MASTER EXCHANGE AGREEMENT
EXHIBIT
99.1
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 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);
(vi) the
Registration Rights Agreement duly executed by the Company;
(vii) the
Security Agreement duly executed by the Company;
(viii) 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;
(ix) a
certificate, executed by the Secretary of the Company, dated as of the Closing
Date, in the form attached hereto as Exhibit
H;
and
(x) 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:
(i) 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;
(ii) 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
(iii) the
delivery by the Purchasers of the items set forth in Section 2.2(b) of this
Agreement.
(b) 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 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)
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.
(e) 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”).
(f) 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.
(g) 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
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.
(h) 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 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.
(i) 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 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.
(j) 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 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.
(k) 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.
(l) 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
that such officer intends to leave the Company or otherwise terminate such
officer's employment with the Company.
(m) 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.
(n) 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.
(o) 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.
(p) 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.
(q) 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.
(r) 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.
(s) 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 Persons for fees of a type contemplated in this Section that
may
be due in connection with the transactions contemplated by the Transaction
Documents.
(t) 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.
(u) 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.
(v) 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.
(w) 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.
(x) 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 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.
(y) 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.
(z) 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.
(aa) 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.
(bb) 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.
(cc) 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.
(dd) 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.
(ee) 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.
(ff) 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
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.
(gg) 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.
(hh) 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 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.
(b) 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.
(c) 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.
(d) 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.
(e) 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 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.
(f) 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.
(g) 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.
(a) 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.
(b) 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.
(c) 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.
(d) 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.
4.2 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.
4.3 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.
4.4 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 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.
4.5 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.
4.6 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.
4.7 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.
4.8 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.
4.9 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
breach of any of the representations, warranties, covenants or agreements made
by the Purchasers in this Agreement or in the other Transaction Documents.
4.10 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.
4.11 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 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.
4.12 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.
4.13 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.
4.14 Termination
of Original Agreements.
The
Company and each Purchaser, severally and not jointly, agrees that, effective
upon the Closing and without further action by 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.
4.15 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.
4.16 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.
4.17 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 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).
5.2 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.
5.3 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.
5.4 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.
5.5 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.
5.6 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 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.
5.7 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”.
5.8 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.
5.9 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.
5.10 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 warranties contained herein shall survive the Closing and
the delivery, and conversion of the Securities, as applicable.
5.11 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.
5.12 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.
5.13 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.
5.14 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.
5.15 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.
5.16 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.
5.17 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.
5.18 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.
5.19 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 Xxxxx
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]
ny-726496
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)
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
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
