Document:

ex10-3.htm

 

Exhibit 10.3

 

FORBEARANCE AND MODIFICATION AGREEMENT

 

This Forbearance and Modification Agreement (this “Agreement") is made as of May 30, 2014 by and among Ranor, Inc., a Delaware corporation, having a place of business and mailing address of 1 Bella Drive, Westminster, MA 01473-1058 (the “Borrower”), TechPrecision Corporation, a Delaware corporation, having a place of business and mailing address of 3477 Corporate Parkway - Suite 140, Center Valley, PA 18034 (the "Guarantor”) and Santander Bank, N.A. (formerly known as Sovereign Bank), a national banking association, with a place of business at 75 State Street, Boston, MA 02109 (the "Lender").

 

Reference is hereby made to the following documents relating to the issuance of certain Massachusetts Development Finance Agency Revenue Bonds (hereinafter collectively referred to as the “Loan Documents”) by and among the Borrower and the Guarantor (collectively, the "Obligors") and the Lender, including, without limitation, the following:

a.           A certain Bond Purchase Agreement among the Lender, the Obligors and Massachusetts Development Finance Agency dated on or about December 30, 2010;

b.           Massachusetts Development Finance Agency Revenue Bonds, Ranor Issue, Series 2010A, in the principal amount of $4,250,000.00 (the “Series A Bonds”);

c.           Massachusetts Development Finance Agency Revenue Bonds, Ranor Issue, Series 2010B, in the principal amount of $1,950,000.00 (the “Series B Bonds”);

d.           A certain Mortgage, Loan and Security Agreement among the Lender, the Borrower and Massachusetts Development Finance Agency, recorded with the Worcester County Registry of Deeds at Book 7331, Page 96 (the “Mortgage”);

e.           A certain Collateral Assignment of Leases and Rents among the Lender and the Borrower, recorded with the Worcester County Registry of Deeds at Book 7331, Page 178;

f.            A certain Depository Account, Security and Pledge Agreement between the Lender and the Borrower relating to a demand deposit account numbered 41300001280;

g.           A certain Guaranty executed by the Guarantor dated on or about December 30, 2010;

h.           A certain ISDA 2002 Master Agreement, and confirmations of trades issued thereunder; and

i.            A certain Forbearance and Modification Agreement dated on or about January 16, 2014 (the “First Forbearance Agreement”).

 

The Obligors acknowledge and agree that as a result of the Borrower’s failure to pay its indebtedness to the Lender arising under the Loan Documents on or before the Forbearance Termination Date specified in the First Forbearance Agreement, all such indebtedness is due and payable in full. The Borrower acknowledges and agrees that the Lender has no obligation to make additional loans or otherwise extend credit to the Borrower under the Loan Documents or otherwise. The Borrower has requested that the Lender forbear from exercising its rights and remedies under the Loan Documents, and the Lender agrees to do so until the Forbearance Termination Date (as hereinafter defined) upon the following terms and conditions:

 

1           Ratification of Existing Agreements. All of the Obligors' obligations, indebtedness and liabilities to the Lender as evidenced by or otherwise arising under the Loan Documents and this agreement (the “Indebtedness”), except as otherwise expressly modified in this Agreement upon the terms set forth herein and therein, are, by the Obligors' execution of this Agreement, ratified and confirmed in all respects by the Obligors. By the Obligors' execution of this Agreement, the Obligors represent and warrant that no counterclaim, right of set-off or defense of any kind exists or is outstanding with respect to the Indebtedness.

 

2           Forbearance Obligations.

2.1           The Lender agrees to forbear from accelerating the payment the Indebtedness and instituting proceedings to enforce its rights and remedies under the Loan Documents until that date (the "Forbearance Termination Date") which is defined as the earliest to occur of:

  

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2.1.1           June 30, 2014;

2.1.2           an Event of Default under the Loan Documents (other than those Events of Default now existing, any existing defaults not having been waived hereunder);

2.1.3           the failure of the Obligors to comply with the terms of this Agreement;

2.1.4           the initiation of any federal or state bankruptcy, insolvency or similar proceeding by or against the Obligors;

2.1.5           the commencement of litigation or legal proceedings by the Obligors against the Lender or any of its affiliates; or

2.1.6           the failure of the Obligors to comply with any term or condition of any other agreement, document or instrument evidencing any other indebtedness to the Lender.

2.2           Upon the termination of the Lender's forbearance obligations hereunder, the Lender shall be free in its sole and absolute discretion to proceed to enforce any or all of its rights and remedies under or in respect of the Loan Documents and applicable law. All of the Obligors' obligations and liabilities to the Lender hereunder (including without limitation the Obligors' payment obligations) shall survive the Forbearance Termination Date, and all of such obligations are secured under the Loan Documents and any other documents, instruments or agreements pursuant to which the Obligors may, from time to time, grant to the Lender collateral security for the Obligors' obligations to the Lender.

 

3           Interest.

3.1           Notwithstanding anything to the contrary set forth in the Loan Documents, the outstanding principal amounts owing from the Borrower to the Lender pursuant to the Series A Bonds and the Series B Bonds shall bear interest after June 1, 2014 at an interest rate per annum equal to the sum of: (a) one month LIBOR plus, (b) 5.75% times 0.65;. Interest shall continue to be payable at the times and in the manner set forth in the Loan Documents.

3.2           Notwithstanding any provisions of the Loan Documents to the contrary, upon the occurrence of the Forbearance Termination Date the outstanding principal balance of the Series A Bonds and the Series B Bonds shall bear interest at an interest rate per annum equal to the sum of: (a) one month LIBOR plus, (b) 10.0% times 0.65.

 

4           Financial Reports. The Borrower shall continue to provide to the Lender all financial reports and other information required to be provided under the Loan Documents. The Obligors shall at any time or from time to time execute and deliver such further instruments, and take such further action as the Lender may reasonably request, in each case further to effect the purposes of this Agreement and the Loan Documents.

 

5           Covenants. Without any prejudice or impairment whatsoever to any of the Lender's rights and remedies contained in the Loan Documents, the Obligors covenant and agree with the Lender as follows:

5.1           Notwithstanding anything to the contrary set forth in any of the Loan Documents, the Obligors agree to pay in full in cash the Indebtedness on the Forbearance Termination Date.

5.2           The Obligors shall comply and continue to comply with all of the terms, covenants and provisions contained in the Loan Documents, except as such terms, covenants and provisions are expressly modified by this Agreement upon the terms set forth herein.

5.3           The Loan Agreement is hereby amended by deleting therefrom Section 5.10(a), and substituting therefor the words, “Intentionally omitted.”

5.4           The Loan Agreement is hereby amended by deleting therefrom Section 5.10(b), and substituting therefor the words, “Intentionally omitted.”

5.5           The Loan Agreement is hereby amended by deleing therefrom Section 5.10(c), and substituting therefor, the following:

 

“(c) Leverage Ratio. Borrower will not permit its Leverage Ratio to be greater than 1.75 to 1.0, at any time, tested quarterly.”

 

6           Subordination of Security Interest in Equipment. The Lender agrees that it will subordinate its security interest in the Borrower’s machinery and equipment and the related patent and licensing agreement to a security interest to be granted to a new lender, upon satisfaction of the following conditions:

  

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6.1           As of the date of closing, the Forbearance Termination Date shall not have occurred;

6.2           Any and all documents providing for the subordination of the Lender’s security interest or otherwise affecting its rights shall be satisfactory to the Lender in its sole discretion;

6.3           The new financing shall be in the amount of $4,150,000.00, of which not less than $2,647,000.00 shall be paid to the Lender to reduce the outstanding balance of the Indebtedness;

6.4           The remaining proceeds of the financing transaction (the “Surplus”) shall be held by the Lender as additional collateral to secure payment of the Indebtedness; and

6.5           In the Lender’s discretion, the Lender shall make disbursements to the Borrower of some or all of the Surplus to pay the Borrowers ordinary and necessary expenses incurred in the ordinary course of business.

 

7           Forbearance Fee. The Borrower shall pay to the Lender a non-refundable forbearance fee equal to $30,000.00 (the "Forbearance Fee"), which shall be deemed fully earned by the Lender upon the execution hereof. The Forbearance Fee shall be payable on the earlier to occur of the Forbearance Termination Date or payment of the Indebtedness in full. In the event that the Indebtedness is paid in full on or before June 15, 2014, payment of one-half of the Forbearance Fee shall be waived by the Lender.

 

8           Expenses. The Obligors agree to pay to the Lender upon demand (a) an amount equal to any and all out-of-pocket costs or expenses (including legal fees and disbursements) incurred or sustained by the Lender in connection with the preparation of this Agreement and all related matters and (b) from time to time after the Forbearance Termination Date, any and all out-of-pocket costs or expenses (including legal fees and disbursements and reasonable consulting, accounting, appraisal and other similar professional fees and expenses) hereafter incurred or sustained by the Lender in connection with the administration of credit extended by the Lender to the Borrower or the preservation of or enforcement of any rights of the Lender under this Agreement and the Loan Documents or in respect of any of the Obligors' other obligations to the Lender.

 

9           Partial Payment Not Waiver. Any partial payments made by the Borrower or the Guarantor or any other party on behalf of the Borrower or the Guarantor and accepted by the Lender will not constitute a waiver of any default, waiver of demand, or waiver of any other right held by the Lender under the Loan Documents or this Agreement. Except as otherwise modified or amended by this Agreement, all of the terms of the Loan Documents shall remain in full force and effect and are expressly ratified and confirmed by the Borrower and the Guarantor.

 

10           No Waiver. Except as otherwise expressly provided for in this Agreement, nothing in this Agreement shall extend to or affect in any way any of the Obligors' obligations or any of the rights of the Lender and remedies of the Lender arising under the Loan Documents, and the Lender shall not be deemed to have waived any or all of such rights or remedies with respect to any Event of Default or event or condition which, with notice or the lapse of time, or both would become an Event of Default under the Loan Documents and which upon the Obligors' execution and delivery of this Agreement might otherwise exist or which might hereafter occur.

 

11           Release of the Lender. By execution of this Agreement, the Borrower and the Guarantor jointly and severally acknowledge and confirm that they do not have any offsets, defenses or claims against the Lender, or any of its officers, agents, directors or employees whether asserted or unasserted. To the extent that they may have such offsets, defenses or claims, the Borrower and the Guarantor and each of their respective successors, assigns, parents, subsidiaries, affiliates, predecessors, employees, agents, heirs, executors, as applicable, jointly and severally, release and forever discharge the Lender, its subsidiaries, affiliates, officers, directors, employees, agents, attorneys, successors and assigns, both present and former (collectively the "Lender Affiliates") of and from any and all manner of action and actions, cause and causes of action, suits, debts, controversies, damages, judgments, executions, claims and demands whatsoever, asserted or unasserted, in law or in equity which against the Lender and/or the Lender Affiliates they ever had, now have or which any of the Borrower’s or the Guarantor’s successors, assigns, parents, subsidiaries, affiliates, predecessors, employees, agents, heirs, executors, as applicable, both present and former ever had or now has, upon or by reason of any manner, cause,

 

  

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causes or thing whatsoever, including, without limitation, any presently existing claim or defense whether or not presently suspected, contemplated or anticipated.

 

12           Waiver of Requirement of Prejudgment Bond. In the event of litigation between the Lender and any Obligor in which the Lender seeks injunctive or other equitable relief, each of the Obligors waives any and all rights to require the Lender to provide or furnish a bond or other surety in connection with the issuance of preliminary or permanent injunctive or other equitable relief under Rule 65 of the Federal Rules of Civil Procedure and under any similar rule or provision of the laws or rules of procedure adopted in any jurisdiction wherein the Lender may seek to enforce tis rights.

 

13           Voluntary Agreement. The Obligors represent and warrant that they are represented by legal counsel of their choice, are fully aware of the terms contained in this Agreement and have voluntarily and without coercion or duress of any kind, entered into this Agreement and the documents executed in connection with this Agreement.

 

14           Notices. Any notice, payment, demand or communication required or permitted to be given by any provision of this Agreement will be deemed to have been given when delivered personally to the party designated to receive such notice or, on the third business day after the same is sent by certified mail, postage and charges prepaid, directed to the following addresses or to such other or additional addresses as any party might designate by written notice to the other parties:

 

	
To the Lender:

	
With a copy to the Lender’s counsel:

	
John P. Bowen, Vice President 

Santander Bank, N.A. MA1-WCM-0301

446 Main Street

Worcester, MA 01608

	
Bertin C. Emmons, Senior Counsel

Santander Bank, N. A.

NH1-CBO-0410

125 Main Street

Salem, NH 03079

 

	
To the Borrower:

	
To the Guarantor:

	 	 
	
Ranor, Inc.

	
TechPrecision Corporation

	
1 Bella Drive

	
3477 Corporate Parkway - Suite 140

	
Westminster, MA 01473-1058

	
Center Valley, PA 18034

	
Attention: Robert Francis, President

	
Attention: Richard Fitzgerald, CFO

 

15           Entire Agreement; Binding Affect. This Agreement constitutes the entire and final agreement among the parties and there are no agreements, understandings, warranties or representations among the parties except as set forth herein. This Agreement will inure to the benefit and bind the respective heirs, administrators, executors, representatives, successors and permitted assigns of the parties hereto.

 

16           Severability. If any clause or provision of this Agreement is determined to be illegal, invalid or unenforceable under any present or future law by the final judgment of a court of competent jurisdiction, the remainder of this Agreement will not be affected thereby. It is the intention of the parties that if any such provision is held to be invalid, illegal or unenforceable, there will be added in lieu thereof a provision as similar in terms to such provision as is possible, and that such added provision will be legal, valid and enforceable.

 

17           Headings. All headings contained in this Agreement are for reference purposes only and are not intended to affect in any way the meaning or interpretation of this Agreement.

 

18           Governing Law. This Agreement is executed and delivered in the Commonwealth of Massachusetts and it is the desire and intention of the parties that it be in all respects interpreted according to the laws of the Commonwealth of Massachusetts. The Obligors specifically and irrevocably

 

 

 

  

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consent to the jurisdiction and venue of the federal and state courts of the Commonwealth of Massachusetts with respect to all matters concerning this Agreement or the Loan Documents or the enforcement of any of the foregoing. The Obligors agree that the execution and performance of this Agreement shall have a Commonwealth of Massachusetts situs and accordingly, the Obligors consent to personal jurisdiction in the Commonwealth of Massachusetts.

 

19           Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original document, but all of which will constitute a single document. This document will not be binding on or constitute evidence of a contract between the parties until such time as a counterpart of this document has been executed by each of the parties and a copy thereof delivered to each party under this Agreement.

 

20           Amendment. Neither this Agreement nor any of the provisions hereof can be changed, waived, discharged or terminated, except by an instrument in writing signed by the parties against whom enforcement of the change, waiver, discharge or termination is sought.

 

21           WAIVER OF JURY TRIAL. THE OBLIGORS KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE OR HEREAFTER HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE UNDERLYING TRANSACTIONS. THE OBLIGORS CERTIFY THAT NEITHER THE LENDER NOR ANY OF ITS REPRESENTATIVES, AGENTS OR COUNSEL HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDER WOULD NOT IN THE EVENT OF ANY SUCH SUIT, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY JURY.

 

22           Restriction on Assignment. The Obligors may not assign any obligations hereunder or under any related agreement to any person without the prior written consent of the Lender. The Lender may without notice to or consent of any person, sell, assign, grant a participation in or otherwise dispose of all or any portion of the Note, the Agreement and the related agreements. In connection therewith, the Lender may disclose to a prospective purchaser, assignee, participant or transferee any information possessed by the Lender relating to the loan and the collateral securing the loan.

 

[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK. THE SIGNATURE PAGE FOLLOWS.]

 

 

 

  

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Witness:

	 	
RANOR, INC.

	 	 	 
	/s/ James Marx	 	
By:  /s/ Robert Francis

	  	 	
Robert Francis, President

	 	 	 
	  	 	
TECHPRECISION CORPORATION

	 	 	 
	/s/ Danny Khouly	 	
By:  /s/ Richard Fitzgerald

	  	 	
Richard Fitzgerald, CFO

	 	 	 
	  	 	
SANTANDER BANK, N.A.

	 	 	 
	/s/ Claudine M. Tikoian	 	
By:  /s/ John P. Bowen

	  	 	
John P. Bowen, Vice President

 

 

 

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Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

THIS PURCHASE AGREEMENT (“Agreement”) is made as of the 29th day of May, 2014 by and between THINSPACE TECHNOLOGY, INC., a Delaware corporation (the “Company”), and the Investor set forth on the signature page affixed hereto (the “Investor”).

Recitals

A.           The Company and the Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Section 4(a)(2) and/or Regulation D (“Regulation D”), as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended; and

B.           The Investor wishes to purchase from the Company, and the Company wishes to sell and issue to the Investor, upon the terms and conditions stated in this Agreement, a $265,000.00 principal amount of 8% convertible debenture, in the form attached hereto as Exhibit A (the “Debenture”).

In consideration of the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.           Definitions.  In addition to those terms defined above and elsewhere in this Agreement, for the purposes of this Agreement, the following terms shall have the meanings set forth below:

“Affiliate” means, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries Controls, is controlled by, or is under common control with, such Person.

“Business Day” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business.

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“Company’s Knowledge” means the actual knowledge of the executive officers (as defined in Rule 405 under the 1933 Act) of the Company, after due inquiry.

“Confidential Information” means trade secrets, confidential information and know-how (including but not limited to ideas, formulae, compositions, processes, procedures and techniques, research and development information, computer program code, performance specifications, support documentation, drawings, specifications, designs, business and marketing plans, and customer and supplier lists and related information).

“Control” (including the terms “controlling”, “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Intellectual Property” means all of the following: (i) patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice); (ii) trademarks, service marks, trade dress, trade names, corporate names, logos, slogans and Internet domain names, together with all goodwill associated with each of the foregoing; (iii) copyrights and copyrightable works; (iv) registrations, applications and renewals for any of the foregoing; and (v) proprietary computer software (including but not limited to data, data bases and documentation).

“Irrevocable Transfer Agent Instructions” means the instruction letter, dated as of May 29, 2014, by and between the Company and Olde Monmouth Stock Transfer Co. Inc., in the form attached hereto as Exhibit C.

 

  

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“Material Adverse Effect” means a material adverse effect on (i) the assets, liabilities, results of operations, condition (financial or otherwise), business, or prospects of the Company and its Subsidiaries taken as a whole, or (ii) the ability of the Company to perform its obligations under the Transaction Documents.

“Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

“Purchase Price” means Two Hundred Sixty Five Thousand Dollars ($265,000.00).

“SEC Filings” has the meaning set forth in Section 4.6.

“SEC” means the United States Securities and Exchange Commission.

“Securities” means the Debentures and the Shares.

“Shares” means the shares of Common Stock issuable upon conversion of the Debenture.

“Subsidiary” of any Person means another Person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first Person.

“Transaction Documents” means this Agreement, the Debenture and the Irrevocable Transfer Agent Instructions.

“1933 Act” means the Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

“1934 Act” means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

2.           Purchase and Sale of the Debenture.  Subject to the terms and conditions of this Agreement, on the Closing Date, the Company shall sell and issue to the Investor, a Debenture in the principal amount of $265,000.00, it being understood and acknowledged that in accordance with the terms of such Debenture, the Investor may, in its discretion make payments to the Company up to the aggregate Purchase Price of $265,000, during the two (2) year period commencing on the issuance date of the Debenture, and the principal amount owed under the Debenture will be equal to such actual Purchase Price paid by the Investor

3.           Closing.  Upon confirmation that the other conditions to closing specified herein have been satisfied or duly waived by the Investor, the Company shall deliver to the Investor, a Debenture registered the name of the Investor (the “Closing Date”). The closing of the purchase and sale of the Debenture shall take place at the offices of Thinspace Technology, Inc. 5535 S. Williamson Blvd., Unit 751, Port Orange, FL 32128, or at such other location and on such other date as the Company and the Investor shall mutually agree.

4.           Representations and Warranties of the Company.  The Company hereby represents and warrants to the Investor that, except as set forth in the schedules delivered herewith (collectively, the “Disclosure Schedules”):

4. 1           Organization, Good Standing and Qualification.  Each of the Company and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted and to own its properties.  Each of the Company and its Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property makes such qualification or leasing necessary unless the failure to so qualify has not and could not reasonably be expected to have a Material Adverse Effect.  The Company’s Subsidiaries are listed on Schedule 4.1 hereto.

 

  

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4.2           Authorization.  The Company has full power and authority and, has taken all requisite action on the part of the Company, its officers, directors and stockholders necessary for (i) the authorization, execution and delivery of the Transaction Documents, (ii) authorization of the performance of all obligations of the Company hereunder or thereunder, and (iii) the authorization, issuance (or reservation for issuance) and delivery of the Securities.  The Transaction Documents constitute the legal, 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.

4.3           Capitalization.  Schedule 4.3 sets forth (a) the authorized capital stock of the Company on the date hereof; (b) the number of shares of capital stock issued and outstanding; (c) the number of shares of capital stock issuable pursuant to the Company’s stock plans; and (d) the number of shares of capital stock issuable and reserved for issuance pursuant to securities (other than the Securities) exercisable for, or convertible into or exchangeable for any shares of capital stock of the Company.  All of the issued and outstanding shares of the Company’s capital stock have been duly authorized and validly issued and are fully paid, nonassessable and free of pre-emptive rights.  Except as described on Schedule 4.3, all of the issued and outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued and are fully paid, nonassessable and free of pre-emptive rights, were issued in full compliance with applicable state and federal securities law and any rights of third parties and are owned by the Company, beneficially and of record, subject to no lien, encumbrance or other adverse claim.  Except as described on Schedule 4.3, no Person is entitled to pre-emptive or similar statutory or contractual rights with respect to any securities of the Company.  Except as described on Schedule 4.3, there are no outstanding warrants, options, convertible securities or other rights, agreements or arrangements of any character under which the Company or any of its Subsidiaries is or may be obligated to issue any equity securities of any kind and except as contemplated by this Agreement, neither the Company nor any of its Subsidiaries is currently in negotiations for the issuance of any equity securities of any kind.

Except as described on Schedule 4.3, the issuance and sale of the Securities hereunder will not obligate the Company to issue shares of Common Stock or other securities to any other Person (other than the Investor) and will not result in the adjustment of the exercise, conversion, exchange or reset price of any outstanding security.

Except as described on Schedule 4.3, the Company does not have outstanding stockholder purchase rights or “poison pill” or any similar arrangement in effect giving any Person the right to purchase any equity interest in the Company upon the occurrence of certain events.

4.4           Valid Issuance.  The Debenture has been duly and validly authorized and, when issued and paid for pursuant to this Agreement, shall be free and clear of all encumbrances and restrictions (other than those created by the Investor), except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws.  Upon the due conversion of the Debenture, the Shares will be validly issued, fully paid and non-assessable free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws and except for those created by the Investor.  The Company shall reserve a sufficient number of shares of Common Stock for issuance upon the exercise of the Debenture, free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws and except for those created by the Investor.

4.5           Consents.  The execution, delivery and performance by the Company of the Transaction Documents, and the offer, issuance and sale of the Securities require no consent of, action by or in respect of, or filing with, any Person, governmental body, agency, or official other than filings that have been made pursuant to applicable state securities laws, and post-sale filings pursuant to applicable state and federal securities laws which the Company undertakes to file within the applicable time periods.  Subject to the accuracy of the representations and warranties of the Investor set forth in Section 5 hereof, the Company has taken all action necessary to exempt (i) the issuance and sale of the Securities, (ii) the issuance of the Shares upon due conversion of the Debenture, and (iii) the other transactions contemplated by the Transaction Documents from the provisions of any shareholder rights plan or other “poison pill” arrangement, any anti-takeover, business combination or control share law or statute binding on the Company or to which the Company or any of its assets and properties may be subject and any provision of the Company’s Articles of Incorporation or By-laws that is or could reasonably be expected to become applicable to the Investor as a result of the transactions contemplated hereby, including without limitation, the issuance of the Securities and the ownership, disposition or voting of the Securities by the Investor or the exercise of any right granted to the Investor pursuant to this Agreement or the other Transaction Documents.

 

  

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4.6           Delivery of SEC Filings; Business.  The Company has made available to the Investor through the EDGAR system, true and complete copies of the Company’s most recent Annual Report on Form 10-K for its last fiscal year (the “10-K”), and all other reports filed by the Company pursuant to the 1934 Act since the filing of the 10-K and prior to the date hereof (collectively, the “SEC Filings”).  The SEC Filings are the only filings required of the Company pursuant to the 1934 Act for such period.  The Company and its Subsidiaries are engaged in all material respects only in the business described in the SEC Filings and the SEC Filings contain a complete and accurate description in all material respects of the business of the Company and its Subsidiaries, taken as a whole.

4.7           Use of Proceeds.  The net proceeds of the sale of the Debenture hereunder shall be used by the Company for working capital and general corporate purposes.

4.8           No Conflict, Breach, Violation or Default.  The execution, delivery and performance of the Transaction Documents by the Company and the issuance and sale of the Securities will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under (i) the Company’s Articles of Incorporation or the Company’s Bylaws, both as in effect on the date hereof (true and complete copies of which have been made available to the Investor through the EDGAR system), or (ii)(a) any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company, any Subsidiary or any of their respective assets or properties, or (b) any agreement or instrument to which the Company or any Subsidiary is a party or by which the Company or a Subsidiary is bound or to which any of their respective assets or properties is subject.

4.9           Brokers and Finders.  No Person will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company, any Subsidiary or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company.

4.10           No Directed Selling Efforts or General Solicitation.  Neither the Company nor any Person acting on its behalf has conducted any general solicitation or general advertising (as those terms are used in Regulation D) in connection with the offer or sale of any of the Securities.

4.11           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 Company security or solicited any offers to buy any security, under circumstances that would adversely affect reliance by the Company on Section 4(a)(2) for the exemption from registration for the transactions contemplated hereby or would require registration of the Securities under the 1933 Act.

4.12           Private Placement.  The offer and sale of the Securities to the Investor as contemplated hereby is exempt from the registration requirements of the 1933 Act.

5.           Representations and Warranties of the Investor.  The Investor hereby represents and warrants to the Company that:

5.1           Organization and Existence.  Such Investor is a validly existing corporation, limited partnership or limited liability company and has all requisite corporate, partnership or limited liability company power and authority to invest in the Securities pursuant to this Agreement.

5.2           Authorization.  The execution, delivery and performance by such Investor of the Transaction Documents to which such Investor is a party have been duly authorized and will each constitute the valid and legally binding obligation of such Investor, enforceable against such Investor in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.

 

  

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5.3           Purchase Entirely for Own Account.  The Securities to be received by such Investor hereunder will be acquired for such Investor’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the 1933 Act, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the 1933 Act without prejudice, however, to such Investor’s right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities laws.  Nothing contained herein shall be deemed a representation or warranty by such Investor to hold the Securities for any period of time.  Such Investor is not a broker-dealer registered with the SEC under the 1934 Act or an entity engaged in a business that would require it to be so registered.

5.4           Investment Experience.  Such Investor acknowledges that it can bear the economic risk and complete loss of its investment in the Securities and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment contemplated hereby.

5.5           Disclosure of Information.  Such Investor has had an opportunity to receive all information related to the Company requested by it and to ask questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the offering of the Securities.  Such Investor acknowledges receipt of copies of the SEC Filings.  Neither such inquiries nor any other due diligence investigation conducted by such Investor shall modify, amend or affect such Investor’s right to rely on the Company’s representations and warranties contained in this Agreement.

5.6           Restricted Securities.  Such Investor understands that the Securities are characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the 1933 Act only in certain limited circumstances.

5.7           Legends.  It is understood that, except as provided below, certificates evidencing the Securities may bear the following or any similar legend:

(a)           “The securities represented hereby may not be transferred unless (i) such securities have been registered for sale pursuant to the Securities Act of 1933, as amended, (ii) such securities may be sold pursuant to Rule 144(i), or (iii) the Company has received an opinion of counsel reasonably satisfactory to it that such transfer may lawfully be made without registration under the Securities Act of 1933 or qualification under applicable state securities laws.”

(b)           If required by the authorities of any state in connection with the issuance of sale of the Securities, the legend required by such state authority.

5.8           Accredited Investor.  Such Investor is an accredited investor as defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act.

5.9           No General Solicitation.  Such Investor did not learn of the investment in the Securities as a result of any public advertising or general solicitation.

5.10           Brokers and Finders.  No Person will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company, any Subsidiary or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of such Investor.

6.  Conditions to Closing.

6.1           Conditions to the Investor’s Obligations. The obligation of the Investor to purchase the Debenture at Closing is subject to the fulfillment to such Investor’s satisfaction, on or prior to the Closing Date, of the following conditions, any of which may be waived by the Investor:

  

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(a)           The representations and warranties made by the Company in Section 4 hereof qualified as to materiality shall be true and correct at all times prior to and on the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date, and, the representations and warranties made by the Company in Section 4 hereof not qualified as to materiality shall be true and correct in all material respects at all times prior to and on the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date.  The Company shall have performed in all material respects all obligations and conditions herein required to be performed or observed by it on or prior to the Closing Date.

(b)           The Company shall have obtained any and all consents, permits, approvals, registrations and waivers necessary or appropriate for consummation of the purchase and sale of the Securities, and the consummation of the other transactions contemplated by the Transaction Documents, all of which shall be in full force and effect.

(c)           No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby or in the other Transaction Documents.

(d)           The Company shall have executed and delivered the Irrevocable Transfer Agent Instructions (including the same executed by Olde Monmouth Signature Stock Transfer, Inc.).

(e)           No stop order or suspension of trading shall have been imposed by Nasdaq, the SEC or any other governmental or regulatory body with respect to public trading in the Common Stock.

6.2           Conditions to Obligations of the Company. The Company's obligation to sell and issue the Debenture at Closing is subject to the fulfillment to the satisfaction of the Company on or prior to the Closing Date of the following conditions, any of which may be waived by the Company:

(a)           The representations and warranties made by the Investor in Section 5 hereof, other than the representations and warranties contained in Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 (the “Investment Representations”), shall be true and correct in all material respects when made, and shall be true and correct in all material respects on the Closing Date with the same force and effect as if they had been made on and as of said date.  The Investment Representations shall be true and correct in all respects when made, and shall be true and correct in all respects on the Closing Date with the same force and effect as if they had been made on and as of said date.  The Investor shall have performed in all material respects all obligations and conditions herein required to be performed or observed by them on or prior to the Closing Date.

6.3           Termination of Obligations to Effect Closing; Effects.

(a)           The obligations of the Company, on the one hand, and the Investor, on the other hand, to effect the Closing shall terminate as follows:

(i)           Upon the mutual written consent of the Company and the Investor;

(ii)          By the Company if any of the conditions set forth in Section 6.2 shall have become incapable of fulfillment, and shall not have been waived by the Company;

(iii)         By the Investor if any of the conditions set forth in Section 6.1 shall have become incapable of fulfillment, and shall not have been waived by the Investor; or

(iv)         By either the Company or the Investor if the Closing has not occurred on or prior to May 31, 2014; provided, however, that, except in the case of clause (i) above, the party seeking to terminate its obligation to effect the Closing shall not then be in breach of any of its representations, warranties, covenants or agreements contained in this Agreement or the other Transaction Documents if such breach has resulted in the circumstances giving rise to such party’s seeking to terminate its obligation to effect the Closing.

 

  

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7.           Survival and Indemnification.

7.1  Survival.  The representations, warranties, covenants and agreements contained in this Agreement shall survive the Closing of the transactions contemplated by this Agreement.

7.2  Indemnification.  The Company agrees to indemnify and hold harmless the Investor and its Affiliates and their respective directors, officers, employees and agents from and against any and all losses, claims, damages, liabilities and expenses (including without limitation reasonable attorney fees and disbursements and other expenses incurred in connection with investigating, preparing or defending any action, claim or proceeding, pending or threatened and the costs of enforcement thereof) (collectively, “Losses”) to which such Person may become subject as a result of any breach of representation, warranty, covenant or agreement made by or to be performed on the part of the Company under the Transaction Documents, and will reimburse any such Person for all such amounts as they are incurred by such Person.

7.3  Conduct of Indemnification Proceedings.  Promptly after receipt by any Person (the “Indemnified Person”) of notice of any demand, claim or circumstances which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to Section 7.2, such Indemnified Person shall promptly notify the Company in writing and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Person, and shall assume the payment of all fees and expenses; provided, however, that the failure of any Indemnified Person so to notify the Company shall not relieve the Company of its obligations hereunder except to the extent that the Company is materially prejudiced by such failure to notify.  In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless: (i) the Company and the Indemnified Person shall have mutually agreed to the retention of such counsel; or (ii) in the reasonable judgment of counsel to such Indemnified Person representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them.  The Company shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent, or if there be a final judgment for the plaintiff, the Company shall indemnify and hold harmless such Indemnified Person from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment.  Without the prior written consent of the Indemnified Person, which consent shall not be unreasonably withheld, the Company shall not effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Person from all liability arising out of such proceeding.

8.           Miscellaneous.

8.1           Successors and Assigns.  This Agreement may not be assigned by a party hereto without the prior written consent of the Company or the Investor, as applicable, provided, however, that an Investor may assign its rights and delegate its duties hereunder in whole or in part to an Affiliate or to a third party acquiring some or all of its Securities in a private transaction without the prior written consent of the Company, after notice duly given by such Investor to the Company.  The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

8.2           Counterparts; Faxes.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  This Agreement may also be executed via facsimile, which shall be deemed an original.

 

  

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8.3           Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

8.4           Notices.  Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by telex or telecopier, then such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one business day after delivery to such carrier.  All notices shall be addressed to the party to be notified at the address as follows, or at such other address as such party may designate by ten days’ advance written notice to the other party:

If to the Company:

THINSPACE TECHNOLOGY, INC.

5535 S. Williamson Blvd., Unit 751

Port Orange, FL 32128

Attn:  President

Fax: 786-763-3830

If to the Investor:

CP US INCOME GROUP, LLC

1428 Brickell Avenue

Miami, Florida 33131

Attn:  Gregory Connell

Fax: _______________

8.5           Expenses.  The parties hereto shall pay their own costs and expenses in connection herewith.  In the event that legal proceedings are commenced by any party to this Agreement against another party to this Agreement in connection with this Agreement or the other Transaction Documents, the party or parties which do not prevail in such proceedings shall severally, but not jointly, pay their pro rata share of the reasonable attorneys’ fees and other reasonable out-of-pocket costs and expenses incurred by the prevailing party in such proceedings.

8.6           Amendments and Waivers.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Investor.  Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Securities purchased under this Agreement at the time outstanding, each future holder of all such Securities, and the Company.

8.7           Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect.

8.8           Entire Agreement.  This Agreement, including the Exhibits and the Disclosure Schedules, and the other Transaction Documents constitute the entire agreement among the parties hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof.

 

  

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8.9           Further Assurances.  The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.

8.10           Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.  This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York, without regard to principles of conflicts of law.  THE COMPANY AND INVESTOR WAIVE ANY RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS DEBENTURE OR ANY TRANSACTION CONTEMPLATED HEREIN, INCLUDING CLAIMS BASED ON CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER COMMON LAW OR STATUTORY BASIS. Each party hereby submits to the exclusive jurisdiction of the state and federal courts located in the County of New York, State of New York.  If the jury waiver set forth in this Section is not enforceable, then any dispute, controversy or claim arising out of or relating to this Agreement or any of the transactions contemplated herein will be finally settled by binding arbitration in New York, New York in accordance with the then current Commercial Arbitration Rules of the American Arbitration Association by one arbitrator appointed in accordance with said rules.  The arbitrator shall apply New York law to the resolution of any dispute, without reference to rules of conflicts of law or rules of statutory arbitration.  Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.  Notwithstanding the foregoing, the parties may apply to any court of competent jurisdiction for preliminary or interim equitable relief, or to compel arbitration in accordance with this paragraph.  The expenses of the arbitration, including the arbitrator’s fees and expert witness fees, incurred by the parties to the arbitration, may be awarded to the prevailing party, in the discretion of the arbitrator, or may be apportioned between the parties in any manner deemed appropriate by the arbitrator.  Unless and until the arbitrator decides that one party is to pay for all (or a share) of such expenses, both parties shall share equally in the payment of the arbitrator’s fees as and when billed by the arbitrator.

[signature page follows]

 

  

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IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

 

	The Company: 	THINSPACE TECHNOLOGY, INC.	 
	 	 	 
	 	 	 
	 	By:	/s/ Robert Zysblat	 	 
	 	Name:	Robert Zysblat	 
	 	Title:	President & Chairman	 
	 	 	 
	 	 	 
	The Investor:	CP US INCOME GROUP LLC	 
	 	 	 
	 	 	 
	 	By:	/s/ Gregory Connell	 	 
	 	Name: 	Gregory Connell	 
	 	Title: 	Member 	 

 

                                                             

 

 

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