Exhibit 2
BLUE RHINO CORPORATION
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
September 7, 2000
TABLE OF CONTENTS
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I. Purchase and Sale of Preferred Stock ................................... 3
1.1 Issue of Securities ........................................... 3
1.2 Purchase, Sale and Issuance of Series A Preferred Stock ....... 3
1.3 Closing; Delivery ............................................. 3
II. Representations and Warranties of the Company ......................... 4
2.1 Organization, Good Standing and Qualification ................. 4
2.2 Capitalization ................................................ 4
2.3 Subsidiaries .................................................. 5
2.4 Authorization and Compliance .................................. 6
2.5 Other Rights .................................................. 6
2.6 Valid Issuance of Securities .................................. 7
2.7 Governmental Consents ......................................... 7
2.8 Litigation .................................................... 7
2.9 Intellectual Property ......................................... 8
2.10 Compliance with Other Instruments ............................. 8
2.11 Agreements; Action ............................................ 9
2.12 Disclosure .................................................... 9
2.13 No Conflict of Interest ....................................... 9
2.14 Title to Property and Assets .................................. 10
2.15 SEC Reports and Financial Statements .......................... 10
2.16 Changes ....................................................... 11
2.17 Employee Benefit Plans ........................................ 12
2.18 Tax Returns and Payments ...................................... 13
2.19 Insurance ..................................................... 14
2.20 Labor Agreements and Actions .................................. 14
2.21 Permits ....................................................... 14
2.22 Environmental and Safety Laws ................................. 14
2.23 Private Offering .............................................. 15
2.24 Brokers ....................................................... 15
III. Representations and Warranties of the Purchasers ..................... 15
3.1 Authorization ................................................. 15
3.2 Purchase Entirely for Own Account ............................. 15
3.3 Restricted Securities ......................................... 15
3.4 Legends ....................................................... 16
3.5 Accredited Investor ........................................... 16
IV. Conditions of the Purchasers' Obligations at Closing .................. 16
4.1 Corporate Proceedings ......................................... 16
4.2 Representations and Warranties ................................ 17
4.3 Compliance with Covenants ..................................... 17
4.4 Certificate of Compliance ..................................... 17
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4.5 Secretary's or President's Certificate ......................... 17
4.6 Qualifications ................................................. 17
4.7 Board of Directors ............................................. 17
4.8 Stockholders Agreement ......................................... 17
4.9 Registration Rights Agreement .................................. 17
4.10 Material Adverse Effect ........................................ 17
4.11 Certificate of Designation ..................................... 17
4.12 Opinion of Counsel for the Company ............................. 18
V. Conditions of the Company's Obligations at Closing ..................... 18
5.1 Representations and Warranties ................................. 18
5.2 Compliance with Covenants ...................................... 18
5.3 Qualifications ................................................. 18
VI. Covenants ............................................................. 18
6.1 Notification of Certain Matters. ............................... 18
6.2 Further Action, Reasonable Efforts; Consents and Approvals. .... 18
6.3 Conduct of Business of the Company Pending the Closing. ........ 19
6.4 Access to Information. ......................................... 20
6.5 Securities Laws Compliance. .................................... 20
VII. Indemnification ...................................................... 20
7.1 Survival of Representations, Etc. .............................. 20
7.2 Indemnification by Company ..................................... 21
7.3 Claims for Indemnification ..................................... 21
7.4 Defense by Indemnifying Party .................................. 21
VIII. Miscellaneous ....................................................... 22
8.1 Transfer; Successors and Assigns ............................... 22
8.2 Further Assurances ............................................. 22
8.3 Governing Law .................................................. 22
8.4 Counterparts ................................................... 22
8.5 Titles and Subtitles ........................................... 22
8.6 Notices ........................................................ 23
8.7 Finder's Fee ................................................... 23
8.8 Fees and Expenses .............................................. 23
8.9 Attorney's Fees ................................................ 23
8.10 Amendments and Waivers ......................................... 23
8.11 Severability ................................................... 24
8.12 Delays or Omissions ............................................ 24
8.13 Entire Agreement ............................................... 24
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BLUE RHINO CORPORATION
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
This Series A Preferred Stock Purchase Agreement (the "Agreement") is
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made as of the 7th day of September, 2000 by and among Blue Rhino Corporation, a
Delaware corporation (the "Company"), and the purchasers listed on Exhibit A
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attached hereto (each a "Purchaser" and together the "Purchasers").
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RECITALS
WHEREAS, the Company desires to issue and sell, and the Purchasers
desire to purchase, up to 2,000,000 shares of the Company's Series A Preferred
stock, par value $.001 per share (the "Series A Preferred Stock"), upon the
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terms and conditions hereinafter set forth; and
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and warranties herein contained, the parties hereto agree
as follows:
I.
Purchase and Sale of Preferred Stock
1.1 Issue of Securities. On or before the Closing, the Company will
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have authorized the issuance of its Series A Preferred Stock, and the issuance
of the shares of common stock of the Company, par value $.001 per share (the
"Common Stock"), into which the Series A Preferred Stock will convert (the
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"Conversion Shares").
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1.2 Purchase, Sale and Issuance of Series A Preferred Stock.
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(a) The Company shall adopt and file with the Secretary of
State of the State of Delaware on or before the Closing (as defined below) the
Certificate of Designation in the form attached hereto as Exhibit B (the
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"Certificate of Designation").
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(b) Subject to the terms and conditions of this Agreement,
each Purchaser agrees, severally and not jointly, to purchase at the Closing and
the Company agrees to sell and issue to each such Purchaser at the Closing that
number of shares of Series A Preferred Stock set forth opposite each such
Purchaser's name on Exhibit A attached hereto at a purchase price of $6.00 per
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share. The Series A Preferred Stock will have the rights, preferences and
privileges set forth in the Certificate of Designation.
1.3 Closing; Delivery.
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(a) The purchase and sale of the Series A Preferred Stock
shall take place at the offices of the Company, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m. local time, on September 7,
2000 (the "Closing Date"), or at such other time and
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place as the Company and the Purchasers mutually agree upon, orally or in
writing (which time and place are designated as the "Closing").
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(b) At the Closing, the Company shall deliver to each
Purchaser a certificate representing the Series A Preferred Stock being
purchased by such Purchaser against payment of the purchase price therefor by
check payable to the Company or by wire transfer to the Company's bank account.
II.
Representations and Warranties of the Company
Each exception set forth on a Schedule of Exceptions attached hereto as
Exhibit C to the representations and warranties in this Article II and each
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other matter set forth in the Schedule of Exceptions is identified by reference
to, or has been grouped under a heading referring to, a specific individual
Section of this Agreement and relates only to such Section, except to the extent
that one section of the Schedule of Exceptions specifically refers to another
section thereof. Except as set forth in the Schedule of Exceptions, the Company
represents and warrants to the Purchasers that as of the date hereof and as of
the Closing Date:
2.1 Organization, Good Standing and Qualification. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
conduct its business as presently conducted and as proposed to be conducted. The
Company is duly qualified or licensed to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business, properties or financial condition.
2.2 Capitalization. The authorized capital stock of the Company
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consists, or will consist, immediately prior to the Closing, of:
(a) Twenty Million (20,000,000) shares of Preferred Stock,
Two Million (2,000,000) of which have been designated Series A Preferred Stock,
par value $.001 per share, none of which are issued and outstanding immediately
prior to the Closing. The rights, privileges and preferences of the Preferred
Stock is as stated in the Certificate of Designation.
(b) One Hundred Million (100,000,000) shares of Common Stock,
Nine Million Two Hundred Twenty One Thousand Seven Hundred Three (9,221,703)
shares of which are issued and outstanding as of August 28, 2000. All of the
outstanding shares of Common Stock have been duly authorized, fully paid and are
nonassessable and issued in compliance with all applicable federal and state
securities laws.
(c) The Company has reserved (i) Three Million Five Hundred
Thousand (3,500,000) shares of Common Stock for issuance to officers, directors,
employees and consultants of the Company pursuant to its 1994 Stock Incentive
Plan (the "1994 Plan"); (ii) One Hundred Thousand (100,000) shares of Common
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Stock for issuance to non-employee directors pursuant to its Amended and
Restated Stock Option Plan for Non-Employee Directors (the "Director Plan");
(iii) One Million Two Hundred Thousand (1,200,000) shares of common stock for
issuance to officers, directors, employees and consultants of the Company
pursuant to its
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1998 Stock Incentive Plan (the "1998 Plan"); (iv) Three Hundred Thousand
(300,000) shares of Common Stock for issuance to employees pursuant to its
Employee Stock Purchase Plan (the "ESPP"); and (v) Four Hundred Thousand
(400,000) shares of Common Stock for issuance to its distributors pursuant to
its Distributor Option Plan (the " Distributor Plan" and, together with the 1994
Plan, the Director Plan, the ESPP and the 1998 Plan, the "Stock Plans"). Of such
reserved shares of Common Stock, options to purchase One Hundred Thirty-Nine
Thousand Eight Hundred Seventy-Five (139,875) shares, Eighty Thousand (80,000)
shares, One Million Sixty-Nine Thousand Six Hundred Nine (1,069,609) shares,
Four Thousand Eight Hundred Eighty (4,880) shares and Two Hundred Forty-Five
Thousand Eight Hundred Twenty-Three (245,823) shares have been granted and are
outstanding as of July 31, 2000 under the 1994 Plan, the Director Plan, the 1998
Plan, the ESPP and the Distributor Plan, respectively, and Zero (0) shares,
Twenty Thousand (20,000) shares, One Hundred Thirty Thousand Three Hundred
Ninety-One (130,391) shares, Two Hundred Ninety-Five Thousand One Hundred Twenty
(295,120) shares and One Hundred Fifty-Four Thousand One Hundred Seventy-Seven
(154,177) shares remain available as of July 31, 2000 for future grants under
the 1994 Plan, the Director Plan, the 1998 Plan, the ESPP and the Distributor
Plan, respectively.
(d) Except for (i) outstanding options issued pursuant to the
Stock Plans; (ii) stock purchase warrants outstanding on the date hereof to
purchase an aggregate of 857,499 shares of Common Stock; and (iii) stock
purchase warrants to purchase an aggregate of 100,000 shares of Common Stock
proposed to be issued ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ in connection with the acquisition
by the Company of 75% of the outstanding capital stock of QuickShip, Inc., there
are no outstanding options, warrants, subscriptions, rights (including
conversion or preemptive rights and rights of first refusal or similar rights),
obligations or agreements relating to or entitling any person to purchase or
otherwise acquire from the Company any capital stock or other equity securities
of the Company.
(e) There are no outstanding rights or obligations of the
Company to repurchase or redeem any of its securities.
(f) Except for capital stock or other equity securities held
by the Company, and except for the 51% interest held in R4 Technical
Center--North Carolina, LLC by Manchester Tank & Equipment Co., no Subsidiary
(as defined below) of the Company has outstanding any stock or any securities
convertible into or exchangeable or exercisable for any shares of its capital
stock or other equity securities, nor does it have outstanding any rights to
subscribe for or to purchase, or any options for the purchase of, or any
agreement providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to, any shares of its capital
stock or other equity securities or any securities convertible into or
exchangeable or exercisable for any shares of its capital stock or other equity
securities.
2.3 Subsidiaries. Section 2.3 of the Schedule of Exceptions sets
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forth the name of each Subsidiary of the Company. Each Subsidiary of the Company
listed in Section 2.3 of the Schedule of Exceptions has been duly organized, is
validly existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite corporate power and authority to conduct its
business as presently conducted. Each such Subsidiary is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on its business,
properties or financial condition. For purposes of
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this Agreement, the term "Subsidiary" shall mean any corporation or other
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organization, whether incorporated or unincorporated, of which the Company is a
general partner or at least 50% of the securities or other interests having by
their terms ordinary voting power to elect at least 50% of the board of
directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by the Company.
2.4 Authorization and Compliance.
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(a) The execution, delivery and performance by the Company of
this Agreement, the Stockholders Agreement attached hereto as Exhibit D, and the
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Registration Rights Agreement attached hereto as Exhibit E and any other
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agreement to which the Purchasers are a party and the execution and delivery of
which is contemplated hereby (such agreements hereinafter referred to as the
"Related Agreements") and the consummation by the Company of the transactions
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contemplated hereby and thereby, have been duly authorized by all necessary
corporate action. All corporate action on the part of the Company and its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement and all Related Agreements, and the performance
of all obligations of the Company hereunder and thereunder has been taken or
will be taken prior to Closing. This Agreement and each of the Related
Agreements have been duly executed and delivered by the Company and constitute
valid and legally binding obligations of the Company enforceable in accordance
with their respective terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights generally, or (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies.
(b) Neither the execution and delivery of this Agreement or
the Related Agreements nor the performance by the Company of its obligations
under the Agreement or the Related Agreements (including the issuance of the
Series A Preferred Stock and the Conversion Shares) will: (i) violate any
provisions of the certificate of incorporation or bylaws of the Company; (ii)
with or without the giving of notice or the passage of time, or both, violate,
or be in conflict with, or constitute a default under, or cause or permit the
termination or the acceleration of the maturity of, any mortgage, indenture,
license, contract, obligation or commitment of the Company, which would,
individually or in the aggregate, have a material adverse affect on the
business, properties or financial condition of the Company and its Subsidiaries,
taken as a whole; (iii) require notice to or the consent of any party to any
agreement or commitment, including, without limitation, any lease or license to
which the Company is a party, or by which it or its properties is bound or
subject; (iv) result in the creation or imposition of any security interest,
lien, or other encumbrance upon any property or assets of the Company under any
agreement or commitment to which it is a party, or by which it or its properties
is bound or subject; or (v) violate any statute, rule or law or any judgment,
decree, order, regulation or rule of any court or governmental authority to
which the Company or its properties is bound or subject, which violation would,
individually or in the aggregate, have a material adverse affect on the
business, properties or financial condition of the Company and its Subsidiaries,
taken as a whole.
2.5 Other Rights. Except as set forth in this Agreement and the
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Related Agreements, there is, and immediately upon consummation of the
transactions contemplated hereby there will
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be: (a) no agreement, restriction or encumbrance to which the Company is a party
or of which the Company has knowledge relating to the sale or voting of any
shares of the capital stock of the Company, including but not limited to rights
of first refusal, preemptive rights, rights of first offer, proxies or voting
agreements; (b) except as set forth in Section 2.2, no subscription, warrant,
option, convertible security, or other right (contingent or other) to purchase
or otherwise acquire from the Company any equity securities of the Company; (c)
except as set forth in Section 2.2, no commitment by the Company to issue
shares, subscriptions, warrants, options, convertible securities, or other such
rights or to distribute to holders of any of its equity securities any evidence
of indebtedness or asset; (d) no obligation (contingent or other) by the Company
to purchase, redeem or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof; and (e) no obligation to register any of the Company's
securities under any applicable securities laws.
2.6 Valid Issuance of Securities. The Series A Preferred Stock that
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is being issued to the Purchasers hereunder, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed herein, will be
duly and validly issued, fully paid and nonassessable and free and clear of all
preemptive rights, rights of first refusal, liens, charges, restrictions, claims
and encumbrances of any kind other than restrictions on transfer under this
Agreement and the Related Agreements and applicable state and federal securities
laws. Based in part upon the representations of the Purchasers in this
Agreement, the Series A Preferred Stock will be issued in compliance with all
applicable federal and state securities laws regarding registration or
qualification. The Conversion Shares have been duly and validly authorized and
reserved for issuance, and upon issuance in accordance with the terms of the
Certificate of Designation shall be duly and validly issued, fully paid and
nonassessable and free and clear of all preemptive rights, rights of first
refusal, liens, charges, restrictions, claims and encumbrances of any kind and
will be issued in compliance with all applicable federal and state securities
laws.
2.7 Governmental Consents. No consent, approval, order or
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authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the offer, sale or issuance of the
Series A Preferred Stock (and the Conversion Shares) or the consummation of the
transactions contemplated by this Agreement, except for (i) filings pursuant to
applicable state securities laws and Regulation D of the Securities Act of 1933,
as amended (the "Securities Act"), which filings shall be effected within the
requisite time period, (ii) filings under the Securities Act and applicable
state securities laws and other action to be taken as contemplated by the
Registration Rights Agreement with respect to the registration of the Conversion
Shares and (iii) the filing of the Certificate of Designation in the office of
the Secretary of State of the State of Delaware which shall be filed by the
Company on or prior to the Closing.
2.8 Litigation. There is no action, suit, proceeding or
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investigation pending or, to the Company's knowledge, currently threatened
against the Company or any of its Subsidiaries that could reasonably be expected
to result, either individually or in the aggregate, in any material adverse
effect on the business, properties or financial condition of the Company or its
Subsidiaries, taken as a whole. Neither the Company nor any of its Subsidiaries
is a party or subject to the provisions of any order, writ, injunction, judgment
or decree of any court or government agency or instrumentality. There is no
action, suit, proceeding or investigation by
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the Company or any of its Subsidiaries currently pending or which the Company or
any of its Subsidiaries intends to initiate.
2.9 Intellectual Property. The Company and its Subsidiaries
---------------------
exclusively owns all right, title and interest in and to the intellectual
property set forth in Section 2.9 of the Schedule of Exceptions and own or
possess sufficient legal rights, pursuant to a written agreement set forth in
Section 2.9 of the Schedule of Exceptions, to all other intellectual property
and proprietary rights necessary for the conduct of their business as currently
conducted without any conflict with, or infringement of, the rights of others,
except for failures, conflicts and infringements which would not have,
individually or in the aggregate, a material adverse effect on the business,
properties or financial condition of the Company and its Subsidiaries, taken as
a whole. The Company has not received any written communications alleging that
the Company has violated or, by conducting its business, would violate any of
the patents, trademarks, trade names, copyrights, trade secrets or other
intellectual property or proprietary rights of any other person or entity. The
Company is not aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would materially interfere with the use of such employee's best
efforts to promote the interest of the Company or that would conflict with the
Company's business. Neither the execution or delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as currently conducted, will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions, or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any such employee is now obligated. The Company does not
believe it is or will be necessary to use any inventions or other proprietary
rights or intellectual property of any of its employees (or persons it currently
intends to hire) made prior to their employment by the Company. Set forth in
Section 2.9 of the Schedule of Exceptions is a listing of all patents and patent
applications, trademarks and applications and registrations therefor, copyright
registrations and applications therefor, trade name, proprietary computer
software developed by or for the Company and all other intellectual property
owned by the Company and all Internet domain names registered or licensed by the
Company.
2.10 Compliance with Other Instruments. The Company is not in
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violation or default of any provision of its certificate of incorporation or
bylaws or of any instrument, judgment, order, writ, decree or contract to which
it is a party or by which it or any of its properties are bound, which
violations or defaults, individually or in the aggregate, would materially
adversely affect the business, properties or financial condition of the Company
and its Subsidiaries taken as a whole. The Company is not in violation of any
provision of federal or state statute, rule or regulation applicable to the
Company, except for violations which would not have, individually or in the
aggregate, a material adverse effect on the business, properties or financial
condition of the Company and its Subsidiaries taken as a whole.
(b) To its knowledge, the Company has avoided every
condition within its control, and has not performed any act, the occurrence of
which would result in the Company's loss of any right granted under any material
license, distribution agreement or other agreement.
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2.11 Agreements; Action. Except (i) as set forth in Section 2.11(a) of the
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Schedule of Exceptions, (ii) filed as an exhibit to an SEC Report (as defined
below) or (iii) for agreements either (x) entered into in the ordinary course of
business or (y) explicitly contemplated by the Agreement, there are no
agreements, understandings, instruments, contracts or proposed transactions to
which the Company or any of its Subsidiaries is a party or by which it or any of
its Subsidiaries is bound that involve (i) obligations (contingent or otherwise)
of, or payments to, the Company or any of its Subsidiaries in excess of,
$100,000, (ii) the license of any patent, copyright, trade secret or other
proprietary right to or from the Company or any of its Subsidiaries (other than
licenses of commercially available software products), or (iii) the grant of
rights to manufacture, produce, assemble, license, market, or sell its products
or services to any other person or adversely affect the Company's exclusive
right to develop, manufacture, assemble, distribute, market or sell its products
or services.
(b) Except as set forth in Section 2.11(b) of the Schedule of
Exceptions, since April 30, 2000 neither the Company nor any of its Subsidiaries
has (i) declared or paid any dividends, or authorized or made any distribution
upon or with respect to any class or series of its capital stock, (ii) incurred
any indebtedness for money borrowed or incurred any other liabilities
individually in excess of $50,000 or in excess of $100,000 in the aggregate,
(iii) made any loans or advances to any person, other than ordinary advances for
travel expenses or extensions of credit to customers in the ordinary course of
business and which are not more than 30 days past due, or (iv) sold, exchanged
or otherwise disposed of any of its assets or rights, other than (x) the sale of
its inventory or assets in the ordinary course of business. or (y) the sale or
other disposition of miscellaneous equipment or assets not used in the Company's
business and typically acquired as part of the acquisition of a cylinder
exchange business.
2.12 Disclosure. The Company has fully provided the Purchasers with all the
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information that the Purchasers have requested for deciding whether to acquire
the Series A Preferred Stock and all information that the Company believes is
reasonably necessary to enable the Purchasers to make such a decision. No
representation or warranty of the Company contained in this Agreement and the
exhibits attached hereto or any certificate furnished or to be furnished to
Purchasers at the Closing or any other documents furnished to the Purchasers,
(when read together) contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
herein or therein not misleading in light of the circumstances under which they
were made.
2.13 No Conflict of Interest. Except as set forth in Section 2.13 of the
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Schedule of Exceptions or in the Company's SEC Reports (as defined below), the
Company is not indebted, directly or indirectly, to any of its stockholders,
officers or directors or to their respective affiliates, spouses or children, in
any amount whatsoever other than in connection with payments for services
rendered and for expenses or advances of expenses incurred in the ordinary
course of business or relocation expenses of employees. None of the Company's 5%
stockholders, officers or directors, or any affiliates thereof or members of
their immediate families, are, directly or indirectly, indebted to the Company
or have any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship. None of the Company's officers or directors, or any affiliates
thereof or members of their immediate families compete with the Company except
that officers and/or, directors of the Company may own stock in (but not
exceeding one percent (1%) of the outstanding capital
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stock of) any publicly traded company that may compete with the Company. There
are no written or oral contracts, agreements, understandings or proposed
transactions between the Company and any of its officers, directors, affiliates,
or any affiliate thereof or which indirectly benefit any such person. The
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
2.14 Title to Property and Assets. The Company has good and marketable
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title to all of its properties and assets, both real and personal, and owns its
property and assets (tangible or intangible) free and clear of all mortgages,
liens, loans and encumbrances, except such encumbrances and liens which arise in
the ordinary course of business and do not, individually or in the aggregate,
materially impair the Company's ownership or use of such property or assets.
With respect to the property and assets it leases, the Company is in material
compliance with such leases and, to its knowledge, holds a valid leasehold
interest free of any liens, claims or encumbrances.
2.15 SEC Reports and Financial Statements.
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(a) Each form, report, schedule, registration statement and definitive
proxy statement filed by the Company with the Securities and Exchange Commission
("SEC") prior to the date hereof (as such documents have been amended prior to
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the date hereof, the "SEC Reports"), as of their respective dates, complied in
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all material respects with the applicable requirements of the Securities Act and
the Securities Exchange Act of 1934 as amended ("Exchange Act") and the rules
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and regulations promulgated thereunder applicable to such SEC Reports, and none
of the SEC Reports when filed (or if amended or superseded by a filing prior to
the date hereof, then on the date of such filing) 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. The financial
statements of the Company included in the SEC Reports as of their respective
dates comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles ("GAAP") (except, in the case of unaudited statements, as permitted
----
by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present in
all material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations, stockholders' equity and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal and recurring
year-end audit adjustments not material in amount). None of the Company's
Subsidiaries has filed, or is obligated to file, any forms, reports, schedules,
statements or other documents with the SEC. The adoption of SEC Staff Accounting
Bulletin No. 101 (Revenue Recognition in Financial Statements) effective January
1, 2000, has not adversely impacted and will not adversely impact, in any
material respect, the amount or timing of revenue recognition by the Company or
any of its Subsidiaries as compared to their respective prior revenue
recognition practices. Neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise), other than liabilities and obligations (i) fully reflected or
reserved against in the financial statements included in the SEC Reports, (ii)
incurred since April 30, 2000 in the ordinary course of
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business, (iii) as set forth in Section 2.15 of the Schedule of Exceptions or
(iv) liabilities that are individually less than $50,000.
2.16 Changes. Except as set forth in Section 2.16 of the Schedule of
-------
Exceptions, since April 30, 2000 there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company and its Subsidiaries from that reflected in the
Financial Statements, except changes in the ordinary course of business that
have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties or
financial condition of the Company and its Subsidiaries, taken as a whole;
(c) any waiver or compromise by the Company or its Subsidiaries of a
valuable right or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Company or its Subsidiaries, except in the
ordinary course of business and that is not material to the business, properties
or financial condition of the Company and its Subsidiaries, taken as a whole;
(e) any material change to a material contract or arrangement by which
the Company or any of its Subsidiaries or any of their respective assets is
bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee, officer, director or stockholder of the Company or its
Subsidiaries;
(g) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other material intangible assets of the Company or
its Subsidiaries;
(h) any resignation or termination of employment of any officer or key
employee of the Company or its Subsidiaries; and the Company, is not aware of
any impending resignation or termination of employment of any such officer or
key employee;
(i) any mortgage, pledge, transfer of a security interest in, or lien,
created by the Company or its Subsidiaries, with respect to any of its material
properties or assets outside the ordinary course of business, except liens for
taxes not yet due or payable;
(j) any loans or guarantees made by the Company or its Subsidiaries to
or for the benefit of its employees, officers or directors, or any members of
their immediate families, other than travel advances and other advances made in
the ordinary course of its business;
(k) any declaration, setting aside or payment or other distribution in
respect to any capital stock of the Company or its Subsidiaries, or any direct
or indirect redemption, purchase, or other acquisition of any of such stock by
the Company or its Subsidiaries;
11
(l) to the Company's knowledge, any other event or condition of any
character that could reasonably be expected to materially and adversely affect
the business, properties or financial condition of the Company and its
Subsidiaries, taken as a whole; or
(m) any arrangement or commitment by the Company or its Subsidiaries
to do any of the things described in this Section 2.16.
2.17 Employee Benefit Plans.
----------------------
(a) (i) Section 2.17 of the Schedule of Exceptions contains a
complete and accurate list of each employee benefit plan (as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) sponsored, maintained or contributed to on behalf of the
-----
Company's employees. Each such "employee benefit plan" listed on Section 2.17 of
the Schedule of Exceptions shall be referred to herein as an "Employee Plan."
-------------
(ii) Section 2.17 of the Schedule of Exceptions contains a
complete and accurate list of (A) all entities (whether or not incorporated)
which, together with the Company, would be deemed a single employer under
Section 414(b), (c) and (m) of the Internal Revenue Code of 1986, as amended
(the "Code") (such entities referred to herein as "ERISA Affiliates") and (B)
---- ----------------
all "employee benefit plans" (as such term is defined in Section 3(3) of ERISA)
of which the Company or any such ERISA Affiliate is or was within the past six
(6) years a plan sponsor, in which the Company or any such ERISA Affiliate
participates or has participated, to which the Company or any such ERISA
Affiliate contributes, has contributed or has incurred an obligation to
contribute or with respect to which the Company or any such ERISA Affiliate has
any liability, potential or otherwise.
(b) The Company has made available to the Purchasers all material
documents pursuant to which each Employee Plan is established, maintained,
administered and funded.
(c) Except as set forth in Section 2.17 of the Schedule of Exceptions:
(i) Each Employee Plan has been maintained, funded and
administered in all material respects in accordance with the terms of such
Employee Plan and complies in form and operation with the requirements of ERISA,
the Code and other applicable laws. All required reports (including Internal
Revenue Service Form 5500 annual reports) have been timely filed with respect to
each such Employee Plan There is no pending, or to the knowledge of the Company,
threatened proceeding, including any audit or pending voluntary compliance
resolution or closing agreement program proceeding (or any other similar
correction proceeding), involving any Employee Plan of the Company before the
Internal Revenue Service or any other governmental body.
(ii) The Company has no liability to the Internal Revenue
Service, the Department of Labor or any other Person with respect to any
Employee Plan.
(iii) Within the past six (6) years, neither the Company nor any
of its ERISA Affiliates sponsors or maintains, previously sponsored or
maintained, contributes or contributed to, or has or at any time had any
obligation to contribute to or has any liability
12
(potential or otherwise) with respect to any arrangement or plan which is
subject to Title IV of ERISA or is a multiemployer plan (as defined in Section
3(37) of ERISA or which is a voluntary employees' beneficiary association under
Section 501(c)(9) of the Code.
(iv) No prohibited transaction (within the meaning of ERISA
Sections 404 or 406 or Code Section 4975(c)(1)) has occurred with respect to any
Employee Plan or any of its ERISA Affiliates to the knowledge of the Company.
(v) Other than claims for benefits submitted in the ordinary
course by participants or beneficiaries, no claim against, or proceeding
involving, any Employee Plan is pending or, to the knowledge of the Company,
threatened and, to the knowledge of the Company, no fact exists which could give
rise to such a claim or proceeding.
(vi) Each Employee Plan of the Company which is intended to be
qualified under Code Section 401(a) has received a determination letter from the
Internal Revenue Service that such Employee Plan is so qualified, and, to the
Company's knowledge, nothing has occurred since the date of such determination
that could adversely affect the qualified status of any such Employee Plan.
(vii) The Company has complied in all material respects with the
provisions of ERISA Section 601 et seq. and Code Section 4980B and similar
applicable state laws ("COBRA"). Except to the extent required under COBRA, the
-----
Company does not provide health or welfare benefits for any retired or former
employee (or any spouse or dependent of a retiree or former employee) and is not
obligated to provide health or welfare benefits to any active employee following
such employee's retirement or other termination of service.
(viii) None of the Employee Plans obligates the Company to pay any
separation, severance, termination or similar benefit or accelerate any vesting
schedule, or alter any benefit structure solely as a result of any transaction
contemplated by this Agreement or solely as a result of a change in control of
ownership within the meaning of any Employee Plan or Section 280G of the Code.
(ix) All contributions (including all employer contributions and
employee salary reduction contributions), premiums or other payments which are
due have been made within the time period prescribed by ERISA to each such
Employee Plan, and all contributions for any period ending on or before the
Closing Date which are not yet due have been made to each such Employee Plan or
accrued in accordance with GAAP.
2.18 Tax Returns and Payments.
------------------------
(a) The Company has filed all tax returns that it is required to file
by law, and all such tax returns were correct and complete in all material
respects when filed. All taxes due and owed by the Company (whether or not shown
on any tax return) have been paid or adequately provided for, except where the
failure to do so would not result in a material adverse effect on the business,
properties or financial condition of the Company and its Subsidiaries, taken as
a whole.
13
(b) There is no material dispute or claim concerning any tax liability
of the Company either (i) claimed or raised by any authority in writing or (ii)
as to which the Company has knowledge based upon personal contact with any agent
of such authority. Section 2.18 of the Schedule of Exceptions lists those tax
returns since 1996 that have been audited or are currently the subject of audit,
and describes any deficiencies assessed against or agreed to by the Company
since 1996. The Company has not waived any statute of limitations in respect of
taxes or agreed to any extension of time with respect to a tax assessment or
deficiency.
2.19 Insurance. The Company has in full force and effect fire and casualty
---------
insurance policies, with extended coverage, sufficient in amount (subject to
reasonable deductibles) to allow it to replace any of its properties that might
be damaged or destroyed.
2.20 Labor Agreements and Actions. The Company is not bound by or subject
----------------------------
to (and none of its assets or properties is bound by or subject to) any written
or oral, express or implied, contract, commitment or arrangement with any labor
union, and no labor union has requested or, to the knowledge of the Company, has
sought to represent any of the employees, representatives or agents of the
Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the business, properties or financial condition of
the Company and its Subsidiaries, taken as a whole, nor is the Company aware of
any labor organization activity involving its employees. Except as set forth in
Section 2.20 of the Schedule of Exceptions, the employment of each officer and
employee of the Company is terminable at the will of the Company. To its
knowledge, the Company has complied in all material respects with all applicable
state and federal equal employment opportunity laws and with other laws related
to employment.
2.21 Permits. The Company and each of its Subsidiaries has all franchises,
-------
permits, licenses and any similar authority necessary for the conduct of its
business, the lack of which could materially and adversely affect the business,
properties or financial condition of the Company and its Subsidiaries, taken as
a whole. The Company is not in default in any material respect under any of such
franchises, permits, licenses or other similar authority.
2.22 Environmental and Safety Laws. The Company is not in violation of any
-----------------------------
applicable statute, law or regulation relating to the environment or
occupational health and safety, except for violations which would not have,
individually or in the aggregate, a material adverse effect on the Company and
its Subsidiaries, taken as a whole, and to its knowledge, no material
expenditures outside the ordinary course of business are or will be required in
order to comply with any such existing statute, law or regulation. No Hazardous
Materials (as defined below) are used or have been used, stored, or disposed of
by the Company or, to the Company's knowledge, by any other person or entity on
any property owned, leased or used by the Company. For the purposes of the
preceding sentence, "Hazardous Materials" shall mean (a) materials which are
-------------------
listed or otherwise defined as "hazardous" or "toxic" under any applicable
local, state, federal and/or foreign laws and regulations that govern the
existence and/or remedy of contamination on property, the protection of the
environment from contamination, the control of hazardous wastes, or other
activities involving hazardous substances, including building materials or (b)
any petroleum products or nuclear materials other than propane gas or liquids.
14
2.23 Private Offering. Assuming the accuracy of the representations and
----------------
warranties of the Purchasers in Article III below, the offer, sale and issuance
of the Series A Preferred Stock and the Conversion Shares as contemplated by
this Agreement are exempt from the registration requirements of the Securities
Act, and the qualification or registration requirements of applicable blue sky
laws. Neither the Company nor anyone acting on its behalf will offer any of the
Series A Preferred Stock or any similar securities for issuance or sale to, or
solicit any offer to acquire any of the same from, anyone in such a way as to
make the issuance and sale of the Series A Preferred Stock subject to the
registration requirements of Section 5 of the Securities Act.
2.24 Brokers. Except for ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, no broker, finder, agent
-------
or similar intermediary has acted on behalf of the Company in connection with
this Agreement or the transactions contemplated hereby, and, to the knowledge of
the Company, there are no brokerage commissions, finder's fees or similar fees
or commissions payable by the Purchasers in connection with this Agreement or
the transactions contemplated hereby.
III.
Representations and Warranties of the Purchasers
Each Purchaser, severally and not jointly, hereby represents and warrants
to the Company that as of the date hereof and as of the Closing Date:
3.1 Authorization. Such Purchaser has full power and authority (and in
-------------
the case of individuals, legal capacity) to enter into the Agreement and the
Related Agreements. Each of the Agreement and the Related Agreements, when
executed and delivered by the Purchaser, will constitute valid and legally
binding obligations of the Purchaser, enforceable in accordance with their
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and any other laws of general
application affecting enforcement of creditors' rights generally and (b) as
limited by laws relating to the availability of a specific performance,
injunctive relief, or other equitable remedies.
3.2 Purchase Entirely for Own Account. This Agreement is made with the
---------------------------------
Purchaser in reliance upon the Purchaser's representation to the Company, which
by the Purchaser's execution of this Agreement, the Purchaser hereby confirms,
that the Series A Preferred Stock to be acquired by the Purchaser will be
acquired for investment for the Purchaser's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that the Purchaser has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, the Purchaser further represents that the Purchaser does not
presently have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person, with respect to any of the Series A Preferred Stock. The Purchaser has
not been formed for the specific purpose of acquiring the Series A Preferred
Stock.
3.3 Restricted Securities. The Purchaser understands that the Series A
---------------------
Preferred Stock has not been, and will not be, registered under the Securities
Act, by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among
15
other things, the bona fide nature of the investment intent and the accuracy of
the Purchaser's representations as expressed herein. The Purchaser understands
that the shares of Series A Preferred Stock are "restricted securities" under
applicable U.S. federal and state securities laws and that, pursuant to these
laws, the Purchaser must hold the shares of Series A Preferred Stock
indefinitely unless they are registered with the SEC and qualified by state
authorities, or an exemption from such registration and qualification
requirements is available. The Purchaser further acknowledges that if an
exemption from registration or qualification is available, it may be conditioned
on various requirements including, but not limited to, the time and manner of
sale, the holding period for the Series A Preferred Stock, and on requirements
relating to the Company which are outside of the Purchaser's control, and which
the Company is under no obligation and may not be able to satisfy.
3.4 Legends. The Purchaser understands that the Series A Preferred Stock,
-------
and any securities issued in respect of or exchange for the Series A Preferred
Stock, may bear one or all of the following legends until they are no longer
required by law or the provisions of this Agreement:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES OR BLUE SKY LAWS. THESE SECURITIES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT OR LAWS."
(b) Any legend set forth in the Related Agreements.
(c) Any legend required by the Blue Sky laws of any state to the
extent such laws are applicable to the shares represented by the certificate so
legended.
3.5 Accredited Investor. The Purchaser is an accredited investor as
-------------------
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
IV.
Conditions of the Purchasers' Obligations at Closing
The obligations of each Purchaser to the Company under this Agreement
are subject to the fulfillment, on or before the Closing, of each of the
following conditions, unless otherwise waived by such Purchaser:
4.1 Corporate Proceedings. All corporate and other proceedings to be taken
---------------------
and all waivers and consents to be obtained in connection with the transactions
contemplated by this Agreement shall have been taken or obtained and all
documents incident to such transactions shall be satisfactory in form and
substance to the Purchasers and their counsel, who shall have received all such
originals or certified or other copies of such documents as they may reasonably
request.
16
4.2 Representations and Warranties. The representations and warranties of
------------------------------
the Company contained herein shall be true and correct in all respects (in the
case of any representation or warranty containing any materiality qualification)
or in all material respects (in the case of any representation or warranty
without any materiality qualification) as of the date of this Agreement and as
of the Closing with the same effect as though all such representations and
warranties had been made as of Closing, except for any such representations and
warranties made as of a specified date, which shall be true and correct in all
respects (in the case of any representation or warranty containing any
materiality qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification) as of such
date
4.3 Compliance with Covenants. The Company shall have duly complied with
-------------------------
and performed all material covenants and agreements of the Company herein, which
are required to be complied with and performed at or before the Closing.
4.4 Certificate of Compliance. Except to the extent Closing occurs as of
-------------------------
the date hereof, the Company shall have provided to each of the Purchasers a
certificate, dated the date of the Closing, in form and substance reasonably
satisfactory to counsel to the Purchasers, confirming compliance with the
conditions set forth in Sections 4.2 and 4.3.
4.5 Secretary's or President's Certificate. The Company shall have
--------------------------------------
delivered a certificate of its respective Secretary, Chief Executive Officer or
President certifying as to its certificates of incorporation, by-laws and
incumbency of officers, and with respect to the certificate of the Secretary of
the Company, as to the resolutions of the directors of the Company authorizing
the execution and delivery of the Agreement and Related Agreements and the
performance of the transactions and other actions contemplated thereby.
4.6 Qualifications. All authorizations, approvals or permits, if any, of
--------------
any governmental authority or regulatory body of the United States or of any
state that are required to be in effect as of the Closing in connection with the
lawful issuance and sale of the Series A Preferred Stock pursuant to this
Agreement shall be obtained and effective as of the Closing.
4.7 Board of Directors. As of the Closing, the Board shall appoint ▇▇▇▇▇
------------------
▇. ▇▇▇▇▇▇▇ as a director.
4.8 Stockholders Agreement. The Company, each Purchaser and the
----------------------
stockholders of the Company named therein shall have executed and delivered the
Stockholders Agreement.
4.9 Registration Rights Agreement. The Company and the Purchasers shall
-----------------------------
have executed and delivered the Registration Rights Agreement.
4.10 Material Adverse Effect. The Company shall not have experienced any
-----------------------
material adverse effect on (i) the validity or enforceability of this Agreement,
(ii) the ability of the Company to perform its obligations under this Agreement
or (iii) the business, properties or financial condition of the Company and its
Subsidiaries, taken as a whole
4.11 Certificate of Designation. The Company shall have filed the
--------------------------
Certificate of Designation with the Secretary of State of Delaware on or prior
to the Closing Date, which shall continue to be in full force and effect as of
the Closing Date.
17
4.12 Opinion of Counsel for the Company. Purchaser shall have received
----------------------------------
an opinion of the Company's counsel dated the Closing Date in form and substance
satisfactory to the Purchasers.
V.
Conditions of the Company's Obligations at Closing
The obligations of the Company to each Purchaser under this
Agreement are subject to the fulfillment, on or before the Closing, of each of
the following conditions, unless otherwise waived:
5.1 Representations and Warranties. The representation and warranties
------------------------------
of each Purchaser contained herein shall be true and correct in all respects (in
the case of any representation or warranty containing any materiality
qualification) or in all material respects (in the case of any representation or
warranty without any materiality qualification) as of the date of this Agreement
and as of the Closing with the same effect as though all such representations
and warranties had been made as of Closing, except for any such representations
and warranties made as of a specified date, which shall be true and correct as
of such date.
5.2 Compliance with Covenants. The Purchasers shall have duly
-------------------------
complied with and performed all material covenants and agreements of the
Purchasers herein which are required to be complied with and performed before
the Closing.
5.3 Qualifications. All authorizations, approvals or permits, if any,
--------------
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Series A Preferred Stock pursuant to this Agreement shall be obtained and
effective as of the Closing.
VI.
Covenants
6.1 Notification of Certain Matters. Each of the parties hereto shall
-------------------------------
give prompt notice to the other parties hereto of the occurrence or
nonoccurrence of any event to which such party becomes aware, the occurrence or
nonoccurrence of which would be reasonably likely to cause (a) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect, or (b) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied in any material
respect. The delivery of any notice pursuant to this Section 6.1 shall not limit
or otherwise affect the remedies available hereunder to the party receiving such
notice.
6.2 Further Action, Reasonable Efforts; Consents and Approvals. Upon
----------------------------------------------------------
the terms and subject to the conditions hereof, each of the parties hereto shall
use commercially reasonable efforts to take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions in as expeditious a manner as is reasonably
practicable, including, without limitation, using commercially reasonable
efforts to obtain all licenses,
18
permits, consents, approvals, authorizations, certificates, qualifications and
orders of, and make all filings and required submissions with, all governmental
authorities, and all shareholders, lenders and partners of, and parties to
contracts with, the Company or any other person, in each case, as are reasonably
necessary for the consummation of the transactions contemplated under the
Agreement. Prior to the Closing, each party shall use its commercially
reasonable efforts not to take any action, or enter into any transaction, that
would cause any of its representations or warranties contained in this Agreement
to be untrue.
6.3 Conduct of Business of the Company Pending the Closing. From the
------------------------------------------------------
date hereof through the Closing, except as expressly permitted or contemplated
by this Agreement, unless the Purchasers shall otherwise agree in writing prior
to the taking of any action prohibited by the terms of this Section 6.3, the
Company and its Subsidiaries shall conduct their operations and business in the
ordinary and usual course of business and use reasonable best efforts to keep
available the services of its present officers and key employees and preserve
the goodwill and business relationships with all persons having business
relationships with it. Without limiting the generality of the foregoing, and
except as otherwise expressly permitted by this Agreement, prior to the Closing,
without the prior written consent of the Purchasers, neither the Company nor any
of its Subsidiaries shall:
(a) amend or modify its certificate of incorporation or bylaws;
(b) issue, sell, pledge or dispose of, grant or otherwise
create, or agree to issue, sell, pledge or dispose of, grant or otherwise create
any capital stock or other equity securities, any debt or other securities
convertible into or exchangeable for any of its capital stock or other equity
securities, or any option with respect thereto, except for (i) the issuance of
Company Common Stock upon conversion of the Series A Preferred Stock, (ii) upon
the exercise of outstanding warrants or options issued under the Stock Plans, or
(iii) the issuance of options under the Stock Plans in the ordinary course of
business;
(c) purchase, redeem or otherwise acquire or retire, or offer to
purchase, redeem or otherwise acquire or retire, any of its capital stock or
other equity securities (including any options with respect to any of its
capital stock or other equity securities and any securities convertible or
exchangeable into any of its capital stock or other equity securities) or any
long term debt (except in accordance with its terms);
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock or other equity securities, or subdivide, reclassify,
recapitalize, split, combine or exchange any of its capital stock or other
equity securities;
(e) incur or become contingently liable with respect to any
indebtedness for borrowed money or guarantee any such indebtedness or issue any
debt securities, except for additional indebtedness incurred under existing debt
agreements or credit facilities, or new credit facilities;
19
(f) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business entity;
(g) mortgage or otherwise encumber or subject to any lien, or sell,
transfer or otherwise dispose of, any assets or properties that are material,
individually or in the aggregate, to the Company and its Subsidiaries, taken as
a whole, other than liens incurred in the ordinary course of business consistent
with past practice, and sales and dispositions in the ordinary course of
business consistent with past practice;
(h) take any action, other than reasonable actions in the ordinary
course of business, with respect to accounting policies or procedures (including
tax accounting policies, procedures and elections relating to taxes that would
apply to the Company and its Subsidiaries), except as may be required by SEC
reporting requirements or GAAP, consistently applied;
(i) enter into, modify, amend, extend or terminate any agreement or
agreements for goods, property rights or services with (i) any director or
officer, or any affiliate of any such person, or (ii) any other person which
obligates the Company to pay in excess of $50,000 in any twelve (12) month
period; provided, however, that the Company may offer employment to individuals
-------- -------
consistent with past practice;
(j) take any affirmative action, or fail to take any reasonable action
within their or its control, as a result of which any of the changes or events
listed in Section 2.16 is likely to occur; and
(k) authorize any of, or commit or agree to take any of, the foregoing
actions.
6.4 Access to Information. From the date hereof to the Closing Date, the
---------------------
Company shall (and shall cause its Subsidiaries and representatives to) afford
the Purchasers, and their attorneys, accountants and other financial advisors
with reasonable access at all reasonable times during normal business hours to
its officers, employees, agents, properties, offices, plants and other
facilities, books, records and Tax Returns, and shall furnish such
Representatives with all financial, operating and other data and information as
may be reasonably requested.
6.5 Securities Laws Compliance. Within fifteen (15) days of the
--------------------------
Closing, the Company will file a notice of sale of the Series A Preferred Stock
pursuant to Form D under the Securities Act and will make any other filings
required by the securities or Blue Sky laws of any other applicable state.
VII.
Indemnification
7.1 Survival of Representations, Etc. All statements contained in any
--------------------------------
schedule or in any certificate delivered by or on behalf of the Company pursuant
to this Agreement or in connection with the transactions contemplated hereby
shall be deemed to be representations and warranties by the Company hereunder.
The representations and warranties of each of the Company and each Purchaser
shall survive the Closing Date for a period of 18 months from the
20
Closing Date. Each covenant and agreement contained in this Agreement shall
survive in accordance with the specific terms thereof.
7.2 Indemnification by Company. Subject to Section 7.3, the Company
--------------------------
shall indemnify each Purchaser and its affiliates and their respective officers,
directors, employees, financial advisors, attorneys, accountants, agents and
affiliates (collectively, the "Indemnified Parties") against, and hold each
-------------------
Indemnified Party harmless from, any damage, claim, loss, cost, liability or
expense, including interest, penalties, reasonable attorneys' fees and the
Indemnified Party's expenses of investigation, response action or remedial
action (collectively, "Damages"), incident to, arising out of, in connection
-------
with or related to, whether directly or indirectly, any of the following:
(a) the breach of any representation or warranty of the Company
that is identified by the Purchaser prior to termination of the representation
and warranty survival period set forth in Section 7.1; or
(b) any breach by the Company of any of its covenants or
agreements set forth in this Agreement, except to the extent (but only to the
extent) any such Damages are incident to, arise out of, in connection with or
are related to, whether directly or indirectly, the gross negligence or willful
misconduct of the Indemnified Parties. The Company's responsibility to indemnify
the Indemnified Parties in accordance with the provisions of this Section 7.2
shall not preclude the Company from asserting any claim against the Purchaser
for a breach of the Purchaser's representations, warranties, covenants or
agreements under this Agreement or any Related Agreement to the extent the
Company's Damages relate to such breach of the Purchaser.
7.3 Claims for Indemnification. Whenever any claim shall arise for
--------------------------
indemnification under Article VI, the Indemnified Parties shall promptly notify
the Company of the claim and, when known, the facts constituting the basis for
such claim. In the event of any claim for indemnification hereunder resulting
from or in connection with any claim or legal proceedings by a third party, the
notice to the Company shall specify, if known, the amount of the liability
arising therefrom. The Indemnified Parties shall not settle or compromise any
claim by a third party for which it is entitled to indemnification hereunder
without the prior written consent of the Company. The Company shall not settle
any claim by a third party for which an Indemnified Party is entitled to
indemnification hereunder without obtaining a full and unconditional release
against the Indemnified Party.
7.4 Defense by Indemnifying Party. In connection with any claim giving
-----------------------------
rise to a right of indemnification under Section 7.2 resulting from or arising
out of any claim or legal proceeding by a person who is not a party to this
Agreement, the Company, at its sole cost and expense may, upon written notice to
an Indemnified Party, assume the defense of any such claim or legal proceeding,
provided that (i) the counsel for the Company who shall conduct the defense of
such claim or legal proceeding shall be reasonably satisfactory to the
Indemnified Party, (ii) the Indemnified Party shall be entitled to participate
in (but not control) the defense of any such action, with its counsel and at its
own expense and (iii) the omission by any Indemnified Party to give notice as
provided herein of any claim as to which indemnity may be sought shall not
relieve the Company of its indemnification obligations under this Agreement
except to the extent such omission to give notice materially prejudices the
Company; provided, further, that, if
21
(x) the Indemnified Party reasonably concludes that a conflict of interest
exists with respect to the interests of any Indemnified Party and the Company or
(y) if the Indemnified Party may have available to it one or more defenses or
counterclaims that are inconsistent with one or more of those that may be
available to the Company in respect of any claim or legal proceeding relating
thereto, the Indemnified Party shall have the right at all times to retain its
own counsel and take over and assume control over the defense, settlement or
litigation of, and negotiations relating to its own defense or the legal
proceeding as it relates to the Purchaser at the sole expense of the Company. It
is understood that the Company shall not, in connection with any claim or legal
proceeding in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for all such
Indemnified Parties. If the Company does not timely assume the defense of any
such claim or legal proceeding resulting therefrom, (a) an Indemnified Party may
defend against such claim or legal proceeding, in such manner as it may deem
appropriate, including, but not limited to, settling such claim or legal
proceeding with the written consent of the Company (not to be unreasonably
withheld or delayed), and (b) the Company shall be entitled to participate in
(but not control) the defense of such action, with its counsel and at its own
expense.
VIII.
Miscellaneous
8.1 Transfer; Successors and Assigns. The terms and conditions of this
--------------------------------
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto. Nothing in this Agreement, express
or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
8.2 Further Assurances. Each party to this Agreement hereby covenants
------------------
and agrees, without the necessity of any further consideration, to execute and
deliver any and all such further documents and take any and all such other
actions as may be necessary or appropriate to carry out the intent and purposes
of this Agreement and to consummate the transactions contemplated herein.
8.3 Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflicts of law.
8.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts and signatures may be delivered by facsimile, each of which shall
be enforceable against the parties actually executing such counterpart and shall
be deemed an original and all of which together shall constitute one instrument.
8.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
22
8.6 Notices. Any notice required or permitted hereunder will be
-------
given in writing and will be conclusively deemed effectively given upon personal
delivery, or five days after deposit in the United States mail, by certified
mail, postage prepaid, return receipt requested, addressed (i) if to the
Company, as set forth below the Company's name on the signature page of this
Agreement, and (ii) if to a Purchaser, at such Purchaser's address as set forth
below the Purchaser's name on the signature page of this Agreement, or at such
other address as the Company or the Purchaser may designate by ten (10) days'
advance written notice to the Purchaser or the Company, respectively.
8.7 Finder's Fee. Except for any payments made by or due from the
------------
Company to ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, each party represents that it neither is nor
will be obligated for any finder's fee or commission in connection with this
transaction. A copy of the agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company is attached at
Section 8.7 of the Schedule of Exceptions. Each Purchaser agrees to indemnify
and to hold harmless the Company from any liability for any commission or
compensation in the nature of a finder's fee (and the costs and expenses of
defending against such liability or asserted liability) for which each Purchaser
or any of its officers, employees, or representatives is responsible. The
Company agrees to indemnify and hold harmless each Purchaser from any liability
for any commission or compensation in the nature of a finder's fee (and the
costs and expenses of defending against such liability or asserted liability)
for which the Company or any of its officers, employees or representatives is
responsible.
8.8 Fees and Expenses.
-----------------
(a) All expenses incurred in connection with the negotiation,
preparation, execution and performance of this Agreement shall be paid by the
party incurring such expenses; provided, however, that (i) if this Agreement is
terminated by the Company for any reason other than a breach of this Agreement
by ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Strategic Partners Fund II A, L.P. or ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Strategic Partners Fund II B. L.P. (together, "▇▇▇▇▇▇ ▇▇▇▇▇▇▇"), then the
--------------
Company shall reimburse ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ for its reasonable, documented
out-of-pocket expenses (in addition to legal fees and expenses as provided in
Section 8.8(b)) incurred in connection with the transactions contemplated under
this Agreement, up to $50,000 in the aggregate.
(b) Whether or not the transactions are consummated at the
Closing, the Company will reimburse the Purchasers in an amount not to exceed
$50,000 for the reasonable legal fees and related expenses incurred by ▇▇▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ acting in the capacity of special counsel to the Purchasers.
8.9 Attorney's Fees. If any action at law or in equity (including
---------------
arbitration) is necessary to enforce or interpret the terms of any of the
Agreements, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
8.10 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended or waived only with the written consent of the Company and the holders
of at least a majority of the Series A Preferred Stock. Any amendment or waiver
effected in accordance with this
23
Section 8.10 shall be binding upon the Purchasers and each transferee of the
Series A Preferred Stock (or the Conversion Shares), each future holder of all
such securities, and the Company.
8.11 Severability. If one or more provisions of this Agreement are held
------------
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
8.12 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party under this Agreement, upon any breach or
default of any other party under this Agreement, shall impair any such right,
power or remedy of such non-breaching or non-defaulting party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
8.13 Entire Agreement. This Agreement, the Related Agreements and the
----------------
documents referred to herein constitute the entire agreement between the parties
hereto pertaining to the subject matter hereof, and any and all other written or
oral agreements relating to the subject matter hereof existing between the
parties hereto are expressly canceled.
[Signature Pages Follow]
24
The parties have executed this Series A Preferred Stock Purchase
Agreement as of the date first written above.
COMPANY:
BLUE RHINO CORPORATION
By: /s/ ▇▇▇▇▇ ▇. Prin
----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------------
(print)
Title: President and CEO
------------------------------------------
Address:
PURCHASERS:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ STRATEGIC PARTNERS
FUND II A, L.P.
By: ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Strategic Partners
II, LLC, its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Member
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ STRATEGIC PARTNERS FUND
II B, L.P.
By: ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Strategic Partners
II, LLC, its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Member
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
EXHIBIT A
---------
SCHEDULE OF PURCHASERS
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Strategic Partners Fund II A, L.P. -- 1,413,000 shares
($8,478,000)
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Strategic Partners Fund II B, L.P. -- 87,000 shares ($522,000)
▇▇▇▇▇ ▇. ▇▇▇▇ -- 8,333 shares ($49,998)
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ -- 41,667 shares ($250,002)
▇▇▇▇ ▇▇▇▇▇▇▇ - 166,667 shares ($1,000,002)