Exhibit 10
STOCK PURCHASE
AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this
“ Agreement ”) is made and entered into
as of March 8, 2007, by and between Granite City Food & Brewery
Ltd., a Minnesota corporation (the “ Company
”), and each of the purchasers set forth on the signature
page hereof (each, an “ Investor ” and
collectively, the “ Investors
”).
1.
Authorization of Issuance and
Sale of Shares .
Subject to the terms and conditions of this Agreement and the Term
Sheet dated March 2, 2007 (the “ Term Sheet
”), the Company has authorized the offer and sale by the
Company of up to 2,617,334 shares (the “ Shares
”) of its common stock, $0.01 par value per share (the
“ Common Stock ”) (the “
Offering ”).
2.
Agreements to Sell and
Purchase . On the
basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company
hereby agrees to sell to the Investors, and each Investor agrees to
purchase from the Company, the number of Shares of Common Stock set
forth immediately next to its name on the signature page hereto at
the aggregate purchase price set forth immediately next to such
Investor’s name on the signature page hereto (the “
Purchase Price ”).
3.
Payment and Delivery
. Payment for the Shares
purchased by each Investor shall be made by such Investor to the
Company in federal or other funds immediately available in New York
City (such payment hereinafter referred to as the “
Closing ”) at 10:00 a.m., New York City time,
on March 8, 2007, or at such other time on the same or such other
date, not later than March 15, 2007, as shall be agreed in writing
by the Company and KeyBanc Capital Markets, a division of McDonald
Investments Inc. (“ KeyBanc ”) and
Craig-Hallum Capital Group LLC (“ Craig Hallum
”), in their capacity as agents of the Company in connection
with the sale of the Shares contemplated hereby (each a “
Placement Agent ” and collectively, the “
Placement Agents ”). The time and date of
such payment is hereinafter referred to as the “
Closing Date .” Except where alternative
settlement arrangements have been agreed to with an Investor,
payment by each Investor for such Shares shall be made through an
escrow agent on terms and instructions set forth in an Escrow
Agreement dated as of February 23, 2007, among the Company,
KeyBanc and Associated Trust Company, N.A., as escrow
agent.
Certificates for the Shares
purchased by each Investor shall be registered in the name of such
Investor or if so indicated on the signature page hereto, in the
name of a nominee designated by such Investor. A facsimile
copy of the certificate evidencing the Shares purchased by each
Investor shall be delivered to such Investor on the Closing Date
and the original certificate evidencing the Shares purchased by
each Investor shall be delivered to such Investor by overnight
courier within one trading day of the Closing Date, except where
alternative settlement arrangements have been agreed to with an
Investor, with any transfer taxes payable in connection with the
issuance of such Shares to such Investor duly paid by or on behalf
of the Company, against payment of the Purchase Price
therefor.
4.
Conditions to the Company’s
Obligations . The
Company’s obligation to issue and sell the Shares to each
Investor is subject to the following conditions:
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(a)
receipt by the Company of federal or
other immediately available funds in the full amount of the
Purchase Price for the Shares to be sold to each Investor
hereunder; and
(b)
the representations and warranties
of each Investor contained in this Agreement being true and correct
in all material respects on and as of the Closing Date with the
same effect as though such representations and warranties had been
made on and as of the Closing Date, and the fulfillment in all
material respects of those undertakings of each Investor to be
fulfilled prior to the Closing Date.
5.
Conditions to the
Investor’s Obligations . The obligation of each Investor to
purchase and pay for Shares on the Closing Date is subject to the
following conditions, any one or more of which may be waived in
writing at any time by such Investor:
(a)
delivery to such Investor on the
Closing Date of an opinion of Briggs and Morgan, Professional
Association, counsel to the Company, dated the Closing Date,
substantially in the form set forth in Exhibit A
hereto;
(b)
the representations and warranties
of the Company contained in this Agreement being true and correct
in all material respects on and as of the Closing Date with the
same effect as though such representations and warranties had been
made on and as of the Closing Date (except with respect to
representations and warranties that are made as of a specific date
or period, which shall continue to be true and correct in all
material respects as of the respective dates and for the respective
periods covered);
(c)
absence of any order, writ,
injunction, judgment or decree that could negatively affect the
validity of this Agreement or the right of the Company to enter
into this Agreement or to consummate the transactions contemplated
hereby;
(d)
receipt by such Investor on the
Closing Date of a certificate, dated the Closing Date and signed by
the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that the conditions set forth in clauses (b)
and (c) of this Section 5 have been fulfilled;
(e)
receipt by such Investor on the
Closing Date of a facsimile copy of the certificate evidencing the
Shares purchased by such Investor (with the original certificate to
be delivered by overnight courier); and
6.
Representations, Warranties and
Covenants of the Company . The Company represents and warrants to,
and covenants with, the Investor that as of the date of this
Agreement and as of the Closing Date:
(a)
The Company’s Annual Report on
Form 10-K for the fiscal year ended December 26, 2006 (the
“ 2006 Annual Report ”) filed with the
Securities and Exchange Commission (the “
Commission ”) on February 21, 2007 does
not as
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of the date hereof contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading. The 2006 Annual Report
complied when filed as to form in all material respects with the
Securities Exchange Act of 1934, as amended (the “
Exchange Act ”) and the applicable rules and
regulations of the Commission thereunder (the “
Exchange Act Regulations ”), except for those
portions to be incorporated by reference to specified portions of
the Company’s definitive proxy statement for the annual
meeting of shareholders to be held in June 2007.
(b)
The Term Sheet and the written
presentation to Investors made by the Company’s management
(the “ Investor Presentation ”) as
amended to the date hereof, do not as of the date hereof contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not
misleading.
(c)
The Company is eligible to register
the resale of the Shares in a secondary offering on a registration
statement on Form S-3 under the Securities Act of 1933, as amended
(the “ Securities Act ”) and the
applicable rules and regulations of the Commission thereunder (the
“ Securities Act Regulations ”).
The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of Minnesota, with
corporate power and authority to own or lease its properties and
conduct its business as currently conducted and as described in the
2006 Annual Report. Each of the subsidiaries listed on
Exhibit 21 of the 2006 Annual Report (collectively, the
“ Subsidiaries ”) has been duly
incorporated and is validly existing as a corporation or other
entity in good standing under the laws of the jurisdiction of its
organization, with the power and authority to own or lease its
properties and conduct its business as currently conducted and as
described in the 2006 Annual Report. Each Subsidiary operates
or will operate a particular restaurant. The Company and the
Subsidiaries are duly qualified to transact business and are in
good standing in all jurisdictions in which the conduct of their
respective businesses or the ownership or leasing of their property
requires such qualification, except in such jurisdictions where the
failure to be so qualified or to be in good standing would not have
a Material Adverse Effect. For purposes of this Agreement,
the term “Material Adverse Effect” means a material
adverse effect on (i) the condition (financial or otherwise),
properties, assets, liabilities, rights, operations, earnings,
business, management or prospects of the Company and the
Subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, (ii) the
transactions contemplated by this Agreement or (iii) the authority
or the ability of the Company to perform its obligations under this
Agreement.
(d)
The outstanding shares of capital
stock of each of the Subsidiaries have been duly authorized and
validly issued, are fully paid and non-assessable and, except as
set forth on Schedule 6(d), are wholly owned by the Company or
another Subsidiary free and clear of all liens, encumbrances,
equities and claims. There are no outstanding rights
(including, without limitation, preemptive rights), warrants or
options to acquire, or instruments convertible into or
exchangeable
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for, any unissued shares of capital
stock or other equity interest in any of the Subsidiaries, or any
contract, commitment, agreement, understanding or arrangement of
any kind, in each case to which the Company or any Subsidiary is a
party and providing for the issuance or sale of any capital stock
of that Subsidiary, any such convertible or exchangeable securities
or any such rights, warrants or options. The Company retains
and will retain all of the net profits from its
Subsidiaries.
(e)
This Agreement has been duly
authorized, executed and delivered by the Company, and constitutes
a valid, legal, and binding obligation of the Company, enforceable
in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws
affecting the rights of creditors generally, and subject to general
principles of equity. The Company has full power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder.
(f)
Neither the Company nor any of the
Subsidiaries is or with the giving of notice or lapse of time or
both, will be, in violation of or in default under its Articles of
Incorporation (the “ Articles ”) or
bylaws or under any agreement, lease, contract, indenture or other
instrument or obligation to which it is a party or by which it is
bound or to which any of its properties or assets are subject, and
which violation or default has had or is reasonably likely to have
a Material Adverse Effect. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
herein, including without limitation the issuance and sale of the
Shares, and the fulfillment of the terms of this Agreement will not
(i) violate (A) any statute, rule or regulation of governmental
agency or authority applicable to the Company or any of the
Subsidiaries, or (B) any order applicable to the Company or any of
the Subsidiaries (or any of properties or assets of the Company or
any Subsidiary) of any court or of any regulatory body or
administrative agency or other governmental body, except where any
such violation would not have a Material Adverse Effect, (ii)
conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, any contract,
indenture, mortgage, deed of trust or other agreement or instrument
to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound or to which
any of the Company’s or any Subsidiary’s properties or
assets are subject, except where any such conflict, breach or
default would not have a Material Adverse Effect, (iii) conflict
with any provisions of the Articles or bylaws of the Company, or
(iv) violate any of the Marketplace Rules of the Nasdaq Stock
Market ( “ NASDAQ ” ) applicable to the
Company.
(g)
Each approval, consent, order,
authorization, designation, declaration or filing by or with any
regulatory, administrative or other governmental body necessary in
connection with the execution and delivery by the Company of the
Agreement and the consummation of the transactions herein
contemplated (except such as may be required by (i) federal
securities laws, (ii)
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state securities laws, or (iii) the
Marketplace Rules of NASDAQ) has been obtained or made and is in
full force and effect.
(h)
The outstanding shares of Common
Stock of the Company have been duly authorized and validly issued
and are fully paid and non-assessable, the Shares have been duly
authorized and when issued and paid for as contemplated in the
Agreement will be validly issued, fully paid and
non-assessable. The Company’s capitalization is
specified on Schedule 6(h). Except as disclosed on Schedule
6(h), there are no outstanding warrants or options to acquire, or
instruments convertible into or exchangeable for, any unissued
shares of capital stock or other equity interest in the Company, or
any contract, commitment, agreement, understanding or arrangement
of any kind, in either case to which the Company is a party and
providing for the issuance or sale of any capital stock of the
Company, any such convertible or exchangeable securities or any
such rights, warrants or options.
(i)
Except as disclosed in the 2006
Annual Report, no preemptive right, co-sale right, registration
right, right of first refusal or other similar right exists with
respect to the issuance and sale of the Shares, the registration
for resale of the Shares or any other transactions contemplated by
the Agreement. There are no stockholders agreements, voting
agreements or other similar agreements with respect to the Common
Stock to which the Company is a party.
(j)
The form of certificates for the
Shares conforms to the requirements of the laws of
Minnesota.
(k)
To the Company’s knowledge,
there are no legal, governmental or regulatory actions, suits,
claims or proceedings pending to which the Company or any of the
Subsidiaries is a party or of which any property of the Company or
any of the Subsidiaries is the subject, which, if determined
adversely to the Company or any of the Subsidiaries, might
individually or in the aggregate reasonably be expected to have a
Material Adverse Effect; to the Company’s knowledge, no such
action, suit, claim or proceeding is threatened or contemplated by
governmental or regulatory authorities or threatened by
others.
(l)
To the Company’s knowledge,
the Company and each Subsidiary (i) are in compliance in all
material respects with any and all applicable foreign, federal,
state and local laws, orders, rules, regulations, directives,
decrees and judgments relating to the protection of human health
and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants (the “ Environmental
Laws ”); (ii) have received all permits,
licenses, certifications, franchises, clearances or other approvals
required of it under applicable Environmental Laws, to conduct its
business to date as described in the 2006 Annual Report; and
(iii) are in compliance in all material respects with all
terms and conditions of any such permit, license certification,
franchise, clearance or approval, except where such noncompliance
with Environmental Laws, failure to receive required permits,
licenses, certifications, franchises, clearances or
other
5
approvals or failure to comply with
the terms and conditions of such permits, licenses, certifications,
franchises, clearances or approvals would not, individually or in
the aggregate, have a Material Adverse Effect. To the
Company’s knowledge, it is not presently subject to any
costs or liabilities associated with Environmental Laws (including,
without limitation, any capital or operating expenditures required
for clean-up and any potential liabilities to third parties) that
would, individually or in the aggregate, have a Material Adverse
Effect. To the Company’s knowledge, there are no
pending or threatened administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigation or proceedings relating
to any Environmental Law against the Company or any
Subsidiary. To the Company’s knowledge, there are no
events or circumstances that would reasonably be expected to form
the basis of an order for clean-up or remediation, or an action,
suit or proceeding by any private party or governmental body or
agency, against or affecting the Company or any Subsidiary, or any
of its predecessors in interest, relating to hazardous materials or
any Environmental Laws. To the Company’s knowledge, no
property that is or has been owned, leased or occupied by the
Company or any Subsidiary has been designated as a Superfund Site
pursuant to the Comprehensive Environmental Response, Compensation
of Liability Act of 1980, as amended (“ CERCLA
”), or otherwise designated as a contaminated site under
applicable state or local law under circumstances that would be
reasonably likely to have a Material Adverse Effect, and neither
the Company nor any Subsidiary has been named as a
“potentially responsible party” under
CERCLA.
(m)
The Company and the Subsidiaries
have good and marketable title to all property described in the
2006 Annual Report as owned by them, free from mortgages, pledges,
liens, security interests, claims, restrictions, encumbrances and
defects of any kind, except as (i) would not, individually or in
the aggregate, materially affect the value of such property or
materially interfere with the use made or to be made of such
property by them, or (ii) would not, individually or in the
aggregate, reasonably be likely to have a Material Adverse
Effect. All of the leases material to the business of the
Company and the Subsidiaries, and under which the Company or any of
its Subsidiaries holds properties described in the 2006 Annual
Report, are in full force and effect, and neither the Company nor
any Subsidiary has any notice of any material claim of any sort
that has been asserted by anyone adverse to the rights of the
Company or such Subsidiary to the continued possession of the
leased or subleased property under any such lease or sublease,
except in each case as would not, individually or in the aggregate,
reasonably be likely to have a Material Adverse Effect.
(n)
The Company and each of the
Subsidiaries possess all material licenses, certifications,
permits, franchises, approvals, consents, clearances and other
authorizations (“ Permits ”) issued by
appropriate federal, state or local governmental authorities as are
necessary to conduct their respective businesses as currently
conducted and to own, lease and operate their respective properties
in the manner described in the 2006 Annual Report, except where the
failure to have
6
any such Permit would not have a
Material Adverse Effect. There is no claim, proceeding or
controversy, pending or, to the knowledge of the Company,
threatened, involving the status of or sanctions under any of the
Permits. The Company and each of the Subsidiaries have
fulfilled and performed all of their material obligations with
respect to the Permits, and no event has occurred that allows, or
after notice or lapse of time would allow, the revocation,
termination, modification or other impairment of the rights of the
Company or any of the Subsidiaries under any such
Permit.
(o)
The Company and each of the
Subsidiaries owns, licenses or otherwise has rights in all United
States and foreign patents, trademarks, service marks, tradenames,
copyrights, trade secrets and other proprietary rights necessary
for the conduct of their respective businesses as currently carried
on and as proposed to be carried on as described in the 2006 Annual
Report (collectively, and together with any applications or
registrations for the foregoing, the “ Intellectual
Property ”). Except as specifically described
in the 2006 Annual Report, neither the Company nor the Subsidiaries
has received any notice or is otherwise aware of any infringement
of or conflict with asserted rights of others with respect to any
Intellectual Property or of any facts or circumstances which would
render any Intellectual Property invalid or inadequate to protect
the interest of the Company or any of the Subsidiaries, except any
infringement, conflict, facts or circumstances which would not have
a Material Adverse Effect.
(p)
To the Company’s knowledge,
neither the Company nor any of the Subsidiaries is in violation of
any law, administrative regulation, ordinance or order of any court
or governmental agency, arbitration panel or authority applicable
to the Company or that Subsidiary, as the case may be, which
violation, individually or in the aggregate, is reasonably likely
to have a Material Adverse Effect.
(q)
The
consolidated financial statements of the Company, together with
related notes set forth in the 2006 Annual Report, present fairly
the consolidated financial position and the results of operations
and cash flows of the Company, at the indicated dates and for the
indicated periods. Such financial statements and related
notes and schedules have been prepared in accordance with
accounting principles generally accepted in the United States
(“ GAAP ”), consistently applied
throughout the periods involved, except as disclosed therein, and
all adjustments necessary for a fair presentation of results for
such periods have been made. The selected financial data included
in the 2006 Annual Report present fairly the information shown
therein and such data have been compiled on a basis consistent with
the financial statements presented therein and the books and
records of the Company and the Subsidiaries.
(r)
The Company
maintains a system of internal accounting controls sufficient to
provide reasonable assurances (i) regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles and (ii) that (A)
7
transactions
are executed in accordance with management’s general or
specific authorization; (B) transactions are recorded as necessary
to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain
accountability for assets; (C) access to assets is permitted only
in accordance with management’s general or specific
authorization; and (D) the recorded accountability for assets is
compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any
differences.
(s)
Since December 26, 2006 there has
not been any material adverse change, financial or otherwise, with
respect to the Company or any of the Subsidiaries that has had or
is reasonably likely to have a Material Adverse Effect, whether or
not occurring in the ordinary course of business, and there has not
been any material transaction entered into by the Company or any of
the Subsidiaries, other than this Agreement and transactions in the
ordinary course of business. The Company and the Subsidiaries
have no material contingent obligations that are not disclosed in
the 2006 Annual Report.
(t)
The Company’s Common Stock is
listed on NASDAQ, the Company is in compliance with applicable
NASDAQ listing requirements, NASDAQ has not objected to the
transactions contemplated by this Agreement, and the Company will
use its best efforts to maintain the listing of its Common Stock on
Nasdaq during the Effectiveness Period. The Company has taken
no action designed to, or which to its knowledge is likely to have
the effect of, disqualifying such shares of Common Stock from
quotation on NASDAQ. The issuance of the Shares does not
require shareholder approval, including, without limitation,
pursuant to the rules of NASDAQ.
(u)
The Company will (i) file with the
Commission a notice of the sale of Shares pursuant to this
Agreement on Form D within the time prescribed for the filing of
such notice under Regulation D of the Securities Act, and (ii) make
the filings required by applicable state securities
laws.
(v)
Neither the
Company nor, to the Company’s knowledge, any of its
affiliates, has taken or may take, directly or indirectly, any
action designed to cause or result in, or which has constituted or
which might reasonably be expected to constitute, the stabilization
or manipulation of the price of the shares of Common Stock to
facilitate the sale or resale of the Shares.
(w)
The contracts listed as exhibits to
the 2006 Annual Report, other than those contracts that are
substantially performed or expired by their terms, are in full
force and effect on the date hereof, and none of the Company, the
Subsidiaries and, to the Company’s knowledge, any other
party, is in breach of or default under any such contract.
Except as disclosed in the 2006 Annual Report or as would not have
a Material Adverse Effect, neither the Company nor any of the
Subsidiaries has sent or received any notice indicating the
termination of or intention to terminate any such contract, and no
such termination has been
8
threatened by the Company, any
Subsidiary, or, to the Company’s knowledge, any other
party.
(x)
The Company
and the Subsidiaries have filed all federal, state, local and
foreign tax returns which have been required to be filed and have
paid all taxes indicated by said returns and all assessments
received by any of them to the extent that such taxes have become
due and are not being contested in good faith and for which an
adequate reserve for accrual has been established in accordance
with GAAP. All tax liabilities have been adequately provided
for in the financial statements of the Company in accordance with
GAAP, and the Company does not know of any actual or proposed
additional material tax assessments.
(y)
Neither the Company nor any of the
Subsidiaries is, or intends to conduct its business in a manner in
which it would become, an “investment company” as
defined in Section 3(a) of the Investment Company Act of 1940, as
amended, and the rules and regulations promulgated
thereunder.
(z)
The Company and the Subsidiaries
carry, or are covered by, insurance in such amounts and covering
such risks as is adequate for the conduct of their respective
businesses and the value of their respective properties and as is
customary for similarly sized companies engaged in similar
industries. All policies of insurance insuring the Company or
any Subsidiary or any of their respective businesses, assets,
employees, officers or directors are in full force and effect, and
the Company and the Subsidiaries are in compliance with the terms
of such policies in all material respects. There are no claims by
the Company or any Subsidiary under any such policy or instrument
as to which an insurance company is denying liability or defending
under a reservation of rights clause.
(aa)
None of the Company, its employees
or directors or, to the knowledge of the Company, any other
affiliate, as defined in Rule 501(b) of Regulation D under the
Securities Act (an “ Affiliate ”), of the
Company has, directly or through any agent, sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act) which is or will be
integrated with the Offering in a manner that would require the
registration under the Securities Act of the sale of the Shares
pursuant to this Agreement, and the Company will not, directly or
through any agent, sell, offer for sale, solicit offers to buy or
otherwise negotiate in respect of, any security (as defined in the
Securities Act) which would be integrated with the Offering in a
manner that would require the registration under the Securities Act
of the sale of the Shares pursuant to this Agreement.
(bb)
None of the Company, its employees
or directors or, to the knowledge of the Company, any other
Affiliate of the Company has, directly or through any agent,
offered, solicited offers to buy or sold Shares in the Offering by
any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) or in any
manner involving a public offering within the meaning of Section
4(2) of the Securities Act, and the
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Company will not, directly or
through any agent, engage in any of the actions described in this
paragraph (bb) in connection with the Offering.
(cc)
Other than the fees to be paid by
the Company to the Placement Agents, the Company has not incurred
any liability for any finder’s or broker’s fee, or
agent’s commission in connection with the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(dd)
None of the Company, any Subsidiary
or, to the knowledge of the Company, any agent or other person
acting on behalf of the Company or any Subsidiary, has (i) directly
or indirectly, used any corrupt funds for unlawful contributions,
gifts, entertainment, or other unlawful expenses related to foreign
or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate
funds, (iii) failed to disclose fully any contribution made by the
Company or any Subsidiary (or made by any person acting on its
behalf of which the Company is aware) that is in violation of law,
or (iv) violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended.
(ee)
The information contained in the
2006 Annual Report regarding the Company’s expectations,
plans and intentions, and any other information that constitutes
“forward-looking” information within the meaning of the
Securities Act and the Exchange Act, were made by the Company on a
reasonable basis and reflected the Company’s good faith
belief or estimate of the matters described therein, in each case
as of the date of the 2006 Annual Report containing such
information.
(ff)
All disclosure concerning the
Company contained in this Agreement, including the Schedules to
this Agreement, is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading. None of the Company, its employees or directors
or, to the Company’s knowledge, any other Person acting on
its behalf has provided any of the Investors or their agents or
counsel with any information that constitutes or might constitute
material, nonpublic information, except information that will be
promptly disclosed in the press release pursuant to paragraph (gg)
below. The Company understands that each of the Investors may rely
on the foregoing representations in effecting transactions in
securities of the Company.
(gg)
The Company agrees, as soon as
practicable but in no event later than 9:30 a.m., New York
City time, or as soon as practicable thereafter, on the business
day immediately following the Closing Date, to issue a press
release in compliance with Rule 135c under the Securities Act,
describing the material terms of the transactions contemplated by
this Agreement. Such press release shall be
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subject to prior review by counsel
to the Placement Agents. The Company shall not include the
name of any Investor in such press release.
(hh)
The Company agrees not to, directly
or indirectly, sell, offer to sell, solicit offers to buy, dispose
of, loan, pledge or grant any right with respect to any shares of
Common Stock, or any securities convertible into or exercisable or
exchangeable for, shares of Common Stock until the date on which
the Registration Statement (as defined below in Section 8(a)) is
declared effective by the Commission, except for (i) grants of
options to purchase Common Stock under stock option plans of the
Company or pursuant to existing agreements with other persons, (ii)
the issuance of shares of Common Stock upon the exercise of stock
options issued under such stock option plans and agreements, and
(iii) the issuance of shares of Common Stock upon the exercise of
currently outstanding warrants.
(ii)
Within two (2) business days of the
Closing Date, the Company shall make reasonable commercial effort
to repay in full all of the Company’s outstanding obligations
under the Master Equipment Finance Lease and the Equipment Lease
Commitment by and between DHW Leasing, L.L.C. ( “
DHW ” ) and the Company, dated September 19, 2006
(the “ DHW Agreement ” ). Following the
repayment in full of the Company’s obligations under the DHW
Agreement, the Company covenants and agrees that it will not pay or
enter into any agreement to pay or benefit any executive officer,
director or shareholder who beneficially owns, directly or
indirectly, 5% or more of a class of equity securities of the
Company, or any entity affiliated with or controlled by any
executive officer, director, or shareholder who beneficially owns,
directly or indirectly, 5% or more of a class of equity securities
of the Company ( “ Interested Party ” )
in respect to any goods or services, financial service, loan,
guaranty (other than guaranties of Company debt), real estate or
lease transaction, construction, construction financing or other
transaction or service directly or indirectly provided by such
Interested Party, or in which such Interested Party is financially
interested (collectively, an “ Interested Party
Transaction ” ); provided, however, that the forgoing
covenant shall not apply to payments or agreements which are
compensatory in nature in respect to services as an executive
officer or director. The Company shall consider the DHW Agreement
and the transactions contemplated thereby Interested Party
Transactions for purposes of this Section 6(ii) so long as any
Interested Party, including Mr. Steven J. Wegenheim, holds a
membership interest in DHW or guaranties any debt of DHW to its
lenders.
(jj)
The Company covenants and agrees
that it will use the net proceeds from the sale of the Shares
hereunder substantially as set forth in Schedule 6(jj).
(kk)
The Company is in material
compliance with all provisions of the Sarbanes-Oxley Act of 2002
which are applicable to it as of the Closing Date.
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(ll)
The Company confirms that neither it
nor any person acting on its behalf has provided any Investor or
its respective agents or counsel with any information that the
Company believes constitutes material, non-public information
concerning the Company, except insofar as the existence and terms
of the proposed transactions contemplated hereunder may constitute
such information. The Company understands and confirms that the
Investors will rely on the foregoing representation in effecting
transactions in securities of the Company.
(mm)
To satisfy its obligations under
Section 10(e) herein, the Company covenants and agrees that it will
(i) furnish its transfer agent with a blanket opinion of counsel
covering resales of Shares under the Registration Statement within
three trading days following effectiveness thereof, and (ii)
furnish its transfer agent with a blanket opinion of counsel
relative to resales of Shares made in accordance with the
requirements of Securities Act Rule 144(k) within three trading
days following the second anniversary of the Closing
Date.
(nn)
The Company shall comply with the
requirements set forth in the instructions to Form S-3 in order to
allow the Company to be eligible to file the Registration
Statement, and shall file all reports required to be filed by it
under the Exchange Act.
7.
Representations, Warranties and
Covenants of the Investor . Each Investor severally, and not
jointly, represents and warrants to, and covenants with, the
Company that:
(a)
If the Investor is in the United
States or is a resident of the United States, then the Investor is
an “accredited investor” as defined in Regulation D
and, as provided under Rule 502(b)(2)(v) under the Securities Act,
has requested, received, reviewed and considered all information it
deems relevant in making an informed decision to purchase
Shares. The Investor is experienced in evaluating companies
such as the Company, and has such business and financial experience
as is required to give it the capacity to utilize the information
received, to evaluate the risks involved in purchasing Shares, and
to protect its own interests in connection with the purchase of
Shares and is able to bear the risks of an investment in
Shares.
(b)
If the Investor is not a resident of
the United States, then the Investor represents that (i) it is not
a person in the United States or a “U.S. Person” (as
defined in Regulation S under the Securities Act); (ii) the offer
to purchase the Shares was not made to the Investor in the United
States; and (iii) at the time the Investor executed and delivered
this Agreement to the Company, the Investor (or the
Investor’s authorized signatory, if it is an entity) was
outside the United States.
(c)
The Investor understands that the
Shares are “restricted securities” and have not been
registered under the Securities Act and is acquiring the number of
Shares set forth on the signature page hereto in the ordinary
course of its
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business and for its own account
with no present intention of distributing any Shares, or any
arrangement or understanding with any other persons regarding the
distribution of such Shares, or otherwise. The representation
and warranty in the previous sentence shall not limit the
Investor’s right to indemnification under Section 12, other
than with respect to any claim arising out of a breach of this
representation and warranty.
(d)
The Investor will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit offers to buy, purchase or otherwise acquire or take a
pledge of) any of the Shares, except in compliance with the
Securities Act, applicable state and other securities laws and the
respective rules and regulations promulgated thereunder.
(e)
Other than the transaction
contemplated hereunder, the Investor has not directly or
indirectly, nor has any person acting on behalf of or pursuant to
any understanding with such Investor, executed any disposition,
including Short Sales (but not including the location and/or
reservation of borrowable shares of Common Stock), in the
securities of the Company during the period commencing from the
time that such Investor first received any information from the
Company or any other person setting forth the material terms of the
transactions contemplated hereunder until the date hereof (“
Discussion Time ”). Notwithstanding the
foregoing, in the case of an Investor that is a multi-managed
investment vehicle whereby separate portfolio managers manage
separate portions of such Investor’s assets and the portfolio
managers have no direct knowledge of the investment decisions made
by the portfolio managers managing other portions of such
Investor’s assets, the representation set forth above shall
only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the
Shares covered by this Agreement.
(f)
Each Investor, severally and not
jointly with the other Investors, covenants that (i) neither it nor
any affiliates acting on its behalf or pursuant to any
understanding with it will execute any Short Sales during the
period after the Discussion Time and ending at the time that the
transactions contemplated by this Agreement are first publicly
announced as described in Section 6(gg) above and (ii) until such
time as the transactions contemplated by this Agreement are
publicly disclosed by the Company as described in Section 6(gg)
above, such Investor will maintain the confidentiality of all
disclosures made to it in connection with this transaction
(including the existence and terms of this transaction). Each
Investor understands and acknowledges that the Commission currently
takes the position that coverage of short sales of shares of the
Common Stock “against the box” prior to the time at
which the Registration Statement is declared effective by the
Commission is a violation of Section 5 of the Securities Act, as
set forth in Item 65, Section 5 under Section A, of the Manual of
Publicly Available Telephone Interpretations, dated July 1997,
compiled by the Office of Chief Counsel, Division of Corporation
Finance. Notwithstanding the foregoing, no Investor makes any
representation, warranty or covenant hereby that it will not engage
in Short Sales in the securities of the Company after the time that
the
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transactions contemplated by this
Agreement are first publicly announced as described in Section
6(gg). Notwithstanding the foregoing, in the case of an
Investor that is a multi-managed investment vehicle whereby
separate portfolio managers manage separate portions of such
Investor’s assets and the portfolio managers have no direct
knowledge of the investment decisions made by the portfolio
managers managing other portions of such Investor’s assets,
the covenant set forth above shall only apply with respect to the
portion of assets managed by the portfolio manager that made the
investment decision to purchase the Shares covered by this
Agreement.
(g)
The Investor will have, not less
than three business days prior to the Closing Date, furnished to
the Company a fully completed (i) Investor Questionnaire
substantially in the form attached hereto as Exhibit B (the
“ Investor Questionnaire ”), for use in
preparation of the Registration Statement and (ii) an executed
Accredited Investor Certificate in the form attached hereto as
Exhibit C , and all of the information contained therein
will be true and correct in all material respects as of such date
and as of the Closing Date.
(h)
The Investor has, in connection with
its decision to purchase the number of Shares set forth on the
signature page hereto, (i) relied only upon the 2006 Annual Report
and the representations and warranties of the Company contained in
this Agreement, and (ii) has not relied on any information or
advice furnished by or on behalf of the Placement Agents or any
other person.
(i)
The Investor acknowledges that the
certificates evidencing the Shares will be imprinted with a legend
in substantially the following form (and a stop-transfer order may
be placed against transfer of the certificates for the
Shares):
“THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR UNDER ANY STATE SECURITIES
LAWS, AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AND IN ACCORDANCE
WITH ALL APPLICABLE STATE SECURITIES LAWS.”
The Investor further acknowledges
that, upon receipt of a Suspension Notice (as defined below in
Section 10(c)), the Investor will refrain from selling any Shares
pursuant to the Registration Statement until the Investor receives
from the Company copies of a supplemented or amended Prospectus
prepared and filed by the Company with the Commission, or until it
is advised in writing by the Company that the current Prospectus
may be used, and has received copies of any
14
additional or supplemental filings
that are incorporated or deemed incorporated by reference in any
such Prospectus.
(j)
The Investor further represents and
warrants to, and covenants with, the Company that (i) if an entity,
the Investor is duly organized and in good standing in the
jurisdiction of its organization, (ii) the Investor has full legal,
corporate or other right, power, authority and capacity to enter
into this Agreement and to consummate the transactions contemplated
hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and (iii)
this Agreement has been duly authorized, executed and delivered by,
and constitutes a valid and binding agreement of, the Investor,
enforceable against the Investor in accordance with its terms,
except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the rights of
creditors generally, and subject to general principles of
equity.
(k)
The Investor understands that
nothing in this Agreement, or any other materials presented to the
Investor in connection with the purchase and sale of Shares
constitutes legal, tax, accounting or investment advice. The
Investor has consulted such legal, tax, accounting and investment
advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of Shares.
(l)
No representation has been made to
the Investor regarding the present or future value of the
Shares.
(m)
(o)
If required by applicable securities
legislation, regulations, rules, policies or orders or by any
securities commission, stock exchange or other regulatory
authority, the Investor will execute, deliver, file and otherwise
assist the Company in filing, such reports, undertakings and other
documents with respect to the issuance or continued ownership of
the Shares as may be required.
(n)
The Investor understands and
acknowledges that: (i) the Shares are being offered and sold to it
without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the
Securities Act, and (ii) the availability of such exemption depends
in part on, and the Company will rely upon the accuracy and
truthfulness of, the representations, warranties and covenants of
such Investor set forth in this Section 7, and such Investor hereby
consents to such reliance.
(o)
If the Investor is a resident of an
International Jurisdiction (which is defined herein to mean a
country other than the United States), then the Investor on its own
behalf and, if applicable, on behalf of others for whom it is
hereby acting, confirms that:
(i)
the Investor is knowledgeable of, or
has been independently advised as to, the International Securities
Laws (which is
15
