EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of September 22,
1999, by and among Blue Rhino Corporation, a Delaware corporation, with
headquarters located at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ (the "Company"), and the investors listed on the Schedule of Buyers
attached hereto (individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("Regulation D") as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act");
B. The Company has authorized convertible notes of the Company, in the
form attached as Exhibit A (together with any convertible notes issued in
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replacement thereof in accordance with the terms thereof, the "Convertible
Notes", which shall be convertible into shares of the Company's common stock,
par value $0.001 per share (the "Common Stock") (as converted, the "Conversion
Shares"), in accordance with the terms of the Convertible Notes;
C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, (i) Convertible Notes in an aggregate principal amount of up to
$7,000,000 in the respective amounts set forth opposite each Buyer's name on the
Schedule of Buyers (the "Initial Notes"), and (ii) warrants (the "Initial
Warrants") to purchase up to an aggregate of 332,203 shares of Common Stock (as
exercised collectively, the "Initial Warrant Shares") in the respective amounts
set forth opposite each Buyer's name on the Schedule of Buyers, such Initial
Warrants to be substantially in the form attached as Exhibit B;
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D. Subject to the terms and conditions set forth in this Agreement, the
Company may have the right to cause the Buyers to purchase (i) Convertible Notes
in the aggregate principal amount of up to $4,900,000 but not less than
$1,000,000 (pro rata based on the aggregate principal amount of Initial Notes
each Buyer purchased in relation to the total aggregate principal amount of
Initial Notes) (the "Additional Notes" and, collectively with the Initial Notes,
the "Notes") and (ii) warrants (the "Additional Warrants" and, collectively with
the Initial Warrants, the "Warrants") to purchase an aggregate number of shares
of Common Stock equal to the quotient of (A) 35% of the aggregate principal
amount of the Additional Notes and (B) the arithmetic average of the Closing Bid
Price (as defined in the Warrant) of the Common Stock for the 10 consecutive
trading days immediately preceding the Additional Closing Date, (as exercised,
collectively, the "Additional Warrant Shares" and, collectively with the Initial
Warrant Shares, the "Warrant Shares") (pro rata based on the aggregate principal
amount of Initial Notes each Buyer purchased in relation to the total aggregate
principal amount of Initial Notes such Additional Warrants to be substantially
in the form attached as Exhibit B;
E. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit C (the "Registration Rights
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Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS
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a. Purchase of Notes and Warrants. Subject to satisfaction (or
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waiver) of the conditions set forth in Sections 6(a) and 7(a), the Company shall
issue and sell to each Buyer and each Buyer severally agrees to purchase from
the Company the Initial Notes in the principal amount as set forth opposite such
Buyer's name on the Schedule of Buyers along with the Initial Warrants as set
forth opposite such Buyers named on the Schedule of Buyers (the "Initial
Closing"). The aggregate purchase price (the "Initial Purchase Price") of
Initial Notes and the Initial Warrants at the Initial Closing shall be
$7,000,000. Subject to the satisfaction (or waiver) of the conditions set forth
in Sections 1(c), 1(d), 6(b) and 7(b), the Company may require that the Buyers
purchase the Additional Notes along with the Additional Warrants (the
"Additional Closing" and, together with the Initial Closing, the "Closings").
The purchase price (the "Additional Purchase Price") of Additional Notes and the
Additional Warrants at the Additional Closing shall be $4,900,000. "Business
Day" means any day other than Saturday, Sunday or other day on which commercial
banks in the City of New York are authorized or required by law to remain
closed.
b. The Initial Closing Date. The date and time of the Initial
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Closing (the "Initial Closing Date") shall be 10:00 a.m. Central Time, within
three (3) Business Days following the date hereof, subject to satisfaction (or
waiver) of the conditions to the Initial Closing set forth in Sections 6(a) and
7(a) (or such later date as is mutually agreed to by the Company and the Buyer).
The Initial Closing shall occur on the Initial Closing Date at the offices of
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇.
c. The Additional Closing Date. The date and time of the Additional
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Closing (the "Additional Closing Date") shall be 10:00 a.m. Central Time, on the
third Business Day following the date of receipt by each Buyer of the Additional
Effectiveness Notice (as defined below) which Additional Closing Date shall be
no more than 85 days following the Additional Note Notice Date (as defined
below), subject to satisfaction (or waiver) of the conditions to the Additional
Closing set forth in Sections 6(b) and 7(b) and the conditions set forth in this
Section 1(c) and Section 1(d), (or such later date as is mutually agreed to by
the Company and the Buyer). During the period beginning on and including the
date on which the Initial Registration Statement (as defined in the Registration
Rights Agreement) registering the Initial Registrable Securities (as defined in
the Registration Rights Agreement) is declared effective by the SEC and ending
on the
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first anniversary of the Initial Closing Date (the "Additional Notice Period"),
but subject to the requirements of Sections 6(b) and 7(b) and satisfaction of
the Additional Notice Conditions and the Effectiveness Conditions (both as
defined in Section 1(d) below), the Company, on only one occasion, may require
the Buyers to purchase Additional Notes and the related Additional Warrants by
delivering written notice to each Buyer (the "Additional Note Notice") on any
date during the Additional Notice Period (the "Additional Note Notice Date").
The Company's Additional Note Notice shall set forth (i) the aggregate principal
amount of the Additional Notes and related Additional Warrants the Company is
requiring all Buyers to purchase (which amount shall be not more than $4,900,000
and not less than $1,000,000) at the Additional Closing and (ii) the aggregate
principal amount of Additional Notes and related Additional Warrants the Company
is requiring each Buyer to purchase at the Additional Closing (pro rata based on
the aggregate principal amount of the Initial Notes each Buyer purchased in
relation to the total aggregate principal amount of Initial Notes). The Company
shall deliver written notice to each Buyer (the "Additional Effectiveness
Notice") by facsimile and overnight delivery within one (1) Business Day of the
satisfaction of the Effectiveness Conditions. The Additional Closing shall occur
on the Additional Closing Date at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. The Initial Closing
Date and the Additional Closing Date collectively are referred to in this
Agreement as the "Closing Dates."
d. The Additional Notice Conditions and the Effectiveness Conditions.
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Notwithstanding anything in this Agreement to the contrary, the Company shall
not be entitled to deliver an Additional Note Notice unless all of the following
conditions (the "Additional Notice Conditions") are satisfied: (i) at all times
during the period beginning on the date the Initial Registration Statement
registering the Initial Registrable Securities is declared effective (which date
shall not be later than 135 days after the Initial Closing Date) and ending on
and including the Additional Note Notice Date, the Initial Registration
Statement shall have been effective and available for the sale of no less than
the sum of (A) the lesser of (1) 20% of the number of shares of Common Stock
outstanding on the Initial Closing Date and (2) 200% of the number of Conversion
Shares then issuable upon the conversion of all outstanding Notes (without
regard to any limitations on conversion), (B) the number of Warrant Shares then
issuable upon exercise of all outstanding Warrants (without regard to any
limitations on exercise) and (C) the number of Conversion Shares and Warrant
Shares that are then held by the Buyers; (ii) at all times during the period
beginning on the Initial Closing Date and ending on and including the Additional
Note Notice Date, the Common Stock shall have been designated for quotation on
The New York Stock Exchange, Inc. (the "NYSE") or the Nasdaq National Market and
shall not have been suspended from trading on such exchanges nor shall delisting
or suspension by such exchanges have been threatened either (A) in writing by
such exchanges or (B) by falling below the minimum listing maintenance
requirements of such exchanges; (iii) during the period beginning on the Initial
Closing Date and ending on and including the Additional Note Notice Date, there
shall not have occurred either (A) the consummation of a Change of Control (as
defined in the Notes) or a public announcement of a pending Change of Control
which has not been abandoned or terminated or (B) a Triggering Event (as defined
in the Notes) (which in the case of a Triggering Event pursuant to Section
3(d)(vii) of the Notes, has not been cured or waived) or an event which, with
the
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passage of time, would constitute a Triggering Event, assuming it is not cured;
(iv) during the period beginning on the Initial Closing Date and ending on and
including the Additional Note Notice Date, the Company shall have delivered
Conversion Shares upon conversion of the Notes on a timely basis as set forth in
Section 2(e)(ii) of the Notes and the Company otherwise shall have been in
compliance with the Transaction Documents (as defined below) and shall not have
breached any provision of the Transaction Documents which has not been cured or
waived; (v) on each day during the period beginning 15 Business Days prior to
the Additional Note Notice Date and ending on the Additional Closing Date, the
Closing Bid Price (as defined in the Notes) of the Common Stock is not less than
$8.50 per share (subject to appropriate adjustments for any stock dividends,
stock splits or other similar transactions with respect to the Common Stock);
and (vi) there shall not have been a prior Additional Note Notice; and (vii) the
Company shall have delivered and not rescinded or revoked at least one
Conversion Notice (as defined in the Notes) which in the aggregate, with all
other Conversion Notices which have not been rescinded or revoked, was for the
conversion of not less than $1,750,000 aggregate principal amount of the Notes.
Notwithstanding anything in this Agreement to the contrary, the Company shall
not be entitled to require the Buyer to purchase the Additional Notes unless, in
addition to the satisfaction of the Additional Notice Conditions and the
requirements of Sections 6(b) and 7(b), all of the following conditions (the
"Effectiveness Conditions") are satisfied: (i) at all times during the period
beginning on the Additional Note Notice Date and ending on and including the
Additional Closing Date, the Initial Registration Statement shall have been
effective and available for the sale of no less than the sum of (A) the lesser
of (1) 20% of the number of shares of Common Stock outstanding on the Initial
Closing Date and (2) 200% of the number of Conversion Shares then issuable upon
the conversion of all outstanding Notes (without regard to any limitations on
conversion), (B) the number of Warrant Shares then issuable upon exercise of all
outstanding Warrants (without regard to any limitations on exercise) and (C) the
number of Conversion Shares and Warrant Shares that are then held by the Buyers;
(ii) at all times during the period beginning on the Additional Note Notice Date
and ending on and including the Additional Closing Date, the Common Stock shall
have been designated for quotation on the NYSE or the Nasdaq National Market and
shall not have been suspended from trading on such exchanges nor shall delisting
or suspension by such exchanges have been threatened either (A) in writing by
such exchanges or (B) by falling below the minimum listing maintenance
requirements of such exchanges; (iii) during the period beginning on the
Additional Note Notice Date and ending on and including the Additional Closing
Date, there shall not have occurred either (A) the consummation of a Major
Transaction or a public announcement of a pending Major Transaction which has
not been abandoned or terminated or (B) a Triggering Event (which in the case of
Section 2(d)(vii) of the Notes, has not been cured or waived) or an event which,
with the passage of time, would constitute a Triggering Event, assuming it is
not cured; (iv) during the period beginning on the Initial Note Notice Date and
ending on and including the Additional Closing Date, the Company shall have
delivered Conversion Shares upon conversion of the Notes on a timely basis as
set forth in Section 2(e)(ii) of the Notes and the Company otherwise shall have
been in compliance with the Transaction Documents (as defined below) and shall
not have breached any provision of the Transaction Documents which have not been
cured or waived; (v) on each day during the period beginning on the Additional
Note Notice Date and ending on and including the date immediately
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preceding the date that the Company files the Additional Registration Statement
registering the Registrable Securities, the Closing Bid Price of the Common
Stock on such date is no less than 95% of the Closing Bid Price of the Common
Stock on the Additional Note Notice Date; and (vi) the Company shall have
delivered and not rescinded or revoked at least one Conversion Notice which in
the aggregate, with all other Conversion Notices which have not been rescinded
or revoked, was for the conversion of not less than $1,750,000 aggregate
principal amount of the Notes, (vii) the Company shall have delivered an
Additional Note Notice on no more than one prior occasion, and (viii) the
Company shall have received shareholder approval of the issuance of the
Conversion Shares and Warrant Shares consistent with the requirements of Section
4(k).
e. Form of Payment. On the Closing Date (i) each Buyer shall pay its
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pro rata portion of the Purchase Price to the Company for the Notes and the
related Warrants to be issued and sold to such Buyer by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions, and (ii) the Company shall deliver to each Buyer Notes (in the
principal amounts as such Buyer shall request) (the "Note Certificates")
representing such principal amount of the Notes which such Buyer is then
purchasing along with the related Warrants, duly executed on behalf of the
Company and registered in the name of such Buyer.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
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Each Buyer represents and warrants with respect to only itself that:
a. Investment Purpose. Such Buyer (i) is acquiring the Notes and the
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Warrants, (ii) upon conversion of the Notes, will acquire the Conversion Shares
then issuable and (iii) upon exercise of the Warrants, will acquire the Warrant
Shares issuable upon exercise thereof (the Notes, the Warrants, the Conversion
Shares and the Warrant Shares, collectively are referred to herein as the
"Securities"), for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the 1933 Act;
provided, however, that by making the representations herein, such Buyer does
not agree to hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the 1933 Act
and in accordance with the provisions of Section 2(f).
b. Accredited Investor Status. Such Buyer is an "accredited
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investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the
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Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
5
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such Securities.
d. Information. Such Buyer and its advisors, if any, have been
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furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company and has
received answers to such questions. Neither such inquiries nor any other due
diligence investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer's right to rely on the
Company's representations and warranties contained in Sections 3 and 9(m) below.
Such Buyer understands that its investment in the Securities involves a high
degree of risk. Such Buyer has sought such accounting, legal and tax advice as
it has considered necessary to make an informed investment decision with respect
to its acquisition of the Securities.
e. No Governmental Review. Such Buyer understands that no United
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States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Such Buyer understands that except as
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provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a form reasonably satisfactory to the Company,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) such Buyer provides the Company with an opinion of counsel reasonably
acceptable to the Company that such Securities can be sold, assigned or
transferred pursuant to Rule 144 promulgated under the 1933 Act (or a successor
rule thereto) ("Rule 144"); provided, however, that the Buyer shall not be
required to provide an opinion of counsel for sales made pursuant to Rule
144(k); (ii) any sale of the Securities made in reliance on Rule 144 may be
made only in accordance with the terms of Rule 144 and further, if Rule 144 is
not applicable, any resale of the Securities under circumstances in which such
Buyer, as a seller (or the person through whom the sale is made on such Buyer's
behalf) may be deemed to be an underwriter (as that term is defined in the ▇▇▇▇
▇▇▇) may require compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder; and (iii) neither the Company nor
any other person is under any obligation to register such Securities under the
1933 Act or any state securities laws or to comply with the terms and conditions
of any exemption thereunder. Notwithstanding the foregoing, the Securities may
be pledged in connection with a bona fide margin account.
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g. Legends. Such Buyer understands that the certificates or other
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instruments representing the Notes and the Warrants and, until such time as the
sale of the Conversion Shares and the Warrant Shares have been registered under
the 1933 Act as contemplated by the Registration Rights Agreement, the stock
certificates representing the Conversion Shares and the Warrant Shares, except
as set forth below, shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of such
stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION
OF COUNSEL, IN A FORM REASONABLY SATISFACTORY TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
LAWS OR UNLESS SOLD PURSUANT TO RULE 144(K) UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if (i) such Securities are registered for sale under the 1933 Act, (ii)
in connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in a form reasonably satisfactory to the Company, to the
effect that a public sale, assignment or transfer of such Securities may be made
without registration under the 1933 Act, or (iii) such holder provides the
Company with an opinion of counsel reasonably acceptable to the Company that
such Securities can be sold pursuant to Rule 144; provided, however, that no
opinion of counsel shall be required for sales made pursuant to Rule 144(k).
Such Buyer acknowledges, covenants and agrees to sell the Securities represented
by a certificate(s) from which the legend has been removed, only pursuant to (i)
a registration statement effective under the 1933 Act, or (ii) advice of counsel
that such sale is exempt from registration required by Section 5 of the 1933
Act.
h. Authorization; Enforcement. This Agreement and the Registration
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Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of such Buyer and are valid and binding agreements of such Buyer
enforceable against such Buyer in accordance with their terms, subject as to
enforceability to general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.
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i. Residency. Such Buyer is a resident of that jurisdiction
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specified on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company and its
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"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns a majority of the capital stock or
holds a majority equity or similar interest) are corporations or limited
liability companies duly organized and validly existing in good standing under
the laws of the jurisdiction in which they are incorporated or organized, and
have the requisite corporate or company power and authorization to own
properties and to carry on their business as now being conducted. Each of the
Company and its Subsidiaries is duly qualified as a foreign corporation or a
limited liability company to do business and is in good standing in every
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a Material
Adverse Effect. As used in this Agreement, "Material Adverse Effect" means any
material adverse effect on the business, properties, assets, operations, results
of operations, financial condition or prospects of the Company and its
Subsidiaries taken as a whole, or on the transactions contemplated hereby or by
the agreements and instruments to be entered into in connection herewith, or on
the authority or ability of the Company to perform its obligations under the
Transaction Documents (as defined below). A complete list of entities in which
the Company, directly or indirectly owns capital stock or holds an equity or
similar interest is set forth in Schedule 3(a).
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b. Authorization; Enforcement; Compliance with Other Instruments.
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(i) The Company has the requisite corporate power and authority to enter into
and perform its obligations under this Agreement, the Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section
5), the Notes, the Warrants and each of the other agreements entered into by
the parties hereto in connection with the transactions contemplated by this
Agreement (collectively, the "Transaction Documents"), and to issue the
Securities in accordance with the terms thereof, (ii) the execution and delivery
of the Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including without limitation the
issuance of the Notes and the Warrants and the reservation for issuance and the
issuance of the Conversion Shares and the Warrant Shares issuable upon
conversion or exercise thereof, have been duly authorized by the Company's Board
of Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders (except such stockholder approval as
may be required for the issuance of a number of shares of Common Stock which is
greater than 20% of the number of shares outstanding on the Initial Closing Date
pursuant to the rules of the Nasdaq National Market), (iii) the Transaction
Documents have been duly executed and delivered by the Company, and (iv) this
Agreement and the Registration Rights Agreement and, when executed and
delivered, the other Transaction
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Documents, constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies.
c. Capitalization. The authorized capital stock of the Company
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consists of (i) 100,000,000 shares of Common Stock, of which as of the date
hereof 8,647,654 shares were issued and outstanding, 1,846,947 shares were
issuable and reserved for issuance pursuant to the Company's stock option and
purchase plans and 525,296 shares are issuable and reserved for issuance
pursuant to securities (other than the Notes and the Warrants) exercisable or
exchangeable for, or convertible into, shares of Common Stock and (ii)
20,000,000 shares of Preferred Stock, of which as of the date hereof, no shares
were issued and outstanding. All of such outstanding shares have been, or upon
issuance will be, validly issued and are fully paid and nonassessable. Except
as disclosed in Schedule 3(c), (i) no shares of the Company's capital stock are
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subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company; (ii) there are no outstanding
debt securities issued by the Company; (iii) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries; (iv) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except the Registration
Rights Agreement); (v) there are no outstanding securities of the Company or any
of its Subsidiaries which contain any redemption or similar provisions, and
there are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries; (vi) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities as described in this Agreement; and
(vii) the Company does not have any stock appreciation rights or "phantom stock"
plans or agreements or any similar plan or agreement. The Company has furnished
to the Buyer true and correct copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the "Certificate
of Incorporation"), and the Company's By-laws, as in effect on the date hereof
(the "By-laws"), and the terms of all securities convertible into or exercisable
for Common Stock and the material rights of the holders thereof in respect
thereto.
d. Issuance of Securities. The Notes and the Warrants are duly
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authorized and, upon issuance in accordance with the terms hereof, shall be free
from all taxes, liens and charges with respect to the issue thereof. As of the
Closing Date the Company has duly authorized and reserved for issuance upon
conversion of the Notes and exercise of the Warrants at least that
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number of shares of Common Stock equal to the sum of (A) 200% of the number of
shares of Common Stock needed to provide for the issuance of the Conversion
Shares issuable upon conversion of the Initial Notes as if the Initial Notes had
been converted on the Initial Closing Date (without regard to any limitations on
conversions) and (B) 100% of the number of shares of Common Stock needed to
provide for the issuance of the Initial Warrant Shares as if the Initial
Warrants had been exercised on the Initial Closing Date (without regard to any
limitations on exercises) (subject to adjustment pursuant to the Company's
covenant set forth in Section 4(f) below). Upon conversion or exercise in
accordance with the Notes or the Warrants, as the case may be, the Conversion
Shares and the Warrant Shares will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. The issuance by the Company of the Securities is exempt
from registration under the 1933 Act.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
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execution, delivery and performance of the Transaction Documents by the Company,
the performance by the Company of its obligations under the Notes and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the reservation for issuance and issuance of the
Conversion Shares and the Warrant Shares) will not (i) result in a violation of
the Certificate of Incorporation, any Certificate of Designations, Preferences
and Rights of any outstanding series of preferred stock of the Company or the
By-laws; (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party; or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the principal market or
exchange on which the Common Stock is traded or listed) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected. Except as disclosed in
Schedule 3(e), neither the Company nor its Subsidiaries is in violation of any
-------------
term of (i) its Certificate of Incorporation, any Certificate of Designations,
Preferences and Rights of any outstanding series of preferred stock of the
Company or By-laws or their organizational charter or by-laws, respectively, or
(ii) any statute, rule or regulation applicable to the Company or its
Subsidiaries the failure to comply with which would have a Material Adverse
Effect and neither the Company nor its Subsidiaries is in default under any
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order the failure to comply with which would have a Material Adverse
Effect. Except as specifically contemplated by this Agreement and except such
as have been obtained as of the date hereof, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or self-
regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents in accordance
with the terms hereof or thereof other than such filings as are necessary to
register the Conversion Shares or Warrant Shares. Except as disclosed in
Schedule 3(e), all consents, authorizations, orders, filings and registrations
-------------
which the Company is required to obtain pursuant to the preceding sentence have
been obtained or
10
effected on or prior to the date hereof. The Company and its Subsidiaries are
unaware of any facts or circumstances which they reasonably believe will give
rise to any of the foregoing. The Company is not in violation of the listing
requirements of the Nasdaq National Market as in effect on the date hereof and
on each of the Closing Dates and has no actual knowledge of any facts which
would reasonably lead to delisting or suspension of the Common Stock by the
Nasdaq National Market in the foreseeable future.
f. SEC Documents; Financial Statements. Since May 18, 1998, the
-----------------------------------
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the 1934 Act, (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
"SEC Documents"). A complete list of the Company's SEC Documents is set forth on
Schedule 3(f). As of their respective dates, the SEC Documents complied in all
-------------
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements of the SEC with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). As of the date
hereof, neither the Company nor any of its Subsidiaries or any of their
officers, directors, employees or agents have provided the Buyers with any
material, nonpublic information except for such information regarding a private
placement of Common Stock and Warrants by the Company with certain individuals
(the "Concurrent Private Placement") which shall be disclosed on a form 8-K
concurrent with or prior to the Form 8-K which will disclose this transaction
pursuant to Section 4(l). The Company meets the requirements for the use of
Form S-3 for registration of the resale of the Registrable Securities (as
defined in the Registration Rights Agreement) by each Buyer.
g. Absence of Certain Changes. Except as disclosed in Schedule 3(g)
-------------------------- -------------
or the SEC Documents filed at least five (5) days prior to the date of this
Agreement and available through ▇▇▇▇▇, since July 31, 1998 there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, liabilities, results of operations
or prospects of the Company or its Subsidiaries, taken as a whole. The Company
has not taken any steps, and does not currently expect to take any steps, to
seek protection
11
pursuant to any bankruptcy law nor does the Company or any of its Subsidiaries
have any knowledge that its creditors intend to initiate involuntary bankruptcy
proceedings or any knowledge of any fact which would reasonably lead a creditor
to do so.
h. Absence of Litigation. Except as disclosed in Schedule 3(h), there
--------------------- -------------
is no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the Company or any of its Subsidiaries, threatened
against the Company or any of the Company's Subsidiaries or any of the Company's
or the Company's Subsidiaries' officers or directors in their capacities as
such. Except as set forth in Schedule 3(h), to the knowledge of the Company,
none of the directors or officers of the Company have been named as a defendant
in securities related litigation during the past five years.
i. Acknowledgment Regarding the Buyer's Purchase of Notes. The
------------------------------------------------------
Company acknowledges and agrees that each of the Buyers is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents and
the transactions contemplated thereby. The Company further acknowledges that
each Buyer is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by any of the Buyers or
any of their respective representatives or agents in connection with the
Transaction Documents and the transactions contemplated thereby is merely
incidental to such Buyer's purchase of the Securities. The Company further
represents to each Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
j. No Undisclosed Events, Liabilities, Developments or Circumstances.
-----------------------------------------------------------------
Except for the Concurrent Private Placement the issuance of the Notes and
Warrants contemplated by this Agreement, no event, liability, development or
circumstance has occurred or exists with respect to the Company or its
Subsidiaries or their respective business, properties, operations or financial
condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement (including by way of
incorporation by reference) filed with the SEC relating to an issuance and sale
by the Company of its Common Stock and which has not been publicly disclosed.
k. No General Solicitation. Neither the Company, nor any of its
-----------------------
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the ▇▇▇▇ ▇▇▇) in connection with the offer or sale of the
Securities.
l. No Integrated Offering. Neither the Company, nor any of its
----------------------
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that (A) would require registration of any
of the Securities under the 1933 Act or (B) would cause this offering of the
12
Securities to be integrated with prior offerings by the Company for purposes of
the 1933 Act, with the exception of the Concurrent Private Placement, or any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of the Nasdaq National Market, nor will the Company or
any of its Subsidiaries take any action or steps that would require registration
of the Securities under the 1933 Act or cause the offering of the Securities to
be integrated with other offerings for purposes of any applicable stockholder
approval requirements.
m. Employee Relations. Neither the Company nor any of its
------------------
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. No executive
officer (as defined in Rule 501(f) of the ▇▇▇▇ ▇▇▇) has notified the Company's
Board of Directors that such officer intends to leave the Company or otherwise
terminate such officer's employment with the Company.
n. Intellectual Property Rights. The Company and its Subsidiaries
----------------------------
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service ▇▇▇▇ registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule 3(n), none of the
-------------
Company's trademarks, trade names, service marks, service ▇▇▇▇ registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
property rights have expired or terminated, or are expected to expire or
terminate within two years from the date of this Agreement. The Company and its
Subsidiaries do not have any knowledge of any infringement by the Company or its
Subsidiaries of trademarks, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service ▇▇▇▇
registrations, trade secrets or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by
others which would have a Material Adverse Effect and, except as set forth on
Schedule 3(n), no claim, action or proceeding has been made or brought against,
-------------
or to the Company's knowledge, has been threatened against, the Company or its
Subsidiaries regarding trademarks, trade name rights, patents, patent rights,
inventions, copyrights, licenses, service names, service marks, service ▇▇▇▇
registrations, trade secrets or other infringement; and the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties.
o. Regulatory Permits. The Company and its Subsidiaries possess all
------------------
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, except for such certificates, authorizations or permits which the
failure to possess would not , individually or in the aggregate, have a Material
Adverse Effect, and neither the Company nor any such Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate,
13
authorization or permit, except for such revocations and modifications as would
not have, individually or in the aggregate, a Material Adverse Effect.
p. Internal Accounting Controls. The Company and each of its
----------------------------
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
q. Tax Status. The Company and each of its Subsidiaries has made or
----------
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and for which the Company has set aside on its books provision reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim.
r. Transactions With Affiliates. Except as set forth on Schedule
---------------------------- --------
3(r) and in the SEC Documents filed at least ten days prior to the date hereof
----
and other than the grant of stock options disclosed on Schedule 3(c), none of
-------------
the officers, directors, or employees of the Company is presently a party to any
transaction with the Company or any of its Subsidiaries (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
s. Dilutive Effect. The Company understands and acknowledges that
---------------
the number of Conversion Shares issuable upon conversion of the Notes will
increase in certain circumstances. The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of the Notes in accordance
with this Agreement and the Notes is absolute and unconditional regardless of
the dilutive effect that such issuance may have on the ownership interests of
other stockholders of the Company.
14
t. Application of Takeover Protections. The Company and its board of
-----------------------------------
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar anti-
takeover provision under the Certificate of Incorporation or the laws of the
state of its incorporation which is or could become applicable to the Buyers as
a result of the Buyers and the Company fulfilling their obligations under the
Transaction Documents, including, without limitation, the Company's issuance of
the Securities and the Buyers' ownership of the Securities.
u. Rights Agreement. As of the date hereof, the Company has not
----------------
adopted a shareholder rights plan or similar arrangement relating to
accumulation of beneficial ownership of Common Stock or a change in control of
the Company.
v. Year 2000 Compliance. The Company has initiated a review and
--------------------
assessment of all areas within its and each Subsidiary's business and operations
that could be materially adversely affected by the "Year 2000 Problem" (that is,
the risk that computer applications used by the Company or any of the
Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999). Based on the foregoing, the Company believes that the computer
applications that are currently material to its or any Subsidiary's business and
operations are reasonably expected to be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000.
w. Environmental Laws. The Company and its Subsidiaries (i) are in
------------------
compliance in all material respects with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), (ii) have received
all material permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance in all material respects with all terms and conditions of any
such permit, license or approval.
x. Title. The Company and its Subsidiaries have good and marketable
-----
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in Schedule 3(x) or such as do not
-------------
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and any of its
Subsidiaries. Any real property and facilities held under lease by the Company
and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
y. Insurance. The Company and each of its Subsidiaries are insured
---------
by insurers of recognized financial responsibility against such losses and risks
and in such amounts
15
as management of the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiaries has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and adversely affect
the condition, financial or otherwise, or the earnings, business or operations
of the Company and its Subsidiaries, taken as a whole.
z. No Other Agreements. The Company has not, directly or indirectly,
-------------------
made any agreements with any Buyer relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents.
aa. Foreign Corrupt Practices. Neither the Company, nor any of its
-------------------------
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
bb. No Materially Adverse Contracts. Except as specifically disclosed
--------------------------------
in the SEC Documents, or as set forth in Schedule 3(bb), neither the Company
--------------
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect.
4. COVENANTS.
---------
a. Best Efforts. Each party shall use its best efforts timely to
------------
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
b. Form D and Blue Sky. The Company agrees to file a Form D with
-------------------
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before each of the Closing Dates, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for, or obtain
exemption for the Securities for, sale to the Buyers at the each of Closings
pursuant to this Agreement under applicable securities or "Blue Sky" laws of the
states of the United States, and shall provide evidence of any such action so
taken to the Buyers on or prior to each of the Closing Dates. The Company shall
make all filings and reports relating to the offer and sale of the Securities
required under applicable securities or "Blue Sky"laws of the states of the
United States following each of the Closing Dates.
16
c. Reporting Status. Until the earlier of (i) the date which is one
----------------
year after the date on which the Investors (as that term is defined in the
Registration Rights Agreement) may sell all of the Conversion Shares and the
Warrant Shares without restriction pursuant to Rule 144(k) promulgated under the
1933 Act (or successor thereto) and (ii) the date on which (A) the Investors
shall have sold all the Conversion Shares and the Warrant Shares and (B) none of
the Notes or the Warrants is outstanding (the "Reporting Period"), the Company
shall file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the sale
---------------
of the Notes for substantially the same purposes and in substantially the same
amounts as indicated in Schedule 4(d).
-------------
e. Financial Information. The Company agrees to send the following
---------------------
to each Investor (as defined in the Registration Rights Agreement) during the
Reporting Period: (i) within two (2) days after the filing thereof with the SEC,
a copy of its Annual Reports on Form 10-K or Form 10-KSB, its Quarterly Reports
on Form 10-Q or Form 10-QSB, any Current Reports on Form 8-K and any
registration statements (other than on Form S-8) or amendments filed pursuant to
the 1933 Act; (ii) on the same day as the release thereof, facsimile copies of
all press releases issued by the Company or any of its Subsidiaries and (iii)
copies of any notices and other information made available or given to the
stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders; provided, however, that the
Company will have satisfied its obligations under this Section 4(e) if the
information required by this Section 4(e) is filed on and available for
retrieval from ▇▇▇▇▇.
f. Reservation of Shares. The Company shall take all action
---------------------
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than the sum of (A) 200% the number of shares of Common Stock
needed to provide for the issuance of the Conversion Shares and (B) 100% the
number of shares of Common Stock needed to provide for the issuance of the
Warrant Shares (without regard to any limitations on conversions or exercise
thereof).
g. Right of First Refusal. Subject to the exceptions described below,
----------------------
during the period beginning on the date hereof and ending on, and including, the
date which is the later of (A) one year after the Initial Closing Date and (B)
the date on which none of the Notes remains outstanding, the Company and its
Subsidiaries shall not negotiate or contract with any party for any equity
financing (including any debt financing with an equity component) or issue any
equity securities of the Company or any Subsidiary or securities convertible
into or exchangeable for equity securities of the Company or any Subsidiary
(including debt securities with an equity component) in any form ("Future
Offerings"), unless it shall have first delivered to each Buyer or a designee
appointed by such Buyer written notice (the "Future Offering Notice") describing
the proposed Future Offering, including the size, terms and conditions thereof,
and providing each
17
Buyer an option to purchase up to its Aggregate Percentage (as defined below) of
the securities to be issued in such Future Offering, as of the date of delivery
of the Future Offering Notice (the limitations referred to in this sentence are
collectively referred to as the "Capital Raising Limitations"). For purposes of
this Section 4(g), "Aggregate Percentage" at any time with respect to any Buyer
shall mean the percentage obtained by dividing (i) the aggregate principal
amount of the Notes issued to such Buyer on the Closing Date by (ii) the
aggregate principal amount of the Notes issued to all the Buyers on the Closing
Date. A Buyer can exercise its option to participate in a Future Offering by
delivering written notice thereof to participate to the Company within three (3)
Business Days after receipt of a Future Offering Notice, which notice shall
state the quantity of securities being offered in the Future Offering that such
Buyer will purchase, up to its Aggregate Percentage, and that number of
securities it is willing to purchase in excess of its Aggregate Percentage. In
the event that one or more Buyers fail to elect to purchase up to each such
Buyer's Aggregate Percentage of the Future Offering, then each Buyer which has
indicated that it is willing to purchase a number of securities in such Future
Offering in excess of its Aggregate Percentage shall be entitled to purchase up
to its pro rata portion (determined in the same manner as described in the
preceding sentence) of the securities in the Future Offering which one or more
of the Buyers have not elected to purchase. In the event the Buyers fail to
elect to fully participate in the Future Offering within the periods described
in this Section 4(g), the Company shall have 45 days thereafter to sell the
securities of the Future Offering that the Buyers did not elect to purchase,
upon terms and conditions, no more favorable to the purchasers thereof than
specified in the Future Offering Notice. In the event the Company has not sold
such securities of the Future Offering within such 45 day period, the Company
shall not thereafter issue or sell such securities without first offering such
securities to the Buyers in the manner provided in this Section 4(g). The
Capital Raising Limitations shall not apply to (i) a loan from a commercial bank
which does not have any equity feature, (ii) the Company's issuances of
securities (A) as consideration in a merger or consolidation, (B) in connection
with any strategic partnership or joint venture (the primary purpose of which is
not to raise equity capital) or (C) as consideration for the acquisition of a
business, product, license or other assets by the Company, (iii) the issuance of
Common Stock in a firm commitment, underwritten public offering, (iv) the
issuance of securities upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding as of the date hereof
provided the terms of such securities are not amended after the date hereof, (v)
the grant of additional options or warrants, or the issuance of additional
securities, under any Company stock option plan, restricted stock plan or stock
purchase plan for the benefit of the Company's employees, officers, directors
for services provided to the Company, (vi) the issuance of Common Stock at a
discount of between 0% and 20% and not accompanied by the issuance of warrants
or any other right to acquire or receive any additional capital stock of the
Company, (vii) up to 156,704 options issued after the date of this Agreement
pursuant to the Company's "distribution option plan" approved by the board of
directors of the Company, provided such options are not issued to affiliates of
the Company and the exercise price of such options is not less than the market
price of the Common Stock on the date of issuance of such option, or (viii) the
Concurrent Private Placement. The Buyers shall not be required to participate or
exercise their right of first refusal with respect to a particular Future
Offering in order to exercise their right of first refusal with respect to later
Future Offerings.
18
h. Listing. The Company shall promptly secure the listing of all of
-------
the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system (including
the Nasdaq National Market), if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all
Registrable Securities from time to time issuable under the terms of the
Transaction Documents. The Company shall maintain the Common Stock's
authorization for listing on the Nasdaq National Market or the New York Stock
Exchange ("NYSE"). Neither the Company nor any of its Subsidiaries shall take
any action which may result in the delisting or suspension of the Common Stock
on the Nasdaq National Market or NYSE (other than to switch listings from the
Nasdaq National Market to NYSE). The Company shall promptly, and in no event
later than the following Business Day, offer to provide to such Buyer copies of
any notices it receives from the Nasdaq National Market or NYSE regarding the
continued eligibility of the Common Stock for listing on such automated
quotation system or securities exchange, provided that such notices shall not
contain any material non-public information. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(h).
i. Expenses. Subject to Section 9(l) below, at the Initial Closing,
--------
the Company shall reimburse the Buyers for the Buyers' expenses (including legal
expenses, in connection with due diligence and negotiating and preparing the
Transaction Documents and consummating the transactions contemplated thereby) up
to an aggregate of $50,000.
j. Transactions With Affiliates. So long as (i) any Notes or Warrants
----------------------------
are outstanding or (ii) any Buyer owns Conversion Shares or Warrant Shares with
a market value of $500,000 the Company shall not, and shall cause each of its
Subsidiaries not to, enter into, amend, modify or supplement, or permit any
Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, person who were officers or directors at any time during
the previous two years, stockholders who beneficially own 5% or more of the
Common Stock, or affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each a "Related Party"),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any agreement, transaction, commitment or arrangement
which is approved by a majority of the disinterested directors of the Company or
(c) any agreement, transaction, commitment or arrangement on an arms-length
basis on terms no less favorable than terms which would have been obtainable
from a person other than such Related Party. For purposes hereof, any director
who is also an officer of the Company or any Subsidiary of the Company shall not
be a disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "Affiliate" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a 5% or more equity interest in that person or entity, (ii) has 5% or
more common ownership with that person or entity, (iii) controls that person or
entity, or (iv) shares common control with that person or entity. "Control" or
"controls" for
19
purposes hereof means that a person or entity has the power, direct or indirect,
to conduct or govern the policies of another person or entity.
k. Proxy Statement. On or before the earlier of (A) the date on which
---------------
the Company has its next annual meeting of stockholders or (B) January 31, 2000
(the "Stockholder Meeting Deadline"), a proxy statement, which has been
previously reviewed by the Buyers and a counsel of their choice, soliciting each
such stockholder's affirmative vote at such stockholder meeting for approval of
the Company's issuance of all of the Securities as described in this Agreement
in accordance with applicable law and the rules and regulations of the Nasdaq
National Market, and the Company shall use its best efforts to solicit its
stockholders' approval of such issuance of the Securities and cause the Board of
Directors of the Company to recommend to the stockholders that they approve such
proposal. If the Company fails to hold a meeting of its stockholders by the
Stockholder Meeting Deadline, then, as partial relief (which remedy shall not be
exclusive of any other remedies available at law or in equity), the Company
shall pay to each holder of Notes an amount in cash per $10,000 in principal
amount of the Notes equal to the product of (i) $10,000 multiplied by (ii) .015
multiplied by (iii) the quotient of (x) the number of days after the Stockholder
Meeting Deadline and prior to the date that a meeting of the Company's
stockholders is held, divided by (y) 30. The Company shall make the payments
referred to in the immediately preceding sentence within five days of the
earlier of (I) the holding of the meeting of the Company's stockholders and (II)
the last day of each 30-day period beginning on the Stockholder Meeting
Deadline.
l. Filing of Form 8-K. On or before the first Business Day following
------------------
each of the Closing Dates and the Additional Note Notice Date, the Company shall
file a Form 8-K with the SEC describing the terms of the transaction
contemplated by the Transaction Documents and consummated at such Closing, in
each case in the form required by the 1934 Act. The Company shall also file a
Form 8-K with the SEC describing the terms of the Concurrent Private Placement
on or before the first Business Day following the closing of such Concurrent
Private Placement and, in any event, prior to or concurrent with the Form 8-K
referred to in the immediately preceding sentence.
m. Corporate Existence. So long as any Buyer beneficially owns any
-------------------
Notes or Warrants, the Company shall maintain its corporate existence and shall
not sell all or substantially all of the Company's assets, except in the event
of a merger or consolidation or sale of all or substantially all of the
Company's assets, where (I) the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose common stock is listed for trading on the
Nasdaq National Market or NYSE, or (II) the Company has satisfied the
requirements of Sections 4(a) and 4(b) of the Note, to the extent applicable,
including the payment of the Change of Control Redemption Price (as defined in
the Note) upon the Company's receipt of a Notice of Redemption upon Change of
Control.
20
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of each Buyer or its respective nominee(s), for the Conversion Shares
and the Warrant Shares in such amounts as specified from time to time by each
Buyer to the Company upon conversion of the Notes or exercise of the Warrants
(in the form attached hereto as Exhibit E, the "Irrevocable Transfer Agent
---------
Instructions"). Prior to registration of the Conversion Shares and the Warrant
Shares under the 1933 Act, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5, and stop transfer instructions to give effect to Section 2(f)
hereof (in the case of the Conversion Shares and the Warrant Shares, prior to
registration of the Conversion Shares and the Warrant Shares under the ▇▇▇▇ ▇▇▇)
will be given by the Company to its transfer agent with respect to the
Securities and that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this Agreement
and the Registration Rights Agreement. Nothing in this Section 5 shall affect in
any way each Buyer's obligations and agreements set forth in Section 2(g) to
comply with all applicable prospectus delivery requirements, if any, upon resale
of the Securities. If a Buyer provides the Company with an opinion of counsel,
in a form reasonable satisfactory to the Company, that registration of a resale
by such Buyer of any of such Securities is not required under the 1933 Act or
such Buyer provides the Company with an opinion of counsel reasonably acceptable
to the Company that the Securities can be sold pursuant to Rule 144 (provided,
however, that the Buyer will not be required to give an opinion of counsel for
sales made pursuant to Rule 144(k)), the Company shall permit the transfer, and,
in the case of the Conversion Shares and the Warrant Shares, promptly instruct
its transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Buyer and without any restrictive legends.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyers shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
(a) The obligation of the Company hereunder to issue and sell the
Initial Notes and the Initial Warrants to each Buyer at the Initial Closing is
subject to the satisfaction, at or before the Initial Closing Date, of each of
the following conditions, provided that these conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole discretion
by providing each Buyer with prior written notice thereof:
21
(i) Such Buyer shall have executed each of this Agreement and
the Registration Rights Agreement and delivered the same to the Company.
(ii) Such Buyer shall have delivered to the Company its pro rata
portion of the Initial Purchase Price for the Initial Notes and the Initial
Warrants being purchased by such Buyer at the Initial Closing by wire
transfer of immediately available funds pursuant to the wire instructions
provided by the Company.
(iii) The representations and warranties of such Buyer contained
herein shall be true and correct as of the date when made and as of the
Initial Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and such
Buyer shall have performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by such Buyer at or prior to the
Initial Closing Date.
(iv) Such Buyer shall have provided the Company with a completed
Investor Questionnaire.
(b) The obligation of the Company hereunder to issue and sell the
Additional Notes and the Additional Warrants to each Buyer at the Additional
Closing is subject to the satisfaction, at or before the Additional Closing
Date, of each of the following conditions, provided that these conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion by providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have delivered to the Company its pro rata
portion of the Additional Purchase Price for the Additional Notes and the
Additional Warrants being purchased by such Buyer at the Additional Closing
by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
(ii) The representations and warranties of such Buyer contained
herein shall be true and correct as of the date when made and as of the
Additional Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and such
Buyer shall have performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by such Buyer at or prior to the
Additional Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
-------------------------------------------------
(a) The obligation of each Buyer hereunder to purchase the Initial
Notes and the Initial Warrants at the Initial Closing is subject to the
satisfaction, at or before the Initial Closing Date, of each of the following
conditions, provided that these conditions are for such
22
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion by providing the Company and each Buyer with prior written notice
thereof:
(i) The Company shall have executed each of the Transaction
Documents, and delivered the same to such Buyer.
(ii) The Common Stock shall be designated for quotation on the
Nasdaq National Market or listed on NYSE, and shall not have been suspended
from trading on or delisted from such exchanges nor shall delisting or
suspension by such exchanges have been threatened either (A) in writing by
such exchanges or (B) by falling below the minimum listing maintenance
requirements of such exchanges and the Company has complied with the
listing requirements of the Nasdaq National Market for the Conversion
Shares and the Warrant Shares issuable upon conversion or exercise of the
Initial Notes and the Initial Warrants, as the case may be.
(iii) The representations and warranties of the Company
contained herein shall be true and correct as of the date when made and as
of the Initial Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the
Company shall have performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the
Initial Closing Date. Such Buyer shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of the
Initial Closing Date, to the foregoing effect and as to such other matters
as such Buyer may reasonably request, including, without limitation, an
update as of the Initial Closing Date regarding the representation
contained in Section 3(c) above.
(iv) Such Buyer shall have received the opinion of ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇ P.C. dated as of the Initial Closing Date, in substantially the forms
of Exhibit D attached hereto.
---------
(v) The Company shall have executed and delivered to such
Buyer the Note Certificates for the Initial Notes and the Initial Warrants
being purchased by the Buyer at the Initial Closing.
(vi) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form reasonably
acceptable to such Buyer (the "Resolutions").
(vii) As of the Initial Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Initial Notes and exercise of
the Initial Warrants, at least shares of Common Stock.
23
(viii) The Irrevocable Transfer Agent Instructions with respect
to the Conversion Shares and Warrant Shares, in the form of Exhibit E
---------
attached hereto, shall have been delivered to and acknowledged in writing
by the Company's transfer agent.
(ix) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation or organization and good standing
or existence of the Company and each Subsidiary in such corporation's or
limited liability company's state of incorporation or organization issued
by the Secretary of State of such state of incorporation or organization as
of a date within ten days of the Initial Closing Date.
(x) The Company shall have delivered to such Buyer a
secretary's certificate certifying as to (A) the Resolutions, (B) the
Certificate of Incorporation and (C) the By-laws, each as in effect at the
Initial Closing Date.
(xi) The Company shall have delivered to such Buyer a certified
copy of its Certificate of Incorporation as certified by the Secretary of
State of the State of Delaware within ten days of the Initial Closing Date.
(xii) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five days of the Initial Closing
Date.
(xiii) The Company and Bank of America (the "Bank") shall have
delivered a copy of an executed waiver, waiving the Bank's right, as
defined pursuant to that certain Loan Agreement dated as of December 31,
1998 between the Company and the Bank (the "Loan Agreement"), upon any
event of default which has occurred prior to, or may be continuing on, the
Initial Closing Date, such waiver to be in a form acceptable to the Buyers.
(xiv) The Company, the Bank and such Buyer shall have executed a
standstill agreement whereby the Bank agrees not to exercise its rights
under the Loan Agreement upon an event of default prior to the day which is
on and after 165 days after the Initial Closing Date (the "Standstill
Agreement"), such Standstill Agreement to be acceptable to the Buyer.
(xv) The Company shall have delivered to the Buyers such other
documents relating to the transactions contemplated by the Transaction
Documents as the Buyers or their counsel may reasonably request.
(b) The obligation of each Buyer hereunder to purchase the Additional
Notes and the Additional Warrants at the Additional Closing is subject to the
satisfaction, at or before the Additional Closing Date, of each of the following
conditions, provided that these conditions are for such Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion by providing the
Company and each Buyer with prior written notice thereof:
(i) The Company shall have complied with the requirements of
Section 1(c) and all of the Additional Notice Conditions set forth in
Section 1(d) shall have been satisfied as of the Additional Closing Date.
(ii) The Common Stock shall be designated for quotation on the
Nasdaq National Market or listed on NYSE, and shall not have been suspended
from trading on or delisted from such exchanges nor shall delisting or
suspension by such exchanges have been threatened either (A) in writing by
such exchanges or (B) by falling below the minimum listing maintenance
requirements of such exchanges and the Company has complied with the
listing requirements of the Nasdaq National Market for the Conversion
24
Shares and the Warrant Shares issuable upon conversion or exercise of the
Additional Notes and the Additional Warrants, as the case may be.
(iii) The representations and warranties of the Company
contained herein shall be true and correct as of the date when made and as
of the Additional Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the
Company shall have performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the
Additional Closing Date. Such Buyer shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of the
Additional Closing Date, to the foregoing effect and as to such other
matters as such Buyer may reasonably request, including, without
limitation, an update as of the Additional Closing Date regarding the
representation contained in Section 3(c) above.
(iv) Such Buyer shall have received the opinion of ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇, P.C. dated as of the Additional Closing Date, in substantially the
forms of Exhibit D attached hereto.
---------
(v) The Company shall have executed and delivered to such
Buyer the Note Certificates for the Additional Notes and the Additional
Warrants being purchased by the Buyer at the Additional Closing.
(vi) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form reasonably
acceptable to such Buyer (the "Resolutions").
(vii) As of the Additional Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, at least the sum
of (A) 200% of the number of Conversion Shares issuable upon the conversion
of the Notes (as if the Additional Notes were issued and outstanding) and
(B) the number of Warrants Shares issuable upon exercise of the Warrants
(as if the Additional Warrants were issued and outstanding).
(viii) The Irrevocable Transfer Agent Instructions with respect
to the Conversion Shares and the Warrant Shares, in the form of Exhibit E
---------
attached hereto, shall have been delivered to and acknowledged in writing
by the Company's transfer agent.
(ix) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company
and each Subsidiary in such corporation's state of incorporation issued by
the Secretary of State of such state of incorporation as of a date within
ten days of the Additional Closing Date.
25
(x) The Company shall have delivered to such Buyer a
secretary's certificate certifying as to (A) the Resolutions, (B) the
Certificate of Incorporation and (C) the By-laws, each as in effect at the
Additional Closing Date.
(xi) The Company shall have delivered to such Buyer a certified
copy of its Certificate of Incorporation as certified by the Secretary of
State of the State of Delaware within ten days of the Additional Closing
Date.
(xii) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five days of the Additional Closing
Date.
(xiii) The Registration Statement registering no less than the
sum of (A) 200% of the number of Conversion Shares then issuable upon the
conversion of all outstanding Notes (including the Additional Notes as if
they were issued and outstanding and without regard to any limitations on
conversion), (B) the number of Warrant Shares then issuable upon exercise
of all outstanding Warrants (including the Additional Warrants as if they
were issued and outstanding and without regard to any limitations on
exercise) and (C) the number of Conversion Shares and Warrant Shares that
are then held by the Buyers shall have been declared effective by the SEC
and shall be available for resale for all the Registrable Securities.
(xiv) the Company shall have received shareholder approval of
the issuance of the Conversion Shares and Warrant Shares consistent with
the requirements of Section 4(k).
(xv) The Company shall have delivered to the Buyers such other
documents relating to the transactions contemplated by the Transaction
Documents as the Buyers or their counsel may reasonably request.
8. INDEMNIFICATION. In consideration of each Buyer's execution and
---------------
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of the Securities and all of their stockholders,
officers, directors, employees and direct or indirect investors and any of the
foregoing persons' agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any
26
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in the Transaction Documents or any other
certificate, instrument or document contemplated thereby or (c) any cause of
action, suit or claim brought or made against such Indemnitee (other than a
cause of action, suit or claim which is (x) brought or made by the Company and
(y) is not a shareholder derivative suit) and arising out of or resulting from
(i) the execution, delivery, performance or enforcement of the Transaction
Documents, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities or
(iii) solely the status of such Buyer or holder of the Securities as an investor
in the Company. To the extent that the foregoing undertaking by the Company may
be unenforceable for any reason, the Company shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. Governing Law; Jurisdiction; Jury Trial. The corporate laws of
---------------------------------------
the State of Delaware shall govern all issues concerning the relative rights of
the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting the City of New York, borough of Manhattan for the adjudication
of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon
27
the signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature.
c. Headings. The headings of this Agreement are for convenience of
--------
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid
------------
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the Standstill
----------------------------
Agreement superseed all other prior oral or written agreements between the
Buyers, the Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Buyers which purchased at least two-thirds (2/3) of the
aggregate principal amount of the Initial Notes on the Initial Closing Date or,
if prior to the Initial Closing Date, the Buyers listed on the Schedule of
Buyers as being obligated to purchase at least two-thirds (2/3) of the aggregate
principal amount of the Notes proposed to be issued at the Initial Closing. No
provision hereof may be waived other than by an instrument in writing signed by
the party against whom enforcement is sought. No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Notes or Warrants then outstanding. No consideration shall be offered or paid
to any person to amend or consent to a waiver or modification of any provision
of any of the Transaction Documents unless the same consideration also is
offered to all of the parties to the Transaction Documents or holders of the
Notes as the case may be.
f. Notices. Any notices, consents, waivers or other communications
-------
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business Day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
28
If to the Company:
Blue Rhino Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: President or Chief Financial Officer
With a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
If to the Transfer Agent:
LaSalle Bank, N.A.
▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
If to a Buyer, to it at the address and facsimile number set forth on the
Schedule of Buyers, with copies to such Buyer's representatives as set forth on
the Schedule of Buyers, or at such other address and/or facsimile number and/or
to the attention of such other person as the recipient party has specified by
written notice given to each other party five at least (5) days prior to the
giving of a notice pursuant to this Section 9(h). Written confirmation of
receipt (A) given by the recipient of such notice, consent, waiver or other
communications, (B) mechanically or electronically generated by the sender's
facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by a nationally
recognized overnight delivery service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.
g. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes. The Company shall not assign this
Agreement or any rights or obligations hereunder, including by merger or
consolidation, without the prior written consent of the Buyers
29
which purchased at least two-thirds (2/3) of the aggregate principal amount of
the Initial Notes on the Initial Closing Date. The rights under this Agreement
shall be assignable by a Buyer without consent of the Company. Notwithstanding
the foregoing, any assignment by a Buyer shall not release such Buyer from its
obligations hereunder unless such obligations are assumed by such assignee.
Notwithstanding anything to the contrary contained in the Transaction Documents,
the Buyers shall be entitled to pledge the Securities in connection with a bona
fide margin account.
h. No Third Party Beneficiaries. This Agreement is intended for the
----------------------------
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. Unless this Agreement is terminated under Section 9(l),
--------
the representations and warranties of the Company and the Buyers contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9,
and the indemnification provisions set forth in Section 8, shall survive each of
the Closings. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
j. Publicity. The Company and each Buyer shall have the right to
---------
approve before issuance any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of the Buyer, to make any
press release or other public disclosure with respect to such transactions as is
required by applicable law and regulations (although each Buyer shall be given
the option to be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof).
k. Further Assurances. Each party shall do and perform, or cause to
------------------
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Initial Closing shall not have
-----------
occurred with respect to a Buyer on or before three (3) Business Days from the
date hereof due to the Company's or the Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the non-breaching party's
failure to waive such unsatisfied condition(s)), the non-breaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this Section 9(l), the Company shall remain obligated to reimburse a non-
breaching Buyer for expenses up to the amount described in Section 4(i) above.
30
m. Placement Agent. The Company acknowledges that it has engaged
---------------
▇.▇. ▇▇▇▇▇▇▇▇ & Co. as placement agent in connection with the sale of the Notes
and the Warrants. The Company shall be responsible for the payment of any
placement agent's fees or brokers' commissions relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without limitation,
attorneys' fees and out of pocket expenses) arising in connection with any such
claim by a placement agent or broker.
n. No Strict Construction. The language used in this Agreement will
----------------------
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
o. Remedies. Each Buyer and each holder of the Securities shall have
--------
all rights and remedies set forth in the Transaction Documents and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any person having any rights under any provision of this Agreement shall
be entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.
p. Payment Set Aside. To the extent that the Company makes a payment
-----------------
or payments to any Buyer hereunder or pursuant to the Registration Rights
Agreement or the Warrants or such Buyer enforces or exercises its rights
hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
* * * * * *
31
IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY: BUYER:
BLUE RHINO CORPORATION HFTP INVESTMENT L.L.C.
By: Promethean Asset Management, L.L.C.
Its: Investment Manager
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------
Title: Chief Financial Officer By: /s/ E. ▇▇▇▇ ▇▇▇
-------------------------- ------------------------------------
Name: E. ▇▇▇▇ ▇▇▇
Its: Duly Authorized Signatory
▇▇▇▇▇▇▇▇, L.P.
By: ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Its: Chief Operating Officer
-----------------------------------
SCHEDULE OF BUYERS
Initial
Warrant
Shares
Principal Subject to
Investor Address Amount of Initial Investor's Representatives' Address
Investor Name and Facsimile Number Initial Notes Warrant and Facsimile Number
---------------------- -------------------------------------- --------------- ----------- --------------------------------------
HFTP Investment L.L.C. c/oPromethean Asset Management, L.L.C. $5,000,000 237,288 Promethean Investment Group, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇. Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇ Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Residence: New York ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 312-902-1061
▇▇▇▇▇▇▇▇, L.P. c/o ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P. $2,000,000 94,915 ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - 26/th/ Floor ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇ or ▇▇▇ ▇▇▇▇▇▇ Attention: ▇▇▇▇ ▇▇▇▇ or ▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Residence: Cayman Islands
SCHEDULES
---------
Schedule of Buyers
Schedule 3(a) - Subsidiaries
Schedule 3(c) - Capitalization
Schedule 3(e) - Conflicts
Schedule 3(f) - SEC Documents
Schedule 3(g) - Material Changes
Schedule 3(h) - Litigation
Schedule 3(n) - Intellectual Property
Schedule 3(r) - Transactions with Affiliates
Schedule 3(x) - Liens
Schedule 3(bb) - Certain Transactions
Schedule 4(d) - Use of Proceeds
EXHIBITS
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Exhibit A - Form of Notes
Exhibit B - Form of Warrant
Exhibit C - Form of Registration Rights Agreement
Exhibit D - Form of Opinion of Counsel
Exhibit E - Form of Irrevocable Transfer Agent Instructions