EXHIBIT 10.1
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DAVE & BUSTER'S, INC.,
as the Company
and
BUYERS,
as defined herein
SECURITIES PURCHASE AGREEMENT
Dated as of August 6, 2003
5.0% Convertible Subordinated Notes due 2008
and Warrants to Purchase Common Stock
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as
of August 6, 2003, by and among Dave & Buster's, Inc., a Missouri 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) Thirty Million United States Dollars
($30,000,000) principal amount of the Company's 5.0% Convertible Subordinated
Notes due 2008 (such Convertible Subordinated Notes, substantially in the form
attached as Exhibit A to the Indenture (as defined below), as such form of Note
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 as Exhibit A to the Warrant Agent Agreement
(as defined below), as such form of Warrant may be amended, modified or
supplemented from time to time in accordance with the terms thereof, the "Buyer
Warrants") to purchase an aggregate 522,446 shares of Common Stock (as
exercised, collectively, the "Buyer Warrant Shares"). The Notes are being issued
pursuant to an Indenture, dated as of August 7, 2003 (the "Indenture") by and
between the Company and Bank of New York, as trustee (the "Trustee"),
substantially in the form attached hereto as Exhibit B. The Warrants are being
issued pursuant to a Warrant Agent Agreement, dated as of August 7, 2003 (the
"Warrant Agent Agreement") by and between the Company and Bank of New York, as
warrant agent (the "Warrant Agent"), substantially in the form attached hereto
as Exhibit C.
B. To induce U.S. Bancorp Piper Jaffray ("Piper Jaffray") to
act as lead placement agent with respect to the offering of the Notes and the
Buyer Warrants (the "Offering"), the Company has agreed to issue Warrants (such
Warrants, substantially in the form attached as Exhibit A to the Warrant Agent
Agreement, as such form of Warrant may be amended, modified or supplemented from
time to time in accordance with the terms thereof, the "Piper Jaffray 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 "Piper
Jaffray 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, Piper Jaffray and Fleet Securities,
Inc. ("Fleet" and together with Piper Jaffray, the "Placement Agents") 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 17.414867 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., Dallas time, on August 7, 2003, 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 Hallett & Perrin,
P.C., 2001 Bryan Street, Suite 3900, Dallas, Texas.
(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.
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(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 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 (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:
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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.
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 Warrant 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
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"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.
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.
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(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 thereby, any court order or judgment addressed
to such Buyer, or the constituent documents of such Buyer.
(k) Conversion/Exercise Limitation. (i) Subject to Buyer's election on
the signature pages hereto to be governed by this Section 2(k)(i), 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)(i)) 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, and the rules and regulations promulgated thereunder (the "Exchange
Act"). To the extent that the limitation contained in this Section 2(k)(i)
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)(i). Notwithstanding anything to the contrary,
this Section 2(k)(i) shall only apply to a Buyer who has elected to be subject
to this Section by so indicating in the signature page.
(ii) Subject to Buyer's election on the signature pages hereto to be
subject to this Section 2(k)(ii), 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)(ii)) 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
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with Section 13(d) of the Exchange Act. To the extent that the limitation
contained in this Section 2(k)(ii) 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)(ii). Notwithstanding anything to
the contrary, this Section 2(k)(ii) shall only apply to a Buyer who has elected
to be subject to 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 Indenture, the Warrant Agent 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 the Placement Agents 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 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 Articles 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 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
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any material adverse effect on the business, properties, assets, operations,
results of operations or financial condition of the Company and its
Subsidiaries, taken as a whole, or on the transactions contemplated hereby or by
the agreements and instruments to be entered into in connection herewith, or on
the authority or ability of the Company to perform its obligations under the
Transaction Documents (as defined below). "Subsidiary" means any entity in which
the Company, directly or indirectly, owns a majority of the capital stock or
other equity or similar interests. A complete list of the Company's "
Subsidiaries" is set forth on Schedule 3(a).
(b) Authorization; Enforcement; Validity. The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Indenture, the Warrant Agent 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(b) 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 Indenture,
the Warrant Agent 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
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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
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, except for those issued in respect of the Revolving Credit and
Term Loan Agreement dated June 30, 2000, among the Company, its Subsidiaries,
Fleet National Bank (as agent) and the lenders named therein (the "Senior
Facility"); (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, 3,041,506 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
9
issuance of the Conversion Shares and the Warrant Shares) will not (i) result in
a violation of the Company's Articles 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 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 Articles 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, 2001, 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 (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 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
10
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 ("GAAP"), during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements), 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. 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 is currently required to be disclosed by the Company under
applicable securities laws and which has not been publicly disclosed. To the
Company's knowledge its independent auditors do not intend to 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 February 2, 2003, 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 Subsidiaries, threatened in writing
against the Company or any of its Subsidiaries or any of the Company's or the
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
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
11
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 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 mark 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 Subsidiaries do not have any knowledge of any infringement
by the Company or its 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 Subsidiaries regarding the Intellectual Property rights of the
Company or its 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 Subsidiaries are insured
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 Subsidiaries.
(k) Regulatory Permits. The Company and its 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 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 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. There are no unpaid taxes or
assessments for tax deficiencies that are individually or 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. All provisions for tax
liabilities of the Company and each of its Subsidiaries have been disclosed in
the Company's financial statements and made in accordance
12
with GAAP, and all liabilities for taxes of the Company and each of its
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 Articles 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 August 5, 2003 (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, 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 Piper Jaffray and
Fleet as placement agents, and to Merriman Curhan Ford & Co. as financial
advisors, no brokers, finders or
13
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 EDGAR system, since February 2, 2003, 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, the transactions
related to the Company's intended use of the net proceeds from the sale of the
Notes and Warrants and the confirmation of existing guidance as to the Company's
projected annual financial results (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.
(t) Acknowledgment Regarding Buyer's Purchase of Securities. The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company, (ii) an "affiliate" of the Company (as defined in
Rule 144) or (iii) to the knowledge of the Company, a "beneficial owner" of more
than 10% of the Common Stock (as defined for purposes of Rule 13d-3 of the
Exchange Act). The Company further acknowledges that no Buyer is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby, and any advice given by a Buyer or any of its representatives or
agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to such Buyer's purchase of
the Securities. The Company further represents to each Buyer that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives. The Company
acknowledges and agrees that no Buyer makes or has made any representations or
warranties with respect to the transactions contemplated hereby other than those
specifically set forth in Section 2.
(u) Dilutive Effect. The Company understands and acknowledges that the
number of Conversion Shares issuable upon conversion of the Notes and the Buyer
Warrant Shares issuable upon exercise of the Buyer Warrants will increase in
certain circumstances. The Company further acknowledges that its obligation to
issue Conversion Shares upon conversion of the Notes in accordance with this
Agreement and the Notes and its obligation to issue the Buyer Warrant Shares
upon exercise of the Buyer Warrants in accordance with this Agreement and the
Buyer Warrants is, in each case, absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
(v) Insolvency. The Company has not taken any steps to seek protection
pursuant to any bankruptcy law nor does the Company have any knowledge or reason
to believe that its creditors intend to initiate involuntary bankruptcy
proceedings or any actual knowledge of any fact which would reasonably lead a
creditor to do so. The Company is not as of the date hereof, and after giving
effect to the transactions contemplated hereby to occur at each Closing, will
not be
14
Insolvent (as defined below). For purposes of this Section 3(v), "Insolvent"
means (i) the present fair saleable value of the Company's assets is less than
the amount required to pay the Company's total Indebtedness (as defined in the
Senior Facility), (ii) the Company is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured, (iii) the Company intends to incur or believes that it
will incur debts that would be beyond its ability to pay as such debts mature or
(iv) the Company has unreasonably small capital with which to conduct the
business in which it is engaged as such business is now conducted and is
proposed to be conducted.
(w) Employee Relations.
(i) Neither the Company nor any of its Subsidiaries is a party
to any collective bargaining agreement or employs any member of a union. The
Company and its Subsidiaries believe that their relations with their employees
are good. No executive officer of the Company (as defined in Rule 501(f) of the
Securities Act) has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer's employment with the Company. No
executive officer of the Company, to the knowledge of the Company, is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability with respect to
any of the foregoing matters.
(ii) The Company and its Subsidiaries are in compliance with all
federal, state, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
(x) Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except for such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such property
by the Company and any of its Subsidiaries. Any real property and facilities
held under lease by the Company and any of its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its Subsidiaries.
(y) Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect. The term "Environmental Laws" means
all federal, state, local or foreign laws
15
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of chemicals, pollutants,
contaminants, or toxic or hazardous substances or wastes (collectively,
"Hazardous Materials") into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued,
entered, promulgated or approved thereunder.
(z) Subsidiary Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
material Subsidiaries as owned by the Company or such Subsidiary.
(aa) Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference.
(bb) Sarbanes-Oxley Act. The Company is in compliance with any and all
applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as
of the date hereof, and any and all applicable rules and regulations promulgated
by the SEC thereunder that are effective as of the date hereof, except where
such noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect.
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
16
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
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)
17
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, (iv) the Registration Rights
Agreement, (v) the form of Indenture and (vi) the form of Warrant Agent
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 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 Piper Jaffray, 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 $25,000,
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
$1,159,839 of the aggregate purchase price for the securities issued by the
Company to the Buyers hereunder (assuming the sale of $30,000,000 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 $28,840,161 (assuming the
sale of $30,000,000 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 $38.66. If the Company shall be required to
withhold or deduct any tax or other governmental charge from any
18
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 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 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) 180 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
19
Board of Directors, (v) to the filing of a Registration Statement on Form S-8,
(vi) 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 (vii) 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 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.
(p) Nonpublic Information. The Company shall not, and shall cause each
of its Subsidiaries and its and each of their respective officers, directors,
employees and agents, not to, provide those Buyers listed on Schedule 4(p) with
any material, nonpublic information regarding the Company or any of its
Subsidiaries from and after the filing of the 8-K Filing with the SEC without
the express written consent of such Buyer' provided, however that the foregoing
shall not restrict in any way the distribution of any information to any such
Buyers by the Company or its Subsidiaries and its and each of their respective
officers, directors, employees and agents (i) as reasonably required by the
terms of the Transaction Documents or (ii) in connection with any request by or
on behalf of the Company to waive, amend or modify any provision of the
Transaction Documents.
(q) Independent Nature of Buyers' Obligations and Rights. The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers are
in any way acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. Each Buyer confirms
that it has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Except as
provided by the Transaction Documents, each Buyer shall be entitled to
independently protect and enforce its rights, including, without limitations,
the rights arising out of this Agreement or out of any other
20
Transaction Documents, and it shall not be necessary for any other Buyer to be
joined as an additional party in any proceeding for such purpose.
SECTION 5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates or credit shares to the applicable balance accounts
at the Company's designated registrar (the "Registrar"), registered in the name
of Piper Jaffray, Fleet 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 Piper Jaffray, Fleet 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 Indenture, the Warrants and the Registration Rights Agreement.
Subject to the Indenture and the Warrant Agent 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 the Registrar,
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 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.
21
(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.
(e) Minimum Subscription. The Company has received subscriptions for an
aggregate principal amount of the Notes that will be purchased by the Buyers on
the Closing Date is not less than U.S. Fifteen Million Dollars ($15,000,000.00)
in the aggregate.
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. The Trustee shall
have executed and delivered the Indenture to the Company. The Warrant Agent
shall have executed and delivered the Warrant Agent Agreement to the Company.
(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
22
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. Piper Jaffray
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 Piper
Jaffray the opinion of Hallett & Perrin, 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
Piper Jaffray (i) a certificate evidencing the incorporation and good standing
of the Company in Missouri issued by the Secretary of State of Missouri as of a
recent date; and (ii) a certificate of good standing (or appropriate
counterpart) from the appropriate governmental authority in each domestic
jurisdiction in which the Subsidiaries are incorporated or organized as of a
recent date.
(i) Secretary's Certificate. The Company shall have delivered to Piper
Jaffray 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 Articles 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 arguably prevents the consummation of
the transactions contemplated by the Transaction
23
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 $20,000,000
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 Piper Jaffray 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 Piper Jaffray's and Fleet's agreement to act as exclusive
placement agents and in addition to all of the Company's other obligations under
the Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless Piper Jaffray, Fleet 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 (i) 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, or (ii)
any breach of any representation, warranty, covenant or agreement made by the
Company in the Transaction Documents. 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,
24
the Company shall reimburse the 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
25
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
26
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:
Dave & Buster's, Inc.
2481 Manana Drive
Dallas, Texas 75220
Telephone: (214) 357-9588
Facsimile: (214) 357-1536
Attention: Mr. John Davis, Esq.,
Senior Vice President and General Counsel
with a copy to:
Hallett & Perrin, P.C.
2001 Bryan Street, Suite 3900
Dallas, Texas 75201
Telephone: (214) 922-4120
Facsimile: (214) 922-4170
Attention: Bruce H. Hallett, Esq.
If to U.S. Bancorp Piper Jaffray:
U.S. Bancorp Piper Jaffray
345 California Street, Suite 2100
San Francisco, California 94104
Telephone: (415) 984-5127
Facsimile: (415) 984-5121
Attention: Mr. David Fullerton
with a copy to:
Gibson, Dunn & Crutcher LLP
1050 Connecticut Avenue NW
Washington, DC 20036
Telephone: (202) 955-8500
Facsimile: (202) 467-0539
Attention: Brian Lane, Esq.
27
If to Fleet Securities, Inc.:
Fleet Securities, Inc.
100 Federal Street,
Boston, MA 02110,
Mail Stop: MA DE 10011D
Telephone: (617) 434-6993
Facsimile: (617) 434-4970
Attention: Kelly Wall
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 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 Piper Jaffray or Fleet.
(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
28
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 Piper Jaffray 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 none of the Company, Piper Jaffray, or Fleet shall have the right
to issue a press release referring to a Buyer or its affiliates without such
Buyer's prior written consent. Piper Jaffray and Fleet have the right to
describe their services to the Company in connection with the Offering and to
reproduce the Company's name and logo in their 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, which shall not
be unreasonably withheld, such additional uses as Piper Jaffray or Fleet 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 Piper Jaffray, 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 Piper Jaffray Inc., and Fleet Securities, Inc., as placement agents in
connection with the sale of the Notes and the Warrants and that the compensation
of such agents 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
agents' 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.
29
(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.
30
IN WITNESS WHEREOF, the parties have caused this Securities Purchase
Agreement to be duly executed as of the date first written above.
"COMPANY"
DAVE & BUSTER'S, INC.
----------------------------------------------
W. C. Hammett, Senior Vice President and Chief
Financial Officer
ACKNOWLEDGED AND AGREED:
"PIPER JAFFRAY"
U.S. BANCORP PIPER JAFFRAY
By:
----------------------------------
Its:
---------------------------------
"FLEET"
FLEET SECURITIES, INC.
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's Allocated Investment Amount:
--------------------------------------------
(amount in U.S. Dollars)
Buyer hereby elects to be subject to Section
2(k)(A):
By:
----------------------------------------
(signature of authorized representative)
OR
Buyer hereby elects to be subject to Section
2(k)(B):
By:
----------------------------------------
(signature of authorized representative)
EXHIBIT A
SCHEDULE OF BUYERS
<Table>
<Caption>
NAME OF BUYERS PRINCIPAL AMOUNT OF NOTES NUMBER OF WARRANTS
--------------------------------- ------------------------- ------------------
1. [Name of Buyer] $
[Contact Information for Buyer]
</Table>
EXHIBIT B
FORM OF INDENTURE
EXHIBIT C
FORM OF WARRANT AGENT AGREEMENT
EXHIBIT D
SCHEDULE OF FEES
FEES PAYABLE TO PIPER JAFFRAY:
CASH COMPENSATION: $1,848,750.00
WARRANTS: Warrants to purchase 52,245 shares of
Common Stock
WIRE INSTRUCTIONS:
FEES PAYABLE TO FLEET:
CASH COMPENSATION: $326,250.00
WIRE INSTRUCTIONS:
EXHIBIT E
FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT F
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
August 7, 2003
VIA FEDERAL EXPRESS
Mellon Investor Services LLC
Overpeck Centre
Ridgefield Park, NJ 07660
Attn:
-----------------
Re: Reservation of Shares of Common Stock Pursuant to Sale by Dave
& Buster's, Inc. of up to $30,000,000 in Aggregate Principal
Amount of 5.0% Convertible Subordinated Notes due 2008 and
Warrants to Purchase up to 574,691 Shares of Common Stock
Ladies and Gentlemen:
Dave & Buster's, Inc., a Missouri corporation (the "Company"), has
agreed (i) to sell to the buyers listed on Schedule A hereto (the "Buyers"), on
the date hereof, Thirty Million United States Dollars ($30,000,000) in aggregate
principal amount of 5.0% Convertible Subordinated Notes due 2008 (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
522,446 shares of Common Stock, pursuant to that certain Securities Purchase
Agreement dated as of August 7, 2003, by and among the Company and each Buyer
(the "Securities Purchase Agreement"), and (ii) to issue to U.S. Bancorp Piper
Jaffray ("Piper Jaffray") 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 "Piper Jaffray 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 2,438,080
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 603,426
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 notes,
warrants and 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 September 6,
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 Piper
Jaffray 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 (214) 357-9588 if you require any further information. Thank you for
your assistance.
Very truly yours,
DAVE & BUSTER'S, INC.
-------------------------------------
Its:
---------------------------------
Acknowledged and Agreed:
MELLON INVESTOR SERVICES LLC
By:
----------------------------
Its:
cc: Mr. David J. Fullerton (w/o encl.)
Enclosures
EXHIBIT G
FORM OF COMPANY COUNSEL OPINION
The Company is a corporation validly existing in good standing under
the laws of the State of Missouri, 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 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 Articles 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 Missouri, New York or 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 Missouri, 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 Piper Jaffray and
Fleet in the Placement Agent Certificate, no registration under the Securities
Act, and no qualification of the Indenture under the Trust Indenture Act, is
required for the purchase and sale of the Notes and the Warrants or the issuance
to Piper Jaffray of the Piper Jaffray 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, as applicable,
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 Piper Jaffray 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
DANB Texas, Inc.
Dave & Buster's of Pennsylvania, Inc.
Dave & Buster's of Florida, Inc.
Dave & Buster's of Georgia, Inc.
Dave & Buster's of Illinois, Inc.
Dave & Buster's of Maryland, Inc.
Dave & Buster's of California, Inc.
Dave & Buster's of Colorado, Inc.
Dave & Buster's of New York, Inc.
Dave & Buster's of Pittsburgh, Inc.
Dave & Buster's of Hawaii, Inc.
D&B Leasing, Inc. (d/b/a Dave & Buster's Leasing, Inc.)
Dave & Buster's I, L.P.
D&B Realty Holding, Inc.
SCHEDULE A
COMPANY WIRE INSTRUCTIONS
Bank Name: Texas Capital Bank, N.A.
ABA No.: 111017979
Account Name: Hallett & Perrin, P.C. IOLTA Account
Account No.: 1111011613
SCHEDULE 4(p)
BUYERS
<Table>
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......................7
SECTION 4. Covenants ........................................................16
SECTION 5. Transfer Agent Instructions.......................................21
SECTION 6. Conditions to the Company's Obligation to Close...................21
SECTION 7. Conditions to Each Buyer's Obligation to Purchase.................22
SECTION 8. Indemnification...................................................24
SECTION 9. Miscellaneous.....................................................25
SCHEDULES
Schedule 3(a)...............................Subsidiaries
Schedule A..................................Company Wire Instructions
Schedule 4(p)...............................Buyers
EXHIBITS
Exhibit A...................................Schedule of Buyers
Exhibit B...................................Form of Indenture
Exhibit C...................................Form of Warrant Agent Agreement
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
</Table>