EXHIBIT 10.3
U-SHIP, INC.
1,245,500 UNITS ($1,494,600)
$1.20 PER UNIT
AGENCY AGREEMENT
April 22, 1998
▇.▇. ▇▇▇▇▇▇▇▇ & Company
One Financial Plaza
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Gentlemen and Ladies:
The undersigned, U-Ship, Inc., a Utah corporation (the "Company"),
confirms its agreement with you, ▇.▇. ▇▇▇▇▇▇▇▇ & Company (the "Agent"), subject
to the terms and conditions stated herein, to act as its agent with respect to
the offer and sale (the "Offering") of 1,245,500 units (the "Units"), each
consisting of two shares of the Company's Series A Cumulative Convertible
Preferred Stock (the "Shares") convertible into two shares of the Company's
Common Stock and one redeemable Warrant to purchase one share of the Company's
Common Stock (the "Investors' Warrants"), as follows:
1. DESCRIPTION OF OFFERING. The Company proposes to issue and sell through
the Agent, on a "best efforts, all or none" basis 1,245,500 Units (the
"Minimum"), which may be increased by an additional 250,000 Units to 1,495,500
Units (the "Optional Maximum") at the option of the Agent. The Units, the
Shares, the Investors' Warrants, the Agent's Warrants (as defined below), and
the shares of Common Stock of the Company issuable upon exercise or conversion
of the Shares, the Investors' Warrants and the Agent's Warrants are collectively
referred to herein as the "Securities."
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with the Agent, as to the following:
(a) The Company has prepared a Confidential Private Placement Memorandum,
dated, ____________, 1998, (the "Memorandum") with respect to the Units in
conformity with applicable requirements of the Securities Act of 1933, as
amended (the "Act"), and the Rules and Regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") thereunder,
including Regulation D, and with applicable securities laws of those states
agreed to by the Company and the Agent to sell the Units. The Agent may sell the
Units to an unlimited number of "Accredited" investors as such term is defined
in Regulation D. The Memorandum is either in compliance, or will be supplemented
to be in compliance with, any applicable securities laws. The Company will give
the Agent immediate notice of any supplement or amendment of the Memorandum.
The term "Memorandum" as used herein, shall mean the Memorandum, including all
financial schedules and exhibits thereto, and all amendments and supplements
thereto.
(b) The Memorandum does not, and will not as of each Closing Date (as
later defined herein), 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; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company by
the Agent expressly for use therein. There are no material contracts or other
information concerning the Company required to be disclosed in the Memorandum
pursuant to the Act, Rules and Regulations or applicable state securities laws
which have not been disclosed therein.
(c) Neither the Commission nor any state securities agency has issued any
order preventing or suspending the use of the Memorandum or the sale of the
Securities.
(d) Subsequent to the respective dates as of which information is given in
the Memorandum and at each Closing Date, except as is otherwise disclosed in the
Memorandum, there has not been:
(i) any material change in the capital stock (other than Securities
pursuant to this Offering) or long-term debt (including any capitalized
lease obligation), or material increase in the short-term debt of the
Company;
(ii) any issuance of options, warrants, convertible securities or
other rights to purchase the capital stock of the Company;
(iii) any material adverse change, or any development involving a
material adverse change, in or affecting the business, business prospects,
properties, management, financial position, stockholders' equity, results
of operations or general condition of the Company;
(iv) any material transaction entered into by the Company;
(v) any material obligation, direct or contingent, incurred by the
Company, except obligations incurred in the ordinary course of business
that, in the aggregate, are not material; or
(vi) any dividend or distribution of any kind declared, paid or made
on the Company's capital stock.
(e) The Company has no subsidiaries, and is not affiliated with any other
company or business entity, except as explicitly stated in the Memorandum.
(f) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Utah, with full
corporate power and authority, to own, lease and operate its properties and
conduct its business as described in the Memorandum. The Company is duly
qualified to do business as a foreign corporation in good standing in each
jurisdiction in which the ownership or lease of its properties, or the conduct
of its business, requires such
qualification and in which the failure to be qualified or in good standing would
have a material adverse effect on the business of the Company. The Company has
all necessary and material authorizations, approvals and orders of and from all
federal, state and local governmental regulatory officials and bodies to own its
properties and to conduct its business as described in the Memorandum, and is
conducting its business in substantial compliance with all applicable material
laws, rules and regulations of the jurisdictions in which it is conducting
business. The Company holds all material licenses, certificates and permits from
state, federal and other regulatory authorities necessary for the conduct of its
business as described in the Memorandum, or has obtained waivers from any such
applicable requirements from the appropriate state, federal or other regulatory
authority.
(g) The Company is not in violation of its Articles of Incorporation or
Bylaws. The Company is not in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any bond, debenture,
note or other evidence of indebtedness or in any contract, indenture, mortgage,
loan agreement, joint venture or other agreement or instrument to which the
Company is a party or by which the Company or its properties are bound. The
Company is not in violation of any law, order, rule, regulation, writ,
injunction or decree of any government, governmental instrumentality or court,
domestic or foreign.
(h) The Company has full requisite power and authority to enter into this
Agreement. This Agreement has been duly authorized, executed and delivered by
the Company and will be a valid and binding agreement on the part of the
Company, enforceable in accordance with its terms, if and when this Agreement
shall have become effective in accordance with the terms hereof, except as
enforceability may be limited by the application of bankruptcy, insolvency,
moratorium or similar laws affecting the rights of creditors generally and by
judicial limitations on the right of specific performance, and except as the
enforceability of the indemnification or contribution provisions hereof may be
affected by applicable federal or state securities laws ("Enforceability
Limitations"). The performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a breach or violation of any
of the terms and provisions of, or constitute a default under:
(i) any bond, debenture, note, contract, lease, license, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement
or instrument to which the Company is a party, or by which it, or any of
its property, is bound;
(ii) the Company's Articles of Incorporation, Bylaws or other
governing documents;
(iii) any law, order, rule, regulation, writ, injunction or decree
of any government, governmental agency or court having jurisdiction over
the Company or any of its properties.
(i) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Company of
the transactions contemplated by this Agreement, except, as may be required
under the Act or state securities or Blue Sky laws in connection with the sale
of the Securities by the Company.
(j) Except as is otherwise expressly stated in the Memorandum, there are
no actions, suits or proceedings pending before any court or before any
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 determined adverse to the Company, might result in any material
adverse change in the condition (financial or otherwise), business or prospects
of the Company, materially and adversely affect its properties or assets or
prevent consummation of the transactions contemplated by this Agreement and, to
the best of the Company's knowledge, no such actions, suits, or proceedings are
threatened.
(k) The Company will, as of each Closing Date, have the duly authorized
and outstanding capitalization set forth in the Memorandum. The outstanding
capital stock of the Company is duly authorized, validly issued, fully paid and
nonassessable. The Securities conform in substance to all statements relating
thereto contained in the Memorandum. The Securities to be sold by the Company
hereunder have been duly authorized and, when issued and delivered pursuant to
this Agreement, the subscription agreement to be entered into between the
Company and purchasers of the Units (the "Subscription Agreements"), and the
Investors' and Agent's Warrants will be validly issued, fully paid and
nonassessable and will conform to the description thereof contained in the
Memorandum. No preemptive rights or similar rights of any security holders of
the Company exist with respect to the issuance and sale of the Securities by the
Company. Except as disclosed in the Memorandum, the Company has no agreement
with any security holder which gives such security holder the right to require
the Company to register under the Act any securities of any nature owned or held
by such person. Upon payment for and delivery of the Securities to be sold by
the Company pursuant to this Agreement and the Subscription Agreement, the
investors will acquire good and marketable title to such Securities, free and
clear of all liens, encumbrances or claims. The certificates evidencing the
Securities will comply as to form with all applicable provisions of the Utah
Revised Business Corporation Act. A sufficient number of shares of Common Stock
of the Company have been reserved for issuance by the Company upon exercise of
the Investors' and Agent's Warrants. The Investors' and Agent's Warrants, when
issued and delivered, will constitute valid and binding obligations of the
Company in accordance with their terms, except as enforceability may be limited
by the Enforceability Limitations.
(l) The financial statements of the Company, together with the related
notes, forming part of the Memorandum, fairly present the financial position and
the results of operations of the Company at the respective dates and for the
respective periods to which they apply. All financial statements included in the
Memorandum have been prepared in accordance with generally accepted accounting
principles, consistently applied throughout the periods involved, except as may
be otherwise stated therein.
(m) Except as is otherwise disclosed in the Memorandum, the Company has
good and marketable title to all of the property, real and personal, described
in the Memorandum as being owned by the Company, free and clear of all liens,
encumbrances, equities, charges or claims, except as do not materially interfere
with the uses made and to be made by the Company of such property or as
disclosed in the financial statements contained in the Memorandum. Except as is
otherwise disclosed in the Memorandum, the Company has valid and binding leases
to the real and/or personal property described in the Memorandum as being under
lease to the Company.
(n) The Company has filed all necessary federal and state income and
franchise tax returns and paid all taxes shown as due thereon. The Company has
no knowledge of any tax deficiency which might be asserted against it which
would materially and adversely affect the Company's business or properties.
(o) Except as disclosed in the Memorandum:
(i) the Company owns or possesses the exclusive and unrestricted
rights to use all patents, copyrights, trademarks, trade secrets and
proprietary rights or information reasonably necessary for the conduct of
its present or intended business as described in the Memorandum and has
not received any notice of conflict with asserted rights of others;
(ii) there are no pending legal, governmental or administrative
proceedings relating to patents, copyrights, trademarks or proprietary
rights or information, to which the Company is a party or of which any
property of the Company is subject and no such proceedings are, to the
best of the Company's knowledge, threatened or contemplated against the
Company by any governmental agency or authority or others;
(iii) the Company is not using any confidential information or trade
secrets of any third party without the consent of such third party;
(iv) the Company does not infringe upon the right or claimed right
of any person under, or with respect to, any of the intangible rights
listed above; or
(v) the Company is not obligated or under any liability whatsoever
to make any payments by way of royalties, fees or otherwise to any owner
of, licensor of or other claimant to, any patent, trademark, trade name,
copyright or other intangible asset, with respect to the use thereof or in
connection with the conduct of its business or otherwise.
(p) The Company intends to apply the proceeds from the sale of the Units
for the purposes and substantially in the manner set forth in the Memorandum.
(q) No person is entitled, directly or indirectly, to compensation from
the Company or the Agent for services as a finder in connection with the
transactions contemplated by this Agreement.
(r) The Company will conduct the offering in compliance with the
requirements of Regulation D promulgated under the Act. The Company is not
disqualified from claiming exemption under Regulation D by Rule 505(b)(2)(iii)
of Regulation D and meets the other requirements to claim exemption under
Regulation D.
(s) No labor disturbance by the employees of the Company or of any of the
Company's exists or, to the best of the Company's knowledge, is imminent which
could reasonably be expected to have a material adverse effect on the conduct of
the business, operations, financial condition or income of the Company.
(t) The Company has no defined benefit pension plan or other plan
promulgated pursuant to, or which is intended to comply with the provisions of,
the Employee Retirement Income Security Act of 1974, except as disclosed in the
Memorandum.
(u) The Company has not sold any securities in violation of Section 5(a)
of the Act or any state securities laws.
(v) The Company maintains insurance, which is in full force and effect, of
the types and in the amounts adequate for its business and in line with the
insurance maintained by similar companies and businesses.
(w) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations and (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP.
(x) All material transactions between the Company and its stockholders who
beneficially own more than 5% of any class of the Company's voting securities
have been accurately disclosed in the Memorandum, 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.
(y) The Company will use its best efforts to obtain written agreements
from Messrs. Bartholomew, Lytle, Ramsden, Rudebusch, and Senske substantially in
the form of Exhibit B hereto.
(z) The Company has timely filed all documents and amendments to
previously filed documents required to be filed by it pursuant to the Securities
Exchange Act of 1934, as amended, (the "1934 Act") and the rules and regulations
of the SEC thereunder. Each such document conformed in all material respects
with the requirements of the 1934 Act and contained all information required to
be stated therein in accordance with the 1934 Act. No part of any such document
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. True copies of each of the documents incorporated by reference,
if any, into the Memorandum have been delivered by the Company to the Agent. To
the best of the Company's knowledge, the executive officers and directors of the
Company and stockholders who hold more than 5% of the Company's outstanding
Common Stock, have made, and are current with, all filings, if any, that are
required under the 1934 Act.
3. REPRESENTATIONS AND WARRANTIES OF THE AGENT.
The Agent represents that:
(a) It is not disqualified from acting as a selling agent hereunder as a
result of the application of Rule 505(b)(2)(iii) of Regulation D.
(b) It is a corporation duly organized, validly existing and in good
standing under the laws of the State of Minnesota with all requisite corporate
power to carry on its business as set forth in the Memorandum.
(c) It is licensed as a broker-dealer, authorized to conduct offerings of
the sort contemplated hereby by the Commission and the blue sky authorities of
each state in which the Company and the Agent have agreed to offer the Units and
is a member in good standing of the National Association of Securities Dealers,
Inc. ("NASD"), and, to the best of the Agent's knowledge, no proceedings are
pending or threatened to revoke or limit any such status.
(d) This Agreement has been duly authorized and executed by the Agent and
is a legal, valid and binding agreement of the Agent enforceable in accordance
with its terms, except as enforceability may be limited by the Enforceability
Limitations.
(e) It will:
(i) not offer, offer for sale or sell the Units by means of any form
of general solicitation or general advertising as described under Rule
502(c) of Regulation D;
(ii) provide each of its offerees of Units a copy of the Memorandum
at all times prior to the date upon which any such offeree purchases any
of the Units;
(iii) not utilize any sales materials other than the Memorandum or
make any statements concerning the Company other than information
contained in the Memorandum unless prior written approval is obtained from
the Company;
(iv) offer and sell the Units on behalf of the Company only to
"accredited investors" within the meaning of Rule 501(a) of Regulation D.
(f) It will not, and will use its best efforts to ensure that any subagent
employed by it will not, offer the Units for sale to, sell to, or solicit any
offers to subscribe for the Units from, any offeree who resides in a state where
the applicable state securities laws require offerees to meet specified
qualifications, unless such offeree meets such qualifications, or where
applicable state securities laws require offerees to receive disclosure
documents, until it has delivered a Memorandum. Within a reasonable time prior
to the Closing respecting such purchase, it or its subagents shall deliver all
such documents to all persons who are to purchase the Units, to the extent they
have not theretofore received such documents.
(g) It will make, and will use its best efforts to ensure that any
subagents employed by it are registered broker-dealers in the appropriate
jurisdictions and will make offers to sell Units to, sell to, or solicit offers
to subscribe for Units from, persons only from those states or other
jurisdictions where the Company has either qualified or registered the offering
for sale or an exemption from such qualification or registration is available
under the applicable securities laws of such states or jurisdictions. It will
not, and will use its best efforts to ensure any subagent employed by it will
not, offer, sell or solicit offers for Units to or from any person unless,
immediately before making such offer, sale or solicitation, it or its subagent
reasonably believes such person would be able to represent that such person is
acquiring such Units for such person's own account as principal for investment
and not with a view to resale or distribution.
(h) Upon the delivery to it by the Company of the requisite number of
copies thereof, it will promptly distribute to each person to whom a Memorandum
was given a copy of any amendment thereof or supplement thereto approved by the
Agent.
(i) The execution of this Agreement and the performance by the Agent of
its obligations hereunder will not result in violation by the Agent of any
federal or state law or regulation or of the rules, regulations or guidelines of
any regulatory or other agency having jurisdiction, including the NASD,
governing the qualification, licensing or conduct of securities brokers or
dealers.
4. BEST EFFORTS ALL OR NONE PRIVATE OFFERING OF THE UNITS.
(a) On the basis of the representations, warranties and agreements herein
contained, and subject to the terms and conditions herein set forth, the Company
appoints the Agent as its non-exclusive agent to effect sales of the Units,
including the Optional Maximum if the Agent so elects, on a "best efforts, all
or none" basis, for the account and risk of the Company, at a price of $1.20 per
Unit and upon the other terms and conditions set forth in the Memorandum. The
Agent agrees to use its best efforts as such agent to procure purchasers for the
Units during a period commencing with the date of this Agreement and ending with
the Termination Date (as hereinafter defined) of the Agreement. The Agent may,
in its sole discretion, use the services of other brokers or dealers in
connection with the offer and sale of the Units and pay any portion of the
Agent's Commission (as hereinafter defined) to such brokers or dealers who are
members of the NASD and who agree to abide by the provisions of Section 3
hereof.
(b) The Company will pay the Agent, as compensation for its services
hereunder, a cash commission of 10% of the aggregate gross proceeds received
from sales of Units by the Agent in the Offering (the "Agent's Commission").
This amount shall be paid to the Agent at each Closing Date.
(c) Unless the Agreement is extended, or earlier terminated as provided
herein, in the event that the Minimum has not been sold and proceeds therefrom
deposited in the escrow account on or before the Termination Date (as defined
below), the Agreement shall terminate and the Escrow Agent designated in section
(d) below shall refund to any persons who have subscribed for any of the Shares
the full amount which the Agent may have received from them, and neither party
to this Agreement shall have any future obligation to the other hereunder,
except that the provisions of Sections 10, 11 and 14 shall at all times continue
to be effective and binding.
(d) The Agent, the Company, the Additional Investors (as defined in the
Memorandum), and Bank Windsor, Minneapolis, Minnesota, as Escrow Agent, have
contemporaneously with the execution of this Agreement entered into an Escrow
Agreement (the "Escrow Agreement"), which is hereby incorporated by reference.
When the Minimum has been sold, and the proceeds therefor deposited with the
Escrow Agent, the escrowed proceeds from the sale of such Shares may be
transmitted to the Company and the Agent in the manner provided in the Escrow
Agreement.
5. AGENT'S WARRANTS. The Company shall sell to the Agent for $50 a
four-year warrant to purchase a number of shares of the Common Stock equal to
10% of the number of Shares sold in this Offering by the Agent (the "Agent's
Warrants"). The Agent's Warrants shall be issued at the final Closing, and shall
first become exercisable one (1) year after issuance at a price equal to $0.60
per share. The Agent's Warrants shall contain such further terms as those
provided in and be substantially similar to that of Exhibit A.
6. EXPENSES. The Company shall, whether or not the issue and sale of any
of the Units under this Agreement is consummated, be responsible for and
promptly pay all costs and expenses related to the offering of the Units
including, but not limited to, all costs, fees and expenses in connection with:
(i) the preparation, printing and filing of the Memorandum (including financial
statements and exhibits) and any amendments or supplements thereto; (ii) the
printing of any other instruments or documents relating to any transaction
contemplated in this Agreement; (iii) the issuance
and delivery of the Securities, including taxes, if any; (iv) the preparation,
printing and issuance of the Securities; (v) the services provided by the
Company's accountants and counsel; (vi) furnishing and delivering to the Agent
and to any selected dealers such copies of the Memorandum as may be reasonably
requested for use by the Agent or any dealer; (vii) all costs of obtaining
exemption from registration of the offer and sale of the Securities under the
applicable state Blue Sky laws; and (viii) the performance of the Company's
obligations hereunder. Provided, however, that if the Agent withdraws from the
Offering for any reason beyond its control, or if the Offering is abandoned by
the Company, the Company will reimburse the Agent only up to $5,000 for
accountable expenses incurred by the Agent in connection with the Offering.
Further, the Company will pay a non-accountable expense allowance to the Agent
equal to 3% of the aggregate gross proceeds received from sales of Units by the
Agent in the Offering.
7. BLUE SKY QUALIFICATIONS. The Offering will be qualified for sale under
the securities or Blue Sky laws of such states as the Agent and the Company may
agree, it being understood that the Agent may refuse to go forward with the
Offering if, in its judgment, the Offering is not qualified in such states as
the Agent deems necessary to reasonably complete the Offering. The necessary
legal work for such qualifications will be performed by counsel for the Company
at the expense of the Company.
8. FURTHER AGREEMENTS OF THE COMPANY. The Company further covenants and
agrees with the Agent as to the following:
(a) The Company will advise you promptly upon becoming known to it of the
issuance by the Commission or any state securities commission of any action or
order suspending the offer and/or sale of the Securities, or of the institution
of any proceedings for that purpose, will use its best efforts to prevent the
issuance of any such action or order and, if such an event occurs will obtain as
soon as reasonably possible the withdrawal or lifting thereof. The Company will
notify the Agent promptly of any request by any state securities commission for
an amendment of or supplement to the Memorandum for additional information, and
will not file any amendment of or supplement to the Memorandum to which the
Agent shall have objected in writing.
(b) The Company will furnish the Agent, as soon as available, copies of
the Memorandum and any amendments or supplements thereto, all in such quantities
as you may from time to time reasonably request. The Company specifically
authorizes the Agent to use and distribute copies of the Memorandum in
connection with the sale of the Units as and to the extent permitted by the
applicable securities laws.
(c) The Company will apply the proceeds from the sale of the Units
substantially in the manner set forth in the Memorandum.
9. CONDITIONS TO THE AGENT'S OBLIGATIONS. The Agent's obligation to sell
the Units and close hereunder shall be subject to the condition that all
representations and warranties and other statements herein of the Company are
true and correct, the condition that the Company shall have performed all of its
obligations hereunder theretofore to be performed prior to the sale of the Units
and closing hereunder, and the following additional conditions:
(a) No stop order suspending the offer and/or sale of the Securities shall
have been issued and no proceedings therefor shall be pending or threatened, by
the Commission or any state securities division. Any requests for additional
information on the part of any state securities division to be included in the
Memorandum shall have been complied with to the Agent's reasonable satisfaction,
and no amendment or supplement to the Memorandum shall be made to which the
Agent, or the Agent's counsel, shall have reasonably objected after having
received reasonable notice.
(b) There shall not have occurred any adverse change, or any development
involving a prospective adverse change in, or affecting the business or
properties of, the Company which, in the Agent's reasonable opinion, would
materially adversely affect, the offer and sale of the Units on the Company's
behalf.
(c) The Agent shall not have been advised by the Company and shall not
have advised the Company that the Memorandum, or any amendment thereof or
supplement thereto, contained any untrue statement of a fact which, in the
opinion of its legal counsel, is material, or that the Memorandum omits to state
a fact which, in the opinion of such counsel, is material and is required to be
stated therein or is necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that this paragraph (c) shall not apply to any statements or omissions
which are based upon and conform to written information furnished to the Company
by the Agent (or on behalf of the Agent and specifically at the request of the
Agent) specifically for use in the Memorandum or any amendment thereof or
supplement thereto.
(d) ▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A., counsel for the Company, shall have furnished
to the Agent as of each Closing Date (as defined herein) such opinion or
opinions in form and substance satisfactory to the Agent and the Agent's
counsel, to the effect that:
(i) The Company has been duly incorporated and is validly existing
in good standing under the laws of the State of Utah (assuming that such
laws are substantially similar to the laws of the State of Minnesota); has
the requisite corporate power to own, lease and operate its properties and
conduct its business as described in the Memorandum; and is duly qualified
to do business as a foreign corporation in good standing in the States of
Minnesota and Wisconsin.
(ii) The number of authorized, and to the best of such counsel's
knowledge, the number of issued and outstanding shares of capital stock of
the Company are as set forth in the Memorandum (except as for the addition
of Securities issued pursuant to this Offering), and all such capital
stock has been duly authorized and is validly issued, fully paid and
nonassessable. Upon delivery of, and payment for, the Securities pursuant
to this Agreement and the Subscription Agreements, the subscribers thereof
will acquire the Securities free and clear of all liens, encumbrances or
claims. To the best knowledge of such counsel, no preemptive rights,
contractual or otherwise, of security holders of the Company exist with
respect to the issuance or sale of the Securities by the Company. The
Securities conform as to matters of law in all material respects to the
description of them made in the Memorandum, and such description
accurately sets forth the material legal provisions thereof required to be
set forth in the Memorandum.
(iii) The Securities have been duly authorized and, upon delivery to
the subscribers thereof against payment therefor, pursuant to this
Agreement and the Subscription Agreements, will be validly issued, fully
paid, and nonassessable.
(iv) The certificates evidencing the Securities comply as to form
with the applicable provisions of the laws of the State of Utah.
(v) This Agreement and the Agent's Warrants have been duly
authorized, executed, and delivered by the Company and are the valid and
binding obligations of the Company, enforceable in accordance with their
terms, except as enforceability may be limited by the Enforceability
Limitations. A sufficient number of shares of Common Stock of the Company
have been reserved for issuance by the Company upon exercise of the
Agent's Warrants.
(vi) To the best of such counsel's knowledge, there are no material
legal or governmental proceedings required by the 1933 Act and the Rules
and Regulations to be described or referred to in the Memorandum that are
not described or referred to therein.
(vii) To the best of such counsel's knowledge there are no legal,
governmental or administrative proceedings pending or threatened against
the Company that relate to patents, trademarks or other intellectual
property, except for pending or proposed United States and foreign patent
applications.
(viii) No authorization, approval or consent of any governmental
authority or agency is necessary in connection with the issuance and sale
of the Securities as contemplated under this Agreement, except such as may
be required under the Act or under state or other securities laws in
connection with the sale of the Securities.
(ix) Assuming that the Securities are offered and sold as
contemplated by the Memorandum and this Agreement (including all
representations and warranties contained therein), the offer, sale,
issuance and delivery of the Securities are exempt from the registration
and prospectus delivery requirements of the Act.
(x) To the best of such counsel's knowledge, the execution,
delivery, and performance of the Agency Agreement and any issuance and
delivery of Securities is not in material contravention of any of the
provisions of any note, indenture, mortgage, deed of trust, joint venture
agreement, agreement or other instrument known to such counsel to which
the Company is a party or by which it is bound and which is material to
the business of the Company as a whole, or of any material law, rule or
regulation of the United States, or the State of Minnesota, or any
judgment, order or decree known to such counsel and applicable to the
Company of any court having jurisdiction over the Company or any of its
properties.
In expressing the foregoing opinion, as to matters of fact relevant to
conclusions of law, counsel may rely, to the extent that they deem proper, upon
certificates of public officials and of the officers of the Company, provided
that copies of such officers' certificates are attached to the opinion.
(e) The Agent and purchasers shall have received from the Company a
certificate, dated as of each Closing Date, of the principal executive officer
and the principal financial or accounting officer of the Company to the effect
that:
(i) The representations and warranties of the Company in this
Agreement are true and correct as if made on each Closing Date;
(ii) the Company has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied at, or prior
to, such date;
(iii) as of each Closing Date, the Memorandum and any supplement
thereto, contained all statements and information required to be included
therein, the Memorandum did not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, and, since the date of the
Memorandum there has occurred no event required to be set forth in an
amendment to the Memorandum which has not been so set forth; provided,
however, that such certificate does not require any representation
concerning statements in, or omissions from, the Memorandum, or any
amendment thereof or supplement thereto, which are based upon and conform
to written information furnished to the Company by the Agent specifically
for use in the preparation of the Memorandum or any such amendment or
supplement;
(iv) except as is otherwise expressly stated in the Memorandum,
there are no material actions, suits or proceedings pending before any
court or governmental agency, authority or body or, to the best of their
knowledge, threatened to which the Company is a party or of which the
business or property of the Company is subject;
(v) subsequent to the date as of which information is given in the
Memorandum, and except as contemplated or referred to in the Memorandum,
the Company has not incurred any direct, or to the best of their
knowledge, contingent liabilities or obligations material to the Company,
or entered into any material transactions, except liabilities, obligations
or transactions in the ordinary course of business or relating to the
offering of Units pursuant to the Memorandum, and there has not been any
change in the capital stock, short-term or long-term debt of the Company,
or any material adverse change in the financial position, net worth or
results of operations of the Company;
(vi) subsequent to the dates as of which information is given in the
Memorandum, the Company has not sustained any material loss of, or damage
to, its properties, whether or not insured.
(f) The Agent and the purchasers shall have received, dated as of each
Closing Date, from the Secretary of the Company a certificate of incumbency
certifying the names, titles and signatures of the officers authorized to
execute the resolutions of the Board of Directors of the Company authorizing and
approving the execution, delivery and performance of this Agreement, a copy of
such resolutions to be attached to such certificate, certifying such resolutions
and certifying that the Articles of Incorporation of the Company and the Bylaws
of the Company in the form attached thereto have been validly adopted and have
not been amended or modified.
(g) Prior to or simultaneously with the First Closing, the Additional
Investors (as defined in the Memorandum) shall have purchased at a price to
equal to $1.20 per unit at least 583,333 units, each consisting of two shares of
the Company's Series A Cumulative Convertible Preferred Stock (convertible into
two shares of the Company's Common Stock) and one redeemable Warrant to purchase
one share of the Company's Common Stock.
(h) Each of Messrs. Bartholomew, Lytle, Ramsden, Rudebusch, and Senske
shall have entered into an agreement with the Agent, substantially in the form
of Exhibit B hereto.
(i) The Agent shall receive such other letters and certificates as may be
reasonably requested by the Agent and by the Agent's counsel.
10. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company hereby agrees to indemnify and hold harmless the Agent and
each person, if any, who controls the Agent within the meaning of Section 15 of
the Act against any losses, claims, damages or liabilities, joint or several, to
which the Agent or each such controlling person may become subject, under the
Act, the Securities and Exchange Act of 1934, as amended (the "1934 Act"), the
common law, or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of, or are based upon (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Memorandum or any amendment or supplement thereof, or the omission or
alleged omission to state in the Memorandum or any amendment or supplement,
thereof a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any application or other statement executed by the
Company or based upon written information furnished by the Company filed in any
jurisdiction in order to obtain an exemption from registration for the
Securities or the sale thereof from the securities laws of such jurisdiction, or
the omission or alleged omission to state in such application or statement of a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company will reimburse the Agent and each such controlling
person for any legal or other expenses reasonably incurred by the Agent or
controlling person (subject to the limitation set forth in Section 11(c) hereof)
in connection with investigating or defending against any such loss, claim,
damage, liability or action as such legal or other expenses are incurred;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arise out of, or is based
upon, an untrue statement, or alleged untrue statement, or omission, or alleged
omission, made in reliance upon and in conformity with written information
furnished to the Company by, or on behalf of, the Agent specifically for use in
the preparation of the Memorandum or any amendment or supplement, or in any
application or other statement executed by the Company or the Agent filed in any
jurisdiction in order to exempt the Securities or the sale thereof from
registration under the securities laws of such jurisdiction. This indemnity
agreement is in addition to any liability which the Company may otherwise have.
(b) The Agent agrees to indemnify and hold harmless the Company, each of
its directors and each person who controls the Company within the meaning of
Section 15 of the Act against any losses, claims, damages or liabilities to
which the Company or any such director, or controlling person may become
subject, under the Act, the 1934 Act, the common law, or otherwise, insofar as
such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of, or are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Memorandum or any amendment thereof, or the
omission or alleged omission to state in the Memorandum or any amendment or
supplement thereof, a material fact required to be stated therein or necessary
to make the statements therein not misleading; or (ii) any untrue statement or
alleged untrue statement of a material fact contained in any application or
other statement executed by the Company or by the Agent and filed in any
jurisdiction in order to obtain an exemption from registration for the
Securities or the sale thereof from the securities laws of such jurisdiction, or
the omission or alleged omission to state in such application or statement a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; in each case to the extent, but only the extent, that such untrue
statement, or alleged untrue statement, or omission, or alleged omission, was
made in reliance upon and in conformity with written information furnished to
the Company by, or on behalf of, the Agent specifically for use in the
preparation of the Memorandum or any amendment thereof or supplement thereto, or
in any application or other statement executed by the Company or by the Agent
and filed in any jurisdiction. The Agent will reimburse any legal or other
expenses reasonably incurred by the Company or any such director or controlling
person in connection with investigating or defending against any such loss,
claim, damage or liability as such legal or other expenses are incurred. This
indemnity agreement is in addition to any liability which the Agent may
otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 11
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 11, notify in writing the indemnifying party of the commencement
thereof. The omission so to notify the indemnifying party will not relieve it
from any liability under this Section 11 as to the particular item for which
indemnification is then being sought. In case any such action is brought against
any indemnified party, and the indemnified party notifies an indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel who shall be reasonably satisfactory to such indemnified party; and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 11 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defenses thereof other than reasonable costs of investigation; provided, however
that any indemnified party shall have the right to employ separate counsel to
represent is and all other parties and their controlling persons who may be
subject to liability arising out of any claim in respect of which indemnity may
be sought by the Agent against the Company, or by the Company against the Agent,
hereunder if, in the reasonable judgment of the indemnified party, it is
advisable for such parties and controlling persons to be represented by separate
counsel, in which event the fees and expenses of such separate counsel shall be
borne by the indemnifying party. Any such indemnifying party shall not be liable
to any indemnified party on account of any settlement of any claim or action
effected without the consent of such indemnifying party.
(d) In order to provide for just and equitable contribution in any case in
which the Agent or the Company (or any person who controls the Agent or the
Company within the meaning of Section 15 of the Act) makes claim for
indemnification pursuant to this Section 11 but it is judicially determined (by
entry of a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such
case, notwithstanding the fact that the provisions of this Section 11 hereof
provide for indemnification in such case, then, and in each such case, (i) the
Company, and any persons controlling the Company and who may be liable for
contribution, in the aggregate, and the Agent, shall contribute to the aggregate
losses, claims, damages, or liabilities to which they may be subject (after
contribution from all others) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the Agent and
any subagents on the other hand from the offering of the Securities 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 on
the one hand and the Agent and any subagents on the other hand in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations;
provided, however, that no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11 of the Act) shall be entitled to contribution
from any person who is not guilty of such fraudulent misrepresentation. The
Company and the Agent agree that it would not be just and equitable if the
respective obligations of the Company and the Agent to contribute pursuant to
this Section 11 were to be determined by pro rata or per capita allocation of
the aggregate damages or by any other method of allocation that does not take
account of the equitable considerations referred to above. Notwithstanding the
provisions of this Section 11, the Agent shall not be required to contribute any
amount in excess of the amount by which the total price of the Units purchased
from the Company pursuant to this Agreement and the Subscription Agreements
exceeds the amount of any damages that the Agent has otherwise been required to
pay by reason of such untrue statement. The foregoing contribution agreement
shall in no way affect the liabilities for contribution of any persons having
liability under Section 11 of the Act other than the Company, the Agent and
persons controlling the Company and the Agent.
(e) Promptly after receipt by a party to this Agreement of notice of the
commencement of any action, suit or proceeding, such person will, if a claim for
contribution in respect thereof is to be made against another party (the
"Contributing Party"), notify the Contributing Party of the commencement
thereof, but the omission so to notify the Contributing Party will not relieve
the Contributing Party from any liability which it may have to any party other
than under this Section 10. In case any such action, suit or proceeding is
brought against any party and such person notifies a Contributing Party of the
commencement thereof, the Contributing Party will be entitled to participate
therein with the notifying party and any other Contributing Party similarly
notified.
11. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. The respective
indemnities, agreements, representations, warranties and other statements of the
Company and the Agent, as set forth in this Agency Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement, shall remain in full
force and effect, regardless of any investigation (or any statement as to the
results thereof) made by or on behalf of the Agent or any controlling person of
the Agent, the Company, or any officer or director or controlling person of the
Company, and shall survive delivery of and payment for the Securities as set
forth in the Memorandum.
12. CLOSING AND DELIVERY OF SHARES. At each closing (a "Closing"), the
Company will deliver to the Agent certificates representing the Securities sold
to purchasers pursuant to this offering as reflected in executed Subscription
Agreements against payment therefor. The initial Closing (the "First Closing")
shall be held as soon as practicable. Thereafter, additional Closings may be
held as agreed upon by the Company and the Agent. The final Closing (the "Final
Closing") shall be held within seven days of the Termination Date (as
hereinafter defined). However, Final Closing may
be accelerated or extended by agreement between the Company and the Agent. The
times and dates of each Closing are herein collectively referred to as a
"Closing Date."
13. EFFECTIVE DATE OF THE AGREEMENT AND TERMINATION.
(a) This Agreement is effective as of the date first written above.
(b) This Agreement shall terminate on May 29, 1998, subject to a 60-day
extension if agreed to by the Agent and the Company (the "Termination Date"). In
addition, this Agreement may be terminated on or any time prior to the Closing
Date by agreement of the parties, or by the Agent upon written or telegraphic
notice to the Company if:
(i) the market value of securities in general or political,
financial or economic conditions shall have so materially changed as in
the Agent's judgment to render it impractical or inadvisable to proceed
with the best efforts offering of the Units;
(ii) there shall be a material outbreak of hostilities or material
escalation and deterioration in the political and military situation
between the United States and any foreign power or a formal declaration of
war by the United States of America shall have occurred;
(iii) trading in securities on the New York Stock Exchange or the
American Stock Exchange shall have been suspended or minimum or maximum
prices shall have been established in either exchange by action of such
exchange, the Commission or other governmental or regulatory authority; or
(iv) any other restrictions (including, without limitation, any
banking moratorium) on transactions in securities materially affecting the
free market for securities or the payment for such securities shall have
been established by either exchange, by the Commission, by any other
federal or state agency, by action of the Congress or by Executive Order.
Any such termination shall be without liability of any party to any other
party except that the provisions of Sections 10, 11 and 14 hereof shall at
all times be effective and binding.
14. APPLICABLE LAW. This Agreement shall be construed in accordance with
the substantive laws, rules and regulations of the State of Minnesota without
regard to its choice of law provisions.
15. PARTIES. This Agreement shall be binding upon, and inure solely to the
benefit of, the Agent and the Company and the officers and directors of the
Company and each person who controls the Company or the Agent and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Units through the Agent, or any other
party, shall be deemed a successor or assign by reason merely of such purchase.
16. NOTICES. All notices or communications hereunder, except as herein
otherwise provided shall be in writing and if to be given to the Agent, shall be
mailed, delivered, or telegraphed and confirmed to:
▇.▇. ▇▇▇▇▇▇▇▇ & Company
One Financial Plaza
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
or if to be given to the Company, shall be mailed, delivered, or telegraphed and
confirmed to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
U-Ship, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
▇▇▇▇▇▇ and ▇▇▇▇▇▇, P.A.
2400 IDS Center
▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
17. EXECUTION. This Agreement may be executed by any one or more of the
parties hereto, in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
If the foregoing is in accordance with your understanding as the Agent,
please sign and return to the Company a counterpart hereof, and upon the
acceptance hereof by you, this letter and such acceptance shall constitute a
binding agreement by and between you, as the Agent, and the Company.
Very truly yours,
U-SHIP, INC.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Its Chief Executive Officer
---------------------------
Accepted and agreed to this
22nd day of April, 1998.
▇. ▇. ▇▇▇▇▇▇▇▇ & COMPANY
By ________________________________________
Its ___________________________________