EXHIBIT 1.1
DISTRIBUTION AND MANAGEMENT AGREEMENT
dated as of _______________, 2002,
ONYX ACCEPTANCE CORPORATION
and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LTD.
$50,000,000.00
Renewable Unsecured Subordinated Notes
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS....................................................... 1
Section 1.01 Defined Terms............................................... 1
Section 1.02 Accounting Terms............................................ 4
ARTICLE II APPOINTMENT OF AGENT AND RELATED AGREEMENTS...................... 5
Section 2.01 Appointment; Exclusivity.................................... 5
Section 2.02 Scope of Agency............................................. 5
Section 2.03 Compensation to Agent....................................... 5
Section 2.04 Brokers and Dealers......................................... 7
Section 2.05 Agent's Unrelated Activities................................ 7
Section 2.06 Best Efforts; Independent Contractor........................ 7
Section 2.07 Issuance and Payment........................................ 8
ARTICLE III SERVICES; STANDARD OF CARE...................................... 8
Section 3.01 Services for Notes.......................................... 8
Section 3.02 Maintenance of Files and Records............................ 10
Section 3.03 Monthly Reports to the Company.............................. 11
ARTICLE IV REPRESENTATIONS AND COVENANTS OF THE COMPANY..................... 11
Section 4.01 Representations, Warranties and Agreements of the Company... 11
Section 4.02 Covenants of the Company.................................... 17
ARTICLE V REPRESENTATIONS AND COVENANTS OF AGENT; CONDITIONS................ 19
Section 5.01 Representations and Warranties of Agent..................... 19
Section 5.02 Covenants of Agent.......................................... 22
ARTICLE VI CONDITIONS....................................................... 23
Section 6.01 Conditions of the Agent's Obligations....................... 23
ARTICLE VII INDEMNIFICATION AND CONTRIBUTION................................ 28
Section 7.01 Company's Indemnification of Agent.......................... 28
Section 7.02 Agent's Indemnification of the Company...................... 29
Section 7.03 Notice of Indemnification Claim............................. 29
Section 7.04 Contribution................................................ 30
Section 7.05 Notice of Contribution Claim................................ 31
Section 7.06 Reimbursement............................................... 31
Section 7.07 Arbitration................................................. 31
ARTICLE VIII TERM AND TERMINATION........................................... 32
Section 8.01 Effective Date of this Agreement............................ 32
Section 8.02 Termination Prior to Initial Closing Date................... 32
Section 8.03 Notice of Termination....................................... 32
Section 8.04 Termination After Initial Closing Date...................... 32
Section 8.05 Termination Without Termination of Offering................. 33
ARTICLE IX MISCELLANEOUS.................................................... 33
Section 9.01 Survival.................................................... 33
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Section 9.02 Notices..................................................... 33
Section 9.03 Successors and Assigns; Transfer............................ 34
Section 9.04 Cumulative Remedies......................................... 34
Section 9.05 Attorneys' Fees............................................. 34
Section 9.06 Entire Agreement............................................ 34
Section 9.07 Choice of Law; Venue........................................ 35
Section 9.08 Confidentiality............................................. 35
Section 9.09 Rights to Investor Lists.................................... 35
Section 9.10 Waiver; Subsequent Modification............................. 35
Section 9.11 Severability................................................ 35
Section 9.12 Joint Preparation........................................... 35
Section 9.13 Captions.................................................... 35
Section 9.14 Counterparts................................................ 35
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DISTRIBUTION AND MANAGEMENT AGREEMENT
THIS DISTRIBUTION AND MANAGEMENT AGREEMENT is entered into as of this ____
day of ______________, 2002 by and between Onyx Acceptance Corporation, a
Delaware Corporation (the "Company"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Ltd., a Minnesota
corporation, as agent (the "Agent").
RECITALS
WHEREAS, the Company proposes to register and publicly offer and sell up
to $50,000,000 aggregate principal amount of renewable, unsecured, subordinated
notes of the Company;
WHEREAS, subject to the termination rights set forth herein, the Company
desires to appoint the Agent to act as the Company's exclusive selling agent in
connection with the offer, sale and renewal of such notes on a best effort basis
and act as the Company's servicing agent to provide certain administrative
services with respect to the Notes, and Agent desires to accept such duties, all
as provided for by the terms of this Agreement.
NOW, THEREFORE, in consideration of the above and for other good and
valuable consideration, receipt of which is acknowledged, and in consideration
of the mutual promises, covenants, representations and warranties hereinafter
set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINED TERMS. Whenever used in this Agreement, the following
terms have the respective meanings set forth below. The definitions of such
terms are applicable to the singular as well as to the plural forms of such
terms.
(a) Accepted Note Practices. As applicable to the context in which
this term is used, those procedures and practices with respect to the
offering, marketing, selling, servicing and administration of the Notes
that satisfy the following: (i) meet at least the same standards that
Agent would follow in exercising reasonable care in offering, marketing,
selling, servicing and administering similar programs for publicly offered
notes or securities; (ii) comply with all applicable federal and state
laws; (iii) comply with the provisions of this Agreement; and (iv) give
due consideration to the accepted standards of practice of prudent
investment banking firms that offer, market, sell, service or administer
comparable programs for publicly offered notes or securities and the
reliance of the Company on the Agent for the offering, marketing, selling,
servicing and administration of the Renewable Note Program.
(b) Agent. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Ltd., a Minnesota corporation, or its
successors in interest, if approved by the Company as provided herein.
(c) Agreement. This Distribution and Management Agreement, including
any exhibits or attachments hereto, as originally executed, and as amended
or supplemented from time to time in accordance with the terms hereof.
(d) Business Day. Any day other than (a) a Saturday or Sunday or (b)
another day on which banking institutions in the State of New York or the
State of Minnesota are authorized or obligated by law, executive order, or
governmental decree to be closed.
(e) Commission or SEC. The Securities and Exchange Commission.
(f) Company. Onyx Acceptance Corporation, or its successors in
interest.
(g) Due Date. The day on which each Scheduled Payment is due to any
Holder from the Company on any Note for a Due Period, exclusive of any
days of grace.
(h) Due Period. The monthly, quarterly, semi-annual, or annual
periods, or the full term of the Note if interest is due at maturity, for
which scheduled payments of interest will be paid on any Note.
(i) Effective Date. As defined in Section 6.01(a), the date and time
the Registration Statement is or was declared effective by the Commission.
(j) Exchange Act. The Securities Exchange Act of 1934, as amended.
(k) Governmental Rules. Any law, rule, regulation, ordinance, order,
code, interpretation, judgment, decree, policy, decision or guideline of
any governmental agency, court or authority.
(l) Holder. The registered owner of any Note, including any
purchaser or any subsequent transferee or other holder thereof.
(m) Indenture. That certain Indenture dated on or about
____________, 2002, by and between the Company and the Trustee with
respect to the Notes.
(n) Initial Closing Date. After the Effective Date, the first date
on which any Notes are issued and sold by the Company to any Investors.
(o) Investor. Any person who purchases Notes or person who contacts
the Agent expressing an interest in purchasing the Notes or requesting
information concerning the Notes.
(p) Letter of Intent. That certain letter of intent dated August 15,
2002 by and between the Company and the Agent relating to the Offering.
(q) Material Agreement. With respect to a person, any agreement,
contract, joint venture, lease, commitment, guaranty or other contractual
arrangement or any bond, debenture, indenture, mortgage, deed of trust,
loan or security agreement, note, instrument or other evidence of
indebtedness, which in the case of any of the foregoing is
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material to the business, assets, operations or condition, financial or
otherwise, of such person or which is material to the ability of such
person to perform its obligations under this Agreement.
(r) NASD. The National Association of Securities Dealers, Inc.
(s) Note Confirmation. With respect to the issuance and ownership of
the Notes in book-entry form, an appropriate written confirmation of the
issuance and ownership or transfer of ownership of a Note to a Holder, the
format of which shall comply with Accepted Note Practices.
(t) Note Portfolio. The aggregate of individual Notes, as it exists
from time to time, which, unless the context otherwise requires or
provides, will be determined or evaluated based upon the principal
balances of the Notes.
(u) Notes. The renewable, unsecured, subordinated notes of the
Company that are being offered and sold pursuant to the Registration
Statement and that have an aggregate principal amount up to $50,000,000
and such other terms as described in the Prospectus, and any additional
principal amount of the same or similar notes as may be registered from
time to time pursuant to the Registration Statement.
(v) Offering. The offer and sale of the Notes in accordance with the
terms and subject to the conditions set forth in the Registration
Statement.
(w) Paying Agent. _________________ or its successors or assigns, or
such other paying agent with respect to the Notes as may be subsequently
appointed by the Company.
(x) Paying Agent Agreement. That certain agreement by and between
the Company and Paying Agent relating to the Company's engagement of the
Paying Agent to act as the paying agent for the Notes.
(y) Paying Agent Fees. All fees and expenses payable to the Paying
Agent in accordance with the Paying Agent Agreement.
(z) Portfolio Reports. The reports to the Company regarding the Note
Portfolio required to be prepared and delivered by the Agent under this
Agreement.
(aa) Preliminary Prospectus. Any preliminary prospectus included in
the Registration Statement prior to the time it becomes or became
effective under the Securities Act, including the respective copies
thereof filed with the Commission.
(bb) Prospectus. The prospectus included in the Registration
Statement at the time it is or was declared effective by the Commission,
except that if any prospectus provided to the Agent by the Company for use
in connection with the Offering differs from the prospectus as filed with
the Commission, the term "Prospectus" shall refer to such differing
prospectus from and after the time such prospectus is first provided to
the
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Agent by the Company for such use, including the respective copies thereof
filed with the Commission.
(cc) Prepayment. The payment of all or part of the interest due in
any Due Period prior to the Due Date.
(dd) Redemption Payment. The payment of principal plus any accrued
and unpaid interest, that is being made at the discretion of the Issuer in
accordance with the Indenture.
(ee) Registration Statement. That certain Registration Statement on
Form S-3 (File No. 333-71238) of the Company with respect to the Notes
filed with the Securities and Exchange Commission under the Securities Act
of 1933, as amended and declared effective on or about the date hereof,
including the respective copies thereof filed with the Commission.
(ff) Renewable Note Program. The marketing, subscription and sale,
administration, customer service and investor relations, registration of
ownership, reporting, payment, repurchase, redemption, renewal and related
activities associated with the Notes.
(gg) Repurchase Payment. The payment of principal plus any accrued
and unpaid interest, less any penalties upon the repurchase of any Note,
that is being made at the request of the Holder in accordance with the
Indenture.
(hh) Rules and Regulations. The rules and regulations under the
Securities Act as now and hereafter amended.
(ii) Scheduled Payment. For any Due Period and any Note, the amount
of interest and/or principal indicated in such Note as required to be paid
by the Company under such Note for the Due Period and giving effect to any
rescheduling or reduction of payments in any insolvency or similar
proceeding and any portion thereof.
(jj) Securities Act. The Securities Act of 1933, as amended, and as
hereafter amended.
(kk) Trust Account. The trust account established by the Trustee
pursuant to the Indenture.
(ll) Trustee. U.S. Bank Trust, National Association, or its
successors or assigns.
(mm) Trustee's Fee. All fees and expenses payable to the Trustee in
accordance with the Indenture.
SECTION 1.02 ACCOUNTING TERMS. Unless otherwise specified in this
Agreement, all accounting terms used in this Agreement shall be interpreted, all
accounting determinations under this Agreement shall be made, and all financial
statements required to be delivered by any
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person pursuant to this Agreement shall be prepared, in accordance with
generally accepted accounting principles as in effect from time to time applied
on a consistent basis. To the extent generally accepted accounting practices do
not apply to certain reports or accounting practices of Agent, the parties will
mutually agree on the accounting practices and assumptions.
ARTICLE II
APPOINTMENT OF AGENT AND RELATED AGREEMENTS
SECTION 2.01 APPOINTMENT; EXCLUSIVITY. On the basis of the
representations, warranties and agreements herein contained, and subject to the
terms and conditions set forth herein and in the Prospectus during the term of
this Agreement, the Company appoints the Agent as its exclusive agent for
purposes of selling, including the offer and sale of the Notes, and servicing,
including the servicing and administration of the Notes, in each case, under the
Renewable Note Program upon the terms and conditions set forth herein, including
without limitation compliance and conformity with Accepted Note Practices and
Governmental Rules, and the Agent agrees to use its best efforts as such agent
to offer and sell the Notes to Investors until the later of the termination of
the Offering or the payment in full of all outstanding Notes, or until the
termination of this Agreement, if earlier. During the term of this Agreement,
the Company agrees to direct to the Agent all inquiries it receives with respect
to the Notes.
SECTION 2.02 SCOPE OF AGENCY. In the performance of its duties hereunder,
Agent shall have full power and authority to take any and all actions for
purposes of selling, including the offer and sale of Notes, and servicing,
including the servicing and administration of the Notes, in each case, under the
Renewable Note Program that Agent, in its discretion, deems necessary or
appropriate, subject in all respects to compliance and conformity with Accepted
Note Practices and Governmental Rules. Such discretion shall include, without
limitation, the right to accept or reject subscription agreements, waive or
reduce early repurchase penalties when appropriate, change interest payment
dates, enforce early repurchase penalties and allow prepayment of Notes, with or
without penalty. Notwithstanding the foregoing, Agent's authority to take any
action on the Company's behalf, other than the rejection of subscription
agreements, which has a financial impact of $500 or more shall be subject to
receiving the prior written consent of the Company. In the performance of its
duties hereunder, the Agent shall (i) act exclusively as the agent and the
bailee of the Company in connection with the Renewable Note Program; (ii) hold,
in trust and as custodian, all subscription agreements, notices or other
documents and all purchase proceeds or other payments received by it in
connection with the Renewable Note Program for the sole and exclusive use and
benefit of the Company; and (iii) make dispositions of the items in clause (ii)
only in accordance with this Agreement or at the written direction of the
Company. Except as set forth herein with respect to the Renewable Note Program,
the Agent shall have no authority, express or implied, to act in any manner or
by any means for or on behalf of the Company.
SECTION 2.03 Compensation to Agent.
(a) Agent's Fees and Commissions. In consideration of the agreement
of the Agent to provide its services as set forth in this Agreement, the
Company will pay the Agent the following amounts:
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(i) a commission of up to three percent (3%) of the gross
proceeds received on the sale and renewal of Notes in accordance
with the schedule set forth as Exhibit A hereto; and
(ii) an annual portfolio management fee equal to 0.25% of the
weighted average principal balance of the Note Portfolio.
(b) Agent's Expenses. The Company agrees with the Agent that whether
or not the Effective Date occurs or the Agreement is terminated or
cancelled or the sale of the Notes 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 to the applicable persons the following, whether incurred prior or
subsequent to the date of this Agreement:
(i) subject to the prior approval by the Company, all
reasonable out-of-pocket costs of the Agent incurred in connection
with the Offering, including, but not limited to, designing,
printing and mailing all offering and advertising materials,
advertisements in newspapers, on the radio, on the internet and
through direct mail, operating a toll-free telephone number, and
assisting the Company with creating a web site, including any costs
of a web developer or other third party consultants;
(ii) all reasonable fees and expenses of persons (other than
the Agent and its affiliates), including, without limitation, fees
and expenses of the Company's auditors and legal counsel, in
connection with the preparation, printing, filing, and delivery of
the Registration Statement (including the financial statements
therein and all amendments, schedules, and exhibits thereto), each
Preliminary Prospectus, the Prospectus, and any amendment thereof or
supplement thereto;
(iii) all reasonable fees and expenses incurred in connection
with the qualification of the Notes for offer and sale under the
securities or Blue Sky laws of the states and other jurisdictions
which the Agent may designate (with the prior approval of the
Company) in accordance with the terms herewith;
(iv) all reasonable out-of-pocket costs incurred by the Agent
or any other contractor in connection with the preparation,
printing, filing, and delivery of notices, quarterly statements,
newsletters and any other materials to be sent to Holders;
(v) all reasonable fees and expenses of the Agent's legal
counsel in connection with the Offering and the ongoing servicing
and administration of the Renewable Note Program as provided herein;
(vi) all fees and expenses of the Trustee and Paying Agent in
connection with the Notes, and
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(vii) all reasonable out-of-pocket costs incident to the
performance of the Agent's obligations hereunder with respect to the
ongoing servicing and administration of the Renewable Note Program
that are not otherwise specifically described herein.
The provisions of this Section are intended to relieve the Agent from the
payment of reasonable fees, expenses and out-of-pocket costs which the
Company hereby agrees to pay and shall not impair or limit the obligations
of the Company hereunder to the Agent.
(c) Payment of Fees and Commissions. On the last Business Day of
each month, or as soon thereafter as practicable, Agent shall provide the
Company with a written invoice for the previous month's fees and
commissions that are payable with respect to Notes issued through the last
three Business Days of the previous month that are not rescinded. Such
commissions and fees will be due and payable by the later of the fifteenth
(15th) day of every month or fifteen (15) days after the date such invoice
is received. Notes issued in the last three Business Days of each month,
and the fees and commissions payable with respect thereto, will be counted
in the amount due to Agent for the subsequent month.
SECTION 2.04 BROKERS AND DEALERS. The Agent may, in its sole discretion
and at no additional obligation or expense to the Company, use the services of
other brokers or dealers who are members of the NASD in connection with the
offer and sale of the Notes. The Agent may enter into agreements with any such
broker or dealers to act as its sub-agents for the sale of the Notes and shall
be solely responsible for the payment of any portion of the Agent's compensation
hereunder to such brokers or dealers.
SECTION 2.05 AGENT'S UNRELATED ACTIVITIES. The Company agrees that Agent
may sell other notes or securities in offerings similar to the Offering for
other issuers during the course of the Offering; provided, however, without the
written consent of the Company, Agent agrees not to advertise such other notes
or securities by radio, newspaper or other media in such markets and at such
times as the Company's advertisements for Notes are being broadcast or
published. Anything to the contrary notwithstanding, the Agent may advertise
other notes or securities of other issuers on its website or on the website of
such other issuers, subject to the confidentiality provisions of this Agreement,
and Agent shall have the right to advertise or otherwise disclose to unrelated
prospective issuers, at its own expense, its relationship with the Company, the
services it provides in connection with the Notes and the amount of money that
it raised through the Offering.
SECTION 2.06 BEST EFFORTS; INDEPENDENT CONTRACTOR. Anything to the
contrary notwithstanding, Agent shall have no obligation to sell any minimum
principal amount of Notes or to purchase Notes for its own account, for resale
or for any other purpose, but rather Agent shall use its best efforts as selling
agent in connection with the Offering of the Notes. During the term of this
Agreement, all actions taken by Agent pursuant to this Agreement shall be in the
capacity of an independent contractor, all sales of Notes conducted by Agent
shall be solely for the account and at the risk of the Company, and in no event
shall the Agent have any obligations under the Notes.
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SECTION 2.07 ISSUANCE AND PAYMENT. The Notes shall be issued pursuant to
the Indenture and all Scheduled Payments, Redemption Payments and Repurchase
Payments shall be made by electronic funds transfer or automated clearing house
(i.e., ACH) remittance from the Trust Account by the Trustee, who shall
initially serve as the Paying Agent, in accordance with the Paying Agent
Agreement. The Company shall pay funds into the Trust Account as needed to cover
Scheduled Payments, Redemption Payments, Repurchase Payments, Trustee's Fees and
Paying Agent Fees.
ARTICLE III
SERVICES; STANDARD OF CARE
SECTION 3.01 SERVICES FOR NOTES. The services to be provided to the
Company by the Agent pursuant to and during the term of this Agreement shall
include the following:
(a) Note Structure and Interest Rates. During the term of this
Agreement, Agent shall advise the Company regarding the structure of the
Notes and provide sample document forms. Throughout the Offering, Agent
shall assist the Company in determining appropriate Note interest rates
based on current market conditions and the Company's capital goals.
(b) Marketing and Advertising. During the term of this Agreement,
Agent shall develop and execute a direct response marketing strategy for
the Notes designed to meet the Company's capital goals in a timely manner.
Agent shall manage the process of creating, producing and placing any
newspaper, radio, internet and direct mail advertisements. Agent shall
also oversee designing and printing all marketing materials, in accordance
with the applicable Rules and Regulations and any other requirements of
the SEC and NASD or other Governmental Rules.
(i) Notwithstanding the foregoing, Agent's authority with
respect to all ad placements and use of all marketing materials
shall be subject to receiving the prior written approval of the
Company.
(ii) In order to minimize advertising costs, Agent may
recommend that the Company enter into long term contracts (not to
exceed one year) with various newspapers and radio stations, and in
such event, in addition to the direct cost of the advertisements
themselves, the Company shall be responsible for any termination
fees that result from the early cancellation of such contracts if
approved by Company.
(iii) During the term of this Agreement, Company shall allow
Agent to use the Company's logo, corporate colors, trademarks,
tradenames, fonts, and other aspects of corporate identity in
advertisements and marketing materials related to the Notes, subject
to the Company's prior written approval of the specific use of these
items in writing in each instance.
(c) Subscription, Sale and Ownership. During the term of this
Agreement, Agent shall review and process each subscription agreement for
the Notes received from
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an Investor with the objective of determining whether (i) such agreement
is complete and accurate in all material respects, including without
limitation the execution thereof by such Investor, (ii) such Investor
timely remits the subscribed amount thereunder, and (iii) the principal
amount, interest rate and term to maturity and any other material terms of
the Notes are verified for accuracy and completeness. Upon delivery by
Investors of completed subscription agreements for Notes and full payment
of the principal amount of such Notes to the Agent, as agent for the
Company, the Agent shall promptly (i) accept or reject such subscription
agreements on the Company's behalf, (ii) remit to the Company the payment
of the principal amount of accepted subscriptions for Notes by directly
depositing such subscription amounts in an account established by the
Company for such purpose or in such other manner as may be directed by the
Company from time to time, and (iii) remit to the Trustee electronic or
hard copies of all accepted subscription agreements and related records as
may be reasonably requested by the Trustee, including without limitation,
a record of each deposit relating to the payment of the subscription
amount of the Notes. Pursuant to the preceding sentence, Notes shall be
issued by Agent on the Company's behalf in book-entry form only and Agent
shall deliver a Note Confirmation to each Holder with respect to such
Holder's respective accepted subscription agreement and the receipt of
full payment for such Holder's Notes. The Company hereby appoints the
Agent as its initial Registrar (as such term is defined in the Indenture)
for the Notes pursuant to Section 2.3 of the Indenture. For so long as
Agent shall serve as the Registrar for the Notes, Agent shall perform all
of the duties and obligations of the Registrar under the Indenture,
including without limitation the obligation to maintain a book-entry
registration and transfer system for the ownership of the Notes in
accordance with Section 2.14 and the other provisions of Article II of the
Indenture.
(d) Investor Relations and Reporting. During the term of this
Agreement, Agent, in conjunction with the Trustee, shall manage all
aspects of the customer service and investor relations functions,
including, but not limited to, handling all inquiries from Investors,
mailing investment kits, delivering to each Investor the Prospectus and
subscription agreement, meeting with Investors, processing subscription
agreements, responding to all written or telephonic questions by Investors
and Holders relating to the Notes, recording changes in Holders' addresses
or accounts, issuing quarterly statements and newsletters to Holders,
directing the Paying Agent to make Scheduled Payments, Repurchase Payments
and Redemption Payments to Holders in a timely manner, and issuing (or
directing the Paying Agent to issue) Form 1099's to Holders as required by
law. In addition, Agent shall provide the Trustee (and copy the Company)
with quarterly management reports regarding the Notes as required under
Section 4.4(d) of the Indenture.
(e) Web Site Development. Subject to compliance and conformity with
Accepted Note Practices by Agent, Agent (or a third party service provider
working at Agent's direction) shall assist the Company in developing a
dedicated Internet web site separate from the Company's corporate site to
allow Investors to view online and download copies of the Offering
documents (including the Prospectus, Interest Rate Supplement, and
Subscription Agreement) and marketing materials that are included in the
investment kit or comparable information.
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SECTION 3.02 MAINTENANCE OF FILES AND RECORDS. Agent shall establish and
maintain at all times during the term of this Agreement files and records
(including, without limitation, computerized records) regarding the Notes and
the Note Portfolio, with full and correct entries of all transactions or
modifications in a reasonably secure, up-to-date manner and in accordance with
the following:
(a) Location. All Note and Note Portfolio files and records shall be
stored and maintained at Agent's principal place of business, or other
location as designated by the Agent, with the Company's prior written
consent, which shall not be unreasonably withheld. Agent shall keep in its
files all correspondence received or sent regarding each Note, each
Investor, and each Holder, whether upon any purchase or transfer of a
Note.
(b) Return. If this Agreement is terminated, the Agent shall
promptly deliver to the Company or its designee, as the case may be, all
Note files and records (including, without limitation, copies of
computerized records and software, except as may be prohibited by any
third party contract or license) related to the selling and servicing of
the Notes and all monies collected by it relating to the Renewable Note
Program (less any fees or expenses due to the Agent). Agent shall be
entitled to make and keep copies of such records, at its cost and expense,
but Agent must maintain such copies in strict compliance with all
applicable Governmental Rules. In addition to delivering such data and
monies, the Agent shall use its best efforts to effect the orderly and
efficient transfer of the selling and servicing of the Notes to the
Company or other party designated by the Company to assume responsibility
for such selling and servicing, including, without limitation, directing
Holders to remit all repurchase or other notices to the address designated
by the Company. All costs of conversion and transfer of such records to
the Company or another agent shall be paid by the Company.
(c) Original Documents. Agent will scan and make an electronic copy
of all original documents, including subscription agreements, Note
Confirmations, correspondence from Investors and Holders and other
materials relating to the Renewable Note Program, and store the originals
of such documents in a reasonably secure manner and location as may be
agreed upon with the Company. Agent shall exercise due care in handling
and delivering the original documents and the other documents in the Note
files and records. Agent shall not grant or allow any person an interest
in original documents or rights thereunder, and all original documents in
the possession of Agent shall be deemed to be in the possession of the
Company.
(d) Examination. At any time during Agent's normal business hours,
the Company and its agents and representatives may physically inspect any
documents, files or other records relating to the Renewable Note Program
and discuss the same with Agent's officers and employees. Agent shall
supply copies of any such documents, files, or other records upon request
of the Company, as soon as is reasonably and commercially practicable,
without notice, at the Company's cost and expense.
(e) Retention. Unless otherwise requested by the Company, or unless
otherwise required by law, Agent shall retain, with respect to each Note,
for a period of 24 months from the date the Note is fully paid, all
records, files and documents related to
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each such Note. At the end of such 24-month period, all such items shall
be transferred to the Company, or to a third party as designated by the
Company, at the Company's sole cost and expense. Agent shall be permitted
to retain copies of any such documents for its own files for its own
account and at its own expense. Agent shall maintain the privacy of the
Investors and Holders in accordance with all applicable Governmental
Rules.
SECTION 3.03 MONTHLY REPORTS TO THE COMPANY. Agent shall provide the
Company with monthly reports and analysis regarding the status of the Note
Portfolio, the marketing efforts and the amount of Notes remaining under the
Registration Statement. Agent shall provide such reports on or before the tenth
(10th) day of each month with respect to activity during the immediately
preceding month. Agent shall also provide interim or custom reports at the
Company's request as is commercially reasonable, including, without limitation,
a weekly update via email identifying new Holders by name, address and principal
amount of Notes purchased.
ARTICLE IV
REPRESENTATIONS AND COVENANTS OF THE COMPANY
SECTION 4.01 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
The Company represents and warrants to and agrees with the Agent as follows,
which representations and warranties shall be deemed to be made continuously
from and as of the date hereof until this Offering is terminated and all
then-outstanding Notes have been paid in full or such earlier date that this
Agreement has been terminated.
(a) The Registration Statement, including the Prospectus subject to
completion, has been prepared by the Company in conformity with the
requirements of the Securities Act and the Rules and Regulations and has
been filed with the Commission under the Securities Act. Copies of the
Registration Statement and any amendments thereto, as filed with the
Commission, have been delivered by the Company to the Agent.
(b) As of the Effective Date, and at all times subsequent thereto
until the termination of the Offering, the Registration Statement and
Prospectus, including each document included therein by reference, and all
amendments thereof and supplements thereto, will comply with or have
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 (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 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 until the termination of
the Offering, the Prospectus (as amended or supplemented, if the Company
shall have filed with the
11
Commission any amendment thereof or supplement 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 in order to make
the statements therein, in light of the circumstances in which they were
made, not misleading. None of the representations and warranties in this
Section shall apply to any statements in, or omissions from the Agent
Disclosure Statements (as defined in Section 5.01(f) below) in the
Registration Statement or the Prospectus, or any amendment thereof or
supplement thereto.
(c) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware,
with full power and authority 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 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, to the best of the
Company' s knowledge, 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.
(d) 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 best of 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.
(e) The Company is not in violation of its certificate of
incorporation or bylaws or in default in the performance or observance of
any obligation, agreement, covenant or condition contained in any Material
Agreement to which it is a party or by which it or its properties are
bound.
(f) 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. The
performance of this Agreement and the consummation of the transactions
herein contemplated will not result in a breach or violation of any of the
terms and provisions of, or constitute a default under:
(i) any Material Agreement to which the Company is a party or
by which the Company or its properties may be bound;
12
(ii) the certificate of incorporation or bylaws of the
Company, or
(iii) 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.
(g) 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 Exchange Act, or under state or
other securities or blue sky laws, all of which requirements have been
satisfied.
(h) 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 if successful would be
likely to (A) 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 its properties, assets or rights,
or (B) prevent consummation of the transactions contemplated hereby.
(i) 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 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 Notes to be sold hereunder by the
Company have been duly authorized for issuance and sale pursuant to the
Indenture and this Agreement and, when issued and delivered against
payment therefor in accordance with the terms of the Indenture and 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 stockholders exists with respect to any
of the Notes to be sold hereunder by the Company or the issuance and sale
thereof. The Notes will comply as to form with all applicable provisions
of the laws of the State of New York.
(j) PricewaterhouseCoopers LLP, which has expressed its opinion with
respect to certain of the financial statements filed as part of the
Registration Statement, is an independent accounting firm within the
meaning of the Securities Act and the Rules and Regulations. The financial
statements of the Company set forth or incorporated by reference in the
Registration Statement and Prospectus comply in all material respects
13
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; and the supporting schedules
included or incorporated by reference in the Registration Statement
present fairly the information required to be stated therein.
(k) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, except as is otherwise
disclosed in the Registration Statement or Prospectus or as is otherwise
incorporated into the Registration Statement pursuant to the Securities
Act and the Rules and Regulations, there has not been:
(i) any material 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;
(ii) any material issuance of options, warrants, convertible
securities or other rights to purchase the capital stock of the
Company;
(iii) 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;
(iv) any transaction entered into by the Company that is
material to the Company, except transactions entered into by the
Company in the ordinary course of business that are consistent with
past practices (including without limitation any securitization
transaction);
(v) any material obligation, direct or contingent, incurred by
the Company, except obligations incurred in the ordinary course of
business; or
(vi) any loss or damage (whether or not insured) sustained to
the property of the Company, which has a material adverse effect on
the condition (financial or otherwise), earnings, operations or
business of the Company.
(l) Except as is otherwise expressly disclosed in the Registration
Statement or Prospectus or as is otherwise incorporated into the
Registration Statement pursuant to the Securities Act and the Rules and
Regulations:
(i) 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; and
14
(ii) the Material 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. 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.
(m) 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. The Company has paid all taxes shown on such tax
returns as due and payable, and 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; provided, however, that the Company has not paid,
and a deficiency may have been asserted for, taxes which are being
contested by the Company in good faith and by proper proceedings and for
which appropriate and reasonable reserves have been provided.
(n) 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 that, 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.
(o) 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, employees, or other agents) 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, to facilitate the sale or resale of the Notes. The Company has
not distributed and will not distribute prior to the completion of the
distribution of the Notes, any offering material in connection with the
offering and sale of the Notes other than any Preliminary Prospectus, the
Prospectus, the Registration Statement and other materials, if any,
permitted by the Securities Act and Rules and Regulations.
(p) 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 its business and, to the
best of the Company's knowledge, in line
15
with the insurance maintained by similar companies and businesses; and the
Company has no reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or 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.
(q) The Company has not at any time during the last five years 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 and transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles. 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.
(r) Except as set forth in the Registration Statement and Prospectus
or as is otherwise incorporated into the Registration Statement pursuant
to the Securities Act and the Rules and Regulations:
(i) 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;
(ii) 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;
(iii) to the best of the Company's knowledge, the Company will
not be required to make any future material capital expenditures to
comply with Environmental Laws: and
(iv) 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 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.
(s) The historical financial information, financial projections and
due diligence information of the Company presented to the Agent for its
review, were prepared in good faith and represent the Company's best
present estimate of the
16
Company's financial condition prior to, and immediately following,
completion of the sale of the Notes.
(t) During the term of this Agreement, and except as set forth
herein and in the Registration Statement, no person or entity other than
the Agent is entitled to any compensation or other payments from either
the Company or the Agent, as a finder, underwriter or agent in connection
with the Offering or any other proposed transaction between the Company
and the Agent. The Company agrees to promptly notify the Agent of any such
relationships, including consulting or prior agency agreements entitling
other parties to compensation for the Offering and agrees to provide the
Agent with a copy of such agreements.
(u) Any certificate signed by any officer of the Company and
delivered to Agent or to Agent's counsel shall be deemed a representation
and warranty by the Company to the Agent as to the matters covered thereby
that have a material relationship to the Offering, the Registration
Statement or the Renewable Note Program.
SECTION 4.02 COVENANTS OF THE COMPANY. The Company hereby covenants and
agrees with the Agent 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
Agent 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. The
Company will prepare and file with the Commission, promptly upon the
Agent's reasonable request, any amendments or supplements to the
Registration Statement or Prospectus that, in the Agent's opinion, may be
necessary or advisable in connection with the Offering of the Notes by the
Agent; and the Company will not file any amendment or supplement to the
Registration Statement or Prospectus to which the Agent 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 Agent, 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
Notes for offering or sale in any jurisdiction, or of the initiation or
receipt of any specific threat of any proceeding for any such purpose. 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 Notes
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 and the Rules and Regulations, so far as necessary to
permit the continuance of sales of or dealings in the Notes as
17
contemplated by the provisions hereof and the Prospectus. If, during the
longer of such period or the term of this Agreement, any event or change
occurs that could reasonably be considered material to the Offering or
that causes any of the representations and warranties of the Company
contained herein to be untrue in any material respect, or 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, then the
Company will promptly notify the Agent, and, if necessary, 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. Without limiting the foregoing, if this Agreement is
terminated for any reason, the Company shall promptly amend the Prospectus
and any related Offering materials to delete references to the Agent.
(d) The Company will use its best efforts to arrange for the
qualification of the Notes for offering and sale under the securities laws
of such jurisdictions as the Agent may reasonably designate (with the
prior approval of the Company) and to continue such qualifications in
effect for so long as may be required for purposes of the Offering. In
each jurisdiction in which the Notes 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 Agent copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus, and all amendments
and supplements to such documents, in each case as soon as available and
in such quantities as the Agent may from time to time reasonably request.
(f) For such period as this Agreement may be in effect, the Company
shall make available to the Agent, as soon as the same shall be sent to
its stockholders generally, copies of all annual or interim stockholder
reports or other written communications to stockholders of the Company and
will, for the same period, also furnish the Agent one copy of any report,
application or document (other than exhibits, which, however, will be
furnished on Agent's request) filed by the Company with the Commission,
Nasdaq, the NASD or any securities exchange.
(g) At all times during the term of this Agreement, the Company
shall provide all information reasonably requested by Agent that relates
to the Renewable Note Program in a timely manner and shall use its best
efforts to insure that such information is complete and accurate.
(h) The Company will, for a period of two (2) years from the
Effective Date or such longer period as this Agreement is in effect,
furnish directly to the Agent quarterly profit and loss statements,
reports of the Company's cash flow and statements of application of the
proceeds of the Offering in such reasonable detail as the Agent may
request.
18
(i) The Company will apply the net proceeds from the sale of the
Notes substantially in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(j) 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 stabilization or manipulation as defined in the
Exchange Act of the price of any security of the Company to facilitate the
sale or resale of the Notes.
(k) The Company will authorize Agent to conduct due diligence
investigations (limited to one per calendar year following the date
hereof) to verify the Company's ability to offer and perform its
obligations under the Notes during the term of this Agreement and agrees
to provide Agent with access to its relevant books and records for the
purpose of performing quarterly cash flow analysis.
ARTICLE V
REPRESENTATIONS AND COVENANTS OF AGENT; CONDITIONS
SECTION 5.01 REPRESENTATIONS AND WARRANTIES OF AGENT. The Agent hereby
represents and warrants to the Company as follows, which representations and
warranties shall be made as of the execution of this Agreement until this
Agreement has been terminated:
(a) The Agent (i) has been duly organized, is validly existing and
in good standing as a Minnesota corporation, (ii) has qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction where the character of its properties or the nature of its
activities (including without limitation activities of the Agent
hereunder) makes such qualification necessary, and (iii) has full power,
authority and legal right to own its property, to carry on its business as
presently conducted, and to enter into and perform its obligations under
this Agreement.
(b) The execution and delivery by the Agent of this Agreement are
within the power of the Agent and have been duly authorized by all
necessary corporate action on the part of the Agent. Neither the execution
and delivery of this Agreement nor the consummation of the transactions
herein contemplated, nor compliance with the provisions hereof, will
conflict with or result in a breach of, or constitute a default under, any
of the provisions of any Governmental Rule binding on the Agent, the
charter or by-laws of the Agent, or any of the provisions of any Material
Agreement to which the Agent is a party or by which it is bound; nor will
they result in the creation or imposition of any lien, charge or
encumbrance upon any of Agent's property pursuant to the terms of any
Material Agreement.
(c) The Agent has obtained all governmental consents, licenses,
approvals and authorizations, registrations and declarations which are
necessary for the execution, delivery, performance, validity and
enforceability of Agent's obligations under this Agreement.
19
(d) There are no actions, suits or proceedings pending or, to the
knowledge of the Agent, threatened against or affecting the Agent, before
or by any court, administrative agency, arbitrator or governmental body
with respect to any of the transactions contemplated by this Agreement, or
which will, if determined adversely to the Agent, materially and adversely
affect it or its business, assets, operations or condition, financial or
otherwise, or adversely affect the Agent's ability to perform its
obligations under this Agreement. The Agent is not in default with respect
to any order of any court, administrative agency, arbitrator or
governmental body so as to materially and adversely affect the
transactions contemplated by this Agreement.
(e) The Agent has obtained all necessary consents, approvals,
waivers and notifications of creditors, lessors and other nongovernmental
persons in connection with the execution and delivery of this Agreement,
and the consummation of all the transactions herein contemplated.
(f) When the Registration Statement shall become effective and when
any post-effective amendment thereto shall become effective, the Agent
Disclosure Statements in the Registration Statement 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 until the
termination of the Offering, the Agent Disclosure Statements in the
Prospectus (as amended or supplemented, if the Company shall have filed
with the Commission any amendment thereof or supplement thereto) will not
or did not contain any untrue statement of a material fact or omit to
state a material fact required to the stated therein or necessary in order
to make the statements therein, in light of the circumstances in which
they were made, not misleading. "Agent Disclosure Statements" shall mean
any statements or disclosures included within or the subject of the
Registration Statement or the Prospectus, which are either (i) included
within the disclosure under the heading "Plan of Distribution" in the
Prospectus, or (ii) based upon and conform to written information relating
to the Agent furnished in writing to the Company by the Agent specifically
for use in the preparation of the Registration Statement or the
Prospectus, or any such amendment or supplement thereto; provided,
however, the Agent makes no representation with respect to any Agent
Disclosure Statement made without the consent of the Agent, or with
respect to which the Agent has provided the Company a written objection.
(g) The Agent 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 conduct its business as
contemplated by and described in this Agreement, all of which are, to the
Agent's knowledge, valid and in full force and effect. The Agent is
conducting its business in substantial compliance with all applicable
Governmental Rules, laws, rules and regulations of the jurisdictions in
which it is conducting business, and the Agent is not in material
violation of any applicable Governmental Rule, law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government
or
20
governmental agency or body, domestic or foreign, having jurisdiction over
the Agent or over its properties.
(h) The Agent 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 Agent
and is a valid and binding agreement on the part of the Agent, enforceable
against the Agent in accordance with its terms. The performance of this
Agreement and the consummation of the transactions herein contemplated
will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under: (i) any Material Agreement
to which the Agent is a party or by which the Agent or its properties may
be bound; (ii) the articles of incorporation or bylaws of the Agent: or
(iii) 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 Agent or over its
properties.
(i) The Agent has not distributed and will not distribute prior to
the completion of the Offering, any offering material in connection with
the Offering, other than any Preliminary Prospectus, the Prospectus, the
Registration Statement and other materials, if any, permitted by and in
compliance with the Securities Act and Rules and Regulations.
(j) The Agent 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 its business and, to the
best of the Agent's knowledge, in line with the insurance maintained by
similar companies and businesses; and the Agent has no reason to believe
that it will not be able to renew its existing insurance coverage as and
when such coverage expires or 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 financial condition or business
operations of the Agent.
(k) The Agent has been assigned, transferred and assumed all of the
rights, interests, duties and obligations that ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
Financial, Inc. ("▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇") previously had or claimed with
respect to the Renewable Note Program and the Offering of the Notes. As a
result of such assignment, transfer and assumption, the Company does not
have any outstanding or existing agreement, contract or other arrangement
relating to the Renewable Note Program and the Offering of the Notes to
which ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ is a party or which otherwise involves ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, and the Company otherwise does not have any obligations,
duties, liabilities or payments owing or due to ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ in
connection with the Renewable Note Program and the Offering of the Notes.
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ does not currently own 50% or more of any class or all
classes of equity in the Agent, nor does ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ have options,
warrants, rights or any other arrangement which would result in ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇▇ owning 50% or more of any class or all classes of equity in the
Agent. The Agent is not controlled directly or indirectly by ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇ and Agent is not subject or party to any arrangement that
permits or allows or would permit or allow the Agent to be controlled
directly or indirectly by ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇. Agent is not subject or a
party to, or otherwise materially involved in, nor does Agent reasonably
expect to be subject or a
21
party to, or otherwise become materially involved in, any litigation,
proceeding, claim or other action involving or relating to ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, including any litigation, proceeding, claim or other action
from prior securities offerings that involved ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ as an
underwriter, broker-dealer or selling agent.
SECTION 5.02 COVENANTS OF AGENT. The Agent hereby covenants to the Company
as follows, which covenants shall be deemed in force unless and until this
Agreement is terminated as provided herein:
(a) The Agent shall punctually perform and observe all of its
obligations and agreements contained in this Agreement.
(b) Except as provided in this Agreement, the Agent shall not take
any action, or permit any action to be taken by others, which would excuse
any person from any of its covenants or obligations under any Note, or
under any other instrument related to a Note, or which would result in the
amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any Note or any such instrument
or any right in favor of the Company in a Note or such instrument, without
the written consent of the Company.
(c) The Agent shall not assign this Agreement or any of its rights,
powers, duties or obligations hereunder without the express prior written
consent of the Company, which shall not be unreasonably withheld.
(d) Within the shorter of the time during which a prospectus
relating to the Notes is required to be delivered under the Securities Act
and the Rules and Regulations or the term of this Agreement, the Agent
will comply as far as it is able with all requirements imposed upon it by
the Securities Act and the Rules and Regulations, so far as necessary to
permit the continuance of sales of or dealings in the Notes as
contemplated by the provisions hereof and the Prospectus. If, during the
shorter of such period or the term of this Agreement, to the Agent's best
knowledge, any event or change occurs that could reasonably be considered
material to the Offering or that causes any of the representations and
warranties of the Agent contained herein to be untrue in any material
respect, or 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, to the Agent's best
knowledge, it is necessary to amend the Registration Statement or
supplement the Prospectus to comply with the Securities Act and the Rules
and Regulations, then the Agent will promptly notify the Company, and, if
necessary, use reasonable efforts to assist the Company in amending the
Registration Statement or supplementing the Prospectus (at the expense of
the Company) so as to correct such statement or omission or effect such
compliance.
(e) The Agent will use reasonable efforts (i) to determine and
designate the states or jurisdictions, if any, where the qualification or
registration of the Notes is necessary or advisable in connection with the
Offering and (ii) to assist the Company in arranging for the qualification
or registration of the Notes for offering and sale under the
22
securities laws of such states or jurisdictions and to continue such
qualifications or registrations in effect for so long as may be required
for purposes of the distribution of the Notes. In each state or
jurisdiction in which the Notes shall have been qualified or registered as
herein provided, the Agent will assist with making and filing the Company
statements and reports in each year as are or may be reasonably required
by the laws of such states or jurisdiction.
(f) At all times during the term of this Agreement, the Agent shall
provide all information relating to the Offering, the Renewable Note
Program or the Note Portfolio reasonably requested by the Company in a
timely manner and shall use its best efforts to insure that such
information is complete and accurate in all material respects.
(g) The Agent shall take such additional action as is reasonably
requested by the Company in order to carry out the purposes of this
Agreement.
ARTICLE VI
CONDITIONS
SECTION 6.01 CONDITIONS OF THE AGENT'S OBLIGATIONS. The obligation of the
Agent to sell the Notes on a best efforts basis as provided herein shall be
subject to the accuracy of the representations and warranties of the Company, in
the case of the Notes, as of the date hereof, to the performance by the Company
of its obligations hereunder, and to the satisfaction of the following
additional conditions:
(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 writing by Agent
(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 Agent,
threatened by the Commission or any state securities commission or similar
regulatory body. 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 Agent
and Agent's counsel.
(b) The Agent 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.
(c) Subsequent to the Effective Date and prior to termination of the
Offering, 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 is material and adverse or
that makes it impracticable or inadvisable to proceed with the Offering of
the Notes as contemplated by the Prospectus and this Agreement.
23
(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 Notes shall have been reasonably satisfactory to Agent's counsel,
in all material respects, and Agent'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) The Agent shall have received the opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇,
L.L.P., counsel for the Company, dated as of the Initial Closing Date,
satisfactory in form and substance to the Agent and Agent's counsel, which
includes the opinions as set forth in Exhibit ___ attached hereto. ▇▇▇▇▇▇▇
& ▇▇▇▇▇, L.L.P., in rendering the foregoing opinion, may rely as to
questions of law not involving the laws of the United States or the State
of New York 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 its opinion is to state such reliance.
Copies of any opinion, representation or certificate so relied upon shall
be delivered to the Agent and to Agent's counsel.
(f) At the time of execution of this Agreement, the Agent shall have
received from PricewaterhouseCoopers LLP a letter dated the date of such
execution, in form and substance satisfactory to the Agent, 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, in their opinion, the audited financial statements
incorporated by reference 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.
(g) At the time of execution of this Agreement, the Agent shall have
received from PricewaterhouseCoopers LLP a letter dated the date of such
execution, in form and substance satisfactory to the Agent, that:
(i) On the basis of (1) a reading of the minutes of the
stockholders' and directors' meetings of the Company, (2) inquiries
of certain officials of the Company responsible for financial and
accounting matters, (3) a reading of the Company's monthly operating
statements for the months beginning on ___________, ____, and (4)
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:
(A) the unaudited financial statements of the Company
incorporated by reference 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;
24
(B) the unaudited amounts of revenues, income before
provision for income taxes, net income and ratio of earnings
to fixed charges of the Company incorporated by reference 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
(C) with respect to the period subsequent to _________,
______, there were, at a specified date, not more than five
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 stockholders' 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.
(ii) Certain information and data regarding the Company and
its operations set forth in the Prospectus 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
in agreement with such records or computations made therefrom,
excluding any questions of legal interpretation.
(h) The Agent shall have received from the Company a certificate,
dated as of the Initial 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 the date of
the certificate, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied under this Agreement.
(ii) No stop order or other order suspending the effectiveness
of the Registration Statement or any amendment thereof or the
qualification of the Notes 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.
(iii) The signers of said certificate have carefully examined
the Registration Statement and the Prospectus and any amendments
thereof or supplements thereto.
25
(iv) 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.
(v) There has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been so set forth.
(vi) 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 Agreements, not in the ordinary course of business
consistent with past practice, and except as disclosed in the
financial statements incorporated by reference in the Registration
Statement, there has not been any material change in the capital
stock, 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
(financial or otherwise), business, key personnel, property,
prospects, net worth or results of operations of the Company.
(vii) 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.
(i) The Agent shall have received a certificate of Secretary of the
Company, dated as of such Initial 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
certificate 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 certificate of incorporation of the
Company, and no resolutions have been adopted by the Board of
Directors or stockholders of the Company relating to (A) the
amendment of said certificate 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 Delaware and
has paid all of its corporate franchise taxes due as of the date of
such certificate.
26
(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
stockholders 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 Notes 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) 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.
(j) ▇▇▇▇▇▇▇, Street and Deinard Professional Association, shall
deliver to the Agent a Blue Sky Memorandum reasonably satisfactory to the
Agent confirming that all requisite actions for the offer and sale of the
Notes in all jurisdictions requested by the Agent have been taken.
(k) The Company shall have furnished to the Agent and to Agent's
Counsel such additional certificates, documents and evidence as the Agent
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 Agent and Agent'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 Agent may waive in writing the performance of any one or more of the
conditions specified in this Section or extend the time for their performance.
If any of the conditions specified in this Section 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 Agent, this Agreement
and all obligations of the Agent hereunder may be canceled at, or at any time
prior to, the Initial Closing Date by the Agent. Any such reasonable
cancellation shall be without liability of the Agent to the Company and shall
not relieve the Company of its obligations under Article VII hereof. Notice of
such cancellation shall be given to the Company as specified in Section 8.03.
27
ARTICLE VII
INDEMNIFICATION AND CONTRIBUTION
SECTION 7.01 COMPANY'S INDEMNIFICATION OF AGENT. The Company hereby agrees
to indemnify and hold harmless the Agent, and each person, if any, who controls
the Agent within the meaning of Section 15 of the Securities Act, against any
losses, claims, damages or liabilities that arise out of, or are based upon, (i)
any breach, in any material respect, 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), 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 Notes under, or exempt the Notes 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 the Agent and each such controlling person (subject to
the limitation set forth in Section 7.03 hereof) for any legal or other expenses
reasonably incurred by the Agent or controlling person in connection with
investigating or defending against any such loss, claim, damage, liability or
action. However, 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 the Agent Disclosure Statements or
any written information furnished to the Company by the Agent specifically for
use in any application or other statement executed by the Company or the Agent
filed in any jurisdiction in order to qualify the Notes under, or exempt the
Notes or the sale thereof from qualification under, the securities laws of such
jurisdiction (unless the Agent provided the Company with written notice of such
untrue statement or omission prior to the claim arising in which case the
indemnification shall nevertheless apply); and provided further that the Company
will not be liable to the Agent with respect to any Preliminary Prospectus to
the extent that any such loss, claim, damage or liability results from the fact
that the Agent sold Notes to a person who was not sent or given, at or prior to
written confirmation of such sale, a copy of the Prospectus in any case where
such delivery is required by the Securities Act and the Rules and Regulations
and the untrue statement or alleged untrue statement or omission or alleged
omission of a material fact contained in such Preliminary Prospectus was correct
in the Prospectus, provided that the Company has delivered the Prospectus to the
Agent in requisite quantity to permit such delivery or sending. This indemnity
agreement is in addition to any liability which the Company may otherwise have.
28
SECTION 7.02 AGENT'S INDEMNIFICATION OF THE COMPANY. The Agent 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 that arise out of, or are based upon, (i)
any breach, in any material respect, of any representation, warranty, agreement,
obligation or covenant of the Agent 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 required to be stated
therein or necessary to make the statements therein 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), 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 (iv) 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 Agent and filed
in any jurisdiction in order to qualify the Notes under, or exempt the Notes 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; provided, however, that in each case such indemnification
shall extend 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 the Agent Disclosure Statements or any written information
furnished to the Company by, or on behalf of, the Agent specifically for use in
any application or other statement executed by the Company or by the Agent and
filed in any jurisdiction (unless the Agent provided the Company with written
notice of such untrue statement or omission prior to the claim arising in which
case the indemnification shall nevertheless apply). The Agent will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, or controlling person (subject to the limitation in Section 7.03
hereof) 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 Agent may otherwise have.
SECTION 7.03 NOTICE OF INDEMNIFICATION CLAIM. Promptly after receipt by an
indemnified party under Section 7.01 or 7.02 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 Section 7.01 or 7.02, notify in
writing the indemnifying party of the commencement thereof. Failure to so notify
the indemnifying party will relieve it from any liability under Section 7.01 or
7.02 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
including under Section 7.04. 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, to assume the defense thereof, with
counsel who shall be reasonably satisfactory to such indemnified party. 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
29
indemnified party under Section 7.01 or 7.02 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 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 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 such separate counsel shall be borne by the
indemnifying party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel for each indemnified party separate
from the indemnifying party's respective counsel(s) for all indemnified parties
in connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances. 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.
SECTION 7.04 CONTRIBUTION. In order to provide for just and equitable
contribution in any action in which the Agent or the Company (or any person who
controls the Agent or the Company within the meaning of Section 15 of the
Securities Act) makes claim for indemnification pursuant to Section 7.01 or 7.02
hereof, but such indemnification is unavailable or insufficient to hold harmless
and indemnify a party under Section 7.01 or 7.02, as applicable, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or liabilities
referred to in Section 7.01 or 7.02, as applicable, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Agent on the other from the offering of the Notes 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 Agent 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 Agent on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Notes (before deducting expenses) received by the
Company bear to the total commissions received by the Agent. 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
Agent and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The Company
and the Agent agree that it would not be just and equitable if contributions
pursuant to this Section 7.04 were to be determined by pro rata allocation or by
any other method of allocation which does not take into account the equitable
considerations referred to in this Section 7.04. The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in this Section 7.04 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 7.04. Notwithstanding the provisions of this Section, the Agent
shall not be required to contribute any amount in excess of the amount by which
the total price at which the Notes distributed to the public were offered
30
to the public exceeds the amount of any damages that the Agent 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.
SECTION 7.05 NOTICE OF CONTRIBUTION CLAIM. 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 failure to so notify the
Contributing Party will not relieve the Contributing Party from any liability
which it may have to any party other than under Section 7.04. Any notice given
pursuant to Section 7.03 hereof shall be deemed to be like notice under this
Section 7.05. 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.
SECTION 7.06 REIMBURSEMENT. In addition to its other obligations under
Section 7.01 and 7.04 hereof, the Company agrees that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 7.01, it will reimburse the Agent on a monthly
basis for all 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 Agent 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 Agent shall
promptly return such payment to the Company.
SECTION 7.07 ARBITRATION. It is agreed that any controversy rising out of
the operation of the interim reimbursement arrangements set forth in Section
7.06 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 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 7.06 hereof and will not resolve the ultimate propriety or
enforceability of the obligation to indemnify for expenses which is created by
the provisions of Section 7.01 and 7.02 hereof or the obligation to contribute
to expenses which is created by the provisions of Section 7.04 hereof.
31
ARTICLE VIII
TERM AND TERMINATION
SECTION 8.01 EFFECTIVE DATE OF THIS AGREEMENT. This Agreement shall become
effective on the Effective Date immediately after the time at which the
Registration Statement shall become effective under the Securities Act.
SECTION 8.02 TERMINATION PRIOR TO INITIAL CLOSING DATE. This Agreement may
be terminated by the Agent, at its option, by giving notice to the Company, if
(i) the Company shall have failed, refused, or been unable, at or prior to the
Initial Closing Date, to perform any agreement on its part to be performed
hereunder; (ii) any other condition of the Agent's obligations hereunder is not
fulfilled or waived by the Agent; (iii) a banking moratorium shall have been
declared by federal, New York or Minnesota authorities; (iv) 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 Agent, makes it inadvisable to proceed with the delivery of the Notes; (v)
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 reasonable judgment of the Agent, materially and adversely affects
or will materially and adversely affect the business or operations of the
Company; or (vi) 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 Section
7.01, 7.02 and 7.04 hereof; provided, however, that the Company shall remain
obligated to pay costs and expenses to the extent provided in Section 2.03
hereof.
SECTION 8.03 NOTICE OF TERMINATION. If the Agent elects to terminate this
Agreement as provided in Section 8.02, it shall notify the Company and the
Company's counsel promptly by telephone or transmitted by any standard form of
telecommunication, confirmed by letter sent to the address specified in Section
9.02 hereof.
SECTION 8.04 TERMINATION AFTER INITIAL CLOSING DATE. The Company or Agent
may terminate this Agreement at any time subsequent to the Initial Closing Date
as provided below, and in such case, Agent will be paid fees and commissions
accrued up to the date of such termination plus its expenses accrued as of such
date within thirty (30) days of such termination:
(a) The Company will have the ability to terminate this Agreement in
the following manner:
(i) with respect to the Company's termination of Agent's
activities to market and sell the Notes, the Company must provide at
least seven (7) days prior written notice to Agent, and
(ii) with respect to the Company's termination of Agent's
other activities relating to the Notes, the Company will provide at
least thirty (30) days prior written notice to Agent.
32
(b) Agent will have the ability to terminate this Agreement in the
following manner:
(i) with respect to the termination of Agent's activities to
market and sell the Notes, Agent must provide at least thirty (30)
days prior written notice to the Company, and
(ii) with respect to the termination of Agent's other
activities relating to the Notes, Agent must provide at least sixty
(60) days prior written notice to the Company; provided, however,
that in either case of clause (i) or (ii) of this sentence, the
Company may decrease the time periods for terminating Agent's
activities by providing Agent with notice for termination consistent
with the preceding paragraph (a).
SECTION 8.05 TERMINATION WITHOUT TERMINATION OF OFFERING. Anything to the
contrary notwithstanding, the termination of this Agreement shall not prevent
the Company from commencing or cause the Company to terminate the Offering. In
the event this Agreement is terminated without a termination of the Offering,
then the Company, or its agents, shall be entitled to use all materials
developed by Agent related to the Notes as provided elsewhere herein.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 SURVIVAL. The respective indemnity and contribution
agreements of the Company and the Agent set forth herein and the respective
representations, warranties, covenants and agreements of the Company and the
Agent set forth herein, shall remain operative and in full force and effect,
regardless of any investigation made by, or on behalf of, the Agent, the
Company, any of its officers and directors, or any controlling person referred
to in Article VII and shall survive the sale of the Notes. 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.
SECTION 9.02 NOTICES. All notices or communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be mailed,
delivered or transmitted by any standard form of telecommunication, as follows:
If to the Agent, to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Ltd.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: K. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
33
with a copy to: ▇▇▇▇▇▇▇, Street and Deinard, Professional
Association
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company, to: Onyx Acceptance Corporation
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Krahelski
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 9.03 SUCCESSORS AND ASSIGNS; TRANSFER. This Agreement shall inure
to the benefit of and be binding upon the Agent and the Company and their
respective successors and assigns, and the officers, directors and controlling
persons referred to in Article VII. 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 Article VII, 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 Notes shall be
construed a successor or assign merely by reason of such purchase. Neither party
may assign its rights and obligations under this Agreement without the written
consent of the other party.
SECTION 9.04 CUMULATIVE REMEDIES. Unless otherwise expressly provided
herein, the remedies of the parties provided for herein shall be cumulative and
concurrent, and may be pursued singularly, successively or together, at the sole
discretion of the party for whose benefit such remedy is provided, and may be
exercised as often as occasion therefor shall arise.
SECTION 9.05 ATTORNEYS' FEES. In the event of any action to enforce or
interpret this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees and costs, whether or not such action proceeds to
judgment.
SECTION 9.06 ENTIRE AGREEMENT. Except as otherwise expressly provided
herein, this Agreement constitutes the entire agreement of the parties hereto
with respect to the matters
34
addressed herein and supersedes all prior or contemporaneous contracts,
promises, representations, warranties and statements, whether written or oral,
with respect to such matters.
SECTION 9.07 CHOICE OF LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to conflict of law principles.
SECTION 9.08 CONFIDENTIALITY. The Company agrees to keep confidential all
non-public information concerning the marketing, selling and administration of
the Notes, except as disclosure may be required by law. The Agent agrees to keep
confidential all non-public information supplied to it by the Company, including
without limitation, all non-public information obtained during any due diligence
investigation of the Company.
SECTION 9.09 RIGHTS TO INVESTOR LISTS. The Offering will produce a list of
prospective, current and former Investors and Holders. The Company and Agent
each shall be able to use these lists for their own business purposes as long as
doing so does not interfere with the marketing, sale or administration of the
Notes.
SECTION 9.10 WAIVER; SUBSEQUENT MODIFICATION. Except as expressly provided
herein, no delay or omission by any party in insisting upon the strict
observance or performance of any provision of this Agreement, or in exercising
any right or remedy, shall be construed as a waiver or relinquishment of such
provision, nor shall it impair such right or remedy, and no waiver by any party
or any failure or refusal of the other party to comply with its obligations
under this Agreement shall be deemed a waiver of any other or subsequent failure
or refusal to so comply by such other party. No waiver or modification of the
terms hereof shall be valid unless in writing and signed by the party to be
charged, and then only to the extent therein set forth.
SECTION 9.11 SEVERABILITY. If any term or provision of this Agreement or
application thereof to any person or circumstance shall, to any extent, be found
by a court of competent jurisdiction to be invalid or unenforceable, the
remainder of this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term or provision of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
SECTION 9.12 JOINT PREPARATION. The preparation of this Agreement has been
a joint effort of the parties and the resulting document shall not, solely as a
matter of judicial construction, be construed more severely against one of the
parties than the other.
SECTION 9.13 CAPTIONS. The title of this Agreement and the headings of the
various articles, section and subsections have been inserted only for the
purpose of convenience, are not part of this Agreement and shall not be deemed
in any manner to modify, explain, expand or restrict any of the provisions of
this Agreement.
SECTION 9.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, this Distribution and Management Agreement is hereby
entered into by the undersigned parties as of the date first set forth above.
THE COMPANY: ONYX ACCEPTANCE CORPORATION
By:
-------------------------------------
[Name]
[Title]
THE AGENT: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LTD.
By:
-------------------------------------
K. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
President
DISTRIBUTION AND MANAGEMENT AGREEMENT SIGNATURE PAGE