Are we suggesting, that this is all to pay their salaries?
Form 8-K for HELIX WIND, CORP.
23-Mar-2011
Entry into a Material Definitive Agreement, Unregistered Sale of Equity Securit
Item 1.01 Entry Into a Material Definitive Agreement
Effective as of March 21, 2011, the Company executed a Purchase and Exchange Agreement (the "First Exchange Agreement") with St. George Investments, LLC, an Illinois limited liability company (the "Investor") pursuant to which, among other things, the Company agreed to exchange 4 outstanding convertible promissory notes in the aggregate amount of $1,176,347.27 for a secured convertible promissory note in the amount of $1,176,347.27 (the "First Note"), and the Company executed a Purchase and Exchange Agreement (the "Second Exchange Agreement") with the Investor pursuant to which, among other things, the Company agreed to exchange 14 outstanding convertible promissory notes in the aggregate amount of $1,430,441.91 for a secured convertible promissory note in the amount of $1,430,441.91 (the "Second Note"). The First Note and Second Note are both secured by all of the assets of the Company pursuant to the terms of a Security Agreement for each of the First Note and Second Note. The Company's obligations under the First Note and Second Note are also guaranteed by the Company's subsidiary, Helix Wind, Inc., pursuant to the terms of a Guaranty for each of the First Note and Second Note.
The First Exchange Agreement, Second Exchange Agreement, First Note, Second Note, Security Agreements and Guaranties are referred to herein as the "Exchange Agreements". The Exchange Agreements also contain representations, warranties and indemnifications by the Company and the Investor.
As consideration for the Exchange Agreements, Investor agreed to pay the Company the sum of $100,000.00 (which sum was not added to the balance of the notes), all existing defaults under the First Note and Second Note were waived and all covenants thereunder were reset according to the terms thereof. Additionally, the First Note and Second Note have certain terms that are more favorable to the Company than the current terms of the original 18 notes which were exchanged, including a two-year term, an interest rate of 6% per annum, and an ability to extinguish the First Note and Second Note for the Company's payment of $1,500,000 if paid within 90 days.
In connection with the Exchange Documents, the Company and Investor also entered into a Forbearance Agreement pursuant to which, among other things:
? Investor agreed to refrain and forbear from exercising and enforcing any of its remedies under the Convertible Secured Promissory Note dated March 30, 2010 (the "March 2010 Note") in the original principal amount of $779,500.00, or under applicable laws, with respect to the defaults, for a period of 90 days from the date of the Forbearance Agreement;
? Provided that the Company pays the Investor the sum of $1,500,000.00 in cash on or before the 90th day from the date of the Forbearance Agreement, the Investor agrees that, upon receipt of the payment, each of the First Note, Second Note and March 2010 Note (collectively, the "Notes") shall be terminated and the Company shall be released from all obligations and liabilities thereunder; and
? Notwithstanding anything to the contrary in the Exchange Agreements or in that certain Note Purchase Agreement between the Company and Borrower dated January 18, 2011 (the "January 2011 Purchase Agreement"), so long as (1) no Event of Default (as defined in the First Note and Second Note) (and in the case of the March 2010 Note, no new Event of Default after the date of the Forbearance Agreement) has occurred under any of the Notes, (2) each of the representations and warranties of Borrower in the Exchange Agreements and the January 2011 Purchase Agreement remain true and correct as of the date of purchase of each Additional Note (as defined below), (3) the Company has increased its authorized shares of common stock to not less than 5,000,000,000 shares as of the date of purchase of such Additional Note, and (4) the Company has complied with all of its obligations and covenants herein, in the Notes, in the Exchange Agreements and in the January 2011 Purchase Agreement as of such date, the Company agrees to deliver to Borrower the sum of $50,000.00 (the "Additional Note Purchase Price") on or around each of April 1, 2011, April 15, 2011, May 1, 2011, May 15, 2011 and June 1, 2011 as consideration for those certain Additional Notes (the "Additional Notes") as defined in the January 2011 Purchase Agreement.
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In connection with the financing, Dominick & Dominick, the placement agent, received a cash payment of $8,000, and will receive an additional $4,000 upon the issuance of each of the Additional Notes.
The description contained herein is a brief summary of each of the Exchange Agreements and the Forbearance Agreement. These summaries are not complete, and are qualified in their entirety by reference to the full text of the agreements that are attached as exhibits to this Current Report on Form 8-K. Readers should review those agreements for a more complete understanding of the terms and conditions associated with this transaction. The description contained herein is a brief summary of each of the January 2011 Purchase Agreement and the Additional Notes. These summaries are not complete, and are qualified in their entirety by reference to the full text of the agreements that are attached as exhibits to the Company's Current Report on Form 8-K filed with the Securities & Exchange Commission on January 25, 2011. Readers should review those agreements for a more complete understanding of the terms and conditions associated with this transaction.
Purchase and Exchange Agreements
Pursuant to the Purchase and Exchange Agreements, the Company has agreed it will not (i) incur any new indebtedness for borrowed money without the prior written consent of the Investor; provided, however the Company may incur obligations under trade payables in the ordinary course of business consistent with past practice without the consent of the Investor; (ii) grant or permit any security interest (or other lien or other encumbrance) in or on any of its assets; and
(iii) enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any affiliate of the Company, or amend or modify any agreement related to any of the foregoing, except on terms that are no less favorable, in any material respect, than those obtainable from any person who is not an affiliate.
The Purchase and Exchange Agreements also contain certain negative covenants regarding the Company and its operation, including, without limitation that the Company may not arrange or facilitate the sale or exchange of any existing securities of the Company, including without limitation warrants, options, convertible debt instruments, or other securities convertible into or exchangeable for shares of Common Stock or other equity of the Company . . .
Item 3.02 Unregistered Sales of Equity Securities
The information provided in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.
Item 8.01 Other Events
On March 18, 2011, the Company received notice that on March 11, 2011 East West Consulting, Ltd. and Steve Polaski (the "East West Parties") filed a complaint in the Superior Court of the State of California, County of San Diego, against the Company and Kevin Claudio relating to a professional services agreement and employment agreement between the parties, and the conversion of certain accounts receivable into shares of Company stock. The East West Parties are seeking damages in the sum of over $4,000,000. Any judgment against the Company resulting from the lawsuit would have a material adverse effect on the Company and its assets.
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