Explanatory Note:
This Form
8-K/A replaces and supersedes in its entirety the Form 8-K filed with the
Securities and Exchange Commission on March 4, 2010. Such Form 8-K
was erroneously filed by the EDGAR filing service provider used by the Company,
and represented an earlier draft of the Form 8-K that had not been reviewed or
approved by management or legal counsel.
Item
1.01
Entry Into a Material Definitive
Agreement.
Purchase
Agreement for Senior Secured Notes and Warrants
On February 26, 2010, Gulfstream
International Group, Inc. (the “
Company
”) completed a
$1,000,000 debt financing pursuant to purchase agreements for senior secured
notes and warrants (the “
Purchase Agreements
”)
with accredited investors and/or qualified institutional purchasers (the “
Investors
”) pursuant
to which the Company sold to the Investors (i) 12% Senior Secured Notes due
December 31, 2010 in an aggregate principal amount of $1,000,000 (the “
Notes
”); and (ii)
warrants, exercisable at $1.22 per share (subject to customary anti-dilution
adjustments) and expiring February 28, 2015 (the “
Warrants
”), to
purchase an aggregate of 409,827 of shares of the Company’s common stock (the
“
Common
Stock
”). The number of Warrants issued to each Investor was
determined by dividing (a) 50% of the principal amount of the Notes purchased by
the Investors, by (b) the Exercise Price (as defined below) of the Warrants (the
“
Offering
”). However,
if the Notes are not prepaid by the Company in full by June 30, 2010, then the
shares of Common Stock issuable upon exercise of the Warrants (the “
Warrant Shares
”)
would represent 100% of the original $1,000,000 principal amount of the Notes
divided by the Exercise Price. Accordingly, if the Notes are not paid in full by
June 30, 2010, assuming no anti-dilution adjustments to the Warrant Shares or
the Exercise Price, the aggregate of 409,827 Warrant Shares would increase to
819,654 Warrant Shares.
Payment of the principal amount of the
Notes and all interest accrued thereon is secured by a priority first lien and
security interest on all of the accounts receivable of the Company and its
subsidiaries, and all proceeds from the collection or sale thereof, pursuant to
a security agreement (the “
Security Agreement
”)
dated as of February 26, 2010 between the Company, each of its subsidiaries and
Taglich Brothers, Inc., as collateral agent for the Investors (“
TBI
”). In
addition, the Notes are subject to the terms of a waiver, consent and
intercreditor agreement (the “
Intercreditor
Agreement
”) dated as of February 26, 2010 between the Company, TBI, as
collateral agent for the Investors, and Shelter Island Opportunity Fund, LLC
(“
Shelter
Island
”), which is described below.
On
February 26, 2010, the Company and the Investors entered into a Registration
Rights Agreement (the “
Registration Rights
Agreement
”) under which the Company agreed to register the Warrant Shares
on the next registration statement that the Company files with the Securities
and Exchange Commission.
In
connection with the closing of the Offering, the Company issued to TGI, as
placement agent, (i) a $50,000 Note (identical to the Investors’ Notes) and a
Warrant to purchase 20,491 Warrant Shares, which represents 5% of the total
principal amount of the Notes and Warrants sold in the Offering; and (ii) a
separate Warrant to purchase 40,982 shares of Common Stock, which represents 10%
of the number of Warrant Shares issuable to Investors under the
Warrants.
The
foregoing is a summary of certain material terms and conditions of the Purchase
Agreements, the Notes, the Warrants, the Security Agreement, the Intercreditor
Agreement and the Registration Rights Agreement, and not a complete discussion
of such agreements. Accordingly, the foregoing is qualified in its
entirety by reference to the full text of those agreements attached to this
Current Report on Form 8-K in Exhibits 10.1, 10.2, 10.3, 10.4, 10.5 and
10.6, respectively, and incorporated herein by reference.
Forbearance
and Related Agreements with Shelter Island
On February 26, 2010, the Company and
Shelter Island entered into a Forbearance Agreement and Amendment to Debenture
(the “
Forbearance
Agreement
”) which reduced the Company’s potential liability under the put
option from $3,000,000 to $1,050,000 and rescheduled certain principal and
interest payments under the Debenture (as defined below) to reduce near-term
liquidity requirements.
In August 2008, the Company obtained an
original $5,100,000 debt financing with Shelter Island Opportunity Fund LLC
(“
Shelter
Island
”) pursuant to a securities purchase agreement (the “
Shelter Island Purchase
Agreement
”) and a secured original issue discount debenture due August
31, 2011 (the “
Debenture
”) of which
$3,659,000 was outstanding as of February 26, 2010. As part of
such financing, the Company granted Shelter Island a first priority lien and
security interest on all of the assets and properties of the Company and its
subsidiaries, issued certain warrants to Shelter Island and granted Shelter
Island a right to “put” the warrants to the Company for $3,000,000 which has
been subsequently reduced to $1,050,000. In December 2009 and January 2010,
Shelter Island agreed to defer the December and January interest payments under
the Debenture.
Under the terms of Forbearance
Agreement, Shelter Island agreed to forbear from exercising its rights and
remedies under the Shelter Island Agreement until the occurrence of (a) the
failure by the Company to comply with the terms, covenants and agreements of the
Forbearance Agreement; and (b) the occurrence of any event of default under the
Debenture or the Shelter Island Purchase Agreement (collectively, a “
Termination
Event
”). One of the covenants to be performed by the Company
under the Forbearance Agreement is the obligation of the Company to raise an
additional $1.5 million of debt or equity financing by March 26, 2010 or
otherwise satisfy Shelter Island that the Company has adequate liquidity and
working capital.
Pursuant to the Forbearance Agreement
the parties amended the Debenture, as follows (i) the Company shall pay interest
on the outstanding principal amount monthly in cash, commencing March 31, 2010;
(ii) the Company shall pay monthly installments on the outstanding principal
amount commencing April 30, 2010 and on the last trading day of each month
thereafter until the August 31, 2011 maturity date of the Debenture; and (iii)
the Company may prepay all or any portion of the outstanding principal amount of
the Debenture together with a premium equal to 5% of outstanding principal
amount being prepaid; provided that, if such prepayment is made in 2011, there
shall be no premium applicable. The Company, each of its
subsidiaries and Shelter Island also entered into an Omnibus Amendment to the
Guaranty Agreements pursuant to which, without limitation, the parties agreed to
amend the existing guarantees to include the repayment of the Shelter Island
Note.
As indicated above
,
Shelter Island currently holds
a first priority lien and security interest on all of the assets of the Company
and its subsidiaries. Under the terms of the Intercreditor Agreement,
Shelter Island agreed to subordinate its first priority lien on the accounts
receivable of the Company and its subsidiaries and the proceeds thereof, to the
lien granted to the Investors under the Security Agreement with TBI to the
extent of the deferred principal and accrued interest under the
Notes. Shelter Island retained its first priority security interest
in all of the other assets and properties of the Company and its
subsidiaries.
As contemplated in the original warrant
to purchase Common Stock issued to Shelter Island on August 31, 2008 (the “
Original Warrant
”),
on February 26, 2010 the Company divided the Original Warrant into (a) a warrant
in the form of the Original Warrant initially exercisable into 70,000 shares of
Common Stock (the “
Put
Warrant
”); and (b) a warrant in the form of the Original Warrant (the
“
Remaining
Warrant
”, and together with the Put Warrant, the "
Divided Warrants
")
such that the aggregate number of shares of Common Stock of Company that are
initially exercisable under the Divided Warrants (inclusive of the 70,000 Shares
of Common Stock initially issuable under the Put Warrant) shall equal, in the
aggregate, 15% of the fully-diluted shares of Company Common Stock issued and
outstanding immediately following consummation of the transactions contemplated
under the Forbearance Agreement and the Purchase Agreements, after giving
pro-forma effect to the conversion into Common Stock of all Company convertible
securities and the exercise of all Company options and warrants, including the
Warrants issued to the Investors. As a result of consummation of the
above transactions with Shelter Island and the TBI Investors, the aggregate
number of shares issuable upon conversion of the Divided Warrant is 883,247
shares of Company Common Stock.
The Company and Shelter Island also
entered into an Amendment to the Put Option Agreement (the “
Put Option
Amendment
”) dated as of August 31, 2008 under which, among other things,
the exercise price applicable for all the put shares under the put option was
reduced from $3,000,000 to $1,050,000, or $15.00 per share.
As consideration for its financial
accommodations, the Company paid Shelter Island an additional $250,000 as a
forbearance fee, by delivering a $250,000 promissory note (the “
Shelter Island Note
”)
due on the earlier of (i) August 31, 2011, and (ii) the date the Debenture is
permitted or required to be paid in accordance with its terms. The
Shelter Island Note accrues interest at a rate of 9% per annum and is payable in
cash on a monthly basis beginning on February 26, 2011.
The
foregoing is a summary of certain material terms and conditions of the
Forbearance Agreement, the Shelter Island Note, the Put Warrant, the Remaining
Warrant, the Put Option
Amendment
and
the Guaranty Agreements Amendment, and not a complete discussion of such
agreements. Accordingly, the foregoing is qualified in its entirety
by reference to the full text of those agreements attached to this Current
Report on Form 8-K in Exhibits 10.7, 10.8, 10.9, 10.10, 10.11 and 10.12,
respectively, and incorporated herein by reference.
Item
3.02
Unregistered Sales of Equity
Securities.
The
disclosure set forth in Item 1.01 to this Current Report is incorporated into
this item by reference. The Company’s issuance of the Notes, the
Warrants, the Shelter Island Note and the Divided Warrants were made in reliance
upon the exemption from registration for non-public offerings under §4(2) of the
Securities Act of 1933, as amended.
Item
9.01
Financial Statements and
Exhibits.
(a)
Financial statements of
businesses acquired
.
Not applicable.
(b)
Pro forma financial
information
.
Not applicable.
(c)
Shell company
transactions
.
Not applicable.