Exhibit 2
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is made and entered into as
of March 9, 2001 by and among Vanguard Airlines, Inc., a Delaware corporation
(the "Company"), and those parties listed on the signature page hereof as
"Investors" (who are referred to individually as an "Investor" and collectively
as the "Investors").
In consideration of the mutual promises and covenants made herein, the
parties hereby agree as follows:
1. Sale of Units; Closing; Delivery.
(a) Purchase and Sale of Units. Subject to the terms and conditions
hereof, the Company will issue and sell to each Investor, and each Investor will
purchase from the Company, at the Closing (as defined below) the number of
shares of Series C Preferred Stock, $.001 par value, (the "Preferred Stock") set
forth opposite each Investor's name on Exhibit A at a purchase price equal to
Twenty Dollars ($20.00) per share. The Preferred Stock shall have the rights,
preferences, privileges and restrictions set forth in the Certificate of
Designation attached hereto as Exhibit B (the "Certificate of Designation").
(b) Closing. The closing of the purchase and sale of the Preferred
Stock shall take place at 2:00 p.m. on or about March 9, 2001, or at such other
date and time as the Investors and the Company shall mutually agree upon (which
date and time are designated as the "Closing"). The date of the Closing is
hereinafter referred to as the "Closing Date."
(c) Delivery. Subject to the terms and conditions of this Agreement,
at the Closing, the Company shall deliver to each Investor a stock certificate
representing the Shares to be purchased by such Investor against payment of the
purchase price therefor by cancellation of the principal amount of any
indebtedness (with accrued and unpaid interest on any such indebtedness being
paid by the Company within fifteen (15) days after the Closing Date), a check
payable to the order of the Company, or by wire transfer of immediately
available funds to the bank account of the Company. In the event that payment by
an Investor is made, in whole or in part, by cancellation of indebtedness, then
such Investor shall surrender to the Company for cancellation at the Closing any
evidence of such indebtedness or shall execute an instrument of cancellation in
form and substance acceptable to the Company.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor, that, except as set forth on the
Schedule of Exceptions attached hereto as Exhibit C (the "Schedule of
Exceptions"), with any disclosure thereon being deemed disclosure for all
purposes and all relevant subsections hereof, which exceptions will be deemed to
be representations and warranties as if made hereunder:
(a) Organization and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company has all necessary corporate power and authority
to own its assets and to carry on its business as now being conducted and
presently proposed to be conducted. The Company is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which its ownership or leasing of assets, or the conduct
of its business, makes such qualification necessary, except where failure to do
so would not have a material adverse effect on the operations or financial
condition of the Company.
(b) Requisite Power and Authorization. The Company will have all
necessary corporate power and authority under the laws of the State of Delaware
and all other applicable provisions of law to execute and deliver this
Agreement, to issue the Shares, the shares of Common Stock issuable upon
conversion of the Shares (the "Conversion Shares"), the Warrants and the Warrant
Shares and to carry out the provisions of this Agreement and the Warrants. All
corporate action on the part of the Company required for the lawful execution
and delivery of this Agreement, and issuance and delivery of the Shares, the
Conversion Shares, the Warrants and the Warrant Shares has been duly and
effectively taken. Upon execution and delivery, this Agreement and the Warrants
constitute valid and binding obligations of the Company enforceable in
accordance with their respective terms, except as enforcement may be limited by
insolvency and similar laws affecting the enforcement of creditors' rights
generally and equitable remedies. The Shares and the Warrants (and the Warrant
Shares issuable upon exercise of the Warrants) when issued in compliance with
the provisions of this Agreement or the Warrants, as the case may be, and the
Conversion Shares when issued in accordance with the Restated Certificate, will,
be duly authorized and validly issued, fully paid, non-assessable, and issued in
compliance with federal securities laws and the securities laws of the State of
California. No stockholder of the Company or other person has any preemptive
right of subscription or purchase or contractual right of first refusal or
similar right with respect to the Shares, the Conversion Shares, the Warrants or
the Warrant Shares. The Company has reserved such number of shares of its Common
Stock necessary for issuance of the Warrant Shares and the Conversion Shares.
(c) Consents. No consent, approval, authorization or order of any
court, governmental agency or third party is required for the execution and
delivery by the Company of this Agreement or the performance by the Company of
any of its obligations hereunder (including issuance of the Shares and the
Warrant Shares) and under the Restated Certificate other than the Stockholder
Approval.
(d) SEC Documents. The Company has timely filed all documents that
the Company was required to file with the Securities and Exchange Commission
(the "SEC") under Sections 13 or 14(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), since December 31, 1996 (collectively, the "SEC
Documents"). As of their respective filing dates, or such later date on which
such reports were amended, the SEC Documents complied in all material respects
with the requirements of the Exchange Act or the Securities Act of 1933, as
amended (the "1933 Act"), as applicable. No SEC Documents as of their respective
dates, or such later date on which such reports were amended, or press release,
containing information material to the business as a whole, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The financial
statements included in the SEC Documents (the "Financial Statements") comply as
to form in all material respects with applicable accounting requirements
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and with the published rules and regulations of the SEC with respect thereto.
Except as may be indicated in the notes to the Financial Statements or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC, the
Financial Statements have been prepared in accordance with generally accepted
accounting principles consistently applied and fairly present the consolidated
financial position of the Company and any subsidiaries at the dates thereof and
the consolidated results of their operations and consolidated cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal,
recurring adjustments).
(e) Capital Stock. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, $.001 par value, and 1,000,000
shares of Preferred Stock, $.001 par value, 600,000 of which have been
designated Series A Preferred Stock. As of January 1, 2001, there were
20,571,862 shares of Common Stock issued and outstanding, and 302,362 shares of
Series A Preferred Stock issued and outstanding and 100,000 shares of Series B
Preferred Stock issued and outstanding. All outstanding shares of Common Stock
and Preferred Stock have been duly authorized and validly issued and are fully
paid and non-assessable. Except for (A) the conversion privileges of the
Preferred Stock to be issued under this Agreement, (B) the 2,584,274 shares of
Common Stock issuable upon the conversion of the Series A Preferred Stock, (C)
the 6,410,256 shares of Common Stock issuable upon the conversion of the Series
B Preferred Stock, (D) 12,538,724 shares of Common Stock issuable upon exercise
of the Company's outstanding warrants, (E) 4,677,291 shares of Common Stock
issuable upon exercise of stock options granted to employees, consultants,
officers or directors of the Company, the Company has no outstanding securities
convertible into or exchangeable for Common Stock and no contracts, rights,
options or warrants to purchase or otherwise acquire Common Stock or securities
convertible into or exchangeable for Common Stock. Since December 1, 2000 the
Company has not issued any shares of capital stock except for shares set forth
on the Schedule of Exceptions.
(f) Compliance with Other Agreements. Neither the execution and
delivery of, nor the consummation of any transaction or execution of any
instrument contemplated by, this Agreement, nor the issuance of the Shares, the
Conversion Shares, the Warrants and the Warrant Shares, has constituted or
resulted in, or will constitute or result in, a default under or breach or
violation of any term or provision of the Company's Bylaws, Restated
Certificate, or contracts with third parties, state or federal laws, rules or
regulations, writs, orders or judgments or decrees which are applicable to the
Company or its properties.
(g) No Material Adverse Change. Since the date of the Company's most
recent quarterly report on Form 10-Q or most recent periodic report on Form 8-K
filed with the SEC, there has not been:
(i) any changes in the assets, liabilities, financial condition
or operations of the Company from that reflected in the Financial Statements
except changes resulting from ongoing operating losses during such period;
(ii) any material change, except in the ordinary course of
business, in the contingent obligations of the Company whether by way of
guarantee, endorsement, indemnity, warranty or otherwise;
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(iii) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties or business of the
Company; or
(iv) any declaration or payment of any dividend or other
distribution of the assets of the Company.
(h) Litigation. There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company
or any of its affiliates that would materially adversely affect the execution by
the Company of, or the performance by the Company of its obligations under, this
Agreement.
(i) No Misrepresentation. No representation or warranty by the
Company in this Agreement and no statements in the SEC Documents, as amended,
nor any other document, statement, certificate or schedule furnished or to be
furnished by or on behalf of the Company pursuant to this Agreement, when taken
together with the foregoing, contains or shall contain any untrue statement of a
material fact or omits or shall omit to state a material fact necessary in order
to make such statements, in light of the circumstances under which they were
made, not misleading. The Company has delivered true and complete copies of all
documents requested by the Investors.
3. Representations and Warranties of Investors. Each Investor
represents and warrants, severally and not jointly, to the Company that:
(a) Authorization. Such Investor has full power and authority to
enter into this Agreement, and this Agreement constitutes the valid and legally
binding obligation of such Investor, enforceable in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency and similar
laws affecting the enforcement of creditors' rights generally and equitable
remedies, and except as indemnity provisions in the enforcement of Section 4 of
this Agreement (relating to registration rights) may be limited by law.
(b) Purchase for Investment. Such Investor is purchasing the Units
for investment purposes only and not with a view to, or for sale in connection
with, a distribution of the Units within the meaning of the 1933 Act. Such
Investor has no present intention of selling or otherwise disposing of all or
any portion of the Units.
(c) Access to Information. Such Investor has had an opportunity to
ask questions of the Company's representatives concerning the Company, its
present and prospective business, assets, liabilities and financial condition
that such Investor has deemed necessary and appropriate as a prudent and
knowledgeable investor in evaluating the risks of purchasing the Units. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 3 of this Agreement or the rights of the Investors to
rely thereon.
(d) Understanding of Risks. Such Investor is fully aware of: (i) the
highly speculative nature of the investment in the Units; (ii) the financial
hazards involved;
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(iii) the risk of loss of the investment if the Company is unable to finance its
continuing operations; (iv) the lack of liquidity of the Shares, the shares of
Common Stock issuable upon conversion of the Shares, the Warrants and the
Warrant Shares (collectively, the "Securities") and the restrictions on the
transferability of the Securities (e.g., that such Investor may not be able to
sell or dispose of the Securities or use them as collateral for loans); and (v)
the tax consequences of investment in the Units. The foregoing, however, does
not limit or modify the representations and warranties of the Company in Section
3 of this Agreement and the rights of the Investors to rely thereon.
(e) Investor's Qualifications. Such Investor is an "accredited"
investor as defined under Regulation D under the 1933 Act. Such Investor is
aware of the general business and financial circumstances of the Company and, by
reason of such Investor's business or financial experience, such Investor is
capable of evaluating the merits and risks of this investment and is financially
capable of bearing a total loss of this investment.
(f) Compliance with Securities Laws. Such Investor understands and
acknowledges that, in reliance upon the representations and warranties made by
such Investor herein, the Securities are not being registered with the SEC under
the 1933 Act or being qualified under the California Corporate Securities Law of
1968, as amended (the "Law"), but instead are being issued under an exemption or
exemptions from the registration and qualification requirements of the 1933 Act
or the Law or other applicable state securities laws which impose certain
restrictions on such Investor's ability to transfer the Shares and the Warrant
Shares.
(g) Restrictions on Transfer. Such Investor understands that such
Investor may not transfer any of the Securities unless such Securities are
registered under the 1933 Act or pursuant to an exemption from such registration
and qualification requirements. Such Investor understands that only the Company
may file a registration statement with the SEC. Such Investor has also been
advised that exemptions from registration and qualification may not be available
or may not permit such Investor to transfer all or any of the Securities in the
amounts or at the times proposed by such Investor.
(h) Rule 144. In addition, such Investor has been advised that SEC
Rule 144 ("Rule 144") promulgated under the 1933 Act, which permits certain
limited sales of unregistered securities, is not presently available with
respect to the Securities solely due to the holding periods required thereunder
and, in any event, requires that the Securities be held for a minimum of one
year, and in certain cases two years, after they have been purchased and paid
for (within the meaning of Rule 144), before they may be resold under Rule 144.
Such Investor understands that Rule 144 may indefinitely restrict transfer of
the Securities if such Investor is an "affiliate" of the Company and "current
public information" about the Company (as defined in Rule 144) is not publicly
available.
(i) Legends and Stop-Transfer Orders. Such Investor understands that
certificates or other instruments representing any of the Securities acquired by
such Investor may bear legends substantially similar to the following, in
addition to any other legends required by federal or state laws:
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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE LAWS OF ANY
STATE. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT
REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
SUCH ACT.
In order to ensure and enforce compliance with the restrictions imposed
by applicable law and those referred to in the foregoing legend, or elsewhere
herein, the Company may issue appropriate "stop transfer" instructions to its
transfer agent, if any, with respect to any certificate or other instrument
representing the Securities, or if the Company transfers its own securities, it
may make appropriate notations to the same effect in the Company's records. Any
legend endorsed on a certificate pursuant to this Subsection (i) and the related
stop transfer instructions with respect to such Securities shall be removed, and
the Company shall issue a certificate or warrant without such legend to the
holder thereof, if such Securities are registered under the 1933 Act and a
prospectus meeting the requirements of Section 10 of the 1933 Act is available,
if such legend may be properly removed under the terms of Rule 144 promulgated
under the 1933 Act or if such holder provides the Company with an opinion of
counsel for such holder, reasonably satisfactory to legal counsel for the
Company, to the effect that a sale, transfer or assignment of such securities
may be made without registration.
4. Registration Rights.
(a) Definitions. For purposes of this Section 4:
(i) "Register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the 1933 Act, and the declaration or ordering of effectiveness
of such registration statement.
(ii) "Registrable Securities" means (A) all shares of Common
Stock issued or issuable upon conversion of the Preferred Stock (B) all shares
of Common Stock issued or issuable pursuant to the exercise of the Warrants, and
(C) any Common Stock of the Company issued (or issuable upon the conversion or
exercise of any warrant, right or other security that is issued) as a dividend
or other distribution with respect to, or in exchange for, or in replacement of,
the shares referenced in (A), (B) or (C) above.
(iii) "Holder" means any person owning of record Registrable
Securities that have not been sold to the public or any assignee of record of
such Registrable Securities to whom rights under this Section 4 (and/or, with
respect to the rights of the Investors set forth in Section 5, under such
Section 5) have been assigned in accordance with this Agreement.
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(b) Shelf Registration. The Company shall
(i) prior to December 15, 2001, both file a registration
statement under the 1933 Act for and all such qualifications and registrations
as may be so required and as would permit the sale and distribution of all of
the Holders' Registrable Securities and thereafter shall use its best efforts to
secure the effectiveness of such registration statement;
(ii) pay all expenses incurred in connection with any
registration qualification and compliance requested hereunder, (excluding
underwriters' or brokers' discounts and commissions), including without
limitation all filing, registration and qualification, printers' and accounting
fees and the reasonable fees and disbursements of one counsel for the selling
Holder or Holders and counsel for the Company; and
(iii) use its best efforts to cause the registration statement
to remain effective until the earlier of (A) the date ending three (3) years
after the effective date of the registration statement filed pursuant to this
Section 4(b), or (B) the date on which each Holder of Registrable Securities is
able to sell all of such Holder's Registrable Securities in any single three (3)
month period without registration under the 1933 Act pursuant to Rule 144,
provided that if the Company elects to terminate the effectiveness of the
registration statement under (B), the Company shall prior to such termination
provide each Holder an opinion of counsel, based on factual representations of
the Holders, that such Holder is able to sell all of the Registrable Securities
held by such Holder and its affiliates in any single three (3) month period
without registration under the 1933 Act pursuant to Rule 144.
(c) Obligations of the Company. Whenever required to effect the
registration of Registrable Securities under this Agreement, the Company will,
as expeditiously as reasonably possible:
(i) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement;
(ii) furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by them that are included in such registration;
(iii) use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
"blue sky" laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company will not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions;
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(iv) in the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering;
(v) cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(vi) provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration; and
(vii) notwithstanding anything else in this Section 4, if, at
any time during which a prospectus is required to be delivered in connection
with the sale of any Registrable Securities, the Company determines in good
faith and in its reasonable judgment that such sale would require public
disclosure by the Company of material non-public information that the Company
deems it advisable not to disclose, or that a development has occurred or a
condition exists as a result of which the registration statement or the
prospectus filed as a part thereof contains a material misstatement or omission,
the Company will immediately notify each Holder thereof by telephone and in
writing. Upon receipt of such notification, Holder and its affiliates will
immediately suspend all offers and sales of any Registrable Securities pursuant
to the registration statement. In such event, the Company will amend or
supplement the registration statement as promptly as practicable and will take
such other steps as may be required to permit sales of the Registrable
Securities thereunder by Holder and its affiliates in accordance with applicable
federal and state securities laws. The Company will promptly notify Holder after
it has determined in good faith that such sales have become permissible in such
manner and will promptly deliver copies of the registration statement and the
prospectus (as so amended or supplemented). Notwithstanding the foregoing, (A)
under no circumstances shall the Company be entitled to exercise its right to
suspend sales of any Registrable Securities pursuant to the registration
statement more than one (1) time in any twelve-month period, (B) the period
during which such sales may be suspended (each a "Blackout Period") shall not
exceed thirty (30) calendar days and (C) no Blackout Period may commence less
than sixty (60) calendar days after the end of the preceding Blackout Period.
Upon the commencement of a Blackout Period pursuant to this Section 4,
Holder will immediately notify the Company of any contracts to sell any
Registrable Securities (each a "Sales Contract") that Holder or any of its
affiliates has entered into prior to notification of the commencement of such
Blackout Period and that would require delivery of such Registrable Securities
during such Blackout Period, which notice will contain the aggregate sale price
and volume of Registrable Securities pursuant to such Sales Contract. Upon
receipt of such notice, the Company will immediately notify Holder of its
election either (i) to terminate the Blackout Period and, as promptly as
practicable, amend or supplement the registration statement or the prospectus
filed as a part thereof in order to correct the material misstatement or
omission and deliver to Holder copies of such amended or supplemented
registration statement and prospectus or (ii) to continue the Blackout Period in
accordance with this paragraph. If the Company elects to continue the Blackout
Period, and Holder or any of its affiliates is therefore unable to
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consummate the sale of Registrable Securities pursuant to the Sales Contract
(such unsold Registrable Securities being hereinafter referred to herein as the
"Unsold Securities"), the Company will promptly indemnify each Holder against
any loss, claim or damage that each Holder may incur arising out of or in
connection with Holder's breach or alleged breach of any such Sales Contract,
and the Company shall reimburse each Holder for any reasonable costs or expenses
(including reasonable legal fees) incurred by such party in investigating or
defending any such proceeding (collectively, the "Indemnification Amount");
provided, however, that each Holder shall take all actions reasonably necessary
or appropriate to mitigate such Indemnification Amount; and provided further,
however, that as long as current prospectus is delivered to such Holder within
one day of the end of the Blackout Period, the Indemnification Amount shall be
reduced by an amount equal to the number of Unsold Securities multiplied by the
difference between (x) the actual per share price received by Holder or any of
its affiliates upon the sale of the Unsold Securities (if such sale occurs
within three (3) trading days of the end of the Blackout Period) or the closing
sale price of the Common Stock on the NASDAQ or other national securities
exchange on which the Common Stock is then listed on the third trading day after
the end of the Blackout Period (if the Unsold Securities are not sold by
Investor or any of its affiliates within three (3) trading days of the end of
the Blackout Period), and (y) the per share sale price for the Unsold Securities
provided in the Sales Contract.
(d) Furnish Information. It will be a condition precedent to the
obligations of the Company to take any action pursuant to Section 4 hereof that
the selling Holders will furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as will be required to effect the registration of
their Registrable Securities.
(e) Delay of Registration. No Holder will have any right to obtain
or seek an injunction restraining or otherwise delaying any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 4.
(f) Indemnification. In the event any Registrable Securities are
included in a registration statement under Section 4 hereof:
(i) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, shareholders, officers, directors,
employees and agents of each Holder, any underwriter (as defined in the 0000
Xxx) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the 1933 Act or the Exchange Act against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the 1933 Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, a "Violation"):
(A) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto;
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(B) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading; or
(C) any violation or alleged violation by the Company of the
1933 Act, the Exchange Act, any federal or state securities law or any rule or
regulation promulgated under the 1933 Act, the Exchange Act or any federal or
state securities law in connection with the offering covered by such
registration statement;
and the Company will reimburse each such Holder, partner, shareholder, officer,
director, employee, agent, underwriter or controlling person for any legal or
other expenses reasonably incurred by them, as incurred, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 4(f)(i)
will not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent will not be unreasonably withheld), nor will the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, shareholder,
officer, director, underwriter or controlling person of such Holder.
(ii) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, each person, if any, who
controls the Company within the meaning of the 1933 Act, any underwriter and any
other Holder selling securities under such registration statement or any of such
other Holder's partners, directors or officers or shareholders or any person who
controls such Holder within the meaning of the 1933 Act or the Exchange Act,
against any losses, claims, damages or liabilities (joint or several) to which
the Company or any such director, officer, controlling person, underwriter or
other such Holder, partner or director, officer, shareholder or controlling
person of such other Holder may become subject under the 1933 Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation that arises solely as a result of written information furnished by
such Holder expressly for use in connection with such registration; and each
such Holder will reimburse any legal or other expenses reasonably incurred by
the Company or any such director, officer, controlling person, underwriter or
other Holder, partner, officer, director, shareholder or controlling person of
such other Holder in connection with investigating or defending any such loss,
claim, damage, liability or action: provided, however, that the indemnity
agreement contained in this Section 4(f)(ii) will not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent will not
be unreasonably withheld; and provided further, that the total amounts payable
in indemnity by a Holder under this Section 4(f)(ii) in respect of any Violation
will not exceed the lesser of (A) the aggregate proceeds (net of discounts)
received by such Holder upon the sale of the Shares or Warrant Shares and (B)
that proportion of aggregate losses, claims, damages, liabilities or expenses
indemnified against which equals the proportion which the number of Registrable
Securities
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being sold by such Holder bears to the total number of Securities being sold by
the Company and all Holders.
(iii) Promptly after receipt by an indemnified party under this
Section 4(f) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 4(f), deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party will have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party will
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if the indemnifying party is materially
prejudiced thereby, will relieve such indemnifying party of liability, but only
to the extent that such indemnifying party is prejudiced with respect to a
specific claim.
(iv) The foregoing indemnity agreement with respect to any
preliminary prospectus shall not inure to the benefit of any Holder or
underwriter, or any person controlling such Holder or underwriter, from whom the
person asserting any losses, claims, damages or liabilities purchased shares, if
a copy of the prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) provided by the Company
was not sent or given by or on behalf of such Holder or underwriter to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the purchased shares to such person, and if the
prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage or liability.
(v) If the indemnification provided for in Sections 4(f)(i) or
4(f)(ii) hereof shall be unavailable to hold harmless an indemnified party in
respect of any liability under the 1933 Act, then, and in each such case, the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
statement or omissions that resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided that in no event
shall any contribution under this subsection (v) by any Holder exceed the gross
proceeds from the offering received by such indemnifying party. No person or
entity guilty of fraudulent misrepresentation (within the meaning of Section
II(f) of the 0000 Xxx) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
11
(vi) The obligations of the Company and Holders under this
Section 4(f) will survive the completion of any offering of Registrable
Securities in a registration statement, and otherwise.
(g) Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the SEC which may at any time permit the
sale of the Registrable Securities to the public without registration, while a
public market exists for the Common Stock of the Company, the Company will:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144 under the 1933 Act, at all times while
the Company is reporting under the Exchange Act;
(ii) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the 1933
Act and the Exchange Act (at any time it is subject to such reporting
requirements); and
(iii) so long as a Holder owns any Registrable Securities,
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of Rule 144, and of the
1933 Act and the Exchange Act (at any time it is subject to the reporting
requirements of the Exchange Act), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents of the Company as a
Holder may reasonably request in availing itself of any rule or regulation of
the SEC allowing a Holder to sell any such securities without registration (at
any time the Company is subject to the reporting requirements of the Exchange
Act).
5. Covenants.
(a) Affirmative Covenants. The Company covenants and agrees that
unless the Holders of a majority of Registrable Securities shall otherwise give
their prior consent in writing (which consent any such Holder may at its sole
discretion withhold):
(i) Authorized Shares. The Company shall, from and at all times
after the Closing maintain a reserve of authorized shares sufficient to cover
the conversion of the Preferred Stock and the exercise in full of the
outstanding Warrants until the conversion of the Preferred Stock and the
expiration or earlier exercise of the Warrants, respectively.
(ii) Exchange Act Filings. The Company shall continue to file
with the SEC all reports and other filings required under the rules of the SEC
and such documents shall comply in all material respects with the requirements
of the Exchange Act or the 1933 Act, as applicable, as long as the Company
continues to be subject to reporting requirements under Sections 13 or 15(d) of
the Exchange Act.
(b) The Company further covenants and agrees that: (i) if the
Company shall elect to issue, after the Initial Series C Issue Date, to any
holders of Series A Preferred Stock or Series B Preferred Stock, any options to
purchase, or rights to subscribe for, or conversion rights in respect of Common
Stock, in addition to those rights described in Section
12
2(e) hereof, or (ii) if the Company shall elect to issue, after the Initial
Series C Issue Date, additional series of preferred stock or other securities by
their terms convertible into or exchangeable for Common Stock or options to
purchase or rights to subscribe for such convertible or exchangeable securities,
and such issuance would have a dilutive effect on the Series B Preferred Stock
and conversion rights pertaining thereto, then the Investor shall have the right
to participate in any such issuance, and purchase any such securities on stated
terms thereof.
6. Conditions to Obligations of the Investors. The obligation of each
Investor to purchase the Units at the Closing is subject to the fulfillment on
or prior to the Closing Date of the following conditions, any of which may be
waived by such Investor:
(a) Representations and Warranties Correct; Performance of
Obligations. The representations and warranties made by the Company in Section 2
hereof shall be true and correct when made, and shall be true and correct on the
Closing Date with the same force and effect as if they had been made on and as
of said date, except for representations and warranties made as of a specific
date which shall be true and correct as of such date; and the Company shall have
performed all obligations and conditions herein required to be performed or
observed by it under this Agreement on or prior to the Closing Date.
(b) Consents and Waivers. The Company shall have obtained any and
all consents (including all governmental or regulatory consents, approvals or
authorizations required in connection with the valid execution and delivery of
this Agreement), permits and waivers, other then the Stockholder Approval,
necessary or appropriate for consummation of the transactions contemplated by
this Agreement.
(c) Compliance Certificate. The Company shall have delivered to the
Investors a certificate, executed by the Chairman of the Board and Chief
Executive Officer of the Company, dated the Closing Date, certifying to the
fulfillment of the conditions specified in subsections (a), (b), (g) and (h) of
this Section 6.
(d) Opinion of Company's Counsel. Investors shall have received from
Xxxxx Xxxxxxx, General Counsel to the Company, an opinion addressed to the
Investors, dated the Closing Date in substantially the form attached hereto as
Exhibit E.
(e) Certificate of Designation. The Company shall have filed with
the Secretary of State of the State of Delaware the Certificate of Designation
in the form attached hereto as Exhibit C.
7. Conditions to Obligations of the Company. The obligation of the
Company to sell and issue the Shares to each Investor at the Closing is subject
to the fulfillment on or prior to the Closing Date of the following conditions,
any of which may be waived by the Company:
(a) Representations and Warranties. The representations and
warranties made by such Investor in Section 3 hereof shall be true and correct
when made, and
13
shall be true and correct on the Closing Date with the same force and effect as
if they had been made on and as of said date.
(b) Consents and Waivers. The conditions set forth in subsections
(b) and (g) of Section 6 hereof shall have been fulfilled.
8. Miscellaneous.
(a) Governing Law. This Agreement will be governed by and construed
in accordance with the internal laws of the State of Missouri applicable to
contracts made among residents of, and wholly to be performed within, the State
of Missouri, without regard to principles of conflict of laws or choice of laws.
(b) Further Instruments. From time to time, each party hereto will
execute and deliver such instruments and documents as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
(c) Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
(d) Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. This Agreement will be
effective following the parties signatory hereto upon such counterpart signature
by all initial parties hereto.
(e) Entire Agreement. This Agreement, including and incorporating
the Schedule of Exceptions and all Exhibits attached hereto and referred to
herein, constitutes and contains the entire agreement and understanding of the
parties regarding the subject matter of this Agreement and supersedes in its
entirety any and all prior negotiations, correspondence, understandings and
agreements among the parties respecting the subject matter hereof.
(f) Notices. All notices required to be given or delivered to the
Company under the terms of this Agreement shall be deemed to have been given or
made for all purposes (i) upon personal delivery, or (ii) upon confirmation
receipt that the communication was successfully sent to the applicable number if
sent by facsimile, or (iii) one day after being sent, when sent by professional
overnight courier service, or (iv) five (5) days after posting when sent by
registered or certified mail. Notices to the Company shall be sent to the
principal office of the Company (or at such other place as the Company shall
notify the Investor of in writing). Notices to the Investor shall be sent to the
address of the Investor on the books of the Company (or at such other place as
the Investor shall notify the Company of in writing).
14
(g) Finders' Fee. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction other than described in this section. Each party agrees to indemnify
and to hold the other parties hereto harmless from any liability for any
commission or compensation in the nature of a finders' fee (and the costs and
expenses of defending against such liability or asserted liability) for which
such party or any of its officers, partners, employees or representatives is
responsible.
(h) Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of the Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and by Investors
holding at least a majority of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 8(h) will be binding upon the
Company, each Investor, and their permitted transferees and assignees.
(i) Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provisions will be excluded
from this Agreement to the extent unenforceable and the balance of such
provisions, and of this Agreement, will be interpreted as if such provision or
part hereof were so excluded and will be enforceable in accordance with its
terms.
(j) Aggregation of Stock. All Securities held or acquired by
affiliated entities or persons will be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
COMPANY
VANGUARD AIRLINES, INC.
By:
----------------------------------------
Title:
-------------------------------------
Address: 000 Xxxxxx Xxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
INVESTOR:
VANGUARD ACQUISITION COMPANY
By:
----------------------------------------
Title:
-------------------------------------
Address: c/o Pegasus Aviation, Inc.
Four Xxxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
EXHIBIT A
SCHEDULE OF INVESTORS
Investor Number of Units Purchase Price
-------- --------------- --------------
Vanguard Acquisition Company 162,500 20.00
EXHIBIT B
[Intentionally Omitted]
EXHIBIT C
CERTIFICATE OF DESIGNATION
EXHIBIT D
SCHEDULE OF EXCEPTIONS
None
EXHIBIT E
FORM OF OPINION
