Document:

Exhibit
10.1(b)

FIRST
MODIFICATION OF CREDIT AGREEMENT

THIS FIRST MODIFICATION
OF CREDIT AGREEMENT (this “Modification”) is made as of the 15th day of
December, 2006, by and among:  (a)
KIMBALL HILL, INC., an Illinois corporation (the “Borrower”), (b) the Guarantors
party to the Credit Agreement (as hereinafter defined), (c) the several
financial institutions signatory hereto that are party to the Credit Agreement
(the “Lenders”), and (d) HARRIS N.A., as Administrative Agent for itself and
the Lenders (“Agent”).

RECITALS

WHEREAS, the
Agent, the Lenders, the Borrower, the Guarantors, and certain other agent and
lender parties are party to that certain Credit Agreement, dated December 21,
2005 (the “Credit Agreement”); and

WHEREAS, the
Agent, the Lenders, the Borrowers, and the Guarantors wish to amend and modify
the Credit Agreement as set forth in this Modification;

NOW, THEREFORE, in
consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

1.             Definitions.  All capitalized terms not otherwise defined
herein shall have the meanings ascribed thereto under the Credit Agreement.

2.             Section 5.1 Amendment.  Section 5.1 of the Credit Agreement is hereby
amended by adding the following defined terms:

“Global
Land” means all Real Property owned by any of the Borrower or
any Subsidiary for current or future development or for the future construction
of Housing Units, excluding any subdivided portions thereof upon which
construction of a Housing Unit has commenced beyond the foundation.

“Global
Land Value” means the sum of all costs incurred by the
Borrower or any Subsidiary with respect to the acquisition and development of
Global Land, excluding any marketing, corporate, general, or administrative
expenses.

“Interest
Incurred” means, for any period, the total interest paid or
accrued by the Borrower, the Wholly-owned Subsidiaries and the Special Project
Subsidiaries (including the interest component of any Capital Lease) as
calculated in accordance with GAAP, minus, to
the extent included in the foregoing amount, amortization of any financing fees
and costs.

 

3.             Section 8.22 Modification.  Section 8.22 of the Credit Agreement is
hereby amended by deleting the text thereof and inserting the following text in
lieu thereof:

(a)           Tangible Net Worth.  The Borrower shall, as of the end of each
fiscal quarter of the Borrower, maintain a Tangible Net Worth in an amount not
less than the sum of (i) $300,000,000.00 and (ii) 50% of the positive Net
Income as earned subsequent to September 30, 2006.

(b)           Leverage Ratio.  The Borrower shall not, at the end of any
fiscal quarter of the Borrower, permit the Leverage Ratio to exceed the ratios
set forth in the below table as corresponding to the fiscal quarters of the
Borrower specified therein:

	
  Fiscal Quarter Ending

  	
   

  	
  Maximum Leverage 

  Ratio

  
	
  December 31,
  2006

  	
   

  	
  2.00 to 1.00

  
	
  March 31, 2007

  	
   

  	
  2.00 to 1.00

  
	
  June 30, 2007
  through September 30, 2008

  	
   

  	
  1.75 to 1.00

  
	
  December 31,
  2008 and thereafter

  	
   

  	
  2.50 to 1.00

  

 

(c)           Builder  Leverage Ratio.  The
Borrower shall not, at the end of any fiscal quarter of the Borrower, permit
the Builder Leverage Ratio to exceed 1.50 to 1.00.

(d)           Interest Coverage Ratio.  The Borrower shall not, at the end of any
fiscal quarter of the Borrower, permit the ratio of EBITDA to Interest
Incurred, as calculated over the preceding four fiscal quarters of the
Borrower, to be less than the ratios set forth in the below table as
corresponding to the fiscal quarters of the Borrower specified therein:

	
  Fiscal Quarter Ending

  	
   

  	
  Minimum Interest 

  Coverage Ratio

  
	
  December 31,
  2006

  	
   

  	
  1.75 to 1.00

  
	
  March 31, 2007

  	
   

  	
  1.50 to 1.00

  
	
  June 30, 2007

  	
   

  	
  1.40 to 1.00

  
	
  September 30,
  2007

  	
   

  	
  1.35 to 1.00

  
	
  December 31,
  2007

  	
   

  	
  1.50 to 1.00

  
	
  March 31, 2008

  	
   

  	
  1.75 to 1.00

  
	
  June 30, 2008
  and thereafter

  	
   

  	
  2.25 to 1.00

  

 

 

(e)           Global Land Value to
Adjusted Tangible Net Worth Ratio. 
The Borrower shall not, at the end of any fiscal quarter of the
Borrower, permit the ratio of Global Land Value to Adjusted Tangible Net Worth
to be greater than 1.50 to 1.00.

4.             Ratification.  Except as modified hereby, the terms and
conditions of the Credit Agreement and the other Loan Documents shall remain in
full force and effect, and the Borrower and the Guarantors hereby ratify the
terms and conditions thereof.

5.             No Default or Event of
Default.  The Borrower and
the Guarantors reaffirm as of the date hereof, all of the covenants,
representations, and warranties contained in the Credit Agreement and the other
Loan Documents.  The Borrower and the
Guarantors further warrant and represent, as of the date hereof, the following:

(a)           The Credit Agreement and the Loan
Documents are binding and enforceable, except as enforceability may be limited
by bankruptcy, insolvency, fraudulent conveyance or similar laws affecting
creditors’ rights generally and general principles of equity (regardless of
whether the application of such principles is considered in a proceeding in
equity or at law);

(b)           There does not exist a Default or
Event of Default under the Credit Agreement or any of the Loan Documents; and

(c)           None of the Borrower or any Guarantor
has any claim, defense, right to set-off, or counterclaim against the obligations
evidenced or secured by the Credit Agreement or any of the Loan Documents or
against the Agent or the Lenders.

6.             Successors and Assigns.  This Modification shall be binding upon and
inure to the benefit of the Agent, the Lenders, the Borrower, the Guarantors
and their respective successors and assigns.

7.             Cross Reference.  All references in the Loan Documents to the
Credit Agreement shall hereafter include the modifications to the Credit
Agreement set forth herein.

8.             Time of the Essence.  Time is of the essence of this Modification.

9.             Counterparts.  This Modification may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which when
taken together shall constitute one and the same instrument.

[SIGNATURES ON
FOLLOWING PAGES]

 

IN
WITNESS WHEREOF, the undersigned have duly executed this Modification as of the
date first set forth above.

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  KIMBALL
  HILL, INC., an Illinois corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ David K. Hill

  	
   

  
	
   

  	
  Name:

  	
    David
  K. Hill

  	
   

  
	
   

  	
  Title:

  	
      Chairman
  & CEO

  	
   

  
						

 

 

 

	
  

  	
  GUARANTORS:

  
	
   

  
	
   

  	
  CACTUS HILLS, LLC

  
	
   

  	
  KIMBALL HILL HOMES AUSTIN 

  INVESTMENTS, L.L.C.

  
	
   

  	
  KIMBALL HILL HOMES AUSTIN 

  OPERATIONS, L.L.C.

  
	
   

  	
  KIMBALL HILL HOMES DALLAS 

  INVESTMENTS, L.L.C.

  
	
   

  	
  KIMBALL HILL HOMES DALLAS 

  OPERATIONS, L.L.C.

  
	
   

  	
  KIMBALL HILL HOMES HOUSTON 

  INVESTMENTS, L.L.C.

  
	
   

  	
  KIMBALL HILL HOMES HOUSTON 

  OPERATIONS, L.L.C.

  
	
   

  	
  KIMBALL HILL TEXAS INVESTMENT 

  COMPANY, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
  Chairman and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EAST LAKE PARK, INC.

  
	
   

  	
  KIMBALL HILL STATEWAY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  KIMBALL HILL FAR EAST DETROIT, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
  Chairman and CEO

  
					

 

 

 

	
   

  	
   

  	
  KH FINANCIAL HOLDING COMPANY

  
	
   

  	
   

  	
  KHH
  TEXAS TRADING COMPANY L.P.

  
	
   

  	
   

  	
  KIMBALL
  HILL HOMES AUSTIN, L.P.

  
	
   

  	
   

  	
  KIMBALL
  HILL HOMES CALIFORNIA, INC.

  
	
   

  	
   

  	
  KIMBALL
  HILL HOMES DALLAS, L.P.

  
	
   

  	
   

  	
  KIMBALL
  HILL HOMES FLORIDA, INC.

  
	
   

  	
   

  	
  KIMBALL
  HILL HOMES HOUSTON, L.P.

  
	
   

  	
   

  	
  KIMBALL
  HILL HOMES ILLINOIS, LLC

  
	
   

  	
   

  	
  KIMBALL
  HILL HOMES NEVADA, INC.

  
	
   

  	
   

  	
  KIMBALL
  HILL HOMES OHIO, INC.

  
	
   

  	
   

  	
  KIMBALL
  HILL HOMES OREGON, INC.

  
	
   

  	
   

  	
  KIMBALL
  HILL HOMES REALTY FLORIDA, 

  INC.

  
	
   

  	
   

  	
  KIMBALL
  HILL HOMES SAN ANTONIO, L.P.

  
	
   

  	
   

  	
  KIMBALL
  HILL HOMES TEXAS, INC.

  
	
   

  	
   

  	
  KIMBALL
  HILL HOMES WASHINGTON, INC.

  
	
   

  	
   

  	
  KIMBALL
  HILL HOMES WISCONSIN, 

  INC.

  
	
   

  	
   

  	
  NATIONAL
  CREDIT AND GUARANTY 

  CORPORATION

  
	
   

  	
   

  	
  RIVER
  OAKS REALTY, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
     /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
   

  	
  Chairman and CEO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  18TH
  AND PEORIA, LLC

  

 

	
  

  	
  By:

  	
  Kimball Hill Suburban Centers,

  L.L.C., its manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Kimball Hill, Inc., its

  manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ David K. Hill

  
	
   

  	
   

  	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
   

  	
   

  	
  Chairman and CEO

  

 

 

 

	
   

  	
  KIMBALL HILL SUBURBAN CENTERS, 

  L.L.C.

  
	
   

  	
  KIMBALL HILL URBAN CENTERS, L.L.C.

  
	
   

  	
  THE GLENS AT WESTLAKE, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Kimball Hill, Inc., its manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
   

  	
  Chairman and CEO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  KIMBALL HILL URBAN CENTERS 

  CHICAGO ONE, L.L.C.

  
	
   

  	
  KIMBALL HILL URBAN CENTERS 

  CHICAGO TWO, L.L.C.

  
	
   

  	
  KIMBALL HILL URBAN CENTERS SPECIAL 

  PURPOSES, L.L.C.

  

 

	
  

  	
   

  	
  By:

  	
  Kimball Hill Urban Centers, L.L.C.,

  its manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Kimball Hill, Inc., its 

  manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
   

  	
   

  	
  Chairman and CEO

  

 

 

 

	
   

  	
  BRIDLE RIDGE LIMITED PARTNERSHIP

  
	
   

  	
  PARKVIEW LIMITED PARTNERSHIP

  
	
   

  	
  RIVER POINTE LIMITED PARTNERSHIP

  
	
   

  	
  SONATA AT MORADA RANCH LIMITED 

  PARTNERSHIP

  
	
   

  	
  WINDMILL PARK LIMITED PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Kimball Hill Homes California, Inc.,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
   

  	
  Chairman and CEO

  

 

 

 

	
   

  	
  KIMBALL HILL BELLEVUE RANCH, LLC

  
	
   

  	
  KIMBALL
  HILL REFLECTIONS, LLC

  
	
   

  	
  KIMBALL
  HILL SHELDON LAKES, LLC

  
	
   

  	
  KIMBALL
  HILL VILLAGES, LLC

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Kimball Hill Homes California, Inc., 

  its manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
   

  	
  Chairman and CEO

  

 

 

	
   

  	
  KIMBALL HILL CHADWICK FARMS 

  LIMITED PARTNERSHIP

  
	
   

  	
  KIMBALL
  WEST FRISCO LIMITED

  PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Kimball Hill Homes Dallas,

  L.P., its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
   

  	
  Chairman and CEO

  

 

 

	
   

  	
  KIMBALL HILL CALUSA PALMS LIMITED 

  PARTNERSHIP

  
	
   

  	
  KIMBALL
  HILL MARBELLA ESTATES

  LIMITED PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Kimball Hill Homes Florida, Inc., its 

  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
   

  	
  Chairman and CEO

  

 

 

 

	
  

  	
  INDIAN
  TRAILS LIMITED PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Kimball Hill Homes Houston, L.P., 

  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
   

  	
  Chairman and CEO

  

 

	
  

  	
  KIMBALL
  HILL TX PROPERTIES, LLC

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Kimball Hill Homes Houston, L.P., 

  its manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
      /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
   

  	
  Chairman and CEO

  

 

	
  

  	
  ASTOR
  PLACE LIMITED PARTNERSHIP

  
	
   

  	
  BOLINGBROOK
  LIMITED PARTNERSHIP

  
	
   

  	
  EDGEWATER
  LIMITED PARTNERSHIP

  
	
   

  	
  HUNTINGTON
  CHASE LIMITED 

  PARTNERSHIP

  
	
   

  	
  LEGEND
  LAKES LIMITED PARTNERSHIP

  
	
   

  	
  THE
  GLEN TOWNHOMES LIMITED 

  PARTNERSHIP

  
	
   

  	
  THE
  HAMILTON PLACE PARTNERSHIP

  
	
   

  	
  WATERFORD
  LIMITED PARTNERSHIP

  
	
   

  	
  WHISPERING
  MEADOW LIMITED 

  PARTNERSHIP

  
	
   

  	
  WHITE
  OAK LIMITED PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Kimball Hill Homes Illinois, LLC, 

  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
     /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
   

  	
  Chairman and CEO

  

 

 

 

	
  

  	
  KH INGHAM PARK SOUTH, LLC

  	 

	
   

  	
  KH SRAV II, LLC

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  Kimball Hill Homes Illinois, LLC,

  its manager

  	 

	
   

  	
   

  	 

	
   

  	
   

  	
  By:

  	
   

  	
  /s/ David K. Hill

  	
   

  	 

	
   

  	
   

  	
  David K. Hill

  	 

	
   

  	
   

  	
  Chairman and CEO

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  

  	
  KIMBALL HILL CENTENNIAL HEIGHTS

  LIMITED PARTNERSHIP

  
	
   

  	
  KIMBALL HILL HEATHERS/CAPAROLA 

  LIMITED PARTNERSHIP

  
	
   

  	
  KIMBALL MOUNTAIN FIRST LIMITED 

  PARTNERSHIP

  
	
   

  	
   

  
	
  

  	
  By:

  	
  Kimball Hill Homes Nevada, Inc., its

  general partner

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
   

  	
  By:

  	
   

  	
  /s/ David K. Hill

  	
   

  	 

	
   

  	
   

  	
  David K. Hill

  	 

	
   

  	
   

  	
  Chairman and CEO

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  

  	
  KIMBALL COVE LIMITED PARTNERSHIP

  	 

	
   

  	
  KIMBALL HILL LYNDEN PARK II LIMITED

  PARTNERSHIP

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  Kimball Hill Homes Texas, Inc., its

  general partner

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
   

  	
  By:

  	
   

  	
  /s/ David K. Hill

  	
   

  	 

	
   

  	
   

  	
  David K. Hill

  	 

	
   

  	
   

  	
  Chairman and CEO

  	 

								

 

 

 

	
  

  	
  RIVER OAKS HOMES, LLP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Texas, Inc.,

  its manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
  Chairman and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  

  	
  GABLES AT HIDDENBROOK LIMITED

  PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Washington,

  Inc., its general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
  Chairman and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  

  	
  PARK SHORE, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Wisconsin, Inc.,

  its manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
  Chairman and CEO

  

 

 

 

	
  

  	
  HARRIS N.A., as Administrative
  Agent, L/C Issuer,

  and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Scott W. Morris

  	
   

  
	
   

  	
  Name:

  	
  Scott W. Morris

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Vice President

  	
   

  
						

 

 

 

	
  

  	
  BANK OF AMERICA, N.A., as a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Patricia A. Provenzano

  	
   

  
	
   

  	
  Name: 

  	
   

  	
  Patricia A. Provenzano

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  	
   

  
							

 

 

 

	
  

  	
  KEYBANK NATIONAL ASSOCIATION, as
  a 

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Kevin DeLozier

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Kevin DeLozier

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  	
   

  
							

 

 

 

	
  

  	
  WACHOVIA BANK, NATIONAL 

  ASSOCIATION, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Maurice M. Ryan

  	
   

  
	
   

  	
  Name: 

  	
   

  	
  Maurice M. Ryan

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Vice President

  	
   

  
							

 

 

 

	
  

  	
  CHARTER ONE BANK, N.A., as a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Jason K. Welch

  	
   

  
	
   

  	
  Name: 

  	
   

  	
  Jason K. Welch

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Vice President

  	
   

  
							

 

 

 

	
  

  	
  FIRST BANK, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ James C. Brennan

  	
   

  
	
   

  	
  Name: 

  	
   

  	
  James C. Brennan

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Vice President

  	
   

  
							

 

 

 

	
  

  	
  LaSALLE BANK, NATIONAL ASSOCIATION,
  as

  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Nathan Weyer

  	
   

  
	
   

  	
  Name: 

  	
   

  	
  Nathan Weyer

  	
   

  
	
   

  	
  Title:

  	
   

  	
  First Vice President

  	
   

  
							

 

 

 

	
  

  	
  FIFTH THIRD BANK, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Thomas W. O’Connell

  	
   

  
	
   

  	
  Name: 

  	
   

  	
  Thomas W. O’Connell

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Assistant Vice President

  	
   

  
							

 

 

	
  

  	
  ASSOCIATED BANK NATIONAL

  ASSOCIATION, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Robert J. Burda

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Robert J. Burda

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Vice President

  	
   

  
							

 

 

 

	
  

  	
  NATIONAL CITY BANK, as a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Gina Fridberg

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Gina Fridberg

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Assistant Vice President

  	
   

  
							

 

 

 

	
  

  	
  CITIBANK, N.A., as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Glen R. Bell

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Glen R. Bell

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Vice President

  	
   

  
							

 

 

 

	
  

  	
  FRANKLIN BANK, SSB, as a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Sherry K. Day

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Sherry K. Day

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  	
   

  
							

 

 

 

	
  

  	
  JPMORGAN CHASE BANK, N.A., as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Elizabeth Ritenour

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Elizabeth Ritenour

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Vice President

  	
   

  
							

 

 

 

	
  

  	
  MB FINANCIAL BANK, N.A., Successor in

  Interest to OAK BROOK BANK, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Christopher Hutter

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Christopher Hutter

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Vice President

  	
   

  
							

 

 

 

	
  

  	
  BANK OF THE WEST, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Lynn Foster

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Lynn Foster

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  	
   

  
							

 

 

 

	
  

  	
  COMERICA BANK, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Charles Weddell

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Charles Weddell

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Vice President

  	
   

  
							

 

 

 

	
  

  	
  COMPASS BANK, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Johanna Duke Paley

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Johanna Duke Paley

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Senior Vice PresidentExhibit
10.1

FORM
OF

SECURITIES
PURCHASE AGREEMENT

Dated
as of December 20, 2006

by
and among

FORCE
PROTECTION, INC.

and

THE
PURCHASERS LISTED ON EXHIBIT A

 

TABLE
OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
  Section

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  Closing

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Purchaser’s Representations and Warranties

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Company Representations and Warranties

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Regulation D Offering

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Conditions

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Survival of Representations, Warranties and
  Agreements

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Covenants of the Company

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Covenants of the Company and Purchaser Regarding
  Indemnification.

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  Registration Rights

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  Miscellaneous.

  	
   

  	
  18

  

 

 

SECURITIES
PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”),
dated as of December 20, 2006, by and among Force Protection, Inc., a Nevada
corporation (the “Company”), and
the purchasers identified on the signature page hereto (each a “Purchaser” and if more than one,
collectively “Purchasers”).

WHEREAS, the Company and the Purchasers are executing and delivering this
Agreement in reliance upon an exemption from securities registration afforded
by the provisions of Section 4(2) and/or Regulation D (“Regulation D”) as promulgated by the United
States Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder, the “1933 Act”); and

WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Purchasers, as
provided herein, and the Purchasers, in the aggregate, shall purchase up to
thirteen million (13,000,000) shares (the “Securities”)
of the Company’s common stock, par value $0.001 (the “Common Stock”) for an aggregate purchase
price of up to one hundred fifty-two million seven hundred fifty thousand
dollars ($152,750,000) (the “Purchase Price”).  The price per share of Common Stock will
equal $11.75 (the “Per Share Price”).

NOW, THEREFORE, in consideration of the mutual covenants
and other agreements contained in this Agreement each of the Purchasers,
severally and not jointly, and the Company hereby agree as follows:

1.             Closing.  Subject to the satisfaction or waiver of the
terms and conditions of this Agreement, on the Closing Date, each Purchaser
shall purchase and the Company shall sell to each Purchaser that number of
Securities indicated on such Purchaser’s signature page hereto.  The product of (a) the aggregate number of
Securities to be purchased by the Purchasers on the Closing Date and (ii) the
Per Share Price shall be equal to the Purchase Price.  The consummation of the transactions
contemplated herein shall take place at the offices of Trombly Business Law,
1320 Centre Street, Suite 202, Newton, Massachusetts 02459 within three (3)
business days of the date hereof (the “Closing”).  As used in this Agreement, “Closing Date” means the date of the Closing.  The following deliveries shall be made at the
Closing:

(a)
          Deliveries by the Purchasers.  At the Closing, each Purchaser shall deliver
to the Company the Purchase Price by wire transfer of immediately available
funds to an account designated by the Company as set forth on Schedule I hereto, which funds will be delivered to the
Company in consideration of the Securities issued at the Closing.

(b)           Deliveries by the Company.  At the Closing, the Company shall deliver to
each Purchaser the Securities by physical delivery of the certificates
representing the Securities purchased by such Purchaser to the address set
forth on Schedule
II hereto.

2.             Purchaser’s
Representations and Warranties.  Each
Purchaser hereby represents and warrants to and agrees with the Company only as
to such Purchaser that:

(a)           Organization and
Standing of the Purchaser.  If such
Purchaser is not a natural person, such Purchaser is a corporation, partnership
or other entity duly incorporated or organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization and has
the requisite corporate power to own its assets and to carry on its business.

(b)           Authorization and
Power.  Each Purchaser has the
requisite power and authority to enter into and perform this Agreement and to
purchase the Securities being sold to it hereunder.  If such Purchaser is not a natural person,
the execution, delivery and performance of this Agreement by such Purchaser and
the consummation by it of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate or partnership action, and no
further consent or authorization of such Purchaser or its Board of Directors,
stockholders, partners, members, as the case may be, is required.  This Agreement has been duly authorized,
executed and delivered by such Purchaser and constitutes, or shall constitute
when executed and

 1
 

 

delivered,
a valid and binding obligation of the Purchaser enforceable against the
Purchaser in accordance with the terms thereof subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’ rights generally and
to general principles of equity.

(c)           No Conflicts.  The execution, delivery and performance of
this Agreement and the consummation by such Purchaser of the transactions
contemplated hereby or relating hereto do not and will not (i) if such
Purchaser is not a natural person, result in a violation of such Purchaser’s
charter documents or bylaws or other organizational documents or (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of any agreement,
indenture or instrument or obligation to which such Purchaser is a party or by
which its properties or assets are bound, or result in a violation of any law,
rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to such Purchaser or its properties (except for
such conflicts, defaults and violations as would not, individually or in the
aggregate, have a material adverse effect on such Purchaser).  Such Purchaser is not required to obtain any
consent, authorization or order of, or make any filing or registration with,
any court or governmental agency in order for it to execute, deliver or perform
any of its obligations under this Agreement or to purchase the Securities in
accordance with the terms hereof, provided that for purposes of the
representation made in this sentence, such Purchaser is assuming and relying
upon the accuracy of the relevant representations and agreements of the Company
herein.

(d)           Receipt of Information.  The Purchaser has had an opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the sale of the Securities and the business, properties,
prospects and financial condition of the Company and to obtain any additional
information requested and has received and considered all information it deems
relevant to make an informed decision to purchase the Securities.  Neither such inquiries nor any other
investigation conducted by or on behalf of such Purchaser or its
representatives or counsel shall modify, amend or affect such Purchaser’s right
to rely on the truth, accuracy and completeness of such information and the
Company’s representations and warranties contained in this Agreement.

(e)           Information on
Purchaser.  The Purchaser is an “accredited
investor”, as such term is defined in Regulation D promulgated by the
Commission under the 1933 Act, is experienced in investments and business
matters, has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in private placements in
the past and, with its representatives, has such knowledge and experience in
financial, tax and other business matters as to enable the Purchaser to utilize
the information made available by the Company to evaluate the merits and risks
of and to make an informed investment decision with respect to the proposed
purchase of the Securities, which represents a speculative investment.  The Purchaser has the authority and is duly
and legally qualified to purchase and own the Securities.  The Purchaser is able to bear the risk of
such investment for an indefinite period and to afford a complete loss
thereof.  The information set forth on
the signature page hereto regarding the Purchaser is accurate.

(f)            Purchase of
Securities.  On the Closing Date, the
Purchaser will purchase the Securities for its own account for investment only
and not with a view toward, or for resale in connection with, the public sale
or any distribution thereof, but Purchaser does not agree to hold the
Securities for any minimum amount of time.

(g)           Compliance with
1933 Act.  The Purchaser understands
and agrees that the Securities have not been registered under the 1933 Act or
any applicable state securities laws, by reason of their issuance in a
transaction that does not require registration under the 1933 Act (based in
part on the accuracy of the representations and warranties of Purchaser
contained herein), and that such Securities must be held indefinitely unless a
subsequent disposition is registered under the 1933 Act or any applicable state
securities laws or is exempt from such registration.  Notwithstanding anything to the contrary
contained in this Agreement, such Purchaser may transfer (without restriction
and without the need for an opinion of counsel) the Securities to its
Affiliates (as defined below) provided that each such Affiliate is an “accredited
investor” under Regulation D and

 2
 

 

such
Affiliate agrees to be bound by the terms and conditions of this
Agreement.  For the purposes of this
Agreement, an “Affiliate” of any person or entity means any other
person or entity directly or indirectly controlling, controlled by or under
direct or indirect common control with such person or entity.  Affiliate when employed in connection with
the Company includes Subsidiary of the Company. 
For purposes of this definition, “control” means the power to direct the
management and policies of such person or firm, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise.  Furthermore, the Company acknowledges and
agrees that Purchaser may from time to time pledge, in accordance with the
requirements of the 1933 Act, pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or all of the
Purchased Securities to a financial institution that is an “accredited investor”
under Regulation D and, if required under the terms of such arrangement, in
accordance with applicable law, including, but not limited to, the 1933 Act,
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, except as provided in the last sentence of this paragraph
(g).  Further, no notice shall be
required of such pledge.  At the expense
of the Purchaser who shall have pledged or otherwise granted a security
interest in its Securities, 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,
the preparation and filing of any required prospectus supplement under Rule
424(b)(3) under the 1933 Act or other applicable provision of the 1933 Act to
appropriately amend the list of selling stockholders thereunder; provided,
however, that, prior to any such amendment of any prospectus supplement, the
Company may, at its option, require an opinion of counsel reasonably acceptable
to the Company that the registration of such pledge or transfer was not
required under the 1933 Act.

(h)           Legend.  The Securities shall bear the following or
similar legend:

“THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THESE SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO FORCE PROTECTION, INC. THAT
SUCH REGISTRATION IS NOT REQUIRED.”

(i)            Communication of
Offer.  The offer to sell the
Securities was directly communicated to the Purchaser by the Company.  At no time was the Purchaser presented with
or solicited by any leaflet, newspaper or magazine article, radio or television
advertisement, or any other form of general advertising or solicited or invited
to attend a promotional meeting otherwise than in connection and concurrently
with such communicated offer.

(j)            No Governmental
Review.  Each Purchaser understands
that no United States federal or state agency or any other governmental or
state agency has passed on or made recommendations or endorsement of the
Securities or the suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

(k)           Correctness of
Representations.  Each Purchaser
represents as to such Purchaser that the foregoing representations and
warranties are true and correct as of the date hereof and, unless a Purchaser
otherwise notifies the Company prior to the Closing Date, shall be true and
correct as of the Closing Date.

(l)            Restrictions on
Short Sales.  Neither the Purchaser
nor any Affiliate of such Purchaser which (i) had knowledge of the transactions
contemplated hereby, (ii) has or shares discretion relating to such Purchaser’s
investments or trading or information concerning such Purchaser’s investments,
including in respect of the Securities, or (iii) is subject to such Purchaser’s
review or input concerning such Affiliate’s investments or trading, has or
will, directly or indirectly, during the period beginning on the date on which
C.E.

 3
 

 

Unterberg,
Towbin, LLC (“CEUT”), financial advisors to the Company, first
contacted such Purchaser regarding the transactions contemplated by this
Agreement until the “Effective Date” (as defined in Section 7(b) hereof) ,
engage in (i) any “short sales” (as such term is defined in Rule 3b-3
promulgated under the 1934 Act) of the Common Stock, including, without
limitation, the maintaining of any short position with respect to, establishing
or maintaining a “put equivalent position” (within the meaning of Rule 16a-1(h)
under the 1934 Act) with respect to, entering into any swap, derivative
transaction or other arrangement (whether any such transaction is to be settled
by delivery of shares of Common Stock, other securities, cash or other
consideration) that transfers to another, in whole or in part, any economic
consequences or ownership, or otherwise dispose of, any of the Securities by
the Purchaser or (ii) any hedging transaction which establishes a net short
position with respect to the Shares (clauses (i) and (ii) together, a “Short
Sale”); except for (A) Short Sales by the Purchaser or Affiliate of such
Purchaser which was, prior to the date on which such Purchaser was first
contacted by CEUT regarding the transactions contemplated by this Agreement, a
market maker for the Common Stock, provided that such Short Sales are in the
ordinary course of business of such Purchaser or Affiliate of such Purchaser
and are in compliance with the 1933 Act, the rules and regulations of the 1933
Act and such other securities laws as may be applicable, (B) Short Sales by the
Purchaser or an Affiliate of such Purchaser which by virtue of the procedures
of such Purchaser are made without knowledge of the transactions contemplated
by this Agreement or (C) Short Sales by the Purchaser or an Affiliate of such
Purchaser to the extent that such Purchaser or Affiliate of such Purchaser is
acting in the capacity of a broker-dealer executing unsolicited third-party
transactions.

3.             Company
Representations and Warranties.  The
Company represents and warrants to and agrees with each Purchaser that except
as set forth in the Reports and as otherwise qualified in the Transaction
Documents:

(a)           Due Incorporation.  The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power to own its properties and
to carry on its business is disclosed in the Reports.  The Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a Material Adverse Effect.  Each Subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation, with corporate power and authority
to own its properties and conduct its business as described in the Reports, and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other jurisdiction in
which it owns or leases properties or conducts any business so as to require
such qualification, except for such jurisdictions wherein the failure to be so
qualified and in good standing would not individually or in the aggregate have
a Material Adverse Effect.  All
Subsidiaries and their respective jurisdictions of incorporation are identified
on Schedule 3(a) hereto. 
Except as disclosed in Schedule
3(a) hereto, all of the
outstanding capital stock or other voting securities of each subsidiary is
owned by the Company, directly or indirectly, free and clear of any lien and
free of any other limitation or restriction (including any restriction on the
right to vote, sell or otherwise dispose of such capital stock or other voting
securities).  For purpose of this
Agreement, a “Material
Adverse Effect” shall mean a
material adverse effect on the financial condition, results of operations,
properties or business of the Company and its Subsidiaries taken individually,
or in the aggregate, as a whole.  For
purposes of this Agreement, “Subsidiary” means, with respect to any entity at any
date, any corporation, limited or general partnership, limited liability
company, trust, estate, association, joint venture or other business entity) of
which more than 50% of (i) the outstanding capital stock having (in the absence
of contingencies) ordinary voting power to elect a majority of the board of
directors or other managing body of such entity, (ii) in the case of a
partnership or limited liability company, the interest in the capital or profits
of such partnership or limited liability company or (iii) in the case of a
trust, estate, association, joint venture or other entity, the beneficial
interest in such trust, estate, association or other entity business is, at the
time of determination, owned or controlled directly or indirectly through one
or more intermediaries, by such entity.

 4
 

 

(b)           Outstanding Stock.  All issued and outstanding shares of capital
stock of the Company and each of the Subsidiaries have been duly authorized and
validly issued and are fully paid and nonassessable.

(c)           Authority;
Enforceability.  The Company has the
requisite power and authority to enter into and perform this Agreement and any
other agreements delivered together with this Agreement or in connection
herewith (collectively, the “Transaction
Documents”) and to perform
its obligations hereunder.  The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action, and no further
consent or authorization of the Company’s Board of Directors or the Company’s
stockholders is required.  The
Transaction Documents have been duly authorized, executed and delivered by the
Company and constitute valid and binding obligations of the Company enforceable
against the Company in accordance with their terms subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’ rights generally and
to general principles of equity.

(d)           Additional
Issuances.  There are no outstanding
agreements or preemptive or similar rights affecting the Common Stock or other
capital stock of the Company and no outstanding rights, warrants or options to
acquire, securities or instruments convertible into or exchangeable for, or
agreements or understandings with respect to the sale or issuance of any shares
of Common Stock or other capital stock of the Company or other equity interest
in any of the Subsidiaries of the Company except as described on Schedule 3(d). 
There are no outstanding obligations of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any outstanding securities of the
Company or any Subsidiary.

(e)           Consents.  No consent, approval, authorization , order,
registration, filing or qualification of or with the OTC Bulletin Board (the “Bulletin Board”) or any court, governmental, regulatory or
self-regulatory agency or body or arbitrator having jurisdiction over the
Company is required for the valid authorization, execution, delivery and
performance by the Company of the Transaction Documents and compliance and
performance by the Company of its obligations under the Transaction Documents,
including, without limitation, the issuance and sale of the Securities, except
for such consents, approvals, authorizations, registrations, filings or
qualifications as may be required under the Securities Act or state securities
or “blue sky” laws or have been or will be obtained or made in connection with
the listing of the Securities on the Nasdaq Capital Market.

(f)            No Violation or
Conflict.  Assuming the
representations and warranties of the Purchasers in Section 4 are true and
correct, neither the issuance and sale of the Securities nor the performance of
the Company’s obligations under this Agreement and all other agreements entered
into by the Company relating thereto by the Company will violate, conflict
with, result in a breach of, or constitute a default (or an event which with
the giving of notice or the lapse of time or both would be reasonably likely to
constitute a default) under (A) the articles or certificate of incorporation,
charter or bylaws of the Company, (B) to the Company’s knowledge, any decree,
judgment, order, law, treaty, rule, regulation or determination applicable to
the Company of any court, governmental agency or body, or arbitrator having
jurisdiction over the Company or any of its subsidiaries or over the properties
or assets of the Company, (C) the terms of any bond, debenture, note or any
other evidence of indebtedness, or any agreement, stock option or other similar
plan, indenture, lease, mortgage, deed of trust or other instrument to which
the Company or subsidiaries is a party, by which the Company or subsidiaries is
bound, or to which any of the properties of the Company or any of its
Affiliates or subsidiaries is subject, or (D) the terms of any “lock-up” or
similar provision of any underwriting or similar agreement to which the
Company, or any of its Affiliates or Subsidiaries is a party except in the case
of clauses (B) and (C) above the violation, conflict, breach, or default of
which would not have a Material Adverse Effect on the Company.

(g)           The Securities.  The Securities upon issuance:

are, or will be, free and clear of any security interests, liens,
claims or other encumbrances, subject to restrictions upon transfer under the
1933 Act and any applicable state securities laws;

 5
 

 

when issued as described in this Agreement, will be duly and validly
issued, fully paid and nonassessable and, if registered pursuant to the 1933
Act and resold pursuant to an effective registration statement, will be free
trading and unrestricted;

will not have been issued or sold in violation of any preemptive or
other similar rights of the holders of any securities of the Company;

will not subject the Purchasers thereof to personal liability by reason
of being holders of the Securities; and

will have been issued in reliance upon an exemption from the
registration requirements of and will not result in a violation of Section 5
under the 1933 Act, provided that Purchaser’s representations herein are true
and accurate.

(h)           Litigation.  Other than as described in the Reports, there
is no pending or, to the best knowledge of the Company, threatened action,
suit, proceeding or investigation before any court, governmental agency or
body, or arbitrator having jurisdiction over the Company, or any of its
Affiliates that would affect the execution by the Company or the performance by
the Company of its obligations under the Transaction Documents.  Except as disclosed in the Reports, there is
no pending or, to the best knowledge of the Company, basis for or threatened
action, suit, proceeding or investigation before any court, governmental agency
or body, or arbitrator having jurisdiction over the Company, or any of its
Affiliates which, if determined adversely to the Company, would have a Material
Adverse Effect.

(i)            Reporting
Company.  The Company is a
publicly-held company subject to reporting obligations pursuant to Section 13
of the Securities Exchange Act of 1934, as amended (together with the rules and
regulations promulgated thereunder, the “1934 Act”) and has a
class of common shares registered pursuant to Section 12(g) of the 1934
Act.  The Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 2005, as amended (the “Form 10-K”), its quarterly report on Form 10-Qs for
the fiscal quarters ended March 31, 2006, June 30, 2006 and September 30, 2006
(the “Forms 10-Q”), any Current Report on Form 8-K for events
occurring since December 31, 2005 (“Form
8-Ks”) and the Company’s
most recent definitive proxy statement (the “Proxy Statement”)
filed by the Company with the Commission (the Form 10-K, the Forms 10-Q, the
Form 8-Ks and the Proxy Statement are collectively referred to herein as the “Reports”) are publicly available on the Commission’s
Electronic Data Gathering, Analysis and Retrieval system.  Pursuant to the provisions of the 1934 Act
and the rules promulgated thereunder, the Company has timely filed all reports
and other materials required to be filed thereunder with the Commission during
the preceding twenty-four months.  Each
of the Reports, as of the respective dates thereof (or, if amended or
superseded by a filing or submission, as the case may be, prior to the Closing
Date, then on the date of such filing or submission, as the case may be), (i)
did not contain any untrue statement of a material fact nor omit to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading, except as
otherwise disclosed in the Company’s Current Report on Form 8-K dated December
15, 2006 and (ii) complied in all material respects with the requirements of
the 1934 Act and the rules and regulations of the Commission promulgated
thereunder applicable to such Report, except as otherwise disclosed in the
Company’s Current Report on Form 8-K dated December 15, 2006; and neither the
Company nor any of its officers has received notice from any governmental
entity questioning or challenging the accuracy, completeness, form or manner of
filing or submission of such Report.

(j)            No Market
Manipulation.  The Company has not
taken, and will not take, directly or indirectly, any action designed to, or
that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Securities or affect the price at which the Securities may be issued or
resold.

 6
 

 

(k)           Information
Concerning Company.

(i)            The consolidated financial
statements of the Company included in the Reports (i) comply in all material
respects with the rules and regulations of the Commission with respect thereto
as were in effect at the time of filing, except as otherwise disclosed in the
Company’s Current Report on Form 8-K dated December 15, 2006 and (ii) present
fairly, in accordance with United States generally accepted accounting
principles (“GAAP”), consistently applied, the financial
position of the Company as of the dates indicated therein, and the results of
its operations and cash flows for the periods therein specified, subject, in
the case of unaudited financial statements for interim periods, to normal,
immaterial year-end audit adjustments, except as otherwise disclosed in the
Company’s Current Report on Form 8-K dated December 15, 2006.  Since the last day of the fiscal year of the
most recent audited financial statements included in the Reports (“Latest Financial Date”), and except as disclosed in the Reports or
the Schedules hereto, there has been no Material Adverse Effect.

(ii)           The Purchasers acknowledge that the
Company will restate its financial results for the years 2003 and 2004 to
include, without limitation, additional general and administrative compensation
expenses related to equity issuances made during 2003 and 2004.  The Company does not believe that such restatements
will materially impact its 2006 financial results.

(iii)          The Company and its Subsidiaries have
good and marketable title to all the real property and owns all other
properties and assets, reflected as owned in the financial statements included
in the Reports, subject to no lien, mortgage, pledge, charge or encumbrance of
any kind except those, if any, reflected in such financial statements or which
are not material to the Company and its Subsidiaries taken as a whole.  The Company and its Subsidiaries hold their
respective leased real and personal properties under valid and binding leases,
except where the failure to do so would not reasonably be expected to
individually or in the aggregate have a Material Adverse Effect.

(l)            Stop Transfer.  The Securities, when issued, will be restricted
securities.  The Company will not issue
any stop transfer order or other order impeding the sale, resale or delivery of
any of the Securities, except as may be required by any applicable federal or
state securities laws and unless contemporaneous notice of such instruction is
given to the Purchaser.

(m)          Defaults.  The Company is not in violation of its
articles of incorporation or bylaws.  The
Company is (i) not in default under or in violation of any other material
agreement or instrument to which it is a party or by which it or any of its
properties are bound or affected, which default or violation would have a
Material Adverse Effect on the Company, (ii) not in default with respect to any
order of any court, arbitrator or governmental body or subject to or party to
any order of any court or governmental authority arising out of any action,
suit or proceeding under any statute or other law respecting antitrust,
monopoly, restraint of trade, unfair competition or similar matters, or (iii)
to its knowledge not in violation of any statute, rule or regulation of any
governmental authority which violation would have a Material Adverse Effect on
the Company.  The conduct of the business
of the Company and each of its Subsidiaries is in compliance in all respects
with applicable laws, rules and regulations of governmental and regulatory
bodies, except where the failure to be in compliance would not individually or
in the aggregate have a Material Adverse Effect.

(n)           No Integrated
Offering.  Neither the Company, nor
any of its Affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited
any offers to buy any security under circumstances that would cause the offer
of the Securities pursuant to this Agreement to be integrated with prior
offerings by the Company for purposes of the 1933 Act or any applicable
stockholder approval provisions, including, without limitation, under the rules
and regulations of the Bulletin Board, except for such offers or sales which
would not, after such integration, cause the transactions contemplated herein
to violate the 1933 Act or any applicable stockholder approval provisions.  Nor will the Company or any of its Affiliates
or subsidiaries take any action or steps that would cause the offer or issuance
of the Securities to be integrated with other offerings.  The Company will not conduct any offering
other than the transactions contemplated hereby that will be integrated with
the offer or issuance of the Securities, except for such offerings

 7
 

 

which
would not, after such integration, cause the transactions contemplated herein
to violate the 1933 Act or any applicable stockholder approval provisions.

(o)           No General
Solicitation.  Neither the Company,
nor any of its Affiliates, nor to its knowledge, any person acting on its or
their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the 1933 Act) in
connection with the offer or sale of the Securities.

(p)           Listing.  The Common Stock is quoted on the Bulletin
Board under the symbol FRPT.  The Company
has not received any oral or written notice that the Common Stock is not
eligible nor will become ineligible for quotation on the Bulletin Board nor that
the Common Stock does not meet all requirements for the continuation of such
quotation.  The Company satisfies all the
requirements for the continued quotation of the Common Stock on the Bulletin
Board.

(q)           No Undisclosed
Liabilities.  The Company has no
liabilities or obligations which are material, individually or in the
aggregate, which are not disclosed in the Reports, other than those incurred in
the ordinary course of the Company’s businesses since December 31, 2005 and
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect other than as set forth in Schedule 3(q).

(r)            No Undisclosed
Events or Circumstances.  Since
December 31, 2005, no event or circumstance has occurred or exists with respect
to the Company or its businesses, properties, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which
has not been so publicly announced or disclosed in the Reports.

(s)           Capitalization.  The authorized and outstanding capital stock
of the Company and Subsidiaries as of the date of this Agreement and the
Closing Date (not including the Securities) are set forth on Schedule 3(d).  Except as set forth on Schedule 3(d), there are no options, warrants, or rights
to subscribe to, securities, rights or obligations convertible into or
exercisable or exchangeable for or giving any right to subscribe for any shares
of capital stock of the Company or any of its Subsidiaries.  All of the outstanding shares of Common Stock
of the Company have been duly and validly authorized and issued and are fully
paid and nonassessable.

(t)            Internal
Accounting Controls.  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.

(u)           Dilution.  The Company’s executive officers and
directors understand the nature of the Securities being sold hereby and
recognize that the issuance of the Securities will have a potential dilutive
effect on the equity holdings of other holders of the Company’s equity or
rights to receive equity of the Company. 
The board of directors of the Company has unanimously concluded, in its
good faith business judgment that the issuance of the Securities is in the best
interests of the Company.

(v)           No Disagreements
with Accountants and Lawyers.  There
are no disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the Company and the accountants and lawyers
formerly or presently employed by the Company, including but not limited to
disputes or conflicts over payment owed to such accountants and lawyers.

 8
 

 

(w)          DTC
Status/Transfer Agent.  The Company’s
transfer agent is eligible to participate in and the Common Stock is eligible
for transfer pursuant to the Depository Trust Company Automated Securities
Transfer Programs.  The name, address,
telephone number, fax number, contact person and email address of the Company
transfer agent are set forth on Schedule 3(w) hereto.

(x)            Investment
Company.  Neither the Company nor any
Affiliate is an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.

(y)           Transactions With
Officers and Directors.  Except as
disclosed in the Reports, none of the officers or directors of the Company has
entered into any transaction with the Company that would be required to be
disclosed pursuant to Item 404(a), (b) or (c) of Regulation S-K of the
Commission.

(z)            Sarbanes-Oxley
Act.  The Company is in compliance
with the applicable provisions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley
Act”), and the rules and regulations promulgated thereunder, that are effective
and for which compliance by the Company is required as of the date hereof and
intends to comply with other applicable provisions of the Sarbanes-Oxley Act,
and the rules and regulations promulgated thereunder, upon the effectiveness of
such provisions or the date by which compliance therewith by the Company is
required.

(aa)         Material Non-Public Information.  The Company has not provided, and will not
provide, to the Purchasers any material non-public information other than
information related to the transactions contemplated by this Agreement, all of
which information shall be disclosed by the Company pursuant to Section 7(f)
hereof. 

(bb)         Intellectual
Property.  Other than as disclosed in
the Reports, the Company together with its Subsidiaries owns and possesses all
right, title and interest in and to, or, to the Company’s knowledge, has duly
licensed from third parties, all patents, patent rights, trade secrets,
inventions, know-how, trademarks, trade names, copyrights, service marks and
other proprietary rights (“Intellectual
Property”) material to the
business of the Company and its Subsidiaries taken as a whole as currently
conducted and as described in the Reports. 
To the Company’s knowledge and except as would not individually or in
the aggregate have a Material Adverse Effect, there is no infringement or other
violation by third parties of any of the Intellectual Property of the
Company.  Neither the Company nor any of
its Subsidiaries has received any notice of infringement or misappropriation
from any third party that has not been resolved or disposed of and, to the Company’s
knowledge, neither the Company nor any of its Subsidiaries has infringed or
misappropriated the Intellectual Property of any third party, which
infringement or misappropriation would individually or in the aggregate have a
Material Adverse Effect.  Further, there
is no pending or, to the Company’s knowledge and except as would not
individually or in the aggregate have a Material Adverse Effect, threatened
action, suit, proceeding or claim by governmental authorities or others that
the Company is infringing a patent, and there is no pending or, to the Company’s
knowledge and except as would not individually or in the aggregate have a
Material Adverse Effect, threatened legal or administrative proceeding relating
to patents and patent applications of the Company, other than proceedings
initiated by the Company before the United States Patent and Trademark Office
and the patent offices of certain foreign jurisdictions which are in the
ordinary course of patent prosecution. 
To the Company’s knowledge, the patent applications of the Company
presently on file disclose patentable subject matter, and the Company is not
aware of any inventorship challenges, any interference which has been declared
or provoked, or any other material fact that (i) would preclude the
issuance of patents with respect to such applications, or (ii) would lead
such counsel to conclude that such patents, when issued, would not be valid and
enforceable in accordance with applicable regulations.

(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 corrupt 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) failed to

 9
 

 

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 (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of
1977, as amended. 

(dd)         No Registration
Rights.  Upon the filing of the
Registration Statement (as defined below), no person will have the right, which
right has not been waived, to require the Company to register any securities
for sale under the Securities Act by reason of the filing of the Registration
Statement with the Commission or the issuance and sale of the Securities.

(ee)         Subsidiary Representations.  The Company makes each of the representations
contained in Sections 3(a), (b), (d), (e), (f), (h), (j), (k), (m), (q), (r),
(s), (u), (t), (x), (y), (aa), (bb) and (cc) of this Agreement, as same relate
to each Subsidiary of the Company, with the same qualifications to each such
representation.

(ff)           Correctness of
Representations.  The Company
represents that the foregoing representations and warranties are true and
correct as of the date hereof in all material respects, and, unless the Company
otherwise notifies the Purchasers prior to the Closing Date, shall be true and
correct in all material respects as of the Closing Date.

4.             Regulation
D Offering.  The offer and issuance
of the Securities to the Purchasers is being made pursuant to the exemption
from the registration provisions of the 1933 Act afforded by Section 4(2) of
the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder.  On the Closing Date, the Company will provide
an opinion reasonably acceptable to the Purchasers from the Company’s legal
counsel opining on the availability of an exemption from registration under the
1933 Act as it relates to the offer and issuance of the Securities and other
matters reasonably requested by Purchasers.

5.             Conditions.  The obligation of each Purchaser to purchase
and acquire the Securities hereunder shall be subject to the condition that all
representations and warranties and other statements of the Company shall be
true and correct as of and on each of the date of this Agreement and the date
of the Closing, the condition that the Company shall have performed all of its
obligations hereunder theretofore to be performed, and the delivery of the
legal opinion described in Section 4 above.

6.             Survival
of Representations, Warranties and Agreements.  Notwithstanding any investigation made by any
party to this Agreement, all covenants, agreements, representations and
warranties made by the Company and the Purchasers herein shall survive the
execution of this Agreement, the delivery to the Purchasers of the Securities
being purchased and the payment therefor, provided that the representations and
warranties contained herein shall expire on the one-year anniversary of the
Closing Date.

7.             Covenants
of the Company.  The Company
covenants and agrees with the Purchasers as follows:

(a)           Stop Orders.  The Company will advise the Purchasers, as
soon as practicable but, in any event, within one business day after the
Company receives notice of issuance by the Commission, any state securities
commission or any other regulatory authority of any stop order or of any order
preventing or suspending any offering of any securities of the Company, or of
the suspension of the qualification of the Common Stock of the Company for
offering or sale in any jurisdiction, or the initiation of any proceeding for
any such purpose.

(b)           Listing.  The Company shall use its best efforts to
secure the listing of the Common Stock on the Nasdaq Capital Market and shall
maintain such listing or a listing on any other national securities exchange
for at least two years after the effective date of the Registration Statement
(the “Effective
Date”).

 10
 

 

(c)           Market
Regulations.  The Company shall
notify the Commission, the Bulletin Board and applicable state authorities, in
accordance with their requirements, of the transactions contemplated by this
Agreement, and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal
and valid issuance of the Securities to the Purchasers and promptly provide
copies thereof to Purchasers.

(d)           Reporting
Requirements.  From the date of this
Agreement until two years after the Effective Date, the Company will (v) cause
the Common Stock to continue to be registered under Section 12(b) or 12(g) of
the 1934 Act, (x) comply in all respects with its reporting and filing
obligations under the 1934 Act, (y) comply with all reporting requirements that
are applicable to an issuer with a class of shares registered pursuant to
Section 12(b) or 12(g) of the 1934 Act, as applicable, and (z) comply with all
requirements related to the Registration Statement.  The Company will use its best efforts not to
take any action or file any document (whether or not permitted by the 1933 Act
or the 1934 Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under said acts until two (2) years after the Effective Date.  The Company agrees to timely file a Form D
with respect to the Securities if required under Regulation D.  Unless all of the Registrable Shares are
subject to an effective Registration Statement, the Company will not file with
the SEC a registration statement relating to an offering for its own account or
the account of others under the 1933 Act of any of its equity securities, other
than any registration statement or post-effective amendment to a registration statement
(or supplement thereto) relating to the Company’s employee benefit plans or
other equity compensation registered on Form S-8.

(e)           Use of Proceeds.  The proceeds received by the Company from the
issuance and sale of the Securities may not and will not be used for accrued
and unpaid officer and director salaries, payment of financing related debt,
redemption of outstanding notes or equity instruments of the Company,
litigation related expenses or settlements, nor non-trade obligations
outstanding on a Closing Date.

(f)            Disclosure of
Transaction.  The Company shall issue
a press release describing the material terms of the transactions contemplated
hereby (the “Press
Release”) as soon as
practicable after the Closing Date but in no event not later than 9:00 A.M.
Eastern Time on the first Trading Day following the Closing Date.  The Company shall also file with the
Commission a Current Report on Form 8-K (the “Announcement 8-K”)
describing the material terms of the transactions contemplated hereby (and attaching
as exhibits thereto this Agreement and the Press Release) as soon as
practicable following the Closing Date but in no event more than two (2)
Trading Days following the Closing Date, which Press Release and Announcement
8-K shall be subject to prior review and comment by the Purchasers.  “Trading
Day” means any day during
which the Nasdaq Capital Market shall be open for trading.  No Purchaser shall be named in the Press
Release without its consent.

(g)           Taxes.  From the date of this Agreement and until two
years after the Effective Date, the Company will promptly pay and discharge, or
cause to be paid and discharged, when due and payable, all lawful taxes,
assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company; provided, however, that any such
tax, assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Company shall have set aside on its books adequate reserves with respect
thereto, and provided, further, that the Company will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of proceedings
to foreclose any lien which may have attached as security therefore.

(h)           Insurance.  From the date of this Agreement and until two
years after the Effective Date, the Company will keep its assets which are of
an insurable character insured by financially sound and reputable insurers
against loss or damage by fire, explosion and other risks customarily insured
against by companies in the Company’s line of business, in amounts sufficient
to prevent the Company from becoming a co-insurer and not in any event less
than one hundred percent (100%) of the insurable value of the property insured;
and the Company will maintain, with financially sound and reputable insurers,
insurance against other hazards

 11
 

 

and
risks and liability to persons and property to the extent and in the manner
customary for companies in similar businesses similarly situated and to the
extent available on commercially reasonable terms.

(i)            Books and
Records.  From the date of this
Agreement and until two years after the Effective Date, the Company will keep
true records and books of account in which full, true and correct entries will
be made of all dealings or transactions in relation to its business and affairs
in accordance with generally accepted accounting principles applied on a
consistent basis.

(j)            Governmental
Authorities.  From the date of this
Agreement and until one year after the Closing Date, the Company shall duly
observe and conform in all material respects to all valid requirements of
governmental authorities relating to the conduct of its business or to its
properties or assets.

(k)           Intellectual
Property.  From the date of this
Agreement and until (i) two years after the Effective Date, or (ii) until all
of the Securities have been resold or transferred by all the Purchasers
pursuant to the Registration Statement or pursuant to Rule 144, without regard to
volume limitations, the Company shall maintain in full force and effect its
corporate existence, rights and franchises and all licenses and other rights to
use intellectual property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business.

(l)            Properties.  For two years after the Effective Date, the
Company will keep its properties in good repair, working order and condition,
reasonable wear and tear excepted, and from time to time make all necessary and
proper repairs, renewals, replacements, additions and improvements thereto; and
the Company will at all times comply with each provision of all leases to which
it is a party or under which it occupies property if the breach of such
provision could reasonably be expected to have a Material Adverse Effect.

(m)          Confidentiality/Public
Announcement.  For two years after
the Effective Date, the Company agrees that except in connection with the
Announcement 8-K or the Registration Statement, it will not disclose publicly
or privately the identity of the Purchasers unless expressly agreed to in
writing by a Purchaser or only to the extent required by law.

(n)           Restrictions on
Insider Sales.  The Company’s policy
on insiders trading prohibits trading (other than pursuant to Rule 10b5-1 plans
adopted outside of a restricted period) in its securities during the first
quarter of each year until the second business day following the filing with
the Commission of the Company’s Form 10-K for the preceding fiscal year.  The Company agrees that it will enforce and
not modify these restrictions until after the Effective Date.

8.             Covenants
of the Company and Purchaser Regarding Indemnification.

(a)           The Company agrees
to indemnify, hold harmless, reimburse and defend the Purchasers, the Purchasers’
officers, directors, agents, Affiliates, counsel, control persons, and
principal shareholders, against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Purchaser or any such person which results,
arises out of or is based upon (i) any material misrepresentation by Company or
breach of any warranty by Company in this Agreement, or other agreement
delivered pursuant hereto; or (ii) after any applicable notice and/or cure
periods, any breach or default in performance by the Company of any covenant or
undertaking to be performed by the Company hereunder, or any other agreement
entered into by the Company and Purchaser relating hereto.

(b)           Each Purchaser,
severally and not jointly, agrees to indemnify, hold harmless, reimburse and
defend the Company and each of the Company’s officers, directors, agents,
Affiliates, counsel, control persons against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Company or any such person which
results, arises out of or is based upon (i) any material misrepresentation by
such Purchaser in this Agreement or in any Exhibits or Schedules attached
hereto, or other agreement delivered pursuant hereto; or (ii) after any
applicable notice and/or

 12
 

 

cure
periods, any breach or default in performance by such Purchaser of any covenant
or undertaking to be performed by such Purchaser hereunder, or any other
agreement entered into by the Company and Purchasers, relating hereto.

(c)           In no event shall
the aggregate liability of any Purchaser or permitted successor of such
Purchaser under this Agreement (including, but not limited to, any liability of
such Purchaser under Section 9.6 hereof) or any other Transaction Document be
greater in amount than the dollar amount of the net proceeds actually received
by such Purchaser upon the sale of Registrable Securities (as defined herein).

(d)           The procedures set forth
in Section 9.6 shall apply to the indemnification set forth in Sections 8 (a)
and 8 (b) above.

9.             Registration
Rights.  The Company shall file with
the Commission a Form S-3 registration statement (the “Registration Statement”)
(or such other form that it is eligible to use), including, without limiting
the generality of the foregoing, any financial statements that are required to
be filed prior to the effectiveness of such S-3 Registration Statement, in
order to register the Registrable Securities for resale and distribution under
the 1933 Act within thirty (30) calendar days after the Closing Date (the “Filing
Date”), and cause to be declared effective not later than one hundred and
twenty (120) calendar days after the Closing Date (the “Effective Date”).  The Company will register all of the
Securities (the “Registrable Securities”).

(a)           When declared effective by the
Commission, the Registration Statement will comply with Rule 415 under the 1933
Act.  On the effective date of the
Registration Statement, the Registration Statement will comply and on the date
of the Prospectus, the Prospectus will comply, in all material respects with
the applicable provisions of the 1933 Act and the applicable rules and
regulations of the Commission thereunder; on the effective date of the
Registration Statement, the Registration Statement will not and on the date of
the Prospectus, the Prospectus will not, contain an 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 light of the
circumstances under which they were made (with respect to the Prospectus), not
misleading; and when filed with the Commission, the documents incorporated by
reference in the Registration Statement and the Prospectus, taken as a whole,
will comply in all material respects with the applicable provisions of the 1934
Act and the applicable rules and regulations of the Commission thereunder.  There will be no material document of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement that is
not described or filed as required.

(b)           The Company will include in such
registration statement (i) the information required under the 1933 Act to be so
included concerning the Purchasers, as provided by the Purchasers on the
Company in writing, including any changes in such information that may be
provided by the Purchasers in writing to the Company from time to time, and (ii)
a section entitled “Plan of Distribution,” which, at a minimum, states that the
selling stockholders may transfer the shares of common stock in various
circumstances.

(c)           Notwithstanding anything to the
contrary herein, the Registration Statement shall cover only the Securities. In
no event at any time before the Registration Statement becomes effective with
respect to the Securities shall the Company publicly announce or file any other
registration statement, other than registrations on Form S-8, without the
prior written consent of a majority in interest of the Purchasers.

(d)           The Company understands that each
Purchaser disclaims being an underwriter, but any Purchaser being deemed an
underwriter by the Commission shall not relieve the Company of any obligations
it has hereunder; provided, however that if the Company receives notification
from the Commission that an Purchaser is deemed an underwriter, then the period
by which the Company is obligated to submit an acceleration request to the
Commission shall be extended to the earlier of (i) the 90th day after such
Commission notification, or (ii) 120 days after the initial filing of the
Registration Statement with the Commission.

 13
 

 

(e)           Within five business days of the
effectiveness date of the Registration Statement, the Company shall use its
commercially reasonable efforts to cause its counsel to issue an appropriate
opinion or opinions to the transfer agent substantially to the effect that the
shares are subject to an effective registration statement and can be reissued
free of restrictive legend upon notice of a sale by a Purchaser and
confirmation by such Purchaser that it has complied with the prospectus
delivery requirements, provided that the Company has not advised the transfer
agent orally or in writing that the opinion has been withdrawn.

9.1           Reserved.

9.2           Registration Procedures.  The Company will, as expeditiously as
possible:

(a)           after the Effective Date, use its
best efforts to prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith (the “Prospectus”) as may be necessary to keep the Registration
Statement current, effective and free from any material misstatement or
omission to state a material fact for a period not exceeding, with respect to
each Purchaser’s Securities purchased hereunder, the earlier of (i) the
second anniversary of the Closing Date, (ii) the date on which the
Purchaser may sell all Securities then held by the Purchaser without restriction
by the volume limitations of Rule 144(e) of the Securities Act, or
(iii) such time as all Securities purchased by the Purchasers in this
offering have been sold pursuant to a registration statement;

(b)           promptly notify
Purchasers (by telecopier and by e-mail addresses provided by Purchasers) on or
before the first business day thereafter that the Company receives notice that
(i) the Commission has no comments or no further comments on the Registration
Statement, and (ii) the Registration Statement has been declared effective;

(c)           prepare and file
with the Commission such amendments and supplements to the Registration
Statement and the prospectus contained therein as may be necessary to keep the
Registration Statement effective until such Registration Statement has been
effective for a period of two (2) years, and comply with the provisions of the
1933 Act with respect to the disposition of all of the Registrable Securities
covered by the Registration Statement in accordance with the Purchasers’
intended method of disposition set forth in such Registration Statement for
such period;

(d)           make available to
the Purchasers, at the Company’s expense, such number of copies of the
Registration Statement and any prospectus included therein (including each
preliminary prospectus) as such persons reasonably may request in order to
facilitate the public sale or their disposition of the Registrable Securities
or make them electronically available;

(e)           use its commercially
reasonable best efforts to register or qualify the Registrable Securities under
the securities or “blue sky” laws of New York, California and such
jurisdictions as the Purchasers shall request in writing, provided, however,
that the Company shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any jurisdiction
where it is not so qualified or to consent to general service of process in any
such jurisdiction;

(f)            list the
Registrable Securities with any securities exchange on which the Common Stock of
the Company is then listed;

(g)           notify the
Purchasers as soon as possible but, in any event, within one business day of
the Company’s becoming aware of the happening of any event as a result of which
the prospectus contained in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were made;

 14
 

 

(h)           notify the
Purchasers within one business day of the Company’s becoming aware of any order
of the Commission, state authority or other governmental authority suspending
the effectiveness of the Registration Statement;

(i)            provided same would
not be in violation of the provision of Regulation FD under the 1934 Act, make
available for inspection by the Purchasers, and any attorney, accountant or
other agent retained by the Purchasers or any underwriter, all publicly
available, non-confidential financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company’s officers,
directors and employees to supply all publicly available, non-confidential
information reasonably requested by the Purchasers, attorney, accountant or
agent in connection with the Registration Statement; and

(j)            make available to
the Purchasers, upon their request in writing, copies of the Registration
Statement and any amendment or supplement thereto two (2) business days prior
to the filing thereof with the Commission and any Commission letters of comment
promptly upon receipt.  The Purchasers
acknowledge that the Registration Statement and any amendment or supplement
thereto may contain material non-public information and agree to keep such
information confidential until the filing of such Registration Statement or
amendment thereto with the Commission.

9.3           Provision of Documents.  In connection with the Registration
Statement, each Purchaser will furnish to the Company in writing such
information with respect to itself and the proposed distribution by it as
reasonably shall be necessary in order to assure compliance with federal and
applicable state securities laws.  At the
request of the Company, the Purchasers will provide the Company with a completed
selling shareholder questionnaire within five business days following
Closing.  Purchasers will respond in
writing to any requests from the Commission for information, whether asked for
in a comment letter or orally via the Company or Company counsel within five
business days after the Company or its representatives have notified the
Purchasers of the request.

9.4           Non-Registration Events.  The Company and the Purchasers agree that the
Purchasers will suffer damages if the Registration Statement is not filed by
the Filing Date and not declared effective by the Commission by the Effective
Date, and it would not be feasible to ascertain the extent of such damages with
precision.  Accordingly, if (A) the
Registration Statement is not filed on or before the Filing Date, (B) is not
declared effective on or before the Effective Date, (C) due to the action or
inaction of the Company the Registration Statement is not declared effective
within three (3) business days after receipt by the Company or its attorneys of
a written or oral communication from the Commission that the Registration
Statement will not be reviewed or that the Commission has no further comments,
or (D) the Registration Statement is filed and declared effective but shall
thereafter cease to be effective for a period of time which shall exceed thirty
(30) days in the aggregate during any 12 month period (each such event referred
to in clauses A through D of this Section 9.4 is referred to herein as a “Non-Registration Event”), then the Company shall deliver to each
Purchaser, as Liquidated
Damages, an amount equal to
one and one third percent (1 1/3%) (to four decimal places or 0.0133) for each
thirty (30) days (or such lesser pro-rata amount for any period of less than
thirty (30) days) of the total purchase price of the Securities purchased and
still held by such Purchaser pursuant to this Agreement on the first day of
each thirty (30) day or shorter period for which Liquidated Damages are
calculable.  The Company must pay the
Liquidated Damages in cash.  The
Liquidated Damages must be paid within ten (10) days after the end of each
thirty (30) day period or shorter part thereof for which Liquidated Damages are
payable.  All oral or written comments
received from the Commission relating to the Registration Statement must be
satisfactorily responded to as soon as possible, but in any event, within
fifteen (15) business days after receipt of comments from the Commission.  Notwithstanding the foregoing, the Company
shall not be liable to the Purchaser under this Section 9.4 for any events or
delays occurring as a consequence of the acts or omissions of the Purchasers
contrary to the obligations undertaken by Purchasers in this Agreement.  Liquidated Damages will not accrue nor be
payable pursuant to this Section 9.4 nor will a Non-Registration Event be
deemed to have occurred for times during which Registrable Securities are
transferable by the holder of Registrable Securities pursuant to Rule 144(k)
under the 1933 Act.

 15
 

 

9.5           Expenses.  All expenses incurred by the Company in
complying with Section 9, including, without limitation, all registration and
filing fees, printing expenses (if required), fees and disbursements of counsel
and independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or “blue sky” laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, and fees of transfer agents and registrars, are
called “Registration Expenses.” All underwriting discounts and selling
commissions applicable to the sale of Registrable Securities are called “Selling
Expenses.” The Company will pay all Registration Expenses in connection with
the Registration Statement.  Selling
Expenses in connection with the Registration Statement shall be borne by the
Purchasers and may be apportioned among the Purchasers in proportion to the
number of shares sold by each Purchaser relative to the number of shares sold
under the Registration Statement.

9.6           Indemnification and Contribution.

(a)           In the event of a
registration of any Registrable Securities under the 1933 Act pursuant to
Section 9, the Company will, to the extent permitted by law, indemnify and hold
harmless the Purchaser, each officer of the Purchaser, each director of the
Purchaser, each underwriter of such Registrable Securities thereunder and each
other person, if any, who controls such Purchaser or underwriter within the
meaning of the 1933 Act, against any losses, claims, damages or liabilities,
joint or several, to which the Purchaser, or such underwriter or controlling
person may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in the Registration Statement, any preliminary
prospectus or final prospectus contained therein, any Company-Represented
Free-Use Writing Prospectus or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were
made, and will subject to the provisions of Section 9.6(c), reimburse the
Purchaser, each such underwriter and each such controlling person for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the Company shall not be liable to the Purchaser to the extent
that any such damages arise out of or are based upon (i) an untrue statement or
alleged untrue statement or omission or alleged omission in the Registration
Statement, any preliminary prospectus or final prospectus contained therein,
any Company-Represented Free-Use Writing Prospectus or any amendment or
supplement thereof made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Purchaser demanding such
indemnification expressly for use in the Registration Statement or the
prospectus included therein, or (ii) any untrue statement or omission of a
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading in any prospectus
contained in the Registration Statement that is corrected in any subsequent
prospectus contained in the Registration Statement that was delivered to such
Purchaser before the pertinent sale or sales by such Purchaser.  For the purposes of this Agreement, the term “Company-Represented
Free-Use Writing Prospectus” means any “issuer free writing prospectus”, as
defined in Commission Rule 433 under the 1933 Act, relating to securities of
Company in the form filed or required to be filed with the Commission or, if
not required to be filed, in the form retained in the Company’s records
pursuant to Rule 433(g) under the 1933 Act.

(b)           In the event of a
registration of any of the Registrable Securities under the 1933 Act pursuant
to Section 9, each Purchaser severally and not jointly will, to the extent
permitted by law, indemnify and hold harmless the Company, and each person, if
any, who controls the Company within the meaning of the 1933 Act, each officer
of the Company who signs the Registration Statement, each director of the
Company, each underwriter and each person who controls any underwriter within
the meaning of the 1933 Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer, director,
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any preliminary prospectus or final prospectus contained therein,
any Company-Represented Free-Use Writing Prospectus or any amendment or
supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material

 16
 

 

fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and each such officer, director,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action, provided, however, that the Purchaser will
be liable hereunder in any such case if and only to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with information pertaining to such Purchaser,
as such, furnished in writing to the Company by such Purchaser specifically for
use in Registration Statement, any preliminary prospectus or final prospectus contained
therein, any Company-Represented Free-Use Writing Prospectus or any amendment
or supplement thereof.

(c)           Promptly after
receipt by an indemnified party hereunder of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party hereunder, notify the indemnifying party in
writing thereof, but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to such indemnified party other
than under this Section 9.6(c) and shall only relieve it from any liability
which it may have to such indemnified party under this Section 9.6(c), except
and only if and to the extent the indemnifying party is materially prejudiced
by such omission.  In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the
indemnifying party shall not be liable to such indemnified party under this
Section 9.6(c) for any reasonable legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, provided,
however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified parties,
as a group, shall have the right to select one separate counsel and to assume
such legal defenses and otherwise to participate in the defense of such action,
with the reasonable expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred.

(d)           In order to provide
for just and equitable contribution in the event of joint liability under the
1933 Act in any case in which either (i) a Purchaser, or any controlling person
of a Purchaser, makes a claim for indemnification pursuant to this Section 9.6
but it is judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 9.6 provides
for indemnification in such case, or (ii) contribution under the 1933 Act may
be required on the part of the Purchaser or controlling person of the Purchaser
in circumstances for which indemnification is not provided under this Section
9.6; then, and in each such case, the Company and the Purchasers will
contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (after contribution from others) in such proportion as is
appropriate to reflect (i) the relative faults of the Company and the
Purchasers in connection with the statements or omissions or inaccuracies in
the representations and warranties in the Registration Statement that resulted
in such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations, or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative faults referred to in clause (i) above but
also the relative benefits received by the Company and the Purchasers from the
sale of the Securities.  The respective
relative benefits received by the Company and the Seller on the one hand and
each Purchaser on the other shall be deemed to be in the same proportion as the
amount to which the consideration paid by such Purchaser to the Company
pursuant to this Agreement for the Securities purchased by such Purchaser that
were sold pursuant to the Registration Statement bears to the difference
between the amount such Purchaser paid for the Securities that were sold
pursuant to the Registration Statement and the amount received by such
Purchaser from such sale.  The relative
fault of the Company and each Purchaser shall be determined by reference to,
among

 17
 

 

other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company or such Purchaser and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission, provided, however, that, in any such case, no
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) will be entitled to contribution from any person
or entity who was not guilty of such fraudulent misrepresentation.

10.           Miscellaneous.

(a)           Notices.  All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile,
addressed as set forth below or to such other address as such party shall have
specified most recently by written notice. 
Any notice or other communication required or permitted to be given
hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur.  The addresses for such communications shall
be: (i) if to the Company, to: Force Protection, Inc., 9801 Highway 78, #3,
Ladson, SC 29456, telecopier: (843) 553-3832, with a copy by telecopier only
to: Amy Trombly, Esq., Trombly Business Law, 1320 Centre Street, Suite 202,
Newton Center, MA 02459, Fax: (617) 243-0066, and (ii) if to the Purchasers,
to: the one or more addresses and telecopier numbers indicated on the signature
pages hereto.

(b)           Entire Agreement;
Assignment.  This Agreement and other
documents delivered in connection herewith represent the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by both parties.  Neither the Company nor the Purchasers have
relied on any representations not contained or referred to in this Agreement
and the documents delivered herewith.  No
right or obligation of the Company shall be assigned without prior notice to
and the written consent of the Purchasers.

(c)           Counterparts/Execution.  This Agreement may be executed in any number
of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.  This Agreement may be executed by facsimile
signature and delivered by facsimile transmission.

(d)           Law Governing
this Agreement.  This Agreement shall
be governed by and construed in accordance with the laws of the State of New
York without regard to principles of conflicts of laws.  Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located
in the state of New York.  The parties
and the individuals executing this Agreement and other agreements referred to
herein or delivered in connection herewith on behalf of the Company agree to
submit to the jurisdiction of such courts and waive trial by jury.  The prevailing party shall be entitled to
recover from the other party its reasonable attorney’s fees and costs.  In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.

(e)           Specific
Enforcement, Consent to Jurisdiction. 
The Company and Purchaser acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this

 18
 

 

Agreement
were not performed in accordance with their specific terms or were otherwise
breached.  It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.  Subject to Section 10(d) hereof, each of the
Company, Purchaser and any signatory hereto in his personal capacity hereby
waives, and agrees not to assert in any such suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction in New York of such
court, that the suit, action or proceeding is brought in an inconvenient forum
or that the venue of the suit, action or proceeding is improper.  Nothing in this Section 8(e) shall affect or
limit any right to serve process in any other manner permitted by law.

(f)            Independent
Nature of Purchasers.  The Company
acknowledges that the obligations of each Purchaser under the Transaction
Documents 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 the Transaction Documents.  The Company acknowledges that the decision of
each Purchaser to purchase Securities has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company which may have been made or given by any
other Purchaser or by any agent or employee of any other Purchaser, and no
Purchaser or any of its agents or employees shall have any liability to any
Purchaser (or any other person) relating to or arising from any such
information, materials, statements or opinions. 
The Company acknowledges that nothing contained in any Transaction
Document, and no action taken by any Purchaser pursuant hereto or thereto
(including, but not limited to, the (i) inclusion of a Purchaser in the
Registration Statement and (ii) review by, and consent to, the Registration
Statement by a Purchaser) 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.  The Company
acknowledges that each Purchaser shall be entitled to independently protect and
enforce its rights, including without limitation, the rights arising out of the
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.  The Company acknowledges that it has elected
to provide all Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because Company was required or requested to
do so by the Purchasers.  The Company
acknowledges that such procedure with respect to the Transaction Documents in
no way creates a presumption that the Purchasers are in any way acting in
concert or as a group with respect to the Transaction Documents or the
transactions contemplated thereby.

(g)           Equal Treatment.  No consideration shall be offered or paid to
any person to amend or consent to a waiver or modification of any provision of
the Transaction Documents unless the same consideration is also offered and
paid to all the parties to the Transaction Documents. 

(h)           Finder’s Fees.  The Purchasers acknowledge that the Company
intends to pay to CEUT, as financial advisor, a fee in respect of the sale of
the Securities.  Each of the parties to
this Agreement hereby represents that, on the basis of any actions and
agreements by it, there are no other brokers or finders entitled to
compensation in connection with the sale of the Purchased Securities to the
Purchasers.  The Company agrees to
indemnify and hold harmless each Purchaser from any liability for any
commission or compensation in the nature of a finder’s, broker’s or similar fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible, including, but not limited to, those fees or
other payments owing to CEUT.  Each
Purchaser, severally and not jointly, agrees to indemnify and to hold harmless
the Company and each of the other Purchasers from any liability for any
commission or compensation in the nature of a finder’s, broker’s or similar fee
(and the costs and expenses of defending against such liability or asserted
liability) for which such Purchaser or any of its officers, employees, or
representatives is responsible.

(i)            Fees and
Expenses.  Each party shall pay its
own fees and expenses incurred with respect to this Agreement, the documents
referred to herein and the transactions contemplated hereby and thereby;

 19
 

 

provided,
however, that if the sale of the Securities is consummated, CEUT will reimburse
Franklin Templeton the reasonable fees and expenses it has incurred with its
Special Counsel and technical consultants not to exceed in the aggregate
$15,000.

 20
 

 

SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT 

Please acknowledge your acceptance of the foregoing Securities Purchase
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.

	
   

  	
   

  	
  FORCE PROTECTION, INC.

  
	
   

  	
   

  	
  a Nevada
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name: Gordon
  McGilton

  
	
   

  	
  Title: Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
  Dated: December
  20, 2006

  
	
   

  	
   

  
					

 

	
  Signature

  	
   

  	
   

  
	
   

  
	
  Name

  	
   

  	
   

  
	
   

  
	
  Legal Entity
  Name

  	
   

  	
   

  
	
   

  
	
  Subscription
  Amount in Shares

  	
   

  	
   

  
	
   

  
	
  Price Per Share

  	
   

  	
   

  
	
   

  
	
  Address

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  TID

  	
   

  	
   

  
	
   

  
	
  Phone #

  	
   

  	
   

  
	
   

  
	
  Fax #

  	
   

  	
   

  
	
   

  
	
  Email

  	
   

  	
   

  
	
   

  
	
  Address for
  certificates to be sent (if different than above)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
											

 

 21

 

Schedule
I

Wire
Transfer Instructions

 

Schedule
II

Address
for Delivery of Certificates 

C.E. Unterberg, Towbin

c/o Jennifer Joinnides

Capital Markets

350 Madison Avenue

New York, NY  10017

 

Schedule
3(a)

Subsidiaries

1) Force Protection
Industries, Inc., a Nevada corporation

2) Force Protection
Technologies, Inc., a Nevada corporation

 

Schedule
3(d)

Capitalization
Table

Force Protection, Inc.

Capitalization

As of

12.18.06

	
  Common stock

  	
   

  	
   

  	
   

  	
  53,404,727

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Warrants                                                                         @

  	
   

  	
  $

  	
  3.75

  	
   

  	
  563,333

  	
   

  	
   

  	
   

  
	
  Warrants                                                                         @

  	
   

  	
  $

  	
  7.48

  	
   

  	
  500,000

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Employee Stock
  Options (Note 1)

  	
   

  	
   

  	
   

  	
  1,463,791

  	
   

  	
   

  	
   

  
	
  Employee Stock
  Commitment (Note 2)

  	
   

  	
   

  	
   

  	
  191,026

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Total =

  	
   

  	
  56,122,877

  	
   

  	
   

  	
   

  
	
  Preferred
  shares

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Preferred Series
  A

  	
   

  	
  0

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Preferred Series
  B

  	
   

  	
  0

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Preferred Series
  C

  	
   

  	
  0

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Preferred Series
  D

  	
   

  	
  0

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Series D converts

  (@$2.10/share) =

  	
   

  	
  0

  	
   

  	
  Common
  Shares

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Total

  	
   

  	
  56,122,877

  	
   

  	
  Fully
  Diluted

  (assuming full value

  of all warrants,

  options etc.)

  	
   

  

 

NOTES

1                  Employee Stock
Options vesting over various time intervals (figure shown assumes full vesting
and exercise)

2                  Employment
agreement with Mr Pollard provides for grant of 20,513 shares of common stock
on 1.1.2007 and on 1.1.2008

BOD Resolution granted
150,000 vesting common shares to Dr. Vernon Joynt (50K on 1.1.2007, 50K on
1.1.2008 and 50K on 1.1.2009)

 

Authorized Shares of
Common Stock = 310,000,000 shares

Authorize Shares of
Preferred Stock = 10,000,000 shares

 

Schedule
3(q)

Undisclosed
Liabilities

None

 

Schedule
3(w) 

Transfer
Agent Contact Information

Don Maddalon

Integrity Stock Transfer

2920 N. Green Valley
Parkway

Building 5, Suite 527

Henderson, NV 89014

Telephone: (702) 317-7757

Fax: (702) 796-5650

don@integritynevada.net

 

Exhibit A

List of
Purchasers

 

	
  Calm Waters Partnership

  
	
  Longview Fund,
  LP

  
	
  Midsummer
  Investment LTD

  
	
  Harbour Holdings
  Ltd.

  
	
  Skylands Special
  Investment II LLC

  
	
  Skylands Special
  Investment LLC

  
	
  Skylands Quest,
  LLC

  
	
  Ardsley Partners
  Fund II, L.P.

  
	
  Ardsley Partners
  Institutional Fund, L.P.

  
	
  Ardsley Offshore
  Fund Ltd

  
	
  Marion Lynton

  
	
  DKR Soundshore
  Oasis Holding Fund Ltd

  
	
  Alydar Fund L.P.

  
	
  Alydar Fund
  Limited

  
	
  Alydar QP Fund
  LP

  
	
  Atlas Master
  Fund, Ltd

  
	
  John Hancock
  Technology Leaders

  
	
  John Hancock
  Small Cap Equity

  
	
  JHFII Emerging
  Growth Fund

  
	
  JHT Emerging
  Growth Trust

  
	
  John Hancock
  Technology Fund

  
	
  George Weiss
  Associates, Inc Profit Sharing Plan

  
	
  IOU Limited
  Partnership

  
	
  OGI Associates
  LLC

  
	
  Weiss
  Multi-Strategy Partners LLC

  
	
  Lagunitas
  Partners LP

  
	
  Gruber &
  McBaine International

  
	
  Trustees of
  Hamilton College

  
	
  The Wallace
  Foundation

  
	
  Jon D and Linda
  W Gruber Trust

  
	
  J Patterson
  McBaine

  
	
  Fidelity
  Commonwealth Trust: Fidelity Small Cap Retirement Fund

  
	
  F/F/C Minnesota
  Life General AC 2307

  
	
  F/F/C FRK
  Templeton Small Cap G AC 2797

  

 

 

 

	
  F/F/C Transamerica F SM MID
  CAP AC 2164

  
	
  F/F/C AmGen
  Small Cap Growth Fund

  
	
  F/F/C FSS FRK
  Small Cap Growth II FRK

  
	
  F/F/C FSS FRK
  Small Cap Growth FD FRK

  
	
  F/F/C FTIF FR US
  SM COS FUND

  
	
  F/F/C FRK SM CAP
  Growth FD CDN FRK

  
	
  F/F/C TGSF FRK
  Aggressive GR FD

  
	
  FSS FRK
  Aggressive Grwth FD FRK

  
	
  F/F/C AXA
  Premier VIP S M CAP G

  
	
  F/F/C AXA
  Premier VIP SMID CAP

  
	
  SEI U.S. Small
  Companies Fund

  
	
  Optimix
  Investment Management Limited

  
	
  Goldman Sachs
  Global Manager Strategies

  
	
  JB Were Global
  Small Companies Fund - CFS

  
	
  NZ Funds Global
  Small Companies Trust

  
	
  SEI
  Institutional Investments Trust, Small Cap Fund

  
	
  SEI
  Institutional Managed Trust, Small Cap Growth Fund

  
	
  SEI
  Institutional Investments Trust, Small/Mid Cap Equity Fund

  
	
  Seligman Global
  Fund Series, Inc. - Global Smaller Companies Fund

  
	
  Retail Employees
  Superannuation Trust

  
	
  Australian
  Retirement Fund

  
	
  Central States,
  Southeast and Southwest Areas Pension Fund

  
	
  Talvest Small
  Cap Cdn. Equity Fund

  
	
  TALVEST Global
  Small Cap Fund

  
	
  Maritime Life
  Discovery Fund

  
	
  BC Telecom
  Pension Plan for Management and Exempt Employees

  
	
  Pension Plan for
  Management and Professionals of TELUS Corp-Alpha

  
	
  Telstra Super
  Pty Ltd

  
	
  Stichting
  Bedrijfstakpensionefonds voor Het Veroepsvervoer Over De Weg

  
	
  J B Were Global
  Small Companies Pooled Fund

  
	
  Stichting
  Bedrijfstakpensioenfonds voor de Media PNO

  
	
  WTC-CTF Smaller
  Companies Portfolio

  
	
  Wellington
  Management Portfolios (Dublin) - Global Smaller Companies Equity

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}]]