UNIT PURCHASE AGREEMENT
This Unit Purchase Agreement (the "Agreement") is made and
entered into as of September 8, 2000 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) 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
units set forth opposite each Investor's name on EXHIBIT A. The
purchase price per Unit (the "Unit Purchase Price") shall be
$1.7173, subject to adjustment as provided for in Section 8 of
this Agreement. A "Unit" shall be composed of one share (a
"Share") of Common Stock, $0.001 par value, of the Company (the
"Common Stock"), and a warrant in the form attached hereto as
EXHIBIT B (a "Warrant") to purchase one share of Common Stock,
$0.001 par value (the "Warrant Shares"). The exercise price of
the Warrant shall be equal to the Unit Purchase Price plus ten
percent (10%) per Warrant Share.
(b) CLOSING. The closing ("Closing") shall take place on the
date hereof and the Investors shall purchase on the date hereof
the number of Units indicated for each Investor on EXHIBIT A. The
date of each Closing is hereinafter referred to as the "Closing
Date."
(c) DELIVERY. Subject to the terms and conditions of this
Agreement, at a Closing, the Company shall deliver to each
Investor (i) a stock certificate representing the Common Stock
included in the Units to be purchased by such Investor and (ii) a
Warrant reflecting the number of Warrant Shares to be purchased,
against payment of the purchase price therefor by cancellation of
indebtedness, including any interest thereon, a check payable to
the order of the Company, or by wire transfer of immediately
available funds to the bank account of the Company.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to each Investor:
(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 has 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 Common Stock,
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 Common Stock, the Warrants and the Warrant Shares
has been duly and effectively taken. Upon execution and
delivery, this Agreement and the Warrants, when issued,
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 Common Stock and the Warrants (and the
Warrant Shares issuable upon exercise of the Warrants) when
issued in compliance with the provisions of this Agreement, 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 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 Common Stock.
(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, the Warrants and the Warrant
Shares) and under the Company's Certificate of Incorporation, as
amended and restated (the "Restated Certificate").
(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 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 2,000,000 shares of Preferred Stock, $.001 par value, 600,000
of which have been designated Series A Preferred Stock.
As of August 1, 2000, there were 17,109,921 shares of Common
Stock, 302,362 shares of Series A 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 nonassessable. Except for (A) 2,793,713
shares of Common Stock issuable upon exercise of the Warrants and
exercise of the Company's outstanding warrants, (B) 4,649,726
shares of Common Stock issuable upon exercise of stock options
granted to employees, consultants, officers or directors of the
Company and (C) 1,209,448 shares issuable upon conversion of the
Series A Preferred Stock, , 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 June 1, 2000 the Company
has not issued any shares of capital stock or any options,
warrants or other rights with respect thereto except for shares
issued upon exercise of options, warrants or rights, all as 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 Common Stock, 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;
(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) REGISTRATION RIGHTS. Except as set forth in the
Registration Rights Agreement dated March 20, 1998 (the
"Registration Rights Agreement"), the Company has not granted or
agreed to grant any registration rights, including piggyback
rights, to any person or entity. None of the registration rights
contained in the Registration Rights Agreement are senior to the
registration rights provided for in this Agreement.
(j) 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; (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 of
Common Stock, 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 Common Stock 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:
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 hereunder,(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.
(b) SHELF REGISTRATION. The Company shall
(i) prior to August 31, 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;
(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 the Nasdaq Stock Market or each other
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 two (2) times 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 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 a current prospectus is delivered to such Holder within
one trading 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 Stock Market 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;
(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 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 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 11(f) of the 0000 Xxx) will be entitled to
contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
(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) RESERVED SHARES. The Company shall, from and at all times
after the Closing maintain a reserve of authorized shares
sufficient exercise in full of the outstanding Warrants until 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.
6. CONDITIONS TO OBLIGATIONS OF THE INVESTORS. The obligation
of each Investor to purchase the Units at each Closing is subject
to the fulfillment on or prior to the applicable 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 applicable 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 applicable 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 necessary or appropriate for consummation of the
transactions contemplated by this Agreement.
(c) OFFICER'S CERTIFICATE. The Company shall have delivered to
the Investors a certificate executed by the Chief Executive
officer of the Company, dated the Closing Date, certifying to the
fulfillment of the conditions specified in subsections (a1) and
(b) 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 C dated as of
the date hereof.
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 shall be true and correct on the
applicable 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
subsection(b) of Section 6 hereof shall have been fulfilled.
8. ADJUSTMENT FOR DILUTIVE ISSUANCES. Additional shares of
Common Stock shall be issued to the Investors from time to time
as follows:
(a) If the Company shall issue, at any time and from time
to time after the Closing Date to and including September
__, 2003, any Dilutive Stock (as defined below) without
consideration or for a consideration per share less than the
Unit Price then on each such occasion the Company shall
issue additional shares of Common Stock to each Investor as
follows:
NAS=(1.7173-PPSDS) x SCS
-------------------
PPSDS
Where NAS means the number of additional shares of Common Stock
to be issued to each Investor, SCS means the Shares of Common
Stock issued to such Investor hereunder (without counting any
Warrant shares), and PPDS means the price per share of the
Dilutive Stock.
(b) (i) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash
paid therefor before deducting any discounts, commissions or
other expenses allowed, paid or incurred by this Company for any
underwriting or otherwise in connection with the issuance and
sale thereof.
(ii) In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
value thereof as determined by the Board of Directors
irrespective of any accounting treatment.
(iii) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, 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, the following provisions shall apply for
all purposes of this subsection:
(1) The shares of Common Stock deliverable upon
exercise (to the extent then exercisable) of such options to
purchase or rights to subscribe for Common Stock shall be deemed
to have been issued at the time such options or rights were
issued and for a consideration equal to the consideration
(determined in the manner provided in subsections 8(b)(i) and
(b)(ii), if any, received by the Company upon the issuance of
such options or rights plus the minimum exercise price provided
in such options or rights for the Common Stock covered thereby.
(2) The shares of Common Stock deliverable upon
conversion of, or in exchange (to the extent then convertible or
exchangeable) for, any such convertible or exchangeable
securities or upon the exercise of options to purchase or rights
to subscribe for such convertible or exchangeable securities and
subsequent conversion or exchange thereof shall be deemed to have
been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to
the consideration, if any, received by the Company for any such
securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends),
plus the minimum additional consideration, if any, to be received
by the Company upon the conversion or exchange of such securities
or the exercise of any related options or rights (the
consideration in each case to be determined in the manner
provided in subsections 8(b)(i) and (b)(ii)).
(3) In the event of any change in the
consideration payable to the Company upon exercise of such
options or rights or upon conversion of or in exchange for such
convertible or exchangeable securities, including, but not
limited to, a change resulting from the antidilution provisions
thereof, the PPSDS, to the extent in any way affected by such
options, rights or securities, shall be recomputed to reflect
such change, but no further adjustment shall be made for the
actual issuance of Common Stock or any payment of such
consideration upon the exercise of any such options or rights or
the conversion or exchange of such securities.
(4) The shares of Common Stock deemed issued and
the consideration deemed paid therefor pursuant to subsections
8(b)(iii)(1) and (2) shall be appropriately adjusted to reflect
any change, termination or expiration of the type described in
either subsection 8(b)(iii)(3) or (4).
(c) "Dilutive Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection
8(b)(iii)) by this Company after the Closing Date other than:
(i) Common Stock issued pursuant to a transaction
described in subsections 8 (d) or (e)hereof; or
(ii) Shares of Common Stock issuable or issued to
employees, consultants, directors or vendors (if in transactions
with primarily non-financing purposes) of this Company directly
or pursuant to a stock option plan, employee stock purchase plan
or other plan or agreement approved by the Board of Directors of
the Company.
(d) STOCK SPLITS AND DIVIDENDS. In the event the Company
should at any time or from time to time after the Closing Date
fix a record date for the effectuation of a split or subdivision
of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the
holder thereof to receive directly or indirectly, additional
shares of Common Stock (hereinafter referred to as "Common Stock
Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such
record date (or the date of such dividend distribution, split or
subdivision if no record date is fixed), the Unit Price, solely
for purposes of adjustment in this Section, shall be
appropriately decreased.
(e) COMBINATIONS. If the number of shares of Common Stock
outstanding at any time after the Closing Date is decreased by a
combination of the outstanding shares of Common Stock, then,
following the record date of such combination, the Unit Price
shall be appropriately increased solely for purposes of
calculating adjustments under this Section in proportion to such
decrease in outstanding shares.
(f) NO IMPAIRMENT. The Company will not, by amendment of
its Restated Certificate or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms to be observed
or performed hereunder by the Company, but it will at all times
in good faith assist in the carrying out of all of the provisions
of this Section 8 and in the taking of all such action as may be
necessary or appropriate in order to protect the holders of the
Common Stock against impairment.
(g) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of
any event covered by this Section 8, the Company, at its expense,
shall promptly make all computations relating to such event in
accordance with the terms hereof and prepare and furnish to each
Investor a certificate setting forth such computation and
showing in detail the facts upon which such computations are
based as well as an originally issued stock certificate
representing the number of shares to be issued in connection
therewith.
(h) NOTICES. Any notice required by the provisions of this
Section 8 to be given to the Investors shall be deemed given if
deposited in the United States mail, postage prepaid, and
addressed to each Investor at his or her address appearing on the
books of this Company.
9. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the internal laws of the State of
California applicable to contracts made among residents of, and
wholly to be performed within, the State of California, 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).
(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.
(k) EXPENSES. The Company shall pay all of the costs and
expenses that it incurs, and will pay the reasonable fees and
expenses of McCutchen, Doyle, Xxxxx & Xxxxxxx, LLP counsel to the
Investors, with respect to the negotiation, execution, delivery
and performance of this Agreement. The Company shall at its own
expense prepare and file all filings required to be made by the
Investors under the Exchange Act as a result of their purchase of
the Units or shall reimburse each Investor for its expenses
(including filing fees) incurred in preparing and filing such
filings if the Company chooses not to do so.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
COMPANY
VANGUARD AIRLINES, INC.
By: /s/ Xxxx X. Xxxxxx
Name: Xxxx X. Xxxxxx
Title: CEO and President
Address: 000 Xxxxxx Xxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
INVESTOR:
X.X. XXXX CO., INC., as nominee 1998-19
By: /s/ Xxxxxx X. Xxxx Xx.
Name: Xxxxxx X. Xxxx, Xx.
Title: Vice President
Address: 000 Xxxx Xxxxxx Xxxx
Xxxxxx, XX 00000-0000
THE XXXXXXXXX 1980 REVOCABLE TRUST
BY: /s/ Xxxxxxx x. Xxxxxxxxx
Xxxxxxx X. Xxxxxxxxx, Trustee
Address: 000 00xx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
EXHIBIT A
INVESTORS
Pro Rata
SHARE INVESTMENT
[S] [C] [C]
X.X. Xxxx Co., Inc.,
As nominee 1998-19
1,172,325 $2,013,233
The Xxxxxxxxx 1980
Revocable Trust
1,186,898 $2,038,260
EXHIBIT B
WARRANT TO PURCHASE COMMON STOCK
EXHIBIT C
FORM OF OPINION OF COMPANY'S COUNSEL
