EXHIBIT 1.1
FOUNDERS FOOD & ▇▇▇▇▇▇▇, LTD.
1,000,000 UNITS(1)
Each Unit Consisting of One Share of Common Stock and
One Redeemable Class A Warrant
UNDERWRITING AGREEMENT
____________, 2000
▇. ▇. ▇▇▇▇▇▇▇▇ & Company
One Financial Plaza
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Founders Food & ▇▇▇▇▇▇▇, Ltd., a Minnesota corporation (the
"Company"), hereby confirms its agreement to issue and sell to ▇. ▇. ▇▇▇▇▇▇▇▇
& Company (the "Underwriter") an aggregate of 1,000,000 units (the "Firm
Units"), each Unit consisting of one share of Common Stock of the Company
(the "Share") and one Redeemable Class A Warrant (the "Warrant") exercisable
for a period of five (5) years commencing on the effective date of the
Registration Statement under the Securities Act of 1933, as amended (the
"Act"), at a price of $3.7125 per Unit. Each Warrant entitles the holder
thereof to purchase one share of Common Stock at a price of $5.00 per share.
The Warrants shall be exercisable, detachable and transferable commencing 425
days after the effective date of the Registration Statement ("the Detachment
Date"). The Company may redeem the Warrants for $0.01 per warrant commencing
upon the Detachment Date upon twenty (20) days prior written notice from the
Company if the closing bid price for the Common Stock exceeds $6.25 per
share, subject to adjustment, for any forty-five (45) consecutive trading
days prior to such notice. The Company also hereby confirms its agreement to
grant to the Underwriter an option to purchase up to 150,000 additional Units
(the "Option Units") on the terms and for the purposes set forth in Section
2(b) hereof. (As used in this Agreement, the term "Units" shall consist of
the Firm Units and the Option Units.) The Company also hereby confirms its
agreement to issue to the Underwriter, warrants for the purchase of a total
of 100,000 Units as described in Section 6 hereof (the "Underwriter's
Warrants"), assuming purchase by the Underwriter of the Firm Units. The
shares of Common Stock issuable upon exercise of the Underwriter's Warrants
are referred to in this Agreement as the "Warrant Shares."
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
(a) The Company represents and warrants to and agrees with the
Underwriter as follows:
(i) A registration statement on Form SB-2 (File No.
333-93459) with respect to the Units, including a prospectus subject to
completion, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Securities
Act"), and the rules and
---------------------------
1 Plus an option to purchase up to 150,000 additional Units to cover
over-allotments.
regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed
with the Commission under the Securities Act; one or more amendments to
such registration statement have also been so prepared and have been,
or will be, so filed. Copies of the registration statement and
amendments and each related preliminary prospectus to date have been
delivered by the Company to the Underwriter, and, to the extent
applicable, were identical to the electronically transmitted copies
thereof filed with the Commission pursuant to the Commission's
Electronic Data Gathering Analysis and Retrieval System ("▇▇▇▇▇"),
except to the extent permitted by Regulation S-T under the Securities
Act. If the Company has elected not to rely upon Rule 430A of the Rules
and Regulations, the Company has prepared and will promptly file an
amendment to the registration statement and an amended prospectus. If
the Company has elected to rely upon Rule 430A of the Rules and
Regulations, it will prepare and file a prospectus pursuant to Rule
424(b) that discloses the information previously omitted from the
prospectus in reliance upon Rule 430A. Such registration statement as
amended at the time it is or was declared effective by the Commission,
including the information deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A(b), if
applicable, is hereinafter called the "Registration Statement" and, if
any amendment thereto shall be filed after the effective date and prior
to the "First Closing Date" (as hereinafter defined), the term
"Registration Statement" shall refer to the registration statement as
so amended (but only from and after the effectiveness of such
amendment). The prospectus included in the Registration Statement at
the time it is or was declared effective by the Commission is
hereinafter called the "Prospectus," except that if any prospectus
filed by the Company with the Commission pursuant to Rule 424(b) of the
Rules and Regulations or any other prospectus provided to the
Underwriter by the Company for use in connection with the offering of
the Units (whether or not required to be filed by the Company with the
Commission pursuant to Rule 424(b) of the Rules and Regulations)
differs from the prospectus on file at the time the Registration
Statement is or was declared effective by the Commission, the term
"Prospectus" shall refer to such differing prospectus from and after
the time such prospectus is filed with the Commission or transmitted to
the Commission for filing pursuant to such Rule 424(b) or from and
after the time it is first provided to the Underwriter by the Company
for such use. The term "Preliminary Prospectus" as used herein means
any preliminary prospectus included in the Registration Statement prior
to the time it becomes or became effective under the Securities Act and
any prospectus subject to completion as described in Rule 430A of the
Rules and Regulations. For purposes of this Agreement, all references
to the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement to any of the foregoing
shall be deemed to include the respective copies thereof filed with the
Commission pursuant to ▇▇▇▇▇.
(ii) At the time the Registration Statement is or was
declared effective by the Commission and at all times subsequent
thereto up to the "First Closing Date" and the "Second Closing Date"
(as such terms are hereinafter defined), the Registration Statement and
Prospectus, and all amendments thereof and supplements thereto, will
comply or complied with the provisions and requirements of the
Securities Act and the Rules and Regulations. Neither the Commission
nor any state securities authority has issued any order preventing or
suspending the use of any Preliminary Prospectus or requiring the
recirculation of a Preliminary Prospectus, or issued a stop order with
respect to the offering of the Units (if the Registration Statement has
been declared effective), or instituted or, to the Company's knowledge,
threatened the institution of, proceedings for any of such purposes.
When the Registration Statement shall become effective and when any
post-effective amendment thereto shall become effective, the
Registration Statement (as amended, if the Company shall have filed
with the Commission any post-effective amendments thereto) will not or
did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which
they were made, not misleading. When the Registration Statement is or
was declared effective by the Commission and at all times subsequent
thereto up to the First Closing Date and the Second Closing Date, the
Prospectus (as amended or supplemented, if the Company shall have filed
with the Commission any amendment thereof or supplement thereto) will
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not or did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances in
which they were made, not misleading. When any Preliminary Prospectus
was first filed with the Commission and when any amendment thereof or
supplement thereto was first filed with the Commission, such
Preliminary Prospectus and any amendment thereof and supplement thereto
complied in all material respects with the applicable provisions of the
Securities Act and the Rules and Regulations and did not contain an
untrue statement of a material fact and did not omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein not misleading. None of the representations
and warranties in this Subsection 1(a) shall apply to statements in, or
omissions from, the Registration Statement or the Prospectus, or any
amendment thereof or supplement thereto, which are based upon and
conform to written information relating to the Underwriter furnished to
the Company by the Underwriter specifically for use in the preparation
of the Registration Statement or the Prospectus, or any such amendment
or supplement.
(iii) The Company has no subsidiaries and is not
affiliated with any other company or business entity, except as
disclosed in the Prospectus. The Company has been duly incorporated and
is validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, with full power and authority
(corporate and other) to own, lease and operate its properties and
conduct its business as described in the Registration Statement and
Prospectus; the Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
ownership or lease of its properties or the conduct of its business
requires such qualification and in which the failure to be qualified or
in good standing would have a material adverse effect on the condition
(financial or otherwise), earnings, operations or business of the
Company; and no proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification.
(iv) The Company has operated and is operating in
material compliance with all authorizations, licenses, certificates,
consents, permits, approvals and orders of and from all state, federal
and other governmental regulatory officials and bodies necessary to own
its properties and to conduct its business as described in the
Registration Statement and Prospectus, all of which are, to the
Company's knowledge, valid and in full force and effect; the Company is
conducting its business in substantial compliance with all applicable
laws, rules and regulations of the jurisdictions in which it is
conducting business; and the Company is not in material violation of
any applicable law, order, rule, regulation, writ, injunction, judgment
or decree of any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or over its
properties. Except as set forth in the Registration Statement and
Prospectus:
(A) the Company is in material compliance
with all material rules, laws and regulations relating to the
use, treatment, storage and disposal of toxic substances and
protection of health or the environment (the "Environmental
Laws") which are applicable to its business;
(B) the Company has received no notice from
any governmental authority or third party of an asserted claim
under Environmental Laws, which claim is required to be
disclosed in the Registration Statement and the Prospectus;
(C) the Company will not be required to make
any future material capital expenditures to comply with
Environmental Laws; and
(D) no property which is owned, leased or
occupied by the Company has been designated as a Superfund
site pursuant to the Comprehensive Response, Compensation and
3
Liability Act of 1980, as amended (42 U.S.C. Section 9601, ET
SEQ.), or otherwise designated as a contaminated site under
applicable state or local law.
(v) The Company is not in violation of its articles
of incorporation or bylaws or in default in the performance or
observance of any obligation, agreement, covenant or condition
contained in any bond, debenture, note or other evidence of
indebtedness or in any contract, lease, indenture, mortgage, loan
agreement, joint venture or other agreement or instrument to which it
is a party or by which it or its properties are bound, which default is
material to the business of the Company.
(vi) The Company has full requisite power and
authority to enter into this Agreement and perform the transactions
contemplated hereby. This Agreement has been duly authorized, executed
and delivered by the Company and is a valid and binding agreement on
the part of the Company, enforceable against the Company in accordance
with its terms, except as enforceability may be limited by the
application of bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally and by
judicial limitations on the right of specific performance, and except
as the enforceability of the indemnification or contribution provisions
hereof may be affected by applicable law or the public policies
underlying such law. The performance of this Agreement and the
consummation of the transactions herein contemplated will not result in
a material breach or violation of any of the terms and provisions of,
or constitute a material default under:
(A) any indenture, mortgage, deed of trust,
loan agreement, bond, debenture, note, agreement or other
evidence of indebtedness, any lease, contract, joint venture
or other agreement or instrument to which the Company is a
party or by which the Company or its properties may be bound;
(B) the articles of incorporation or bylaws
of the Company; or
(C) any material applicable law, order,
rule, regulation, writ, injunction, judgment or decree of any
court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or over its
properties.
No consent, approval, authorization or order of or qualification with
any court, governmental agency or body, domestic or foreign, having
jurisdiction over the Company or over its properties is required for
the execution and delivery of this Agreement and the consummation by
the Company of the transactions herein contemplated, except such as may
be required under the Securities Act, the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or under state or other
securities or Blue Sky laws, all of which requirements have been
satisfied.
(vii) Except as is otherwise expressly described in
the Registration Statement or Prospectus, there is neither pending nor,
to the best of the Company's knowledge, threatened, any action, suit,
claim or proceeding against the Company or any of its officers or any
of its properties, assets or rights before any court, government or
governmental agency or body, domestic or foreign, having jurisdiction
over the Company or over its officers or properties or otherwise which
(A) might result in any material adverse change in the condition
(financial or otherwise), earnings, operations or business of the
Company or might materially and adversely affect their properties,
assets or rights, or (B) might prevent consummation of the transactions
contemplated hereby.
(viii) The Company has, and at the First Closing Date
and Second Closing Date (collectively, the "Closing Dates") will have,
the duly authorized and outstanding capitalization set forth in the
Prospectus. All outstanding shares of capital stock of the Company are
duly authorized and validly issued, fully paid and non-assessable, have
been issued in compliance with all federal and state securities
4
laws, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities, and the
authorized and outstanding capital stock of the Company conforms in all
material respects with the statements relating thereto contained in the
Registration Statement and the Prospectus; the Units to be sold
hereunder by the Company have been duly authorized for issuance and
sale to the Underwriter pursuant to this Agreement and, when issued and
delivered by the Company against payment therefor in accordance with
the terms of this Agreement, will be duly and validly issued and fully
paid and non-assessable and will be sold free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest; and
no preemptive right, co-sale right, registration right, right of first
refusal or other similar right of shareholders exists with respect to
any of the Units to be sold hereunder by the Company or the issuance
and sale thereof, or the issuance and sale or exercise of the
Underwriter's Warrants, other than those that have been expressly
waived prior to the date hereof. Except as disclosed in the Prospectus,
the Company has no outstanding options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, any securities
or obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The certificates evidencing the
Units, the Shares and the Warrants comply as to form with all
applicable provisions of the laws of the State of Minnesota.
(ix) The Underwriter's Warrants, the Warrants and the
Warrant Shares have been duly authorized. The Underwriter's Warrants
and the Warrants, when issued and delivered to the Underwriter, will
constitute valid and binding obligations of the Company in accordance
with their terms, except as enforceability may be limited by the
application of bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally and by
judicial limitations on the right of specific performance and except
insofar as the indemnification provisions thereof may be limited by
applicable law and the policies underlying such law. The Warrant
Shares, when issued in accordance with the terms of this Agreement and
pursuant to the Underwriter's Warrants and the Warrants, will be fully
paid and non-assessable and subject to no preemptive rights or similar
rights on the part of any person or entity. A sufficient number of
shares of Common Stock of the Company has been reserved for issuance by
the Company upon exercise of the Underwriter's Warrants and the
Warrants.
(x) Schechter, Dokken, Kanter, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
Ltd., which has expressed its opinion with respect to the financial
statements filed as part of the Registration Statement and included in
the Registration Statement and Prospectus, are independent accountants
within the meaning of the Securities Act and the Rules and Regulations.
The financial statements of the Company set forth in the Registration
Statement and Prospectus comply in all material respects with the
requirements of the Securities Act and fairly present the financial
position and the results of operations of the Company at the respective
dates and for the respective periods to which they apply in accordance
with generally accepted accounting principles consistently applied
throughout the periods involved (subject, in the case of unaudited
financial statements, to normal year-end adjustments which in the
opinion of management of the Company are not material, and except as
otherwise stated therein); and the supporting schedules included in the
Registration Statement present fairly the information required to be
stated therein. The selected and summary financial and statistical data
included in the Registration Statement present fairly the information
shown therein and have been compiled on a basis consistent with the
audited financial statements presented therein. No other financial
statements or schedules are required by the Securities Act or the Rules
and Regulations to be included in the Registration Statement.
(xi) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, and
at each Closing Date, except as is otherwise disclosed in the
Registration Statement or Prospectus, there has not been:
5
(A) any change in the capital stock or
long-term debt (including any capitalized lease obligation) or
material increase in the short-term debt of the Company (other
than issuances of Common Stock upon the exercise of options
outstanding as of the Effective Date and options granted under
the Company's 1997 Stock Option Plan and the Company's
Director Stock Option Plan (collectively, the "Option
Plans"));
(B) any issuance of options, warrants,
convertible securities or other rights to purchase the capital
stock of the Company (other than options granted under the
Option Plans);
(C) any material adverse change, or any
development involving a material adverse change, in or
affecting the condition (financial or otherwise), earnings,
operations, business, or business prospects, management,
financial position, stockholders' equity, results of
operations or general condition of the Company;
(D) any transaction entered into by the
Company that is material to the Company;
(E) any obligation, direct or contingent,
incurred by the Company except obligations incurred in the
ordinary course of business that, in the aggregate, are not
material;
(F) any dividend or distribution of any
kind declared, paid or made on the capital stock of the
Company; or
(G) any loss or damage (whether or not
insured) to the property of the Company which has been
sustained which has a material adverse effect on the condition
(financial or otherwise), earnings, operations or business of
the Company.
(xii) Except as is otherwise expressly disclosed in
the Registration Statement or Prospectus:
(A) the Company has good and marketable
title to all of the property, real and personal, and assets
described in the Registration Statement or Prospectus as being
owned by it, free and clear of any and all pledges, liens,
security interests, encumbrances, equities, charges or claims,
other than such as would not have a material adverse effect on
the condition (financial or otherwise), earnings, operations
or business of the Company;
(B) the agreements to which the Company
is a party described in the Registration Statement and
Prospectus are valid agreements, enforceable by the Company
except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights
generally or by judicial limitations on the right of specific
performance; and
(C) the Company has valid and enforceable
leases for all properties described in the Registration
Statement and Prospectus as leased by it, except as the
enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by
judicial limitations on the right of specific performance.
Except as set forth in the Registration Statement and
Prospectus, the Company owns or leases all such properties as
are necessary to its operations as now conducted.
6
(xiii) The Company has timely filed (or has timely
requested an extension of time to file) all necessary federal and state
income and franchise tax returns and has paid all taxes shown thereon
as due; there is no tax deficiency that has been or, to the best of the
Company's knowledge, could be asserted against the Company that might
have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or properties of the
Company; and all tax liabilities are adequately provided for in the
books of the Company.
(xiv) No labor disturbance by the employees of the
Company exists or, to the best of the Company's knowledge, is imminent.
Except as disclosed in the Registration Statement and the Prospectus,
no collective bargaining agreement exists with any of the employees of
the Company and, to the best of the Company's knowledge, no such
agreement is imminent.
(xv) The Company owns, or possesses adequate rights
to use, all patents, patent rights, inventions, trade secrets,
know-how, technology, service marks, trade names, copyrights,
trademarks and proprietary rights or information which are necessary
for the conduct of its present or intended business as described in the
Registration Statement or Prospectus; the expiration of any patents,
patent rights, trade secrets, trademarks, service marks, trade names or
copyrights would not have a material adverse effect on the condition
(financial or otherwise), earnings, operations or business of the
Company and the Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with the asserted rights
of others with respect to any patent, patent rights, inventions, trade
secrets, know-how, technology, trademarks, service marks, trade names
or copyrights which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, might have a material adverse
effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company. Except as disclosed in
the Registration Statement or Prospectus, the Company is not obligated
or under any liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner of, licensor of, or other
claimant to, any patent, patent rights, inventions, trade secrets,
know-how, technology, service marks, trade names, trademark, copyright
or other intangible asset, with respect to the use thereof or in
connection with the conduct of its business or otherwise.
(xvi) The Units have been approved for quotation on
The Nasdaq SmallCap Market.
(xvii) The Company has no defined benefit pension
plan or other pension benefit plan which is intended to comply with the
provisions of the Employee Retirement Income Security Act of 1974 as
amended from time to time, except as disclosed in the Registration
Statement.
(xviii) The Company has not taken and will not take,
directly or indirectly, any action (and does not know of any action by
its directors, officers, shareholders or others) which has constituted
or is designed to, or which might reasonably be expected to, cause or
result in stabilization or manipulation, as defined in the Exchange Act
or otherwise, of the price of any security of the Company to facilitate
the sale or resale of the Units. The Company has not distributed and
will not distribute prior to the later of (A) the First Closing Date or
the Second Closing Date, as the case may be, and (B) completion of the
distribution of the Units, any offering material in connection with the
offering and sale of the Units other than any Preliminary Prospectus,
the Prospectus, the Registration Statement and other materials, if any,
permitted by the Securities Act. Except as is otherwise disclosed in
the Registration Statement or Prospectus, and to the best of the
Company's knowledge, no person is entitled, directly or indirectly, to
compensation from the Company or the Underwriter for services as a
"finder" or otherwise in connection with the transactions contemplated
by this Agreement.
(xix) The Company maintains insurance, which is in
full force and effect, with insurers of recognized financial
responsibility of the types and in the amounts generally deemed
adequate for their respective businesses and, to the best of the
Company's knowledge, in line with the insurance
7
maintained by similar companies and businesses; and the Company has no
any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially and adversely affect
the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company.
(xx) Each executive officer and director of the
Company and each beneficial owner of five percent (5%) or more of the
Common Stock to be outstanding after the sale of the Firm Units
(calculated in accordance with Rule 13d-3 under the Exchange Act) has
agreed pursuant to the form of One-Year Lock-up Agreement attached
hereto as APPENDIX A (the "One-Year Lock-up Agreement") that such
person will not, for a period of one year from the date (the "Effective
Date") that the Registration Statement is declared effective by the
Commission (the "One-Year Lock-up Period"), without the prior written
consent of the Underwriter, offer to sell, contract to sell, sell,
pledge, hypothecate, transfer or otherwise dispose of, or grant any
rights with respect to (collectively, a "Disposition"), any
unregistered shares of Common Stock and any options, warrants and other
rights to purchase any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for unregistered shares
of Common Stock now owned or hereafter acquired by such person
(collectively, "Securities"), or with respect to which such person has
or hereafter acquires the power of Disposition, other than as permitted
by the One-Year Lock-up Agreement. The Company has provided to counsel
for the Underwriter ("Underwriter's Counsel") true, accurate and
complete copies of all of the One-Year Lock-up Agreements. The Company
has provided to Underwriter's Counsel a complete and accurate list of
all holders of unregistered Securities of the Company and the number
and type of securities held by each holder of Securities.
(xxi) The Company has not at any time during the last
five (5) years (or, if formed during the last five years, since its
inception) made any unlawful contribution to any candidate for an
office or failed to disclose fully any contribution in violation of
law, or made any payment to any federal or state governmental officer
or official, domestic or foreign, or other person charged with similar
public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof.
The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that transactions are
executed in accordance with management's general or specific
authorizations, transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets, access to assets is permitted only in accordance with
management's general or specific authorization, and the recorded
accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(xxii) Neither the Company nor any of its affiliates
is presently doing business with the government of Cuba or with any
person or affiliate located in Cuba.
(xxiii) The Company represents and warrants that the
historical financial information, financial projections and due
diligence information presented to the Underwriter for its review, were
prepared in good faith and represent the Company's best present and
future estimate of the Company's financial condition prior to, and
immediately following, completion of the sale of the Firm Units.
8
(xxiv) The Company represents and warrants that,
except for a possible claim in the amount of $25,000 by Equity
Securities Investments, Inc., no person or entity other than the
Underwriter is entitled to any compensation or other payments from
either the Company or the Underwriter, as a finder or underwriter in
connection with the offering contemplated hereby or any other proposed
transaction between the Company and the Underwriter. The Company agrees
to promptly notify the Underwriter of any such relationships, including
consulting or prior agency agreements entitling other parties to
compensation for the transaction described herein and agrees to provide
the Underwriter with a copy of such agreements.
(b) Any certificate signed by any officer of the Company and
delivered to you or to Underwriter's Counsel shall be deemed a representation
and warranty by the Company to the Underwriter as to the matters covered
thereby.
2. PURCHASE, SALE, DELIVERY AND PAYMENT.
(a) On the basis of the representations, warranties and
agreements herein contained, and subject to the terms and conditions herein set
forth, the Company agrees to sell to the Underwriter, and the Underwriter agrees
to purchase from the Company, the Firm Units at a purchase price of $3.7125 per
Unit. The Underwriter will purchase all of the Firm Units if any are purchased.
The Firm Units will be delivered by the Company to the
Underwriter for the account of the Underwriter against payment of the purchase
price therefor by wire transfer or other same-day funds payable to the order of
the Company at the offices of ▇. ▇. ▇▇▇▇▇▇▇▇ & Company, One Financial Plaza, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (or at such other place as may
be agreed upon by the Underwriter and the Company), at 9:00 a.m., Minneapolis,
Minnesota time, on (i) the third (3rd) full business day following the date
hereof if the Registration Statement is declared effective before 3:30 p.m.,
Minneapolis, Minnesota time on the date hereof, (ii) the fourth (4th) full
business day following the date hereof if the Registration Statement is declared
effective after 3:30 p.m., Minneapolis, Minnesota time on the date hereof, or
(iii) such other time and date as the Underwriter and the Company may determine,
such time and date of payment and delivery being herein called the "First
Closing Date." Delivery of the Firm Units will be made by credit to "full fast"
transfer to the account or accounts at The Depository Trust Company designated
by the Underwriter.
(b) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants an option to the Underwriter to purchase an
aggregate of up to 150,000 Option Units at the same purchase price as the Firm
Units, for use solely in covering any over-allotments made by the Underwriter in
the sale and distribution of the Firm Units. The option granted hereunder may be
exercised by the Underwriter at any time (but not more than once), in whole or
in part, during the period of thirty (30) days after the Effective Date of the
Registration Statement by giving written notice to the Company and the Company's
counsel, which notice shall set forth the aggregate number of Option Units as to
which the Underwriter is exercising the option, the names and denominations in
which the Option Units are to be registered, and the date and time, as
determined by the Underwriter, when the Option Units are to be delivered, such
time and date being herein referred to as the "Second Closing Date;" provided,
however, that the Second Closing Date shall not be earlier than the First
Closing Date nor earlier than the second business day after the date on which
the option shall have been exercised. No Option Units shall be sold and
delivered unless the Firm Units previously have been, or simultaneously are,
sold and delivered.
The Option Units will be delivered by the Company to the
Underwriter for the account of the Underwriter against payment of the purchase
price therefor by wire transfer or other same-day funds payable to the order of
the Company at the offices of ▇. ▇. ▇▇▇▇▇▇▇▇ & Company, One Financial Plaza, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (or at such other place as may
be agreed upon by the Underwriter and the Company) at 9:00 a.m., Minneapolis,
Minnesota time, on the Second Closing Date. Delivery of the Option Units
9
will be made by credit to "full fast" transfer to the account or accounts at The
Depository Trust Company designated by the Underwriter.
3. COVENANTS OF THE COMPANY. The Company hereby covenants and agrees
with the Underwriter as follows:
(a) If the Registration Statement has not already been
declared effective by the Commission, the Company will use its best efforts to
cause the Registration Statement and any post-effective amendments thereto to
become effective as promptly as possible; the Company will notify the
Underwriter promptly of the time when the Registration Statement or any
post-effective amendment to the Registration Statement has become effective or
any supplement to the Prospectus has been filed and of any request by the
Commission for any amendment or supplement to the Registration Statement or
Prospectus or additional information; if the Company has elected to rely on Rule
430A of the Rules and Regulations, the Company will file a Prospectus containing
the information omitted therefrom pursuant to such Rule 430A with the Commission
within the time period required by, and otherwise in accordance with the
provisions of, Rules 424(b) and 430A of the Rules and Regulations; the Company
will prepare and file with the Commission, promptly upon your request, any
amendments or supplements to the Registration Statement or Prospectus that, in
your opinion, may be necessary or advisable in connection with the distribution
of the Units by the Underwriter; and the Company will not file any amendment or
supplement to the Registration Statement or Prospectus to which the Underwriter
shall reasonably object by notice to the Company after having been furnished a
copy a reasonable time prior to the filing.
(b) The Company will advise the Underwriter, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement, of the suspension of the qualification of the Units for offering or
sale in any jurisdiction, or of the initiation or threatening of any proceeding
for any such purpose; and the Company will promptly use its best efforts to
prevent the issuance of any stop order or to obtain its withdrawal if such a
stop order should be issued.
(c) Within the time during which a prospectus relating to the
Units is required to be delivered under the Securities Act, the Company will
comply as far as it is able with all requirements imposed upon it by the
Securities Act, as now and hereafter amended, and by the Rules and Regulations,
as from time to time in force, so far as necessary to permit the continuance of
sales of or dealings in the Units as contemplated by the provisions hereof and
the Prospectus. If, during such period, any event occurs as a result of which
the Prospectus would include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances then existing, not misleading, or if, during such period, it
is necessary to amend the Registration Statement or supplement the Prospectus to
comply with the Securities Act, the Company will promptly notify the Underwriter
and will amend the Registration Statement or supplement the Prospectus (at the
expense of the Company) so as to correct such statement or omission or effect
such compliance.
(d) The Company will use its best efforts to arrange for the
qualification of the Units for offering and sale under the securities laws of
such jurisdictions as the Underwriter may designate and to continue such
qualifications in effect for so long as may be required for purposes of the
distribution of the Units; PROVIDED, HOWEVER, that in no event shall the Company
be obligated to qualify to do business in any jurisdiction where it is not now
so qualified or to take any action which would subject it to the service of
process in suits, other than those arising out of the offering or sale of the
Units, in any jurisdiction where it is not now so subject. In each jurisdiction
in which the Units shall have been qualified as herein provided, the Company
will make and file such statements and reports in each year as are or may be
reasonably required by the laws of such jurisdiction.
(e) The Company will furnish to the Underwriter copies of the
Registration Statement (two of which will be signed and will include all
exhibits), each Preliminary Prospectus, the Prospectus, and all
10
amendments and supplements to such documents, in each case as soon as available
and in such quantities as the Underwriter may from time to time reasonably
request.
(f) For a period of five years from the Effective Date, the
Company will furnish directly to the Underwriter as soon as the same shall be
sent to its shareholders generally copies of all annual or interim shareholder
reports of the Company and will, for the same period, also furnish the
Underwriter with the following:
(i) One copy of any report, application or document
(other than exhibits, which, however, will be furnished on your
request) filed by the Company with the Commission, Nasdaq, the NASD or
any securities exchange;
(ii) As soon as the same shall be sent to
shareholders generally, copies of each communication sent to
shareholders; and
(iii) From time to time, such other information
concerning the Company as the Underwriter may reasonably and
specifically request, provided that the Company shall not be required
to furnish any information pursuant hereto that is not furnished to its
shareholders or not otherwise made publicly available.
(g) The Company will, for a period of two (2) years from the
Effective Date, furnish directly to the Underwriter quarterly profit and loss
statements, reports of the Company's cash flow and statements of application of
the proceeds of the offering of the Units by the Company in such reasonable
detail as the Underwriter may request.
(h) The Company will make generally available to its security
holders as soon as practicable, but in any event not later than the fifteen (15)
months after the end of the Company's current fiscal quarter, an earnings
statement (which will be in reasonable detail but need not be audited) complying
with the provisions of Section 11(a) of the Securities Act and Rule 158 of the
Rules and Regulations and covering a twelve (12)-month period beginning after
the Effective Date of the Registration Statement.
(i) After completion of the offering of the Units, the Company
will make all filings required to maintain the quotation of the Common Stock on
The Nasdaq SmallCap Market or any national stock exchange.
(j) The Company will apply the net proceeds from the sale of
the Units substantially in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(k) For a period of six months after the Effective Date of the
Registration Statement, the Company will not, without the prior written consent
of the Underwriter, directly or indirectly, effect the disposition of any
securities including, without limitation, any securities that are convertible
into or exchangeable or exercisable for Common Stock, and shall not accelerate
the exercisability of any securities that are convertible into or exchangeable
or exercisable for Common Stock, except the Company may take the following
actions:
(i) sell Units pursuant to this Agreement;
(ii) grant options under the Option Plans in the
ordinary course, provided that the exercise price or conversion price
of any options shall have an exercise price or conversion price that is
not less than the market price of the Common Stock at the date of
grant, or if greater, $4.00 per share;
(iii) issue shares of Common Stock pursuant to the
exercise of options granted under the Option Plans; and
11
(iv) sell Common Stock, grant warrants to purchase
Common Stock (and issue shares pursuant to the exercise of such
warrant), and grant other Securities convertible into Common Stock (and
issue shares pursuant to the exercise of such warrant), to the
Company's strategic business partners consistent with the past
practices of the Company, provided that the exercise price or
conversion price of any warrants or other convertible Security shall
have an exercise price or conversion price that is not less than the
market price of the common stock at the date of grant, or if greater,
$4.00 per share.
(l) The Company will not take, and will use its best efforts
to cause each of its officers and directors not to take, directly or indirectly,
any action designed to or which might reasonably be expected to cause or result
in the stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Units.
(m) The Company will inform the Florida Department of Banking
and Finance at any time prior to the consummation of the distribution of the
Units by the Underwriter if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba. Such
information shall be provided within ninety (90) days after the commencement
thereof or after a change occurs with respect to previously reported
information.
(n) The Company hereby grants to the Underwriter a right of
first refusal to act as the sole or managing agent or underwriter, as the case
may be, for any private or public offering of equity or debt securities
commenced by the Company during the period of three (3) years following the
Effective Date of the Registration Statement. If the Company receives a bona
fide offer from any third party to serve as sole or managing agent or
underwriter in such a private or public offering which the Company is willing to
accept, the Company shall promptly give written notice to the Underwriter,
including all essential terms and conditions of such offer. The Underwriter
shall have a period of fifteen (15) days after receipt of such written notice to
elect to enter into an agreement with the Company as sole or managing agent or
underwriter, as the case may be, on the same terms and conditions as set forth
in the Company's written notice, after which time the Underwriter will be deemed
to have declined such exercise. If the Underwriter declines to exercise its
right of first refusal or fails to notify the Company within such 15-day period
of an election to invoke its right of first refusal, the Company may enter into
an agreement with such third party from whom it has received a bona fide offer;
provided, however, that the Underwriter's right of first refusal with respect to
other offerings shall continue until the termination of the three-year period
following the Effective Date of the Registration Statement. If the Company fails
to enter into such an agreement with such third party or if the terms and
conditions of such offer are thereafter materially changed, the right of first
refusal granted to the Underwriter shall once again apply.
4. EXPENSES.
(a) The Company agrees with the Underwriter that:
(i) Whether or not this Agreement becomes effective
or is terminated or cancelled or the sale of the Units hereunder is
consummated, and regardless of the reason for or cause of any such
termination, cancellation, or failure to consummate, the Company will
pay or cause to be paid:
(A) all expenses (including any transfer
taxes) incurred in connection with the delivery to the
Underwriter of the Units;
(B) all expenses and fees (including,
without limitation, fees and expenses of the Company's
accountants and of counsel to the Company, excluding, however,
fees of Underwriter's Counsel) in connection with the
preparation, printing, filing, delivery, and shipping of the
Registration Statement (including the financial statements
therein and all amendments,
12
schedules, and exhibits thereto), each Preliminary Prospectus,
the Prospectus, and any amendment thereof or supplement
thereto;
(C) all fees and reasonable expenses,
including all reasonable counsel fees of Underwriter's
Counsel, incurred in connection with the qualification of the
Units for offering and sale by the Underwriter or by dealers
under the securities or Blue Sky laws of the states and other
jurisdictions which the Underwriter may designate in
accordance with Section 3(d) hereof;
(D) all costs and expenses incident to
qualification with The Nasdaq SmallCap Market;
(E) postage and express charges and other
expenses in connection with delivery to the Underwriter of the
Preliminary Prospectus and Prospectus; and
(F) all other costs and expenses incident to
the performance of the Company's obligations hereunder that
are not otherwise specifically described herein.
In addition to and not in lieu of the foregoing, the Company shall pay
to the Underwriter on each Closing Date for out-of-pocket expenses
(including fees of Underwriter's Counsel other than fees and expenses
incurred in connection with Blue Sky or state securities
qualifications) a nonaccountable expense allowance equal to three
percent (3.0%) of the aggregate Price to Public for all the Units sold
to the Underwriter on each Closing Date, including Units sold pursuant
to orders received through the Company. If the Underwriter withdraws
from the sale of the Units as herein proposed:
(A) for any reason within the control of the
Company such as, for example, the sale of the Units as herein
proposed is abandoned by the Company;
(B) based upon the fact that there has been
a material adverse change in the financial or other affairs of
the Company since the date of the last financial statements of
the Company provided to the Underwriter;
(C) because any of the Company's
representations or warranties in this Agreement prove to be
untrue;
(D) because there shall have occurred any
general suspension of trading in securities on the New York
Stock Exchange or any limitation on prices for such trading or
because any new restrictions on the distribution of securities
shall have been established by the New York Stock Exchange or
by the Commission or by any federal or state agency, all to
such a degree as, in the Underwriter's judgment, would
restrict materially a free market for the Units;
(E) because there shall have occurred such a
material change in general economic, political or financial
conditions, or because the effect of international conditions
on the financial markets in the United States become such as,
in the Underwriter's judgment, makes it inadvisable to proceed
with the sale of the Units;
(F) because the Company's financial
condition or its business prospects do not fulfill the
Underwriter's expectations based on representations made by
the Company prior to ____________;
(G) because the offering of the Units lacks
public interest prior to the Effective Date; or
13
(H) because adverse market or other
conditions make the offering of the Units not feasible in the
Underwriter's judgment;
the Company will pay to the Underwriter the amount of all actual
accountable, out-of-pocket expenses (including fees and disbursements
of Underwriter's Counsel) incurred by the Underwriter in connection
with the contemplated purchase, offer and sale of the Units, including,
without limitation, expenses incurred in its investigation, preparation
to market, and marketing of the Units, and in contemplation of
performing and in performance of its obligations hereunder, up to a
maximum of $25,000.00. All reimbursements pursuant to this Section
4(a)(i) shall occur within ten (10) days after the Underwriter delivers
to the Company a written itemization of such expenses. The provisions
of this Section 4(a)(i) are intended to relieve the Underwriter from
the payment of the expenses and costs which the Company hereby agrees
to pay and shall not impair the obligations of the Company hereunder to
the Underwriter.
(ii) In addition to its other obligations under
Sections 7(a) and 8 hereof, the Company agrees that, as an interim
measure during the pendency of any claim, action, investigation,
inquiry or other proceeding described in Section 7(a), it will
reimburse the Underwriter on a monthly basis for all reasonable legal
or other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other
proceeding, notwithstanding the absence of a judicial determination as
to the propriety and enforceability of the Company's obligation to
reimburse the Underwriter for such expenses and the possibility that
such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Underwriter
shall promptly return such payment to the Company together with
interest, compounded daily, determined on the basis of the prime rate
(or other commercial lending rate for borrowers of the highest credit
standing) listed from time to time in The Wall Street Journal which
represents the base rate on corporate loans posted by a substantial
majority of the nation's thirty (30) largest banks (the "Prime Rate").
Any such interim reimbursement payments which are not made to the
Underwriter within thirty (30) days of a request for reimbursement
shall bear interest at the Prime Rate from the date of such request.
(b) It is agreed that any controversy rising out of the
operation of the interim reimbursement arrangements set forth in Section
4(a)(ii) hereof, including the amounts of any requested reimbursement payments
and the method of determining such amounts, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the National
Association of Securities Dealers, Inc. ("NASD"). Any such arbitration must be
commenced by service of a written demand for arbitration or a written notice of
intention to arbitrate, therein electing the arbitration tribunal. If the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Section 4(a)(ii) hereof and
will not resolve the ultimate propriety or enforceability of the obligation to
indemnify for expenses which is created by the provisions of Sections 7(a) and
7(b) hereof or the obligation to contribute to expenses which is created by the
provisions of Section 8(a) hereof.
5. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The obligation of
the Underwriter to purchase and pay for the Units as provided herein shall be
subject to the accuracy of the representations and warranties of the Company,
in the case of the Firm Units, as of the date hereof and the First Closing
Date (as if made on and as of the First Closing Date), and in the case of the
Option Unit , as of the date hereof and the Second Closing Date (as if made
on and as of the Second Closing Date); to the performance by the Company of
its obligations hereunder; and to the satisfaction of the following
additional conditions on or before the First Closing Date in the case of the
Firm Units and on or before the Second Closing Date in the case of the Option
Units:
(a) The Registration Statement shall have become effective not
later than 4:00 p.m. Minneapolis, Minnesota time on the date of this Agreement,
or such later date or time as shall be consented to in
14
writing by you (the "Effective Date"); and no stop order suspending the
effectiveness thereof shall have been issued and no proceedings for that
purpose shall have been initiated or, to the knowledge of the Company, or the
Underwriter, threatened by the Commission or any state securities commission
or similar regulatory body; and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus
or otherwise) shall have been complied with to the satisfaction of the
Underwriter and Underwriter's Counsel.
(b) The Underwriter shall not have advised the Company that
the Registration Statement or Prospectus, or any amendment thereof or
supplement thereto, contains any untrue statement of a fact which is material
or omits to state a fact which is material and is required to be stated
therein or is necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading; provided,
however, that this Section 5(b) shall not apply to statements in, or
omissions from, the Registration Statement or Prospectus, or any amendment
thereof or supplement thereto, which are based upon and conform to written
information furnished to the Company by the Underwriter specifically for use
in the preparation of the Registration Statement or the Prospectus, or any
such amendment or supplement.
(c) Subsequent to the Effective Date and prior to each
Closing Date, there shall not have occurred any change, or any development
involving a prospective change, which materially and adversely affects the
Company's condition (financial or otherwise), earnings, operations,
properties, business or business prospects from that set forth in the
Registration Statement or Prospectus, and which, in the Underwriter's sole
judgment, is material and adverse and that makes it, in the Underwriter's
sole judgment, impracticable or inadvisable to proceed with the public
offering of the Units as contemplated by the Prospectus and this Agreement.
(d) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery of
the Units shall have been reasonably satisfactory to Underwriter's Counsel,
and Underwriter's Counsel shall have been furnished with such papers and
information as it may reasonably have requested to enable it to pass upon the
matters referred to in this Section.
(e) On each Closing Date, the Underwriter shall have
received the opinion of ▇▇▇▇▇▇ and ▇▇▇▇▇▇, P.A., counsel for the Company,
dated as of such Closing Date, satisfactory in form and substance to the
Underwriter and Underwriter's Counsel, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation and has the corporate power and
authority to own, lease and operate its properties and to conduct its
business as currently being carried on and as described in the
Registration Statement and Prospectus.
(ii) The Company is duly qualified to do business as
a foreign corporation and is in good standing in each jurisdiction, if
any, in which the ownership or leasing of its properties or the conduct
of its business requires such qualification, except where the failure
to be so qualified or be in good standing would not have a material
adverse effect on the condition (financial or otherwise), earnings,
operations or business of the Company. To the best of such counsel's
knowledge, the Company does not own or control, directly or indirectly,
any corporation, association or other entity.
(iii) The capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus
under the caption "Description of Securities." The issued and
outstanding shares of capital stock of the Company have been duly and
validly issued and are fully paid and non-assessable, and the holders
thereof are not subject to any personal liability solely by reason of
being such holders.
15
(iv) The Units to be issued by the Company pursuant
to the terms of this Agreement have been duly authorized and, upon
issuance and delivery against payment therefor in accordance with the
terms hereof, will be duly and validly issued and fully paid and
non-assessable, and the holders thereof will not be subject to personal
liability solely by reason of being such holders. Except as otherwise
stated in the Registration Statement and Prospectus, there are no
preemptive rights or other rights to subscribe for or to purchase, or
any restriction upon the voting or transfer of, any shares of capital
stock pursuant to the Company's articles of incorporation, bylaws or
any agreement or other instrument known to such counsel to which the
Company is a party or by which the Company is bound. To the best of
such counsel's knowledge, except as set forth in the Prospectus,
neither the filing of the Registration Statement nor the offering or
sale of the Units as contemplated by this Agreement gives rise to any
rights for or relating to the registration of any shares of capital
stock or other securities of the Company and no such rights exist,
other than those rights that have been waived prior to the date hereof.
To the best of such counsel's knowledge, except as described in the
Registration Statement and Prospectus, there are no options, warrants,
agreements, contracts or rights in existence to purchase or acquire
from the Company any shares of capital stock of the Company.
(v) The Underwriter's Warrants, the Warrants and the
Warrant Shares have been duly authorized. The Underwriter's Warrants
and the Warrants, when issued and delivered to the Underwriter, will
constitute valid and binding obligations of the Company in accordance
with their terms, except as enforceability may be limited by the
application of bankruptcy, insolvency, reorganization, moratorium, or
other similar laws affecting the rights of creditors generally and by
judicial limitations and the right of specific performance. The Warrant
Shares, when issued in accordance with the terms of this Agreement and
pursuant to the Underwriter's Warrants, will be fully paid and
non-assessable and subject to no preemptive rights or similar rights on
the part of any person or entity. A sufficient number of shares of
Common Stock of the Company has been reserved for issuance by the
Company upon exercise of the Underwriter's Warrants and the Warrants.
(vi) The Company has the requisite corporate power
and authority to enter into this Agreement and to issue, sell and
deliver to the Underwriter the Units to be issued and sold by it
hereunder. This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed
and delivered by the Company and, assuming due authorization, execution
and delivery by the Underwriter, is a valid, legal and binding
agreement of the Company, enforceable in accordance with its terms,
except insofar as indemnification and contribution provisions may be
limited by applicable law or the public policies underlying such law
and except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws
relating to or affecting creditors' rights generally or by general
equitable principles.
(vii) The Registration Statement has become effective
under the Securities Act and, to the best of such counsel's knowledge,
no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been
instituted or is pending or threatened under the Securities Act.
(viii) The Registration Statement and the Prospectus,
and each amendment thereof or supplement thereto (other than the
financial statements, including the notes thereto and the supporting
schedules, and other financial, numerical, statistical and accounting
data derived therefrom, as to which such counsel need express no
opinion), comply as to form in all material respects with the
requirements of the Securities Act and the Rules and Regulations.
(ix) The forms of certificates evidencing a Unit, a
Share and a Warrant, filed as exhibits to the Registration Statement,
comply with Minnesota law.
16
(x) The description in the Registration Statement
and the Prospectus of the Company's articles of incorporation and
bylaws and of statutes, legal and governmental proceedings, contracts
and other documents are accurate in all material respects and fairly
present the information required to be presented by the Securities Act
and the applicable Rules and Regulations; and such counsel does not
know of any statutes or legal or governmental proceedings required to
be described in the Prospectus that are not described as required, or
of any agreements, contracts, leases or documents of a character
required to be described or referred to in the Registration Statement
or Prospectus or to be filed as an exhibit to the Registration
Statement which are not described or referred to therein or filed as
required.
(xi) The execution, delivery and performance of this
Agreement and the consummation of the transactions herein contemplated
(other than performance of the Company's indemnification and
contribution obligations hereunder, concerning which no opinion need be
expressed) do not result in any violation of the Company's articles of
incorporation or bylaws or result in a breach or violation of any of
the terms and provisions of, or constitute a default under, any bond,
debenture, note or other evidence of indebtedness, or any material
lease, contract, indenture, mortgage, deed of trust, loan agreement,
joint venture or other material agreement or instrument known to such
counsel to which the Company is a party or by which its properties are
bound, or any applicable statute, rule or regulation known to such
counsel or, to the best of such counsel's knowledge, any order, writ or
decree of any court, government or governmental agency or body having
jurisdiction over the Company or other any of its material properties
or operations.
(xii) No consent, approval, authorization or order
of, or filing with, or qualification with, any court, government or
governmental agency or body is necessary in connection with the
execution, delivery and performance of this Agreement or for the
execution, delivery and performance of this Agreement or for the
consummation of the transactions herein contemplated, except such as
have been obtained under the Securities Act or such as may be required
under state or other securities or Blue Sky laws in connection with the
purchase and the distribution of the Units by the Underwriter.
(xiii) To the best of such counsel's knowledge, there
are no legal or governmental proceedings pending or threatened against
the Company of a character required to be disclosed in the Registration
Statement or the Prospectus by the Securities Act or the Rules and
Regulations, other than those described therein.
(xiv) To the best of such counsel's knowledge, the
Company is not presently (A) in violation of its articles of
incorporation or bylaws, (B) in material breach or violation of any
applicable statute, rule or regulation known to such counsel or any
order, writ or decree of any court or governmental agency or body, or
(C) in breach of or otherwise in default in the performance of any
material obligation, agreement or condition contained in any bond,
debenture, note, loan agreement or any other material contract, lease
or other instrument to which the Company is subject or by which it may
be bound, or to which any of the material assets or property of the
Company is subject.
(xv) To the best of such counsel's knowledge, the
Company holds, and is operating in compliance in all material respects
with, all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates and orders of any government or
self-regulatory body required for the conduct of its business, and all
such franchises, grants, authorizations, licenses, permits, easements,
consents, certifications and orders are valid and in full force and
effect.
(xvi) To the best of such counsel's knowledge, after
due inquiry, the Company has not received any notice (other than a
notice of claim which has been resolved) of, and has no knowledge of,
any infringement of or conflict with the asserted rights of others with
respect to any patent, patent rights, inventions, trade secrets,
know-how, technology,
17
trade marks, service marks, trade names, or copyrights (other than
notices which have been received relating to the Company's trade dress
and menu which such counsel believes, to the best of its knowledge,
have been resolved) which, singularly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a
material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company.
(xvii) To the best of such counsel's knowledge, after
due inquiry, the Company owns, or possesses adequate rights to use, all
patents, patent rights, inventions, trade secrets, know-how,
technology, service marks, trade names, copyrights, trade marks and
proprietary rights or information which are necessary for the conduct
of its present or intended business as described in the Registration
Statement or Prospectus.
(xviii) A statement of fact (but not an opinion)
that, on the basis of information obtained as a result of discussions
and meetings with officers and other Underwriter of the Company,
discussions with Underwriter of the independent public accountants for
the Company in connection with the preparation of the Registration
Statement and the Prospectus, and the examination of other information
and documents requested by such counsel, nothing has come to such
counsel's attention that has caused them to believe that the
Registration Statement and any amendment thereof, at the time it became
effective and at all times subsequent thereto up to and on that Closing
Date, 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 not misleading, or that the
Prospectus, and any amendment or supplement thereto, at the first date
of its issuance and up to and at all times subsequent thereto up to and
on that Closing Date, 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 light of the
circumstances under which they were made, not misleading. Such counsel
may further state that in making the foregoing comments, such counsel
does not intend them to include or cover the financial statements and
notes thereto and related schedules and other financial, numerical,
statistical and accounting data contained or omitted from the
Registration Statement and any amendment or supplement thereto and the
Prospectus.
Counsel rendering the foregoing opinion may rely as to
questions of law not involving the laws of the United States or the State of
Minnesota upon opinions of local counsel, and, as to questions of fact, upon
representations or certificates of officers of the Company and of government
officials, in which case their opinion is to state the extent of such reliance.
Copies of any opinion, representation or certificate so relied upon shall be
delivered to the Underwriter and to Underwriter's Counsel.
(f) The Underwriter shall have received from ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, P.L.L.P., Underwriter's Counsel, such opinion or opinions as the
Underwriter may reasonably require, dated as of the First Closing Date and the
Second Closing Date, which are satisfactory in form and substance to the
Underwriter, with respect to the sufficiency of corporate proceedings and other
legal matters relating to this Agreement and the transactions contemplated
hereby, and the Company shall have furnished to Underwriter's Counsel such
documents as it may have requested for the purpose of enabling it to pass upon
such matters. In connection with such opinion, as to matters of fact relevant to
conclusions of law, Underwriter's Counsel may rely, to the extent that it deems
proper, upon representations or certificates of public officials and of
responsible officers of the Company.
(g) At the time of execution of this Agreement, the
Underwriter shall have received from Schechter, Dokken, Kanter, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, Ltd. a letter dated the date of such execution, in form and substance
satisfactory to the Underwriter, to the effect that they are independent
accountants with respect to the Company within the meaning of the Securities Act
and the applicable published instructions, and the Rules and Regulations
thereunder, and further stating in effect that:
18
(i) In their opinion, the audited financial
statements included in the Registration Statement and Prospectus
covered by their report included therein comply as to form in all
material respects with the applicable requirements of the Securities
Act, the published instructions and the Rule and Regulations.
(ii) On the basis of (A) a reading of the minutes of
the shareholders' and directors' meetings of the Company since
inception, (B) inquiries of certain officials of the Company
responsible for financial and accounting matters, (C) a reading of the
Company's monthly operating statements for the months beginning on June
26, 1997, and (D) other specified procedures and inquiries (but not an
audit in accordance with generally accepted accounting principles),
nothing came to their attention causing them to believe that:
(1) the unaudited financial statements of
the Company contained in the Prospectus and any amendment
thereof or supplement thereto do not comply as to form, in all
material respects, with the applicable accounting requirements
of the Securities Act and the published Rules and Regulations
or were not prepared in conformity with generally accepted
accounting principles and practices applied on a basis
consistent in all material respects with those followed in the
preparation of the audited financial statements of the Company
included therein; or
(2) the unaudited amounts of revenues,
income before provision for income taxes, net income and ratio
of earnings to fixed charges of the Company contained in the
Prospectus, or any amendment thereof or supplement thereto,
were not derived from financial statements prepared in
conformity with generally accepted accounting principles and
practices applied on a basis consistent in all material
respects with those followed in the preparation of the audited
financial statements of the Company included therein; or
(3) the unaudited pro forma financial
statements of the Company contained in the Prospectus or any
amendment thereof or supplement thereto, were not properly
compiled in accordance with generally accepted accounting
principles or did not provide for all adjustments necessary
for a fair presentation of the information purported to be
shown thereby; or
(4) with respect to the period subsequent to
September 30, 1999, there were, at a specified date, not more
than five (5) business days prior to the date of the letter,
any changes or any material increases or decreases in capital
stock, long-term or short-term debt or shareholders' equity,
decreases in net assets, net current assets, or net worth or
any material decrease, as compared with the corresponding
period of the prior year, in revenues or net income of the
Company as compared with the amounts shown in the balance
sheet included in the Registration Statement, except as
disclosed or referred to in the Prospectus and Registration
Statement.
(iii) Certain information set forth on the cover of
the Prospectus and in the Prospectus under the headings "Prospectus
Summary" (including the subheading "Summary Financial Data"), "Risk
Factors," "Use of Proceeds," "Dividend Policy," "Capitalization,"
"Dilution," "Selected Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business,"
"Management," "Certain Relationships and Related Transactions,"
"Principal Shareholders," "Description of Securities" and "Shares
Eligible for Future Sale," and that are expressed in dollars (or
percentages derived from dollar amounts) or numbers have been compared
to accounting records of the Company which were subject to the internal
accounting controls of the Company and are
19
in agreement with such records or computations made therefrom,
excluding any questions of legal interpretation.
(h) The Underwriter shall have received from Schechter,
Dokken, Kanter, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd. a letter dated as of each Closing Date to
the effect that such accountants reaffirm, as of such Closing Date, and as
though made on such Closing Date, the statements made in the letter furnished by
such accountants pursuant to Section 5(g), except that the specified date
referred to in such letter will be a date not more than five (5) business days
prior to such Closing Date.
(i) The Underwriter shall have received from the Company a
certificate, dated as of the First Closing Date and the Second Closing Date, of
the principal executive officer and the principal financial or accounting
officer of the Company, to the effect that:
(i) The representations and warranties of the Company
in this Agreement are true and correct as if made on and as of such
Closing Date, and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied
at, or prior to, such Closing Date;
(ii) No stop order or other order suspending the
effectiveness of the Registration Statement or any amendment thereof or
the qualification of the Units for offering or sale have been issued,
and no proceedings for that purpose have been instituted or, to the
best of their knowledge, are contemplated by the Commission or any
state or regulatory body; and
(iii) The signers of said certificate have carefully
examined the Registration Statement and the Prospectus and any
amendments thereof or supplements thereto, and
(A) such documents contain all statements
and information required to be included therein; the
Registration Statement, or any amendment thereof, does not
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading; and
the Prospectus, as amended or supplemented, does not include
any untrue statement of material fact or omit to state a
material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading;
(B) since the Effective Date of the
Registration Statement, there has occurred no event required
to be set forth in an amended or supplemented Prospectus which
has not been so set forth;
(C) subsequent to the respective dates as of
which information is given in the Registration Statement and
the Prospectus, the Company has not incurred any material
liabilities or material obligations, direct or contingent, or
entered into any material transactions, not in the ordinary
course of business consistent with past practice, or declared
or paid any dividends or made any distribution of any kind
with respect to its capital stock, and except as disclosed in
the Prospectus, there has not been any change in the capital
stock (other than a change in the number of outstanding shares
of Common Stock due to the offering of the Units or the
issuance of shares upon the exercise of options outstanding as
of the Effective Date or options granted pursuant to the
Option Plans described to in the Registration Statement), or
any material increase in the short-term debt or long-term
debt, or in the issuance of options, warrants, convertible
securities or other rights to purchase the capital stock, of
the Company, or any material adverse change or any development
involving a prospective material adverse change (whether or
not arising in the ordinary course of business) in the general
affairs, condition
20
(financial or otherwise), business, key personnel, property,
prospects, net worth or results of operations of the Company,
and
(D) except as stated in the Registration
Statement and Prospectus, there is not pending or, to their
knowledge, threatened or contemplated, any action, suit or
proceeding to which the Company is a party before or by any
court or governmental agency, authority or body, or any
arbitrator, which might result in any material adverse change
of the condition, (financial or otherwise), business,
prospects, or results of operations of the Company.
(j) On each Closing Date, there shall have been furnished the
Underwriter a certificate of Secretary of the Company, dated as of such Closing
Date, with the documents listed herein attached, and to the effect and
certifying as follows:
(i) Attached thereto are true and correct copies of
the articles of incorporation of the Company, as amended to the date of
the certificate, and stating that there have been no changes or
amendments to the attached articles of incorporation of the Company,
and no resolutions have been adopted by the Board of Directors or
shareholders of the Company relating to (A) the amendment of said
articles of incorporation, (B) the merger, consolidation or dissolution
of the Company, or (C) the sale of all or substantially all of the
assets or business of the Company, and that the Company is in good
standing in the State of Minnesota and has paid all of its corporate
franchise taxes due as of the date of such certificate.
(ii) Attached thereto is a true and correct copy of
the bylaws of the Company as in effect as of the date of such
certificate and no resolutions have been adopted by the Board of
Directors or shareholders of the Company relating to changes or
amendments to the attached Bylaws.
(iii) Attached thereto are true and correct copies of
the resolutions of the Board of Directors of the Company relating to
the preparation and signing of the Registration Statement and this
Agreement, the issuance and sale of the Units and other related
matters, and such resolutions have not been amended, modified or
rescinded and are in full force and effect as of the date of such
certificate and are the only resolutions adopted by the Board of
Directors of the Company with respect to the offering contemplated by
the Registration Statement.
(iv) Attached thereto are true and correct copies of
all material correspondence with respect to the Registration Statement
and Prospectus and related matters between the Company, its counsel,
and/or Schechter, Dokken, Kanter, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd., on the one
hand, and the Commission, on the other.
(v) This Agreement, as executed and delivered by the
Company, is in the form presented to and approved by officers
authorized to do so by the Board of Directors of the Company.
(vi) Attached thereto are specimens of the
certificates for the Unit, the Common Stock and the Warrant in the
forms authorized and approved for use by the Board of Directors of the
Company.
(vii) The persons who have signed the Registration
Statement and all amendments thereto were duly elected at the
respective times of such signing and duly acting as officers and
directors of the Company or as an attorney-in-fact therefor, as set
forth in the Registration Statement.
(k) The Underwriter shall have received from each of the
executive officers and directors of the Company and each beneficial owner of
five percent (5%) or more of the Common Stock to be outstanding
21
after the sale of the Firm Units (calculated in accordance with Rule 13d-3 under
the Exchange Act) the One-Year Lock-up Agreement in the form of APPENDIX A
hereto whereby each such person agrees that during the One- Year Lock-up Period
such person will not, without the Underwriter's prior written consent, effect
the Disposition of any unregistered Securities except as permitted by the
One-Year Lock-up Agreement.
(l) The Units shall be included and quoted on The Nasdaq
SmallCap Market.
(m) ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.L.L.P. shall deliver to the
Underwriter a Blue Sky Memorandum reasonably satisfactory to the Underwriter
confirming that all requisite actions for the offer and sale of the Units in all
jurisdictions requested by the Underwriter have been taken.
(n) The Company shall have furnished to the Underwriter and to
Underwriter's Counsel such additional certificates, documents and evidence as
the Underwriter shall reasonably request.
All such opinions, certificates, letters and documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory to the Underwriter and Underwriter's Counsel. All statements
contained in any certificate, letter or other document delivered pursuant hereto
by, or on behalf of, the Company shall be deemed to constitute representations
and warranties of the Company.
The Underwriter may waive in writing the performance of any
one or more of the conditions specified in this Section 5 or extend the time for
their performance.
If any of the conditions specified in this Section 5 shall not
have been fulfilled when and as required by this Agreement to be fulfilled and
if the fulfillment of said condition has not been waived by the Underwriter,
this Agreement and all obligations of the Underwriter hereunder may be canceled
at, or at any time prior to, each Closing Date by the Underwriter. Any such
cancellation shall be without liability of the Underwriter to the Company and
shall not relieve the Company of its obligations under Section 4(a) hereof.
Notice of such cancellation shall be given to the Company at the address
specified in Section 12 hereof in writing, or by telegraph or telephone
confirmed in writing.
6. UNDERWRITER'S WARRANTS. In consideration of the agreement of the
Underwriter to act as Underwriter, and upon payment of a purchase price of
$100.00, on the First Closing Date the Company will issue and deliver to the
Underwriter, for its account, the Underwriter's Warrants to purchase Units in an
amount equal to ten percent (10%) of the number of Firm Units purchased by the
Underwriter in the offering. The Underwriter's Warrants shall be issued on the
First Closing Date and shall be dated as of the Effective Date. The
Underwriter's Warrants shall be exercisable commencing one year after the
Effective Date and for a period of five years after the Effective Date at a
price equal to 120% of the Price to Public per Share set forth on the cover page
of the Prospectus. As to other terms, the Underwriter's Warrants shall be in
form and substance substantially the same as APPENDIX B hereto. The Company
represents and warrants that the Underwriter's Warrants have been duly
authorized and, when granted and delivered in accordance with the terms hereof,
will be valid, binding and enforceable obligations of the Company, except
insofar as indemnification and contribution provisions may be limited by
applicable law or the public policies underlying such law and except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws relating to or affecting
creditors' rights generally or by general equitable principles; the Warrant
Shares issuable upon exercise of the Underwriter's Warrants have been duly
authorized and reserved for issuance upon exercise; and upon receipt
22
by the Company of the consideration for such securities in accordance with the
terms of the Underwriter's Warrants, the Warrant Shares shall have been duly and
validly issued, fully paid and non-assessable.
7. INDEMNIFICATION.
(a) The Company hereby agrees to indemnify and hold harmless
the Underwriter, and each person, if any, who controls the Underwriter within
the meaning of Section 15 of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which the Underwriter or each such
controlling person may become subject under the Securities Act, the Exchange
Act, the common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of, or are based upon, (i)
any breach of any representation, warranty, agreement or covenant of the Company
contained in this Agreement, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
amendment thereof or supplement thereto, or the omission or alleged omission to
state in the Registration Statement or any amendment thereof or supplement
thereto a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; (iii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, if used prior to the Effective Date of the Registration
Statement, or in the Prospectus (as amended or as supplemented, if the Company
shall have filed with the Commission any amendment thereof or supplement
thereto), or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; or (iv) any untrue statement or
alleged untrue statement of a material fact contained in any application or
other statement executed by the Company or based upon written information
furnished by the Company filed in any jurisdiction in order to qualify the Units
under, or exempt the Units or the sale thereof from qualification under, the
securities laws of such jurisdiction, or the omission or alleged omission to
state in such application or statement a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company will
reimburse each Underwriter and each such controlling person for any legal or
other expenses of one firm of attorneys reasonably incurred by such Underwriter
or controlling person in connection with investigating or defending against any
such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information relating to the Underwriter furnished
to the Company by the Underwriter specifically for use in the preparation of the
Registration Statement or any such post-effective amendment thereof, any such
Preliminary Prospectus, or the Prospectus, or any such amendment thereof or
supplement thereto, or in any application or other statement executed by the
Company or the Underwriter filed in any jurisdiction in order to qualify the
Units under, or exempt the Units or the sale thereof from qualification under,
the securities laws of such jurisdiction; and provided further that the
foregoing indemnity agreement is subject to the condition that, insofar as it
relates to any untrue statement, alleged untrue statement, omission or alleged
omission made in any Preliminary Prospectus but eliminated or remedied in the
Prospectus, such indemnity agreement shall not inure to the benefit of the
Underwriter (or to the benefit of any person who controls the Underwriter) if
the person asserting any loss, claim, damage or liability purchased the Units
from the Underwriter if a copy of the Prospectus was not sent or given to such
person with, or prior to, the written confirmation of the sale of such Units to
such person. This indemnity agreement is in addition to any liability which the
Company may otherwise have.
(b) The Underwriter agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the
Registration Statement, and each person who controls the Company within the
meaning of Section 15 of the Securities Act against any losses, claims, damages
or liabilities to which the Company or any such director, officer or controlling
person may become subject under the Securities Act, the Exchange Act, the common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of, or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof or supplement thereto, or the
23
omission or alleged omission to state in the Registration Statement or any
amendment thereof or supplement thereto, a material fact required to be stated
therein or necessary to make the statements therein not misleading; (ii) any
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, if used prior to the Effective Date of the Registration
Statement, or in the Prospectus (as amended or as supplemented, if the Company
shall have filed with the Commission any amendment thereof or supplement
thereto), or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; or (iii) any untrue statement or alleged untrue statement of a
material fact contained in any application or other statement executed by the
Company or by the Underwriter and filed in any jurisdiction in order to qualify
the Units under, or exempt the Units or the sale thereof from qualification
under, the securities laws of such jurisdiction, or the omission or alleged
omission to state in such application or statement a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by, or on behalf
of, the Underwriter specifically for use in the preparation of the Registration
Statement or any such post-effective amendment thereof, any such Preliminary
Prospectus, or the Prospectus or any such amendment thereof or supplement
thereto, or in any application or other statement executed by the Company or by
the Underwriter and filed in any jurisdiction; and the Underwriter will
reimburse any legal or other expenses reasonably incurred by the Company or any
such director, officer, or controlling person in connection with investigating
or defending against any such loss, claim, damage, liability or action. This
indemnity agreement is in addition to any liability which the Underwriter may
otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 7, notify in writing the indemnifying party of the
commencement thereof. The omission so to notify the indemnifying party will
relieve it from any liability under this Section 7 as to the particular item for
which indemnification is then being sought, but not from any other liability
which it may have to any indemnified party. In case any such action is brought
against any indemnified party, and the indemnified party notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel who shall be reasonably satisfactory to such indemnified
party; and after notice from the indemnifying party to such indemnified party of
the indemnifying party's election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that if the defendants in any such
action include both the indemnified party and the indemnifying party, and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select one law firm as separate counsel
to assume such legal defenses and to otherwise participate in the defense of
such action on behalf of such indemnified party or parties, in which event the
fees and expenses of one such separate counsel shall be borne by the
indemnifying party. Any such indemnifying party shall not be liable to any such
indemnified party on account of any settlement of any claim or action effected
without the consent of such indemnifying party.
8. CONTRIBUTION.
(a) In order to provide for just and equitable contribution in
any action in which the Underwriter or the Company (or any person who controls
the Underwriter or the Company within the meaning of Section 15 of the
Securities Act) makes claim for indemnification pursuant to Section 7 hereof,
but such indemnification is unavailable or insufficient to hold harmless and
indemnify a party under Section 7, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of the
24
losses, claims, damages or liabilities referred to in Section 7 above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Underwriter on the other from the offering
of the Units hereunder or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in such clause
(i) but also the relative fault of the Company on the one hand and the
Underwriter on the other in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the Underwriter on the other shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Units (before
the deducting expenses) received by the Company bear to the total underwriting
discounts received by the Underwriter, in each case as set forth in the table on
the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriter and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Company and the
Underwriter agree that it would not be just and equitable if contributions
pursuant to this Section 8 were to be determined by pro rata allocation or by
any other method f allocation which does not take into account the equitable
considerations referred to in the first sentence of this Section 8. The amount
paid by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this Section 8 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending against any action or claim
which is the subject of this Section 8. Notwithstanding the provisions of this
Section 8, the Underwriter shall not be required to contribute any amount in
excess of the amount by which the total price at which the Units underwritten by
it and distributed to the public were offered to the public exceeds the amount
of any damages that the Underwriter 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 is not guilty of such fraudulent misrepresentation.
(b) Promptly after receipt by a party to this Agreement of
notice of the commencement of any action, suit or proceeding, such person will,
if a claim for contribution in respect thereof is to be made against another
party (the "Contributing Party"), notify the Contributing Party of the
commencement thereof; but the omission so to notify the Contributing Party will
not relieve the Contributing Party from any liability which it may have to any
party other than under this Section 8. Any notice given pursuant to Section 7
hereof shall be deemed to be like notice hereunder. In case any such action,
suit or proceeding is brought against any party, and such person notifies a
Contributing Party of the commencement thereof, the Contributing Party will be
entitled to participate therein with the notifying party and any other
Contributing Party similarly notified.
9. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at immediately after
the time at which the Registration Statement shall become effective under the
Securities Act upon the Effective Date of the Registration Statement.
(b) Until the First Closing Date, this Agreement may be
terminated by the Underwriter, at its option, by giving notice to the Company,
and the option referred to in Section 2(b), if exercised, may be cancelled at
any time prior to the Second Closing Date, if (i) the Company shall have failed,
refused, or been unable, at or prior to such Closing Date, to perform any
agreement on its part to be performed hereunder, (ii) any other condition of the
Underwriter's obligations hereunder is not fulfilled or waived by the
Underwriter, (iii) trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or in the over-the-counter market shall
have been suspended, (iv) minimum or maximum prices for trading shall have been
fixed, or maximum ranges for prices for securities shall be required, on the New
York Stock Exchange, the American Stock Exchange, or in the over-the-counter
market, by such Exchange or by Nasdaq or by order of the Commission or any other
governmental authority having jurisdiction, (v) a banking moratorium shall have
been declared by
25
federal, New York, or Minnesota authorities, (vi) there shall have been such a
serious, unusual and material change in general economic, monetary, political or
financial conditions, or the effect of international conditions on the financial
markets in the United States shall be such as, in the judgment of the
Underwriter, makes it inadvisable to proceed with the delivery of the Units,
(vii) the enactment, publication, decree or other promulgation of any federal or
state statute, regulation, rule or order of any court or other governmental
authority which, in the judgment of the Underwriter, materially and adversely
affects or will materially and adversely affect the business or operations of
the Company, or (viii) there shall be a material outbreak of hostilities or
material escalation and deterioration in the political and military situation
between the United States and any foreign power, or a formal declaration of war
by the United States of America shall have occurred. Any such termination shall
be without liability of any party to any other party, except as provided in
Sections 7 and 8 hereof; provided, however, that the Company shall remain
obligated to pay costs and expenses to the extent provided in Section 4 hereof.
(c) If the Underwriter elects to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Section 9,
it shall notify the Company and the Company's counsel promptly by telegram or
telephone, confirmed by letter sent to the address specified in Section 11
hereof. If the Company shall elect to prevent this Agreement from becoming
effective, it shall notify the Underwriter promptly by telegram or telephone,
confirmed by letter sent to the addresses specified in Section 11 hereof.
10. SURVIVAL OF INDEMNITIES, CONTRIBUTION AGREEMENTS, WARRANTIES AND
REPRESENTATIONS. The respective indemnity and contribution agreements of the
Company and the Underwriter contained in Sections 7 and 8, the representations
and warranties of the Company set forth in Section 1 hereof, and the covenants
and agreements of the Company set forth in Section 3 hereof, shall remain
operative and in full force and effect, regardless of any investigation made by,
or on behalf of, the Underwriter, the Company, any of its officers and
directors, or any controlling person referred to in Sections 7 and 8, and shall
survive the delivery of and payment for the Units. The aforesaid indemnity and
contribution agreements shall also survive any termination or cancellation of
this Agreement. Any successor of any party or of any such controlling person, or
any legal representative of such controlling person, as the case may be, shall
be entitled to the benefit of the respective indemnity and contribution
agreements.
11. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be mailed,
delivered or telegraphed, and confirmed, as follows:
If to the Underwriter, to: ▇. ▇. ▇▇▇▇▇▇▇▇ & Company
One Financial Plaza
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.L.L.P.
4200 IDS Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to the Company, to: Founders Food & ▇▇▇▇▇▇▇, Ltd.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
26
with a copy to: ▇▇▇▇▇▇ and ▇▇▇▇▇▇, P.A.
2400 IDS Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
12. INFORMATION FURNISHED BY THE UNDERWRITER. The statements relating
to the stabilization activities of the Underwriter and the statements under the
caption "Underwriting" in any Preliminary Prospectus and in the Prospectus
constitute the written information furnished by, or on behalf of, the
Underwriter specifically for use with reference to the Underwriter referred to
in Section 1(a)(ii) and Sections 7(a) and 7(b) hereof.
13. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the Underwriter and the Company and their respective
successors and assigns, and the officers, directors and controlling persons
referred to in Sections 7 and 8. Nothing expressed in this Agreement is intended
or shall be construed to give any person or corporation, other than the parties
hereto, their respective successors and assigns, and the controlling persons,
officers and directors referred to in Sections 7 and 8 any legal or equitable
right, remedy or claim under, or in respect of, this Agreement or any provision
herein contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of the parties
hereto and their respective executors, administrators, successors, assigns and
such controlling persons, officers and directors, and for the benefit of no
other person or corporation. No purchaser of any Units from the Underwriter
shall be construed a successor or assign merely by reason of such purchase.
14. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed counterpart of this
Agreement, whereupon it will become a binding agreement between the Company and
the Underwriter in accordance with its terms.
Very truly yours,
FOUNDERS FOOD & ▇▇▇▇▇▇▇, LTD.
By
-----------------------------------------
Signature
-------------------------------------------
Name Typed or Printed
Its
----------------------------------------
Title Typed or Printed
27
ACCEPTANCE
The foregoing Underwriting Agreement is hereby confirmed and accepted by us as
of the date first above written.
▇. ▇. ▇▇▇▇▇▇▇▇ & COMPANY
By
-------------------------------------------
Signature
---------------------------------------------
Name Type or Printed
Its
------------------------------------------
Title Typed or Printed
28
APPENDIX A
FOUNDERS FOOD & ▇▇▇▇▇▇▇ LTD.
Public Offering of Units
____________________, 2000
▇.▇. ▇▇▇▇▇▇▇▇ & Company
One Financial Plaza
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
This letter is being delivered to you in connection with the
Underwriting Agreement (the "Underwriting Agreement") between Founders Food &
▇▇▇▇▇▇▇ Ltd., a Minnesota corporation (the "Company"), and you, as the
Underwriter named in the Underwriting Agreement, relating to an underwritten
public offering of Units ("Units") of the Company, each Unit consisting of
one share of common stock ("Common Stock") and one Redeemable Class A Warrant
to purchase one share of Common Stock (the "Warrant").
In order to induce you to enter into the Underwriting Agreement, the
undersigned officer, director or 5% or greater shareholder of the Company
agrees that, without your prior express written consent, the undersigned will
not offer, sell, contract to sell, grant any option to purchase, or otherwise
dispose of, or arrange for the contingent disposition of any unregistered
equity securities of the Company or any securities convertible into, or
exercisable or exchangeable for, unregistered equity securities of the
Company (except by gift to a donee who agrees to be bound by the terms hereof
and except for the BONA FIDE pledge of such securities to a pledgee who
agrees to be bound by the terms hereof) for the period of one (1) year after
the date that the Registration Statement relating to the sale of the Units
has been declared effective by the Securities and Exchange Commission.
If, for any reason, the Underwriting Agreement shall be terminated prior
to the First Closing Date (as defined in the Underwriting Agreement), the
agreement set forth above shall likewise be terminated.
Very truly yours,
--------------------------------------