EXHIBIT 10.92
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of March
31, 2008, by and among U.S. HELICOPTER CORPORATION, a Delaware corporation (the
"Company"), and the Buyers listed on Schedule I attached hereto (individually, a
"Buyer" or collectively "Buyers").
WITNESSETH
WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("Regulation D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act");
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase (i) up to One Million Two
Hundred Fifty Thousand Dollars ($1,250,000) of secured convertible debentures in
the form attached hereto as "Exhibit A" (the "Convertible Debentures"), which
shall be convertible into shares of the Company's common stock, par value $0.001
(the "Common Stock") (as converted, the "Conversion Shares"), and (ii) warrants
substantially in the form attached hereto as "Exhibit B" (the "Warrants"), to
acquire up to that number of additional shares of Common Stock set forth
opposite such Buyer's name in column (5) of Schedule I attached hereto (as
exercised, the "Warrant Shares"), which shall be funded within two business day
of the date hereof (the "Funding Date") for a total purchase price of up to One
Million Two Hundred Fifty Thousand Dollars ($1,250,000) (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 Buyer are executing and
delivering an Amendment No. 4 to the Amended and Restated Security Agreement
(the "Security Agreement") pursuant to which the Company agreed to extend the
Buyer's security interest which was originally created in connection with a loan
made to the Company by the Buyer in the Pledged Property (as this term is
defined in the Security Agreement) to secure all the Company's obligations to
the Buyer, which shall include all obligations to the Buyer 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 that certain securities purchase agreement (the
"Bridge SPA") dated March 30, 2007 between the Buyer and the Company, the
Company has issued to the Buyer secured convertible debentures in the principal
amount of One Million One Hundred Thousand Dollars ($1,100,000.00), of which a
total of $844,836 in principal remains outstanding as of the date of this
Agreement (the Bridge SPA, the secured convertible debentures issued thereunder,
and all related documents are hereinafter referred to as the "YA Bridge
Debentures" and all monetary obligations of the Company to Buyer under the YA
Bridge 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 Debenture Obligations"); and
WHEREAS, in addition to the YA Bridge Debenture Obligations, 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 of $9,258,000 (all secured convertible debentures issued
pursuant to the Prior Financing Agreements and all related documents are
hereinafter referred to as the "Prior Debentures" and all monetary obligations
of the Company to Buyer under the Prior 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 Debenture
Obligations");
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.
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2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants, severally and not jointly, that:
(a) Investment Purpose. Each Buyer is acquiring the Securities for
its own account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the Securities Act; provided, however, that
by making the representations herein, such Buyer reserves the right to dispose
of the Securities at any time in accordance with or pursuant to an effective
registration statement covering such Securities or an available exemption under
the Securities Act. Such Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities.
(b) Accredited Investor Status. Each Buyer is an "Accredited
Investor" as that term is defined in Rule 501(a)(3) of Regulation D.
(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.
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(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
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, 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 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, or (iv) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the SEC). The Company
shall cause its counsel to issue a legal opinion to the Company's transfer agent
promptly after the effective date (the "Effective Date") of a Registration
Statement if required by the Company's transfer agent to effect the removal of
the legend hereunder. If all or any portion of the Convertible Debentures or
Warrants are exercised by a Buyer that is not an Affiliate (as defined below) of
the Company (a "Non-Affiliated Buyer") at a time when there is an effective
registration statement to cover the resale of the Conversion Shares or the
Warrant Shares, such Conversion Shares or Warrant Shares shall be issued free of
all legends. The Company agrees that following the Effective Date or at such
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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 quarterly reports on Form 10-QSB for the periods ended March
31, 2007, June 30, 2007 and September 30, 2007; (v) the Company's Reports on
Form 8-K filed on December 10, 2007, December 18, 2007, January 9, 2008,
February 15, 2008, February 28, 2008 and March 19, 2008; 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.
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(j) Due Formation of Corporate and Other Buyers. If the Buyer(s) is
a corporation, trust, partnership or other entity that is not an individual
person, it has been formed and validly exists and has not been organized for the
specific purpose of purchasing the Securities and is not prohibited from doing
so.
(k) No Legal Advice From the Company. Each Buyer acknowledges, that
it had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or its own legal counsel and investment
and tax advisors. Each Buyer is relying solely on such counsel and advisors and
not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.
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
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 perform any of the Company's other obligations
under the Transaction Documents.
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(c) Capitalization. The authorized capital stock of the Company
consists of 95,000,000 shares of Common Stock and 5,000,000 shares of Preferred
Stock, par value $0.001 ("Preferred Stock") of which 45,804,168 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
for the issuance and sale of the Securities. There are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Company's capital stock to which the Company is a party or, to the knowledge of
the Company, between or among any of the Company's stockholders.
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(d) Issuance of Securities. The issuance of the Convertible
Debentures and the Warrants is duly authorized and free from all taxes, liens
and charges with respect to the issue thereof. Upon conversion in accordance
with the terms of the Convertible Debentures or exercise in accordance with the
Warrants, as the case may be, the Conversion Shares and Warrant Shares,
respectively, when issued will be validly issued, fully paid and nonassessable,
free from all taxes, liens and charges with respect to the issue thereof. The
Company has reserved from its duly authorized capital stock the appropriate
number of shares of Common Stock as set forth in this Agreement.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Convertible Debentures and the Warrants, and reservation for
issuance and issuance of the Conversion Shares and the Warrant Shares) will not
(i) result in a violation of any certificate of incorporation, certificate of
formation, any certificate of designations or other constituent documents of the
Company, any capital stock of the Company or bylaws of the Company or (ii)
conflict with, or constitute a material default (or an event which with notice
or lapse of time or both would become a material default) in any respect under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company is
a party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including foreign, federal and state securities laws and
regulations and the rules and regulations of the National Association of
Securities Dealers Inc.'s OTC Bulletin Board) applicable to the Company or by
which any property or asset of the Company is bound or affected; except in the
case of each of clauses (ii) and (iii), such as could not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect. The business of the Company is not being conducted, and shall not be
conducted in violation of any material law, ordinance, or regulation of any
governmental entity. Except as specifically contemplated by this Agreement and
as required under the Securities Act and any applicable state securities laws,
the Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under or
contemplated by this Agreement or the Registration Rights Agreement in
accordance with the terms hereof or thereof. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof. The Company is unaware of any facts or circumstance, which
might give rise to any of the foregoing.
(f) SEC Documents; Financial Statements. The Company has filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), for the two years preceding the date hereof (or such shorter
period as the Company was required by law or regulation to file such material)
(all of the foregoing filed prior to the date hereof or amended after the date
hereof and all exhibits included therein and financial statements and schedules
thereto and any prospectuses that are current as of the date hereof and
documents incorporated by reference therein, being hereinafter referred to as
the "SEC Documents") on timely basis or has received a valid extension of such
time of filing and has filed any such SEC Document prior to the expiration of
any such extension. The Company has delivered to the Buyers or their
representatives, or made available through the SEC's website at
xxxx://xxx.xxx.xxx., true and complete copies of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with the
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
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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.
10
(p) Insurance. The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be reasonably prudent and customary in the
business in which the Company is engaged. The Company has not been refused any
insurance coverage sought or applied for and the Company has no reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially
and adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company, taken as a whole.
(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.
11
(u) Certain Transactions. Except for arm's length transactions
pursuant to which the Company makes payments in the ordinary course of business
upon terms no less favorable than the Company could obtain from third parties
and other than the grant of stock options disclosed in the SEC Documents, none
of the officers, directors, or employees of the Company is presently a party to
any transaction with the Company (other than for services as employees, officers
and directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
(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.
12
(aa) Reporting Status. With a view to making available to the Buyer
the benefits of Rule 144 or any similar rule or regulation of the SEC that may
at any time permit the Buyer to sell securities of the Company to the public
without registration, and as a material inducement to the Buyer's purchase of
the Securities, the Company represents and warrants to the following: (i) the
Company is, and has been for a period of at least 90 days immediately preceding
the date hereof, subject to the reporting requirements of section 13 or 15(d) of
the Exchange Act and has filed all required reports under section 13 or 15(d) of
the Exchange, as applicable, during the 12 months preceding the date hereof (or
for such shorter period that the Company was required to file such reports), and
(ii) the Company is not and for at least the last 12 months prior to the date
hereof has not been a "shell company," as defined in paragraph (i)(1)(i) of Rule
144.
(bb) 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.
(cc) 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.
(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.
13
(c) Reporting Status. With a view to making available to the Buyer
the benefits of Rule 144 or any similar rule or regulation of the SEC that may
at any time permit the Buyer to sell securities of the Company to the public
without registration, and as a material inducement to the Buyer's purchase of
the Securities, the Company represents, warrants, and covenants to the
following:
(i) from the date hereof until all the Securities either have
been sold by the Buyer, or may permanently be sold by the Buyer without any
restrictions pursuant to Rule 144, (the "Registration Period") the Company shall
file with the SEC in a timely manner all required reports under section 13 or
15(d) of the Exchange Act and such reports shall conform to the requirement of
the Exchange Act and the SEC for filing thereunder;
(ii) The Company shall furnish to the Buyer so long as the
Buyer owns Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, (ii) a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested to permit the Buyers to sell such securities
pursuant to Rule 144 without registration; and
(iii) During the Registration Period 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"), which shall include repayment of that certain convertible
debenture issued to the Buyer by the Company on March 14, 2008 in the principal
amount of $608,000, plus accrued interest. Management may not deviate from any
line item of the Budget.
(e) Reservation of Shares.
(i) As of the Closing, the Company shall have reserved for
issuance to Buyer 5,000,000 shares for issuance upon conversion of the
Convertible Debentures and exercise of the Warrants (collectively, the "Share
Reserve"). The Company represents that it has sufficient authorized and
un-issued shares of Common Stock available to create the Share Reserve after
considering all other commitments that may require the issuance of Common Stock.
(ii) The Company shall, within 90 days of the date hereof,
call and hold a special meeting of the shareholders for of increasing the
authorized Common Stock of the Company to at least 500,000,000 shares of Common
Stock. Upon completion of such increase, the Company shall increase the Share
Reserve to at least 30,000,000 shares. 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.
(iii) If at any time after the shareholder vote described in
the preceding paragraph, 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 at such time, 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.
14
(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 a fee of $78,750 (the "Monitoring
Fee") into an escrow account for payment to Yorkville Advisors LLC ("Yorkville")
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 Twenty Five Thousand Dollars ($25,000), which shall be paid
directly from the proceeds of the Closing.
(h) Corporate Existence. So long as at least $100,000 in principal
of the Convertible Debentures remains outstanding, the Company shall not
directly or indirectly consummate any merger, reorganization, restructuring,
reverse stock split consolidation, sale of all or substantially all of the
Company's assets or any similar transaction or related transactions (each such
transaction, an "Organizational Change") unless, prior to the consummation an
Organizational Change, the Company obtains the written consent 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,
15
transaction, commitment, or arrangement on an arms-length basis on terms no less
favorable than terms which would have been obtainable from a person other than
such Related Party, (d) any agreement, transaction, commitment, or arrangement
which is approved by a majority of the disinterested directors of the Company;
for purposes hereof, any director who is also an officer of the Company or any
subsidiary of the Company shall not be a disinterested director with respect to
any such agreement, transaction, commitment, or arrangement. "Affiliate" for
purposes hereof means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity. "Control" or "controls"
for purposes hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or entity.
(j) Transfer Agent. The Company covenants and agrees that, in the
event that the Company's agency relationship with the transfer agent should be
terminated for any reason prior to a date which is two (2) years after the
Closing Date, the Company shall immediately appoint a new transfer agent and
shall require that the new transfer agent execute and agree to be bound by the
terms of the Irrevocable Transfer Agent Instructions (as defined herein).
(k) Restriction on Issuance of the Capital Stock. So long as at
least $100,000 in principal of the Convertible Debentures is outstanding, the
Company shall not, without the prior written consent of the Buyer(s), (i) issue
or sell shares of Common Stock or Preferred Stock without consideration or for a
consideration per share less than the bid price of the Common Stock determined
immediately prior to its issuance, (ii) issue any preferred stock, warrant,
option, right, contract, call, or other security or instrument granting the
holder thereof the right to acquire Common Stock without consideration or for a
consideration less than such Common Stock's Bid Price determined immediately
prior to its issuance, (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) Registration Statements. 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.
16
(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 Debentures 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(p) that are eligible for resale
without any restrictions pursuant to Rule 144 promulgated under the Securities
Act or that are the subject of a then effective registration statement.
(q) The Company shall not utilize cash flow from operations or
proceeds received by the Company in subsequent financing rounds to repay any
outstanding indebtedness other than amounts owed to the Buyer.
(r) The Company shall amend the Prior Debentures and the YA Bridge
Debentures to provide that all amounts owed to the Buyer will contain payoff
provisions equal to the greater of (X) the amounts owed pursuant to the terms of
such debt instruments or (Y) the amount equal to the number of shares of Common
Stock that such debt instruments would be convertible into as of the payoff date
(assuming for these purposes that the number of authorized shares of Common
Stock is sufficient for the full conversion of such debt instrument and without
taking into effect any limitations on conversions or beneficial ownership
limitations set forth in such debt instruments) multiplied by the Closing Bid
Price of the Common Stock on the payoff date.
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
17
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.
(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.
18
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.
(vii) All prior bridge loan lenders to the Company shall have
entered into subordination agreements with the Buyer in a form reasonably
satisfactory to the Buyer, pursuant to which such lenders will agree to
subordinate to the Buyer in terms payment and any liens, provided however, that
such lender's shall be permitted to be repaid from an institutional capital
raise from third parties after the Buyer has be repaid at least $6,250,000 of
its existing debt.
19
(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, 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 the aggregate debt owed to the Buyer is reduced by $6.25 million
or more, at which time the person's salary may be restored to its prior level.
Any accrued but unpaid salary may be converted into Common Stock at the greater
of (i) the VWAP on the day immediately preceding the payoff of the YA Bridge
Debenture 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 described in the Securities Purchase Agreement dated as
of August 24, 2007 (the "August 2007 SPA") may elect not to convert the portion
of the accrued but unpaid salary equal to such person's Management Contribution
(as such term is defined in the August 2007 SPA) and may be paid in cash only
after all amounts owed collectively under the Prior Debentures and the Bridge
Loans have been reduced by $6.25 million or more.
(xi) The Company shall have raised an additional $1,250,000
from an existing investor of the Company on terms satisfactory to the Buyer.
8. INDEMNIFICATION.
(a) In consideration of the Buyer's execution and delivery of this
Agreement and acquiring the Convertible Debentures and the Conversion Shares
hereunder, and in addition to all of the Company's other obligations under this
Agreement, the Company shall defend, protect, indemnify and hold harmless the
Buyer(s) and each other holder of the Convertible Debentures and the Conversion
Shares, and all of their officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Buyer Indemnitees") from and
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Buyer Indemnitee is a party to the action for
which indemnification hereunder is sought), and including reasonable attorneys'
fees and disbursements (the "Indemnified Liabilities"), incurred by the Buyer
Indemnitees or any of them as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in this Agreement, the Convertible Debentures or the other Transaction
20
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.
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.
21
(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 the YA Bridge Debenture
Obligations, the Prior Debenture Obligations, and all other amounts owed in
connection therewith, together with interest accrued and accruing thereon, and
any applicable redemption premiums now or hereafter payable by the Company to
the Buyer 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 YA Bridge Debentures 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.
(e) Acknowledgement of Security Interests. The Company hereby
acknowledges, confirms and agrees that the Buyer has and shall continue to have
valid, enforceable and perfected liens upon and security interests in the
Pledged Property heretofore granted to the Buyer pursuant to the Security
Agreement or otherwise granted to or held by the Buyer.
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,
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.
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(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
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
23
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.
The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Buyer. The Buyer may assign
this Agreement upon 30 days' prior written notice to the Company, provided the
assignee is capable of and agrees to comply with the terms and conditions of
this Agreement and the Transaction Documents in their entirety and provided
further that such assignment would not result in a violation of U.S. Department
of Transportation regulations applicable to the Company.
(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
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.
24
(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. Notwithstanding the foregoing, the
Company shall be permitted to pay a commission of up to 3.33% of the Purchase
Price to a third party; provided, however, that the debenture financing
completed by the parties hereto as of March 14, 2008 shall be considered an
advance against the Purchase Price hereunder and that no commissions shall be
paid in connection therewith.
(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 $0.30 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 $0.30 per share as a
result of the Issuance. The Buyer hereby waives on a one-time basis any
anti-dilution protection or other similar provision in such warrants that may
otherwise apply in connection with the price adjustment described 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/ Xxxx X. Xxxxxx
------------------
Name: Xxxx X. Xxxxxx
Title: Chief Executive Officer and President
BUYERS:
YA GLOBAL INVESTMENTS, L.P.
By: Yorkville Advisors, LLC
Its: Investment Manager
By: /s/ Xxxx Xxxxxx
---------------
Name: Xxxx Xxxxxx
Its: Portfolio Manager
26
SCHEDULE I
SCHEDULE OF BUYERS
(1) (2) (3) (4) (5) (6) (7) (8)
BUYER SUBSCRIPTION AMOUNT NUMBER OF LEGAL REPRESENTATIVE'S
WARRANT SHARES ADDRESS AND
FACSIMILE NUMBER
FIRST CLOSING FIRST CLOSING
YA GLOBAL INVESTMENTS, L.P. $1,250,000 2,783,333 Shares Xxxx Xxxxx, Esq.
@ $0.01 000 Xxxxxx Xxxxxx, Xxxxx 0000
000 Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxx Xxxxxx 00000
Suite 3700 Telephone: (000) 000-0000
Xxxxxx Xxxx, XX 00000 Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Residence: Cayman Islands
