Item 5.02. Departure of Directors
or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
As a result of conditional resignations made on
Tuesday, April 25, 2017, at a duly authorized meeting of the board of directors (the “Board”) of Tempus Applied
Solutions Holdings, Inc. (the “Company”) by four of the Company’s directors, Christopher Brady, John G.
Gulbin III, Niall Olver and Joseph Wright, the unconditional resignation of each of those directors was automatically
effected on Wednesday, April 26, 2017. As of such date, director and Company CEO, Benjamin Scott Terry, has been the only
sitting member of the Board. The circumstances relating to the foregoing events are described in further detail, below.
Effective as of February 25, 2016, the Company leased a Gulfstream
G-IV aircraft at a rate of $70,000 a month for a period of 40 months, under a capital lease. The lease permitted the lessor, Bluebell
Business Limited (“Bluebell”), to exercise an option to sell the aircraft to the Company in a transaction to close
no earlier than November 30, 2016, at a sale price of $5,500,000. In November 2016, Bluebell exercised its option to sell the aircraft
to the Company, with the sale to close in January 2017. As described in the Company’s Annual Report on Form 10-K for the
2016 calendar year, filed on March 31, 2017, as of that date, the Company had not completed the purchase; according to the terms
of the lease agreement, interest on the unpaid balance was accruing at the rate of LIBOR plus 5%; the Company was continuing to
seek financing to facilitate the purchase of the aircraft; the Company was continuing to have discussions with Bluebell to extend
the option to sell to coincide with the finalization of third party financing; and in the interim, the Company was continuing to
make regular lease payments to Bluebell.
In April 2017, the Company and Bluebell entered into extensive negotiations
with respect to resolving the matter of the option to sell. On April 24, 2017, Bluebell sent a written demand that the aircraft
be redelivered to Bluebell. On April 25, 2017, the Company’s Board met to consider the written demand and the state of the
parties’ negotiations. At that time, each of four of the Company’s directors, Christopher Brady, John G. Gulbin III,
Niall Olver and Joseph Wright, stated that, if Bluebell were to reject the Company’s then outstanding offer to Bluebell to
resolve the matter, such rejection would automatically trigger such director’s immediate resignation from the Board. Thereafter,
Bluebell rejected the Company’s offer. On April 26, 2017, director and Company CEO, Benjamin Scott Terry, as of such date,
the only sitting member of the Board, held a Board meeting at which he acknowledged the resignations of the other directors, considered
the outstanding proposal from Bluebell for resolving the matter, concluded that in light of all the circumstances it was in the
best interests of the Company and its stockholders and determined to conditionally accept it in principle, subject to satisfactory
final documentation.
As of the date of this report, the Company has received the confirmatory
resignation letters attached as exhibits hereto, and the Company and Bluebell are continuing to prepare final documentation in
respect of the Bluebell matter. When the documentation is complete and executed, the Company expects to file it publicly, consistent
with its reporting obligations. Based on the proposal accepted as described above, and on additional communications with Bluebell,
the Company expects that:
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It will purchase the Bluebell aircraft in exchange for issuing to Bluebell’s owner, Santiago Business Co. International Ltd., or its successors or assigns, a one-year, non-prepayable note in the principal amount of $6.2 million, bearing interest at the rate of 10% per annum, with interest payable on a quarterly basis, and with the unpaid principal thereof and accrued but unpaid interest thereunder being convertible, in whole or in part, at any time of the holder’s choosing, into shares of the Company’s common stock, based on a share value equal to the closing market price of the common stock on April 24, 2017 ($0.09 per share). Any exercise in respect of all or substantially all of the amounts due under the note would substantially dilute the interests of current shareholders and effect a change of control of the Company.
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The note will be secured by security interests granted to the holder over the Bluebell aircraft.
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The holder will be provided with the right to vote on all matters submitted to a vote of the shareholders of the Company as if the note had already been converted.
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Under the terms of the note, the Company will be prohibited from taking certain actions without the prior written approval of the holder of the note, including entering into a merger, consolidation or similar transaction, amending the Company’s certificate of incorporation, bylaws or any existing Company securities, incurring new indebtedness other than pursuant to existing credit facilities, disposing of material assets, paying dividends, and certain other actions.
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Certain registration rights will be granted, in respect of any common stock into which the note may be converted.
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The Company’s ongoing performance of a contract with a U.S. government agency, using the aircraft, will not be interrupted.
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