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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) April 3, 2000
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Blue Rhino Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-24287 56-1870472
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(State of or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
104 Cambridge Plaza Drive, Winston-Salem, North Carolina 27104
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (336) 659-6900
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Not Applicable
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
UNIFLAME, INC. ACQUISITION
On April 4, 2000, the Company completed the acquisition of substantially all of
assets from Uniflame, Inc. ("Uniflame"), an import and design company based in
Zion, Illinois dealing in barbecue grills, garden art and fireplace accessories.
The acquired assets include inventories, accounts receivable, various trademarks
and copyrights, a patent and 100% of the stock of Uni-Asia, Ltd., a Seychelles
corporation engaged in exports to Asia. The effective date of the acquisition
was March 31, 2000. The purchase price consisted of approximately $4.6 million
in cash, 478,716 shares of the Company's common stock (calculated based on the
average closing price for the common stock for the 10 days ended March 31, 2000
and representing approximately 59% of the consideration paid at closing) and a
deferred purchase price of a maximum of $2.25 million. The deferred purchase
price is payable on a quarterly basis over a three-year period and is based on a
targeted EBITDA for the Uniflame lines operated by the Company, which target
increases each year. The deferred purchase price is payable in the amount of
$187,500 per calendar quarter ending June 30, September 30, December 31 and
March 31. In the event the target EBITDA for a given year is not met, the amount
of the deferred purchase price paid in the fourth quarter of such year is
reduced by the shortfall from the target EBITDA. In the event the target EBITDA
is not met in any given year, the amount that the deferred purchase price is
reduced will be paid if the actual EBITDA for future years exceed such year's
target EBITDA, but only to the extent of the percentage increase from the target
EBITDA. With respect to the accounts receivable and accounts payable assumed by
the Company, if by September 30, 2000 the Company does not collect 100% of the
accounts receivable or is obligated to pay more than the accounts payable as
shown on the books of Uniflame as of March 31, 2000, the Company may deduct such
amounts from the next installment of the deferred purchase price. The purchase
price and manner of payment were negotiated between the Company and Uniflame at
arms-length, and no formula or other fixed or identifiable principles were used
in establishing these terms other than the share calculation method described
above.
Uniflame and its shareholders, Mac. R. McQuilkin and James E. Harris, agreed not
to compete with the Company with respect to the business operated by Uniflame
for a period of five years after the effective date. The Company has agreed to
take steps to provide for the resale without restriction of the shares of common
stock issued in the Uniflame acquisition. In the event the Company is unable to
deliver the common stock pursuant to the preceding sentence, the persons
receiving common stock pursuant to the Uniflame acquisition shall have demand
registration rights pursuant to a registration rights agreement dated as of
March 31, 2000.
In connection with the Uniflame acquisition, the Company entered into employment
agreements
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with Michael Fasel and Martin Bossler and certain other former Uniflame
employees. Mr. Fasel has been named an Executive Vice President of the Company.
Mr. Fasel's employment agreement has a three year term and provides an annual
base salary of $235,000. Mr. Fasel is responsible for the Uniflame line of
business as operated by the Company. Mr. Bossler has been named Senior Vice
President - R&D of the Company. Mr. Bossler's employment agreement also has a
three year term, and provides for an annual base salary of $187,000. Mr. Bossler
is responsible for all aspects of product design and factory management
connected with the Uniflame line of business operated by the Company. Any
bonuses paid to Messrs. Fasel and Bossler will be determined in the sole
discretion of the board of directors of the Company on recommendation of the
president of the Company. The Company may terminate Messrs. Fasel or Bossler for
cause or without cause at any time, provided that if Messrs. Fasel or Bossler
are terminated without cause, they shall continue to receive their base salary
for one year from the date their employment is terminated. Messrs. Fasel and
Bossler, as well as the other employees who entered into employment agreements
with the Company, have each agreed not to compete against the Company within the
United States for a period of one year after termination of employment with the
Company.
The Company drew on its credit facility with Bank of America to provide the cash
portion of the purchase price for this acquisition. See Item 5, below.
The description of this transaction contained in this Item 2 is qualified in its
entirety by reference to the documents relating thereto filed as exhibits to
this Report.
INTERNATIONAL PROPANE PRODUCTS ACQUISITION
On April 3, 2000, the Company completed the acquisition of substantially all of
assets relating to patio heaters developed by, manufactured for and marketed by
International Propane Products, LLC ("IPP"), a wholesale and design company
based in Elgin, Illinois owned by Michael A. Waters. IPP's primary products are
several models of propane patio heaters that have been distributed in North
America exclusively by the Company. The acquired assets include all of the
assets relating to or necessary for the manufacture or sale of patio heaters,
inventories, molds, dies and all intellectual property relating to the patio
heaters developed by Mr. Waters, which include patent applications relating to
the patio heaters (the "Intellectual Property"). The effective date of the IPP
Acquisition was March 31, 2000. The purchase price included approximately $2.9
million in cash, of which approximately $1.7 million was credited to the Company
for prepaid patio heater inventory, resulting in a net cash paid at closing of
approximately $1.2 million, 83,572 shares of the Company's common stock
(calculated based on the average closing price for the common stock for the five
days ended March 31, 2000 and representing approximately 48% of the
consideration paid at closing) and a deferred purchase price equal to 1% of net
sales from patio heaters. The deferred purchase price is payable on a quarterly
basis for a term equal to the lesser of (a) the life of the patent that may be
issued with respect to the Intellectual Property, but in any event not less than
five years, or (b) the period ending on the last day of the first one year
period during which the Company does not make, use or sell the patio heaters.
The Company has agreed to pay a minimum deferred purchase price which may be as
much as $530,000 under certain circumstances.
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The purchase price and manner of payment were negotiated between the Company and
IPP at arms-length, and no formula or other fixed or identifiable principles
were used in establishing these terms other than the share calculation method
described above.
IPP and Mr. Waters have each agreed not to compete with the Company with respect
to the manufacture and sale of patio heaters for a period of five years after
the effective date. The Company has granted Mr. Waters a license permitting him
to use the Intellectual Property upon the earlier of (a) the Company failing to
make the minimum deferred purchase price payments or (b) the end of the deferred
payment term. Under the license agreement, Mr. Waters would be obligated to pay
a licensing fee to the Company in the amount of 1% of net sales from patio
heaters. The Company has agreed to take steps to provide for the resale without
restriction of the shares of common stock issued in this acquisition.
The Company drew on its credit facility with Bank of America to provide the cash
portion of the purchase price for this acquisition. See Item 5, below.
The description of this transaction contained in this Item 2 is qualified in its
entirety by reference to the documents relating thereto filed as exhibits to
this Report.
Item 5. Other Items.
BANK OF AMERICA CREDIT FACILITY
In connection with the Uniflame and IPP transactions, the Company negotiated a
$5.0 million increase in the principal amount of its credit facility with Bank
of America, to $30.0 million (the "Credit Facility"). The Credit Facility will
be used to finance working capital, acquisitions and capital expenditures, and
to support the issuance of documentary and standby letters of credit. The Credit
Facility, which expires on August 31, 2001, bears interest at a maximum rate of
LIBOR plus 2.25% and is collateralized by a lien on substantially all of the
Company's assets. The Credit Facility also requires the Company to meet certain
covenants, including maintaining a minimum net worth, debt coverage and cash
flow coverage ratios. The amendment to the Credit Facility also provides the
Company with waivers in connection with the Uniflame and IPP transactions of the
Company's obligations under the deferred purchase price payments and tangible
net worth requirements. The Company paid $10,000 in fees related to the
amendment to the Credit Facility.
The description of this transaction contained in this Item 5 is qualified in its
entirety by reference
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to the documents relating thereto filed as exhibits to this Report.
CONVERTIBLE NOTE AND WARRANT PRIVATE PLACEMENT
In connection with the amendment to the Credit Facility, the Company entered
into amendments to the convertible notes (the "Convertible Notes") issued to
certain institutional investors (the "Investors") on September 23, 1999. The
Convertible Notes were amended to make them subordinate to the Credit Facility.
Pursuant to the Convertible Notes, as amended, the Company has the right to
redeem the Convertible Notes or require the Convertible Notes to be converted on
or before August 31, 2000. The Convertible Notes, as amended, contain
restrictions on the Investors with respect to conversion and hedging activities,
which expire August 31, 2000.
The description of this transaction contained in this Item 5 is qualified in
its entirety by reference to the documents relating thereto filed as exhibits to
this Report.
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Item 7. Exhibits.
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4.1 Registration Rights Agreement among the Company and the shareholders
and certain employees of Uniflame dated March 31, 2000.
10.1 Asset Purchase Agreement by and among the Company, Uniflame, Mac R.
McQuilkin and James E. Harris dated as of March 31, 2000.
10.2 Employment Agreement by and between the Company and Michael Fasel
dated April 1, 2000.
10.3 Employment Agreement by and between the Company and Martin Bossler
dated April 1, 2000.
10.4 Asset Purchase Agreement by and among the Company, IPP and Waters
dated as of March 31, 2000.
10.5 Indemnification Agreement by and among the Company, IPP and Waters
dated as of March 31, 2000.
10.6 License Agreement by and among the Company, IPP and Waters dated as
of March 31, 2000.
10.7 Amendment to Amended and Restated Loan Amendment by and between the
Company and Bank of America dated April 3, 2000.
10.8 Agreement to Amend the Convertible Notes by and among Blue Rhino
Corporation, HFTP Investment L.L.C. and Leonardo, L.P. dated of April 3, 2000.
10.9 Form of Amendment #1 to Convertible Notes, dated as of March 31,
issued to purchasers of the Company's Convertible Notes, dated September 23,
1999.
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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
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Secretary and Chief Financial Officer
DATED: April 18, 2000
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Exhibit 4.1
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
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entered into as of March 31, 2000 between BLUE RHINO CORPORATION, a Delaware
corporation (the "Company"), and the parties named on Schedule 1 attached, who
are assignee-holders (the "Holders") of $7,000,000 (subject to adjustment at
Closing) of common stock of the Company, received in connection with the Asset
Purchase Agreement between the Company, as Buyer, and Uniflame, Inc., as seller.
WHEREAS, in order to induce the Holders to cause Uniflame, Inc. to
execute and perform the aforesaid Asset Purchase Agreement, the Company has
agreed to grant to the Holders the registration rights set forth in this
Agreement.
NOW, THEREFORE, the parties to this Agreement hereby agree as follows:
Unless otherwise defined herein, capitalized terms so used herein and
not defined shall have the same meaning as provided in the aforesaid Asset
Purchase Agreement.
The parties hereby agree as follows:
1. Certain Definitions.
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As used in this Agreement, the following terms shall have the following
respective meanings:
"Asset Purchase Agreement" means the agreement executed by the Company and
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Uniflame, Inc. and the Holders, involving the sale of the assets of Uniflame,
Inc. to the Company.
"Business Day" means any day, other than a Saturday, Sunday or legal
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holiday, on which banks in the State of New York are open for business.
"Commission" means the Securities and Exchange Commission.
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"Common Stock" means the Common Stock, par value $0.001 per share, of the
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Company, as constituted on the date hereof, any shares of the Company's capital
stock into which such Common Stock shall be changed, or any shares of the
Company's capital stock resulting from any reclassification of such Common Stock
or recapitalization of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
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any successor statute thereto, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect at the time.
"Holders" means the Holders referred to in the Preamble and any other
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person holding Registrable Securities to whom these registration rights have
been assigned pursuant to Section 10(f) of this Agreement.
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"Majority Holders" means at any time the holders of a majority of the
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Registrable Securities.
"Person" shall mean an individual, partnership, corporation, association,
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trust, joint venture, unincorporated organization and any government,
governmental department or agency or political subdivision thereof.
"Registrable Securities" means (i) all Common Stock issued or issuable by
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the Company and owned by Holders; (ii) any Common Stock or other securities
issued or issuable to Holders upon any stock split, stock dividend,
recapitalization, or similar event; (iii) securities issued in replacement or
exchange of any of the securities issued in clauses (i) or (ii) above; (iv) any
Common Stock issued as, or issued directly or indirectly upon the conversion or
exercise of other securities issued as, a dividend or other distribution with
respect to or in replacement of any Common Stock or other securities referred to
in (i), (ii) or (iii); or (v) any Common Stock issuable directly or indirectly
upon the conversion or exercise of other securities that were issued as a
dividend or other distribution with respect to or in replacement of any
securities referred to in (i), (ii) or (iii); in all cases (i), (ii), (iii) and
(iv) above, such shares of Common Stock and other securities shall remain
Registrable Securities only until a Registration Statement(s) covering such
shares of Common Stock and other securities has been declared effective by the
Commission and all of such shares of Common Stock and other securities have been
disposed of pursuant to such effective Registration Statement(s) or have been
otherwise disposed of in a transaction after which disposition such Common Stock
or other securities became freely tradable.
"Registration Expenses" means all expenses incident to the Company's
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performance of or compliance with this Agreement, including, without limitation,
all registration, filing, listing and National Association of Securities
Dealers, Inc. ("NASD") fees, all fees and expenses of complying with securities
or blue sky laws, all word processing, duplicating and printing expenses, all
messenger and delivery expenses, any transfer taxes, the fees and expenses of
the Company's legal counsel and independent public accountants, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance, fees and disbursements of one counsel for
all of the Holders, or sellers of securities; provided, however, that
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Registration Expenses shall not include underwriting discounts and commissions
or fees and disbursements of Underwriters.
"Securities Act" means the Securities Act of 1933, as amended, or any
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successor statute thereto, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect at the time.
"Underwriter" means a securities dealer who purchases any Registrable
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Securities as principal in an underwritten offering and not as part of such
dealer's market making activities.
"Warrants" means the warrants to purchase shares of Common Stock of the
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Company issued to the persons who purchased Bridge Notes.
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2. Registration.
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(a) Demand Registration. At any time commencing six (6) months after
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closing of the sale transaction contemplated by the aforesaid Asset Purchase
Agreement and ending two years after said closing ("Protected Period") if the
Company has not provided the Holders with an effective registration statement
permitting them to freely and lawfully sell their common stock Registrable
Securities during the Protected Period, then upon written request by the
Majority Holders made to the Company that the Company effect the registration
under the Securities Act of all or part of the Registrable Securities (a "Demand
Registration"), the Company will use its diligent efforts to effect the
registration under the Securities Act of the Registrable Securities that the
Company has been so requested to register by such Majority Holders within ninety
(90) days after receipt of such request or within forty-five (45) days after
receipt of such request if the Company is qualified to file a registration
statement on Commission Form S-3 or any successor or similar short-form
registration statement (collectively, "Commission Form S-3"). The Company must
effect Demand Registrations pursuant to this Section 2(a) to the extent such
registrations may be effected on Commission Form S-3, but the Company shall not
be obligated to effect more than one (1) Demand Registration hereunder on
Commission Form S-1 or any other similar Commission Form.
(b) Piggyback Registration. If the Company for itself or any of its
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security holders shall at any time or times during the Protected Period
determine to register under the Securities Act any shares of its capital stock
or other securities (other than (i) the registration of an offer, sale or other
disposition of securities solely to employees of, or other persons providing
services to, the Company, or any subsidiary pursuant to an employee or similar
benefit plan registered on Form S-8 or similar or successor forms or (ii)
relating to a merger, acquisition or other transaction of the type described in
Rule 145 under the Securities Act or a comparable or successor rule, registered
on Form S-4 or similar or successor forms), on each such occasion the Company
will notify each Holder of such determination at least thirty (30) days prior to
the filing of such registration statement, and upon the request of any Holder
given in writing within twenty (20) days after the receipt of such notice,
subject to Section 2(f), the Company will use its diligent efforts as soon as
practicable thereafter to cause any of the Registrable Securities specified by
any such Holder to be included in such registration statement to the extent such
registration is permissible under the Securities Act and subject to the
conditions of the Securities Act (a "Piggyback Registration"). The rights
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granted to the Holders pursuant to this Section 2(b) shall be subordinate to any
previously granted piggyback registration rights granted by the Company.
(c) Registration Statement Form. The Company shall, if permitted by law,
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effect any registration requested under Section 2 by the filing of a
registration statement on Commission Form S-3 and shall use its diligent efforts
to take any action necessary to maintain its eligibility to utilize Commission
Form S-3 to permit resales as requested by the Holders with respect to
"Transactions Involving Secondary Offerings" as described in General Instruction
I.B.3 of Commission Form S-3; provided however, Holder shall have the right to
cause the Company to
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satisfy the Holders' demand registration rights hereunder on SEC Form S-1 or
such similar form as then in existence.
(d) Expenses. The Company shall pay all Registration Expenses incurred in
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connection with any Piggyback Registrations and any Demand Registrations.
(e) Effective Registration Statement. A Demand Registration or a Piggyback
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Registration requested pursuant to Section 2(a) or Section 2(b), respectively,
shall not be deemed to have been effected unless the registration statement
filed with respect thereto in accordance with the Securities Act has become
effective with the Commission. Notwithstanding the foregoing, a registration
statement will not be deemed to have become effective if (i) after it has become
effective with the Commission, such registration is interfered with by any stop
order, injunction, or other order or requirement of the Commission or other
governmental agency or any court proceeding for any reason other than a
misrepresentation or omission by any Holder, or (ii) the conditions to closing
specified in the purchase agreement or underwriting agreement entered into in
connection with such registration are not satisfied.
(f) Priority in Registration. If a Demand Registration or a Piggyback
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Registration is an underwritten offering, and the managing Underwriters shall
give written advice to Majority Holders or the Company, as the case may be,
that, in their opinion, market conditions dictate that no more than a specified
maximum number of securities (the "Underwriter's Maximum Number") could
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successfully be included in such registration, then the Company and the Holders
will be able to participate in such offering in the following order of priority:
(i) first, the Company shall be entitled to include in such registration that
number of securities that the Company proposes to offer and sell for its own
account in such registration and that does not exceed the Underwriter's Maximum
Number; (ii) second, the Company will be obligated and required to include in
such registration that number of shares of Registrable Securities that the
Holders thereof shall have requested to be included in such offering, along with
shares of the Company's common stock owned by holders of piggyback registration
rights issued hereinbefore who request to include their shares in such offering,
allocated between such holders and the Holders, first to holders of such rights
issued hereinbefore, and second to the Holders to the full extent of the
remaining portion of the Underwriter's Maximum Number.
(g) Acceptable Delays. Notwithstanding anything in this Section 2 to the
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contrary, the Company shall have the right to delay any registration of
Registrable Securities requested pursuant to paragraph (a) of this Section 2 for
up to ninety (90) days if such registration would, in the judgment of the
Company's Board of Directors, substantially interfere with any material
transaction being considered at the time of receipt of the request from the
Holders.
(h) Exceptions to Registration. Notwithstanding anything in this Agreement
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to the contrary, the Company shall not be obligated to take any action to effect
registration, qualification or compliance with respect to its Registrable
Securities:
(i) in any jurisdiction that would require it to qualify generally to
do business where it is not already so qualified;
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(ii) that would subject it to taxation in a jurisdiction in which it
is not already subject generally to taxation;
(iii) resulting in registering its securities in any jurisdiction
outside the United States.
3. Registration Procedures.
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(a) If and whenever the Company is required to use its diligent efforts to
effect the registration of any Registrable Securities under the Securities Act
as provided in Section 2, the Company, as expeditiously as possible and subject
to the terms and conditions of Section 2, will:
(i) prepare and file with the Commission the requisite registration
statement to effect such registration and use its diligent efforts to cause such
registration to become and remain effective;
(ii) permit any Holder who, in the reasonable judgment of such
Holder, might be deemed to be an underwriter or a controlling person of the
Company, to participate in the preparation of such registration statement;
(iii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement or the expiration of twelve
months after such registration statement becomes effective;
(iv) furnish to the Holders such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as the purchaser or any Holder of Registrable
Securities to be sold under such registration statement may reasonably request;
(v) use its diligent efforts to register or qualify all Registrable
Securities covered by such registration statement under such other United States
state securities or blue sky laws of such jurisdictions as any Holder of
Registrable Securities to be sold under such registration statement shall
reasonably request, to keep such registration or qualification in effect for so
long as such registration remains in effect, and take any other action that may
be reasonably necessary or advisable to enable the Holder of Registrable
Securities to be sold under such registration statement to consummate the
disposition thereof in such jurisdictions;
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(vi) use its diligent efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by such
other United States state governmental agencies or authorities as may be
necessary to enable the Holder of Registrable Securities to be sold under such
registration statement to consummate the intended disposition of such
Registrable Securities;
(vii) in the event of the issuance of any stop order suspending the
effectiveness of the registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Registrable Securities included in such registration statement for sale in
any jurisdiction, the Company shall use its diligent efforts promptly to obtain
the withdrawal of such order;
(viii) use it diligent efforts to furnish to the Holders of
Registrable Securities to be sold under such registration statement (1) an
opinion, dated the effective date of the registration statement, of the counsel
representing the Company for the purposes of such registration, addressed to the
Underwriters, if any, stating that such registration statement has become
effective under the Securities Act and that (i) to the diligent knowledge of
such counsel, no stop order suspending the effectiveness thereof has been issued
and no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act; (ii) the registration statement, the
related prospectus, and each amendment or supplement thereto, comply as to form
in all material respects with the requirements of the Securities Act and the
applicable rules and regulations of the Commission thereunder (except that such
counsel need express no opinion as to financial statements contained therein);
(iii) such counsel has no reason to believe that either the registration
statement or the prospectus, or any amendment or supplement thereto, contains
any untrue statement of a material fact or omits a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; (iv) the descriptions in the registration statement or the
prospectus, or any amendment or supplement thereto, of all legal and
governmental matters and contracts and other legal documents or instruments
provided to such counsel are accurate and fairly present the information
required to be shown; and (v) such counsel does not know of any legal or
governmental proceedings, pending or contemplated, required to be described in
the registration statement or prospectus, or any amendment or supplement
thereto, which are not described as required nor of any contracts or documents
or instruments of a character required to be described in the registration
statement or prospectus, or any amendment or supplement thereto or to be filed
as exhibits to the registration statement that are not described and filed as
required; and (2) a letter, dated the effective date of the registration
statement, from the independent certified public accountants of the Company,
addressed to the Underwriters, if any, stating that they are independent
certified public accountants within the meaning of the Securities Act and that
in the opinion of such accountants, the financial statements and other financial
data of the Company included in the registration statement or the prospectus, or
any amendment or supplement thereto, comply as to form in all material respects
with the applicable accounting requirements of the Securities Act; and such
letter from the independent certified public accountants shall additionally
cover such other financial matters (including information as to the period
ending not more than five business days prior to the date of such letter) with
respect to the registration in respect of which such letter is being given as
the Holders may reasonably request);
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(ix) immediately notify the Holders of Registrable Securities
included in such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of its becoming
aware of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of the Holders
promptly prepare and furnish to the Holders a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include an 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
not misleading in the light of the circumstances under which they were made;
(x) otherwise use its diligent efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first full calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of Section 11
(a) of the Securities Act and Rule 158 thereunder, and not file any amendment or
supplement to such registration statement or prospectus to which any Holder
shall have reasonably objected in writing on the grounds that such amendment or
supplement does not comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder, having been furnished
with a copy thereof at least two business days prior to the filing thereof;
(xi) provide a transfer agent for all Registrable Securities covered
by such registration statement not later than the effective date of such
registration statement; and
(xii) use its diligent efforts to list all Registrable Securities
covered by such registration statement on any securities exchange on which any
of the Registrable Securities are then listed.
(b) The Company may require each Holder of Registrable Securities to be
sold under such registration statement, at the Company's expense, to furnish the
Company with such information and undertakings as it may reasonably request
regarding such Holder and the distribution of such securities as the Company may
from time to time reasonably request in writing.
(c) Each Holder, by execution of this Agreement, agrees (A) that upon
receipt of any notice from the Company, or upon such Holder's otherwise becoming
aware, of the happening of any event of the kind described in subdivision
(a)(ix) of this Section 3, such Holder will forthwith discontinue its
disposition of Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until the receipt by such Holder of the
copies of the supplemented or amended prospectus contemplated by subdivision
(a)(ix) of this Section 3 and, if so directed by the Company, will deliver to
the Company all copies other than permanent
7
<PAGE>
file copies, then in possession of the Holders of the prospectus relating to
such Registrable Securities current at the time of receipt of such notice and
(B) that it will immediately notify the Company, at any time when a prospectus
relating to the registration of such Registrable Securities is required to be
delivered under the Securities Act, of the happening of any event as a result of
which information previously furnished by such Holder to the Company for
inclusion in such prospectus contains an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
under which they were made. In the event the Company or any such Holder shall
give any such notice, the period referred to in subdivision (a)(iii) of this
Section 3 shall be extended by a number of days equal to the number of days
during the period from and including the giving of notice pursuant to
subdivision (a)(ix) of this Section 3 to and including the date when such Holder
shall have received the copies of the supplemented or amended prospectus
contemplated by subdivision (a)(ix) of this Section 3.
4. Underwritten Offerings.
----------------------
(a) Underwritten Offering. In connection with any underwritten
---------------------
offering pursuant to a Demand Registration requested under Section 2(a), the
Company will enter into an underwriting agreement with the Underwriters for such
offering, to contain such representations and warranties by the Company and such
other terms as are customarily contained in agreements of that type, including,
without limitation, indemnities to the effect and to the extent provided in
Section 6. Each Holder participating in such underwritten registration shall be
a party to such underwriting agreement and may, at such Holder's option, require
that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
Underwriters shall also be made to and for the benefit of each such Holder and
that any or all of the conditions precedent to the obligations of such
Underwriters under such underwriting agreement be conditions precedent to the
obligations of such Holder. No Holder participating in any such underwritten
registration shall be required to make any representations or warranties to or
agreements with the Company or the Underwriters other than representations,
warranties or agreements regarding such Holder and its intended method of
distribution and any other representation required by law.
(b) Selection of Underwriters. If the Holders of a majority of the
-------------------------
Registrable Securities participating in a Demand Registration so elect, the
offering of such Registrable Securities pursuant to such Demand Registration
shall be in the form of an underwritten offering. The Holders of a majority of
the Registrable Securities to be included in the Demand Registration shall
select one or more nationally recognized firms of investment bankers to act as
the lead managing Underwriter or Underwriters in connection with such offering
and shall select any additional investment bankers and managers to be used in
connection with the offering; provided that such Underwriter or Underwriters are
reasonably acceptable to the Company.
(c) Holdback Agreements. Each Holder agrees, if so requested by the
-------------------
managing Underwriter in each underwritten registration of the Company's capital
stock or other securities described in Section 2 (a) and Section 2(b), to sign
an agreement not to effect (except as part of such underwritten registration in
accordance with the provisions hereof) any sale, distribution,
8
<PAGE>
short sale, loan, grant of options for the purchase of, or otherwise dispose of,
any Registrable Securities for such period as such Underwriter requests, such
period in no event to commence earlier than seven (7) days prior to, or to end
more than 90 days after, the effective date of such registration.
5. Preparation, Reasonable Investigation.
-------------------------------------
In connection with the preparation and filing of each registration
statement under the Securities Act, the Company will give the Holders of
Registerable Securities to be sold under such registration statement, the
Underwriters, if any, and their respective counsel and accountants, advance
draft copies of such registration statement, each prospectus included therein or
filed with the Commission at least 5 business days prior to the filing thereof
with the Commission, and any amendments and supplements thereto promptly as they
become available, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such Holders and such
Underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
6. Indemnification and Contribution.
--------------------------------
(a) Indemnification by the Company. In the event of any registration
------------------------------
under the Securities Act pursuant to Section 2 of any Registrable Securities
covered by such registration, the Company will, and hereby does, indemnify and
hold harmless each Holder of Registrable Securities to be sold under such
registration statement, each such Holder's legal counsel, each other person who
participates as an Underwriter in the offering or sale of such securities (if so
required by such Underwriter as a condition to including the Registrable
Securities of the Holders in such registration) and each other person, if any,
who controls any such Holder or any such Underwriter within the meaning of the
Securities Act (collectively, the "Indemnified Parties"), against any losses,
claims, damages or liabilities, joint or several, to which the Holders or
Underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein or any document
incorporated therein by reference, or any amendment or supplement thereto, or
any omission or alleged omission to state therein 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, or arise out of any
violation by the Company of any rule or regulation promulgated under the
Securities Act or state securities law applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, and the Company will reimburse the Indemnified Parties for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, however, that the Company shall not be liable to any
-------- -------
Indemnified Party in any such
9
<PAGE>
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such Indemnified
Party.
(b) Indemnification by the Holders. The Company may require, as a
------------------------------
condition to including any Registrable Securities of any person or entity in any
registration statement filed pursuant to Section 2, that the Company shall have
received an undertaking reasonably satisfactory to it from such person or entity
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 6) the Company, each director of the
Company, each officer of the Company and each other person, if any, who controls
the Company within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if, and
only if, such statement or alleged statement or omission or alleged omission was
made in reliance upon and in conformity with information furnished in writing to
the Company directly by such person or entity specifically for use therein;
provided, however, that the obligation of any Holder hereunder shall be limited
- - - -------- -------
to an amount equal to the net proceeds received by such Holder upon the sale of
Registrable Securities sold in the offering covered by such registration.
(c) Notices of Claims. Etc. Promptly after receipt by an Indemnified
-----------------
Party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 6, such
Indemnified Party will, if a claim in respect thereof is to be made against a
party required to provide indemnification (an "Indemnifying Party"), give
written notice to the latter of the commencement of such action, provided,
--------
however, that the failure of any Indemnified Party to give notice as provided
- - - -------
herein shall not relieve the Indemnifying Party of its obligation under the
preceding subdivisions of this Section 6, except to the extent that the
Indemnifying Party is actually materially prejudiced by such failure to give
notice. In case any such action is brought against an Indemnified Party, unless
in such Indemnified Party's reasonable judgment a conflict of interest between
such Indemnified and indemnifying parties may exist in respect of such claim,
the Indemnifying Party shall be entitled to participate in and to assume the
defense thereof, jointly with any other Indemnifying Party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
Indemnified Party, and after notice from the Indemnifying Party to such
Indemnified Party of its election so to assume the defense thereof, the
Indemnifying Party shall not be liable to such Indemnified Party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No Indemnifying
Party shall consent to entry of any judgment or enter into any settlement
without the consent of the Indemnified Party which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
10
<PAGE>
(d) Other Indemnification. Indemnification similar to that specified
---------------------
in the preceding subdivisions of this Section 6 (with appropriate modifications)
shall be given by the Company and each Holder of Registrable Securities included
in any registration statement with respect to any required registration or other
qualification of securities under any Federal or state law or regulation of any
governmental authority, other than the Securities Act.
(e) Indemnification Payment. 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, to be made promptly, as and when bills
are received or expense, loss, damage or liability is incurred provided evidence
of such has been delivered to the Indemnifying Party.
(f) Survival of Obligations. The obligations of the Company and of the
-----------------------
Holders under this Section 6 shall survive the completion of any offering of
Registrable Securities under this Agreement.
(g) Contribution. If the indemnification provided for in this Section
------------
6 is unavailable or insufficient to hold harmless an Indemnified Party, then
each Indemnifying Party shall contribute to the amount paid or payable to such
Indemnified Party as a result of the losses, claims, damages or liabilities
referred to in this Section 6 an amount or additional amount, as the case may
be, in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party or parties on the one hand and the Indemnified Party on the
other in connection with the statements or omissions which resulted in such
losses, claims, demands or liabilities as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Indemnifying Party or parties on the one hand or the
Indemnified Party on the other and the parties' relative, intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid to an Indemnified Party as a result of
the losses, claims, damages or liabilities referred to in the first sentence of
this Section 6(g) shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any action or claim which is the subject of this Section 6. No
person guilty of fraudulent misrepresentation within the meaning of Section
11(f) of the Securities Act shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. The amount due from any
Holder pursuant to this Section 6(g) shall be limited to an amount equal to the
net proceeds received by such Holder upon the sale of Registrable Securities
sold on the offering covered by such registration.
7. Covenants Relating to Rule 144.
------------------------------
With a view to making available the benefits of certain rules and
regulations of the Commission which may at any time permit the sale of
securities of the Company to the public without registration after such time as
a public market exists for the Common Stock of the Company, the Company agrees:
11
<PAGE>
(a) to make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date of the first registration under the Securities Act filed by
the Company for an offering of its securities to the general public;
(b) to use its diligent efforts to then file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act, as amended (at any time after it has become
subject to such reporting requirements); and
(c) so long as a Holder owns any Registrable Securities, to furnish to
the Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (at any time after
90 days after the effective date of the first registration statement filed by
the Company for an offering of its securities to the general public), and of the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements) a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents of the Company as a
Holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing a Holder to sell any such securities without
registration.
8. Other Registration Rights. The Company covenants and warrants that it shall
-------------------------
not hereinafter grant to any Person any registration rights unless such rights
are subordinate to and not inconsistent with the rights granted or contained
herein, so long as any of the registration rights under this Agreement remain in
effect.
9. Termination of Registration Rights. The right to cause the Company to
----------------------------------
effect the registration of Registrable Securities set forth herein shall
terminate when all Registrable Securities, (i) can be sold in any one three (3)
month period without registration pursuant to the terms of Rule 144 of the
Securities Act and (ii) the market for the Company's Common Stock is
sufficiently liquid to permit sale of such all of such within a three month
period without adversely affecting the market price.
10. Miscellaneous.
(a) Specific Performance. The parties hereto acknowledge that there
--------------------
may be no adequate remedy at law if any party fails to perform any of its
obligations hereunder and that each party may be irreparably harmed by any such
failure, and accordingly agree that each party, in addition to any other remedy
to which it may be entitled at law or in equity, shall be entitled to compel
specific performance of the obligations of any other party under this Agreement
in accordance with the terms and conditions of this Agreement. Legal fees and
costs of enforcing this Agreement shall be awarded to the prevailing party.
(b) Notices. All demands, requests, notices and other communications
-------
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered personally or sent by
United States first class mail, postage prepaid, and
12
<PAGE>
to the parties hereto at the following address or at such other address as any
party hereto shall hereafter specify by notice to the other party hereto:
(i) If to the Company, addressed to:
Blue Rhino Corporation
104 Cambridge Plaza Drive
Winston-Salem, N.C. 27104
Attn: Mark Castaneda
with a copy to:
John H. Muehlstein
Pedersen & Houpt
161 North Clark Street
Suite 3100
Chicago, IL 60601
(ii) If to the Holders, to their addresses set forth on
Schedule 1 attached hereto,
----------
with a copy to :
Richard A. Sugar
Sugar, Friedberg & Felsenthal
30 North LaSalle Street
Suite 2600
Chicago, IL 60602
Except as otherwise provided herein, all such demands, requests,
notices and other communications shall be deemed to have been received on the
date of personal delivery thereof or on the third business day after the mailing
thereof.
(c) Governing Law. This Agreement shall be construed in accordance
-------------
with and governed by the laws of the State of Illinois (without giving effect to
any conflicts or choice of laws provisions that would cause the applications of
the domestic substantive laws of any other jurisdiction).
(d) Headings. The descriptive headings of the several sections and
--------
paragraphs of this Agreement are inserted for convenience only, and do not
constitute a part of this Agreement and shall not affect in any way the meaning
or interpretation of this Agreement.
(e) Entire Agreement: Amendments. This Agreement and the other
----------------------------
writings referred to herein or delivered pursuant hereto which form a part
hereof contain the entire understanding of the parties with respect to its
subject matter. This Agreement supersedes all prior agreements
13
<PAGE>
and understandings between the parties with respect to its subject matter. This
Agreement may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company and the
Majority Holders. Each Holder of any Registrable Securities at the time or
thereafter outstanding shall be bound by an amendment or waiver authorized by
this Section 10(e), whether or not any such Registrable Securities shall have
been marked to indicate such consent.
(f) Assignability. This Agreement and all of the provisions hereof
-------------
may not be assigned by any Holder without the prior written consent of the
Company.
(g) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF the parties have executed this Agreement as of the
date first written above.
COMPANY: HOLDERS:
__________________________________
BLUE RHINO CORPORATION Malcolm R. McQuilkin
By:_________________________________ __________________________________
James Harris
Name:_______________________________
HOLDERS: __________________________________
Darren Howanietz
____________________________________
Martin Bossler __________________________________
Brandon McQuilkin
____________________________________
Paul Friduss __________________________________
Michael Fasel
14
<PAGE>
Exhibit 10.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
UNIFLAME, INC.,
MAC MCQUILKIN,
JAMES E. HARRIS
AND
BLUE RHINO CORPORATION
March 31, 2000
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of this 31st day
of March, 2000, by and among BLUE RHINO CORPORATION, a Delaware corporation
("Buyer"), and UNIFLAME, INC. an Illinois corporation ("Seller"), MAC R.
MCQUILKIN, an Illinois resident ("McQuilkin"), and JAMES E. HARRIS, an Illinois
resident ("Harris") (collectively, McQuilkin and Harris are hereinafter referred
to as the "Shareholders").
R E C I T A L S:
- - - - - - - -
A. Seller manufactures and sells garden art, fireplace accessories and
barbeque grills, firepits and smokers in the United States and throughout the
word (the "Business").
B. The Shareholders, through the James E. Harris Self Declaration of
Trust dated January 28, 1998 and the Malcolm McQuilkin Living Trust Agreement
dated November 1, 1999 (the "Trusts"), own 100% of the equity interest of
Seller.
C. The Shareholders have complete authority and control over the Trusts.
D. Buyer desires to purchase, and Seller desires to sell, certain of the
assets of the Seller used or useful in the operations of the Business as
currently conducted on the terms and conditions hereinafter set forth.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
ARTICLE 1
PURCHASE OF ASSETS
1.1 Sale of Assets. On the Closing Date, Seller shall, assign, transfer,
--------------
convey and deliver to Buyer, and Buyer agrees to purchase and accept from
Seller, all of the assets and properties of Seller of every kind, nature and
description, real and personal, tangible and intangible, wherever situated,
which are owned, leased, held, used or related to the operation of the Business
as currently conducted (the "Assets"), except for the Excluded Assets (as
hereinafter defined) described in Section 1.2. Without limiting the generality
of the foregoing, the Assets shall include:
(a) Tangible Assets. All the tangible personal property, physical
---------------
assets and equipment, furnishings, and decorative objects held by Seller that
are used in the operation of the Business as currently conducted, as described
on Schedule 1.1(a) hereto, and any replacements
<PAGE>
thereof or additions thereto made between the date hereof and the Closing Date,
less any retirements thereof made in the ordinary and usual course of business
that are replaced by property or assets of at least equivalent utility and value
(hereinafter referred to as the "Tangible Assets").
(b) Licenses and Intangible Assets.
------------------------------
(1) All intangible assets owned or held or used by Seller and
used in the operation of the Business as currently conducted, such as any
franchises, trademarks or service marks, licenses, trade names, logos,
promotions, slogans, original copy, copyrights, patents, and applications for,
registrations of and licenses in respect of any of the foregoing, all trade
secrets, customer lists and proprietary rights; and the like (the "Intangible
Property"), including but not limited to those of which are set forth in
Schedule 1.1(b) hereto; and
(2) All goodwill of the Business, if any.
(c) Inventory. All inventories of products, work-in-process, finished
---------
goods, raw materials, supplies and parts held in connection with the Business
(the "Inventory"), a complete list of which is set forth in Schedule 1.1(c)
hereto.
(d) Accounts Receivable. All accounts and notes receivable and all of
-------------------
seller's right, title and interest in customer accounts (the "Accounts
Receivable") a complete list of which is set forth in Schedule 1.1(d) hereto.
(e) Real Property. All of the Seller's fee or leasehold interest, as
-------------
applicable, to the real property, buildings and structures set forth in Schedule
1.1(e) hereto, together with all appurtenances, rights, privileges and easements
benefitting, belonging or pertaining to such property (the "Real Property"), and
any and all improvements made thereto and any and all improvements made between
the date of this Agreement and the Closing Date (the "Improvements"), and
Seller's interests in and to all fixtures related to the Real Property and
Improvements.
(f) Contracts. All leases, contracts, agreements, arrangements,
---------
commitments and understandings to which Seller is a party to and set forth on
Schedule 1.1(f) hereto, and all leases, contracts, agreements, arrangements,
commitments and understandings entered into between the date hereof and the
Closing Date in the usual and ordinary course of business (the "Contracts").
(g) Records. All files, records and logs pertaining to the operation
-------
of the Business, including, without limitation, all computer software used in
the operations of and the accounting for the Business.
(h) Cash and Cash Equivalents. Cash, amounts on deposit, and other
-------------------------
cash equivalents of Seller existing at the Closing Date;
-2-
<PAGE>
1.2 Excluded Assets. The following assets (the "Excluded Assets") shall
---------------
be specifically excluded from the Assets:
(a) Tax Claims. Any and all claims of Seller for tax refunds, tax
----------
loss carry-forward benefits, other similar claims or rights of Seller existing
at the Closing Date; and
(b) Corporate Items. The corporate books, records and tax returns of
---------------
Seller.
(c) Other. Any benefit, right or claim relating to any liability or
-----
contract not assumed by Buyer.
1.3 Assumed Liabilities. Subject to the conditions and exceptions
-------------------
contained herein, on the Closing Date, Buyer will assume and agree to pay,
defend, discharge and perform when due only the following liabilities and
obligations of Seller relating to the Business (the "Assumed Liabilities"):
(a) Contracts. The liabilities and obligations of Seller accruing and
---------
to be performed after the Closing Date under the Contracts relating to the
operation of the Business after the Closing Date.
(b) Accounts Payable. The amounts due to certain suppliers and
----------------
vendors of Seller (the "Accounts Payable") a complete list of which is set forth
in Schedule 1.3(b) hereto.
(c) Other. The liabilities, commitments and delegations specifically
-----
set forth on Schedule 1.3(c).
Other than the Assumed Liabilities, Buyer shall not assume and shall not be
obligated in any manner to pay any debts, liabilities or obligations (the
"Excluded Liabilities") of Seller of any kind or nature, whether express or
implied, known or unknown, contingent or absolute.
1.4 Liabilities to be Paid at or Before Closing. The debts, liabilities,
-------------------------------------------
and obligations to be paid by Seller out of its sale proceeds are described on
Schedule 1.4. The payoff amounts for these debts, liabilities, and obligations
for which Seller is responsible are the balances as they exist on the Closing
Date. Except for the Assumed Liabilities, Seller hereby agrees to retain and
discharge, and to indemnify and hold Buyer harmless against, any and all debts,
liabilities, and obligations of Seller arising with respect to the period prior
to the Closing Date.
1.5 Purchase Price, Payment.
-----------------------
(a) Purchase Price. The total purchase price (the "Purchase Price")
--------------
to be paid by Buyer to Seller for the Assets shall be Thirteen Million Five
Hundred Fifty Thousand One Hundred Thirty One Dollars ($13,550,131.00).
-3-
<PAGE>
(b) Payment of Purchase Price. The Purchase Price shall be paid by
-------------------------
Buyer to Seller in the following manner:
(1) Cash. At the Closing, Buyer will pay to Seller by wire
----
transfer Four Million Six Hundred Seven Thousand Thirty One and 63/100 Dollars
($4,607,031.63), plus any cash required in lieu of fractional shares pursuant to
Section 1.5(b)(2).
(2) Stock. Within 90 days following the Closing Date, Buyer
-----
shall deliver to Seller shares of Buyer's common stock, $.001 par value with a
market value of Six Million Six Hundred Ninety Three Thousand Ninety Nine and
37/100 Dollars ($6,693,099.37) (the "Purchase Shares") titled in the names of
the Shareholders and employees identified in Section 3.1(e) herein and allocated
among them in the proportions provided in Schedule 1.5(b)(2). The value of the
shares shall be determined by the average of the last trade prices for a share
of Buyer's common stock, as listed in The Wall Street Journal, Central Edition,
reported for the ten (10) trading days ending on the Closing Date. No fractional
shares will be issued. With respect to any fractional share, Buyer shall pay to
Seller an amount in cash equal to such fraction.
(3) Deferred Purchase Price. Cash in the amount of the Deferred
-----------------------
Purchase Price (as hereinafter defined) payable to Seller pursuant to Section
1.5(c).
(c) Deferred Purchase Price. The "Deferred Purchase Price" shall mean
-----------------------
payments made by Buyer to Seller in an amount up to Two Million Two Hundred
Fifty Thousand Dollars ($2,250,000.00) payable over three (3) years (the "DPP
Term") on a quarterly basis, subject to adjustments as set forth in this Section
1.5(c), Section 1.5(d) and Section 1.5(e). The Deferred Purchase Price is based
on a target EBITDA for the Business of One Million Eight Hundred Twelve Thousand
Dollars ($1,812,000.00) in the first year following the Closing Date, such
amount to be increased five percent (5%) per year during the DPP Term and the
year immediately thereafter (the "Target EBITDA"). EBITDA shall mean the net
income of the Business, as determined using generally accepted accounting
principals consistently applied, before deductions for interest, taxes,
depreciation and amortization. At the end of each the first three (3) quarters
(i.e. the last day of June, September and December) of each year during the DPP
Term, Buyer shall pay Seller One Hundred Eighty Seven Thousand Five Hundred
Dollars ($187,500.00). At the end of the fourth quarter of each year during the
DPP Term, Buyer shall pay Seller One Hundred Eighty Seven Thousand Five Hundred
Dollars ($187,500.00); provided, however, if the actual EBITDA for such year is
less than the Target EBITDA for such year (a "EBITDA Shortfall") an amount equal
to the difference between (i) a fraction, the numerator of which shall be the
difference between the Target EBITDA for such year and the actual EBITDA for
such year and the denominator of which shall be the Target EBITDA for such year,
which fraction shall be multiplied by $750,000, and (ii) $187,500. The fourth
quarter payments payable hereunder shall be made within 90 days after the end of
such fourth quarter. If earned, the EBITDA Shortfall for any year in the DPP
Term shall be recaptured and paid to Seller with respect to the fourth quarter
payment of subsequent years during the DPP Term only if the Target EBITDA for
such subsequent year is met and then the recaptured amount shall be an amount
-4-
<PAGE>
equal to a fraction, the numerator of which shall be the difference between the
actual EBITDA for the current year and the Target EBITDA for such year and the
denominator of which shall be the Target EBITDA for such year, which fraction
shall be multiplied by $750,000 (the "Subsequent Adjustment"); provided,
however, that the aggregate amount of all Subsequent Adjustments payable to
Seller shall not exceed the aggregate of any prior EBITDA Shortfalls. The EBITDA
Shortfall, if any, that exists at the end of the DPP Term shall be recaptured
and paid to Seller if the actual EBITDA for the year immediately following the
DPP Term exceeds the Target EBITDA for such year by using the same formula set
forth in the previous sentence. During the DPP Term, Seller or its
representatives shall have the right to inspect the financial statements and
other information used by Buyer in calculating the actual EBITDA. Such
inspections shall take place with reasonable notice and in a manner that does
not interrupt the Business.
(d) Adjustments to Deferred Purchase Price - Accounts Receivables. If
-------------------------------------------------------------
within six (6) months after the Closing Date, all of the Accounts Receivable
have not been fully collected by Buyer, Buyer shall be entitled to deduct from
the Deferred Purchase Price the difference between the value of the Accounts
Receivable and the amount actually collected by Buyer (the "Accounts Receivable
Adjustment"). The Accounts Receivable Adjustment shall be deducted from the
quarterly payments due Seller pursuant to the Deferred Purchase Price until the
Accounts Receivable Adjustment has been fully satisfied. After the Accounts
Receivable Adjustment has been fully satisfied, Buyer shall forward any
subsequent payment received on any Accounts Receivable to Seller. During the six
(6) month period immediately following Closing Date, Buyer shall (i) use its
normal collection efforts in collecting the Accounts Receivable and (ii) shall
apply monies received from account debtors to such account debtors' oldest
account, except in the case of a "disputed" Account Receivable and except for
instances where the account debtor has directed the payment to a specific
invoice or specific invoices. For purposes of this Section, a "disputed" Account
Receivable means one which the account debtor refuses to pay because he asserts
that the money is not owed or the amount is incorrect. During said six (6) month
period, Buyer shall supply Seller with a monthly report, to be provided to
Seller within fifteen (15) days after the end of each calendar month, showing
the status of the Accounts Receivable and shall afford Seller or its
representatives the right to inspect Buyer's records related to the Accounts
Receivable, provided such inspections take place with reasonable notice and in a
manner that does not interrupt the Business.
(e) Adjustments to Deferred Purchase Price - Accounts Payable. At
---------------------------------------------------------
Closing, Seller shall deliver to Buyer a list of the accounts payable as of the
date of Closing (the "Accounts Payable List"). If within six (6) months after
Closing Date Buyer has paid any amounts for obligations of Seller that are not
contained on the Accounts Payable List, Buyer shall be entitled to deduct from
the Deferred Purchase Price any such amounts. If within six (6) months after
Closing Date Buyer has paid amounts less than the obligations of Seller set
forth on the Accounts Payable List, Buyer shall pay such amount to Seller
through an increase in the next Deferred Purchase Price payment.
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1.6 Registration of Purchase Shares. Buyer will use its best efforts to
-------------------------------
prepare, file and have become effective with the Securities and Exchange
Commission (the "Commission") an amendment or supplement to Buyer's Form S-1
registration statement last amended on July 21, 1999 (the "Shelf Registration
Statement") relating to the sale of all of the Purchase Shares to be issued to
Seller pursuant to this Agreement on or before the one (1) month anniversary
date of the Closing Date. Buyer shall cause the Purchase Shares to be listed on
the Nasdaq National Market at its expense so as to permit the sale by Seller of
the Purchase Shares without further action under any state securities or blue
sky laws. Buyer's obligation hereunder to so prepare and file the Shelf
Registration Statement relating to the Purchase Shares is subject to the full
cooperation of Seller in furnishing any and all information about themselves and
any contemplated method of resale of such shares as may be necessary to make
such statements not misleading, and any such information so furnished shall be
treated as representations and warranties made by Seller under this Agreement,
covered by the indemnification provisions set forth in Section 4(a) hereof.
Buyer shall not be obligated to pay any underwriting discounts, selling
commissions, brokers' fees or other offering expenses of any kind attributable
to any sale of the Purchase Shares, which fees and expenses will be paid by
Seller. Except for transfers permitted to Seller's Shareholders and to the
employees identified in Section 3.1(e), Seller's rights under this Section 1.6
are not transferable without Buyer's prior written consent. Buyer agrees to
maintain the effectiveness of the Shelf Registration Statement effective for a
period of two (2) years after the Closing Date. In the event Buyer is unable to
deliver the Purchase Shares pursuant to the Shelf Registration Statement within
six (6) months of the Closing Date, or if Buyer does not maintain the
effectiveness of the Shelf Registration Statement for two (2) years after the
Closing Date, Seller shall have demand registration rights pursuant to the
registration rights agreement attached hereto as Exhibit L (the "Registration
---------
Rights Agreement").
1.7 Closing. The closing of the transactions contemplated hereby (the
-------
"Closing") shall take place at the offices of Pedersen & Houpt, 161 N. Clark,
Suite 3100, Chicago, Illinois 60601on the date hereof (the "Closing Date").
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Seller. Seller and the
----------------------------------------
Shareholders, jointly and severally represent and warrant to Buyer as follows:
(a) Organization and Standing. Seller is a corporation duly
-------------------------
organized, validly existing, and in good standing under the laws of the State of
Illinois, has the corporate power to own, lease and operate the properties it
now owns, leases and operates, and to carry on its business as now being
conducted, and is duly qualified or licensed to do business and is in good
standing in every domestic and foreign jurisdiction in the United States and
elsewhere in which the nature of its business or its ownership or leasing of
property requires such qualification.
(b) Authorization. Seller has all necessary power and authority to
-------------
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution,
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delivery and performance of this Agreement have been duly approved by all
necessary actions, and this Agreement constitutes the valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms.
(c) Legal Proceedings. Except as set forth on Schedule 2.1(c), there
-----------------
are no claims, suits, actions, administrative, bankruptcy, arbitration or other
proceedings or governmental investigations pending or, to Seller's knowledge,
threatened against Seller or the Assets, and Seller does not know of any facts
which could reasonably form the basis for any such claim, suit, action,
proceeding, or investigation. Except as set forth on Schedule 2.1(c), there are
presently no outstanding judgments, decrees, or orders of any court or any
governmental or administrative agency against or affecting Seller or any of the
Assets. No insolvency proceedings of any character including, without
limitation, bankruptcy, receivership, reorganization, or arrangement with
creditors, voluntary or involuntary, affecting Seller or any of the Assets are
pending, or to Seller's knowledge, threatened. Seller has not made or taken any
assignment for the benefit of creditors or any actions with a view to, or which
would constitute the basis for, the institution of any such insolvency
proceedings.
(d) Noncontravention. Neither the execution and the delivery of this
----------------
Agreement, nor the consummation of the transactions contemplated hereby, 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 Seller is subject or any provision of the
charter or bylaws of Seller, 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 Seller is a party or by which it is bound or to which any of its assets
is subject (or result in the imposition of any security interest upon any of its
assets). The execution and delivery of this Agreement by Seller and the
performance of its obligations hereunder do not require any consent or approval
of, action by, or notice to any governmental department, commission, board,
bureau, agency or instrumentality, or any other third party.
(e) Intellectual Property.
---------------------
(1) Except with respect to the Weber Litigation described on
Schedule 2.1(c), Seller owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intangible Property necessary for the
operation of the Businesses as presently conducted and as presently proposed to
be conducted. Each item of Intangible Property owned or used by the Seller
immediately prior to the Closing hereunder will be owned or available for use by
the Buyer on identical terms and conditions immediately subsequent to the
Closing hereunder. Seller has taken all necessary action to maintain and protect
each item of Intangible Property that it owns or uses.
(2) Except with respect to the Weber Litigation described on
Schedule 2.1(c), Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into
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conflict with any Intangible Property rights of third parties, and none of the
Shareholders and the directors and officers (and employees with responsibility
for Intangible Property matters) of Seller has ever received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that must
license or refrain from using any Intangible Property rights of any third
party). To the knowledge of the Stockholders and the directors and officers (and
employees with responsibility for Intellectual Property matters) of Seller, no
third party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intangible Property rights of Seller.
(3) Schedule 1.1(b) identifies each patent or registration which
has been issued to Seller with respect to any of its Intangible Property,
identifies each pending patent application or application for registration which
Seller has made with respect to any of its Intangible Property, and identifies
each license, agreement, or other permission which Seller has granted to any
third party with respect to any of its Intangible Property (together with any
exceptions). Seller has delivered to the Buyer correct and complete copies of
all such patents, registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to Buyer correct and
complete copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. Schedule 1.1(b) identifies each
trade name or unregistered trademark used by Seller in connection with its
Business. With respect to each item of Intangible Property required to be
identified in Disclosure Schedule 1.1(b).
(A) Seller possess all right, title, and interest in and to
the item, free and clear of any security interest, license, or other
restriction;
(B) The item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) No action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is threatened which challenges
the legality, validity, enforceability, use, or ownership of the item; and
(D) Seller has never agreed to indemnify any person or
entity for or against any interference, infringement, misappropriation, or other
conflict with respect to the item; and
(4) Schedule 1.1(b) identifies each item of Intellectual
Property that any third party owns and that Seller uses pursuant to license,
sublicense, agreement or permission. Seller has delivered to Buyer correct and
complete copies of all such licenses, sublicenses, agreements and permissions.
With respect to each item of Property required to be identified in Schedule
1.1(b):
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<PAGE>
(A) The license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable and in full force and
effect;
(B) The license, sublicense, agreement or permission 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;
(C) No party to the license, sublicense, agreement or
permission 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 thereunder;
(D) No party to the license, sublicense, agreement or
permission has repudiated any provision thereof;
(E) With respect to each sublicense, the representations
and warranties set forth in subsections (A) through (D) above are true and
correct with respect to the underlying license;
(F) The underlying item of Intangible Property is not
subject to any outstanding injunction, judgment, order, decree, ruling or
charge;
(G) No action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand is pending or is threatened which challenges
the legality, validity or enforceability of the underlying item of Intangible
Property; and
(H) Seller has not granted any sublicense or similar right
with respect to the license, sublicense, agreement or permission.
(5) Seller will not interfere with, infringe upon,
misappropriate or otherwise come into conflict with, any Intangible Property
rights of third parties as a result of the continued operation of the Business
as presently conducted and as presently proposed to be conducted.
(f) Compliance with Laws. Seller has complied with all applicable
--------------------
laws of federal, state, local and foreign governments (and all agencies
thereof). No notice, action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against Seller
alleging any failure so to comply.
(g) Assets. The Assets constitute all of the assets of Seller that
------
are necessary to operate the Business as currently operated. Except as set forth
on Schedule 2.1(g), Seller is the sole owner of the Assets and has marketable
and valid title to the Assets, free and clear of all liens, charges, security
interests, claims, or encumbrances whatsoever, except for and subject only to
liens, charges, security interests and encumbrances to be discharged at Closing.
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<PAGE>
(h) Financial Statements. Seller has heretofore delivered to Buyer
--------------------
(collectively, together with the notes thereto, the "Financial Statements") the
balance sheet of Seller (collectively the "Balance Sheet") as of December 31,
1999 (the "Balance Sheet Date"), December 31, 1998 and December 31, 1997, and
the statements of income of Seller for the years ended December 31, 1999,
December 31, 1998 and December 31, 1997, as well as the balance sheet and
statement of income for the months ended January 31, 2000 and February 29, 2000
and the balance sheet as of March 31, 2000. The "Most Recent Balance Sheet"
refers to the Balance Sheet dated December 31, 1999.
Each of the Financial Statements is true, complete and correct in all
material respects, was prepared from the books and records kept by Seller, and
fairly presents the financial position of Seller as of such dates, and the
results of Seller's operations and Seller's cash flows for the periods then
ended in accordance with GAAP consistently applied (except in the case of
Financial Statements which are not audited for normally recurring year-end
adjustments, which adjustments will not differ materially from the effects of
normally recurring year-end adjustments on the audited financial statements for
the 1999 fiscal year). Except as set forth in the Schedules delivered pursuant
to this Agreement or the Financial Statements, since the Balance Sheet Date,
there has been no material adverse change in the condition (financial or
otherwise), results of operations, properties, assets, liabilities, business or
prospects of Seller, nor has there been any event or condition of any character
which is likely to materially and adversely affect, the condition (financial or
otherwise), results of operations, properties, assets, liabilities, business or
prospects of Seller. The Balance Sheet reflects all properties and assets, real,
personal or mixed, which are currently used in connection with such Seller's
business, except for properties and assets (other than capital assets) not in
excess of $10,000 (in the aggregate) purchased or sold since the Balance Sheet
Date consistent with past practice and in the ordinary and normal course of
business.
(i) Absence of Changes. Except as disclosed in Schedule 2.1(i), since
------------------
the Balance Sheet Date, Seller has conducted the Business only in the ordinary
course. Without limiting the generality of the foregoing sentence, except as
disclosed on Schedule 2.1(i), since the Balance Sheet Date there has not been:
(1) any change in the financial condition, assets, liabilities,
net worth, or business of Seller, except changes in the ordinary course of
business, none of which, individually or in the aggregate, has been or will be
materially adverse to Seller;
(2) any damage, destruction, or loss, whether or not covered by
insurance, materially adversely affecting the properties, business or prospects
of Seller, or any material deterioration in the operating condition of any of
the Assets;
(3) any mortgage, pledge, or subjection to lien, charge or
encumbrance of any kind on any of the Assets, tangible or intangible;
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<PAGE>
(4) any strike, walkout, labor trouble or any other new or
continued event, development, or condition or any character which has or could
materially adversely affect the business, properties, or prospects of Seller;
(5) any increase in the salaries or other compensation payable
or to become payable to, any employee of Seller (except normal annual merit
increases made in the ordinary course of business and consistent with past
practice), or any increase in, or any addition to, other benefits (including
without limitation, any bonus, profit sharing pension, or other plan) to which
Seller's employees may be entitled, or any other payment of any kind to (or on
behalf of) any such employee other than payment of base compensation and
reimbursement for reasonable business expenses in the ordinary course of
business;
(6) any cancellation or waiver of any right material to the
operation of Seller's business or any cancellation or waiver of any debt or
claim of substantial value or any cancellation or waiver of any debt or claim
against any Related Party (as defined below);
(7) any sale, transfer, or other disposition of any asset of
Seller, except sales of assets in the ordinary course of business;
(8) any write-off as uncollectible of any note or account
receivable of Seller or write-down of the value of any asset or inventory by
Seller other than in immaterial amounts or in the ordinary course of business
consistent with past practice and at a rate no greater than during the twelve
(12) months ending on December 31, 1999;
(9) any material change in the management or operations of
Seller or any method of accounting or keeping of Seller's books of account or
accounting practices;
(10) any creation, incurrence, assumption, or guarantee by Seller
of any obligation or liability (whether absolute, accrued, contingent, or
otherwise and whether due or to become due), except in the ordinary course of
business, or any creation, incurrence, assumption or guarantee by Seller or any
indebtedness for money borrowed;
(11) any sale, transfer, or lease of any property or asset
(whether real, personal, or mixed, tangible or intangible) to any Related Party;
or
(12) any disposition of or failure to keep in effect any rights
in, to or for the use of any patent, trademark, service mark, trade name, or
copyright, or any disclosure to any person not an employee, or other disposal of
any trade secret, process or know-how.
As used herein, the term "Related Party" means, with respect to any person, any
beneficiary, employee, partner, trustee, affiliate, associate, or relative of a
person or of any Related Party with respect to such person.
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<PAGE>
(j) Condition of Equipment. Except as set forth in Schedule 2.1(j),
----------------------
the Tangible Assets are in good operating condition and repair, reasonable wear
and tear in ordinary usage excepted, free of defects, and are suitable, adequate
and fit for the uses for which they are being used.
(k) Contracts. The Contracts are all of the material contracts,
---------
agreements, leases and commitments (both written and oral) relating to the
Assets or to the Business. Seller has delivered to Buyer prior to the execution
of this Agreement true and complete copies or descriptions of all of the
Contracts (and all amendments and modifications thereto). Each Contract is in
full force and effect, and constitutes a valid and binding obligation of, and is
legally enforceable in accordance with its terms against, the parties thereto.
To Sellers' knowledge, the parties thereto have complied with all of the
provisions of the Contracts and are not in default thereunder, and there has not
occurred any event which (whether with or without notice, lapse of time, or the
happening or occurrence of any other event) would constitute such a default.
Except as set forth on Schedule 2.1(k), no Contracts require the consent of any
party thereto to the consummation of the transactions contemplated hereby. On
the Closing Date, the provisions of this Section 2.1(k) shall be applicable to
all of the Contracts entered into between the date of this Agreement and the
Closing Date.
(l) Inventory. The Inventory was purchased in the ordinary course of
---------
business and in a manner consistent with the regular inventory practices of
Seller. The Inventory is 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 reserve for inventory write down 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 Seller.
(m) Accounts Receivable. All Accounts Receivable are reflected
-------------------
properly on Seller's books and records, are valid receivables subject to no
setoffs or counterclaims, are current and collectible, and will be collected in
accordance with the terms of their recorded amounts, subject only to the reserve
for bad debts 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 Seller.
(n) Accounts Payable. All Accounts Payable were incurred by Seller in
----------------
the ordinary course of business. No accounts payable are subject to any contest
or dispute of any kind, whether in whole or part, and Seller has not received
any complaints, threats or collection efforts on the part of any suppliers or
trade vendors with respect thereto.
(o) Product Warranty. Each product manufactured, sold, leased, or
----------------
delivered by Seller has been in conformity with all applicable contractual
commitments and all express and implied warranties, and Seller does not have 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
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<PAGE>
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 Seller. No
product manufactured, sold, leased, or delivered by Seller is subject to any
guaranty, warranty, or other indemnity beyond the applicable standard terms and
conditions of sale or lease. Schedule 2.1(o) includes copies of the standard
terms and conditions of sale or lease for the Sellers (containing applicable
guaranty, warranty, and indemnity provisions).
(p) Product Liability. Except as set forth on Schedule 2.1(p), to
-----------------
Seller's knowledge, Seller has no liability (and there is no basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against Seller giving rise to any liability) arising
out of any injury to individuals or property as a result of the ownership,
possession, or use of products manufactured, sold or distributed by Seller.
(q) Compensation Arrangements. Schedule 2.1(q) hereto sets forth the
-------------------------
names, ages, and current salary, including any bonus, if applicable, of all
present employees of Seller together with a statement of the full amount of all
remuneration including fringe benefits (other than benefits paid under the Plans
as defined in Section 2.1(r) hereof) paid by Seller to each such person during
the twelve (12) month period preceding the date hereof. Schedule 2.1(q) also
contains a brief description of all material terms of employment agreements to
which Seller is a party and all severance and accrued benefits to which any
director, officer, or employee of Seller is or may be entitled to receive.
Seller acknowledges that Buyer is not assuming any of the compensation
arrangements set forth on Schedule 2.1(q).
(r) Labor Relations. There are no strikes, work stoppages, grievance
---------------
proceedings, union organization efforts, or other controversies pending or
threatened between Seller and any of its employees, supervisors, managers, or
agents. Seller has complied and is in compliance, in all material respects, with
all laws and regulations relating to the employment of labor, including without
limitation provisions relating to wages, hours, collective bargaining,
occupational safety and health, equal employment opportunity, and the
withholding of income taxes and social security contributions. There are no
collective bargaining agreements or employment agreements between Seller and any
of its employees. The consummation of the transactions contemplated hereby will
not cause Buyer to incur or suffer any liability relating to, or obligation to
pay, severance, termination, or other payments to any person or entity.
(s) Employee Benefit Plans.
----------------------
(1) Definitions. For purposes of this Section 2.1(s), the
-----------
following terms shall have the definition ascribed herein:
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of ERISA
-------
and Code (S)4980B.
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"Code" means the Internal Revenue Code of 1986, as amended.
------
"Controlled Group" means one or more incorporated or unincorporated
------------------
businesses under common control pursuant to Code Sections 414(b), (c), (m) or
(o).
"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 (S)3(2).
-------------------------------
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA (S)3(1).
-------------------------------
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-------
amended.
"ERISA Affiliate" means each entity which is treated as a single employer
-----------------
with Seller for purposes of Code (S)414.
"Fiduciary" has the meaning set forth in ERISA (S)3(21).
-----------
"Liability" means any liability (whether known or unknown, asserted or
-----------
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and due or to become due), including any liability for taxes.
"Multiemployer Plan" has the meaning set forth in ERISA (S)3(37).
--------------------
"PBGC" means the Pension Benefit Guaranty Corporation.
------
"Prohibited Transaction" has the meaning set forth in ERISA (S)406 and Code
------------------------
(S)4975.
"Reportable Event" has the meaning set forth in ERISA (S)4043.
------------------
(2) Schedule 2.1(s) lists each Employee Benefit Plan that Seller
maintains or to which Seller contributes or has any obligation to contribute.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in operation in all
respects with the applicable requirements of ERISA, the Code, and other
applicable laws.
(B) All required reports and descriptions (including Form
5500 Annual Reports, summary annual reports, PBGC-1's, and summary plan
descriptions) have been
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<PAGE>
timely filed and distributed appropriately with respect to each such Employee
Benefit Plan. The requirements of COBRA have been met with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(C) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have been paid to
each such Employee Benefit Plan which is an Employee Pension Benefit Plan and
all contributions for any period ending on or before the Closing Date which are
not yet due have been paid to each such Employee Pension Benefit Plan or accrued
in accordance with the past custom and practice of Seller. All premiums or other
payments for all periods ending on or before the Closing Date have been paid
with respect to each such Employee Benefit Plan which is an Employee Welfare
Benefit Plan.
(D) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan" under Code
(S)401(a), has received, within the last two years, a favorable determination
letter from the Internal Revenue Service that it is a "qualified plan," and
Seller is not aware of any facts or circumstances that could result in the
revocation of such determination letter.
(E) The market value of assets under each such Employee
Benefit Plan which is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) equals or exceeds the present value of all vested and
nonvested Liabilities thereunder determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee Pension Benefit Plan
terminating on the date for determination.
(F) Seller has delivered to Buyer correct and complete
copies of the plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, the most recent
Form 5500 Annual Report, and all related trust agreements, insurance contracts,
and other funding agreements which implement each such Employee Benefit Plan.
(3) With respect to each Employee Benefit Plan that Seller and
any ERISA Affiliate maintains or ever has maintained or to which any of them
contributes, ever has contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which is an Employee
Pension Benefit Plan (other than any Multiemployer Plan) has been completely or
partially terminated or been the subject of a Reportable Event as to which
notices would be required to be filed with the PBGC. No proceeding by the PBGC
to terminate any such Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been instituted or, to Seller's knowledge, threatened.
(B) There have been no Prohibited Transactions with respect
to any such Employee Benefit Plan. No Fiduciary has any Liability for breach of
fiduciary duty or
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any other failure to act or comply in connection with the administration or
investment of the assets of any such Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan (other than routine
claims for benefits) is pending or, to Seller's knowledge, threatened. Seller
has no knowledge of any Basis for any such action, suit, proceeding, hearing, or
investigation.
(C) Seller has not incurred any Liability to the PBGC
(other than PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal liability as defined in ERISA (S)4201) or under the
Code with respect to any such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
(4) Seller has not, and the other members of the Controlled
Group have not, ever contributed to, or ever been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal liability as
defined in ERISA (S)4201) under any Multiemployer Plan.
(5) Seller does not maintain or ever has maintained or
contributes, ever has contributed, or ever has been required to contribute to
any Employee Welfare Benefit Plan providing medical, health, or life insurance
or other welfare-type benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in accordance with
Code (S)4980B).
(6) Seller hereby acknowledges that Buyer will not be assuming
any Employee Benefit Plan that is maintained by Seller.
(t) Environmental, Health, and Safety Matters.
------------------------------------------
(1) Definitions. For purposes of this Section 2.1(t), the
-----------
following terms shall have the definition ascribed herein:
"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
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.
(2) Seller has, in all material respects, complied with and is
in compliance with all Environmental, Health, and Safety Requirements.
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<PAGE>
(3) Without limiting the generality of the foregoing, the Seller
has obtained and complied with, and is in compliance with, all permits, licenses
and other authorizations that are required pursuant to Environmental, Health,
and Safety Requirements for the occupation of its facilities and the operation
of its business; a list of all such permits, licenses and other authorizations
is set forth on Schedule 2.1(t) attached hereto.
(4) Seller has not received any written or oral notice, report
or other information regarding any actual or alleged violation of Environmental,
Health, and Safety Requirements, or any liabilities or potential liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise), including
any investigatory, remedial or corrective obligations, relating to Seller, the
Stations or the Assets arising under Environmental, Health, and Safety
Requirements.
(5) Except as set forth on Schedule 2.1 (t), none of the
following exists at any property or facility owned or operated by Seller: (A)
underground storage tanks, (B) asbestos-containing material in any form or
condition, (C) materials or equipment containing polychlorinated biphenyls, or
(D) landfills, surface impoundments, or disposal areas.
(6) Seller has not treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or released any substance,
including without limitation any hazardous substance, or owned or operated any
property or facility (and no such property or facility is contaminated by any
such substance) in a manner that has given or would give rise to liabilities,
including any liability for response costs, corrective action costs, personal
injury, property damage, natural resources damages or attorney fees, pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), the Solid Waste Disposal Act, as amended ("SWDA")
or any other Environmental, Health, and Safety Requirements.
(7) Neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will result in any obligations
for site investigation or cleanup, or notification to or consent of government
agencies or third parties, pursuant to any of the so-called "transaction-
triggered" or "responsible property transfer" Environmental, Health, and Safety
Requirements.
(8) Seller has not, either expressly or by operation of law,
assumed or undertaken any liability, including without limitation any obligation
for corrective or remedial action, of any other person or entity relating to
Environmental, Health, and Safety Requirements.
(9) No facts, events or conditions relating to the past or
present facilities, properties or operations of the Seller will prevent, hinder
or limit continued compliance with Environmental, Health, and Safety
Requirements, give rise to any investigatory, remedial or corrective obligations
pursuant to Environmental, Health, and Safety Requirements, or give rise to any
other liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) pursuant to Environmental, Health, and Safety Requirements, including
without limitation any
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<PAGE>
relating to onsite or offsite releases or threatened releases of hazardous
materials, substances or wastes, personal injury, property damage or natural
resources damage.
(u) Tax Matters. Except as set forth on Schedule 2.1(u), Seller has
-----------
timely filed with all appropriate governmental agencies all federal, state,
local, and other tax or information returns and tax reports due for all periods
ended on or before the date hereof and has paid in full all federal, state,
foreign, local and other governmental taxes, estimated taxes, interest,
penalties, assessments and deficiencies (collectively, "Taxes") which have
become due. Such returns and forms are true, correct and complete in all
material respects, and Seller has no liability for Taxes in excess of the Taxes
shown on such returns. Seller is not a party to any pending action or
proceeding, and, to Seller's knowledge, there is no action or proceeding
threatened by any government or authority against Seller for assessment or
collection of any Taxes, and no unresolved claim for assessment or collection of
any Taxes has been asserted against Seller.
(v) Insurance. Schedule 2.1(v) contains a list and brief description
---------
of all policies of title, property, fire, casualty, liability, life, workmen's
compensation, business interruption and other forms of insurance of any kind
relating to the Assets or the Business. All such policies: (i) are in full force
and effect; (ii) are sufficient for compliance in all material respects by
Seller with all requirements of law and of all agreements to which Seller is a
party; (iii) are valid, outstanding, and enforceable policies; and (iv) insure
against risks of the kind customarily insured against and in amounts customarily
carried by corporations similarly situated and provide adequate insurance
coverage for the Assets and the Business. There is no default with respect to
any provision contained in any such policy, nor has there been any failure to
give any notice or present any claim under any such policy in a timely fashion
or in the manner or detail required by the policy. No notice of cancellation or
non-renewal with respect to, or disallowance of any claim under, any such policy
has been received by Seller.
(w) Real Property.
-------------
(1) Seller does not own any Real Property.
(2) Schedule 1.1(e) lists and describes briefly all Real
Property leased or subleased to Seller. Seller has delivered to Buyer correct
and complete copies of the leases and subleases listed in Section 1.1(e). With
respect to each lease and sublease listed in Schedule 1.1(e):
(A) The lease or sublease is legal, valid, binding,
enforceable, and in full force and effect.
(B) The lease or sublease 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.
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<PAGE>
(C) No party to the lease or sublease 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 thereunder.
(D) No party to the lease or sublease has repudiated any
provision thereof.
(E) There are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease.
(F) With respect to each sublease, the representations and
warranties set forth in subsections (A) through (E) above are true and correct
with respect to the underlying lease.
(G) Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold.
(H) All facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and have been
operated and maintained in accordance with applicable laws, rules, and
regulations.
(I) All facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation of said
facilities.
(J) The owner of the facility leased or subleased has good
and marketable title to the Real Property, free and clear of any security
interest, easement, covenant, or other restriction, except for installments of
special easements not yet delinquent and recorded easements, covenants, and
other restrictions which do not impair the current use, occupancy, or value, or
the marketability of title, of the property subject thereto.
(x) Subsidiaries. Uni-Asia, Ltd. ("Uni-Asia"), a wholly-owned
------------
subsidiary of Seller, is a corporation duly organized, validly existing and in
good standing under the laws of the country of Seychelles. Uni-Asia is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required. Uni-Asia has full corporate
power and authority and all licenses, permits, and authorizations necessary to
carry on the businesses in which it is engaged and in which it presently
proposes to engage and to own and use the properties owned and used by it.
Schedule 2.1(x) attached hereto lists the directors and officers of Uni-Asia.
The Sellers have delivered to Buyer correct and complete copies of the articles
of incorporation and bylaws of Uni-Asia (as amended to date). The minute books
(containing the records of meetings of the stockholders, the board of directors,
and any committees of the board of directors), the stock certificate books, and
the stock record books of Uni-Asia are correct and complete. Uni-Asia is not in
default under or in violation of any
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<PAGE>
provision of its articles of incorporation or bylaws. Other than Uni-Asia,
Seller does not own an equity interest in another corporation or other business
entity.
(y) Broker's Fee. Seller has no liability or obligation to pay any
------------
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(z) Disclosure. No covenant, representation or warranty by Seller,
----------
and no written statement, schedule or certificate furnished or to be furnished
by Seller pursuant hereto or at the Closing hereunder, contains or will contain
any untrue statement of a material fact, or will omit to state a material fact
necessary to provide Buyer with complete and accurate information as to the
Seller, the Assets, or the Business or to make the statements therein not
misleading. All documentation and information furnished by Seller to Buyer are
accurate in all material respects.
2.2 Representations and Warranties of Buyer. Buyer represents and
---------------------------------------
warrants to Seller as follows:
(a) Organization and Standing. Buyer is a corporation duly formed,
-------------------------
validly existing, and in good standing under the laws of the State of Delaware.
(b) Authorization. Buyer has all necessary power and authority to
-------------
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
has been duly approved by all necessary actions, and the Agreement constitutes a
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms.
(c) Noncontravention. Neither the execution and the delivery of this
----------------
Agreement, nor the consummation of the transactions contemplated hereby, 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 Buyer is subject or any provision of its
partnership agreement 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
Buyer is a party or by which it is bound or to which any of its assets is
subject. The execution and delivery of this Agreement by Buyer and the
performance of its obligations hereunder do not require, as to Buyer, any
consent or approval of, or action by, any governmental department, commission,
board, bureau, agency, or instrumentality, or any other third party.
(d) Broker's Fees. Buyer has no liability or obligation to pay any
-------------
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
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<PAGE>
(e) Disclosure. No covenant, representation or warranty by Buyer, and
----------
no written statement, schedule or certificate furnished or to be furnished by
Buyer pursuant hereto or at the Closing hereunder, contains or will contain any
untrue statement of a material fact, or will omit to state a material fact
necessary to provide Seller with complete and accurate information as to the
Buyer, the Assets, or the Stations or to make the statements therein not
misleading. All documentation and information furnished by Buyer to Seller are
accurate in all material respects.
ARTICLE 3
PERFORMANCE AT AND AFTER CLOSING
3.1 Buyer's Performance at Closing. At the Closing, Buyer shall execute
------------------------------
and deliver or cause to be delivered to Seller:
(a) Purchase Price. The Purchase Price in the amount and manner as
--------------
set forth in Section 1.5(b)(1) hereof and an acknowledgment that a stock
certificate representing the number of Purchase Shares determined pursuant to
Section 1.5(b)(2) will be delivered to Buyer when the Shelf Registration
Statement is declared effective by the Commission.
(b) Assignment of Leases. An Assignment and Assumption of Leases in
--------------------
the form attached hereto as Exhibit A.
---------
(c) Assignment and Assumption Agreement. An Assignment and Assumption
-----------------------------------
Agreement of the Contracts substantially in the form attached hereto as Exhibit
-------
B.
- - - -
(d) Restricted Stock Agreement. A Restricted Stock Agreement is the
--------------------------
form attached hereto as Exhibit C.
---------
(e) Employment Agreements. Employment Agreements in the form attached
---------------------
hereto as Exhibit D for the following employees: Mac McQuilkin, Michael Fasel,
---------
Martin Bossler, Paul Friduss, Darren Howanietz and Brandon McQuilkin. The
specific terms of such employment is set forth on Schedule 3.1(e).
3.2 Seller's Performance at Closing. At the Closing, Seller shall execute
-------------------------------
and deliver or cause to be delivered to Buyer:
(a) Resolutions. Copies of (i) the resolutions of the board of
-----------
directors and the Shareholders of Seller, certified by an officer of Seller as
being correct and complete and then in full force and effect, authorizing the
execution, delivery and performance of this Agreement and the agreements and
instruments called for hereunder, and the consummation of the transactions
contemplated hereby and by such agreements and instruments; (ii) Seller's
certificate of incorporation, certified by the Secretary of State of Seller's
state of incorporation; and (iii) good standing certificates for Seller from the
Secretary of State of Seller's state of incorporation and from the appropriate
authorities in each jurisdiction in which Seller is qualified to do business as
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<PAGE>
a foreign corporation, with respect to the ownership, possession, use or
operation of any of the Assets, dated not more than sixty (60) days prior to
Closing;
(b) Bill of Sale. One or more bills of sale assigning, transferring,
------------
and conveying to Buyer free and clear title to all of the Tangible Assets to be
acquired by Buyer pursuant to the terms of this Agreement in the form of Exhibit
-------
E attached hereto.
- - - -
(c) Assignment and Assumption of Lease. An Assignment Assumption of
----------------------------------
Lease in the form attached hereto as Exhibit A.
---------
(d) Assignment and Assumption Agreement. An Assignment and Assumption
-----------------------------------
Agreement of the Contracts in the form attached hereto as Exhibit B.
---------
(e) Assignment of Trademarks. An Assignment of Trademarks in the
------------------------
form attached hereto as Exhibit F.
---------
(f) Assignment of Patents. As Assignment of Patents in the form
---------------------
attached hereto as Exhibit G.
---------
(g) Assignment of Copyrights. An Assignment of Copyrights in the
------------------------
form attached hereto as Exhibit K.
---------
(h) Opinion of Seller's Counsel. Buyer shall have received the
---------------------------
opinion of counsel to Seller dated the Closing Date, in form reasonably
acceptable to Buyer's counsel.
(i) Non-Compete Agreement. Buyer shall have received a non-compete
---------------------
agreement from Seller and the Shareholders in the form attached hereto as
Exhibit H.
- - - ---------
(j) Restricted Stock Agreement. A Restricted Stock Agreement, in the
--------------------------
form attached hereto as Exhibit C, executed by the Shareholders, Michael Fasel,
---------
Martin Bossler, Paul Friduss, Darren Howanietz and Brandon McQuilkin.
(k) Employment Agreements. Employment Agreements in the form attached
---------------------
as Exhibit D executed by following employees: Mac McQuilkin, Michael Fasel,
---------
Martin Bossler, Paul Friduss, Darren Howanietz and Brandon McQuilkin.
(l) Uni-Asia Shares. Seller shall deliver to Buyer stock certificate
---------------
representing all of the outstanding shares of stock of Uni-Asia accompanied by a
stock power in the form attached hereto as Exhibit I.
---------
(m) Bulk Sales. Evidence of compliance with applicable state tax bulk
----------
sales notification laws, including proper notice, submission of required returns
and remittances, and release or removal of all stop orders.
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<PAGE>
(n) Name Change. An amendment to Seller's Articles of Incorporation
-----------
to effectuate a name change which shall be filed within five (5) business days
after the Closing Date.
(o) Other Matters. As of the Closing except for Assumed Liabilities,
-------------
Seller shall have extinguished all of its indebtedness and shall have obtained
all releases, termination of liens and other claims and encumbrances necessary
to transfer the Assets to Buyer free and clean of all liens, claims and
encumbrances, and shall have delivered to Buyer pay-off letters in the form
reasonably acceptable to Buyer.
3.3 Allocation of Purchase Price. Buyer and Seller hereby agree to
----------------------------
allocate the Purchase Price (and all other capitalized costs) among the Assets
for all purposes (including financial, accounting and tax purposes) in
accordance with the allocation schedule attached hereto as Exhibit J.
---------
3.4 Other Post-Closing Responsibilities. Except as otherwise provided in
-----------------------------------
this Agreement, from and after the Closing Date, Buyer shall assume, perform and
hold Seller harmless from all the liabilities, obligations and duties relating
to the Business and the Assets that accrue on or after the Closing Date,
pursuant to conditions and obligations herein recited, and Buyer shall be
possessed of all privileges and rights to be exercised and enjoyed in connection
with the ownership of the Assets.
ARTICLE 4
INDEMNIFICATION
4.1 Indemnification by Seller and Shareholders. Subject to the conditions
------------------------------------------
and provisions of Section 4.3, Seller and the Shareholders, jointly and
severally, agree to indemnify, defend and hold harmless Buyer from and against
any and all demands, claims, complaints, actions or causes of action, suits,
proceedings, investigations, arbitrations, assessments, losses, damages,
liabilities, costs and expenses, including, but not limited to, interest,
penalties and attorneys' fees and disbursements, asserted against, imposed upon
or incurred by Buyer, directly or indirectly, by reason of or resulting from (a)
any liability, obligation, or claim (whether absolute, accrued, contingent or
otherwise and whether a contractual, tax or any other type of liability or
obligation or claim) not expressly assumed by Buyer pursuant to Section 1.3,
arising out of, relating to or resulting from the business of Seller or relating
to or resulting from the Assets during the period prior to the Closing Date; (b)
any misrepresentation or breach of the representations and warranties of Seller
contained in or made pursuant to this Agreement; (c) any noncompliance by Seller
with any covenants, agreements or undertakings of Seller contained in or made
pursuant to this Agreement; and (d) Seller's failure to comply with any
applicable bulk sales statutes, laws, rules, regulations or orders.
Notwithstanding anything to the contrary herein, Buyer shall not seek
indemnification from Seller with respect to representations regarding the
Accounts Receivable to the extent the Deferred Purchase Price is reduced by the
Accounts Receivable Adjustment.
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<PAGE>
4.2 Indemnification by Buyer. Subject to the conditions and provisions of
------------------------
Section 4.3, Buyer hereby agrees to indemnify, defend and hold harmless Seller
and the Shareholders from and against all demands, claims, complaints, actions
or causes of action, suits, proceedings, investigations, arbitrations,
assessments, losses, damages, liabilities, costs and expenses, including, but
not limited to, interest, penalties and attorneys' fees and disbursements,
asserted against, imposed upon or incurred by Seller, directly or indirectly, by
reason of or resulting from (a) any liability, obligation, or claim (whether
absolute, accrued, contingent or otherwise and whether contractual, tax or and
other type of liability or obligation or claim) expressly assumed by Buyer
pursuant to this Agreement; (b) any misrepresentation or breach of the
representations and warranties of Buyer contained in or made pursuant to this
Agreement; or (c) any noncompliance by Buyer with any covenants, agreements or
undertakings of Buyer contained in or made pursuant to this Agreement.
4.3 Procedure. In the event that any claim is asserted against a party
---------
hereto as to which such party is entitled to indemnification hereunder, such
party (the "Indemnified Party") shall (i) within thirty (30) days after
receiving written notice of the notice of any other third party claim (e.g., an
invoice, notice of assessment, etc.), or (ii) within a reasonable time after
becoming aware of the existence of any other claim as to which indemnification
may be sought, notify the party obligated to indemnify it (the "Indemnifying
Party") thereof in writing (which notice shall be in reasonable detail such that
the Indemnifying Party can ascertain the basis for such claim), provided,
however, that the failure to provide such notice shall not limit an Indemnified
Party from obtaining indemnification for such claim under this Article 4. The
Indemnifying Party shall, upon receipt of the written notice, conduct at its
expense the defense against such claims in its own name, or, if necessary, in
the name of the Indemnified Party. The Indemnified Party shall cooperate with
and make available to the Indemnifying Party such assistance and materials as
may be reasonably requested of it, all at the expense of the Indemnifying Party,
and the Indemnified Party shall have the right to compromise and settle the
claim only with prior written consent of the Indemnifying Party, provided,
however, that the Indemnified Party may settle any claim against it at any time
by waiving its right to indemnification hereunder. Any judgment entered or
settlement agreed upon in the manner provided herein shall be binding upon the
Indemnifying Party and shall conclusively be deemed to be an obligation with
respect to which the Indemnified Party is entitled to indemnification hereunder.
All disputes between Seller on the one hand and Buyer on the other hand with
respect to indemnification hereunder, which cannot be resolved promptly by
mutual agreement, will be resolved by binding arbitration to be conducted in
Chicago, Illinois, pursuant to the rules proscribed from time to time by the
American Arbitration Association.
4.4 Limitation. Notwithstanding anything to the contrary herein, in no
----------
event shall Buyer, or Seller and the Shareholders collectively, be liable to the
other for indemnification obligations which, in the aggregate, exceed the
Purchase Price.
ARTICLE 5
ADDITIONAL PROVISIONS
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<PAGE>
5.1 Survival. Except as otherwise specified, the representations and
--------
warranties made by Sellers in this Agreement or pursuant hereto shall survive
the Closing Date for a period of two (2) years, provided that Sections 2.1(q),
2.1(r) and 2.1(s) shall survive the Closing Date for a period equal to the
applicable statute of limitations plus 45 days and Section 2.1(i) shall survive
without limitation as to time, and the representations and warranties made by
Sellers shall also survive and shall be unaffected by (and shall not be deemed
waived by) any investigation, audit, appraisal, or inspection at any time made
by or on behalf of Buyer.
5.2 Expenses. Each party hereto shall pay its own expenses incurred in
--------
connection with this Agreement and in the preparation for and consummation of
the transactions provided for herein.
5.3 Non-Violation. Neither party shall take or omit to take any action
-------------
(or permit any person, firm, or corporation under its control to take or omit to
take any action) that would violate or cause a violation of its representations
or warranties made herein or render the same inaccurate as of the date hereof or
which in any way would prevent the carrying out of this Agreement or
consummation of the transactions contemplated by this Agreement. Each of the
parties shall take all such action or further action as may be reasonably
necessary or desirable in order to effectuate the consummation of the
transactions contemplated hereby.
5.4 Notices. All notices under this Agreement shall be in writing and
-------
shall be (i) delivered in person, (ii) sent by telecopy, or (iii) mailed,
postage prepaid, either by registered or certified mail, return receipt
requested, or overnight express carrier, addressed in each case as follows:
If to Seller, to: Uniflame, Inc.
1817 N. Kenosha
Zion, Illinois 60099
Attn: Mac McQuilkin
Facsimile:
with copy to: Sugar, Friedberg & Felsenthal
30 N. LaSalle, Suite 2600
Chicago, Illinois 60602
Attn: Richard A. Sugar
Facsimile: 312/372-7951
If to Buyer, to: Blue Rhino Corporation
104 Cambridge Plaza Drive
Winston-Salem, North Carolina 27104
Attn: Mark Castaneda
Facsimile:
with copy to: Pedersen & Houpt
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<PAGE>
161 N. Clark, Suite 3100
Chicago, Illinois 60601
Attn: John H. Muehlstein
Facsimile: 312/641-6895
or to any other address or telecopy number as such party shall designate in a
written notice to the other. All notices sent pursuant to the terms of this
Section 10.4 shall be deemed received (i) if personally delivered, then on the
date of delivery; (ii) if sent by telecopy before 2:00 p.m. local time of the
recipient, on the day sent if a business day or if such day is not a business
day or if sent after 2:00 p.m. local time of the recipient, then on the next
business day; (iii) if sent by overnight, express carrier, on the next business
day immediately following the day sent; or (iv) if sent by registered or
certified mail, on the earlier of the third (3rd) business day following the day
sent or when actually received. Any notice by telecopy shall be followed by
delivery of a copy of such notice on the next business day by overnight express
carrier or by hand.
5.5 Amendment. This Agreement may be amended only by an instrument in
---------
writing executed by all parties hereto.
5.6 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure only to the benefit of, and be enforceable against, the parties hereto and
their respective successors and assigns. Nothing in this Agreement, express or
implied, is intended to confer upon any person, other than the parties hereto
and their respective successors and assigns, any rights or remedies under or by
reason of this Agreement. Seller may not assign its rights or obligations
hereunder without the prior written consent of Buyer.
5.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
5.8 Press Release and Announcements. Unless required by law, after the
-------------------------------
date hereof, no press releases, announcements to the employees, advertisers, or
suppliers of the Seller, or other releases of information related to this
Agreement or the transactions contemplated hereby will be issued or released
without the joint consultation of Buyer and Seller. Buyer and Seller will
cooperate to prepare a joint press release to be issued on the Closing Date or,
upon the request of either Seller or Buyer, at the time of the execution of this
Agreement.
5.9 Governing Law; Jurisdiction; Venue. This Agreement shall be governed
----------------------------------
by and construed in accordance with the laws of the State of Illinois. Buyer,
Seller and the Shareholders agree that all actions or proceedings in any way,
manner or respect, arising out of or from or related to this Agreement shall be
litigated in courts having situs within the city of Chicago, state of Illinois.
Buyer, Seller and the Shareholders hereby consent and submit to the jurisdiction
of any local, state or federal courts located within said city and state. Buyer,
Seller and the Shareholders hereby waive any right they may have to transfer or
change the venue of any litigation brought against any of them by the other in
accordance with this section.
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<PAGE>
5.10 Waivers. Compliance with the provisions of this Agreement may be
-------
waived only by an instrument in writing executed by the party granting the
waiver. The failure of any party at any time or times to require performance of
any provisions of this Agreement shall in no manner affect the right of such
party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or be construed as
a further or continuing waiver of such condition or breach or of any other
condition or of the breach of any other term of this Agreement.
5.11 Further Assurances; Cooperation. At and after the Closing, Seller
-------------------------------
will execute and deliver such further instruments of conveyance and transfer as
Buyer may reasonably request to convey and transfer effectively to Buyer the
Assets or to put Buyer in actual possession and control of the business and
assets of the Seller.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Asset Purchase Agreement
on the day and year first above written.
Uniflame, Inc.
By___________________________________________
Its__________________________________________
_____________________________________________
Mac McQuilkin
_____________________________________________
James E. Harris
Blue Rhino Corporation
By___________________________________________
Its__________________________________________
Signature Page to
Asset Purchase Agreement
<PAGE>
Exhibit 10.2
EMPLOYMENT AGREEMENT
--------------------
This agreement ("Agreement") is made as of April 1, 2000 by and among Blue Rhino
Corporation, a Delaware corporation ("Blue Rhino"), and Michael Fasel (the
"Employee").
RECITALS
--------
WHEREAS, Blue Rhino is engaged in the business of manufacturing,
distributing, imparting and otherwise dealing in fireplace furnishings and
related products;
WHEREAS, Blue Rhino desires to employ Employee and Employee is willing to
be employed by Blue Rhino, on the terms and subject to the conditions set forth
in this Agreement;
WHEREAS, Employee recognizes that such employment constitutes a
confidential relationship wherein Employee will become familiar with and aware
of information as to the specific manner of doing business, all of which
information is secret and proprietary and constitutes valuable goodwill Blue
Rhino;
WHEREAS, Employee recognizes that the success of Blue Rhino's Business (as
defined in Section 9) is dependent upon the maintenance of a number of
proprietary trade secrets, including the identity of customers and vendors, the
confidential information regarding and analysis of such candidates and the
financial data of Blue Rhino, and that the protection of these proprietary trade
secrets is of critical importance to Blue Rhino; and
WHEREAS, Employee recognizes that Blue Rhino will sustain great loss and
damage if he should violate the provisions of this Agreement. Further, monetary
damages for such losses would be extremely difficult to measure and would
therefore be likely to be inadequate for any violation of this Agreement by
Employee; and
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein and other good and valuable consideration, the parties hereby
agree as follows:
<PAGE>
TERMS
- - - -----
1. Employment: Blue Rhino hereby employs Employee in the capacity
described on Exhibit A attached hereto, and Employee hereby accepts such
employment with Blue Rhino. Employee will perform the duties associated with
such position and will perform such others duties consistent with his position
as may be assigned to him from time to time by the board of directors, president
or chief executive officer of Blue Rhino. Employee's primary duties shall be
described an Exhibit A attached hereto. During his employment, Employee shall
devote his full time and best efforts to promote and further the business and
services of Blue Rhino. Employee shall faithfully adhere to, execute, and
fulfill all policies established by Blue Rhino's board of directors. Employee
shall not, during his employment hereunder, be engaged in any business or
perform any services in any capacity other than for Blue Rhino, whether or not
they interfere with his duties to Blue Rhino, without the prior approval of the
board of directors of Blue Rhino, except that no such approval shall be required
with respect to volunteer activities for organizations with charitable purposes;
provided that such activities do not interfere with his duties for Blue Rhino
and are not conducted during business hours. Without limiting the generality of
any other provisions hereunder, under no circumstances shall Employee accept any
form of remuneration from any business owner or broker with respect to any
matter related to the Business of Blue Rhino without prior written approval.
Notwithstanding the foregoing, Blue Rhino consents to Employee's working, in a
self-employed capacity, in a retail ceramic/art studio, so long as such work
does not interfere with the performance of Employee's duties at Blue Rhino.
2. Term. The term of this Agreement shall begin April 1, 2000, and shall
expire March 31, 2003, unless terminated as herein provided (the "Term").
3. Compensation. During the Term, Blue Rhino shall compensate Employee as
follows:
a. Salary. For his services during the Term, Blue Rhino shall pay to
Employee a base salary of $235,000 per year ("Base Salary"), payable in
accordance with Blue Rhino's standard payroll practices, but no less frequently
than in monthly installments. The payment of salary and any bonuses paid
hereunder shall be subject to all Federal, State, and local withholding taxes,
social security tax deduction, and other general obligations. Employee may be
entitled to receive additional compensation from Blue Rhino in such form and
<PAGE>
only to the extent explicitly set forth herein, subject to limitations set forth
herein. The Base Salary shall increase each year during the Term at January 1st
in the same proportion as the annual increase in the "Consumer Price Index" when
measured at the aforesaid January 1st of each year as compared to the
immediately preceding January 1st. The "Consumer Price Index" means the consumer
price index published by the U.S. Bureau of Labor Statistics, all Retail
Products, Chicago/Northwestern Indiana metropolitan region.
b. Incentive Bonus. Employee may receive a bonus for each fiscal
year, as determined in the sole discretion of the board of directors on
recommendation of the President, based on Employee's performance, Blue Rhino's
performance, Blue Rhino's profitability, industry performance or any other
factors the board of directors chooses. The factors for achieving Employee's
bonus shall be, determined at the beginning of the fiscal year of the Term, and
shall be attached as Exhibit B to this Agreement and communicated to Employee at
the beginning of the fiscal year of the Term. There is no guarantee that
Employee shall receive an Incentive Bonus each year. Except as otherwise
specifically provided herein. Employee must be employed by Blue Rhino at the
time that the bonus is to be paid to be eligible to receive such bonus. Such
bonus will be paid after the end of the year to which it is attributable, after
the determination of bonus factors is made.
c. Other Compensation. Employee shall be entitled to participate, on
the same terms as other nonunion, executive employees of Blue Rhino, in any
medical, dental or other health plan, 401k plan, stock option plan, employee
stock purchase plan and life insurance plan that Blue Rhino may adopt or
maintain for such employees, any of which plans may be changed, terminated or
eliminated by Blue Rhino at any time in its sole discretion.
d. Reimbursement of Expenses. Blue Rhino shall reimburse Employee
for properly documented expenses that are incurred by Employee on behalf of Blue
Rhino in accordance with corporate policies in effect from time to time.
4. Vacation, Holidays and Sick Leave. Employee shall be entitled to
fifteen (15) paid vacation days annually during the Term, to be taken at such
time or times and in such number of consecutive days as Employee and Blue Rhino
shall mutually agree and in accordance with the regular policy relating to
vacation days for executive employees of Blue Rhino. Employee shall be entitled
to such paid holidays and sick leave policy regularly recognized by Blue Rhino
for executive personnel.
-3-
<PAGE>
5. Termination by Blue Rhino.
--------------------------
a. Termination for Cause. Blue Rhino may terminate this Agreement at
any time for Cause, in which case Employee shall be entitled to receive his Base
Salary accrued and unpaid through the date of such termination in full
satisfaction of Blue Rhino's obligations to Employee under this Agreement. Any
of the following shall constitute "Cause"
i. Any material breach by Employee of any of the terms of this
Agreement where such breach is not cured within five (5)
days after written notice of such breach is delivered to
Employee;
ii. Intoxication with alcohol or drugs while on the premises of
Blue Rhino or of any customer or potential customer to the
extent that in the reasonable judgment of management,
Employee is abusive or his ability to perform his duties
and responsibilities under this Agreement is impaired;
iii. Conviction of a felony or any misdemeanor involving
dishonesty, theft, the failure to tell the truth, other
unethical behavior, racial prejudice, drugs, alcohol,
sexual misconduct or any other crime;
iv. Intentional misappropriation of property belonging to Blue
Rhino;
v. Illegal business practices in connection with Blue Rhino
that could have an adverse effect on Blue Rhino or its
business or reputation;
vi. Excessive absence of Employee from his employment during
usual business hours for reasons other than vacation,
disability or sickness after written notice thereof is
delivered to Employee describing the nature of such excess
absences and affording Employee one opportunity to avoid
excess absences; or
vii. Willful failure of Employee to obey directions of the board
of directors of Blue Rhino, the president or chief executive
officer of Blue Rhino, consistent with his
-4-
<PAGE>
duties as described in paragraph 1 hereof, provided Blue
Rhino first gives written notice to Employee of such
failure, and Employee, does not cure such failure within
five (5) days of the delivery of such notice.
b. Termination Without Cause. Blue Rhino may terminate the
employment of Employee, and this Agreement without Cause at any time, in which
event Blue Rhino shall pay to Employee, in full satisfaction of Blue Rhino's
obligations to Employee under this Agreement, the Base Salary accrued but unpaid
through the date of the termination of his employment and shall continue to pay
the Base Salary for one (1) year following the date of Employee's termination.
Such amounts shall be earned and paid over the applicable period in accordance
with Blue Rhino's regular payroll practices.
6. Termination of Account of Death or Disability. If Employee dies during
the Term, this Agreement shall terminate and Blue Rhino shall pay to the estate
of Employee, the Base Salary accrued but unpaid through the date of his death.
Blue Rhino may elect to terminate the employment of Employee for "disability" if
Employee is no longer able to perform the duties of his position due to illness,
accident or other physical or mental condition and such disability is expected
to continue, with or without interruption, for a period equal to the later of
ninety (90) days and Employee's accumulated sick leave ("Disability Period").
Blue Rhino may engage a licensed physician of its choosing to examine Employee
to determine if Employee is suffering from a disability and to determine the
date of onset of such disability. Blue Rhino's physician's determination shall
be final.
7. a. Confidentiality. Except in the furtherance of the business of
Blue Rhino, during and at all times after Employee's employment:
i. Employee shall not disclose to any person or entity, without
Blue Rhino's prior written consent, any Confidential or
Proprietary information (as defined below), whether prepared
by him or others.
ii. Employee shall not directly or indirectly use any such
Confidential or Proprietary Information other than as
directed by Blue Rhino in writing.
-5-
<PAGE>
iii. Employee shall not remove Confidential or Proprietary
information from the premises of Blue Rhino without the
prior written consent of Blue Rhino.
Upon termination of his employment for whatever reasons with or without Cause,
Employee will promptly deliver to Blue Rhino all originals and copies (whether
in note, memo or other document form or on video, audio or computer tapes or
discs or otherwise) of Confidential or Proprietary Information in his
possession, custody or control, whether prepared by him or others.
b. "Confidential or Proprietary Information" includes, but is not
limited to:
i. Business, pricing and management methods;
ii. Finances, strategies, systems, research, surveys, plans,
reports, recommendations and conclusions, financial
statements, tax returns, budgets, and compilations of any
kind of Blue Rhino's finances and operations;
iii. Names of, arrangements with, or other information relating
to, Blue Rhino's customers, equipment suppliers,
manufacturers, financiers, owners or operators,
representatives and other persons who have business
relationships with Blue Rhino or who are prospects for
business relationships with Blue Rhino;
iv. Technical information, work products and know-how;
v. Cost, operating, and other management information systems,
and other software and programming; and
(vii) Plans for new products and new product development.
c. "Confidential or Proprietary Information" does not include:
i. Information in the public domain; and
ii. Information known to Employee prior to his engagement as an
Employee of Blue Rhino, learned
-6-
<PAGE>
from sources which had no obligation to keep such
information confidential.
8. Confidentiality After Termination of Employment. The confidentiality
provisions of this Agreement shall remain in full force and effect after the
termination of Employee 's employment for a period of one (1) year.
9. Non-Compete and Non-Solicitation Agreement.
------------------------------------------
a. Employee recognizes the Confidential or Proprietary Information
of Blue Rhino is a special and unique asset of Blue Rhino and needs to be
protected from improper disclosure. In consideration of the disclosure of the
Confidential or Proprietary Information to Employee to allow Employee to perform
his duties under this Agreement, Employee agrees and covenants that during the
Term of this Agreement and for a period of one (1) year following the
termination of this Agreement, whether such termination is voluntary or
involuntary, Employee will not directly or indirectly engage in any business
competitive with Employer, within the United States of America. For purposes of
this Agreement, "Business" means:
i. Engaging in the business of manufacturing, distributing,
imparting or otherwise dealing in fireplace accessories and
garden and patio furnishings, barbeque grills and related
products, reflective of the business acquired by Blue Rhino
from Uniflame, Inc. at the date of execution of this
Agreement; or
ii. Engaging in the business of manufacturing, distributing,
imparting or otherwise dealing in propane-related products.
b. The term "directly or indirectly engaging in" means:
i. Acting as an owner, partner, or agent;
ii. Becoming an employee or independent contractor of any third
party that is engaged in the Business;
iii. Becoming interested directly or indirectly in the Business;
or
-7-
<PAGE>
iv. Soliciting any customer, employee or business partner of
Blue Rhino for the benefit of a third party that is engaged
in the Business.
c. Employee agrees and covenants that during such Employee's
employment by Blue Rhino and for a period of one (1) year following the
termination of this Agreement, whether such termination is voluntary or
involuntary, Employee will not directly or indirectly, or by action in concert
with others, induce or influence, any person who is engaged as an employee or
consultant of Blue Rhino, or any affiliate of Blue Rhino, to terminate his or
her employment or consultant relationship with Blue Rhino, or such affiliate of
Blue Rhino; or either directly or indirectly, or by action in concert with
others, call on, solicit or take away any of the customers of Blue Rhino, or any
affiliate of Blue Rhino, either for the benefit of Employee or any other person.
d. Employee agrees that this non-compete and non-solicitation
provision is a restriction necessary to protect Blue Rhino's confidential
customer lists and other trade secrets and that such restriction will not
unreasonably adversely affect the Employee's livelihood.
10. Inventions and Improvements. Employee agrees that Blue Rhino will own
all right title and interest in and to any and all intellectual and industrial
property developed or created by Employee, and related in any way to Blue
Rhino's business or products, during Employee's employment by Blue Rhino
including, without limitation, improvements to Blue Rhino's products, derivative
works of Blue Rhino's products, and trade secrets or know-how derived from Blue
Rhino's products or business.
11. Damages. The parties acknowledge that monetary damages will be
inadequate and Blue Rhino will be irreparably damaged if the provisions of
Sections 7, 8, 9, 10 and 13 of this Agreement are not specifically enforced.
Blue Rhino shall be entitled among other remedies, (a) without any bond or other
security being required, to an injunction restraining any violation of this
Agreement by Employee and by any person or entity to whom Employee provides or
proposes to provide any services in violation of this Agreement, and (b) to
require Employee to hold in a constructive trust, account for and pay over to
Blue Rhino all compensation and other benefits which Employee shall derive as a
result of any action or omission which is a violation of any provision of this
Agreement. Employee shall indemnify and hold Blue Rhino harmless with respect to
any costs, fees and expenses incurred by Blue Rhino in order to enforce the
terms of Sections 7, 8, 9, 10 and 13 of this Agreement.
-8-
<PAGE>
12. Enforceability. If any provision contained in this Agreement is
determined to be void, illegal or unenforceable, in whole or in part, then the
other provisions contained herein shall remain in full force and effect as if
the provision which was determined to be void, illegal, or unenforceable, had
not been contained herein. The courts or other parties enforcing this Agreement
shall be entitled to modify the duration and scope of any restriction contained
herein to the extent necessary to render such restriction enforceable, and such
restriction as so modified shall be enforced.
13. Return of Property. All products, records, designs, plans, manuals,
memoranda, lists and other property delivered to Employee by or on behalf of any
of Blue Rhino or by its customers, including, but not limited to, customers
obtained for it by Employee, and all records compiled by Employee which pertain
to the business of Blue Rhino, or any of its customers, whether or not
confidential, shall be and remain the property of Blue Rhino and be subject at
all times to the discretion and control of Blue Rhino. Likewise, all
correspondence with customers or representatives, reports, records, charts,
advertising materials, and any data collected by Employee, or by or on behalf of
Blue Rhino or its representatives, whether or not confidential, shall be
delivered promptly to Blue Rhino without request by it upon termination of
Employee's employment.
14. Cooperation in Proceedings. During and after the termination of
Employee's employment, Employee shall cooperate fully and at reasonable times
with Blue Rhino in all litigation and regulatory proceedings with respect to
which Blue Rhino seeks Employee's assistance and as to which Employee has any
knowledge or involvement. Without limiting the generality of the foregoing,
Employee shall be available to testify at such litigation and other proceedings,
and will cooperate with counsel to Blue Rhino in preparing materials and
offering advice in such litigation and other proceedings. To the extent Employee
is no longer employed by Blue Rhino, should Employee avail himself in accordance
with this Section 14, Blue Rhino shall compensate Employee for any wages lost by
Employee in connection with his current employment plus any travel and
incidental expenses incurred by Employee.
15. Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and will be deemed duly given: (a)
when personally delivered, (b) the next business day when deposited with Federal
Express or other nationally recognized overnight courier service delivery
prepaid, or (c) five (5) business days after being sent by registered mail,
return receipt requested, postage prepaid, and (d) addressed to the intended
recipient as set forth below:
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<PAGE>
If to Employee: Michael Fasel
________________________
________________________
If to Blue Rhino: Blue Rhino Corporation
104 Cambridge Plaza Drive
Winston-Salem, NC 27104
Attn: Mark Castaneda
Either party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other party
written notice in the manner herein set forth.
16. Other Agreements. Employee represents that he has furnished to Blue
Rhino copies of all agreements that restrict or limit or could restrict or limit
his services for Blue Rhino at any time during the term. However, nothing in
this Agreement shall be construed to render an opinion as to the interpretation
or validity of any agreements with prior employers purporting to restrict or
limit Employee's services for Blue Rhino.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois without giving effect to any
choice or conflict of law provision or rule, whether of the State of Illinois or
any other jurisdiction, that would cause the application of the laws of any
jurisdiction other than the State of Illinois. In the event of any dispute or
claim relating to arising out of Employee's employment relationship with Blue
Rhino, or the termination of Employee's employment relationship with Blue Rhino,
Employee and Blue Rhino agree that (i) all such disputes shall be fully and
finally resolved by binding arbitration conducted by the American Arbitration
Association in Cook County, Illinois, and (ii) each waives his or its rights to
have such dispute tried by a court or jury. RIGHT TO TRIAL BY JURY IS WAIVED.
However, Employee and Blue Rhino agree that this arbitration provision shall not
apply to any disputes or claims relating to or arising out of Sections 7, 8, 9,
10 and 13 of this Agreement. With respect to each such dispute, each of the
parties submits to the jurisdiction of any state court sitting in Chicago,
Illinois or the United States District Court for the Northern District of
Illinois.
18. Advice of Counsel. Employee been advised by his own independent
counsel concerning this Agreement prior to executing this Agreement.
-10-
<PAGE>
19. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective heirs,
legal representatives, successors and permitted assigns. Employee may not assign
either this Agreement or any of Employee's rights, interests or obligations
hereunder. Blue Rhino may assign any or all of its rights and interests
hereunder to any person or entity that acquires the business of Blue Rhino or to
any entity with which Blue Rhino merges or consolidates.
20. 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 agreement.
21. Headings. The section headings contained in this Agreement are for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
22. Waiver. The waiver of a breach of any provision of this Agreement
shall not operate or be construed to be a waiver of any other provision or of a
subsequent or prior breach of this Agreement.
23. Entire Agreement. This Agreement contains the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior or
contemporaneous negotiations, correspondence, understandings, and agreements
between the parties regarding the subject matter of this Agreement. This
Agreement may not be amended or modified or any provision waived except in a
writing signed by both parties and supported by new consideration.
11
<PAGE>
Executed as of the date first set forth above.
BLUE RHINO CORPORATION EMPLOYEE
By:___________________________ _________________________________
Its:__________________________ Michael Fasel
12
<PAGE>
Exhibit 10.3
EMPLOYMENT AGREEMENT
--------------------
This agreement ("Agreement") is made as of April 1, 2000 by and among Blue Rhino
Corporation, a Delaware corporation ("Blue Rhino"), and Martin Bossler (the
"Employee").
RECITALS
--------
WHEREAS, Blue Rhino is engaged in the business of manufacturing,
distributing, imparting and otherwise dealing in fireplace furnishings and
related products;
WHEREAS, Blue Rhino desires to employ Employee and Employee is willing to
be employed by Blue Rhino, on the terms and subject to the conditions set forth
in this Agreement;
WHEREAS, Employee recognizes that such employment constitutes a
confidential relationship wherein Employee will become familiar with and aware
of information as to the specific manner of doing business, all of which
information is secret and proprietary and constitutes valuable goodwill Blue
Rhino;
WHEREAS, Employee recognizes that the success of Blue Rhino's Business (as
defined in Section 9) is dependent upon the maintenance of a number of
proprietary trade secrets, including the identity of customers and vendors, the
confidential information regarding and analysis of such candidates and the
financial data of Blue Rhino, and that the protection of these proprietary trade
secrets is of critical importance to Blue Rhino; and
WHEREAS, Employee recognizes that Blue Rhino will sustain great loss and
damage if he should violate the provisions of this Agreement. Further, monetary
damages for such losses would be extremely difficult to measure and would
therefore be likely to be inadequate for any violation of this Agreement by
Employee; and
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein and other good and valuable consideration, the parties hereby
agree as follows:
<PAGE>
TERMS
- - - -----
1. Employment: Blue Rhino hereby employs Employee in the capacity
described on Exhibit A attached hereto, and Employee hereby accepts such
employment with Blue Rhino. Employee will perform the duties associated with
such position and will perform such others duties consistent with his position
as may be assigned to him from time to time by the board of directors, president
or chief executive officer of Blue Rhino. Employee's primary duties shall be
described an Exhibit A attached hereto. During his employment, Employee shall
devote his full time and best efforts to promote and further the business and
services of Blue Rhino. Employee shall faithfully adhere to, execute, and
fulfill all policies established by Blue Rhino's board of directors. Employee
shall not, during his employment hereunder, be engaged in any business or
perform any services in any capacity other than for Blue Rhino, whether or not
they interfere with his duties to Blue Rhino, without the prior approval of the
board of directors of Blue Rhino, except that no such approval shall be required
with respect to volunteer activities for organizations with charitable purposes;
provided that such activities do not interfere with his duties for Blue Rhino
and are not conducted during business hours. Without limiting the generality of
any other provisions hereunder, under no circumstances shall Employee accept any
form of remuneration from any business owner or broker with respect to any
matter related to the Business of Blue Rhino without prior written approval.
Notwithstanding the foregoing, Blue Rhino consents to Employee's working, in a
self-employed capacity, in a retail ceramic/art studio, so long as such work
does not interfere with the performance of Employee's duties at Blue Rhino.
2. Term. The term of this Agreement shall begin April 1, 2000, and shall
expire March 31, 2003, unless terminated as herein provided (the "Term").
3. Compensation. During the Term, Blue Rhino shall compensate Employee
as follows:
a. Salary. For his services during the Term, Blue Rhino shall pay to
Employee a base salary of $187,000 per year ("Base Salary"), payable in
accordance with Blue Rhino's standard payroll practices, but no less frequently
than in monthly installments. The payment of salary and any bonuses paid
hereunder shall be subject to all Federal, State, and local withholding taxes,
social security tax deduction, and other general obligations. Employee may be
entitled to receive additional compensation from Blue Rhino in such form and
<PAGE>
only to the extent explicitly set forth herein, subject to limitations set forth
herein. The Base Salary shall increase each year during the Term at January 1st
in the same proportion as the annual increase in the "Consumer Price Index" when
measured at the aforesaid January 1st of each year as compared to the
immediately preceding January 1st. The "Consumer Price Index" means the consumer
price index published by the U.S. Bureau of Labor Statistics, all Retail
Products, Chicago/Northwestern Indiana metropolitan region.
b. Incentive Bonus. Employee may receive a bonus for each fiscal
year, as determined in the sole discretion of the board of directors on
recommendation of the President, based on Employee's performance, Blue Rhino's
performance, Blue Rhino's profitability, industry performance or any other
factors the board of directors chooses. The factors for achieving Employee's
bonus shall be, determined at the beginning of the fiscal year of the Term, and
shall be attached as Exhibit B to this Agreement and communicated to Employee at
the beginning of the fiscal year of the Term. There is no guarantee that
Employee shall receive an Incentive Bonus each year. Except as otherwise
specifically provided herein. Employee must be employed by Blue Rhino at the
time that the bonus is to be paid to be eligible to receive such bonus. Such
bonus will be paid after the end of the year to which it is attributable, after
the determination of bonus factors is made.
c. Other Compensation. Employee shall be entitled to participate, on
the same terms as other nonunion, executive employees of Blue Rhino, in any
medical, dental or other health plan, 401k plan, stock option plan, employee
stock purchase plan and life insurance plan that Blue Rhino may adopt or
maintain for such employees, any of which plans may be changed, terminated or
eliminated by Blue Rhino at any time in its sole discretion.
d. Reimbursement of Expenses. Blue Rhino shall reimburse Employee
for properly documented expenses that are incurred by Employee on behalf of Blue
Rhino in accordance with corporate policies in effect from time to time.
4. Vacation, Holidays and Sick Leave. Employee shall be entitled to
fifteen (15) paid vacation days annually during the Term, to be taken at such
time or times and in such number of consecutive days as Employee and Blue Rhino
shall mutually agree and in accordance with the regular policy relating to
vacation days for executive employees of Blue Rhino. Employee shall be entitled
to such paid holidays and sick leave policy regularly recognized by Blue Rhino
for executive personnel.
-3-
<PAGE>
5. Termination by Blue Rhino.
a. Termination for Cause. Blue Rhino may terminate this Agreement
at any time for Cause, in which case Employee shall be entitled to receive his
Base Salary accrued and unpaid through the date of such termination in full
satisfaction of Blue Rhino's obligations to Employee under this Agreement. Any
of the following shall constitute "Cause"
i. Any material breach by Employee of any of the terms of this
Agreement where such breach is not cured within five (5)
days after written notice of such breach is delivered to
Employee;
ii. Intoxication with alcohol or drugs while on the premises of
Blue Rhino or of any customer or potential customer to the
extent that in the reasonable judgment of management,
Employee is abusive or his ability to perform his duties and
responsibilities under this Agreement is impaired;
iii. Conviction of a felony or any misdemeanor involving
dishonesty, theft, the failure to tell the truth, other
unethical behavior, racial prejudice, drugs, alcohol, sexual
misconduct or any other crime;
iv. Intentional misappropriation of property belonging to Blue
Rhino;
v. Illegal business practices in connection with Blue Rhino
that could have an adverse effect on Blue Rhino or its
business or reputation;
vi. Excessive absence of Employee from his employment during
usual business hours for reasons other than vacation,
disability or sickness after written notice thereof is
delivered to Employee describing the nature of such excess
absences and affording Employee one opportunity to avoid
excess absences; or
vii. Willful failure of Employee to obey directions of the board
of directors of Blue Rhino, the president or chief
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<PAGE>
executive officer of Blue Rhino, consistent with his duties
as described in paragraph 1 hereof, provided Blue Rhino
first gives written notice to Employee of such failure, and
Employee, does not cure such failure within five (5) days of
the delivery of such notice.
b. Termination Without Cause. Blue Rhino may terminate the
employment of Employee, and this Agreement without Cause at any time, in which
event Blue Rhino shall pay to Employee, in full satisfaction of Blue Rhino's
obligations to Employee under this Agreement, the Base Salary accrued but unpaid
through the date of the termination of his employment and shall continue to pay
the Base Salary for one (1) year following the date of Employee's termination.
Such amounts shall be earned and paid over the applicable period in accordance
with Blue Rhino's regular payroll practices.
6. Termination of Account of Death or Disability. If Employee dies
during the Term, this Agreement shall terminate and Blue Rhino shall pay to the
estate of Employee, the Base Salary accrued but unpaid through the date of his
death. Blue Rhino may elect to terminate the employment of Employee for
"disability" if Employee is no longer able to perform the duties of his position
due to illness, accident or other physical or mental condition and such
disability is expected to continue, with or without interruption, for a period
equal to the later of ninety (90) days and Employee's accumulated sick leave
("Disability Period"). Blue Rhino may engage a licensed physician of its
choosing to examine Employee to determine if Employee is suffering from a
disability and to determine the date of onset of such disability. Blue Rhino's
physician's determination shall be final.
7. a. Confidentiality. Except in the furtherance of the business of
Blue Rhino, during and at all times after Employee's employment:
i. Employee shall not disclose to any person or entity, without
Blue Rhino's prior written consent, any Confidential or
Proprietary information (as defined below), whether prepared
by him or others.
ii. Employee shall not directly or indirectly use any such
Confidential or Proprietary Information other than as
directed by Blue Rhino in writing.
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<PAGE>
iii. Employee shall not remove Confidential or Proprietary
information from the premises of Blue Rhino without the
prior written consent of Blue Rhino.
Upon termination of his employment for whatever reasons with or without Cause,
Employee will promptly deliver to Blue Rhino all originals and copies (whether
in note, memo or other document form or on video, audio or computer tapes or
discs or otherwise) of Confidential or Proprietary Information in his
possession, custody or control, whether prepared by him or others.
b. "Confidential or Proprietary Information" includes, but is not
limited to:
i. Business, pricing and management methods;
ii. Finances, strategies, systems, research, surveys, plans,
reports, recommendations and conclusions, financial
statements, tax returns, budgets, and compilations of any
kind of Blue Rhino's finances and operations;
iii. Names of, arrangements with, or other information relating
to, Blue Rhino's customers, equipment suppliers,
manufacturers, financiers, owners or operators,
representatives and other persons who have business
relationships with Blue Rhino or who are prospects for
business relationships with Blue Rhino;
iv. Technical information, work products and know-how;
v. Cost, operating, and other management information systems,
and other software and programming; and
(vii) Plans for new products and new product development.
c. "Confidential or Proprietary Information" does not include:
i. Information in the public domain; and
ii. Information known to Employee prior to his engagement as an
Employee of Blue Rhino, learned
-6-
<PAGE>
from sources which had no obligation to keep such
information confidential.
8. Confidentiality After Termination of Employment. The confidentiality
provisions of this Agreement shall remain in full force and effect after the
termination of Employee 's employment for a period of one (1) year.
9. Non-Compete and Non-Solicitation Agreement.
a. Employee recognizes the Confidential or Proprietary Information of
Blue Rhino is a special and unique asset of Blue Rhino and needs to be protected
from improper disclosure. In consideration of the disclosure of the Confidential
or Proprietary Information to Employee to allow Employee to perform his duties
under this Agreement, Employee agrees and covenants that during the Term of this
Agreement and for a period of one (1) year following the termination of this
Agreement, whether such termination is voluntary or involuntary, Employee will
not directly or indirectly engage in any business competitive with Employer,
within the United States of America. For purposes of this Agreement, "Business"
means:
i. Engaging in the business of manufacturing, distributing,
imparting or otherwise dealing in fireplace accessories and
garden and patio furnishings, barbeque grills and related
products, reflective of the business acquired by Blue Rhino
from Uniflame, Inc. at the date of execution of this
Agreement; or
ii. Engaging in the business of manufacturing, distributing,
imparting or otherwise dealing in propane-related products.
b. The term "directly or indirectly engaging in" means:
i. Acting as an owner, partner, or agent;
ii. Becoming an employee or independent contractor of any third
party that is engaged in the Business;
iii. Becoming interested directly or indirectly in the Business;
or
-7-
<PAGE>
iv. Soliciting any customer, employee or business partner of
Blue Rhino for the benefit of a third party that is engaged
in the Business.
c. Employee agrees and covenants that during such Employee's
employment by Blue Rhino and for a period of one (1) year following the
termination of this Agreement, whether such termination is voluntary or
involuntary, Employee will not directly or indirectly, or by action in concert
with others, induce or influence, any person who is engaged as an employee or
consultant of Blue Rhino, or any affiliate of Blue Rhino, to terminate his or
her employment or consultant relationship with Blue Rhino, or such affiliate of
Blue Rhino; or either directly or indirectly, or by action in concert with
others, call on, solicit or take away any of the customers of Blue Rhino, or any
affiliate of Blue Rhino, either for the benefit of Employee or any other person.
d. Employee agrees that this non-compete and non-solicitation
provision is a restriction necessary to protect Blue Rhino's confidential
customer lists and other trade secrets and that such restriction will not
unreasonably adversely affect the Employee's livelihood.
10. Inventions and Improvements. Employee agrees that Blue Rhino will own
all right title and interest in and to any and all intellectual and industrial
property developed or created by Employee, and related in any way to Blue
Rhino's business or products, during Employee's employment by Blue Rhino
including, without limitation, improvements to Blue Rhino's products, derivative
works of Blue Rhino's products, and trade secrets or know-how derived from Blue
Rhino's products or business.
11. Damages. The parties acknowledge that monetary damages will be
inadequate and Blue Rhino will be irreparably damaged if the provisions of
Sections 7, 8, 9, 10 and 13 of this Agreement are not specifically enforced.
Blue Rhino shall be entitled among other remedies, (a) without any bond or other
security being required, to an injunction restraining any violation of this
Agreement by Employee and by any person or entity to whom Employee provides or
proposes to provide any services in violation of this Agreement, and (b) to
require Employee to hold in a constructive trust, account for and pay over to
Blue Rhino all compensation and other benefits which Employee shall derive as a
result of any action or omission which is a violation of any provision of this
Agreement. Employee shall indemnify and hold Blue Rhino harmless with respect to
any costs, fees and expenses incurred by Blue Rhino in order to enforce the
terms of Sections 7, 8, 9, 10 and 13 of this Agreement.
-8-
<PAGE>
12. Enforceability. If any provision contained in this Agreement is
determined to be void, illegal or unenforceable, in whole or in part, then the
other provisions contained herein shall remain in full force and effect as if
the provision which was determined to be void, illegal, or unenforceable, had
not been contained herein. The courts or other parties enforcing this Agreement
shall be entitled to modify the duration and scope of any restriction contained
herein to the extent necessary to render such restriction enforceable, and such
restriction as so modified shall be enforced.
13. Return of Property. All products, records, designs, plans, manuals,
memoranda, lists and other property delivered to Employee by or on behalf of any
of Blue Rhino or by its customers, including, but not limited to, customers
obtained for it by Employee, and all records compiled by Employee which pertain
to the business of Blue Rhino, or any of its customers, whether or not
confidential, shall be and remain the property of Blue Rhino and be subject at
all times to the discretion and control of Blue Rhino. Likewise, all
correspondence with customers or representatives, reports, records, charts,
advertising materials, and any data collected by Employee, or by or on behalf of
Blue Rhino or its representatives, whether or not confidential, shall be
delivered promptly to Blue Rhino without request by it upon termination of
Employee's employment.
14. Cooperation in Proceedings. During and after the termination of
Employee's employment, Employee shall cooperate fully and at reasonable times
with Blue Rhino in all litigation and regulatory proceedings with respect to
which Blue Rhino seeks Employee's assistance and as to which Employee has any
knowledge or involvement. Without limiting the generality of the foregoing,
Employee shall be available to testify at such litigation and other proceedings,
and will cooperate with counsel to Blue Rhino in preparing materials and
offering advice in such litigation and other proceedings. To the extent Employee
is no longer employed by Blue Rhino, should Employee avail himself in accordance
with this Section 14, Blue Rhino shall compensate Employee for any wages lost by
Employee in connection with his current employment plus any travel and
incidental expenses incurred by Employee.
15. Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and will be deemed duly given: (a)
when personally delivered, (b) the next business day when deposited with Federal
Express or other nationally recognized overnight courier service delivery
prepaid, or (c) five (5) business days after being sent by registered mail,
return receipt requested, postage prepaid, and (d) addressed to the intended
recipient as set forth below:
-9-
<PAGE>
If to Employee: Martin Bossler
------------------------
------------------------
If to Blue Rhino: Blue Rhino Corporation
104 Cambridge Plaza Drive
Winston-Salem, NC 27104
Attn: Mark Castaneda
Either party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other party
written notice in the manner herein set forth.
16. Other Agreements. Employee represents that he has furnished to Blue
Rhino copies of all agreements that restrict or limit or could restrict or limit
his services for Blue Rhino at any time during the term. However, nothing in
this Agreement shall be construed to render an opinion as to the interpretation
or validity of any agreements with prior employers purporting to restrict or
limit Employee's services for Blue Rhino.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois without giving effect to any
choice or conflict of law provision or rule, whether of the State of Illinois or
any other jurisdiction, that would cause the application of the laws of any
jurisdiction other than the State of Illinois. In the event of any dispute or
claim relating to arising out of Employee's employment relationship with Blue
Rhino, or the termination of Employee's employment relationship with Blue Rhino,
Employee and Blue Rhino agree that (i) all such disputes shall be fully and
finally resolved by binding arbitration conducted by the American Arbitration
Association in Cook County, Illinois, and (ii) each waives his or its rights to
have such dispute tried by a court or jury. RIGHT TO TRIAL BY JURY IS WAIVED.
However, Employee and Blue Rhino agree that this arbitration provision shall not
apply to any disputes or claims relating to or arising out of Sections 7, 8, 9,
10 and 13 of this Agreement. With respect to each such dispute, each of the
parties submits to the jurisdiction of any state court sitting in Chicago,
Illinois or the United States District Court for the Northern District of
Illinois.
18. Advice of Counsel. Employee been advised by his own independent
counsel concerning this Agreement prior to executing this Agreement.
-10-
<PAGE>
19. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective heirs,
legal representatives, successors and permitted assigns. Employee may not assign
either this Agreement or any of Employee's rights, interests or obligations
hereunder. Blue Rhino may assign any or all of its rights and interests
hereunder to any person or entity that acquires the business of Blue Rhino or to
any entity with which Blue Rhino merges or consolidates.
20. 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 agreement.
21. Headings. The section headings contained in this Agreement are for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
22. Waiver. The waiver of a breach of any provision of this Agreement
shall not operate or be construed to be a waiver of any other provision or of a
subsequent or prior breach of this Agreement.
23. Entire Agreement. This Agreement contains the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior or
contemporaneous negotiations, correspondence, understandings, and agreements
between the parties regarding the subject matter of this Agreement. This
Agreement may not be amended or modified or any provision waived except in a
writing signed by both parties and supported by new consideration.
-11-
<PAGE>
Executed as of the date first set forth above.
BLUE RHINO CORPORATION EMPLOYEE
By:
---------------------------- -----------------------------------
Its: Martin Bossler
----------------------------
-12-
<PAGE>
Exhibit 10.4
ASSET PURCHASE AGREEMENT
AMONG
BLUE RHINO CORPORATION
AND
INTERNATIONAL PROPANE PRODUCTS, LLC
AND
MICHAEL A. WATERS
<PAGE>
ASSET PURCHASE AGREEMENT
Agreement entered into on as of March 31, 2000, among Blue Rhino
Corporation, a Delaware corporation ("Buyer"), International Propane Products,
LLC, an Illinois limited liability company ("IPP"), and Michael A. Waters
("Waters") (collectively IPP and Waters are referred to herein as the
"Sellers"). Buyer and the Sellers are referred to collectively herein as the
"Parties."
R E C I T A L S:
---------------
A. Buyer desires to purchase, and IPP desires to sell, substantially all
of the assets of IPP.
B. Waters is the sole member of IPP.
A G R E E M E N T
- - - - - - - - -
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 IPP directly relating to or necessary for the manufacture or sale of
patio heaters or brass gas cylinder valves, 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) (the "Tangible Assets"),
(b) the 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 listed on Schedule 1(b), (c) IPP's
claims, contractual deposits, prepaid assets, 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 IPP which claim was not
included as an Assumed Liability) and rights of recoupment, (d) IPP's assignable
approvals, permits, licenses, orders, registrations, certificates, variances,
and similar rights obtained from governments and governmental agencies listed on
Schedule 1(d), (e) all leases, contracts, agreements, arrangements, commitments
and understandings to which IPP is a party listed on Schedule 1(e) (the
"Contracts"), and (f) access to all of the of 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 Patio
Heater and
1
<PAGE>
valves; provided, however, that the Acquired Assets shall not include
-----------------
the Excluded Assets.
"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.
"Assignment and Assumption Agreement" means the Assignment and Assumption
Agreement in the form attached hereto as Exhibit C-3.
-----------
"Assumed Liabilities" means (a) the liabilities for payment under and
performance of all Contracts included in the Acquired Assets, (b) any Liability
arising out of product liability claims related to products designed,
manufactured, imported or sold by IPP prior to the date of this Agreement that
are made or occur after the five (5) year anniversary date of this Agreement and
----
(c) accrued vacation pay for employees of IPP employed by Buyer after the
- - - ------------
Closing, provided, however, that the Assumed Liabilities shall not include (i)
-----------------
any trade accounts payable, (ii) accrued payroll, (iii) accrued liabilities
(other than accrued vacation pay as provided herein above) (iv) 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 under the Code (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 IPP 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 or obligation of any Seller under this Agreement (or under any side
agreement between any Seller on the one hand and 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
Buyer's common stock, as listed in The Wall Street Journal, Central Edition,
reported for the five (5) 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 has caused or reasonably could be expected
to cause any specified consequence.
"Cash" means cash and cash equivalents (including bank deposits, marketable
securities and short term investments) calculated in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
2
<PAGE>
"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.
"Consulting Agreement" means the Consulting Agreement in the form attached
hereto as Exhibit C-4.
-----------
"Deferred Payment Term" means the lesser of (a) the life of the Patio
Heater Patent (which time period includes the application process thereto), but
in no event less than five (5) years, or (b) until Buyer stops making, using or
selling the invention claimed in the Patio Heater Patent for a period of one (1)
year.
"Deferred Purchase Price" has the meaning set forth in Section 2(g).
"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
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.
3
<PAGE>
"Excluded Assets" means (i) any documents relating to the organization,
maintenance, and existence of IPP 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 Buyer on the other hand entered into on
or after the date of this Agreement), (iv) Cash, (v) Accounts Receivable and
(vi) any of the assets listed on Schedule 2, including the list of accounts
receivable as of March 31, 2000 attached thereto.
"Financial Statement" has the meaning set forth in Section 3(g) below.
"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
Buyer, IPP and Waters entered into concurrently herewith and attached hereto as
Exhibit B.
- - - ---------
"Intellectual Property" means the Patio Heater Patent and all of IPP's (a)
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 related to valves or
patio heaters, (b) 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)
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) mask works and all applications,
registrations, and renewals in connection therewith, (e) 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) computer software (including data and related
documentation), (g) 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.
-----------
"IPP Manager" means Waters.
"Knowledge" means actual knowledge of Waters.
"Liability" means any liability (whether known or unknown, whether asserted
or
4
<PAGE>
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.
"Most Recent Balance Sheet" means the balance sheet contained within the
Financial Statements.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"License Agreement" means the License Agreement, dated of even date
herewith between Buyer and Waters, attached hereto as Exhibit D.
---------
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Patio Heater" means the patio heaters that are the subject of the Patio
Heater Patent and all equivalents or continuations thereof.
"Patio Heater Business" means the business operated by IPP of importing and
selling Patio Heaters and brass valves for propane cylinders.
"Patio Heater Patent" means the patent applications listed on Schedule 3
filed with the United States Patent and Trademark Office and all reissues,
divisions, continuations, renewals, extensions and continuations-in-part
thereof. A description of the status of the Patio Heater Patent is set forth on
Schedule 3.
"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.
"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.
5
<PAGE>
"Seller Member" means any person who or which is a member of IPP.
"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.
2. Basic Transaction.
-----------------
(a) Purchase and Sale of Assets. On and subject to the terms and
---------------------------
conditions of this Agreement, Buyer agrees to purchase from the Sellers, and the
Sellers agree to sell, transfer, convey, and deliver to 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, Buyer agrees to assume and become responsible for all of the
Assumed Liabilities at the Closing. 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 total purchase price (the "Purchase Price") to be
--------------
paid by Buyer to IPP for the Acquired Assets shall be as follows:
(i) Buyer's Common Stock. At the Closing, Buyer shall deliver to
--------------------
Waters Common Stock with a market value of One Million One Hundred Twenty-
Three Thousand Dollars ($1,123,000) (the "Purchase Shares"). The number of
Purchase Shares to be delivered to Waters constituting a market value of
$1,123,000 will be the number of shares of Buyer's Common Stock valued at
Average Closing Price which have an aggregate Average Closing Price equal
to One Million One Hundred Twenty-Three Thousand Dollars ($1,123,000). No
fractional shares will be issued. With respect to any fractional share,
Buyer shall pay to Waters an amount in cash equal to such fraction.
(ii) Cash. Cash in the amount of $1,206,471.17, the calculation of
----
which is set forth on Section 2(c)(ii) of the Disclosure Schedule.
(iii) Assumed Liabilities. The assumption of the Assumed Liabilities.
-------------------
6
<PAGE>
(iv) Deferred Purchase Price. The Deferred Purchase Price payable to
-----------------------
Waters pursuant to Section 2(g).
(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 March 31,
2000 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 Buyer:
(A) the various certificates, instruments, and documents referred
to in Section 6(a) below and;
(B) an executed bill of sale transferring the Acquired Assets to
Buyer;
(C) Intentionally deleted;
(D) an executed Intellectual Property Assignment;
(E) an executed Assignment and Assumption Agreement;
(F) an executed the Consulting Agreement;
(G) an executed License Agreement;
(H) an acknowledgement from the Sellers that the oral license
agreement between IPP and Waters for the Patio Heater Patent
has been terminated;
(I) copies of all necessary third-party consents; and
(J) such other instruments of sale, transfer, conveyance, and
assignment as Buyer and its counsel reasonably may request,
including an Amendment of IPP's Certificate of Formation to
effectuate a change of name which shall be filed by IPP
within 15 days of the Closing Date.
(ii) Buyer will deliver to the Sellers:
(A) the various certificates, instruments, and documents referred
to in
7
<PAGE>
Section 6(b) below;
(B) a certificate (with a legend restricting transferability)
representing that number of Purchase Shares as determined
pursuant to Section 2(c)(I);
(C) cash in the amount determined pursuant to Section 2(c)(ii),
payable by wire transfer or delivery of other immediately
available funds:
(D) an executed Assignment and Assumption Agreement;
(E) an executed License Agreement;
(F) an executed Consulting 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 this Section 2(g) within thirty (30)
days of the close of each and every calendar quarter 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 during the Deferred Payment Term, at which
time adjustments, if any, to Net Sales and payments will be made based
on fiscal year end audited financial statements of Buyer. The
Schedule of Deferred Payments in Section 2(g)(ii) below is based on
the Net Sales of the Patio Heaters. For purposes of this Agreement,
"Net Sales" shall mean the sales price at which the Patio Heaters and
parts therefor are sold as adjusted for returns, discounts, and
allowances, unless otherwise agreed by the parties in good faith.
Buyer's Deferred Purchase Price payments to Waters shall be
accompanied by a report setting forth, Net Sales of the Patio Heaters
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 readily determined
by an accountant or other person with comparable financial statement
and general ledger sophistication. 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, deductions and payments provided
for
8
<PAGE>
herein. Such examination shall be made during normal business hours,
at times convenient to Waters and Buyer. In the event that such
examination reveals an underpayment in the Deferred Purchase Payments
of more than 5%, Buyer shall pay Waters' costs for such examination.
(ii) The Deferred Purchase Price shall equal 1.0% of the Net
Sales from Patio Heaters. The Deferred Purchase Price shall be
payable during the Deferred Payment Term. Notwithstanding anything to
the contrary contained herein, in the event (A) a patent is issued
within three (3) years from the date hereof by the United States
Patent and Trademark Office in connection with the Patio Heater
Patent, the minimum Deferred Purchase Price payment made to Waters
during the first seven (7) years of the Deferred Payment Term shall be
as follows: year 1 - $25,000; year 2 - $40,000; year 3 - $65,000; and
years 4-7 - $100,000 each year or (B) a patent is not issued within
three (3) years from the date hereof by the United States Patent and
Trademark Office in connection with the Patent Heater Patent the
minimum Deferred Purchase Price payment made to Waters during the
first three (3) years of the Deferred Payment Term shall be as
follows: year 1 - $25,000; year 2 - $40,000; year 3 - $65,000 (in
each case, the "Minimum Deferred Purchase Price"). The Minimum
Deferred Purchase Price may be paid to Waters from Blue Rhino out of
any source of income, regardless of whether it is related to the Net
Sales from Patio Heaters.
In the event that either: (a) Buyer fails to make the Minimum Deferred
Purchase Price payments within thirty (30) days after notice from Waters that
the same has become due and payable pursuant to Section 2(g), or (b) Deferred
Payment Term ends before the end of the life of the Patio Heater Patent (which
time period includes the application process thereto), then Waters shall have
the right to manufacture and sell Patio Heaters pursuant to the License
Agreement and the non-competition agreement contained in the Indemnification
Agreement shall not apply to such sales.
(h) Purchase Shares. Buyer will use its best efforts to prepare, file and
---------------
have become effective with the Securities and Exchange Commission (the
"Commission") an amendment or supplement to Buyer's Form S-1 registration
statement last amended July 21, 1999 (the "Shelf Registration Statement")
relating to the issuance of all of the Purchase Shares to be issued to Waters
pursuant to this Agreement on or before one (1) month after the date of this
Agreement. Buyer shall cause the Purchase Shares to be listed on the Nasdaq
National Market at its expense so as to permit the sale by Waters of the
Purchase Shares without further action under any state securities or blue sky
laws. Buyer's obligation hereunder to so prepare and file the Shelf
Registration Statement relating to the Purchase Shares is subject to the full
cooperation of Waters in furnishing any and all information about themselves and
any contemplated method of resale of such shares as may be necessary to make
such statements not misleading, and any such information so furnished shall be
treated as representations and warranties made by IPP under this Agreement,
covered by the indemnification provisions set forth in the Indemnification
Agreement. Buyer shall not be obligated to pay any underwriting discounts,
selling
9
<PAGE>
commissions, brokers' fees or other offering expenses of any kind attributable
to any sale of the Purchase Shares, which fees and expenses will be paid by
Waters. Water's rights under this Section 2(h) are not transferable without
Buyer's prior written consent. Upon the effectiveness of the Shelf Registration
Statement, Buyer will issue Seller an certificate (without restrictive legends)
representing that number of Purchase Shares as determined pursuant to Section
2(c)(I) in exchange for the certificate issued at Closing pursuant to Section
2(e)(II)(B).
(i) Collection of Certain Monies. In the event IPP receives monies for
----------------------------
Patio Heaters or other products relating to the Acquired Assets shipped after
April 3, 2000, IPP hereby agrees to hold such monies for the benefit of Buyer
and to forward all such amounts to Buyer on a timely basis.
3. Representations and Warranties of the Sellers. IPP represents and
---------------------------------------------
warrants to Buyer that the statements that are made by IPP contained in this
Section 3 are correct and complete as applied to IPP 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. IPP 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. IPP 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 manager of
IPP have duly authorized the execution, delivery, and performance of this
Agreement by IPP. This Agreement constitutes the valid and legally binding
obligation of IPP, enforceable in accordance with its terms and conditions.
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
10
<PAGE>
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 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. IPP 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 except for the leased
postage meter, the printer supplied by UPS for printing UPS shipping documents
and the air tanks provided by the supplier of compressed air for a nominal
monthly fee.
(f) Financial Statements. IPP 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 year ended December
31, 1999 (the "Most Recent Fiscal Year End") and for the two (2) month period
ended February 29, 2000 for IPP (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 IPP as of such dates and the results of operations of IPP
for such periods as limited by the notes therein, are materially correct and
complete, and are consistent with the books and records of IPP (which books and
records are materially correct and, except as noted therein complete). On or
before April 30, 2000, the Sellers hereby covenant and agree to provide Buyer
with Financial Statements for the month ended March 31, 2000.
(g) Events Subsequent to Most Recent Fiscal Year End. Since the Most
------------------------------------------------
Recent Fiscal Year 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
11
<PAGE>
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 caused or allowed to be imposed any Security
Interest upon any of the Acquired Assets;
(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;
(vii) there has been no change made or authorized in the Seller LLC
Agreement;
(viii) IPP 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) IPP 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.
(h) Undisclosed Liabilities. IPP 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
Year End in the Ordinary Course of Business; (iii) Liabilities which are not
Assumed Liabilities and were incurred in connection with the business of IPP
other than the Patio Heater Business; and (iv) Liabilities which are unknown to
12
<PAGE>
Waters and IPP. Nothing in this representation shall limit the obligation of the
Sellers under the Indemnification Agreement to indemnify Buyer for any losses
suffered by Buyer as a result of any Liabilities of the Sellers other than the
Assumed Liabilities.
(i) 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 IPP 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.
(j) Tax Matters.
-----------
(i) IPP 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. IPP
shall make available to Buyer copies of, and Section 3(j) of the Disclosure
Schedule hereof contains a complete and accurate list of, all such Tax
Returns relating to income or other Taxes filed since the date of IPP's
formation. IPP 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 IPP.
(ii) No deficiency for Taxes has been claimed, proposed or assessed
against IPP. There are not pending, nor to either Seller's knowledge,
threatened audits, investigations, or claims for or relating to additional
liability in respect of Taxes owed by IPP. All Taxes that IPP 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 IPP are
materially true, correct, and complete. Neither Seller has been audited
during the last three (3) years and has any knowledge of any future IRS or
other tax authority audits.
(k) Real Property. Section 3(k) of the Disclosure Schedule lists and
-------------
describes briefly all real property leased to IPP. IPP has delivered to Buyer
correct and complete copies of such leases. With respect to each lease:
(i) The lease is legal, valid, binding, enforceable, and in full
force and effect.
(ii) The lease 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 and the receipt of
consent of the lessor thereunder.
(iii) The tenant is not, and to the best knowledge of Waters, the
lessor is not in breach or default, and no event has occurred which, with
notice or lapse of time, would
13
<PAGE>
constitute a breach or default or permit termination, modification, or
acceleration thereunder.
(iv) No party to the lease has repudiated any provision thereof.
(v) There are no material disputes, oral agreements, or forbearance
programs in effect as to the lease.
(vi) IPP has not assigned, transferred, conveyed, mortgaged, deeded
in trust, or encumbered any interest in the leasehold.
(vii) All facilities leased thereunder have received all approvals of
governmental authorities (including licenses and permits) required in
connection with the operation thereof as operated by IPP and have been
operated and maintained in accordance with applicable laws, rules, and
regulations.
(viii) All facilities leased thereunder are supplied with utilities
and other services necessary for the operation of said facilities as
operated by IPP.
(l) 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
Patio Heaters. IPP and Waters jointly and severally warrant and represent
that Waters owns Patio Heater Patent that is being licensed to IPP pursuant
to an oral license agreement.
(ii) To the knowledge of the Sellers, none of the Sellers has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties in
connection with the manufacture, use or sale of the patio heaters, 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 Patio Heaters). To the Knowledge of any Seller and the
Manager of IPP (and employees with responsibility for Intellectual Property
matters), no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of any Seller other than Intellectual Property rights of
Waters which are not related to the business of IPP.
(iii) Neither IPP nor Waters has granted to any third party any
license,
14
<PAGE>
agreement or other permission with respect to, or any other current or
future rights in, any of its Intellectual Property, including rights in any
now existing or hereafter filed or granted domestic or foreign patent
applications or patents, excepts those manufactures of Patio Heaters
specifically listed on Section 3(l) of the Disclosure Schedule. Section
3(l)(iii) of the Disclosure Schedule identifies each (1) trade name or
registered or unregistered trademark used by IPP and (2) each patent or
patent application filed by the Sellers relating to the business of IPP.
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 or use, or ownership of the License Agreement, the
Intellectual Property licensed thereunder, or the names, marks, patents or
patent applications. 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 computer software which was not written for the
Sellers, there is no item of Intellectual Property that any third party
owns and that IPP uses pursuant to license, sublicense, agreement, or
permission in connection with the manufacture, use or sale of Patio
Heaters.
(v) Other than the Patio Heater Patent, the Sellers are not the
holders of, and have not filed any patent applications with, any United
States or foreign patents with respect to Patio Heaters.
(m) Tangible Assets. Each Tangible Asset is in good operating condition
---------------
and repair (subject to normal wear and tear), and is suitable for the purposes
for which it is presently used.
(n) Inventory. The inventory of IPP consists of raw materials and
---------
supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is 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. Buyer acknowledges that Seller has been engaged in the Patio Heater
Business for less than eighteen months and, therefore, does not have the
operating experience to determine which parts and products in its inventory are
excess or obsolete in accordance with GAAP.
(o) Contracts.
---------
(i) The Contracts are all of the existing material contracts,
agreements, leases and commitments (both written and oral) relating to the
Acquired Assets. The Sellers have delivered to Buyer prior to the execution
of this Agreement true and complete copies or descriptions of all of the
Contracts (and all amendments and modifications thereto). Each Contract is
in full force and effect, and constitutes a valid and binding obligation
of,
15
<PAGE>
and is legally enforceable in accordance with its terms against, the
parties thereto. To the Sellers' Knowledge, the parties thereto have
complied with all of the provisions of the Contracts and are not in default
thereunder, and there has not occurred any event which (whether with or
without notice, lapse of time, or the happening or occurrence of any other
event) would constitute such a default. Except as set forth in Section 3(o)
of the Disclosure Schedule, such Contract does not require the consent of
any party thereto to the consummation of the transactions contemplated
hereby.
(ii) The Sellers have delivered to 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
(l)(iii); Neither Seller has granted any sublicense or similar right with
respect to the License Agreement.
(q) 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) 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),
provided, however, that none of such policies will be assigned to the Buyer or
insure any interest of the Buyer; (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(q) 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.
(r) Litigation. Except as listed in Section 3(R) of the Disclosure
----------
Schedule There are no claims, suits, actions, administrative, bankruptcy,
arbitration or other proceedings or governmental investigations pending or, to
the Sellers' Knowledge, threatened against IPP or the Acquired Assets, and the
Sellers do not know of any facts which could reasonably form the basis for any
such claim, suit, action, proceeding, or investigation. There are presently no
outstanding judgments, decrees, or orders of any court or any governmental or
administrative agency against or, in any proceeding in which IPP is a party,
affecting IPP or any of the Acquired Assets. No insolvency proceedings of any
character including, without limitation, bankruptcy, receivership,
reorganization, or arrangement with creditors, voluntary or involuntary,
affecting IPP or any of
16
<PAGE>
the Acquired Assets are pending, or to the Sellers' Knowledge, threatened. IPP
has not made or taken any assignment for the benefit of creditors or any actions
with a view to, or which would constitute the basis for, the institution of any
such insolvency proceedings.
(s) 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, to Seller's knowledge, 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(s) 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).
(t) Product Liability. Except as set forth on Schedule 3(t), to the
-----------------
Knowledge of the Seller's, IPP has no Liability (and there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against IPP giving rise to any Liability) arising
out of any injury to individuals or property as a result of the ownership,
possession, or use of products manufactured, sold or leased by IPP. Sellers
hereby covenants and agrees to carry products liability insurance, for a period
of five (5) years after the date of this Agreement, covering claims related to
products designed, manufactured, imported or sold prior to the date of this
Agreement.
(u) Employee Benefits. There are no Employee Benefit Plans applicable to
-----------------
any employee of IPP, except the group health and life insurance plan through
Principal Financial Group, which have been maintained in accordance with all
applicable federal, state and local laws, rules and regulations.
(v) Environmental, Health, and Safety Matters.
-----------------------------------------
(i) IPP in all material respects, has complied with and is in
compliance with all Environmental, Health, and Safety Requirements.
(ii) Without limiting the generality of the foregoing, IPP has
obtained and complied with, and is in compliance with, all permits,
licenses and other authorizations that are required pursuant to
Environmental, Health, and Safety Requirements for the occupation of its
facilities and the operation of its business.
(iii) IPP has not received any written or oral notice, report or
other information
17
<PAGE>
regarding any actual or alleged violation of Environmental, Health, and
Safety Requirements, or any Liabilities or potential Liabilities, including
any investigatory, remedial or corrective obligations, relating to IPP or
the Acquired Assets arising under Environmental, Health, and Safety
Requirements.
(iv) None of the following exists at any property or facility
operated by IPP: (A) underground storage tanks, (B) asbestos-containing
material in any form or condition, (C) materials or equipment containing
polychlorinated biphenyls, or (D) landfills, surface impoundments, or
disposal areas.
(v) Neither Seller has treated, stored, disposed of, arranged for
or permitted the disposal of, transported, handled, or released any
substance, including without limitation any hazardous substance, or owned
or operated any property or facility (and no such property or facility is
contaminated by any such substance) in a manner that has given or would
give rise to liabilities, including any liability for response costs,
corrective action costs, personal injury, property damage, natural
resources damages or attorney fees, pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Solid Waste Disposal Act, as amended ("SWDA") or any other
Environmental, Health, and Safety Requirements.
(vi) Neither this Agreement nor the consummation of the transaction
that is the subject of this Agreement will result in any obligations for
site investigation or cleanup, or notification to or consent of government
agencies or third parties, pursuant to any of the so-called "transaction-
triggered" or "responsible property transfer" Environmental, Health, and
Safety Requirements.
(vii) IPP has not, either expressly or by operation of law, assumed
or undertaken any liability, including without limitation any obligation
for corrective or remedial action, of any other person or entity relating
to Environmental, Health, and Safety Requirements.
(viii) No facts, events or conditions relating to the past or present
facilities, properties or operations of IPP will prevent, hinder or limit
continued compliance with Environmental, Health, and Safety Requirements,
give rise to any investigatory, remedial or corrective obligations pursuant
to Environmental, Health, and Safety Requirements, or give rise to any
other liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) pursuant to Environmental, Health, and Safety Requirements,
including without limitation any relating to onsite or offsite releases or
threatened releases of hazardous materials, substances or wastes, personal
injury, property damage or natural resources damage.
4. Representations and Warranties of Buyer. Buyer represents and
---------------------------------------
warrants to the Sellers that the statements contained in this Section 4 are
correct and complete as of the date of
18
<PAGE>
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 Buyer. Buyer is a corporation duly organized, validly
---------------------
existing, and in good standing under the laws of the State of Delaware.
(b) Authorization of Transaction. 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 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 Common Stock, 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 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 Buyer is a party or by which
it is bound or to which any of its assets is subject. 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 contemplated by this Agreement (including the
assignments and assumptions referred to in Section 2 above).
(d) Brokers' Fees. Buyer has not engaged nor authorized any broker,
-------------
investment banker or third party to act on Buyer's behalf, either directly or
indirectly, as a broker, finder or advisor in connection with the transaction
contemplated hereby.
(e) Buyer Stock. The Buyer Stock, when issued, shall be fully paid and non
-----------
assessable and shall be delivered to Seller free and clear of all Security
Interests and restrictions except restrictions required pursuant to the
Securities Act.
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
19
<PAGE>
Sellers will use their reasonable best efforts to obtain any third party
consents, that 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. IPP 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, IPP will not (i) declare, set
aside, or pay any distribution to the Seller Members, (ii) purchase, or
otherwise acquire any membership units of IPP, (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. IPP will keep its business and properties
------------------------
substantially intact, including its present operations, physical facilities,
working conditions, and relationships with lessors, licensors, suppliers,
customers, and employees.
(e) Full Access. IPP will permit representatives of Buyer to have full
-----------
access at all reasonable times, and in a manner so as not to interfere with the
normal business operations of IPP, to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to IPP.
(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 IPP (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 Buyer immediately if any Person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
(h) Public Disclosures. Buyer will provide to the 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.
----------------------------------
20
<PAGE>
(a) Conditions to Obligation of Buyer. The obligation of 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;
(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 Buyer to own the Acquired Assets and to operate the business of the
Sellers relating to the Patio Heaters;
(v) the Sellers shall have delivered to 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 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) 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
21
<PAGE>
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) 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;
(v) all actions to be taken by 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. 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 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 (2) 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
22
<PAGE>
without the prior written approval of the other Party; provided, however, that
-----------------
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 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 (2) days after
it is sent by registered or certified mail, return receipt 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
372 Bateman Circle North
Barrington Hills, Illinois 60010
Fax: (847) 381-3059
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
23
<PAGE>
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 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.
(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 Parties 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
24
<PAGE>
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: INTERNATIONAL PROPANE PRODUCTS
By__________________________________
Its: Manager and Sole Member
_____________________________________
Michael A. Waters
BUYER: BLUE RHINO CORPORATION
By__________________________________
Its_________________________________
26
<PAGE>
Exhibit 10.5
INDEMNIFICATION AGREEMENT
Agreement dated as of March 31, 2000 among Blue Rhino Corporation, a
Delaware corporation (the "Buyer"), International Propane Products, LLC, an
Illinois limited liability company ("IPP"), and Michael A. Waters ("Waters")
(together Bison and Waters are referred to herein as the "Sellers"). The Buyer
and the Sellers are referred to collectively herein as the "Parties."
The Buyer and the Sellers are entering into an Asset Purchase Agreement
concurrently herewith (the "Asset Purchase Agreement"). Certain terms used
herein without definition are used herein as defined in the Asset Purchase
Agreement.
The Asset Purchase Agreement contemplates a transaction in which the Buyer
will purchase the Acquired Assets (and accept responsibility for the Assumed
Liabilities) of the Sellers in return for a payment of cash, the issuance of the
Purchase Shares, the Deferred Purchase Payments and the assumption of certain
Liabilities.
The Buyer and the Sellers make certain representations, warranties, and
covenants in the Asset Purchase Agreement which will survive the Closing for
purposes of potential indemnification. The Buyer and the Sellers therefore wish
to provide for post-Closing indemnification against breaches of these
representations, warranties, and covenants and to make certain other covenants
among themselves.
Now, therefore, in consideration of the premises and the mutual promises
herein made, the Parties agree as follows:
1. Definitions. Except as defined herein, all capitalized terms shall
have the meanings accorded to them in the Asset Purchase Agreement.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"Annex" has the meaning set forth in Section 2 below.
"Asset Purchase Agreement" has the meaning set forth in the preface above.
"Confidential Information" means any information of value concerning the
Patio Heater, or the Acquired Assets that is not either (a) already generally
available to the public or (b) made generally available to the public prior to
any alleged breach of this Agreement other than by breach of this Agreement.
Information available on a web site on the world wide web or
<PAGE>
published in any newspaper or magazine (including trade-oriented magazines with
limited or controlled circulation) shall be deemed generally available to the
public.
"Indemnified Party" has the meaning set forth in Section 4(d) below.
"Indemnifying Party" has the meaning set forth in Section 4(d) below.
"Party" has the meaning set forth in the preface above.
"Third Party Claim" has the meaning set forth in Section 4(d) below.
2. Representations and Warranties of Waters. Waters represents and
warrants to the Buyer that the statements contained in this Section 2 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 2)
with respect to himself or itself, except as set forth in the Annex attached
hereto (the "Annex").
(a) Authorization. Waters 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.
(b) Noncontravention. Neither the execution and the delivery of this
Agreement by Waters, nor the performance by Waters of his obligations hereunder,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, stipulation, ruling, charge, or other restriction of
any government, governmental agency, or court to which Waters is subject 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 Waters is a party or by which
he is bound or to which any of his or its assets is subject.
3. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing:
(a) General. In case at any time after the Closing any further action
is necessary or desirable to fully effect the transactions provided for in the
Asset Purchase Agreement, each of the Parties will take such further action
(including the execution and delivery of such further instruments and documents)
as any other Party reasonably may request, all at the sole cost and expense of
the requesting Party (unless the requesting Party is entitled to indemnification
therefor under Section 4 below). Sellers acknowledge and agree that from and
after the Closing the Buyer will be entitled to possession of all documents,
books, records (including Tax records), agreements, and financial data of any
sort relating to the Acquired
<PAGE>
Assets, or copies thereof, in the case of any such information that, although
related to the Acquired Assets, is related to the business of the Sellers.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under the Asset Purchase Agreement or (ii) any
fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Patio Heater or the Acquired Assets, each of
the other Parties will cooperate with the contesting or defending Party and his
or its counsel in the contest or defense, make available his or its personnel,
and provide such testimony and access to his or its books and records as shall
be necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor under Section 4 below).
(c) Transition. Waters will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of IPP from maintaining the same business
relationships with the Buyer after the Closing as it maintained with IPP prior
to the Closing. Sellers will refer all customer inquiries relating to the Patio
Heater Business of the Sellers to the Buyer from and after the Closing.
(d) Confidentiality. Sellers will treat as and hold confidential all
of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement or at the request of the
Buyer, and deliver promptly to the Buyer or destroy, at the request and option
of the Buyer, all tangible embodiments (and all copies) of the Confidential
Information which are in his or its possession except information related to the
prosecution of the patent with respect to the Patio Heater. In the event any
Seller is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information, such
Seller will notify the Buyer promptly of the request or requirement so that the
Buyer may seek an appropriate protective order or waive compliance with the
provisions of this Section 3(d). If, in the absence of a protective order or the
receipt of a waiver hereunder, any Seller is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else risk
being found liable for contempt, such Seller may disclose the Confidential
Information to or as ordered by the tribunal; provided, however, that such
Seller shall use his or its reasonable best efforts to obtain, at the reasonable
request and expense of the Buyer, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as the Buyer shall designate. This Agreement however
will not prevent Waters from using Confidential Information in accordance with
the License Agreement.
(e) Covenant Not to Compete. Other than as allowed pursuant to the
terms of
<PAGE>
the License Agreement, for a period of five (5) years from and after the Closing
Date, no Seller shall engage directly or indirectly in the business of the
manufacture or sale of the Patio Heater or any heating devices used to warm the
outdoor atmosphere in a defined space; provided, however, that no owner of less
than 2% of the outstanding stock of any publicly traded corporation shall be
deemed to engage solely by reason thereof in any of its businesses. If the final
judgment of a court of competent jurisdiction declares that any term or
provision of this Section 3(e) is invalid or unenforceable, the Parties agree
that the court making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration, or area of the term or provision,
to delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed. The
provisions of this covenant not to compete will not prevent Waters from
manufacturing and selling Patio Heaters pursuant to the terms of the License
Agreement with any variation or improvement on the design licensed pursuant to
the License Agreement included within this exception so long as royalties on
such sales are included in the royalty calculation under the License Agreement.
(f) Technical Support. For a period of the longer of the time
necessary to fully process the Patio Heater Patent or two (2) years, Waters
shall provide technical support services to the Buyer consisting of research and
development into New Developments. The term "New Developments" means concepts
and ideas necessary to prosecute the Patio Heater Patent, whether patentable or
not, including but not limited to proprietary or secret processes, designs,
inventions, developments, modifications, procedures, methods, techniques,
processes, adaptations, and applications, as well as improvements thereof or
know-how related thereto. During the term of the consulting Agreement, the
Consulting Agreement shall cover all compensation owed under this Section 3(f).
Upon termination of the Consulting Agreement, Waters shall be compensated for
all services provided after such date under this Section 3(f) on a time and
materials basis at a rate to be agreed in advance of services performed. Any
fees of attorneys or other professionals incurred in connection with patent
searches or applications shall be paid directly by Buyer. Waters and Buyer shall
jointly control the prosecution of the Patio Heater Patent.
With respect to New Developments made or conceived by Waters which result
from the performance of the technical services by Waters as contemplated by this
Agreement, or result from the use of any Confidential Information, Waters and
the Buyer agree that:
(i) Waters shall disclose such New Developments to Buyer in
writing, setting forth in reasonable detail the procedures employed
and the results achieved;
(ii) Waters shall apply, at Buyer's request and expense, for
<PAGE>
United States and foreign letters patent, copyrights, and trademarks,
for any New Developments either in the name of Buyer or otherwise as
Buyer shall direct in writing;
(iii) Waters shall assign, to Buyer or otherwise as Buyer shall
designate in writing, all of Waters's rights to such New Developments,
including but not limited to United States and foreign letters patent,
copyrights, trade names and trademarks granted upon such New
Developments;
(iv) Waters shall execute all documents reasonably requested by
Buyer to formally assign any interest he may have in such New
Developments to Buyer or otherwise as Buyer shall designate in
writing; and
(v) Waters shall execute any other written instrument and
shall do any other acts reasonably requested by Buyer to assist Buyer
or such other party as Buyer designates in writing to perfect or
protect any or all of its rights in any New Development, including but
not limited to trade secret, trademark, trade name, copyright and
patent rights, both United States and foreign.
4. Remedies for Breaches of this Agreement and the Asset Purchase
Agreement.
(a) Survival of Representations and Warranties.
All of the representations and warranties of the Buyer and the Sellers
contained in the Asset Purchase Agreement and in this Agreement shall survive
the Closing and continue in full force and effect as of the Closing Date for a
period of one (1) year except that (i) the representations and warranties
contained in Sections 3(j), shall survive the Closing and continue in full force
and effect as of the Closing Date for a period of three years; (ii) the
representations and warranties contained in Section 3(l) shall survive the
Closing and continue in full force and effect as of the Closing Date for a
period of one (1) year after the grant of the Patio Heater Patent; (iii) the
representations and warranties contained in Section 3(t) shall survive the
Closing and continue in full force and effect as of the Closing Date for a
period of five (5) years; and (iii) the representations and warranties contained
in Sections 3(a), (b), (c), (d) and (e) of the Asset Purchase Agreement and
Sections 4(a), (b), (c), (d) and (e) of the Asset Purchase Agreement shall
continue in full force and effect forever thereafter (subject to any applicable
statutes of limitations).
(b) Indemnification Provisions for Benefit of the Buyer.
(i) In the event any Seller breaches (or in the event any
third party alleges facts that, if true, would mean a Seller has
breached) any of its representations, warranties, and covenants
contained in the Asset Purchase
<PAGE>
Agreement or any documents delivered therewith (which shall include a
breach by Waters Industries, Inc. under the Consulting Agreement dated
as of the date hereof), and, if there is an applicable survival period
pursuant to Section 4(a) above, provided that the Buyer makes a
written claim for indemnification against the Sellers pursuant to
Section 6(h) below within such survival period, then the Sellers agree
to indemnify the Buyer from and against the entirety of any Adverse
Consequences the Buyer may suffer through and after the date of the
claim for indemnification (including any Adverse Consequences the
Buyer may suffer after the end of any applicable survival period)
resulting from, arising out of or caused by the breach (or the alleged
breach) up to the limits provided herein below.
(ii) In the event Waters breaches (or in the event any third
party alleges facts that, if true, would mean Waters has breached) any
of his representations, warranties, and covenants contained in this
Agreement, and, if there is an applicable survival period pursuant to
Section 4(a) above, provided that the Buyer makes a written claim for
indemnification against Waters pursuant to Section 6(h) below within
such survival period, then Waters agrees to indemnify the Buyer from
and against the entirety of any Adverse Consequences the Buyer may
suffer through and after the date of the claim for indemnification
(including any Adverse Consequences the Buyer may suffer after the end
of any applicable survival period) arising out of or caused by the
breach (or the alleged breach) up to the limits provided herein below.
(iii) The Sellers agree to indemnify the Buyer from and against
the entirety of any Adverse Consequences the Buyer may suffer arising
out of or caused by any Liability of any Seller which is not an
Assumed Liability (including any Liability of any Seller that becomes
a Liability of the Buyer under any bulk transfer law of any
jurisdiction, under any common law doctrine of de facto merger or
successor liability, under Environmental, Health, and Safety
Requirements, or otherwise by operation of law).
(iv) Except as set forth herein, no amount shall be payable by
the Sellers with respect to any Adverse Consequences unless and until
all of the Adverse Consequences for which claims have been made exceed
$25,000 in the aggregate. Except as set forth herein, the amount that
the Waters and IPP shall be obligated to pay or expend in fulfilling
their obligations under this Agreement shall be limited to, and in no
event shall exceed, the amount of $1,123,000. Notwithstanding anything
to the contrary contained herein, in the event of a breach by either
of the Sellers of their obligations under Section 3(e) of this
Agreement, there shall be no limitation on the amount paid by Sellers
to Buyer, and such amount may include lost profits.
<PAGE>
(c) Indemnification Provisions for Benefit of Waters.
(i) In the event the Buyer breaches (or in the event any third
party alleges facts that, if true, would mean the Buyer has breached)
any of its representations, warranties, and covenants contained in the
Asset Purchase Agreement or any of the documents delivered therewith,
and, if there is an applicable survival period pursuant to Section
4(a) above, provided that Waters makes a written claim for
indemnification against the Buyer pursuant to Section 6(h) below
within such survival period, then the Buyer agrees to indemnify Waters
from and against the entirety of any Adverse Consequences Waters may
suffer through and after the date of the claim for indemnification
(including any Adverse Consequences Waters may suffer after the end of
any applicable survival period), arising out of, or caused by the
breach (or the alleged breach).
(ii) The Buyer agrees to indemnify Waters from and against the
entirety of any Adverse Consequences Waters may suffer arising out of
or caused by any Assumed Liability.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against any
other Party (the "Indemnifying Party") under this Section 4, then the
Indemnified Party shall promptly notify each Indemnifying Party
thereof in writing; provided, however, that no delay on the part of
the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is
prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (A)
the Indemnifying Party notifies the Indemnified Party in writing
within 45 days after the Indemnified Party has given notice of the
Third Party Claim that the Indemnifying Party will indemnify the
Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer arising out of or caused
by the Third Party Claim, (B) the Indemnifying Party provides the
Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial
resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (C) the Third Party Claim
involves only money damages and does not seek an injunction or other
equitable relief, (D) settlement of, or an adverse judgment with
respect to, the Third Party Claim is not, in the good faith judgment
of the Indemnified Party,
<PAGE>
likely to establish a precedential custom or practice materially
adverse to the continuing business interests of the Indemnified Party,
and (E) the Indemnifying Party conducts the defense of the Third Party
Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 4(d)(ii)
above, (A) the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of the Third
Party Claim, (B) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnifying
Party, and (C) the Indemnifying Party will not consent to the entry of
any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified
Party.
(iv) In the event any of the conditions in Section 4(d)(ii)
above is or becomes unsatisfied, however, (A) the Indemnified Party
may defend against, and consent to the entry of any judgment or enter
into any settlement with respect to, the Third Party Claim in any
manner it reasonably may deem appropriate (and the Indemnified Party
need not consult with, or obtain any consent from, the Indemnifying
Party in connection therewith), (B) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the
costs of defending against the Third Party Claim (including reasonable
attorneys' fees and expenses), and (C) the Indemnifying Party will
remain responsible for any Adverse Consequences the Indemnified Party
may suffer arising out of or caused by the Third Party Claim to the
fullest extent provided in this Section 4.
(e) Purchase Price Adjustments. All indemnification payments under
this Section 4 shall be deemed adjustments to the Purchase Price.
(f) Other Recoupment Options. The Buyer, at its sole discretion,
shall have the option of recouping all or any part of any amount owed Buyer
under Section 4(b) (in lieu of seeking any indemnification to which it is
entitled under this Section 4) by:
(i) reducing the Deferred Purchase Price required to be paid
to Waters pursuant to the Asset Purchase Agreement to the extent of
all or any part of the amount owed Buyer under Section 4(b) up to the
limit provided herein above;
The Buyer shall provide the Sellers with thirty days written notice prior
to taking any of the actions provided for in this Section 4(f) and will not take
such an action if the Sellers contest the right of the Buyer to take such action
by written notice delivered during such thirty day
<PAGE>
period. In the event that the Sellers contest the Buyer's right to recoupment
hereunder, the Buyer shall continue to pay the Deferred Purchase Price when due,
but shall pay such Deferred Purchase Price into a segregated account up to the
amount that the Buyer claims to be owed under Section 4(b) above, which shall be
held in trust for Waters under the Asset Purchase Agreement until a final
decision by an arbitrator or a court of competent jurisdiction as to the amount,
if any, of any right to recoupment. The Buyer shall pay the Deferred Purchase
Price over and above the amount that the Buyer claims to be owed under Section
4(b) above directly to Waters as provided in the Asset Purchase Agreement.
(g) Other Indemnification Provisions. The foregoing indemnification
provisions are the exclusive remedies of the parties for breach of the Asset
Purchase Agreement.
5. Termination. This Agreement shall terminate if and only if the
Asset Purchase Agreement is terminated prior to the Closing in accordance with
and pursuant to the terms thereof.
6. Miscellaneous.
(a) Exclusivity. Waters will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any Person relating to the
acquisition of any of the membership units, or any substantial portion of the
assets, of the Sellers (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. Waters will notify the Buyer
immediately if he becomes aware that any Person has made any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
(b) Press Releases and Public Announcements. Waters shall not issue
any press release or make any public announcement relating to the subject matter
of the Asset Purchase Agreement without the prior written approval of the Buyer;
provided, however, that Waters may make any public disclosure it believes in
good faith is required by applicable law (in which case Waters will use his
reasonable best efforts to advise the other Buyer prior to making the
disclosure).
(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) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
<PAGE>
(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 his or its rights, interests, or obligations hereunder without the prior
written approval of the Buyer and Waters; 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 liable and 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 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
372 Bateman Circle North
Barrington Hills, Illinois 60010
Fax: 847/381-3059
With a copy to the attorneys of the Sellers and Waters:
Vance L. Liebman, Esq.
Levin & Funkhouser, Ltd.
55 West Monroe Street, Suite 2410
Chicago, Illinois 60603
Fax: 312/641-2640
<PAGE>
If to the Buyer:
Blue Rhino Corporation
104 Cambridge Plaza Drive
Winston-Salem, North Carolina 27104
Attention: Mark A. Castaneda
Fax: 910/659-6750
With a copy to the Buyer's attorneys:
John H. Muehlstein, Esq.
Pedersen & Houpt, P.C.
161 North Clark Street, Suite 3100
Chicago, Illinois 60601
Fax: 312/641-6895
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Parties 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 Waters. 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.
(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
<PAGE>
provision of this Agreement or the application of such provision to other
parties or circumstances.
(l) Expenses. Each of the Parties 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 (except as otherwise provided
herein).
(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 Annex. The Annex is incorporated herein by
reference and made a part hereof.
(o) Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties 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 Parties 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 (subject to the provisions set forth in Section 6(p)
below) in addition to any other remedy to which they may be entitled, at law or
in equity.
(p) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Chicago, Illinois, in any
action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the Parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto. Any
Party may make service on any other Party by sending or delivering a copy of the
process to the Party to be served at the address and in the manner provided for
the giving of notices in Section 6(h) above. Each Party agrees that a final
judgment in any action or proceeding so brought shall be conclusive and may be
enforced by suit on the judgment or in any other manner provided by law or in
equity.
[The next page is the Signature Page]
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
SELLERS: INTERNATIONAL PROPANE PRODUCTS
By _________________________________
Name: Michael A. Waters
Title: Manager and Sole Member
___________________________________
Michael A. Waters
BUYER: BLUE RHINO CORPORATION
By _________________________________
Name: Mark A. Castaneda
Title: Chief Financial Officer
<PAGE>
Exhibit 10.6
LICENSE AGREEMENT
-----------------
THIS LICENSE AGREEMENT (the "Agreement") dated as of the 31st day of March,
2000, by and between by and between MICHAEL A. WATERS (the "Licensee"), residing
at 372 N. Bateman Circle, Barrington Hills, Illinois and Blue Rhino Corporation,
a Delaware corporation ("Licensor"), having its principal place of business at
104 Cambridge Plaza Drive, Winston-Salem, North Carolina.
W I T N E S S E T H:
-------------------
THAT, WHEREAS, Licensor purchased from Licensee the design of a certain gas
heater for use in outdoor applications (the "Patio Heater") which is the subject
of a applications for patents with the United States Patent & Trademark Office
which are listed on Schedule A; and
WHEREAS, pursuant to the Asset Purchase Agreement dated as of March 31,
1999, among International Propane Products, LLC ("IPP"), and Licensee, as
Seller, and Licensor, as Buyer (the "Purchase Agreement"), the Licensor has
agreed to execute and deliver this Agreement; and
WHEREAS, Licensor has the right to grant licenses to make, use and vend
Patio Heater and trade secret technology related to the production of Patio
Heater, including the technology disclosed in the patent application and any
related technology developed by Licensor hereafter (the "Trade Secret
Technology"); and
WHEREAS, Licensee desires to acquire from Licensor a license to make, use
and vend the Patio Heater and the Trade Secret Technology upon the terms and
conditions herein set forth; and
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, each of the parties hereto agree as follows:
1. Grant of License. After the occurrence of a Deficiency Event unless
sooner terminated or modified as hereinafter provided, for a period during which
a patent covering the Patio Heater provides to Licensor the exclusive right to
make, use and vend the Patio Heater (the "Term"), Licensor hereby grants to
Licensee the right and license (A) to manufacture, have manufactured, import,
use and sell the Patio Heater throughout the United States, its territories,
Canada and Mexico (the "Territory") and (B) to use the Trade Secret Technology
for the sole purpose of manufacturing, having manufactured, using, and selling
the Patio Heater in the Territory. Licensor agrees to apply for patents in the
Territory and to maintain the patents during the Term.
2. Power to Sublicense. Licensor hereby grants Licensee the right and
power, After the occurrence of any Deficiency Event, (as hereinafter defined),
to issue sublicenses to manufacture inside or outside of the Territory and sell
the Patio Heater throughout the
<PAGE>
Territory and to disclose the Trade Secret Technology to such sublicensees
during the Term, provided, however, that Licensee requires any such sublicensee,
pursuant to a written agreement, to maintain the confidentiality of the Trade
Secret Technology and use the Trade Secret Technology solely for the purpose of
manufacturing the Patio Heater. Any such sublicense may be for all or any
portion of the Territory and for all or less than the Term. Licensee shall
promptly give reasonable notice to Licensor of any such sublicense and its basic
terms and promptly provide Licensor with copies of any and all agreements
relating thereto. As used herein a "Deficiency Event" is the first to occur of
either (a) the failure of Blue Rhino to pay Deferred Purchase Price in the
amount of the minimum required pursuant to the Purchase Agreement within thirty
(30) days after notice from Waters that the same is due and payable or (b) the
end of the Deferred Payment Term (as defined in the Purchase Agreement).
3. Royalties. In consideration of the license granted in this Agreement,
Licensee agrees to pay to Licensor royalties ("Royalties") derived from sales of
the Patio Heaters, whether by Licensee or by sublicensees, as hereinafter
provided. The Royalties shall be one percent 1% of Net Sales as defined in the
calculation of the Deferred Purchase Price under the Purchase Agreement except
that Net Sales does not include sales to or at the direction of Licensor.
Licensee shall pay Licensor royalties pursuant hereto within thirty (30) days of
the close of each and every calendar quarter of the Term, except that Licensee
shall pay Licensor royalties for the last quarter of the year within ninety (90)
days of the close of each and every calendar year of the Term, at which time
adjustments, if any, to Net Profit and royalties will be made based on fiscal
year end audited financial statements of the Licensee or, if audited financial
statements are not prepared by an independent accountant, on the reviewed or
compiled financial statements of the Licensee or its sublicensees. Licensee's
royalty payments to Licensor shall be accompanied by a royalty report setting
forth sales of the Patio Heater Net Sales for the appropriate period(s).
Licensee will keep records showing the products sold or otherwise disposed of
during the Term of this Agreement in such detail as to enable the amounts
payable hereunder to be easily determined. Licensee shall also permit its books
and records to be examined by Licensor up to twice annually to the extent
necessary to verify the sales, Gross Profit, Fair Market Value, Cost of Good
Sold, and royalty payments provided for herein. Such examination shall be made
during normal business hours, at times convenient to Licensor and Licensee. In
the event that such examination reveals an underpayment in the Royalties of more
than 5%, Licensee shall pay Licensors' costs for such examination.
4. No Duty to Exploit the Technology. During the Term the Licensee shall
have no duty to promote the sale and use of the Patio Heater or to sublicense
any manufacturer to manufacture the Patio Heater.
5. Infringement. In the event it appears that one or more third parties
are infringing any right of Licensor, Licensee shall notify Licensor of such
apparent infringement. Licensor, after notice thereof to Licensee, may
immediately commence and
2
<PAGE>
prosecute all legal proceedings necessary to prevent such infringement and shall
be responsible for all costs relating to such legal proceedings. Licensee agrees
to cooperate with the Licensor in connection with any infringement matters. Any
payment by an infringer made in settlement of or by way of judgment or award or
otherwise shall belong to Licensor. If Licensor fails to prevent any such
infringement, Licensee may at its sole option and upon written notice to
Licensor, immediately commence and prosecute, at its cost and expense, all legal
proceedings necessary to prevent such infringement itself in the name of
Licensor. In any such action Licensor shall cooperate with Licensee and may
participate at Licensor's expense. Any payment by an infringer made in
settlement of or by way of judgment or award or otherwise shall belong to
Licensee.
6. Confidentiality. Licensee acknowledges and agrees that (a) Licensor has
expended significant money to purchase and maintain the secrecy of the Trade
Secret Technology, and (b) if the Trade Secret Technology were disclosed to
another person or entity contrary to this Agreement or used for the benefit of
anyone other than Licensor or Licensee, Licensor would suffer irreparable harm,
loss and damage. Accordingly, Licensee acknowledges and agrees that, unless the
Trade Secret Technology becomes publicly known through legitimate origins:
1) the Trade Secret Technology is, and at all times hereafter shall
remain, the sole property of Licensor; and
2) except as otherwise specifically permitted by this Agreement with
respect to sublicensees, Licensee shall use its best efforts and the
utmost diligence to guard and protect the Trade Secret Technology from
any unauthorized use or disclosure to any other person or other
entity.
Licensee also acknowledges and agrees that all documentary and tangible Trade
Secret Technology is supplied or made available by Licensor to Licensee solely
for the purposes of the license granted herein. Licensee further agrees that if
the Term of the licensee granted herein terminates or is terminated at any time
for any reason, Licensee and its sublicensees shall immediately return to
Licensor all documentary and/or tangible Trade Secret Technology in their
possession, custody, or control and not make or keep any copies, notes,
abstracts, summaries, tapes or other record of any type of Trade Secret
Technology.
7. Default. Should a party to this Agreement consider the other party to
be in breach of this Agreement, it shall notify the breaching part as to the
breach. The breaching party shall have thirty (30) days from the notice to
correct the breach and give notice of the correction to the non-breaching party.
Should, after the thirty (30) day period following the notice of breach, the
breach not be corrected, the non-breaching party may notify the breaching party
that the Agreement is terminated, and the Agreement shall be terminated.
Notwithstanding anything to the contrary set forth herein, if the default is of
such a nature that cure commenced during such thirty day period cannot be
completed within such period, this agreement may not be terminated so long as
cure is commenced during such thirty day period and completed within one hundred
and twenty days thereafter.
3
<PAGE>
8. Marking Agreement. Licensee agrees to mark each product which is the
subject of claims of any issued and subsisting patent with appropriate notice of
such patent pursuant to 35 U.S.C. (S)287(a).
9. Transfer of License. The license granted to Licensee under this
Agreement shall be indivisible and shall not be transferable without the
Licensor's prior express written consent. Except for sublicensing as provided in
Section 2 of this Agreement, Licensee shall not sell, assign, transfer, convey,
license, or encumber this Agreement, or any right or interest accruing under
this Agreement, in whole or in part, without Licensor's prior express written
consent except an assignment as collateral or, after foreclosure, by a secured
party to a purchaser in a sale pursuant to notice given to Licensor at least ten
days prior to the date of such sale, provided that such assignee agrees in
writing to be bound to the terms hereof as Licensee. In the event of any such
foreclosure sale Licensee shall be solely responsible for royalties accrued
prior to the default pursuant to which the foreclosure occurs and the successor
to Licensee's interest hereunder shall have no obligation for any such accrued
royalties.
10. Notices. Except as otherwise provided in this Agreement, all notices
requests, consents, and other communications required or permitted under this
Agreement shall be in writing and signed by the party giving notice, and shall
be deemed to have been given when hand-delivered by personal delivery, or by
Fedex or similar courier service or three (3) business days after being
deposited in the United States mail, registered or certified mail, with postage
prepaid, return receipt requested, addressed to the Licensee at his residence
set forth above, or addressed to the Licensor c/o its principal place of
business as set forth above, Attention: President, or to such other address as
either party may designate for himself or itself by notice given to the other
party from time to time in accordance with the provisions of this Agreement.
11. Waiver of Breach. No delay on the part of any party in the exercise of
any right or remedy shall operate as a waiver thereof, and no single or partial
exercise by any party of any right or remedy shall preclude other or further
exercise thereof or the exercise of any other right or remedy. The waiver of any
breach or condition of this Agreement by either party shall not constitute a
precedent in the future enforcement of any of the terms and conditions of this
Agreement.
12. Headings and Recitals. The headings of Sections contained in this
Agreement are merely for convenience of reference and shall not affect the
interpretation of any of the provisions of this Agreement. This Agreement is
deemed to have been drafted jointly by the parties, and any uncertainty or
ambiguity shall not be construed for or against either party as an attribution
of drafting to either party. Whenever the context so requires, the singular
shall include the plural and vice versa. All words and phrases shall be
construed as masculine, feminine or neuter gender, according to the context. The
recitals to this Agreement are hereby incorporated herein as part of this
Agreement.
13. 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,
4
<PAGE>
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.
14. Entire Agreement. All discussions, correspondence, understandings, and
agreements heretofore had or made between the parties relating to its subject
matter are superseded by and merged into this Agreement and the Purchase
Agreement and agreements delivered pursuant thereto, which alone fully and
completely expresses the agreement between the parties regarding the Trade
Secret Technology and the Patio Heater and the license to make, use and sell
such devise, and the same is entered into with no party relying upon any
statement or representation made by or on behalf of any party not embodied in
this Agreement. Any modification of this Agreement may be made only by a written
agreement signed by both of the parties to this Agreement.
15. Arbitration. Any dispute between the parties arising under this
Agreement which cannot be amicably resolved between the parties shall be
resolved by arbitration in the Chicago metropolitan area in accordance with the
following terms and conditions: Either party may deliver a notice to the other
party which shall set forth in detail all issues which it believes constitute a
dispute or grievance. Within twenty (20) days of the delivery of such notice,
counsel for the parties shall mutually select an arbitrator. If the parties are
unable to agree upon the selection of an arbitration within said twenty (20)
days, then within seven (7) days thereafter, either party may request the
JAMS/Endispute to submit a single panel consisting of a list of seven (7)
disinterested persons who are qualified and willing to act as impartial
arbitrators. Upon receipt of this list, the parties shall promptly flip a coin
to determine who shall have first choice to strike a name, and then the parties
shall proceed to strike alternatively and the person whose name remains shall be
the arbitrator. Unless otherwise agreed by the parties, (a) the arbitration
shall be conducted in accordance with the commercial arbitration rules of
JAMS/Endispute, and (b) the arbitrator shall commence hearings within thirty
(30) days after he is selected and shall render his award in writing, together
with his written findings and conclusions, as soon as possible after the
hearing. The decision of the arbitrator shall be final and binding on the
parties and may be confirmed by a court of competent jurisdiction. The
arbitrator may consider only the particular issue or issues presented to him by
the parties, and his decision must be based upon the provisions of this
Agreement, the Purchase Agreement and any amendments hereto or thereto. The
arbitrator shall have no power to add to, subtract from, alter or modify this
Agreement or the Purchase Agreement, as amended. The arbitrator shall assess the
costs of the arbitration of the parties as he determines to be appropriate. The
parties to this Agreement agree that this Section has been included to resolve
rapidly and inexpensively any disputes which may arise, and that submission of a
dispute to arbitration in accordance with this Agreement shall constitute
grounds for dismissal of any action commenced by any party with respect to a
dispute arising out of or from any provisions of this Agreement. In any
arbitration the
5
<PAGE>
prevailing party shall be entitled to an award of its reasonable attorney's
fees, expert fees and costs.
16. Choice of Law. This Agreement is being executed and delivered in the
State of Illinois, and the validity, construction, and enforceability of this
Agreement shall be governed in all respects by the domestic laws of the United
States and the State of Illinois applicable to agreements made and to be
performed entirely within the State of Illinois, without regard to the conflicts
of laws principles of the State of Illinois or any other state.
17. Counterparts. This Agreement may be executed in any one or more
counterparts, each of which shall constitute an original, no other counterpart
needing to be produced, and all of which, when taken together, shall constitute
but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Licensing
Agreement as of the date and year first above written.
MICHAEL A. WATERS (Licensee) Blue Rhino Corporation
(Licensor)
___________________________________ By:__________________________________
Michael A. Waters Its President
6
<PAGE>
Exhibit 10.7
AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT ("Amendment") is made
this 3rd day of April, 2000, by and between Bank of America, N.A., a national
banking association (the "Bank") and Blue Rhino Corporation, a Delaware
corporation (the "Borrower").
W I T N E S S E T H:
-------------------
WHEREAS, Bank and Borrower are parties to that certain Amended and Restated
Loan Agreement dated December 9, 1999 (the "Loan Agreement"), pursuant to which
Bank extended a revolving line of credit to the Borrower (the "Loan"), in the
principal amount of $25,000,000 (all capitalized terms appearing herein and not
otherwise defined shall have the meanings ascribed to such terms in the Loan
Agreement); and
WHEREAS, Bank and Borrower have now agreed that Bank will increase the
amount of the Loan by $5,000,000, to a total of $30,000,000; and
WHEREAS, the parties hereto wish to amend the Loan Agreement to provide for
the increase in the amount of the Loan to Borrower; and
WHEREAS, the parties wish to set forth their agreement with respect to the
foregoing matters herein;
NOW, THEREFORE, in consideration of the premises, the Bank's agreement to
increase the Loan to Borrower, the mutual promises set forth below, and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree hereby as follows:
1. Amendment to Increase Loan. The Loan Agreement is amended hereby in
--------------------------
Section 2, Loan, by deleting paragraph A thereof and substituting in lieu
----
thereof the following new paragraph:
A. Revolving Line of Credit. (i) Subject to the terms hereof,
------------------------
Bank agrees to extend a revolving line of credit (the "Revolver") to
Borrower, in the original principal amount of up to Thirty Million
Dollars ($30,000,000), for the purpose of financing Borrower's short-
term working capital needs, including but not limited to payments
under letters of credit issued for the benefit of Borrower, and
financing acquisitions by Borrower. The Revolver will be available
during the period commencing on the date hereof and continuing until
August 31, 2001 (which date, as extended in accordance with the terms
hereof, shall be the "Maturity Date"). Borrower may from time to time
borrow, repay and re-borrow, subject to the Borrowing Base Agreement
attached hereto as Exhibit "A" and by reference made a part hereof,
and the Borrowing Base set forth
<PAGE>
therein (the "Borrowing Base"). Borrower shall execute and deliver to
Bank a promissory note (the "Note") in the principal amount of
$30,000,000, which Note shall bear interest and be payable in
accordance with the terms set forth hereinbelow. It is further
provided that the commitment of the Bank to continue to make the
Revolver available to the Borrower beyond the Maturity Date is subject
to annual review by the Bank (subject to and following receipt of the
Borrower's annual report of audit as provided hereinafter), and the
Bank may, in its sole discretion, elect to renew the commitment for an
additional year, whereupon the Maturity Date shall be extended to the
date that is one year after the then-current Maturity Date.
2. Collateral for Loan. Repayment in full of the Loan, as increased by
-------------------
this Amendment, shall be secured by all Collateral described in the Loan
Agreement. Borrower hereby expressly affirms and agrees that the Security
Agreement dated of even date with the Loan Agreement (the "Security Agreement"),
granting a security interest to Bank in all of Borrower's accounts, inventory
and equipment, shall be deemed to cover and apply to the Loan, as increased by
this Amendment, and that repayment of the Loan, as increased by this Amendment,
shall be secured thereby to the same extent as if the Loan had been in original
principal amount of $30,000,000.
3. Guaranties. Repayment in full of the Loan, as increased by this
----------
Amendment, shall be guaranteed by each of the Guarantors pursuant to the
Guaranties, and payment and performance of such Guaranties shall be secured by
all Collateral granted therefor. Each of the Guarantors shall execute an
acknowledgment, in form satisfactory to the Bank, that their obligations
pursuant to their Guaranty, and any Collateral therefor, shall extend to the
Loan, as increased by this Amendment.
4. Conditions Precedent to Amendment. The Bank's obligation to increase
---------------------------------
the Loan shall be subject to the satisfaction of the following conditions, in
form and substance reasonably acceptable to the Bank and the Bank's counsel:
A. Note. Execution and delivery of the Note, in the principal amount of
----
$30,000,000.
B. Acknowledgment of Guaranties. Execution and delivery of an
----------------------------
acknowledgment from each of the Guarantors to the effect that their Guaranty,
and any Collateral therefor, extends to the Loan, as increased by this
Amendment.
C. Consent of Holder of Convertible Notes. The holder of the Convertible
--------------------------------------
Notes has approved the increase in the Loan and has amended the terms of the
Convertible Notes, in a manner satisfactory to the Bank, so that such
Convertible Notes are subject and subordinate to the Loan as increased by this
Amendment.
2
<PAGE>
D. No Defaults. Borrower has provided documentation acceptable to the
-----------
Bank that no condition or event of default under the Loan Agreement exists or
will exist after giving effect to the increase in the amount of the Loan.
E. Amended Borrowing Base Agreement. Borrower has executed and delivered
--------------------------------
an amended Borrowing Base Agreement, reflecting the increased amount of the
Loan.
F. Commitment Fee. Borrower has paid Bank a commitment fee in the amount
--------------
of $10,000.
G. Miscellaneous. Borrower has provided all other Loan Documents or items
-------------
that are customarily provided in loan transactions of this type and all other
loan documents or items set forth in the commitment letter.
5. Waivers. Provided that Borrower complies with all of the conditions to
-------
the increase in the Loan, as set forth in this Amendment, Bank agrees to waive
(a) compliance with the total liabilities to Tangible Net Worth ratio set forth
in Section 6 (A) (i) of the Loan Agreement, as of the date hereof and until
April 30, 2000, and (b) any violation of the limitation on borrowings set forth
in Section 7 (E) of the Loan Agreement resulting solely from the assumption by
Borrower, as of the date hereof, of liability for certain deferred compensation
arrangements disclosed to and approved by the Bank. Such waivers are, however,
limited to this Amendment and shall not apply or be deemed to apply to any other
or further amendment or modification to the Loan Agreement.
6. Costs, Expenses and Attorneys' Fees. Borrower shall pay to Bank all
-----------------------------------
costs and expenses, including reasonable attorneys' fees incurred by Bank in
connection with (a) negotiation and preparation of this Amendment and each of
the Loan Documents, and (b) Bank's continued administration thereof.
7. Representations and Warranties. Borrower represents and warrants to
------------------------------
the Bank as follows:
(a) Power and Authority; Enforceability. Borrower has the power and
-----------------------------------
authority to execute and deliver this Amendment and to perform the terms
and conditions of the Loan Agreement and the other Loan Documents (as
defined in the Loan Agreement), as amended and modified by this Amendment.
The execution and delivery of this Amendment by the Borrower and the
performance of the Loan Agreement and the other Loan Documents, as amended
and modified by this Amendment, do not and will not violate any law, rule
or regulation, or constitute a breach of the articles of organization,
operating agreement or resolutions of Borrower or any agreement to which
Borrower is a party or by which its assets are bound. The Loan Agreement
and the other Loan Documents, as amended and modified by this Amendment,
constitute legal, valid and binding obligations of Borrower, enforceable in
accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, and similar laws and other law generally affecting the
enforceability of creditors' rights and to general principles of equity.
3
<PAGE>
(b) No Default. Upon the execution and delivery of this Amendment by
----------
the Borrower, the Borrower will not be in default in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in the Loan Agreement or the other Loan Documents, as
amended and modified by this Amendment, or any other agreement or
instrument to which any of them is a party.
(c) Representations. The representations and the information
---------------
furnished by the Borrower to the Bank with regard to this Amendment are and
shall continue to be true and not misleading in all material respects. In
addition, the representations and warranties of the Borrower to the Bank
contained herein, in the Loan Agreement, in the other Loan Documents and in
any other document or instrument executed or delivered by the Borrower in
connection therewith, are and shall continue to be true and not misleading
in all material respects, except as otherwise disclosed in writing to the
Bank and approved by the Bank prior to the date hereof.
8. Covenants. The Borrower covenants and agrees that, unless the Bank
---------
shall otherwise consent in writing, the Borrower shall:
(a) Compliance with Covenants. Continue to comply with all of the
-------------------------
terms, covenants and agreements contained in the Loan Agreement and the
other Loan Documents, as amended and modified by this Amendment.
(b) Further Assurances. Execute and deliver such further instruments,
------------------
and take such further action as the Bank may reasonably request, in each
case to further effect the purposes of the Loan Agreement and the other
Loan Documents, as modified by this Amendment.
9. Ratification. Except as expressly amended hereby, the Loan Agreement
------------
shall be and remain in full force and effect in accordance with its terms. The
Borrower stipulates and agrees that there exists no defense, claim of setoff, or
claim in avoidance of any of its liabilities or obligations under or pursuant to
the Loan Agreement, as so amended.
10. Miscellaneous.
-------------
(a) All references to the "Loan Agreement" in the Loan Agreement shall
hereafter mean and refer to the Loan Agreement as previously amended and as
amended hereby.
(b) All references to the "Loan Agreement" in the other Loan Documents
shall hereafter mean and refer to the Loan Agreement as previously amended and
as amended hereby.
(c) In the event of any conflict between the terms of this Amendment and
the Loan Documents, the terms of this Amendment shall control and govern.
(d) All capitalized terms used herein that are not otherwise defined shall
have the meanings ascribed to such terms in the Loan Agreement.
4
<PAGE>
11. Counterparts. This Amendment may be executed in separate counterparts,
------------
and said counterparts taken together shall be deemed to constitute one and the
same instrument. An executed copy of this Amendment delivered by telecopier
shall have the same effect as an originally executed copy of this Amendment.
12. NO ORAL AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS
-----------------
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed the foregoing
Amendment to Amended and Restated Loan Agreement as of the date first above
written.
BORROWER:
--------
BLUE RHINO CORPORATION
ATTEST:
By:_______________________________
__________________________ Title:____________________________
Secretary
[Corporate Seal]
BANK:
----
BANK OF AMERICA, N.A.
By: ______________________________
Title: ___________________________
5
<PAGE>
Exhibit 10.8
AGREEMENT TO AMEND
THE CONVERTIBLE NOTES
This Agreement to Amend (this "Amendment Agreement") each of the
Convertible Notes (the "Notes") dated September 23, 1999, issued by Blue Rhino
Corporation, a Delaware corporation (the "Company"), to the undersigned buyers
(each a "Buyer" and collectively, the "Buyers") is entered into by and among the
Company and each of the Buyers on this 3rd day of April, 2000.
RECITAL
-------
WHEREAS, The Company and each of the Buyers has agreed that Section 26 of
each of the Notes, which provides a limitation on the maximum amount of
principal to which the Notes will be subordinated, will be amended to increase
such limitation from $25,000,000 to $30,000,000;
WHEREAS, the Company and each of the Buyers have agreed that the Company's
right to redeem the Notes set forth in Section 5 of each of the Notes, which
right ends on March 25, 2001, will be amended so that such right to redeem shall
end on and include August 31, 2000;
WHEREAS, the Company and each of the Buyers have agreed that the Company's
right to force conversion of the Notes set forth in Section 6 of each of the
Notes, which right ends on March 25, 2001, will be amended so that such right to
convert shall end on and include August 31, 2000;
WHEREAS, the Company and each of the Buyers have agreed that the
restrictions on conversions set forth in Section 7 of each of the Notes, which
restrictions end on March 24, 2001, will be amended so that such restrictions on
conversions shall end on and include August 31, 2000;
WHEREAS, the Company and each of the Buyers have agreed that the
restrictions on hedging activities set forth in Section 11 of each of the Notes,
which restrictions end on March 25, 2001, will be amended so that such
restrictions on hedging activities shall end on and include August 31, 2000; and
WHEREAS, the Buyers hold all of the Notes;
NOW, THEREFORE, in consideration of the foregoing:
1. Amendment to the Notes. The Company and each of the Buyers agree that
each of the Notes shall be amended pursuant to the Form of Amendment Number 1 to
the Convertible Note attached hereto as Exhibit A (the "Amendment").
2. Delivery of Amendment. Concurrent with the execution of this Amendment
Agreement the Company is delivering an original executed Amendment to the holder
of each Note.
<PAGE>
3. Miscellaneous.
-------------
3.1 Other Provisions. Except as set forth in the Amendment, all
other provisions of the Notes shall remain in full force and effect.
3.2 Counterparts. This Amendment Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
* * * * *
2
<PAGE>
IN WITNESS WHEREOF, each of the Buyers and the Company have caused this
Amendment 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:______________________________
Name:__________________________
Title:_________________________ By:___________________________
Name: James F. O'Brien, Jr.
Its: Managing Member
LEONARDO, L.P.
By: Angelo, Gordon & Co., L.P.
Its: General Partner
By:_____________________________
Name: Michael L. Gordon
Its: Chief Operating Officer
<PAGE>
Exhibit 10.9
AMENDMENT #1 TO
CONVERTIBLE NOTE
This Amendment #1 (this "Amendment") to the Convertible Note (the "Notes"),
dated September 23, 1999, issued by Blue Rhino Corporation, a Delaware
corporation (the "Company"), to _________ ("Holder") is dated and is effective
March 31, 2000.
1. Subordination Limitation. Section 26(a) of the Note, is hereby amended
such that Section 26(a) of the Note shall be replaced to read in its entirety as
follows:
(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 Amended and Restated Loan
Agreement dated as of December 9, 1999 between the Company and the Bank, as
amended by the Amendment to the Amended and Restated Loan Agreement dated
April 3, 2000 (the "Loan Agreement"), whether now existing or hereafter
incurred, including, without limitation, all principal (up to but not
exceeding Thirty Million Dollars ($30,000,000)), 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 maximum principal debt
limit of $30,000,000 under the Senior Debt.
2. Company's Right to Redeem. The first sentence of Section 5 of the Note
is hereby amended such that the first sentence of Section 5 shall be replaced in
its entirety to read as follows:
At any time or times during the period beginning on the Issuance Date and
ending on and including August 31, 2000, 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.
<PAGE>
3. Company's Right to Convert. The first sentence of Section 6 of the
Note is hereby amended such that the first sentence of Section 6 shall be
replaced in its entirety to read as follows:
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 and including August 31, 2000, 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.
4. Restrictions on Conversions. The second sentence of Section 7 of the
Note is hereby amended such that the second sentence of Section 7 shall be
replaced in its entirety to read as follows:
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 August 31, 2000.
5. Restriction on Hedging Activities. The first sentence of Section 11 of
the Note is hereby amended such that the first sentence of Section 11 shall be
replaced in its entirety to read as follows:
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 and including August 31, 2000, 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 amended) of the Common Stock or similar hedge of
the Common Stock (collectively, "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
2
<PAGE>
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.
6. Other Provisions. Except as set forth herein, all other provisions of
the Note shall remain in full force and effect.
* * * * *
3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Amendment #1 to the
Convertible Note to be signed by ___________________, its
___________________________, as of the 31st day of March, 2000.
BLUE RHINO CORPORATION
By:________________________
Name:______________________
Title:_____________________
