EXHIBIT 10.1
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CHAMPPS ENTERTAINMENT, INC.,
as the Company
and
BUYERS,
as defined herein
SECURITIES PURCHASE AGREEMENT
Dated as of December 12, 2002
5.50% Convertible Subordinated Notes due 2007
and Warrants to Purchase Common Stock
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of
December 12, 2002, by and among Champps Entertainment, Inc., a Delaware
corporation (the "Company"), and the Buyers listed on the Schedule of Buyers
attached hereto as Exhibit A (individually, a "Buyer" and, collectively, the
"Buyers").
THE PARTIES TO THIS AGREEMENT enter into this Agreement on the basis of
the following facts, intentions and understandings:
A. In accordance with the terms and conditions of this Agreement, the
Company has agreed to issue and sell, and the Buyers have agreed to purchase in
the aggregate, (i) Fifteen Million United States Dollars ($15,000,000) principal
amount of the Company's 5.50% Convertible Subordinated Notes due 2007 (such
Convertible Subordinated Notes, substantially in the form attached hereto as
Exhibit B, as the same may be amended, modified or supplemented from time to
time in accordance with the terms thereof, the "Notes"), which shall be
convertible into shares of the common stock, $0.01 par value per share (the
"Common Stock"), of the Company (as converted, the "Conversion Shares"), and
(ii) Warrants (such Warrants, substantially in the form attached hereto as
Exhibit C, as the same may be amended, modified or supplemented from time to
time in accordance with the terms thereof, the "Buyer Warrants") to purchase
351,782 shares of Common Stock (as exercised, collectively, the "Buyer Warrant
Shares").
B. To induce U.S. Bancorp Xxxxx Xxxxxxx ("Xxxxx Xxxxxxx") to act as
exclusive placement agent with respect to the offering of the Notes and the
Buyer Warrants (the "Offering"), the Company has agreed (i) to issue Warrants
(such Warrants, substantially in the form attached hereto as Exhibit C, as the
same may be amended, modified or supplemented from time to time in accordance
with the terms thereof, the "Xxxxx Xxxxxxx Warrant" and, together with the Buyer
Warrants, the "Warrants") to purchase the number of shares of Common Stock set
forth on the Schedule of Fees (the "Schedule of Fees") attached hereto as
Exhibit D (as exercised, collectively, the "Xxxxx Xxxxxxx Warrant Shares", and
together with the Buyer Warrant Shares, the "Warrant Shares").
C. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit E (as the same may be
amended, modified or supplemented from time to time in accordance with the terms
thereof, the "Registration Rights Agreement") pursuant to which the Company has
agreed to provide the Buyers and Xxxxx Xxxxxxx with the benefit of certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (the "Securities Act") and applicable
state securities laws, on the terms and subject to the conditions set forth
therein.
NOW THEREFORE, in consideration of the promises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Buyers hereby agree as follows:
SECTION 1. Purchase and Sale of Notes and Warrants.
(a) Purchase of Notes and Warrants. Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7 of this Agreement, the
Company shall issue and sell to each Buyer, and each Buyer severally and not
jointly agrees to purchase from the Company, the respective principal amount of
Notes, together with the related Warrants, set forth opposite such Buyer's name
on the Schedule of Buyers attached hereto as Exhibit A (the "Closing"). The
Company shall issue to each Buyer One Thousand United States Dollars ($1,000)
principal amount of the Notes and Warrants to purchase approximately 23.4522
Warrant Shares for each One Thousand United States Dollars ($1,000) tendered by
each such Buyer.
(b) The Closing. The date and time of the Closing (the "Closing Date")
shall be 10:00 a.m., Denver time, on December 16, 2002, subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 of this
Agreement. The Closing shall occur on the Closing Date at the offices of
Xxxxxxxxxx Xxxxx & Xxxxxx, P.C., 000 Xxxxxxxxxxx Xxxxxx, Xxxxxx-Xxxxxx Xxxxx,
Xxxxxx, Xxxxxxxx 00000-0000.
(c) Form of Payment. On the Closing Date, (i) each Buyer shall pay the
Company for the Notes and the related Warrants to be issued and sold to such
Buyer on the Closing Date, by wire transfer of immediately available funds in
accordance with the Company's written wire instructions attached hereto on
Schedule A, (ii) the Company shall reimburse each Buyer for its reasonable
expenses to the extent required by Section 4(i) of this Agreement, and (iii) the
Company shall issue to each Buyer properly authenticated Notes (in the
denominations as such Buyer shall reasonably request) representing the principal
amount of Notes which such Buyer is then purchasing hereunder, along with
Warrants representing the related number of Warrant Shares, duly executed on
behalf of the Company and registered in the name of such Buyer.
SECTION 2. Buyer's Representations and Warranties. Each Buyer
represents and warrants to the Company with respect to only itself that as of
the date hereof:
(a) Investment Purpose. Such Buyer is acquiring the Notes and the
Warrants for its own account for investment only and not with a view towards, or
for resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted from registration under the Securities
Act; provided, however, that by making the representations herein, such Buyer
does not agree to hold any of the Notes, the Conversion Shares, the Warrants and
the Warrants Shares (collectively, the "Securities") for any minimum or other
specific term and reserves the right to dispose of the Securities at any time;
provided, further, that such disposition shall be in accordance with or pursuant
to a registration statement or an exemption under the Securities Act.
(b) Accredited Investor Status. Such Buyer is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D under the Securities Act
as of the date of this Agreement and was not organized for the specific purpose
of acquiring the Securities.
(c) Reliance on Exemptions. Such Buyer understands that the Securities
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of the United States federal and state securities laws
and that the Company is relying upon the truth and
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accuracy of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein
and in the applicable Note or Warrant in order to determine the availability of
such exemptions and the eligibility of such Buyer to acquire the Securities.
(d) Information. Such Buyer believes it (i) has been furnished with or
believes it has had full access to all of the information that it considers
necessary or appropriate for deciding whether to purchase the Securities, (ii)
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Securities, (iii) can
bear the economic risk of a total loss of its investment in the Notes and the
Warrants and (iv) has such knowledge and experience in business and financial
matters so as to enable it to understand the risks of and form an investment
decision with respect to its investment in the Securities. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall limit, modify, amend or
affect the Company's representations and warranties contained in this Agreement
and the Buyer's right to rely thereon.
(e) No Governmental Review. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
(f) Transfer or Resale. Such Buyer understands that, except as provided
in the Registration Rights Agreement, the Securities have not been registered
under the Securities Act or any state securities laws, and may not be offered
for sale, sold, assigned or transferred without registration under the
Securities Act or an exemption therefrom and that, in the absence of an
effective registration statement under the Securities Act, such Securities may
only be sold under certain circumstances as set forth in the Securities Act. In
that connection, such Buyer is aware of Rule 144 under the Securities Act and
the restrictions imposed thereby.
(g) Legends.
(1) Such Buyer understands that, until two (2) years after the original
issuance date of the Notes and the Warrants, any certificate evidencing such
Notes and any certificate evidencing such Warrant (and all securities issued in
exchange therefor or in substitution thereof, other than Common Stock, if any,
issued upon conversion thereof (in the case of a Note) or upon exercise thereof
(in the case of a Warrant), which shall bear the legend set forth in Section
2(g)(2) of this Agreement, if applicable) shall bear a legend in substantially
the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM. THE
SECURITIES MAY
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BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY THE SECURITIES.
The Company may place the following legend on any Warrant or Note, as
appropriate, held by or transferred to an "affiliate" (as defined in Rule 501(b)
of Regulation D under the Securities Act) of the Company:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO
MAY BE DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY BE SOLD ONLY IN COMPLIANCE WITH RULE 144,
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT.
The legends set forth above shall be removed and the Company shall
issue a new Note or Warrant, as appropriate, of like tenor and aggregate
principal amount or number of shares, as appropriate, and which shall not bear
the restrictive legends required by this Section 2(g)(1), (i) if such Notes or
Warrants, as appropriate, are registered for resale under the Securities Act and
are transferred or sold pursuant to such registration, (ii) if, in connection
with a sale transaction, such holder provides the Company with an opinion of
counsel reasonably acceptable to the Company to the effect that a public sale,
assignment or transfer of the Notes or Warrants, as appropriate, may be made
without registration under the Securities Act, or (iii) upon expiration of the
two-year period under Rule 144(k) of the Securities Act (or any successor rule)
if the holder of the Securities has not been an "affiliate" (as defined in Rule
501(b) of Regulation D under the Securities Act) during the preceding three (3)
months.
(2) Such Buyer understands that any stock certificate representing
Conversion Shares or Warrant Shares shall bear a legend in substantially the
following form (unless (i) such Conversion Shares or Warrant Shares have been
transferred or sold pursuant to an effective registration statement, (ii) such
Conversion Shares or Warrant Shares, as appropriate, have been transferred or
sold pursuant to the exemption from registration provided by Rule 144 under the
Securities Act, (iii) such Conversion Shares or Warrants Shares, as appropriate,
may be transferred pursuant to Rule 144(k) under the Securities Act, or (iv)
unless otherwise agreed by the Company in writing with written notice to the
transfer agent):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM. THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN SECURED BY THE SECURITIES.
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The Company may instruct the transfer agent to place the following
legend on any certificate evidencing shares of Common Stock held by or
transferred to an "affiliate" (as defined in Rule 501(b) of Regulation D under
the Securities Act) of the Company:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO
MAY BE DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY BE SOLD ONLY IN COMPLIANCE WITH RULE 144,
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO A VALID EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT.
The legends set forth above shall be removed and the Company
shall issue the relevant Securities without such legends to the holder of the
Securities upon which it is stamped, (i) if such Securities are registered for
resale under the Securities Act and are transferred or sold pursuant to such
registration, (ii) if, in connection with a sale transaction, such holder
provides the Company with an opinion of counsel reasonably acceptable to the
Company to the effect that a public sale, assignment or transfer of the
Securities may be made without registration under the Securities Act, or (iii)
upon expiration of the two-year period under Rule 144(k) of the Securities Act
(or any successor rule) if the holder of the Securities has not been an
"affiliate" (as defined in Rule 501(b) of Regulation D under the Securities Act)
during the preceding three (3) months.
(3) Such Buyer understands that, in the event Rule 144(k) as
promulgated under the Securities Act (or any successor rule) is amended to
change the two-year or three-month periods under Rule 144(k) (or the
corresponding periods under any successor rule), (i) each reference in Sections
2(g)(1) and 2(g)(2) of this Agreement to "two (2) years" or the "two-year
period" and to "three (3) months" shall be deemed for all purposes of this
Agreement to be references to such changed period or periods, and (ii) all
corresponding references in the Notes and Warrants shall be deemed for all
purposes to be references to the changed period or periods, provided that such
changes shall not become effective if they are otherwise prohibited by, or would
otherwise cause a violation of, the then-applicable federal securities laws.
(h) Authorization; Enforcement; Validity. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of such Buyer and are valid and binding agreements of
such Buyer enforceable against such Buyer in accordance with their terms,
subject as to enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(i) Residency. Such Buyer is a resident of that country or state
specified in its address on the Schedule of Buyers attached hereto as Exhibit A.
(j) No Conflicts. The execution and performance of this Agreement and
the Registration Rights Agreement do not conflict with any agreement to which
such Buyer is a party or is bound
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thereby, any court order or judgment addressed to such Buyer, or the constituent
documents of such Buyer.
(k) Conversion/Exercise Limitation. (A) Subject to Buyer's election on
the signature pages hereto, each Buyer hereby agrees that in no event will it
convert any of the Notes or exercise any of the Warrants in excess of the number
of such Notes or Warrants, upon the conversion of which (x) the number of shares
of Common Stock beneficially owned by such Buyer (other than the shares which
would otherwise be deemed beneficially owned except for being subject to a
limitation on conversion or exercise analogous to the limitation contained in
this Section 2(k)(A)) plus (y) the number of shares of Common Stock issuable
upon the conversion of such Notes and the exercise of such Warrants, would be
equal to or exceed 9.99% of the number of shares of Common Stock then issued and
outstanding (after giving effect to such conversion or exercise), it being the
intent of the Company and the Buyers that no Buyer be deemed at any time to have
the power to vote or dispose of greater than 9.99% of the number of shares of
Common Stock issued and outstanding. As used herein, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). To the extent that the limitation
contained in this Section 2(k)(A) applies (and without limiting any rights the
Company may otherwise have), the Company may rely on the Buyer's determination
of whether the Notes are convertible and whether the Warrants are exercisable
pursuant to the terms hereof, the Company having no obligation whatsoever to
verify or confirm the accuracy of such determination, and the submission of the
Conversion Notice (as that term is defined in the Note) or the Exercise Notice
(as that term is defined in the Warrant) by the Buyer shall be deemed to be the
Buyer's representation that the Notes or the Warrants specified therein are
convertible or exercisable pursuant to the terms hereof. Nothing contained
herein shall be deemed to restrict the right of a Buyer to convert the Notes or
exercise the Warrants at such time as the conversion or exercise thereof will
not violate the provisions of this Section 2(k)(A). Notwithstanding anything to
the contrary, this Section 2(k)(A) shall not apply to a Buyer who has elected to
opt out of the application of this Section by so indicating in the signature
page.
(B) Subject to Buyer's election on the signature pages hereto, each
Buyer hereby agrees that in no event will it convert any of the Notes or
exercise any of the Warrants in excess of the number of such Notes or Warrants,
upon the conversion of which (x) the number of shares of Common Stock
beneficially owned by such Buyer (other than the shares which would otherwise be
deemed beneficially owned except for being subject to a limitation on conversion
or exercise analogous to the limitation contained in this Section 2(k)(B)) plus
(y) the number of shares of Common Stock issuable upon the conversion of such
Notes and the exercise of such Warrants, would be equal to or exceed 4.99% of
the number of shares of Common Stock then issued and outstanding (after giving
effect to such conversion or exercise), it being the intent of the Company and
the Buyers that no Buyer be deemed at any time to have the power to vote or
dispose of greater than 4.99% of the number of shares of Common Stock issued and
outstanding. As used herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act. To the extent that the
limitation contained in this Section 2(k)(B) applies (and without limiting any
rights the Company may otherwise have), the Company may rely on the Buyer's
determination of whether the Notes are convertible and whether the Warrants are
exercisable pursuant to the terms hereof, the Company having no obligation
whatsoever to verify or confirm the accuracy of such determination, and the
submission of the Conversion Notice (as
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that term is defined in the Note) or the Exercise Notice (as that term is
defined in the Warrant) by the Buyer shall be deemed to be the Buyer's
representation that the Notes or the Warrants specified therein are convertible
or exercisable pursuant to the terms hereof. Nothing contained herein shall be
deemed to restrict the right of a Buyer to convert the Notes or exercise the
Warrants at such time as the conversion or exercise thereof will not violate the
provisions of this Section 2(k)(B). Notwithstanding anything to the contrary,
this Section 2(k)(B) shall not apply to a Buyer who has elected to opt out of
the application of this Section by so indicating in the signature page.
(l) Additional Acknowledgement. Each Buyer acknowledges that it has
independently evaluated the merits of the transactions contemplated by this
Agreement, the Notes, the Registration Rights Agreement and the Warrants, that
it has independently determined to enter into the transactions contemplated
hereby and thereby, that it is not relying on any advice from or evaluation by
any other Buyer, and that it is not acting in concert with any other Buyer in
purchasing the Securities offered hereunder. The Buyers and, to its knowledge,
the Company agree that the Buyers have not taken any actions that would make
such Buyers to be deemed as members of a "group" for purposes of Section 13(d)
of the Exchange Act.
The Buyer's representations and warranties made in this Section 2 are
made solely for the purpose of permitting the Company to make a determination
that the offer and sale of the Notes and Warrants pursuant to this Agreement
complies with applicable U.S. federal and state securities laws and not for any
other purpose. Accordingly, the Company shall not rely on such representations
and warranties for any other purpose.
SECTION 3. Representations and Warranties of the Company. The Company
represents and warrants to Xxxxx Xxxxxxx and each of the Buyers that as of the
date hereof subject to such exceptions as set forth in a Disclosure Schedule:
(a) Organization and Qualification. The Company and its Operating
Subsidiaries (as defined below) are corporations, partnerships or limited
liability companies duly organized and validly existing in good standing under
the laws of the jurisdiction in which they are incorporated or organized, and
have the requisite corporate, limited liability company or partnership power and
authorization to own their properties and to carry on their business as now
being conducted. Copies of the Company's Certificate of Incorporation and
Bylaws, and all amendments thereto, have been filed as exhibits to the Company's
SEC Documents (as defined in Section 3(f) of this Agreement), are in full effect
and have not been modified. Each of the Company and its Operating Subsidiaries
is duly qualified as a foreign corporation, partnership or limited liability
company to do business and is in good standing in every jurisdiction in which
its ownership of property or the nature of the business conducted and proposed
to be conducted by it makes such qualification necessary, except to the extent
that the failure to be so qualified or be in good standing would not have a
Material Adverse Effect. As used in this Agreement, "Material Adverse Effect"
means any material adverse effect on the business, properties, assets,
operations, results of operations or financial condition of the Company and its
Operating Subsidiaries, taken as a whole, or on the transactions contemplated
hereby or by the agreements and instruments to be entered into in connection
herewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below). "Subsidiary"
means any entity in which the Company, directly or indirectly, owns a majority
of the capital stock or other
7
equity or similar interests. The Company's "Operating Subsidiaries" are forth on
Schedule 3(a) are the only Subsidiaries holding more than nominal assets. There
are additional dormant Subsidiaries holding no more than nominal assets that are
expected to be statutorily dissolved; the Company will not transfer any
non-nominal assets to the dormant Subsidiaries.
(b) Authorization; Enforcement; Validity. The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Notes, the Warrants, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions (as defined in Section 5 of this
Agreement) and each of the other agreements entered into by the parties hereto
in connection with the transactions contemplated by this Agreement
(collectively, the "Transaction Documents"), and to issue the Securities in
accordance with the terms hereof and thereof. The execution and delivery of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including, without limitation, the
issuance and repayment of the Notes, the reservation for issuance and the
issuance of the Conversion Shares issuable upon conversion thereof, the issuance
of the Warrants and the reservation for issuance and the issuance of the Warrant
Shares issuable upon exercise of the Warrants, have been duly authorized by the
Company's Board of Directors and no further consent or authorization is required
of the Company's Board of Directors or stockholders. The Transaction Documents
have been duly executed and delivered by the Company. The Transaction Documents
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except (i) as rights to
indemnification and contribution may be limited by federal or state securities
laws and policies underlying such laws and (ii) as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies.
(c) Capitalization. Except for any shares issuable upon exercise of
options issued pursuant to employee benefit plans disclosed in the Company's SEC
Documents, the capitalization of the Company is as described in the Company's
SEC Documents. All of the Company's outstanding shares have been, or upon
issuance will be, validly issued and are fully paid and nonassessable. The
Company's Common Stock is registered pursuant to Section 12(g) of the Exchange
Act and is listed for trading on the Principal Market (as defined in Section
4(f) of this Agreement). Except as set forth in this Agreement, the Registration
Rights Agreement and as set forth in the SEC Documents, (i) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances created by the Company; (ii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries (other than
any such options, warrants, scrip, rights, calls, commitments, securities,
understandings and arrangement outstanding under plans disclosed in the SEC
Documents); (iii) there are no outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments
evidencing indebtedness of the Company or any of its Subsidiaries or by which
the Company or any of its
8
Subsidiaries is or may become bound; (iv) there are no amounts outstanding
under, and there will be no amounts due upon termination of, any credit
agreement or credit facility; (v) there are no financing statements securing
obligations in any amounts greater than Fifty Thousand United States Dollars
($50,000), singly, or Two Hundred Fifty Thousand United States Dollars
($250,000) in the aggregate, filed in connection with the Company or any of its
Subsidiaries; (vi) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
its securities under the Securities Act; (vi) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement; (viii) the Company does not have
any stock appreciation rights or "phantom" stock plans or agreements or any
similar plan or agreement; and (ix) the Company and its Subsidiaries have no
liabilities or obligations required to be disclosed in the SEC Documents but not
so disclosed in the SEC Documents, other than those incurred in the ordinary
course of the Company's or its Subsidiaries' respective businesses and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect on the Company and its Subsidiaries taken as a whole.
(d) Issuance of Securities. The Securities are duly authorized and,
upon issuance in accordance with the terms of the applicable Transaction
Documents, shall be (i) validly issued, fully paid and non-assessable and (ii)
free from all taxes, liens and charges with respect to the issuance thereof,
other than any liens or encumbrances created by or imposed by the Buyers, and
shall not be subject to preemptive rights or other similar rights of
stockholders of the Company. As of the Closing, at least 1,883,794 shares of
Common Stock (subject to adjustment pursuant to the Company's covenant set forth
in Section 4(e) of this Agreement) will have been duly authorized and reserved
for issuance upon conversion of the Notes and exercise of the Warrants. Upon
conversion or issuance in accordance with the terms of the Notes or upon
exercise or issuance in accordance with the terms of the Warrants, as
applicable, the Conversion Shares and the Warrant Shares, as the case may be,
will be validly issued, fully paid and non-assessable and free from all taxes,
liens and charges with respect to the issue thereof, other than any liens or
encumbrances created by or imposed by the Buyers, with the holders being
entitled to all rights accorded to a holder of Common Stock. Subject to the
accuracy of the representations and warranties of each of the Buyers in this
Agreement, the issuance by the Company of the Securities is exempt from
registration under the Securities Act and applicable state securities laws.
(e) 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 (including, without limitation, the
reservation for issuance and issuance of the Conversion Shares and the Warrant
Shares) will not (i) result in a violation of the Company's Certificate of
Incorporation or the Bylaws; (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party, except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as
9
would not, individually or in the aggregate, have a Material Adverse Effect; or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and the
rules and regulations of the Principal Market applicable to the Company or any
of its Subsidiaries or by which any property or asset of the Company or any of
its Subsidiaries is bound or affected. Neither the Company nor any of its
Subsidiaries is in violation of any material term of or in default under its
Certificate of Incorporation, Bylaws or their organizational charter or bylaws,
respectively. Neither the Company nor any of its Subsidiaries is in violation of
any term of or in default under any contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its Subsidiaries, except where such
violations and defaults would not result, either individually or in the
aggregate, in a Material Adverse Effect. The business of the Company and its
Subsidiaries is not being conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
Except as specifically contemplated by this Agreement, as required under the
Securities Act or as required by Blue Sky filings (but only to the extent that
such filings may be made after the Closing), the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof and copies of such consents, authorizations, orders,
filings and registrations have been delivered to the Buyers. The Company is not
in violation of the listing requirements of the Principal Market, and has no
actual knowledge of any facts which would reasonably lead to delisting or
suspension of the Common Stock by the Principal Market in the foreseeable
future. The Company and its Subsidiaries are not in violation of any covenants
or other terms of its outstanding indebtedness for borrowed money, which could
reasonably be expected to have a Material Adverse Effect. The Company and its
Subsidiaries are currently unaware of any facts or circumstances which might
give rise to any of the foregoing events set forth in this paragraph.
(f) SEC Documents; Financial Statements. Since January 1, 2000, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Securities and Exchange Commission (the
"Commission") pursuant to the reporting requirements of the Exchange Act, and
the rules and regulations promulgated thereunder (all of the foregoing filed
prior to or on the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference therein
being hereinafter referred to as the "SEC Documents"). As of the date of filing
of such SEC Documents, each such SEC Document, as it may have been subsequently
amended by filings made by the Company with the Commission prior to the date
hereof, complied in all material respects with the requirements of the Exchange
Act and the rules and regulations of the Commission promulgated thereunder
applicable to such SEC Document. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and published
rules and regulations of the Commission with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied in the United States, during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, (ii) in the case of unaudited interim statements, to the
10
extent they may exclude footnotes or may be condensed or summary statements,
(iii) changes in the Company's financial statements made upon the recommendation
of KPMG, LLP as successor auditor to Xxxxxx Xxxxxxxx, LLP or (iv) changes made
in response to comments received by the Company from the Commission with respect
to its annual report on Form 10-K for the year ended June 30, 2002), correspond
to the books and records of the Company and fairly present in all material
respects the financial position of the Company and its Subsidiaries as of the
dates thereof and the results of operations and cash flows for the periods then
ended. KPMG, LLP are independent accountants as required by the Exchange Act.
The Company is not aware of any issues raised by the Commission with respect to
any of the SEC Reports, other than those disclosed in the SEC Reports, the
Disclosure Schedule or clause (iv) above. No other written information provided
by or on behalf of the Company to the Buyers which is not included in the SEC
Documents, including, without limitation, information referred to in Section
2(d) of this Agreement, contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they are or were made,
not misleading. The Company satisfies the requirements for use of Form S-3 for
registration of the resale of Registrable Securities (as that term is defined in
the Registration Rights Agreement) and does not have any knowledge or reason to
believe that it does not satisfy such requirements or have any knowledge of any
fact which would reasonably result in its not satisfying such requirements. The
Company is not required to file and will not be required to file any agreement,
note, lease, mortgage, deed or other instrument entered into prior to the date
hereof and to which the Company is a party or by which the Company is bound
which has not been previously filed as an exhibit to its reports filed with the
Commission under the Exchange Act. Except for the issuance of the Notes and the
Warrants contemplated by this Agreement, no event, liability, development or
circumstance has occurred or exists, or is currently contemplated to occur, with
respect to the Company or its Subsidiaries or their respective business,
properties, prospects, operations or financial condition, that would be required
to be disclosed by the Company under applicable securities laws and which has
not been publicly disclosed. The Company has no reason to believe that its
independent auditors will withhold their consent to the inclusion of their audit
opinion concerning the Company's financial statements which shall be included in
the Registration Statement (as such term is defined in the Registration Rights
Agreement).
(g) Absence of Litigation. Except as disclosed in the section titled
"Legal Proceedings" in the Company's Annual Report on Form 10-K for the period
ended June 30, 2002, there is no action, suit, proceeding, inquiry or
investigation ("Material Litigation") before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Operating Subsidiaries, threatened in
writing against the Company or any of its Operating Subsidiaries or any of the
Company's or the Operating Subsidiaries' officers or directors in their
capacities as such that would have a Material Adverse Effect. The Company
believes it has set aside on its books provisions reasonably adequate for the
payment of all judgments, damages, costs, and expenses arising out of its
pending Material Litigation and has appropriately accounted for such reserves
under GAAP.
(h) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
11
the Securities Act or any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated, nor will the Company or any of its Subsidiaries take any action or
steps that would cause the offering of the Securities to be integrated with
other offerings.
(i) Intellectual Property Rights. The Company and its Operating
Subsidiaries own, possess, license or can acquire or make use of on reasonable
terms, adequate rights or licenses to use all trademarks, trade names, trade
dress, service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, technology licenses, approvals, governmental
authorizations, trade secrets, and other intellectual property rights
(collectively, "Intellectual Property") necessary to conduct their respective
businesses as now conducted and as currently contemplated to be conducted by
them as described in the SEC Documents, except where the failure to currently
own or possess Intellectual Property would not have a Material Adverse Effect.
The Company and its Operating Subsidiaries do not have any knowledge of any
infringement by the Company or its Operating Subsidiaries of Intellectual
Property rights of others, or of any development of similar or identical trade
secrets or technical information by others. There is no claim, action or
proceeding being made by the Company or its Operating Subsidiaries regarding the
Intellectual Property rights of the Company or its Operating Subsidiaries or to
the Company's knowledge, brought or currently threatened against the Company or
its Subsidiaries regarding the Intellectual Property rights of or the use of any
Intellectual Property by the Company or its Subsidiaries of any third party
that, if the subject of an unfavorable decision, ruling or finding, would have a
Material Adverse Effect.
(j) Insurance. The Company and each of its Operating Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as are commensurate with similarly situated
companies engaged in similar businesses as the Company and its Operating
Subsidiaries.
(k) Regulatory Permits. Except for temporary suspension of liquor
licenses in two restaurants (one for ten days and one for five days), the
Company and its Operating Subsidiaries possess all material certificates,
authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses
as currently conducted (the "Permits"), and neither the Company nor any of its
Operating Subsidiaries has received any written notice of proceedings relating
to the revocation or material modification of any such Permit.
(l) Tax Status. The Company and each of its Operating Subsidiaries (i)
has made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject and
all such tax returns are accurate and complete in all material respects, (ii)
has paid all taxes and other governmental assessments and charges due with
respect to the periods covered by such returns, reports and declarations, except
those being contested in good faith and for which the Company has made
appropriate reserves on its books in accordance with GAAP, and (iii) has paid or
set aside on its books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or
declarations (referred to in clause (i) above) apply. Except as disclosed in the
SEC Documents, there are no unpaid taxes or assessments for tax deficiencies
that are individually or
12
in the aggregate material in amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim, and there are no audits in progress with respect to any tax returns, no
extension of time is in force with respect to any date on which any tax return
was or is to be filed, and no waiver or agreement is in force for the extension
of time for the assessment or payment of any tax. Except as disclosed in the SEC
Documents, all provisions for tax liabilities of the Company and each of its
Operating Subsidiaries have been disclosed in the Company's financial statements
and made in accordance with GAAP consistently applied, and all liabilities for
taxes of the Company and each of its Operating Subsidiaries attributable to
periods prior to or ending on the Closing Date have been adequately disclosed in
the Company's financial statements.
(m) Application of Takeover Protections. The Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation, the laws of the
state of its incorporation or the laws of any other state which is applicable to
the Buyers as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company's issuance of the Securities and the
Buyers' ownership of the Securities.
(n) Foreign Corrupt Practices. Neither the Company nor any of its
Subsidiaries, nor, to the Company's knowledge, any director, officer, agent,
employee or other person acting on behalf of the Company or any Subsidiary has,
in the course of his actions for, or on behalf of, the Company or any Subsidiary
used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation of any provision of
the United States Foreign Corrupt Practices Act of 1977, as amended, or made any
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
(o) Confidential Private Placement Memorandum. The information supplied
by the Company for inclusion or incorporation by reference in the Confidential
Private Placement Memorandum dated as of December 12, 2002 (the "Confidential
Private Placement Memorandum") in connection with the Offering does 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
light of the circumstances under which they are made, not misleading. If, at any
time prior to the Closing Date, any event with respect to the Company shall
occur which is required to be described in the Confidential Private Placement
Memorandum, such event shall be so described, and an appropriate amendment or
supplement shall be prepared by the Company.
(p) Transactions With Affiliates. Except as disclosed in the SEC
Documents, other than the grant of stock options granted pursuant to the
Company's employee benefit plans, none of the officers, directors or employees
of the Company is presently a party to any transaction with the Company or any
of its Subsidiaries (other than in connection with the provision of 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 such officer, director or employee or,
13
to the knowledge of the Company, any corporation, partnership, trust or other
entity in which any such officer, director, or employee has a substantial
interest or is an officer, director, trustee or partner, such that the
transaction would be required to be disclosed pursuant to Item 404 of Regulation
S-K promulgated under the Securities Act.
(q) Brokers and Finders. Except for fees payable to Xxxxx Xxxxxxx as
placement agent, no brokers, finders or financial advisory fees or commissions
will be payable by the Company with respect to the transactions contemplated by
this Agreement.
(r) Absence of Certain Changes. Except as disclosed in the SEC
Documents available on the XXXXX system, since September 29, 2002, there has
been no change or development that has had or could reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect.
(s) No Material Non-Public Information. Except for the issuance of the
Securities and the transactions contemplated by this Agreement (which such
information shall be fully disclosed in the Current Report on Form 8-K filed
pursuant to Section 4(g)(1) hereof), the Company has not provided the Buyers
with, and the Confidential Private Placement Memorandum does not contain,
material non-public information.
SECTION 4. Covenants.
(a) Obligations. Each party shall use commercially reasonable efforts
to timely satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
(b) Form D and Blue Sky. The Company agrees to file timely a Form D
with the Commission with respect to the Securities as required under Regulation
D and to provide, upon request, a copy thereof to each Buyer. The Company shall,
on or before the Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to qualify the
Securities for, sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States (or to obtain an exemption from such qualification), and shall provide
evidence of any such action so taken to the Buyers on or prior to the Closing
Date. The Company shall make all timely filings and reports relating to the
offer and sale of the Securities required under applicable securities or "Blue
Sky" laws of the states of the United States following the Closing Date. The
Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(b).
(c) Reporting Status. With a view to making available to the Investors
(as that term is defined in the Registration Rights Agreement) the benefits of
Rule 144 promulgated under the Securities Act or any similar rule or regulation
of the Commission that may at any time permit the Investors to sell securities
of the Company to the public without registration ("Rule 144"), the Company
shall: (i) make and keep public information available, as those terms are
understood and defined in Rule 144; (2) file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and (3) furnish to each Investor, so long
as such Investor owns Registrable Securities (the "Reporting Period"), promptly
upon request, (A) a written statement by the Company, if true, that it has
14
complied with the applicable reporting requirements of Rule 144, the Securities
Act and the Exchange Act, (B) a copy of the most recent annual or quarterly
report of the Company and copies of such other reports and documents so filed by
the Company, (C) the information required by Rule 144A(d)(4) (or any successor
rule) under the Securities Act, and (D) such other information as may be
reasonably requested to permit the Investors to sell such securities pursuant to
Rule 144 without registration.
(d) Use of Proceeds. The Company intends to use the net proceeds from
the sale of the Notes and the Warrants as described in the Confidential Private
Placement Memorandum.
(e) Reservation of Shares. The Company shall take all actions necessary
to at all times have authorized, and reserved for the purpose of issuance, no
less than one hundred five percent (105%) of the number of shares of Common
Stock (the "Reservation Amount") needed to provide for the issuance of the
Conversion Shares upon conversion of all of the Notes and the Warrant Shares
upon exercise of all of the Warrants without regard to any limitations on
conversions or exercise.
(f) Listing. The Company shall promptly use its best efforts to secure
the listing of all of the Conversion Shares and Warrant Shares upon each
national securities exchange and automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of issuance)
and, shall maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all Conversion Shares and Warrant Shares from time to
time issuable under the terms of the Transaction Documents. So long as any
Securities are outstanding, the Company shall maintain the Common Stock's
authorization for quotation or listing on The New York Stock Exchange, Inc. (the
"NYSE"), the American Stock Exchange, Inc. ("AMEX") or The Nasdaq National
Market or SmallCap Market ("NASDAQ") (as applicable, the "Principal Market").
The Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(f).
(g) Filing of Form 8-K. On the day of closing of the transaction
contemplated hereby, the Company shall issue a press release announcing the
transactions contemplated hereby. The Company shall use reasonable efforts
within twenty-four (24) hours after the public announcement of the transactions
contemplated hereby to file (1) a Current Report on Form 8-K with the Commission
including as an exhibit to such Current Report on Form 8-K the press release
announcing the signing of this Agreement after the issuance of such press
release, and (2) a Current Report on Form 8-K with the Commission describing the
terms of the transactions contemplated by the Transaction Documents and
including as exhibits to such Current Report on Form 8-K (i) this Agreement and
the Exhibits hereto, (ii) the form of Note, (iii) the form of Warrant, and (iv)
the Registration Rights Agreement, each in the form required by the Exchange
Act; provided, however, that the signature pages and all references to the names
of the Buyers shall be redacted from the Transaction Documents filed as exhibits
to such Current Report on Form 8-K and in any press release filed in connection
with the transactions contemplated hereby. "Business Day" means any day other
than Saturday, Sunday or other day on which commercial banks in the City of New
York are required by law to remain closed.
(h) Stockholder Approval. In the event that Stockholder Approval is
required pursuant to the rules of the Principal Market for the issuance of a
number of Conversion Shares and Warrant
15
Shares greater in the aggregate than 19.99% of the number of shares of Common
Stock outstanding immediately prior to the Closing Date (the "19.99% Rule"), the
Company shall provide each stockholder entitled to vote at the next meeting of
stockholders of the Company, which meeting shall occur on or before ninety (90)
days from the date of such determination (the "Stockholders Meeting Deadline"),
a proxy statement, which has been previously reviewed by Xxxxx Xxxxxxx, the
Buyers and a counsel of their choice, soliciting each such stockholder's
affirmative vote at such stockholder meeting for approval of the Company's
issuance of all of the Securities as described in the Transaction Documents in
accordance with applicable law and the rules and regulations of the Principal
Market (such affirmative approval being referred to herein as the "Stockholder
Approval"), and the Company shall solicit its stockholders' approval of such
issuance of the Securities and cause the Board of Directors of the Company to
recommend to the stockholders that they approve such proposal.
(i) Expenses. Subject to Section 9(o) of this Agreement, at the
Closing, the Company shall reimburse the Buyers for the Buyers' reasonable,
documented, out-of-pocket expenses incurred in connection with the consummation
of the transactions contemplated by this Agreement, up to a maximum of $10,000,
which amount shall be paid by the Company to the Buyers concurrently with the
Company's receipt of the Purchase Price at the Closing and shall be allocated
pro rata among the Buyers based on the respective principal amount of Notes set
forth opposite such Buyer's name on the Schedule of Buyers attached hereto as
Exhibit A.
(j) Additional Securities. For so long as any Buyer beneficially owns
any Securities, the Company will not issue any Notes or Warrants other than to
the Buyers as contemplated hereby and the Company shall not issue any other
securities that would cause a breach or default under the Notes.
(k) Tax Matters. For United States Federal income tax purposes, the
Company and each Buyer agree (i) to treat the Notes as indebtedness, (ii) that
$[960,000]of the aggregate purchase price for the securities issued by the
Company to the Buyers hereunder (assuming the sale of $[15,000,000] of
Securities) is attributable to the purchase of the Warrants, and (iii) to treat
the Notes as having been issued for an aggregate purchase price of $[14,040,000]
(assuming the sale of $15,000,000 of Securities), such that the aggregate
original issue discount that will accrue over the term of One Thousand Dollars
($1,000) principal amount of the Notes is $[64.00]. If the Company shall be
required to withhold or deduct any tax or other governmental charge from any
payment made hereunder or under any Note to any Buyer, then, subject to the last
sentence of this Section 4(k), the Company shall pay to such Buyer such
additional amounts as are necessary such that such Buyer actually receives the
amount such Buyer would have received if no such withholding or deduction had
been required. If any Buyer is organized under the laws of a jurisdiction other
than the United States, any State thereof or the District of Columbia (a
"Non-United States Buyer"), such Buyer shall deliver to the Company either (a)
two (2) copies of either United States Internal Revenue Service Form W-8BEN or
Form W-8ECI, or (b) in the case of a Non-United States Buyer claiming exemption
from United States Federal withholding tax under Section 871(h) or 881(c) of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code") with respect to payments of "portfolio
interest", a certificate in form and substance reasonably acceptable to the
Company representing that such Non-United States Buyer is not a bank for
purposes of Section 881(c) of the Code, is not a ten percent (10%) shareholder
(within the meaning of Section 871(h)(3)(B) of the Code) of the
16
Company and is not a controlled foreign corporation related to the Company
(within the meaning of Section 864(d)(4) of the Code), together with Internal
Revenue Service Form W-8 or W-9, as applicable, in all cases such forms and
other documents being properly completed and duly executed by such Non-United
States Buyer claiming complete exemption from United States Federal withholding
tax on payments of interest by the Company (or accruals of original issue
discount) under the Notes. In addition, each Buyer that is not otherwise exempt
from "back-up withholding" shall deliver to the Company properly completed and
duly executed Internal Revenue Service Form W-8 or W-9 indicating that such
Buyer is subject to "back-up withholding" for United States Federal income tax
purposes. The forms and other documents required to be delivered pursuant to the
two preceding sentences shall be delivered within ten (10) days after the
Closing Date. The Company shall not be required to pay any additional amounts
(x) to any Non-United States Buyer in respect of United States Federal
withholding tax or (y) to any Buyer in respect of United States Federal "back-up
withholding" tax to the extent that the obligation to pay such additional
amounts would not have arisen but for a failure by such Non-United States Buyer
or Buyer, as the case may be, to comply with the provisions of this Section
4(k).
(l) Violation of Laws. The business of the Company and its Operating
Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
(m) Limits on Additional Issuances. The Company shall not, in any
manner, until the later of (i) 90 days after the Closing or (ii) the date on
which the Registration Statement required to be filed pursuant to Section 2(a)
of the Registration Rights Agreement is declared effective by the Commission,
issue or sell any Common Stock or rights, warrants or options to subscribe for
or purchase Common Stock or any security directly or indirectly convertible into
or exchangeable or exercisable for Common Stock (the "Equity Limitation"). The
Equity Limitation shall not apply (i) to the issuance of Conversion Shares or
Warrant Shares, as the case may be, pursuant to the Notes or the Warrants, (ii)
to the issuance of securities pursuant to the conversion or exchange of
convertible or exchangeable securities or the exercise of warrants or options,
in each case outstanding on the date hereof, (iii) if holders representing a
majority of the outstanding principal amount of the Notes give their prior
written consent to such issuance or sale, (iv) if the issuance is pursuant to
employee benefits plans approved by the Company's Board of Directors, (iv) to
the filing of a Registration Statement on Form S-8, (v) if the securities are
issued for consideration other than cash in connection with a bona fide business
acquisition by the Company whether by merger, consolidation, purchase of assets,
sale or exchange of stock or otherwise; or (vi) if the issuance is in connection
with a (A) commercial banking arrangement, (B) equipment financing, (C)
sponsored research, (D) collaboration, (E) technology licensing, (F) development
agreements or (G) other strategic partnership; provided, however, that with
respect to (C) through (G) hereof, the primary purpose of such transaction is
not to raise equity capital.
(n) CUSIP Numbers. The Company in issuing the Securities shall use
"CUSIP" numbers (if then generally in use), and shall use such "CUSIP" numbers
in notices to holders as a convenience to holders thereof; provided that any
such notice may state that no representation is made as to the correctness of
such numbers either as printed on the Securities or as contained in
17
any notice to such holders and that reliance may be placed only on other
identification numbers printed on such Securities, and any such Company action
referenced in such notice (including, without limitation, redemption or
automatic conversion of Notes) shall not be affected by any defect in or
omission of such numbers.
(o) Accounting Matters. The Company shall use its reasonable best
efforts to cause to be delivered to the Buyers a letter in form and substance
reasonably acceptable to the Buyers and reasonably customary in scope and
substance for comfort letters delivered by independent accountants in connection
with offerings similar to the Offering.
SECTION 5. Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its transfer agents, and any subsequent transfer
agent, to issue certificates or credit shares to the applicable balance accounts
at The Depository Trust Company ("DTC"), registered in the name of Xxxxx Xxxxxxx
and each Buyer or their respective nominee(s), for the Conversion Shares and
Warrant Shares in such amounts as specified from time to time by Xxxxx Xxxxxxx
or a Buyer to the Company upon conversion of the Notes or exercise of the
Warrants, as applicable and in accordance with their respective terms (the
"Irrevocable Transfer Agent Instructions"), substantially in the form attached
hereto as Exhibit F. Prior to transfer or sale pursuant to a registration
statement or Rule 144 under the Securities Act of the Conversion Shares and the
Warrant Shares, all such certificates shall bear the restrictive legend
specified in Section 2(g) of this Agreement. The Company represents and warrants
that no instruction inconsistent with the Irrevocable Transfer Agent
Instructions referred to in this Section 5 will be given by the Company to its
transfer agent and that the Securities shall be freely transferable on the books
and records of the Company as and to the extent provided in this Agreement, the
Notes, the Warrants and the Registration Rights Agreement. If a Buyer provides
the Company with an opinion of counsel, in form reasonably acceptable to the
Company, to the effect that a public sale, assignment or transfer of the
Securities has been made without registration under the Securities Act or that
the Securities can be sold pursuant to Rule 144(k) without any restriction as to
the number of securities acquired as of a particular date that can then be
immediately sold, and provides such representations that the Company shall
reasonably request confirming compliance with the requirements of Rule 144, the
Company shall permit the transfer, and, in the case of the Conversion Shares and
the Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates, or credit shares to one or more balance accounts at DTC, in such
name and in such denominations as specified by such Buyer and without any
restrictive legend. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyers by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5, that the
Buyers shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required.
SECTION 6. Conditions to the Company's Obligation to Close. The
obligation of the Company to issue and sell the Notes and the Warrants to each
respective Buyer at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived
18
by the Company at any time in its sole discretion by providing such Buyer with
prior written notice thereof, and provided further such waiver shall not be
effective against any other Buyer who does not consent in writing:
(a) Transaction Documents. Such Buyer shall have executed each of the
Transaction Documents to which it is a party and delivered the same to the
Company.
(b) Payment of Purchase Price. Such Buyer shall have delivered to the
Company the purchase price for the Notes and the Warrants being purchased by
such Buyer at the Closing, by wire transfer of immediately available funds
pursuant to the wire instructions attached hereto as Schedule A.
(c) Representations and Warranties; Covenants. The representations and
warranties of such Buyer shall be true, correct and complete in all material
respects (except to the extent that any of such representations and warranties
is already qualified as to materiality in Section 2 above, in which case such
representations and warranties shall be true, correct and complete without
further qualification) as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date (which shall be true, correct and complete as of such
date)), and such Buyer shall have performed, satisfied and complied with in all
material respects the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by such Buyer
at or prior to the Closing Date.
(d) Investor Questionnaires. Such Buyer shall have completed an
investor questionnaire and the Company shall be reasonably satisfied with such
Buyer's declaration in the investor questionnaire of its status as an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D
under the Securities Act.
SECTION 7. Conditions to Each Buyer's Obligation to Purchase. The
obligation of each Buyer hereunder to purchase the Notes and the Warrants from
the Company at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion by providing the Company with prior written
notice thereof:
(a) Transaction Documents. The Company shall have executed each of the
Transaction Documents and delivered the same to such Buyer.
(b) No Delisting of Common Stock. The Common Stock (i) shall be
designated for quotation or listed on the Principal Market and (ii) shall not
have been suspended by the Commission or the Principal Market from trading on
the Principal Market nor shall suspension by the Commission or the Principal
Market have been threatened either (A) in writing by the Commission or the
Principal Market or (B) by falling below the minimum listing maintenance
requirements of the Principal Market.
(c) Representations and Warranties; Covenants. The representations and
warranties of the Company shall be true, correct and complete in all material
respects (except to the extent that any of such representations and warranties
is already qualified as to materiality in Section 3 of
19
this Agreement, in which case such representations and warranties shall be true,
correct and complete without further qualification) as of the date when made and
as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date (which shall be true, correct
and complete as of such date)) and the Company shall have performed, satisfied
and complied with in all material respects the covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or
complied with by the Company at or prior to the Closing Date. Such Buyer shall
have received a certificate, executed by the Chief Executive Officer of the
Company, dated as of the Closing Date, to the foregoing effect.
(d) Opinion of Counsel. The Company shall have delivered to such Buyer
the opinion of Xxxxxxxxxx Xxxxx & Xxxxxx, P.C., dated as of the Closing Date, in
the form of Exhibit G attached hereto.
(e) Delivery of Notes and Warrants. The Company shall have executed and
delivered to such Buyer the Notes and the Warrants (in such denominations as
such Buyer shall reasonably request) for the Notes and the Warrants being
purchased by such Buyer at the Closing.
(f) Reservation of Common Stock. As of the Closing Date, the Company
shall have reserved out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversion of the Notes and the exercise of the
Warrants, the number of shares of Common Stock equal to the Reservation Amount
(as defined in Section 4(e) of this Agreement).
(g) Irrevocable Transfer Agent Instructions. The Company shall have
delivered the Irrevocable Transfer Agent Instructions, in the form of Exhibit F
attached hereto, to the Company's transfer agent.
(h) Good Standing Certificates. The Company shall have delivered to
Xxxxx Xxxxxxx (i) a certificate evidencing the incorporation and good standing
of the Company in Delaware issued by the Secretary of State of Delaware as of a
recent date; and (ii) a certificate of good standing (or appropriate
counterpart) from the appropriate governmental authority in each domestic
jurisdictions in which Operating Subsidiaries are incorporated or organized as
of a recent date.
(i) Secretary's Certificate. The Company shall have delivered to such
Buyer a secretary's certificate, dated as of the Closing Date, certifying as to
(i) adoption of the form of resolutions of the Board of Directors of the Company
consistent with Section 3(b) of this Agreement and in a form reasonably
acceptable to such Buyer, (ii) the Certificate of Incorporation and (iii) the
Bylaws, each as in effect at the Closing.
(j) Filings; Authorizations. The Company shall have made all filings
under all applicable federal and state securities laws necessary to consummate
the issuance of the Securities pursuant to this Agreement in compliance with
such laws, and shall have obtained all authorizations, approvals and permits
necessary to consummate the transactions contemplated by the Transaction
Documents and such authorizations, approvals and permits shall be effective as
of the Closing Date.
(k) No Injunctions. No temporary restraining order, preliminary or
permanent injunction or other order or decree, and no other legal restraint or
prohibition shall exist which prevents or
20
arguably prevents the consummation of the transactions contemplated by the
Transaction Documents, nor shall any proceeding have been commenced or
threatened with respect to the foregoing.
(l) No Material Adverse Effect. Between the time of execution of this
Agreement and the Closing Date, (i) no Material Adverse Effect shall occur or
become known (whether or not arising in the ordinary course of business) and
(ii) no transaction which is material and unfavorable to the Company shall have
been entered into by the Company.
(m) Payment of Fees. The Company shall have satisfied its obligations
under Section 9(p) of this Agreement.
(n) Minimum Offering. The Company shall have confirmed in writing to
the Buyers that it will be issuing at least an aggregate of $15,000,000
principal amount of Notes and Warrants to the Buyers on the Closing Date.
(o) Comfort Letter. The Company's independent accountants shall have
delivered to the Buyers a letter in form and substance reasonably acceptable to
the Buyers and reasonably customary in scope and substance for comfort letters
delivered by independent accountants in connection with offerings similar to the
Offering.
SECTION 8. Indemnification.
(a) Indemnification by the Company. In consideration of each Buyer's
execution and delivery of the Transaction Documents and acquiring the Securities
thereunder and Xxxxx Xxxxxxx'x agreement to act as exclusive placement agent and
in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless Xxxxx
Xxxxxxx and each Buyer and each other holder of the Securities and all of their
shareholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (collectively, "Claims"), incurred
by any Indemnitee as a result of, or arising out of, or relating to an untrue
statement or alleged untrue statement of a material fact contained in the
Confidential Private Placement Memorandum, or in any amendment or supplement
thereto, or in any Blue Sky filings executed by the Company or based on any
information furnished in writing by the Company and filed in any jurisdiction in
order to qualify any or all of the Securities under (or obtain exemption from)
the securities laws thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law. Subject
to Section 8(b) of this Agreement, the Company shall reimburse the
21
Indemnitees, promptly as such expenses are incurred and are due and payable, for
any legal fees or other reasonable expenses incurred by them in connection with
the investigating or defending any such Claim.
(b) Procedures for Indemnification. Promptly after an Indemnitee has
knowledge of any Claim as to which such Indemnitee reasonably believes indemnity
may be sought or promptly after such Indemnitee receives notice of the
commencement of any action or proceeding (including any governmental action or
proceeding) involving a Claim, such Indemnitee shall, if a Claim in respect
thereof is to be made against the Company under this Section 8, deliver to the
Company a written notice of such Claim, and the Company shall have the right to
participate in, and, to the extent the Company so desires, to assume control of
the defense thereof with counsel mutually satisfactory to the Company and the
Indemnitee; provided, however, that an Indemnitee shall have the right to retain
its own counsel if, in the reasonable opinion of counsel retained by the
Company, the representation by such counsel of the Indemnitee and the Company
would be inappropriate due to actual or potential differing interests between
such Indemnitee and the Company; provided, further, that the Company shall not
be responsible for the reasonable fees and expense of more than one (1) separate
legal counsel for such Indemnitee. In the case of an Indemnitee, the legal
counsel referred to in the immediately preceding sentence shall be selected by
the Investors holding at least a majority in interest of the Securities to which
the Claim relates. The Indemnitee shall cooperate fully with the Company in
connection with any negotiation or defense of any such action or Claim by the
Company and shall furnish to the Company all information reasonably available to
the Indemnitee which relates to such action or Claim. The Company shall keep the
Indemnitee fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. The Company shall not be liable
for any settlement of any Claim effected without its prior written consent;
provided, however, that the Company shall not unreasonably withhold, delay or
condition its consent. The Company shall not, without the prior written consent
of the Indemnitee, consent to entry of any judgment or enter into any settlement
or other compromise which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnitee of a full release from
all liability in respect to such Claim and action and proceeding. The failure to
deliver written notice to the Company as provided in this Agreement shall not
relieve the Company of any liability to the Indemnitee under this Section 8,
except to the extent that the Company is materially prejudiced in its ability to
defend such action.
(c) Survival of Indemnification Obligations. The obligations of the
Company under this Section 8 shall survive the transfer of the Securities by the
Indemnitees.
SECTION 9. Miscellaneous.
(a) Governing Law; Jurisdiction. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of
22
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(b) Counterparts. This Agreement may be executed in identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other parties hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
(c) Headings. The headings of this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(d) Entire Agreement. This Agreement, the Registration Rights
Agreement, the Notes and the Warrants and the documents referenced herein and
therein constitute the entire agreement among the parties hereto with respect to
the subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the Registration Rights Agreement, the Notes and the
Warrants supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
(e) Consents. All consents and other determinations required to be made
by Investors pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by Investors holding at least a majority of the
Conversion Shares and Warrant Shares, determined as if all of the Notes held by
Buyers then outstanding have been converted into Conversion Shares and all
Warrants then outstanding have been exercised for Warrant Shares without regard
to any limitations on conversion of the Notes or on the exercise of the
Warrants.
(f) Waivers. No provision of this Agreement may be amended or waived
other than by an instrument in writing signed by the Company and Investors
holding at least a majority of the Conversion Shares and Warrant Shares,
determined as if all of the Notes held by Buyers then outstanding have been
converted into Conversion Shares and all Warrants then outstanding have been
exercised for Warrant Shares without regard to any limitations on the conversion
of the Notes or on the exercise of the Warrants. No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Notes then outstanding. No consideration shall be offered or paid to any holder
of any Securities who is an "affiliate" (as defined in Rule 501(b) of Regulation
D under the Securities Act) to amend or consent to a waiver or modification of
any provision of any of the Transaction Documents unless the same consideration
is offered to all of the holders of such Securities.
(g) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (evidenced by
mechanically or electronically generated receipt by the sender's facsimile
machine); or (iii) one (1) Business Day after deposit with a nationally
recognized
23
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
Champps Entertainment, Inc.
00000 Xxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxx
with a copy to:
Xxxxxxxxxx Xxxxx & Xxxxxx, P.C.
000 Xxxxxxxxxxx Xxxxxx, Xxxxxx-Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
If to U.S. Bancorp Xxxxx Xxxxxxx:
U.S. Bancorp Xxxxx Xxxxxxx
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxx Xxxxxxxxx
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxxxxxxxxx Xxxxxx XX
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxx, Esq.
If to a Buyer, to its address and facsimile number set forth on the
Schedule of Buyers attached hereto as Exhibit A, with copies to such Buyer's
representatives as set forth on the Schedule of Buyers, or at such other address
and/or facsimile number and/or to the attention of such other person as the
recipient party has specified by written notice given to each other party.
(h) Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other
24
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
(i) Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person other than Xxxxx Xxxxxxx.
(j) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(k) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Securities. The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the holders of at least a majority of the outstanding principal
amount of the Notes including by merger or consolidation, except pursuant to a
Change of Control (as defined in the Notes) with respect to which the Company is
in compliance with the terms of the Notes. Other than in connection with a sale
pursuant to the Registration Rights Agreement, a Buyer may assign some or all of
its rights and obligations hereunder without the consent of the Company;
provided, however, that the transferee has agreed in writing to be bound by the
applicable provisions of this Agreement and provided, further, that such
assignment shall be in connection with a transfer of all or a portion of the
Notes and Warrants held by such Buyer and subject to the terms and conditions of
the Warrants and Notes, as applicable.
(l) Survival. Unless this Agreement is terminated under Section 9(n) of
this Agreement, the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3 of this Agreement, the indemnification provisions
set forth in Section 8 of this Agreement, and the agreements and covenants set
forth in Sections 4, 5 and 9 of this Agreement shall survive with respect to
each Note or Warrant for so long as such Note or Warrant is outstanding and with
respect to each Conversion Share or Warrant Share until such Conversion Share or
Warrant Share (x) has been transferred or sold pursuant to an effective
registration statement, or (y) has been transferred or sold pursuant to the
exemption from registration provided by Rule 144 under the Securities Act. Each
Buyer shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.
(m) Publicity. The Company and Xxxxx Xxxxxxx shall have the right to
approve before issuance any press releases or any other public statements with
respect to the transactions contemplated by the Transaction Documents; provided,
however, that neither the Company nor Xxxxx Xxxxxxx shall have the right to
issue a press release referring to a Buyer or its affiliates without such
Buyer's prior written consent. Xxxxx Xxxxxxx has the right to describe its
services to the Company in connection with the Offering and to reproduce the
Company's name and logo in Xxxxx Xxxxxxx'x advertisements, marketing materials
and equity research reports, if any, in the form previously approved by the
Company and subject to the prior approval of the Company,
25
which shall not be unreasonably withheld, such additional uses as Xxxxx Xxxxxxx
may from time to time request.
(n) Termination. In the event that the Closing shall not have occurred
with respect to a Buyer on or before five (5) Business Days from the date hereof
due to the Company's or such Buyer's failure to satisfy the conditions set forth
in Sections 6 and 7 of this Agreement (and the nonbreaching party's failure to
waive such unsatisfied conditions), the nonbreaching party shall have the option
to terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party, and the
Company or Xxxxx Xxxxxxx, as the case may be, shall return any and all funds
paid hereunder to the applicable Buyer no later than the close of business on
the Business Day following such termination; provided, however, that if this
Agreement is terminated pursuant to this Section 9(o), the Company shall remain
obligated to reimburse any nonbreaching Buyer for the expenses described in
Section 4(i) of this Agreement.
(o) Placement Agent. The Company acknowledges that it has engaged U.S.
Bancorp Xxxxx Xxxxxxx Inc. as placement agent in connection with the sale of the
Notes and the Warrants and that the compensation of such agent is as set forth
on the Schedule of Fees attached hereto as Exhibit D. The Company shall be
responsible for the payment of any placement agent's fees, financial advisory
fees, or brokers' commissions (other than for persons engaged by any Buyer or
its investment advisor) relating to or arising out of the transactions
contemplated hereby. The Company shall pay, and hold each Buyer harmless
against, any liability, loss or expense (including, without limitation,
attorney's fees and out-of-pocket expenses) arising in connection with any such
claim.
(p) Remedies. Each Buyer and each holder of the Securities shall have
all rights and remedies set forth in the Transaction Documents and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any person having any rights under any provision of this Agreement shall be
entitled to enforce such rights to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by law.
(q) Payment Set Aside. To the extent that the Company makes a payment
or payments to any Buyer hereunder or pursuant to any of the other Transaction
Documents, or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
26
IN WITNESS WHEREOF, the parties have caused this Securities Purchase
Agreement to be duly executed as of the date first written above.
"COMPANY"
CHAMPPS ENTERTAINMENT, INC.
By:
--------------------------------
ACKNOWLEDGED AND AGREED:
"XXXXX XXXXXXX"
U.S. BANCORP XXXXX XXXXXXX
By:
-------------------------------
Its:
-----------------------------
[Signatures of Buyers on Following Page]
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
"BUYER"
----------------------------------------------
(print full legal name of Buyer)
By:
------------------------------------------
(signature of authorized representative)
Name:
----------------------------------------
Its:
-----------------------------------------
Buyer hereby opts out of the application of
Section 2(k)(A):
By:
------------------------------------------
(signature of authorized representative)
Buyer hereby opts out of the application of
Section 2(k)(B):
By:
-------------------------------------------
(signature of authorized representative)
EXHIBIT A
---------
SCHEDULE OF BUYERS
------------------
EXHIBIT B
---------
FORM OF NOTE
------------
EXHIBIT C
---------
FORM OF WARRANT
---------------
EXHIBIT D
---------
SCHEDULE OF FEES
----------------
EXHIBIT E
---------
FORM OF REGISTRATION RIGHTS AGREEMENT
-------------------------------------
EXHIBIT F
---------
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
-----------------------------------------------
December 16, 2002
VIA FEDERAL EXPRESS
American Stock Transfer and Trust Company
0000 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxxx
Re: Reservation of Shares of Common Stock Pursuant to Sale by
Champps Entertainment, Inc. of up to $15,000,000 in Aggregate
Principal Amount of 5.50% Convertible Subordinated Notes due
2007 and Warrants to Purchase up to 351,782 Shares of Common
Stock
Ladies and Gentlemen:
Champps Entertainment, Inc., a Delaware corporation (the "Company"),
has agreed (i) to sell to the buyers listed on Schedule A hereto (the "Buyers"),
on the date hereof, Fifteen Million United States Dollars ($15,000,000) in
aggregate principal amount of 5.50% Convertible Subordinated Notes due 2007 (the
"Notes"), convertible into shares of the common stock, $0.01 par value per share
(the "Common Stock") of the Company, and warrants (the "Buyer Warrants") to
purchase 351,782 shares of Common Stock, pursuant to that certain Securities
Purchase Agreement dated as of December 12, 2002, by and among the Company and
each Buyer (the "Securities Purchase Agreement"), and (ii) to issue to U.S.
Bancorp Xxxxx Xxxxxxx ("Xxxxx Xxxxxxx") a warrant to purchase the number of
shares of Common Stock set forth in the Schedule of Fees attached as Exhibit D
to the Securities Purchase Agreement (the "Xxxxx Xxxxxxx Warrant" and, together
with the Buyer Warrants, the "Warrants"). Capitalized terms used herein without
definition have the meanings assigned to them in the Securities Purchase
Agreement.
You are hereby instructed to:
Establish as of the date of this letter a reserve of 1,477,486 shares
of Common Stock for issuance to holders of Notes upon conversion of their Notes
(the "Conversion Share Reserve"). The Conversion Share Reserve shall be adjusted
to appropriately reflect the effect of any stock split, reverse stock split,
stock dividend (including any dividend or distribution of securities convertible
into Common Stock), reorganization, recapitalization, reclassification, exchange
or other like change with respect to Common Stock occurring on or after the date
hereof.
Establish as of the date of this letter a reserve of 406,308 shares of
Common Stock for issuance to holders of Warrants upon exercise of their Warrants
(the "Warrant Share Reserve"). The Warrant Share Reserve shall be adjusted to
appropriately reflect the effect of any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities convertible into
Common Stock), reorganization, recapitalization, reclassification, exchange or
other like change with respect to Common Stock occurring on or after the date
hereof.
A registration statement on Form S-3 to register the Common Stock
issuable out of the Conversion Share Reserve and the Warrant Share Reserve (the
"Registration Statement") will be filed with the Securities and Exchange
Commission (the "Commission") on or before January 15, 2003. We will forward to
you copies of the filing promptly after it is declared or deemed effective by
the Commission.
Until the Registration Statement is declared effective by the
Commission, the certificates evidencing the shares of Common Stock issued out of
the Conversion Share Reserve or the Warrant Share Reserve will bear the
restrictive legend set forth below:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM. THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN SECURED BY THE SECURITIES.
Until the Registration Statement is declared effective by the
Commission, certificates evidencing shares of Common Stock held by or
transferred to an "affiliate" (as defined in Rule 501(b) of Regulation D under
the Securities Act) of the Company will bear the restrictive legend set forth
below:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO
MAY BE DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY BE SOLD ONLY IN COMPLIANCE WITH RULE 144,
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO A VALID EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT.
So long as you have previously received (i) an opinion of the Company's
outside counsel (which the Company shall direct be delivered to you by such
outside counsel upon the effectiveness of the Registration Statement covering
the resales of the Common Stock) stating that a Registration Statement covering
the resales of the Common Stock has been declared effective by the Commission
under the Securities Act (the "Opinion"), (ii) a certification from the clearing
broker for the Buyers as to compliance with the prospectus delivery requirements
and as to the fact that the sale of the Common Stock was made in compliance with
the Plan of Distribution set forth in the Registration Statement (the "Broker
Certification"), (iii) a copy of the Registration Statement and (iv)
confirmation from the Company that sales are permitted under the Registration
Statement at that time, the certificates representing the Common Stock sold
pursuant to the Registration Statement shall not bear any legend restricting
transfer of the Common Stock thereby and should not be subject to any
stop-transfer restriction.
We enclose the following additional documents:
1. A copy of the Securities Purchase Agreement; and
2. A capitalization table listing the Buyers and Xxxxx Xxxxxxx
and their respective beneficial ownership interests in the
shares of Common Stock.
Please be advised that the Buyers have relied upon this instruction
letter as an inducement to enter into the Securities Purchase Agreement and,
accordingly, each of the Buyers is a third party beneficiary to these
instructions.
Please sign in the space provided below to evidence your acceptance and
acknowledgment of your responsibilities under this letter. Please call me at
(000) 000-0000 if you require any further information. Thank you for your
assistance.
Very truly yours,
CHAMPPS ENTERTAINMENT, INC.
--------------------------------------
Its:
----------------------------------
Acknowledged and Agreed:
AMERICAN STOCK TRANSFER AND TRUST COMPANY
By:
-----------------------------
Its:
cc: Xx. Xxxxx X. Xxxxxxxxx (w/o encl.)
Enclosures
EXHIBIT G
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FORM OF COMPANY COUNSEL OPINION
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The Company is a corporation validly existing in good standing under
the laws of the State of Delaware, with all requisite corporate power and
authority to own, lease and operate its properties and assets, to conduct its
business as described in the Confidential Private Placement Memorandum, and to
enter into and perform its obligations under the Transaction Documents.
The Operating Subsidiaries are corporations validly existing in good
standing under the laws of their respective jurisdictions of incorporation, with
all requisite corporate power and authority to own, lease and operate its
properties and assets, to conduct their businesses as described in the
Confidential Private Placement Memorandum.
The execution, delivery and performance of the Transaction Documents
have been duly authorized by all necessary corporate action on the part of the
Company and the Transaction Documents have been duly executed and delivered by
the Company.
The Transaction Documents constitute the legally valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except (i) as rights to indemnification and contribution may be
limited by federal or state securities laws and policies underlying such laws
and (ii) as such enforceability may be limited by general principles of equity
or applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
The execution and delivery by the Company of the Transaction Documents
do not, and the Company performance of its obligations under the Transaction
Documents will not, (i) violate the Company's Certificate of Incorporation or
By-Laws, (ii) violate, breach or result in a default under, any existing
obligation of or restrictions on the Company under any other agreement listed in
an exhibit to the Company's most recent annual report on Form 10-K or any
quarterly report on Form 10-Q filed since such annual report, (iii) breach or
otherwise violate any existing obligation of or restriction on the Company under
any order, judgment or decree of any state or federal court or governmental
authority binding on the Company, and known to us, or (iv) to our knowledge,
violate any current Delaware or New York federal statute, rule or regulation
that we have recognized as applicable to the Company or to transactions of the
type contemplated by the Transaction Documents.
The Notes have been duly authorized by all necessary corporate action
on the part of the Company and, upon payment for and delivery of the Notes in
accordance with the Securities Purchase Agreement, to our knowledge will be made
and issued free of preemptive or similar rights.
The Warrants have been duly authorized by all necessary corporate
action on the part of the Company and, upon payment for and delivery of the
Warrants in accordance with the
Securities Purchase Agreement, the Warrants will be validly issued, fully paid,
and nonassessable and to our knowledge, free of preemptive or similar rights.
The Conversion Shares have been duly authorized and reserved for
issuance upon conversion of the Notes by all necessary corporate action on the
part of the Company and, upon conversion of the Notes and delivery of the
Conversion Shares in accordance with the Notes, the Conversion Shares will be
validly issued, fully paid and nonassessable and to our knowledge, free of
preemptive or similar rights.
The Warrant Shares have been duly authorized and reserved for issuance
upon exercise of the Warrants by all necessary corporate action on the part of
the Company and, upon payment of the exercise price upon exercise of the
Warrants and delivery of the Warrant Shares in accordance with the Warrants, the
Warrant Shares will be validly issued, fully paid, and nonassessable and to our
knowledge, free of preemptive or similar rights.
No order, consent, permit or approval of any Delaware, New York or
federal governmental authority that we have recognized as applicable and
material to the Company or to the transactions of the type contemplated by the
Transaction Documents is required on the part of the Company for the execution
and delivery of, and performance of its obligations under, the Transaction
Documents except as may be required under applicable state and federal
securities laws and regulations applicable to the offer and sale of the
Securities and by federal and state securities laws with respect to the
Company's obligations under the Registration Rights Agreement.
Assuming the accuracy of your representations in Section 2 of the
Securities Purchase Agreement and the representations made by Xxxxx Xxxxxxx in
the Placement Agent Certificate, no registration under the Securities Act is
required for the purchase and sale of the Notes and the Warrants or the issuance
to Xxxxx Xxxxxxx of the Xxxxx Xxxxxxx Warrants in the manner contemplated by the
Securities Purchase Agreement and the Confidential Private Placement Memorandum.
Assuming that the exemption provided by Section 3(a)(9) of the Securities Act of
1933 would be available, no registration under the Securities Act will be
required for the issuance of the Conversion Shares and the Warrant Shares in the
manner contemplated by the Note and the Warrant, respectively.
We do not know of any contract or other document of a character
required to be filed as an SEC Document which is not filed as required.
The SEC Documents incorporated by reference in the Confidential Private
Placement Memorandum, on the respective dates they were filed, appeared on their
face to comply in all material respects with the requirements as to form for
reports on Form 10-K, Form 10-Q, Form 8-K and Schedule 14-A, except that we
express no opinion concerning the financial statements and other financial or
statistical information contained or incorporated by reference therein or the
exhibits thereto.
In the course of acting as counsel for the Company in connection with
the preparation by the Company of the Confidential Private Placement Memorandum,
we have participated in conferences with officers and representatives of the
Company, the independent accountants of
the Company, and representatives of Xxxxx Xxxxxxx and their counsel, at which
time the contents of the Confidential Private Placement Memorandum and related
matters were discussed. Although we are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Confidential Private Placement Memorandum, based on such
participation, no facts have come to our attention that would lead us to believe
that the Confidential Private Placement Memorandum (except that we express no
view with respect to the financial statements, including the notes thereto, and
schedules or other financial data included therein or the exhibits contained in
the SEC Documents) as of the date thereof contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading.
SCHEDULE 3(a)
Subsidiaries
1. Champps Operating Corporation
2. Champps of Maryland, Inc.
3. Champps Entertainment of Texas, Inc.
SECTION 1. Purchase and Sale of Notes and Warrants ......................... 2
SECTION 2. Buyer's Representations and Warranties .......................... 2
SECTION 3. Representations and Warranties of the Company ................... 6
SECTION 4. Covenants ....................................................... 13
SECTION 5. Transfer Agent Instructions ..................................... 17
SECTION 6. Conditions to the Company's Obligation to Close ................. 18
SECTION 7. Conditions to Each Buyer's Obligation to Purchase ............... 18
SECTION 8. Indemnification ................................................. 20
SECTION 9. Miscellaneous ................................................... 21
SCHEDULES
Schedule 3(a) .................. Subsidiaries
Schedule A ..................... Company Wire Instructions
EXHIBITS
Exhibit A ...................... Schedule of Buyers
Exhibit B ...................... Form of Note
Exhibit C ...................... Form of Warrant
Exhibit D ...................... Schedule of Fees
Exhibit E ...................... Form of Registration Rights Agreement
Exhibit F ...................... Form of Irrevocable Transfer Agent Instructions
Exhibit G ...................... Form of Company Counsel Opinion
