BRIDGE NOTE CONVERSION AGREEMENT
This Budge Note Conversion Agreement (the "Agreement") is
entered into as of ________ 1998 between BALTIA AIR LINES, INC., a New
York corporation ("COMPANY") and___________ ("HOLDER") (collectively
the "PARTIES"), with reference to the following:
WITNESSETH
WHEREAS, the HOLDER has loaned funds to the COMPANY pursuant
to a certain Bridge Loan Agreement THE "Loan Agreement") between the
COMPANY and the HOLDER, dated _________, 1998;
WHEREAS, the COMPANY and the HOLDER desire to modify the Loan
Agreement to provide for that the underlying note of the Loan Agreement
be converted into preferred stock equity ("Preferred Shares") in the
COMPANY;
NOW THEREFORE, in consideration for the following terms,
promises, covenants and/or warranties, and for good and other valuable
consideration, the sufficiency and receipt of which is hereby
acknowledged, the PARTIES hereto agree as follows:
1. Note Conversion. The HOLDER hereby surrenders the underlying
note issued to the HOLDER by the COMPANY as and for consideration
pursuant to the Loan Agreement. The COMPANY hereby issues Preferred
Shares to the HOLDER:
The HOLDER is due and owing the sum of _______Dollars (____)
pursuant to the underlying note of the Loan Agreement. The
COMPANY hereby issues _________Preferred Shares to HOLDER as
consideration for HOLDER converting the note under the Loan
Agreement. The basis of this note conversion formula is 10,000
Preferred Shares for each $100,000.00 note pursuant to the Loan
Agreement.
The Preferred Shares shall carry a ten (10%) percent coupon
payable concurrently with redemption or conversion and shall be
converted in accordance with the terms herein this agreement, unless
earlier redeemed by the COMPANY. The HOLDER hereby tenders the
original note to the COMPANY and relinquishes all rights, title and
interest in and to the collective terms of the Loan Agreement and the
underlying note.
2. Warrant Conversion. The HOLDER hereby surrenders the warrants
issued by the
COMPANY as and for consideration of the underlying note to the COMPANY
pursuant to the Loan Agreement (the "Bridge Warrants"). The COMPANY
hereby issues to the HOLDER Warrants identical to those offered in the
Registration Statement and promises to use its best efforts to register
the HOLDER as a selling securityholder contemporaneously with the
Registration Statement.
The HOLDER is the holder in due course of _________ Bridge
Warrants pursuant to the underlying note of the Loan
Agreement. The COMPANY hereby issues __________ Warrants to
HOLDER as consideration for HOLDER surrendering the Bridge
Warrants. The basis of this warrant conversion formula is
one (1) Warrant will be issued for every one (1) Bridge
Warrant surrendered.
The HOLDER consents and agrees to a lock up by the underwriter
of the Warrants hereby exchanged, and the underlying shares of common
stock, for a period of twelve (12) months commencing from the date of
effectiveness of the Registration Statement. The lock up period
restriction may only be removed with the express written consent of the
underwriter. The HOLDER acknowledges that the underwriter defined
herein is Hornblower & Weeks, Inc. and that no other entity, member
firm or underwriter may issue consent to remove the lock up restriction
other than Hornblower & Weeks, Inc. The HOLDER hereby tenders the
original Bridge Warrant certificate to the COMPANY and relinquishes all
rights, title and interest in and to the terms of the Bridge Warrant.
3. Conversion Rights. The Preferred Shares carry a (10%) percent
coupon payable
concurrently with redemption or conversion. Ninety (90) days afer the
initial public offering of the COMPANY'S common stock in accordance
with the Registration Statement, each Preferred Shares shall be
converted by the HOLDER for three (3) shares of the COMPANY's
unregistered common stock which are not part of the Registration
Statement, unless redeemed earlier by the COMPANY at $12.00 per share
on twenty days written notice. The shares of common stock shall be
subject to any or all lock up provisions pursuant to SEC Rule 144, as
amended and/or modified.
4. Registration. The HOLDER hereby acknowledges that it is aware of
all risks involved of this investment and further acknowledges that the
investment is not liquid and may not be liquid for an extended period
of time, if at all. The PARTIES consent to the use of the Registration
Statement in connection with the sale of the HOLDER's Warrants and the
same is incorporated by reference into the Agreement.
5. Representation and Warranties of COMPANY. The COMPANY hereby
represents and warrants to HOLDER as follows:
a. Organization. The COMPANY (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
State of New York; (ii) is duly qualified and licensed to do business
in each jurisdiction in which it operates and has all requisite power
and authority to carry on it business as stated in the Registration
Statement, to own and hold its properties and assets, and (iv) to enter
into and perform this Agreement and to issue and carry out the
provisions of this Agreement.
b. Authorization. The execution, performance and delivery by the
COMPANY of this Agreement, the Warrants and Preferred Shares have been
duly and validly authorized by the COMPANY's Board of Directors and by
Written Consent of a majority of the Shareholders. No further
authorization or approval of the COMPANY's shareholders is required in
connection therewith. This Agreement shall constitute legal, valid and
binding obligations of the COMPANY and each is enforceable against the
COMPANY in accordance with its respective terms, except as such
enforcement may be limited by bankruptcy, insolvency and other similar
laws affecting the enforcement of creditors' rights generally.
c. No Conflict. The execution, delivery and performance by the
COMPANY of this Agreement and the issuance of the Preferred Shares and
Warrants; (i) will not conflict with, result in a breach or constitute
a default under any contract, agreement, indenture or credit agreement,
deed of trust, mortgage, lease, security agreement, lock up agreement,
or other arrangement to which the COMPANY is a party by which the
COMPANY or any of its properties or assets is bound or affected; (ii)
will not cause the COMPANY to violate or contravene any provision of
its Articles of Incorporation or Bylaws; or (iii) require any
authorization, consent, approval, permit, exemption or other action by
or notice to any court or administrative or governmental body pursuant
to its Articles of Incorporation, Bylaw; or any law, statute, rule or
regulation to which the COMPANY is subject or any agreement or,
instrument, order, judgment, or decree to which the COMPANY is subject;
provided, however; that certain securities authorities, governmental
agencies and/or regulatory authorities, including, but not limited to
the SEC, the NASD, NASDAQ Market System, state securities
commissioners, etc., may opine as to the validity of this Agreement, or
any term herein, and the PARTIES agree to be bound by such
determination.
d. Patents, Trademarks, and Other Intangible Rights. The
COMPANY has good title (without known misappropriation) to all
inventions (whether patentable or not), patents, trademarks,
copyrights, trade names, proprietary information, processes, designs,
trade secrets, computer programs, source codes, modules, and technical
materials (collectively, the "Trade Secrets"), or adequate licenses and
rights to use the Trade Secrets of others on terms deemed favorable by
the COMPANY, that are necessary for the successful conduct of the
business of the COMPANY, and are free of any claim by an officer,
director, employee or other person. The COMPANY's business is being
carried on without known conflicts or infringements with the Trade
Secrets of others; and the COMPANY has taken reasonable security
measures to protect the secrecy, value and confidentiality of its Trade
Secrets, and any former or current employees who have worked on,
developed or contributed to the development of such Trade Secrets have
been informed that such Trade Secrets are proprietary. The COMPANY
knows of no reason why any Trade Secrets of the COMPANY which are
eligible for patent, copyright or trademark protection cannot be
patented, copyrighted or trademarked. No shareholder or employee is
under any restriction, whether contractual or by virtue of previous
employment or otherwise, that would prevent him from performing his
duties for the COMPANY or prevent the COMPANY from using the Trade
Secrets
e. Litigation. There are no (i) actions, proceedings or
investigations pending or threatened to the COMPANY's knowledge, or any
verdicts or judgments entered against the COMPANY, its officers or
directors or shareholders before any court or any administrative agency
that might result in any material adverse change in the business,
properties or condition, financial or otherwise, of the COMPANY and the
COMPANY has received no correspondence or communication with respect
to any possible violation or investigation of the same, except as
provided in the Registration Statement.
f. Material Facts Disclosed. There are no material
facts relating to the COMPANY not fully disclosed to HOLDER by the
Registration Statement. No representation, covenant or warranty made
by the COMPANY herein, or with the transaction contemplated hereby,
contains or will contain any untrue statement of fact, or omits to
state a material fact necessary to make the statement not misleading.
7. Representations and Warranties and Agreements of HOLDER. HOLDER
hereby represents and warrants to COMPANY as follows:
a. Knowledge and Experience. HOLDER has sufficient knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of investments generally and investment
in the COMPANY in particular and HOLDER IS ABLE TO BEAR THE ECONOMIC
RISK OF THIS TRANSACTION WITH THE UNDERSTANDING THAT IT CAN LOSE ITS
ENTIRE INVESTMENT HEREIN WITHOUT PRODUCING A MATERIAL ADVERSE CHANGE IN
HOLDER'S FINANCIAL CONDITION.
b. Transferability Restrictions. No Share may be transferred
or sold, unless such transfer or sale is registered pursuant to the
Securities Act of 1933 (the "Act") and or registered or qualified
pursuant to applicable securities laws or exemptions from such
registrations or qualifications, without prior written consent of the
COMPANY which consent may require an opinion of legal counsel ( with
concurrence by COMPANY's legal counsel) to the effect that the proposed
transfer is exempt from the registration provisions of the Act and from
the registration or qualification provisions of any applicable
securities law.
c. No Public Market. HOLDER is aware that there is currently no
public market for the Shares and that HOLDER may not be able to readily
liquidate HOLDER'S investment herein.
8. Affirmative Covenants of the COMPANY. The COMPANY makes the
following affirmative covenants to HOLDER, upon which HOLDER is relying
in entering into this Agreement and which, unless otherwise indicated,
shall survive until the COMPANY's initial public offering.
a. Records. The COMPANY shall, at all times, keep proper books
and records and accounts in which full, true and correct entries shall
be made of its transactions in accordance with generally accepted
accounting principles, consistently applied; and set aside on its books
from its earnings for each fiscal year, all proper reserves, including
reserves for each year's depreciation, depletion, obsolescence and
amortization of its properties in connection with the COMPANY's
business.
b. Taxes. The COMPANY shall pay and discharge promptly as they
become due and payable all taxes, assessments and other governmental
charges or levies imposed upon it or its income or upon any or its
property, real, personal or mixed, or upon any part thereof, as well as
all material claims of any kind (including claims for labor, materials
and supplies) which if unpaid might by law become a lien or charge
upon, its property; provided, however, that it shall not be required to
pay any such tax, assessment, charge, levy or claim if the amount,
applicability or validity thereof shall concurrently be contested in
good faith by appropriate proceedings or other appropriate actions
promptly initiated and diligently conducted.
c. Existence. The COMPANY shall do, or cause to be done, all
things necessary to preserve and keep in full force and effect its
corporate existence.
d. Properties. The COMPANY shall maintain and keep its
properties in good repair, working order and condition, ordinary wear
and tear excepted, and from time to time make all necessary and proper
repairs, renewals and replacements and preserve all licenses, contracts
and rights as in its judgment may be necessary so that the business
carried on in connection therewith may be proper and advantageously
conducted at all times; provided, however, that nothing in this Section
shall prevent the COMPANY from selling, abandoning or otherwise
disposing of any property that is not material to its business or
property (including any lease of property) if, in its judgment, the
same is no longer useful in the business.
e. Compliance with Laws. The COMPANY shall comply in all
material respect with all applicable statutes rules, regulations and
orders of, and all applicable restrictions imposed by, all governmental
authorities related to the conduct of its business and the ownership of
its property and to environmental, safety and other similar standards
or controls, unless the failure to so comply would not have a material
adverse effect on the business or condition, financial or otherwise, of
the COMPANY.
8. Investment Covenant. By accepting the Shares, the HOLDER thereof
represents, warrants and covenants that it is an accredited investor as
defined under Regulation D of the Act or an accredited person within
the meaning of Rule 242 of the Act, and is acquiring this investment
for its own account and not with the view to resale or distribution
thereof, except in accordance with applicable, federal and state
securities laws.
9. Disputes. This Agreement will be interpreted in accordance with
New York Law, including all manners of construction, validity,
performance and enforcement, without giving effect to any principle of
conflict of laws.
l0. Attorney's Fees. If any arbitration, litigation, action, suit or
other proceeding is instituted to remedy, prevent or obtain relief from
a breach of this Agreement, or pertaining to a declaration of rights
under this Agreement, the prevailing party will recover all such
party's reasonable attorney's fees incurred in each and every such
action, suit or other proceedings, including any and all appeals or
petitions therefrom. As used in this Agreement, reasonable attorney's
fees will be deemed to be the full and actual costs of any legal
services actually performed in connection with the matters involved,
including those related to any appeal or the enforcement of any
judgment, calculated on the basis of the usual fee charged by attorneys
performing such services.
11. Notices. Any notice to be given hereunder shall be given
(except as otherwise expressly set forth herein) by registered or
certified mail postage prepaid, by cable, telex or facsimile, or may be
delivered by hand or by messenger and shall be deemed to have been
received as follows: if given by registered or certified mail, five
business days after posting; if given by cable, two business days after
dispatch; if given by telex or facsimile, one business day after
dispatch; and if delivered by hand or by messenger and receipted by, or
on behalf of the PARTY to whom the notice is directed, at the time of
such delivery. Any notice shall be sent to the address set forth below,
or to such other address as the relevant PARTY may notice to the other.
If to COMPANY:
Igor Dmitrowsky
President Baltia Air Lines, Inc.
00-00 Xxxxxxx Xxxxxx
Xxxx Xxxx, Xxx Xxxx 00000
If to HOLDER:
__________________________
___________________________
___________________________
___________________________
12. Counterparts. This Agreement may be executed in counterparts, each
of which shall be an original but all of which shall be constituted one
and the same instrument.
13. Interpretation. The language in all parts of this Agreement shall
be in all cases construed simply according to its fair meaning and not
strictly for or against any party. Whenever the content requires, all
words used in the singular shall be construed to have been used in the
plural and vice versa and each gender will include any other gender.
The captions of the sections of this Agreement are for convenience only
and shall not affect the construction or interpretation of any
provisions herein.
14. Miscellaneous. The recital and all exhibits, attachments or other
documents, referenced in this Agreement are fully incorporated into
this Agreement by reference. Unless expressly set forth otherwise
herein, all references herein to a "day","month" or "year" will be
deemed to be a reference to a calendar day, month, or year as the case
may be. Unless expressly set forth otherwise herein, all
cross-references herein will refer to provisions within this Agreement
and will not be deemed to be references to the overall transaction or
to any other agreement or documents.
15. Modifications, Amendments, and Waivers. No, provision of this
Agreement, or the documents referred to herein, may be altered,
amended, canceled, revoked or otherwise modified, and no addition to
this Agreement may be made unless in writing signed by each of the
PARTIES. There can be no waiver with respect to this Agreement of any
provision of this Agreement by any PARTY without consent of the other
PARTY, nor will it be deemed to be a waiver of the right of any of
party to enforce strict compliance with the provisions hereof.
16. Severability. Each provision of this Agreement is intended to be
severable and if any term or provision herein is determined invalid or
unenforceable for any reason, such illegality or invalidity will not
affect the validity of the remainder of this Agreement; and whenever
possible, intent will be given to the invalid or unenforceable
provision.
17. Merger. The terms of this Agreement are the final expression of
the PARTIES' agreement with respect to this transaction and may not be
contradicted by evidence of any prior agreement or contemporaneous oral
agreement, and this Agreement constitutes the complete and exclusive
statement of its terms and no extrinsic evidence whatsoever may be
introduced in any judicial or arbitration proceeding, if any, involving
this Agreement.
IN WITNESS WHEREOF, this Agreement is entered into by the PARTIES as of
the date set forth above.
BALTIA AIR LINES, INC.
By:_______________________
IGOR DMITROWSKY, President
HOLDER
________________________
________________________
________________________
________________________
