EXHIBIT 1.1
KMZ DRAFT:
APRIL 29, 1999
3,333,000 SHARES
NETRADIO CORPORATION
COMMON STOCK
UNDERWRITING AGREEMENT
___________ ___, 1999
EVEREN Securities, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Incorporated
As Representatives of the
Several Underwriters
c/o EVEREN Securities, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
NetRadio Corporation, a Minnesota corporation (the "Company"), proposes to
issue and sell 3,333,000 shares (the "Firm Shares") of its authorized but
unissued common stock, no par value ("Common Stock"), to the several
underwriters named in SCHEDULE I hereto (the "Underwriters"). The Company
proposes to grant to the Underwriters an option to purchase up to an aggregate
of 499,950 additional shares of Common Stock (the "Additional Shares"). The
Firm Shares and the Additional Shares are herein collectively referred to as the
"Shares". The Shares are more fully described in the Registration Statement and
Prospectus referred to below. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Registration Statement and
Prospectus.
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder
(collectively, the "Act"), a registration statement on Form S-1 (No. 333-73261)
including a prospectus relating to the Shares, which may be amended. The
registration statement as amended at the time when it becomes effective,
including information (if any) deemed to be part of the registration statement
at the time of effectiveness pursuant to Rule 430A or Rule 434 under the Act, is
hereinafter referred to as the "Registration Statement", and the prospectus in
the form first used to confirm sales of the Firm Shares is hereinafter referred
as the "Prospectus". Any registration statement filed by the Company pursuant
to Rule 462(b)
under the Securities Act is called the "Rule 462(b) Registration Statement", and
from and after the date and time of filing of the Rule 462(b) Registration
Statement the term "Registration Statement" shall include the Rule 462(b)
Registration Statement. "Amended," "amendment" or "supplement" with respect to
the Registration Statement or the Prospectus shall be deemed to include the
filing by the Company of any document pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
after the date hereof.
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations and warranties contained in this Agreement, and subject to its
terms and conditions, the Company agrees to issue and sell the Firm Shares, and
each Underwriter agrees, severally and not jointly, to purchase from the Company
at a price per share of $_____ (the "Purchase Price"), the number of Firm Shares
(subject to such adjustments to eliminate fractional shares as you may
determine) set forth opposite the name of such Underwriter on SCHEDULE I hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, (i) the Company agrees to
issue and sell up to 499,950 Additional Shares and (ii) the Underwriters shall
have the right to purchase, severally and not jointly, up to an aggregate of
499,950 Additional Shares from the Company at the Purchase Price. Additional
Shares may be purchased solely for the purpose of covering over-allotments made
in connection with the offering of the Firm Shares. The Underwriters may
exercise their option to purchase Additional Shares, in whole or in part, from
time to time, by giving written notice thereof to the Company within 30 days
after the date of this Agreement. You shall give any such notice on behalf of
the Underwriters and such notice shall specify the aggregate number of
Additional Shares to be purchased pursuant to such exercise and the date for
payment and delivery thereof. The date specified in any such notice shall be a
business day (i) no earlier than the Closing Date (as hereinafter defined), (ii)
no later than five business days after such notice has been given and (iii) no
earlier than two business days after such notice has been given. If any
Additional Shares are to be purchased, each Underwriter, severally and not
jointly, agrees to purchase from the Company the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as you may
determine) which bears the same proportion to the total number of Additional
Shares to be purchased from the Company as the number of Firm Shares set forth
opposite the name of such Underwriter in SCHEDULE I bears to the total number of
Firm Shares.
The Company shall, concurrently with the execution of this Agreement,
deliver agreements (collectively, the "Lock-up Agreements") executed by each of
the directors, executive officers and securityholders of the Company, pursuant
to which each such person agrees not to offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of any Common Stock of the Company or any securities convertible into or
exercisable or exchangeable for such Common Stock or in any other manner
transfer all or a portion of the economic consequences associated with the
ownership of any such Common Stock for a period of 180 days after the date of
the Prospectus without the prior written consent of EVEREN Securities, Inc.
Notwithstanding the foregoing, during such period (i) the Company may, in the
ordinary course, grant stock options to purchase shares of Common Stock pursuant
to the Company's existing stock option plan, and (ii) the Company may issue
shares of its Common
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Stock upon the exercise of an option or warrant or the conversion of a security
outstanding on the date hereof.
3. TERMS OF PUBLIC OFFERING. You have advised the Company that the
Underwriters propose (i) to make a public offering of their respective portions
of the Shares as soon after the date the Registration Statement becomes
effective under the Act as in your judgment is advisable and (ii) initially to
offer the Shares upon the terms set forth in the Prospectus.
4. DELIVERY AND PAYMENT. Delivery to the Underwriters of and payment
for the Firm Shares shall be made to the Company at 9:00 a.m., Chicago time, on
the fourth business day (the "Closing Date") following the date of the initial
public offering at such place as you shall designate. Payment for the Firm
Shares shall be made by one or more certified checks or official bank check or
checks in same day funds or by a wire transfer of immediately available funds,
as you and the Company may agree. The Closing Date and the location of delivery
of and the form of payment for the Firm Shares may be varied by agreement
between you and the Company.
Delivery to the Underwriters of and payment for any Additional Shares to
be purchased by the Underwriters shall be made to the Company at 9:00 a.m.,
Chicago time, on the date specified in the applicable exercise notice given by
you pursuant to SECTION 2 (an "Option Closing Date"). Payment for the
Additional Shares shall in each case be made by one or more certified checks or
official bank check or checks in same day funds or by a wire transfer of
immediately available funds, as you and the Company may agree. Any such Option
Closing Date and the location of delivery of and the form of payment for such
Additional Shares may be varied by agreement between you and the Company.
Certificates for the Shares shall be registered in such names and issued
in such denominations as you shall request in writing not later than two full
business days prior to the Closing Date or any Option Closing Date, as the case
may be. Such certificates shall be made available to you for inspection not
later than 8:30 a.m., Chicago time, on the business day next preceding the
Closing Date or any Option Closing Date, as the case may be. Certificates in
definitive form evidencing the Shares shall be delivered to you on the Closing
Date or any Option Closing Date as the case may be, with any transfer taxes
thereon duly paid by the Company, for the respective accounts of the several
Underwriters, against payment of the Purchase Price therefor.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
for shares to be purchased by any Underwriter whose check shall not have been
received by you on the Closing Date or any later date on which Additional Shares
are purchased for the account of such Underwriter. Any such payment by you
shall not relieve such Underwriter from any of its obligations hereunder.
5. FURTHER AGREEMENTS OF THE COMPANY AND NAVARRE CORPORATION. The
Company and Navarre Corporation, a Minnesota corporation and the majority
shareholder of the Company (the "Majority Shareholder"), covenant and agree
as follows:
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(a) The Registration Statement has been declared effective under
the Act.
(b) The Company will advise you promptly and, if requested by you,
to confirm such advice in writing, (i) when any post-effective amendment
to the Registration Statement has become effective (ii) of any request by
the Commission for amendments to the Registration Statement or amendments
or supplements to the Prospectus or for additional information, (iii) of
the receipt of any comments from the Commission or the Blue Sky or other
securities authority of any jurisdiction regarding the Registration
Statement, any post-effective amendment thereto, the Prospectus, or any
amendment or supplement thereto, (iv) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement
or of the suspension of qualification of the Shares for offering or sale
in any jurisdiction, or the initiation of any proceeding for such
purposes, and (v) of the happening of any event during the period referred
to in PARAGRAPH (e) below which makes any statement of a material fact
made in the Registration Statement or the Prospectus untrue or which
requires the making of any additions to or changes in the Registration
Statement or the Prospectus in order to make the statements therein not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company
will make every reasonable effort to obtain the withdrawal or lifting of
such order at the earliest possible time. If the Registration Statement
has become effective with a form of prospectus omitting certain
information pursuant to Rule 430A under the Act, or filing of the
Prospectus is otherwise required under Rule 424(b) under the Act, the
Company will file the Prospectus, properly completed, pursuant to Rule
424(b) within the time period prescribed and will provide evidence
satisfactory to you of such timely filing.
(c) The Company will furnish to you, without charge, four signed
copies of the Registration Statement as first filed with the Commission
and of each amendment to it, including all exhibits, and will furnish to
you and each Underwriter designated by you such number of conformed copies
of the Registration Statement as so filed and of each amendment to it,
without exhibits, as you may reasonably request.
(d) The Company will not file any amendment or supplement to the
Registration Statement, whether before or after the time when it becomes
effective, or make any amendment or supplement to the Prospectus of which
you shall not previously have been advised or to which you shall
reasonably object; and the Company will prepare and file with the
Commission, promptly upon your reasonable request, any amendment to the
Registration Statement or supplement to the Prospectus which may be
necessary or advisable in connection with the distribution of the Shares
by you, and use its best efforts to cause the same to become promptly
effective.
(e) The Company will promptly after the Registration Statement
becomes effective, and from time to time thereafter for such period as in
the opinion of counsel for the Underwriters a prospectus is required by
law to be delivered in connection with sales by an Underwriter or a
dealer, furnish to each Underwriter and dealer as many copies of the
Prospectus (and of any amendment or supplement to the Prospectus) as such
Underwriter or dealer may reasonably request and during such period comply
with all
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requirements imposed upon it by the Act, as now existing and as hereafter
amended, so far as necessary to permit the continuance of sales of or
dealings in the Shares in accordance with the provisions hereof and the
Prospectus.
(f) If during the period specified in PARAGRAPH (e) any event
shall occur as a result of which, in the opinion of your counsel it
becomes necessary to amend or supplement the Prospectus in order to make
the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if it is
necessary to amend or supplement the Prospectus to comply with any law,
the Company will forthwith prepare and file with the Commission an
appropriate amendment or supplement to the Prospectus so that the
statements in the Prospectus, as so amended or supplemented, will not in
the light of the circumstances when it is so delivered, be misleading, or
so that the Prospectus will comply with law, and furnish to each
Underwriter and to such dealers as you shall specify, such number of
copies thereof as such Underwriter or dealers may reasonably request.
(g) Prior to any public offering of the Shares, the Company will
cooperate with you and counsel for the Underwriters in connection with the
registration or qualification of the Shares for offer and sale by you and
by dealers under the state securities or Blue Sky laws of such
jurisdictions as you may request, continue such qualification in effect so
long as required for distribution of the Shares and file such consents to
service of process or other documents as may be necessary in order to
effect such registration or qualification.
(h) The Company will make generally available to its
securityholders as soon as reasonably practicable an earnings statement
covering a period of at least twelve months after the effective date of
the Registration Statement (but in no event commencing later than 90 days
after such date) which shall satisfy the provisions of Section 11(a) of
the Act, and advise you in writing when such statement has been so made
available.
(i) During the period of five (5) years after the date of this
Agreement, the Company will (i) mail as soon as reasonably practicable
after the end of each fiscal year to the record holders of its Common
Stock a financial report of the Company, all such financial reports to
include a balance sheet, a statement of operations, a statement of cash
flows and a statement of shareholders' equity as of the end of and for
such fiscal year, together with comparable information as of the end of
and for the preceding fiscal year, certified by independent certified
public accountants, and (ii) make generally available as soon as
practicable after the end of each quarterly period (except for the last
quarterly period of each fiscal year) to such holders, a balance sheet, a
statement of operations and a statement of cash flows (and similar
financial reports of all unconsolidated subsidiaries, if any) as of the
end of and for such period, and for the period from the beginning of such
fiscal year to the close of such quarterly period, together with
comparable information for the corresponding periods of the preceding
fiscal year.
(j) During the period of five years after the date of this
Agreement, the Company will furnish to you as soon as available a copy of
each report or other publicly
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available information of the Company mailed to the securityholders of the
Company or filed with the Commission, the National Association of
Securities Dealers, Inc. (the "NASD") or any securities exchange, and such
other publicly available information concerning the Company as you may
reasonably request.
(k) Whether or not the transactions contemplated hereunder are
consummated or this Agreement becomes effective or is terminated (whether
by you in accordance with the provisions of SECTION 9 or otherwise) the
Company will pay all reasonable costs, expenses, fees and taxes incident
to (i) the preparation, printing, filing and distribution under the Act of
the Registration Statement (including financial statements and exhibits),
each preliminary prospectus and all amendments and supplements to any of
them prior to or during the period specified in PARAGRAPH (e), (ii) the
preparation, printing and delivery of the Prospectus and all amendments or
supplements to it during the period specified in PARAGRAPH (e), (iii) the
preparation, printing and delivery of this Agreement, any Preliminary and
Supplemental Blue Sky Memoranda, the certificates for the Shares and all
other agreements, memoranda, correspondence and other documents printed
and delivered in connection with the offering of the Shares (including in
each case any disbursements of counsel for the Underwriters), (iv) the
registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of the several states (including in each case
the fees and disbursements of counsel for the Underwriters relating to
such registration or qualification and memoranda relating thereto), (v)
filings and clearance with the NASD in connection with the offering of the
Shares, (vi) the listing of the Shares on the National Association of
Securities Dealers Automated Quotation system ("NASDAQ National Market
System") and (vii) furnishing such copies of the Registration Statement,
the Prospectus and all amendments and supplements thereto as may be
requested for use in connection with the offering or sale of the Shares by
the Underwriters or by dealers to whom Shares may be sold.
(l) Except to the extent reasonably believed by the Company's
Board of Directors to be consistent with their fiduciary obligations to
the Company's shareholders, neither the Company nor the Majority
Shareholder shall take any action or fail to take any action which the
Company or the Majority Shareholder has agreed, prior to the date hereof,
to take, nor shall any such party authorize any employee, director,
shareholder, partner, affiliate (within the meaning of Rule 405 under the
Act), agent or other person to take any action or fail to take any action
which the Company or the Majority Shareholder has agreed, prior to the
date hereof, to take, directly or indirectly, during the five (5) years
after the Registration Statement becomes effective, which action or
failure to take such action shall be designed to, or might reasonably be
expected to, cause or result in the suspension, revocation or termination
of the quotation or trading of the Common Stock on the NASDAQ National
Market System.
(m) Prior to the Closing Date and any Option Closing Date, as the
case may be, neither the Company nor the Majority Shareholder will issue
any press release or other communication relating to the offering of the
Shares or hold any press conference with respect to the Company or its
financial conditions, results of operations, business,
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properties, assets, or liabilities or this offering, without the prior
written consent of EVEREN Securities, Inc., which consent shall not be
unreasonably withheld.
(n) The Company will apply the proceeds from the sale of the
Shares substantially as set forth under "Use of Proceeds" in the
Prospectus. Additionally, the Company shall report the use of the
proceeds of the issuance of the Shares as may be required under Rule 463
under the Act.
(o) The Company and the Majority Shareholder will use their best
efforts to do and perform all things required or necessary to be done and
performed under this Agreement by the Company and the Majority Shareholder
prior to the Closing Date or any Option Closing Date, as the case may be,
and satisfy all conditions precedent to the delivery of the Shares.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MAJORITY
SHAREHOLDER. The Company and the Majority Shareholder, jointly and severally,
hereby represent and warrant to you that:
(a) The Company has filed with the Commission the Registration
Statement, including the Prospectus relating to the Shares.
(b) The Registration Statement has become effective under the Act,
no stop order suspending the effectiveness of the Registration Statement
is in effect and, to the Company's and the Majority Shareholder's
knowledge, no proceedings for such purpose are pending before or
contemplated by the Commission.
(c) (i) Each part of the Registration Statement, when such part
became effective under the Act, did not contain and each such part, as
amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, (ii) the Registration Statement and the Prospectus comply and,
as amended or supplemented, if applicable, will comply in all material
respects with the Act and the Exchange Act and (iii) the Prospectus does
not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except that
the representations and warranties set forth in this PARAGRAPH (c) do not
apply to statements or omissions in the Registration Statement or the
Prospectus based upon information relating to any Underwriter furnished to
the Company in writing by such Underwriter through you expressly for use
therein.
(d) Each preliminary prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 424 under the Act, complied when so filed in all
material respects with the requirements of the Act and did not contain an
untrue statement of a material fact or omit to state a material fact
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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.
(e) The documents incorporated by reference into the Prospectus,
if any, at the time they were filed with the Commission, complied in all
material respects with the requirements of the Exchange Act and the rules
and regulations thereunder, and, as of the date of this Agreement, the
Closing Date and any Option Closing Date, as the case may be, when read
together with the Prospectus and any supplement thereto, will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
and any documents filed after the date of this Agreement and so
incorporated by reference in the Prospectus will, when they are filed with
the Commission, comply in all material respects with the requirements of
the Exchange Act and the rules and regulations thereunder, and when read
together with the Prospectus and any supplement thereto, will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(f) The Company does not own or control, directly or indirectly,
any corporation, association or other entity. The Company has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has the corporate
power and authority to carry on its business as it is currently being
conducted and to own, lease and operate its properties. The Company is
duly qualified and is in good standing as a foreign corporation authorized
to do business in each jurisdiction in which the nature of its business or
its ownership or leasing of property requires such qualification, except
where the failure to be so qualified would not have a material adverse
effect on the condition (financial or otherwise), earnings, assets,
results of operations, business affairs or business prospects of the
Company (a "Material Adverse Effect"), and no proceeding has been
instituted in any such jurisdiction, revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or
qualification.
(g) The Company has authorized and outstanding capital stock as
set forth under the heading "Capitalization" in the Prospectus and all of
the issued and outstanding shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable,
have been issued in substantial compliance with all federal and state
securities laws and, except as disclosed in the Prospectus, were not
issued in violation of or subject to any preemptive rights or other rights
to subscribe for or purchase securities.
(h) Except as disclosed in the Prospectus and the financial
statements of the Company and the related notes thereto included in the
Prospectus, the Company has no outstanding options to purchase,
registration rights, or preemptive rights or other rights to subscribe for
or to purchase, any securities or obligations convertible into, or any
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contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations.
(i) The Shares to be issued and sold by the Company hereunder have
been duly authorized and, when issued and delivered to the Underwriters
against payment therefor as provided in this Agreement, will be validly
issued, fully paid and nonassessable. Except as disclosed in the
Prospectus, (i) neither the Company nor the Majority Shareholder is a
party to any agreement or understanding, and neither the Company nor the
Majority Shareholder has knowledge of any agreement or understanding,
granting any person or entity a right to acquire Shares or participate in
the sale of Shares pursuant to the Registration Statement; (ii) no person
or entity has the right to require registration under the Act of any
securities of the Company at any time; and (iii) neither the Company nor
the Majority Shareholder is a party to any agreement or understanding, or
has knowledge of any agreement or understanding, granting any person or
entity a right to acquire Common Stock or any other security of the
Company at any time, upon any conditions or upon the occurrence of any
events.
(j) Both the Company and the Majority Shareholder have the
requisite corporate power and authority to enter into, execute and deliver
this Agreement and perform their respective obligations hereunder. This
Agreement has been duly authorized, executed and delivered by the Company
and the Majority Shareholder and is a valid and binding agreement of the
Company and the Majority Shareholder enforceable in accordance with its
terms, except as enforceability may be limited by general equitable
principles, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing (regardless of whether such
enforceability is considered in a proceeding in equity or at law),
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
or other laws affecting creditors' rights generally and except as to those
provisions relating to indemnity or contribution for liabilities arising
under the Act.
(k) The Company's Common Stock, including the Shares, is eligible
for trading on the Nasdaq National Market System.
(l) The Company is not in violation of its charter or by-laws or,
except for conditions that have been satisfied or waived, in default in
the performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any
other agreement, indenture or instrument material to the conduct of the
business of the Company to which the Company is a party or by which it or
its property is bound, except where such violations or defaults would not
result in a Material Adverse Effect.
(m) Except as disclosed in the Prospectus, (i) the Company is in
possession of and is operating in substantial compliance with all
authorizations, licenses, permits, consents, approvals, certificates,
orders and other rights of or with any court, regulatory, administrative
or other governmental body reasonably necessary or required and material
to the conduct of its businesses as now conducted, all of which are valid
and in full force
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and effect in all material respects subject to any conditions imposed by
any such authority, (ii) neither the Company nor the Majority Shareholder
has reason to believe that any governmental body or agency is considering
limiting, suspending, revoking or refusing to grant or renew any such
authorizations, licenses, permits, consents, approvals, certificates,
orders or other rights in any material respect reasonably necessary to the
conduct of the Company's business as now conducted or as proposed to be
conducted as disclosed in the Prospectus and (iii) the Company is in
substantial compliance with all laws, rules, regulations, judgments,
decrees, orders and statutes of any court or jurisdiction to which it is
subject, except where noncompliance would not have a Material Adverse
Effect.
(n) No consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any
federal, state or local governmental authority or any court or other
tribunal is required by the Company or the Majority Shareholder for the
execution or delivery of, or the performance of the Company's and the
Majority Shareholder's obligations under, this Agreement (except filings
under Blue Sky or state securities laws or as may be required under the
rules of the NASD).
(o) Except for conditions that have been satisfied or waived, no
consent of any party to any material contract, agreement, instrument,
lease, license, arrangement, or understanding to which the Company or the
Majority Shareholder is a party, or to which any of their properties or
assets are subject, is required for the execution or delivery of, or the
performance of the Company's or the Majority Shareholder's obligations
under, this Agreement.
(p) Except for conditions that have been satisfied or waived,
neither the execution and delivery of, nor the performance of the
Company's and the Majority Shareholder's obligations under, this
Agreement, nor the issuance and sale of the Shares as contemplated hereby,
nor the consummation of any other of the transactions herein contemplated,
nor the fulfillment of the terms hereof, will violate, result in a breach
of, conflict with, nor (with or without the giving of notice or the
passage of time or both) entitle any party to terminate or call a default
under any contract, agreement, instrument, lease, license, arrangement, or
understanding, to which the Company or the Majority Shareholder is a
party, or to which any of their respective properties or assets are
subject, nor violate or result in a breach of any term of the charter or
by-laws of the Company or the Majority Shareholder, nor violate, result in
a breach of, or conflict with any law, rule, or regulation, or any order,
judgment, or decree binding on the Company or the Majority Shareholder or
to which any of their respective operations, businesses, properties, or
assets are subject, except where such violation, breach or conflict would
not, individually or in the aggregate, have a Material Adverse Effect and
would not impair materially the ability of the Company and the Majority
Shareholder to perform their respective obligations hereunder or
thereunder.
(q) Neither the Company, any of its executive officers, directors,
or affiliates (as defined pursuant to the Act), nor the Majority
Shareholder has taken or will take, directly or indirectly, prior to the
termination of the underwriting arrangements contemplated by this
Agreement, any action designed to stabilize or manipulate the price
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of the Common Stock or which has caused or resulted in, or which might in
the future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of any of the Shares.
(r) There is no legal or governmental proceeding pending or, to
the Company's and the Majority Shareholder's knowledge, threatened, to
which the Company is a party or to which its properties are subject which
is required to be described in the Registration Statement or the
Prospectus and is not so described or, or of any contract or other
document which is required to be described in the Registration Statement
or the Prospectus or is required to be filed as an exhibit to the
Registration Statement, which is not described or filed as required.
(s) To the Company's and the Majority Shareholder's knowledge, the
Company is conducting its business in compliance with, and has not
violated, any foreign, federal, state or local laws or regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), any federal or state laws relating to
discrimination in the hiring, promotion or pay of employees nor any
applicable federal or state wages and hours laws, or any provisions of the
Employee Retirement Income Security Act or the rules and regulations
promulgated thereunder, in each case that are applicable to it, except
where violation of or failure to be in compliance with would not result in
a Material Adverse Effect.
(t) The Company has such permits, licenses, franchises and
authorizations of governmental or regulatory authorities ("Permits"),
including, without limitation, under any applicable Environmental Laws, as
are necessary to own, lease and operate its properties and to conduct its
business; the Company has fulfilled and performed all of its material
obligations with respect to such Permits and no event has occurred which
allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the
rights of the holder of any such Permit; in each case except where failure
to so have, fulfill or perform would not result in a Material Adverse
Effect.
(u) The Company has good and marketable title, free and clear of
all liens, claims, encumbrances and restrictions (collectively, "Liens"),
to all property and assets described in the Prospectus, except (i) Liens
for taxes not yet due and payable, (ii) Liens entered into in connection
with that certain Loan and Security Agreement, dated June 12, 1997,
between Congress Financial Corporation (Central) and the Majority
Shareholder, as amended, and (iii) Liens that are described in the
Prospectus or where failure to so have would not result in a Material
Adverse Effect.
(v) All leases to which the Company is a party are valid and
binding on the Company and no default has occurred or is continuing
thereunder, except where such invalidity, unenforceability or default
would not result in a Material Adverse Effect, and the Company enjoys
peaceful and undisturbed possession under all such leases to which
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it is a party as lessee with such exceptions as do not materially
interfere with the use made by the Company.
(w) Ernst & Young LLP, who have expressed their opinion with
respect to certain of the financial statements and schedules included in
the Registration Statement, are independent public accountants with
respect to the Company, as required by the Act.
(x) The financial statements and schedules of the Company, and the
related notes thereto, included in the Registration Statement and the
Prospectus (and any amendment or supplement thereto) present fairly the
financial position, results of operations and changes in financial
position of the Company on the basis stated in the Registration Statement
at the respective dates or for the respective periods to which they apply;
such statements, schedules and related notes have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved as certified by the
independent accountants named in the preceding paragraph of this section,
except as disclosed therein; and the other financial and statistical
information and data set forth in the Registration Statement and the
Prospectus (and any amendment or supplement thereto) is, in all material
respects, accurately presented and prepared on a basis consistent with
such financial statements and the books and records of the Company.
(y) Since the respective dates as of which information is given in
the Registration Statement and Prospectus, and except as described
therein: (i) the Company has not incurred any material liabilities or
obligations, indirect, direct or contingent, or entered into any material
verbal or written agreement or other transaction which is not in the
ordinary course of business or which could result in a material reduction
in the future earnings of the Company; (ii) the Company has not sustained
any material loss or interference with its business or properties from
fire, flood, windstorm, accident or other calamity, whether or not covered
by insurance; (iii) the Company has not paid or declared any dividends or
other distributions with respect to its capital stock and the Company is
not in default in the payment of principal or interest on any outstanding
debt obligations; and (iv) there has not been any change in the capital
stock or indebtedness material to the Company (other than in the ordinary
course of business).
(z) The Company and the Majority Shareholder maintain a system of
internal accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general
or specific authorization; (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;
and (iii) access to assets is permitted only in accordance with
management's general or specific authorization.
(aa) To the Company's and the Majority Shareholder's knowledge, and
except as disclosed in the Prospectus, the Company has sufficient
trademarks, trade names, patent rights, mask works, copyrights, licenses,
approvals and governmental authorizations reasonably necessary to conduct
its business as now conducted; the expiration of any
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trademarks, trade names, patent rights, mask works, copyrights,
licenses, approvals or governmental authorizations would not have a
Material Adverse Effect; neither the Company nor the Majority
Shareholder has knowledge of any material infringement by the Company
of trademark, trade name rights, patent rights, mask works, copyrights,
licenses, trade secret or other similar propriety rights (collectively,
"Proprietary Rights") of others, and there is no claim being made
against the Company regarding infringement of any Proprietary Right
which could have a Material Adverse Effect; and except as disclosed in
the Prospectus, the Company is not obligated or under any liability
whatsoever to pay any royalty, fee or other similar payment in respect
of any Proprietary Rights.
(ab) Except as disclosed in the Prospectus, to the Company's and
the Majority Shareholder's knowledge, the Company owns and has the
unrestricted right to use all trade secrets, including know-how, customer
lists, inventions, designs, processes, computer programs and technical
data necessary to manufacture, operate and sell all products and services
sold or developed and proposed to be sold by it as described in the
Prospectus, free and clear of any rights, liens and claims of others. To
the Company's and the Majority Shareholder's knowledge, the Company is not
using any material confidential information or trade secrets of any former
employer of any of its past or present employees.
(ac) The Company has filed all necessary federal, state and foreign
income and franchise tax returns and has paid all taxes shown as due
thereon; and neither the Company nor the Majority Shareholder has
knowledge of any tax deficiency which has been or might reasonably be
asserted or which has been threatened against the Company which could have
a Material Adverse Effect.
(ad) Except as set forth in the Prospectus, there are no
agreements, claims, payment, issuances, arrangements or understandings,
whether oral or written, for services in the nature of finder's,
consulting or origination fees with respect to the sale of Shares
hereunder or any other arrangements, agreements, understandings, payments
or issuances with respect to the Company or, to the knowledge of the
Company and the Majority Shareholder, any of its officers, directors,
partners, employees or affiliates that may affect the Underwriters'
compensation, as determined by the NASD.
(ae) The Company is not involved in any material labor dispute nor,
to the knowledge of the Company and the Majority Shareholder, is any such
dispute threatened.
(af) Except as described in the Prospectus or as set forth on
SCHEDULE II, neither the Company nor the Majority Shareholder maintains,
sponsors or contributes on behalf of the Company's employees to any
program or arrangement that is an "employee welfare benefit plan,"
"employee pension benefit plan," or a "multiemployer plan" as such terms
are defined in Sections 3(1), 3(2) and 3(37), respectively, of the
Employee Retirement Income Security Act of 1974, as amended (herein called
ERISA) (herein collectively called the ERISA Plans). Neither the Company
nor the Majority Shareholder maintains or contributes, now or at any time
previously, to a defined benefit plan, as defined in Section 3(35) of
ERISA. No ERISA Plan (or any trust created thereunder) has engaged in a
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"prohibited transaction" within the meaning of Section 406 of ERISA or
Section 4975 of the United States Internal Revenue Code of 1986, as
amended (herein called the Code), which could subject the Company to any
tax penalty on prohibited transactions and which has not adequately been
corrected. Each ERISA Plan is in compliance with all material reporting,
disclosure and other requirements of the Code and ERISA as they relate to
any such ERISA Plan. Determination letters have been received from the
Internal Revenue Service with respect to each ERISA Plan which is intended
to comply with Code Section 401(a), stating that such ERISA Plan (or the
underlying prototype document relating thereto) and the attendant trust
are qualified thereunder. Neither the Company nor the Majority
Shareholder has ever completely or partially withdrawn from a
"multiemployer plan."
(ag) Except as set forth in the Prospectus, no officer, director
(to the extent required to be disclosed by applicable Commission
regulations) or shareholder of the Company or any "affiliate" or
"associate" (as these terms are defined in Rule 405 under the Act) of any
of the foregoing persons or entities has or has had (to the extent in
excess of $25,000), either directly or indirectly (i) an interest in any
person or entity that (x) furnishes or sells services or products which
are furnished or sold or that are proposed to be furnished or sold by the
Company, or (y) purchases from or sells or furnishes to the Company any
goods or services, or (ii) a beneficial interest in any contract or
agreement to which the Company is a party or by which it may be bound or
affected. Except as set forth in the Prospectus under the captions
"Certain Transactions" and "Management" there are no existing or proposed
agreements, arrangements, understandings or transactions, between the
Company and any existing officer, director, principal shareholder of the
Company or any partner, affiliate or associate of any of the foregoing
persons or entities.
(ah) The minute books of the Company have been made available to
the Underwriters and contain an accurate summary of all meetings with
respect to which minutes exist and contain all actions taken by the
directors and shareholders of the Company during such meetings since the
time of its incorporation, and reflect accurately and fairly in all
respects all transactions referred to in such minutes. No material
actions that would materially adversely affect the Company have been taken
by the directors and/or shareholders of the Company at a meeting for which
minutes do not exist.
(ai) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(aj) To the Company's and the Majority Shareholder's knowledge, the
Company has complied with all provisions of Section 517.075, Florida
Statutes (Chapter 92-198, Laws of Florida) relating to doing business with
the Government of Cuba or with any person or any affiliate located in
Cuba.
7. INDEMNIFICATION.(a) The Company and the Majority Shareholder,
jointly and severally, agree to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20 of the
-14-
Exchange Act from and against any and all losses, claims, damages,
liabilities and judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) or any preliminary prospectus, or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any
Underwriter or underwriting arrangements furnished in writing to the Company
by or on behalf of any Underwriter through you expressly for use therein.
Both the Company and the Majority Shareholder acknowledge that the only
information relating to any Underwriter or underwriting arrangements
furnished in writing to the Company by or on behalf of any Underwriter
expressly for use in the Registration Statement or Prospectus are the
statements set forth in the third and last paragraphs under the caption
"Underwriting" in the Prospectus.
(b) In case any action shall be brought against any Underwriter or any
person controlling such Underwriter, based upon any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment or supplement thereto
and with respect to which indemnity may be sought against the Company, such
Underwriter shall promptly notify the Company and the Majority Shareholder in
writing and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such indemnified party and
payment of all reasonable fees and expenses. Any Underwriter or any such
controlling person shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Underwriter or such controlling person
unless (i) the employment of such counsel has been specifically authorized in
writing by the Company, (ii) the Company shall have failed to assume the defense
and employ counsel or (iii) the named parties to any such action (including any
impleaded parties) include both such Underwriter or such controlling person and
the Company, as the case may be, and counsel for such Underwriter or such
controlling person has reasonably concluded that there may be one or more legal
defenses available to such Underwriter or such controlling person which are
different from or additional to those available to the Company (in which case
the Company shall not have the right to assume the defense of such action on
behalf of such Underwriter or such controlling person, it being understood,
however, that the Company shall not, in connection with any one such action or
separate but substantially similar or related actions arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for all such Underwriters and controlling persons, which firm shall be
designated in writing by EVEREN Securities, Inc. and that all such reasonable
fees and expenses shall be reimbursed as they are incurred). The Company shall
not be liable for any settlement of any such action effected without the written
consent of the Company but if settled with the written consent of the Company,
the Company agrees to indemnify and hold harmless any Underwriter and any such
controlling person from and against any loss or liability by reason of such
settlement. If at any time the indemnified party shall have requested the
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second sentence of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than fifteen business days after receipt by such
-15-
indemnifying party of the aforesaid request and (ii) the indemnifying party
shall not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes
an unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceeding.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, the Majority Shareholder and their respective
directors and officers who sign the Registration Statement, any person
controlling the Company or the Majority Shareholder within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the Company and the Majority Shareholder to
each Underwriter but only with reference to information relating to such
Underwriter or the underwriting arrangements furnished in writing by or on
behalf of such Underwriter through you expressly for use in the Registration
Statement, the Prospectus or any preliminary prospectus. In case any action
shall be brought against the Company, the Majority Shareholder or any of
their respective directors, any such officer or any person controlling the
Company or the Majority Shareholder based on the Registration Statement, the
Prospectus or any preliminary prospectus and in respect of which indemnity
may be sought against any Underwriter, such Underwriter shall have the rights
and duties given to the Company and the Majority Shareholder (except that if
the Company or the Majority Shareholder shall have assumed the defense
thereof, such Underwriter shall not be required to do so, but may employ
separate counsel therein and participate in the defense thereof but the fees
and expenses of such counsel shall be at the expense of such Underwriter),
and the Company, the Majority Shareholder and their respective directors, any
such officers and any person controlling the Company, the Majority
Shareholder shall have the rights and duties given to the Underwriter, by
SECTION 7(b) hereof.
(d) If the indemnification provided for in this SECTION 7 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities and judgments (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company and
the Majority Shareholder, on the one hand, and the Underwriters, on the other
hand, from the offering of the Shares or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company, the Majority
Shareholder and the Underwriters in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The
relative benefits received by the Underwriters shall be deemed to be the
total underwriting discount received by the Underwriters and the relative
benefits received by the Company and the Majority Shareholder shall be deemed
to be the total net proceeds from the offering (before deducting expenses)
received by the Company, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault of the Company, the Majority
Shareholder and the Underwriters shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state
-16-
a material fact relates to information supplied by the Company, the Majority
Shareholder or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company, the Majority Shareholder and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this SECTION
7(d) were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in
the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
judgments referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this SECTION 7, no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the
Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this SECTION 7(d) are several in proportion to the respective
number of Shares purchased by each of the Underwriters hereunder and not
joint.
(e) Notwithstanding anything to the contrary contained herein, an
Underwriter or person controlling an Underwriter shall not bring any claim
against the Majority Shareholder under this SECTION 7 with respect to any
breach of a representation, warranty or agreement contained in this Agreement
unless (i) such Underwriter or controlling person shall have first submitted
such claim to the Company and (ii) the Company shall not, within forty-five
(45) days, (a) have paid such claim in full or (b) be otherwise fully
satisfying its indemnification obligations with respect to such claim (by
assuming the defense of any proceeding giving rise to such claim or otherwise
as set forth in this SECTION 7); provided, however, that if at any time
thereafter the Company is no longer fully satisfying its indemnification
obligations with respect to such claim, such Underwriter or controlling
person may immediately bring such claim against the Majority Shareholder.
8. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The several obligations
of the Underwriters to purchase the Firm Shares under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company and the
Majority Shareholder contained in this Agreement shall be true and correct
as of the date hereof and as of the Closing Date with the same force and
effect as if made on and as of such date.
(b) The Registration Statement shall have become effective not
later than 4:00 p.m., Chicago time, on the date of this Agreement or at
such later date and time as you may approve in writing, and at the Closing
Date no stop order suspending the effectiveness
-17-
of the Registration Statement shall have been issued and no proceedings
for that purpose shall have been commenced or shall be pending before
or contemplated by the Commission.
(c) You shall be satisfied that since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, (i) there shall not have been any action or inaction which
might result in a Material Adverse Change of the Company which makes it
impractical or inadvisable in your judgment to proceed with the public
offering or purchase the Shares as contemplated hereby, (ii) except as set
forth in the Registration Statement and the Prospectus, no verbal or
written agreement or other transaction shall have been entered into by the
Company, which is not in the ordinary course of business or which could
result in a Material Adverse Change, (iii) no loss or damage (whether or
not insured) to the property of the Company shall have been sustained the
result of which would have a Material Adverse Effect, (iv) no legal or
governmental action, suit or proceeding affecting the Company the result
of which could have a Material Adverse Effect or may materially affect the
transactions contemplated by this Agreement shall have been instituted or
threatened and (v) on the Closing Date you shall have received a
certificate dated the Closing Date, signed by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ in their capacities as the Chief Executive Officer and
Chief Financial Officer of the Company, respectively, confirming the
matters set forth in PARAGRAPHS (a), (b) and (c) of this SECTION 8.
(d) You shall have received on the Closing Date and any Option
Closing Date, as the case may be, an opinion (satisfactory to you and your
counsel), dated as of the Closing Date or any Option Closing Date, as the
case may be, of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.L.L.P, counsel for the Company and
the Majority Shareholder, to the effect that:
(i) The Company is duly qualified and is in good standing
as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the
failure to be so qualified would not have a Material Adverse Effect
and to the best of such counsel's knowledge, after due inquiry, no
proceeding has been instituted in any such jurisdiction, revoking,
limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification.
(ii) The Company has authorized and outstanding capital
stock as set forth under the heading "Capitalization" in the
Prospectus and all of the issued and outstanding shares of capital
stock of the Company have been duly authorized and validly issued,
are fully paid and nonassessable, and, except as disclosed in the
Prospectus, were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase
securities.
(iii) The Firm Shares have been duly authorized and,
when issued and delivered, will be validly issued, fully paid
and non-assessable and free and clear of all liens and
restrictions on transfer. The Additional Shares have been duly
authorized and, when issued and delivered, will be validly
issued, fully paid and non-assessable and free and clear of all
liens and restrictions on transfer.
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(iv) Except as disclosed in the Prospectus and the financial
statements of the Company and the related notes thereto included in
the Prospectus, or to such counsel's knowledge, the Company has no
outstanding options to purchase, registration rights, preemptive
rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any
such options, rights, convertible securities or obligations.
(v) This Agreement has been duly authorized, executed and
delivered by the Company and the Majority Shareholder and is a valid
and binding agreement of the Company and the Majority Shareholder
enforceable in accordance with its terms, except as enforceability
may be limited by general equitable principles, including, without
limitation, concepts of materiality, reasonableness, good faith and
fair dealing (regardless of whether such enforceability is
considered in a proceeding in equity or at law), bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or
other laws affecting creditors' rights generally and except as to
those provisions relating to indemnity or contribution for
liabilities arising under the Act.
(vi) The Registration Statement has become effective under
the Act, no stop order suspending its effectiveness has been issued
and no proceedings for that purpose are, to the best of such
counsel's knowledge, after due inquiry, pending before or
contemplated by the Commission.
(vii) The statements set forth in the Prospectus under the
headings "Risk Factors -- Shares eligible for future sale by our
current shareholders may adversely affect our stock price,"
"Capitalization" and "Description of Capital Stock" and Item 15 Part
II of the Registration Statement insofar as such statements
constitute a summary of documents referred to therein or of legal
matters or proceedings, are complete and accurate in all material
respects and fairly summarize in all material respects the
information called for with respect to such documents, legal matters
and proceedings.
(viii) The Shares and the Common Stock conform in all material
respects as to legal matters to the description thereof contained in
the Prospectus.
(ix) Neither the Company nor the Majority Shareholder is in
violation of its charter or by-laws and, to such counsel's
knowledge, and except for conditions that have been satisfied or
waived, the Company is not in default in the performance of any
obligation, agreement or condition contained in any bond, debenture,
note or any other evidence of indebtedness or in any other
agreement, indenture or instrument material to the conduct of the
business of the Company to which the Company is a party or by which
it or its properties are bound, except where such violation or
default would not result in a Material Adverse Effect.
-19-
(x) To such counsel's knowledge and except as disclosed in
the Prospectus, (i) the Company is in possession of and is operating
in substantial compliance with all authorizations, licenses,
permits, consents, approvals, certificates, orders and other rights
of or with any court, regulatory, administrative or other
governmental body reasonably necessary or required and material to
the conduct of its business as now conducted, all of which are valid
and in full force and effect in all material respects, subject to
any conditions imposed by any such authority and (ii) the Company is
in substantial compliance with all laws, rules, regulations,
judgements, decrees, orders and statutes of any court or
jurisdiction to which it is subject, except where noncompliance
would not have a Material Adverse Effect.
(xi) No consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with,
any federal, state or local governmental authority or any court or
other tribunal is required by the Company for the execution or
delivery of, or the performance of the Company's obligations under,
this Agreement (except filings under the Act which have been or will
be made before the Closing Date or any Option Closing Date, as the
case may be, and filings under Blue Sky or state securities laws or
as may be required under the rules of the NASD).
(xii) Except for conditions that have been satisfied or
waived, no consent of any party to any material contract, agreement,
instrument, lease, license, arrangement, or understanding to which
the Company or the Majority Shareholder is a party, or to which any
of their properties or assets are subject, is required for the
execution or delivery of, or the performance of the Company's or the
Majority Shareholder's obligations under, this Agreement.
(xiii) Except for conditions that have been satisfied or
waived, neither the execution and delivery of, nor the performance
of the Company's and the Majority Shareholder's respective
obligations under, this Agreement nor the issuance and sale of the
Shares as contemplated hereby nor the consummation of any other of
the transactions herein contemplated nor the fulfillment of the
terms hereof, will violate, result in a breach of, conflict with,
nor (with or without the giving of notice or the passage of time or
both) entitle any party to terminate or call a default under any
material contract, agreement, instrument, lease, license,
arrangement, or understanding to which the Company is a party, or to
which its properties or assets are subject, nor violate or result in
a breach of any term of the charter or by-laws of the Company or the
Majority Shareholder, nor violate, result in a breach of, or to the
best of such counsel's knowledge, conflict with any law, rule, or
regulation, or any order, judgment, or decree binding on the Company
or the Majority Shareholder or to which any of its operations,
business, properties, or assets are subject, except where such
violation, breach or conflict would not, individually or in the
aggregate, have a Material Adverse Effect or would impair materially
the ability of the Company or the Majority Shareholder to perform
its obligations hereunder or thereunder.
-20-
(xiv) To such counsel's knowledge, such counsel does not know
of any legal or governmental proceeding pending or threatened to
which the Company is a party or to which any of its properties are
subject which is required to be described in the Registration
Statement or the Prospectus and is not so described or, or of any
contract or other document which is required to be described in the
Registration Statement or the Prospectus or is required to be filed
as an exhibit to the Registration Statement which is not described
or filed as required.
(xv) To such counsel's knowledge, the Company has such
permits, licenses, franchises and authorizations of governmental or
regulatory authorities ("Permits"), as are necessary to own, lease
and operate its properties and to conduct its business; the Company
has fulfilled and performed all of its material obligations with
respect to such Permits and no event has occurred which allows, or
after notice or lapse of time would allow, revocation or termination
thereof or result in any other material impairment of the rights of
the holder of any such Permit; in each case except where failure to
so have, fulfill or perform would not result in a Material Adverse
Effect.
(xvi) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(xvii) (1) The Registration Statement and the Prospectus and
any supplement or amendment thereto (except for financial statements
and notes, schedules and other financial statistical data included
therein, as to which no opinion need be expressed) comply as to form
in all material respects with the Act and the Exchange Act and (2)
no facts have come to the attention of such counsel that have led
such counsel to believe that the Registration Statement and the
prospectus included therein at the time the Registration Statement
became effective contained 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 not misleading, or that the
Prospectus as amended or supplemented, if applicable (except for
financial statements as aforesaid) contained any untrue statement of
a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely on (A) an opinion
or opinions of other counsel retained by them or the Company as to laws of
any jurisdiction other than the United States and Minnesota, provided that
(i) each such local counsel is acceptable to you, (ii) such reliance is
expressly authorized by each opinion so relied upon and (iii) each such
opinion is in form and substance satisfactory to you and your counsel; and
(B) as to matters of fact, certificates of officers of the Company and the
Majority Shareholder and governmental officials. In each such case, the
opinion of such counsel is to state that they are so doing and that they
have no reason to believe that the Underwriters are not
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justified in relying on such opinions or certificates and copies of said
opinions or certificates are to be attached to the opinion. In addition,
in giving such opinion with respect to the matters covered by clause
(xvii)(2) such counsel may state that their opinion is based upon their
participation in the preparation of the Registration Statement and
Prospectus, any amendments or supplements thereto or other documents, as
the case may be, and review and discussion of the contents thereof, but
is without independent check or verification except as specified.
The opinion of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.L.L.P. described in PARAGRAPH
(d) above shall be rendered to you at the request of the Company and shall
so state therein.
(e) You shall have received, on the Closing Date and any Option
Closing Date, as the case may be, a letter dated the Closing Date or any
Option Closing Date, as the case may be, in form and substance
satisfactory to you, of Ernst & Young LLP confirming that they are
independent public accountants within the meaning of the Act and stating
that in their opinion the financial statements and schedules examined by
them and included in the Registration Statement comply in form in all
material respect with the applicable accounting requirements of the Act;
and containing such other statements and information as is ordinarily
included in accountants' "comfort letters" to Underwriters with respect to
the financial statements and certain financial and statistical information
contained in the Registration Statement and Prospectus.
(f) You shall have received on the Closing Date, the Lock-up
Agreements referred to in SECTION 2 herein, duly executed by each of the
executive officers, directors and securityholders of the Company.
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to
the good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such
Additional Shares.
9. EFFECTIVE DATE OF AGREEMENT AND TERMINATION. This Agreement
shall become effective upon the later of (i) the execution of this Agreement
and (ii) when notification of the effectiveness of the Registration Statement
has been released by the Commission.
This Agreement may be terminated at any time prior to the Closing Date
by you by written notice to the Company if any of the following has occurred:
(i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any adverse change or development
involving a prospective adverse change in the condition, financial or
otherwise, of the Company or the earnings, affairs, or business prospects of
the Company, whether or not arising in the ordinary course of business, which
would, in your judgment, make it impracticable to market the Shares on the
terms and in the manner contemplated in the Prospectus, (ii) any outbreak or
escalation of hostilities or other national or international calamity or
crisis or change in economic conditions or in the financial markets of the
United States or elsewhere that, in your judgment, is material and adverse
and would, in your judgment, make it impracticable to market the Shares on
the terms and in the manner contemplated in the Prospectus, (iii) the
suspension or
-22-
material limitation of trading in securities on the New York Stock Exchange,
the American Stock Exchange or the NASDAQ National Market System or
limitation on prices for securities on any such exchange or NASDAQ National
Market System, (iv) the enactment, publication, decree or other promulgation
of any federal or state statute, regulation, rule or order of any court or
other governmental authority which in your opinion materially and adversely
affects, or will materially and adversely affect, the business or operations
of the Company, (v) the declaration of a banking moratorium by either Federal
or New York State authorities or (vi) the taking of any action by any
Federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
If on the Closing Date or on an Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase the
Firm Shares or the Additional Shares, as the case may be, which it or they
have agreed to purchase hereunder on such date and the aggregate number of
Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters, as the case may be, agreed but failed or refused
to purchase is not more than one-tenth of the total number of Shares to be
purchased on such date by all Underwriters, each non-defaulting Underwriter
shall be obligated severally, in the proportion which the number of Firm
Shares set forth opposite its name in SCHEDULE I bears to the total number of
Firm Shares which all the non-defaulting Underwriters, as the case may be,
have agreed to purchase, or in such other proportion as you may specify, to
purchase the Firm Shares or the Additional Shares, as the case may be, which
such defaulting Underwriter or Underwriters, as the case may be, agreed but
failed or refused to purchase on such date; PROVIDED, that in no event shall
the number of Firm Shares or Additional Shares, as the case may be, which any
Underwriter has agreed to purchase pursuant to SECTION 2 hereof be increased
pursuant to this SECTION 9 by an amount in excess of one-ninth of such number
of Firm Shares or Additional Shares, as the case may be, without the written
consent of such Underwriter. If on the Closing Date or on an Option Closing
Date, as the case may be, any Underwriter or Underwriters shall fail or
refuse to purchase Firm Shares or Additional Shares, as the case may be, and
the aggregate number of Firm Shares or Additional Shares, as the case may be,
with respect to which such default occurs is more than one-tenth of the
aggregate number of Shares to be purchased on such date by all Underwriters
and arrangements satisfactory to you and the Company for purchase of such
Shares are not made within 48 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or
on the part of the Company and the Selling Securityholder. In any such case
which does not result in termination of this Agreement, either you or the
Company shall have the right to postpone the Closing Date or the applicable
Option Closing Date, as the case may be, but in no event for longer than
seven days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of any such
Underwriter under this Agreement.
10. MISCELLANEOUS. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (a) if to the Company or the
Majority Shareholder, to NetRadio Corporation, with copies to ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ P.L.L.P., ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and (b) if to any Underwriter or to you, to EVEREN
Securities, Inc., ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
attention:
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, with copies to ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, or in any
case to such other address as the person to be notified may have requested in
writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, the Majority Shareholder,
their respective executive officers and directors and of the Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in
full force and effect, and will survive delivery of and payment for the
Shares, regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of any of the Underwriters or by or on behalf
of the Company or the Majority Shareholder, the executive officers or
directors of the Company or the Majority Shareholder or any controlling
person of the Company or the Majority Shareholder, (ii) acceptance of the
Shares and payment for them hereunder or (iii) termination of this Agreement.
If this Agreement shall be terminated by the Underwriters because of
any failure or refusal on the part of the Company or the Majority Shareholder
to comply with the terms or to fulfill any of the conditions of this
Agreement, the Company and the Majority Shareholder agree to reimburse the
Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) reasonably incurred by them.
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Majority
Shareholder, the Underwriters, any controlling persons referred to herein and
their respective successors and assigns, all as and to the extent provided in
this Agreement, and no other person shall acquire or have any right under or
by virtue of this Agreement. The term "successors and assigns" shall not
include a purchaser of any of the Shares from the Underwriters merely because
of such purchase.
For purposes of this Agreement, the term "knowledge" means, with
respect to a person, knowledge that is possessed, or should have been
possessed after due inquiry, by such person.
This Agreement shall be governed and construed in accordance with the
internal laws (and not the laws pertaining to conflicts of laws) of the State
of Illinois.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
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Please confirm that the foregoing correctly sets forth the agreement
between the Company, the Majority Shareholder and the Underwriters.
Very truly yours,
NETRADIO CORPORATION
By:
------------------------------------
Title:
---------------------------------
NAVARRE CORPORATION
By:
------------------------------------
Title:
---------------------------------
EVEREN SECURITIES, INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, INCORPORATED
Acting severally on behalf of
themselves and the several
Underwriters named in Schedule I
hereto
By: EVEREN SECURITIES, INC.
By:
---------------------
Title:
---------------------
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SCHEDULE I
UNDERWRITERS
NUMBER OF FIRM SHARES
UNDERWRITERS TO BE PURCHASED
------------------------------------------------------------------------
EVEREN Securities, Inc. . . . . . . . . . . . . . . . . . . .
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Incorporated . . . . . . . . . . . . .
---------
TOTAL 3,333,000
=========
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SCHEDULE II
EMPLOYEE BENEFIT PLANS
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