EXHIBIT 10.86
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
March 30, 2007, by and among U.S. HELICOPTER CORPORATION, a Delaware corporation
(the "COMPANY"), and the Buyers listed on Schedule I attached hereto
(individually, a "BUYER" or collectively "BUYERS").
WITNESSETH
WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("REGULATION D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "SECURITIES ACT");
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase (i) up to One Million One
Hundred Thousand Dollars ($1,100,000) of secured convertible debentures in the
form attached hereto as "EXHIBIT A" (the "CONVERTIBLE DEBENTURES"), which shall
be convertible into shares of the Company's common stock, par value $0.001 (the
"COMMON STOCK") (as converted, the "CONVERSION SHARES"), and (ii) warrants
substantially in the form attached hereto as "EXHIBIT B" (the "WARRANTS"), to
acquire up to that number of additional shares of Common Stock set forth
opposite such Buyer's name in column (5) of Schedule I attached hereto (as
exercised, the "WARRANT SHARES"), which shall be funded within two business day
of the date hereof (the "FUNDING DATE") for a total purchase price of up to One
Million One Hundred Thousand Dollars ($1,100,000) (the "PURCHASE PRICE") in the
respective amounts set forth opposite each Buyer(s) name on Schedule I (the
"SUBSCRIPTION AMOUNT");
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement (the "REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company
has agreed to provide certain registration rights under the Securities Act and
the rules and regulations promulgated thereunder, and applicable state
securities laws;
WHEREAS, on the date hereof, the Company and the Buyers are executing
and delivering an Amended and Restated Security Agreement (the "SECURITY
AGREEMENT") pursuant to which the Company agreed to extend the Buyers security
interest which was originally created in connection with a loan made to the
Company by the Buyers in the Pledged Property (as this term is defined in the
each Security Agreement) to secure all the Company's obligations to the Buyers,
which shall include all obligations to the Buyers created in this Agreement and
the Convertible Debentures issued in connection herewith;
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering Irrevocable Transfer
Agent Instructions (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"); and
WHEREAS, the Convertible Debentures, the Conversion Shares, the
Warrants, and the Warrants Shares collectively are referred to herein as the
"SECURITIES".
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer(s) hereby agree
as follows:
1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
(a) PURCHASE OF CONVERTIBLE DEBENTURES. Subject to
the satisfaction (or waiver) of the terms and conditions of this Agreement, each
Buyer agrees, severally and not jointly, to purchase and the Company agrees to
sell and issue to each Buyer, severally and not jointly, Convertible Debentures
in amounts corresponding with the Subscription Amount set forth opposite each
Buyer's name on Schedule I hereto and the Warrants to acquire up that number of
Warrant Shares as set forth opposite such Buyer's name in column (5) on Schedule
I .
(b) CLOSING DATES. The Closing of the purchase and
sale of the Convertible Debentures and Warrants shall take place at 10:00 a.m.
Eastern Standard Time within two business day of the date hereof (the "CLOSING
DATE"), subject to notification of satisfaction of the conditions to the Closing
set forth herein and in Sections 6 and 7 below (or such later date as is
mutually agreed to by the Company and the Buyer(s)) on or before the Funding
Date. The Closing shall occur on the Closing Date at the offices of Yorkville
Advisors, LLC, 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxx Xxxxxx 00000 (or
such other place as is mutually agreed to by the Company and the Buyer(s)).
(c) FORM OF PAYMENT. Subject to the satisfaction of
the terms and conditions of this Agreement, on the Closing Date, (i) the Buyers
shall deliver to the Company such aggregate proceeds for the Convertible
Debentures and Warrants to be issued and sold to such Buyer at such Closing,
minus the fees to be paid directly from the proceeds of such Closing as set
forth herein, and (ii) the Company shall deliver to each Buyer, Convertible
Debentures and Warrants which such Buyer is purchasing at such Closing in
amounts indicated opposite such Buyer's name on Schedule I, duly executed on
behalf of the Company.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants, severally and not jointly, that:
(a) INVESTMENT PURPOSE. Each Buyer is acquiring the
Securities for its own account for investment only and not with a view towards,
or for resale in connection with, the public sale or distribution thereof,
except pursuant to sales registered or exempted under the Securities Act;
provided, however, that by making the representations herein, such Buyer
reserves the right to dispose of the Securities at any time in accordance with
or pursuant to an effective registration statement covering such Securities or
an available exemption under the Securities Act. Such Buyer does not presently
have any agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities.
(b) ACCREDITED INVESTOR STATUS. Each Buyer is an
"ACCREDITED INVESTOR" as that term is defined in Rule 501(a)(3) of Regulation D.
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(c) RELIANCE ON EXEMPTIONS. Each Buyer understands
that the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
such Buyer to acquire the Securities.
(d) INFORMATION. Each Buyer and its advisors (and his
or, its counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information he deemed
material to making an informed investment decision regarding his purchase of the
Securities, which have been requested by such Buyer. Each Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and its management. Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer's right to rely on the
Company's representations and warranties contained in Section 3 below. Each
Buyer understands that its investment in the Securities involves a high degree
of risk. Each Buyer is in a position regarding the Company, which, based upon
employment, family relationship or economic bargaining power, enabled and
enables such Buyer to obtain information from the Company in order to evaluate
the merits and risks of this investment. Each Buyer has sought such accounting,
legal and tax advice, as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities.
(e) NO GOVERNMENTAL REVIEW. Each Buyer understands
that no United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or endorsement of
the Securities, or the fairness or suitability of the investment in the
Securities, nor have such authorities passed upon or endorsed the merits of the
offering of the Securities. Each Buyer understands and acknowledges that the
Company has undertaken and will undertake no efforts to comply with any laws of
any jurisdiction outside the United States relating to the issuance and sale of
its securities except as may be provided herein.
(f) TRANSFER OR RESALE. Each Buyer understands that
except as provided in the Registration Rights Agreement: (i) the Securities have
not been and are not being registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, (B) such Buyer shall have
delivered to the Company an opinion of counsel, in a generally acceptable form,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration
requirements, or (C) such Buyer provides the Company with reasonable assurances
(in the form of seller and broker representation letters) that such Securities
can be sold, assigned or transferred pursuant to Rule 144, Rule 144(k), or Rule
144A promulgated under the Securities Act, as amended (or a successor rule
thereto) (collectively, "RULE 144"), in each case following the applicable
holding period set forth therein; (ii) any sale of the Securities made in
reliance on Rule 144 may be made only in accordance with the terms of Rule 144
and further, if Rule 144 is not applicable, any resale of the Securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the SEC thereunder; and (iii) neither the
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Company nor any other person is under any obligation to register the Securities
under the Securities Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder. The Company reserves the right
to place stop transfer instructions against the shares and certificates for the
Conversion Shares.
(g) LEGENDS. Each Buyer agrees to the imprinting, so
long as is required by this Section 2(g), of a restrictive legend in
substantially the following form (and a stop transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS,
OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS.
Certificates evidencing the Conversion Shares or Warrant Shares shall not
contain any legend (including the legend set forth above), (i) while a
registration statement (including the Registration Statement) covering the
resale of such security is effective under the Securities Act, (ii) following
any sale of such Conversion Shares or Warrant Shares pursuant to Rule 144, (iii)
if such Conversion Shares or Warrant Shares are eligible for sale under Rule
144(k), or (iv) if such legend is not required under applicable requirements of
the Securities Act (including judicial interpretations and pronouncements issued
by the staff of the SEC). The Company shall cause its counsel to issue a legal
opinion to the Company's transfer agent promptly after the effective date (the
"EFFECTIVE DATE") of a Registration Statement if required by the Company's
transfer agent to effect the removal of the legend hereunder. If all or any
portion of the Convertible Debentures or Warrants are exercised by a Buyer that
is not an Affiliate (as defined below) of the Company (a "NON-AFFILIATED BUYER")
at a time when there is an effective registration statement to cover the resale
of the Conversion Shares or the Warrant Shares, such Conversion Shares or
Warrant Shares shall be issued free of all legends. The Company agrees that
following the Effective Date or at such time as such legend is no longer
required under this Section 2(g), it will, no later than three (3) Trading Days
following the delivery by a Non-Affiliated Buyer to the Company or the Company's
transfer agent of a certificate representing Conversion Shares or Warrant
Shares, as the case may be, issued with a restrictive legend (such third Trading
Day, the "LEGEND REMOVAL DATE"), deliver or cause to be delivered to such
Non-Affiliated Buyer a certificate representing such shares that is free from
all restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in this Section. Each Buyer acknowledges
that the Company's agreement hereunder to remove all legends from Conversion
Shares or Warrant Shares is not an affirmative statement or representation that
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such Conversion Shares or Warrant Shares are freely tradable. Each Buyer,
severally and not jointly with the other Buyers, agrees that the removal of the
restrictive legend from certificates representing Securities as set forth in
this Section 3(g) is predicated upon the Company's reliance that the Buyer will
sell any Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery requirements, or an
exemption therefrom, and that if Securities are sold pursuant to a Registration
Statement, they will be sold in compliance with the plan of distribution set
forth therein.
(h) AUTHORIZATION, ENFORCEMENT. This Agreement, and
all related agreements, are within Buyer's corporate power and have been duly
and validly authorized, executed and delivered on behalf of such Buyer and are
valid and binding agreements of such Buyer enforceable in accordance with their
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
(i) RECEIPT OF DOCUMENTS. Each Buyer and his or its
counsel has received and read in their entirety: (i) this Agreement and each
representation, warranty and covenant set forth herein and the Transaction
Documents (as defined herein); (ii) all due diligence and other information
necessary to verify the accuracy and completeness of such representations,
warranties and covenants; (iii) the Company's Form 10-KSB for the fiscal year
ended December 31, 2005; (iv) the Company's Form 10-QSB for the fiscal quarter
ended September 30, 2006; (v) the Company's Form 8-Ks filed with the SEC on
December 4, 2006, December 22, 2006, January 4, 2007 and January 24, 2007; and
(vi) answers to all questions each Buyer submitted to the Company regarding an
investment in the Company; and each Buyer has relied on the information
contained therein and has not been furnished any other documents, literature,
memorandum or prospectus. Buyer acknowledges and agrees that the Company's
representations and warranties are limited to exclusively those expressly stated
in this Agreement and exclude any and all statements made in any other business
plan, prospectus, projections, memorandum or other document or in any oral
communication.
(j) DUE FORMATION OF CORPORATE AND OTHER BUYERS. If
the Buyer(s) is a corporation, trust, partnership or other entity that is not an
individual person, it has been formed and validly exists and has not been
organized for the specific purpose of purchasing the Securities and is not
prohibited from doing so.
(k) NO LEGAL ADVICE FROM THE COMPANY. Each Buyer
acknowledges, that it had the opportunity to review this Agreement and the
transactions contemplated by this Agreement with his or its own legal counsel
and investment and tax advisors. Each Buyer is relying solely on such counsel
and advisors and not on any statements or representations of the Company or any
of its representatives or agents for legal, tax or investment advice with
respect to this investment, the transactions contemplated by this Agreement or
the securities laws of any jurisdiction.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the SEC Documents (as defined herein) or under
the corresponding section of the Disclosure Schedules which Disclosure Schedules
shall be deemed a part hereof and to qualify any representation or warranty
otherwise made herein to the extent of such disclosure, the Company hereby makes
the representations and warranties set forth below to each Buyer:
(a) ORGANIZATION AND QUALIFICATION. The Company and
its subsidiaries are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated, and
have the requisite corporate power to own their properties and to carry on their
business as now being conducted. Each of the Company and its subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have or reasonably be expected to
result in (i) a material adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material adverse effect on
the results of operations, assets, business or condition (financial or
otherwise) of the Company, taken as a whole, or (iii) a material adverse effect
on the Company's ability to perform in any material respect on a timely basis
its obligations under any Transaction Document (any of (i), (ii) or (iii), a
"MATERIAL ADVERSE EFFECT") and no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.
(b) AUTHORIZATION, ENFORCEMENT, COMPLIANCE WITH OTHER
INSTRUMENTS. (i) The Company has the requisite corporate power and authority to
enter into and perform its obligations under this Agreement, the Convertible
Debentures, the Warrants, the Security Agreement, the Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions, and each of the other
agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively the "TRANSACTION
DOCUMENTS") and to issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including, without limitation, the issuance of the Securities, the
reservation for issuance and the issuance of the Conversion Shares, and the
reservation for issuance and the issuance of the Warrant Shares, have been duly
authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders, (iii) the Transaction Documents have been duly executed and
delivered by the Company, (iv) the Transaction Documents constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies. The
authorized officer of the Company executing the Transaction Documents knows of
no reason why the Company cannot file the Registration Statement as required
under the Registration Rights Agreement or perform any of the Company's other
obligations under the Transaction Documents.
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(c) CAPITALIZATION. The authorized capital stock of
the Company consists of 95,000,000 shares of Common Stock and 1,500,000 shares
of Preferred Stock, par value $0.001 ("PREFERRED STOCK") of which 35,524,931
shares of Common Stock and 47,000 shares of Preferred Stock are issued and
outstanding. All of the outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities. Except as disclosed in the SEC Documents or Schedule
3(d) and immediately preceding the Closing: (i) none of the Company's capital
stock is subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company; (ii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional capital stock of the Company or any of its
subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its subsidiaries; (iii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other agreements,
documents or instruments evidencing indebtedness of the Company or any of its
subsidiaries or by which the Company or any of its subsidiaries is or may become
bound; (iv) there are no financing statements securing obligations in any
material amounts, either singly or in the aggregate, filed in connection with
the Company or any of its subsidiaries; (v) there are no outstanding securities
or instruments of the Company or any of its subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its subsidiaries
is or may become bound to redeem a security of the Company or any of its
subsidiaries; (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (vii) the Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement; and (viii)
the Company and its subsidiaries have no liabilities or obligations required to
be disclosed in the SEC Documents but not so disclosed in the SEC Documents,
other than those incurred in the ordinary course of the Company's or its
subsidiaries' respective businesses and which, individually or in the aggregate,
do not or would not have a Material Adverse Effect. The Company has furnished to
the Buyers or made available through the SEC Documents true, correct and
complete copies of the Company's Certificate of Incorporation, as amended and as
in effect on the date hereof (the "CERTIFICATE OF INCORPORATION"), and the
Company's Bylaws, as amended and as in effect on the date hereof (the "BYLAWS"),
and the terms of all securities convertible into, or exercisable or exchangeable
for, shares of Common Stock and the material rights of the holders thereof in
respect thereto. No further approval or authorization of any stockholder, the
Board of Directors of the Company or others is required for the issuance and
sale of the Securities. There are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company's capital stock to which
the Company is a party or, to the knowledge of the Company, between or among any
of the Company's stockholders.
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(d) ISSUANCE OF SECURITIES. The issuance of the
Convertible Debentures and the Warrants is duly authorized and free from all
taxes, liens and charges with respect to the issue thereof. Upon conversion in
accordance with the terms of the Convertible Debentures or exercise in
accordance with the Warrants, as the case may be, the Conversion Shares and
Warrant Shares, respectively, when issued will be validly issued, fully paid and
nonassessable, free from all taxes, liens and charges with respect to the issue
thereof. The Company has reserved from its duly authorized capital stock the
appropriate number of shares of Common Stock as set forth in this Agreement.
(e) NO CONFLICTS. The execution, delivery and
performance of the Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby (including,
without limitation, the issuance of the Convertible Debentures and the Warrants,
and reservation for issuance and issuance of the Conversion Shares and the
Warrant Shares) will not (i) result in a violation of any certificate of
incorporation, certificate of formation, any certificate of designations or
other constituent documents of the Company, any capital stock of the Company or
bylaws of the Company or (ii) conflict with, or constitute a material default
(or an event which with notice or lapse of time or both would become a material
default) in any respect under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment or decree (including foreign, federal
and state securities laws and regulations and the rules and regulations of the
National Association of Securities Dealers Inc.'s OTC Bulletin Board) applicable
to the Company or by which any property or asset of the Company is bound or
affected; except in the case of each of clauses (ii) and (iii), such as could
not, individually or in the aggregate, have or reasonably be expected to result
in a Material Adverse Effect. The business of the Company is not being
conducted, and shall not be conducted in violation of any material law,
ordinance, or regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the Securities Act and any
applicable state securities laws, the Company 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 or contemplated by this Agreement or the Registration
Rights Agreement in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company is unaware of any facts or
circumstance, which might give rise to any of the foregoing.
(f) SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company
has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), for the two years preceding the date hereof (or
such shorter period as the Company was required by law or regulation to file
such material) (all of the foregoing filed prior to the date hereof or amended
after the date hereof and all exhibits included therein and financial statements
and schedules thereto and any prospectuses that are current as of the date
hereof and documents incorporated by reference therein, being hereinafter
referred to as the "SEC DOCUMENTS") on timely basis or has received a valid
extension of such time of filing and has filed any such SEC Document prior to
the expiration of any such extension. The Company has delivered to the Buyers or
their representatives, or made available through the SEC's website at
xxxx://xxx.xxx.xxx., true and complete copies of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with the
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requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(i) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are or
were made and not misleading.
(g) 10(B)-5. The SEC Documents do not include any
untrue statements of material fact, nor do they omit to state any material fact
required to be stated therein necessary to make the statements made, in light of
the circumstances under which they were made, not misleading.
(h) ABSENCE OF LITIGATION. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending against or
affecting the Company or the Common Stock, wherein an unfavorable decision,
ruling or finding would have a Material Adverse Effect.
(i) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF THE
CONVERTIBLE DEBENTURES. The Company acknowledges and agrees that each Buyer is
acting solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that each Buyer is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by each Buyer or any
of their respective representatives or agents in connection with this Agreement
and the transactions contemplated hereby is merely incidental to such Buyer's
purchase of the Securities. The Company further represents to each Buyer that
the Company's decision to enter into this Agreement has been based solely on the
independent evaluation by the Company and its representatives.
(j) NO GENERAL SOLICITATION. Neither the Company, nor
any of its affiliates, nor 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 Securities Act) in connection with the offer or sale
of the Securities.
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(k) 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 require
registration of the Securities under the Securities Act or cause this offering
of the Securities to be integrated with prior offerings by the Company for
purposes of the Securities Act.
(l) EMPLOYEE RELATIONS. The Company is not involved
in any labor dispute or, to the knowledge of the Company, is any such dispute
threatened. None of the Company's employees is a member of a union and the
Company believes that its relations with its employees are good.
(m) INTELLECTUAL PROPERTY RIGHTS. The Company owns or
possesses adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct its business as
now conducted. The Company does not have any knowledge of any infringement by
the Company of trademark, trade name rights, patents, patent rights, copyrights,
inventions, licenses, service names, service marks, service xxxx registrations,
trade secret or other similar rights of others, and, to the knowledge of the
Company there is no claim, action or proceeding being made or brought against,
or to the Company's knowledge, being threatened against, the Company or its
subsidiaries regarding trademark, trade name, patents, patent rights, invention,
copyright, license, service names, service marks, service xxxx registrations,
trade secret or other infringement; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing.
(n) ENVIRONMENTAL LAWS. The Company is (i) in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) has received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
its business and (iii) is in material compliance with all terms and conditions
of any such permit, license or approval.
(o) TITLE. All real property and facilities held
under lease by the Company is held by the Company under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company.
(p) INSURANCE. The Company is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be reasonably prudent and
customary in the business in which the Company is engaged. The Company has not
been refused any insurance coverage sought or applied for and the Company has no
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the condition, financial or otherwise,
or the earnings, business or operations of the Company, taken as a whole.
-10-
(q) REGULATORY PERMITS. The Company possesses or is
in the process of applying for all material certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its business, and the Company has not received
any notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
(r) 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
generally accepted accounting principles and to maintain asset accountability,
and (iii) the recorded amounts for assets are compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
(s) NO MATERIAL ADVERSE BREACHES, ETC. The Company is
not subject to any charter, corporate or other legal restriction, or any
judgment, decree, order, rule or regulation which in the judgment of the
Company's officers has or is expected in the future to have a Material Adverse
Effect on the business, properties, operations, financial condition, results of
operations or prospects of the Company. The Company is not in breach of any
contract or agreement which breach, in the judgment of the Company's officers,
has or is expected to have a Material Adverse Effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company.
(t) TAX STATUS. The Company has made and filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and (unless and only to the
extent that the Company has set aside on its books provisions reasonably
adequate for the payment of all unpaid and unreported taxes) has paid all taxes
and other governmental assessments and charges that are material in amount,
shown or determined to be due on such returns, reports and declarations, except
those being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
(u) CERTAIN TRANSACTIONS. Except for arm's length
transactions pursuant to which the Company makes payments in the ordinary course
of business upon terms no less favorable than the Company could obtain from
third parties and other than the grant of stock options disclosed in the SEC
Documents, none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
-11-
(v) FEES AND RIGHTS OF FIRST REFUSAL. The Company is
not obligated to offer the securities offered hereunder on a right of first
refusal basis or otherwise to any third parties including, but not limited to,
current or former shareholders of the Company, underwriters, brokers, agents or
other third parties.
(w) INVESTMENT COMPANY. The Company is not, and is
not an affiliate of, and immediately after receipt of payment for the
Securities, will not be or be an affiliate of, an "investment company" within
the meaning of the Investment Company Act of 1940, as amended. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
(x) REGISTRATION RIGHTS. Other than each of the
Buyers, no person has any right to cause the Company to effect the registration
under the Securities Act of any securities of the Company. There are no
outstanding registration statements not yet declared effective and there are no
outstanding comment letters from the SEC or any other regulatory agency.
(y) PRIVATE PLACEMENT. Assuming the accuracy of the
Buyers' representations and warranties set forth in Section 2, no registration
under the Securities Act is required for the offer and sale of the Securities by
the Company to the Buyers as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the OTCBB.
(z) LISTING AND MAINTENANCE REQUIREMENTS. The
Company's Common Stock is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, and the Company has taken no action designed to terminate, or
which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company
received any notification that the SEC is contemplating terminating such
registration. The Company has not, in the twelve (12) months preceding the date
hereof, received notice from any Primary Market on which the Common Stock is or
has been listed or quoted to the effect that the Company is not in compliance
with the listing or maintenance requirements of such Primary Market. The Company
is, and has no reason to believe that it will not in the foreseeable future
continue to be, in material compliance with all such listing and maintenance
requirements.
(aa) MANIPULATION OF PRICE. The Company has not, and
to its knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any
compensation for soliciting purchases of, any of the Securities, or (iii) paid
or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company, other than, in the case of clauses
(ii) and (iii), compensation paid to the Company's placement agent in connection
with the placement of the Securities.
-12-
(bb) DILUTIVE EFFECT. The Company understands and
acknowledges that the number of Conversion Shares issuable upon conversion of
the Convertible Debentures and the Warrant Shares issuable upon exercise of the
Warrants will increase in certain circumstances. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Convertible Debentures in accordance with this Agreement and the Convertible
Debentures and its obligation to issue the Warrant Shares upon exercise of the
Warrants in accordance with this Agreement and the Warrants, in each case, is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the Company.
(cc) REPAYMENTS TO CERTAIN PERSONS. The Company
covenants and agrees that, with respect to its obligations to each of JMC
Marketing Services, LLC ("JMC"), Xxxx Xxxxxxx ("Xxxxxxx") and Xxxxx XxXxxxxxxx
("McSullivan") pursuant to a certain Settlement Agreement and Release by and
among the Company and such parties: (X) no further cash payments shall be made
by the Company to any of JMC, Xxxxxxx or McSullivan until such time as the
Company receives proceeds of at least $10 million in private placement
financings conducted subsequent to the date hereof, and the Board of Directors
of the Company (exclusive of Xxxxxxx and McSullivan, to the extent they occupy
seats on the Board) reasonably believes that the Company has sufficient capital
to finance operations for the 12 month period following such financings; and (Y)
any warrants issuable pursuant to such agreement shall not contain any cashless
exercise or registration rights provisions.
4. COVENANTS.
(a) BEST EFFORTS. Each party shall use its best
efforts to timely satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
(b) FORM D. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities, or obtain an exemption for the
Securities for sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to the Buyers on
or prior to the Closing Date.
(c) REPORTING STATUS. Until the earlier of (i) the
date as of which the Buyer(s) may sell all of the Securities without restriction
pursuant to Rule 144(k) promulgated under the Securities Act (or successor
thereto), or (ii) the date on which (A) the Buyers shall have sold all the
Securities and (B) none of the Convertible Debentures or Warrants are
outstanding (the "REGISTRATION PERIOD"), the Company shall file in a timely
manner all reports required to be filed with the SEC pursuant to the Exchange
Act and the regulations of the SEC thereunder, and the Company shall not
terminate its status as an issuer required to file reports under the Exchange
Act even if the Exchange Act or the rules and regulations thereunder would
otherwise permit such termination.
(d) USE OF PROCEEDS. The Company will use the
proceeds from the sale of the Convertible Debentures for general corporate and
working capital purposes.
-13-
(e) RESERVATION OF SHARES. On the date hereof, the
Company shall reserve for issuance to the Buyers 3,000,000 shares for issuance
upon conversions of the Convertible Dentures and 155,481 shares for issuance
upon exercise of the Warrants (collectively, the "SHARE RESERVE"). The Company
represents that it has sufficient authorized and unissued shares of Common Stock
available to create the Share Reserve after considering all other commitments
that may require the issuance of Common Stock. The Company shall take all action
reasonably necessary to at all times have authorized, and reserved for the
purpose of issuance, such number of shares of Common Stock as shall be necessary
to effect the full conversion of the Convertible Debentures and the full
exercise of the Warrants. If at any time the Share Reserve is insufficient to
effect the full conversion of the Convertible Debentures or the full exercise of
the Warrants, the Company shall increase the Share Reserve accordingly. If the
Company does not have sufficient authorized and unissued shares of Common Stock
available to increase the Share Reserve, the Company shall call and hold a
special meeting of the shareholders within thirty (30) days of such occurrence,
for the sole purpose of increasing the number of shares authorized. The
Company's management shall recommend to the shareholders to vote in favor of
increasing the number of shares of Common Stock authorized. Management shall
also vote all of its shares in favor of increasing the number of authorized
shares of Common Stock.
(f) LISTINGS OR QUOTATION. The Company's Common Stock
shall be listed or quoted for trading on any of (a) the American Stock Exchange,
(b) New York Stock Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq
Capital Market, or (e) the Nasdaq OTC Bulletin Board ("OTCBB") (each, a "PRIMARY
MARKET"). The Company shall promptly secure the listing of all of the
Registrable Securities (as defined in the Registration Rights Agreement) upon
each national securities exchange and automated quotation system, if any, upon
which the Common Stock is then listed (subject to official notice of issuance)
and shall maintain such listing of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents.
(g) Fees and Expenses.
(i) Each of the Company and the Buyer(s)
shall pay all costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution and delivery of the
Transaction Documents. The Company shall pay Yorkville Advisors LLC a fee equal
to four percent (4%) of the Purchase Price which shall be paid directly from the
gross proceeds of the Closing.
(ii) The Company shall pay a structuring fee
to Yorkville Advisors LLC of Fifteen Thousand Dollars ($15,000), which shall be
paid directly from the proceeds of the Closing.
(h) CORPORATE EXISTENCE. So long as at least $100,000
in principal of the Convertible Debentures remains outstanding, the Company
shall not directly or indirectly consummate any merger, reorganization,
restructuring, reverse stock split consolidation, sale of all or substantially
all of the Company's assets or any similar transaction or related transactions
(each such transaction, an "ORGANIZATIONAL CHANGE") unless, prior to the
consummation an Organizational Change, the Company obtains the written consent
-14-
of each Buyer not to be unreasonably withheld. In any such case, the Company
will make appropriate provision with respect to such holders' rights and
interests to insure that the provisions of this Section 4(h) will thereafter be
applicable to the Convertible Debentures.
(i) TRANSACTIONS WITH AFFILIATES. So long as at least
$100,000 in principal of the Convertible Debentures is outstanding, the Company
shall not, and shall cause each of its subsidiaries not to, enter into, amend,
modify or supplement, or permit any subsidiary to enter into, amend, modify or
supplement any agreement, transaction, commitment, or arrangement with any of
its or any subsidiary's officers, directors, person who were officers or
directors at any time during the previous two (2) years, stockholders who
beneficially own five percent (5%) or more of the Common Stock, or Affiliates
(as defined below) or with any individual related by blood, marriage, or
adoption to any such individual or with any entity in which any such entity or
individual owns a five percent (5%) or more beneficial interest (each a "RELATED
PARTY"), except for (a) customary employment arrangements and benefit programs
on reasonable terms, (b) any investment in an Affiliate of the Company, (c) any
agreement, transaction, commitment, or arrangement on an arms-length basis on
terms no less favorable than terms which would have been obtainable from a
person other than such Related Party, (d) any agreement, transaction,
commitment, or arrangement which is approved by a majority of the disinterested
directors of the Company; for purposes hereof, any director who is also an
officer of the Company or any subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment, or arrangement. "AFFILIATE" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a ten percent (10%) or more equity interest in that person or entity,
(ii) has ten percent (10%) or more common ownership with that person or entity,
(iii) controls that person or entity, or (iv) shares common control with that
person or entity. "CONTROL" or "CONTROLS" for purposes hereof means that a
person or entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.
(j) TRANSFER AGENT. The Company covenants and agrees
that, in the event that the Company's agency relationship with the transfer
agent should be terminated for any reason prior to a date which is two (2) years
after the Closing Date, the Company shall immediately appoint a new transfer
agent and shall require that the new transfer agent execute and agree to be
bound by the terms of the Irrevocable Transfer Agent Instructions (as defined
herein).
(k) RESTRICTION ON ISSUANCE OF THE CAPITAL STOCK. So
long as at least $100,000 in principal of the Convertible Debentures is
outstanding, the Company shall not, without the prior written consent of the
Buyer(s), (i) issue or sell shares of Common Stock or Preferred Stock without
consideration or for a consideration per share less than the bid price of the
Common Stock determined immediately prior to its issuance, (ii) issue any
preferred stock, warrant, option, right, contract, call, or other security or
instrument granting the holder thereof the right to acquire Common Stock without
consideration or for a consideration less than such Common Stock's Bid Price
determined immediately prior to its issuance, or (iii) file any registration
statement on Form S-8, except to register securities to be issued under the
Company's Stock Incentive Plan in effect.
-15-
(l) Neither the Buyer(s) nor any of its affiliates
have an open short position in the Common Stock of the Company, and the Buyer(s)
agrees that it shall not, and that it will cause its affiliates not to, engage
in any short sales of or hedging transactions with respect to the Common Stock
as long as any Convertible Debentures shall remain outstanding.
(m) ADDITIONAL REGISTRATION STATEMENTS. Until the
effective date of the initial Registration Statement, the Company will not file
a registration statement under the Securities Act relating to securities that
does not include the Securities.
(n) REVIEW OF PUBLIC DISCLOSURES. All SEC filings
(including, without limitation, all filings required under the Exchange Act,
which include Forms 10-Q and 10-QSB, 10-K and 10K-SB, 8-K, etc) and other public
disclosures made by the Company, including, without limitation, all press
releases, investor relations materials, and scripts of analysts meetings and
calls, shall be reviewed and approved for release by the Company's attorneys
and, if containing financial information, the Company's independent certified
public accountants.
(o) DISCLOSURE OF TRANSACTION. Within four business
days following the date of this Agreement, the Company shall file a Current
Report on Form 8-K describing the terms of the transactions contemplated by the
Transaction Documents in the form required by the Exchange Act and attaching the
material Transaction Documents (including, without limitation, this Agreement,
the form of the Convertible Debenture, the form of Warrant and the form of the
Registration Rights Agreement) as exhibits to such filing.
(p) Repayment of Outstanding Debentures. In the event
the Company closes on any debt or equity financing of at least $5 million (net
of offering fees and commissions) after the date hereof with either The Chart
Group (the "Chart Financing") or Westminster Securities Corporation (the
"Westminster Financing"), or any combination of the two, the Company shall remit
to the buyer a total of $2.0 million out of the proceeds received in the Chart
Financing and a total of $3.0 million out of proceeds received in the
Westminster Financing, which proceeds shall first apply to any amounts
outstanding under this Convertible Debenture, then to amounts outstanding under
previously issued and outstanding debentures held by the Buyer. The obligations
of the Company pursuant to this Section 4(p) shall survive the repayment of the
Convertible Debenture.
(q) If at any time while the Convertible Debenture or
the Warrants remain outstanding there is not an effective registration statement
covering all of the shares of Common Stock underlying the Convertible Debenture
and the Warrants, and the Company shall determine to prepare and file with the
SEC a registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act), then the Company shall send to each Buyer a written notice of such
determination and, if within fifteen (15) days after the date of such notice,
any such Buyer shall so request in writing, the Company shall include in such
registration statement all or any part of such shares of Common Stock underlying
the Convertible Debenture and the Warrants such Buyer requests to be registered;
PROVIDED, HOWEVER, that, the Company shall not be required to register any
shares pursuant to this Section 4(q) that are eligible for resale pursuant to
Rule 144(k) promulgated under the Securities Act or that are the subject of a
then effective registration statement.
-16-
5. TRANSFER AGENT INSTRUCTIONS.
(a) The Company shall issue the Irrevocable Transfer
Agent Instructions to its transfer agent, and any subsequent transfer agent,
irrevocably appointing Xxxxx Xxxxxxxx, Esq. as the Company's agent for purpose
instructing its transfer agent to issue certificates or credit shares to the
applicable balance accounts at The Deposity Trust Company ("DTC"), registered in
the name of each Buyer or its respective nominee(s), for the Conversion Shares
and the Warrant Shares issued upon conversion of the Convertible Debentures or
exercise of the Warrants as specified from time to time by each Buyer to the
Company upon conversion of the Convertible Debentures or exercise of the
Warrants. As long as at least $100,000 in principal of the Convertible
Debentures issued under this Agreement remains outstanding, the Company shall
not change its transfer agent without the express written consent of the Buyers,
not to be unreasonably withheld by the Buyers in their sole discretion. The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(g) hereof (in the case of the Conversion Shares or
Warrant Shares prior to registration of such shares under the Securities Act)
will be given by the Company to its transfer agent, and that the Securities
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the other Transaction
Documents. If a Buyer effects a sale, assignment or transfer of the Securities
in accordance with Section 2(f), the Company shall promptly instruct its
transfer agent to issue one or more certificates or credit shares to the
applicable balance accounts at DTC in such name and in such denominations as
specified by such Buyer to effect such sale, transfer or assignment and, with
respect to any transfer, shall permit the transfer. In the event that such sale,
assignment or transfer involves Conversion Shares or Warrant Shares sold,
assigned or transferred pursuant to an effective registration statement or
pursuant to Rule 144, the transfer agent shall issue such Securities to the
Buyer, assignee or transferee, as the case may be, without any restrictive
legend. Nothing in this Section 5 shall affect in any way the Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of Conversion Shares. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyer by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5, that the
Buyer(s) shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Convertible Debentures to the Buyer(s) at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:
(a) Each Buyer shall have executed the Transaction
Documents and delivered them to the Company.
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(b) The Buyer(s) shall have delivered to the Company
the Purchase Price for the Convertible Debentures and Warrants in the respective
amounts as set forth next to each Buyer as set forth on Schedule I attached
hereto, minus any fees to be paid directly from the proceeds the Closing as set
forth herein, by wire transfer of immediately available U.S. funds pursuant to
the wire instructions provided by the Company.
(c) The representations and warranties of the
Buyer(s) shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and the
Buyer(s) shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Buyer(s) at or prior to the Closing
Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
(a) The obligation of the Buyer(s) hereunder to
purchase the Convertible Debentures at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions:
(i) The Company shall have executed the
Transaction Documents and delivered the same to the Buyers.
(ii) The Common Stock shall be authorized
for quotation or trading on the Primary Market, trading in the Common Stock
shall not have been suspended for any reason, and all the Conversion Shares
issuable upon the conversion of the Convertible Debentures shall be approved for
listing or trading on the Primary Market.
(iii) The representations and warranties of
the Company shall be true and correct in all material respects (except to the
extent that any of such representations and warranties is already qualified as
to materiality in Section 3 above, in which case, such representations and
warranties shall be true and correct without further qualification) as of the
date when made and as of the Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date) and the
Company shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date.
(iv) The Company shall have executed and
delivered to the Buyer(s) the Convertible Debentures and Warrants in the
respective amounts set forth opposite each Buyer's name on Schedule I attached
hereto.
(v) The Buyers shall have received an
opinion of counsel from counsel to the Company in a form satisfactory to the
Buyers.
(vi) The Company shall have provided to the
Buyers a true copy of a certificate of good standing evidencing the formation
and good standing of the Company from the secretary of state (or comparable
office) from the jurisdiction in which the Company is incorporated, as of a date
within 10 days of the Closing Date.
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(vii) The Company shall have filed a form
UCC-1 or such other forms as may be required to perfect the Buyer's interest in
the Pledged Property as detailed in the Security Agreement dated the date hereof
and provided proof of such filing to the Buyer(s).
(viii) The Company shall have created the
Share Reserve.
(ix) The Irrevocable Transfer Agent
Instructions, in form and substance satisfactory to the Buyer, shall have been
delivered to and acknowledged in writing by the Company's transfer agent.
8. INDEMNIFICATION.
(a) In consideration of the Buyer's execution and
delivery of this Agreement and acquiring the Convertible Debentures and the
Conversion Shares hereunder, and in addition to all of the Company's other
obligations under this Agreement, the Company shall defend, protect, indemnify
and hold harmless the Buyer(s) and each other holder of the Convertible
Debentures and the Conversion Shares, and all of their officers, directors,
employees and agents (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively,
the "BUYER INDEMNITEES") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Buyer
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"INDEMNIFIED LIABILITIES"), incurred by the Buyer Indemnitees or any of them as
a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in this Agreement,
the Convertible Debentures or the other Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement, or the other Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby, or (c) any cause of
action, suit or claim brought or made against such Buyer Indemnitee and arising
out of or resulting from the execution, delivery, performance or enforcement of
this Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the parties hereto, any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Convertible Debentures or the status of the Buyer or holder of the
Convertible Debentures or the Conversion Shares, as a Buyer of Convertible
Debentures in the Company. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law. This indemnification
shall not apply to any Indemnified Liabilities arising out of the willful or
reckless actions or inactions of any Buyer Indemnitee.
(b) In consideration of the Company's execution and
delivery of this Agreement, and in addition to all of the Buyer's other
obligations under this Agreement, the Buyer shall defend, protect, indemnify and
hold harmless the Company and all of its officers, directors, employees and
agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "COMPANY
INDEMNITEES") from and against any and all Indemnified Liabilities incurred by
the Indemnitees or any of them as a result of, or arising out of, or relating to
-19-
(a) any misrepresentation or breach of any representation or warranty made by
the Buyer(s) in this Agreement, the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby executed by
the Buyer, (b) any breach of any covenant, agreement or obligation of the
Buyer(s) contained in this Agreement, the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby executed by
the Buyer, or (c) any cause of action, suit or claim brought or made against
such Company Indemnitee based on material misrepresentations or due to a
material breach and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement, the Transaction Documents or any
other instrument, document or agreement executed pursuant hereto by any of the
parties hereto. To the extent that the foregoing undertaking by each Buyer may
be unenforceable for any reason, each Buyer shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law. This indemnification shall not apply to any
Indemnified Liabilities arising out of the willful or reckless actions or
inactions of any Company Indemnitee.
9. GOVERNING LAW: MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed
by and interpreted in accordance with the laws of the State of New Jersey
without regard to the principles of conflict of laws. The parties further agree
that any action between them shall be heard in Xxxxxx County, New Jersey, and
expressly consent to the jurisdiction and venue of the Superior Court of New
Jersey, sitting in Xxxxxx County and the United States District Court for the
District of New Jersey sitting in Newark, New Jersey for the adjudication of any
civil action asserted pursuant to this Paragraph.
(b) COUNTERPARTS. This Agreement may be executed in
two or more identical counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
(c) HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) SEVERABILITY. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
(e) ENTIRE AGREEMENT, AMENDMENTS. This Agreement
supersedes all other prior oral or written agreements between the Buyer(s), the
Company, their affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
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(f) NOTICES. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon confirmation of receipt, when sent
by facsimile; (iii) three (3) days after being sent by U.S. certified mail,
return receipt requested, or (iv) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company, to: U.S. Helicopter Corporation
6 East River Piers
Downtown Manhattan Heliport
Xxx Xxxx, XX 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Gallagher, Briody, and Xxxxxx
Princeton Xxxxxxxxx Village
000 Xxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Buyer(s), to its address and facsimile number on Schedule I,
with copies to the Buyer's counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written notice to the other party of any change in
address or facsimile number.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns. Neither the Company nor any Buyer shall assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other party hereto.
(h) NO THIRD PARTY BENEFICIARIES. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
(i) SURVIVAL. Unless this Agreement is terminated
under Section 9(l), the representations and warranties of the Company and the
Buyer(s) contained in Sections 2 and 3, the agreements and covenants set forth
in Sections 4, 5 and 9, and the indemnification provisions set forth in Section
8, shall survive the Closing for a period of two (2) years following the date on
which the Convertible Debentures are converted in full. The Buyer(s) shall be
responsible only for its own representations, warranties, agreements and
covenants hereunder.
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(j) PUBLICITY. The Company and the Buyer(s) shall
have the right to approve, before issuance any press release or any other public
statement with respect to the transactions contemplated hereby made by any
party; provided, however, that the Company shall be entitled, without the prior
approval of the Buyer(s), to issue any press release or other public disclosure
with respect to such transactions required under applicable securities or other
laws or regulations (the Company shall use its best efforts to consult the
Buyer(s) in connection with any such press release or other public disclosure
prior to its release and Buyer(s) shall be provided with a copy thereof upon
release thereof).
(k) FURTHER ASSURANCES. Each party shall do and
perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
(l) TERMINATION. In the event that the First Closing
shall not have occurred with respect to the Buyers on or before five (5)
business days from the date hereof due to the Company's or the Buyer's failure
to satisfy the conditions set forth in Sections 6 and 7 above (and the
non-breaching party's failure to waive such unsatisfied condition(s)), the
non-breaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date without
liability of any party to any other party; provided, however, that if this
Agreement is terminated by the Company pursuant to this Section 9(l), the
Company shall remain obligated to reimburse the Buyer(s) for the fees and
expenses of Yorkville Advisors LLC described in Section 4(g) above.
(m) BROKERAGE. The Company represents that no broker,
agent, finder or other party, including officers, directors, employees, or
affiliates of the Company (collectively, "BROKER") has been retained by it in
connection with the transactions contemplated hereby and that no fee or
commission (in any form, whether cash, notes, stock, warrants, or convertible
securities) has been agreed by the Company, or will be paid by the Company to
any Broker for or on account of the transactions contemplated hereby.
(n) NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
COMPANY:
U.S. HELICOPTER CORPORATION
By: /S/ XXXX X. XXXXXX
--- ------------------
Name: Xxxx X. Xxxxxx
Title: Chief Executive Officer
BUYERS:
CORNELL CAPITAL PARTNERS, L.P.
By: Yorkville Advisors, LLC
Its: Investment Manager
By: /S/ XXXXXX XXXXX
--- ----------------
Name: Xxxxxx Xxxxx
Its: Managing Partner
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SCHEDULE I
SCHEDULE OF BUYERS
(1) (2) (3) (4) (5) (6) (7) (8)
BUYER SUBSCRIPTION AMOUNT NUMBER OF WARRANT LEGAL REPRESENTATIVE'S ADDRESS
SHARES AND FACSIMILE NUMBER
FIRST CLOSING FIRST CLOSING
CORNELL CAPITAL PARTNERS, L.P. $1,100,000 1. 47,827 (exercise Xxxx Xxxxx, Esq.
price @ $1.15 per 000 Xxxxxx Xxxxxx, Xxxxx 0000
000 Xxxxxx Xxxxxx, share) Xxxxxx Xxxx, Xxx Xxxxxx 00000
Suite 3700 2. 40,741 (exercise Telephone: (000) 000-0000
Xxxxxx Xxxx, XX 00000 price @ $1.35 per Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxx share)
Telephone: (000) 000-0000 3. 35,484 (exercise
Facsimile: (000) 000-0000 price @ $1.55 per
Residence: Cayman Islands share)
4. 31,429 (exercise
price @ $1.75 per
share)
