankruptcy or otherwise) relating to this Debenture or any
other Transaction Document, or any other agreement, guaranty, note,
instrument or document heretofore, now or at any time or times hereafter
executed by the Company and delivered to Holder, or to enforce any rights
of Holder hereunder whether before or after the occurrence of any Event of
Default, or to collect any of the Liabilities, then in any of such events,
all of the reasonable attorneys' fees arising from such services, and any
expenses, costs and charges relating thereto, shall be part of the
Liabilities, payable on demand.
l) Financial Reporting. The Company shall provide to Holder audited
annual financial statements, audited by mutually agreed upon independent
certified public accounting firm. Said financial statements shall be
prepared in accordance with GAAP, consistently applied, and shall be
delivered to Holder within ninety (90) days after the close of the
Company's fiscal year. The report of the auditor that accompanies the
financial statements shall not contain any qualifications or limitations,
such auditor to be a mutually agreeable accounting firm. The Company's
fiscal year ends on June 30, and shall not be changed without the prior
written consent of the Holder. The Company shall provide to Holder
unaudited monthly financial statements (including month to date and year
to date actual to prior periods) and a report in such form as is
acceptable to Holder, both presented in accordance with GAAP, consistently
applied (subject to such exceptions for interim financials as may be noted
by the Company thereon), and shall be delivered to Holder within thirty
(30) days after the close of the Company's month. The Company shall also
deliver any other reports reasonably requested by Xxxxxx. If the
statements or reports are not delivered within thirty (30) days of the
close of any month, then the Company will pay a late fee of $250 per day
until the report is delivered in adequate form in the sole discretion of
Holder.
12% Senior Secured Convertible Debenture (FP Technology Holdings, Inc.), Page 13
m) Financial Covenants. As of the 90th date following the date of
this Agreement and thereafter continuing until the Termination Date, the
Company must maintain the following ratios:
(i) Cash Interest Coverage. Until this Debenture is repaid in
full, the Company shall maintain a Consolidated EBITDA ratio, based on any
of the Company's quarterly financial statements (as determined on the last
day of each fiscal quarter for the immediately preceding quarter), of 2.0
or greater. The Consolidated EBITDA ratio is defined as Consolidated
EBITDA divided by Interest Expense (Consolidated EBITDA / Interest
Expense).
(ii) Cash Flow Coverage Ratio. The ratio of (a) the Company's
Cash Flow to (b) the sum of (i) the Company's consolidated Interest
Expense plus (ii) the Company's scheduled payments of principal (including
the principal component of Capital Leases) to be paid during the 12 months
following any date of determination shall at all times exceed (1) 1.5 to
1.0. Compliance with the ratio will be tested as of the last day of each
month, with Cash Flow and Interest Expense being calculated for the twelve
months then ended.
(iii) Current Ratio. The Company will at all times maintain a
Current Ratio of not less than 1.5 to 1.0. The Current Ratio shall be
calculated and tested quarterly as of the last day of each fiscal quarter
of the Company.
(iv) Actual versus Budget. The Company shall on a quarterly
basis achieve 75 percent of its budgeted revenue and income. Budget
numbers shall be those delivered to Holder contemporaneously herewith and
then on an annual calendar basis.
Section 7. Events of Default.
a) "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment,
decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
i. any default in the payment of (A) the principal amount of
any Debenture, or (B) interest (including Late Fees) on, or
liquidated damages in respect of, any Debenture, in each case free
of any claim of subordination, as and when the same shall become due
and payable (whether on the Maturity Date or by acceleration or
otherwise);
12% Senior Secured Convertible Debenture (FP Technology Holdings, Inc.), Page 14
ii. the Company shall fail to observe or perform any other
covenant or agreement contained in this Debenture or any of the
other Transaction Documents which failure is not cured, if possible
to cure, within the earlier to occur of (A) 10 Business Days after
notice of such default sent by the Holder or by any other Holder and
(B) 10 Business Days after the Company shall become or should have
become aware of such failure;
iii. a default or event of default (subject to any grace or
cure period provided for in the applicable agreement, document or
instrument) shall occur under (A) any of the Transaction Documents
or (B) any other material agreement, lease, document or instrument
to which the Company or any Subsidiary is bound and not cured;
iv. any representation or warranty made herein, in any other
Transaction Documents, in any written statement pursuant hereto or
thereto, or in any other report, financial statement or certificate
made or delivered to the Holder or any other holder of Debentures
shall be untrue or incorrect in any material respect as of the date
when made or deemed made;
v. there shall have occurred a Bankruptcy Event;
vi. the Company or any Subsidiary shall default in any of its
obligations under any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument under
which there may be issued, or by which there may be secured or
evidenced any indebtedness for borrowed money or money due under any
long term leasing or factoring arrangement of the Company in an
amount exceeding $100,000, whether such indebtedness now exists or
shall hereafter be created and such default shall result in such
indebtedness becoming or being declared due and payable prior to the
date on which it would otherwise become due and payable.
vii. the Company shall be a party to any Change of Control
Transaction or Fundamental Transaction, shall agree to sell or
dispose of all or in excess of 33% of its assets in one or more
transactions (whether or not such sale would constitute a Change of
Control Transaction) or shall redeem or repurchase any its
outstanding shares of Common Stock or Common Stock Equivalents;
viii. the Company shall fail for any reason to pay in full the
amount of cash due pursuant to a Buy-In of the Warrant within 5
Business Days after notice therefor is delivered hereunder or shall
fail to pay all amounts owed on account of an Event of Default
within 5 Business Days of the date due;
12% Senior Secured Convertible Debenture (FP Technology Holdings, Inc.), Page 15
ix. the Company shall fail to have available a sufficient
number of authorized and unreserved shares of Common Stock to issue
to such Holder upon exercise of the Warrants in full and not
remedied as permitted in the Transaction Documents;
x. the Company shall redeem any of the Common Stock
Equivalents;
xi. upon the reasonable determination by the Holder that there
has been a Material Adverse Effect;
xii. the occurrence of an Activity Event of Default (as
defined in Section 5.1(f)(ii) of the Purchase Agreement); or
xiii. the Company fails to close that Asset Purchase by and
between it and Firepond, Inc., a Delaware corporation, on the date
hereof, as contemplated in the Purchase Agreement.
b) Remedies Upon Event of Default. If any Event of Default occurs,
the full principal amount of this Debenture, together with interest and
other amounts owing in respect thereof, to the date of acceleration shall
become, at the Holder's election, immediately due and payable in cash.
Commencing 5 days after the occurrence of any Event of Default that
results in the eventual acceleration of this Debenture, the interest rate
on this Debenture shall accrue at the rate of 18% per annum, or such lower
maximum amount of interest permitted to be charged under applicable law.
All Debentures for which the full principal amount hereunder shall have
been paid in accordance herewith shall promptly be surrendered to or as
directed by the Company. The Holder need not provide and the Company
hereby waives any presentment, demand, protest or other notice of any
kind, and the Holder may immediately and without expiration of any grace
period enforce any and all of its rights and remedies hereunder and all
other remedies available to it under applicable law. Such declaration may
be rescinded and annulled by Xxxxxx at any time prior to payment hereunder
and the Holder shall have all rights as a Debenture holder until such
time, if any, as the full payment under this Section shall have been
received by it. No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent thereon.
Section 8. Miscellaneous.
a) Notices. Any and all notices or other communications or
deliveries to be provided by the Holders hereunder shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized
overnight courier service, addressed to the Company, at the address set
forth above, facsimile number (000) 000-0000, Attn: Chief Executive
Officer, 00 Xxxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxx 00000, or such other
address or facsimile number as the Company may specify for such purposes
by notice to the Holders delivered in accordance with this Section. Any
and all notices or other communications or deliveries to be provided by
the Company hereunder shall be in writing and delivered personally, by
facsimile, sent by a nationally recognized overnight courier service
addressed to each Holder at the facsimile number or address of such Holder
appearing herein, or such other address or facsimile number as such Holder
may specify in accordance with this Section. Any notice or other
communication or deliveries hereunder shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section prior to 5:30 p.m. (Dallas, Texas time), (ii)
the date after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in
this Section later than 5:30 p.m. (Dallas, Texas time) on any date and
earlier than 11:59 p.m. (Dallas, Texas time) on such date, (iii) the
second Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the
party to whom such notice is required to be given.
12% Senior Secured Convertible Debenture (FP Technology Holdings, Inc.), Page 16
b) Absolute Obligation. Except as expressly provided herein, no
provision of this Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of,
interest and liquidated damages (if any) on, this Debenture at the time,
place, and rate, and in the coin or currency, herein prescribed. This
Debenture is a direct debt obligation of the Company. This Debenture ranks
pari passu with all other Debentures now or hereafter issued under the
terms set forth herein.
c) Security Interest. This Debenture is a direct debt obligation of
the Company and, pursuant to the Security Documents, is secured by a first
priority security interest in all of the assets of the Company and certain
other collateral for the benefit of the Holders.
d) Lost or Mutilated Debenture. If this Debenture shall be
mutilated, lost, stolen or destroyed, the Company shall execute and
deliver, in exchange and substitution for and upon cancellation of a
mutilated Debenture, or in lieu of or in substitution for a lost, stolen
or destroyed Debenture, a new Debenture for the principal amount of this
Debenture so mutilated, lost, stolen or destroyed but only upon receipt of
evidence of such loss, theft or destruction of such Debenture, and of the
ownership hereof, and indemnity, if requested, all reasonably satisfactory
to the Company.
e) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Debenture shall be
governed by and construed and enforced in accordance with the internal
laws of the State of Texas, 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 any of the Transaction Documents (whether brought against
a party hereto or its respective affiliates, directors, officers,
shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of Dallas, Texas (the "Dallas Courts").
Each party hereto hereby irrevocably submits to the exclusive jurisdiction
of the Dallas Courts 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, or such Dallas
Courts are 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 Debenture 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. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
and all right to trial by jury in any legal proceeding arising out of or
relating to this Debenture or the transactions contemplated hereby. If
either party shall commence an action or proceeding to enforce any
provisions of this Debenture, 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.
12% Senior Secured Convertible Debenture (FP Technology Holdings, Inc.), Page 17
f) Waiver. Any waiver by the Company or the Holder of a breach of
any provision of this Debenture shall not operate as or be construed to be
a waiver of any other breach of such provision or of any breach of any
other provision of this Debenture. The failure of the Company or the
Holder to insist upon strict adherence to any term of this Debenture on
one or more occasions shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term
or any other term of this Debenture. Any waiver must be in writing.
g) Severability. If any provision of this Debenture is invalid,
illegal or unenforceable, the balance of this Debenture shall remain in
effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other persons
and circumstances. If it shall be found that any interest or other amount
deemed interest due hereunder violates applicable laws governing usury,
the applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum permitted rate of interest. The Company
covenants (to the extent that it may lawfully do so) that it shall not at
any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay, extension or usury law or other law
which would prohibit or forgive the Company from paying all or any portion
of the principal of or interest on this Debenture as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this indenture, and the Company
(to the extent it may lawfully do so) hereby expressly waives all benefits
or advantage of any such law, and covenants that it will not, by resort to
any such law, hinder, delay or impeded the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every
such as though no such law has been enacted.
12% Senior Secured Convertible Debenture (FP Technology Holdings, Inc.), Page 18
h) Next Business Day. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.
i) Headings. The headings contained herein are for convenience only,
do not constitute a part of this Debenture and shall not be deemed to
limit or affect any of the provisions hereof.
j) Usury. To the extent it may lawfully do so, the Company hereby
agrees not to insist upon or plead or in any manner whatsoever claim, and
will resist any and all efforts to be compelled to take the benefit or
advantage of, usury laws wherever enacted, now or at any time hereafter in
force, in connection with any claim, action or proceeding that may be
brought by any Purchaser in order to enforce any right or remedy under any
Transaction Documents. Notwithstanding any provision to the contrary
contained in any Transaction Documents, it is expressly agreed and
provided that the total liability of the Company under the Transaction
Documents for payments in the nature of interest shall not exceed the
Maximum Rate, and, without limiting the foregoing, in no event shall any
rate of interest or default interest, or both of them, when aggregated
with any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such Maximum Rate.
It is agreed that if the maximum contract rate of interest allowed by law
and applicable to the Transaction Documents is increased or decreased by
statute or any official governmental action subsequent to the date hereof,
the new maximum contract rate of interest allowed by law will be the
Maximum Rate applicable to the Transaction Documents from the effective
date of such increase or decrease forward, unless such application is
precluded by applicable law. If under any circumstances whatsoever,
interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness, if any, evidenced by the
Transaction Documents, such excess shall be applied by such Purchaser to
the unpaid principal balance of any such indebtedness or be refunded to
the Company, the manner of handling such excess to be at such Purchaser's
election in the event any principal amount remains outstanding.
(k) Amendment. This Agreement may not be amended, supplemented or
modified, except by an agreement in writing signed by each of the parties
hereto.
[Signature Page Follows]
12% Senior Secured Convertible Debenture (FP Technology Holdings, Inc.), Page 19
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
FP TECHNOLOGY HOLDINGS, INC.
By:__________________________________________
Name:
Title:
12% Senior Secured Convertible Debenture (FP Technology Holdings, Inc.),
Signature Page
EXHIBIT A
I, the undersigned, hereby represent that FP Technology Holdings, Inc. is
in compliance with all of its covenants specified in Sections 5 and 6 of that
certain 12% Senior Secured Convertible Debenture originally dated as of
September 13, 2005, executed by FP Technology Holdings, Inc., with its principal
place of business at 00 Xxxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxx 00000, in favor
of Trident Growth Fund, L.P., with its principal place of business at 000
Xxxxxx, Xxxxxxx, Xxxxx 00000.
FP TECHNOLOGY HOLDINGS, INC.
By:__________________________________________
Name:
Title:
12% Senior Secured Convertible Debenture (FP Technology Holdings, Inc.),
Exhibit A
