Attached files
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of the Securities Exchange Act of 1934
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Date
of Report (Date of earliest event reported): February 26,
2010
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GULFSTREAM
INTERNATIONAL GROUP, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
(State
or other jurisdiction of incorporation)
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001-33884
(Commission
File Number)
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20-3973956
(IRS
Employer Identification No.)
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3201
Griffin Road, 4th Floor, Ft. Lauderdale, Florida 33312
Telephone
No.: (954) 985-1500
(Address
and telephone number of Registrant's principal
executive
offices and principal place of
business)
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
o Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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”)
entered into Purchase Agreements for Senior Secured Notes and Warrants (the
“Purchase
Agreements”) with 16 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, expiring February 28, 2015 (the “Warrants”),
to purchase an aggregate of 409,827 of shares of the Company’s common stock, par
value $0.01 per share (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”).
The
exercise price of the Warrants is $1.22 per share (the “Exercise Price”); which
Exercise Price, subject to anti-dilution adjustments set forth in the Warrants,
represents 100% of the closing price of the Common Stock on February 25,
2010. 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”). Shelter Island currently holds a first priority lien
and security interest on all of the assets of the Company and its subsidiaries
granted issued in connection with an original $5,100,000 Secured Original Issue
Discount Debenture (“Debenture”)
financing provided by Shelter Island in August 2008, of which $3,659,000 was
outstanding as of February 26, 2010. 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 unpaid 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.
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”) related to the following events of default under the
Debenture which occurred and were continuing (i) failure by the Company to pay
Shelter Island interest for December 31, 2009 and January 31, 2010; and (ii)
failure by the Company to achieve minimum quarterly EBITDA of not less than
$350,000 for the fiscal quarter ending December 31, 2009 (collectively, the
“Shelter
Island Defaults”). Under the Forbearance Agreement, Shelter
Island agreed to forbear from exercising its rights and remedies under the
Securities Purchase Agreement dated as of August 31, 2008 (the “Securities
Purchase Agreement”) and the Debenture as a result of the Shelter Island
Defaults until the occurrence of, without limitation (a) failure by the Company
to comply with the terms, covenants and agreements of the Forbearance Agreement;
and (b) the occurrence of any other event of default under the August 2008
Debenture or the Securities Purchase Agreement (collectively, a “Termination
Event”). One of the covenants to be performed by the Company
under the Forebearance 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. Upon satisfaction of such covenant, Shelter Island
has agreed to waive all prior Shelter Island Defaults.
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 December 31, 2011 maturity date of the Debenture; and (iii) the
Company may prepay all or any portion of the outstanding principal amount
together with a premium equal to 5% of outstanding principal amount being
prepaid; provided that, is such prepayment is made in 2011, there shall be no
premium applicable. In addition, the Company, each of its
subsidiaries and Shelter Island entered into an Omnibus Amendment to the
Guaranty Agreements (the “Guaranty
Agreements Amendment”) pursuant to which, without limitation, the parties
agreed to amend the existing guarantees to include the repayment of the Shelter
Island Note.
As
part of such agreement, 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.
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 __________ shares of Company Common
Stock.
On
February 26, 2010, the Company and Shelter Island 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 shall be equal to $1,050,000, or $15.00 per share.
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.
(d) Exhibits.
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Exhibit
Number
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Description
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Form of Purchase
Agreement for Senior Secured Notes and Warrants dated as of February 26,
2010.
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Form of 12% Senior Secured Note due December 31, 2010 issued
on February 26, 2010.
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Form of Warrant
issued on February 26, 2010.
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Security Agreement
dated as of February 26, 2010.
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Waiver,
Consent and Intercreditor Agreement dated as of February 26,
2010.
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Form
of Registration Rights Agreement.
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Forbearance
Agreement and Amendment to Debenture dated as of February 26,
2010.
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$250,000
Promissory Note issued to Shelter Island Opportunity Fund, LLC on February
26, 2010.
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Put
Warrant issued to Shelter Island Opportunity Fund, LLC on February 26,
2010.
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Remaining
Warrant issued to Shelter Island Opportunity Fund, LLC on February 26,
2010.
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Amendment
to the Put Option Agreement dated as of February 26, 2010.
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Omnibus
Amendment to the Guaranty Agreements dated as of February 26,
2010.
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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GULFSTREAM
INTERNATIONAL GROUP, INC.
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Date: March
4, 2010
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By:
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/s/
David F. Hackett
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David
F. Hackett
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Chief
Executive Officer
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