1,500,000 UNITS CONSISTING OF 1,500,000 SHARES OF COMMON STOCK
AND
1,500,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
BUFFALO WILD WINGS, INC.
UNDERWRITING AGREEMENT
_________, 1998
▇. ▇. ▇▇▇▇▇▇▇▇ & Company
As Representative of the Several Underwriters
One Financial Plaza
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Buffalo Wild Wings, Inc., an Minnesota corporation (the "COMPANY"),
proposes to issue and sell to you (the "REPRESENTATIVE") and the other
Underwriters named in Schedule I hereto, an aggregate of 1,500,000 Units
("UNITS"), each Unit consisting of one share of Common Stock ("COMMON STOCK")
and one Redeemable Common Stock Purchase Warrant (the "WARRANT") exercisable
for a period of four (4) years commencing on the effective date of the
Registration Statement to purchase one share of Common Stock of the Company
at a price of $8.00 per share. The Warrants shall be immediately exercisable
and are detachable immediately after the effective date of the Registration
Statement under the Act. The Warrants shall be redeemable at the option of
the Company at $.01 per Warrant at any time ninety (90) days after the
effective date and upon thirty (30) days' prior notice in writing of the
Company's intention to redeem, provided that the average closing bid price
for the Common Stock exceeds $9.25 per share (subject to adjustment) for any
20 consecutive trading days prior to such notice, on such other terms set
forth in the Preliminary Prospectus (defined herein).
The 1,500,000 Units to be purchased from the Company are referred to
herein as the "FIRM UNITS." In addition, solely for the purpose of covering
overallotments with respect to the Firm Units, the Company proposes to grant
to the Underwriters, for their account, the option to purchase up to an
additional 225,000 Units (the "OPTION UNITS"). The Firm Units and any Option
Units purchased pursuant to this Underwriting Agreement are herein referred
to as the "UNITS."
The Company hereby confirms its agreement with respect to the purchase of
the Units by the Underwriters.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the several Underwriters as
follows:
(a) The Company has prepared in conformity in all material respects
with the requirements of the Securities Act of 1933, as amended (the
"ACT"), and the applicable rules and regulations of the Securities and
Exchange Commission (the "COMMISSION") thereunder, and has filed with the
National Office of the Commission in Washington, D.C., a registration
statement on Form SB-2, File No. 333-________, including a Prospectus
relating to the Units, and will file with the Commission before the
effective date of the registration statement one or more amendments
thereto. Copies of such registration statement and amendments (including
all forms of the preliminary prospectus) have been delivered to the
Representative. Any such preliminary prospectus (as described in Rule 430
under the Act) included at any time as part of such registration statement
is herein called a "PRELIMINARY PROSPECTUS." As used herein, the term
"REGISTRATION STATEMENT" shall, except where the context otherwise
requires, mean said registration statement (and all exhibits thereto) as
amended by all amendments filed prior to its effective date; and the term
"PROSPECTUS" shall, except where the context otherwise requires, mean said
final prospectus on file with the Commission when the Registration
Statement becomes effective (except that, if the prospectus filed by the
Company pursuant to Rule 424(b) under Act shall differ from the prospectus
included in the Registration Statement, the term "PROSPECTUS" shall, except
where the context otherwise requires, mean the prospectus so filed pursuant
to Rule 424(b) from and after the date on which it shall have been first
used.) Reference herein to the Registration Statement, to any Preliminary
Prospectus, to the Prospectus or to any amendment of or supplement to the
Prospectus includes all documents and information incorporated therein by
reference.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus, and each Preliminary Prospectus, at
the time of filing thereof with the Commission, did not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
PROVIDED, HOWEVER, that none of the representations and warranties in this
subparagraph shall apply to statements in, or omissions from, any
Preliminary Prospectus which are based upon and conform to written
information furnished to the Company by or on behalf of the Representative
specifically for use in the preparation thereof.
(c) When the Registration Statement becomes effective and at all
times subsequent thereto up to each Closing Date (defined hereinafter) and
upon the effective date of any post-effective amendment to the Registration
Statement, the Registration Statement and the Prospectus, and any
amendments thereof or supplements thereto, will in all material respects
conform to the requirements of the Act and of the applicable rules
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and regulations of the Commission thereunder (the "RULES AND REGULATIONS").
When the Registration Statement becomes effective and at all times
subsequent thereto, up to each Closing Date and the effective date of any
post-effective amendment to the Registration Statement, neither the
Registration Statement (as amended, if the Company shall have filed with
the Commission any post-effective amendment thereto), nor the Prospectus,
will include an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; PROVIDED, HOWEVER, that the Company makes no
representations or warranties as to information contained in or omitted
from the 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 the Representative specifically for use in the
preparation thereof. There is no contract or document required to be
described in the Registration Statement or Prospectus, or to be filed as an
exhibit to the Registration Statement, which was not described or filed as
required.
(d) [Deleted]
(e) KPMG Peat Marwick LLP, the accountants who have examined certain
financial statements and schedules of the Company, filed and to be filed
with the Commission as part of the Registration Statement and the
Prospectus, are independent public accountants within the meaning of the
Act and the Rules and Regulations. The financial statements of the
Company, together with related notes and summaries thereof, set forth in
the Registration Statement and Prospectus, in all material respects present
fairly the financial position and results of operations and changes in
financial position of the Company as of the dates and for the periods
indicated. To the Company's knowledge, all such financial statements
(including the related notes) have been prepared in accordance with
generally accepted accounting principles consistently applied throughout
the periods concerned except as may be otherwise stated therein.
(f) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and other than as
described in the Registration Statement and Prospectus, (i) the Company has
not incurred any material liabilities or obligations, contingent or
otherwise, or entered into any material transaction, except obligations
incurred in the ordinary course of business that in the aggregate are not
material; (ii) the Company has not paid or declared any dividend or other
distribution on its Common Stock; (iii) there has not been any change in
the Common Stock (except pursuant to currently outstanding options or
warrants described in the Prospectus) or increase in the long-term debt of
the Company (including any capitalized lease obligation), or any issuance
of options, warrants, or rights to purchase Common Stock of the Company, or
any material adverse change in the business, financial position, results of
operations, key personnel, capitalization, properties, or net worth of the
Company, considered as a whole; and (iv) no material loss or damage
(whether or not insured) to the property of the Company has been sustained.
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(g) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation, with full power and authority to own its properties and
conduct its business as it is currently being carried on and as described
in the Prospectus and is duly qualified to do business as a foreign
corporation and is in good standing in all states or jurisdictions in which
the ownership or lease of property or the conduct of its business requires
such qualification and in which the failure to so qualify would have a
material adverse effect on its business condition (financial or other), or
properties. To the Company's knowledge, the Company has all necessary and
material authorizations, approvals and orders of and from all governmental
regulatory officials and bodies to own its properties and conduct its
business as described in the Prospectus and is conducting its business in
substantial compliance with all applicable laws, rules and regulations of
the jurisdictions in which it is conducting business.
(h) The Company is not in violation of its Articles of Incorporation,
Bylaws, or other governing documents and is not in default in the
performance of any obligation, agreement or condition contained in any
lease agreement or in any bond, debenture, note or any other evidence of
indebtedness or in any material contract, indenture, loan agreement or
license where such default would have a material adverse effect on the
business condition (financial or other) or properties of the Company,
considered as a whole which violation or default has not been waived. The
consummation of the transactions herein contemplated and the fulfillment of
the terms hereof will not conflict with or result in a material breach of
any of the terms or provisions of, or constitute a material default under,
the Articles of Incorporation or Bylaws, or other governing documents of
the Company, or any indenture, mortgage, agreement or other instrument to
which the Company is a party or by which it is bound, or to which any
property of the Company is subject, or conflict with or violate any law or
any order, rule or regulation, applicable to the Company of any court, or
of any federal or state regulatory body or administrative agency, having
jurisdiction over the Company or any of its properties which conflict,
breach or default has not been waived.
(i) The Company will, as of each Closing Date, have the duly
authorized and outstanding capitalization set forth in the Prospectus. The
outstanding Common Stock of the Company is duly authorized and validly
issued, fully paid and nonassessable. The Common Stock of the Company
conform in all material respects in substance to all statements in relation
thereto contained in the Registration Statement and the Prospectus. The
Company has all requisite power and authority (corporate and other) to
issue, sell, and deliver the Units, including the Common Stock issuable
upon exercise of the Warrants, in accordance with and upon the terms and
conditions set forth in this Agreement and in the Registration Statement
and Prospectus; and all corporate action required to be taken by the
Company for the due and proper authorization, issuance, sale, and delivery
of the Units, including the Common Stock issuable upon exercise of the
Warrants, has been validly and sufficiently taken.
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(j) The Company has full legal power, right and authority (corporate
and other) to enter into this Underwriting Agreement and to perform and
discharge its obligations hereunder, and this Underwriting Agreement has
been duly authorized, executed and delivered on behalf of the Company and
is the valid and binding obligation of the Company, subject, as
enforceability may be limited by, applicable bankruptcy, insolvency,
moratorium and other laws affecting the rights of creditors generally, and
except as enforceability of the indemnification or contribution provisions
may be limited by federal or state securities laws or principles of public
policy.
(k) The Company will apply the proceeds of the sale of the Units by
it substantially to the purposes set forth in the Prospectus.
(l) To the Company's knowledge, no approval, authorization, consent
or order of any public board or body (other than in connection with or in
compliance with the provisions of the Act and the securities or Blue Sky
laws of various jurisdictions) is legally required for the sale of the
Units by the Company.
(m) The Company's only subsidiary is bw-3 Franchise Systems, Inc.
(n) The Company has good and marketable title, free and clear of all
liens, encumbrances, equities, charges or claims, to all of the property,
real and personal, described in the Registration Statement and Prospectus
as being owned by it, except as otherwise set forth in the Registration
Statement and Prospectus and except for such as are not in the aggregate
material in relation to the property of the Company considered as a whole
and do not materially affect the value of such property, and, except as
otherwise stated in the Registration Statement and Prospectus, has valid
and binding leases to the real and/or personal property described in the
Registration Statement and Prospectus as under lease to it with such
exceptions as could not materially interfere with the conduct of the
business.
(o) There are no actions, suits or proceedings or investigations
pending before any court or governmental agency, authority or body to which
the Company is a party or of which the business or property of the Company
is the subject which, if decided adversely, would have a material adverse
effect on the general affairs, condition (financial or other), business,
properties, net worth, or results of operations of the Company, and, to the
best of the Company's knowledge, no such actions, suits or proceedings are
threatened.
(p) The Company has not taken or 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
as defined in the Securities Exchange Act of 1934, as amended, of the price
of the Company's securities to facilitate the sale or resale of the Units.
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(q) The Company has not, directly or indirectly, at any time during
the past five years (i) made any contributions to any candidate for
political office, or failed to disclose fully any contribution in violation
of law, or (ii) made any payment to any state, Federal or foreign
governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or permitted by
applicable law.
(r) Except as described in the Prospectus and to the knowledge of the
Company, the Company owns or possesses the right to utilize all the
patents, patent applications, trademarks, service marks, trade names,
trademark registrations, service ▇▇▇▇ registrations, copyrights, licenses,
inventions, trade secrets, and similar rights necessary for the present
conduct of its business as described in the Prospectus, without any known
conflict with the asserted rights of others in respect of such matters.
Except as may be stated in the Prospectus, the Company has not received any
notice of any infringement of, or license or similar fees for, any patents,
patent applications, trademarks, service marks, trade names, trademark
registrations, service ▇▇▇▇ registrations, copyrights, licenses,
inventions, trade secrets, or other similar rights of others, or any claim
with respect thereto, which would have a material adverse effect on the
business of the Company.
(s) The Company has filed all necessary federal, state and foreign
income and franchise tax returns or if not filed, has obtained all
necessary extensions and has paid all taxes as shown as due on any such
returns; and the Company has no knowledge of any material tax deficiency
which has been asserted against the Company, and, to the best of the
Company's knowledge, the Company has no material obligation to pay any
taxes except as may be stated in the Prospectus.
(t) All prior offers or sales of the securities of the Company were
exempt from registration under the Act and all applicable state blue sky
laws.
(u) No securities of the Company have been sold within three years
prior to the date hereof, except as set out in Item 26 of Part II of the
Registration Statement.
(v) The Company knows of no outstanding claims for services in the
nature of a finder's fee or origination fee with respect to the sale of the
Units or Underwriter's Warrants (defined hereinafter) hereunder resulting
from its acts for which the Underwriters may be responsible. The Company
will indemnify the Underwriters for and hold the Underwriters harmless
against any claim for such finder's fees or origination fees.
(w) All material contracts or agreements are properly filed as an
exhibit to the Registration Statement. Each contract to which the Company
is a party and which is filed as a part of or incorporated by reference
into the Registration Statement has been duly and validly executed, is in
full force and effect in all material respects in accordance with its
terms, except as enforceability may be limited by federal or state laws or
principles of public policy, and none of such contracts have been assigned
by the Company, and the
6
Company knows of no present situation or condition or fact which would
prevent compliance by the Company with the terms of such contracts, as
amended to date. Except for amendments or modifications of such contracts
in the ordinary course of business, the Company has no intention of
exercising any right which it may have to cancel any of its obligations
under any of such contracts, and has no knowledge that any other party to
any of such contracts has any intention not to render full performance
under such contracts.
(x) The Company maintains insurance which is in full force and
effect, of the types and in an amount, in the judgment of the Company and
except as otherwise disclosed in the Prospectus, which is reasonable for
its present business taking into account its operations and assets,
including, but not limited to, insurance covering all personal property
owned or leased by the Company against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against.
(y) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii)
access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets
is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(z) All material transactions between the Company and its officers,
directors, promoters, and its shareholders who beneficially own 5% or more
of any class of the Company's voting securities required to be disclosed in
the Prospectus have been accurately disclosed in the Prospectus, and the
terms of each such transaction are fair to the Company and no less
favorable to the Company than the terms that could have been obtained from
unrelated parties.
2. PURCHASE OF THE UNITS BY THE UNDERWRITERS.
(a) On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth, the
Company agrees to sell to the several Underwriters, and the Underwriters,
severally and not jointly, agree to purchase from the Company, the Firm
Units. The purchase price for each Firm Unit shall be $5.98 per Unit.
(b) The Company hereby grants to the Underwriters, for their account,
an option to purchase from the Company, solely for the purpose of covering
overallotments in the sale of Firm Units, all or any portion of an
aggregate of 225,000 Option Units for a period of 45 days from the date
hereof at the same purchase price per Option Unit as the purchase price per
Firm Unit set forth in Section 2(a) above.
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3. DELIVERY OF AND PAYMENT FOR UNITS. Delivery of certificates for
the Firm Units and payment therefor shall be made at the offices of
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A. (or such other place as mutually may be agreed
upon), at 10:00 a.m., Minneapolis, Minnesota time, on or before the third
full business day following the effective date of the Registration Statement
(the "FIRST CLOSING DATE").
The option to purchase Option Units granted in Section 2(b) hereof may
be exercised at any time during the 45-day term thereof by written notice to
the Company from the Representative. Such notice shall set forth the
aggregate number of Option Units as to which the option is being exercised,
and the time and date, not earlier than either the First Closing Date or the
second business day after the day on which the option shall have been
exercised but not later than the third full business day after the date of
such exercise, as determined by the Representative, when the Option Units are
to be delivered (the "SECOND CLOSING DATE"). Delivery and payment for such
Option Units to be purchased by the Representative are to be at the offices
set forth above for delivery and payment of the Firm Units. The First
Closing Date and the Second Closing Date are sometimes herein individually
called the "CLOSING DATE" and collectively called the "CLOSING DATES."
Delivery of facsimile certificates for the Units shall be made by or on
behalf of the Company to the Representative against payment by the
Representative of the purchase price therefor by wire transfer or certified
or official bank check in clearing house funds to the order of the Company.
The certificates for such Units shall be registered in such names and
denominations as the Representative shall have requested at least two full
business days prior to the applicable Closing Date. Time shall be of the
essence and delivery at the time and place specified in this Agreement is a
further condition to your obligations hereunder.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with
each Underwriter that:
(a) The Company will use its best efforts to cause the Registration
Statement to become and remain effective, up to each Closing Date. The
Company will notify the Representative promptly of any request by the
Commission for any amendment of or supplement to the Registration Statement
or the Prospectus or for additional information, will prepare and file with
the Commission, promptly upon the Representative's request, any amendments
of or supplements to the Registration Statement or Prospectus which, in the
Representative's reasonable opinion, may be necessary or advisable in
connection with the distribution of the Units; and will not file any
amendments and supplements to the Registration Statement as originally
filed with the Commission unless it shall first have delivered copies of
such amendments or supplements to the Representative, or file any such
amendment or supplement to which the Representative shall have reasonably
objected in writing to the Company. The Company will immediately advise
the Representative by telephone, confirming such advice in writing (i) when
notice is received from the Commission that the Registration Statement has
become effective, (ii) of any order suspending the effectiveness of the
Registration Statement or of any proceedings or
8
examination under the Act, as soon as the Company is advised thereof, and
(iii) of any order or communication of any public authority addressed to
the Company suspending or threatening to suspend qualification of the Units
for sale in any state. The Company will use its best efforts to prevent
the issuance of any stop order or other such order, and, should a stop
order or other such order be issued, to obtain as soon as possible the
lifting thereof.
(b) If, at any time when a prospectus relating to the Units is
required to be delivered under the Act, any event shall have occurred as a
result of which, in the opinion of counsel for the Company or in the
reasonable opinion of counsel for the Representative, the Prospectus, as
then amended or supplemented, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or if it is
necessary at any time to amend or supplement the Prospectus to comply with
the Act, the Company will notify the Representative promptly and prepare
and file with the Commission an appropriate amendment or supplement.
(c) The Company will use its best efforts to take or cause to be
taken all necessary action and furnish to whomever the Representative may
reasonably direct such information as may be required in qualifying the
Units for offering and sale under the Blue Sky or securities laws of such
states as the Representative and the Company shall designate. The
necessary legal work for such qualifications will be undertaken by counsel
for the Company, at the Company's expense. The Company shall not, however,
be required to register or qualify as a foreign corporation or as a dealer
in securities or, except as to matters and transactions related to the
offering or sale of the Units, consent to service of process in any state.
(d) The Company will furnish to each of the several Underwriters,
from time to time and without charge, copies of the Registration Statement,
each Preliminary Prospectus, the Prospectus (including all documents from
which information is incorporated by reference), and all amendments of and
supplements to any of such documents, in each case as soon as available and
in such quantities as the Representative may from time to time reasonably
request for the purposes contemplated by the Act. The Company authorizes
the several Underwriters and all dealers to whom any of the Units may be
sold by the Underwriters to use the Preliminary Prospectuses and
Prospectuses supplied, as from time to time amended or supplemented, in
connection with the sale of the Units as and to the extent permitted by
federal and applicable state and local securities laws.
(e) The Company will furnish to the Representative two copies of the
Registration Statement and all amendments thereof which are signed and
include all exhibits and schedules.
9
(f) The Company will, for a period of five (5) years after the
Effective Date, furnish directly to the Representative, and to each
Underwriter who may so request in writing, as soon as the same shall be
sent to shareholders generally, copies of all annual or interim shareholder
reports of the Company, and will, for the same period, also furnish the
Representative, and to each Underwriter who may so request in writing, with
the following:
(i) two copies of any report, application, or document
(other than exhibits, which, however, will be furnished on request)
which the Company shall file with the Commission or any securities
exchange;
(ii) as soon as the same shall be sent to shareholders
generally, copies of each communication which shall be sent to
shareholders; and
(iii) from time to time such other information concerning the
Company as the Representative may reasonably request, provided that
the Company shall not be required to furnish any information pursuant
hereto that is not furnished to its shareholders or not otherwise made
publicly available.
(g) The Company will, for a period of five (5) years after the
Effective Date, furnish directly to the Representative, quarterly profit
and loss statements, reports of the Company's cash flow filed by the
Company with the Commission.
(h) The Company will make generally available to its security holders
as soon as practicable, but in any event not later than eighteen months
after the effective date of the Registration Statement, a statement of
earnings of the Company (which need not be audited) complying with Section
11(a) of the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158).
(i) Whether or not this Agreement becomes effective or is terminated
or cancelled or the sale of the Units to the Representative is consummated,
and regardless of the reason for or cause of any such termination,
cancellation, or failure to consummate, the Company will pay or cause to be
paid (A) all expenses (including any transfer taxes) incurred in connection
with the delivery to the Representative of the Units, (B) all expenses and
fees (including, without limitation, fees and expenses of the Company's
accountants and counsel, excluding, however, fees of the Underwriters'
counsel) in connection with the preparation, printing, filing, delivery,
and shipping of the Registration Statement (including the financial
statements therein and all amendments, schedules, and exhibits thereto),
each Preliminary Prospectus, the Prospectus, and any amendment thereof or
supplement thereto, (C) all fees and expenses incurred by the Company in
connection with the Registration Statement, including all Company counsel
fees, (D) fees and expenses of the Company's counsel, incurred in
connection with the qualification of the Units for offering and sale by the
Underwriters or by dealers under the securities or Blue Sky laws of the
states and other jurisdictions designated in accordance with Section 4(c)
10
hereof, (E) subject to the further provisions of this Section 4(i), all
fees and expenses, including all counsel fees, excluding, however, fees of
the Underwriters' counsel, incurred in connection with the review of the
offering by the National Association of Securities Dealers, Inc. and
listing fees, if any, (F) all costs and expenses incident to qualification
of the Common Stock and the Warrants with The Nasdaq National Market, and
(G) postage and express charges, due diligence meetings for the investment
community and other expenses in connection with delivery of the Preliminary
and Final Prospectus to the Underwriters and Blue Sky Registrations,
filings and legal expenses. In addition to and not in lieu of the
foregoing, the Company shall pay to the Representative on each Closing
Date, for out-of-pocket expenses (including fees of Representative's
counsel), a nonaccountable expense allowance equal to two percent (2%) of
the aggregate purchase price for the Units sold to all the Underwriters on
each Closing Date, less the $10,000 refundable retainer (the "Retainer")
previously paid by the Company, receipt of which is acknowledged by the
Representative. If the Underwriters withdraw from the sale of the Units as
herein proposed for any reason other than their inability to sell the Units
and through no other fault of their own, or if the sale of the Units as
herein proposed is abandoned by the Company, the Company will reimburse the
Representative in the amount of all accountable expenses (including fees
and disbursements of counsel), in excess of the $10,000 Retainer, incurred
by the Representative in connection with the contemplated purchase, offer,
and sale of the Units, including without limitation, expenses incurred in
their investigation, preparation to market, and marketing of the Units, and
in contemplation of performing and in performance of its obligations
hereunder, up to an aggregate of $20,000, such expenses and fees to be
evidenced by appropriate receipts, invoices, or other documentation.
Should the offering as contemplated herein not occur, and should the
Representative's accountable expense not exceed the amount of the Retainer,
the Representative shall refund to the Company the difference between the
Retainer amount and its accountable expenses.
(j) The Company will cause all officers, directors and shareholders
of the Company to furnish to the Representative, on or prior to the date of
this Agreement, a letter or letters, in form and substance satisfactory to
counsel for the Representative, pursuant to which each such person shall
agree not to offer for sale, sell, distribute or otherwise dispose of any
securities of the Company for a period of 180 days from the date hereof.
(k) The Company will not, during the 180 days following the effective
date of the Registration Statement, except with the Representative's prior
written consent, offer for sale, sell, distribute, or otherwise dispose of
any Common Stock or sell or grant options, rights, or warrants with respect
to any Common Stock (except for the grants, options, rights, warrants or
convertible securities pursuant to the Company's 1995 Stock Option Plan or
sales upon the exercise of options or warrants or the conversion of
convertible notes outstanding on the date hereof), otherwise than in
accordance with this Agreement or as contemplated by the Prospectus. The
Company shall not register the
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Common Stock or options underlying such 1995 Stock Option Plan within the
180 day period immediately following the date hereof.
(l) The Company authorizes the Underwriters and all dealers to whom
any of the Units may be sold by the Underwriters in connection with the
distribution of the Units, to use the Prospectus as from time to time
amended or supplemented in connection with the offering and sale of the
Units and in accordance with the applicable provisions of the Act and the
applicable Rules and Regulations and applicable state Blue Sky or
securities laws.
(m) The Company shall not request an effective date nor allow the
Registration Statement to be declared effective without the prior approval
of the Representative.
(n) Within the time during which the Prospectus is required to be
delivered under the Act, the Company will comply, at its own expense, with
all requirements imposed upon it by the Act, by the Rules and Regulations,
by the Exchange Act, and by any order of the Commission, so far as
necessary to permit the continuance of sales or dealings in the Units.
(o) The Company shall file an application and take all other steps
necessary to have the Common Stock and Warrants actually listed on The
Nasdaq National Market on or prior to the effective date of the
Registration Statement under the Act.
(p) The Company will reserve and keep available that maximum number
of its authorized but unissued shares of Common Stock which are issuable
upon exercise of Warrants and the Underwriter's Warrants during the term of
the Warrants and the Underwriter's Warrants (as described in Section 12
hereof).
(q) Prior to the Closing Date, no discussions will be held by
officers or directors of the Company with any member of the news media and
no news release or other publicity about the Company will be issued or
authorized by the Company without prior approval of the Company's and the
Representative's respective legal counsel; further, the Company will use
its best efforts to prevent discussions by any affiliate or associate of
the Company with any member of the news media and the Company will use its
best efforts to prevent the issuance of any news release or other publicity
by any affiliate or associate of the Company without the prior approval of
the Company's and the Representative's respective legal counsel.
(r) The Company shall have obtained a CUSIP number for the Units (and
its components) prior to the effective date of the Registration Statement
under the Act.
(s) The Company shall supply to the Representative, and its legal
counsel, at the Company's cost, one complete bound volume each of all of
the documents relating to
12
the public offering, within a reasonable time after the Closing Date, not
to exceed four (4) months. The volume shall be hard cover bound in book
format.
(t) The Company will apply the proceeds from the sale of the Units by
it to the purposes and in the manner set forth in the Registration
Statement and, pending such application, shall invest such net proceeds
only in one or more of the following, except as otherwise provided by prior
written consent of the Underwriters: (i) interest-bearing obligations
issued by the United States Government or issued by an agency or
instrumentality of the United States Government and guaranteed by the
United States Government and having a maturity not in excess of one year,
(ii) interest-bearing domestic commercial paper having a maturity of not
more than 365 days and, at the time of purchase by the Company, rated
investment grade by ▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's
Corporation, (iii) interest-bearing certificates of deposit issued by a
commercial bank chartered by the United States Government or by any state
of the United States having shareholders' equity of at least $500,000,000
except that the foregoing notwithstanding, the Company may invest no more
than $100,000 of such net proceeds in certificates of deposit issued by any
such commercial bank regardless of shareholders' equity, and (iv) shares or
other units of interest in a registered open-ended investment company the
assets of which aggregate at least $200,000,000 and are invested solely in
so-called "money market" obligations.
(u) The Company shall supply to the Representative and its counsel
such financial statements, contracts and other corporate documents as the
Representative or its counsel may reasonably request, and the Company shall
make reasonably available for consultation, such persons involved with the
Company's business as the Representative or its counsel shall deem
necessary in connection with the Representative's due diligence examination
of the Company.
(v) The President of the Company will certify that projections
presented to the Representative for its review were prepared in good faith
and represent the President's best present estimate of the Company's
financial condition following completion of the Initial Public Offering.
The President of the Company shall also provide the Representative with her
assurance that the proceeds of the Initial Public Offering are sufficient
to fund the Company over the next twelve months from the date of receipt.
(w) All documents to be filed with the Commission shall be submitted
to the Representative and its counsel for prior approval and no amendment
will be made to the Registration Statement or to any preliminary or final
prospectus without the prior consent of such counsel, which approval and
consent shall not be unreasonably withheld.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters herein shall be subject to the accuracy of the
representations and warranties on the part of the Company herein as of the date
hereof, and as of each Closing Date, to the accuracy of the written statements
of Company officers made pursuant to the provisions hereof, to the
13
performance by the Company of its obligations hereunder and to the following
additional conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 P.M., Minneapolis, Minnesota time, on the date of this Agreement
or on such later time and date as shall be satisfactory to the
Representative, as the representative of the several Underwriters, no stop
order suspending the effectiveness of the Registration Statement or any
amendment thereof or supplement or the qualification of the Units for
offering or sale shall have been issued and no proceedings for that purpose
shall have been instituted or shall be pending or shall be threatened by
the Commission or by any state securities authority, and any request of the
Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to
the Representative's satisfaction.
(b) The Representative shall not have advised the Company that the
Registration Statement or Prospectus, or any amendment thereof or
supplement thereto, contains an untrue statement of fact that, in the
Representative's reasonable opinion, is material, or omits to state a fact
that, in the Representative's reasonable opinion, is material and is
required to be stated therein or is necessary to make the statements
therein not misleading provided that this Section 5(b) shall not apply to
statements in, or omissions from, the Registration Statement or Prospectus,
or any amendment thereof or supplement thereto that are based upon and
conform to written information provided by the Representative specifically
for use in the Registration Statement or Prospectus.
(c) On or prior to each Closing Date, the form and validity of the
Units, the legality and sufficiency of the corporate proceedings and
matters relating to the incorporation of the Company and other matters
incident to the issuance of the Units, the form of the Registration
Statement and the Prospectus and of any amendments thereof or supplements
thereto filed prior to such Closing Date (other than financial statements
and schedules and other financial or statistical data included therein),
the authorization, execution, and delivery of this Agreement and the
description of the Units contained in the Prospectus shall have been
reasonably approved by the Representative. In connection with such
determination, the Company shall have furnished to the Representative such
documents as the Representative may have requested for the purpose of
enabling the Representative to pass upon such matters.
(d) On each Closing Date there shall have been furnished to the
Representative, the opinion (addressed to the Underwriters) of ▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇, P.A., counsel for the Company, dated such Closing Date, and in form
reasonably satisfactory to counsel for the Underwriters, to the effect
that:
(i) The Company (and any subsidiary) is a corporation duly
incorporated, validly existing and in good standing under the laws of
its state of incorporation, with corporate power and authority to own
or lease its properties and conduct its
14
business as described in the Prospectus. To such counsel's knowledge,
the Company's sole subsidiary is bw-3 Franchise Systems, Inc.
(ii) The authorized capital stock of the Company as of the date
of this Agreement is as set forth in the Prospectus. To such
counsel's knowledge, the outstanding shares of the Common Stock of the
Company have been duly authorized and validly issued and are fully
paid and nonassessable. The Units (and their components) have been
duly authorized and, upon issuance, delivery and payment therefor as
described in this Agreement, will be validly issued, fully paid and
nonassessable. The shares of Common Stock underlying the Warrants
have been duly authorized and reserved for issuance and when issued,
sold and delivered in accordance with the terms of the Warrant
Agreement, will be validly issued, fully paid and nonassessable. The
issuance, sale and delivery of the Underwriter's Warrant has been duly
authorized and the shares (the "WARRANT SHARES") of Common Stock
issuable upon the exercise thereof have been reserved for issuance
upon such exercise. The Warrant Shares, when issued, sold and
delivered in accordance with the terms of the Underwriter's Warrant,
will be validly issued, fully paid and nonassessable. No preemptive
rights of, or rights of refusal in favor of, stockholders of the
Company exist with respect to the Units (or any component thereof),
the Underwriter's Warrant or the Warrant Shares, or the issue and sale
thereof, pursuant to the Company's Articles of Incorporation or
Bylaws.
(iii) The authorized securities of the Company conform as to
legal matters in all material respects to the description thereof set
forth in the Prospectus under the caption "Description of Securities."
The form of stock and warrant certificate filed as Exhibits 4.1 and
4.2, respectively, to the Registration Statement comply as to form
with the applicable provisions of the Minnesota Business Corporation
Act.
(iv) The Registration Statement has become effective under the
Securities Act and, to such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement or
suspending or preventing the use of the Prospectus is in effect and,
to such counsel's knowledge, no proceedings for that purpose have been
instituted or are pending by the Commission.
(v) To such counsel's knowledge, the Registration Statement and
the Prospectus comply as to form in all material respects with the
requirements of the Securities Act and with the Rules and Regulations,
except the financial statements, the notes thereto and the related
schedules and other financial and statistical data contained therein,
as to which counsel need express no opinion.
(vi) Counsel knows of no contracts, leases, documents or pending
legal proceedings that are required to be described in the Prospectus
or to be filed as exhibits to the Registration Statement that are not
so described or filed.
15
(vii) The Underwriting Agreement, the Warrant Agreement and
the Underwriter's Warrant have been duly authorized by all requisite
corporate action, executed and delivered by the Company and constitute
the valid and binding obligations of the Company enforceable in
accordance with their respective terms, except as enforceability is
limited.
(viii) The execution and delivery of the Underwriting
Agreement and the issue and sale of the Underwriter's Warrant, the
Units (and their components) and the shares underlying the
Underwriter's Warrant will not violate or conflict with the Articles
of Incorporation or the Bylaws of the Company or any material
provision of any material contract or instrument filed as an exhibit
to the Registration Statement to which the Company is a party or by
which the Company is bound or to such counsel's knowledge (i) any law
of the United States or the State of Minnesota, (ii) any rule or
regulation of any governmental authority or regulatory body of the
United States or the State of Minnesota, or (iii) any judgment, order
or decree known to us and applicable to the Company of any court or
governmental authority.
(ix) No holders of capital stock of the Company, or securities
convertible into capital stock of the Company, have the right to cause
the Company to include such holder's capital stock in the Registration
Statement pursuant to the Company's Articles of Incorporation or
Bylaws or any contract or agreement.
(x) No consent, approval, authorization or order of, and no
notice to or filing with, any governmental agency or body or any court
is required to be obtained or made by the Company for the issue and
sale of the Units pursuant to the Underwriting Agreement, except such
as have been obtained or made and such as may be required under
applicable state securities or blue sky laws or by the National
Association of Securities Dealers, Inc. (as to latter which counsel
need express no opinion).
Although counsel to the Company is not opining to and cannot guarantee
the accuracy and completeness of the statements contained in the
Registration Statement or in the Prospectus, and such counsel makes no
representation that they have independently verified the accuracy,
completeness, or fairness of such statements, in connection with such
counsel's representation of the Company in the preparation of the
Registration Statement and Prospectus, nothing came to counsel's attention
that led counsel to conclude that the Registration Statement, as of the
date it was declared effective, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that the
Prospectus, as of its date or on the date hereof, 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, in light of the circumstances under which they were made, not
misleading (provided that counsel need express no view with respect to the
content of
16
financial statements, the notes thereto and the related schedules
included in the Registration Statement or the Prospectus or as to
statements in the Registration Statement or Prospectus which are based
on and conform to written information furnished to the Company by or on
the Representative's behalf specifically for use in the preparation of
the Underwriting section of the Registration Statement).
In rendering such opinion, such counsel may rely (A) as to questions
of the law of jurisdictions other than the State of Minnesota or the United
States upon an opinion or opinions (dated the Closing Date, addressed to
the Representative and in form satisfactory to the Representative) of
counsel acceptable to the Representative and (B) as to matters of fact, to
the extent counsel to the Representative reasonably deems such reliance
proper, on certificates of appropriate officers of the Company, of the
transfer agent and registrar for the Units and of public officials;
PROVIDED, such opinions and certificates must be attached to the opinion of
counsel.
(e) At the time of execution of this Agreement, the Underwriters
shall have received from KPMG Peat Marwick LLP, a letter dated the date of
such execution, in form and substance satisfactory to the Representative,
to the effect that they are independent accountants with respect to the
Company within the meaning of the Act and the applicable published
instructions, and Regulations thereunder, and further stating in effect
that:
(i) In their opinion, the audited financial statements
included in the Registration Statement and Prospectus covered by their
report included therein, comply as to form in all material respects
with the applicable requirements of the Act and the published
instructions, and Regulations, thereunder.
(ii) On the basis of (A) a reading of the minutes of the
shareholders' and directors' meetings of the Company since inception,
(B) inquiries of certain officials of the Company responsible for
financial and accounting matters, (C) a reading of the Company's
monthly operating statements subsequent to March 29, 1998, and (D)
other specified procedures and inquiries (but not an audit in
accordance with generally accepted auditing standards), nothing came
to their attention causing them to believe that:
(1) that the unaudited financial statements of the Company,
contained in the Prospectus and any amendment thereof or
supplement thereto, do not comply as to form, in all material
respects, with the applicable accounting requirements of the Act
and the published Rules and Regulations or were not prepared in
conformity with generally-accepted accounting principles and
practices applied on a basis consistent in all material respects
with those followed in the preparation of, the audited financial
statements of the Company included therein; or
17
(2) that the unaudited amounts of revenues, income before
provision for income taxes, net income and ratio of earnings to
fixed charges of the Company contained in the Prospectus, or any
amendment thereof or supplement thereto, were not derived from
financial statements prepared in conformity with generally-
accepted accounting principles and practices applied on a basis
consistent in all material respects with those followed in the
preparation of the audited financial statements of the Company
included therein; or
(3) that the unaudited pro forma financial statements of
the Company and recently-acquired companies, if any, contained in
the Prospectus or any amendment thereof or supplement thereto,
were not properly compiled in accordance with generally-accepted
accounting principles or did not provide for all adjustments
necessary for a fair presentation of the information purported to
be shown thereby; or
(4) with respect to the period subsequent to March 29,
1998, there were, at a specified date, not more than five (5)
business days prior to the date of the letter, any changes or any
material increases or decreases in capital stock, long-term or
short-term debt or shareholders' equity, decreases in net assets,
net current assets, or net worth or any material decrease, as
compared with the corresponding period of the prior year, in
revenues or net income of the Company as compared with the
amounts shown in the March 29, 1998 balance sheet included in the
Registration Statement, except as disclosed or referred to in the
Prospectus and Registration Statement.
(iii) Certain information set forth on the cover of the
Prospectus, and in the Prospectus under the headings "Prospectus
Summary," "The Offering," "Summary Consolidated Financial Data," "Risk
Factors," "Use of Proceeds," "Dilution," "Capitalization," "Selected
Consolidated Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business,"
"Management," "Certain Transactions," "Principal Stockholders" and
"Description of Securities" and that are expressed in dollars (or
percentages derived from dollar amounts) or numbers have been compared
to accounting records of the Company which were subject to the
internal accounting controls of the Company and are in agreement with
such records or computations made therefrom, excluding any questions
of legal interpretation.
(f) The Underwriters shall have received from KPMG Peat Marwick LLP,
a letter dated as of each Closing Date, to the effect that such accountants
reaffirm, as of such Closing Date, and as though made on such Closing Date,
the statements made in the letter furnished by such accountants pursuant to
subparagraph (e) of this Section 5, except that
18
the specified date referred to in such letter will be a date not more than
five (5) business days prior to such Closing Date.
(g) At each Closing Date, the Company shall have performed all
material obligations and satisfied all material conditions on its part to
be performed or satisfied on or prior thereto (except any condition
satisfaction of which shall have been waived as herein provided) and
compliance with the provisions of this subparagraph (g) shall be evidenced
by a certificate of an executive officer of the Company.
(h) On each Closing Date there shall have been furnished to the
Representative a certificate, dated as of such Closing Date and addressed
to the Representative, as representative of the several Underwriters,
signed by the principal executive officer and principal financial officer
of the Company to the effect that:
(i) the representations and warranties and covenants of the
Company in this Agreement are true and correct in all material
respects as if made at and as of such Closing Date and the Company has
complied in all material respects with all the agreements and
satisfied all the material conditions on its part to be performed or
satisfied hereunder at or prior to such Closing Date;
(ii) no stop order or other order suspending the effectiveness
of the Registration Statement or any amendment or supplement thereto
or the qualification of the Units for offering or sale has been issued
and, to the Company's knowledge, no proceedings for that purpose have
been instituted or are pending or, to the knowledge of the respective
signers thereof, are threatened by the Commission or any state or
regulatory body;
(iii) neither the Registration Statement, as of the date it was
declared effective, nor the Prospectus, as of its date and the Closing
Date, included any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading; (B) since the effective date of the
Registration Statement, no event has occurred which should have been
set forth in an amendment or supplement to the Prospectus which has
not been set forth in such an amendment or supplement; (C) subsequent
to the respective dates as of which information is given in the
Registration Statement and Prospectus and except as set forth in or
contemplated by the Prospectus, the Company has not incurred any
material liability or obligation, direct or contingent, whether or not
in the ordinary course of business, or entered into any material
transaction, outside of the ordinary course of business, and there has
not been any material change in the Common Stock, or any increase in
the short-term or long-term debt, including any capitalized lease
obligation (other than in the ordinary course of its business and in
an amount which is not material) or any issuance of options, warrants,
convertible securities or other rights to purchase the Common Stock of
the
19
Company or any material adverse change in the general affairs,
business, key personnel, capitalization or financial position of the
Company considered as a whole (other than the issuance of Common Stock
pursuant to existing options described in the Prospectus); and
subsequent to the date of this Agreement, the Company has not
sustained any material loss or damage to its property or interference
with its business by strike, fire, flood, accident or other calamity,
whether or not any of the foregoing is insured, that would have a
material adverse effect upon the Company considered as a whole,
(D) the projections of the Company previously presented to the
Representative showing that the Company will be able to meet the
maintenance requirements for listing on The Nasdaq National Market for
a period of 24 months from the date hereof, were prepared in good
faith and continue to represent the signers' best present estimate of
the Company's financial condition following the Closing of the sale of
the Units.
(i) The Representative shall receive a Blue Sky Memorandum reasonably
satisfactory to the Representative from ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A.,
confirming that all requisite action for the offer and sale of the Units in
all jurisdictions requested has been taken.
(j) The Representative shall have received "lock up" agreements, in
form and substance acceptable to the Representative, from all directors,
officers and shareholders of the Company restricting the sale, assignment
or other conveyance of any securities of the Company without the prior
written consent of the Representative for a period of 180 days from the
effective date of the Registration Statement under the Act.
(k) The Company's Common Stock and Warrants shall be approved for
quotation on The Nasdaq National Market on or prior to the effective date
of the Registration Statement under the Act.
(l) Prior to the First Closing, the number of issued and outstanding
shares of common stock of the Company shall not exceed 1,987,758 shares
(after considering the one for two reverse split of the Company's Common
Stock) and options and warrants to acquire 505,185 shares of common stock
(after considering the one for two reverse split of the Company's Common
Stock), and there shall be no change in the capitalization of the Company
without the prior written consent of the Representative, except pursuant to
the outstanding options, warrants and convertible notes described in the
Prospectus.
(m) The Company's Common Stock and Warrants shall be registered under
the Securities Exchange Act of 1934, as amended, pursuant to Form 8-A, on
or prior to the effective date of the Registration Statement under the Act.
(n) The Company shall have furnished to the Representative and
▇▇▇▇▇▇▇, Rumble & ▇▇▇▇▇▇ Professional Association, counsel for the
Representative, such further
20
certificates and documents as Underwriters' counsel may reasonably request,
relating to the fulfillment of the conditions set forth in this Section 5.
(o) The Company shall effect a one for two reverse stock split of its
Common Stock simultaneous with the effectiveness of the Registration
Statement and shall promptly provide counsel to the Representative evidence
of the effectiveness of such reverse split.
(p) The Representative shall have received an opinion of ▇▇▇▇▇▇▇,
Rumble & ▇▇▇▇▇▇ Professional Association, in form and substance
satisfactory to it as to certain matters pertaining to the registration of
the Units.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to the Representative and to counsel for the Representative. The Company will
furnish the Representative with such conformed copies of such opinions,
certificates, letters, and other documents as the Representative shall
reasonably request. The Representative, on behalf of the several Underwriters,
may waive in writing the performance of any one or more of the conditions
specified in this Section 5 or extend the time for their performance.
If any of the conditions specified in this Section 5 shall not have been
fulfilled when and as required by this Agreement to be fulfilled, this Agreement
and all obligations of the several Underwriters hereunder may be cancelled by
the Representative, as the representative of the several Underwriters, at, or at
any time prior to, each Closing Date. Any such cancellation shall be without
liability of the Underwriters to the Company or any liability of the Company to
the Underwriters, except pursuant to Section 4(i) hereof. Notice of such
cancellation shall be given to the Company in writing, or by telefax or
telephone confirmed in writing.
The Representative may waive in writing the performance of any one or more
of the foregoing conditions or extend the time for their performance.
6. EFFECTIVE DATE AND TERMINATION.
(a) This Agreement shall become effective at immediately after the
time at which the Registration Statement shall have become effective under
the Act.
(b) Until the First Closing Date, this Agreement may be terminated by
the Representative by giving notice to the Company, if (i) the Company
shall have sustained a loss or damage by fire, flood, accident, or other
calamity which is material to the property, business, or condition
(financial or other) of the Company considered as a whole, any properties
of the Company shall have become a party or subject to litigation material
to the Company considered as a whole, or there shall have been, since the
respective dates as of which information is given in the Registration
Statement or the Prospectus, any material adverse change or development in
the general affairs, condition (financial or other), business, key
personnel, capitalization, properties, results of
21
operations or net worth, of the Company considered as a whole, whether or
not arising in the ordinary course of business, which loss, damage, or
change, in the Representative's judgment, shall render it inadvisable to
proceed with the delivery of the Units, whether or not such loss shall
have been insured, (ii) trading in securities generally on the New York
Stock Exchange, the American Stock Exchange, The Nasdaq National Market,
The Nasdaq SmallCap Market or the over-the-counter market shall have been
suspended or minimum prices shall have been established on such exchange
or market by the Commission or by such exchange, (iii) a general banking
moratorium shall have been declared by federal or state authorities, or
(iv) there shall have been such a serious, unusual and material adverse
change in general economic, political, or financial conditions or the
effect of international conditions on the financial markets in the United
States shall be such as, in the Representative's reasonable judgment, makes
it inadvisable to proceed with the delivery of the Units. Any termination
of this Agreement pursuant to this Section 6 shall be without liability of
the Company to the Underwriters, except as otherwise provided in Sections
4(i), 7 and 8 hereof, and without liability of the Underwriters to the
Company, except as provided in Sections 7 and 8 hereof.
(c) Any notice referred to in this Section 6 may be given at the
address specified in Section 11 hereof in writing or by telegraph or
telephone, and if by telefax or telephone, shall be immediately confirmed
in writing.
7. INDEMNIFICATION. (a) The Company agrees to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of the Act against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter or such controlling
person may become subject, under the Act 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 (A) in the Registration Statement, any Preliminary
Prospectus, or the Prospectus, or any amendment thereof or supplement thereto,
or (B) in any Blue Sky application or other document executed by the Company
specifically for that purpose or based upon and conforming to written
information furnished by the Company filed in any state or other jurisdiction in
order to qualify any or all of the Units under the securities laws thereof (any
such application, document or information being hereinafter called a "Blue Sky
Application"), or (ii) the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, or the Prospectus, or any
amendment thereof or supplement thereto, or in any Blue Sky Application a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and will reimburse the Underwriters, their officers and directors
and each such controlling person for any legal or other expenses reasonably
incurred by the Underwriters, their officers and directors or such controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent, but only to the extent, that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with
22
written information furnished to the Company through you or on your behalf
specifically for use in the preparation of the Registration Statement or any
amendment thereof or supplement thereto, or any such Blue Sky Application or
any such Preliminary Prospectus or the Prospectus or any such amendment
thereof or supplement thereto; and provided, further, that the foregoing
indemnity agreement is subject to the condition that, insofar as it relates
to any untrue statement, alleged untrue statement, omission or alleged
omission made in any Preliminary Prospectus but eliminated or remedied in the
Prospectus (as amended or supplemented), such indemnity agreement shall not
inure to the benefit of any Underwriter (or to the benefit of any person who
controls any Underwriter), if the person asserting any loss, liability, claim
or damage purchased the Units which are the subject thereof and a copy of the
Prospectus (as then supplemented or amended) was not sent or given to such
person with or prior to the written confirmation of the sale of such Units to
such person.
(b) Each Underwriter, severally, but not jointly, will indemnify and hold
harmless the Company, each of its directors, each of its officers who has signed
the Registration Statement, and each person, if any, who controls the Company
within the meaning of the Act, against any losses, claims, damages or
liabilities, joint or several, to which the Company or any such director or
officer, or controlling person, may become subject, under the Act 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 (A) in the Registration Statement,
any Preliminary Prospectus, or the Prospectus, or any amendment thereof or
supplement thereto, or (B) in any Blue Sky Application, or (ii) the omission or
alleged omission to state in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment thereof or supplement thereto or in
any Blue Sky Application a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through the Representative, as
representative of the Underwriters by or on behalf of such Underwriter,
specifically for use with reference to the Underwriter in the preparation of the
Registration Statement or any amendment thereof or supplement thereto or any
such Blue Sky Application or any such Preliminary Prospectus or the Prospectus
or any such amendment thereof or supplement thereto; and will reimburse the
Company, any such director or officer, or controlling person, for any legal or
other expenses reasonably incurred by the Company or any such director or
officer, or controlling person, in connection with investigating or defending
any such loss, claim, damage, liability or action. This indemnity agreement
will be in addition to any liability which such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 7, notify in writing the indemnifying party of the commencement thereof;
no indemnification shall be available to any party who shall fail to give notice
as provided in this Section 7(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
prejudiced by the
23
failure to give such notice, but the omission so to notify such indemnifying
party of any such action, suit or proceeding shall not relieve it from any
liability that it may have to any indemnified party for contribution or
otherwise than under this section. 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 to the reasonable satisfaction of
such indemnified party, and (notwithstanding subparagraphs (a) and (b) of
this Section 7) 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 7 for
any legal or other expenses subsequently incurred by such indemnified party
in connection with the defense thereof other than reasonable costs of
investigation except as provided below. The indemnified party shall have the
right to employ its counsel in any such action, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless (i) the
employment of counsel by such indemnified party has been authorized in
writing by the indemnifying parties, (ii) the indemnified party shall have
reasonably concluded that there may be a conflict of interest between the
indemnifying parties, or any of them, and the indemnified party in the
conduct of the defense of such action (in which case the indemnifying parties
shall not have the right to direct the defense of such action on behalf of
the indemnified party) or (iii) the indemnifying parties shall not have
employed counsel to assume the defense of such action within a reasonable
time after notice of the commencement thereof, in each of which cases the
fees and expenses of counsel shall be at the expense of the indemnifying
parties; provided, however, that the indemnifying parties shall not be liable
for the fees and expenses of more than one counsel for the indemnified
parties. Any such indemnifying party shall not be liable to any such
indemnified party on account of any settlement of any claim or action
effected by the indemnified party without the consent of such indemnifying
party.
8. CONTRIBUTION. In order to provide for just and equitable contribution
in circumstances in which indemnification provided for in Section 7 is
unavailable, each indemnifying party shall contribute to the aggregate losses,
claims, damages, expenses and liabilities to which the indemnified parties may
be subject in such proportion so that the several Underwriters are responsible
for that portion (the "UNDERWRITING PORTION") represented by the percentage that
the underwriting commissions appearing on the cover page of the Prospectus bear
to the public offering price (net of Underwriting Commissions) appearing thereon
and the Company is responsible for the remaining portion (the "RESIDUAL
PORTION"); provided, however, (i) that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation; and (ii) if such allocation is not permitted by applicable
law, then the relative fault of the Company, its directors, officers and
controlling persons, on the one hand, and the several Underwriters, and their
respective officers, directors and its controlling persons, on the other, in
connection with the statements or omissions which resulted in such damages and
other relevant equitable considerations shall also be considered. The relative
fault shall be determined by reference to, among other things, whether in the
case of an untrue statement of a material fact or the omission to state a
material fact, such statement or omission relates to information supplied
24
by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
untrue statement or omission. The Company and the several Underwriters agree
that it would not be just and equitable if the respective obligations of the
Company on the one hand, and the Underwriters, on the other, to contribute
pursuant to this Section 8 were to be determined by pro rata or per capita
allocation of the aggregate damages (even if the Underwriters, and their
respective officers, directors and their respective controlling persons in
the aggregate were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable
considerations referred to in this Section 8. For purposes of this Section 8,
the term "DAMAGES" shall include any legal or other expense reasonably
incurred by the indemnified party in connection with investigating or
defending any action or claim that is the subject of the contribution
provisions of this Section 8. Notwithstanding the provisions of this Section
8, the several Underwriters, their respective officers, directors and its
controlling persons in the aggregate shall not be required to contribute any
amount in excess of the amount by which the total purchase price of the Units
purchased by it, directly or indirectly, from the Company pursuant to this
Agreement exceeds the amount of any damages that the several Underwriters,
their respective officers, directors and their respective controlling persons
in the aggregate have otherwise been required to pay by reason of such untrue
statement or omission. For purposes of this Section 8, each person, if any,
who controls any Underwriter within the meaning of the Act shall have the
same rights to contribution as such Underwriter, and each person, if any, who
controls the Company within the meaning of the Act, each officer who shall
have signed the Registration Statement and each director of the Company shall
have the same rights to contribution as the Company. Each party entitled to
contribution agrees that, upon the service of a summons or other initial
legal process upon it in any action instituted against it in respect of which
contribution may be sought, it will promptly give written notice of such
service to the party or parties from whom contribution may be sought, but the
omission so to notify such party or parties of any such service shall not
relieve the party from whom contribution may be sought from any obligation it
may have hereunder or otherwise. In case any such action, suit, or
proceeding is brought against any party, and such person so notifies a
contributing party of the commencement thereof, the contributing party will
be entitled to participate therein with the notifying party and any other
contributing party similarly notified.
9. SUBSTITUTION OF UNDERWRITERS. If one or more of the Underwriters
shall fail or refuse (otherwise than for a reason sufficient to justify the
cancellation or termination of this Agreement under the provisions of Sections 5
or 6 hereof) to purchase and pay for the number of Units agreed to be purchased
by such Underwriter or Underwriters upon tender to the Representative of such
Units in accordance with the terms hereof, and the number of such Units shall
not exceed 10% of the total number of units to be purchased by the Underwriters
hereunder, then, each of the nondefaulting Underwriters shall purchase and pay
for (in addition to the number of Units which it has severally agreed to
purchase hereunder) that proportion of the number of Units which the defaulting
Underwriter or Underwriters shall have so failed or refused to purchase which
the number of Units agreed to be purchased by the nondefaulting Underwriter
bears to the aggregate number of Units so agreed to be purchased by all such
nondefaulting Underwriters. In such case, the Representative or the Company
shall have the right to postpone each Closing Date specified in Section 3 hereof
to a date not later than the seventh full business day after the date
25
originally fixed as such Closing Date pursuant to said Section 3 in order
that any necessary changes in the Registration Statement, the Prospectus, or
any other documents or arrangements may be made.
If one or more of the Underwriters shall fail or refuse (otherwise than for
a reason sufficient to justify the cancellation or termination of this Agreement
under the provisions of Sections 5 or 6 hereof) to purchase and pay for the
number of Units agreed to be purchased by such Underwriter or Underwriters upon
tender to the Representative of such Units in accordance with the terms hereof
and the number of such Units shall exceed 10% of the total number of Units to be
purchased by the Underwriters, hereunder, then (unless within forty-eight hours
after such default arrangements to your satisfaction shall have been made for
the purchase of the defaulted Units by an Underwriter or Underwriters) this
Agreement shall terminate without liability on the part of any nondefaulting
Underwriter or on the part of the Company except as otherwise provided in
Sections 4(i), 7 and 8 hereof. As used in this Agreement, the term
"UNDERWRITER" includes any person substituted for an Underwriter under this
paragraph. Nothing in this Section 9, and no action taken hereunder, shall
relieve an defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
10. SURVIVAL OF INDEMNITIES, CONTRIBUTION, WARRANTIES AND REPRESENTATIONS.
The respective indemnity and contribution agreements of the Company and the
Underwriters contained in Sections 7 and 8 hereof, the representations,
warranties, and covenants of the Company contained in Sections 1 and 4 hereof
and the representations and warranties of the Underwriters contained in Section
15 hereof shall remain operative and in full force and effect, regardless of any
termination or cancellation of this Agreement or any investigation made by or on
behalf of any of the Underwriters or the Company or any of their respective
directors or officers, or any controlling person referred to in said Sections 7
and 8, and shall survive the delivery of, and payment for, the Units.
11. NOTICES. Except as otherwise expressly provided in this Agreement,
all notices and other communications hereunder shall be in writing and, if
given to the Underwriters, shall be mailed, delivered or telefaxed to ▇. ▇.
▇▇▇▇▇▇▇▇ & Company, One Financial Plaza, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇, Attention: President, with a copy to Girard P. Miller, Doherty,
Rumble & ▇▇▇▇▇▇, Professional Association, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or if given to the Company, shall be mailed,
delivered or telefaxed to it at Buffalo Wild Wings, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: President, with a copy
to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A., ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
12. UNDERWRITER'S WARRANT. Upon payment of a purchase price of $50 by the
Representative, the Company will issue and deliver to ▇. ▇. ▇▇▇▇▇▇▇▇ & Company,
for its account, Warrants to purchase Common Stock in an amount equal to 150,000
shares of Common Stock. Such Warrants shall be issued on the Closing Date and
shall be dated as of the Closing Date. Such Warrants shall be exercisable
commencing one (1) year after the Effective Date for a period of four years
thereafter at a price per share of $7.80. Such Warrant shall contain such terms
and
26
conditions as contained in the form of Underwriter's Warrant attached hereto
and labeled Appendix A.
13. INFORMATION FURNISHED BY UNDERWRITERS. The statements relating to
stabilization activities of the Underwriters on the inside front cover of the
Preliminary Prospectus and the Prospectus, and under the caption "UNDERWRITING"
in any Preliminary Prospectus and in the Prospectus, and, to the extent the same
relate to you, in any Blue Sky application, constitute the written information
furnished by or on behalf of the Representative referred to in Section 1 hereof,
Section 5(d) hereof and in paragraphs (a) and (b) of Section 7 hereof.
14. PARTIES. This Agreement is made solely for the benefit of the several
Underwriters, the Company, any director, officer, or controlling person referred
to in Sections 7 and 8 hereof, and their respective personal representatives,
successors and assigns, and no other person shall acquire or have any right by
virtue of this Agreement. The term "personal representatives, successors and
assigns," as used in this Agreement, shall not include any purchaser of Units
(as such purchaser) from the Underwriters.
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE REPRESENTATIVE. The
Representative, on behalf of the several Underwriters, represents, warrants to
and agrees with the Company that:
(a) The Underwriters are corporations or partnerships duly formed and
validly existing in good standing under the laws of the jurisdiction in
which they are incorporated or formed.
(b) Each Underwriter is duly registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended, and under the securities laws
of Minnesota and of such other states in which it intends to offer or sell
the Units, if such registration is required in any such other state, and is
a member in good standing of the National Association of Securities
Dealers, Inc., and no proceedings have been initiated or threatened to
suspend any such registration or membership.
(c) The execution, delivery and performance of this Agreement by the
Representative on behalf of the several Underwriters, and the consummation
of the transactions contemplated hereby, have been duly authorized by the
Underwriters, and at the time of its execution, performance, or
consummation, will not constitute or result in any breach or violation by
the Underwriters of any of the terms, provisions or conditions of, or
constitute a default under, any federal statute or regulation (including,
without limitation, the net capital requirements under Rule 15c-1 of the
Securities Exchange Act of 1934) or any statute or regulation of any state
in which any Underwriter intends to offer or sell the Units, or any order,
judgment, decree, rule or regulation of any court or governmental agency or
body having jurisdiction over the Underwriters or any of their activities
or property.
27
(d) Each of the Underwriters will abide by the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. in making sales
within the United States, its territories and possessions, and will comply
with the requirements of the National Association of Securities Dealers,
Inc.'s interpretation with respect to free riding and withholding.
(e) The Units will be offered by the Underwriters only to persons
resident in such states as are designated pursuant to Section 4(c) hereof.
All of such persons shall be persons and entities for whom the purchase of
the Units is a suitable investment and the Underwriters shall employ or
engage no Selected Dealer, sales person, agent or representative in the
offer or sale of the Units, which Selected Dealer, sales person, agent or
representative is not properly registered and licensed for the purpose of
such offer or sale. All such registrations and licenses shall remain in
full force and effect until after the Closing Dates.
(f) The Representative, on behalf of the several Underwriters, agrees
that neither any Underwriter nor any officer or other person employed by
any Underwriter or any Selected Dealer will provide any information or make
any representations to offerees of the Units, other than such information
and representations as are either contained in the Prospectus or the
Registration Statement or are not inconsistent with information set forth
in the Prospectus or the Registration Statement.
(g) The Representative, on behalf of the several Underwriters, agrees
that in any event the Representative learns of any circumstances or fact
which it believes would make any Preliminary Prospectus, the Prospectus, or
the Registration Statement inaccurate or misleading in any material
respect, it will immediately bring such circumstances or facts to the
attention of the Company.
16. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Minnesota, without regard
to its choice of law provisions.
BUFFALO WILD WINGS, INC.
By
----------------------------------------
Its
----------------------------------
"COMPANY"
28
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written:
▇. ▇. ▇▇▇▇▇▇▇▇ & COMPANY
By
----------------------------------
Authorized Officer
------------------------------------
Print Name
"REPRESENTATIVE OF THE SEVERAL UNDERWRITERS"
29
SCHEDULE I
NUMBER OF FIRM UNITS
UNDERWRITERS TO BE PURCHASED
------------ ---------------
▇.▇. ▇▇▇▇▇▇▇▇ & Company . . . . . . . . . ________
_____________________ . . . . . . . . . . ________
_____________________ . . . . . . . . . . ________
_____________________ . . . . . . . . . . ________
TOTAL. . . . . . . . . . . . . . . . 1,500,000
---------
---------
APPENDIX A
COMMON STOCK PURCHASE WARRANT
(FORM OF)
BUFFALO WILD WINGS, INC.
COMMON STOCK PURCHASE WARRANT
Buffalo Wild Wings, Inc., an Minnesota corporation (the "COMPANY"),
hereby agrees that, for value received, ________________________________, or
its assigns, is entitled, subject to the terms set forth below, to purchase
from the Company at any time or from time to time after ____________, 1999,
and before 4:30 p.m., Minneapolis, Minnesota time, on __________, 2003 One
Hundred Fifty Thousand (150,000) shares of the $.01 par value Common Stock of
the Company, at an exercise price of $7.80 per Share, subject to adjustment
as provided herein.
1. EXERCISE OF WARRANT. The purchase rights granted by this Warrant
shall be exercised (in minimum quantities of 100 shares) by the holder
surrendering this Warrant with the form of exercise attached hereto duly
executed by such holder, to the Company at its principal office, accompanied
by payment, in cash or by cashier's check payable to the order of the
Company, of the purchase price payable in respect of the Shares being
purchased. If less than all of the Shares purchasable hereunder is
purchased, the Company will, upon such exercise, execute and deliver to the
holder hereof a new Warrant (dated the date hereof) evidencing the number of
Shares not so purchased. As soon as practicable after the exercise of this
Warrant and payment of the purchase price, the Company will cause to be
issued in the name of and delivered to the holder hereof, or as such holder
may direct, a certificate or certificates representing the Shares purchased
upon such exercise. The Company may require that such certificate or
certificates contain on the face thereof a legend substantially as follows:
"The transfer of the shares represented by this certificate is
restricted pursuant to the terms of a Common Stock Purchase Warrant
dated , 1998, issued by Buffalo Wild Wings, Inc., a
copy of which is available for inspection at the offices of Buffalo
Wild Wings Discovery, Inc. Transfer may not be made except in
accordance with the terms of the Common Stock Purchase Warrant. In
addition, no sale, offer to sell or transfer of the shares represented
by this certificate shall be made unless a Registration Statement
under the Securities Act of 1933, as amended (the "ACT"), with respect
to such shares is then in effect or an exemption from the registration
requirements of the Act is then in fact applicable to such shares."
___________________________
THIS WARRANT IS SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH AT
THE BOTTOM OF PAGE 8 HEREOF.
2. NEGOTIABILITY AND TRANSFER. This Warrant is issued upon the following
terms, to which each holder hereof consents and agrees:
(a) Except where directed by a court of competent jurisdiction
pursuant to the dissolution or liquidation of a corporate holder
hereof, for the period ending one year from _________________ ,
1998, title to this Warrant may not be sold, transferred,
assigned or hypothecated, except that within such one-year period
title to this Warrant may be transferred only to ▇.▇. ▇▇▇▇▇▇▇▇ &
Company (the "UNDERWRITER"), or to a person who is both an
officer and shareholder, or both an officer and employee, of the
Underwriter, or to a successor (or both an officer and
shareholder, or both an officer and employee) in interest to the
business of the Underwriter, by endorsement (by the holder hereof
executing the form of assignment attached hereto) and delivery in
the same manner as in the case of a negotiable instrument
transferable by endorsement and delivery subject to the
requirements of Section 4 hereof.
(b) Until this Warrant is duly transferred on the books of the
Company, the Company may treat the registered holder of this
Warrant as absolute owner hereof for all purposes without being
affected by any notice to the contrary.
(c) Each successive holder of this Warrant, or of any portion of the
rights represented thereby, shall be bound by the terms and
conditions set forth herein.
3. ANTIDILUTION ADJUSTMENTS. If the Company shall at any time
hereafter subdivide or combine its outstanding shares of Common Stock, or
declare a dividend payable in Common Stock, the exercise price in effect
immediately prior to the subdivision, combination or record date for such
dividend payable in Common Stock shall forthwith be proportionately
increased, in the case of combination, or proportionately decreased, in the
case of subdivision or declaration of a dividend payable in Common Stock, and
the number of Shares purchasable upon exercise of this Warrant, immediately
preceding such event, shall be changed to the number determined by dividing
the then current exercise price by the exercise price as adjusted after such
subdivision, combination or dividend payable in Common Stock and against the
number of Shares purchasable upon the exercise of this Warrant immediately
preceding such event, so as to achieve an exercise price and number of Shares
purchasable after such event proportional to such exercise price and number
of Shares purchasable immediately preceding such event. No adjustment in
exercise price shall be required unless such adjustment would require an
increase or decrease of at least five cents ($0.05) in such price; PROVIDED,
HOWEVER, that any adjustments which are not required to be so made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations hereunder shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
2
No fractional Shares are to be issued upon the exercise of the Warrant,
but the Company shall pay a cash adjustment in respect of any fraction of a
Share which would otherwise be issuable in an amount equal to the same
fraction of the market price per share of Common Stock on the day of exercise
as determined in good faith by the Company.
In case of any capital reorganization or any reclassification of the
Common Stock of the Company, or in the case of any consolidation with or
merger of the Company into or with another corporation, or the sale of all or
substantially all of its assets to another corporation, which is effected in
such a manner that the holders of Common Stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for Common Stock,
then, as a part of such reorganization, reclassification, consolidation,
merger or sale, as the case may be, lawful provision shall be made so that
the holder of the Warrant shall have the right thereafter to receive, upon
the exercise hereof, the kind and amount of shares of stock or other
securities or property which the holder would have been entitled to receive
if, immediately prior to such reorganization, reclassification,
consolidation, merger or sale, the holder had held the number of Shares which
were then purchasable upon the exercise of the Warrant. In any such case,
appropriate adjustment (as determined in good faith by the Board of Directors
of the Company) shall be made in the application of the provisions set forth
herein with respect to the rights and interest thereafter of the holder of
the Warrant, to the end that the provisions set forth herein (including
provisions with respect to adjustments of the exercise price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon the exercise of
the Warrant.
When any adjustment is required to be made in the exercise price,
initial or adjusted, the Company shall forthwith determine the new exercise
price, and
(a) prepare and retain on file a statement describing in reasonable detail
the method used in arriving at the new exercise price; and
(b) cause a copy of such statement to be mailed to the holder of the
Warrant as of a date within ten (10) days after the date when the
circumstances giving rise to the adjustment occurred.
4. TRANSFER AND REGISTRATION RIGHTS. Prior to making any disposition
of the Warrant or of any Shares purchased upon exercise of the Warrant, the
holder will give written notice to the Company describing briefly the manner
of any such proposed disposition. The holder will not make any such
disposition until (i) the Company has notified him that, in the opinion of
its counsel, registration under the Act is not required with respect to such
disposition, or (ii) a Registration Statement covering the proposed
distribution has been filed by the Company and has become effective. The
Company agrees that, upon receipt of written notice from the holder hereof
with respect to such proposed distribution, it will use its best efforts, in
the consultation with the holder's counsel, to ascertain as promptly as
possible whether or not registration is required, and will advise the holder
promptly with respect thereto, and the holder will cooperate in providing the
Company with information necessary to make such determination.
3
If, at any time prior to the expiration of seven (7) years from the date
hereof, the Company shall propose to file any Registration Statement (other
than any registration on Forms ▇-▇, ▇-▇ or any other similarly inappropriate
form or Registration Statement with respect to a public offering in which
there are no selling shareholders) under the Securities Act of 1933, as
amended, covering a public offering of the Company's securities, it will
notify the holder hereof at least thirty (30) days prior to each such filing
and will include in the Registration Statement (to the extent permitted by
applicable regulation), the shares purchased by the holder or purchasable by
the holder upon the exercise of the Warrant to the extent requested by the
holder hereof. Notwithstanding the foregoing, the number of shares of the
holders of the Warrants proposed to be registered thereby shall be reduced
pro rata with any other selling shareholder (other than the Company) upon the
reasonable request of the managing underwriter of such offering. If the
Registration Statement or Offering Statement filed pursuant to such thirty
(30) day notice has not become effective within six months following the date
such notice is given to the holder hereof, the Company must again notify such
holder in the manner provided above.
At any time prior to the expiration of five (5) years from the date
hereof, and provided that a registration statement on Form S-3 (or its
equivalent) is then available to the Company, and on a one-time basis only,
if the holders of 50% or more of the Warrants and/or the Shares acquired upon
exercise of the Warrants request the registration of the Shares on Form S-3
(or its equivalent), the Company shall promptly thereafter use its best
efforts to effect the registration under the Securities Act of 1933, as
amended, of all such shares which such holders request in writing to be so
registered, and in a manner corresponding to the methods of distribution
described in such holders' request.
All expenses of any such registrations referred to in this Section 4,
except the fees of counsel to and accountants for such holders and
underwriting commissions or discounts, filing fees, and any transfer or other
taxes applicable to such shares, shall be borne by the Company.
Upon effectiveness of a Registration Statement which includes Common
Stock purchased or purchasable upon the exercise of this Warrant in
accordance with a valid demand under this Section 4, the rights under this
Warrant of all holders to make another such demand shall terminate. Each
purchaser or transferee of a portion of this Warrant is responsible to
determine whether his or her demand rights under this paragraph have been
terminated by such an exercise. Any Warrants issued upon transfers
subsequent to such an exercise shall have all of the demand registration
provisions under this Section 4 deleted.
The Company will mail to each record holder, at the last known post
office address, written notice of any exercise of the rights granted under
this paragraph 4, by certified or registered mail, return receipt requested,
and each holder shall have twenty (20) days from the date of deposit of such
notice in the U.S. Mail to notify the Company in writing whether such holder
wishes to join in such exercise.
The Company will furnish the holder hereof with a reasonable number of
copies of any prospectus included in such filings and will amend or
supplement the same as required during the
4
period of required use thereof. The Company will maintain, at its expense,
the effectiveness of any Registration Statement or the Offering Statement
filed by the Company, whether or not at the request of the holder hereof, for
at least six (6) months following the effective date thereof.
In the case of the filing of any Registration Statement, and to the
extent permissible under the Securities Act of 1933, as amended, and
controlling precedent thereunder, the Company and the holder hereof shall
provide cross indemnification agreements to each other in customary scope
covering the accuracy and completeness of the information furnished by each.
The holder of the Warrant agrees to cooperate with the Company in the
preparation and filing of any such Registration Statement or Offering
Statement, and in the furnishing of information concerning the holder for
inclusion therein, or in any efforts by the Company to establish that the
proposed sale is exempt under the Act as to any proposed distribution.
The Registration Rights described in this Section 4 shall terminate as
to any holder when all such holder's shares are eligible for resale under
Rule 144 (or successor rule) of the Securities Act.
5. RIGHT TO CONVERT.
(a) Provided the Company's Common Stock shall then be traded on an
exchange or quoted by NASDAQ or otherwise traded as described in
5(d) hereof, the holder of this Warrant shall have the right to
require the Company to convert this Warrant (the "CONVERSION
RIGHT"), at any time from ___________, 1999, and prior to its
expiration, into shares of Common Stock as provided for in this
Section 5. Upon exercise of the Conversion Right, the Company
shall deliver to the holder (without payment by the holder of any
exercise price) that number of shares of Common Stock equal to
the number of shares of Common Stock resulting from multiplying
the number of shares of Common Stock issuable to the holder upon
exercise of the Warrant (and desired to be converted) times the
quotient obtained by dividing (x) the value of the Warrant at the
time the Conversion Right is exercised (determined by subtracting
the exercise price for one Warrant Share in effect immediately
prior to the exercise of the Conversion Right from the Fair
Market Value (as determined below) for one Warrant Share
immediately prior to the exercise of the Conversion Right) by (y)
the Fair Market Value of one share of Common Stock 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 its expiration, on any business
day, by delivering a written notice (the "CONVERSION NOTICE") to
the Company at the offices of the Company exercising the
Conversion Right and specifying (i) the total number of shares of
Stock the Warrantholder will purchase pursuant to such
5
conversion, and (ii) a place, and a date not less than five (5)
nor more than twenty (20) business days from the date of the
Conversion Notice for the closing of such purchase.
(c) At any closing under Section 5(b) hereof, (i) the holder will
surrender the Warrant, (ii) the Company will deliver to the
holder a certificate or certificates for the number of shares of
Common Stock issuable upon such conversion, together with cash,
in lieu of any fraction of a share, and (iii) the Company will
deliver to the holder a new Warrant representing the number of
shares, if any, with respect to which the Warrant shall not have
been exercised.
(d) "FAIR MARKET VALUE" of a share of Common Stock 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 the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") National
Market System, or The SmallCap Market, then the average
closing or last sale prices, respectively, reported for the
ten (10) business days immediately preceding the
Determination Date.
(ii) If the Company's Common Stock is not traded on an exchange
or on The NASDAQ National Market System, or The SmallCap
Market, but is traded in the over-the-counter market, then
the average of the closing bid and asked prices reported
for the ten (10) business days immediately preceding the
Determination Date.
(iii) If the Company's Common Stock is not publicly traded
and there has been a bona fide sale for cash on an
arm's-length basis within 10 days prior to the
Determination Date of such Common Stock by the Company
privately to one or more investors unaffiliated with
the Company (a "Qualifying Sale"), then the most recent
such sales price.
(iv) If the Company's Common Stock is not publicly traded and
there has been no Qualifying Sale, then the appraised fair
market value of such stock, as determined by mutual
agreement of the Company and the holder of the Warrant; or
if the parties cannot agree to such valuation, then each of
the Company and the holder shall select an arbitrator and
such arbitrators shall select a third, and such three
arbitrators shall determine (in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association, such expenses to be borne equally by the
parties) the fair market value
6
(without any discount for lack of marketability or minority
interest) of a share of Common Stock of the Company.
6. NOTICES. The Company shall mail to the registered holder of the
Warrant, at his or her last known post office address appearing on the books
of the Company, not less than fifteen (15) days prior to the date on which
(a) a record will be taken for the purpose of determining the holders of
Common Stock entitled to dividends (other than cash dividends) or
subscription rights, or (b) a record will be taken (or in lieu thereof, the
transfer books will be closed) for the purpose of determining the holders of
common stock entitled to notice of and to vote at a meeting of shareholders
at which any capital reorganization, reclassification of common stock,
consolidation, merger, dissolution, liquidation, winding up or sale of
substantially all of the Company's assets shall be considered and acted upon.
7. RESERVATION OF COMMON STOCK. A number of shares of Common Stock
sufficient to provide for the exercise of the Warrant and the shares of
Common Stock included therein upon the basis herein set forth shall at all
times be reserved for the exercise thereof.
8. MISCELLANEOUS. Whenever reference is made herein to the issue or
sale of shares of Common Stock, the terms "COMMON STOCK" or "SHARES" shall
include any stock of any class of the Company other than preferred stock that
has a fixed limit on dividends and a fixed amount payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Company.
The Company will not, by amendment of its Articles of Incorporation or
through reorganization, consolidation, merger, dissolution or sale of assets,
or by any other voluntary act or deed, avoid or seek to avoid the observance
or performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by the Company, but will, at all times in
good faith, assist, insofar as it is able, in the carrying out of all
provisions hereof and in the taking of all other action which may be
necessary in order to protect the rights of the holder hereof against
dilution.
Upon written request of the holder of this Warrant, the Company will
promptly provide such holder with a then current written list of the names
and addresses of all holders of warrants originally issued under the terms
of, and concurrent with, this Warrant.
The representations, warranties and agreements herein contained shall
survive the exercise of this Warrant. References to the "holder of" include
the immediate holder of shares purchased on the exercise of this Warrant, and
the word "holder" shall include the plural thereof. This Common Stock
Purchase Warrant shall be interpreted under the laws of the State of
Minnesota, without regard to its choice of law provisions.
All Shares or other securities issued upon the exercise of the Warrant
shall be validly issued, fully paid and non-assessable, and the Company will
pay all taxes in respect of the issuer thereof.
7
Notwithstanding anything contained herein to the contrary, the holder of
this Warrant shall not be deemed a stockholder of the Company for any purpose
whatsoever until and unless this Warrant is duly exercised.
IN WITNESS WHEREOF, this Warrant has been duly executed by Buffalo Wild
Wings, Inc., this _____ day of ___________________ , 1998.
BUFFALO WILD WINGS, INC.
By
-----------------------------------
Its
----------------------------
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAW. THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED
FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ASSIGNED OR OTHERWISE
DISPOSED OF, AND NO TRANSFER OF THE SECURITIES WILL BE MADE BY THE
COMPANY OR ITS TRANSFER AGENT, IN THE ABSENCE OF SUCH REGISTRATION OR
AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
8
WARRANT EXERCISE FORM
To be signed only upon exercise of Warrant.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ____________ shares of Common Stock of Buffalo Wild
Wings, Inc. to which such Warrant relates and herewith makes payment of
$_______ therefor in cash or by certified check, and requests that
such shares be issued and be delivered to, _________________________ , the
address for which is set forth below the signature of the undersigned.
Dated:
------------------------
------------------------------ ---------------------------------
(Taxpayer's I.D. Number) Signature)
---------------------------------
(Address)
---------------------------------
___________________________
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto ________________________ the right to purchase shares of Common Stock of
Buffalo Wild Wings, Inc. to which the within Warrant relates and appoints
________________________ , attorney, to transfer said right on the books of
Buffalo Wild Wings, Inc. with full power of substitution in the premises.
Dated:
-----------------------
---------------------------------
(Signature)
---------------------------------
(Address)
---------------------------------
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant pursuant to Section 5)
The undersigned hereby irrevocably elects a cashless exercise of the
right of purchase represented by the within Common Stock Purchase Warrant
for, and to purchase thereunder, ______________________ shares of Common
Stock, as provided for in Section 5 therein.
If said number of shares shall not be all the shares purchasable under
the within Common Stock Purchase Warrant, a new Warrant is to be issued in
the name of said undersigned for the balance remaining of the shares
purchasable thereunder rounded up to the next higher number of shares.
Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional shares to:
NAME
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(PLEASE PRINT NAME)
ADDRESS
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SOCIAL SECURITY NO.
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SIGNATURE
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NOTE: The above signature should correspond exactly with the
name on the first page of this Common Stock Purchase Warrant or
with the name of the assignee appearing in the assignment form on
the preceding page.