EXHIBIT 10.58
DATED: MARCH 31, 2006
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
No. CCP-1 $6,000,000
U.S. HELICOPTER CORPORATION
SECURED CONVERTIBLE DEBENTURE
DUE: MARCH 31, 2009
This Secured Convertible Debenture (the "Debenture") is issued by U.S.
HELICOPTER CORPORATION, a Delaware corporation (the "Obligor"), to CORNELL
CAPITAL PARTNERS, LP (the "Holder"), pursuant to that certain Securities
Purchase Agreement (the "Securities Purchase Agreement") of even date herewith.
FOR VALUE RECEIVED, the Obligor hereby promises to pay to the Holder or
its successors and assigns the principal sum of Six Million Dollars ($6,000,000)
together with accrued but unpaid interest on or before March 31, 2009 (the
"Maturity Date") in accordance with the following terms:
INTEREST. Interest shall accrue on the outstanding principal balance
hereof at an annual rate equal to eight percent (8%). Interest shall be
calculated on the basis of a 365-day year and the actual number of days elapsed,
to the extent permitted by applicable law. Interest hereunder shall be paid to
the Holder or its assignee on the Maturity Date in whose name this Debenture is
registered on the records of the Obligor regarding registration and transfers of
Debentures (the "Debenture Register") and shall be payable in Common Stock at
the rate equal to the Conversion Price in effect at the time of payment.
PAYMENT AT MATURITY. The Obligor shall pay all outstanding principal and
interest on this Debenture on the Maturity Date. No payments of any amounts of
outstanding principal or accrued interest shall be made by the Obligor prior to
the Maturity Date.
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SECURITY AGREEMENTS. This Debenture is secured by an Amended and Restated
Security Agreement of even date herewith between the Obligor and the Holder (the
"Security Agreement").
This Debenture is subject to the following additional provisions:
SECTION 1. This Debenture is exchangeable for an equal aggregate principal
amount of Debentures of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such
registration of transfer or exchange.
SECTION 2. Events of Default.
(a) An "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) Any default in the payment of the principal of, interest on or
other charges in respect of this Debenture, free of any claim of subordination,
as and when the same shall become due and payable (whether on a Conversion Date
or the Maturity Date or by acceleration or otherwise);
(ii) The Obligor or any Material Subsidiary (as defined in Section
5) of the Obligor shall commence, or there shall be commenced against the
Obligor or any Material Subsidiary under any applicable bankruptcy or insolvency
laws as now or hereafter in effect or any successor thereto, or the Obligor or
any Material Subsidiary commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to the Obligor or any Material Subsidiary or there is commenced
against the Obligor or any Material Subsidiary any such bankruptcy, insolvency
or other proceeding which remains undismissed for a period of 61 days; or the
Obligor or any Material Subsidiary is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding is entered;
or the Obligor or any Material Subsidiary suffers any appointment of any
custodian, private or court appointed receiver or the like for it or any
substantial part of its property which continues undischarged or unstayed for a
period of sixty one (61) days; or the Obligor or any Material Subsidiary makes a
general assignment for the benefit of creditors; or the Obligor or any Material
Subsidiary shall fail to pay, or shall state that it is unable to pay, or shall
be unable to pay, its debts generally as they become due; or the Obligor or any
Material Subsidiary shall call a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of its debts; or the
Obligor or any Material Subsidiary shall by any act or failure to act expressly
indicate its consent to, approval of or acquiescence in any of the foregoing; or
any corporate or other action is taken by the Obligor or any Material Subsidiary
for the purpose of effecting any of the foregoing;
(iii) The Obligor or any subsidiary of the Obligor shall default in
any of its obligations under any other debenture or any mortgage, credit
agreement or other facility, indenture agreement, factoring agreement or other
instrument under which there may be issued, or by which there may be secured or
evidenced any indebtedness for borrowed money or money due under any long term
leasing or factoring arrangement of the Obligor or any subsidiary of the Obligor
in an amount exceeding $100,000, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such indebtedness becoming
or being declared due and payable prior to the date on which it would otherwise
become due and payable (the "Accelerated Due Date") and such default is not
cured within ten days of the Accelerated Due Date;
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(iv) The Common Stock shall cease to be quoted for trading or
listing for trading on either the Nasdaq OTC Bulletin Board ("OTC"), or if then
listed on Nasdaq Capital Market, --- New York Stock Exchange, American Stock
Exchange or the Nasdaq National Market (each, a "Subsequent Market") shall cease
to be quoted for trading or listing on such Subsequent Market and shall not
again be quoted or listed for trading thereon within five (5) Trading Days of
such delisting;
(v) A Change of Control Transaction (as defined in SECTION 5) shall
have occurred;
(vi) The Obligor shall fail to file the Underlying Shares
Registration Statement (as defined in SECTION 5) with the Commission (as defined
in SECTION 5), or the Underlying Shares Registration Statement shall not have
been declared effective by the Commission, in each case within the time periods
set forth in the Investor Registration Rights Agreement ("Registration Rights
Agreement") of even date herewith between the Obligor and the Holder;
(vii) If the effectiveness of the Underlying Shares Registration
Statement lapses for any reason or the Holder shall not be permitted to resell
the shares of Common Stock underlying this Debenture under the Underlying Shares
Registration Statement, in either case, for more than five (5) consecutive
Trading Days or an aggregate of eight Trading Days (which need not be
consecutive Trading Days);
(viii) The Obligor shall fail for any reason to deliver Common Stock
certificates to a Holder prior to the fifth (5th) Trading Day after a Conversion
Date or the Obligor shall provide notice to the Holder, including by way of
public announcement, at any time, of its intention not to comply with requests
for conversions of this Debenture in accordance with the terms hereof;
(ix) The Obligor shall fail for any reason to deliver the payment in
cash pursuant to a Buy-In (as defined herein) within three (3) days after notice
is claimed delivered hereunder;
(x) The Obligor shall fail after ten (10) days written notice
thereof by the Holder to observe or perform any other covenant, agreement or
warranty contained in, or otherwise commit any breach or default of any
provision of this Debenture (except as may be covered by SECTION 2(A)(I) THROUGH
2(A)(IX) hereof) or any Transaction Document (as defined in SECTION 5) which is
not cured with in the time prescribed;
(b) During the time that any portion of this Debenture is outstanding, if
any Event of Default has occurred, the full principal amount of this Debenture,
together with interest and other amounts owing in respect thereof, to the date
of acceleration shall become at the Holder's election, immediately due and
payable in cash, PROVIDED HOWEVER, the Holder may request (but shall have no
obligation to request) payment of such amounts in Common Stock of the Obligor.
In addition to any other remedies, the Holder shall have the right (but not the
obligation) to convert this Debenture at any time after (x) an Event of Default
or (y) the Maturity Date at the Conversion Price then in-effect. The Holder need
not provide and the Obligor hereby waives any presentment, demand, protest or
other notice of any kind, and the Holder may immediately and without expiration
of any grace period enforce any and all of its rights and remedies hereunder and
all other remedies available to it under applicable law. Such declaration may be
rescinded and annulled by Xxxxxx at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon. Upon an Event of Default, notwithstanding any
other provision of this Debenture or any Transaction Document, the Holder shall
have no obligation to comply with or adhere to any limitations, if any, on the
conversion of this Debenture or the sale of the Underlying Shares.
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SECTION 3. Conversion.
(a) Conversion at Option of Holder.
(i) This Debenture shall be convertible into shares of Common Stock
at the option of the Holder, in whole or in part at any time and from time to
time, after the Original Issue Date (as defined in SECTION 5) (subject to the
limitations on conversion set forth in SECTION 3(B) hereof). The number of
shares of Common Stock issuable upon a conversion hereunder equals the quotient
obtained by dividing (x) the outstanding amount of this Debenture to be
converted by (y) the Conversion Price (as defined in SECTION 3(C)(I)). The
Obligor shall deliver Common Stock certificates to the Holder prior to the Fifth
(5th) Trading Day after a Conversion Date.
(ii) Notwithstanding anything to the contrary contained herein, if
on any Conversion Date: (1) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury stock,
is insufficient to pay principal and interest hereunder in shares of Common
Stock; (2) the Common Stock is not listed or quoted for trading on the OTC or on
a Subsequent Market; (3) the Obligor has failed to timely satisfy its
conversion; or (4) the issuance of such shares of Common Stock would result in a
violation of SECTION 3(B), then, at the option of the Holder, the Obligor, in
lieu of delivering shares of Common Stock pursuant to SECTION 3(A)(I), shall
deliver, within three (3) Trading Days of each applicable Conversion Date, an
amount in cash equal to the product of the outstanding principal amount to be
converted plus any interest due therein divided by the Conversion Price, chosen
by the Holder, and multiplied by the highest closing price of the stock from
date of the conversion notice till the date that such cash payment is made.
Further, if the Obligor shall not have delivered any cash due in respect
of conversion of this Debenture or as payment of interest thereon by the fifth
(5th) Trading Day after the Conversion Date, the Holder may, by notice to the
Obligor, require the Obligor to issue shares of Common Stock pursuant to SECTION
3(C), except that for such purpose the Conversion Price applicable thereto shall
be the lesser of the Conversion Price on the Conversion Date and the Conversion
Price on the date of such Holder demand. Any such shares will be subject to the
provisions of this Section.
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(iii) The Holder shall effect conversions by delivering to the
Obligor a completed notice in the form attached hereto as Exhibit A (a
"Conversion Notice"). The date on which a Conversion Notice is delivered is the
"Conversion Date." Unless the Holder is converting the entire principal amount
outstanding under this Debenture, the Holder is not required to physically
surrender this Debenture to the Obligor in order to effect conversions.
Conversions hereunder shall have the effect of lowering the outstanding
principal amount of this Debenture plus all accrued and unpaid interest thereon
in an amount equal to the applicable conversion. The Holder and the Obligor
shall maintain records showing the principal amount converted and the date of
such conversions. In the event of any dispute or discrepancy, the records of the
Holder shall be controlling and determinative in the absence of manifest error.
(b) Certain Conversion and Sales Restrictions.
(i) Limitation of Conversion by the Holder. A Holder may not convert
this Debenture or receive shares of Common Stock as payment of interest
hereunder to the extent such conversion or receipt of such interest payment
would (x) result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the
then issued and outstanding shares of Common Stock, including shares issuable
upon conversion of, and payment of interest on, this Debenture held by such
Holder after application of this Section, or (y) result in a violation of the
U.S. Department of Transportation foreign ownership regulations. Since the
Holder will not be obligated to report to the Obligor the number of shares of
Common Stock it may hold at the time of a conversion hereunder, unless the
conversion at issue would result in the issuance of shares of Common Stock in
excess of 4.99% of the then outstanding shares of Common Stock without regard to
any other shares which may be beneficially owned by the Holder or an affiliate
thereof, the Holder shall have the authority and obligation to determine whether
the restriction contained in this Section will limit any particular conversion
hereunder and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of the
principal amount of this Debenture is convertible shall be the responsibility
and obligation of the Holder. If the Holder has delivered a Conversion Notice
for a principal amount of this Debenture that, without regard to any other
shares that the Holder or its affiliates may beneficially own, would result in
the issuance in excess of the permitted amount hereunder, the Obligor shall
notify the Holder of this fact and shall honor the conversion for the maximum
principal amount permitted to be converted on such Conversion Date in accordance
with the periods described in SECTION 3(A)(I) and, at the option of the Holder,
either retain any principal amount tendered for conversion in excess of the
permitted amount hereunder for future conversions or return such excess
principal amount to the Holder. The provisions of SECTION 3(B)(I)(X) may be
waived by a Holder (but only as to itself and not to any other Holder) upon not
less than 65 days prior notice to the Obligor. Other Holders shall be unaffected
by any such waiver.
(ii) Limitation of Sales by the Holder. The Holder agrees that
during any Limitation Period (as defined herein) it shall limit its sales of
Common Stock it acquired upon conversions of this Debenture to no more than
$250,000 in any thirty (30) day period. A Limitation Period shall commence each
time that the Closing Bid Price of the Common Stock is less than $1.45 for five
consecutive Trading Days and shall continue until the Closing Bid Price of the
Common Stock is greater than $1.45 for five consecutive Trading Days. This
restriction shall apply only with respect to shares of Common Stock acquired by
the Holder upon conversions of this Debenture. Notwithstanding the forgoing,
this restriction shall not apply upon the occurrence of an Event of Default or
if waived in writing by the Obligor.
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(c) Conversion Price and Adjustments to Conversion Price.
(i) The conversion price in effect on any Conversion Date shall be
equal to the lesser of (a) $1.45 (the "Fixed Conversion Price") or (b) ninety
five percent (95%) of the lowest Volume Weighted Average Price of the Common
Stock during the thirty (30) trading days immediately preceding the Conversion
Date or the interest payment date, as applicable, as quoted by Bloomberg, LP
(the "Market Conversion Price"), but in no event less than $.001. The Fixed
Conversion Price and the Market Conversion Price are collectively referred to as
the "Conversion Price." The Conversion Price may be adjusted pursuant to the
other terms of this Debenture.
(ii) If the Obligor, at any time while this Debenture is
outstanding, shall (a) pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of shares, (c) combine
(including by way of reverse stock split) outstanding shares of Common Stock
into a smaller number of shares, or (d) issue by reclassification of shares of
the Common Stock any shares of capital stock of the Obligor, then the Fixed
Conversion Price shall be multiplied by a fraction of which the numerator shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding before such event and of which the denominator shall be the number
of shares of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification.
(iii) If the Obligor, at any time while this Debenture is
outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to the Holder) entitling them to subscribe for or purchase shares
of Common Stock at a price per share less than the Fixed Conversion Price, then
the Fixed Conversion Price shall be multiplied by a fraction, of which the
denominator shall be the number of shares of the Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such rights or
warrants (plus the number of additional shares of Common Stock offered for
subscription or purchase), and of which the numerator shall be the number of
shares of the Common Stock (excluding treasury shares, if any) outstanding on
the date of issuance of such rights or warrants, plus the number of shares which
the aggregate offering price of the total number of shares so offered would
purchase at the Fixed Conversion Price. Such adjustment shall be made whenever
such rights or warrants are issued, and shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
rights, options or warrants. However, upon the expiration of any such right,
option or warrant to purchase shares of the Common Stock the issuance of which
resulted in an adjustment in the Fixed Conversion Price pursuant to this
Section, if any such right, option or warrant shall expire and shall not have
been exercised, the Fixed Conversion Price shall immediately upon such
expiration be recomputed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting any other
adjustments in the Fixed Conversion Price made pursuant to the provisions of
this Section after the issuance of such rights or warrants) had the adjustment
of the Fixed Conversion Price made upon the issuance of such rights, options or
warrants been made on the basis of offering for subscription or purchase only
that number of shares of the Common Stock actually purchased upon the exercise
of such rights, options or warrants actually exercised.
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(iv) If the Obligor or any subsidiary thereof, as applicable, at any
time while this Debenture is outstanding, shall issue shares of Common Stock or
rights, warrants, options or other securities or debt that are convertible into
or exchangeable for shares of Common Stock ("Common Stock Equivalents")
entitling any Person to acquire shares of Common Stock other than Excluded
Securities, at a price per share less than the Fixed Conversion Price (if the
holder of the Common Stock or Common Stock Equivalent so issued shall at any
time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which is issued in connection with such
issuance, be entitled to receive shares of Common Stock at a price per share
which is less than the Fixed Conversion Price, such issuance shall be deemed to
have occurred for less than the Fixed Conversion Price), then, at the sole
option of the Holder, the Fixed Conversion Price shall be adjusted to mirror the
conversion, exchange or purchase price for such Common Stock or Common Stock
Equivalents (including any reset provisions thereof) at issue. Such adjustment
shall be made whenever such Common Stock or Common Stock Equivalents are issued.
The Obligor shall notify the Holder in writing, no later than one (1) business
day following the issuance of any Common Stock or Common Stock Equivalent
subject to this Section, indicating therein the applicable issuance price, or of
applicable reset price, exchange price, conversion price and other pricing
terms. No adjustment under this Section shall be made as a result of issuances
and exercises of options to purchase shares of Common Stock issued for
compensatory purposes pursuant to any of the Obligor's stock option or stock
purchase plans.
(v) If the Obligor, at any time while this Debenture is outstanding,
shall distribute to all holders of Common Stock (and not to the Holder)
evidences of its indebtedness or assets or rights or warrants to subscribe for
or purchase any security, then in each such case the Fixed Conversion Price at
which this Debenture shall thereafter be convertible shall be determined by
multiplying the Fixed Conversion Price in effect immediately prior to the record
date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Closing Bid
Price determined as of the record date mentioned above, and of which the
numerator shall be such Closing Bid Price on such record date less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holder of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
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(vi) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, the Holder shall have the right thereafter
to, at its option, (A) convert the then outstanding principal amount, together
with all accrued but unpaid interest and any other amounts then owing hereunder
in respect of this Debenture into the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of the Common Stock
following such reclassification or share exchange, and the Holder of this
Debenture shall be entitled upon such event to receive such amount of
securities, cash or property as the shares of the Common Stock of the Obligor
into which the then outstanding principal amount, together with all accrued but
unpaid interest and any other amounts then owing hereunder in respect of this
Debenture could have been converted immediately prior to such reclassification
or share exchange would have been entitled, or (B) require the Obligor to prepay
the outstanding principal amount of this Debenture, plus all interest and other
amounts due and payable thereon. The entire prepayment price shall be paid in
cash. This provision shall similarly apply to successive reclassifications or
share exchanges.
(vii) The Obligor shall at all times reserve and keep available out
of its authorized Common Stock the full number of shares of Common Stock
issuable upon conversion of all outstanding amounts under this Debenture; and
within three (3) Business Days following the receipt by the Obligor of a
Holder's notice that such minimum number of Underlying Shares is not so
reserved, the Obligor shall promptly reserve a sufficient number of shares of
Common Stock to comply with such requirement.
(viii) All calculations under this SECTION 3 shall be rounded up to
the nearest $0.001 or whole share.
(ix) Whenever the Conversion Price is adjusted pursuant to SECTION 3
hereof, the Obligor shall promptly mail to the Holder a notice setting forth the
Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.
(x) If (A) the Obligor shall declare a dividend (or any other
distribution) on the Common Stock; (B) the Obligor shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock; (C) the
Obligor shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders of the Obligor
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Obligor is a party, any sale or
transfer of all or substantially all of the assets of the Obligor, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; or (E) the Obligor shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Obligor; then, in each case, the Obligor shall cause to be filed at each office
or agency maintained for the purpose of conversion of this Debenture, and shall
cause to be mailed to the Holder at its last address as it shall appear upon the
stock books of the Obligor, at least twenty (20) calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, provided, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. The Holder is entitled to convert this Debenture during the
20-day calendar period commencing the date of such notice to the effective date
of the event triggering such notice.
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(xi) In case of any (1) merger or consolidation of the Obligor or
any subsidiary of the Obligor with or into another Person, or (2) sale by the
Obligor or any subsidiary of the Obligor of more than one-half of the assets of
the Obligor in one or a series of related transactions, a Holder shall have the
right to (A) exercise any rights under SECTION 2(B), (B) convert the aggregate
amount of this Debenture then outstanding into the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such merger, consolidation or sale, and such Holder shall
be entitled upon such event or series of related events to receive such amount
of securities, cash and property as the shares of Common Stock into which such
aggregate principal amount of this Debenture could have been converted
immediately prior to such merger, consolidation or sales would have been
entitled, or (C) in the case of a merger or consolidation, require the surviving
entity to issue to the Holder a convertible Debenture with a principal amount
equal to the aggregate principal amount of this Debenture then held by such
Holder, plus all accrued and unpaid interest and other amounts owing thereon,
which such newly issued convertible Debenture shall have terms identical
(including with respect to conversion) to the terms of this Debenture, and shall
be entitled to all of the rights and privileges of the Holder of this Debenture
set forth herein and the agreements pursuant to which this Debentures were
issued. In the case of clause (C), the conversion price applicable for the newly
issued shares of convertible preferred stock or convertible Debentures shall be
based upon the amount of securities, cash and property that each share of Common
Stock would receive in such transaction and the Conversion Price in effect
immediately prior to the effectiveness or closing date for such transaction. The
terms of any such merger, sale or consolidation shall include such terms so as
to continue to give the Holder the right to receive the securities, cash and
property set forth in this Section upon any conversion or redemption following
such event. This provision shall similarly apply to successive such events.
(d) Other Provisions.
(i) The Obligor covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock solely for
the purpose of issuance upon conversion of this Debenture and payment of
interest on this Debenture, each as herein provided, free from preemptive rights
or any other actual contingent purchase rights of persons other than the Holder,
not less than such number of shares of the Common Stock as shall (subject to any
additional requirements of the Obligor as to reservation of such shares set
forth in this Debenture) be issuable (taking into account the adjustments and
restrictions of SECTIONS 2(B) AND 3(C)) upon the conversion of the outstanding
principal amount of this Debenture and payment of interest hereunder. The
Obligor covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid,
nonassessable and, if the Underlying Shares Registration Statement has been
declared effective under the Securities Act, registered for public sale in
accordance with such Underlying Shares Registration Statement.
9
(ii) Upon a conversion hereunder the Obligor shall not be required
to issue stock certificates representing fractions of shares of the Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Closing Bid Price at such time. If the
Obligor elects not, or is unable, to make such a cash payment, the Holder shall
be entitled to receive, in lieu of the final fraction of a share, one whole
share of Common Stock.
(iii) The issuance of certificates for shares of the Common Stock on
conversion of this Debenture shall be made without charge to the Holder thereof
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate, provided that the Obligor shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name
other than that of the Holder of such Debenture so converted and the Obligor
shall not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Obligor
the amount of such tax or shall have established to the satisfaction of the
Obligor that such tax has been paid.
(iv) Nothing herein shall limit a Holder's right to pursue actual
damages or declare an Event of Default pursuant to SECTION 2 herein for the
Obligor 's failure to deliver certificates representing shares of Common Stock
upon conversion within the period specified herein and such Holder shall have
the right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief,
in each case without the need to post a bond or provide other security. The
exercise of any such rights shall not prohibit the Holder from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.
In addition to any other rights available to the Holder, if the
Obligor fails to deliver to the Holder such certificate or certificates pursuant
to SECTION 3(A)(I) by the fifth (5th) Trading Day after the Conversion Date, and
if after such fifth (5th) Trading Day the Holder purchases (in an open market
transaction or otherwise) Common Stock to deliver in satisfaction of a sale by
such Holder of the Underlying Shares which the Holder anticipated receiving upon
such conversion (a "Buy-In"), then the Obligor shall (A) pay in cash to the
Holder (in addition to any remedies available to or elected by the Holder) the
amount by which (x) the Holder's total purchase price (including brokerage
commissions, if any) for the Common Stock so purchased exceeds (y) the product
of (1) the aggregate number of shares of Common Stock that such Holder
anticipated receiving from the conversion at issue multiplied by (2) the market
price of the Common Stock at the time of the sale giving rise to such purchase
obligation and (B) at the option of the Holder, either reissue a Debenture in
the principal amount equal to the principal amount of the attempted conversion
or deliver to the Holder the number of shares of Common Stock that would have
been issued had the Obligor timely complied with its delivery requirements under
SECTION 3(A)(I). For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of Debentures with respect to which the market price of the
Underlying Shares on the date of conversion was a total of $10,000 under clause
(A) of the immediately preceding sentence, the Obligor shall be required to pay
the Holder $1,000. The Holder shall provide the Obligor written notice
indicating the amounts payable to the Holder in respect of the Buy-In.
10
(v) The Obligor shall reserve 20% of the Foreign Ownership Pool (as
herein defined) for the Holder (the "Holder Reserve") and shall not issue any
shares of Common Stock to any third party that would decrease the number of
shares of Common Stock in the Holder Reserve. The "Foreign Ownership Pool" means
the maximum number of shares of Common Stock that may be owned by persons or
entities that are non-U.S. citizens, as determined pursuant to the U.S.
Department of Transportation foreign ownership regulations. (BY WAY OF EXAMPLE,
IF THE FOREIGN OWNERSHIP POOL EQUALS 24,999 SHARES OF COMMON STOCK, THE BUYER
RESERVE SHALL BE 4,999 SHARES.)
SECTION 4. Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms hereof must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one (1) trading 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
0 Xxxx Xxxxx Piers
Downtown Manhattan Heliport
New York, NY 10004
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxxxx, Xxxxxx, 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 Holder: Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
11
With a copy to: Xxxx Xxxxx, Esq.
000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) business days prior to the effectiveness of such
change. Written confirmation of receipt (i) given by the recipient of such
notice, consent, waiver or other communication, (ii) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (iii) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
SECTION 5. Definitions. For the purposes hereof, the following terms shall
have the following meanings:
"Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday in the United States or a day on which banking
institutions are authorized or required by law or other government action to
close.
"Change of Control Transaction" means the occurrence of (a) an acquisition
after the date hereof by an individual or legal entity or "group" (as described
in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control
(whether through legal or beneficial ownership of capital stock of the Obligor,
by contract or otherwise) of in excess of fifty percent (50%) of the voting
securities of the Obligor (except that the acquisition of voting securities by
the Holder shall not constitute a Change of Control Transaction for purposes
hereof), (b) a replacement at one time or over time of more than one-half of the
members of the board of directors of the Obligor which is not approved by a
majority of those individuals who are members of the board of directors on the
date hereof (the "Current Directors") or by those individuals who are serving as
members of the board of directors on any date whose nomination to the board of
directors was approved by a majority of the members of the board of the Current
Directors, (c) the merger or consolidation of the Obligor or any Material
Subsidiary or sale of fifty percent (50%) or more of the assets of the Obligor
or any Material Subsidiary in one or a series of related transactions with or
into another entity, or (d) the execution by the Obligor of an agreement to
which the Obligor is a party or by which it is bound, providing for any of the
events set forth above in (a), (b) or (c).
"Closing Bid Price" means the closing bid price of Common Stock as quoted
on the Principal Market (as reported by Bloomberg Financial Markets through its
"Volume at Price" function).
"Commission" means the Securities and Exchange Commission.
12
"Common Stock" means the common stock, par value $.001, of the Obligor and
stock of any other class into which such shares may hereafter be changed or
reclassified.
"Conversion Date" shall mean the date upon which the Holder gives the
Obligor notice of their intention to effectuate a conversion of this Debenture
into shares of the Company's Common Stock as outlined herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Securities" means (a) shares of Common Stock issued in
connection with any employee benefit plan which has been approved by the Board
of Directors of the Company, pursuant to which the Company's securities may be
issued to any employee, officer or director for services provided to the
Company, (b) provided such security is issued at a price which is greater than
or equal to the arithmetic average of the Closing Bid Prices of the Common Stock
for the ten (10) consecutive trading days immediately preceding the date of
issuance, any of the following: (i) any issuance by the Company of securities in
connection with a strategic partnership or a joint venture (the primary purpose
of which is not to raise equity capital), or (ii) any issuance by the Company of
securities as consideration for a merger or consolidation or the acquisition of
a business, product, license, or other assets of another person or entity, (c)
those options and warrants of the Company issued prior to, and outstanding on,
the Issuance Date of this Debenture, (d) the shares of Common Stock issuable on
exercise of such options and warrants, provided such options and warrants are
not amended after the Issuance Date of this Debenture, and (e) the shares of
Common Stock issuable upon exercise of the Warrants issued pursuant to the
Securities Purchase Agreement or this Debenture.
"Material Subsidiary" shall mean with respect to the Obligor, a subsidiary
of the Obligor the business, operations, affairs, assets, liabilities, financial
condition or properties of which are material to the business, operations,
affairs, assets, liabilities, financial condition, or properties of the Obligor
and its subsidiaries taken as a whole.
"Original Issue Date" shall mean the date of the first issuance of this
Debenture regardless of the number of transfers and regardless of the number of
instruments, which may be issued to evidence such Debenture.
"Person" means a corporation, an association, a partnership, organization,
a business, an individual, a government or political subdivision thereof or a
governmental agency.
"Principal Market" means the New York Stock Exchange, the American Stock
Exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, whichever is
at the time the principal trading exchange or market for such security, or the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg or, if no bid or sale information is reported for such
security by Bloomberg, then the average of the bid prices of each of the market
makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
13
"Trading Day" means a day on which the shares of Common Stock are quoted
on the OTC or quoted or traded on such Subsequent Market on which the shares of
Common Stock are then quoted or listed; provided, that in the event that the
shares of Common Stock are not listed or quoted, then Trading Day shall mean a
Business Day.
"Transaction Documents" means the Securities Purchase Agreement or any
other agreement delivered in connection with the Securities Purchase Agreement,
including, without limitation, the Security Agreement, the Irrevocable Transfer
Agent Instructions, and the Registration Rights Agreement.
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of this Debenture or as payment of interest in accordance with the
terms hereof.
"Underlying Shares Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement,
covering among other things the resale of the Underlying Shares and naming the
Holder as a "selling stockholder" thereunder.
SECTION 6. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligations of the Obligor, which are
absolute and unconditional, to pay the principal of, interest and other charges
(if any) on, this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture is a direct obligation of the
Obligor. This Debenture ranks pari passu with all other Debentures now or
hereafter issued under the terms set forth herein. As long as this Debenture is
outstanding, the Obligor shall not and shall cause their subsidiaries not to,
without the consent of the Holder, (i) amend its certificate of incorporation,
bylaws or other charter documents so as to adversely affect any rights of the
Holder; (ii) repay, repurchase or offer to repay, repurchase or otherwise
acquire shares of its Common Stock or other equity securities other than as to
the Underlying Shares to the extent permitted or required under the Transaction
Documents; or (iii) enter into any agreement with respect to any of the
foregoing.
SECTION 7. This Debenture shall not entitle the Holder to any of the
rights of a stockholder of the Obligor, including without limitation, the right
to vote, to receive dividends and other distributions, or to receive any notice
of, or to attend, meetings of stockholders or any other proceedings of the
Obligor, unless and to the extent converted into shares of Common Stock in
accordance with the terms hereof.
SECTION 8. If this Debenture is mutilated, lost, stolen or destroyed, the
Obligor shall execute and deliver, in exchange and substitution for and upon
cancellation of the mutilated Debenture, or in lieu of or in substitution for a
lost, stolen or destroyed Debenture, a new Debenture for the principal amount of
this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of
evidence of such loss, theft or destruction of such Debenture, and of the
ownership hereof, and indemnity, if requested, all reasonably satisfactory to
the Obligor.
SECTION 9. No indebtedness of the Obligor is senior to this Debenture in
right of payment, whether with respect to interest, damages or upon liquidation
or dissolution or otherwise other than debentures issued by the Obligor to the
Holder prior to the date hereof. Except as permitted under the Security
Agreement, without the Holder's consent, the Obligor will not and will not
permit any of their subsidiaries to, directly or indirectly, enter into, create,
incur, assume or suffer to exist any indebtedness of any kind, on or with
respect to any of its property or assets now owned or hereafter acquired or any
interest therein or any income or profits there from that is senior in any
respect to the obligations of the Obligor under this Debenture.
14
SECTION 10. This Debenture shall be governed by and construed in
accordance with the laws of the State of New Jersey, without giving effect to
conflicts of laws thereof. Each of the parties consents to the jurisdiction of
the Superior Courts of the State of New Jersey sitting in Xxxxxx County, New
Jersey and the U.S. District Court for the District of New Jersey sitting in
Newark, New Jersey in connection with any dispute arising under this Debenture
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non conveniens to the bringing of any
such proceeding in such jurisdictions.
SECTION 11. If the Obligor fails to strictly comply with the terms of this
Debenture, then the Obligor shall reimburse the Holder promptly for all fees,
costs and expenses, including, without limitation, attorneys' fees and expenses
incurred by the Holder in any action in connection with this Debenture,
including, without limitation, those incurred: (i) during any workout, attempted
workout, and/or in connection with the rendering of legal advice as to the
Holder's rights, remedies and obligations, (ii) collecting any sums which become
due to the Holder, (iii) defending or prosecuting any proceeding or any
counterclaim to any proceeding or appeal; or (iv) the protection, preservation
or enforcement of any rights or remedies of the Holder.
SECTION 12. Any waiver by the Holder of a breach of any provision of this
Debenture shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Debenture. The failure of the Holder to insist upon strict adherence to any term
of this Debenture on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Debenture. Any waiver must be in writing.
SECTION 13. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Obligor covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Obligor from paying all or any portion of the
principal of or interest on this Debenture as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Obligor (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.
15
SECTION 14. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
SECTION 15. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES' ACCEPTANCE OF THIS
AGREEMENT.
16
IN WITNESS WHEREOF, the Obligor has caused this Secured Convertible
Debenture to be duly executed by a duly authorized officer as of the date set
forth above.
U.S. HELICOPTER CORPORATION
By: /s/ Xxxx X. Xxxxxx
------------------
Name: Xxxx X. Xxxxxx
Title: Chief Executive Officer
17
EXHIBIT "A"
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE HOLDER IN ORDER TO CONVERT THE DEBENTURE)
TO:
The undersigned hereby irrevocably elects to convert $ of the principal
amount of the above Debenture into Shares of Common Stock of U.S. Helicopter
Corporation, according to the conditions stated therein, as of the Conversion
Date written below.
CONVERSION DATE:
--------------------------------------------
APPLICABLE CONVERSION PRICE:
--------------------------------------------
SIGNATURE:
--------------------------------------------
NAME:
--------------------------------------------
ADDRESS:
--------------------------------------------
AMOUNT TO BE CONVERTED: $
--------------------------------------------
AMOUNT OF DEBENTURE UNCONVERTED: $
--------------------------------------------
CONVERSION PRICE PER SHARE: $
--------------------------------------------
NUMBER OF SHARES OF COMMON
STOCK TO BE ISSUED:
--------------------------------------------
PLEASE ISSUE THE SHARES OF COMMON
STOCK IN THE FOLLOWING NAME AND
TO THE FOLLOWING ADDRESS:
--------------------------------------------
ISSUE TO:
--------------------------------------------
AUTHORIZED SIGNATURE:
--------------------------------------------
NAME:
--------------------------------------------
TITLE:
--------------------------------------------
PHONE NUMBER:
--------------------------------------------
BROKER DTC PARTICIPANT CODE:
--------------------------------------------
ACCOUNT NUMBER:
--------------------------------------------
