<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 7, 1999
------------------------------
Blue Rhino Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-24287 56-1870472
- -------------------- ------------ --------------
(State of or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
104 Cambridge Plaza Drive, Winston-Salem, North Carolina 27104
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (336) 659-6900
---------------------------
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
------------
COMMON STOCK AND WARRANT PRIVATE PLACEMENT
On September 7, 1999, the Company completed a $7.2 million private
placement of 981,119 units with each consisting of one share of the Company's
common stock, par value $0.001 (the "Common Stock") and one warrant to purchase
0.35 shares of Common Stock. The offering was made to "accredited investors"
only, as defined in Rule 501(a) of Regulation D. The investors include the
following officers and directors of the Company: Billy D. Prim, Craig J.
Duchossois, Andrew J. Filipowski, Mark Castaneda, Steven D. Devick, Richard A.
Brenner and Jerald D. Shadley, who in the aggregate purchased 438,747 of the
981,119 units sold. The price per unit was $7.375 per share, which was the
closing price of the Company's Common Stock on September 3, 1999, the final
trading day prior to the consummation of the offering. The warrants may be
exercised at a price equal to $8.48 per share at any time prior to September 7,
2004. The Company used the proceeds of this offering to pay certain expenses
associated with the offering and repay indebtedness. Lunn Partners, LLC,
received a placement fee of $120,000 in connection with this offering.
Pursuant to the terms of the offering, the Company is required to file a
registration statement by November 5, 1999 to register the resale of the shares
issued in the offering and any shares issued upon the exercise of the warrants.
This registration statement will also cover the shares of Common Stock required
to be registered pursuant to the terms of the private offering described below.
CONVERTIBLE NOTE AND WARRANT PRIVATE PLACEMENT
On September 22, 1999, the Company entered into an agreement with two
institutional investors (the "Investors") to issue $7,000,000 of 5% Convertible
Notes (the "Convertible Notes") and warrants to purchase Common Stock (the
"Warrants") in a private placement (the "Convertible Note Offering"). The
Company has authorized and reserved for issuance upon the conversion of the
Convertible Notes and exercise of the Warrants shares of its Common Stock equal
to 200% of the total number of shares issuable upon conversion of the
Convertible Notes as of the closing date plus the number of Shares issuable upon
the exercise of the warrants. The Convertible Notes have a two year term and
bear interest at 5% per annum, payable in full in cash at maturity. The Company
may require the holders of the Convertible Notes to convert the principal and
interest on the Convertible Notes into Common Stock subject to certain
conditions, or upon the occurrence of certain events, the holder may convert the
principal and interest on the Convertible Notes into Common Stock. The
Convertible Notes convert at the lesser of a fixed conversion price or 95% of
the Weighted Average Price of the Common Stock at the time of conversion. The
Company will use the $7.0 million of proceeds from this offering to pay expenses
associated with the offering, reduce indebtedness, acquire assets and for
working capital and general corporate purposes. Upon the repayment of $2.6
million of the indebtedness of its wholly owned subsidiary, USA Leasing, L.L.C.
to Bank of America, the bank will release Billy D. Prim, Andrew J. Filipowski,
Craig J. Duchossois and Peer Pedersen from their $650,000 guarantees of such
indebtedness.
The following is a summary of the material terms of the Convertible Note
Offering, which terms are qualified by reference to the full text of the
underlying documents which are filed as exhibits to this Form 8-K. The
underlying documents for the Convertible Note Offering are a securities purchase
agreement ("Securities Purchase Agreement") and a registration rights
-2-
<PAGE>
agreement ("Registration Rights Agreement") by and between the Company and the
Investors and a convertible note ("Convertible Note") made by the Company all
filed as exhibits to this Form 8-K. In addition, a Form of Warrant is also filed
as an exhibit to this Form 8-K. All capitalized terms used but otherwise not
defined herein have the meanings ascribed to those terms in the transaction
documents.
THE CLOSINGS. At the initial closing of the transaction (the "Initial Closing"),
the Investors purchased Convertible Notes in the aggregate principal amount of
$7,000,000. The Company also issued the Investors warrants to purchase in the
aggregate 332,203 shares of Common Stock. The warrants are exercisable for five
years at an exercise price of $8.48 per share. In the future, the Company may
also require the Investors to purchase in up to two additional closings
Convertible Notes in an amount equal in the aggregate to at least $1,000,000 but
not more than $4,900,000 if certain conditions are met. The Investors'
obligation to purchase additional Convertible Notes is conditioned upon (a) the
effectiveness of a registration statement with the Securities and Exchange
Commission ("SEC") covering the resale of the shares of Common Stock issuable
upon conversion or exercise of the Convertible Notes and the Warrant issued at
the Initial Closing and shares to be issued upon the conversion of any notes or
exercise of warrants issued at any subsequent closing, (b) the Company's Common
Stock is listed with The Nasdaq Stock Market ("Nasdaq") or the New York Stock
Exchange, (c) the Company shall not have consummated a Change of Control or
defaulted under the terms of the Securities Purchase Agreement or Convertible
Notes, (d) the stock price of the Common Stock shall be at least $8.50 per share
(adjusted for stock splits, combinations and recapitalizations effected after
the closing date), (e) the Company shall have converted at least $1,750,000 of
the balance of the initial Convertible Note into common stock, (f) the Company
shall have received stockholder approval of the issuance of the Conversion
Shares and Warrant Shares as required by the Securities Purchase Agreement and
(h) the satisfaction of certain other terms and conditions, all as more fully
set forth in the Securities Purchase Agreement.
CONVERSION. The principal and accrued interest on the Convertible Notes is
convertible, in whole or in part, by dividing the amount to be converted (the
"Conversion Amount") by the lesser of (i) a "fixed conversion price", or (ii) a
"variable conversion price". The fixed conversion price shall equal $20.00 per
share. The variable conversion price shall equal 95% of the dollar volume-
weighted average price for the Common Stock on Nasdaq (as reported by Bloomberg
Financial Markets through its "Volume at Price" function) on the conversion date
(the "Variable Conversion Price"). For a period of 18 months, the Convertible
Notes may not be converted unless: (a) the Company, subject to certain
exceptions, requires conversion, (b) the Common Stock is not listed or quoted on
Nasdaq or The New York Stock Exchange ("NYSE"), or has been suspended from
trading for more than one day, (c) a Change of Control or Triggering Event or
Event of Default shall have occurred or be pending, (d) the Company issues or
sells or is deemed to have issued or sold any Convertible Securities that are
convertible into or exercisable or exchangeable for shares of Common Stock at a
variable price, (e) the Company fails to pay any redemption amount or issue any
shares upon a conversion of the Convertible Notes or exercise of the Warrants,
(f) the Company issues additional shares of Common Stock or securities
convertible into Common Stock other than (i) up to 500,000 shares issuable in
connection with acquisitions at a value per share equal or greater than the
market price of the Common Stock, (ii) shares issuable upon the exercise of
employee,
-3-
<PAGE>
director and distributor options and outstanding warrants, or (g) with respect
to the conversion of up to 25% of the total amount outstanding on the
Convertible Notes, if on or after the date which is 15 months after the Initial
Closing at least 75% of the aggregate original principal amounts of all Notes
remains outstanding. Upon the occurrence of any events in (b) through (g) above,
the holder of the Convertible Note may elect to convert all or any portion of
the Note into Common Stock. "Triggering Events" include the Company's: (a)
failure to register the shares issuable upon conversion of the Convertible Notes
or Warrants within 155 days after the Initial Closing, (b) failure to maintain
the effectiveness of such registration statement, (c) Common Stock not being
listed or quoted on Nasdaq or the NYSE, (d) failure to issue any Common Stock
upon conversion as required, (e) inability to issue any shares of Common Stock
as a result of restrictions on the issuance of shares under Nasdaq rules or (f)
failure to seek the consent of its stockholders to the issuance of Common Stock
upon conversion of the Convertible Notes and Warrants before January 31, 2000.
Upon the occurrence of a Triggering Event, in addition to converting the balance
of their Note into Common Stock, the holders of Convertible Notes could require
the Company to redeem all of the remaining principal and interest at a price
equal to 120% of the outstanding balance. In the event that the Company or its
transfer agent do not timely effect a conversion of the Convertible Notes, the
Company is subject to certain liquidated damage penalties including reductions
in the Variable Conversion Price, adjustments to the applicable fixed conversion
price and certain other penalties as more fully described in the Convertible
Note.
The holders of the Convertible Notes are prohibited from converting their notes
if after giving effect to such conversion the holder would beneficially own in
excess of 4.99% of the outstanding shares of Common Stock of the Company
following such conversion. In addition, the Convertible Notes are subordinate
subject to certain exceptions, to up to $25 million of the Company's
indebtedness to Bank of America.
The following risks are associated with Convertible Note conversions:
. Because the Variable Conversion Price of the Convertible Notes is a
function of the market price of the Common Stock upon conversion, the
lower the price of the Common Stock at the time the holder converts,
the greater the number of shares of Common Stock received upon
conversion;
. To the extent that Common Stock received upon conversion is sold into
the market, and disregarding the manner in which such shares are sold
as well as any other factors such as reactions to the Company's
operating results and general market conditions which may be operative
in the market at such time, such sales may cause a decrease in the
market price of the Common Stock, which in turn, relative to
additional conversions of the Convertible Notes and Warrants, would
reduce the Variable Conversion Price and increase the number of shares
of Common Stock issued upon conversion of the Convertible Notes and
available for sale into the market for the Common Stock;
. Short sales of the Common Stock may accompany conversions and sales of
Common Stock from conversions, which sales in the
-4-
<PAGE>
aggregate could cause downward pressure upon the price of the Common
Stock, excluding the effect of other market factors possibly operative
at the time; and
. Conversions of the Convertible Notes may result in substantial
dilution of the interests of the other holders of Common Stock. In
this regard, the ownership limitation which prohibits the purchasers
from owning more than 4.99% of the Common Stock of the Company only
applies to shares of Common Stock held at one time and does not
prevent purchasers from converting and selling some of their holdings
and then later converting the rest of their holdings.
. The Common Stock could be delisted by Nasdaq in the event that the
Company's stock price decreases below the $1 minimum bid price as
required by Nasdaq or the Company otherwise fails to satisfy the
minimum listing requirements of Nasdaq. In such an event, should such
a delisting extend for five or more consecutive trading days, a
Triggering Event would occur and the holders of the Convertible Notes
could require the Company to redeem the outstanding shares of
Convertible Notes.
INTEREST. The outstanding principal balance on the Convertible Notes bears
interest at 5% per annum. Interest accrues until paid in full. After and
during the continuance of an event of default, the Convertible Notes bear a
default rate of interest equal to 18%.
REGISTRATION OF SHARES; POSSIBLE ADJUSTMENT OF CONVERSION PRICE AND EXERCISE
PRICE. The Company is required to register with the SEC the resale of at least
200% of the number of shares of Common Stock issuable upon conversion of the
Convertible Notes and exercise of the Warrants and conversion of any Convertible
Notes or exercise of any warrants to be issued in any subsequent closing. The
number of shares is based on the Conversion Price at the time of the filing of
the registration statement. The Company has agreed to use its best efforts to
file the initial registration statement as soon as possible but no later than 60
days after the Initial Closing and have the registration statement declared
effective by the SEC no later than 135 days after the initial closing (the
"Scheduled Effective Date"). In addition, during the period the registration
statement is effective, the Company has agreed that the resale of at least 150%
of the shares issuable upon conversion of the Convertible Notes and the resale
of at least 100% of the shares of Common Stock issuable upon exercise of the
warrants will remain registered under the registration statement.
OTHER TERMS. The transaction documents relating to the Convertible Notes also
contain certain other representations, warranties, agreements, and
indemnification obligations of the Company. The operative agreements also
contain (i) a right of first refusal in favor of the investors which applies to
certain private equity financings of the Company and (ii) prohibit the Company
from entering into certain related party transactions. The Convertible Notes
and Warrants are also subject to antidilution provisions which are triggered in
the event of certain stock splits, recapitalizations, or other dilutive
transactions, as well as issuances of Common
-5-
<PAGE>
Stock at a price below the market price or the fixed conversion price in effect,
or the issuance of warrants, options, rights, or convertible securities which
have an exercise price or conversion price less than the market price on the
date of issuance or the fixed conversion price, other than for certain
previously outstanding securities and certain excluded securities. In the event
that the Company issues securities in the future which have a conversion price
or exercise price which varies with the market price and the terms of such
variable price are more favorable than the Variable Conversion Price in the
Convertible Notes, the purchasers may elect to substitute the more favorable
variable price when making conversions of the Convertible Notes.
WARRANTS. In connection with the closings of the Convertible Notes, the Company
will issue warrants to purchase Common Stock which at the time of issuance has a
market value (as determined using the average of the closing share price for the
ten days prior to the closing) equal to 35% of the principal value of the
Convertible Notes. The warrants may be exercised over five years. At the Initial
Closing, the Company will issue the Investors warrants to purchase in the
aggregate 332,203 shares of Common Stock at an exercise price of $8.48 per
share. The warrants expire on September 23, 2004. The warrants are subject to
certain antidilution provisions in the event the Company sells Common Stock or
securities convertible or exercisable into Common Stock at a price less than the
exercise price of such warrants or the market price of the Common Stock.
BISON VALVE ACQUISITION.
On September 17, 1999, the Company completed the acquisition of certain assets
related to the overfill protection device ("OPD") developed, manufactured for
and marketed by Bison Valve, L.L.C. The purchase price included $1.123 million
in cash, the offset of $732,190.23 in principal and accrued interest due to the
Company under a convertible note and a ten-year warrant to purchase 100,000
shares of the Company's Common Stock at an exercise price equal to $7.40 per
share. The acquired assets included OPD inventories, molds, dies, and all
intellectual property relating to the OPD developed by Bison Valve and its
manager, Michael A. Waters, which includes two patent applications on the OPD.
The net book value of the assets acquired and the purchase price paid did not
exceed 10 percent of the book value of the Company's assets nor does the
acquisition involve a business which is significant as defined in Rule 11-01 of
Regulation S-X.
An OPD is a device which fits inside of the valve of a grill cylinder and
prevents the overfilling of the cylinder by automatically cutting off the flow
of liquid propane gas after the amount in the cylinder reaches a certain level.
Current guidelines issued by the National Fire Protection Association require
that all grill cylinders produced or recertified after September 30, 1998, and
all grill cylinders refilled after April 1, 2002, must be fitted with an OPD.
The Company believes there are 50 million grill cylinders in use today that must
be upgraded or replaced with an OPD-equipped cylinder.
-6-
<PAGE>
Item 7. Exhibits.
--------
4.1 Registration Rights Agreement among the Company and the purchasers of
Common Stock and Warrants dated September 7, 1999.
4.2 Registration Rights Agreement among the Company and the Buyers of its
Convertible Notes dated September 20, 1999.
4.3 Amendment to Amended and Restated Registration Rights Agreement among
the Company and certain holders of its common stock dated September 7, 1999.
4.4 Form of Warrant to Purchase Common Stock of the Company issued to
purchasers of the Company's Common Stock in its private offering dated September
7, 1999.
4.5 Form of Warrant to Purchase Common Stock of the Company issued to
purchasers of the Company's Convertible Notes on September 20, 1999.
4.6 Form of Warrant issued to Michael A. Waters dated September 17, 1999.
10.1 Securities Purchase Agreement among the Company and Promethean
Investment Group, L.L.C., dated September 20, 1999.
10.2 Form of Convertible Note issued to purchasers of the Company's
Convertible Notes on September 20, 1999.
10.3 Asset Purchase Agreement among the Company, Bison Valve, L.L.C. and
Michael A. Waters dated September 17, 1999.
-7-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLUE RHINO CORPORATION
(Registrant)
By: /s/ Mark Castaneda
------------------------------------
Secretary and Chief Financial Officer
DATED: September 22, 1999
-8-
<PAGE>
EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of September 7,
1999, by and among BLUE RHINO CORPORATION, a Delaware corporation with
headquarters located at 104 Cambridge Plaza Drive, Winston-Salem, North Carolina
27104 (the "Company"), and the undersigned Buyers (individually a "Buyer" and
collectively the "Buyers").
WHEREAS:
A. In connection with the private offering of approximately $7.2 million
of shares of the Company's common stock on September 7, 1999 (the "Offering"),
the Company has agreed to issue and sell to the Buyers (i) 981,119 shares of the
Company's common stock, par value $.001 per share (the "Common Stock") and (ii)
warrants to purchase 343,383 shares of Common Stock (the "Initial Warrants"
and, as exercised, the "Initial Warrant Shares").
B. To induce the Buyers to participate in the Offering, the Company has
agreed to provide certain registration rights under the Securities Act of 1933,
as amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, the "1933 Act"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the Buyers
hereby agree as follows:
1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the
following meanings:
a. "Investor" means a Buyer and any transferee or assignee thereof
to whom a Buyer assigns its rights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9.
b. "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
c. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis ("Rule 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the "SEC").
<PAGE>
d. "Registrable Securities" means (i) the Common Stock purchased in
the Offering, (ii) the Common Stock issued or issuable upon the exercise of the
Warrants (the "Warrant Shares"), and (iii) any shares of capital stock issued or
issuable with respect to the Common Stock or Warrant Shares as a result of any
stock split, stock dividend, recapitalization, exchange or similar event or
otherwise.
e. "Registration Statement" means a registration statement or
registration statements of the Company filed under the 1933 Act covering the
Registrable Securities.
f. "Filing Deadline" has the meaning ascribed to it in Section
2(a)(i).
g. "Effectiveness Deadline" means the Initial Effectiveness Deadline
or the Additional Effectiveness Deadline, as applicable.
2. REGISTRATION.
------------
a. Mandatory Registration. The Company shall prepare, and, as soon
----------------------
as practicable, but in no event later than 60 days after the Closing Date (as
defined in the Securities Purchase Agreement) (the "Filing Deadline") file with
the SEC an Registration Statement or Registration Statements (as necessary) on
Form S-3 covering the resale of all of the Registrable Securities. In the event
that Form S-3 is unavailable for such a registration, the Company shall use such
other form as is available for such a registration, subject to the provisions of
Section 2(e). Any first Registration Statement prepared pursuant hereto shall
register for resale at least that number of shares of Common Stock equal to the
sum of the number of Shares of Common Stock, plus the number of Warrant Shares
issuable upon exercise of all of the Warrants (without regard to any limitations
on exercise) as of the date immediately preceding the date the Registration
Statement is initially filed with the SEC, subject to adjustment as provided in
Section 3(b). The Company shall use its best efforts to cause such Registration
Statement to be declared effective by the SEC as soon as possible, but in no
event later than 120 days after the Initial Closing Date (the "Initial
Effectiveness Deadline").
b. Piggy-Back Registrations. If at any time prior to the expiration
------------------------
of the Registration Period (as hereinafter defined), the number of shares of
Common Stock available for sale under a Registration Statement is insufficient
(as that term is used in Section 2(g)) to cover all of the Registrable
Securities and the Company proposes to file with the SEC a Registration
Statement relating to an offering for its own account or the account of others
under the 1933 Act of any of its securities (other than on Form S-4 or Form S-8
(or their equivalents at such time) relating to securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans and other than in connection with the Company's Distributor Option Plan)
the Company shall promptly send to each Investor who is entitled to registration
rights under this Section 2(b) written notice of the Company's intention to file
a Registration Statement and of such Investor's rights under this Section 2(b)
and, if within twenty (20) days after receipt of such notice, such Investor
shall so request in writing, the
-2-
<PAGE>
Company shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, subject to the
priorities set forth in Section 2(b) below. No right to registration of
Registrable Securities under this Section 2(b) shall be construed to limit any
registration required under Section 2(a). The obligations of the Company under
this Section 2(b) may be waived by Investors holding a majority of the
Registrable Securities. If an offering in connection with which an Investor is
entitled to registration under this Section 2(b) is an underwritten offering,
then each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Common Stock included in such
underwritten offering. If a registration pursuant to this Section 2(b) is to be
an underwritten public offering and the managing underwriter(s) advise the
Company in writing, that in their reasonable good faith opinion, marketing or
other factors dictate that a limitation on the number of shares of Common Stock
which may be included in the Registration Statement is necessary to facilitate
and not adversely affect the proposed offering, then the Company shall include
in such registration: (1) first, all securities the Company proposes to sell for
its own account, (2) second, up to the full number of securities proposed to be
registered for the account of the holders of securities entitled to inclusion of
their securities in the Registration Statement by reason of demand registration
rights, (3) third, the securities requested to be registered by the holders of
securities entitled to participate in the registration, as of the date hereof,
pursuant to the Amended and Restated Registration Rights Agreement, as amended
and (4) fourth, the securities requested to be registered by the Investors and
other holders of securities entitled to participate in the registration, as of
the date hereof, drawn from them pro rata based on the number each has requested
to be included in such registration including those holders of registration
rights which may be granted by the Company in connection with any sale of
Convertible Notes and Warrants which is contemplated as of the date of this
Agreement.
c. Allocation of Registrable Securities. The initial number of
------------------------------------
Registrable Securities included in any Registration Statement and each increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time the Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by
the SEC. In the event that an Investor sells or otherwise transfers any of such
Person's Registrable Securities, each transferee shall be allocated a pro rata
portion of the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common Stock included
in a Registration Statement and which remain allocated to any Person which
ceases to hold any Registrable Securities covered by such Registration Statement
shall be allocated to the remaining Investors, pro rata based on the number of
Registrable Securities then held by such Investors which are covered by such
Registration Statement.
3. RELATED OBLIGATIONS.
-------------------
-3-
<PAGE>
At such time as the Company is obligated to file a Registration Statement
with the SEC pursuant to Section 2(a), the Company will use its best efforts to
effect the registration of the Registrable Securities in accordance with the
intended method of disposition thereof and, pursuant thereto, the Company shall
have the following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (but in no
event later than the Filing Deadline) and use its best efforts to cause such
Registration Statement relating to the Registrable Securities to become
effective as soon as practicable after such filing (but in no event later than
the applicable Effectiveness Deadline). The Company shall keep each
Registration Statement effective pursuant to Rule 415 at all times until the
earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto) or (ii) the date on which the Investors shall have sold all the
Registrable Securities covered by such Registration Statement (the "Registration
Period"), which Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading. The term "best efforts"
as used in the first sentence of this Section 3(a) shall mean, among other
things, that the Company shall submit to the SEC, within two business days after
the Company learns that no review of a particular Registration Statement will be
made by the staff of the SEC or that the staff has no further comments on the
Registration Statement, as the case may be, a request for acceleration of
effectiveness of such Registration Statement to a time and date not later than
two business days after the submission of such request.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in such Registration Statement. In the case of
amendments and supplements to a Registration Statement which are required to be
filed pursuant to this Agreement (including pursuant to this Section 3(b)) by
reason of the Company filing a report on Form 10-K, Form 10-Q or Form 8-K or any
analogous report under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), the Company shall have incorporated such report by reference into
the Registration Statement, if applicable, or shall file such amendments or
supplements with the SEC on the same day on which the 1934 Act report is filed
which created the requirement for the Company to amend or supplement the
Registration Statement.
-4-
<PAGE>
c. The Company shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement, without charge, (i)
promptly after the same is prepared and filed with the SEC, at least one copy of
such Registration Statement and any amendment(s) thereto, including financial
statements and schedules, and all exhibits and each preliminary prospectus, (ii)
upon the effectiveness of any Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including copies of any
preliminary or final prospectus, as such Investor may reasonably request from
time to time in order to facilitate the disposition of the Registrable
Securities owned by such Investor.
d. The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by a Registration Statement under all
other securities or "blue sky" laws of such jurisdictions in the United States,
(ii) prepare and file in those jurisdictions, such amendments (including post-
effective amendments) and supplements to such registrations and qualifications
as may be necessary to maintain the effectiveness thereof during the
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (w) make any change in the Company's
Certificate of Incorporation or by-laws that the Company's board of directors
determines in good faith to be contrary to the best interests of the Company and
its shareholders, (x) qualify to do business in any jurisdiction where it would
not otherwise be required to qualify but for this Section 3(e), (y) subject
itself to general taxation in any such jurisdiction, or (z) file a general
consent to service of process in any such jurisdiction. The Company shall
promptly notify each Investor who holds Registrable Securities of the receipt
by the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or "blue sky" laws of any jurisdiction in the United States
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
e. As promptly as practicable after becoming aware of such event or
development, the Company shall notify each Investor in writing of the happening
of any event as a result of which the prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
ten (10) copies of such supplement or amendment to each Investor (or such other
number of copies as such Investor may reasonably request). The Company shall
also promptly notify each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to each Investor by
facsimile on the same day of such effectiveness), (ii) of any request by the SEC
for amendments or supplements to a Registration Statement or related
-5-
<PAGE>
prospectus or related information, and (iii) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate.
f. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify each Investor who holds Registrable Securities being sold
of the issuance of such order and the resolution thereof or its receipt of
actual notice of the initiation or threat of any proceeding for such purpose.
g. The Company shall make available for inspection by any Investor
all pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "Records"), as shall be reasonably
deemed necessary by each Investor, and cause the Company's officers, directors
and employees to supply all information which any Investor may reasonably
request; provided, however, that each Investor hereby agrees to hold in strict
confidence and shall not make any disclosure (except to an Investor) or use of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Investors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement or is otherwise required
under the 1933 Act, (b) the release of such Records is ordered pursuant to a
final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
or any other agreement of which the Investor has knowledge. Each Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential.
h. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement, or (v) such Investor consents to the form and content of any such
disclosure. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
-6-
<PAGE>
i. The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by a Registration Statement to be listed on
each securities exchange on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
designation and quotation of all the Registrable Securities covered by the
Registration Statement on The Nasdaq SmallCap Market, the Nasdaq National Market
The American Stock Exchange, Inc., or The New York Stock Exchange, Inc. The
Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(i).
j. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legend) representing the Registrable Securities to be offered
pursuant to a Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the Investors may reasonably
request and registered in such names as the Investors may request.
k. The Company shall provide a transfer agent and registrar of all
such Registrable Securities not later than the effective date of such
Registration Statement.
l. If requested by an Investor, the Company shall (i) as soon as
practicable incorporate in a prospectus supplement or post-effective amendment
such information as an Investor requests to be included therein relating to the
sale and distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being offered
or sold, the purchase price being paid therefor and any other terms of the
offering of the Registrable Securities to be sold in such offering; and (ii) as
soon as practicable make all required filings of such prospectus supplement or
post-effective amendment after being notified of the matters to be incorporated
in such prospectus supplement or post-effective amendment.
m. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities within
the United States.
n. The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.
o. Within two (2) business days after a Registration Statement which
covers applicable Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to the transfer agent for such Registrable Securities (with copies to the
Investors whose Registrable Securities are included in such Registration
Statement) confirmation that such Registration Statement has been declared
effective by the SEC.
-7-
<PAGE>
p. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.
q. Notwithstanding anything to the contrary in Section 3(f), at any
time after the applicable Registration Statement has been declared effective by
the SEC, the Company may delay the disclosure of material non-public information
concerning the Company the disclosure of which at the time is not, in the good
faith opinion of the Board of Directors of the Company and its counsel, in the
best interest of the Company and, in the opinion of counsel to the Company,
otherwise required (a "Grace Period"); provided, that the Company shall promptly
(i) notify the Investors in writing of the existence of material non-public
information giving rise to a Grace Period (provided that in each notice the
Company will not disclose the content of such material non-public information to
the Investors) and the date on which the Grace Period will begin, and (ii)
notify the Investors in writing of the date on which the Grace Period ends; and,
provided further, that no Grace Periods shall exceed 30 consecutive days and
during any consecutive 365 day period, such Grace Periods shall not exceed an
aggregate of 45 days (an "Allowable Grace Period"). For purposes of determining
the length of a Grace Period above, the Grace Period shall begin on and include
the date the holders receive the notice referred to in clause (i) and shall end
on and include the later of the date the holders receive the notice referred to
in clause (ii) and the date referred to in such notice. The provisions of
Sections 2(f) and 3(g) hereof shall not be applicable during the period of any
Allowable Grace Period. Upon expiration of the Grace Period, the Company shall
again be bound by the first sentence of Section 3(f) with respect to the
information giving rise thereto unless such material non-public information is
no longer applicable.
4. OBLIGATIONS OF THE INVESTORS.
----------------------------
a. At least seven (7) days prior to the first anticipated filing
date of a Registration Statement, the Company shall notify each Investor in
writing of the information the Company requires from each such Investor if such
Investor elects to have any of such Investor's Registrable Securities included
in such Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Investor
that such Investor shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
-8-
<PAGE>
c. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(g) or
the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of 3(f) or receipt of notice that no supplement or amendment is
required. Notwithstanding anything to the contrary, the Company shall cause its
transfer agent to deliver unlegended shares of Common Stock to a transferee of
an Investor in accordance with the terms of the Securities Purchase Agreement in
connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale prior to the Investor's receipt of
a notice from the Company of the happening of any event of the kind described in
Section 3(g) or the first sentence of 3(h) and for which the Investor has not
yet settled.
5. EXPENSES OF REGISTRATION.
------------------------
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees
shall be paid by the Company.
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor, the directors,
officers, partners, employees, agents, representatives of, and each Person, if
any, who controls any Investor within the meaning of the 1933 Act or the
Securities Exchange Act of 1934, as amended (the "1934 Act") (each, an
"Indemnified Person"), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, reasonable attorneys' fees, amounts
paid in settlement or expenses, joint or several, (collectively, "Claims")
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto ("Indemnified Damages"), to which any of them
may become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered ("Blue Sky Filing"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue statement of
a material fact contained in any preliminary
-9-
<PAGE>
prospectus if used prior to the effective date of such Registration Statement,
or contained in the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the omission
or alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to Section
6(c), the Company shall reimburse the Investors and each such controlling
person, promptly as such expenses are incurred and are due and payable, for any
legal fees or disbursements or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified
Person arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by such
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant to Section
3(d); (ii) shall not be available to the extent such Claim is based on a failure
of the Investor to deliver or to cause to be delivered the prospectus made
available by the Company, if such prospectus was timely made available by the
Company pursuant to Section 3(d); and (iii) shall not apply to amounts paid in
settlement of any Claim, if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement, each of the Company's
agents or representatives and each Person, if any, who controls the Company
within the meaning of the 1933 Act or the 1934 Act (each an "Indemnified
Party"), against any Claim or Indemnified Damages to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim or Indemnified Damages arise out of or are based upon any Violation, in
each case to the extent, and only to the extent, that such Violation occurs in
reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and, subject to Section 6(d), such Investor will reimburse any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or
-10-
<PAGE>
Indemnified Damages as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim,
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party to be paid by the Indemnified Party or
Indemnified Person, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. In the case of an Indemnified Person, legal counsel referred to in
the immediately preceding sentence shall be selected by the Investors holding a
majority in interest of the Registrable Securities included in the Registration
Statement to which the Claim relates. The Indemnified Party or Indemnified
Person shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the Indemnified Party or Indemnified Person which relates to such action or
claim. The indemnifying party shall keep the Indemnified Party or Indemnified
Person apprized as to the status of the defense or any settlement negotiations
with respect thereto. No indemnifying party shall be liable for any settlement
of any action, claim or proceeding effected without its prior written consent.
No indemnifying party shall, without the prior written consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability in
respect to such claim or litigation. Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the
-11-
<PAGE>
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.
d. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
e. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities pursuant to such
Registration Statement.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, and (ii) such other information as may be
-12-
<PAGE>
reasonably requested to permit the investors to sell such securities pursuant to
Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of Registrable Securities
if: (i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned;
(iii) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the 1933
Act and applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein; and (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who then hold at least two-thirds (2/3) of the principal amount of
the Notes which are then outstanding. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the
Company. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the Registrable Securities. 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 this Agreement unless the same
consideration also is offered to all of the parties to this Agreement.
11. MISCELLANEOUS.
-------------
a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities.
b. 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 business day after deposit with a nationally
recognized overnight
-13-
<PAGE>
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
If to the Company:
Blue Rhino Corporation
104 Cambridge Plaza Drive
Winston-Salem, North Carolina 27104
Telephone: 336-656-6900
Facsimile: 336-659-6750
Attention: President
With a copy to:
Pedersen & Houpt
161 North Clark Street
Suite 3100
Chicago, Illinois 60601
Telephone: 312-641-6888
Facsimile: 312-641-6895
Attention: John H. Muehlstein, Esq.
If to a Buyer, to its address and facsimile number on the Schedule of Buyers
attached hereto, with copies to such Buyer's representatives as set forth on the
Schedule of Buyers or to 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 days prior to the effectiveness of
such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (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 courier or overnight courier 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.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. The corporate laws of the State of Delaware shall govern all
issues concerning the relative rights of the Company and its stockholders as
well as other questions concerning the construction, validity, enforcement and
interpretation of this Agreement. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in Winston-
Salem, North Carolina for the adjudication of any dispute hereunder or in
connection
-14-
<PAGE>
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.
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. 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.
e. This Agreement, the Securities Purchase Agreement, the Warrants
and the Notes the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the Securities Purchase Agreement, the Warrants and
the Notes supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in identical counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. 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.
-15-
<PAGE>
j. All consents and other determinations to be made by the Investors
pursuant to this Agreement shall be made, unless otherwise specified in this
Agreement, by Investors holding a majority of the Registrable Securities,
determined as if all of the Common Stock and the Warrants then outstanding have
been converted into or exercised for Registrable Securities without regard to
any limitation on conversions of the Common Stock or exercises of the Warrants.
k. 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.
l. 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.
-16-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY:
- -------
BLUE RHINO CORPORATION
By: ____________________________________________
Name: __________________________________________
Its: ___________________________________________
BUYERS:
- -------
By:______________________________________________
Billy D. Prim, not personally but under the
power of attorney granted by the Investors listed
on Exhibit A hereto pursuant to the Subscription
Agreement entered into between each Investor
and the Company
-17-
<PAGE>
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of September 22,
1999, by and among BLUE RHINO CORPORATION, a Delaware corporation with
headquarters located at 104 Cambridge Plaza Drive, Winston-Salem, North Carolina
27104 (the "Company"), and the undersigned Buyers (individually a "Buyer" and
collectively the "Buyers").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "Securities Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyers (i) convertible
notes (the "Initial Notes"), which will be convertible into shares (as
converted, the "Initial Conversion Shares") of the Company's common stock, par
value $0.001 per share (the "Common Stock"), in accordance with the terms of the
Initial Notes and (ii) warrants to purchase shares of Common Stock (the
"Initial Warrants" and, as exercised, the "Initial Warrant Shares").
B. In connection with the Securities Purchase Agreement, the Company may
have the right, upon the terms and subject to the conditions of the Securities
Purchase Agreement, to require the Buyers to purchase (i) convertible notes (the
"Additional Notes" and, collectively with the Initial Notes, the "Notes"), which
will be convertible into Common Stock (as converted, the "Additional Conversion
Shares" and, collectively with the Initial Conversion Shares, the "Conversion
Shares") in accordance with the terms of the Additional Notes and (ii) warrants
to purchase shares of Common Stock (the "Additional Warrants" and, collectively
with the Initial Warrants, the "Warrants"; and as exercised the "Additional
Warrant Shares" and, collectively with the Initial Warrant Shares, the "Warrant
Shares").
C. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the Buyers
hereby agree as follows:
<PAGE>
1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the
following meanings:
a. "Investor" means a Buyer and any transferee or assignee thereof to
whom a Buyer assigns its rights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9.
b. "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
c. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis ("Rule 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the "SEC").
d. "Initial Registrable Securities" means (i) the Initial Conversion
Shares issued or issuable upon conversion of the Initial Notes, (ii) the Initial
Warrant Shares issued or issuable upon exercise of the Initial Warrants and
(iii) any shares of capital stock issued or issuable with respect to the Initial
Conversion Shares, the Initial Notes, the Initial Warrant Shares or the Initial
Warrants as a result of any stock split, stock dividend, recapitalization,
exchange or similar event or otherwise, without regard to any limitations on
conversions of the Initial Notes or exercises of Initial Warrants.
e. "Additional Registrable Securities" means (i) the Additional
Conversion Shares issued or issuable upon conversion of the Additional Notes,
(ii) the Additional Warrant Shares issued or issuable upon exercise of the
Additional Warrants and (iii) any shares of capital stock issued or issuable
with respect to the Additional Conversion Shares, the Additional Notes, the
Additional Warrant Shares or the Additional Warrants as a result of any stock
split, stock dividend, recapitalization, exchange or similar event or otherwise,
without regard to any limitations on conversions of Additional Notes or
exercises of Additional Warrants.
f. "Registrable Securities" means the Initial Registrable Securities
and the Additional Registrable Securities.
g. "Initial Registration Statement" means a registration statement or
registration statements of the Company filed under the 1933 Act covering the
Initial Registrable Securities.
2
<PAGE>
h. "Additional Registration Statement" means a registration statement
or registration statements of the Company filed under the 1933 Act covering the
Additional Registrable Securities.
i. "Registration Statement" means the Initial Registration Statement
and the Additional Registration Statement, as applicable.
j. "Filing Deadline" means the Initial Filing Deadline on the
Additional Filing Deadline, as applicable.
k. "Effectiveness Deadline" means the Initial Effectiveness Deadline
or the Additional Effectiveness Deadline, as applicable.
2. REGISTRATION.
------------
a. Mandatory Registration.
----------------------
(i) Initial Mandatory Registration. The Company shall prepare,
------------------------------
and, as soon as practicable, but in no event later than 60 days after the
Closing Date (as defined in the Securities Purchase Agreement) (the "Initial
Filing Deadline") file with the SEC an Initial Registration Statement or Initial
Registration Statements (as necessary) on Form S-3 covering the resale of all of
the Initial Registrable Securities relating to the Initial Notes and Initial
Warrants which are to be issued on the Initial Closing Date (as defined in the
Securities Purchase Agreement). In the event that Form S-3 is unavailable for
such a registration, the Company shall use such other form as is available for
such a registration, subject to the provisions of Section 2(e). Any first
Registration Statement prepared pursuant hereto shall register for resale at
least that number of shares of Common Stock equal to the sum of (y) the product
of (i) 2.0 and (ii) the number of Initial Conversion Shares issuable upon
conversion of the Initial Notes (without regard to any limitations on
conversions) as of the date immediately preceding the date the Initial
Registration Statement is initially filed with the SEC, subject to adjustment as
provided in Section 3(b), plus (z) the number of Initial Warrant Shares issuable
upon exercise of the Initial Warrant (without regard to any limitations on
exercise) as of the date immediately preceding the date the Initial Registration
Statement is initially filed with the SEC, subject to adjustment as provided in
Section 3(b). The Company shall use its best efforts to cause such Registration
Statement to be declared effective by the SEC as soon as possible, but in no
event later than 135 days after the Initial Closing Date (the "Initial
Effectiveness Deadline").
(ii) Additional Mandatory Registration. The Company shall
---------------------------------
prepare, and, as soon as practicable, but in no event later than 20 days after
the Additional Note Notice Date (as defined in the Securities Purchase
Agreement) (the "Additional Filing Deadline") file with the SEC an Additional
Registration Statement or Additional Registration Statements (as
3
<PAGE>
necessary) on Form S-3 covering the resale of all of the Additional Registrable
Securities relating to the Additional Notes and Additional Warrants which are to
be issued on the Additional Closing Date (as defined in the Securities Purchase
Agreement). In the event that Form S-3 is unavailable for such a registration,
the Company shall use such other form as is available for such a registration,
subject to the provisions of Section 2(e). Any first Registration Statement
prepared pursuant hereto shall register for resale at least that number of
shares of Common Stock equal to the sum of (y) the product of (i) 2.0 and (ii)
the number of Additional Conversion Shares issuable upon conversion of the
Additional Notes to be issued on the Additional Closing Date (as if such
Additional Notes were then outstanding and without regard to any limitations on
conversions) as of the date immediately preceding the date the Additional
Registration Statement is initially filed with the SEC, subject to adjustment as
provided in Section 3(b), plus (z) the number of Additional Warrant Shares
issuable upon exercise of the Additional Warrants to be issued on the Additional
Closing Date (as if such Additional Warrants were then outstanding and without
regard to any limitations on exercise) as of the date immediately preceding the
date the Additional Registration Statement is initially filed with the SEC,
subject to adjustment as provided in Section 3(b). The Company shall use its
best efforts to cause such Registration Statement to be declared effective by
the SEC as soon as possible, but in no event later than 80 days after the
Additional Closing Date (the "Additional Effectiveness Deadline").
b. Piggy-Back Registrations. If at any time prior to the expiration
------------------------
of the Registration Period (as hereinafter defined), the number of shares of
Common Stock available for sale under a Registration Statement is insufficient
(as that term is used in Section 2(f)) to cover all of the Registrable
Securities and the Company proposes to file with the SEC a Registration
Statement relating to an offering for its own account or the account of others
under the 1933 Act of any of its securities (other than on Form S-4, Form S-8 or
Form S-1 (or their equivalents at such time) relating to securities to be issued
solely in connection with any acquisition of any entity or business; equity
securities issuable in connection with stock option or other employee benefit
plans; or equity securities issuable to non-affiliates of the Company in
connection with the Company's "distributor option plan" approved by the board of
directors of the Company) the Company shall promptly send to each Investor who
is entitled to registration rights under this Section 2(b) written notice of the
Company's intention to file a Registration Statement and of such Investor's
rights under this Section 2(b) and, if within twenty (20) days after receipt of
such notice, such Investor shall so request in writing, the Company shall
include in such Registration Statement all or any part of the Registrable
Securities such Investor requests to be registered, subject to the priorities
set forth in Section 2(b) below. No right to registration of Registrable
Securities under this Section 2(b) shall be construed to limit any registration
required under Section 2(a). The obligations of the Company under this Section
2(b) may be waived by Investors holding a majority of the Registrable
Securities. If an offering in connection with which an Investor is entitled to
registration under this Section 2(b) is an underwritten offering, then each
Investor whose Registrable Securities are included in such Registration
Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten
4
<PAGE>
offering using the same underwriter or underwriters and, subject to the
provisions of this Agreement, on the same terms and conditions as other shares
of Common Stock included in such underwritten offering. If a registration
pursuant to this Section 2(b) is to be an underwritten public offering and the
managing underwriter(s) advise the Company in writing, that in their reasonable
good faith opinion, marketing or other factors dictate that a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement is necessary to facilitate and not adversely affect the proposed
offering, then the Company shall include in such registration: (1) first, all
securities the Company proposes to sell for its own account, (2) second, up to
the full number of securities proposed to be registered for the account of the
holders of securities entitled to inclusion of their securities in the
Registration Statement by reason of demand registration rights, and (3) third,
the securities requested to be registered by the holders of the securities
entitled to participate in the registration under the Amended and Restated
Registration Rights Agreement dated March 7, 1998, (4) fourth, the securities
requested to be registered by the Investors and other holders of securities
entitled to participate in the registration, as of the date hereof, drawn from
them pro rata based on the number each has requested to be included in such
registration, including those holders of registration rights pursuant to the
Registration Rights Agreement dated September 7, 1999.
c. Allocation of Registrable Securities. The initial number of
------------------------------------
Registrable Securities included in any Registration Statement and each increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time the Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by
the SEC. In the event that an Investor sells or otherwise transfers any of such
Person's Registrable Securities, each transferee shall be allocated a pro rata
portion of the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common Stock included
in a Registration Statement and which remain allocated to any Person which
ceases to hold any Registrable Securities covered by such Registration Statement
shall be allocated to the remaining Investors, pro rata based on the number of
Registrable Securities then held by such Investors which are covered by such
Registration Statement.
d. Legal Counsel. Subject to Section 5 hereof, the Buyers holding a
-------------
majority of the Registrable Securities shall have the right to select one legal
counsel to review and oversee any offering pursuant to this Section 2 ("Legal
Counsel"), which shall be Katten Muchin & Zavis or such other counsel as
thereafter designated by the holders of a majority of Registrable Securities and
of which the Company and its counsel have been given prior notice. The Company
shall reasonably cooperate with Legal Counsel in performing the Company's
obligations under this Agreement.
e. Ineligibility for Form S-3. In the event that Form S-3 is not
--------------------------
available for any registration of Registrable Securities hereunder, the Company
shall (i) register the sale of the
5
<PAGE>
Registrable Securities on another appropriate form reasonably acceptable to the
holders of a majority of the Registrable Securities and (ii) undertake to
register the Registrable Securities on Form S-3 as soon as such form is
available, provided that the Company shall maintain the effectiveness of the
Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared
effective by the SEC.
f. Sufficient Number of Shares Registered. In the event the number of
--------------------------------------
shares available under a Registration Statement filed pursuant to Section 2(a)
is insufficient to cover all of the Registrable Securities which such
Registration Statement is required to cover or an
6
<PAGE>
Investor's allocated portion of the Registrable Securities pursuant to Section
2(c), the Company shall amend the Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable), or
both, so as to cover at least 150% of the Registrable Securities (based on the
market price of the Common Stock on the trading day immediately preceding the
date of filing of such amendment or new Registration Statement), in each case,
as soon as practicable, but in any event not later than fifteen (15) days after
the necessity therefor arises. The Company shall use its best efforts to cause
such amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof. For purposes of the foregoing
provision, the number of shares available under a Registration Statement shall
be deemed "insufficient to cover all of the Registrable Securities" if the
number of Registrable Securities issued or issuable upon conversion of the Notes
and exercise of the Warrants covered by such Registration Statement for five
consecutive trading days is greater than the quotient determined by dividing (i)
the number of shares of Common Stock available for resale under such
Registration Statement and (ii) 1.5. For purposes of the calculation set forth
in the foregoing sentence, any restrictions on the convertibility of the Notes
or exercise of the Warrants shall be disregarded and such calculation shall
assume that the Notes are then convertible into, and the Warrants are then
exercisable for, shares of Common Stock at the then prevailing Conversion Rate
(as defined in the Notes) or Warrant Exercise Price (as defined in the
Warrants), respectively.
3. RELATED OBLIGATIONS.
-------------------
At such time as the Company is obligated to file a Registration Statement
with the SEC pursuant to Section 2(a) or 2(f), the Company will use its best
efforts to effect the registration of the Registrable Securities in accordance
with the intended method of disposition thereof and, pursuant thereto, the
Company shall have the following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (but in no
event later than the Filing Deadline) and use its best efforts to cause such
Registration Statement relating to the Registrable Securities to become
effective as soon as practicable after such filing (but in no event later than
the applicable Effectiveness Deadline). The Company shall keep each
Registration Statement effective pursuant to Rule 415 at all times until the
earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto) or (ii) the date on which the Investors shall have sold all the
Registrable Securities covered by such Registration Statement (the "Registration
Period"), which Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading. The term "best efforts"
as used in the first sentence of this Section 3(a) shall mean, among other
things, that the Company shall submit to the SEC, within two (2) business days
after
7
<PAGE>
the Company learns that no review of a particular Registration Statement will be
made by the staff of the SEC or that the staff has no further comments on the
Registration Statement, as the case may be, a request for acceleration of
effectiveness of such Registration Statement to a time and date not later than
two (2) business days after the submission of such request.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in such Registration Statement. In the case of
amendments and supplements to a Registration Statement which are required to be
filed pursuant to this Agreement (including pursuant to this Section 3(b)) by
reason of the Company filing a report on Form 10-K, Form 10-Q or Form 8-K or any
analogous report under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), the Company shall have incorporated such report by reference into
the Registration Statement, if applicable, or shall file such amendments or
supplements with the SEC on the same day on which the 1934 Act report is filed
which created the requirement for the Company to amend or supplement the
Registration Statement.
c. The Company shall (a) permit Legal Counsel to review and comment
upon those sections of (i) the Initial Registration Statement and the Additional
Registration Statement which are applicable to the Buyers at least five (5)
business days prior to its filing with the SEC and (ii) all other Registration
Statements and all amendments and supplements to all Registration Statements
which are applicable to the Buyers (except for Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and any similar
or successor reports) within a reasonable number of days prior to the their
filing with the SEC and (b) not file any document in a form to which Legal
Counsel reasonably objects. The Company shall not submit a request for
acceleration of the effectiveness of a Registration Statement or any amendment
or supplement thereto without the prior approval of Legal Counsel, which consent
shall not be unreasonably withheld. The Company shall furnish to Legal Counsel,
without charge, (i) any correspondence from the SEC or the staff of the SEC to
the Company or its representatives relating to any Registration Statement,
provided the Investors and Legal Counsel keep such correspondence confidential,
(ii) promptly after the same is prepared and filed with the SEC, one copy of any
Registration Statement and any amendment(s) thereto, including financial
statements and schedules and all exhibits and (iii) upon the effectiveness of
any Registration Statement, one copy of the prospectus included in such
Registration Statement and all amendments and
8
<PAGE>
supplements thereto. The Company shall reasonably cooperate with Legal Counsel
in performing the Company's obligations pursuant to this Section 3.
d. The Company shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement, without charge, (i)
promptly after the same is prepared and filed with the SEC, at least one copy of
such Registration Statement and any amendment(s) thereto, including financial
statements and schedules, and all exhibits and each preliminary prospectus, (ii)
upon the effectiveness of any Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including copies of any
preliminary or final prospectus, as such Investor may reasonably request from
time to time in order to facilitate the disposition of the Registrable
Securities owned by such Investor.
e. The Company shall use its best efforts to (i) register and qualify
the Registrable Securities covered by a Registration Statement under all other
securities or "blue sky" laws of such jurisdictions in the United States, (ii)
prepare and file in those jurisdictions, such amendments (including post-
effective amendments) and supplements to such registrations and qualifications
as may be necessary to maintain the effectiveness thereof during the
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (w) make any change in the Company's
Certificate of Incorporation or by-laws that the Company's board of directors
determines in good faith to be contrary to the best interests of the Company and
its shareholders, (x) qualify to do business in any jurisdiction where it would
not otherwise be required to qualify but for this Section 3(e), (y) subject
itself to general taxation in any such jurisdiction, or (z) file a general
consent to service of process in any such jurisdiction. The Company shall
promptly notify Legal Counsel and each Investor who holds Registrable Securities
of the receipt by the Company of any notification with respect to the suspension
of the registration or qualification of any of the Registrable Securities for
sale under the securities or "blue sky" laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or threat of any
proceeding for such purpose.
f. As promptly as practicable after becoming aware of such event or
development, the Company shall notify Legal Counsel and each Investor in writing
of the happening of any event as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and promptly prepare a supplement or
amendment to such Registration Statement to correct such untrue statement or
omission, and
9
<PAGE>
deliver ten (10) copies of such supplement or amendment to Legal Counsel and
each Investor (or such other number of copies as Legal Counsel or such Investor
may reasonably request). The Company shall also promptly notify Legal Counsel
and each Investor in writing (i) when a prospectus or any prospectus supplement
or post-effective amendment has been filed, and when a Registration Statement or
any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Legal Counsel and each Investor by facsimile
on the same day of such effectiveness), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, and (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify Legal Counsel and each Investor who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
h. At the reasonable request of any Investor and at such Investor=s
expense, the Company shall furnish to such Investor, on the date of the
effectiveness of the Registration Statement and thereafter from time to time on
such dates as an Investor may reasonably request (i) a letter, dated such date,
from the Company's independent certified public accountants in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, and (ii) an opinion, dated as
of such date, of counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the Investors.
i. The Company shall make available for inspection by (i) any
Investor, (ii) Legal Counsel and (iii) one firm of accountants or other agents
retained by the Investors (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request;
provided, however, that each Inspector which is not a party hereto shall agree
in writing prior to obtaining access to any Records, and each Investor hereby
agrees, to hold in strict confidence and shall not make any disclosure (except
to an Investor) or use of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (b) the release of such
Records is ordered pursuant to a final, non-appealable subpoena or order from a
10
<PAGE>
court or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement of which the Inspector
has knowledge. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements with the Company with respect
thereto, substantially in the form of this Section 3(i). Each Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company prior to making any such disclosure and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential.
j. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement, or (v) such Investor consents to the form and content of any such
disclosure. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor prior to making any such disclosure and allow
such Investor, at the Investor's expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, such information.
k. The Company shall use its best efforts either to (i) cause all the
Registrable Securities covered by a Registration Statement to be listed on each
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
designation and quotation of all the Registrable Securities covered by the
Registration Statement on The Nasdaq SmallCap Market, the Nasdaq National Market
The American Stock Exchange, Inc., or The New York Stock Exchange, Inc. The
Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(k).
l. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legend) representing the Registrable Securities to be offered
pursuant to a Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the Investors may reasonably
request and registered in such names as the Investors may request.
11
<PAGE>
m. The Company shall provide a transfer agent and registrar of all
such Registrable Securities not later than the effective date of such
Registration Statement.
n. If requested by an Investor, the Company shall (i) as soon as
practicable incorporate in a prospectus supplement or post-effective amendment
such information as an Investor requests to be included therein relating to the
Investor and the sale and distribution of Registrable Securities, including,
without limitation, information with respect to the number of Registrable
Securities being offered or sold, the purchase price being paid therefor and any
other terms of the offering of the Registrable Securities to be sold in such
offering; and (ii) as soon as practicable make all required filings of such
prospectus supplement or post-effective amendment after being notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment.
o. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities within
the United States.
p. The Company shall make generally available to its security holders
as soon as practicable, but not later than 90 days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the 1933 Act) covering a twelve-month period beginning not later
than the first day of the Company's fiscal quarter next following the effective
date of the Registration Statement.
q. The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.
r. Within two (2) business days after a Registration Statement which
covers applicable Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to the transfer agent for such Registrable Securities (with copies to the
Investors whose Registrable Securities are included in such Registration
Statement) confirmation that such Registration Statement has been declared
effective by the SEC in the form attached hereto as Exhibit A.
---------
s. Notwithstanding anything to the contrary in Section 3(f), at any
time after the applicable Registration Statement has been declared effective by
the SEC, the Company may delay the disclosure of material non-public information
concerning the Company the disclosure of which at the time is not, in the good
faith opinion of the Board of Directors of the Company and its counsel, in the
best interest of the Company and, in the opinion of counsel to the Company,
otherwise required (a "Grace Period"); provided, that the Company shall promptly
(i) notify the Investors in writing of the existence of material non-public
information giving rise to
12
<PAGE>
a Grace Period (provided that in each notice the Company will not disclose the
content of such material non-public information to the Investors) and the date
on which the Grace Period will begin, and (ii) notify the Investors in writing
of the date on which the Grace Period ends; and, provided further, that no Grace
Periods shall exceed 15 consecutive days and during any consecutive 365 day
period, such Grace Periods shall not exceed an aggregate of 30 days (an
"Allowable Grace Period"). For purposes of determining the length of a Grace
Period above, the Grace Period shall begin on and include the date the holders
receive the notice referred to in clause (i) and shall end on and include the
later of the date the holders receive the notice referred to in clause (ii) and
the date referred to in such notice. The provisions of Section 3(g) hereof shall
not be applicable during the period of any Allowable Grace Period. Upon
expiration of the Grace Period, the Company shall again be bound by the first
sentence of Section 3(f) with respect to the information giving rise thereto
unless such material non-public information is no longer applicable.
4. OBLIGATIONS OF THE INVESTORS.
----------------------------
a. At least seven (7) days prior to the first anticipated filing date
of a Registration Statement, the Company shall notify each Investor in writing
of the information the Company requires from each such Investor if such Investor
elects to have any of such Investor's Registrable Securities included in such
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. If an Investor
does not provide the Company with the information it has requested pursuant to
this Section 4(a) within seven (7) days of being notified by the Company of its
necessity, then for every day after such seventh (7th) day until such date as
such Investor provided the requested information, the applicable Effectiveness
Deadline shall be extended by one (1) day for such Investor.
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(g) or
the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the
13
<PAGE>
copies of the supplemented or amended prospectus contemplated by Section 3(g) or
the first sentence of 3(f) or receipt of notice that no supplement or amendment
is required. Notwithstanding anything to the contrary, the Company shall cause
its transfer agent to deliver unlegended shares of Common Stock to a transferee
of an Investor in accordance with the terms of the Securities Purchase Agreement
in connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale prior to the Investor's receipt of
a notice from the Company of the happening of any event of the kind described in
Section 3(g) or the first sentence of 3(h) and for which the Investor has not
yet settled.
d. As promptly as practicable after becoming aware of such event,
each Investor shall notify the Company in writing of the happening of any event
as a result of which the information provided in writing by such Investor to the
Company expressly for use in the Prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
5. EXPENSES OF REGISTRATION.
------------------------
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees
shall be paid by the Company. In addition, the Company shall reimburse the
Investors for the reasonable fees and disbursements of Legal Counsel in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3 of this Agreement, provided that the Company shall only reimburse that
amount, if any, equal to up to $10,000.
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor, the directors,
officers, partners, employees, agents, representatives of, and each Person, if
any, who controls any Investor within the meaning of the 1933 Act or the
Securities Exchange Act of 1934, as amended (the "1934 Act") (each, an
"Indemnified Person"), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, reasonable attorneys' fees, amounts
paid in settlement or expenses, joint or several, (collectively, "Claims")
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether
14
<PAGE>
pending or threatened, whether or not an indemnified party is or may be a party
thereto ("Indemnified Damages"), to which any of them may become subject insofar
as such Claims (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon: (i) any untrue statement or
alleged untrue statement of a material fact in a Registration Statement or any
post-effective amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other "blue sky" laws of
any jurisdiction in which Registrable Securities are offered ("Blue Sky
Filing"), or the omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus if used prior to the effective date of
such Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to Section 6(c), the Company shall reimburse the Investors and each such
controlling person, promptly as such expenses are incurred and are due and
payable, for any legal fees or disbursements or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim by an
Indemnified Person arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(d); (ii) shall not be available to the extent such Claim
is based on a failure of the Investor to deliver or to cause to be delivered the
prospectus made available by the Company, if such prospectus was timely made
available by the Company pursuant to Section 3(d); (iii) shall not apply to
amounts paid in settlement of any Claim, if such settlement is effected without
the prior written consent of the Company, which consent shall not be
unreasonably withheld and (iv) shall not apply to the cost of investigation of
any non-threatened potential claim. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement, each of the Company's agents or
representatives, and each Person, if any, who controls the Company within
15
<PAGE>
the meaning of the 1933 Act or the 1934 Act (each an "Indemnified Party"),
against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified Damages arise out of or are based upon any Violation, in each case
to the extent, and only to the extent, that such Violation occurs in reliance
upon and in conformity with written information furnished to the Company by such
Investor expressly for use in connection with such Registration Statement; and,
subject to Section 6(d), such Investor will reimburse any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
such Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any prospectus shall not inure to the benefit of any Indemnified
Party if the untrue statement or omission of material fact contained in the
prospectus was corrected on a timely basis in the prospectus, as then amended or
supplemented.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim,
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and
any other party represented by such counsel in such proceeding. In the case of
an Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding a majority in interest of
the Registrable Securities included in the Registration Statement to which the
Claim relates. The Indemnified Party or Indemnified Person shall cooperate
fully with the indemnifying
16
<PAGE>
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party or Indemnified Person
which relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person apprised as to the status of the defense
or any settlement negotiations with respect thereto. No indemnifying party shall
be liable for any settlement of any action, claim or proceeding effected without
its prior written consent. No indemnifying party shall, without the prior
written consent of the Indemnified Party or Indemnified Person, consent to entry
of any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect of such claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
d. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
e. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities pursuant to such
Registration Statement.
17
<PAGE>
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act and (ii) such other information as may be reasonably requested to
permit the investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of Registrable Securities
in accordance with Section 2(f) of the Securities Purchase Agreement if: (i) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned;
(iii) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the 1933
Act and applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein; and (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement. No transferee of registration rights under this Agreement shall be
entitled to include any Registrable Securities on a Registration Statement
unless it previously has provided the Company the written notice referred to in
clause (ii) of the preceding sentence.
18
<PAGE>
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who then hold at least two-thirds (2/3) of the principal amount of
the Notes which are then outstanding. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the
Company. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the Registrable Securities. 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 this Agreement unless the same
consideration also is offered to all of the parties to this Agreement.
11. MISCELLANEOUS.
-------------
a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities.
b. 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 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:
If to the Company:
Blue Rhino Corporation
104 Cambridge Plaza Drive
Winston-Salem, North Carolina 27104
Telephone: 336-659-6900
Facsimile: 336-659-6750
Attention: President
19
<PAGE>
With a copy to:
Pedersen & Houpt, P.C.
161 N. Clark, Suite 3100
Chicago, IL 60601
Telephone: 312-641-6888
Facsimile: 312-641-6895
Attention: John H. Muehlstein, Esq.
If to Legal Counsel:
Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
Telephone: 312-902-5200
Facsimile: 312-902-1061
Attention: Robert J. Brantman, Esq.
If to a Buyer, to its address and facsimile number on the Schedule of Buyers
attached hereto, with copies to such Buyer's representatives as set forth on the
Schedule of Buyers or to 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 at least five (5) days prior to the
giving of a notice pursuant to this Section 11(b). Written confirmation of
receipt (A) given by the recipient of such notice, consent, waiver or other
communication, (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 courier or
overnight courier 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.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. 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.
20
<PAGE>
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. 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.
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.
e. This Agreement, the Securities Purchase Agreement, the Warrants
and the Notes constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement, the Securities Purchase Agreement, the
Warrants and the Notes supersede all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in identical counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. 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,
21
<PAGE>
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.
j. All consents and other determinations to be made by the Investors
pursuant to this Agreement shall be made, unless otherwise specified in this
Agreement, by Investors holding a majority of the Registrable Securities,
determined as if all of the Notes and the Warrants then outstanding have been
converted into or exercised for Registrable Securities without regard to any
limitation on conversions of the Notes or exercises of the Warrants.
k. 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.
l. 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.
22
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYER:
- ------- -----
BLUE RHINO CORPORATION HFTP INVESTMENT L.L.C.
By: Promethean Asset Management,
L.L.C.
Its: Investment Manager
By: /s/ Mark Castaneda By: /s/ E. Kurt Kim
------------------------- ----------------------------
Name: Mark Castaneda Name: E. Kurt Kim
Its: Chief Financial Officer Its: Duly Authorized Signatory
Leonardo, L.P.
By: Angelo Gordon & Co., L.P.
Its: General Partner
By: /s/ Michael L. Gordon
-------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
23
<PAGE>
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
Investor Address Investor's Representatives' Address
Investor Name and Facsimile Number and Facsimile Number
- -------------------------- ----------------------------------------------- -----------------------------------------
<S> <C> <C>
HFTP Investment L.L.C. c/o Promethean Asset Management, L.L.C. Promethean Investment Group, L.L.C.
750 Lexington Avenue 750 Lexington Avenue
22/nd/ Floor 22/nd/ Floor
New York, New York 10022 New York, New York 10022
Attn: James F. O'Brien, Jr. Attn: James F. O'Brien, Jr.
John Floegel John Floegel
Telephone: 212-702-5200 Telephone: 212-702-5200
Facsimile: 212-758-9334 Facsimile: 212-758-9334
Residence: New York
Katten Muchin & Zavis
525 West Monroe
Suite 1600
Chicago, Illinois 60661-3693
Attn: Robert J. Brantman, Esq.
Telephone: 312-902-5200
Facsimile: 312-902-1061
Leonardo, L.P. c/o Angelo, Gordon & Co., L.P. Angelo, Gordon & Co., L.P.
245 Park Avenue-26th Floor 245 Park Avenue-26th Floor
New York, New York 10167 New York, New York 10167
Attention: Gary Wolf or Ari Storch Attention: Gary Wolf or Ari Storch
Facsimile: (212) 867-6449 Facsimile: (212) 867-6449
Telephone: (212) 692-2035 Telephone: (212) 692-2035
</TABLE>
24
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attn:________________
Re: Blue Rhino Corporation
----------------------
Ladies and Gentlemen:
We are counsel to Blue Rhino Corporation, a Delaware corporation (the
"Company"), and have represented the Company in connection with that certain
Securities Purchase Agreement (the "Purchase Agreement") entered into by and
among the Company and the Buyer named therein (collectively, the "Holders")
pursuant to which the Company issued to the Holders of convertible notes (the
"Notes") convertible into shares of the Company's common stock, par value $.001
per share (the "Common Stock") and the related Warrants (the "Warrants") to
acquire shares of Common Stock. Pursuant to the Purchase Agreement, the Company
also has entered into a Registration Rights Agreement with the Holders (the
"Registration Rights Agreement") pursuant to which the Company agreed, among
other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable
upon conversion of the Notes and exercise of the Warrants, under the Securities
Act of 1933, as amended (the "1933 Act"). In connection with the Company's
obligations under the Registration Rights Agreement, on ____________ ____, the
Company filed a Registration Statement on Form S-3 (File No. 333-_____________)
(the "Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of the Holders as
a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
By:_______________________________
cc: [LIST NAMES OF HOLDERS]
<PAGE>
EXHIBIT 4.3
BLUE RHINO CORPORATION
FIRST AMENDMENT TO
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
THIS FIRST AMENDMENT TO THE AMENDED AND RESTATED REGISTRATION RIGHTS
AGREEMENT (this "Amendment") is dated as of September 7, 1999 by and among BLUE
RHINO CORPORATION, a Delaware corporation (the "Corporation"), the Persons
listed on Schedule 1 attached hereto who are showing on the records of the
----------
Corporation as holders of Registrable Shares as of the date of the amendment and
restatement of this Agreement (collectively, the "Purchasers"). This Amendment
amends that certain Registration Rights Agreement dated December 1, 1994, as
amended and restated by that certain Amended and Restated Registration Rights
Agreement dated March 1, 1997.
RECITALS:
A. Purchasers are the record holders of unregistered shares of the
Corporation's Common Stock which are Registrable Shares subject to the Agreement
and which were issued upon the conversion of the Corporation's Series A
Convertible Participating Preferred Stock (the "Series A Preferred Shares"),
the Common Shares and Old Warrants in connection with the Corporation's initial
public offering in May 1998.
B. The Corporation and Purchasers deem it desirable to enter into this
Amendment.
AGREEMENTS
In consideration of the premises and the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. The definition of "Registrable Securities" is hereby
------------
amended as follows:
"Registrable Shares" means at any time (i) any shares of Common Stock then
outstanding which were issued upon conversion of the Securities; (ii) any shares
of Common Stock then issuable upon conversion or exercise of the then
outstanding Securities; (iii) the Common Shares; (iv) the September 1999 Common
Shares (v) any shares of Common Stock then outstanding which were issued as, or
were issued directly or indirectly upon the conversion or exercise of other
securities issued as, a dividend or other distribution with respect or in
replacement of any shares referred to in (i), (ii), (iii) or (iv); and (v) any
shares of Common Stock then issuable directly or indirectly upon the conversion
or exercise of other securities which were issued as a dividend or other
distribution with respect to or in replacement of any shares referred to in (i),
(ii), (iii) or (iv); provided, however, that Registrable Shares shall not
include any shares which have been registered pursuant to the Securities Act,
which have been sold to the public pursuant to Rule 144 of the Commission under
the Securities Act ("Rule 144"), for which certificates for such securities not
bearing a legend restricting further transfer shall have been delivered by the
Company or which have been issued via book entry format, without restrictions
and subsequent disposition of such securities shall not require registration or
qualification of such securities under the Securities Act or any similar state
law then in force or the filing of any notice with the Commission under Rule
144. For purposes of this Agreement, a person will be deemed to be a holder of
Registrable Shares whenever such person has the then-existing right to acquire
such Registrable Shares (by conversion or otherwise), whether or not such
acquisition actually has been effected.
1
<PAGE>
2. Section 10.4 is amended and restated in its entirety to read as
follows:
10.4 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, all covenants and, agreements contained in this Agreement by or on
behalf of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto, whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for the benefit of the Purchasers or
holders of Registrable Shares are also for the benefit of, and enforceable by,
any subsequent holders of such Registrable Shares. Notwithstanding anything to
the contrary, no assignee of a Purchaser shall be deemed to be a holder of
Registrable Shares unless such assignee notifies the Company in writing of such
assignment and the number of Registrable Shares held by such assignee and agrees
to be bound by the terms of this Agreement.
3. All other terms of the Amended and Restated Registration Rights
Agreement remain unchanged and in full force and effect.
The parties hereto have executed this Amendment on the date first set
forth above.
BLUE RHINO CORPORATION
By: /s/ Billy Prim
_____________________________________
Billy Prim, Chief Executive Officer
Billy D. Prim, not personally but as attorney in
fact for the persons listed on Exhibit A hereto
pursuant to the Consent executed by the holders of
over 51% of the Registrable Shares consenting to
this Agreement.
/s/ Billy D. Prim
________________________________________
Billy D. Prim, Attorney in Fact
2
<PAGE>
Exhibit 4.4
WARRANT - SERIES 1999-A - CERTIFICATE NO. _______
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OFFERED FOR
SALE UNLESS REGISTERED UNDER SAID ACT OR UNLESS THE HOLDER OF THIS WARRANT
DELIVERS TO BLUE RHINO CORPORATION AN OPINION OF COUNSEL REASONABLY ACCEPTABLE
TO BLUE RHINO CORPORATION STATING THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
Original Exercise Price: $______ per share Dated: September __, 1999
WARRANT
Series - 1999-A
To Purchase ________ Shares of Common Stock (Subject to adjustment herein)
Expiring September __, 2004
THIS IS TO CERTIFY THAT, for value received, _____________________
("Original Warrantholder") or his respective registered assign is entitled to
purchase from Blue Rhino Corporation, a Delaware corporation (the "Company"), at
any time and from time to time prior to 5:00 P.M., Winston-Salem, North Carolina
time, on September __, 2004, at the principal office of the Company which is
currently 104 Cambridge Plaza Drive, Winston-Salem, North Carolina 27104 (or
such other address as the Company shall specify by notice to the Holder) at the
Exercise Price, the number of shares of Common Stock, with a par value of $0.001
per share (the "Common Stock"), of the Company shown above, all subject to
adjustment and upon the terms and conditions as hereinafter provided, and is
entitled also to exercise the other appurtenant rights, powers and privileges
hereinafter described.
Certain terms used in this Warrant are defined in Article V.
ARTICLE I
EXERCISE OF WARRANTS
1.1 Method of Exercise and Payment.
------------------------------
(a) Method of Exercise. To exercise this Warrant in whole or in part,
the registered holder of this Warrant (the "Holder") shall deliver to the
Company on or prior to 5:00 P.M., Winston-Salem, North Carolina time, on
September __, 2004, at the principal office of the Company, (a) this Warrant,
(b) a written notice, in substantially the form of the subscription notice (the
"Subscription Notice") attached hereto, of such Holder's election to exercise
this Warrant, which notice shall specify the number of shares of Common Stock to
be purchased or converted into, as the case may be, the denominations of the
share certificate or certificates desired and the name or names in which such
certificates are to be registered, and (c) payment to the Company of the amount
equal to the product of the then applicable Exercise Price multiplied by the
number of shares of Common Stock then being purchased pursuant to one of the
payment methods permitted under Section 1.1(b) below.
(b) Method of Payment. Payment shall be made either (1) by cash,
money order, certified or bank cashier's check, (2) by wire transfer, (3) by
converting the Warrant, or any portion thereof, into Common Stock pursuant to
Section 1.1(c) below ("Warrant Conversion") or (4) any combination of the
foregoing at the option of the Holder.
(c) Payment by Warrant Conversion. Subject to any limitations set
forth in this Warrant, the Holder may exercise the purchase right represented by
this Warrant with respect to a particular number of shares of
<PAGE>
Common Stock subject to this Warrant and elect to pay for the Underlying Common
Stock through Warrant Conversion as defined in Section 1.1(b), by specifying
such election in the Subscription Notice. In such event, the Company shall
deliver to the Holder (without payment by the Holder of any Exercise Price or
any cash or other consideration) that number of shares of Common Stock equal to
the quotient obtained by dividing (x) the value of this Warrant (or the
specified portion hereof) on the Exercise Date, which value shall be determined
by subtracting (A) the aggregate Exercise Price of the Underlying Common Stock
immediately prior to the exercise of the Warrant from (B) the aggregate Fair
Market Value of the Underlying Common Stock issuable upon exercise of this
Warrant (or the specified portion hereof) on the Exercise Date, by (y) the Fair
Market Value of one share of Common Stock on the Exercise Date. For purposes of
this Section 1, "Fair Market Value" of a share of Common Stock as of a
particular date shall mean:
(i) If the Company's Common Stock is Publicly Traded, then the
fair market value of a share of Common Stock shall equal the Market
Price as of the last Business Day immediately prior to the Exercise
Date. "Publicly Traded" shall mean such stock is listed on any
national securities exchange (as defined in the Exchange Act) or
quoted on NASDAQ.
(ii) If the Company stock is not Publicly Traded, then as
determined in good faith by the Board of Directors upon review of the
relevant factors.
(d) Mechanics. The Company shall, as promptly as practicable and in
any event within three days after delivery of a Subscription Notice as described
above, execute and deliver or cause to be executed and delivered, in accordance
with such Subscription Notice any payment of the Exercise Price, a certificate
or certificates representing the aggregate number of shares of Common Stock
specified in said Subscription Notice. In the event the shares of Common Stock
issuable upon the Exercise of this Warrant may, in the opinion of counsel
acceptable to the Company, be issued without the legend set forth in Section 1.4
and the Holder requests that the shares be issued via electronic book entry
format, such issuance shall be deemed to satisfy the certificate delivery
requirements of this Section. The share certificate or certificates so
delivered shall be in such denominations as may be specified in such
Subscription Notice or, if such Subscription Notice shall not specify
denominations, in denominations of 100 shares each, and shall be issued in the
name of the Holder or such other name or names as shall be designated in such
Subscription Notice. Such certificate or certificates shall be deemed to have
been issued (and this Warrant or the portion thereof specified in the
Subscription Notice shall be deemed to have been exercised), and such Holder or
any other Person so designated to be named therein shall be deemed for all
purposes to have become a holder of record of such shares, as of the date the
aforementioned Subscription Notice is received by the Company, or delivery
thereof is refused (the "Exercise Date"). If this Warrant shall have been
exercised only in part, the Company shall, at the time of delivery of the
certificate or certificates, deliver to the Holder a new Warrant evidencing the
rights to purchase or convert the remaining shares of Common Stock called for by
this Warrant, which new Warrant shall in all other respects be identical with
this Warrant, or, at the request of the Holder, appropriate notation may be made
on this Warrant which shall then be refunded to the Holder. The Company shall
pay all expenses, taxes and other charges payable in connection with the
preparation, issuance and delivery of share certificates and new Warrants,
except that, if share certificates or new Warrants shall be registered in a name
or names other than the name of the Holder, funds sufficient to pay all transfer
taxes payable as a result of such transfer shall be paid by the Holder at the
time of delivering the aforementioned notice of exercise or promptly upon
receipt of a written request of the Company for payment.
1.2 Shares to Be Fully Paid and Nonassessable. All shares of Common Stock
issued upon the exercise of this Warrant shall be validly issued, fully paid and
nonassessable and free from all preemptive rights of any stockholder, and from
all taxes, liens and charges with respect to the issue thereof (other than
transfer taxes).
1.3 No Fractional Shares to Be Issued. The Company shall not be required
to issue fractions of shares of Common Stock upon exercise of this Warrant. If
any fraction of a share would, but for this Section, be issuable upon any
exercise of this Warrant, in lieu of such fractional share the Company may pay
to the Holder, in cash, an amount equal to such fraction of the fair market
value (as determined in good faith by the Board of Directors) per
2
<PAGE>
share of outstanding Common Stock of the Company in the Business Day immediately
prior to the date of such exercise.
1.4 Share Legends. Each certificate for shares of Common Stock issued
upon exercise of this Warrant, unless at the time of exercise such shares are
registered under the Securities Act, shall bear the following legend:
"This security has not been registered under the Securities Act of
1933 and may not be sold or offered for sale unless registered
pursuant to such Act or unless the holder hereof delivers to Blue
Rhino Corporation an opinion of counsel reasonably acceptable to Blue
Rhino Corporation stating that an exemption from such registration is
available."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act) shall also bear such legend unless, in the opinion of counsel
selected by the holder of such certificate (who may be an employee of such
holder) and reasonably acceptable to the Company, the securities represented
thereby need no longer be subject to restrictions on resale under the Securities
Act.
1.5 Reservation; Authorization. The Company has reserved and will keep
available for issuance upon exercise of the Warrant the total number of shares
of Common Stock deliverable upon exercise of the Warrant from time to time
outstanding. The issuance of the shares of Common Stock upon exercise of the
Warrant has been duly and validly authorized and, when issued and sold in
accordance with the Warrant, such shares of Common Stock will be duly and
validly issued, fully paid and nonassessable. The Company will take all such
actions as are necessary in order to insure the foregoing.
1.6 Result of Exercise. On the Exercise Date the rights of the holder of
such Warrant as such holder will cease and the Person or Persons in whose name
or names any certificate or certificates for shares of Common Stock are to be
issued upon such exercise will be deemed to have become the holder or holders of
record of the shares of Common Stock represented thereby.
1.7 Not Close Books Until Exercise. The Company will not close its books
against the transfer of this Warrant or shares of Common Stock issued or
issuable upon exercise of this Warrant in any manner which interferes with the
timely exercise of this Warrant.
ARTICLE II
TRANSFER, EXCHANGE AND
REPLACEMENT OF WARRANT
2.1 Ownership of Warrant. The Company may deem and treat the Person in
whose name this Warrant is registered as the holder and owner hereof for all
purposes and shall not be affected by any notice to the contrary, until this
Warrant is presented for registration of transfer as provided in this Article
II.
2.2 Transfer of Warrant. The Company agrees to maintain books for the
registration of transfers of the Warrant, and any transfer, in whole or in part,
of this Warrant and all rights hereunder shall be registered on such books, upon
surrender of this Warrant at the principal office of the Company together with a
written assignment of this Warrant duly executed by the Holder or his, her or
its duly authorized agent or attorney. The Warrant is transferable pursuant to
(i) public offerings registered under the Securities Act, and (ii) Rule 144 of
the Commission (or any similar rule then in force) if such rule is available.
2.3 Division or Combination of Warrant. This Warrant may be divided or
combined with other Warrants upon surrender hereof and of any Warrant or
Warrants with which this Warrant is to be combined at the Company, together with
a written notice specifying the names and denominations in which the new Warrant
or
3
<PAGE>
Warrants are to be issued, signed by the holders hereof and thereof or their
respective duly authorized agents or attorneys. Subject to compliance with
Section 2.2 as to any transfer which may be involved in the division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
2.4 Loss, Theft, Destruction of Warrant Certificates. Upon receipt of
evidence reasonably satisfactory to the Company (an affidavit of the registered
holder will be satisfactory) of the loss, theft, destruction or mutilation of
any Warrant and, in the case of any such loss, theft or destruction upon receipt
of indemnity or security reasonably satisfactory to the Company, or, in the case
of any such mutilation, upon surrender and cancellation of such Warrant, the
Company will (at its expense) make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same aggregate number of shares of Common Stock.
2.5 Expenses of Delivery of Warrant. The Company shall pay all expenses,
taxes (other than transfer taxes) and other charges payable in connection with
the preparation, issuance and delivery of Warrant and Underlying Common Stock
hereunder. If, pursuant to Section 2.2, the opinion of counsel provides that
registration is not required for the proposed exercise or transfer of this
Warrant or the proposed transfer of the Underlying Common Stock and that the
proposed exercise or transfer in the absence of registration would require the
Company to take any action including executing and filing forms or other
documents with the Commission or any state securities agency, or delivering to
the Holder any form or document in order to establish the right of the Holder to
effectuate the proposed exercise or transfer, the Company agrees promptly, at
its expense, to take any such action; and provided, further, that the Company
will reimburse the Holder in full for any expenses (including but not limited to
the fees and disbursements of such counsel, but excluding brokers' commissions)
incurred by the Holder or owner of Underlying Common Stock on his, her or its
behalf in connection with such exercise or transfer of the Warrant or transfer
of Underlying Common Stock.
ARTICLE III
ANTIDILUTION PROVISIONS
3.1 Adjustments Generally. The Exercise Price and the number of shares of
Common Stock (or other securities or property) issuable upon exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events, as provided in this Article III.
3.2 Exercise of Warrant. At any time and from time to time, any holder of
this Warrant may exercise all or any portion of this Warrant into the number of
shares of Common Stock computed by (i) multiplying the number of shares of
Common Stock sought to be purchased pursuant to this Warrant by the Exercise
Price set forth in Section 3.3(a) and (ii) dividing the resulting product by the
Exercise Price then in effect.
3.3 Exercise Price. The "Exercise Price" shall be equal to 115% per share
of the Common Stock purchased by the Holder in connection with the Holder's
acquisition of this Warrant. In order to prevent dilution of the exercise
rights granted to the Holder the Exercise Price will be subject to adjustment
from time to time pursuant to this Section 3.4 and 3.5 below.
3.4 Subdivision or Combination of Common Stock. If the Company at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) or combines (by reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision or
combination will be adjusted by the same factor by which the Company subdivided
or combined the Common Stock so that through the application of Section 3.2, the
total number of shares of Common Stock which such Holder may purchase upon the
exercise of this Warrant shall equal the number of shares such Holder would own
had such Holder exercised this Warrant immediately prior to such
recapitalization, subdivision or combination and the Exercise Price multiplied
by the number of Underlying Common Shares shall be equal before and after such
subdivision or combination.
4
<PAGE>
3.5 Organic Change. Prior to the consummation of any Organic Change, the
Company will make appropriate provisions to insure that the Holder of this
Warrant will thereafter have the right to acquire and receive, in lieu of or in
addition to the shares of Common Stock immediately theretofore acquirable and
receivable upon the exercise of this Warrant, such shares of stock, securities
or assets as such holder would have received in connection with such Organic
Change if the Holder had exercised this Warrant immediately prior to such
Organic Change. In any such case, the Company will make appropriate provisions
to insure that the provisions of this Section 3.5 will thereafter be applicable
to this Warrant (including, an immediate adjustment of the Exercise Price to the
value for the Common Stock reflected by the terms of such Organic Change and a
corresponding immediate adjustment in the number of shares of Common Stock
acquirable and receivable upon exercise of this Warrant, if the value so
reflected is less than the Exercise Price in effect immediately prior to such
Organic Change). The Company will not effect any such Organic Change, unless
prior to the consummation thereof, the successor Company resulting from such
Organic Change assumes by written instrument, the obligation to deliver to each
such holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to acquire.
All other terms of this Warrant shall remain in full force and effect
following such an Organic Change. The provisions of this Section 3.5 shall
similarly apply to successive Organic Changes.
3.6 Notices.
-------
(a) Immediately upon any adjustment of the Exercise Price, the Company
shall give written notice thereof to the Holder of this Warrant specifying the
Exercise Price in effect thereafter with respect to the particular holder.
(b) The Company shall give written notice to the Holder of this
Warrant at least 20 days prior to the date on which the Company closes its books
or takes a record for determining rights to vote with respect to any Organic
Change, Change in Ownership, Fundamental Change or other reorganization,
dissolution or liquidation. The Company shall also give written notice to the
Holder of this Warrant at least 20 days prior to the date on which any Organic
Change, Change in Ownership, Fundamental Change or other reorganization,
dissolution or liquidation shall occur.
3.7 Certain Other Events. The Company will not, by amendment of its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issues or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder against
dilution or other impairment. If any event occurs as to which the foregoing
provisions of this Article III are not strictly applicable or, if strictly
applicable, would not, in the good faith judgment of the Board of Directors,
fairly protect the purchase rights of this Warrant in accordance with the
essential intent and principles of such provisions, then the Board of Directors
shall make such adjustments in the application of such provisions, in accordance
with such essential intent and principles, as shall be reasonably necessary, in
the good faith opinion of the Board of Directors, to protect such purchase
rights as aforesaid, but in no event shall any such adjustment have the effect
of increasing the Exercise Price or decreasing the number of shares of Common
Stock subject to purchase upon exercise of this Warrant.
3.8 Proceedings Prior to Any Action Requiring Adjustment. As a condition
precedent to the taking of any action which would require an adjustment pursuant
to this Article III, the Company shall take any action which may be necessary,
including obtaining regulatory approvals or exemptions, in order that the
Company may thereafter validly and legally issue as fully paid and nonassessable
all shares of Common Stock which the Holder of this Warrant is entitled to
receive upon exercise thereof, and if all such approvals and actions are not
taken, the Company shall take any action which would cause the Company to be
able to issue to the Holder of this Warrant the full number of shares issuable
upon exercise hereof in accordance with the terms hereof.
5
<PAGE>
ARTICLE IV
LIQUIDATION, DISSOLUTION, DISTRIBUTIONS
4.1 Liquidation or Dissolution. In case the Company at any time while
this Warrant shall remain unexpired and unexercised, shall dissolve, liquidate,
or wind up its affairs other than in connection with an Organic Change, the
Holder shall have the right to exercise this Warrant for a period of sixty (60)
days after the later of (i) such event having occurred and (ii) receipt by the
Holder of a notice from the Company indicating the kind and amount of securities
or assets issuable or distributable to holders of shares of Common Stock with
respect to such event, and upon exercise of this Warrant during such period, the
Holder shall have the right to receive in lieu of each share of the Underlying
Common Stock, the same kind and amount of any securities or assets as may be
issuable, distributable, or payable upon any such dissolution, liquidation, or
winding up with respect to each of the shares of the Common Stock.
ARTICLE V
DEFINITIONS
The following terms, as used in this Warrant, have the following respective
meanings:
"Board of Directors" means the Company's duly elected Board of Directors.
"Business Day" shall mean (a) if any class of Common Stock is listed or
admitted to trading on a national securities exchange, a day on which the
principal national securities exchange on which such class of Common Stock is
listed or admitted to trading is open for business or (b) if no class of Common
Stock is so listed or admitted to trading, a day on which any New York Stock
Exchange member firm is open for business.
"Change in Ownership" means any sale or issuance or series of sales and/or
issuances of shares of the Company's capital stock by the Company or any holders
thereof which results in any Person or group of affiliated Persons (other than
the holders of the Company's Common Stock as of the date hereof) owning capital
stock of the Company possessing the voting power (under ordinary circumstances)
to elect a majority of the Board of Directors.
"Commission" means the Securities and Exchange Commission.
"Fundamental Change" means (a) a sale or transfer of all or substantially
all of the assets of the Company, or of the Company and its Subsidiaries on a
consolidated basis, in any transaction or series of transactions, and (b) any
merger or consolidation to which the Company is a party, except for a merger in
which the Company is the surviving Company and, after giving effect to such
merger, the holders of the Company's outstanding capital stock immediately prior
to the merger shall own the Company's outstanding capital stock possessing the
voting power (under ordinary circumstances) to elect a majority of the Board of
Directors after such merger.
"Holder" means the Person in whose name this Warrant is registered on the
books of the Company maintained for such purpose or the Person in whose name any
Underlying Common Stock is registered on such books. Together each Holder known
as the "Holders."
"Market Price" of any security means the average of the last trade prices
of such security's sales on all securities exchanges on which such security may
at the time be listed, or, if there has been no sales on any such exchange on
any day, the average of the highest bid and lowest asked prices on the primary
exchange on which such security is listed at the end of such day, or, if on any
day such security is not so listed, the average of the representative bid and
asked prices quoted in the NASDAQ as of 4:00 P.M., New York time, or, if on any
day such security is not quoted in the NASDAQ, the average of the highest bid
and lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which
6
<PAGE>
"Market Price" is being determined and the 20 consecutive business days prior to
such day. The "Market Price" of a note or other obligation which is not listed
on a securities exchange or quoted in the NASDAQ or reported by the National
Quotation Bureau, Incorporated, the total consideration received by the Company
(including interest) will be discounted at the prime rate of interest at the
Bank of America Illinois in effect at the time the note or obligation is deemed
to have been issued. If at any other time such security is not listed on any
securities exchange or quoted in the NASDAQ or the over-the-counter market, the
"Market Price" will be the fair value thereof determined by the Board of
Directors of the Company.
"NASDAQ" means The Nasdaq Stock Market.
"Organic Change" means any capital reorganization, reclassification,
consolidation, merger, lease, or sale of all or substantially all of the
Company's assets to another Person (other than a dissolution, liquidation or
winding up of the Company as indicated in Section 4.1 above) which is effected
in such a way that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for shares of Common Stock.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means any corporation, association or other business entity of
which securities or other ownership interests representing more than fifty
percent (50%) of the ordinary voting power are, at the time as of which any
determination is being made, owned or controlled by the Company or one or more
Subsidiaries of the Company or by the Company and one or more Subsidiaries of
the Company.
"Underlying Common Stock" means the Common Stock issuable upon exercise of
this Warrant.
ARTICLE VI
MISCELLANEOUS
6.1 Notices. Notices and other communications provided for herein shall
be in writing and shall be delivered personally or mailed certified mail, return
receipt requested or delivered by overnight courier service to the addresses
specified below or such other address as any party hereto other than the Company
designates by written notice to the Company or if the designation is by the
Company, such notice of other address shall be to the Holder, and all notices
shall be deemed to have been given upon delivery if delivered personally, three
(3) days after mailing if mailed, or one (1) business day after delivery to the
courier, if delivered by overnight courier service. If to the Company, such
notice shall be mailed to
Blue Rhino Corporation
104 Cambridge Plaza Drive
Winston-Salem, North Carolina 27104
Attention: Billy D. Prim, Chief Executive Officer
In the case of the Holder, such notices and communications shall be addressed to
his, her or its address as shown on the books maintained by the Company.
6.2 Waivers; Amendments. No failure or delay of the Holder in exercising
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise
7
<PAGE>
thereof or the exercise of any other right or power. The rights and remedies of
the Holder are cumulative and not exclusive of any rights or remedies which it
would otherwise have. The provisions of this Warrant may be amended, modified or
waived with (and only with) the written consent of the Company and the Holders.
Any such amendment, modification or waiver effected pursuant to this
Section shall be binding upon the Holder of this Warrant and upon each future
holder thereof and upon the Company. In the event of any such amendment,
modification or waiver, the Company shall give prompt notice thereof to the
Holder and, if appropriate, notation thereof shall be made on the Warrant
thereafter surrendered for registration of transfer or exchange.
No notice or demand on the Company in any case shall entitle the Company to
any other or further notice or demand in similar or other circumstances.
6.3 Governing Law. This Warrant shall be construed in accordance with and
governed by the internal laws of the State of Delaware, without regard to
principles of conflicts of law.
6.4 Survival of Agreements; Representations and Warranties, etc. All
warranties, representations and covenants made by the Company herein or in any
certificate or other instrument delivered by or on behalf of it in connection
with the Warrant shall be considered to have been relied upon by the Holder and
shall survive the issuance and delivery of the Warrant, regardless of any
investigation made by the Holder, and shall continue in full force and effect so
long as this Warrant is outstanding. All statements in any such certificate or
other instrument shall constitute representations and warranties hereunder.
6.5 Covenants to Bind Successor and Assigns. All covenants, stipulations,
promises and agreements in this Warrant contained by or on behalf of the Company
shall bind its successors and assigns, whether so expressed or not.
6.6 Severability. In case any one or more of the provisions contained in
this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby.
6.7 Section Headings. The section headings used herein are for
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
6.8 No Rights as Stockholder. This Warrant shall not entitle the Holder
to any rights as a stockholder of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed in
its corporate name by one of its officers thereunto duly authorized, all as of
the day and year first above written.
Blue Rhino Corporation, a Delaware corporation
By______________________________________
Billy D. Prim, Chief Executive Officer
8
<PAGE>
SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
To _____________________________
[Choose one or both of first two paragraphs, as applicable]
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the attached Warrant for, and to purchase thereunder,
______________ shares of Common Stock, as provided for therein, and tenders
herewith payment of the Exercise Price in full in the form of certified or bank
cashier's check or wire transfer.
The undersigned hereby irrevocably elects to exercise the right of
conversion represented by the attached Warrant for, and to convert thereunder,
_______________ shares of Common Stock, as provided for therein.
Please issue a certificate or certificates for such shares of Common
Stock in the following name or names and denominations:
If said number of shares shall not be all the shares issuable upon exercise
of the attached Warrant, a new Warrant is to be issued in the name of the
undersigned for the balance remaining of such shares less any fraction of a
share paid in cash.
Dated:__________________
______________________________
______________________________
NOTE: The above signature should correspond
exactly with the name on the face of the
attached Warrant or with the name of the
assignee appearing in the assignment form
below.
9
<PAGE>
ASSIGNMENT
(To be executed upon assignment of Warrant)
For value received, ___________________ hereby sells, assigns and transfers
unto the attached Warrant, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ attorney to
transfer said Warrant on the books of Blue Rhino Corporation, with full power of
substitution in the premises.
_______________________________
________________________
Note: The above signature should correspond
exactly with the name on the face of the
attached Warrant.
Dated:___________________
240612
10
<PAGE>
EXHIBIT 4.5
FORM OF WARRANT
THE SECURITIES REPRESENTED BY THIS WARRANT 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 FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. ANY SUCH OFFER, SALE, ASSIGNMENT OR TRANSFER MUST ALSO
COMPLY WITH THE APPLICABLE STATE SECURITIES LAWS.
BLUE RHINO CORPORATION
Warrant To Purchase Common Stock
Warrant No.:__________________ Number of Shares: _______
Date of Issuance: _________ __, _____
Blue Rhino Corporation, a Delaware corporation (the "Company"), hereby certifies
that, for Ten United States Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
____________________, the registered holder hereof or its permitted assigns, is
entitled, subject to the terms set forth below, to purchase from the Company
upon surrender of this Warrant, at any time or times on or after the date
hereof, but not after 11:59 P.M. Eastern Time on the Expiration Date (as defined
herein)__________ (___) fully paid nonassessable shares of Common Stock (as
defined herein) of the Company (the "Warrant Shares") at the purchase price per
share provided in Section 1(b) below; provided, however, that in no event shall
the holder be entitled to exercise this Warrant for a number of Warrant Shares
in excess of that number of Warrant Shares which, upon giving effect to such
exercise, would cause the aggregate number of shares of Common Stock
beneficially owned by the holder and its affiliates to exceed 4.99% of the
outstanding shares of the Common Stock following such exercise. For purposes of
the foregoing proviso, the aggregate number of shares of Common Stock
beneficially owned by the holder and its affiliates shall include the number of
shares of Common Stock issuable upon exercise of this Warrant with respect to
which the determination of such proviso is being made, but shall exclude shares
of Common Stock which
<PAGE>
would be issuable upon (i) exercise of the remaining, unexercised Warrants
beneficially owned by the holder and its affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Company beneficially owned by the holder and its affiliates (including,
without limitation, any convertible notes or preferred stock) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein. Except as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this
Warrant, in determining the number of outstanding shares of Common Stock a
holder may rely on the number of outstanding shares of Common Stock as reflected
in (1) the Company's most recent Form 10-Q or Form 10-K, as the case may be, (2)
a more recent public announcement by the Company or (3) any other notice by the
Company or its transfer agent setting forth the number of shares of Common Stock
outstanding. Upon the written request of any holder, the Company shall promptly,
but in no event later than one (1) Business Day following the receipt of such
notice, confirm in writing to any such holder the number of shares of Common
Stock then outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to conversions of the Notes (as
defined below) and exercise of Warrants (as defined below) by such holder and
its affiliates since the date as of which such number of outstanding shares of
Common Stock was reported.
Section 1.
(a) Securities Purchase Agreement. This Warrant is one of the
-----------------------------
Warrants (the "Note Warrant") issued pursuant to Section 1 of that certain
Securities Purchase Agreement dated as of September __, 1999, among the Company
and the Buyers referred to therein (the "Securities Purchase Agreement").
(b) Definitions. The following words and terms as used in this
-----------
Warrant shall have the following meanings:
(i) "Approved Stock Plan" shall mean (A) any employee benefit
plan which has been approved by the board of directors of the Company, pursuant
to which the Company's securities may be issued to any employee, officer,
director for services provide to the Company or (B) up to 156,704 options issued
after the date of this Warrant pursuant to the Company's "distributor 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 options, or (C) the issuance of up to 500,000 shares of the
Company's Common Stock as consideration in a merger or consolidation or for the
acquisition of a business, product, license or other asset by the Company,
provided that the issuance price of such shares of Common Stock is not less than
the market price of the Common Stock on the date of issuance.
-2-
<PAGE>
(ii) "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.
(iii) "Notes" means the convertible notes of the Company issued
pursuant to the Securities Purchase Agreement.
(iv) "Common Stock" means (i) the Company's common stock, par
value $.001 per share, and (ii) any capital stock into which such Common Stock
shall have been changed or any capital stock resulting from a reclassification
of such Common Stock.
(v) "Convertible Securities" means any stock or securities
(other than Options) directly or indirectly convertible into or exchangeable for
Common Stock.
(vi) "Expiration Date" means the date five years from the date
of this Warrant or, if such date falls on a Saturday, Sunday or other day on
which banks are required or authorized to be closed in the City of New York or
the State of New York or on which trading does not take place on the principal
exchange or automated quotation system on which the Common Stock is traded (a
"Holiday"), the next date that is not a Holiday.
(vii) "Options" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.
(viii) "Other Securities" means (i) those warrants of the Company
issued prior to, and outstanding on, the date of issuance of this Warrant, (ii)
the Notes, (iii) the shares of Common Stock issued upon conversion of the Notes
and (iv) the issuance of Common Stock or warrants to purchase Common Stock as
consideration for an acquisition which shall be disclosed on a Form 8-K prior to
or concurrent with the Form 8-K required to be filed pursuant to Section 4(l) of
the Securities Purchase Agreement disclosing the Securities Purchase Agreement
and the related transactions.
(ix) "Person" means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
(x) "Principal Market" means the Nasdaq National Market.
(xi) "Securities Act" means the Securities Act of 1933, as
amended.
(xii) "Warrant" means this Warrant and all Warrants issued in
exchange, transfer or replacement thereof.
-3-
<PAGE>
(xiii) "Warrant Exercise Price" shall be equal to 115% of the
arithmetic average of the Closing Bid Price of the Common Stock for the 10
Consecutive trading days immediately preceding the Additional Closing Date (as
defined in the Securities Purchase Agreement), subject to adjustment as
hereinafter provided.
(xiv) "Closing Bid Price" means, for any security as of any
date, the last closing bid price for such security on the Principal Market (as
defined below) as reported by Bloomberg Financial Markets ("Bloomberg"), or, if
the Principal Market is not the principal trading market for such security, the
last closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg,
or if the foregoing do not apply, the last closing bid price of such security in
the over-the-counter market on the electronic bulletin board for such security
as reported by Bloomberg, or, if no closing bid price is reported for such
security by Bloomberg, the last closing trade price for such security as
reported by Bloomberg, or, if no last closing trade price is reported for such
security by Bloomberg, the average of the bid prices of any market makers for
such security as reported in the "pink sheets" by the National Quotation Bureau,
Inc. If the Closing Bid Price cannot be calculated for such security on such
date on any of the foregoing bases, the Closing Bid Price of such security on
such date shall be the fair market value as mutually determined by the Company
and the holders of the Notes. If the Company and the holders of the Notes are
unable to agree upon the fair market value of the Common Stock, then such
dispute shall be resolved pursuant to Section 2(a) of this Warrant. (All such
determinations to be appropriately adjusted for any stock dividend, stock split
or other similar transaction during such period.)
(xv) "Closing Sale Price" means, for any security as of any
date, the last closing trade price for such security on the Principal Market (as
defined below) as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last
closing trade price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg,
or if the foregoing do not apply, the last closing trade price of such security
in the over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg, or, if no last closing trade price is
reported for such security by Bloomberg, the last closing ask price of such
security as reported by Bloomberg, or, if no last closing ask price is reported
for such security by Bloomberg, the average of the lowest ask price and the
lowest bid price of any market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Sale Price cannot
be calculated for such security on such date on any of the foregoing bases, the
Closing Sale Price of such security on such date shall be the fair market value
as mutually determined by the Company and the holders of Notes. If the Company
and the holders of Notes are unable to agree upon the fair market value of the
Common Stock, then such dispute shall be resolved pursuant to Section 2(a)
below. (All such determinations to be appropriately adjusted for any stock
dividend, stock split or other similar transaction during such period).
-4-
<PAGE>
(c) Other Definitional Provisions.
-----------------------------
(i) Except as otherwise specified herein, all references
herein (A) to the Company shall be deemed to include the Company's successors
and (B) to any applicable law defined or referred to herein, shall be deemed
references to such applicable law as the same may have been or may be amended or
supplemented from time to time.
(ii) When used in this Warrant, the words "herein," "hereof,"
and "hereunder," and words of similar import, shall refer to this Warrant as a
whole and not to any provision of this Warrant, and the words "Section,"
"Schedule," and "Exhibit" shall refer to Sections of, and Schedules and Exhibits
to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires, the neuter gender
includes the masculine or feminine, and the singular number includes the plural,
and vice versa.
Section 2. Exercise of Warrant.
-------------------
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the Company, in
whole or in part, at any time on any Business Day on or after the opening of
business on the date hereof and prior to 11:59 P.M. Eastern Time on the
Expiration Date by (i) delivery of a written notice, in the form of the
subscription notice attached as Exhibit A hereto (the "Exercise Notice"), of
---------
such holder's election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, (ii) (A) payment to the Company of an
amount equal to the applicable Warrant Exercise Price multiplied by the number
of Warrant Shares as to which this Warrant is being exercised (plus any
applicable issue or transfer taxes) (the "Aggregate Exercise Price") in cash or
wire transfer of immediately available funds or (B) by notifying the Company
that this Warrant is being exercised pursuant to a Cashless Exercise (as defined
in Section 2(e)) and (iii) the surrender to a common carrier for overnight
delivery to the Company as soon as practicable following such date, this Warrant
(or an indemnification undertaking with respect to this Warrant in the case of
its loss, theft or destruction); provided, that if such Warrant Shares are to be
issued in any name other than that of the registered holder of this Warrant,
such issuance shall be deemed a transfer and the provisions of Section 7 shall
be applicable. In the event of any exercise of the rights represented by this
Warrant in compliance with this Section 2(a), the Company shall on the second
Business Day following the date of receipt of the Exercise Notice, the Aggregate
Exercise Price (or notice of a Cashless Exercise) and this Warrant (or an
indemnification undertaking with respect to this Warrant in the case of its
loss, theft or destruction) (the "Exercise Delivery Documents"), credit such
aggregate number of shares of Common Stock to which the holder shall be entitled
to the holder's or its designee's balance account with The Depository Trust
Company; provided, however, if the holder who submitted the Exercise Notice
requested physical delivery of any or all of the Warrant Shares and such shares
cannot be delivered via the Depository Trust Company, then the Company shall, on
or before the second Business Day following receipt of the Exercise Delivery
Documents issue and surrender to a common carrier for overnight delivery to the
address specified in the Exercise Notice, a certificate, registered in the name
of the holder,
-5-
<PAGE>
for the number of shares of Common Stock to which the holder shall be entitled
pursuant to such request. Upon delivery of the Exercise Notice and Aggregate
Exercise Price referred to in clause (ii)(A) above or notification to the
Company of a Cashless Exercise referred to in Section 2(e), the holder of this
Warrant shall be deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date of delivery of this Warrant as required by
clause (iii) above or the certificates evidencing such Warrant Shares. In the
case of a dispute as to the determination of the Warrant Exercise Price, the
Closing Sale Price or the Closing Bid Price of a security or the arithmetic
calculation of the Warrant Shares, the Company shall promptly issue to the
holder the number of shares of Common Stock that is not disputed and shall
submit the disputed determinations or arithmetic calculations to the holder via
facsimile within one Business Day of receipt of the holder's subscription
notice. If the holder and the Company are unable to agree upon the determination
of the Warrant Exercise Price, the Closing Sale Price or Closing Bid Price or
arithmetic calculation of the Warrant Shares within one day of such disputed
determination or arithmetic calculation being submitted to the holder, then the
Company shall immediately submit via facsimile (i) the disputed determination of
the Warrant Exercise Price, Closing Sale Price or the Closing Bid Price to an
independent, reputable investment banking firm or (ii) the disputed arithmetic
calculation of the Warrant Shares to its independent, outside accountant. The
Company shall cause the investment banking firm or the accountant, as the case
may be, to perform the determinations or calculations and notify the Company and
the holder of the results no later than two (2) Business Days from the time it
receives the disputed determinations or calculations. Such investment banking
firm's or accountant's determination or calculation, as the case may be, shall
be deemed conclusive absent manifest error.
(b) Unless the rights represented by this Warrant shall have expired
or shall have been fully exercised, the Company shall, as soon as practicable
and in no event later than five Business Days after any exercise and at its own
expense, issue a new Warrant identical in all respects to the Warrant exercised
except it shall represent rights to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under the Warrant exercised, less
the number of Warrant Shares with respect to which such Warrant is exercised.
(c) No fractional shares of Common Stock are to be issued upon the
exercise of this Warrant, but rather the number of shares of Common Stock issued
upon exercise of this Warrant shall be rounded up or down to the nearest whole
number.
(d) Intentionally left blank.
-6-
<PAGE>
(e) Notwithstanding anything contained herein to the contrary and in
addition to and not in lieu of any of the other rights and remedies to which the
holder may be entitled by reason of the Company's failure fully to meet its
obligations under the Securities Purchase Agreement or the Registration Rights
Agreement, the holder of this Warrant may, at its election exercised in its sole
discretion, exercise this Warrant in whole or in part and, in lieu of making the
cash payment otherwise contemplated to be made to the Company upon such exercise
in payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the "Net Number" of shares of Common Stock determined according to the
following formula (a "Cashless Exercise"):
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A= the total number shares with respect to which this Warrant is
then being exercised.
B= the Closing Sale Price of the Common Stock on the date
immediately preceding the date of the subscription notice.
C= the Warrant Exercise Price then in effect for the applicable
Warrant Shares at the time of such exercise.
Section 3. Covenants as to Common Stock. The Company hereby covenants and
----------------------------
agrees as follows:
(a) This Warrant is, and any Warrants issued in substitution for or
replacement of this Warrant will upon issuance be, duly authorized and validly
issued.
(b) All Warrant Shares which may be issued upon the exercise of the
rights represented by this Warrant in conformity with the terms of this Warrant
will, upon issuance, be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof.
-7-
<PAGE>
(c) During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved at least 100% of the number of shares of Common Stock needed to provide
for the exercise of the rights then represented by this Warrant and the par
value of said shares will at all times be less than or equal to the applicable
Warrant Exercise Price.
(d) The Company shall promptly secure the listing of the shares of
Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock from
time to time issuable upon the exercise of this Warrant; and the Company shall
so list on each national securities exchange or automated quotation system, as
the case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed on such national securities
exchange or automated quotation system.
(e) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. No impairment of the preferences and rights contained in the
Company's Notes or any waiver thereof which has an adverse effect on the rights
granted hereunder shall be given effect until the Company has taken appropriate
action (satisfactory to the holders of Note Warrants representing a majority of
the shares of Common Stock issuable upon the exercise of such Note Warrants then
outstanding) to avoid such adverse effect with respect to this Warrant. Without
limiting the generality of the foregoing, the Company (i) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Warrant Exercise Price then in effect, and (ii) will take all
such actions as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant.
(f) This Warrant will be binding upon any entity succeeding to the
Company by merger, consolidation or acquisition of all or substantially all of
the Company's assets.
Section 4. Taxes. The Company shall pay any and all taxes which may be
-----
payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant (but no income, capital gain, estate or other taxes
applicable to the holder resulting from any profits realized upon such
exercise); provided, however, that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issue or
delivery of Common Stock or other securities or property in a name other than
that of the registered holders
-8-
<PAGE>
of this Warrant to be converted and such holder shall pay such amount, if any,
to cover any applicable transfer or similar tax.
Section 5. Warrant Holder Not Deemed a Stockholder. Except as otherwise
---------------------------------------
specifically provided herein, no holder, as such, of this Warrant shall be
entitled to vote or receive dividends or be deemed the holder of shares of the
Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the holder of this Warrant of the Warrant Shares which he or she is
then entitled to receive upon the due exercise of this Warrant. In addition,
nothing contained in this Warrant shall be construed as imposing any liabilities
on such holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors of the Company. Notwithstanding this
Section 5, the Company will provide the holder of this Warrant with copies of
the same notices and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the stockholders.
Section 6. Representations of Holder. The holder of this Warrant, by the
-------------------------
acceptance hereof, represents that it is acquiring this Warrant and the Warrant
Shares for its own account for investment only and not with a view towards, or
for resale in connection with, the public sale or distribution of this Warrant
or the Warrant Shares, except pursuant to sales registered or exempted under the
Securities Act; provided, however, that by making the representations herein,
the holder does not agree to hold this Warrant or any of the Warrant Shares for
any minimum or other specific term and reserves the right to dispose of this
Warrant and the Warrant Shares at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act. The holder of
this Warrant further represents, by acceptance hereof, that, as of this date,
such holder is an "accredited investor" as such term is defined in Rule
501(a)(1) of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act (an "Accredited Investor"). Upon exercise of this
Warrant, other than pursuant to a Cashless Exercise the holder shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the Warrant Shares so purchased are being acquired solely for the
holder's own account and not as a nominee for any other party, for investment,
and not with a view toward distribution or resale and that such holder is an
Accredited Investor. If such holder cannot make such representations because
they would be factually incorrect, it shall be a condition to such holder's
exercise of this Warrant that the Company receive such other representations as
the Company considers reasonably necessary to assure the Company that the
issuance of its securities upon exercise of this Warrant shall not violate any
United States or state securities laws.
Section 7. Ownership and Transfer.
----------------------
(a) The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to the
holder hereof), a register for
-9-
<PAGE>
this Warrant, in which the Company shall record the name and address of the
person in whose name this Warrant has been issued, as well as the name and
address of each transferee. The Company may treat the person in whose name any
Warrant is registered on the register as the owner and holder thereof for all
purposes, notwithstanding any notice to the contrary, but in all events
recognizing any transfers made in accordance with the terms of this Warrant.
(b) This Warrant and the rights granted hereunder shall be assignable
in compliance with all federal securities and blue sky laws by the holder hereof
without the consent of the Company.
(c) The Company is obligated to register the Warrant Shares for
resale under the Securities Act pursuant to the Registration Rights Agreement
dated September 22, 1999 by and between the Company and the Buyer listed on the
signature page thereto (the "Registration Rights Agreement") and the initial
holder of this Warrant (and certain assignees thereof) is entitled to the
registration rights in respect of the Warrant Shares as set forth in the
Registration Rights Agreement.
Section 8. Adjustment of Warrant Exercise Price and Number of Shares. The
---------------------------------------------------------
Warrant Exercise Price and the number of shares of Common Stock issuable upon
exercise of this Warrant shall be adjusted from time to time as follows:
(a) Adjustment of Warrant Exercise Price and Number of Shares upon
--------------------------------------------------------------
Issuance of Common Stock. If and whenever on or after the date of issuance of
- ------------------------
this Warrant, the Company issues or sells, or is deemed to have issued or sold,
any shares of Common Stock (other than shares of Common Stock deemed to have
been issued by the Company in connection with an Approved Stock Plan or upon
exercise or conversion of the Other Securities) for a consideration per share
less than a price (the "Applicable Price") equal to the Warrant Exercise Price
in effect immediately prior to such issuance or sale, then immediately after
such issue or sale the Warrant Exercise Price then in effect shall be reduced to
an amount equal to such consideration per share. Upon each such adjustment of
the Warrant Exercise Price hereunder, the number of shares of Common Stock
acquirable upon exercise of this Warrant shall be adjusted to the number of
shares determined by multiplying the Warrant Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
acquirable upon exercise of this Warrant immediately prior to such adjustment
and dividing the product thereof by the Warrant Exercise Price resulting from
such adjustment.
(b) Effect on Warrant Exercise Price of Certain Events. For purposes
--------------------------------------------------
of determining the adjusted Warrant Exercise Price under Section 8(a) above, the
following shall be applicable:
(i) Issuance of Options. If the Company in any manner grants any
-------------------
Options and the lowest price per share for which one share of Common Stock is
issuable upon the exercise of any such Option or upon conversion or exchange of
any Convertible Securities issuable upon exercise of any such Option is less
than the Applicable Price, then such share of Common
-10-
<PAGE>
Stock shall be deemed to be outstanding and to have been issued and sold by the
Company at the time of the granting or sale of such Option for such price per
share. For purposes of this Section 8(b)(i), the Alowest price per share for
which one share of Common Stock is issuable upon exercise of such Options or
upon conversion or exchange of such Convertible Securities shall be equal to
the sum of the lowest amounts of consideration (if any) received or receivable
by the Company with respect to any one share of Common Stock upon the granting
or sale of the Option, upon exercise of the Option and upon conversion or
exchange of any Convertible Security issuable upon exercise of such Option. No
further adjustment of the Warrant Exercise Price shall be made upon the actual
issuance of such Common Stock or of such Convertible Securities upon the
exercise of such Options or upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities. Notwithstanding the
foregoing, no adjustment shall be made pursuant to this Section 8(b)(i) to the
extent that such adjustment is based solely on the fact that the Convertible
Securities issuable upon exercise of such Option are convertible into or
exchangeable for Common Stock at a price which varies with the market price of
the Common Stock.
(ii) Issuance of Convertible Securities. If the Company in any
----------------------------------
manner issues or sells any Convertible Securities and the lowest price per share
for which one share of Common Stock is issuable upon such conversion or exchange
thereof is less than the Applicable Price, then such share of Common Stock shall
be deemed to be outstanding and to have been issued and sold by the Company at
the time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this Section 8(b)(ii), the Alowest price per
share for which one share of Common Stock is issuable upon such conversion or
exchange@ shall be equal to the sum of the lowest amounts of consideration (if
any) received or receivable by the Company with respect to one share of Common
Stock upon the issuance or sale of the Convertible Security and upon conversion
or exchange of such Convertible Security. No further adjustment of the Warrant
Exercise Price shall be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustment of the Warrant Exercise Price had been or are to be made
pursuant to other provisions of this Section 8(b), no further adjustment of the
Warrant Exercise Price shall be made by reason of such issue or sale.
Notwithstanding the foregoing, no adjustment shall be made pursuant to this
Section 8(b)(ii) to the extent that such adjustment is based solely on the fact
that such Convertible Securities are convertible into or exchangeable for Common
Stock at a price which varies with the market price of the Common Stock.
(iii) Change in Option Price or Rate of Conversion. If the
--------------------------------------------
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock changes at any time, the Warrant Exercise Price
in effect at the time of such change shall be adjusted to the Warrant Exercise
Price which would have been in effect at such time had such Options or
Convertible Securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold and the number
-11-
<PAGE>
of shares of Common Stock acquirable hereunder shall be correspondingly
readjusted. For purposes of this Section 8(b)(iii), if the terms of any Option
or Convertible Security that was outstanding as of the date of issuance of this
Warrant are changed in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such change. No adjustment pursuant to this
Section 8(b) shall be made if such adjustment would result in an increase of the
Warrant Exercise Price then in effect.
(c) Effect on Warrant Exercise Price of Certain Events. For purposes
of determining the adjusted Warrant Exercise Price under Sections 8(a) and 8(b),
the following shall be applicable:
(i) Calculation of Consideration Received. In case any Option
is issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $.01. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be deemed
to be the net amount of cash received by the Company therefor. If any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of such consideration received by the Company will
be the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration received by
the Company will be the average of the Closing Bid Price of such securities for
the ten (10) consecutive trading days immediately preceding the date of receipt.
If any Common Stock, Options or Convertible Securities are issued to the owners
of the non-surviving entity in connection with any merger in which the Company
is the surviving entity, the amount of consideration therefor will be deemed to
be the fair value of such portion of the net assets and business of the non-
surviving entity as is attributable to such Common Stock, Options or Convertible
Securities, as the case may be. The fair value of any consideration other than
cash or securities will be determined by the Company and the holders of the Note
Warrants representing a majority of the shares of Common Stock obtainable upon
exercise of the Note Warrants then outstanding. If such parties are unable to
reach agreement within ten (10) days after the occurrence of an event requiring
valuation (the "VALUATION EVENT"), the fair value of such consideration will be
determined in good faith by the Board of Directors of the Company within five
Business Days after the tenth (10th) day following the Valuation Event. The
determination pursuant to the immediately preceding sentence made in good faith
by the Board of Directors of the Company shall be final and binding upon all
parties.
(ii) Integrated Transactions. In case any Option is issued in
-----------------------
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options will be deemed to
have been issued for a consideration of $.01.
-12-
<PAGE>
(iii) Treasury Shares. The number of shares of Common Stock
---------------
outstanding at any given time does not include shares owned or held by or for
the account of the Company, and the disposition of any shares so owned or held
will be considered an issue or sale of Common Stock.
(iv) Record Date. If the Company takes a record of the holders
-----------
of Common Stock for the purpose of entitling them (1) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible Securities
or (2) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(d) Adjustment of Warrant Exercise Price upon Subdivision or
--------------------------------------------------------
Combination of Common Stock. If the Company at any time after the date of
- ---------------------------
issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, any Warrant Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of shares of Common Stock obtainable upon exercise of this Warrant
will be proportionately increased. If the Company at any time after the date of
issuance of this Warrant combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, any Warrant Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of shares
of Common Stock obtainable upon exercise of this Warrant will be proportionately
decreased. Any adjustment under this Section 8(d) shall become effective at the
close of business on the date the subdivision or combination becomes effective.
(e) Adjustment of Warrant Exercise Price for Registration Statement
---------------------------------------------------------------
Failures. If (A) the registration statement (the "Registration Statement")
- --------
covering the resale of the Warrant Shares required to be filed by the Company
pursuant to the Registration Rights Agreement is not filed with the SEC by the
applicable Filing Deadline (as defined in the Registration Rights Agreement) or
declared effective by the SEC on or before the applicable Effectiveness Deadline
(as defined in the Registration Rights Agreement) or (B) after the Registration
Statement has been declared effective by the SEC, sales cannot be made pursuant
to the Registration Statement (whether because of a failure to keep the
Registration Statement effective, to disclose such information as is necessary
for sales to be made pursuant to the Registration Statement, to register
sufficient shares of Common Stock or otherwise), then, as partial relief for the
damages to the holder of this Warrant by reason of any of the foregoing events
(which remedy shall not be exclusive of any other remedies available at law or
in equity), the Warrant Exercise Price in effect at such time shall be reduced
by an amount equal to the product of (I) the Warrant Exercise Price in effect as
of the date of this Warrant (subject to adjustment for stock splits, stock
dividends and other similar transactions) and (II) the sum of (A) 0.01, if the
Registration Statement is not filed with the SEC by the applicable Filing
Deadline, plus (B) 0.01, if the Registration Statement is not effective by the
applicable Effectiveness Deadline, plus (C) the product of .0005 and the sum of
(w) the number of days after the applicable Filing Deadline that the relevant
Registration Statement has not been filed with the SEC, (x) the number of days
after the applicable Effectiveness Deadline that the Registration Statement has
not been declared effective by the SEC, and (y) the number of days that sales
cannot be made pursuant to the Registration Statement in accordance with the
Registration Rights Agreement after the Registration Statement has been declared
effective.
(f) Adjustment of Warrant Exercise Price for Company's Failure to
-------------------------------------------------------------
Timely Exercise. If the Company shall fail for any reason or for no reason to
- ---------------
issue to the holder within five (5) Business Days of receipt of the Exercise
Delivery Documents (a "Share Delivery Date"), a certificate for the number of
shares of Common Stock to which the holder is entitled or to credit the holder's
balance account with The Depository Trust Company for such number of shares of
Common Stock to which the holder is entitled upon the holder's exercise of this
Warrant or a new Warrant for the number of shares of Common Stock to which such
holder is entitled pursuant to Section 2(b) hereof (A "Warrant Delivery Date"),
then, in addition to any other remedies under this Warrant or the Securities
Purchase Agreement or otherwise available to such holder, including any
indemnification under Section 8 of the Securities Purchase Agreement, the
Warrant Exercise Price in effect at such time shall be reduced by product of (I)
the Warrant Exercise Price in effect as of the date of this Warrant (subject to
adjustment for stock splits, stock dividends and other similar transactions) and
(II) the product of (A) 0.05 and the (B) the sum of (I) the number of days after
the Share Delivery Date that such Exercise is not timely effected and (II) the
number of days after the Warrant Delivery Date such new Warrant is not
delivered.
(g) Distribution of Assets. If the Company shall declare or make any
----------------------
dividend or other distribution of its assets (or rights to acquire its assets)
to holders of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate
rearrangement or other similar transaction) ("Distribution"), at any time after
the issuance of this Warrant, then, in each such case:
(i) any Warrant Exercise Price in effect immediately prior to
the close of business on the record date fixed for the determination of holders
of Common Stock entitled to receive the Distribution shall be reduced, effective
as of the close of business on such record date, to a price determined by
multiplying such Warrant Exercise Price by a fraction of which (A) the numerator
shall be the Closing Sale Price of the Common Stock on the trading day
immediately preceding such record date minus the value of the Distribution (as
determined in good faith by the Company's Board of Directors) applicable to one
share of Common Stock, and (B) the denominator shall be the Closing Sale Price
of the Common Stock on the trading day immediately preceding such record date;
and
-13-
<PAGE>
(ii) either (A) the number of Warrant Shares obtainable upon
exercise of this Warrant shall be increased to a number of shares equal to a
number of shares of Common Stock obtainable immediately prior to the close
business on the record date fixed for the determination of holders of Common
Stock entitled to receive the Distribution multiplied by the reciprocal of the
fraction set forth in the immediately preceeding clause (i), or (B) in the event
that the Distibution is of common stock of a company whose common stock is
traded on a national securities exchange or a national automated quotation
system, then the holder of this Warrant shall receive an additional warrant to
purchase Common Stock, the terms of which shall be identical to those of this
Warrant, except that such warrant shall be exercisable into the amount of the
assets that would have been payable to the holder of this Warrant pursuant to
the Distribution had the holder exercised this Warrant immediately prior to such
record date and with an exercise price equal to the amount by which the exercise
price of this Warrant was decreased with respect to the Distribution pursuant to
the terms of the immediately preceding clause (i).
(h) Certain Events. If any event occurs of the type contemplated by
the provisions of this Section 8 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company's Board of Directors will make an appropriate adjustment in the Warrant
Exercise Price and the number of shares of Common Stock obtainable upon exercise
of this Warrant so as to protect the rights of the holders of the Note Warrants;
provided that no such adjustment will increase the Warrant Exercise Price or
decrease the number of shares of Common Stock obtainable as otherwise determined
pursuant to this Section 8.
(i) Notices.
-------
(i) Immediately upon any adjustment of a Warrant Exercise
Price, the Company will give written notice thereof to the holder of this
Warrant, setting forth in reasonable detail, and certifying, the calculation of
such adjustment.
(ii) The Company will give written notice to the holder of this
Warrant at least ten (10) days prior to the date on which the Company closes its
books or takes a record (A) with respect to any dividend or distribution upon
the Common Stock, (B) with respect to any pro rata subscription offer to holders
of Common Stock or (C) for determining rights to vote with respect to any
Organic Change (as defined below), dissolution or liquidation, provided that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to such holder.
(iii) The Company will also give written notice to the holder of
this Warrant at least ten (10) days prior to the date on which any Organic
Change, dissolution or liquidation will take place, provided that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to such holder.
Section 9. Purchase Rights; Reorganization, Reclassification,
--------------------------------------------------
Consolidation, Merger or Sale. (a) In addition to any adjustments pursuant to
- -----------------------------
Section 8 above, if at any time the
-14-
<PAGE>
Company grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the "Purchase Rights"), then the holder of
this Warrant will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights, or, if
no such record is taken, the date as of which the record holders of Common Stock
are to be determined for the grant, issue or sale of such Purchase Rights.
(b) Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
to another Person or other transaction in each case which is effected in such a
way that holders of Common Stock are entitled to receive (either directly or
upon subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as "Organic Change." Prior to
the consummation of any (i) sale of all or substantially all of the Company's
assets to an acquiring Person or (ii) other Organic Change following which the
Company is not a surviving entity, the Company will secure from the Person
purchasing such assets or the successor resulting from such Organic Change (in
each case, the "Acquiring Entity") written agreement (in form and substance
reasonably satisfactory to the holders of Note Warrants representing a majority
of the shares of Common Stock obtainable upon exercise of the Note Warrants then
outstanding) to deliver to each holder of Note Warrants in exchange for such
Warrants, a security of the Acquiring Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant and reasonably
satisfactory to the holders of the Note Warrants (including, an adjusted warrant
exercise price equal to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, and exercisable for a corresponding number
of shares of Common Stock acquirable and receivable upon exercise of the Note
Warrants, if the value so reflected is less than any Warrant Exercise Price in
effect immediately prior to such consolidation, merger or sale). Prior to the
consummation of any other Organic Change, the Company shall make appropriate
provision (in form and substance reasonably satisfactory to the holders of Note
Warrants representing a majority of the shares of Common Stock obtainable upon
exercise of the Note Warrants then outstanding) to insure that each of the
holders of the Note Warrants will thereafter have the right to acquire and
receive in lieu of or in addition to (as the case may be) the shares of Common
Stock immediately theretofore acquirable and receivable upon the exercise of
such holder's Note Warrants, such shares of stock, securities or assets that
would have been issued or payable in such Organic Change with respect to or in
exchange for the number of shares of Common Stock which would have been
acquirable and receivable upon the exercise of such holder's Warrant as of the
date of such Organic Change (without taking into account any limitations or
restrictions on the exerciseability of this Warrant).
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant
--------------------------------------------
is lost, stolen, mutilated or destroyed, the Company shall, on receipt of an
indemnification undertaking (or, in the case of a mutilated Warrant, the
Warrant), issue a new Warrant of like denomination and tenor as this Warrant so
lost, stolen, mutilated or destroyed.
-15-
<PAGE>
Section 11. Notice. Any notices, consents, waivers or other
------
communications required or permitted to be given under the terms of this Warrant
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 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:
If to the Company:
Blue Rhino Corporation
104 Cambridge Plaza Drive
Winston-Salem, North Carolina 27104
Telephone: 336-659-6900
Facsimile: 336-659-6750
Attention: President
With copy to:
Pedersen & Houpt, P.C.
161 N. Clark, Suite 3100
Chicago, IL 60601
Telephone: 312-641-6888
Facsimile: 312-641-6895
Attention: John H. Muehlstein, Esq.
If to a holder of this Warrant, to it at the address and facsimile number set
forth on the Schedule of Buyers to the Securities Purchase Agreement, with
copies to such holder's representatives as set forth on such Schedule of Buyers,
or at such other address and facsimile as shall be delivered to the Company upon
the issuance or transfer of this Warrant. Each party shall provide five days'
prior written notice to the other party of any change in address or facsimile
number. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (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.
Section 12. Amendments. This Warrant and any term hereof may be changed,
----------
waived, discharged, or terminated only by an instrument in writing signed by the
party or holder hereof against which enforcement of such change, waiver,
discharge or termination is sought.
-16-
<PAGE>
Section 13. Date. The date of this Warrant is September __, 1999. This
----
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 7 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
Section 14. Amendment and Waiver. Except as otherwise provided herein,
--------------------
the provisions of the Note Warrants may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of Note Warrants representing a majority of the shares of Common Stock
obtainable upon exercise of the Note Warrants then outstanding; provided that no
such action may increase the Warrant Exercise Price of the Note Warrants or
decrease the number of shares or class of stock obtainable upon exercise of any
Note Warrants without the written consent of the holder of such Note Warrant.
Section 15. Descriptive Headings; Governing Law. The descriptive headings
-----------------------------------
of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. 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 Warrant 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.
[SIGNATURE PAGE FOLLOWS]
-17-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
___________________, its ____________________________, as of the ___ day of
____________, ______.
BLUE RHINO CORPORATION
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE>
EXHIBIT A TO WARRANT
--------------------
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
BLUE RHINO CORPORATION
The undersigned holder hereby exercises the right to purchase _____________
of the shares of Common Stock ("Warrant Shares") of Blue Rhino Corporation, a
Delaware corporation (the "Company"), evidenced by the attached Warrant (the
"Warrant"). Capitalized terms used herein and not otherwise defined shall have
the respective meanings set forth in the Warrant.
1. Form of Warrant Exercise Price. The Holder intends that payment of the
Warrant Exercise Price shall be made as:
____________ a "Cash Exercise" with respect to _________________
-------------
Warrant Shares; and/or
____________ a "Cashless Exercise" with respect to _______________
-----------------
Warrant Shares (to the extent permitted by the terms
of the Warrant).
2. Payment of Warrant Exercise Price. In the event that the holder has
elected a Cash Exercise with respect to some or all of the Warrant Shares to be
issued pursuant hereto, the holder shall pay the sum of $___________________ to
the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.
Date: _______________ __, ______
________________________________
Name of Registered Holder
By: ____________________________
Name:
Title:
<PAGE>
EXHIBIT B TO WARRANT
--------------------
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of Blue Rhino Corporation, a Delaware
corporation, represented by warrant certificate no. _____, standing in the name
of the undersigned on the books of said corporation. The undersigned does
hereby irrevocably constitute and appoint ______________, attorney to transfer
the warrants of said corporation, with full power of substitution in the
premises.
Dated: _________, ____
____________________________________
By: _____________________________
Its: _____________________________
<PAGE>
Exhibit 4.6
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OFFERED FOR
SALE UNLESS REGISTERED UNDER SAID ACT OR UNLESS THE HOLDER OF THIS WARRANT
DELIVERS TO BLUE RHINO CORPORATION AN OPINION OF COUNSEL REASONABLY ACCEPTABLE
TO BLUE RHINO CORPORATION STATING THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
Dated: September 17, 1999
WARRANT
To Purchase One Hundred Thousand (100,000) Shares of Common Stock
(subject to adjustment herein)
Expiring September 17, 2009
THIS IS TO CERTIFY THAT, for value received, Michael A. Waters, or his
respective registered assigns is entitled to purchase from Blue Rhino
Corporation, a Delaware corporation (the "Corporation"), at any time and from
time to time after 9:00 A.M., Winston-Salem, North Carolina time, on September
17, 2000 but prior to 5:00 P.M., Winston-Salem, North Carolina time, on
September 17, 2009 (the "Exercise Period"), at the principal office of the
Corporation which is currently 104 Cambridge Plaza Drive, Winston-Salem, North
Carolina 27104 (or such other address as the Corporation shall specify by notice
to the registered holder of this Warrant) at the Exercise Price, the number of
shares of Common Stock, with a par value of $0.001 per share (the "Common
Stock"), of the Corporation shown above, all subject to adjustment and upon the
terms and conditions as hereinafter provided, and is entitled also to exercise
the other appurtenant rights, powers and privileges hereinafter described.
Capitalized terms used in this Warrant are defined in Article V.
ARTICLE I
EXERCISE OF WARRANTS
1.1 Method of Exercise and Payment.
------------------------------
(a) Method of Exercise. To exercise this Warrant in whole or in part,
the registered holder of this Warrant (the "Holder") shall deliver to the
principal office of the Corporation at any time during the Exercise Period (1)
this Warrant, (2) a written notice, in substantially the form of the
subscription notice (the "Subscription Notice") attached hereto, of such
Holder's election to exercise this Warrant, which notice shall specify the
number of shares of Common Stock to be purchased or converted into, as the case
may be, the denominations of the share certificate or certificates desired and
the name or names in which such certificates are to be registered, and (3)
payment to the Corporation of the amount equal to the product of the then
applicable Exercise Price multiplied by the number of shares of Common Stock
then being purchased pursuant to one of the payment methods permitted under
Section 1.1(b) below.
<PAGE>
(b) Method of Payment. Upon receipt of the Warrant and the
Subscription Notice, the Corporation shall determine whether the shares of
Common Stock to be purchased or converted into, as the case may be, by the
exercise of this Warrant are Registered Shares or Unregistered Shares. If the
Holder elects that this Warrant is exercised for Registered Shares, payment may
only be made by either (1) cash, money order, certified check or bank cashier's
check or (2) wire transfer. If the Holder elects that this Warrant is exercised
for Unregistered Shares, payment may be made by (1) cash, money order, certified
check or bank cashier's check, (2) wire transfer or (3) converting the Warrant,
or any portion thereof, into Common Stock pursuant to Section 1.1(c).
(c) Payment by Warrant Conversion. Subject to any limitations set
forth in this Warrant, the Holder may exercise the purchase right represented by
this Warrant with respect to a particular number of shares of Common Stock
subject to this Warrant and elect to pay for the Underlying Common Stock by
converting the Warrant, or any portion thereof, into Common Stock by specifying
such election in the Subscription Notice. In such event, the Corporation shall
deliver to the Holder (without payment by the Holder of any Exercise Price or
any cash or other consideration) that number of shares of Common Stock equal to
the quotient obtained by dividing (x) the value of this Warrant (or the
specified portion hereof) on the Exercise Date, which value shall be determined
by subtracting (A) the aggregate Exercise Price of the Underlying Common Stock
immediately prior to the exercise of the Warrant from (B) the aggregate Market
Price of the Underlying Common Stock issuable upon exercise of this Warrant (or
the specified portion hereof) on the Exercise Date, by (y) the Market Price of
one share of Common Stock on the Exercise Date.
(d) Mechanics. Unless the Corporation elects the Buy Out permitted
under Section 1.5 below, the Corporation shall, as promptly as practicable and
in any event within fifteen (15) days after delivery of a Subscription Notice as
described above, execute and deliver or cause to be executed and delivered, in
accordance with such Subscription Notice, a certificate or certificates
representing the aggregate number of shares of Common Stock specified in said
Subscription Notice. The share certificate or certificates so delivered shall be
in such denominations as may be specified in such Subscription Notice and shall
be issued in the name of the Holder or such other name or names as shall be
designated in such Subscription Notice. Such certificate or certificates shall
be deemed to have been issued (and this Warrant or the portion thereof specified
in the Subscription Notice shall be deemed to have been exercised), and such
Holder or any other Person so designated to be named therein shall be deemed for
all purposes to have become a holder of record of such shares, as of the date
the aforementioned Subscription Notice is received by the Corporation, or
delivery thereof is refused (the "Exercise Date"). If this Warrant shall have
been exercised only in part, the Corporation shall, at the time of delivery of
the certificate or certificates, deliver to the Holder a new Warrant evidencing
the rights to purchase or convert the remaining shares of Common Stock called
for by this Warrant, which new Warrant shall in all other respects be identical
with this Warrant, or, at the request of the Holder, appropriate notation may be
made on this Warrant which shall then be refunded to the Holder. The Corporation
shall pay all expenses, taxes and other charges payable in connection with the
preparation, issuance and delivery of share certificates and new Warrants,
except that, if share certificates or new Warrants shall be registered in a name
or names other than the name of the Holder, funds sufficient to pay all transfer
taxes
- 2 -
<PAGE>
payable as a result of such transfer shall be paid by the Holder at the time of
delivering the aforementioned notice of exercise or promptly upon receipt of a
written request of the Corporation for payment.
1.2 Shares to Be Fully Paid and Nonassessable. All shares of Common Stock
issued upon the exercise of this Warrant shall be validly issued, fully paid and
nonassessable and free from all preemptive rights of any stockholder, and from
all taxes, liens and charges with respect to the issue thereof (other than
transfer taxes).
1.3 No Fractional Shares to Be Issued. The Corporation shall not be
required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section, be issuable
upon any exercise of this Warrant, in lieu of such fractional share the
Corporation may pay to the Holder, in cash, an amount equal to such fraction of
the Market Price per share of outstanding Common Stock of the Corporation on the
Business Day immediately prior to the date of such exercise.
1.4 Share Legends. Each certificate for shares of Common Stock issued upon
exercise of this Warrant, unless at the time of exercise such shares are
registered under the Securities Act, shall bear the following legend:
"This security has not been registered under the Securities Act of 1933 and
may not be sold or offered for sale unless registered pursuant to such Act
or unless the holder hereof delivers to Blue Rhino Corporation an opinion
of counsel reasonably acceptable to Blue Rhino Corporation stating that an
exemption from such registration is available."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act) shall also bear such legend unless, in the opinion of counsel
selected by the holder of such certificate (who may be an employee of such
holder) and reasonably acceptable to the Corporation, the securities represented
thereby need no longer be subject to restrictions on resale under the Securities
Act.
1.5 Buy Out. On the Exercise Date or on the day that an Organizational
Change is announced (either such date is referred to herein as the "Buy Out
Date"), the Corporation, in its sole discretion, may elect to Buy Out any or all
of the Holder's interest in the Warrant. "Buy Out" means that the Corporation
shall deliver to the Holder (without payment by the Holder of any Exercise Price
or any cash or other consideration) the value of the Warrant, taking into
account the number of shares of Common Stock that the Corporation desires to Buy
Out. The value of this Warrant (or the specified portion thereof) on the Buy
Out Date shall be determined by subtracting (x) the Exercise Price on the Buy
Out Date from (y) the Market Price of a share of the Common Stock issuable upon
exercise of this Warrant on the Buy Out Date and multiplying the remainder by
(z) the number of shares that the Corporation desires to Buy Out.
- 3 -
<PAGE>
1.6 Result of Exercise. On the Exercise Date, the rights of the Holder as a
holder of the Warrant will cease and the Person or Persons in whose name or
names any certificate or certificates for shares of Common Stock are to be
issued upon such exercise will be deemed to have become the holder or holders of
record of the shares of Common Stock represented thereby.
1.7 Not Close Books Until Exercise. The Corporation will not close its
books against the transfer of this Warrant or shares of Common Stock issued or
issuable upon exercise of this Warrant in any manner which interferes with the
timely exercise of this Warrant.
ARTICLE II
TRANSFER, EXCHANGE AND
REPLACEMENT OF WARRANT
2.1 Ownership of Warrant. The Corporation may deem and treat the Person in
whose name this Warrant is registered as the holder and owner hereof for all
purposes and shall not be affected by any notice to the contrary, until this
Warrant is presented for registration of transfer as provided in this Article
II.
2.2 Prohibition on Transfer of Warrant.
----------------------------------
(a) Except as specifically provided in this paragraph (b) of this
Section, the Warrants may not be transferred or assigned by the Holder.
(b) The Holder may transfer some or all of its interests in the
Warrant to the following Persons ("Permitted Assignees"):
(i) a trust created by it for estate planning purposes of which
it is a trustee;
(ii) a family partnership, limited liability company or
corporation;
(iii) a spouse and/or children of the Holder;
(iv) if the Holder is a trust, then to its beneficiaries as
permitted under the trust instrument; and
(v) if the Holder is a limited liability company, to its
members as permitted under such limited liability company's
operating agreement and pursuant to the laws of its state
of formation.
2.3 Division or Combination of Warrants. Subject to the limitations of
Section 2.2, this Warrant may be divided or combined with other Warrants upon
surrender hereof and of any Warrant or Warrants with which this Warrant is to be
combined to the Corporation, together with a written notice specifying the names
of the Permitted Assignees and denominations in which the new
- 4 -
<PAGE>
Warrant or Warrants are to be issued, signed by the Holder or their respective
duly authorized agents or attorneys. The Corporation shall execute and deliver a
new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice.
2.4 Loss, Theft, Destruction of Warrant Certificates. Upon receipt of
evidence reasonably satisfactory to the Corporation (an affidavit of the
registered holder will be satisfactory) of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction upon receipt of indemnity or security reasonably satisfactory to the
Corporation, or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Corporation will (at its expense) make and
deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new
Warrant of like tenor and representing the right to purchase the same aggregate
number of shares of Common Stock.
2.5 Expenses of Delivery of Warrants. The Holder shall pay all
administrative expenses and taxes payable in connection with the preparation,
issuance and delivery of Warrants and Underlying Common Stock hereunder.
ARTICLE III
ADJUSTMENT PROVISIONS
3.1 Adjustments Generally. The Exercise Price and the number of shares of
Common Stock (or other securities or property) issuable upon exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events, as provided in this Article III.
3.2 Exercise of Warrant. At any time during the Exercise Period, any Holder
of this Warrant may exercise this Warrant to purchase all or any portion of the
number of shares of Common Stock stated on the face of this Warrant.
3.3 Exercise Price. The "Exercise Price" shall initially be equal to $7.40
per share. In order to prevent dilution of the exercise rights granted to a
Holder, the Exercise Price will be subject to adjustment from time to time
pursuant to Section 3.4 below.
3.4 Subdivision or Combination of Common Stock. If the Corporation at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision will
be proportionately reduced. If the Corporation at any time combines (by reverse
stock split, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased.
3.5 Notices. Immediately upon any adjustment of the Exercise Price, the
Corporation shall give written notice thereof to the Holder specifying the
Exercise Price in effect thereafter with respect to the Holder.
- 5 -
<PAGE>
ARTICLE IV
LIQUIDATION, DISSOLUTION, DISTRIBUTIONS
4.1 Liquidation or Dissolution. In case the Corporation at any time while
this Warrant shall remain unexpired and unexercised, shall dissolve, liquidate,
or wind up its affairs, the Holder shall have the right to exercise this Warrant
for a period of sixty (60) days after the later of (1) such event having
occurred and (2) receipt by the Holder of a notice from the Company indicating
the kind and amount of securities or assets issuable or distributable to holders
of shares of Common Stock with respect to such event, and upon exercise of this
Warrant during such period, the Holder shall have the right to receive in lieu
of each share of the Underlying Common Stock, the same kind and amount of any
securities or assets as may be issuable, distributable, or payable upon any such
dissolution, liquidation, or winding up with respect to each of the shares of
the Common Stock.
ARTICLE V
DEFINITIONS
The following terms, as used in this Warrant, have the following respective
meanings:
"Board of Directors" shall mean the Corporation's duly elected Board of
Directors.
"Business Day" shall mean (1) if any class of Common Stock is listed or
admitted to trading on a national securities exchange, a day on which the
principal national securities exchange on which such class of Common Stock is
listed or admitted to trading is open for business or (2) if no class of Common
Stock is so listed or admitted to trading, a day on which trading is conducted
on the New York Stock Exchange.
"Buy Out" shall have the meaning provided for in Section 1.6.
"Buy Out Date" shall have the meaning provided for in Section 1.6.
"Closing Date" shall have the definition provided in the Asset Purchase
Agreement entered into among the Corporation and Bison Valve, L.L.C. and Michael
A. Waters dated September 17, 1999.
"Commission" shall mean the Securities and Exchange Commission.
"Common Stock" shall have the meaning provided for in the opening
paragraph.
"Exercise Period" shall have the meaning provided for in the opening
paragraph.
"Exercise Price" shall have the meaning provided for in Section 3.3.
"Holder" shall mean the Person in whose name this Warrant is registered on
the books of the
- 6 -
<PAGE>
Corporation maintained for such purpose or the Person in whose name any
Underlying Common Stock is registered on such books. Together each Holder known
as the "Holders."
"Indemnification Agreement" shall have the meaning provided for in the
legends of this Warrant.
"Market Price" of any security shall mean the average of the closing prices
of such security's sales on all securities exchanges on which such security may
at the time be listed, or, if there has been no sales on any such exchange on
any day, the average of the highest bid and lowest asked prices on the primary
exchange on which such security is listed at the end of such day, or, if on any
day such security is not so listed, the average of the representative bid and
asked prices quoted in the NASDAQ as of 4:00 P.M., New York time, or, if on any
day such security is not quoted in the NASDAQ, the average of the highest bid
and lowest asked prices on such day in the domestic over-the-counter market as
reported by The Wall Street Journal, Central Edition, in each such case averaged
over a period of five (5) days consisting of the day as of which "Market Price"
is being determined and the four (4) consecutive business days prior to such
day.
"NASDAQ" shall mean The National Association of Securities Dealers'
National Market or Small Capitalization Market.
"Organizational Change" shall mean any of the following: (1) a
recapitalization, (2) a reorganization, (3) a consolidation or merger of the
Corporation with another Person or (4) a sale of all or substantially all of the
Corporation's assets to another Person.
"Person" shall mean an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Registered Shares" shall mean shares effectively registered under the
Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Subscription Notice" shall have the meaning provided in Section 1(a).
"Subsidiary" shall mean any corporation, association or other business
entity of which securities or other ownership interests representing more than
fifty percent (50%) of the ordinary voting power are, at the time as of which
any determination is being made, owned or controlled by the Corporation or one
or more Subsidiaries of the Corporation or by the Corporation and one or more
Subsidiaries of the Corporation.
"Underlying Common Stock" shall mean (1) the Common Stock issuable upon
exercise of this Warrant and (2) any Common Stock issued or issuable with
respect to the securities referred to in clause (1) above by way of stock
dividend or stock split or in connection with a reverse stock split,
recapitalization or otherwise.
- 7 -
<PAGE>
"Unregistered Shares" shall mean shares of Common Stock which have not
been effectively registered under the Securities Act.
"Warrant" shall mean this warrant to purchase shares of Common Stock.
ARTICLE VI
MISCELLANEOUS
6.1 Notices. Notices and other communications provided for herein shall be
in writing and shall be delivered personally or mailed certified mail, return
receipt requested or delivered by overnight courier service to the addresses
specified below or such other address as any party hereto other than the
Corporation designates by written notice to the Corporation or if the
designation is by the Corporation, such notice of other address shall be to the
Holder, and all notices shall be deemed to have been given upon delivery if
delivered personally, three (3) days after mailing if mailed, or one (1)
business day after delivery to the courier, if delivered by overnight courier
service. If to the Corporation, such notice shall be mailed to
Blue Rhino Corporation
104 Cambridge Plaza Drive
Winston-Salem, North Carolina 27104
Attention: Billy D. Prim, Chief Executive Officer
In the case of the Holder, such notices and communications shall be addressed to
his, her or its address as shown on the books maintained by the Corporation.
6.2 Waivers; Amendments. No failure or delay of the Holder in exercising
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Holder are cumulative and not exclusive of any rights or
remedies which it would otherwise have. The provisions of this Warrant may be
amended, modified or waived with (and only with) the written consent of the
Corporation and the Holder (or if such proposed amendment, modification or
waiver is subsequent to an assignment of the Warrant by the initial Holder, the
written consent of holders of new Warrants representing the right to purchase a
majority of the shares of Common Stock that the initial Warrant entitled the
Holder to purchase).
Any such amendment, modification or waiver effected pursuant to this
Section shall be binding upon the Holder of this Warrant and upon each future
holder thereof and upon the Corporation. In the event of any such amendment,
modification or waiver, the Corporation shall give prompt notice thereof to the
Holder and, if appropriate, notation thereof shall be made on the Warrant
thereafter surrendered for registration of transfer or exchange.
No notice or demand on the Corporation in any case shall entitle the
Corporation to any other or further notice or demand in similar or other
circumstances.
- 8 -
<PAGE>
6.3 Governing Law. This Warrant shall be construed in accordance with and
governed by the internal laws of the State of Delaware, without regard to
principles of conflicts of law.
6.4 Survival of Agreements; Representations and Warranties, etc. All
warranties, representations and covenants made by the Corporation herein or in
any certificate or other instrument delivered by or on behalf of it in
connection with the Warrants shall be considered to have been relied upon by the
Holder and shall survive the issuance and delivery of the Warrant, regardless of
any investigation made by the Holder, and shall continue in full force and
effect so long as this Warrant or any Warrant Stock is outstanding. All
statements in any such certificate or other instrument shall constitute
representations and warranties hereunder.
6.5 Covenants to Bind Successor and Assigns. All covenants, stipulations,
promises and agreements in this Warrant contained by or on behalf of the
Corporation shall bind its successors and assigns, whether so expressed or not.
6.6 Severability. In case any one or more of the provisions contained in
this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby.
6.7 Section Headings. The section headings used herein are for convenience
of reference only, are not part of this Warrant and are not to affect the
construction of or be taken into consideration in interpreting this Warrant.
6.8 No Rights as Stockholder. This Warrant shall not entitle the Holder to
any rights as a stockholder of the Corporation.
6.9 Maintenance of Shares. So long as all or any part of the Warrant
remains outstanding and exercisable the Corporation will maintain sufficient
authorized shares of Common Stock so that the Corporation could issue the
Underlying Common Stock even if all other then outstanding exercisable options
for the purchase of Common Stock were exercised prior to the exercise of the
Warrant. The shares of Underlying Common Stock issuable upon exercise of this
Warrant will be Registered Shares or will be shares which are transferable when
issued (and without a waiting period) under Rule 144 or such other exemption
from the registration requirements of the Securities Act which may be in effect
from time to time..
[The next page is the Signature Page]
- 9 -
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed
in its corporate name by one of its officers thereunto duly authorized, all as
of the day and year first above written.
Blue Rhino Corporation, a Delaware corporation
/s/ Mark Castaneda
By --------------------------------------------
Mark Castaneda, Chief Financial Officer
- 10 -
<PAGE>
SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
To -----------------------------
[Choose one or both of first two paragraphs, as applicable]
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the attached Warrant for, and to purchase thereunder,
______________ shares of Common Stock, as provided for therein, and tenders
herewith payment of the Exercise Price in full in the form of certified or bank
cashier's check or wire transfer.
The undersigned hereby irrevocably elects to exercise the right of
conversion represented by the attached Warrant for, and to convert thereunder,
_______________ shares of Common Stock, as provided for therein.
Please issue a certificate or certificates for such shares of Common
Stock in the following name or names and denominations:
If said number of shares shall not be all the shares issuable upon exercise
of the attached Warrant, a new Warrant is to be issued in the name of the
undersigned for the balance remaining of such shares less any fraction of a
share paid in cash.
Dated:____________, 19___
______________________________
___________________________
NOTE: The above signature should correspond
exactly with the name on the face of the
attached Warrant or with the name of the
assignee appearing in the assignment form
below.
- 11 -
<PAGE>
ASSIGNMENT
(To be executed upon assignment of Warrant)
For value received, ___________________ hereby sells, assigns and transfers
unto the attached Warrant, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ attorney to
transfer said Warrant on the books of Blue Rhino Corporation, with full power of
substitution in the premises.
_______________________________
________________________
Note: The above signature should correspond
exactly with the name on the face of the
attached Warrant.
Dated:___________________
- 12 -
<PAGE>
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 104 Cambridge Plaza Drive, Winston-Salem, North Carolina
27104 (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
---------
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;
---------
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;
<PAGE>
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
---------
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
---------------------------------------
a. Purchase of Notes and Warrants. Subject to satisfaction (or
------------------------------
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
------------------------
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
Katten Muchin & Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois
60661-3693.
c. The Additional Closing Date. The date and time of the Additional
---------------------------
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
2
<PAGE>
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 Katten Muchin & Zavis, 525 West
Monroe Street, Suite 1600, Chicago, Illinois 60661-3693. 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.
-----------------------------------------------------------------
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
3
<PAGE>
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
4
<PAGE>
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
---------------
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.
--------------------------------------
Each Buyer represents and warrants with respect to only itself that:
a. Investment Purpose. Such Buyer (i) is acquiring the Notes and the
------------------
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
--------------------------
investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the
----------------------
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
<PAGE>
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
-----------
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
----------------------
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
------------------
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 1933
Act) 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.
6
<PAGE>
g. Legends. Such Buyer understands that the certificates or other
-------
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
--------------------------
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.
7
<PAGE>
i. Residency. Such Buyer is a resident of that jurisdiction
---------
specified on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company and its
------------------------------
"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).
-------------
b. Authorization; Enforcement; Compliance with Other Instruments.
-------------------------------------------------------------
(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
8
<PAGE>
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
--------------
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
-------------
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
----------------------
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
9
<PAGE>
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
------------ -------------
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
<PAGE>
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 EDGAR, 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
<PAGE>
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 1933 Act) 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
<PAGE>
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 1933 Act) 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 mark 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 mark 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 mark
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 mark
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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 EDGAR.
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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 1933 Act)
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
<PAGE>
(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
<PAGE>
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 Pedersen &
Houpt 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
<PAGE>
(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
<PAGE>
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 Pedersen &
Houpt, 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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
If to the Company:
Blue Rhino Corporation
103 Cambridge Plaza Drive
Winston-Salem, North Carolina 27104
Telephone: 336-659-6900
Facsimile: 336-659-6750
Attention: President or Chief Financial Officer
With a copy to:
Pedersen & Houpt, P.C.
161 N. Clark, Suite 3100
Chicago, IL 60601
Telephone: 312-641-6888
Facsimile: 312-641-6895
Attention: John H. Muehlstein, Esq.
If to the Transfer Agent:
LaSalle Bank, N.A.
135 S. LaSalle
Chicago, IL 60603
Telephone: 312-904-2584
Facsimile: 312-904-2236
Attention: Gregory Malatia
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
<PAGE>
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
<PAGE>
m. Placement Agent. The Company acknowledges that it has engaged
---------------
J.C. Bradford & 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
<PAGE>
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/ Mark Castaneda
-----------------------------
Name: Mark Castaneda
---------------------------
Title: Chief Financial Officer By: /s/ E. Kurt Kim
-------------------------- ------------------------------------
Name: E. Kurt Kim
Its: Duly Authorized Signatory
Leonardo, L.P.
By: Angelo, Gordon & Co., L.P.
By: /s/ Michael L. Gordon
------------------------------------
Name: Michael L. Gordon
----------------------------------
Its: Chief Operating Officer
-----------------------------------
<PAGE>
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
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
- ---------------------- -------------------------------------- --------------- ----------- --------------------------------------
<S> <C> <C> <C> <C>
HFTP Investment L.L.C. c/oPromethean Asset Management, L.L.C. $5,000,000 237,288 Promethean Investment Group, L.L.C.
750 Lexington Avenue 750 Lexington Avenue
22nd Floor 22nd Floor
New York, New York 10022 New York, New York 10022
Attn: James F. O'Brien, Jr. Attn: James F. O'Brien, Jr.
John Floegel John Floegel
Telephone: 212-702-5200 Telephone: 212-702-5200
Facsimile: 212-758-9334 Facsimile: 212-758-9334
Residence: New York Katten Muchin & Zavis
525 West Monroe, Suite 1600
Chicago, Illinois 60661-3693
Attn: Robert J. Brantman, Esq.
Telephone: 312-902-5200
Facsimile: 312-902-1061
Leonardo, L.P. c/o Angelo, Gordon & Co., L.P. $2,000,000 94,915 Angelo, Gordon & Co., L.P.
245 Park Avenue - 26/th/ Floor 245 Park Avenue - 26/th/ Floor
New York, New York 10167 New York, New York 10167
Attention: Gary Wolf or Ari Storch Attention: Gary Wolf or Ari Storch
Facsimile: (212) 867-6449 Facsimile: (212) 867-6449
Telephone: (212) 692-2035 Telephone: (212) 692-2035
Residence: Cayman Islands
</TABLE>
<PAGE>
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
--------
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
<PAGE>
EXHIBIT 10.2
THE SECURITIES REPRESENTED HEREBY 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
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 UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THIS NOTE MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW
THE TERMS OF THIS NOTE, INCLUDING SECTION 2(e)(viii) HEREOF. THE PRINCIPAL
AMOUNT AND THE INTEREST THEREON REPRESENTED BY THIS NOTE MAY BE LESS THAN THE
AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 2(e)(viii) OF THIS
NOTE.
CONVERTIBLE NOTE
----------------
_______ __, ______ $____________
FOR VALUE RECEIVED, BLUE RHINO CORPORATION, a Delaware corporation (the
"Company"), hereby promises to pay to the order of __________________ or
registered assigns ("Holder") the principal amount of ___________________
Dollars ($________________), on [INSERT date which is 2 years after Issuance
Date] (the "Maturity Date"), and to pay interest ("Interest") on the unpaid
principal balance hereof at the rate of 5.0% per annum from the date hereof (the
"Issuance Date") until the same becomes due and payable, whether at maturity or
upon acceleration or by conversion or redemption in accordance with the terms
hereof or otherwise. Interest on this Note shall commence accruing on the
Issuance Date and shall be computed on the basis of a 365-day year and actual
days elapsed and shall be payable at the time of optional or mandatory
conversion or redemption of the principal to which such interest relates in
accordance with Section 1 hereof. Any amount of interest on this Note which is
not paid when due shall bear interest at the rate of 18% per annum from the date
thereof until the same is paid ("Default Interest").
1. Payments of Principal and Interest. All payments of principal and
----------------------------------
interest on this Note (to the extent such principal and/or interest is not
converted into Common Stock in accordance with the terms hereof) shall be made
in lawful money of the United States of America by wire transfer of immediately
available funds to such account as the Holder may from time to time designate by
written notice in accordance with the provisions of this Note. Whenever any
<PAGE>
amount expressed to be due by the terms of this Note is due on any day which is
not a Business Day (as defined below), the same shall instead be due on the next
succeeding day which is a Business Day and, in the case of any interest payment
date which is not the date on which this Note is paid in full, the extension of
the due date thereof shall not be taken into account for purposes of determining
the amount of interest due on such date. For purposes of this Note, "Business
Day" shall mean any day other than a Saturday, Sunday or a day on which
commercial banks in The City of New York are authorized or required by law or
executive order to remain closed. Each capitalized term used herein, and not
otherwise defined, shall have the meaning ascribed thereto in the Securities
Purchase Agreement, dated September __, 1999, pursuant to which this Note and
the Other Notes (as defined below) were originally issued (the "Securities
Purchase Agreement"). This Note and the Other Notes issued by the Company
pursuant to the Securities Purchase Agreement are collectively referred to in
this Note as the "Notes."
2. Conversion of Notes. This Note shall be convertible into shares of the
-------------------
Company's common stock, par value $.001 per share (the "Common Stock"), on the
terms and conditions set forth in this Section 2.
(a) Certain Defined Terms. For purposes of this Note, the following
---------------------
terms shall have the following meanings:
(i) "Additional Amount" means, with respect to any principal
amount of Notes, the sum of (A) accrued and unpaid Interest on such
principal amount and (B) Default Interest, if any, on the interest
referred to in the immediately preceding clause (A).
(ii) "Closing Bid Price" means, for any security as of any date,
the last closing bid price for such security on the Principal Market
(as defined below) as reported by Bloomberg Financial Markets
("Bloomberg"), or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last
closing bid price of such security on the principal securities
exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last
closing bid price of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price is reported for such security
by Bloomberg, the last closing trade price of such security as
reported by Bloomberg, or, if no last closing trade price is reported
for such security by Bloomberg, the average of the bid prices of any
market makers for such security as reported in the "pink sheets" by
the National Quotation Bureau, Inc. If the Closing Bid Price cannot
be calculated for such security on such date on any of the foregoing
bases, the Closing Bid Price of such security on such date shall be
the fair market value as mutually determined by the Company and the
Holders of the Notes. If the Company and the Holders of the Notes are
unable to agree upon the fair market value of the Common Stock, then
such dispute shall be resolved pursuant to Section 2(e)(iii) below
with the term "Closing Bid Price" being substituted for the
-2-
<PAGE>
term "Market Price." All such determinations to be appropriately
adjusted for any stock dividend, stock split or other similar
transaction during such period.
(iii) "Conversion Price" means, as of any Conversion Date (as
defined below) or other date of determination, the product of the
Conversion Percentage and the Weighted Average Price of the Common
Stock (the "Daily Market Price"), provided that in no event shall the
Conversion Price exceed the Fixed Conversion Price, each in effect as
of such date and subject in each case to adjustment as provided
herein.
(iv) "Conversion Percentage" means 95%, subject to adjustment as
provided herein.
(v) "Weighted Average Price" means, for any security as of any
date, the dollar volume-weighted average price for such security on
the Principal Market (as reported by Bloomberg through its "Volume at
Price" function) or, if the Principal Market is not the principal
securities exchange or trading market for such security, the dollar
volume-weighted average price of such security on the principal
securities exchange or trading market where such security is listed or
traded (as reported by Bloomberg through its "Volume at Price"
function), or if the foregoing do not apply, the dollar volume-
weighted average price of such security in the over-the-counter market
on the electronic bulletin board for such security as reported by
Bloomberg, or, if no dollar volume-weighted average price is reported
for such security by Bloomberg, the average of the bid prices of each
of the market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Weighted
Average Price cannot be calculated for such security on such date on
any of the foregoing bases, the Weighted Average Price of such
security on such date shall be the fair market value as mutually
determined by the Company and the Holders of the Notes. If the
Company and the Holders of the Notes are unable to agree upon the fair
market value of the Common Stock, then such dispute shall be resolved
pursuant to Section 2(e)(iii) below. All such determinations to be
appropriately adjusted for any stock dividend, stock split or other
similar transaction during such period.
(vi) "Conversion Amount" means the sum of (A) the principal
amount of this Note to be converted, redeemed or otherwise with
respect to which this determination is being made and (B) the
Additional Amount with respect to such principal amount, provided that
the Company has not elected to pay such Additional Amount in cash as
described in Section 2(c)(ii).
(vii) "Fixed Conversion Price" means, with respect to any Note,
as of any Conversion Date or other date of determination, $20.00,
subject to adjustment as provided herein.
(viii) "Holders" means the holders of this Note and the Other
Notes.
(ix) "Issuance Date" means, with respect to each Note, the date
of issuance of the applicable Note.
-3-
<PAGE>
(x) "Maturity Date" means the date which is two (2) years
after the Issuance Date of this Note, subject to extension pursuant to
Section 2(e)(vii).
(xi) "Market Price" means, with respect to any security, that
price which shall be computed as the arithmetic average of the Closing
Bid Prices for such security during the 10 consecutive trading days
immediately preceding such date of determination. All such
determinations shall be appropriately adjusted for any stock dividend,
stock split or other similar transaction during such period.
(xii) "Other Notes" means the convertible notes, other than this
Note, issued by the Company pursuant to the Securities Purchase
Agreement.
(xiii) "Person" means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or
agency thereof.
(xiv) "Principal Market" means the Nasdaq National Market.
(xv) "Options" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.
(xvi) "Convertible Securities" means any stock or securities
(other than Options) directly or indirectly convertible into or
exchangeable for Common Stock.
(b) Holder's Conversion Right; Mandatory Conversion. Subject to the
-----------------------------------------------
provisions of Sections 2(d) and 6, at any time or times on or after the Issuance
Date (as defined below), the Holder shall be entitled to convert any part of the
outstanding and unpaid Conversion Amount of this Note into fully paid and
nonassessable shares of Common Stock in accordance with Section 2(d), at the
Conversion Rate (as defined below). If any Conversion Amount of this Note
remains outstanding on the Maturity, then, pursuant to Section 2(e)(vii), all of
such Conversion Amount shall be converted at the Conversion Rate as of such date
in accordance with Section 2(d) or redeemed by the Company. The Company shall
not issue any fraction of a share of Common Stock upon any conversion. All
shares of Common Stock (including fractions thereof) issuable upon conversion of
this Note by the Holder shall be aggregated for purposes of determining whether
the conversion would result in the issuance of a fraction of a share of Common
Stock. If, after the aforementioned aggregation, the issuance would result in
the issuance of a fraction of a share of Common Stock, the Company shall round
such fraction of a share of Common Stock up or down to the nearest whole share.
-4-
<PAGE>
(c) Conversion.
----------
(i) Conversion Rate. The number of shares of Common Stock
---------------
issuable upon conversion of a Conversion Amount of this Note pursuant to
Section 2(b) shall be determined according to the following formula (the
"Conversion Rate"):
Conversion Amount
-----------------
Conversion Price
(ii) Cash Payment of Additional Amount. Subject to the notice
---------------------------------
provisions of this Section 2(c)(ii), upon conversion pursuant to Sections
2(b) or 2(e)(vii), the Company shall have the right to elect to pay the
Additional Amount in cash, in lieu of conversion to Common Stock. If the
Company elects to pay the Additional Amount in cash, such cash shall be
paid simultaneously with the delivery to the Holder of the certificates
representing the Common Stock issuable upon conversion in accordance with
Section 2(e)(ii). In order to exercise its right to pay any Additional
Amount in cash, the Company must advise each Holder of the Notes in writing
(the "Cash Payment Notice") that the Additional Amount shall be paid in
cash until such time as the Company shall terminate the Cash Payment Notice
by providing at least five (5) Business Days prior written notice of such
termination (the "Termination Notice"). The Cash Payment Notice shall set
forth the effective date of the Cash Payment Notice, which date shall be at
least five (5) Business Days after the date the Cash Payment Notice is
deemed to have been delivered pursuant to Section 25. The Termination
Notice shall be effective on the fifth Business Day after the date the
Termination Notice is deemed to have been delivered pursuant to Section 25
unless a later date shall be specified in the Termination Notice.
(d) Limitations on Beneficial Ownership. The Company shall not effect
-----------------------------------
any conversion of this Note and no Holder shall have the right to convert
any portion of this Note pursuant to Section 2(b) to the extent that after
giving effect to such conversion such Person (together with such Person's
affiliates) would beneficially own in excess of 4.99% of the outstanding
shares of the Common Stock following such conversion. For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned
by a Person and its affiliates shall include the number of shares of Common
Stock issuable upon conversion of this Note with respect to which the
determination of such sentence is being made, but shall exclude the number
of shares of Common Stock which would be issuable upon (i) conversion of
the remaining, nonconverted portion of this Note beneficially owned by such
Person and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
(including, without limitation, any warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained herein
beneficially owned by such Person and its affiliates. Except as set forth
in the preceding sentence, for purposes of this Section 2(d), beneficial
ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended. For purposes of this Section
2(d), in determining the number of outstanding shares Common Stock a Holder
may rely on the number of outstanding shares of Common Stock as reflected
in (1) the Company's most recent Form
-5-
<PAGE>
10-Q or Form 10-K, as the case may be, (2) a more recent public
announcement by the Company or (3) any other notice by the Company or its
transfer agent setting forth the number of shares of Common Stock
outstanding. For any reason at any time, upon the written or oral request
of the Holder, the Company shall immediately confirm orally and in writing
to the Holder the number of shares Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be determined
after giving effect to exercises of Warrants (as defined in the Securities
Purchase Agreement) and conversions of the Notes by the Holder and its
affiliates since the date as of which such number of outstanding shares of
Common Stock was reported.
(e) Mechanics of Conversion. The conversion of this Note shall be
-----------------------
conducted in the following manner:
(i) Holder's Delivery Requirements. To convert this Note into
------------------------------
shares of Common Stock on any date (the "Conversion Date"), the Holder
hereof shall (A) transmit by facsimile (or otherwise deliver), for
receipt on or prior to 11:59 p.m., Eastern Time on such date, a copy
of a fully executed notice of conversion in the form attached hereto
as Exhibit I (the "Conversion Notice") to the Company with a copy
thereof to the Company's designated transfer agent (the "Transfer
Agent") and (B) if required by Section 2(e)(viii), surrender to a
common carrier for delivery to the Company as soon as practicable
following such date the original Note being converted (or an
indemnification undertaking with respect to such Note in the case of
its loss, theft or destruction).
(ii) Company's Response. Upon receipt by the Company of a copy
------------------
of a Conversion Notice, the Company (1) shall immediately send, via
facsimile, a confirmation of receipt of such Conversion Notice to such
Holder and the Transfer Agent, which confirmation shall constitute an
instruction to the Transfer Agent to process such Conversion Notice in
accordance with the terms herein and (2) on or before the second
Business Day following the date of receipt by the Company of such
Conversion Notice (the "Share Delivery Date"), (A) issue and deliver
to the address as specified in the Conversion Notice, a certificate,
registered in the name of the Holder or its designee, for the number
of shares of Common Stock to which the Holder shall be entitled, or
(B) provided the Transfer Agent is participating in The Depository
Trust Company ("DTC") Fast Automated Securities Transfer Program, upon
the request of the Holder, credit such aggregate number of shares of
Common Stock to which the Holder shall be entitled to the Holder's or
its designee's balance account with DTC through its Deposit Withdrawal
Agent Commission system. Subject to Section 2(e)(viii), if less than
the Conversion Amount of this Note is submitted for conversion, then
the Company shall, as soon as practicable and in no event later than
three Business Days after receipt of the Note (the "Note Delivery
Date") and at its own expense, issue and deliver to the Holder a new
Note for the outstanding principal amount not converted.
-6-
<PAGE>
(iii) Dispute Resolution. In the case of a dispute as to the
------------------
determination of the Market Price or the arithmetic calculation of the
Conversion Rate, the Company shall instruct the Transfer Agent to
issue to the Holder the number of shares of Common Stock that is not
disputed and shall submit the disputed determinations or arithmetic
calculations to the Holder via facsimile within one (1) Business Day
of receipt of such Holder's Conversion Notice. If such Holder and the
Company are unable to agree upon the determination of the Market Price
or arithmetic calculation of the Conversion Rate within one (1)
Business Day of such disputed determination or arithmetic calculation
being submitted to the Holder, then the Company shall within one (1)
Business Day submit via facsimile (A) the disputed determination of
the Market Price to an independent, reputable investment bank selected
by the Company and approved by the Holders of the Notes representing a
majority of the Conversion Amounts of the Notes then outstanding or
(B) the disputed arithmetic calculation of the Conversion Rate to the
Company's independent, outside accountant. The Company shall cause
the investment bank or the accountant, as the case may be, to perform
the determinations or calculations and notify the Company and the
Holders of the results no later than forty-eight (48) hours from the
time it receives the disputed determinations or calculations. Such
investment bank's or accountant's determination or calculation, as the
case may be, shall be binding upon all parties absent manifest error.
(iv) Record Holder. The person or persons entitled to receive
-------------
the shares of Common Stock issuable upon a conversion of this Note
shall be treated for all purposes as the record Holder or Holders of
such shares of Common Stock as of the close of business on the
Conversion Date.
(v) Company's Failure to Timely Convert.
-----------------------------------
-7-
<PAGE>
(A) Void Conversion Notice; Adjustment to Conversion Price.
------------------------------------------------------
If for any reason the Holder has not received all of the shares
of Common Stock prior to the tenth (10th) Business Day after the
expiration of the Share Delivery Date with respect to a
conversion of this Note, then the Holder, upon written notice to
the Company, may void its Conversion Notice with respect to, and
retain or have returned, as the case may be, any principal amount
of this Note that has not been converted pursuant to such
Holder's Conversion Notice; provided that the voiding of a
--------
Holder's Conversion Notice shall not effect the Company's
obligations to make any payments which have accrued prior to the
date of such notice pursuant to Section 2(e)(v)(A) or otherwise.
Thereafter, the Fixed Conversion Price of the principal amount of
this Note returned or retained by the Holder for failure to
timely convert shall be adjusted to the lesser of (I) the Fixed
Conversion Price as in effect on the date on which the Holder
voided the Conversion Notice and (II) the lowest Closing Bid
Price during the period beginning on the Conversion Date and
ending on the date such Holder voided the Conversion Notice,
subject to further adjustment as provided in this Note.
(B) Redemption. If for any reason the Holder has not
----------
received all of the shares of Common Stock prior to the tenth
(10th) Business Day after the Share Delivery Date with respect
to a conversion of this Note (a "Conversion Failure"), then the
Holder, upon written notice to the Company, may require that the
Company redeem all of the Conversion Amount of this Note,
including the Conversion Amount previously submitted for
conversion and with respect to which the Company has not
delivered shares of Common Stock, in accordance with Section 3.
-8-
<PAGE>
(vi) Pro Rata Conversion and Redemption. In the event the
----------------------------------
Company receives a Conversion Notice from more than one Holder of the
Notes for the same Conversion Date and the Company can convert some,
but not all, of the Notes submitted for conversion, the Company shall
convert from each Holder electing to have Notes converted at such time
a pro rata amount of such Holder's Conversion Amount submitted for
conversion based on the principal amount of the Notes submitted for
conversion on such date by such Holder relative to the Conversion
Amount of all Notes submitted for conversion on such date.
(vii) Mandatory Conversion or Redemption at Maturity. If any
----------------------------------------------
Conversion Amount of this Note remains outstanding on the Maturity
Date, then all of Conversion Amount, at the Company's option, either
(i) shall be converted at the Conversion Price for the Common Stock as
of such date as if the Holder had given the Conversion Notice on the
Maturity Date (a "Maturity Date Mandatory Conversion"), or (ii) shall
be redeemed as of such date (a "Maturity Date Mandatory Redemption")
for an amount in cash equal to the Conversion Amount on the Maturity
Date (the "Maturity Date Redemption Price"). The Company shall be
deemed to have elected a Maturity Date Mandatory Redemption unless it
delivers written notice to the Holder at least 20 Business Days prior
to the Maturity Date of its election to effect a Maturity Date
Mandatory Conversion. If the Company elects a Maturity Date Mandatory
Redemption, then on the Maturity Date the Company shall pay to each
the Holder outstanding on the Maturity Date, by wire transfer of
immediately available funds, an amount equal to the Maturity Date
Redemption Price. If the Company elects a Maturity Date Mandatory
Redemption and shall fail to redeem all of the Conversion Amount of
this Note outstanding on the Maturity Date by payment of the Maturity
Date Redemption Price, then in addition to any remedy the Holder may
have under this Note, the Securities Purchase Agreement and the
Registration Rights Agreement, the Holder shall have the option to
require the Company to convert any or all of the Conversion Amount
that the Company elected to redeem under this Section 2(e)(vii) and
for which the Maturity Date Redemption Price (together with any
interest thereon) has not been paid into the number of shares of
Common Stock the Holder would have received if the Holder had given a
Conversion Notice for such Conversion Amount on the Maturity Date.
(viii) Book-Entry. Notwithstanding anything to the contrary set
----------
forth herein, upon conversion of any portion of this Note in
accordance with the terms hereof, the Holder thereof shall not be
required to physically surrender this Note to the Company unless the
full Conversion Amount represented by this Note is being converted.
The Holder and the Company shall maintain records showing the
Conversion Amount so converted and the dates of such conversions or
shall use such other method, reasonably satisfactory to the Holder and
the Company, so as not to require physical surrender of this Note upon
each such conversion. In the event of any dispute or discrepancy,
such records of the Company shall be controlling and determinative in
the absence of manifest error. Notwithstanding
-9-
<PAGE>
the foregoing, if this Note is converted as aforesaid, the Holder may
not transfer this Note unless the Holder first physically surrenders
this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Note of like tenor,
registered as the Holder may request, representing in the aggregate
the remaining Conversion Amount represented by this Note. The Holder
and any assignee, by acceptance of a this Note or such new Note,
acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of any portion of this Note, the
Conversion Amount (including the principal of this Note) represented
by this Note may be less than the principal amount and the accrued
interest set forth on the face hereof.
(f) Taxes. The Company shall pay any and all taxes that may be
-----
payable with respect to the issuance and delivery of Common Stock upon the
conversion of Notes.
(g) Adjustments to Conversion Price -- Dilution and Other Events. In
------------------------------------------------------------
addition to any other adjustments provided herein, the Conversion Price
will be subject to adjustment from time to time as provided in this Section
2(g).
(i) Adjustment of Fixed Conversion Price upon Subdivision or
--------------------------------------------------------
Combination of Common Stock. If the Company at any time subdivides
---------------------------
(by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Fixed Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced.
If the Company at any time combines (by combination, reverse stock
split or otherwise) one or more classes of its outstanding shares of
Common Stock into a smaller number of shares, the Fixed Conversion
Price in effect immediately prior to such combination will be
proportionately increased.
(ii) Holder's Right of Alternative Variable Conversion Price
-------------------------------------------------------
Following Issuance of Convertible Securities. If the Company in any
--------------------------------------------
manner issues or sells Convertible Securities or Options that are
convertible into or exchangeable for Common Stock at a price which
varies or may vary with the market price of the Common Stock,
including by way of periodic resets to a fixed price (each of the
formulations for such variable price being herein referred to as, a
"Variable Price"), and such Variable Price is not calculated using the
same formula used to calculate the Daily Market Price in effect
immediately prior to the time of such issue or sale, the Company
shall provide written notice thereof via facsimile and overnight
courier to each Holder of the Notes ("Variable Notice") on the date of
issuance of such Convertible Securities or Options. From and after
the date the Company issues any such Convertible Securities with a
Variable Price, the Holder shall have the right, but not the
obligation, in its sole discretion to substitute a Variable Price for
the Daily Market Price upon conversion of any part of the Notes by
designating in the Conversion Notice delivered upon conversion of such
Notes that solely for purposes of such conversion the Holder is
relying on a Variable Price rather than the Daily Market Price then in
effect. The Holder's election to
-10-
<PAGE>
rely on a Variable Price for a particular conversion of Notes shall
not obligate the Holder to rely on a Variable Price for any future
conversions of Notes.
(iii) Adjustment of Conversion Price for Registration Statement
Failures. If (A) the registration statement (the "Registration
Statement") covering the resale of the shares of Common Stock issuable
upon conversion of the Notes required to be filed by the Company
pursuant to the Registration Rights Agreement is not filed with the
SEC by the applicable Filing Deadline (as defined in the Registration
Rights Agreement) or declared effective by the SEC on or before the
applicable Effectiveness Deadline (as defined in the Registration
Rights Agreement) or (B) after the Registration Statement has been
declared effective by the SEC, sales cannot be made pursuant to the
Registration Statement (whether because of a failure to keep the
Registration Statement effective, to disclose such information as is
necessary for sales to be made pursuant to the Registration Statement,
to register sufficient shares of Common Stock or otherwise), then, as
partial relief for the damages to the Holder of this Note by reason of
any of the foregoing events (which remedy shall not be exclusive of
any other remedies available at law or in equity), the Conversion
Percentage in effect at such time shall be reduced by a number of
percentage points equal to the sum of (A) 1.0, if the Registration
Statement is not filed with the SEC by the applicable Filing Deadline,
plus (B) 1.0, if the Registration Statement is not effective by the
applicable Effectiveness Deadline, plus (C) the product of .05 and the
sum of (w) the number of days after the Filing Deadline that the
relevant Registration Statement has not been filed with the SEC, (x)
the number of days after the applicable Effectiveness Deadline that
the Registration Statement has not been declared effective by the SEC,
and (y) the number of days that sales cannot be made pursuant to the
Registration Statement in accordance with the Registration Rights
Agreement after the Registration Statement has been declared
effective.
(iv) Adjustment of Conversion Price for Company's Failure to
Timely Convert. If within five (5) Business Days after the Company's
receipt of a facsimile or other copy of the Conversion Notice the
Company shall fail to issue a certificate to the Holder or credit the
Holder's balance account with DTC for the number of shares of Common
Stock to which such Holder is entitled upon such Holder's conversion
of this Note or, subject to Section 2(e)(viii), the Company shall fail
to issue a new Note representing the principal amount to which such
Holder is entitled, if any, pursuant to Section 2(e)(ii), in addition
to all other available remedies which such Holder may pursue hereunder
and under the Securities Purchase Agreement (including indemnification
pursuant to Section 8 thereof), the Conversion Percentage in effect at
such time and applying to the Conversion Amount of the Note for which
shares of Common Stock have failed to be delivered and/or for which a
new Note has not been delivered shall be reduced by a number of
percentage points equal to the product of (A) 0.5 and (B) the sum of
(I) the number of days after the Share Delivery Date such conversion
is not timely effected and (II) the number of days after the Note
Delivery Date such new Note is not delivered.
(v) Notices.
--------
(A) Immediately upon any adjustment of the Conversion
Price, the Company will give written notice thereof to each
Holder of the Notes setting forth in reasonable detail, and
certifying, the calculation of such adjustment.
(B) The Company will give written notice to each Holder
of the Notes at least ten (10) days prior to the date on which
the Company closes its books or takes a record (I) with respect
to any dividend or distribution upon the Common Stock, (II) with
respect to any pro rata subscription offer to Holders of Common
Stock or (III) for determining rights to vote with respect to any
Organic Change (as defined in Section 4(a)), dissolution or
liquidation, provided that such information shall be made known
to the public prior to or in conjunction with such notice being
provided to each such Holder.
(C) The Company will also give written notice to each
Holder of the Notes at least ten (10) days prior to the date on
which any Organic Change, dissolution or liquidation will take
place, provided that such information shall be made known to the
public prior to or in conjunction with such notice being provided
to each such Holder.
3. Redemption at Option of Holder.
------------------------------
(a) Redemption Option Upon Triggering Event. In addition to all other
---------------------------------------
rights of the Holder contained herein, after a Triggering Event (as defined
below), the Holder shall have the right, at the Holder's option, to require
the Company to redeem all or a portion of this Note at a price equal to the
greater of (i) 120% of the Conversion Amount and (ii) the product of (A)
the Conversion Rate for the Conversion Amount to be redeemed in effect at
such time as such Holder delivers a Notice of Redemption at Option of Buyer
(as defined below) and (B) the Weighted Average Price of the Common Stock
on the date immediately preceding such Triggering Event on which the
Principal Market, or the market or exchange where the Common Stock is then
traded, is open for trading ("Redemption Price"); provided, however, for a
Triggering Event resulting pursuant to Sections 3(b)(vi) or 3(b)(viii)
below, the holder shall only have the right to redeem that portion of the
Note which the Company would not be obligated to convert pursuant to
Section 12 if the entire Conversion Amount of the Note were converted as of
the applicable date of determination (without regard to any limitation on
conversion).
(b) "Triggering Event". A "Triggering Event" shall be deemed to have
------------------
occurred at such time as any of the following events:
-11-
<PAGE>
(i) the failure of the Registration Statement to be declared
effective by the SEC on or prior to the date that is 20 days after the
applicable Effectiveness Deadline (as defined in the Registration
Rights Agreement);
(ii) while the Registration Statement is required to be
maintained effective pursuant to the terms of the Registration Rights
Agreement, the effectiveness of the Registration Statement lapses for
any reason (including, without limitation, the issuance of a stop
order) or is unavailable to the Holder for sale of all of such
Holder's Registrable Securities (as defined in the Registration Rights
Agreement) in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of
five consecutive trading days.
(iii) the suspension from trading or failure of the Common Stock
to be listed on The Nasdaq National Market or The New York Stock
Exchange, Inc. or The American Stock Exchange, Inc. for a period of
five consecutive trading days or for more than an aggregate of 10
trading days in any 365-day period;
(iv) the Company's or the Transfer Agent's notice to any Holder
of Notes, including by way of public announcement, at any time, of its
intention not to comply with a request for conversion of any Notes
into shares of Common Stock that is tendered in accordance with the
provisions of the Notes;
(v) a Conversion Failure (as defined in Section 2(e)(v)(B));
(vi) if the Company fails to hold a meeting of its stockholders
for the purpose of approving the issuance of the Conversion Shares
upon conversion of the Notes and the Warrant Shares (as defined in the
Securities Purchase Agreement) upon exercise of the Warrants in
accordance with Section 4(k) of the Securities Purchase Agreement and
the applicable laws and the rules and regulations of the Nasdaq
National Market on or prior to January 31, 2000, or such a meeting of
stockholders is held on or prior to January 31, 2000 but the
stockholders fail to approve of such proposal, then the earlier to
occur of (A) April 30, 2000 and (B) the date on which the Company
receives a Conversion Notice and shall not be obligated to issue the
shares of Common Stock issuable upon such conversion due to the
provisions of Section 12.
(vii) the Company breaches any representation, warranty, covenant
or other term or condition of the Securities Purchase Agreement, the
Registration Rights Agreement, the Warrants, this Note or any other
agreement, document, certificate or other instrument delivered in
connection with the transactions contemplated thereby and hereby,
except to the extent that such breach would not have a Material
Adverse Effect (as defined in Section 3(a) of the Securities Purchase
Agreement) and except, in the case of a breach of a covenant which is
curable, only if such breach continues for a period of at least 10
days.
-12-
<PAGE>
(viii) upon the Company's receipt of a Conversion Notice, the
Company shall not be obligated to issue shares of Common Stock
issuable upon such conversion due to the provisions of Section 12.
(c) Mechanics of Redemption at Option of Buyer. Within one (1)
------------------------------------------
Business Day after the occurrence of a Triggering Event, the Company shall
deliver written notice thereof via facsimile and overnight courier ("Notice
of Triggering Event") to each Holder of the Notes. At any time after the
earlier of the Holder's receipt of a Notice of Triggering Event and the
Holder becoming aware of a Triggering Event, the Holder may require the
Company to redeem all of such Holder's Notes by delivering written notice
thereof via facsimile and overnight courier ("Notice of Redemption at
Option of Buyer") to the Company, which notice shall include the date that
such notice was given and to the extent such notice is given upon the
occurrence of a Triggering Event pursuant to Sections 3(b)(iii), 3(b)(v),
3(b)(vii) and 3(b)(viii) the date which is 120 days after the date that
such notice is given (which period shall be referred to as "Payment Block
Period") provided that each Notice of Redemption at Option of Buyer may
only be sent during the period beginning on the date of the occurrence of
the Triggering Event and ending on the later of the date which is (i) 45
days after the date on which such Holder received a Notice of Triggering
Event from the Company with respect to such event and (ii) the date on
which such Triggering Event is cured, which Notice of Redemption at Option
of Buyer shall indicate the Conversion Amount of the Notes that the Holder
is electing to redeem. Each Buyer hereby agrees to use its best efforts to
deliver to the Bank (as defined below) a Notice of Redemption at Option of
Buyer promptly after sending such notice to the Company. Such notice shall
be sent to the Bank by facsimile at (336) 721-4099 or at such other number
provided to such Buyer by the Bank in writing at least five (5) Business
Days prior to such Buyer's sending of a Notice of Redemption at Option of
Buyer, provided, however, that the failure of such Buyer to send such
notice to the Bank shall in no way limit or affect such Buyer's rights or
remedies under this Note.
(d) Payment of Redemption Price. Upon the Company's receipt of a
---------------------------
Notice(s) of Redemption at Option of Buyer from any Holder of Notes, the
Company shall immediately notify each Holder of Notes by facsimile of the
Company's receipt of such notices. The Company shall deliver the applicable
Redemption Price to the Holder within (A) five (5) Business Days after the
Company's receipt of a Notice of Redemption at Option of Buyer for
redemptions pursuant to Sections 3(b)(i), 3(b)(ii), 3(b)(iv) and 3(b)(vi)
and (B) one (1) Business Day after the expiration of the Payment Block
Period for redemptions pursuant to Sections 3(b)(iii), 3(b)(v), 3(b)(vii)
and 3(b)(viii); provided that the Holder's Notes shall have been so
delivered to the Transfer Agent. If more than one Holder of Notes submits
Notes for redemption and the Company is unable to redeem all of the Notes
submitted for redemption, the Company shall redeem a pro rata amount from
each Holder of Notes based on the Conversion Amount represented by the
Notes submitted for redemption by such Holder relative to the aggregate
Conversion Amounts of all Notes for redemption by all Holders of Notes.
(e) Void Redemption. In the event that the Company does not pay the
---------------
Redemption Price within the time period set forth in Section 3(d), at any
time thereafter and until the Company pays such unpaid applicable
Redemption Price in full, the Holder shall have the option (the "Void
Optional Redemption Option") to, in lieu of redemption, require the Company
to promptly return to the Holder the Note that was submitted for redemption
by such Holder under this Section 3 and for which the applicable Redemption
Price (together with any interest thereon) has not been paid, by sending
written notice thereof to the Company via facsimile (the "Void Optional
Redemption Notice"). Upon the Company's receipt of such Void Optional
Redemption Notice, (i) the Notice of Redemption at Option of Buyer shall be
null and void with respect to that portion of the Note subject to the Void
Optional Redemption Notice, and (ii) the Company shall immediately return
the Note subject to the Void Optional Redemption Notice, and (iii) the
Fixed Conversion Price of such portion of the Note shall be adjusted to the
lesser of (A) the Conversion Price as in effect on the date on which the
Void Optional Redemption
-13-
<PAGE>
Notice is delivered to the Company and (B) the lowest Closing Bid Price
during the period beginning on the date on which the Notice of Redemption
at Option of Buyer is delivered to the Company and ending on the date on
which the Void Optional Redemption Notice is delivered to the Company.
(f) Disputes; Miscellaneous. In the event of a dispute as to the
-----------------------
determination of the Weighted Average Price, the Closing Bid Price or the
arithmetic calculation of the Redemption Price, such dispute shall be
resolved pursuant to Section 2(e)(iii) above with the term "Closing Bid
Price" being substituted for the term "Weighted Average Price" and the term
"Redemption Price" being substituted for the term "Conversion Rate". The
Holder's delivery of a Void Optional Redemption Notice and exercise of its
rights following such notice shall not effect the Company's obligations to
make any payments which have accrued prior to the date of such notice. In
the event of a redemption pursuant to this Section 3 of less than all of
the Conversion Amount of this Note, the Company shall promptly cause to be
issued and delivered to the Holder a new Note representing the remaining
Conversion Amount which has not been redeemed.
4. Other Rights of Holders.
-----------------------
(a) Reorganization, Reclassification, Consolidation, Merger or Sale.
---------------------------------------------------------------
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets to another Person or
other transaction which is effected in such a way that Holders of Common Stock
are entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as "Organic Change." Prior to the consummation of any (i) sale of all
or substantially all of the Company's assets to an acquiring Person or (ii)
other Organic Change following which the Company is not a surviving entity, the
Company will secure from the Person purchasing such assets or the successor
resulting from such Organic Change (in each case, the "Acquiring Entity") a
written agreement (in form and substance satisfactory to the Holders of the
Notes representing a majority of the Conversion Amounts of the Notes then
outstanding) to deliver to the Holder in exchange for this Note, a security of
the Acquiring Entity evidenced by a written instrument substantially similar in
form and substance to this Note, and satisfactory to the Holders the Notes
representing a majority of the Conversion Amounts of the Notes then outstanding.
Prior to the consummation of any other Organic Change, the Company shall make
appropriate provision (in form and substance satisfactory to the Holders of
Notes representing a majority of the Conversion Amounts of the Notes then
outstanding) to insure that each of the Holders will thereafter have the right
to acquire and receive in lieu of or in addition to (as the case may be) the
shares of Common Stock immediately theretofore acquirable and receivable upon
the conversion of this Note such shares of stock, securities or assets that
would have been issued or payable in such Organic Change with respect to or in
exchange for the number of shares of Common Stock which would have been
acquirable and receivable upon the conversion of this Note as of the date of
such Organic Change (without taking into account any limitations or restrictions
on the convertibility of this Note).
-14-
<PAGE>
(b) Optional Redemption Upon Change of Control. In addition to the
------------------------------------------
rights of the Holder under Section 4(a), upon a Change of Control (as defined
below) of the Company the Holder shall have the right, at the Holder's option,
to require the Company to redeem all or a portion of the Conversion Amount
represented by this Note equal to the Conversion Amount ("Change of Control
Redemption Price"). No sooner than 15 days nor later than 10 days prior to the
consummation of a Change of Control, but not prior to the public announcement of
such Change of Control, the Company shall deliver written notice thereof via
facsimile and overnight courier (a "Notice of Change of Control") to the Holder.
At any time during the period beginning after receipt of a Notice of Change of
Control (or, in the event a Notice of Change of Control is not delivered at
least 10 days prior to a Change of Control, at any time on or after the date
which is 10 days prior to a Change of Control) and ending on the date of such
Change of Control, the Holder may require the Company to redeem all or a portion
of the Conversion Amount of this Note then outstanding by delivering written
notice thereof via facsimile and overnight courier (a "Notice of Redemption Upon
Change of Control") to the Company, which Notice of Redemption Upon Change of
Control shall indicate (i) the Conversion Amount the Holder is submitting for
redemption, and (ii) the applicable Change of Control Redemption Price, as
calculated pursuant to Section this Section 4(b). Upon the Company's receipt of
a Notice(s) of Redemption Upon Change of Control from any Holder of Notes, the
Company shall promptly, but in no event later than one (1) Business Day
following such receipt, notify the Holder of this Note by facsimile of the
Company's receipt of such Notice(s) of Redemption Upon Change of Control. The
Company shall deliver the applicable Change of Control Redemption Price
simultaneous with the consummation of the Change of Control; provided that, if
required by Section 2(e)(viii), this Note shall have been so delivered to the
Company. Payments provided for in this Section 4(b) shall have priority to
payments to other stockholders in connection with a Change of Control. For
purposes of this Section 4(b), "Change of Control" means (i) the consolidation,
merger or other business combination of the Company with or into another Person
(other than (A) a consolidation, merger or other business combination in which
Holders of the Company's voting power immediately prior to the transaction
continue after the transaction to hold, directly or indirectly, the voting power
of the surviving entity or entities necessary to elect a majority of the members
of the board of directors (or their equivalent if other than a corporation) of
such entity or entities, or (B) pursuant to a migratory merger effected solely
for the purpose of changing the jurisdiction of incorporation of the Company),
(ii) the sale or transfer of all or substantially all of the Company's assets,
or (iii) a purchase, tender or exchange offer made to and accepted by the
Holders of more than the 50% of the outstanding shares of Common Stock.
(c) Purchase Rights. If at any time the Company grants, issues or
---------------
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record Holders of any class of
Common Stock (the "Purchase Rights"), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete conversion of this
Note (without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights,
-15-
<PAGE>
or, if no such record is taken, the date as of which the record Holders of
Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights.
5. Redemption at the Company's Election. At any time or times during the
------------------------------------
period beginning on the Issuance Date and ending on and including the date which
is 549 days after such Issuance Date, the Company shall have the right, in its
sole discretion, to require that some or all of the outstanding Conversion
Amount of the outstanding Notes issued on such Issuance Date be redeemed
("Redemption at Company's Election") for consideration equal to the Conversion
Amount of such Notes to be redeemed on the Company Election Redemption Date (as
defined below) (the "Company's Election Redemption Price"); provided that the
Conditions to Redemption at the Company's Election (as set forth below) are
satisfied. The Company shall exercise its right to Redemption at Company's
Election by providing each Holder of Notes issued on such Issuance Date written
notice ("Notice of Redemption at Company's Election") at least 15 Business Days
but not more than 20 Business Days prior to the date of consummation of such
redemption ("Company's Election Redemption Date"). If the Company elects to
require redemption of some, but not all, of the Conversion Amount of the Notes
issued on the Issuance Date then outstanding, the Company shall require
redemption of the pro rata amount from each Holder of such Notes based on the
principal amount of Notes purchased by such Holder on the Issuance Date relative
to the aggregate principal amount of all Notes purchased on such Issuance Date
(such amount with respect to the Holder being referred to herein as its "Pro
Rata Redemption Amount"). The Notice of Redemption at Company's Election shall
indicate (x) the Conversion Amount of the Notes the Company has elected to
redeem from all Holders of Notes, (y) the Company's Election Redemption Date,
and (z) each Holder's pro rata share of Conversion Amounts of the Notes selected
for redemption as determined in accordance with the immediately preceding
sentence. If the Company has exercised its right of Redemption at Company's
Election and the conditions of this Section 5, including the Conditions to
Redemption at Company's Election, have been satisfied, then each Holder's Pro
Rata Redemption Amount shall be redeemed as of the Company's Election Redemption
Date by payment by the Company to each Holder of the Notes of the Company's
Election Redemption Price. If required by Section 2(e)(viii), all Holders of
the Notes shall thereupon and within two (2) Business Days after the Company's
Election Redemption Date or such earlier date as the Company and each Holder of
Notes mutually agree, surrender all Notes being redeemed on such date to the
Company. If the Company fails to pay the full Company's Election Redemption
Price with respect to this Note then the Redemption at Company's Election shall
be null and void with respect to this Note and the Holder shall be entitled to
all the rights of a Holder of outstanding Notes. "Conditions to Redemption at
the Company's Election" means the following conditions: (i) during the period
beginning on the Issuance Date and ending on and including the Company's
Election Redemption Date, the Company shall have delivered Conversion Shares
upon conversion of the Notes to the Holders of the Notes on a timely basis as
set forth in Section 2(e)(ii) of this Note; (ii) on each day during the period
beginning 30 days prior to the date of Notice of Redemption at Company's
Election and ending on and including the Company's Election Redemption Date the
Registration Statement shall be effective and available for the sale of at least
all of the Registrable Securities (as defined in the Registration Rights
Agreement); (iii) on each day during the period beginning 30 days prior to the
date of Notice of Redemption at Company's Election and ending on and including
the Company's Election Redemption Date, the Common Stock is designated for
quotation on the Nasdaq National
-16-
<PAGE>
Market or listed on The New York Stock Exchange, Inc. and is not suspended from
trading (excluding suspensions of not more than one day resulting from business
announcements by the Company); and (iv) during the period beginning on the
Issuance Date and ending on and including the Company's Election Redemption
Date, there shall not have occurred a Triggering Event (which in the case of a
Triggering Event pursuant to Section 3(d)(vii) hereof, has not been cured or
waived) or an event that with the passage of time would constitute a Triggering
Event, assuming it is not cured. Notwithstanding the above, but subject to
Section 2(d) and Section 7, the Holder may convert any Conversion Amount
(including Conversion Amounts selected for redemption) into Common Stock
pursuant to Section 2(a) on or prior to the date immediately preceding the
Company's Election Redemption Date. If the Company fails to timely pay any
Company's Election Redemption Price in accordance with this Section 5, then the
Company shall not be permitted to submit another Notice of Redemption at
Company's Election without the prior written consent of the Holders of the Notes
representing at least two-thirds (2/3) of the Conversion Amounts of the Notes
then outstanding.
6. Conversion at the Company's Election. On any date during the period
------------------------------------
beginning on the date which is 30 days after the Registration Statement has been
declared effective by the SEC and ending on the date which is 549 days after the
Issuance Date of this Note, the Company shall have the right, in its sole
discretion, to require that all or portion of the outstanding Conversion Amount
of this Note be converted ("Company's Conversion Election") at the applicable
Conversion Rate; provided that the Conditions to Conversion at the Company's
Election (as set forth below) are satisfied. The Company shall exercise its
right to Company's Conversion Election by providing each Holder of the Notes
written notice ("Company's Conversion Election Notice") on such date by
facsimile and overnight courier. The date on which each of the Holders of the
Notes issued on the Issuance Date receives the Company's Conversion Election
Notice is referred to in this Note as the "Company's Conversion Election Notice
Date"). If the Company elects to require conversion of some, but not all, of
the Conversion Amounts of the Notes issued on the Issuance Date then
outstanding, the Company shall require conversion of the pro rata amount from
each Holder of such Notes based on the principal amount of Notes purchased by
such Holder on the Issuance Date relative to the aggregate principal amount of
all Notes purchased on such Issuance Date (such amount with respect to the
Holder being referred to herein as its "Pro Rata Conversion Amount"). The
Company's Conversion Election Notice shall indicate (x) the Conversion Amount of
Notes held by each Holder of Notes the Company has selected for conversion, (y)
the date selected by the Company for conversion ("Company's Election Conversion
Date"), which date shall be not less than 20 or more than 60 Business Days after
the Company's Conversion Election Notice Date, and (z) each Holder's pro rata
share of Conversion Amounts of the Notes selected for conversion as determined
in accordance with the immediately preceding sentence. Subject to the
satisfaction of all the conditions of this Section 6, on the Company's Election
Conversion Date the Holder of this Note will be deemed to have submitted a
Conversion Notice in accordance with Section 2(e)(i) for a Conversion Amount
equal to the result of (a) the Holder's Pro Rata Conversion Amount, minus (b)
the Conversion Amount of this Note converted by the Holder during the Company's
Mandatory Conversion Period (as defined below); provided, however, in no event
shall the Holder be required to convert a Conversion Amount during any Company's
Mandatory Conversion Period into a number of shares of Common Stock in excess of
the pro rata amount (determined
-17-
<PAGE>
in the same manner as the Pro Rata Conversion Amount above) of 15% of the
trading volume of the Common Stock on the Principal Market (as reported by
Bloomberg) during the Company's Mandatory Conversion Period. The Company may
terminate a Conversion at Company's Election prior to the Company's Election
Conversion Date with respect to Conversion Amounts not submitted for conversion
prior to the effective date of such termination by delivering written notice
("Company's Mandatory Conversion Period Termination Notice") to each Holder of
Notes issued on the Issuance Date at least five Business Days prior to the
effective date of such termination, provided that the Company has not previously
delivered two Company's Mandatory Conversion Period Termination Notices.
"Conditions to Conversion at the Company's Election" means the following
conditions: (i) on each day during the period beginning the date the SEC
declares the Registration Statement registering the Registrable Securities
effective and ending on and including the Company's Election Conversion Date,
the Registration Statement shall be effective and available for the sale of no
less than all of the Registrable Securities; (ii) on each day during the period
beginning on the Issuance Date and ending on and including the Company's
Election Conversion Date, the Common Stock is designated for quotation on the
Nasdaq Market or listed on The New York Stock Exchange, Inc. 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 Issuance Date and ending on
and including the Company's Election Conversion Date, there shall not have
occurred (A) an event constituting a Change of Control or a Triggering Event,
(B) an event that with the passage of time and without being cured would
constitute a Triggering Event, or (C) the public announcement of a pending
Change of Control which has not be abandoned or terminated; (iv) the aggregate
Conversion Amounts of the Notes issued on the Issuance Date selected for
conversion by the Company as reflected in the Company's Conversion Election
Notice is at least $300,000; (v) during the period beginning on the Issuance
Date and ending on and including the Company's Election Conversion Date, the
Company shall have delivered shares of Common Stock upon conversion of the this
Note and upon exercise of the Warrants to the Holder on a timely basis as set
forth in Section 2(e)(ii) of this Note and Sections 2(a) and 2(b) of the
Warrants, respectively; and (vi) the Company otherwise has satisfied its
obligations and is not in default under this Note, the Securities Purchase
Agreement, the Warrants and the Registration Rights Agreement. "Company's
Mandatory Conversion Period" means, with respect to any Company's Conversion
Election, the period beginning on and including the earlier of (i) the Company's
Conversion Election Notice Date and ending on and including the Company's
Election Conversion Date and (ii) the effective date of a Company's Mandatory
Conversion Period Termination Notice, which effective date shall not be fewer
than five (5) Business Days after each of the Holder of the Notes receipt of
such Notes.
7. Restrictions on Conversions. The right of a Holder to convert this
---------------------------
Note pursuant to Section 2(a) shall be limited as set forth below. Subject to
the exceptions described below, without the prior consent of the Company, the
Holder shall not be entitled to convert any Conversion Amount of this Note
during the period beginning on the Issuance Date of this Note and ending on and
including the date which is 548 days after such Issuance Date. Notwithstanding
the foregoing, the conversion restrictions set forth in this Section 7 shall not
apply: (a) during a Company's Mandatory Conversion Period, but only with
respect to the
-18-
<PAGE>
Conversion Amount set forth in a Company's Election Conversion Notice for the
Holder with respect to such Company Mandatory Conversion Period; (b) on and
after any date on which the Common Stock is not listed or quoted on the Nasdaq
National Market or The New York Stock Exchange, Inc. or has been suspended from
trading on any such exchange (excluding suspensions of not more than one day
resulting from business announcements by the Company), or any such delisting or
suspension is threatened or pending either (I) in writing by such exchanges or
(II) by falling below the minimum listing maintenance requirements of such
exchanges; (c) on or after any date on which there shall have occurred an event
constituting a Change of Control, a Triggering Event or an Event of Default or
an event that with the passage of time and without being cured would constitute
a Triggering Event or an Event of Default; (d) on or after any date on which
there shall have been an announcement of a pending Change of Control; (e) on or
after any date on which the Company issues or sells or is deemed to have issued
or sold any Convertible Securities that are convertible into or exercisable or
exchangeable for shares of Common Stock at a Variable Price, unless such
Variable Price is subject to a minimum price, which minimum price is not subject
to adjustment and is greater than the Fixed Conversion Price; (f) on or after
any date on which the Company fails to pay the Company's Election Redemption
Price for any portion of this Note in a timely manner in accordance with a
Redemption at Company's Election pursuant to Section 5; (g) on or after the date
the Company issues or sells any shares of Common Stock or any Convertible
Securities or Options (other than (A) upon conversion of the Notes or the
Warrants, (B) in connection with any employee or directors benefit plan which
has been approved by the Board of Directors of the Company, pursuant to which
the Company's securities may be issued to any employee, officer or director for
services provided to the Company, (C) options issued prior to the Issuance Date
under the Company's "distributor option plan" approved by the board of directors
of the Company, (D) up to 156,704 options issued after the Issuance Date under
the Company's "distributor 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 options, (E) the issuance of Common
Stock or warrants to purchase Common Stock as consideration for an acquisition
which shall be disclosed on a Form 8-K prior to or concurrent with the Form 8-K
required to be filed pursuant to Section 4(l) of the Securities Purchase
Agreement disclosing the Securities Purchase Agreement and the related
transactions, (F) a firm commitment, underwritten public offering, provided that
within three days of the closing of such underwritten public offering the
Company will have delivered to the Holder a Notice of Redemption at Company's
Election requiring the Company to redeem the remaining outstanding Conversion
Amount of such Holder's Note and the Company shall have fulfilled all of its
obligations under Section 5 within 20 Business Days of delivering such Notice of
Redemption of Company Election, with respect to a Conversion Amount of this Note
equal to the lesser of (I) the Holder's pro rata amount (determined as in
Section 6) of the consideration received by the Company in connection with such
issuance or sale and (II) the Conversion Amount of this Note then outstanding,
and (G) the issuance of up to 500,000 shares of the Company's Common Stock as
consideration in a merger or consolidation or for the acquisition of a business,
product, license or other asset by the Company, provided that the issuance price
of such shares of Common Stock is not less than the market price of the Common
Stock on the date of issuance; (h) on and after January 31, 2000 if the Company
fails to hold a meeting of its Stockholders for the purpose of approving the
issuance of the Conversion Shares upon conversion of the Notes and the Warrant
Shares (as defined in the Securities Purchase
-19-
<PAGE>
Agreement) upon exercise of the Warrants in accordance with Section 4(k) of the
Securities Purchase Agreement and the applicable laws and the rules and
regulations of the Nasdaq National Market on or prior to January 31, 2000, or
such a meeting of stockholders is held on or prior to such date but the
stockholders fail to approve of such proposal; or (i) on and after the date
which is 15 months after the Initial Closing Date if there remains outstanding
at least 75% of the aggregate original principal amounts of all Notes issued by
the Company pursuant to this Agreement and the Company's unrestricted cash, as
reflected on the balance sheet included in the Company's most recent Form 10-Q,
is less than the aggregate Conversion Amounts of all Notes outstanding on the
date which is 15 months after the Initial Closing Date, then with respect to a
Conversion Amount equal to 25% of the aggregate original principal amounts (plus
accrued interest thereon) of the Notes issued to the Holder of this Note
pursuant to the Securities Purchase Agreement.
8. Reservation of Shares. The Company shall, so long as any principal
---------------------
amount of the Note is outstanding, reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Notes, such number of shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all of the principal
amount of the Notes then outstanding; provided that the number of shares of
Common Stock so reserved shall at no time be less than 200% of the number of
shares of Common Stock for which the principal amount of the Notes are at any
time convertible. The initial number of shares of Common Stock reserved for
conversions of the Notes and each increase in the number of shares so reserved
shall be allocated pro rata among the Holders of the Notes based on the
principal amount of the Notes held by each Holder at the time of issuance of the
Notes or increase in the number of reserved shares, as the case may be. In the
event a Holder shall sell or otherwise transfer any of such Holder's Notes, each
transferee shall be allocated a pro rata portion of the number of reserved
shares of Common Stock reserved for such transferor. Any shares of Common Stock
reserved and allocated to any Person which ceases to hold any Notes shall be
allocated to the remaining Holders, pro rata based on the principal amount of
the Notes then held by such Holders.
9. Voting Rights; Rank. Holders shall have no voting rights, except as
-------------------
required by law, including but not limited to the General Corporation Law of the
State of Delaware, and as expressly provided in this Note. Payments of
principal and interest and other payments due under this Note, except as
otherwise provided herein, shall rank pari passu with and shall not be
subordinated to any other unsecured debt obligations of the Company.
10. Restriction on Redemption and Cash Dividends. Until all of the
--------------------------------------------
Conversion Amount of this Note has been converted, redeemed or otherwise
satisfied as provided herein, the Company shall not, directly or indirectly,
redeem, or declare or pay any cash dividend or distribution on, its capital
stock without the prior express written consent of the Holders of Notes
representing at least fifty-one percent (51%) of the Conversion Amount of the
Notes then outstanding, except for payments on convertible securities of the
Company outstanding on the Issuance Date pursuant to the terms of such
convertible securities as in effect on the Issuance Date.
-20-
<PAGE>
11. Restriction on Hedging Activity. Subject to the exceptions described
-------------------------------
below, during the period beginning on the Initial Closing Date (as defined in
the Securities Purchase Agreement) and ending on the date which is 549 days
after the Initial Issuance Date, neither such Buyer nor any of its affiliates
shall engage, directly or indirectly, in any transaction constituting a "short
sale" (as defined in rule 3b-3 of the Securities Exchange Act of 1934, as
"Short Sales"); provided, however, that the Holder and its affiliates are
entitled to engage in transactions which constitute Short Sales to the extent
that following such transaction the aggregate short position of the Holder and
its affiliates does not exceed the sum of (a) the number shares of Common Stock
equal to the number of shares of Common Stock the Holder and its affiliates have
the right to acquire upon exercise of the Warrants held by the Holder and its
affiliates (without regard to any limitations on exercises of the Warrants),
plus (b) during the period beginning the first day of a Company Mandatory
Conversion Period and ending on and including the date which is last day of such
Company Mandatory Conversion Period, that number of shares of Common Stock equal
to the quotient of (i) the Conversion Amount set forth in a Company's Notice of
Mandatory Conversion for such Holder and its affiliates with respect to such
Company Mandatory Conversion Period, divided by (ii) 95% of the average of the
Weighted Average Price of the Common Stock on each trading day during the period
beginning on the first day of such Company Mandatory Conversion Period and
ending on and including the earlier of (A) the last trading day of such Company
Mandatory Conversion Period and (B) the date as of which the determination is
being made for purposes of this Section 11. Notwithstanding the foregoing, the
restriction on Short Sales set forth in the first sentence of this Section 11
shall not apply (I) on and after the first date on which there shall have
occurred a Triggering Event or an event that with the passage of time would
constitute a Triggering Event, assuming it is not cured, (II) on and after
January 31, 2000, if the Company fails to hold a meeting of its stockholders for
the purpose of approving the issuance of the Conversion Shares upon conversion
of the Notes and the Warrant Shares upon exercise of the Warrants in accordance
with Section 4(k) of the Securities Purchase Agreement and the applicable laws
and the rules and regulations of the Nasdaq National Market on or prior to
January 31, 2000, or such a meeting of stockholders is held on or prior to such
date but the stockholders fail to approve of such proposal and (III) on or after
any date on which the Company issues or sells or is deemed to have issued or
sold any Convertible Securities that are convertible into or exercisable or
exchangeable for shares of Common Stock at a Variable Price, unless such
Variable Price is subject to a minimum price, which minimum price is not subject
to adjustment and is greater than the Fixed Conversion Price.
12. Limitation on Number of Conversion Shares. The Company shall not be
-----------------------------------------
obligated to issue any shares of Common Stock upon conversion of this Note if
the issuance of such shares of Common Stock would exceed that number of shares
of Common Stock which the Company may issue upon Conversion of this Note (the
"Exchange Cap") without breaching the Company's obligations under the rules or
regulations of the Principal Market, or the market or exchange where the Common
Stock is then traded, except that such limitation shall not apply in the event
that the Company (a) obtains the approval of its stockholders as required by the
applicable rules of the Principal Market, or the market or exchange where the
Common Stock is then traded, (or any successor rule or regulation) for issuances
of Common Stock in excess of such amount, or (b) obtains a written opinion from
outside counsel to the Company that such approval is not
-21-
<PAGE>
required, which opinion shall be reasonably satisfactory to the Holders of a
majority of the principal amount of the Notes then outstanding. Until such
approval or written opinion is obtained, or such action is taken by the required
number of Holders of the Notes, no purchaser of Notes pursuant to the Securities
Purchase Agreement (the "Purchasers") shall be issued, upon conversion of this
Note, shares of Common Stock in an amount greater than the product of (i) the
Exchange Cap amount multiplied by (ii) a fraction, the numerator of which is the
principal amount of the Notes issued to such Purchaser pursuant to the
Securities Purchase Agreement and the denominator of which is the aggregate
principal amount of all Notes issued to the Purchasers pursuant to the
Securities Purchase Agreement (the "Cap Allocation Amount"). In the event that
any Purchaser shall sell or otherwise transfer any of such Purchaser's Notes,
the transferee shall be allocated a pro rata portion of such Purchaser's Cap
Allocation Amount. In the event that any Holder of Notes, shall convert all of
such Holder's Notes into a number of shares of Common Stock which, in the
aggregate, is less than such Holder's Cap Allocation Amount, then the difference
between such Holder's Cap Allocation Amount and the number of shares of Common
Stock actually issued to such Holder shall be allocated to the respective Cap
Allocation Amounts of the remaining Holders of Notes on a pro rata basis in
proportion to Conversion Amount of Notes then held by each such Holder.
13. Reissuance of Notes. Subject to Section 2(e)(viii) in the event of a
-------------------
conversion or redemption pursuant to this Note of less than all of the
Conversion Amount represented by this Note, the Company shall promptly cause to
be issued and delivered to the Holder, upon tender by the Holder of the Note
converted or redeemed, a new note of like tenor representing the remaining
principal amount of this Note which has not been so converted or redeemed.
14. Defaults and Remedies.
---------------------
(a) Events of Default. An "Event of Default" is: (i) default for
-----------------
thirty (30) days in payment of interest or Default Interest on this Note on
or after the Maturity Date; (ii) default in payment of the principal amount
of this Note when and as due; (iii) failure by the Company for thirty (30)
days after notice to it to comply with any other material provision of this
Note; (iv) any default under or acceleration prior to maturity of any
mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any indebtedness for money borrowed
of at least $500,000 by the Company or for money borrowed the repayment of
at least $500,000 of which is guaranteed by the Company, whether such
indebtedness or guarantee now exists or shall be created hereafter, (v) if
the Company pursuant to or within the meaning of any Bankruptcy Law; (A)
commences a voluntary case; (B) consents to the entry of an order for
relief against it in an involuntary case; (C) consents to the appointment
of a Custodian of it or for all or substantially all of its property; (D)
makes a general assignment for the benefit of its creditors; or (E) admits
in writing that it is generally unable to pay its debts as the same become
due; or (vi) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that: (1) is for relief against the Company in an
involuntary case; (2) appoints a Custodian of the Company or for all or
substantially all of its property; or (3) orders the liquidation of the
Company or any subsidiary, and the order or decree remains unstayed and in
effect for ninety (90) days. The Term "Bankruptcy
-22-
<PAGE>
Law" means Title 11, U.S. Code, or any similar Federal or State Law for the
relief of debtors. The term "Custodian" means any receiver, trustee,
assignee, liquidator or similar official under any Bankruptcy Law.
(b) Remedies. If an Event of Default occurs and is continuing, the
--------
Holder of this Note may declare all of this Note, including any interest
and Default Interest and other amounts due, to be due and payable
immediately, except that in the case of an Event of Default arising from
events described in clauses (iv) and (v) of Section 13(a), this Note shall
become due and payable without further action or notice. Holder may not
enforce the provisions of this Section 14 except as provided in this
Section 14. In addition to any remedy such Holder of the Notes may have
under this Note and the Securities Purchase Agreement, such unpaid amount
shall bear interest at the rate of 1.5% per month (prorated for partial
months) until paid in full
15. Vote to Change the Terms of Notes. This Note and any provision
----------------------------------
hereof may only be amended by an instrument in writing signed by the Company and
Holders of a majority of the aggregate Conversion Amount of the Notes then
outstanding. The term "Note" and all reference thereto, as used throughout this
instrument, shall mean this instrument (and the other Notes issued pursuant to
the Securities Purchase Agreement) as originally executed, or if later amended
or supplemented, then as so amended or supplemented.
16. Lost or Stolen Notes. Upon receipt by the Company of evidence
--------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Note, and, in the case of loss, theft or destruction, of an indemnification
undertaking by the Holder to the Company in a form reasonably acceptable to the
Company and, in the case of mutilation, upon surrender and cancellation of the
Notes, the Company shall execute and deliver new notes of like tenor and date;
provided, however, the Company shall not be obligated to re-issue notes if the
Holder contemporaneously requests the Company to convert such remaining
principal amount into Common Stock.
17. Payment of Collection, Enforcement and Other Costs. If: (i) this Note
--------------------------------------------------
is placed in the hands of an attorney for collection or enforcement or is
collected or enforced through any legal proceeding; or (ii) an attorney is
retained to represent the Holder of this Note in any bankruptcy, reorganization,
receivership of the Company or other proceedings affecting Company creditors'
rights and involving a claim under this Note.
18. Cancellation. After all principal and accrued interest at any time
------------
owed on this Note has been paid in full, this Note shall automatically be deemed
canceled, shall be surrendered to the Company for cancellation and shall not be
reissued.
19. Note Exchangeable for Different Denominations. This Note is
---------------------------------------------
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Note or Notes (in principal amounts of at least $100,000)
containing the same terms and conditions and representing in the aggregate the
principal amount of this Note, and each such new Note will represent such
portion of such principal amount as is designated by the Holder at the time of
such
-23-
<PAGE>
surrender. The date the Company initially issues this Note will be deemed to be
the "Issuance Date" hereof regardless of the number of times a new Note shall be
issued.
20. Waiver of Notice. To the extent permitted by law, the Company hereby
----------------
waives demand, notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance, default or enforcement of this Note
and the Securities Purchase Agreement.
21. Governing Law. This Note shall be construed and enforced in
-------------
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the laws of
the State of New York, without giving effect to provisions thereof regarding
conflict of laws.
22. Remedies, Characterizations, Other Obligations, Breaches and
------------------------------------------------------------
Injunctive Relief. The remedies provided in this Note shall be cumulative and
- -----------------
in addition to all other remedies available under this Note, at law or in equity
(including a decree of specific performance and/or other injunctive relief), no
remedy contained herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy and nothing herein shall limit a Holder's
right to pursue actual damages for any failure by the Company to comply with the
terms of this Note. The Company covenants to each Holder of Notes that there
shall be no characterization concerning this instrument other than as expressly
provided herein. Amounts set forth or provided for herein with respect to
payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the Holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holders of the Notes
and that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the
Holders of the Notes shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.
23. Specific Shall Not Limit General; Construction. No specific provision
----------------------------------------------
contained in this Note shall limit or modify any more general provision
contained herein. This Note shall be deemed to be jointly drafted by the
Company and all Holders and shall not be construed against any person as the
drafter hereof.
24. Failure or Indulgence Not Waiver. No failure or delay on the part of
--------------------------------
this Note in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
25. Notices. Whenever notice is required to be given under this Note,
-------
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement.
-24-
<PAGE>
26. Subordination Provisions Generally.
----------------------------------
(a) Subject to the provisions of this Section 26 and Section 27
hereof, this Note is hereby made and declared to be subject and subordinate to
the prior payment in full of all indebtedness of the Company and or USA Leasing,
LLC (the "Lessor") to Bank of America, N.A. (formerly, NationsBank, N.A.) (the
"Bank") pursuant to that certain loan agreement dated as of December 31, 1998
between the Company and the Bank as amended by the amendment to loan agreement
dated June 14, 1999, and that certain loan agreement dated December 31, 1998
between the Lessor and the Bank (the "Loan Agreement") whether now existing or
hereafter incurred, including, without limitation, all principal (up to but not
exceeding Twenty-Five Million Dollars ($25,000,000)), accrued interest
(including interest accruing after the date on which the Company becomes subject
to any federal or state debtor relief statute, whether or not recoverable
against the Company or the Lessor), collection costs and other fees or expenses
incurred by the Bank in connection therewith, (collectively, the "Senior Debt").
The Bank may, at any time, in its discretion, renew, modify, or extend the time
for payment of all or any portion of the Senior Debt, or waive or release any
collateral which may be held therefor, or enter into any other agreement with
the Company and or the Lessor as Bank may deem desirable, all without any notice
to or any assent from the Holder and without in any way affecting Bank's rights
hereunder, providing, however, that the Bank shall not, either through
amendment, waiver, or separate agreement exceed the existing maximum debt limit
of $25,000,000 under the Senior Debt.
(b) Subject to the provisions set forth in Section 27 below limiting
the extent of the subordination provisions set forth herein, the Holder
hereof agrees that:
(i) it will not ask, demand, sue for, take, receive or accept any
payment in cash of or under this Note;
(ii) it will not exercise any right or option hereunder to redeem
in cash all or any part of this Note at or prior to the maturity
hereof, unless and until the Senior Debt shall have been fully and
indefeasibly paid and discharged; and
(iii) if any payment is received by the Holder on account of
this Note prior to such full payment of this Note, such payment shall
be held in trust by
-25-
<PAGE>
the Holder for the benefit of the Bank, and shall be delivered to the Bank
in kind (with any necessary indorsement or instrument of transfer) to be
applied to the Senior Debt.
(c) Upon the distribution of any of the Company's assets, whether by
reason of sale, reorganization, liquidation, dissolution, arrangement,
bankruptcy, receivership, assignment for the benefit of creditors,
foreclosure or otherwise, the Bank shall be entitled to receive payment in
full of the Senior Debt prior to the payment of all or any part of this
Note. Bank is hereby irrevocably appointed attorney-in-fact for the Holder
for the purpose of making, presenting, filing and voting such proofs of
claim against the Company on account of all or any part of this the
indebtedness represented by this Note as Bank deems advisable, but, such
power of attorney does not include, nor is it intended to include, any
ability of the Bank to amend the terms of this Note or exercise any of the
conversion rights set forth herein.
(d) So long as the Senior Debt is outstanding, the Holder will not,
without the prior written consent of the Bank commence or join with any
other creditor in commencing any bankruptcy, reorganization or insolvency
proceeding against the Company, unless the Bank has already commenced such
a proceeding or the Company has voluntarily initiated its own such
proceeding.
(e) The subordination of this Note is continuing and irrevocable, and
is binding upon and enforceable against the Company, the Holder, and their
successors and assigns, and shall extend to and for the benefit of the
Bank, and any other holder of the Senior Debt. The Company acknowledges
that any attempted or purported termination by the Company of the
subordination provisions of this Note shall constitute a default under the
Senior Debt. Any Note that renews, replaces, substitutes for or supercedes
this Note, in whole or in part, and any modification or amendment hereof,
shall be deemed to be subject to the subordination provisions set forth
hereinabove, and the Company agrees that is will not issue any such Note,
or modify or amend this Note, without the prior written approval of the
Bank.
27. Limitations on Subordination Provisions Generally. The subordination
provisions set forth in Section 26 above are limited to the extent set forth in
this Section 27:
(a) Each of the Company and the Holder may exercise any conversion
right or option under this Note pursuant to which all or any portion of the
Conversion Amount of this Note may be converted to Common Stock of the
Company.
(b) The subordination provisions set forth in Section 26 above shall
not, and are not intended to, prohibit the Holder of this Note from giving
the Company notice of the occurrence of an Event of Default, a Triggering
Event or of the intention of the Holder to convert all or a portion of the
balance due under this Note into Common
-26-
<PAGE>
Stock.
(c) Notwithstanding the subordination provisions set forth in Section
26 above, upon the occurrence of a Triggering Event under Sections 3(b)(i),
3(b)(ii), 3(b)(iv) or 3(b)(vi), the Holder may give a Notice of Redemption
at Option of Buyer and the Holder shall be entitled to exercise all of its
remedies hereunder, and the Company shall honor its obligations under this
Note, including, without limitation, its obligations under Section 3
hereof. The Holder shall be entitled to retain for its own account,
without regard to the subordination provisions set forth herein and without
any obligation to account to the Bank, any amounts paid to the Holder by
the Company pursuant to Section 3 hereof as a result of such Triggering
Events or without any obligation to hold in trust for the Bank, any such
amounts so received.
(d) Notwithstanding the subordination provisions set forth in Section
26 above, upon the occurrence of a Triggering Event under Sections
3(b)(iii), 3(b)(v), 3(b)(vii) or 3(b)(viii), the Holder may give a Notice
of Redemption at Option of Buyer. Any amounts received by the Holder during
such Payment Block Period shall be subject to the provisions of Section 26
above. Upon the expiration of any Payment Block Period, and so long as the
Company is not the subject of any bankruptcy or insolvency proceeding, the
Holder shall be entitled to receive any amounts paid by the Company
hereunder without any obligation to account to the Bank for any such
amounts or without any obligation to hold in trust for the Bank, any such
amounts so received.
-27-
<PAGE>
* * * * *
-28-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed by
___________________, its ___________________________, as of the ____ day of
____________, ______.
BLUE RHINO CORPORATION
By:___________________________
Name:_________________________
Title:________________________
<PAGE>
EXHIBIT I
BLUE RHINO CORPORATION
CONVERSION NOTICE
Reference is made to the Note issued by Blue Rhino Corporation (the "Company").
In accordance with and pursuant to the Note, the undersigned hereby elects to
convert the Conversion Amount (as defined in the Note) of the Note, indicated
below into shares of Common Stock, par value $.001 per share (the "Common
Stock"), of the Company as of the date specified below.
Date of Conversion: _________________________________________
Aggregate Conversion Amount to be converted: _________________________
Note no(s). of Note to be converted: _________________________________
Please confirm the following information:
Conversion Price: _______________________________________________
Number of shares of Common Stock to be issued: ________________________
Is the alternative Daily Market Price being relied on pursuant to Section
2(g)(ii) of the Note? (check one) YES ____ No ____
Please issue the Common Stock into which the Note is being converted and, if
applicable, any check drawn on an account of the Company in the following name
and to the following address:
Issue to: ___________________________________
___________________________________
___________________________________
Facsimile Number: ___________________________________
Authorization: ___________________________________
By: _______________________________
Title: ____________________________
Dated: ___________________________________
Account Number:
(if electronic book entry transfer): ___________________________________
Transaction Code Number
(if electronic book entry transfer): ___________________________________
<PAGE>
ACKNOWLEDGMENT
--------------
The Company hereby acknowledges this Conversion Notice and hereby directs
[TRANSFER AGENT] to issue the above indicated number of shares of Common Stock
in accordance with the Transfer Agent Instructions dated ___________ ___, 1999
from the Company and acknowledged and agreed to by [TRANSFER AGENT].
BLUE RHINO CORPORATION
By: __________________________
Name:
Title:
<PAGE>
EXHIBIT 10.3
ASSET PURCHASE AGREEMENT
AMONG
BLUE RHINO CORPORATION
AND
BISON VALVE, L.L.C.
AND
MICHAEL A. WATERS
<PAGE>
ASSET PURCHASE AGREEMENT
Agreement entered into on as of September 17, 1999, among Blue Rhino
Corporation, a Delaware corporation (the "Buyer"), on the one hand and Bison
Valve, L.L.C., an Illinois limited liability company ("Bison"), and Michael A.
Waters ("Waters") (collectively Bison and Waters are referred to herein as the
"Sellers"). The Buyer and the Sellers are referred to collectively herein as
the "Parties."
This Agreement contemplates a transaction in which the Buyer will purchase
certain of the assets and assume certain of the liabilities of the Sellers in
return for the cancellation of the Convertible Note, and all interest due
thereunder, cash consideration, the Buyer Warrant and the Deferred Purchase
Price payments.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. Definitions.
-----------
"Accredited Investor" has the meaning set forth in Regulation D promulgated
under the Securities Act.
"Acquired Assets" means all right, title, and interest in and to (a) all
assets of Bison directly relating to or necessary for the manufacture or sale of
the OPD Valve, consisting of all tangible personal property (such as machinery,
equipment, inventories of raw materials and supplies, manufactured and purchased
parts, goods in process and finished goods, tools, jigs, molds and dies) listed
on Schedule 1(a), (b) the OPD Intellectual Property, goodwill associated
therewith, licenses and sublicenses granted and obtained with respect thereto,
and rights thereunder, remedies against infringements thereof, and rights to
protection of interests therein under the laws of all jurisdictions (c) Bison's
accounts, notes, and other receivables arising from the sale of the OPD Valve,
(d) Bison's claims, deposits, prepayments, refunds, causes of action, chooses in
action, rights of recovery, rights of set off (except those which could be
asserted against any Person making a claim against Bison which claim was not
included as an Assumed Liability) and rights of recoupment, (e) Bison's
assignable approvals, permits, licenses, orders, registrations, certificates,
variances, and similar rights obtained from governments and governmental
agencies relating to the manufacture, import or sale of the OPD Valve by Bison,
and (f) books, records, ledgers, files, documents, correspondence, lists,
drawings, and specifications, creative materials, advertising and promotional
materials, studies, reports, and other printed or written materials related to
the manufacture or sale of the OPD Valve; provided, however, that the Acquired
-----------------
Assets shall not include (i) any documents relating to the organization,
maintenance, and existence of Bison as a limited liability company, (ii) any of
the rights of the Sellers under this Agreement (or under any side agreement
between any Seller on the one hand and the Buyer on the other hand entered into
on or after the date of this Agreement), (iii) any of the assets listed on
Schedule 1, (iv) assets relating to either the propane heater, cylinder or
2
<PAGE>
cylinder valve business of the Sellers or Cash on hand.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
Section 1504(a) or any similar group defined under a similar provision of state,
local, or foreign law.
"Assumed Liabilities" means (a) up to $50,000 of Bison's trade accounts
payable as reflected or included on the Most Recent Balance Sheet or incurred by
Bison between the date of the Most Recent Balance Sheet and the Closing Date in
the Ordinary Course of Business, consistent with past practices of Bison and
without violation of this Agreement, that have not been satisfied or discharged
(unless with borrowed funds, in which case the loan will be assumed in place of
the account payable) on or prior to the Closing Date (b) the liabilities for
payment under and performance of all contracts included in the Acquired Assets
provided, however, that the Assumed Liabilities shall not include (i) any
- -----------------
Liability of any Seller for Taxes, (ii) any Liability of any Seller for the
unpaid Taxes of any Person under Reg. Section 1.1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or successor, by contract, or
otherwise, (iii) any obligation of any Seller to indemnify any Person (including
any of the Seller Members) by reason of the fact that such Person was the
manager, officer, employee, or agent of Bison or was serving at the request of
any such entity as a partner, trustee, director, officer, employee, or agent of
another entity (whether such indemnification is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses, expenses, or
otherwise and whether such indemnification is pursuant to any statute, charter
document, bylaw, agreement, or otherwise), (iv) any Liability of any Seller
arising under an Employee Benefit Plan that the Seller maintains, or (v) any
Liability arising out of product liability claims related to OPD Valves
designed, manufactured, imported or sold by any Bison, or (vi) any Liability or
obligation of any Seller under this Agreement (or under any side agreement
between any Seller on the one hand and the Buyer on the other hand entered into
on or after the date of this Agreement).
"Average Closing Price" means the average closing price for a share of the
Buyer's common stock, as listed in The Wall Street Journal, Central Edition, for
the five trading days prior to the date of this Agreement.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or reasonably could be expected to
form the basis for any specified consequence.
"Benchmark Price" has the meaning set forth in Section 2(g).
"Bison" has the meaning set forth in the preface above.
"Bison Manager" means Waters.
3
<PAGE>
"Buyer" has the meaning set forth in the preface above.
"Buyer Warrant" means a warrant, in the form attached hereto as Exhibit A,
to acquire 100,000 shares of the Common Stock, at an exercise price equal to the
Average Closing Price as of the Closing Date.
"Cash" means cash and cash equivalents (including marketable securities and
short term investments) calculated in accordance with GAAP applied on a basis
consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 2(d) below.
"Closing Date" has the meaning set forth in Section 2(d) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Buyer's Common Stock, par value $.001 per share.
"Convertible Note" means the Convertible Note, dated as of February 12,
1998, issued by Bison payable to the Buyer.
"Cost of Goods Sold" has the meaning set forth in Section 2(g)(i).
"Deferred Purchase Price" has the meaning set forth in Section 2(g).
"Deferred Payment Term" has the meaning set forth in Section 2(g)(i).
"Disclosure Schedule" has the meaning set forth in Section 3 below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement, (b) qualified defined contribution retirement
plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement which is an Employee Pension
Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare Benefit
Plan or material fringe benefit or other retirement, bonus, or incentive plan or
program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(1).
"Environmental, Health, and Safety Requirements" shall mean all federal,
state, local and foreign statutes, regulations, ordinances and other provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety, and pollution or protection of the
4
<PAGE>
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation, each as amended and as now or
hereafter in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Fair Market Value" has the meaning set forth in Section 2(g)(i).
"Financial Statement" has the meaning set forth in Section 3(g) below.
"First Patent Application" means patent application number 09/039,663 filed
with the United States Patent and Trademark Office on March 16, 1998 and
including the results of any amendments, continuations, continuation in part,
divisionals, re-examinations, re-issues similar procedures
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Gross Profits" has the meaning set forth in Section 2(g)(i).
"Indemnification Agreement" means the Indemnification Agreement among the
Buyer, Bison and Waters entered into concurrently herewith and attached hereto
as Exhibit B.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Intellectual Property Assignment" means the Intellectual Property
Assignment attached hereto as Exhibit C-2.
5
<PAGE>
"Knowledge" means actual knowledge of Waters.
"Liability" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"License Agreement" means the License Agreement, dated as of February 12,
1998, by and between Waters and Bison, attached hereto as Exhibit B.
"Most Recent Balance Sheet" means the balance sheet contained within the
Financial Statements.
"Most Recent Fiscal Quarter End" has the meaning set forth in Section 3(g)
below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"New License Agreement" means the License Agreement, dated of even date
herewith between the Buyer and Waters, attached hereto as Exhibit D.
"OPD Intellectual Property" means all Intellectual Property related to the
OPD Valve but shall not include any Intellectual Property relating to either the
propane heater, cylinder or cylinder valve (other than the OPD Valve) businesses
of the Sellers.
"OPD Valve" means the invention that is the subject of the License
Agreement.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"OPD Patent" means any patent which may be issued in the future with
respect to the OPD Valve as applied for in the Patent Applicaitons.
"Patent Applications" means the First Patent Application and the Second
Patent Application.
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, a limited
liability company, a legal entity, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization, or a governmental entity
(or any department, agency, or political subdivision thereof).
"Purchase Price" has the meaning set forth in Section 2(c) below.
6
<PAGE>
"Second Patent Application" means patent application number 09/362,791
filed with the United States Patent and Trademark Office on July 28, 1999 and
including the results of any amendments, continuations, continuation in part,
divisionals, re-examinations, re-issues similar procedures
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest.
"Subsidiary" means any corporation or other Person with respect to which a
specified Person (or a Subsidiary thereof) owns more than eighty percent (80%)
of the equity interests.
"Sellers" has the meaning set forth in the preface above.
"Seller LLC Agreement" means the Operating Agreement of the Bison, dated as
of February 12, 1998.
"Seller Member" means any person who or which is a member of Bison.
"Seller Membership Interest" means the membership interests of Bison.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
environmental (including taxes under Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Trademark Assignment" means the Trademark Assignment in the for attached
hereto as Exhibit C-1.
"Waters" has the meaning set forth in the preface above.
7
<PAGE>
2. Basic Transaction.
-----------------
(a) Purchase and Sale of Assets. On and subject to the terms and
---------------------------
conditions of this Agreement, the Buyer agrees to purchase from the Sellers, and
the Sellers agree to sell, transfer, convey, and deliver to the Buyer, all of
the Acquired Assets at the Closing for the consideration specified below in this
Section 2.
(b) Assumption of Liabilities. On and subject to the terms and conditions
-------------------------
of this Agreement, the Buyer agrees to assume and become responsible for all of
the Assumed Liabilities at the Closing. The Buyer will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Sellers not included within the definition of Assumed Liabilities.
(c) Purchase Price. The Purchase price shall consist of (i) the
--------------
cancellation of the Convertible Note and any accrued and unpaid interest due
thereunder, (ii) the payment of $1,123,000 in cash and (iii) the Buyer Warrant,
(iv) the assumption of the Assumed Liabilities and (v) the Deferred Purchase
Price payments payable to Waters.
(d) The Closing. The closing of the transactions contemplated by this
-----------
Agreement (the "Closing") shall take place at the offices of Pedersen & Houpt in
Chicago, Illinois, commencing at 11:00 a.m. local time on or before September
30, 1999 or such other date as the Parties may mutually determine (the "Closing
Date").
(e) Deliveries at the Closing. At the Closing,
-------------------------
(i) Sellers shall deliver to the Buyer:
(A) the various certificates, instruments, and documents referred
to in Section 6(a) below and;
(B) a Trademark Assignment in the form attached hereto as Exhibit
C-1,
(C) an Intellectual Property Assignment in the form attached
hereto as Exhibit C-2;
(D) an Assignment and Assumption Agreement the form attached
hereto as Exhibit C-3;
(E) a termination of the License Agreement;
(F) the New License Agreement;
(G) copies of all necessary third-party consents; and
8
<PAGE>
(H) such other instruments of sale, transfer, conveyance, and
assignment as the Buyer and its counsel reasonably may request,
including an Amendment of Bison's Articles of Organization to
effectuate a change of name which shall be filed by the Bison
within 15 days of the Closing Date.
(ii) the Buyer will deliver to the Sellers:
(A) the various certificates, instruments, and documents referred
to in Section 6(b) below;
(B) the Convertible Note marked "canceled and paid in full";
(C) Cash in the amount of $1,123,000 payable by wire transfer or
delivery of other immediately available funds:
(D) the fully executed Buyer Warrant;
(E) the Assignment and Assumption Agreement in the form attached
hereto as Exhibit C-3;
(F) the New License Agreement; and
(G) such other instruments of assumption as the Sellers and its
counsel reasonably may request.
(f) Allocation. The Parties agree to allocate the Purchase Price (and all
----------
other capitalizable costs) among the Acquired Assets for all purposes (including
financial accounting and tax purposes) in accordance with the allocation
schedule attached hereto as Exhibit E.
(g) Deferred Purchase Price.
-----------------------
(i) The "Deferred Purchase Price " shall mean payments from the Buyer
to Waters pursuant to the Schedule of Deferred Payments within thirty (30)
days of the close of each and every calendar quarter for the life of the OPD
Patent or twenty-two years, whichever is less (the "Deferred Payment Term")
except that Buyer shall make Deferred Purchase Price payments to Waters for
the last quarter of the year within ninety (90) days of the close of each and
every calendar year of the Deferred Payment Term, at which time adjustments,
if any, to Gross Profit and payments will be made based on fiscal year end
audited financial statements of the Buyer. The Schedule of Deferred Payments
in Section 2(g)(ii) below is based on the Benchmark Price at open market (the
"Fair Market Value") of the OPD Valve and the gross profits from sales of the
OPD Valve (the "Gross Profits"). For purposes of this Agreement, "Benchmark
Price" shall mean the price at which the OPD Valves are sold, unless
otherwise agreed by the parties in good faith. In the event OPD
9
<PAGE>
Valves are sold as a component of other products sold by the Buyer, the
Benchmark Price for such OPD Valves shall equal the Benchmark Price
determined by reference to the average sales price for OPD Valves over the
previous ninety (90) days in sales which the OPD Valves were not sold as a
component of another product. For purposes of this Agreement, Gross Profits
shall mean the profit from sales of OPD Valves at Fair Market Value minus
all Costs of Goods Sold. For purposes of this Agreement, "Costs of Goods
Sold" shall mean cost of material, direct labor, subcontract production,
warranty on a cash basis including only the cost of and freight for
replacement units, duty, freight in, shop supplies, and shipping supplies
and production machinery depreciation and production tooling depreciation,
as determined in accordance with generally accepted accounting principles
consistently applied. Buyer's Deferred Purchase Price payments to Waters
shall be accompanied by a report setting forth, Fair Market Value, Gross
Profit, and sales of the OPD Valves for the appropriate period(s). Buyer
will keep records showing the products sold or otherwise disposed of during
the Term in such detail as to enable the amounts payable hereunder to be
easily determined. Buyer shall also permit its books and records to be
examined by Waters up to twice annually to the extent necessary to verify
the sales, Gross Profit, Fair Market Value, Cost of Goods Sold, and
payments provided for herein. Such examination shall be made during normal
business hours, at times convenient to Waters and Buyer.
(ii) Schedule of Deferred Payments
Deferred Purchase Price payments to be made on behalf of OPD
Valves shall be made according to the following schedule:
(A) If Gross Profits are greater than or equal to seventy percent
(70%) of the Fair Market Value sales of the OPD Valves, then the
Deferred Purchase Price payments shall be twelve and one-half percent
(12.5%) of the Fair Market Value sales of the OPD Valves.
(B) If Gross Profits are greater than or equal to sixty percent
(60%) but less than seventy percent (70%) of the Fair Market Value
sales of the OPD Valves, then the Deferred Purchase Price payments
shall be ten percent (10%) of the Fair Market Value sales of the OPD
Valves.
(C) If Gross Profits are greater than or equal to fifty percent
(50%) but less than sixty percent (60%) of the Fair Market Value sales
of the OPD Valves, then the Deferred Purchase Price payments shall be
seven and one-half percent (7.5%) of the Fair Market Value sales of
the OPD Valves.
(D) If Gross Profits are greater than or equal to forty percent
(40%) but less than fifty percent (50%) of the Fair Market Value sales
of the OPD Valves, then the Deferred Purchase Price payments shall be
five percent (5%) of the Fair Market
10
<PAGE>
Value sales of the OPD Valves.
(E) If Gross Profits are less than forty percent (40%) of the
Fair Market Value sales of the OPD Valves, then the Deferred Purchase
Price payments shall be two and one-half percent (2.5%) of the Fair
Market Value sales of the OPD Valves.
3. Representations and Warranties of the Sellers. Bison represents and
---------------------------------------------
warrants to the Buyer that the statements that are made by Bison contained in
this Section 3 are correct and complete as applied to Bison as of the date of
this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 3), except as set forth in the disclosure
schedule accompanying this Agreement and initialed by the Parties (the
"Disclosure Schedule"). Waters represents and warrants that the statements that
are made by Waters in this Section 3 are correct ad complete as applied to
Waters as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement) except as set forth on the
Disclosure Schedule The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this Section
3.
(a) Organization of the Seller. Bison represents that it is a limited
--------------------------
liability company, duly organized, validly existing, and in good standing under
the laws of the State of Illinois.
(b) Authorization of Transaction. (i) Bison represents that it has full
----------------------------
power and authority (including full company power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. Without
limiting the generality of the foregoing, the Seller Members and the Bison
Manager have duly authorized the execution, delivery, and performance of this
Agreement by Bison. This Agreement constitutes the valid and legally binding
obligation of Bison, enforceable in accordance with its terms and conditions and
(ii) Waters represents that he has full power and authority to execute and
deliver this Agreement and to perform his obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of Waters, enforceable in
accordance with its terms and conditions.
(c) Non-contravention. Sellers represent that neither the execution and
-----------------
the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby (including the assignments and assumptions referred to in
Section 2 above), will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which any Seller is subject or any
provision of the Seller LLC Agreements or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which any Seller is a party or by which any Seller is bound or to
which any of the Acquired Assets is subject (or result in the imposition of any
Security Interest upon any of the Acquired Assets). With the exception of the
filing of the Trademark Assignment and Intellectual Property Assignment
11
<PAGE>
with the United States Patent and Trademark Office, the Sellers have not and are
not required to (i) give any notice to, (ii) make any filing with or (iii)
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement (including the assignments and assumptions referred to in Section
2 above).
(d) Brokers' Fees. The Sellers have not engaged nor authorized any broker,
-------------
investment banker or third party to act on the Sellers' behalf, either directly
or indirectly, as a broker, finder or advisor in connection with the transaction
contemplated hereby.
(e) Title to Assets. Bison and Waters each have good and marketable title
---------------
to the Acquired Assets to be transferred by each hereunder, free and clear of
all Security Interests and any restrictions on transfer.
(f) Subsidiaries. [Intentionally Omitted]
------------
(g) Financial Statements. Bison and Waters represent that attached hereto
--------------------
as Exhibit F are unaudited balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal quarter ended June
30, 1999 (the "Most Recent Fiscal Quarter End") for Bison (the "Financial
Statements"). The Financial Statements (including any notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, subject only to normal year end adjustments and notes,
present fairly the financial condition of Bison as of such dates and the results
of operations of the Bison for such periods as limited by the notes therein, are
materially correct and complete, and are consistent with the books and records
of Bison (which books and records are materially correct and, except as noted
therein complete).
(h) Events Subsequent to Most Recent Fiscal Quarter End. Since the Most
---------------------------------------------------
Recent Fiscal Quarter End:
(i) no Seller has sold, leased, transferred, or assigned any of the
Acquired Assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) no Seller has entered into any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and licenses)
affecting the Acquired Assets either involving more than $22,000 or outside
the Ordinary Course of Business;
(iii) no party (including any Seller) has accelerated, terminated,
modified, or canceled any agreement, contract, lease, or license (or series
of related agreements, contracts, leases, and licenses) involving more than
$22,000 to which any Seller is a party or by which it is bound;
(iv) no Seller has imposed any Security Interest upon any of the
Acquired Assets;
12
<PAGE>
(v) no Seller has canceled, compromised, waived, or released any
right or claim (or series of related rights and claims) affecting the
Acquired Assets either involving more than $22,000 or outside the Ordinary
Course of Business;
(vi) no Seller has granted any license or sublicense of any rights
under or with respect to any of the Intellectual Property included in the
Acquired Assets except for the License Agreement and the Manufacturing
Agreement with Achiever Industries, Ltd.;
(vii) there has been no change made or authorized in the Seller LLC
Agreements;
(viii) Bison has not issued, sold, or otherwise disposed of any of
its equity, or granted any options, warrants, or other rights to purchase
or obtain (including upon conversion, exchange, or exercise) any of its
equity;
(ix) Bison has not has declared, set aside, or made any
distribution with respect to its equity (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its equity except
distributions of proceeds from the transactions pursuant to this Agreement;
(x) no Seller has experienced any damage, destruction, or loss
(whether or not covered by insurance) to any of the Acquired Assets; and
(xi) no Seller has committed to do any of the foregoing and to the
best of each Seller's knowledge, none of the foregoing is reasonably likely
to occur in the foreseeable future.
(i) Undisclosed Liabilities. Bison does not have any Liability, except for
-----------------------
(i) Liabilities set forth on the face of the Most Recent Balance Sheet or in the
notes thereto; (ii) Liabilities which have arisen after the Most Recent Fiscal
Quarter End in the Ordinary Course of Business; (iii) Liabilities which are not
Assumed Liabilities and were incurred in connection with the business of Bison
other than the OPD Valve business; and (iv) Liabilities which are unknown to
Waters and Bison. Nothing in this representation shall limit the obligation of
the Sellers under the Indemnification Agreement to indemnify the Buyer for any
losses suffered by the Buyer as a result of any Liabilities of the Sellers other
than the Assumed Liabilities.
(j) Legal Compliance. The Sellers have complied with all material
----------------
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof) related to the
Acquired Assets the failure to comply with which would have a material adverse
affect on the business of Bison or the Acquired Assets and neither Seller has
received any notice of any action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice which has been filed or commenced
against either Seller alleging any failure so to comply.
13
<PAGE>
(k) Tax Matters.
-----------
(i) Bison has filed or caused to be filed on a timely basis all
Tax Returns that are or were required to be filed by or with respect
to it. Bison shall make available to Buyer copies of, and Schedule
3(k) hereof contains a complete and accurate list of, all such Tax
Returns relating to income or other Taxes filed since February 12,
1998. Bison has paid all Taxes that have or may have become due
pursuant to those Tax Returns, or pursuant to any assessment received
by any Seller or any Seller Member or Manager of Bison.
(ii) No deficiency for Taxes has been claimed, proposed or
assessed against Bison. There are not pending, nor to Bison's
knowledge, threatened audits, investigations, or claims for or
relating to additional liability in respect of Taxes owed by Bison.
All Taxes that Bison is or was required by applicable legal authority
or otherwise to withhold or collect have been duly withheld or
collected and have been paid to the proper governmental body or other
Person. All Tax Returns filed by Bison are materially true, correct,
and complete. Bison has never been audited and has no knowledge of any
future IRS or other tax authority audits.
(iii) [Intentionally Omitted]
(iv) [Intentionally Omitted]
(v) [Intentionally Omitted]
(vi) [Intentionally Omitted].
(vii) [Intentionally Omitted].
(l) Real Property. [Intentionally Omitted]
-------------
(m) Intellectual Property.
---------------------
(i) To the knowledge of the Sellers, the Sellers own or have
the right to use pursuant to license, sublicense, agreement, or
permission all Intellectual Property necessary to manufacture, market,
use and/or sell the OPD Valve. Bison and Waters jointly and severally
warrant and represent that Waters with Chan Yet, owns all Intellectual
Property that is being licensed pursuant to the License Agreement,
that Waters is the sole registered applicant on the First Patent
Application and Waters and Chan Yet are the registered applicant on
the Second Patent Application.
(ii) To the knowledge of the Sellers, none of the Sellers has
interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any
14
<PAGE>
Intellectual Property rights of third parties in connection with the
manufacture, use or sale of the OPD Valve, and none of the Sellers,
Seller Members or officers (and employees with responsibility for
Intellectual Property matters) of any Seller has ever received any
charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including
any claim that any Seller must license or refrain from using any
Intellectual Property rights of any third party in connection with the
manufacture, use or sale of the OPD Valve). To the Knowledge of any
Seller or Seller Member and Bison Manager (and employees with
responsibility for Intellectual Property matters), no third party has
interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any OPD Intellectual Property rights of any Seller
other than Intellectual Property rights of Waters which are not
related to the OPD Valve or business of Bison.
(iii) Neither Bison nor Waters has granted to any third party any
license, agreement or other permission with respect to, or any other
current or future rights in, any of its OPD Intellectual Property,
including rights in any now existing or hereafter filed or granted
domestic or foreign patent applications or patents, except those
manufacturers of OPD Valves specifically listed on Section 3(m)(iii)
of the Disclosure Schedule. Section 3(m)(iii) of the Disclosure
Schedule identifies each trade name or registered or unregistered
trademark used by Bison in connection with the OPD Valve. There are no
actions, suits, proceedings, hearings, investigations, charges,
complaints, claims, or demands pending and, to the Knowledge of
Sellers, none are threatened which challenge the legality, validity,
enforceability, use, or ownership of the License Agreement, the
Intellectual Property licensed under the License Agreement or the
names and marks listed in Section 3(m)(iii) of the Disclosure
Schedule. No Seller has ever agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or other
conflict with respect to any of the Intellectual Property.
(iv) Other than the License Agreement and computer software
which was not written for the Sellers, there is no item of
Intellectual Property that any third party owns and that Bison uses
pursuant to license, sublicense, agreement, or permission in
connection with the manufacture, use or sale of the OPD Valve.
(v) The Patent Applications include all of the patent
applications now owned or existing and filed by Assignor with respect
to the OPD Valve in the United States and in any other country. The
Sellers are not the holders of any United States or foreign patents
with respect to the OPD Valve.
(n) Tangible Assets. [Intentionally Deleted].
---------------
(o) Inventory. The inventory of Bison consists of raw materials and
---------
supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is
15
<PAGE>
merchantable and fit for the purpose for which it was procured or manufactured,
and none of which is slow-moving, obsolete, damaged, or defective, subject only
to the reserve for inventory writedown set forth on the face of the Most Recent
Balance Sheet as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Sellers.
(p) Contracts. Section 3(p) of the Disclosure Schedule lists the
---------
following contracts and other agreements related to the OPD Valve to which Bison
is a party:
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $2,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year, result in a material loss to Bison, or involve consideration in
excess of $2,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of
$2,000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
and
(vi) any agreement involving any of the Seller Members and their
Affiliates (other than the Sellers).
Sellers have delivered to the Buyer a correct and complete copy of the
License Agreement. With respect to the License Agreement: (A) no party is in
breach or default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination, modification, or
acceleration, under the License Agreement; (B) no party has repudiated any
provision of the License Agreement; and (C) other than the sublicenses to the
manufacturers set forth in Schedule 3 (m)(iii); Neither Seller has granted any
sublicense or similar right with respect to the License Agreement.
(q) Notes and Accounts Receivable. [Intentionally omitted].
-----------------------------
(s) Insurance. The Sellers carry insurance, which is adequate in
---------
character and amount, with reputable insurers, covering all of the Acquired
Assets. With respect to each such insurance policy: (A) the policy is legal,
valid, binding, enforceable, and in full force and effect; (B)
16
<PAGE>
the policy will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby (including the assignments and assumptions
referred to in Section 2 above); (C) neither the Sellers nor any other party to
the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (D) no party
to the policy has repudiated any provision thereof. The Sellers have been
covered since its formation by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged during the aforementioned
period. Section 3(s) of the Disclosure Schedule describes any self-insurance
arrangements affecting the Sellers and lists each insurance policy currently or
previously in effect with respect to the Acquired Assets.
(t) Litigation. [Intentionally Omitted].
----------
(u) Product Warranty. Each product manufactured, sold, leased, or
----------------
delivered by the Sellers has been in conformity with all applicable contractual
commitments and all express and implied warranties, and no Seller has any
Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability) for replacement or repair thereof or
other damages in connection therewith, subject only to the reserve for product
warranty claims set forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the Sellers. No
product manufactured, sold, leased, or delivered by any Seller is subject to any
guaranty, warranty, or other indemnity beyond the applicable standard terms and
conditions of sale or lease. Section 3(u) of the Disclosure Schedule includes
copies of the standard terms and conditions of sale or lease for the Sellers
(containing applicable guaranty, warranty, and indemnity provisions). The OPD
Valve has received Underwriters Laboratories' approval.
(v) Product Liability. Except as set forth on Schedule 3(v), to the
-----------------
Knowledge of Bison, Bison has no Liability (and there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against Bison giving rise to any Liability) arising
out of any injury to individuals or property as a result of the ownership,
possession, or use of the OPD Valve.
(w) Employees. [Intentionally Omitted].
---------
(x) Employee Benefits. [Intentionally Omitted].
-----------------
(y) Guaranties. [Intentionally Omitted].
----------
(z) Environmental, Health, and Safety Matters. To the best of each
-----------------------------------------
Seller's Knowledge, each Seller has materially complied and is in material
compliance with all material Environmental, Health, and Safety Requirements in
connection with the manufacture, transportation
17
<PAGE>
and storage of the OPD Valve.
(aa) Certain Business Relationships With the Sellers. [Intentionally
-----------------------------------------------
Omitted]
(bb) Disclosure. [Intentionally Omitted.]
----------
(cc) Investment. The Seller (i) understands that the Buyer Warrant
----------
has not been, and will not be, registered under the Securities Act, or under any
state securities laws, and is being offered and sold in reliance upon federal
and state exemptions for transactions not involving any public offering, (ii) is
acquiring the Buyer Warrant solely for its own account for investment purposes,
and not with a view to the distribution thereof (except to the Seller Members),
(iii) is a sophisticated investor with knowledge and experience in business and
financial matters, (iv) has received certain information concerning the Buyer
and has had the opportunity to obtain additional information as desired in order
to evaluate the merits and the risks inherent in holding the Buyer Warrant, (v)
is able to bear the economic risk and lack of liquidity inherent in holding the
Buyer Warrant, and (vi) is an Accredited Investor.
4. Representations and Warranties of the Buyer. The Buyer
-------------------------------------------
represents and warrants to the Sellers that the statements contained in this
Section 4 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section 4).
(a) Organization of the Buyer. The Buyer is a corporation duly
-------------------------
organized, validly existing, and in good standing under the laws of the State of
Delaware.
(b) Authorization of Transaction. The Buyer has full power and
----------------------------
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
----------------
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above and
the issuance by Buyer of the Buyer Warrant and delivery of stock to Seller upon
exercise thereof), will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Buyer is subject or any
provision of its charter or bylaws or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which the Buyer is a party or by which it is bound or to which any of its
assets is subject. The Buyer does not need to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order for the Parties to consummate the transactions
18
<PAGE>
contemplated by this Agreement (including the assignments and assumptions
referred to in Section 2 above).
(d) Brokers' Fees. The Buyer has not engaged nor authorized any
-------------
broker, investment banker or third party to act on the Buyer's behalf, either
directly or indirectly, as a broker, finder or advisor in connection with the
transaction contemplated hereby.
(e) Buyer Stock. [Intentionally Omitted].
-----------
(f) Buyer Warrant. When issued, the Buyer Warrant shall be free of
--------------
all Liabilities and shall evidence the binding agreement of Buyer, enforceable
against Buyer in accordance with its terms.
(g) Buyer Warrant Stock. Upon exercise of the Buyer Warrant and
-------------------
payment of the purchase price of the stock to be issued thereunder by the holder
of the Buyer Warrant, such stock (i) will be fully paid and non assessable (ii)
will be free from restrictions on transfer (iii) will have been transferred in a
transaction that is the subject of an effective registration statement.
5. Pre-Closing Covenants. The Parties agree as follows with respect
---------------------
to the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best efforts
-------
to take all action and to do all things necessary in order to consummate and
make effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Section 6
below).
(b) Notices and Consents. The Sellers will give any notices to third
--------------------
parties, and the Sellers will use their reasonable best efforts to obtain any
third party consents, that the Buyer reasonably may request in connection with
the matters referred to in Section 3(c) above. Each of the Parties will give
any notices to, make any filings with, and use its reasonable best efforts to
obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in Section 3(c)
and Section 4(c) above.
(c) Operation of Business. Bison will not engage in any practice,
---------------------
take any action, or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing, Bison will not (i)
declare, set aside, or pay any distribution to the Seller Members, (ii)
purchase, or otherwise acquire any membership units of the Bison, (iii) modify
the terms of the License Agreement except pursuant to the written request of
Buyer to effect the Closing, or (iv) otherwise engage in any practice, take any
action, or enter into any transaction of the sort described in Section 3(h)
above.
(d) Preservation of Business. Bison will keep its business and
------------------------
properties substantially intact, including its present operations, physical
facilities, working conditions, and
19
<PAGE>
relationships with lessors, licensors, suppliers, customers, and employees.
(e) Full Access. Bison will permit representatives of the Buyer to
-----------
have full access at all reasonable times, and in a manner so as not to interfere
with the normal business operations of Bison, to all premises, properties,
personnel, books, records (including Tax records), contracts, and documents of
or pertaining to Bison.
(f) Notice of Developments. Each Party will give prompt written
----------------------
notice to the other Party of any material adverse development causing a breach
of any of its own representations and warranties in Section 3 and Section 4
above. No disclosure by any Party pursuant to this Section 5(f), however, shall
be deemed to amend or supplement the Disclosure Schedule or to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant.
(g) Exclusivity. The Sellers will not (i) solicit, initiate, or
-----------
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any membership units or other voting securities, or any
substantial portion of the assets, of Bison (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. The Sellers will
notify the Buyer immediately if any Person makes any proposal, offer, inquiry,
or contact with respect to any of the foregoing.
(h) Title Insurance. [Intentionally Omitted].
---------------
(i) Non-Exercise. The Buyer shall not exercise any rights or
------------
remedies, including its right to convert debt into units, under the Convertible
Note.
(j) Public Disclosures. Buyer will provide to Sellers simultaneously
-------------------
with the filing thereof copies of all filings of Buyer with the S.E.C. and all
press releases or other public disclosures of Buyer relating to this
acquisition.
6. Conditions to Obligation to Close.
----------------------------------
(a) Conditions to Obligation of the Buyer. The obligation of the
-------------------------------------
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Sellers shall have performed and complied with all of
their covenants hereunder in all material respects through the
Closing;
20
<PAGE>
(iii) the Sellers shall have procured all of the third party
consents specified in Section 5(b) above;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (C) affect adversely the right of the Buyer to own
the Acquired Assets and to operate the former businesses of the
Sellers;
(v) the Sellers shall have delivered to the Buyer a certificate
to the effect that each of the conditions specified above in Section
6(a)(i)-(iv) is satisfied in all respects;
(vi) all actions to be taken by the Sellers in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer.
(b) Conditions to Obligation of the Sellers. The obligation of the
---------------------------------------
Sellers to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 4
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
(iv) the Buyer shall have delivered to the Sellers a certificate
to the effect that each of the conditions specified above in Section
6(b)(i)-(iii) is satisfied in all respects;
21
<PAGE>
(v) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Sellers.
7. Termination.
------------
(a) Termination of Agreement. Certain of the Parties may terminate
------------------------
this Agreement as provided below:
(i) the Buyer and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing (A) in the
event any Seller has breached any material representation, warranty,
or covenant contained in this Agreement in any material respect, the
Buyer has notified the Sellers of the breach, and the breach has
continued without cure for a period of 15 days after the notice of
breach or (B) if the Closing shall not have occurred on or before
September 30, 1999 (or such later date as is necessary to allow for
the completion of any 15 day cure period provided for under subsection
(A)), by reason of the failure of any condition precedent under
Section 6(a) hereof (unless the failure results primarily from the
Buyer itself breaching any representation, warranty, or covenant
contained in this Agreement); and
(iii) the Sellers may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (A) in the event
the Buyer has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the
Sellers have notified the Buyer of the breach, and the breach has
continued without cure for a period of 15 days after the notice of
breach, (B) if the trading in the stock of the Buyer is halted, an
investigation of the Buyer by the S.E.C. is commenced or the Buyers
stock is delisted or (C) if the Closing shall not have occurred on or
before September 30, 1999 (or such later date as is necessary to allow
for the completion of any 15 day cure period provided for under
subsection (A)), by reason of the failure of any condition precedent
under Section 6(b) hereof (unless the failure results primarily from
the Seller itself breaching any representation, warranty, or covenant
contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
---------------------
pursuant to Section 7(a) above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
(except for any Liability of any Party then in breach).
22
<PAGE>
8. Miscellaneous.
--------------
(a) Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder as and to the extent provided in the
Indemnification Agreement, which provides the sole remedy of the Buyer after
Closing for any claims of breach of any representation or warranty.
(b) Press Releases and Public Announcements. No Party shall issue any
---------------------------------------
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that any Party may make any public disclosure it
-----------------
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise the other Party
prior to making the disclosure and will, in any event, provide a copy of any
such disclosure (including transcripts of any analysts' meetings or conference
calls) within two business days of its release).
(c) No Third-Party Beneficiaries. This Agreement shall not confer any
----------------------------
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
----------------
referred to herein and agreements executed and delivered pursuant hereto)
constitutes the entire agreement between the Parties and supersedes any prior
understandings, agreements, or representations by or between the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(e) Succession and Assignment. This Agreement shall be binding upon
-------------------------
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that the Buyer may (i) assign
-----------------
any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
(f) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
--------
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
-------
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given two days
after it is sent by registered or certified mail, return receipt
23
<PAGE>
requested, postage prepaid, and on the day after it is sent by next day air
courier or ground messenger service or by telecopy and on the day of actual
delivery by personal delivery, and addressed to the intended recipient as set
forth below:
If to the Sellers: Michael A. Waters
1520 Commerce Drive
Elgin, Illinois 60123
Fax: (847) 888-1496
With a copy to the Seller's
attorneys: Vance L. Liebman, Esq.
Levin & Funkhouser, Ltd.
55 West Monroe Street, Suite 2410
Chicago, Illinois 60603
Fax: (312) 641-2640
If to the Buyer: Blue Rhino Corporation
104 Cambridge Plaza Drive
Winston-Salem, North Carolina 27104
Attention: Mark Castaneda
Fax: (336) 659-6750
With a copy to the Buyer's John H. Muehlstein, Esq.
attorneys: Pedersen & Houpt, P.C.
161 North Clark Street, Suite 3100
Chicago, Illinois 60601
Fax: (312) 641-6895
Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Party notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the domestic laws of the State of Illinois without giving
effect to any choice or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of Illinois.
(j) Amendments and Waivers. No amendment of any provision of this
----------------------
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
24
<PAGE>
(k) Severability. Whenever possible, each provision of this Agreement
------------
shall be construed and interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement or the application
thereof to any party or circumstance shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition without invalidating the remainder of such provision or any other
provision of this Agreement or the application of such provision to other
parties or circumstances.
(l) Expenses. Each of the Buyer, the Sellers, and the Seller Members
--------
will bear his or its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby.
(m) Construction. The Parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(n) Incorporation of Exhibits and Schedules. The Exhibits and
---------------------------------------
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(o) Specific Performance. Each of the Parties acknowledges and agrees
--------------------
that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter, in addition to any other remedy to which it may be
entitled, at law or in equity.
[The next page is the Signature Page]
25
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
SELLERS: BISON VALVE, L.L.C.
By /s/ Michael A. Waters
--------------------------
Name: Michael A. Waters
Title: President
/s/ Michael A. Waters
----------------------------
Michael A. Waters
BUYER: BLUE RHINO CORPORATION
By /s/ Mark Castaneda
--------------------------
Name: Mark Castaneda
Title: Chief Financial Officer
26
<PAGE>
Exhibit List
- ------------
Exhibit A Buyer Warrant
Exhibit B Indemnification Agreement
Exhibit C-1 Assignment of Trademarks
Exhibit C-2 Assignment of Intellectual Property
Exhibit C-3 Assignment and Assumption Agreement
Exhibit D New License Agreement
Exhibit E Allocation of Purchase Price
Exhibit F Financial Statements
27
