EXHIBIT 10.7
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of
December 20, 2002 among Blue Rhino Corporation, a Delaware corporation (the
"COMPANY"), and the purchasers identified on the signature pages hereto (each, a
"PURCHASER" and collectively, the "PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "SECURITIES ACT"), the Company desires to issue and sell to the Purchasers,
and the Purchasers, severally and not jointly, desire to purchase from the
Company, securities of the Company as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated:
"ADDITIONAL INVESTMENT RIGHTS" means, collectively, the
Additional Investment Rights issued and sold under this Agreement, in the form
of Exhibit A.
"AFFILIATE" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed under Rule
144 under the Securities Act. With respect to a Purchaser, any investment fund
or managed account that is managed on a discretionary basis by the same
investment manager as such Purchaser will be deemed to be an Affiliate of such
Purchaser.
"BENEFICIAL OWNERSHIP" means beneficial ownership as
determined pursuant to Rule 13d-3 of the Exchange Act.
"BUSINESS DAY" means any day other than Saturday, Sunday or
other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
"CHANGE OF CONTROL" means the occurrence of any of the
following in one or a series of related transactions: (i) an acquisition after
the date hereof by an individual or legal entity or "group" (as described in
Rule 13d-5(b)(1) under the Exchange Act) of more than one-half of the voting
rights or equity interests in the Company; (ii) a replacement of more than
one-half of the members of the Company's board of directors that is not approved
by a majority of those individuals who are members of the board of directors on
the date hereof (or other directors previously approved by a majority of such
individuals); (iii) a merger or consolidation of the Company or a sale of more
than one-half of the assets of the Company in one or a series of related
transactions, unless following such transaction or series of transactions, the
holders of the Company's securities prior to the first such transaction continue
to hold at least two-thirds of the voting rights and equity interests of the
surviving entity or acquirer; (iv) a recapitalization, reorganization or other
transaction involving the Company or any Subsidiary that constitutes or results
in a transfer of more than one-half of the voting rights or equity interests in
the Company to Persons other than holders of the Company's voting securities
prior to such transaction; (v) consummation of a "Rule 13e-3 transaction" as
defined in Rule 13e-3 under the Exchange Act with respect to the Company, or
(vi) the execution by the Company or its controlling shareholders of an
agreement providing for or reasonably likely to result in any of the foregoing
events.
"CLOSING" means the closing of the purchase and sale of the
Shares and the Additional Investment Rights pursuant to Section 2.1.
"CLOSING DATE" means the earlier of (i) the date on which the
Purchasers deliver the purchase price set forth in Section 2.2(b) to the
Company, and (ii) the date on which the Purchasers deliver the purchase price
set forth in Section 2.2(b) to the Company Counsel in accordance with Section
2.2(c) except that if, in accordance with Section 2.2(c), the purchase price set
forth in Section 2.2(b) is not released to the Company and is returned to the
Purchasers, no Closing Date shall have occurred.
"CLOSING PRICE" means, for any date, the price determined by
the first of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on an Eligible Market or any other national securities
exchange, the closing price per share of the Common Stock for such date (or the
nearest preceding date) on the primary Eligible Market or exchange on which the
Common Stock is then listed or quoted; (b) if prices for the Common Stock are
then quoted on the OTC Bulletin Board, the closing bid price per share of the
Common Stock for such date (or the nearest preceding date) so quoted; (c) if
prices for the Common Stock are then reported in the "Pink Sheets" published by
the National Quotation Bureau Incorporated (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent closing bid
price per share of the Common Stock so reported; or (d) in all other cases, the
fair market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by Purchasers holding a majority of the
Securities.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par
value $0.001 per share.
"COMMON STOCK EQUIVALENTS" means, collectively, Options and
Convertible Securities.
"COMPANY COUNSEL" means Xxxxxx Xxxxxxx Xxxxxxxxx and Xxxx
PLLC, counsel to the Company.
"CONVERTIBLE SECURITIES" means any stock or securities (other
than Options) convertible into or exercisable or exchangeable for Common Stock.
"EFFECTIVE DATE" means the date that the Registration
Statement is first declared effective by the Commission.
"ELIGIBLE MARKET" means any of the New York Stock Exchange,
the American Stock Exchange, the NASDAQ National Market or the NASDAQ SmallCap
Market.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FILING DATE" means January 19, 2003.
"LIEN" means any lien, charge, claim, security interest,
encumbrance, right of first refusal or other restriction.
"LOSSES" means any and all losses, claims, damages,
liabilities, settlement costs and expenses, including, without limitation, costs
of preparation and reasonable attorneys' fees.
"OPTIONS" means any rights, warrants or options to subscribe
for or purchase Common Stock or Convertible Securities.
"PERSON" means any individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or any court or other federal, state, local or other governmental
authority or other entity of any kind.
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"PER UNIT PURCHASE PRICE" means $15.79.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement or any
amendment to the Registration Statement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement, and all material incorporated by reference or deemed to
be incorporated by reference in such Prospectus.
"PURCHASER COUNSEL" means Proskauer Rose LLP, counsel to the
Purchasers, or, in lieu thereof, any other single counsel selected by the
Purchasers hereunder.
"REGISTRABLE SECURITIES" means any Common Stock (including
Underlying Shares) issued or issuable pursuant to the Transaction Documents,
together with any securities issued or issuable upon any stock split, dividend
or other distribution, recapitalization or similar event with respect to the
foregoing.
"REGISTRATION STATEMENT" means the registration statement
required to be filed under Article VI, including the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
"REQUIRED EFFECTIVENESS DATE" means March 20, 2003.
"RULE 144," "RULE 415," and "RULE 424" mean Rule 144, Rule 415
and Rule 424, respectively, promulgated by the Commission pursuant to the
Securities Act, as such Rules may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"SECURITIES" means the Shares, the Additional Investment
Rights and the Underlying Shares.
"SHARES" means an aggregate of 1,000,000 shares of Common
Stock, which are being issued and sold to the Purchasers at the Closing.
"SUBSIDIARY" means, except as such term is used in Section
3.1, any subsidiary, as defined in Rule 1-02(x) of Regulation S-X promulgated by
the Commission, of the Company, and with respect to Section 3.1, any significant
subsidiary as defined in Rule 1-02(w) of Regulation S-X promulgated by the
Commission, of the Company.
"TRADING DAY" means (a) any day on which the Common Stock is
listed or quoted and traded on its primary Trading Market, (b) if the Common
Stock is not then listed or quoted and traded on any Eligible Market, then a day
on which trading occurs on the NASDAQ National Market (or any successor
thereto), or (c) if trading ceases to occur on the NASDAQ National Market (or
any successor thereto), any Business Day.
"TRADING MARKET" means the Nasdaq National Market or any other
Eligible Market, or any national securities exchange, on which the Common Stock
is then listed or quoted.
"TRANSACTION DOCUMENTS" means this Agreement, the Additional
Investment Rights and the Transfer Agent Instructions.
"TRANSFER AGENT INSTRUCTIONS" means the Irrevocable Transfer
Agent Instructions, in the form of Exhibit D, executed by the Company and
delivered to and acknowledged in writing by the Company's transfer agent.
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"UNDERLYING SHARES" means the shares of Common Stock issuable
upon exercise of the Additional Investment Rights.
"UNIT" means one Share and an Additional Investment Right to
acquire 0.33 of a share of Common Stock.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
such number of Units indicated below such Purchaser's name on the signature page
of this Agreement at the Per Unit Purchase Price. The Closing shall take place
at the offices of Purchaser Counsel immediately following the execution hereof,
or at such other location or time as the parties may agree.
2.2 Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause to be
delivered to each Purchaser the following:
(i) one or more stock certificates, free and clear of
all restrictive and other legends (except as expressly provided in
Section 4.1(b) hereof), evidencing such number of Shares equal to the
number of Units indicated below such Purchaser's name on the signature
page of this Agreement, registered in the name of such Purchaser;
(ii) an Additional Investment Right, registered in
the name of such Purchaser, pursuant to which such Purchaser shall have
the right to acquire such number of Underlying Shares indicated below
such Purchaser's name on the signature page of this Agreement, on the
terms set forth therein;
(iii) a legal opinion of Company Counsel, in the form
of Exhibit B, executed by such counsel; and
(iv) duly executed Transfer Agent Instructions
acknowledged by the Company's transfer agent.
(b) At the Closing, each Purchaser shall deliver or cause to
be delivered to the Company an amount equal to the Per Unit Purchase Price
multiplied by the number of Units indicated below such Purchaser's name on the
signature page of this Agreement, in United States dollars and in immediately
available funds, by wire transfer to an account designated in writing to such
Purchaser by the Company for such purpose.
(c) Notwithstanding anything to the contrary in this
Section 2.2, in the event that the Company cannot deliver all of the items set
forth in Section 2.2(a) above, each Purchaser shall instead deliver the purchase
price set forth in Section 2.2(b) to the Company Counsel, to be held by the
Company Counsel in escrow on behalf of the Purchasers. Upon confirmation from
the Purchaser Counsel of receipt by the Purchasers of all the items set forth in
Section 2.2(a) above (which may be in writing or via email), the Company Counsel
shall release the escrow funds to the Company. In the event all of the items set
forth in Section 2.2(a) are not delivered to the Purchasers within one Trading
Day after the Closing Date, the Purchasers shall have the right to demand that
the Company Counsel release the escrow funds to the Purchasers. The Company
Counsel hereby acknowledges and agrees to act as escrow agent in accordance with
this Section 2.2(c). The Company Counsel (i) shall be entitled to rely on any
written or email communication received from the Purchaser Counsel without any
requirement to ascertain that the person(s) who have executed or conveyed such
communication are authorized to do so or are the persons named therein or
otherwise to pass upon any requirements of such communication that may be
essential for
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its validity and (ii) shall not be liable for any acts or omissions of any kind
any unless caused by its own gross negligence or willful misconduct.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to each of the Purchasers as of the date hereof as
follows:
(a) Subsidiaries. The Company has no direct or indirect
Subsidiaries other than those listed in Schedule 3.1(a). Except as disclosed in
Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital
stock or comparable equity interests of each Subsidiary free and clear of any
Lien and all the issued and outstanding shares of capital stock or comparable
equity interest of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights.
(b) Organization and Qualification. Each of the Company and
the Subsidiaries is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the Subsidiaries is
duly qualified to do business and is in good standing as a foreign corporation
or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
would not, individually or in the aggregate, (i) adversely affect the legality,
validity or enforceability of any Transaction Document, (ii) have or result in a
material adverse effect on the results of operations, assets, business or
financial condition of the Company and the Subsidiaries, taken as a whole on a
consolidated basis, or (iii) adversely impair the Company's ability to perform
fully on a timely basis its obligations under any of the Transaction Documents
(any of (i), (ii) or (iii), a "Material Adverse Effect").
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further consent or action is
required by the Company, its Board of Directors or its stockholders. Each of the
Transaction Documents has been (or upon delivery will be) duly executed by the
Company and is, or when delivered in accordance with the terms hereof, will
constitute, the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, to general principles of equity and to limitations on the rights to
indemnity and contribution that exist by virtue of public policy.
(d) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby do not and will not (i)
conflict with or violate any provision of the Company's or any Subsidiary's
certificate or articles of incorporation, bylaws or other organizational or
charter documents, (ii) conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, except to the extent that such conflict, default or termination right
could not reasonably be expected to have a Material Adverse Effect or (iii)
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company
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or a Subsidiary is subject (including federal and state securities laws and
regulations and the rules and regulations of any self-regulatory organization to
which the Company or its securities are subject) or by which any property or
asset of the Company or a Subsidiary is bound or affected.
(e) Issuance of the Securities. The Securities (including the
Underlying Shares) are duly authorized and, when issued and paid for in
accordance with the Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens (except for
restrictions under federal and state securities laws) and shall not be subject
to preemptive rights or similar rights of stockholders that have not been
waived. The Company has reserved from its duly authorized capital stock the
maximum number of shares of Common Stock issuable upon exercise of the
Additional Investment Rights.
(f) Capitalization. The number of shares and type of all
authorized, issued and outstanding capital stock, options and other securities
of the Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) is set forth in
Schedule 3.1(f). All outstanding shares of capital stock are duly authorized,
validly issued, fully paid and nonassessable and have been issued in compliance
with all applicable securities laws. Except as disclosed in Schedule 3.1(f),
there are no outstanding options, warrants, script rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common
Stock, or securities or rights convertible or exchangeable into shares of Common
Stock. The Company has outstanding warrants to purchase an aggregate of
2,223,199 shares of Common Stock, which were issued in 3 different transactions,
that contain certain anti-dilution or price adjustment provisions, and the
exercise price or strike price of all such warrants as of the date hereof is
$3.8685. The issue and sale of the Securities (including the Underlying Shares)
will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities. To the knowledge of the Company,
except as specifically disclosed in Schedule 3.1(f) or as reflected in the SEC
Reports, no Person or group of related Persons beneficially owns (as determined
pursuant to Rule 13d-3 under the Exchange Act), or has the right to acquire, by
agreement with or by obligation binding upon the Company, beneficial ownership
of in excess of 5% of the outstanding Common Stock, ignoring for such purposes
any limitation on the number of shares of Common Stock that may be owned at any
single time.
(g) SEC Reports; Financial Statements. The Company has filed
all reports required to be filed by it under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date
hereof (or such shorter period as the Company was required by law to file such
material) (the foregoing materials (together with any materials filed by the
Company under the Exchange Act, whether or not required) being collectively
referred to herein as the "SEC Reports" and, together with this Agreement and
the Schedules to this Agreement, the "Disclosure Materials") on a timely basis
or has received a valid extension of such time of filing and has filed any such
SEC Reports prior to the expiration of any such extension. The Company has
delivered to each Purchaser true, correct and complete copies of all SEC Reports
filed after the filing on December 16, 2002 of the Company's Form 10-Q for the
quarter ending October 31, 2002. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise specified in
such financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments and the absence of
footnotes. All material agreements to which the Company or any Subsidiary is a
party or to which the property or assets of the Company or any Subsidiary are
subject are included as part of or specifically identified in the SEC Reports,
to the extent required under the Exchange Act.
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(h) Material Changes. Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports or in Schedule 3.1(h), (i) there has been no event,
occurrence or development that, individually or in the aggregate, has had or
that will result in a Material Adverse Effect, (ii) the Company has not incurred
any liabilities (contingent or otherwise) other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock, and (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except pursuant to existing Company
stock-based plans.
(i) Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries that, if adversely determined, would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(j) Compliance. Neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as would not, individually or in the aggregate, have or result in a
Material Adverse Effect.
(k) Title to Assets. Except as disclosed on Schedule 3.1(k),
the Company and the Subsidiaries have good and marketable title in fee simple to
all real property owned by them, respectively, that is material to the
respective businesses of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them, respectively, that is
material to the respective businesses of the Company and the Subsidiaries, in
each case free and clear of all Liens other than Liens that do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries. Any real or personal property and facilities held under lease by
the Company and the Subsidiaries are held under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such properties by the Company and
the Subsidiaries and with which the Company and the Subsidiaries are in
compliance.
(l) Certain Fees. Except for the fees described in Schedule
3.1(l), all of which are payable to registered broker-dealers, no brokerage or
finder's fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement, and the Company has not taken any action that would cause any
Purchaser to be liable for any such fees or commissions.
(m) Private Placement. Neither the Company nor any Person
acting on the Company's behalf has sold or offered to sell or solicited any
offer to buy the Securities by means of any form of general solicitation or
advertising. Neither the Company nor any of its Affiliates nor any person acting
on the Company's behalf has, directly or indirectly, at any time within the past
six months, made any offer or sale of any security or solicitation of any offer
to buy any security under circumstances that would (i) eliminate the
availability of the exemption from registration under Regulation D under the
Securities Act in connection with the offer and sale of the Securities as
contemplated hereby or (ii) cause the offering of the Securities pursuant to the
Transaction Documents to be integrated with prior offerings by the Company for
purposes of any applicable law, regulation or stockholder approval provisions,
including, without limitation, under the rules and regulations of any Trading
Market. The
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Company is not, and is not an Affiliate of, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended. The Company is not a
United States real property holding corporation within the meaning of the
Foreign Investment in Real Property Tax Act of 1980.
(n) Form S-3 Eligibility. The Company is eligible to register
its Common Stock for resale by the Purchasers using Form S-3 promulgated under
the Securities Act.
(o) Listing and Maintenance Requirements. The Company has not,
in the two years preceding the date hereof, received notice (written or oral)
from any Trading Market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is, and has no
reason to believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements.
(p) Registration Rights. Except as described in Schedule
3.1(p), the Company has not granted or agreed to grant to any Person any rights
(including "piggy-back" registration rights) to have any securities of the
Company registered with the Commission or any other governmental authority that
have not been satisfied.
(q) Application of Takeover Protections. There is no control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Company's charter documents or the laws of its state of incorporation that is or
could become applicable to any of the Purchasers as a result of the Purchasers
and the Company fulfilling their obligations or exercising their rights under
the Transaction Documents, including, without limitation, as a result of the
Company's issuance of the Securities and the Purchasers' ownership of the
Securities.
(r) Disclosure. The Company confirms that neither it nor any
other Person acting on its behalf has provided any of the Purchasers or their
agents or counsel with any information that constitutes material nonpublic
information. The Company understands and confirms that each of the Purchasers
will rely on the foregoing representations in effecting transactions in
securities of the Company. No event or circumstance has occurred or information
exists with respect to the Company or any of its Subsidiaries or its or their
business, properties, prospects, operations or financial conditions, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed (assuming for this purpose that the Company's reports filed under the
Exchange Act are incorporated into each effective registration statement filed
by the Company under the Securities Act), except, until such time as the press
release is issued as contemplated by Section 4.6, the execution of this
Agreement. The Company acknowledges and agrees that no Purchaser makes or has
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.2.
(s) Acknowledgment Regarding Purchasers' Purchase of
Securities. The Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by any Purchaser or any of
their respective representatives or agents in connection with this Agreement and
the transactions contemplated hereby is merely incidental to the Purchasers'
purchase of the Securities. The Company further represents to each Purchaser
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
(t) Patents and Trademarks. The Company and the Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
other similar rights that are required for use in connection with their
respective businesses as described in the SEC Reports and that the failure to so
have would have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. To the
8
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property Rights.
(u) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
without a significant increase in cost.
(v) Regulatory Permits. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except where the
failure to possess such permits would not, individually or in the aggregate,
have or result in a Material Adverse Effect ("Material Permits"), and neither
the Company nor any Subsidiary has received any notice of proceedings relating
to the revocation or modification of any Material Permit.
(w) Transactions With Affiliates and Employees. Except as set
forth in SEC Reports filed at least two days prior to the date hereof, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
(x) Solvency. Based on the financial condition of the Company
as of the Closing Date, (i) the Company's fair saleable value of its assets
exceeds the amount that will be required to be paid on or in respect of the
Company's existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company's assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt when such amounts are
required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt).
(y) Internal Accounting Controls. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, as to itself only and for no other Purchaser, represents and warrants to
the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The purchase by such Purchaser of the
Shares and the Additional Investment Rights hereunder has been duly authorized
by all necessary action on the part of such
9
Purchaser. This Agreement has been duly executed and delivered by such Purchaser
and constitutes the valid and binding obligation of such Purchaser, enforceable
against it in accordance with its terms.
(b) Investment Intent. Such Purchaser is acquiring the
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof other than, subject to the provisions of this Agreement, pursuant to an
effective registration statement under the Securities Act or an available
exemption from such registration and in compliance with all applicable federal
and state securities laws. Such Purchaser understands and agrees that: (i) the
offer and sale of the Securities have not been registered under the Securities
Act by reason of the exemption from the registration provisions of the
Securities Act provided by Section 4(2) thereof and Rule 506 promulgated
thereunder, the availability of which depends upon, among other things, the bona
fide nature of the investment intent and the accuracy of such Purchaser's
representations, warranties and covenants as expressed herein; (ii) the Company
is relying on such Purchaser's representations, warranties and covenants in
offering and selling the Securities hereunder; and (iii) the Securities may not
be transferred by such Purchaser except pursuant to an effective registration
statement under the Securities Act or an available exemption from such
registration and in compliance with all applicable federal and state securities
laws. Subject to compliance with the foregoing, nothing contained herein shall
be deemed a representation or warranty by such Purchaser to hold Securities for
any period of time. Such Purchaser does not have any agreement or understanding,
directly or indirectly, with any Person to distribute or otherwise transfer any
of the Securities.
(c) Purchaser Status. At the time such Purchaser was offered
the Shares and the Additional Investment Rights, it was, and at the date hereof
it is, an "accredited investor" as defined in Rule 501(a) under the Securities
Act because it is an organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, partnership
or limited liability company, not formed for the specific purpose of acquiring
any of the Securities, with total assets in excess of $5,000,000.
(d) Experience of such Purchaser. Such Purchaser has such
knowledge, sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of such
investment. The Purchaser understands that its investment in the Securities
involves a high degree of risk.
(e) Access to Information. Such Purchaser acknowledges that it
has reviewed the Disclosure Materials and has been afforded: (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Purchaser or its representatives or counsel shall modify,
amend or affect such Purchaser's right to rely on the truth, accuracy and
completeness of the Disclosure Materials and the Company's representations and
warranties contained in the Transaction Documents.
(f) Residency. Such Purchaser is domiciled in the jurisdiction
set forth immediately below such Purchaser's name on the signature page hereof.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
10
(a) In connection with any transfer of Securities other than
pursuant to an effective registration statement or to the Company or pursuant to
Rule 144(k), except as otherwise expressly set forth herein, the transferor,
shall provide to the Company an opinion of counsel selected by the transferor,
the form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration under
the Securities Act or applicable state securities laws. Notwithstanding the
foregoing, the Company hereby consents to and agrees to register on the books of
the Company and with its transfer agent, without any such legal opinion, any
transfer of Securities by a Purchaser to an Affiliate of such Purchaser,
provided that the transferee certifies to the Company that it is an "accredited
investor" as defined in Rule 501(a) under the Securities Act and delivers to the
Company a written statement in which it makes such representations and
certification as set forth in Sections 3.2(b), (c), (d), and (e).
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 4.1(b), of the following legend on any certificate
evidencing Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
ALL APPLICABLE STATE SECURITIES LAWS. NOTWITHSTANDING THE FOREGOING,
THESE SECURITIES [AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH
SECURITIES.
Certificates evidencing Securities shall not be required to contain such legend
or any other legend (i) while a Registration Statement covering the resale of
such Securities is effective under the Securities Act, (ii) if such Securities
are eligible for sale under Rule 144, including, but not limited to, Rule
144(k), or (iii) if such legend is not required under the Securities Act. The
Company shall cause its counsel to issue the legal opinion included in the
Transfer Agent Instructions to the Company's transfer agent on (or within one
Trading Day after) the Effective Date. Following the Effective Date or at such
earlier time as a legend is no longer required for certain Securities, the
Company will no later than three Trading Days following the delivery by a
Purchaser to the Company or the Company's transfer agent of a legended
certificate representing such Securities (and all other documents reasonably
required by the Company or its transfer agent in connection therewith), deliver
or cause to be delivered to such Purchaser a certificate representing such
Securities that is free from all restrictive and other legends. The Company may
not make any notation on its records or give instructions to any transfer agent
of the Company that enlarge the restrictions on transfer set forth in this
Section.
(c) The Company acknowledges and agrees that a Purchaser may
from time to time pledge or grant a security interest in some or all of the
Securities in connection with a bona fide margin agreement or other loan or
financing arrangement secured by the Securities and, if required under the terms
of such agreement, loan or arrangement, such Purchaser may transfer pledged or
secured Securities to the pledgees or secured parties (subject to any
restrictions on transfer applicable to such pledgees or secured parties pursuant
to applicable law). Such a pledge or transfer would not be subject to approval
of the Company and no legal opinion of the pledgee, secured party or pledgor
shall be required in connection therewith. Further, no notice shall be required
of such pledge. At the appropriate Purchaser's expense, the Company will execute
and deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of the
Securities, including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of selling
stockholders in the Prospectus.
11
4.2 Furnishing of Information. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of any Purchaser, the Company shall deliver to
such Purchaser a written certification of a duly authorized officer as to
whether it has complied with the preceding sentence. As long as any Purchaser
owns Securities, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to the Purchasers and make publicly available
in accordance with paragraph (c) of Rule 144 such information as is required for
the Purchasers to sell the Securities under Rule 144. The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request to satisfy the provisions of Rule 144 applicable to the
issuer of securities relating to the sale of securities pursuant to Rule 144.
4.3 Integration. The Company shall not, and shall use its best efforts
to ensure that no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that it knows or should know would
be integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the Securities
to the Purchasers or that it knows or should know would be integrated with the
offer or sale of the Securities for purposes of the rules and regulations of any
Trading Market.
4.4 Reservation of Securities. The Company shall maintain a reserve
from its duly authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. In the event that at any
time the then authorized shares of Common Stock are insufficient for the Company
to satisfy its obligations in full under the Transaction Documents, the Company
shall promptly take such actions as may be required to increase the number of
authorized shares.
4.5 Subsequent Placements.
(a) From the date hereof until the Effective Date, the Company
will not, directly or indirectly, offer, sell, grant any option to purchase, or
otherwise dispose of (or announce any offer, sale, grant or any option to
purchase or other disposition of) any of its or the Subsidiaries' equity or
equity equivalent securities, including without limitation any debt, preferred
stock or other instrument or security that is, at any time during its life and
under any circumstances, convertible into or exchangeable or exercisable for
Common Stock or Common Stock Equivalents.
(b) The restrictions contained in paragraph (a) of this
Section 4.5 shall not apply to (A) any issuance of Common Stock or grant of
Options to employees, officers, directors of or consultants or advisors to the
Company, in each case, pursuant to a stock-based plan duly approved by the
Company's board of directors; (B) the issuance of securities in connection with
a joint venture or development agreement or strategic partnership or similar
agreement approved by the Company's board of directors, a primary purpose of
which is not to raise equity capital; (C) upon exercise, conversion or exchange
of any Common Stock Equivalents described in Schedule 3.1(f) (provided that such
exercise or conversion occurs in accordance with the terms thereof, without
amendment or modification); or (D) in connection with a transaction involving a
sale of a Subsidiary or a line of business not resulting in a Change of Control.
4.6 Securities Laws Disclosure; Publicity. The Company shall, on the
Closing Date, issue a press release reasonably acceptable to the Purchasers
disclosing material terms of the transactions contemplated hereby. On or before
the first Trading Day following the Closing Date, the Company shall file a
Current Report on Form 8-K with the Commission (the "8-K Filing") describing the
terms of the transactions contemplated by the Transaction Documents and, to the
extent required by the Exchange Act, including as exhibits to such Current
Report on Form 8-K this Agreement and the form of Additional Investment Rights,
in the form required by the Exchange Act. Thereafter, the Company shall use its
best efforts to timely file any filings and notices required by the Commission
or applicable law that relate principally to the Sale of Securities provided for
herein and provide copies thereof to the Purchasers promptly after filing. The
Company shall promptly provide the Purchasers with a copy of any filing or
dissemination of any disclosure required by this paragraph for their review. The
Company and the Purchasers shall
12
consult with each other in issuing the 8-K Filing or any press releases that
relate principally to the Sale of Securities provided for herein, and neither
party shall issue any such press release or 8-K Filing without the prior consent
of the other, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or filing. Notwithstanding the foregoing, the Company
shall not publicly disclose the name of any Purchaser, or include the name of
any Purchaser in any filing with the Commission or any regulatory agency or
Trading Market, without the prior written consent of such Purchaser, except to
the extent such disclosure (but not any disclosure as to the controlling Persons
thereof) is required by law or Trading Market regulations, in which case the
Company shall provide the Purchasers with prior notice of such disclosure. The
Company shall not, and shall cause each of its Subsidiaries and its and each of
their respective officers, directors, employees and agents not to, provide any
Purchaser with any material nonpublic information regarding the Company or any
of its Subsidiaries from and after the issuance of the press release
contemplated in the first sentence of this Section 4.6 without the express
written consent of such Purchaser, and the Purchaser shall not request any such
material nonpublic information unless it expressly acknowledges in advance in
writing that it is requesting material nonpublic information. In the event of a
breach of the foregoing covenant by the Company, any of its Subsidiaries, or any
of its or their respective officers, directors, employees and agents, in
addition to any other remedy provided herein or in the Transaction Documents, a
Purchaser shall have the right to make a public disclosure, in the form of a
press release, public advertisement or otherwise, of such material nonpublic
information without the prior approval by the Company, its Subsidiaries, or any
of its or their respective officers, directors, employees or agents, if, and
only if, the Company (i) has acknowledged in writing that such information
constitutes material nonpublic information and (ii) does not publicly disclose
such information within two Trading Days following receipt of notification of
the breach of the foregoing covenant. No Purchaser shall have any liability to
the Company, its Subsidiaries, or any of its or their respective officers,
directors, employees, shareholders or agents for any such disclosure made in
compliance with the preceding sentence.
4.7 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder to promptly repay (in full, to the extent the
proceeds are sufficient) amounts outstanding under the Senior Subordinated
Debenture dated June 15, 2001 payable to Allied Capital Corporation and the
remainder for working capital purposes and not to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation.
4.8 Reimbursement. If any Purchaser or any of its Affiliates or any
officer, director, partner, controlling person, employee or agent of a Purchaser
or any of its Affiliates (a "Related Person") becomes involved in any capacity
in any Proceeding brought by or against any Person in connection with or as a
result of the transactions contemplated by the Transaction Documents (other than
relating to the Registration Statement, Prospectus or other matter covered by
the indemnity in Article VI hereof), the Company will indemnify and hold
harmless such Purchaser or Related Person for its reasonable legal and other
expenses (including the reasonable costs of any investigation, preparation and
travel) and for any Losses incurred in connection therewith, if and as such
expenses or Losses are actually incurred, excluding only Losses that arise out
of or result directly from such Purchaser's or Related Person's gross negligence
or willful misconduct. In addition, the Company shall indemnify and hold
harmless each Purchaser and Related Person from and against any and all Losses,
if and as actually incurred, arising out of or relating to any breach by the
Company of any of the representations, warranties or covenants made by the
Company in this Agreement or any other Transaction Document. The conduct of any
Proceedings for which indemnification is available under this paragraph shall be
governed by Section 6.4(c) below. The indemnification obligations of the Company
under this paragraph shall be in addition to any liability that the Company may
otherwise have and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Purchasers and
any such Related Persons. The Company also agrees that neither the Purchasers
nor any Related Persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the transactions contemplated by the Transaction Documents,
except to the extent that any Losses incurred by the Company arise out of or
result directly from the gross negligence or willful misconduct of the
applicable Purchaser or Related Person in connection with such transactions or
arise out of or relate to any breach by a Purchaser of any of the
representations, warranties or covenants made by a Purchaser in this Agreement
or any other Transaction Document. If the Company breaches its obligations under
any Transaction Document, then, in addition to any other liabilities the Company
may have under any Transaction Document or applicable law, the Company shall pay
or reimburse the Purchasers on demand for all costs of collection and
enforcement (including reasonable attorneys fees and expenses) actually incurred
and
13
reasonably documented. Without limiting the generality of the foregoing, the
Company specifically agrees to reimburse the Purchasers on demand for all
actually incurred and reasonably documented costs of enforcing the
indemnification obligations in this paragraph.
ARTICLE V
CONDITIONS
The provisions of this Article V shall apply only if the Closing Date
is after the date hereof.
5.1 Conditions Precedent to the Obligations of the Purchasers. The
obligation of each Purchaser to acquire Securities at the Closing is subject to
the satisfaction or waiver by such Purchaser, at or before the Closing, of each
of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
on and as of such date; and
(b) Performance. The Company and each other Purchaser shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by it at or prior to the Closing.
5.2 Conditions Precedent to the Obligations of the Company. The
obligation of the Company to sell Securities at the Closing is subject to the
satisfaction or waiver by the Company, at or before the Closing, of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Purchasers contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made on and as of such date; and
(b) Performance. The Purchasers shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by the Purchasers at or prior to the Closing.
ARTICLE VI
REGISTRATION RIGHTS
6.1 Shelf Registration
(a) As promptly as reasonably practicable, and in any event on
or prior to the Filing Date, the Company shall prepare and file with the
Commission a "Shelf" Registration Statement covering the resale of all
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration Statement shall be on Form S-3 (except if the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3, in which case such registration shall be on another appropriate
form in accordance herewith as to which Purchasers holding a majority of the
Registrable Securities may consent) and shall contain (except if otherwise
directed by Purchasers holding a majority of the Registrable Securities) the
"Plan of Distribution" attached hereto as Exhibit C.
(b) The Company shall use its best efforts to cause the
Registration Statement to be declared effective by the Commission as promptly as
possible after the filing thereof, but in any event prior to the Required
Effectiveness Date, and shall use its best efforts to keep the Registration
Statement continuously effective under the Securities Act until the date each
Purchaser named herein on the Closing Date can sell all of its Securities
without
14
restriction pursuant to Rule 144(k) or such earlier date when all Registrable
Securities covered by such Registration Statement have been sold publicly (the
"Effectiveness Period").
(c) The Company shall notify each Purchaser promptly (and in
any event within one Business Day) after receiving notification from the
Commission that the Registration Statement has been declared effective.
(d) Upon the occurrence of any Event (as defined below) and on
every monthly anniversary thereof until the applicable Event is cured, as
partial relief for the damages suffered therefrom by the Purchasers (which
remedy shall not be exclusive of any other remedies available under this
Agreement, at law or in equity), the Company shall pay to each Purchaser an
amount in cash, as liquidated damages and not as a penalty, equal to 1.0% of the
aggregate purchase price paid by such Purchaser hereunder. The payments to which
a Purchaser shall be entitled pursuant to this Section 6.1(d) are referred to
herein as "Event Payments." Any Event Payments payable pursuant to the terms
hereof shall apply on a pro-rata basis for any portion of a month prior to the
cure of an Event. In the event the Company fails to make Event Payments in a
timely manner, such Event Payments shall bear interest at the rate of 1.5% per
month (prorated for partial months) until paid in full.
(e) For such purposes, each of the following shall constitute
an "Event":
(i) the Registration Statement is not filed on or
prior to the Filing Date or is not declared effective on or prior to
the Required Effectiveness Date;
(ii) after the Effective Date and during the
Effectiveness Period, a Purchaser is not permitted to sell Registrable
Securities under the Registration Statement (or a subsequent
registration statement filed in replacement thereof) for any reason for
more than seven Trading Days (whether or not consecutive);
(iii) the Common Stock is not listed or quoted on
any, or is suspended from trading on all, Eligible Markets for a period
of four Trading Days (which need not be consecutive Trading Days);
(iv) the Company fails to have available a sufficient
number of authorized but unissued and otherwise unreserved shares of
Common Stock available to issue Underlying Shares upon any exercise of
the Additional Investment Rights.
(f) The Company shall not, prior to the Effective Date of the
Registration Statement, prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than one or more
registration statements on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued in connection with any acquisition of any entity or business or equity
securities issuable in connection with a stock option or other employee benefit
plan.
6.2 Registration Procedures. In connection with the Company's
registration obligations hereunder, the Company shall:
(a) Not less than three Trading Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i) furnish to the
Purchasers and Purchaser Counsel copies of all such documents proposed to be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Purchasers and
Purchaser Counsel, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
shall not file a Registration Statement or any such Prospectus or any amendments
or supplements thereto to which Purchasers holding a majority of the Registrable
Securities shall reasonably object; provided that, notwithstanding anything
herein to the contrary, pending resolution of the
15
Purchasers' objection and the subsequent filing of such Registration Statement
or Prospectus (or amendment or supplement thereto) within a reasonable time
following such resolution, no Event shall be deemed to occur.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to each Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement and, as so
supplemented or amended, to be filed pursuant to Rule 424; (iii) use its best
efforts to respond as promptly as reasonably practicable, and within ten days,
to any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and, as promptly as reasonably practicable
after receipt of written request from any Purchaser, provide such Purchaser true
and complete copies of all correspondence from and to the Commission relating to
the Registration Statement; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Purchasers thereof set forth in the Registration Statement,
as may be amended, or in such Prospectus, as may be supplemented.
(c) Notify the Purchasers of Registrable Securities to be sold
under the Registration Statement and Purchaser Counsel as promptly as reasonably
practicable, and (if requested by any such Person) confirm such notice in
writing no later than one Trading Day thereafter, of any of the following
events: (i) any Registration Statement or any post-effective amendment is
declared effective; (ii) the Commission issues any stop order suspending the
effectiveness of any Registration Statement or initiates any Proceedings for
that purpose; (iii) the Company receives notice of any suspension of the
qualification or exemption from qualification of any Registrable Securities for
sale in any jurisdiction, or the initiation or threat of any Proceeding for such
purpose; or (iv) the financial statements included in any Registration Statement
become ineligible for inclusion therein or the Company has knowledge that any
statement made in any Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference is untrue in any
material respect or that a revision to a Registration Statement, Prospectus or
other document is required so that it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(d) Use its best efforts to avoid the issuance of or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
any Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as reasonably practicable.
(e) Furnish to each Purchaser and Purchaser Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after receipt of written request from such
Purchaser or Purchaser Counsel after the filing of such documents with the
Commission.
(f) Promptly deliver to each Purchaser and Purchaser Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. Subject to the terms hereof, the Company hereby consents to
the use of such Prospectus and each amendment or supplement thereto by each of
the selling Purchasers in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(g) (i) In the time and manner required by each Trading
Market, if at all, prepare and file with such Trading Market an additional
shares listing application covering all of the Registrable Securities; (ii) take
all steps necessary to cause such Registrable Securities to be approved for
listing on each Trading Market as soon as reasonably practicable thereafter;
(iii) to the extent available to the Company, provide to the Purchasers evidence
of
16
such listing; and (iv) maintain the listing of such Registrable Securities on
each such Trading Market or another Eligible Market.
(h) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Purchasers and Purchaser Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Purchaser requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to take any and all
other actions necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided that the Company shall not be required to qualify generally to do
business as a foreign corporation in any jurisdiction where it is not so
qualified or to execute a general consent to service of process in effecting
such registration or qualification (or exemption therefrom).
(i) Cooperate with the Purchasers to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by this Agreement and
consistent with applicable law, of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and, if after the Effective
Date, registered in such names as any such Purchasers may request.
(j) Upon the occurrence of any event described in Section
6.2(c)(iv), as promptly as reasonably practicable, prepare a supplement or
amendment, including a post-effective amendment, to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain 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, in the light of the circumstances under which they were
made, not misleading.
(k) Cooperate with any due diligence investigation undertaken
by the Purchasers in connection with the sale of Registrable Securities,
including, without limitation, by making available any documents and
information; provided that no Purchaser will request material nonpublic
information unless it acknowledges in advance in writing that it is doing so,
and the Company will not deliver or make available to any Purchaser material
nonpublic information unless such Purchaser specifically so requests in writing.
(l) If Holders of a majority of the Registrable Securities
being offered pursuant to a Registration Statement select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, by providing customary legal opinions, comfort letters and
indemnification and contribution obligations.
(m) Comply with all applicable rules and regulations of the
Commission.
6.3 Registration Expenses. The Company shall pay (or reimburse the
Purchasers for) all fees and expenses incident to the performance of or
compliance with this Agreement by the Company, including without limitation (a)
all registration and filing fees and expenses, including without limitation
those related to filings with the Commission, any Trading Market and in
connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities), (c) messenger, telephone and delivery expenses, (d)
fees and disbursements of counsel for the Company and up to $10,000 in the
aggregate for a single Purchaser Counsel for the Purchasers, (e) fees and
expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement, and (f) all
listing fees to be paid by the Company to the Trading Market. Notwithstanding
the foregoing, each Purchaser shall pay all selling commissions, brokerage fees
and stock transfer taxes, if any, applicable to the Registrable Securities sold
by such Purchaser.
6.4 Indemnification
17
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Purchaser, the officers, directors, partners, members, agents and employees
of each Purchaser, each Person who controls any such Purchaser (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, partners, members, agents and employees of each
such controlling Person, to the fullest extent permitted by applicable law, from
and against any and all Losses, as incurred, arising out of or relating to any
untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, except to the extent, but only to the
extent, that (i) such untrue statements, alleged untrue statements, omissions or
alleged omissions arise out of or result directly from (A) information regarding
such Purchaser furnished in writing to the Company by such Purchaser expressly
for use in connection therewith or (B) information relating to such Purchaser or
such Purchaser's proposed method of distribution of Registrable Securities that
is in conformity with the "Plan of Distribution" attached hereto as Exhibit C or
was reviewed and expressly approved in writing by such Purchaser expressly for
use in the Registration Statement, such Prospectus or such form of Prospectus or
in any amendment or supplement thereto or (ii) in the case of an occurrence of
an event of the type specified in Section 6.2(c)(ii)-(iv), such Purchaser uses
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice contemplated in Section 6.5. The
Company shall notify the Purchasers promptly of the institution or actual threat
of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) Indemnification by Purchasers. Each Purchaser shall,
severally and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents and employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and
against all Losses arising out of any untrue statement of a material fact
contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising out of any
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading to the extent, but only to the extent, that (i) such untrue
statement or omission arises out of or results directly from any information (A)
furnished in writing by such Purchaser to the Company specifically for use in
connection with such Registration Statement or such Prospectus or with any
amendment or supplement thereto or (B) based upon information relating to such
Purchaser or such Purchaser's proposed method of distribution of Registrable
Securities that is in conformity with the "Plan of Distribution" attached hereto
as Exhibit C or was reviewed and expressly approved in writing by such Purchaser
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto or (ii) in the case of an
occurrence of an event of the type specified in Section 6.2(c)(ii)-(iv), such
Purchaser uses an outdated or defective Prospectus after the Company has
notified such Purchaser in writing that the Prospectus is outdated or defective
and prior to the receipt by such Purchaser of the Advice contemplated in Section
6.5. In no event shall the liability of any selling Purchaser hereunder be
greater in amount than the dollar amount of the net proceeds received by such
Purchaser upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that such failure shall have
materially prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses;
18
or (ii) the Indemnifying Party shall have failed promptly to assume the defense
of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (iii) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense thereof
and such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Trading Days of written notice thereof to the Indemnifying
Party (regardless of whether it is subsequently ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is judicially determined
and not subject to appeal or review that such Indemnified Party is not entitled
to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section
6.4(a) or (b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 6.4(c), any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6.4(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 6.4(d), no Purchaser
shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the proceeds actually received by such Purchaser from the sale
of the Registrable Securities subject to the Proceeding exceeds the amount of
any damages that such Purchaser has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. 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 indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6.5 Dispositions. Each Purchaser agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement. Each Purchaser further agrees that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Sections
6.2(c)(ii), (iii) or (iv), such Purchaser will discontinue disposition of such
Registrable Securities under the Registration Statement until such Purchaser's
receipt of the copies of the
19
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 6.2(j), or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph.
6.6 No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Purchasers in such capacity pursuant hereto)
may include securities of the Company in the Registration Statement other than
the Registrable Securities, and the Company shall not after the date hereof
enter into any agreement providing any such right to any of its security
holders.
6.7 Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with a stock option or other employee
benefit plan, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
ARTICLE VII
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third Business Day following the date of this Agreement;
provided that no such termination will affect the right of any party to xxx for
any breach by the other party (or parties).
7.2 Fees and Expenses. At the Closing, the Company shall pay to
Mainfield Enterprises, Inc. an aggregate of $55,000 for their legal fees and
expenses incurred in connection with its due diligence and its due diligence and
the preparation and negotiation of the Transaction Documents. In lieu of the
foregoing payment, Mainfield Enterprises, Inc. may retain such amount at the
Closing or require the Company to pay such amount directly to Purchaser Counsel.
Except as expressly set forth in the Transaction Documents to the contrary, each
party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all transfer agent fees, stamp taxes and other
taxes and duties levied in connection with the issuance of the Securities.
7.3 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company and the
Purchasers will execute and deliver such further documents as may be reasonably
requested in order to give effect to the intention of the parties under the
Transaction Documents.
7.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (c) the
20
Trading Day following the date of deposit with a nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The addresses and facsimile numbers for such notices and
communications are those set forth on the signature pages hereof, or such other
address or facsimile number as may be designated in writing hereafter, in the
same manner, by any such Person.
7.5 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and Purchasers holding (or, in the case of an amendment prior to
the Closing Date, committing to hold) a majority of the Securities or, in the
case of a waiver, by the party against whom enforcement of any such waiver is
sought. No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of either party
to exercise any right hereunder in any manner impair the exercise of any such
right. Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Purchasers under Article VI and that does not directly or indirectly
affect the rights of other Purchasers may be given by Purchasers holding at
least a majority of the Registrable Securities to which such waiver or consent
relates.
7.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
7.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser is
permitted to assign or transfer, and assigns or transfers, any Securities,
provided such transferee delivers a statement to the Company in which it agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers."
7.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary of Section 4.8 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.
7.9 Governing Law; Venue; Waiver Of Jury Trial. The Corporate Laws Of
The State Of Delaware Shall Govern All Issues Concerning The Relative Rights Of
The Company And Its Stockholders AND All Questions Concerning The Construction,
Validity, Enforcement And Interpretation Of This Agreement. THE COMPANY Hereby
Irrevocably Submits To The Exclusive Jurisdiction Of The State And Federal
Courts Sitting In The STATE OF DELAWARE For The Adjudication Of Any Dispute
BROUGHT BY ANY PURCHASER Hereunder, In Connection Herewith Or With Any
Transaction Contemplated Hereby Or Discussed Herein (Including With Respect To
The Enforcement Of Any Of The Transaction Documents), And Hereby Irrevocably
Waives, And Agrees Not To Assert In Any Suit, Action Or ProceedinG BROUGHT BY
ANY PURCHASER, Any Claim That It Is Not Personally Subject To The Jurisdiction
Of Any Such Court, That Such Suit, Action Or Proceeding Is Improper. Each
purchaser HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS SITTING IN DELAWARe, for the adjudication of any dispute
brought by the company hereunder, in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to the
enforcement of any of the transaction documents), and hereby irrevocably waives,
and agrees not to assert in any suit, action or proceeding brought by the
company, any claim that it is not personally subject to the jurisdiction of any
such court or that such suit, action or proceeding is improper. Each party
Hereby Irrevocably Waives Personal Service Of Process And Consents To Process
Being Served In Any Such Suit, Action Or Proceeding By Mailing A Copy Thereof
Via Registered Or Certified Mail Or Overnight Delivery (With Evidence Of
Delivery) To Such Party At The Address In Effect For Notices To It Under This
Agreement And Agrees That Such Service Shall Constitute Good And Sufficient
Service Of Process And Notice Thereof. Nothing Contained Herein
21
Shall Be Deemed To Limit In Any Way Any Right To Serve Process In Any Manner
Permitted By Law. The Company Hereby Waives All Rights To A Trial By Jury.
7.10 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery and/or
exercise of the Securities, as applicable.
7.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
7.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
7.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
7.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and, if requested, customary and
reasonable indemnity. If any Purchaser seeks a new certificate or instrument
under such circumstances, it shall also comply with such other reasonable
regulations and procedures and pay such other reasonable third party costs as
the Company may prescribe.
7.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
7.16 Payment Set Aside. To the extent that the Company makes a payment
or payments to any Purchaser hereunder or pursuant to the Additional Investment
Rights or any Purchaser enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company by a
trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
7.17 Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or
22
event occurring after the date hereof and before the Closing Date, each
reference herein to a number of shares or a price per share shall be amended to
appropriately account for such event.
7.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Shares pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any other Purchaser (or any other person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. Each Purchaser acknowledges that no other Purchaser has
acted as agent for such Purchaser in connection with making its investment
hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
[SIGNATURE PAGES TO FOLLOW]
23
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
BLUE RHINO CORPORATION
By: /s/ Xxxx Xxxxxxxxx
------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Chief Financial Officer
Address for Notice:
000 Xxxxxxxxx Xxxxx Xxxxx
Xxxxxxx-Xxxxx, Xxxxx Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxx Xxxxxxxxx, Chief Financial
Officer
With a copy to: Xxxxxx Xxxxxxx Xxxxxxxxx & Xxxx, PLLC
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxxx-Xxxxx, Xxxxx Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxx X. Xxxx, Esq.
Consented and Acknowledged
with respect to Section 2.2 (c) only
XXXXXX XXXXXXX XXXXXXXXX
& XXXX PLLC
By: /s/ Xxxxx Xxxx
------------------------
Name: Xxxxx Xxxx
Title: Of Counsel
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
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MAINFIELD ENTERPRISES, INC.
By: /s/ Avi Vigder
------------------------------------
Name: Avi Vigder
Title: Authorized Signatory
Domicile: British Virgin Islands
Number of Units: 600,000
Underlying Shares subject to
Additional Investment Rights: 198,000
Address for Notice:
Mainfield Enterprises, Inc.
c/o Avi Vigder
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
With a copy to: Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxx X. Xxxxxxx, Esq.
25
SMITHFIELD FIDUCIARY LLC
By: /s/ Xxxx X. Chill
---------------------------
Name: Xxxx X. Chill
Title: Authorized Signatory
Domicile: Cayman Islands
Number of Units: 400,000
Underlying Shares subject to
Additional Investment Rights: 132,000
Address for Notice:
Smithfield Fiduciary LLC
c/o Highbridge Capital Management, LLC
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxx X. Chill
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Exhibits:
--------
A Form of Additional Investment Right
B Opinion of Company Counsel
C Plan of Distribution
D Transfer Agent Instructions
[These exhibits are omitted. Blue Rhino Corporation will furnish supplementally
a copy of any omitted exhibit to the Commission upon request.]
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