Draft 7/9/97
2,000,000 SHARES
THE SPORTSMAN'S GUIDE, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
___________________, 1997
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ AND COMPANY, INCORPORATED
CRUTTENDEN ▇▇▇▇ INCORPORATED
As Representatives of the Several Underwriters
c/o ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Company, Incorporated
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
The Sportsman's Guide, Inc., a Minnesota corporation (the "Company")
and the shareholders of the Company named in Schedule II hereto (the "Selling
Shareholders") propose to sell to the several underwriters named in Schedule
I hereto (the "Underwriters"), for whom you are acting as representatives
(the "Representatives"), an aggregate of Two Million (2,000,000) shares (the
"Firm Shares") of Common Stock, $.01 par value, of the Company (the "Common
Stock"), of which 1,600,000 shares will be sold by the Company and 400,000
shares will be sold by the Selling Shareholders. The respective amounts of
the Firm Shares to be so purchased by the several Underwriters are set forth
opposite their names in Schedule I hereto, and the respective amounts to be
sold by the Selling Shareholders are set forth opposite their names in
Schedule II hereto. The Company and the Selling Shareholders are sometimes
referred to herein collectively as the "Sellers." In addition, to cover
overallotments in connection with the sale of the Firm Shares, the Selling
Shareholders propose, subject to the terms and conditions stated herein, to
grant to the Underwriters an option to purchase an additional number of
shares not exceeding 300,000 in the aggregate. The shares subject to such
option are herein called the "Option Shares." The respective amounts of
Option Shares to be sold by the Selling Shareholders are set forth opposite
their names in Schedule II hereto. The Firm Shares and any Option Shares
purchased pursuant to this Agreement are herein called the "Shares." As used
in this Agreement, the term "Underwriter" includes any party substituted for
an Underwriter under Section 9 hereof.
As Representatives, you have advised the Company and the Selling
Shareholders (i) that you are authorized to enter into this Agreement on
behalf of the Underwriters and (ii) that the Underwriters are willing, acting
severally and not jointly, to purchase the numbers of Firm Shares,
aggregating in total 2,000,000 shares, set forth opposite their respective
names in Schedule I, plus their pro rata portion of the Option Shares
purchased if you elect to exercise the overallotment option in whole or in
part for the accounts of the Underwriters.
The Company hereby confirms its agreement to issue to the
Representatives a warrant for the purchase of 100,000 shares of the Company's
Common Stock as described in Section 5 hereof (the "Representatives'
Warrant"), contingent upon the purchase by the Underwriters of the Firm
Shares. The shares issuable upon exercise of the Representatives' Warrant
are referred to in this Agreement as the "Warrant Shares."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-2 (File No. 333--_____) and
a related preliminary prospectus for the registration of the Shares under the
Securities Act of 1933, as amended (the "Act"). If the Company has elected
to rely upon Rule 462(b) under the Act to increase the size of the offering
registered under the Act, the Company will prepare and file with the
Commission a registration statement with respect to such increase pursuant to
Rule 462(b). The registration statement, as amended, including a registration
statement (if any) filed pursuant to Rule 462(b) under the Act and the
information (if any) deemed to be part thereof pursuant to Rules 430A and
434(d) under the Act, is herein called the "Registration Statement." The
prospectus included in the Registration Statement at the time it is or was
declared effective by the Commission is hereinafter called the "Prospectus,"
except that if any prospectus (including any term sheet meeting the
requirements of Rule 434 under the Act provided by the Company for use with a
prospectus subject to completion within the meaning of Rule 434 in order to
meet the requirements of Section 10(a) of the Act) filed by the Company with
the Commission pursuant to Rule 424(b) (and Rule 434, if applicable) under
the Act or any other such prospectus provided to the Underwriters by the
Company for use in connection with the offering of the Shares (whether or not
required to be filed by the Company with the Commission pursuant to Rule
424(b) under the Act) differs from the prospectus on file at the time the
Registration Statement is or was declared effective by the Commission, the
term "Prospectus" shall refer to such differing prospectus (including any
term sheet within the meaning of Rule 434 under the Act) from and after the
time such prospectus is filed with the Commission or transmitted to the
Commission for filing pursuant to Rule 424(b) (and Rule 434, if applicable)
or from and after the time it is first provided to the Underwriters by the
Company for such use. The term "Preliminary Prospectus" as used herein means
any preliminary prospectus included in the Registration Statement prior to
the time it becomes or became effective under the Act and any prospectus
subject to completion as described in Rule 430A or Rule 434 under the Act.
Copies of the Registration
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Statement, including all exhibits and schedules thereto, any amendments
thereto and all Preliminary Prospectuses have been delivered to you.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SHAREHOLDERS.
(a) The Company represents and warrants to, and agrees with, each
of the Underwriters that:
(i) The Registration Statement has been declared effective under
the Act, and no post-effective amendment to the Registration Statement
has been filed as of the date of this Agreement. No stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or threatened by the
Commission.
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission promulgated thereunder, and did not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading; provided,
however, that the Company makes no representation or warranty as to
information contained in or omitted in reliance upon, and in conformity
with, written information furnished to the Company by or on behalf of any
Underwriter through the Representatives, or by or on behalf of any Selling
Shareholder, expressly for use in the preparation thereof.
(iii) As of the time the Registration Statement was declared effective
by the Commission, upon the filing or first delivery to the Underwriters
of the Prospectus and at the First Closing Date and Second Closing Date
(each as hereinafter defined), (A) the Registration Statement and
Prospectus conformed or will conform in all material respects to the
requirements of the Act and the rules and regulations of the Commission
promulgated thereunder, (B) the Registration Statement did not or will not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and (C) the Prospectus did not or will not include
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they are or were made, not
misleading; provided, however, that the Company makes no representation or
warranty as to information contained in or omitted from the
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Registration Statement or the Prospectus, or any such amendment or
supplement, in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of any Underwriter through the
Representatives, or by or on behalf of any Selling Shareholder, expressly
for use in the preparation thereof.
(iv) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Minnesota.
The Company owns no capital stock or other equity or ownership or
proprietary interest in any corporation, partnership, association, trust
or other entity. The Company has the power and authority to own or lease
its properties and conduct its business as described in the Prospectus,
and is duly qualified to transact business in all jurisdictions in which
the conduct of its business or its ownership or leasing of property
requires such qualification and the failure so to qualify would have a
material adverse effect on the condition (financial or otherwise),
business, property, prospects, net worth or results of operations of the
Company.
(v) The outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable.
The Shares to be issued and sold by the Company to the Underwriters
pursuant to this Agreement have been duly authorized and, when issued and
paid for as contemplated herein, will be validly issued, fully paid and
nonassessable. The Warrant Shares have been duly authorized and reserved
for issuance and, when issued and paid for pursuant to the terms of the
Representatives' Warrant, will be validly issued, fully paid and
nonassessable. Except as described in the Prospectus, there are no
preemptive rights or other rights to subscribe for or to purchase, or any
restriction upon the voting or transfer of, any shares of capital stock of
the Company pursuant to the Company's Articles of Incorporation, Bylaws or
any agreement or other instrument to which the Company is a party or by
which the Company is bound. Neither the filing of the Registration
Statement nor the offering or the sale of the Shares as contemplated by
this Agreement gives rise to any rights for, or relating to, the
registration of any shares of capital stock or other securities of the
Company, except such rights which have been validly waived or satisfied.
Except as described in the Prospectus, there are no outstanding options,
warrants, agreements, contracts or other rights to purchase or acquire
from the Company any shares of its capital stock. The Company has an
authorized and outstanding capitalization as set forth under the heading
"Capitalization" in the Prospectus. The outstanding capital stock of the
Company conforms, and the Shares to be issued by the Company to the
Underwriters will conform, to the description thereof contained in the
Prospectus.
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(vi) The financial statements (together with the notes thereto)
included in the Registration Statement and Prospectus comply in all
material respects with the requirements of the Act and present fairly the
financial position, results of operations and changes in stockholders'
equity and cash flows of the Company on the basis stated in the
Registration Statement, at the indicated dates and for the indicated
periods. Such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied throughout
the periods involved, and all adjustments necessary for a fair
presentation of results for such periods have been made, except as
otherwise stated therein. No other financial statements or schedules are
required to be included in the Registration Statement. The summary and
selected consolidated financial data included in the Registration
Statement present fairly the information shown therein on the basis stated
in the Registration Statement and have been compiled on a basis consistent
with the financial statements presented therein. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP,
which has expressed its opinion with respect to the financial statements
filed with the Commission as part of the Registration Statement, are
independent public accountants as required by the Act and the rules and
regulations of the Commission promulgated thereunder.
(vii) There is no action or proceeding pending or, to the knowledge
of the Company, threatened or contemplated against the Company before any
court or administrative or regulatory agency, authority or body, or any
arbitrator, which might result, individually or in the aggregate, in a
material adverse change in the condition (financial or otherwise),
business, property, prospects, net worth or results of operations of the
Company, except as set forth in the Registration Statement and the
Prospectus.
(viii) The Company has good and marketable title to all properties
and assets reflected as owned in the financial statements hereinabove
described or in the Prospectus, in each case free and clear of all liens,
encumbrances, claims, security interests or defects, except such as are
described in the Prospectus or do not substantially affect the value of
such properties and assets and do not materially interfere with the use
made and proposed to be made of such properties and assets by the Company;
and any real property and buildings held under lease by the Company are
held under valid, subsisting and enforceable leases with only such
exceptions with respect to any particular lease as are not material and
do not interfere in any material respect with the use made and proposed to
be made of such property and buildings by the Company.
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(ix) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, (A) there has not been any
material adverse change in or affecting, or any event, occurrence or
development in the business of the Company that, taken together with
other events, occurrences and developments with respect to such
business, would have or would reasonably be expected to have a material
adverse effect on, the general affairs, condition (financial or
otherwise), business, key personnel, property, prospects, net worth
or results of operations of the Company (whether or not occurring in
the ordinary course of business), (B) the Company has not entered
into any transaction not in the ordinary course of business that is
material to the Company, other than transactions described in the
Registration Statement and the Prospectus, (C) the Company has not
incurred any material liabilities or obligations, direct or
contingent, (D) the Company has not sustained any material loss
or interference with its business or properties from fire, flood,
windstorm, accident or other calamity, whether or not covered by
insurance, (E) there has not been any change in the capital stock
of the Company (other than upon the exercise of options and warrants
described in the Registration Statement and the Prospectus), or any
material increase in the short-term or long-term debt (including
capitalized lease obligations) of the Company other than increases in
debt incurred in the ordinary course of business, and (F) there has
not been any issuance of warrants, options, convertible securities
or other rights to purchase or acquire any capital stock of the Company.
(x) The Company is not in violation of or in default under its
Articles of Incorporation or Bylaws, or any statute, rule, regulation,
order, judgment, decree or authorization of any governmental entity or
administrative agency, court or other body having jurisdiction over the
Company or any of its properties, or any indenture, mortgage, deed of
trust, loan agreement, lease, franchise, license or other agreement or
instrument to which the Company is a party or by which it is bound or to
which any property or assets of the Company are subject, which violation
or default would have a material adverse effect on the business, condition
(financial or otherwise), results of operations, shareholders' equity or
prospects of the Company or the ability of the Company to consummate the
transactions contemplated hereby.
(xi) The Company has the power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company,
and constitutes a valid, legal and binding obligation of the Company,
enforceable in accordance with its terms, except as rights to indemnity
hereunder may be limited by federal or state securities laws and except
as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of
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creditors generally and subject to general principles of equity. The
execution, delivery and performance of this Agreement and the
consummation of the transactions herein contemplated (A) will not
result in a breach or violation of any provision of the Articles of
Incorporation or Bylaws of the Company or any statute, rule,
regulation, order, judgment, decree or authorization of any
governmental or administrative agency, court or other body having
jurisdiction over the Company or any of its properties, and (B) will not
conflict with, result in a breach or violation of, or constitute, either
by itself or upon notice or passage of time or both, a default under any
indenture, mortgage, deed of trust, loan agreement, lease, franchise,
license or other agreement or instrument to which the Company is a party
or by which the Company is bound or to which any property or assets of the
Company are subject. No approval, consent, order, authorization,
designation, declaration or filing by or with any governmental or
administrative agency, court or other body is required for the execution
and delivery by the Company of this Agreement and the consummation of the
transactions herein contemplated, except as may be required under the Act
or any state securities or blue sky laws.
(xii) The Company holds and is operating in compliance with all
licenses, authorizations, approvals, certificates and permits from
governmental and regulatory authorities, foreign and domestic, which are
necessary to the conduct of its business as described in the Prospectus,
except where the failure to comply would not have a material adverse
effect on the business, condition (financial or otherwise), results of
operations, shareholders' equity or prospects of the Company; and all such
licenses, authorizations, approvals, certificates and permits are in full
force and effect.
(xiii) No labor disturbance or dispute by the employees or consultants
or contractors to the Company exists or, to the Company's knowledge, is
threatened that could reasonably be expected to have a material adverse
effect on the conduct of the Company's business as described in the
Prospectus or on the condition (financial or otherwise), property,
prospects, net worth or results of operations of the Company.
(xiv) The Company has the power and authority to enter into the
Representatives' Warrant and to issue and sell the Warrant Shares as
contemplated thereby. The Representatives' Warrant and the Warrant Shares
have been duly authorized. The Representatives' Warrant, when issued and
delivered to the Representatives, will constitute a valid and binding
obligation of the Company, enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally
and subject to general principles of equity.
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(xv) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (A) transactions are
executed in accordance with management's general or specific
authorization, (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets,
(C) access to assets is permitted only in accordance with management's
general or specific authorization, and (D) the recorded accountability
for assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(xvi) The Company has not taken and will not take, directly or
indirectly, any action designed to, or which has constituted, or which
might reasonably be expected to cause or result in, stabilization or
manipulation of the price of the Common Stock.
(xvii) The Company's application for listing on the Nasdaq National
Market ("Nasdaq") has been approved.
(xviii) The Company has obtained and delivered to the Representatives
written agreements, in form and substance satisfactory to the
Representatives, of each of its directors and executive officers and the
shareholders named in Schedule III hereto, that no offer, sale, contract
to sell, other disposition of any Common Stock of the Company will be
made for a period of 180 days after the effective date of the Registration
Statement, directly or indirectly, by such holder otherwise than with the
prior written consent of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Company, Incorporated
("▇▇▇▇▇▇▇").
(xix) The Company has not distributed and will not distribute any
prospectus or other offering material in connection with the offering
and sale of the Shares other than any Preliminary Prospectus or the
Prospectus or other materials permitted by the Act to be distributed
by the Company.
(xx) The Company has filed all federal, state, local and foreign
tax returns or reports required to be filed by it (except in any case in
which the failure so to file would not have a material adverse effect on
the Company) and has paid in full all taxes indicated by said returns or
reports and all assessments received by it to the extent that such taxes
have become due and payable, except where the Company is contesting in
good faith such taxes and assessments.
(xxi) The Company maintains insurance of the type and in the amounts
generally deemed adequate for its business and consistent
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with insurance coverage maintained by similar companies and businesses,
including without limitation, product liability insurance and insurance
covering all real and personal property owned or leased by it, all of
which is in full force and effect.
(xxii) The Company owns or is licensed to use all inventions,
trademarks, tradenames, applications for registration of trademarks,
copyrights, know-how, trade secrets, licenses and rights in any thereof
that are material to the business of the Company as now conducted and as
proposed to be conducted, in each case as described in the Prospectus
(the "Proprietary Rights"). The Company does not have knowledge of, and
the Company has not given or received any notice of any pending conflicts
with or infringement of, the rights of others with respect to any
Proprietary Rights or with respect to any license of Proprietary Rights.
No action, suit, arbitration or legal, administrative or other proceeding,
or domestic or foreign governmental investigation involving any
Proprietary Rights is pending or, to the best of the Company's knowledge,
is threatened. The Company is not subject to any judgment, order, writ,
injunction or decree of any court or any federal, state, local, foreign or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any arbitrator, or has entered
into or is a party to any contract which restricts or impairs the use of
any such Proprietary Rights. To the best of the Company's knowledge, no
Proprietary Rights used by the Company conflict with or infringe upon any
proprietary rights of or available to any third party. Except as otherwise
disclosed in writing to the Representatives, the Company has not received
written notice of any pending conflict with or infringement upon such
third-party proprietary rights. The Company has not entered into any
consent, indemnification, forbearance to sue or settlement agreement with
respect to Proprietary Rights other than in the ordinary course of
business. No claims have been asserted by any person with respect to the
validity of or the Company's ownership or right to use the Proprietary
Rights and, to the best knowledge of the Company, there is no reasonable
basis for any such claim to be successful. The Proprietary Rights are
valid and enforceable and no registration relating thereto has lapsed,
expired or been abandoned or cancelled or is the subject of cancellation
or other adversarial proceedings, and all applications therefor are
pending and are in good standing. The Company has complied with its
respective contractual obligations relating to the protection of any
Proprietary Rights used pursuant to licenses. To the knowledge of the
Company, no person is infringing on or violating the Proprietary Rights
owned or used by the Company.
(xxiii) To the Company's knowledge, none of the Company's officers,
directors or 5% shareholders has any affiliations with the
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National Association of Securities Dealers, Inc., except as set forth
in the Registration Statement or as otherwise disclosed in writing to
the Representatives.
(xxiv) The Company intends to apply the proceeds from the sale of the
Shares by it to the purposes and substantially in the manner set forth in
the Prospectus.
(xxv) No person is entitled, directly or indirectly, to compensation
from the Company or the Underwriters for services as a finder in
connection with the transactions contemplated by this Agreement.
(xxvi) The conditions for use of a registration statement on Form
S-2 for the distribution of the Shares have been satisfied with respect to
the Company.
(xxvii) The Company has not sold any securities in violation of
Section 5 of the Act.
(xxviii) The Company has complied and will comply with all provisions
of Florida Statutes Section 517.075 (Chapter 92-198, Laws of Florida).
Neither the Company, nor any affiliate thereof, does business with the
government of Cuba or with any person or affiliate located in Cuba.
(b) Any certificate signed by any officer of the Company and delivered
to the Representatives or counsel to the Underwriters shall be deemed to be a
representation and warranty of the Company to each Underwriter as to
the matters covered thereby.
(c) Each of the Selling Shareholders severally, but not jointly,
represents and warrants to and agrees with each of the Underwriters as
follows:
(i) The Selling Shareholder has duly executed a Custody Agreement
("Custody Agreement") between the Selling Shareholder and Corporate Stock
Transfer, Inc. as Custodian (the "Custodian"), and a Power of Attorney
("Power of Attorney") appointing ▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and
each of them, as attorneys-in-fact (the "Attorneys-in-Fact") with
authority to execute and deliver this Agreement on behalf of the
Selling Shareholder and to take certain other actions with respect
thereto.
(ii) The Selling Shareholder now has, and at the First or Second
Closing Date (as the case may be) will have, good and valid title to the
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Shares to be sold by such Selling Shareholder, free and clear of any
liens, encumbrances, equities and claims, and full right, power and
authority to effect the sale and delivery of such Shares. The
certificates representing such Shares, which have been deposited by the
Selling Shareholder with the Custodian, were duly and properly endorsed in
blank for transfer, or were accompanied by all documents, duly and
properly executed, necessary to validate the transfer of title thereto to
the Underwriters, free of any legend, restriction on transferability,
proxy, lien, encumbrance, equity or claim whatsoever; and, upon the
delivery of, and against payment for, such Shares pursuant to this
Agreement, the Underwriters will acquire good and valid title thereto,
free and clear of any legends, liens, restrictions on transferability,
proxies, encumbrances, equities or claims.
(iii) The Selling Shareholder is disposing of the Shares held by
him or her for his or her account and is not selling such Shares,
directly or indirectly, for the benefit of the Company or the
Underwriters, and no part of the proceeds of such sale received by
such Selling Shareholder will inure, either directly or indirectly,
to the benefit of the Company.
(iv) The Selling Shareholder has full right, power and authority to
execute and deliver this Agreement, the Power of Attorney, and the Custody
Agreement and to perform the obligations of the Selling Shareholder under
this Agreement, the Power of Attorney and the Custody Agreement. This
Agreement, the Power of Attorney and the Custody Agreement are each a
valid and binding obligation of such Selling Shareholder, except as the
obligations of the Selling Shareholder under the indemnification and
contribution provisions hereof may be limited under federal securities
laws. The execution and delivery of this Agreement and the consummation by
such Selling Shareholder of the transactions herein contemplated and the
fulfillment by such Selling Shareholder of the terms hereof will not
require any consent, approval, authorization, or other order of any court,
regulatory body, administrative agency or other governmental body (except
as may be required under the Act, state securities laws or Blue Sky laws)
and will not result in a breach of any of the terms and provisions of, or
constitute a default under, governing documents of such Selling
Shareholder, if not an individual, any indenture, mortgage, deed of trust
or other agreement or instrument to which such Selling Shareholder is a
party, or, to the knowledge of such Selling Shareholder, any order, rule
or regulation applicable to such Selling Shareholder of any court or of
any regulatory body or administrative agency or other governmental body
having jurisdiction.
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(v) The Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to, or which has constituted,
or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Common Stock of the
Company. Other than as permitted by the Act, the Selling Shareholder will
not distribute any prospectus or other offering material in connection
with the offering of the Shares.
(vi) The information pertaining to such Selling Shareholder under
the caption "Principal and Selling Shareholders" in the Prospectus is
complete and accurate in all material respects.
(vii) All information furnished to the Company in writing by the
Selling Shareholder for use in the preparation of the Registration
Statement and Prospectus is true in all material respects and does not
omit any material fact necessary to make such information not misleading.
When the Registration Statement becomes effective, and at all times
subsequent thereto up to and including any Closing Date, the Registration
Statement and the Prospectus, as may be amended or supplemented, will not
contain any untrue statement of a material fact with respect to the
Selling Shareholder or omit, with respect to such Selling Shareholder,
to state a material fact required to be stated therein or necessary to
make the statements therein with respect to the Selling Shareholder not
misleading.
2. PURCHASE AND SALE; DELIVERY AND PAYMENT.
(a) On the basis of the representations, warranties, and agreements
herein contained, but subject to the terms and conditions herein set forth,
the Sellers agree to sell to each of the Underwriters, and the Underwriters
agree, severally and not jointly, to purchase, at a purchase price equal to
ninety-two percent (92%) of the per share price to public of $______, the
respective amount of Firm Shares set forth opposite such Underwriter's name
in Schedule I hereto, subject to adjustments in accordance with Section 9
hereof. The number of Firm Shares to be purchased by each Underwriter from
each Seller shall be as nearly as practicable in the same proportion to the
total number of Firm Shares being sold by each Seller as the number of Firm
Shares being purchased by each Underwriter bears to the total number of Firm
Shares to be sold hereunder. The Underwriters will collectively purchase all
of the Firm Shares if any are purchased.
(b) Certificates in negotiable form for the total number of Shares to
be sold hereunder by the Selling Shareholders have been placed in custody
with the Custodian pursuant to the Custody Agreement executed by each Selling
Shareholder for delivery of all Shares to be sold hereunder by the Selling
Shareholders. Each of the Selling Shareholders specifically agrees that
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the Shares represented by the certificates held in custody for the Selling
Shareholders under the Custody Agreement are subject to the interests of the
Underwriters hereunder, that the arrangements made by the Selling
Shareholders for such custody are to that extent irrevocable, and that the
obligations of the Selling Shareholders hereunder shall not be terminable by
any act or deed of the Selling Shareholders (or by any other person, firm or
corporation including the Company, the Custodian or the Underwriters) or by
operation of law (including the death of an individual Selling Shareholder
or the dissolution or termination of a Selling Shareholder which is not an
individual person) or by the occurrence of any other event or events, except
as set forth in the Custody Agreement. If any such event should occur prior
to the delivery to the Underwriters of the Shares hereunder, certificates for
the Shares shall be delivered by the Custodian in accordance with the terms
and conditions of this Agreement as if such event has not occurred. The
Custodian is authorized to receive and acknowledge receipt of the proceeds of
sale of the Shares held by it against delivery of such Shares.
(c) On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth, the
Selling Shareholders hereby grant an option to the Underwriters to purchase
an aggregate of up to 300,000 Option Shares, at the same purchase price as
the Firm Shares, for use solely in covering any overallotments made by the
Underwriters in the sale and distribution of the Firm Shares. The option
granted hereunder may be exercised at any time (but not more than once)
within 30 days after the date on which the Registration Statement was
declared effective under the Act, as described in Section 1(a)(i) hereof (the
"Effective Date") upon notice (confirmed in writing) by the Representatives
to the Company setting forth the aggregate number of Option Shares as to
which the Underwriters are exercising the option and the date on which
certificates for such Option Shares are to be delivered. Option Shares shall
be sold by the Selling Shareholders in the amounts set forth opposite the
name of such Selling Shareholders in Schedule II hereto, and shall be
purchased severally for the account of each Underwriter in proportion to the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I hereto.
(d) The Company and the Selling Shareholders will deliver or cause to
be delivered their respective portions of the Firm Shares to the
Representatives at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless some other place is agreed
upon, at 10:00 a.m., Minneapolis time, against payment of the purchase price
as set forth in Section 2(a) above, on the third full business day after
commencement of the offering or, if the offering commences after 4:30 p.m.,
on the fourth full business day after commencement of the offering, or such
other time as may be agreed upon by the Representatives, the Company and the
Selling Shareholders, such time and place being herein referred to as the
"First Closing Date."
-13-
(e) The Selling Shareholders will deliver or cause to be delivered
their respective portions of the Option Shares being purchased by the
Underwriters to the Representatives at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP as
set forth in Section 2(c) above, unless some other place is agreed upon, at
10:00 a.m., Minneapolis time, against payment of the purchase price at the
same place, on the date determined by the Representatives and of which the
Selling Shareholders have received notice as provided in Section 2(b), which
shall not be earlier than two nor later than three full business days after
the exercise of the option as set forth in Section 2(b), or at such other
time not later than ten full business days thereafter as may be agreed upon
by the Representatives and the Company, such time and date being herein
referred to as the "Second Closing Date."
(f) Certificates for the Shares to be delivered will be registered in
such names and issued in such denominations as the Underwriters shall request
at least two business days prior to the First Closing Date or the Second
Closing Date, as the case may be. The certificates will be made available to
the Underwriters in definitive form for the purpose of inspection and
packaging at least 24 hours prior to each respective closing date.
(g) Payment to the Company and the Selling Shareholders for the
Shares sold shall be made by wire transfer to the account designated by the
Company or by certified or official bank check or checks in Clearing House
funds, payable to the order, respectively, of the Company and the Selling
Shareholders.
(h) The Underwriters will make a public offering of the Shares
directly to the public (which may include selected dealers who are members in
good standing of the National Association of Securities Dealers, Inc.
("NASD") or foreign dealers not eligible for membership in the NASD but who
have agreed to abide by the interpretation of the NASD's Board of Governors
with respect to free-riding and withholding) as soon as the Underwriters deem
practicable after the Registration Statement becomes effective at the public
offering price set forth in Section 2(a) above, subject to the terms and
conditions of this Agreement and in accordance with the Prospectus;
concessions from the public offering price may be allowed to selected dealers
who are members of the NASD as the Underwriters determine, and the
Underwriters will furnish the Company with such information about the
distribution arrangements as may be necessary for inclusion in the
Registration Statement. It is understood that the public offering price and
concessions may vary after the public offering. The Underwriters shall offer
and sell the Shares only in jurisdictions in which the offering of Shares has
been duly registered or qualified, or is exempt from registration or
qualification, and shall take reasonable measures to effect compliance with
applicable state securities laws.
-14-
(i) It is understood that the Representatives, individually and not as
Representatives, may (but shall not be obligated to) make payment on behalf of
any Underwriter or Underwriters for the Shares to be purchased by such
Underwriter or Underwriters. No such payment by the Representatives shall
relieve such Underwriter or Underwriters from any of its or their other
obligations hereunder.
(j) On the First Closing Date, the Company shall issue and deliver to
you the Representatives' Warrant, against payment by the Representatives of
$50.00 as set forth in Section 5 of this Agreement.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the several Underwriters that:
(a) If the Company has elected to rely on Rule 430A under the Act,
the Company will prepare and file a Prospectus (or term sheet within the
meaning of Rule 434 under the Act) containing the information omitted
therefrom pursuant to Rule 430A under the Act with the Commission within the
time period required by, and otherwise in accordance with the provisions of,
Rules 424(b), 430A and 434, if applicable, under the Act; if the Company has
elected to rely upon Rule 462(b) under the Act to increase the size of the
offering registered under the Act, the Company will prepare and file a
registration statement with respect to such increase with the Commission
within the time period required by, and otherwise in accordance with the
provisions of, Rule 462(b) under the Act; the Company will prepare and file
with the Commission, promptly upon the request of the Representatives, any
amendments or supplements to the Registration Statement or Prospectus
(including any term sheet within the meaning of Rule 434 under the Act) that,
in the opinion of the Representatives, may be necessary or advisable in
connection with distribution of the Shares by Underwriters; and the Company
will not file any amendment or supplement to the Registration Statement or
Prospectus (including any term sheet within the meaning of Rule 434 under the
Act) to which the Representatives shall reasonably object by notice to the
Company after having been furnished with a copy a reasonable time prior to
the filing.
(b) The Company will advise the Representatives promptly of (i) any
request of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, (ii) the
issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the use of the Prospectus, (iii) the suspension
of the qualification of the Shares for offering or sale in any jurisdiction,
or (iv) the institution or threatening of any proceedings for that purpose,
and the Company will use its best efforts to prevent the issuance of any such
stop order preventing or suspending the use of the Prospectus or suspending
such qualification and to obtain as soon as possible the lifting thereof, if
issued.
-15-
(c) The Company will endeavor to qualify the Shares for sale under
the securities laws of such jurisdictions as the Representatives may
reasonably have designated in writing and will, or will cause counsel for the
Underwriters to, make such applications, file such documents, and furnish
such information as may be reasonably requested by the Representatives,
provided that the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction where it is not now so qualified or required to file such a
consent. The Company will, from time to time, prepare and file such
statements, reports and other documents as are or may be required to continue
such qualifications in effect for so long a period as the Representatives may
reasonably request for distribution of the Shares.
(d) The Company will furnish the Underwriters with as many copies of
any Preliminary Prospectus as the Representatives may reasonably request and,
during the period when delivery of a prospectus is required under the Act,
the Company will furnish the Underwriters with as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as the
Representatives may, from time to time, reasonably request. The Company will
deliver to the Representatives, at or before the First Closing Date, three
signed copies of the Registration Statement and all amendments thereto
including all exhibits filed therewith, and will deliver to the
Representatives such number of copies of the Registration Statement, without
exhibits, and of all amendments thereto, as the Representatives may
reasonably request.
(e) If, during the period in which a prospectus is required by law to
be delivered by an Underwriter or dealer, any event shall occur as a result
of which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances existing at the time the Prospectus is delivered to a
purchaser, not misleading, or if for any other reason it shall be necessary
at any time to amend or supplement the Prospectus to comply with any law, the
Company promptly will prepare and file with the Commission an appropriate
amendment to the Registration Statement or supplement to the Prospectus so
that the Prospectus as so amended or supplemented will not include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein in light of the circumstances in which
they are made, when it is so delivered, not misleading, or so that the
Prospectus will comply with law. In case any Underwriter is required to
deliver a prospectus in connection with sales of any Shares at any time nine
months or more after the effective date of the Registration Statement, upon
the request of the Representatives but at the expense of such Underwriter,
the Company will prepare and deliver to such Underwriter as many copies as the
-16-
Representatives may request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act.
(f) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later
than 15 months after the effective date of the Registration Statement, an
earnings statement (which need not be audited) in reasonable detail, covering
a period of at least 12 consecutive months beginning after the effective date
of the Registration Statement, which earnings statement shall satisfy the
requirements of Section 11(a) of the Act and Rule 158 thereunder, and the
Company will advise you in writing when such statement has been so made
available.
(g) The Company will, for a period of five years after the First
Closing Date, deliver to the Representatives copies of its annual report and
copies of all other documents, reports and information furnished by the
Company to its security holders or filed with any securities exchange
pursuant to the requirements of such exchange or with the Commission pursuant
to the Act or the Exchange Act.
(h) No offering, sale or other disposition of any Common Stock or
other capital stock of the Company, or warrants, options, convertible
securities or other rights to acquire such Common Stock or other capital
stock (other than pursuant to existing employee stock option plans,
outstanding options or warrants or on the conversion of convertible
securities outstanding on the date of this Agreement) will be made for a
period of 180 days after the date of this Agreement, directly or indirectly,
by the Company otherwise than hereunder or with the prior written consent of
▇▇▇▇▇▇▇.
(i) The Company will apply the net proceeds from the sale of the
Shares to be sold by it hereunder substantially in accordance with the
purposes set forth under "Use of Proceeds" in the Prospectus and will file
such reports with the Commission with respect to the sale of the Shares and
the application of the proceeds therefrom as may be required in accordance
with Rule 463 under the Act.
(j) The Company will use its best efforts to maintain the designation
of the Common Stock on the Nasdaq National Market.
(k) Subject to the provisions set forth below, the Company shall be
responsible for and pay all costs and expenses incident to the performance of
its obligations under this Agreement including, without limiting the
generality of the foregoing, (i) all costs and expenses in connection with
the preparation, printing and filing of the Registration Statement (including
financial statements and exhibits), Preliminary Prospectuses, the Prospectus
and any amendments thereof or supplements to any of the foregoing; (ii) the
-17-
issuance and delivery of the Shares, including taxes, if any; (iii) the cost
of all certificates representing the Shares; (iv) the fees and expenses of
the Transfer Agent for the Shares; (v) the fees and disbursements of counsel
for the Company; (vi) all fees and other charges of the independent public
accountants of the Company; (vii) the cost of furnishing and delivering to
the Underwriters and dealers participating in the offering copies of the
Registration Statement (including appropriate exhibits), Preliminary
Prospectuses, the Prospectus and any amendments of, or supplements to, any of
the foregoing; (viii) the NASD filing fee; and (ix) all accountable fees and
expenses of counsel for the Company and counsel for the Representatives
incurred in qualifying the Shares for sale under the laws of such
jurisdictions upon which the Representatives and the Company may agree
(including filing fees). The Company shall grant to the Representatives a
non-accountable expense allowance equal to 2% of the gross proceeds of the
offering of the Shares to cover certain expenses of the Representatives,
including but not limited to the reasonable fees and expenses of the
Representatives' counsel, costs and expenses of conducting a due diligence
investigation of the Company and due diligence meetings, costs of travel in
connection with the selling effort and tombstone advertisements. The
Representatives acknowledge receipt of a $50,000 non-refundable deposit
against the non-accountable expense allowance referred to in the preceding
sentence. In the event this Agreement is terminated pursuant to Section 8
below, the Company shall remain obligated to pay the Representatives their
actual accountable out-of-pocket expenses, not to exceed $50,000, plus any
fees and expenses described in (ix) above. The Company shall not in any
event be liable to any of the Underwriters for the loss of anticipated
profits from the transactions covered by this Agreement. The provisions of
this Section 3(k) are intended to allocate responsibility for the expenses as
between the Company and the Underwriters and shall not affect any agreement
between the Company and the Selling Shareholders for the sharing of such
costs and expenses.
(l) The Company will not take, directly or indirectly, any action
designed to or which might reasonably be expected to cause or result in, or
which has constituted, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares, and
will not effect any sales of any security of the Company which are required
to be disclosed in response to Item 701 of Regulation S-K of the Commission
which have not been so disclosed in the Registration Statement.
4.CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
The respective obligations of the Underwriters to purchase and pay for
the Shares as provided herein shall be subject to the accuracy of the
representations and warranties of the Company and the Selling Shareholders,
in the case of the Firm Shares as of the date hereof and the First Closing
Date (as if made on and as of
-18-
the First Closing Date), and in the case of the Option Shares, as of the date
hereof and the Second Closing Date (as if made on and as of the Second
Closing Date), to the performance by the Company and the Selling Shareholders
(in the case of the First Closing Date) of their obligations hereunder, and
to the satisfaction of the following additional conditions on or before the
First Closing Date in the case of the Firm Shares and on or before the Second
Closing Date in the case of the Option Shares:
(a) All filings required by Rules 424, 430A and 434 under the Act
shall have been timely made; no stop order suspending the effectiveness of
the Registration Statement, as amended from time to time, or any part thereof
shall have been issued and no proceedings for that purpose shall have been
initiated or threatened by the Commission; and all requests for additional
information on the part of the Commission shall have been complied with to
the reasonable satisfaction of the Representatives.
(b) The Representatives shall have received the opinion of ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇ P.L.L., counsel for the Company, dated as of the First Closing
Date or the Second Closing Date, as the case may be, addressed to the
Underwriters and satisfactory in form and substance to the Representatives
and their counsel, substantially to the effect that:
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Minnesota,
with corporate power and authority to own or lease its properties and conduct
its business as described in the Registration Statement and the Prospectus.
The Company is duly qualified and in good standing as a foreign corporation
in each jurisdiction where the conduct of its business makes such
qualification necessary and the failure to so qualify would have a material
adverse effect on the business, properties, condition (financial or
otherwise), results of operations, shareholders' equity or prospects of the
Company.
(ii) The Company has authorized capital stock as described in the
Prospectus. The outstanding shares of the Company's capital stock have been
duly authorized and validly issued and are fully paid and nonassessable. The
Shares to be issued and sold by the Company pursuant to this Agreement have
been duly authorized and, when issued and paid for as contemplated herein,
will be validly issued, fully paid and nonassessable. No preemptive rights
pursuant to corporate law or, to the knowledge of such counsel, other
preemptive or similar subscription rights of shareholders of the Company, or
of holders of warrants, options, convertible securities or other rights to
acquire shares of capital stock of the Company, exist with respect to any of
the Shares or the issue and sale thereof. To the knowledge of such counsel,
no rights to register outstanding shares of the Company's capital stock,
-19-
or shares issuable upon the exercise of outstanding warrants, options,
convertible securities or other rights to acquire shares of such capital
stock, exist which have not been validly exercised or waived with respect to
the Registration Statement. The capital stock of the Company, including the
Shares, conforms in all material respects to the description thereof
contained in the Prospectus.
(iii) The Registration Statement has become effective under the Act
and, to the knowledge of such counsel, no stop order or proceedings with
respect thereto have been instituted or are pending or threatened by the
Commission.
(iv) The Registration Statement, the Prospectus and each amendment
or supplement thereto comply as to form in all material respects with the
requirements of the Act and the rules and regulations thereunder (except that
such counsel need express no opinion as to the financial statements, related
schedules or other financial or statistical data included therein or
incorporated therein by reference).
(v) To such counsel's knowledge, there are no statutes,
regulations or legal or governmental proceedings required to be described in
the Prospectus that are not described as required and no franchises, leases,
contracts, agreements or documents of a character required to be disclosed in
the Registration Statement or Prospectus or to be filed as exhibits to the
Registration Statement which are not disclosed or filed, as required.
(vi) The statements (A) in the Prospectus under the caption
"Description of Capital Stock," and (B) in the Registration Statement in Item
15, insofar as such statements constitute a summary of matters of law, are
accurate summaries and fairly present the information called for with respect
to such matters in all material respects.
(vii) The execution, delivery and performance of this Agreement and
the consummation of the transactions herein contemplated do not and will not
conflict with or result in a violation of or default under the Articles of
Incorporation or Bylaws of the Company, or (assuming compliance with all
applicable state securities and blue sky laws) under any statute, rule or
regulation of the United States or the State of Minnesota applicable to the
Company or any permit, order, judgment or decree known to such counsel, or
any indenture, mortgage, loan agreement or other material agreement,
instrument or obligation known to such counsel to which the Company is a
party or by which it or its material properties are bound.
-20-
(viii) The Company has the corporate power and authority to enter
into this Agreement and to authorize, issue and sell the Shares as
contemplated hereby. This Agreement has been duly and validly authorized,
executed and delivered by the Company and constitutes a valid, legal and
binding obligation of the Company enforceable in accordance with its terms,
except as rights to indemnity hereunder may be limited by federal or state
securities laws and except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the rights
of creditors generally and subject to general principles of equity.
(ix) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions herein
contemplated (other than as may be required by state securities and blue sky
laws, as to which such counsel need express no opinion) except such as have
been obtained or made, specifying the same.
(x) To such counsel's knowledge, there are no legal or
governmental proceedings, pending or threatened, before any court or
administrative body or regulatory agency to which the Company is a party or
to which any of the properties of the Company is subject except as have been
disclosed in writing to the Representatives.
(xi) The form of certificate for the Shares is in due and proper
form and complies with all applicable statutory requirements.
(xii) The Company has the corporate power and authority to issue the
Representatives' Warrant. The Representatives' Warrant has been duly
authorized, executed and delivered by the Company and constitutes the valid
and binding obligation of the Company enforceable in accordance with its
terms, except as enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity. The Warrant Shares
issuable upon exercise of the Representatives' Warrant have been duly
authorized and reserved for issuance upon exercise of the Representatives'
Warrant, and, upon exercise of the Representatives' Warrant and receipt by
the Company of the consideration for such shares in accordance with the terms
thereof, such Warrant Shares will be validly issued, fully paid and
nonassessable.
-21-
(xiii) Based solely upon a review of 16 C.F.R. Section 435.1 et seq.
(1996) (the "Mail Order Rule"), the conduct of the Company's business as
described in the Prospectus does not violate the Mail Order Rule.
(xiv) To the best of such counsel's knowledge, the statements in
the Registration Statement and the Prospectus under the caption
"Business--Service Marks" are accurate and complete statements or summaries
of the matters therein set forth.
(xv) To the best of such counsel's knowledge, the Company owns or
is licensed to use all trade secrets, trademarks, service marks or other
proprietary information or know-how necessary to conduct the business now
being or proposed to be conducted by the Company as described in the
Prospectus (the "Proprietary Rights").
(xvi) To the best of such counsel's knowledge, there are no pending
legal proceedings relating to the Proprietary Rights, and no such proceedings
are threatened or contemplated.
(xvii) To such counsel's knowledge after due inquiry, the Company is
not infringing or otherwise violating, and the conduct of the business of the
Company as intended to be conducted as described in the Prospectus will not
infringe or otherwise violate, any patents, trade secrets, trademarks,
service marks, copyrights or other proprietary information or know-how of any
persons, and no person is infringing or otherwise violating any of the
Proprietary Rights in a way which could materially affect the ownership or
use thereof by the Company.
In rendering the opinions described above, counsel for the Company may
rely, as to matters of fact with respect to the Company, upon representations
of the Company contained in this Agreement and certificates of officers of
the Company provided that copies of such certificates are delivered to the
Representatives and as to matters governed by the laws of the State of
Minnesota, on opinions of local counsel reasonably satisfactory to the
Representatives.
In addition to the matters set forth above, each such opinion shall
also include a statement to the effect that, although such counsel has not
independently verified or checked the accuracy, completeness or fairness of
any of the statements contained in the Registration Statement or Prospectus,
(and accordingly does not assume any responsibility for the accuracy,
completeness or fairness of such statements), in connection with such
counsel's representation and inquiry of the Company in the preparation of the
Registration Statement and Prospectus, no facts came to the attention of such
counsel which caused it to conclude that, as of the time the Registration
Statement became effective and as of the First Closing Date or the Second
Closing Date, as the case may be, the Registration Statement or any further
amendment thereto (other than the financial statements, and other financial
or statistical data included therein or incorporated therein by reference, or
any information furnished by the Underwriters for use in the Registration
Statement, as to which such counsel need make no statement) contained or
contains an untrue statement of a material fact or omitted or omits to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading or that, as of the date of the Prospectus
or any amendment or supplement thereto and as of the First Closing Date or
the Second Closing Date, as the case may be, the Prospectus or any amendment
or supplement thereto (other than the financial statements,
-22-
and other financial or statistical data included therein or
incorporated therein by reference, or any information furnished by the
Underwriters for use in the Registration Statement, as to which such counsel
need make no statement) contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary to make
the statements therein, in light of the circumstances in which they were
made, not misleading.
(c) The Representatives shall have received the opinion of counsel
for each of the Selling Shareholders, which counsel shall be reasonably
acceptable to the Representatives, dated the First Closing Date or the Second
Closing Date, as the case may be, addressed to the Underwriters and
satisfactory in form and substance to the Representatives and their counsel,
substantially to the effect that:
(i) Such Selling Shareholder has the power and authority to enter
into this Agreement, the Custody Agreement and the Power of Attorney and to
perform and discharge such Selling Shareholder's obligations thereunder and
hereunder; and this Agreement, the Custody Agreement and the Power of
Attorney have been duly and validly authorized, executed and delivered by (or
by the Attorneys-in-Fact, or either of them, on behalf of) such Selling
Shareholder and are the valid and binding agreements of the Selling
Shareholder, enforceable in accordance with their respective terms (except as
rights to indemnity hereunder or thereunder may be limited by federal or
state securities laws and except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally and subject to general principles of equity).
(ii) The sale of the Shares to be sold by such Selling Shareholder
hereunder and the compliance by such Selling Shareholder with all of the
provisions of this Agreement, the Power of Attorney and the Custody
Agreement, and the consummation of the transactions herein and therein
contemplated, will not conflict with or result in a breach or violation of
any terms or provisions of, or constitute a default under, any statute, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument known to such counsel to which such
-23-
Selling Shareholder is a party or by which such Selling Shareholder is bound
or to which any of the property or assets of such Selling Shareholder is
subject, nor will such action result in any violation of any order, rule or
regulation known to such counsel of any court or governmental agency or body
having jurisdiction over such Selling Shareholder or the property of such
Selling Shareholder.
(iii) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated by this Agreement in connection with the Shares to
be sold by such Selling Shareholder hereunder, except such consents,
approvals, authorizations or orders as have been validly obtained and are in
full force and effect, such as have been obtained under the Act and such as
may be required under the state securities or blue sky laws in connection
with the purchase and distribution of such Shares by the Underwriters.
(iv) Such Selling Shareholder has full power and authority to sell
and deliver the Shares to be sold by such Selling Shareholder hereunder.
(v) Delivery of the certificates for the Shares to be sold by such
Selling Shareholder pursuant to this Agreement, upon payment therefor by the
Underwriters, will pass good and valid title to such Shares to the
Underwriters, and the Underwriters will acquire all the rights of such
Selling Shareholder in the Shares (assuming the Underwriters have no
knowledge of an adverse claim), free and clear of any claims, liens,
encumbrances, security interests or other adverse claims.
In rendering the opinions described above, counsel for each of the
Selling Shareholders may rely, as to matters of fact with respect to such
Selling Shareholder, upon the representations of such Selling Shareholder
contained in this Agreement, the Power of Attorney and Custody Agreement.
(d) The Representatives shall have received from ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
LLP, counsel for the Underwriters, an opinion dated the First Closing Date or
the Second Closing Date, as the case may be, with respect to such matters as
the Representatives may reasonably request, and such counsel shall have
received such documents and information as they may reasonably request to
enable them to pass upon such matters.
(e) The Representatives shall have received on each of the date
hereof, the First Closing Date and the Second Closing Date, as the case may
be, a signed letter, dated as of the date hereof, the First Closing Date or
the Second Closing Date, as the case may be, in form and substance
satisfactory to the
-24-
Representatives, from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, to the effect that they are
independent public accountants with respect to the Company within the meaning
of the Act and the related rules and regulations, stating that in their
opinion the financial statements and schedules examined by them and included
in the Registration Statement comply in form in all material respects with
the applicable accounting requirements of the Act and the related rules and
regulations, and containing such other statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information
contained in the Registration Statement and the Prospectus.
(f) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except as
contemplated or referred to in the Prospectus, the Company shall not have
incurred any direct or contingent liabilities or obligations material to the
Company, or entered into any material transactions, except liabilities,
obligations or transactions in the ordinary course of business, or declared
or paid any dividends or made any distribution of any kind with respect to
its capital stock; and there shall not have been any change in the capital
stock (other than a change in the number of outstanding shares of Common
Stock due to the exercise of options or warrants described in the
Registration Statement and the Prospectus), or any change in the short-term
debt or long-term debt (including capitalized lease obligations) of the
Company, or any issuance of options, warrants, convertible securities or
other rights to purchase the capital stock of the Company or any change or
any development involving a prospective change in or affecting the general
affairs, management, financial position, shareholders' equity or results of
operations of the Company, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in the judgment of the Representatives makes
it impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered on the terms and in the manner
contemplated in the Prospectus.
(g) The Representatives shall have received from the Company a
certificate, dated as of the First Closing Date or Second Closing Date (as
the case may be), of the chief executive officer, the chief operating officer
and the chief financial 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 each closing date.
The Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at, or prior to, such
date.
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceeding for that
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purpose has been instituted or is pending or, to the knowledge of such
officers, is contemplated under the Act.
(iii) Neither the Registration Statement nor the Prospectus nor
any amendment thereof or supplement thereto included any untrue statement of
a material fact or omitted to state any 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, and, since the
effective date of the Registration Statement, there has occurred no event
required to be set forth in an amended or supplemented prospectus which has
not been so set forth; provided, however, that such certificate does not
require any representation concerning statements in, or omissions from, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto, which are based solely upon and conform to written information
furnished to the Company by any of the Selling Shareholders or any of the
Underwriters specifically for use in the preparation of the Registration
Statement or the Prospectus or any such amendment or supplement.
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except as
contemplated or referred to in the Prospectus, the Company has not incurred
any direct or contingent liabilities or obligations material to the Company,
or entered into any material transactions, except liabilities, obligations or
transactions in the ordinary course of business, or declared or paid any
dividend or made any distribution of any kind with respect to its capital
stock, and there has not been any change in the capital stock (other than a
change in the number of outstanding shares of Common Stock due to the
exercise of options or warrants described in the Registration Statement and
the Prospectus), short-term debt, or long-term debt (including capitalized
lease obligations) of the Company, or any 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 or affecting the general affairs, condition (financial
or otherwise), business, key personnel, property, prospects, net worth or
results of operations of the Company.
(v) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the Company has not
sustained any material loss of, or damage to, its business or properties,
whether or not covered by insurance.
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(vi) Except as is otherwise expressly stated in the Registration
Statement and Prospectus there are no material actions, suits or proceedings
pending before any court or governmental agency, authority or body, or, to
such officers' knowledge, threatened, to which the Company is a party or of
which the business or property of the Company is the subject.
(h) The Representatives shall have received from the Secretary of the
Company a certificate of incumbency, dated as of the First Closing Date or
Second Closing Date (as the case may be), certifying the names, titles and
signatures of the officers authorized to execute, deliver and perform this
Agreement. Attached to such certificate shall be a copy of the Bylaws of the
Company and the resolutions of the Board of Directors of the Company
authorizing the execution, delivery and performance of this Agreement. Such
certificate shall also certify that such resolutions, the Articles of
Incorporation of the Company and the Bylaws of the Company have been validly
adopted and have not been amended or modified, except as described in the
Prospectus.
(i) The Representatives shall have received a written agreement from
each of the officers, directors and shareholders named in Schedule III
hereto, that (A) no offer, sale, contract to sell, other disposition of any
Common Stock of the Company will be made for a period of 180 days after the
effective date of the Registration Statement (the "Lock-Up Period"), directly
or indirectly, by such holder otherwise than with the prior written consent
of ▇▇▇▇▇▇▇, and (B) for a period of 90 days following the Lock-Up Period, any
shares of Common Stock sold by such officer, director or shareholder shall be
sold through the Representatives.
(j) The Shares shall have been approved for listing on the Nasdaq
National Market.
(k) The Company and the Selling Shareholders shall have furnished to
the Underwriters, dated as of the date of each Closing Date, such further
certificates and documents as the Representatives shall have reasonably
required.
(l) All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably
satisfactory to the Representatives and their legal 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.
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(m) The Representatives may waive in writing the performance of any
one or more of the conditions specified in this Section 4 or extend the time
for their performance.
5. REPRESENTATIVES' WARRANT.
On the First Closing Date, the Company shall sell to you, in
consideration of a payment by the Representatives to the Company of Fifty
Dollars ($50.00), the Representatives' Warrant, which shall first become
exercisable one year after the Effective Date and shall remain exercisable
for a period of four years thereafter. The Representatives' Warrant shall be
subject to certain transfer restrictions and shall be in substantially the
form filed as an exhibit to the Registration Statement and attached as
Appendix A hereto.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, the Selling Shareholders and each person, if any, who controls
any Underwriter within the meaning of Section 15 of the Act against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter, any of the Selling Shareholders or each such controlling person
may become subject, under the Act, the Exchange Act, the common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of, or are based upon: (i) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, or the omission or alleged omission to
state in the Registration Statement or any amendment thereof a material fact
required to be stated therein or necessary to make the statements therein not
misleading; (ii) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; or (iii) 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 and filed in any jurisdiction in order to qualify the Shares under,
or exempt the Shares 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; and will reimburse
each Underwriter, each such Selling Shareholder and each such controlling
person for any legal or other expenses reasonably incurred by such
Underwriter, Selling Shareholder or controlling person (subject to the
limitations of Section 6(d) below) in connection with investigating or
defending against any such loss,
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claim, damage, liability or action; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of, or is based upon, an untrue statement, or
alleged untrue statement, omission or alleged omission, made in reliance upon
and in conformity with information furnished to the Company by, or on behalf
of, any Underwriter or any Selling Shareholder in writing specifically for
use in the preparation of the Registration Statement or any such post
effective amendment thereof, any such Preliminary Prospectus or the
Prospectus or any such amendment thereof or supplement thereto. This
indemnity agreement is in addition to any liability which the Company may
otherwise have.
(b) Each Underwriter severally, but not jointly, agrees to indemnify
and hold harmless the Company, each of the Company's directors, each of the
Company's officers who has signed the Registration Statement, the Selling
Shareholders and each person who controls the Company within the meaning of
Section 15 of the Act against any losses, claims, damages or liabilities,
joint or several, to which the Company or any such Selling Shareholder,
director, officer, or controlling person may become subject, under the Act,
the Exchange Act, the common law or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of,
or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment
thereof, or the omission or alleged omission to state in the Registration
Statement or any amendment thereof, a material fact required to be stated
therein or necessary to make the statements therein not misleading; (ii) any
untrue statement or alleged untrue statement of a material fact contained in
any Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; or (iii) any untrue statement or alleged untrue statement of a
material fact contained in any application or other statement executed by the
Company or by any Underwriter or based upon written information furnished by
the Company or the Underwriters and filed in any jurisdiction in order to
qualify the Shares under, or exempt the Shares or the sale thereof from
qualification under, the securities laws of such jurisdiction, or the
omission or alleged omission to state in such application or statement a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; in each of the above cases to the extent, but only the
extent, that such untrue statement, alleged untrue statement, omission or
alleged omission, was made in reliance upon and in conformity with
information furnished to the Company by, or on behalf of, any Underwriter in
writing specifically for use in the preparation of the Registration Statement
or any such post-effective amendment thereof, any such Preliminary
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Prospectus or the Prospectus or any such amendment thereof or supplement
thereto, or in any application or other statement executed by the Company or
by any Underwriter and filed in any jurisdiction; and each Underwriter will
reimburse any legal or other expenses reasonably incurred by the Company or
any such Selling Shareholder, director, officer, or controlling person in
connection with investigating or defending against any such loss, claim,
damage, liability or action. This indemnity agreement is in addition to any
liability which the Underwriters may otherwise have.
(c) Each Selling Shareholder severally, but not jointly, agrees to
indemnify and hold harmless the Company, each of the Company's directors,
each of the Company's officers who has signed the Registration Statement,
each person who controls the Company within the meaning of Section 15 of the
Act, each Underwriter and each person who controls an Underwriter against any
losses, claims, damages or liabilities to which the Company, any Underwriter,
or any such director, officer, or controlling person may become subject,
under the Act, the Exchange Act, the common law, or otherwise, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of, or are based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
amendment thereof, or the omission or alleged omission to state in the
Registration Statement or any amendment thereof a material fact required to
be stated therein or necessary to make the statements therein not misleading;
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; in each of the above cases to the extent, but only the
extent, that such untrue statement, alleged untrue statement, omission or
alleged omission was made in reliance upon and in conformity with information
furnished to the Company by, or on behalf of, the Selling Shareholder in
writing specifically for use in the preparation of the Registration
Statement, any such Preliminary Prospectus or the Prospectus or any such
amendment or supplement thereto, and the Selling Shareholder will reimburse
any legal or other expenses reasonably incurred by the Company, any
Underwriter or any such director, officer or controlling person in connection
with investigating or defending against any such loss, claim, damage,
liability or action. In no event, however, shall the liability of the
Selling Shareholder for indemnification under this Section 6(c) exceed the
lesser of (i) that proportion of the total of such losses, claims, damages or
liabilities indemnified against equal to the proportion of the total Shares
sold hereunder that are being sold by such Selling Shareholder, or (ii) the
proceeds received by such Selling Shareholder for the Shares sold by it to
the Underwriters. This indemnity agreement is in addition to any liability
which the Selling Shareholder may otherwise have. Each Selling Shareholder's
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liability for indemnification under this Section 6(c), insofar as it arises
(i) from any untrue statement or alleged untrue statement of a material fact
pertaining to the Selling Shareholder contained in a post-effective amendment
to the Registration Statement but not in the Registration Statement, or (ii)
the omission or alleged omission to state a material fact pertaining to the
Selling Shareholder in a post-effective amendment which fact was stated in
the Registration Statement, shall require the indemnified party or parties to
demonstrate that prior to the filing of such post-effective amendment the
indemnifying Selling Shareholder shall have been furnished a copy of such
post-effective amendment and given an opportunity to comment thereon.
(d) Promptly after receipt by an indemnified party under this Section
6 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against any indemnifying party
under this Section 6, notify in writing the indemnifying party of the
commencement thereof. The omission to so notify the indemnifying party will
not relieve it from any liability under this Section 6 as to the particular
item for which indemnification is then being sought, unless such omission so
to notify materially prejudices the indemnifying party's ability to defend
such action. In case any such action is brought against any indemnified
party and the indemnified party notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof with
counsel who shall be reasonably satisfactory to such indemnified party; and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 6 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, in the reasonable judgment of the indemnified party or
parties, it is advisable for such party or parties and any controlling
persons to be represented by separate counsel, any indemnified party shall
have the right to employ separate counsel to represent it and other parties
and their controlling persons who may be subject to liability arising out of
any claim in respect of which indemnity may be sought by any party hereunder,
in which event the fees and expenses of such separate counsel shall be borne
by the indemnifying party. In such event, the indemnifying party will not be
obligated to pay the fees and expenses of more than one counsel for the
indemnified parties with respect to such claim. 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 prior written consent
of such indemnifying party.
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7. CONTRIBUTION.
(a) If the indemnification provided for in Section 6 is unavailable
under applicable law to any indemnified party in respect of any losses,
claims, damages or liabilities referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, the
Selling Shareholders and the Underwriters from the offering of the Shares or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the parties in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The Company, the Selling Shareholders and the
Underwriters agree that contribution determined by per capita allocation
(even if the Underwriters were considered a single person) would not be
equitable. The respective relative benefits received by the Company and the
Selling Shareholders on the one hand, and the Underwriters on the other hand,
shall be deemed to be in the same proportion as the total net proceeds from
the offering of the Shares (before deducting expenses) received by the
Company and the Selling Shareholders bears to the total underwriting discount
received by the Underwriters, in each case as set forth in the Prospectus.
The relative fault of the parties 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 parties and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages and liabilities referred to above shall be deemed
to include any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim.
Notwithstanding the provisions of this Section 7, (i) no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto; and (ii) no Selling Shareholder shall be required to
contribute any amount in excess of the proceeds such Selling Shareholder has
received for the Shares sold by such Selling Shareholder to the Underwriters.
The Underwriters' obligation to contribute pursuant to this Section 7 are
several and not joint in proportion to their respective Underwriting
Obligations. No person guilty of fraudulent misrepresentation (within the
meaning of Section
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11(f) of the Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this
Section 7, each person who controls an Underwriter within the meaning of the
Act or the Exchange Act shall have the same rights to contribution as such
Underwriter, each person who controls the Company within the meaning of the
Act or the Exchange Act shall have the same rights to contribution as the
Company and each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company.
(b) Promptly after receipt by a party to this Agreement of notice of
the commencement of any action, suit, or proceeding, such person will, if a
claim for contribution in respect thereof is to be made against another party
(the "Contributing Party"), notify the Contributing Party of the commencement
thereof, but the omission so to notify the Contributing Party will not
relieve the Contributing Party from any liability which it may have to any
party other than under this Section 7, unless such omission so to notify
materially prejudices the Contributing Party's ability to defend such action.
Any notice given pursuant to Section 6 hereof shall be deemed to be like
notice hereunder. In case any such action, suit or proceeding is brought
against any party, and such person notifies a Contributing Party of the
commencement thereof, the Contributing Party will be entitled to participate
therein with the notifying party and any other Contributing Party similarly
notified.
8. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective the later of (i) the date
and time that this Agreement is executed and delivered by the parties hereto
and (ii) at 10:00 a.m., Minneapolis time, on the first full business day
following the Effective Date, or at such earlier time after the Effective
Date as the Representatives in their discretion shall first release the
Shares for offering to the public. For purposes of this Section 8, the
Shares shall be deemed to have been released to the public upon release by
the Representatives of the publication of a newspaper advertisement relating
to the Shares or upon release of a telegram or a letter offering the Shares
for sale to securities dealers, whichever shall first occur.
(b) The Representatives shall have the right to terminate this
Agreement by giving notice to the Company as hereinafter specified at any
time prior to the First Closing Date, and the option referred to in Section
2(c), if exercised, may be canceled at any time by the Representatives by
giving such notice to the Company at any time prior to the Second Closing
Date, if (i) the Company shall have failed, refused or been unable, at or
prior to the First Closing Date, to perform any material agreement on its
part to be performed hereunder as of such date; (ii) any other condition of
the Underwriters'
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obligations hereunder is not fulfilled; (iii) trading in securities generally
on the New York Stock Exchange, American Stock Exchange or the Nasdaq Stock
Market shall have been suspended, or minimum or maximum prices for trading
shall have been required or established by the Commission or by any such
exchange or the Nasdaq Stock Market; (iv) a banking moratorium shall have
been declared by federal, New York or Minnesota authorities; (v) there shall
have been such a material adverse 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
reasonable judgment of the Representatives, makes it impractical or
inadvisable to proceed with the completion of the sale of and payment for the
Shares; (vi) there shall have been 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 Representatives materially and adversely affects or will
materially and adversely affect the business or operations of the Company; or
(vii) there shall be an outbreak of major hostilities (or an escalation
thereof) in which the United States is involved or a formal declaration of
war by the United States of America shall have occurred or any other
substantial national or international calamity or any other event or
occurrence of a similar character shall have occurred since the execution of
this Agreement that, in the reasonable judgment of the Representatives, makes
it impractical or inadvisable to proceed with the completion of the sale of
and payment for the Shares. Any such termination shall be without liability
of any party to any other party, except as provided in Sections 6 and 7
hereof; provided, however, that the Company shall remain obligated to pay
costs and expenses to the extent provided in Section 3(k) hereof.
(c) If the Representatives elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Section
8, they shall notify the Company and the Selling Shareholders by telegram or
telephone, confirmed by letter sent to the address(es) specified in Section
11 hereof. If the Company shall elect to prevent this Agreement from
becoming effective, it shall notify the Representatives promptly by telegram
or telephone, confirmed by letter sent to the address specified in Section 11
hereof.
(d) If the Company shall fail at the First Closing Date to sell and
deliver the number of Shares which it is obligated to sell hereunder, then
this Agreement shall terminate without any liability on the part of any
Underwriter. No action taken pursuant to this Section 8(d) shall relieve the
Company from liability, if any, in respect of such default.
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9. DEFAULT OF UNDERWRITER.
If on the First Closing Date or the Second Closing Date, as the case
may be, any Underwriter shall fail to purchase and pay for the portion of the
Shares which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company), you, as
Representatives of the Underwriters, shall use your best efforts to procure
within 36 hours thereafter one or more of the other Underwriters, or any
others, to purchase from the Company such amounts as may be agreed upon, and
upon the terms set forth herein, of the Firm Shares or Option Shares, as the
case may be, which the defaulting Underwriter or Underwriters failed to
purchase. If during such 36 hours you, as Representatives, shall not have
procured such other Underwriters, or any others, to purchase the Firm Shares
or Option Shares, as the case may be, agreed to be purchased by the
defaulting Underwriter or Underwriters, then (A) if the aggregate number of
Shares with respect to which such default shall occur does not exceed 10% of
the Firm Shares or Option Shares, as the case may be, covered hereby, the
other Underwriters shall be obligated, severally, in proportion to the
respective numbers of Firm Shares or Option Shares, as the case may be, which
they are obligated to purchase hereunder, to purchase the Firm Shares or
Option Shares, as the case may be, which such defaulting Underwriter or
Underwriters failed to purchase or (B) if the aggregate number of shares of
Firm Shares or Option Shares, as the case may be, with respect to which such
default shall occur exceeds 10% of the Firm Shares or Option Shares, as the
case may be, covered hereby, the Company or you as the Representatives of the
Underwriters will have the right, by written notice given within the next
36-hour period to the parties to this Agreement, to terminate this Agreement
without liability on the part of the non-defaulting Underwriters or of the
Company or the Selling Shareholders except for expenses to be borne by the
Company and the Underwriters as provided in Section 3(k) hereof and the
indemnity and contribution agreements in Sections 6 and 7 hereof. In the
event of a default by any Underwriter or Underwriters as set forth in this
Section 9, the First Closing Date or Second Closing Date, as the case may be,
may be postponed for such period, not exceeding seven days, as you, as
Representatives, may determine in order that the required changes, not
including a reduction in the number of Firm Shares, in the Registration
Statement or in the Prospectus or in any other documents or arrangements may
be effected. Any action taken under this Section 9 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
10. SURVIVAL OF INDEMNITIES, CONTRIBUTION AGREEMENTS, WARRANTIES AND
REPRESENTATIONS.
The respective indemnity and contribution agreements of the Company and
the Underwriters contained in Sections 6 and 7, respectively, the
representations and warranties of the Company and the Selling Shareholders
set forth in Section 1 hereof, and the covenants of the Company set forth in
Section 3 hereof, respectively, shall remain operative and in full force and
effect, regardless of
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any investigation made by, or on behalf of, the Underwriters, the Selling
Shareholders, the Company, any of its officers and directors, or any
controlling person referred to in Sections 6 and 7, and shall survive the
delivery of and payment for the Shares. 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 representatives of such controlling person, as the case
may be, shall be entitled to the benefit of the respective indemnity and
contribution agreements.
11. NOTICES.
All notices or communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to the
Representatives or any of the Underwriters, shall be mailed, delivered, or
telecopied and confirmed, to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Company, Incorporated, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇,
with a copy to ▇▇▇ ▇. ▇▇▇▇▇, Esq., ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; if sent to the Company or the Selling
Shareholders, shall be mailed, delivered, or telecopied and confirmed, to The
Sportsman's Guide, Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇ ▇▇▇▇, with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq., ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
& ▇▇▇▇▇ P.L.L., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇.▇., ▇.▇. Box 3808, Dayton, Ohio
45401.
12. INFORMATION FURNISHED BY THE UNDERWRITERS AND THE SELLING
SHAREHOLDERS.
The statements (i) set forth in the last paragraph on the front cover
page, (ii) relating to the stabilization activities of the Underwriters and
(iii) the list of Underwriters following the first paragraph under the
caption "Underwriting," the third paragraph under the caption "Underwriting"
and the eighth paragraph under the caption "Underwriting" in any Preliminary
Prospectus and in the Prospectus constitute the only information furnished
by, or on behalf of, the Underwriters in writing specifically for use in the
preparation of the Registration Statement or any post-effective amendment
thereof, any Preliminary Prospectus or the Prospectus or any amendment
thereof or supplement thereto, or in any application or other statement
executed by the Company or by any Underwriter and filed in any jurisdiction
as referred to in Section 6 hereof. The statements set forth with respect to
the Selling Shareholders in "Principal and Selling Shareholders" are the only
information furnished in writing by or on behalf of the Selling Shareholders,
specifically for use with reference to such Selling Shareholders in any
Preliminary Prospectus and in the Prospectus.
-36-
13. PARTIES.
This Agreement shall inure to the benefit of and be binding upon the
Underwriters, the Selling Shareholders and the Company, their respective
successors and assigns and the officers, directors and controlling persons
referred to in Sections 6 and 7. Nothing expressed in this Agreement is
intended or shall be construed to give any person or corporation, other than
the parties hereto, their respective successors and assigns and the
controlling persons, officers and directors referred to in Sections 6 and 7
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 Shares from the Underwriters shall be construed a successor
or assign merely by reason of such purchase.
14. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with the
laws of the State of Minnesota without regard to its conflict of law
provisions.
-37-
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed counterpart of this
Agreement, whereupon it will become a binding agreement between the Company,
the Selling Shareholders and each of the Underwriters in accordance with its
terms.
Very truly yours,
THE SPORTSMAN'S GUIDE, INC.
__________________________
By:
Its:
SELLING SHAREHOLDERS:
[Names]
By________________________
Attorney-In-Fact
The foregoing Underwriting Agreement is
hereby confirmed and accepted by us for
ourselves and as Representatives of the
Underwriters referred to in the foregoing
Agreement as of the date first above written.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ AND COMPANY,
INCORPORATED
CRUTTENDEN ▇▇▇▇ INCORPORATED
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Company, Incorporated
__________________________
By:
Its:
-38-
SCHEDULE I
NAME OF UNDERWRITER NUMBER OF FIRM SHARES
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
Company, Incorporated
Cruttenden ▇▇▇▇ Incorporated
Total 2,000,000
---------
---------
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SCHEDULE II
Schedule of Selling Shareholders
NUMBER OF NUMBER OF
NAME OF SELLING SHAREHOLDER FIRM SHARES OPTION SHARES
Total 400,000 300,000
------- -------
------- -------
-40-
SCHEDULE III
Schedule of Shareholders Required to Execute Lock-up Agreements
NAME OF SHAREHOLDER NUMBER OF SHARES
Total Lock-up Shares
-41-
APPENDIX A
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. NO SALE, OFFER TO SELL OR TRANSFER OF THESE SECURITIES MAY
BE MADE WITHOUT SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
WARRANT
TO PURCHASE 100,000 SHARES OF
COMMON STOCK OF
THE SPORTSMAN'S GUIDE, INC.
THIS CERTIFIES THAT, for good and valuable consideration received, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and Company, Incorporated and Cruttenden ▇▇▇▇ Incorporated (the
"Representatives"), or their registered assigns, are entitled to subscribe
for and purchase from The Sportsman's Guide, Inc., a Minnesota corporation
(the "Company"), at any time after September __, 1998 (one year after
Effective Date as defined in the Underwriting Agreement), up to and including
September __, 2002, 100,000 fully paid and nonassessable shares of the Common
Stock of the Company at the price of $___ per share (the "Warrant Exercise
Price"), subject to the antidilution provisions, and to the provisions of
Section 10, of this Warrant. Reference is made to this Warrant in the
Underwriting Agreement dated September __, 1997, by and between the Company,
the Representatives and certain shareholders of the Company. The shares
which may be acquired upon exercise of this Warrant are referred to herein as
the "Warrant Shares." As used herein, the term "Holder" means the
Representatives, any party who acquires all or a part of this Warrant as a
registered transferee of the Representatives, or any record holder or holders
of the Warrant Shares issued upon exercise, whether in whole or in part, of
the Warrant; and the term "Common Stock" means and includes the Company's
presently authorized common stock, $.01 par value, and shall also include any
capital stock of any class of the Company hereafter authorized which shall
not be limited to a fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends or in the distribution of assets
upon the voluntary or involuntary liquidation, dissolution, or winding up of
the Company.
This Warrant is subject to the following provisions, terms and conditions:
1. EXERCISE; TRANSFERABILITY.
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(a) The rights represented by this Warrant may be exercised by the
Holder hereof, in whole or in part (but not as to a fractional share of
Common Stock), by written notice of exercise (in the form attached hereto)
delivered to the Company at the principal office of the Company prior to the
expiration of this Warrant and accompanied or preceded by the surrender of
this Warrant along with a check in payment of the Warrant Exercise Price for
such shares or without payment of cash pursuant to Section 10 hereof.
(b) This Warrant may not be sold, assigned, hypothecated, or
otherwise transferred, other than by will or pursuant to the operation of
law, except to a person who is an officer of the Representatives. Further,
this Warrant may not be sold, transferred, assigned, hypothecated or divided
into two or more Warrants of smaller denominations, nor may any Warrant
Shares issued pursuant to exercise of this Warrant be transferred, except as
provided in Section 7 hereof.
2. EXCHANGE AND REPLACEMENT.
Subject to Sections 1 and 7 hereof, this Warrant is exchangeable upon
the surrender hereof by the Holder to the Company at its principal office for
new Warrants of like tenor representing in the aggregate the right to
purchase the number of Warrant Shares purchasable hereunder, each of such new
Warrants to represent the right to purchase such number of Warrant Shares
(not to exceed the aggregate total number purchasable hereunder) as shall be
designated by the Holder at the time of such surrender. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction, or mutilation of this Warrant, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor, in lieu of this Warrant;
provided, however, that if the Representatives shall be such Holder, an
agreement of indemnity by such Holder shall be sufficient for all purposes of
this Section 2. This Warrant shall be promptly canceled by the Company upon
the surrender hereof in connection with any exchange or replacement. The
Company shall pay all expenses, taxes (other than stock transfer taxes), and
other charges payable in connection with the preparation, execution, and
delivery of Warrants pursuant to this Section 2.
3. ISSUANCE OF THE WARRANT SHARES.
(a) The Company agrees that the shares of Common Stock purchased
hereby shall be and are deemed to be issued to the Holder as of the close of
business on the date on which this Warrant shall have been surrendered and
the payment made for such Warrant Shares as aforesaid. Subject to the
provisions of the next section, certificates for the Warrant Shares so
purchased shall be delivered to the Holder within a reasonable time, not
exceeding fifteen (15) days after the rights represented by this
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Warrant shall have been so exercised, and, unless this Warrant has expired, a
new Warrant representing the right to purchase the number of Warrant Shares,
if any, with respect to which this Warrant shall not then have been exercised
shall also be delivered to the Holder within such time.
(b) Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for Warrant Shares upon exercise of this
Warrant except in accordance with exemptions from the applicable securities
registration requirements or registrations under applicable securities laws.
Nothing herein, however, shall obligate the Company to effect registrations
under federal or state securities laws, except as provided in Section 9. If
registrations are not in effect and if exemptions are not available when the
Holder seeks to exercise the Warrant, the Warrant exercise period will be
extended, if need be, to prevent the Warrant from expiring, until such time
as either registrations become effective or exemptions become available, and
the Warrant shall then remain exercisable for a period of at least 45
calendar days from the date the Company delivers to the Holder written notice
of the availability of such registrations or exemptions. The Holder agrees
to execute such documents and make such representations, warranties, and
agreements as may be required solely to comply with the exemptions relied
upon by the Company, or the registrations made for the issuance of the
Warrant Shares.
4. COVENANTS OF THE COMPANY.
The Company covenants and agrees that all Warrant Shares will, upon
issuance, be duly authorized and issued, fully paid, nonassessable, and free
from all taxes, liens, and charges with respect to the issue thereof. The
Company further covenants and agrees that during the period within which the
rights represented by this Warrant may be exercised, the Company will at all
times have authorized and reserved for the purpose of issue or transfer upon
exercise of the subscription rights evidenced by this Warrant a sufficient
number of shares of Common Stock to provide for the exercise of the rights
represented this Warrant.
5. ANTIDILUTION ADJUSTMENTS.
The provisions of this Warrant are subject to adjustment as provided in
this Section 5.
(a) The Warrant Exercise Price shall be adjusted from time to time
such that in case the Company shall hereafter:
(i) pay any dividends on any class of stock of the Company
payable in Common Stock or securities convertible into Common
Stock;
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(ii) subdivide its then outstanding shares of Common Stock
into a greater number of shares; or
(iii) combine outstanding shares of Common Stock, by
reclassification or otherwise;
then, in any such event, the Warrant Exercise Price in effect immediately
prior to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price determined by dividing (a) the total
number of shares of Common Stock outstanding immediately prior to such event
(including the maximum number of shares of Common Stock issuable in respect
of any securities convertible into Common Stock), multiplied by the then
existing Warrant Exercise Price, by (b) the total number of shares of Common
Stock outstanding immediately after such event (including the maximum number
of shares of Common Stock issuable in respect of any securities convertible
into Common Stock), and the resulting quotient shall be the adjusted Warrant
Exercise Price per share. An adjustment made pursuant to this subsection
shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, as a result of an adjustment made pursuant to this subsection, the
Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares
of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive) shall determine the
allocation of the adjusted Warrant Exercise Price between or among shares of
such classes of capital stock or shares of Common Stock and other capital
stock. All calculations under this subsection shall be made to the nearest
cent. In the event that at any time as a result of an adjustment made
pursuant to this subsection, the holder of any Warrant thereafter surrendered
for exercise shall become entitled to receive any shares of the Company other
than shares of Common Stock, the Warrant Exercise Price of such other shares
so receivable upon exercise of any Warrant shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock contained in this
Section.
(b) Upon each adjustment of the Warrant Exercise Price pursuant to
Section 5(a) above, the Holder of each Warrant shall thereafter (until
another such adjustment) be entitled to purchase at the adjusted Warrant
Exercise Price the number of shares, calculated to the nearest full share,
obtained by multiplying the number of shares specified in such Warrant (as
adjusted as a result of all adjustments in the Warrant Exercise Price in
effect prior to such adjustment) by the Warrant Exercise Price in effect
prior to such adjustment and dividing the product so obtained by the adjusted
Warrant Exercise Price.
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(c) In case of any consolidation or merger to which the Company is a
party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as
an entirety, or in the case of any statutory exchange of securities with
another corporation (including any exchange effected in connection with a
merger of a third corporation into the Company), there shall be no adjustment
under subsection (a) of this Section above but the Holder of each Warrant
then outstanding shall have the right thereafter to convert such Warrant into
the kind and amount of shares of stock and other securities and property
which such Holder would have owned or have been entitled to receive
immediately after such consolidation, merger, statutory exchange, sale, or
conveyance had such Warrant been converted immediately prior to the effective
date of such consolidation, merger, statutory exchange, sale, or conveyance
and in any such case, if necessary, appropriate adjustment shall be made in
the application of the provisions set forth in this Section with respect to
the rights and interests thereafter of any Holders of the Warrant, to the end
that the provisions set forth in this Section shall thereafter
correspondingly be made applicable, as nearly as may reasonably be, in
relation to any shares of stock and other securities and property thereafter
deliverable on the exercise of the Warrant. The provisions of this
subsection shall similarly apply to successive consolidations, mergers,
statutory exchanges, sales or conveyances.
(d) Upon any adjustment of the Warrant Exercise Price, then and in
each such case, the Company shall give written notice thereof, by first-class
mail, postage prepaid, addressed to the Holder as shown on the books of the
Company, which notice shall state the Warrant Exercise Price resulting from
such adjustment and the increase or decrease, if any, in the number of shares
of Common Stock purchasable at such adjusted Warrant Exercise Price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
6. NO VOTING RIGHTS.
This Warrant shall not entitle the Holder to any voting rights or other
rights as a shareholder of the Company.
7. NOTICE OF TRANSFER OF WARRANT OR RESALE OF THE WARRANT SHARES.
(a) Subject to the sale, assignment, hypothecation, or other transfer
restriction set forth in Section 1 hereof, the Holder, by acceptance hereof,
agrees to give written notice to the Company before transferring this Warrant
or transferring any Warrant Shares of such ▇▇▇▇▇▇'s intention to do so,
describing briefly the manner of any proposed transfer. Promptly upon
receiving such written notice, the Company shall present copies thereof to
the Company's counsel and to counsel to the original purchaser of this
Warrant.
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If in the opinion of each such counsel the proposed transfer may be effected
without registration or qualification (under any federal or state securities
laws), the Company, as promptly as practicable, shall notify the Holder of
such opinion, whereupon the Holder shall be entitled to transfer this Warrant
or to dispose of Warrant Shares received upon the previous exercise of this
Warrant, all in accordance with the terms of the notice delivered by the
Holder to the Company; provided that an appropriate legend may be endorsed on
this Warrant or the certificates for such Warrant Shares respecting
restrictions upon transfer thereof necessary or advisable in the opinion of
counsel and satisfactory to the Company to prevent further transfers which
would be in violation of Section 5 of the Securities Act of 1933, as amended
(the "1933 Act"), and applicable state securities laws; and provided further
that the prospective transferee or purchaser shall execute such documents and
make such representations, warranties, and agreements as may be required
solely to comply with the exemptions relied upon by the Company for the
transfer or disposition of the Warrant or Warrant Shares.
(b) If in the opinion of either of the counsel referred to in this
Section 7, the proposed transfer or disposition of this Warrant or such
Warrant Shares described in the written notice given pursuant to this Section
7 may not be effected without registration or qualification of this Warrant
or such Warrant Shares, the Company shall promptly give written notice
thereof to the Holder and the Holder will limit its activities in respect to
this Warrant or such Warrant shares to such activities as, in the opinion of
both such counsel, are permitted by law.
8. FRACTIONAL SHARES.
Fractional shares shall not be issued upon the exercise of this
Warrant, but in any case where the Holder would, except for the provisions of
this Section, be entitled under the terms hereof to receive a fractional
share, the Company shall, upon the exercise of this Warrant for the largest
number of whole shares then called for, pay a sum in cash equal to the sum of
(a) the excess, if any, of the Market Price on the date of exercise of such
fractional share over the proportional part of the Warrant Exercise Price
represented by such fractional share, plus (b) the proportional part of the
Warrant Exercise Price represented by such fractional share. For purposes of
this Section, the term "Market Price" as of a particular date with respect to
shares of Common Stock of any class or series means the last reported sale
price on such date or, if none, the average of the last reported closing bid
and asked prices on any national securities exchange or quoted in the
National Association of Securities Dealers, Inc.'s Automated Quotations
System ("Nasdaq"), or if not listed on a national securities exchange or
quoted in Nasdaq, the average of the last reported closing bid and asked
prices as reported by Metro Data Company, Inc. from quotations by market
makers in such Common Stock on the Minneapolis-St.▇▇▇▇ local over-the-counter
market.
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9. REGISTRATION RIGHTS.
(a) If at any time after September __, 1998, and prior to the end of
the two-year period following complete exercise of this Warrant or September
__, 2004, whichever occurs earlier, the Company proposes to register under
the 1933 Act (except by a Form S-4 or Form S-8 Registration Statement or any
successor forms thereto or such other form as would not allow the
registration of such shares) or qualify for a public distribution under
Section 3(b) of the 1933 Act, any of its equity securities or debt with
equity features, it will give written notice to all Holders of this Warrant,
any Warrants issued pursuant to Section 2 and/or Section 3(a) hereof, and any
Warrant Shares of its intention to do so and, on the written request of any
such Holder given within twenty (20) days after receipt of any such notice
(which request shall specify the interest in the Warrant Shares intended to
be sold or disposed of by such Holder and describe the nature of any proposed
sale or other disposition thereof), the Company will use its best efforts to
cause all such Warrant Shares, the Holders of which shall have requested the
registration or qualification thereof, to be included in such registration
statement proposed to be filed by the Company; provided, however, that if a
greater number of Warrant Shares is offered for participation in the proposed
offering than in the reasonable opinion of the managing underwriter of the
proposed offering can be accommodated without adversely affecting the
proposed offering, then the amount of Warrant Shares proposed to be offered
by such Holders for registration, as well as the number of securities of any
other selling shareholders participating in the registration, shall be
proportionately reduced to a number deemed satisfactory by the managing
underwriter.
(b) On a one-time basis during the four-year period commencing
September __, 1998 (one year after the Effective Date as defined in the
Underwriting Agreement), upon request by the Holder or Holders of a majority
in interest of this Warrant, of any Warrants issued pursuant to Section 2
and/or Section 3(a) hereof, and of any Warrant Shares, the Company will
promptly take all necessary steps to register on Form S-3 under the 1933 Act
(if such Form is then available to the Company) and the securities laws of
such states as the Holders may reasonably request, the number of Warrant
Shares issued and to be issued upon exercise of the Warrants requested by
such Holders in their request to the Company. The Company shall keep
effective and maintain any registration, qualification, notification, or
approval specified in this subparagraph (b) for such period (not to exceed 9
months) as may be reasonably necessary for such Holder or Holders of such
Warrant Shares to dispose thereof and from time to time shall amend or
supplement the prospectus used in connection therewith to the extent
necessary in order to comply with applicable law.
(c) With respect to each inclusion of securities in a registration
statement pursuant to this Section 9, the Company shall bear the following
A-7
fees, costs, and expenses: all registration, filing and NASD fees, Nasdaq
fees, printing expenses, fees and disbursements of counsel and accountants
for the Company, fees and disbursements of counsel for the underwriter or
underwriters of such securities (if the offering is underwritten and the
Company is otherwise required to bear such fees and disbursements), all
internal expenses, the premiums and other costs of policies of insurance
against liability arising out of the public offering, and legal fees and
disbursements and other expenses of complying with state securities laws of
any jurisdictions in which the securities to be offered are to be registered
or qualified. Fees and disbursements of special counsel and accountants for
the selling Holders, underwriting discounts and commissions, and transfer
taxes for selling Holders and any other expenses relating to the sale of
securities by the selling Holders not expressly included above shall be borne
by the selling Holders.
(d) The Company hereby agrees to indemnify each of the Holders of any
Warrant Shares included in any such registration, and the officers and
directors, if any, who control such Holders, within the meaning of Section 15
of the 1933 Act, against all losses, claims, damages, and liabilities caused
by (1) any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or Prospectus (and as amended or
supplemented if the Company shall have furnished any amendments thereof or
supplements thereto), any Preliminary Prospectus or any state securities law
filings; (2) any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages, or
liabilities are caused by any untrue statement or omission contained in
information furnished in writing to the Company by such Holder or any
underwriter expressly for use therein; and each such Holder by its acceptance
hereof severally agrees that it will indemnify and hold harmless the Company,
each of its directors, each of its officers who signs such Registration
Statement, and each person, if any, who controls the Company, within the
meaning of Section 15 of the 1933 Act, with respect to losses, claims,
damages, or liabilities which are caused by any untrue statement or omission
contained in information furnished in writing to the Company by such Holder
expressly for use therein.
10. ADDITIONAL RIGHT TO CONVERT WARRANT.
(a) The Holder of this Warrant shall have the right to require the
Company to convert this Warrant (the "Conversion Right") at any time after it
is exercisable, but prior to its expiration, into shares of Company Common
Stock as provided for in this Section 10. Upon exercise of the Conversion
Right, the Company shall deliver to the Holder (without payment by the Holder
of any Warrant Exercise Price) that number of shares of Company Common Stock
equal to the quotient obtained by dividing (x) the value of the
A-8
Warrant at the time the Conversion Right is exercised (determined by
subtracting the Warrant Exercise Price for a Warrant Share in effect
immediately prior to the exercise of the Conversion Right from the Fair
Market Value of a Warrant Share immediately prior to the date of the exercise
of the Conversion Right and multiplying that number by the number of Warrant
Shares for which the Conversion Right is being exercised) by (y) the Fair
Market Value of a Warrant Share immediately prior to the exercise of the
Conversion Right.
(b) The Conversion Right may be exercised by the Holder, at any time
or from time to time, prior to the expiration of the Warrant, on any business
day by delivering a written notice in the form attached hereto (the
"Conversion Notice") to the Company at the offices of the Company stating
that the Holder desires to exercise the Conversion Right and specifying (i)
the total number of shares with respect to which the Conversion Right is
being exercised and (ii) a place and date not less than five or more than 20
business days from the date of the Conversion Notice for the closing of such
purchase.
(c) At any closing under Section 10(b) hereof, (i) the Holder will
surrender the Warrant and (ii) the Company will deliver to the Holder (A) a
certificate or certificates for the number of shares of Company Common Stock
issuable upon such conversion, together with cash, in lieu of any fraction of
a share and (B) a new warrant representing the number of shares, if any, with
respect to which the Warrant shall not have been exercised.
(d) For purposes of this Section 10, Fair Market Value of a Warrant
Share as of a particular date (the "Determination Date") shall mean:
(i) If the Company's Common Stock is traded on an exchange or is
quoted on Nasdaq, then the average closing or last sale prices, respectively,
reported for the ten (10) business days immediately preceding the
Determination Date, and
(ii) If the Company's Common Stock is not traded on an exchange or on
Nasdaq but is traded on the over-the-counter market, then the average closing
bid and asked prices reported for the ten (10) business days immediately
preceding the Determination Date.
IN WITNESS WHEREOF, The Sportsman's Guide, Inc. has caused this Warrant
to be signed by its duly authorized officer and this Warrant to be dated
September __, 1997.
THE SPORTSMAN'S GUIDE, INC.
___________________________
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By:
Its:
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THE SPORTSMAN'S GUIDE, INC.
WARRANT EXERCISE
(TO BE SIGNED ONLY UPON EXERCISE OF WARRANT)
The undersigned, the holder of the foregoing Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, _______ shares of the Common Stock of The
Sportsman's Guide, Inc., to which such Warrant relates and herewith makes
payment of $____________ therefor in cash or by certified or cashier's check
and requests that the certificates for such shares be issued in the name of,
and be delivered to _______________________, whose address is set forth below
the signature of the undersigned. If said number of shares shall not be all
the shares purchasable under the Warrant, a new warrant is to be issued in
the name of the undersigned for the balance remaining of the shares
purchasable thereunder.
Name of Warrant Holder:
________________________________
(Please print)
Address of person to whom shares
are to be issued:
________________________________
________________________________
Tax Identification No. or Social
Security No. of person to whom
shares are to be issued:
________________________________
Signature: ____________________
NOTE: THE ABOVE SIGNATURE SHOULD
CORRESPOND EXACTLY WITH THE NAME
OF THE WARRANT HOLDER AS IT
APPEARS ON THE FIRST PAGE OF THE
WARRANT OR ON A DULY EXECUTED
WARRANT ASSIGNMENT
Dated: ________________________
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THE SPORTSMAN'S GUIDE, INC.
WARRANT ASSIGNMENT
(TO BE SIGNED ONLY UPON TRANSFER OF WARRANT)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________, the assignee, whose address is , and
whose tax identification or social security number is
, the right represented by the foregoing Warrant to purchase _________
shares of the Common Stock of The Sportsman's Guide, Inc., to which the
foregoing Warrant relates and appoints ________ attorney to transfer said
right on the books of The Sportsman's Guide, Inc., with full power of
substitution in the premises. If said number of shares shall not be all the
shares purchasable under the Warrant, a new warrant is to be issued in the
name of the undersigned for the balance remaining of the shares purchasable
thereunder.
Name of Warrant Holder:
______________________________
(Please print)
Address of Warrant Holder:
______________________________
______________________________
Tax Identification No. or Social
Security No. of Warrant Holder:
______________________________
Signature _________________
NOTE: THE ABOVE SIGNATURE SHOULD
CORRESPOND EXACTLY WITH THE NAME
OF THE WARRANT HOLDER AS IT APPEARS
ON THE FIRST PAGE OF THE WARRANT OR
ON A DULY EXECUTED WARRANT
ASSIGNMENT
Dated: ______________________
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THE SPORTSMAN'S GUIDE, INC.
CONVERSION NOTICE
(TO BE EXECUTED ONLY UPON CONVERSION OF WARRANT PURSUANT TO SECTION 10)
The undersigned hereby irrevocably elects to exercise the Conversion Right
as provided for in Section 10 of the foregoing Warrant, with respect to _____
of the previously unexercised shares, which shall result pursuant to the
conversion provisions of Section 10 in the purchase thereunder of ______
shares of Common Stock of The Sportsman's Guide, Inc., and herewith tenders
the Warrant in full payment for the purchased shares, as provided for in
Section 10 of the foregoing Warrant. If said number of shares shall not be
all the shares purchasable under the Warrant, a new warrant is to be issued
in the name of the undersigned for the remaining balance of the unexercised
shares.
Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional share, to:
Name of Warrant Holder:
________________________
(Please print)
Address of Warrant Holder:
________________________
________________________
Tax Identification No. or Social
Security No. of Warrant Holder:
________________________
Signature _____________
NOTE: THE ABOVE SIGNATURE SHOULD
CORRESPOND EXACTLY WITH THE NAME OF
THE WARRANT HOLDER AS IT APPEARS ON
THE FIRST PAGE OF THE WARRANT OR ON
A DULY EXECUTED WARRANT ASSIGNMENT
Dated: ____________________
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