Filed by Bowne Pure Compliance



 




Exhibit 10.17




SECURITIES PURCHASE AGREEMENT




THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of November 1, 2007, by and
among Kona Grill, Inc., a Delaware corporation with headquarters located at 7150 East Camelback
Road, Suite 220, Scottsdale, Arizona 85251 (the “Company”), and the investors listed on the
Schedule of Investors attached hereto as Exhibit A (individually, an “Investor” and collectively,
the “Investors”).



BACKGROUND




A. The Company and each Investor are executing and delivering this Agreement in reliance upon
the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended
(the “1933 Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States
Securities and Exchange Commission (the “SEC”) under the 1933 Act.



B. Each Investor, severally and not jointly, wishes to purchase, and the Company wishes to
sell, upon the terms and conditions stated in this Agreement, (i) that aggregate number of shares
of the Common Stock, par value $0.01 per share, of the Company (the “Common Stock”), set forth
opposite such Investor’s name in column two (2) on the Schedule of Investors in Exhibit A
(which aggregate amount for all Investors together shall be 650,000 shares of Common Stock and
shall collectively be referred to herein as the “Common Shares”).



C. The Common Shares issued pursuant to this Agreement are collectively referred to herein as
the “Securities.”



NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are hereby acknowledged,
the Company and the Investors agree as follows:



ARTICLE I

DEFINITIONS




1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, the
following terms have the meanings indicated:



“Affiliate” means any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such terms are used in
and construed under Rule 144 under the Securities Act.



“Agent” has the meaning set forth in Section 3.1(l).



“Agreement” has the meaning set forth in the Preamble.



“Best Efforts” means the efforts that a prudent person desirous of achieving a result would
use in similar circumstances to ensure that such result is achieved as expeditiously as practical;
provided, however, that an obligation to use Best Efforts under this Agreement does
not require the Company to dispose of or make any change to its business, expend any material
funds or incur any other material burden.


 


 









 





“Business Day” means any day other than Saturday, Sunday or other day on which commercial
banks in the City of New York are authorized or required by law to remain closed.



“Closing” means the closing of the purchase and sale of the Securities pursuant to Section
2.1.



“Closing Date” means the date and time of the Closing and shall be on such date and time as is
mutually agreed to by the Company and each Investor).



“Closing Price” means, for any date, the closing price per share of the Common Stock for such
date (or the nearest preceding date) on the primary Eligible Market or exchange or quotation system
on which the Common Stock is then listed or quoted.



“Company” has the meaning set forth in the Preamble.



“Company Counsel” means Greenberg Traurig, LLP, counsel to the Company.



“Common
Shares” means an aggregate of 650,000 shares of Common Stock, which are being issued
and sold by the Company to the Investors at the Closing.



“Common Stock” means the common stock of the Company, par value $0.01 per share.



“Common Stock Equivalents” means, collectively, Options and Convertible Securities.



“Contingent
Obligation” has the meaning set forth in
Section 3.1(bb).



“Convertible Securities” means any stock or securities (other than Options) convertible into
or exercisable or exchangeable for Common Stock.



“Disclosure Materials” has the meaning set forth in Section 3.1(g).



“Effective Date” means the date that the Registration Statement is first declared effective by
the SEC.



“Effectiveness Period” has the meaning set forth in Section 6.1(b).



“8-K Filing” has the meaning set forth in Section 4.5.



“Eligible Market” means any of the New York Stock Exchange, the American Stock Exchange, The
Nasdaq Global Select Market or The Nasdaq Capital Market.



“Environmental
Laws” has the meaning set forth in Section 3.1(ee).



“Event” has the meaning set forth in Section 6.1(d).



“Event Payments” has the meaning set forth in Section 6.1(d).


 


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“Exchange Act” means the Securities Exchange Act of 1934, as amended.



“Excluded Events” has the meaning set forth in Section 6.1(d)(ii).



“Excluded Investors” means Cowen and Company, LLC and its Affiliates.



“Filing Date” means 30 days after the Closing Date.



“FINRA” means Financial Industry Regulatory Authority.



“GAAP” has the meaning set forth in Section 3.1(g).



“Hazardous
Materials” has the meaning set forth in
Section 3.1(ee).



“Indebtedness”
has the meaning set forth in Section 3.1(bb).



“Indemnified Party” has the meaning set forth in Section 6.4(c).



“Indemnifying Party” has the meaning set forth in Section 6.4(c).



“Insolvent” has the meaning set forth in Section 3.1(h).



“Intellectual Property Rights” has the meaning set forth in Section 3.1(t).



“Investor” has the meaning set forth in the Preamble.



“Lien” means any lien, charge, claim, security interest, encumbrance, right of first refusal
or other restriction.



“Losses” means any and all losses, claims, damages, liabilities, settlement costs and
expenses, including, without limitation and reasonable attorneys’ fees.



“Material Adverse Effect” means (i) a material adverse effect on the results of operations,
assets, business or financial condition of the Company and the Subsidiaries, taken as a whole on a
consolidated basis, or (ii) materially and adversely impair the Company’s ability to perform its
obligations under any of the Transaction Documents, provided, that none of the following alone
shall be deemed, in and of itself, to constitute a Material Adverse Effect for purposes of (i)
above: (a) a change in the market price or trading volume of the Common Stock (unrelated to (i) or
(ii) above), or (b) changes in general economic conditions or changes affecting the industry in
which the Company operates generally (as opposed to Company-specific changes) so long as such
changes do not have a disproportionate effect on the Company and its Subsidiaries taken as a whole.



“Material Permits” has the meaning set forth in Section 3.1(v).



“Options” means any outstanding rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities.


 


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“Person” means any individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, or joint stock company.



“Proceeding” means an action, claim, suit, investigation or proceeding (including, without
limitation, or a partial proceeding, such as a deposition), whether commenced or threatened in
writing.



“Prospectus” means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the Registration Statement,
and all other amendments and supplements to the Prospectus including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by reference in such
Prospectus.



“Registrable Securities” means the Common Shares issued or issuable pursuant to the
Transaction Documents, together with any securities issued or issuable upon any stock split,
dividend or other distribution, recapitalization or similar event with respect to the foregoing.



“Registration Statement” means each registration statement required to be filed under Article
VI, including (in each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and
all material incorporated by reference or deemed to be incorporated by reference in such
registration statement.



“Regulation D” has the meaning set forth in the Preamble.



“Related Person” has the meaning set forth in Section 4.6.



“Repurchase Notice” has the meaning set forth in Section 6.1.



“Repurchase Price” has the meaning set forth in Section 6.1.



“Required Effectiveness Date” means the date which is the earliest of (i) if the Registration
Statement does not become subject to review by the SEC, (a) ninety (90) days after the Closing Date
or (b) five (5) Trading Days after the Company receives notification from the SEC that the
Registration Statement will not become subject to review and the Company fails to request to
accelerate the effectiveness of the Registration Statement, or (ii) if the Registration Statement
becomes subject to review by the SEC, (x) one hundred and twenty (120) days after the Closing Date
or (y) five (5) Trading Days after the Company receives notification from the SEC that the
Registration Statement is not longer subject to further review or comment and the Company fails to
request to accelerate the effectiveness of the Registration Statement.



“Rule 144,” “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and Rule 424, respectively,
promulgated by the SEC pursuant to the Securities Act, as such Rules may be amended from time to
time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same
effect as such Rule.


 


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“SEC” has the meaning set forth in the Preamble.



“SEC Reports” has the meaning set forth in Section 3.1(g).



“Securities” has the meaning set forth in the Preamble.



“Securities Act” has the meaning set forth in the Preamble.



“Shares” means shares of the Company’s Common Stock.



“Short Sales” has the meaning set forth in Section 3.2(h).



“Subsidiary” means any direct or indirect subsidiary of the Company.



“Trading Day” means (a) any day on which the Common Stock is listed or quoted and traded on
its primary Trading Market, (b) if the Common Stock is not then listed or quoted and traded on any
Eligible Market, then a day on which trading occurs on the The Nasdaq Global Select Market (or any
successor thereto), or (c) if trading ceases to occur on the The Nasdaq National Market (or any
successor thereto), any Business Day.



“Trading Market” means the The Nasdaq Global Market or any other Eligible Market, or any
national securities exchange, market or trading or quotation facility on which the Common Stock is
then listed or quoted.



“Transaction Documents” means this Agreement, the schedules and exhibits attached hereto, and
the Transfer Agent Instructions.



“Transfer Agent” means Continental Stock Transfer & Trust Company, or any successor transfer
agent for the Company.



“Transfer Agent Instructions” means, with respect to the Company, the Irrevocable Transfer
Agent Instructions, in the form of Exhibit D, executed by the Company and delivered to and
acknowledged in writing by the Transfer Agent.



ARTICLE II

PURCHASE AND SALE




2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at the
Closing the Company shall issue and sell to each Investor, and each Investor shall, severally and
not jointly, purchase from the Company, such number of Common Shares for the price set forth
opposite such Investor’s name on Exhibit A hereto under the headings “Common Shares” . The
date and time of the Closing and shall be 11:00 a.m., New York City Time, on the Closing Date. The
Closing shall take place at the offices of the Company’s Counsel, 2375 E. Camelback Road, Suite
700, Phoenix, Arizona.


 


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2.2 Closing Deliveries.



(a) At the Closing, the Company shall deliver or cause to be delivered to each Investor the
following:



(i) one or more stock certificates (or copies thereof provided by the Transfer Agent), free
and clear of all restrictive and other legends (except as expressly provided in Section
4.1(b) hereof), evidencing such number of Common Shares set forth opposite such Investor’s name
on Exhibit A hereto under the heading “Common Shares,” registered in the name of such
Investor;



(ii) a legal opinion of Company Counsel, in the form of Exhibit C, executed by such
counsel and delivered to the Investors and the Agent;



(iii) duly executed Transfer Agent Instructions acknowledged by the Company’s transfer agent;
and



approval by each applicable Trading Market of an additional shares listing application covering all
of the Registrable Securities.



(b) At the Closing, each Investor shall deliver or cause to be delivered to the Company the
purchase price set forth opposite such Investor’s name on Exhibit A hereto under the
heading “Purchase Price” in United States dollars and in immediately available funds, by wire
transfer to an account designated in writing to such Investor by the Company for such purpose.



ARTICLE III

REPRESENTATIONS AND WARRANTIES




3.1 Representations and Warranties of the Company. The Company hereby represents and
warrants to the Investors and the Agent as follows (which representations and warranties shall be
deemed to apply, where appropriate, to each Subsidiary of the Company):



(a) Subsidiaries. The Company has no Subsidiaries other than as specified in the SEC
Reports. Except as specified in the SEC Reports, the Company owns, directly or indirectly, all of
the capital stock or comparable equity interests of each Subsidiary free and clear of any Lien and
all the issued and outstanding shares of capital stock or comparable equity interest of each
Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar
rights.



(b) Organization and Qualification. Each of the Company and the Subsidiaries is an
entity duly organized, validly existing and in good standing under the laws of the jurisdiction of
its incorporation or organization (as applicable), with the requisite legal authority to own and
use its properties and assets and to carry on its business as currently conducted. Neither the
Company nor any Subsidiary is in violation of any of the provisions of its respective certificate
or articles of incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, would not,
individually or in the aggregate, have or reasonably be expected to result in a Material
Adverse Effect.


 


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(c) Authorization; Enforcement. The Company has the requisite corporate authority to
enter into and to consummate the transactions contemplated by each of the Transaction Documents to
which it is a party and otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents to which it is a party by the Company
and the consummation by it of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of the Company and no further consent or
action is required by the Company, its Board of Directors or its stockholders. Each of the
Transaction Documents to which it is a party has been (or upon delivery will be) duly executed by
the Company and is, or when delivered in accordance with the terms hereof, will constitute, the
valid and binding obligation of the Company enforceable against the Company in accordance with its
terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other
laws of general application relating to or affecting the enforcement of creditors rights generally,
and (ii) the effect of rules of law governing the availability of specific performance and other
equitable remedies.



(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents to which it is a party by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not, and will not, (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or
other organizational or charter documents, (ii) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of
time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary is bound, or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company or a Subsidiary is
subject (including, assuming the accuracy of the representations and warranties of the Investors
set forth in Section 3.2 hereof, federal and state securities laws and regulations and the rules
and regulations of any self-regulatory organization to which the Company or its securities are
subject, including all applicable Trading Markets), or by which any property or asset of the
Company or a Subsidiary is bound or affected, except to the extent that such violation would not
reasonably be expected to have a Material Adverse Effect.



(e) The Securities. The Securities are duly authorized and, when issued and paid for
in accordance with the Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens and will not be subject to preemptive or similar rights
of stockholders (other than those imposed by the Investors). Assuming the truth and accuracy of
the representations and warranties of the Investors contained herein, the offer and sale of the
Shares to the Investors pursuant to the Agreement, will not require registration under the
Securities Act by reason of the exemption provided by Section 4(2) of the Securities Act.


 


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(f) Capitalization. The aggregate number of shares and type of all authorized, issued
and outstanding classes of capital stock, options and other securities of the Company (whether or
not presently convertible into or exercisable or exchangeable for shares of capital stock of the
Company) is set forth in Schedule 3.1(f). All outstanding shares of capital stock are duly
authorized, validly issued, fully paid and nonassessable and have been issued in compliance in all
material respects with all applicable securities laws. Except as disclosed in Schedule
3.1(f), the Company did not have outstanding at June 30, 2007 any other options, warrants,
script rights to subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable or exchangeable for, or entered
into any agreement giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or securities or rights convertible or exchangeable into shares of Common Stock. Except for
customary adjustments as a result of stock dividends, stock splits, combinations of shares,
reorganizations, recapitalizations, reclassifications or other similar events, there are no
anti-dilution or price adjustment provisions contained in any security issued by the Company (or in
any agreement providing rights to security holders) and the issuance and sale of the Securities
will not obligate the Company to issue shares of Common Stock or other securities to any Person
(other than the Investors) and will not result in a right of any holder of securities to adjust the
exercise, conversion, exchange or reset price under such securities. To the knowledge of the
Company, except as disclosed in the SEC Reports and any Schedules filed with the SEC pursuant to
Rule 13d-1 of the Exchange Act by reporting persons, no Person or group of related Persons
beneficially owns (as determined pursuant to Rule 13d-3 under the Exchange Act), or has the right
to acquire, by agreement with or by obligation binding upon the Company, beneficial ownership of in
excess of 5% of the outstanding Common Stock.



(g) SEC Reports; Financial Statements. The Company has filed all reports required to
be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the 12 months preceding the date hereof on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the expiration of any
such extension and has filed all reports required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding
the date hereof. Such reports required to be filed by the Company under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, together with any materials
filed or furnished by the Company under the Exchange Act, whether or not any such reports were
required being collectively referred to herein as the “SEC Reports” and, together with this
Agreement and the Schedules to this Agreement, the “Disclosure Materials”. As of their respective
dates, the SEC Reports filed by the Company complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the SEC promulgated
thereunder, and none of the SEC Reports, when filed by the Company, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the SEC Reports comply
in all material respects with applicable accounting requirements and the rules and regulations of
the SEC with respect thereto as in effect at the time of filing. Such financial statements have
been prepared in accordance with United States generally accepted accounting principles applied on
a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in
such financial statements, the notes thereto and except that unaudited financial statements may not
contain all footnotes required by GAAP or may be condensed or summary statements, and
fairly present in all material respects the consolidated financial position of the Company and
its consolidated Subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited statements, to normal,
year-end audit adjustments. All material agreements to which the Company or any Subsidiary is a
party or to which the property or assets of the Company or any Subsidiary are subject are included
as part of or identified in the SEC Reports, to the extent such agreements are required to be
included or identified pursuant to the rules and regulations of the SEC.


 


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(h) Since the date of the latest audited financial statements included within the SEC Reports,
except as disclosed in the SEC Reports, (i) there has been no event, occurrence or development
that, individually or in the aggregate, has had or that would result in a Material Adverse Effect,
(ii) the Company has not incurred any material liabilities other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or
required to be disclosed in filings made with the SEC, (iii) the Company has not altered its method
of accounting or changed its auditors, except as disclosed in its SEC Reports, (iv) the Company
has not declared or made any dividend or distribution of cash or other property to its
stockholders, in their capacities as such, or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock (except for repurchases by the Company of shares
of capital stock held by employees, officers, directors, or consultants pursuant to an option of
the Company to repurchase such shares upon the termination of employment or services), and (v) the
Company has not issued any equity securities to any officer, director or Affiliate, except pursuant
to existing Company stock-based plans. 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 the applicable Closing,
will not be Insolvent (as defined below). For purposes of this Section 3.1(h), “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
Section 3.1(bb)), (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.



(i) Absence of Litigation. Except as disclosed in Schedule 3.1(i), there is
no action, suit, claim, or Proceeding, or, to the Company’s knowledge, inquiry or investigation,
before or by any court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries that could, individually or in the aggregate, have a Material Adverse Effect.



(j) Compliance. Except as described in the SEC Reports, neither the Company nor any
Subsidiary, except in each case as would not, individually or in the aggregate, reasonably be
expected to have or result in a Material Adverse Effect, (i) is in default under or in
violation of (and no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received written notice of a claim that it is in default under or that it
is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or not such default
or violation has been waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any
governmental authority.


 


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(k) Title to Assets. The Company and the Subsidiaries have good and marketable title
to all real property owned by them that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal property owned by them that is material
to the business of the Company and the Subsidiaries, in each case free and clear of all Liens,
except for Liens that do not, individually or in the aggregate, have or result in a Material
Adverse Effect. Any real property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company
and the Subsidiaries are in material compliance.



(l) No General Solicitation; Placement Agent’s Fees. Neither the Company, nor any of
its Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in connection with the
offer or sale of the Securities. The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or brokers’ commission (other than for persons engaged by
any Investor or its investment advisor) relating to or arising out of the issuance of the
Securities pursuant to this Agreement. The Company shall pay, and hold each Investor harmless
against, any liability, loss or expense (including, without limitation, reasonable attorney’s fees
and out-of-pocket expenses) arising in connection with any such claim for fees arising out of the
issuance of the Securities pursuant to this Agreement. The Company acknowledges that it has
engaged Cowen and Company, LLC as its exclusive placement agent (the “Agent”) in connection with
the sale of the Securities. Other than the Agent, the Company has not engaged any placement agent
or other agent in connection with the sale of the Securities.



(m) Private Placement. Neither the Company nor any of its Affiliates nor, any Person
acting on the Company’s behalf has, directly or indirectly, at any time within the past six months,
made any offer or sale of any security or solicitation of any offer to buy any security under
circumstances that would (i) eliminate the availability of the exemption from registration under
Regulation D under the Securities Act in connection with the offer and sale by the Company of the
Securities as contemplated hereby or (ii) cause the offering of the Securities pursuant to the
Transaction Documents to be integrated with prior offerings by the Company for purposes of any
applicable law, regulation or stockholder approval provisions, including, without limitation, under
the rules and regulations of any Trading Market. The Company is not required to be registered as,
and is not an Affiliate of, an “investment company” within the meaning of the Investment Company
Act of 1940, as amended. The Company is not required to be registered as, a United States real
property holding corporation within the meaning of the Foreign Investment in Real Property Tax Act
of 1980.



(n) Form S-3 Eligibility. The Company is eligible to register the Common Shares for
resale by the Investors using Form S-3 promulgated under the Securities Act.


 


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(o) Listing and Maintenance Requirements. Other than as disclosed in the SEC Reports,
the Company has not, in the twelve months preceding the date hereof, received notice (written or
oral) from any Trading Market on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or maintenance requirements of such
Trading Market. The Company is in compliance with all such listing and maintenance requirements.



(p) Registration Rights. Except as disclosed in Schedule 3.1(p), the Company
has not granted or agreed to grant to any Person any rights (including “piggy-back” registration
rights) to have any securities of the Company registered with the SEC or any other governmental
authority that have not been satisfied or waived.



(q) Application of Takeover Protections. Except as described in the SEC Reports,
there is no control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision under the Company’s
charter documents or the laws of its state of incorporation that is or could become applicable to
any of the Investors as a result of the Investors and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including, without limitation, as a result
of the Company’s issuance of the Securities and the Investors’ ownership of the Securities.



(r) Disclosure. The Company confirms that neither it nor any officers, directors or
Affiliates, has provided any of the Investors (other than Excluded Investors) or their agents or
counsel with any information that constitutes or might constitute material, nonpublic information
(other than the existence and terms of the issuance of Securities, as contemplated by this
Agreement). The Company understands and confirms that each of the Investors will rely on the
foregoing representations in effecting transactions in securities of the Company (other than
Excluded Investors). All disclosure provided by the Company to the Investors regarding the
Company, its business and the transactions contemplated hereby, including the Schedules to this
Agreement, furnished by or on the behalf of the Company are true and correct in all material
respects and do not contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. To the Company’s knowledge, except for the
transactions contemplated by this Agreement, no event or circumstance has occurred with respect to
the Company or any of its Subsidiaries or its or their business, properties, operations or
financial condition, which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or disclosed. The Company
acknowledges and agrees that no Investor (other than Excluded Investors) makes or has made any
representations or warranties with respect to the transactions contemplated hereby other than those
set forth in the Transaction Documents.



(s) Acknowledgment Regarding Investors’ Purchase of Securities. Based upon the
assumption that the transactions contemplated by this Agreement are consummated in all material
respects in conformity with the Transaction Documents, the Company acknowledges
and agrees that each of the Investors (other than Excluded Investors) is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further acknowledges that no Investor
(other than Excluded Investors) is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions contemplated hereby and
any advice given by any Investor (other than Excluded Investors) or any of their respective
representatives or agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to the Investors’ purchase of the Securities.
The Company further represents to each Investor that the Company’s decision to enter into this
Agreement has been based solely on the independent evaluation of the transactions contemplated
hereby by the Company and its representatives.


 


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(t) Patents and Trademarks. The Company and its Subsidiaries own, or possess adequate
rights or licenses to use, all trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights (“Intellectual Property
Rights”) necessary to conduct their respective businesses now conducted. Except as set forth in
the SEC Reports, none of the Company’s Intellectual Property Rights have expired or terminated, or
are expected to expire or terminate, within three years from the date of this Agreement. The
Company does not have any knowledge of any infringement by the Company or its Subsidiaries of
Intellectual Property Rights of others, except in each case as would not, individually or in the
aggregate, reasonably be expected to have or result in a Material Adverse Effect. Except as
disclosed in the SEC Reports, there is no claim, action or proceeding being made or brought, or to
the knowledge of the Company, being threatened, against the Company or its Subsidiaries regarding
its Intellectual Property Rights, except in each case as would not, individually or in the
aggregate, reasonably be expected to have or result in a Material Adverse Effect.



(u) Insurance. The Company and the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as are prudent and
customary in the businesses and location in which the Company and the Subsidiaries are engaged.



(v) Regulatory Permits. The Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in the SEC Reports
(“Material Permits”), except where the failure to possess such permits does not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse Effect, and neither
the Company nor any Subsidiary has received any written notice of proceedings relating to the
revocation or modification of any Material Permit.



(w) Transactions With Affiliates and Employees. Except as set forth or incorporated
by reference in the Company’s SEC Reports, none of the officers, directors or employees of the
Company is presently a party to any transaction that would be required to be reported on Form 10-K
with the Company or any of its Subsidiaries (other than for ordinary course services as employees,
officers or 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 Company’s knowledge, 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.


 


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(x) Internal Accounting Controls. The Company and the Subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific authorization, and
(iv) the recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.



(y) Disclosure Controls and Procedures. The Company maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15 of the General Rules and Regulations under the
Exchange Act) that comply with the requirements of the Exchange Act; such disclosure controls and
procedures have been designed to ensure that information required to be disclosed by the Company
and its Subsidiaries is accumulated and communicated to the Company’s management, including the
Company’s principal executive officer and principal financial officer by others within those
entities, such disclosure controls and procedures are effective.



(z) Sarbanes-Oxley Act. The Company is in compliance in all material respects with
applicable requirements of the Sarbanes-Oxley Act of 2002 and applicable rules and regulations
promulgated by the SEC thereunder.



(aa) Foreign Corrupt Practices. Neither the Company nor any of its Subsidiaries nor,
to the knowledge of the Company, any director, officer, agent, employee or other Person acting on
behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on
behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or employee from corporate
funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act
of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback
or other unlawful payment to any foreign or domestic government official or employee.



(bb) Indebtedness. Except as disclosed in the SEC Reports, neither the Company nor
any of its Subsidiaries (i) has any outstanding Indebtedness (as defined below), (ii) is in
violation of any term of or in default under any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, or (iii) is a party to any contract, agreement or
instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s
officers, has or is expected to have a Material Adverse Effect. The SEC Reports provide a detailed
description of the material terms of any such outstanding Indebtedness.



 


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For purposes of this Agreement: (x) “Indebtedness” of any Person means, without duplication (A)
all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables entered into in the
ordinary course of business), (C) all reimbursement or payment obligations with respect to letters
of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses, (E) all indebtedness created or arising
under any conditional sale or other title retention agreement, or incurred as financing, in either
case with respect to any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the event of default
are limited to repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the Person which owns
such assets or property has not assumed or become liable for the payment of such indebtedness, and
(H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; (y) “Contingent Obligation” means, as to any Person,
any direct or indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the primary purpose or
intent of the Person incurring such liability, or the primary effect thereof, is to provide
assurance to the obligee of such liability that such liability will be paid or discharged, or that
any agreements relating thereto will be complied with, or that the holders of such liability will
be protected (in whole or in part) against loss with respect thereto; and (z) “Person” means an
individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency thereof.



(cc) Employee Relations. 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 believes that
its relations with its employees are as disclosed in the SEC Reports. Except as disclosed in the
SEC Reports, during the period covered by the SEC Reports, no executive officer of the Company or
any of its Subsidiaries (as defined in Rule 501(f) of the Securities Act) has notified the Company
or any such Subsidiary that such officer intends to leave the Company or any such Subsidiary or
otherwise terminate such officer’s employment with the Company or any such Subsidiary. To the
knowledge of the Company or any such Subsidiary, no executive officer of the Company or any of its
Subsidiaries is 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 such Subsidiary to any liability with respect to any of
the foregoing matters.



(dd) Labor Matters. The Company and its Subsidiaries are in compliance in all
material respects with all federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, 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.


 


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(ee) Environmental Laws. The Company and its Subsidiaries (i) are in compliance in
all material respects 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 in all material respects
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 would 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 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.



(ff) Subsidiary Rights. Except as set forth in the SEC Reports, 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
Subsidiaries as owned by the Company or such Subsidiary.



(gg) Tax Status. The Company and each of its Subsidiaries (i) has made or filed all
foreign, federal and state income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set aside on its books
provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes in any material
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.



3.2 Representations, Warranties and Covenants of the Investors. Each Investor hereby,
as to itself only and for no other Investor, represents, warrants and covenants to the Company and
the Agent as follows:



(a) Organization; Authority. Such Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization with the
requisite corporate, partnership or other power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The purchase by such Investor of the Securities hereunder has been duly
authorized by all necessary corporate, partnership or other action on the part of such Investor.
This Agreement has been duly executed and delivered by such Investor and constitutes the valid and
binding obligation of such Investor, enforceable against it in accordance with its terms, except as
may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors rights
generally, and (ii) the effect of rules of law governing the availability of specific
performance and other equitable remedies.


 


15









 





(b) No Public Sale or Distribution. Such Investor is (i) acquiring the Common Shares
in the ordinary course of business for its own account and not with a view towards, or for resale
in connection with, the public sale or distribution thereof, except pursuant to sales registered
under the Securities Act or under an exemption from such registration and in compliance with
applicable federal and state securities laws, and such Investor does not have a present arrangement
to effect any distribution of the Securities to or through any person or entity; provided, however,
that by making the representations herein, such Investor does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration statement or an exemption
under the Securities Act.



(c) Investor Status. At the time such Investor was offered the Securities, it was,
and at the date hereof it is, either (A) a “qualified institutional buyer” as defined in Rule
144A(a) under the Securities Act or (B) an “accredited investor” as defined in Rule 501(a)(1), (2)
or (3) under the Securities Act. At the date hereof, such Investor has that dollar amount of
securities invested in its portfolio or under management (including investments held by its wholly
owned subsidiaries) as set forth on the Investor Signature Page. Such Investor is not a registered
broker dealer registered under Section 15(a) of the Exchange Act, or a member of FINRA or an entity
engaged in the business of being a broker dealer. Except as otherwise disclosed in writing to the
Company on Exhibit B-2 (attached hereto) on or prior to the date of this Agreement, such Investor
is not affiliated with any broker dealer registered under Section 15(a) of the Exchange Act, or a
member of FINRA or an entity engaged in the business of being a broker dealer.



(d) Experience of Such Investor. Such Investor, either alone or together with its
representatives has such knowledge, sophistication and experience in business and financial matters
so as to be capable of evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment. Such Investor
understands that it must bear the economic risk of this investment in the Securities indefinitely,
and is able to bear such risk and is able to afford a complete loss of such investment.



(e) Access to Information. Such Investor acknowledges that it has reviewed the
Disclosure Materials and has been afforded: (i) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information (other than material non-public information) about the
Company and the Subsidiaries and their respective financial condition, results of operations,
business, properties, management and prospects sufficient to enable it to evaluate its investment;
and (iii) the opportunity to obtain such additional information that the Company possesses or can
acquire without unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other investigation
conducted by or on behalf of such Investor or its representatives or counsel shall modify, amend or
affect such Investor’s right to rely on the truth, accuracy and completeness of the Disclosure
Materials and the Company’s representations and warranties
contained in the Transaction Documents. Such Investor acknowledges receipt of copies of the
SEC Reports.


 


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(f) No Governmental Review. Such Investor 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.



(g) No Conflicts. The execution, delivery and performance by such Investor of this
Agreement and the consummation by such Investor of the transactions contemplated hereby will not
(i) result in a violation of the organizational documents of such Investor or (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 such Investor is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree (including federal
and state securities laws) applicable to such Investor, except in the case of clauses (ii) and
(iii) above, for such that are not material and do not otherwise affect the ability of such
Investor to consummate the transactions contemplated hereby.



(h) Prohibited Transactions. No Investor, directly or indirectly, and no Person
acting on behalf of or pursuant to any understanding with any Investor, has engaged in any
purchases or sales of any securities, including any derivatives, of the Company (including, without
limitation, any Short Sales involving any of the Company’s securities) (a “Transaction”) since the
time that such Investor was first contacted by the Company, the Agent or any other Person regarding
the transactions contemplated hereby. Such Investor covenants that neither it nor any Person
acting on its behalf or pursuant to any understanding with such Investor will engage, directly or
indirectly, in any Transactions prior to the time the transactions contemplated by this Agreement
are publicly disclosed. “Short Sales” include, without limitation, all “short sales” as defined in
Rule 200 promulgated under Regulation SHO under the Exchange Act and all types of direct and
indirect stock pledges, forward sale contracts, options, puts, calls, short sales, swaps,
derivatives and similar arrangements (including on a total return basis), and sales and other
transactions through non-U.S. broker-dealers or foreign regulated brokers.



(i) Restricted Securities. The Investors understand that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they
are being acquired from the Company in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold without registration under the
Securities Act only in certain limited circumstances.



(j) Legends. It is understood that, except as provided in Section 4.1(b) of this
Agreement, certificates evidencing such Securities may bear the legend set forth in Section 4.1(b).


 


17









 





(k) No Legal, Tax or Investment Advice. Such Investor understands that nothing in
this Agreement or any other materials presented by or on behalf of the Company to
the Investor in connection with the purchase of the Securities constitutes legal, tax or
investment advice. Such Investor has consulted such legal, tax and investment advisors as it, in
its sole discretion, has deemed necessary or appropriate in connection with its purchase of the
Securities. Such Investor understands that the Agent has acted solely as the agent of the Company
in this placement of the Securities, and that the Agent makes no representation or warranty with
regard to the merits of this transaction or as to the accuracy of any information such Investor may
have received in connection therewith. Such Investor acknowledges that he has not relied on any
information or advice furnished by or on behalf of the Agent.



ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES




4.1 Transfer Restrictions.



(a) The Investors covenant that the Securities will only be disposed of pursuant to an
effective registration statement under, and in compliance with the requirements of, the Securities
Act or pursuant to an available exemption from the registration requirements of the Securities Act,
and in compliance with any applicable state securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement or to the Company, or
pursuant to Rule 144(k), the Company may require the transferor to provide to the Company an
opinion of counsel selected by the transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does not require
registration under the Securities Act. Notwithstanding the foregoing, the Company hereby consents
to and agrees to register on the books of the Company and with its Transfer Agent, without any such
legal opinion, except to the extent that the Transfer Agent requests such legal opinion, any
transfer of Securities by an Investor to an Affiliate of such Investor, provided that the
transferee certifies to the Company that it is an “accredited investor” as defined in Rule 501(a)
under the Securities Act and provided that such Affiliate does not request any removal of any
existing legends on any certificate evidencing the Securities.



(b) The Investors agree to the imprinting, so long as is required by this Section
4.1(b), of the following legend on any certificate evidencing any of the Securities:



THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.


 


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Certificates evidencing Securities shall not be required to contain such legend or any other legend
(i) while a registration statement (including the Registration Statement) covering the resale of
the Securities is effective under the Securities Act, (ii) following any sale of such Securities
pursuant to Rule 144 if the holder provides the Company with a legal opinion (and the documents
upon which the legal opinion is based) reasonable acceptance to the Company to the effect that the
Securities can be sold under Rule 144, (iii) if the holder provides the Company with a legal
opinion (and the documents upon which the legal opinion is based) reasonably acceptable to the
Company to the effect that the Securities are eligible for sale under Rule 144(k), or (iv) if the
holder provides the Company with a legal opinion (and the documents upon which the legal opinion is
based) reasonably acceptable to the Company to the effect that the legend is not required under
applicable requirements of the Securities Act (including controlling judicial interpretations and
pronouncements issued by the Staff of the SEC). The Company shall cause its counsel to issue the
legal opinion included in the Transfer Agent Instructions to the Transfer Agent on the Effective
Date. Following the Effective Date or at such earlier time as a legend is no longer required for
certain Securities, the Company will no later than three Trading Days following the delivery by an
Investor to the Company or the Transfer Agent of (i) a legended certificate representing such
Securities, and (ii) an opinion of counsel to the extent required by Section 4.1(a),
deliver or cause to be delivered to such Investor a certificate representing such Securities that
is free from all restrictive and other legends. The Company may not make any notation on its
records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section.



(c) The Company will not object to and shall permit (except as prohibited by law) an Investor
to pledge or grant a security interest in some or all of the Securities in connection with a bona
fide margin agreement or other loan or financing arrangement secured by the Securities, and if
required under the terms of such agreement, loan or arrangement, the Company will not object to and
shall permit (except as prohibited by law) such Investor to transfer pledged or secured Securities
to the pledges or secured parties. Except as required by law, or as required by the Transfer
Agent, such a pledge or transfer would not be subject to approval of the Company, no legal opinion
of the pledgee, secured party or pledgor shall be required by the Company in connection therewith,
and no notice shall be required of such pledge. Each Investor acknowledges that the Company shall
not be responsible for any pledges relating to, or the grant of any security interest in, any of
the Securities or for any agreement, understanding or arrangement between any Investor and its
pledgee or secured party. At the appropriate Investor’s expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably
request in connection with a pledge or transfer of the Securities, including the preparation and
filing of any required prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders
thereunder. Provided that the Company is in compliance with the terms of this Section
4.1(c), the Company’s indemnification obligations pursuant to Section 6.4 shall not
extend to any Proceeding or Losses arising out of or related to this Section 4.1(c).



4.2 Furnishing of Information. Until the date that any Investor owning Shares may
sell all of such Shares under Rule 144(k) of the Securities Act (or any successor provision), the
Company covenants to use its commercially reasonable efforts to timely file (or obtain extensions
in respect thereof and file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to the Exchange Act. The Company further
covenants that it will take such further action as any holder of Securities may reasonably request
to satisfy the provisions of this Section 4.2.


 


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4.3 Integration. The Company shall not, and shall use its commercially reasonably
efforts to ensure that no Affiliate thereof shall, sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that
would be integrated with the offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities to the Investors or that would
be integrated with the offer or sale of the Securities for purposes of the rules and regulations of
any Trading Market.



4.4 Reservation of Securities. The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount
as may be required to fulfill its obligations to issue such Shares under the Transaction Documents.
In the event that at any time prior to Closing the then authorized shares of Common Stock are
insufficient for the Company to satisfy its obligations to issue such Shares under the Transaction
Documents, the Company shall promptly take such actions as may be required to increase the number
of authorized shares.



4.5 Securities Laws Disclosure; Publicity. The Company shall, on or before 8:30 a.m.,
New York time, on the first Trading Day following execution of this Agreement, issue a press
release reasonably acceptable to the Investors and in compliance with applicable securities laws
disclosing all material terms of the transactions contemplated hereby. On the later of the Closing
Date or the date required by applicable securities laws, the Company shall file a Current Report on
Form 8-K with the SEC (the “8-K Filing”) describing the terms of the transactions contemplated by
the Transaction Documents and including as exhibits to such Current Report on Form 8-K the
Transaction Documents (including the schedules and the names, and addresses of the Investors and
the amount(s) of Securities respectively purchased), in the form required by the Exchange Act.
Thereafter, the Company shall timely file any filings and notices required by the SEC or applicable
law with respect to the transactions contemplated hereby and provide copies thereof to the
Investors promptly after filing. Except as herein provided, the Company shall not publicly
disclose the name of any Investor, or include the name of any Investor in any press release without
the prior written consent of such Investor, unless otherwise required by law. The Company shall
not, and shall cause each of its Subsidiaries and its and each of their respective officers,
directors, employees and agents not to, provide any Investor with any material nonpublic
information regarding the Company or any of its Subsidiaries from and after the issuance of the
above referenced press release without the express written consent of such Investor.



4.6 Use of Proceeds. The Company intends to use the net proceeds from the sale of the
Securities for working capital and general corporate purposes. The Company also may use a portion
of the net proceeds, currently intended for general corporate purposes, to acquire or invest in new
restaurant construction, products or services that complement its business, although the Company
has no present plans or commitments and is not currently engaged in any material negotiations with
respect to these types of transactions. Pending these uses, the Company
intends to invest the net proceeds from this offering in short-term, interest-bearing,
investment-grade securities, or as otherwise pursuant to the Company’s customary investment
policies.


 


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4.7 Subsequent Private Offerings. During the period commencing on the Closing Date
and ending on 30 days following the Effective Date, the Company shall not sell any of its
securities (or equity-linked securities) for cash in a private placement or offering substantially
similar to the transactions contemplated by this Agreement.



ARTICLE V

CONDITIONS




5.1 Conditions Precedent to the Obligations of the Investors. The obligation of each
Investor to acquire Securities at the Closing is subject to the satisfaction or waiver by such
Investor, at or before the Closing, of each of the following conditions:



(a) Representations and Warranties. The representations and warranties of the Company
contained herein shall be true and correct as of the date when made and as of the Closing as though
made on and as of such date; and



(b) Performance. The Company and each other Investor shall have performed, satisfied
and complied in all material respects with all covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing.



5.2 Conditions Precedent to the Obligations of the Company. The obligation of the
Company to sell the Securities at the Closing is subject to the satisfaction or waiver by the
Company, at or before the Closing, of each of the following conditions:



(a) Representations and Warranties. The representations and warranties of the
Investors contained herein shall be true and correct as of the date when made and as of the Closing
Date as though made on and as of such date; and



(b) Performance. The Investors shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Investors at or prior to the Closing.



ARTICLE VI

REGISTRATION RIGHTS




6.1 Registration Statement.



(a) As promptly as possible, and in any event on or prior to the Filing Date, the Company
shall prepare and file with the SEC a Registration Statement covering the resale of all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule 415. The Registration
Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale
the Registrable Securities on Form S-3, in which case such registration shall be on another
appropriate form in accordance with the Securities Act and the Exchange Act) and
shall contain (except if otherwise directed by the Investors or requested by the SEC) the
“Plan of Distribution” in substantially the form attached hereto as Exhibit D.


 


21









 





(b) The Company shall use its commercially reasonable efforts to cause the Registration
Statement to be declared effective by the SEC as promptly as possible after the filing thereof, but
in any event prior to the Required Effectiveness Date, and shall use its commercially reasonable
efforts to keep the Registration Statement continuously effective under the Securities Act until
the earlier of the date that all Shares covered by such Registration Statement have been sold or
can be sold publicly under Rule 144(k) (the “Effectiveness Period”); provided that, upon
notification by the SEC that a Registration Statement will not be reviewed or is no longer subject
to further review and comments, the Company shall request acceleration of the effectiveness of such
Registration Statement so as to cause the Registration Statement to be declared effective within
five (5) Trading Days after receipt of such notice and request that it becomes effective at 4:00
p.m. New York City time on the Effective Dave and file a prospectus supplement for any Registration
Statement, whether or not required under Rule 424 (or otherwise), by 9:00 a.m. New York City time
the day after the Effective Date; provided, however, that any such request for acceleration will be
deemed made timely pursuant to this Section 6.2(b) so long as the Company is using its
commercially reasonable best efforts to pursue such effectiveness but is delayed by any requirement
of its independent registered public accountants to obtain any necessary consents or approvals
required under the Securities Act.



(c) The Company shall notify the Investors in writing promptly (and in any event within one
Trading Day) after receiving notification from the SEC that the Registration Statement has been
declared effective.



(d) Should an Event (as defined below) occur, then upon the occurrence of such Event, and on
every monthly anniversary thereof until the applicable Event is cured, the Company shall pay to
each Investor an amount in cash, as liquidated damages and not as a penalty, equal to one percent
(1.0%) of (i) the number of Common Shares held by such Investor as of the date of such Event,
multiplied by (ii) the purchase price paid by such Investor for such Common Shares then held;
provided, however, that the total amount of payments pursuant to this Section 6.1(d) shall
not exceed, when aggregated with all such payments paid to all Investors pursuant to this
Section 6.1(d), ten percent (10%) of the aggregate purchase price. The payments to which
an Investor shall be entitled pursuant to this Section 6.1(d) are referred to herein as
"Event Payments.” Any Event Payments payable pursuant to the terms hereof shall apply on a pro
rated basis for any portion of a month prior to the cure of an Event. In the event the Company
fails to make Event Payments in a timely manner, such Event Payments shall bear interest at the
rate of one percent (1.0%) per month (prorated for partial months) until paid in full. All pro
rated calculations made pursuant to this paragraph shall be based upon the actual number of days in
such pro rated month.



For such purposes, each of the following shall constitute an “Event”:



(i) the Registration Statement is not filed on or prior to the Filing Date or is not declared
effective on or prior to the Required Effectiveness Date;


 


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(ii) except as provided for in Section 6.1(e) (the “Excluded Events”), after the
Effective Date, an Investor is not permitted to sell Registrable Securities under the Registration
Statement (or a subsequent Registration Statement filed in replacement thereof) for any reason
(other than the fault of such Investor) for five or more Trading Days (whether or not consecutive);



(iii) the Common Stock is not listed or quoted, or is suspended from trading, on an Eligible
Market for a period of three Trading Days (which need not be consecutive Trading Days) during the
Effectiveness Period; or



(iv) with respect to an Investor, the Company fails for any reason to deliver a certificate
evidencing any Securities to such Investor within five Trading Days after delivery of such
certificate is required pursuant to any Transaction Document.



(e) Notwithstanding anything in this Agreement to the contrary, after 60 consecutive Trading
Days of continuous effectiveness of the initial Registration Statement filed and declared effective
pursuant to this Agreement, the Company may, by written notice to the Investors, suspend sales
under a Registration Statement after the Effective Date thereof and/or require that the Investors
immediately cease the sale of shares of Common Stock pursuant thereto and/or defer the filing of
any subsequent Registration Statement if the Company is engaged in a material merger, acquisition
or sale and the Board of Directors determines in good faith, by appropriate resolutions, that, as a
result of such activity it would be materially detrimental to the Company (other than as relating
solely to the price of the Common Stock) to maintain a Registration Statement at such time. Upon
receipt of such notice, each Investor shall immediately discontinue any sales of Registrable
Securities pursuant to such registration until such Investor is advised in writing by the Company
that the current Prospectus or amended Prospectus, as applicable, may be used. In no event,
however, shall this right be exercised to suspend sales beyond the period during which (in the good
faith determination of the Company’s Board of Directors) the failure to require such suspension
would be materially detrimental to the Company. The Company’s rights under this Section
6(e) may be exercised for a period of no more than 20 Trading Days at a time and not more than
two times in any twelve-month period, without such suspension being considered as part of an Event
Payment determination. Immediately after the end of any suspension period under this Section
6(e), the Company shall take all necessary actions (including filing any required supplemental
prospectus) to restore the effectiveness of the applicable Registration Statement and the ability
of the Investors to publicly resell their Registrable Securities pursuant to such effective
Registration Statement.



(f) The Company shall not, from the date hereof until the Effective Date of the Registration
Statement covering all Registrable Securities, prepare and file with the SEC a registration
statement relating to an offering for its own account or the account of others under the Securities
Act of any of its equity securities, other than any registration statement or post-effective
amendment to a registration statement (or supplement thereto) relating to the Company’s employee
benefit plans registered on Form S-8.


 


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6.2 Registration Procedures. In connection with the Company’s registration
obligations hereunder, the Company shall:



(a) Not less than three Trading Days prior to the filing of a Registration Statement or any
related Prospectus or any amendment or supplement thereto, furnish via email to those Investors who
have supplied the Company with email addresses copies of all such documents proposed to be filed,
which documents (other than any document that is incorporated or deemed to be incorporated by
reference therein) will be subject to the review of such Investors. The Company shall reflect in
each such document when so filed with the SEC such comments regarding the Investors and the plan of
distribution as the Investors may reasonably and promptly propose no later than two Trading Days
after the Investors have been so furnished with copies of such documents as aforesaid.



(b) (i) Subject to Section 6.1(e), prepare and file with the SEC such amendments,
including post-effective amendments, to each Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep the Registration Statement continuously effective,
as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with
the SEC such additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended
or supplemented by any required Prospectus supplement, and as so supplemented or amended to be
filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible, and in any event
within 12 Trading Days (except to the extent that the Company reasonably requires additional time
to respond to accounting comments), to any comments received from the SEC with respect to the
Registration Statement or any amendment thereto; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Investors thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.



(c) Notify the Investors as promptly as reasonably possible, and (if requested by the
Investors confirm such notice in writing no later than two Trading Days thereafter, of any of the
following events: (i) the SEC notifies the Company whether there will be a “review” of any
Registration Statement; (ii) the SEC comments in writing on any Registration Statement; (iii) any
Registration Statement or any post-effective amendment is declared effective; (iv) the SEC or any
other federal or state governmental authority requests any amendment or supplement to any
Registration Statement or Prospectus or requests additional information related thereto; (v) the
SEC issues any stop order suspending the effectiveness of any Registration Statement or initiates
any Proceedings for that purpose; (vi) the Company receives notice of any suspension of the
qualification or exemption from qualification of any Registrable Securities for sale in any
jurisdiction, or the initiation or threat of any Proceeding for such purpose; or (vii) the
financial statements included in any Registration Statement become ineligible for inclusion therein
or any Registration Statement or Prospectus or other document contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they were made, not
misleading.



(d) Use its reasonable Best Efforts to avoid the issuance of or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of any Registration Statement, or (ii) any
suspension of the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, as soon as possible.


 


24









 





(e) If requested by an Investor, provide such Investor, without charge, at least one conformed
copy of each Registration Statement and each amendment thereto, including financial statements and
schedules, and all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such documents with the SEC.



(f) Promptly deliver to each Investor, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such
Persons may reasonably request. The Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Investors in connection with the offering
and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement
thereto to the extent permitted by federal and state securities laws and regulations.



(g) (i) In the time and manner required by each Trading Market, prepare and file with such
Trading Market an additional shares listing application covering all of the Registrable Securities;
(ii) take all steps necessary to cause such Common Shares to be approved for listing on each
Trading Market as soon as possible thereafter; (iii) provide to Investor Counsel evidence of such
listing; and (iv) except as a result of the Excluded Events, during the Effectiveness Period,
maintain the listing of such Common Shares on each such Trading Market or another Eligible Market.



(h) Prior to any public offering of Registrable Securities, use its reasonable Best Efforts to
register or qualify or cooperate with the selling Investors in connection with the registration or
qualification (or exemption from such registration or qualification) of such Registrable Securities
for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United
States as any Investor requests in writing, to keep each such registration or qualification (or
exemption therefrom) effective for so long as required, but not to exceed the duration of the
Effectiveness Period, and to do any and all other acts or things reasonably necessary or advisable
to enable the disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement; provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in
respect of doing business in any jurisdiction in which it is not otherwise so subject.



(i) Cooperate with the Investors to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent permitted by this Agreement
and under law, of all restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Investors may reasonably request.



(j) Upon the occurrence of any event described in Section 6.2(c)(vii), as promptly as
reasonably possible, prepare a supplement or amendment, including a post-effective amendment, to
the Registration Statement or a supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, and file any other
required document so that, as thereafter delivered, neither the Registration Statement nor
such Prospectus will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.


 


25









 





(k) Cooperate with any reasonable due diligence investigation undertaken by the Investors in
connection with the sale of Registrable Securities, including, without limitation, by making
available documents and information; provided that the Company will not deliver or make available
to any Investor material, nonpublic information unless such Investor requests in advance in writing
to receive material, nonpublic information and agrees to keep such information confidential.



(l) Comply with all rules and regulations of the SEC applicable to the registration of the
Securities.



(m) It shall be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable Securities of any
particular Investor or to make any Event Payments set forth in Section 6.1(c) to such
Investor that such Investor furnish to the Company the information specified in Exhibits B-1, B-2
and B-3 hereto and such other information regarding itself, the Registrable Securities and other
shares of Common Stock held by it and the intended method of disposition of the Registrable
Securities held by it (if different from the Plan of Distribution set forth on Exhibit D
hereto) as shall be reasonably required to effect the registration of such Registrable Securities
and shall complete and execute such documents in connection with such registration as the Company
may reasonably request.



(n) The Company shall comply with all applicable rules and regulations of the SEC under the
Securities Act and the Exchange Act, including, without limitation, Rule 172 under the Securities
Act, file any final Prospectus, including any supplement or amendment thereof, with the SEC
pursuant to Rule 424 under the Securities Act, promptly inform the Holders in writing if, at any
time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule
172 and, as a result thereof, the Holders are required to make available a Prospectus in connection
with any disposition of Registrable Securities and take such other actions as may be reasonably
necessary to facilitate the registration of the Registrable Securities hereunder.



6.3 Registration Expenses. The Company shall pay all fees and expenses incident to
the performance of or compliance with Article VI of this Agreement by the Company, including
without limitation (a) all registration and filing fees and expenses, including without limitation
those related to filings with the SEC, any Trading Market and in connection with applicable state
securities or Blue Sky laws, (b) printing expenses (including without limitation expenses of
printing certificates for Registrable Securities), (c) messenger, telephone and delivery expenses,
(d) fees and disbursements of counsel for the Company, (e) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions contemplated by
this Agreement, and (f) all listing fees to be paid by the Company to the Trading Market.
Notwithstanding the foregoing or anything in this Agreement to the contrary, each holder of the
Registrable Securities being registered shall pay all commissions, placement
agent fees, and underwriting discounts and commissions with respect to any Registrable
Securities sold by it and the fees and disbursements of any counsel or other advisors or experts
retained by such holders (severally or jointly).


 


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6.4 Indemnification



(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Investor, the officers, directors,
partners, members, agents and employees of each of them, each Person who controls any such Investor
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, partners, members, agents and employees of each such
controlling Person, to the fullest extent permitted by applicable law, from and against any and all
Losses, as incurred, arising out of or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any breach of any
covenant, agreement or obligation of the Company contained in the Transaction Documents or any
other certificate, instrument or document contemplated hereby or thereby, (iii) any cause of
action, suit or claim brought or made against such Indemnified Party (as defined in Section
6.4(c) below) by a third party (including for these purposes a derivative action brought on
behalf of the Company), arising out of or resulting from (x) execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (y) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities, or (z) the status of
Indemnified Party as holder of the Securities or (iv) any untrue or alleged untrue statement of a
material fact contained in the Registration Statement, any Prospectus or any form of Company
prospectus or in any amendment or supplement thereto or in any Company preliminary prospectus, or
arising out of or relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that (A) such untrue statements,
alleged untrue statements, omissions or alleged omissions are based solely upon information
regarding such Investor furnished in writing to the Company by such Investor for use therein, or
to the extent that such information relates to such Investor or such Investor’s proposed method of
distribution of Registrable Securities and was reviewed and expressly approved by such Investor
expressly for use in the Registration Statement, or (B) with respect to any prospectus, if the
untrue statement or omission of material fact contained in such prospectus was corrected on a
timely basis in the prospectus, as then amended or supplemented, if such corrected prospectus was
timely made available by the Company to the Holder, and the Holder seeking indemnity hereunder was
advised in writing not to use the incorrect prospectus prior to the use giving rise to Losses.



(b) Indemnification by Investors. Each Investor shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person
who controls the Company (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses
(as determined by a court of competent jurisdiction in a final judgment not subject to appeal or
review) arising solely out of any untrue statement of a material fact contained in the
Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or
supplement thereto, or arising out of or relating to any omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under which they were made)
not misleading, but only to the extent that such untrue statement or omission is contained in any
information so furnished by such Investor in writing to the Company specifically for inclusion in
such Registration Statement or such Prospectus. In no event shall the liability of any selling
Investor hereunder be greater in amount than the dollar amount of the net proceeds received by such
Investor upon the sale of the Registrable Securities giving rise to such indemnification
obligation.


 


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(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such
Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying
Party”) in writing, and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees
and expenses incurred in connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations
or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.



An Indemnified Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (iii) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party
(in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall
not have the right to assume the defense thereof and the reasonable fees and expenses of separate
counsel shall be at the expense of the Indemnifying Party). It being understood, however, that the
Indemnifying Party shall not, in connection with any one such Proceeding (including separate
Proceedings that have been or will be consolidated before a single judge) be liable for the fees
and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties,
which firm shall be appointed by a majority of the Indemnified Parties. The Indemnifying Party
shall not be liable for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any pending Proceeding in
respect of which any Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the subject matter of such
Proceeding.


 


28









 





All reasonable fees and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party,
as incurred, within 20 Trading Days of written notice thereof to the Indemnifying Party (regardless
of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially determined that such
Indemnified Party is not entitled to indemnification hereunder).



(d) Contribution. If a claim for indemnification under Section 6.4(a) or
(b) is unavailable to an Indemnified Party (by reason of public policy or otherwise), then
each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in
connection with the actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact or omission or
alleged omission of a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such action, statement or omission.
The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 6.4(c), any reasonable attorneys’ or other
reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the indemnification provided
for in this Section was available to such party in accordance with its terms.



The parties hereto agree that it would not be just and equitable if contribution pursuant to
this Section 6.4(d) were determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section 6.4(d), no
Investor shall be required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Investor from the sale of the Registrable Securities
subject to the Proceeding exceeds the amount of any damages that such Investor has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.



The indemnity and contribution agreements contained in this Section are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.



6.5 Dispositions. Each Investor agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection with sales of
Registrable Securities pursuant to the Registration Statement and shall sell its Registrable
Securities in accordance with the Plan of Distribution set forth in the Prospectus. Each Investor
further agrees that, upon receipt of a notice from the Company of the occurrence of any event of
the kind described in Sections 6.2(c)(v), (vi) or (vii), such Investor
will discontinue disposition of such Registrable Securities under the Registration Statement until
such Investor is advised in writing by the Company that the use of the Prospectus, or amended
Prospectus, as applicable, may be used. The Company may provide appropriate stop orders to enforce
the provisions of this paragraph.


 


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6.6 No Piggyback on Registrations. Except for up to 300,000 shares held by William
Blair & Company, L.L.C. or its affiliates, neither the Company nor any of its security holders
(other than the Investors in such capacity pursuant hereto may include securities of the Company in
the Registration Statement other than the Registrable Securities.



6.7 Piggy-Back Registrations. If at any time during the Effectiveness Period there is
not an effective Registration Statement covering all of the Registrable Securities and the Company
shall determine to prepare and file with the SEC a registration statement relating to an offering
for its own account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or
their then equivalents relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in connection with stock option
or other employee benefit plans, then the Company shall send to each Investor not then eligible to
sell all of their Registrable Securities under Rule 144 in a three-month period, written notice of
such determination and if, within ten days after receipt of such notice, any such Investor shall so
request in writing, the Company shall include in such registration statement all or any part of
such Registrable Securities such Investor requests to be registered. Notwithstanding the
foregoing, in the event that, in connection with any underwritten public offering, the managing
underwriter(s) thereof shall impose a limitation on the number of shares of Common Stock which may
be included in the Registration Statement because, in such underwriter(s)’ judgment, marketing or
other factors dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only such limited portion of
the Registrable Securities with respect to which such Investor has requested inclusion hereunder as
the underwriter shall permit; provided, however, that (i) the Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding securities, the
holders of which are not contractually entitled to inclusion of such securities in such
Registration Statement or are not contractually entitled to pro rata inclusion with the Registrable
Securities and (ii) after giving effect to the immediately preceding proviso, any such exclusion of
Registrable Securities shall be made pro rata among the Investors seeking to include Registrable
Securities and the holders of other securities having the contractual right to inclusion of their
securities in such Registration Statement by reason of demand registration rights, in proportion to
the number of Registrable Securities or other securities, as applicable, sought to be included by
each such Investor or other holder. If an offering in connection with which an Investor is
entitled to registration under this Section 6.7 is an underwritten offering, then each
Investor whose Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in an underwritten
offering using the same underwriter or underwriters and, subject to the provisions of this
Agreement, on the same terms and conditions as other shares of Common Stock included in such
underwritten offering and shall enter into an underwriting agreement in a form and substance
reasonably satisfactory to the Company and the underwriter or underwriters. Upon the effectiveness
the registration statement for which piggy-back registration has been provided in
this Section 6.7, any Event Payments payable to an Investor whose Securities are
included in such registration statement shall terminate.


 


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6.8 Regarding Rule 415. Notwithstanding anything to the contrary contained in this
Agreement, in the event the SEC seeks to characterize any offering pursuant to a Registration
Statement filed pursuant to this Agreement as constituting an offering of securities by or on
behalf of the Company, or in any other manner, such that the SEC does not permit such Registration
Statement to become effective and used for resales in a manner that does not constitute such an
offering and that permits the continuous resale at the market by the Investors participating
therein (or as otherwise may be acceptable to each Investor) without being named therein as an
“underwriter,” then the Company shall reduce the number of shares to be included in such
Registration Statement by all Investors (subject to the priorities set forth in the remainder of
this paragraph) until such time as the SEC shall so permit such Registration Statement to become
effective as aforesaid. In making such reduction, the Company shall first reduce or eliminate the
shares to be included by persons, if any, other than the Investors under the Purchase Agreement.
If, following such reduction, such characterization still exists, the Company shall then reduce the
number of shares to be included by all other Investors on a pro rata basis (based upon the number
of Registrable Securities otherwise required to be included for each such Investor) unless the
inclusion of shares by a particular Investor or a particular set of Investors are resulting in the
SEC’s “by or on behalf of the Company” offering position, in which event the shares held by such
Investor or set of Investors shall be the only shares subject to reduction (and if by a set of
Investors on a pro rata basis by such Investors or on such other basis as would result in the
exclusion of the least number of shares by all such Investors). In addition, in the event that the
SEC requires any Investor seeking to sell securities under a Registration Statement filed pursuant
to this Agreement to be specifically identified as an “underwriter” in order to permit such
Registration Statement to become effective, and such Investor does not consent to being so named as
an underwriter in such Registration Statement, then, in each such case, the Company shall reduce
the total number of Registrable Securities to be registered on behalf of such Investor, until such
time as the SEC does not require such identification or until such Investor accepts such
identification and the manner thereof. In the event of any reduction in Registrable Securities
pursuant to this paragraph, an affected Investor shall have the right to require, upon delivery of
a written request to the Company signed by such Investor, the Company to file a registration
statement within 30 days of such request (subject to any restrictions imposed by Rule 415 or
required by the SEC) for resale by such Investor in a manner acceptable to such Investor, and the
Company shall following such request cause to be and keep effective such registration statement in
the same manner as otherwise contemplated in this Agreement for a Registration Statement hereunder,
in each case until such time as: (i) all Registrable Securities held by such Investor have been
registered pursuant to an effective Registration Statement in a manner acceptable to such Investor
and disposed of thereunder or (ii) the Registrable Securities may be resold by such Investor
without restriction (including volume limitations) pursuant to Rule 144(k) of the Securities Act
(taking account of any SEC position with respect to “affiliate” status) or (iii) such Investor
agrees to be named as an underwriter in any such Registration Statement in a manner acceptable to
such Investor as to all Registrable Securities held by such Investor and that have not theretofore
been included in a Registration Statement under this Agreement and have been disposed of thereunder
(it being understood that the special demand right under this sentence may be exercised by a
Investor multiple times and with respect to limited amounts of Registrable Securities in order to permit the resale thereof by such
Investor as contemplated above).


 


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ARTICLE VII

MISCELLANEOUS




7.1 Termination. This Agreement may be terminated by the Company or any Investor, by
written notice to the other parties, if the Closing has not been consummated by the third Business
Day following the date of this Agreement; provided that no such termination will affect the right
of any party to sue for any breach by the other party (or parties).



7.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents to
the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company shall pay all
Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the sale and
issuance of their applicable Securities.



7.3 Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such documents, exhibits and
schedules. At or after the Closing, and without further consideration, the Company will execute
and deliver to the Investors such further documents as may be reasonably requested in order to give
practical effect to the intention of the parties under the Transaction Documents.



7.4 Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile or email at the facsimile number or email address specified in this Section prior to
6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile or email at the facsimile
number or email address specified in this Section on a day that is not a Trading Day or later than
6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of
deposit with a nationally recognized overnight courier service, or (d) upon actual receipt by the
party to whom such notice is required to be given. The addresses, facsimile numbers and email
addresses for such notices and communications are those set forth on the signature pages hereof, or
such other address or facsimile number as may be designated in writing hereafter, in the same
manner, by any such Person.



7.5 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the Company and each of the
Investors or, in the case of a waiver, by the party against whom enforcement of any such waiver is
sought. No waiver of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any
manner impair the exercise of any such right. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that relates exclusively to
the rights of Investors under Article VI may be given by Investors holding at least a
majority of the Registrable Securities to which such waiver or consent relates.


 


32









 





7.6 Construction. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
The language used in this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied against any party.



7.7 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written consent of the
Investors. Any Investor may assign its rights under this Agreement to any Person to whom such
Investor assigns or transfers any Securities, provided (i) such transferor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the
Company after such assignment, (ii) the Company is furnished with written notice of (x) the name
and address of such transferee or assignee and (y) the Registrable Securities with respect to which
such registration rights are being transferred or assigned, (iii) following such transfer or
assignment, the further disposition of such securities by the transferee or assignee is restricted
under the Securities Act and applicable state securities laws, (iv) such transferee agrees in
writing to be bound, with respect to the transferred Securities, by the provisions hereof that
apply to the “Investors” and (v) such transfer shall have been made in accordance with the
applicable requirements of this Agreement and with all laws applicable thereto.



7.8 Persons Entitled to Benefit of Agreement. This Agreement shall inure to the
benefit of and be binding upon the Company and each Investor and their respective successors and
permitted assigns. Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person, other than those persons mentioned in the preceding sentence or
otherwise explicitly mentioned in this Agreement, any legal or equitable right, remedy or claim
under or in respect of this Agreement, or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole and exclusive benefit
of such persons and for the benefit of no other person; except that each Indemnified Party is an
intended third party beneficiary of Section 6.4 and (in each case) may enforce the provisions of
such Sections directly against the parties with obligations thereunder.



7.9 Governing Law; Venue; Waiver of Jury Trial. THE CORPORATE LAWS OF THE STATE OF
DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS
STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF
THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE
ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR ANY INVESTOR HEREUNDER, IN CONNECTION
HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY
OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION
DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING
BROUGHT BY THE COMPANY OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY
HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY
SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY
WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND INVESTORS HEREBY
WAIVE ALL RIGHTS TO A TRIAL BY JURY.


 


33









 





7.10 Survival. The representations and warranties, agreements and covenants contained
herein shall survive the Closing.



7.11 Execution. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission or email attachment, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile or email-attached signature page were an original
thereof.



7.12 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Agreement.



7.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction Documents, whenever
any Investor exercises a right, election, demand or option owed to such Investor by the Company
under a Transaction Document and the Company does not timely perform its related obligations within
the periods therein provided, then, prior to the performance by the Company of the Company’s
related obligation, such Investor may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights.



7.14 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued
in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and the execution by the holder
thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and
hold harmless the Company for any losses in connection therewith. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.


 


34









 





7.15 Remedies. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, each of the Investors and the Company will be
entitled to seek specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation (other than in connection with any action for temporary
restraining order) the defense that a remedy at law would be adequate.



7.16 Payment Set Aside. To the extent that the Company makes a payment or payments to
any Investor hereunder or any Investor enforces or exercises its rights hereunder or thereunder,
and such payment or payments or the proceeds of such enforcement or exercise or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from,
disgorged by or are required to be refunded, repaid or otherwise restored to the Company by a
trustee, receiver or any other person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or such enforcement or
setoff had not occurred.



7.17 Adjustments in Share Numbers and Prices. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or other securities or
rights convertible into, or entitling the holder thereof to receive directly or indirectly shares
of Common Stock), combination or other similar recapitalization or event occurring after the date
hereof and prior to the Closing, each reference in any Transaction Document to a number of shares
or a price per share shall be amended to appropriately account for such event.



7.18 Independent Nature of Investors’ Obligations and Rights. The obligations of each
Investor under any Transaction Document are several and not joint with the obligations of any other
Investor, and no Investor shall be responsible in any way for the performance of the obligations of
any other Investor under any Transaction Document. The decision of each Investor to purchase
Securities pursuant to this Agreement has been made by such Investor independently of any other
Investor and independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may have been made or given by any other
Investor or by any agent or employee of any other Investor, and no Investor or any of its agents or
employees shall have any liability to any other Investor (or any other person) relating to or
arising from any such information, materials, statements or opinions. Nothing contained herein or
in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed
to constitute the Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated
by the Transaction Document. Each Investor acknowledges that no other Investor has acted as
agent for such Investor in connection with making its investment hereunder and that no other
Investor will be acting as agent of such Investor in connection with monitoring its investment
hereunder. Each Investor shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Investor to be joined as an
additional party in any proceeding for such purpose.



[SIGNATURE PAGES TO FOLLOW]



 


35









 





IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.



	 	 	 	 	 
	 	KONA GRILL, INC.

 	 
	 	By:  	 	 
	 	 	Mark S. Robinow, Chief Financial Officer 	 
	 	 	 	 
	 





Address for Notice:




7150 E. Camelback Road, Suite 220

Scottsdale, AZ 85251

Facsimile No.: (480) 991-6811

Telephone No.: (952) 646-2245

Attn: Mark S. Robinow




With a copy to:




Greenberg Traurig, LLP

2375 E. Camelback Road, Suite 700

Phoenix, AZ 85016

Facsimile No.: (602) 445-8632

Telephone No.: (602) 445-8318

Attn: Scott K. Weiss



COMPANY SIGNATURE PAGE



 


 









 





Investor Signature Page




By its execution and delivery of this signature page, the undersigned Investor hereby joins in
and agrees to be bound by the terms and conditions of the Securities Purchase Agreement dated as of
                    , 2007 (the “Purchase Agreement”) by and among Kona Grill, Inc. and the Investors (as
defined therein), as to the number of shares of Common Stock set forth below, and authorizes this
signature page to be attached to the Purchase Agreement or counterparts thereof.



	 	 	 	 	 
	 	 	Name of Investor:
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 

	 	By:
	 	 
	 	 	 	 	 
	 

	 	Name:
	 	 
	 	 	 	 	 
	 

	 	Title:
	 	 
	 	 	 	 	 






	 	 	 	 	 
	 

	 	Address:
	 	 
	 	 	 	 	 
	 
	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 
	 	 	 	 	 






	 	 	 	 	 
	 

	 	Telephone No.:
	 	 
	 

	 	 	 	 
	 

	 	Facsimile No.:
	 	 
	 

	 	 	 	 
	 

	 	Email Address:
	 	 
	 

	 	 	 	 
	 

	 	Number of Shares:
	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	Aggregate Purchase Price: $





 


 









 





Exhibits:




	 	 	 
	A

	 	Schedule of Investors
	B

	 	Instruction Sheet for Investors
	C

	 	Opinion of Company Corporate Counsel
	D

	 	Plan of Distribution
	E

	 	Company Transfer Agent Instructions





 


 









 




Exhibit A



Schedule of Investors




	 	 	 	 	 	 	 	 	 
	Investor	 	Common Shares	 	 	Purchase Price	 
	 
	 	 	 	 	 	 	 	 
	Capital Ventures International

101 California Street

Suite 3250

San Francisco, CA 94111
	 	 	200,000	 	 	$	3,250,000.00	 
	 
	 	 	 	 	 	 	 	 
	Wellington Trust Company, National

Association Multiple Common Trust Funds

Trust, Micro Cap Equity Portfolio

75 State Street

Boston, MA 02109
	 	 	97,000	 	 	 	1,576,250.00	 
	 
	 	 	 	 	 	 	 	 
	Blackwell Partners, LLC 

324 Blackwell Street, Suite 520

Durham, North Carolina 27701
	 	 	77,000	 	 	 	1,251,250.00	 
	 
	 	 	 	 	 	 	 	 
	Outpoint Offshore Fund, Ltd.

237 Park Avenue

Suite 900

New York, NY 10017
	 	 	60,000	 	 	 	975,000.00	 
	 
	 	 	 	 	 	 	 	 
	DCM1-Allocation Account

4350 Von Karman Ave.

4th Floor

Newport Beach, CA 92660
	 	 	50,000	 	 	 	812,500.00	 
	 
	 	 	 	 	 	 	 	 
	Eagle Select Fund Limited

c/o Natixis Bleichroeder Inc.

1345 Avenue of the Americas

New York, NY 10105
	 	 	40,498	 	 	 	658,092.50	 
	 
	 	 	 	 	 	 	 	 
	Hudson Bay Overseas Fund Ltd.

120 Broadway, 40th Floor

New York, NY 10271
	 	 	28,500	 	 	 	463,125.00	 
	 
	 	 	 	 	 	 	 	 
	Brightleaf Partners L.P.

324 Blackwell St., Suite 520

Durham, NC 27701
	 	 	23,000	 	 	 	373,750.00	 
	 
	 	 	 	 	 	 	 	 
	Global Growth Partners LP

c/o Natixis Bleichroeder Inc.

1345 Avenue of the Americas

New York, NY 10105
	 	 	22,227	 	 	 	361,188.75	 
	 
	 	 	 	 	 	 	 	 
	Hudson Bay Fund LP

120 Broadway, 40th Floor

New York, NY 10271
	 	 	21,500	 	 	 	349,375.00	 
	 
	 	 	 	 	 	 	 	 
	Wellington Trust Company, National

Association Multiple Collective Investment

Funds Trust, Micro Cap Equity Portfolio

75 State Street

Boston, MA 02109
	 	 	13,000	 	 	 	211,250.00	 
	 
	 	 	 	 	 	 	 	 
	Robert Birch

c/o Natixis Bleichroeder Inc.

1345 Avenue of the Americas

New York, NY 10105
	 	 	9,038	 	 	 	146,867.50	 
	 
	 	 	 	 	 	 	 	 
	Alternative Investment Management

c/o Natixis Bleichroeder Inc.

1345 Avenue of the Americas

New York, NY 10105
	 	 	6,289	 	 	 	102,196.25	 
	 
	 	 	 	 	 	 	 	 
	Glen Tomlinson

c/o Natixis Bleichroeder Inc.

1345 Avenue of the Americas

New York, NY 10105
	 	 	1,948	 	 	 	31,655.00	 
	 
	 	 	 	 	 	 	 	 
	TOTAL
	 	 	650,000	 	 	$	10,562,500