EXHIBIT 10.69
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
August 24, 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 Eight Hundred
Thousand Dollars ($800,000) 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
Eight Hundred Thousand Dollars ($800,000) (the "PURCHASE PRICE") in the
respective amounts set forth opposite each Buyer(s) name on Schedule I (the
"SUBSCRIPTION AMOUNT");
WHEREAS, on the date hereof, the Company and the Buyers are executing
and delivering an Amendment No. 2 to the 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".
WHEREAS, pursuant to those certain securities purchase agreements
(collectively, the "BRIDGE SPAS") dated March 30, 2007 and May 14, 2007 between
the Buyer and the Company, the Company has issued to the Buyer secured
convertible debentures in the aggregate principal amount of One Million Six
Hundred Thousand Dollars ($1,600,000.00) (all monetary obligations of the
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Company to Buyer under the Bridge SPAs and related documents and debentures,
including without limitation all principal, interest, redemption fees, costs,
and expenses, whether now owed or hereafter arising are hereinafter referred to
as the "YA BRIDGE DEBENTURES"); and
WHEREAS, in addition to the YA Bridge Debentures, the Company is
indebted to the Buyer under prior financing arrangements (the "PRIOR FINANCING
AGREEMENTS") between the Buyer and the Company in the aggregate principal amount
in excess of $8,650,000 (all monetary obligations of the Company to the Buyer
under the Prior Financing Agreements and related documents and debentures,
including without limitation all principal, interest, redemption fees, costs,
and expenses, whether now owed or hereafter arising are hereinafter referred to
as the "PRIOR DEBENTURES");
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 days 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:
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(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.
(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: (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
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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
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
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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
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, 2006; (iv) the Company's Form 8-Ks filed with the SEC on
January 4, 2007, January 24, 2007, April 4, 2007; May 11, 2007 and June 21,
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.
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(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.
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 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
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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.
(c) CAPITALIZATION. The authorized capital stock of the
Company consists of 95,000,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock, par value $0.001 ("PREFERRED STOCK") of which 36,641,779 shares
of Common Stock and no 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
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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.
(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
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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
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.
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(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.
(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
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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.
(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
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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.
(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.
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(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.
(dd) Except as disclosed on the Disclosure Schedule no
securities of the Company will be ratcheted, reset, adjusted, or repriced as a
result of the issuance of the Securities.
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
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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 transaction contemplated herein in accordance with the budget forth as
Exhibit C hereto (the "BUDGET"). Management may not deviate from any line item
of the Budget by more than 10%.
(e) RESERVATION OF SHARES. On the date hereof, the Company
shall reserve for issuance to the Buyers 4,000,000 shares for issuance upon
conversions of the Convertible Dentures 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) The Company shall pay to Yorkville Advisors LLC
("YORKVILLE") a fee of $48,000 for monitoring and managing the investment by YA
Global Investments, L.P. ("YA GLOBAL") described herein, pursuant to Yorkville's
existing advisory obligations to YA Global.
(ii) The Company shall pay a structuring fee to
Yorkville Advisors LLC of Ten Thousand Dollars ($10,000), which shall be paid
directly from the proceeds of the Closing.
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(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 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
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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, (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, or (iv) issue any Common Stock rights, warrants, options, or other
securities to Management (as defined herein). .
(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) 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.
(q) Within ninety (90) days of the date hereof the Company
shall call and hold a special meeting of the shareholders for the purpose of
increasing the authorized Common Stock of the Company to at least 500,000,000
shares of Common Stock.
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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 Depository 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.
(x) Prior to the Closing Date, any combination of the
Company's senior management and Board of Directors shall invest a total of
$50,000 (the "MANAGEMENT CONTRIBUTION") in the Company's common stock at a price
equal to the greater of (i) the VWAP on the day immediately preceding the
Closing Date or (ii) $0.50 per share.
(xi) Prior to the Closing Date, Xxxx X. Xxxxxx,
Xxxxxx X. Xxxx, Xx., Xxxxx XxXxxxxxxx, Xxxxx Xxxxxxxx and Xxxxxxx Xxxxxxx
(collectively, "MANAGEMENT") shall each enter into a salary reduction agreement
in a form acceptable to the Buyer providing that 20% of such person's salary
shall be reduced until all amounts due and owing under YA Bridge Debentures and
the Convertible Debenture issued hereunder (collectively, the "BRIDGE LOANS")
are repaid in full at which time the person's salary shall be restored to its
prior level. Any accrued but unpaid salary will be converted into Common Stock
at the greater of (i) the VWAP on the day immediately preceding the payoff of
the Bridge Loans or (ii) $0.50 per share (and such accrued but unpaid salary
shall not be paid in cash). Any person referenced herein that has contributed to
the Management Contribution may elect not to convert the portion of the accrued
but unpaid salary equal to such person's Management Contribution and may be paid
in cash only after all amounts owed collectively under the Prior Debentures and
the Bridge Loans have been reduced to $5.0 million or less.
(xii) Lockup. Each of the Company's Management and
member of the Board of Directors shall enter into a lockup agreement pursuant to
which such person shall be prohibited from sales of Common Stock until all
amounts owed collectively under the Prior Debentures and the Bridge Loans have
been reduced to $5.0 million or less. Such lockup shall remain in place even if
such person's service to the Company ends.
(xiii) Subordination. The Buyer, the Company and
other bridge lenders shall enter into a subordination agreement (the
"SUBORDINATION AGREEMENT") in a form satisfactory to the Buyer acknowledging the
first priority lien held by the Investor and setting forth the payment rights of
the subordinated bridge lenders.
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
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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 (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.
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9. REAFFIRMATION AND RELEASE.
(a) The Company does hereby, on behalf of itself and its
agents, representatives, attorneys, assigns, heirs, executors and administrators
(collectively, "Company Parties") RELEASE AND FOREVER DISCHARGE the Buyer and
its subsidiaries and its respective affiliates, parents, joint ventures,
officers, directors, shareholders, interest holders, members, managers,
employees, consultants, representatives, successors and assigns, heirs,
executors and administrators (collectively, "Buyer Parties") from all causes of
action, suits, debts, claims and demands whatsoever known or unknown, at law, in
equity or otherwise, which the Company Parties ever had, now has, or hereafter
may have, arising from or relating in any way to the Company's status as a
debtor of the Buyer on or prior to the date hereof (including, without
limitation, under the Prior Debentures, the YA Bridge Debentures, and the
documents entered into in connection therewith), any agreement between the
Company Parties and the Buyer Parties entered into prior to the date hereof, any
claims for reasonable attorneys' fees and costs, and including, without
limitation, any claims relating to fees, penalties, liquidated damages, and
indemnification for losses, liabilities and expenses. The release contained in
this Section 9 is effective without regard to the legal nature of the claims
raised and without regard to whether any such claims are based upon tort,
equity, or implied or express contract. It is expressly understood and agreed
that this release shall operate as a clear and unequivocal waiver by the Company
Parties of any such claim whatsoever.
(b) The Company acknowledges that there is a risk that after signing this
Agreement it may discover losses or claims that are released under this
Agreement, but that are presently unknown to it. The Company assumes this risk
and understands that this release shall apply to any such
losses and claims. The
Company understands that this Agreement includes a full and final release
covering all known and unknown, suspected or unsuspected injuries, debts, claims
or damages which have arisen or may have arisen from any matters, acts,
omissions or dealings released in Section 9(a) above.
(c) The Company covenants and agrees that all amounts owed,
together with interest accrued and accruing thereon, and any applicable
redemption premiums now or hereafter payable by the Company to the Buyer in
connection with the Prior Debentures, the YA Bridge Debentures, and all
documents and agreements entered into in connection therewith, are
unconditionally owing by the Company to the Buyer, without offset, setoff,
defense or counterclaim of any kind, nature or description whatsoever.
(d) From and after the date hereof, notwithstanding any prior
agreements between the Company and the Buyer (whether written, oral, or
otherwise), and except as set forth in the Amendment to the Prior Debentures and
the Bridge Loans entered into on the date hereof, any and all prior conversion
limitations, lockup agreement of the Buyer, or restrictions of the Buyer
regarding the sale of the Common Stock of the Company shall be null and void.
10. 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,
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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.
(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
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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
contained herein, the agreements and covenants contained herein, 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 all amounts owed to
the Buyer pursuant to the Prior Debentures and the Bridge Loans are paid in
full. The Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
(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
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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.
(o) The Company acknowledges that it has previously raised
capital (the "ISSUANCE") by the issuance of convertible debt and warrants with a
fixed conversion price and exercise price of $0.50 per share. Pursuant to the
terms of all convertible debt and warrants held by the Buyer, the Company
further acknowledges that the fixed conversion price of such convertible debt
and the exercise price of such warrants have been adjusted to $0.50 per share as
a result of the Issuance. Further, as a result of the Issuance, the number of
warrants has been increased pursuant to the terms of the outstanding warrants to
the denominations set forth in Schedule "II" hereto. No new consideration is
being given for this provision since it is a pre-existing obligation of the
Company to reset the price as set forth herein.
(p) The Company shall amend and restate all convertible debt
and warrants held by the Investor to be consistent with the preceding paragraph.
To the extent possible, the convertible debt and warrants shall be consolidated
in a manner that will not result in the loss of tacking to the holding period of
the original security under Rule 144 promulgated under the Securities Act of
1933, as amended.
[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/ XXXXXX X. XXXX, XX.
------------------------
Name: Xxxxxx X. Xxxx, Xx.
Title: Chief Financial Officer,
Sr. Vice President and Treasurer
BUYERS:
YA GLOBAL INVESTMENTS, L.P.
By: Yorkville Advisors, LLC
Its: Investment Manager
By: /S/ XXXX XXXXX
Name: Xxxx Xxxxx
Its: Senior Managing Director
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SCHEDULE I
SCHEDULE OF BUYERS
(1) (2) (3) (4) (5) (6) (7) (8)
BUYER SUBSCRIPTION NUMBER OF LEGAL REPRESENTATIVE'S
AMOUNT WARRANT SHARES ADDRESS
AND FACSIMILE NUMBER
FIRST CLOSING FIRST CLOSING
YA GLOBAL INVESTMENTS, L.P. $800,000 400,000 Shares @ $0.50 Xxxx Xxxxx, Esq.
400,000 Shares @ $0.01 000 Xxxxxx Xxxxxx, Xxxxx 0000
000 Xxxxxx Xxxxxx, Xxxxx 0000 Xxxxxx Xxxx, Xxx Xxxxxx 07302
Xxxxxx Xxxx, XX 00000 Telephone: (000) 000-0000
Attention: Xxxx Xxxxxx Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Residence: Cayman Islands
