Exhibit 1.1
▇▇▇▇▇▇▇ THE LEATHER EXPERTS INC.
1,100,000 Units/1/
Consisting of 1,100,000 shares of Common Stock and
1,100,000 Redeemable Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
___________, 1997
Equity Securities Trading Co., Inc.
2820 IDS Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
▇▇▇▇▇▇▇ The Leather Experts Inc., a Minnesota corporation (the
"Company"), hereby confirms its agreement to issue and sell to Equity Securities
Trading Co., Inc. (the "Underwriter") an aggregate of 1,100,000 Units, each Unit
consisting of one share of common stock, $.01 par value per Unit, of the Company
(the "Common Stock") and one redeemable common stock purchase warrant of the
Company (the "Redeemable Warrants"). Such 1,100,000 Units are collectively
referred to in this Agreement as the "Firm Units." The Company also hereby
confirms its agreement to grant to the Underwriter an option to purchase up to
165,000 additional Units (the "Option Units") on the terms and for the purposes
set forth in Section 2(b) hereof. As used in this Agreement, the term "Units"
shall consist of the Firm Units and the Option Units.
The Company also hereby confirms its agreement to issue to the
Underwriter warrants for the purchase of a total of 110,000 shares of Common
Stock as described in Section 6 hereof (the "Underwriter's Warrants"), assuming
purchase by the Underwriter of the Firm Units. The Shares issuable upon
exercise of the Underwriter's Warrants are referred to in this Agreement as the
"Warrant Shares."
1. Representations, Warranties and Agreements of the Company.
(a) The Company represents and warrants to and agrees with the
Underwriter as follows:
(i) A registration statement on Form S-1 (File No. 333-13967)
with respect to the Units, including a prospectus subject to completion,
has been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the rules
and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "SEC") thereunder and has been filed with the SEC
under the Securities Act; one or more amendments to such registration
statement have also been so prepared and have been, or will be, so filed.
Copies of the registration statement and amendments and each related
preliminary prospectus to date have been delivered by the Company to the
Underwriter, and, to the extent applicable, were identical to the
electronically transmitted copies thereof filed with the SEC pursuant to
the SEC's Electronic Data Gathering Analysis and Retrieval System
("▇▇▇▇▇"), except to the extent permitted by Regulation S-T under the
Securities Act. If the Company has elected not to rely upon Rule 430A of
the Rules and Regulations, the Company has prepared and will promptly file
an amendment to the registration statement
----------------------------
/1/ Plus an option to purchase up to 165,000 additional Units to cover over-
allotments.
and an amended prospectus. If the Company has elected to rely upon Rule
430A of the Rules and Regulations, it will prepare and file a prospectus
pursuant to Rule 424(b) that discloses the information previously omitted
from the prospectus in reliance upon Rule 430A. Such registration statement
as amended at the time it is or was declared effective by the SEC and, in
the event of any amendment thereto after the effective date and prior to
the First Closing Date (as hereinafter defined), such registration
statement as so amended (but only from and after the effectiveness of such
amendment), including the information deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A(b), if
applicable, is hereinafter called the "Registration Statement." The
prospectus included in the Registration Statement at the time it is or was
declared effective by the SEC is hereinafter called the "Prospectus,"
except that if any prospectus filed by the Company with the SEC pursuant to
Rule 424(b) of the Rules and Regulations or any other prospectus provided
to the Underwriter by the Company for use in connection with the offering
of the Units (whether or not required to be filed by the Company with the
SEC pursuant to Rule 424(b) of the Rules and Regulations) differs from the
prospectus on file at the time the Registration Statement is or was
declared effective by the SEC, the term "Prospectus" shall refer to such
differing prospectus from and after the time such prospectus is filed with
the SEC or transmitted to the SEC for filing pursuant to such Rule 424(b)
or from and after the time it is first provided to the Underwriter by the
Company for such use. The term "Preliminary Prospectus" as used herein
means any preliminary prospectus included in the Registration Statement
prior to the time it becomes or became effective under the Securities Act
and any prospectus subject to completion as described in Rule 430A of the
Rules and Regulations. For purposes of this Agreement, all references to
the Registration Statement, any Preliminary Prospectus, the Prospectus, or
any amendment or supplement to any of the foregoing, shall be deemed to
include the respective copies thereof filed with the SEC pursuant to ▇▇▇▇▇.
(ii) At the time the Registration Statement is or was declared
effective by the SEC and at all times subsequent thereto up to the "First
Closing Date" and the "Second Closing Date" (as such terms are hereinafter
defined), the Registration Statement and Prospectus, and all amendments
thereof and supplements thereto, will comply or complied with the
provisions and requirements of the Securities Act and the Rules and
Regulations. Neither the SEC nor any state securities authority has issued
any order preventing or suspending the use of any Preliminary Prospectus or
requiring the recirculation of a Preliminary Prospectus, or issued a stop
order with respect to the offering of the Units (if the Registration
Statement has been declared effective), or instituted or, to the Company's
knowledge, threatened the institution of, proceedings for any of such
purposes. When the Registration Statement shall become effective and when
any post-effective amendment thereto shall become effective, the
Registration Statement (as amended, if the Company shall have filed with
the SEC any post-effective amendments thereto) will not or did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading. When
the Registration Statement is or was declared effective by the SEC and at
all times subsequent thereto up to the First Closing Date and the Second
Closing Date, the Prospectus (as amended or supplemented, if the Company
shall have filed with the SEC any amendment thereof or supplement thereto)
will not or did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances in
which they were made, not misleading. When any Preliminary Prospectus was
first filed with the SEC and when any amendment thereof or supplement
thereto was first filed with the SEC, such Preliminary Prospectus and any
amendment thereof and supplement thereto complied in all material respects
with the applicable provisions of the Securities Act and the Rules and
Regulations and did not contain an untrue statement of a material fact and
did not omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. None of
the representations and warranties in this Subsection 1(a) shall apply to
statements in, or omissions from, the Registration Statement or the
Prospectus, or any amendment thereof or supplement thereto, which are based
upon and conform to written information relating to the Underwriter
furnished to the Company by the Underwriter specifically for use in the
preparation of the Registration Statement or the Prospectus, or any such
amendment or supplement.
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(iii) The Company has no subsidiaries other than those
identified in Exhibit 21.1 to the Registration Statement (each one a
"Subsidiary" and collectively the "Subsidiaries") and is not affiliated
with any other company or business entity, except as disclosed in the
Prospectus. The Company and each Subsidiary has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority (corporate
and other) to own, lease and operate its properties and conduct its
business as described in the Registration Statement and Prospectus; the
Company owns all of the outstanding capital stock of each of the
Subsidiaries free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest; the Company and each Subsidiary
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the ownership or lease of its
properties or the conduct of its business requires such qualification and
in which the failure to be qualified or in good standing would have a
material adverse effect on the condition (financial or otherwise),
earnings, operations or business of the Company; and 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.
(iv) The Company and each Subsidiary has and is operating in
material compliance with all authorizations, licenses, certificates,
consents, permits, approvals and orders of and from all state, federal and
other governmental regulatory officials and bodies necessary to own its
properties and to conduct its business as described in the Registration
Statement and Prospectus, all of which are, to the Company's knowledge,
valid and in full force and effect; the Company and each Subsidiary is
conducting its business in substantial compliance with all applicable laws,
rules and regulations of the jurisdictions in which it is conducting
business; and neither the Company nor any Subsidiary is in material
violation of any applicable law, order, rule, regulation, writ, injunction,
judgment or decree of any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or any Subsidiary
or over their respective properties. Except as set forth in the
Registration Statement and Prospectus, (A) the Company is in material
compliance with all material rules, laws and regulations relating to the
use, treatment, storage and disposal of toxic substances and protection of
health or the environment (the "Environmental Laws") which are applicable
to its business, (B) the Company has received no notice from any
governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the
Registration Statement and the Prospectus, (C) the Company will not be
required to make any future material capital expenditures to comply with
Environmental Laws, and (D) no property which is owned, leased or occupied
by the Company has been designated as a Superfund site pursuant to the
Comprehensive Response, Compensation and Liability Act of 1980, as amended
(42 U.S.C. (S) 9601, et seq.), or otherwise designated as a contaminated
site under applicable state or local law.
(v) Neither the Company nor any Subsidiary is in violation of
its respective articles of incorporation or bylaws or 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, lease, indenture, mortgage, loan
agreement, joint venture or other agreement or instrument to which it is a
party or by which it or its respective properties are bound, which default
is material to the business of the Company.
(vi) The Company has full requisite power and authority to
enter into this Agreement and perform the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by the
Company and is a valid and binding agreement on the part of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by the application of bankruptcy, insolvency,
reorganization, moratorium or other 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. The performance of this Agreement and the
consummation of the transactions herein contemplated will not result in a
material breach or violation of any of the terms and provisions of, or
constitute a material default under, (A) any indenture, mortgage, deed of
trust, loan agreement, bond, debenture, note, agreement or other evidence
of indebtedness, any lease, contract,
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indenture, mortgage, loan agreement, joint venture or other agreement or
instrument to which the Company or any Subsidiary is a party or by which
the Company or any Subsidiary or their respective properties may be bound,
(B) the respective articles of incorporation or bylaws of the Company or
any Subsidiary, or (C) any material applicable law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government
or governmental agency or body, domestic or foreign, having jurisdiction
over the Company or any Subsidiary or over their respective properties. No
consent, approval, authorization or order of or qualification with any
court, governmental agency or body, domestic or foreign, having
jurisdiction over the Company or any Subsidiary or over their respective
properties is required for the execution and delivery of this Agreement and
the consummation by the Company of the transactions herein contemplated,
except such as may be required under the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or under state or
other securities or Blue Sky laws, all of which requirements have been
satisfied.
(vii) Except as is otherwise expressly described in the
Registration Statement or Prospectus, there is not any pending or, to the
best of the Company's knowledge, threatened, any action, suit, claim or
proceeding against the Company, any Subsidiary or any of their respective
officers or any of their respective properties, assets or rights before any
court, government or governmental agency or body, domestic or foreign,
having jurisdiction over the Company or any Subsidiary or over their
respective officers or properties or otherwise which (i) might result in
any material adverse change in the condition (financial or otherwise),
earnings, operations or business of the Company or any Subsidiary or might
materially and adversely affect their respective properties, assets or
rights, or (ii) might prevent consummation of the transactions contemplated
hereby.
(viii) The Company has, and at the First Closing Date and
Second Closing Date (collectively, the "Closing Dates") will have, the duly
authorized and outstanding capitalization set forth in the Prospectus. All
outstanding shares of capital stock of the Company are duly authorized and
validly issued, fully paid and non-assessable, have been issued in
compliance with all federal and state securities laws, were not issued in
violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities, and the authorized and outstanding
capital stock of the Company conforms in all material respects with the
statements relating thereto contained in the Registration Statement and the
Prospectus; the shares of Common Stock included in the Units to be sold
hereunder by the Company have been duly authorized for issuance and sale to
the Underwriter pursuant to this Agreement and, when issued and delivered
by the Company against payment therefor in accordance with the terms of
this Agreement, will be duly and validly issued and fully paid and non-
assessable and will be sold free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest; and no preemptive
right, co-sale right, registration right, right of first refusal or other
similar right of shareholders exists with respect to any of the shares of
Common Stock included in the Units to be sold hereunder by the Company or
the issuance and sale thereof, or the issuance and sale or exercise of the
Redeemable Warrants, or the issuance and sale or exercise of the
Underwriter's Warrants, other than those that have been expressly waived
prior to the date hereof. Except as disclosed in the Prospectus, the
Company has no outstanding options to purchase, or any 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. The certificates evidencing the shares of Common Stock and the
Redeemable Warrants comply as to form with all applicable provisions of the
laws of the State of Minnesota.
(ix) The Redeemable Warrants included in the Units to be sold
by the Company have been duly and validly authorized and, when
authenticated by Norwest Bank Minnesota, National Association (the "Warrant
Agent") and issued, delivered and sold in accordance with this Agreement
and the Warrant Agreement dated as of the date hereof, between the Company
and the Warrant Agent, will have been duly and validly executed,
authenticated, issued and delivered and will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms, except as enforceability may be limited by the
application of bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the rights of creditors generally and by judicial
limitations on
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the right of specific performance. A sufficient number of shares of Common
Stock of the Company has been reserved for issuance by the Company upon
exercise of the Redeemable Warrants.
(x) The Underwriter's Warrants and the Warrant Shares have
been duly authorized. The Underwriter's Warrants, when issued and delivered
to the Underwriter, will constitute valid and binding obligations of the
Company in accordance with their terms, except as enforceability may be
limited by the application of bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of creditors
generally and by judicial limitations on the right of specific performance.
The Warrant Shares, when issued in accordance with the terms of this
Agreement and pursuant to the Underwriter's Warrants, will be fully paid
and non-assessable and subject to no preemptive rights or similar rights on
the part of any person or entity. A sufficient number of shares of Common
Stock of the Company has been reserved for issuance by the Company upon
exercise of the Underwriter's Warrants.
(xi) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP and KPMG Peat Marwick LLP, each of
which has expressed its opinion with respect to financial statements filed
as part of the Registration Statement and included in the Registration
Statement and Prospectus, are independent accountants within the meaning of
the Securities Act and the Rules and Regulations. The financial statements
of the Company set forth in the Registration Statement and Prospectus
comply in all material respects with the requirements of the Securities Act
and fairly present the financial position and the results of operations of
the Company at the respective dates and for the respective periods to which
they apply in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (subject, in the case
of unaudited financial statements, to normal year-end adjustments which in
the opinion of management of the Company are not material, and except as
otherwise stated therein); and the supporting schedules included in the
Registration Statement present fairly the information required to be stated
therein. The selected and summary financial and statistical data included
in the Registration Statement present fairly the information shown therein
and have been compiled on a basis consistent with the audited financial
statements presented therein. No other financial statements or schedules
are required by the Securities Act or the Rules and Regulations to be
included in the Registration Statement.
(xii) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, and at
each Closing Date, except as is otherwise disclosed in the Registration
Statement or Prospectus, there has not been: (A) any change in the capital
stock or long-term debt (including any capitalized lease obligation) or
material increase in the short-term debt of the Company or any Subsidiary;
(B) any issuance of options, warrants, convertible securities or other
rights to purchase the capital stock of the Company or any Subsidiary; (C)
any material adverse change, or any development involving a material
adverse change, in or affecting the condition (financial or otherwise),
earnings, operations, business, or business prospects, management,
financial position, stockholders' equity, results of operations or general
condition of the Company; (D) any material transaction entered into by the
Company or any Subsidiary; (E) any material obligation, direct or
contingent, incurred by the Company or any Subsidiary, except obligations
incurred in the ordinary course of business that, in the aggregate, are not
material; (F) any dividend or distribution of any kind declared, paid or
made on the capital stock of the Company; or (G) any loss or damage
(whether or not insured) to the property of the Company or any Subsidiary
which has been sustained which has a material adverse effect on the
condition (financial or otherwise), earnings, operations or business of the
Company.
(xiii) Except as is otherwise expressly disclosed in the
Registration Statement or Prospectus, (A) the Company and each Subsidiary
has good and marketable title to all of the property, real and personal,
and assets described in the Registration Statement or Prospectus as being
owned by it, free and clear of any and all pledges, liens, security
interests, encumbrances, equities, charges or claims, other than such as
would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations or business of the Company, (B) the
agreements to which the Company or any Subsidiary is a party described in
the Registration Statement and Prospectus are valid agreements, enforceable
by the Company or the Subsidiary (as applicable), except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors'
5
rights generally or by judicial limitations on the right of specific
performance, and (C) each of the Company and the Subsidiaries has valid and
enforceable leases for all properties described in the Registration
Statement and Prospectus as leased by it, except as the enforcement thereof
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by judicial limitations on the right of specific performance.
Except as set forth in the Registration Statement and Prospectus, the
Company owns or leases all such properties as are necessary to its
operations as now conducted.
(xiv) The Company and each Subsidiary has timely filed (or has
timely requested an extension of time to file) all necessary federal and
state income and franchise tax returns and has paid all taxes shown thereon
as due; there is no tax deficiency that has been or, to the best of the
Company's knowledge, could be asserted against the Company or any
Subsidiary that might have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or properties of
the Company; and all tax liabilities are adequately provided for in the
books of the Company.
(xv) No labor disturbance by the employees of the Company or
any Subsidiary exists or, to the best of the Company's knowledge, is
imminent. Except as disclosed in the Registration Statement and the
Prospectus, no collective bargaining agreement exists with any of the
employees of the Company or any Subsidiary and, to the best of the
Company's knowledge, no such agreement is imminent.
(xvi) The Company and each Subsidiary owns, or possesses
adequate rights to use, all patents, patent rights, inventions, trade
secrets, know-how, technology, service marks, trade names, copyrights,
trademarks and proprietary rights or information which are necessary for
the conduct of its present or intended business as described in the
Registration Statement or Prospectus; the expiration of any patents, patent
rights, trade secrets, trademarks, service marks, trade names or copyrights
would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations or business of the Company; and the
Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with the asserted rights of others with respect
to any patent, patent rights, inventions, trade secrets, know-how,
technology, trade marks, service marks, trade names or copyrights which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, might have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company. Except as disclosed in the Registration
Statement or Prospectus, 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,
patent rights, inventions, trade secrets, know-how, technology, service
marks, trade names, trademark, copyright or other intangible asset, with
respect to the use thereof or in connection with the conduct of its
business or otherwise.
(xvii) The Common Stock and the Redeemable Warrants have been
approved for quotation on The Nasdaq National Market.
(xviii) The Company has no defined benefit pension plan or other
pension benefit plan which is intended to comply with the provisions of the
Employee Retirement Income Security Act of 1974 as amended from time to
time, except as disclosed in the Registration Statement.
(xix) The Company has not taken and will not take, directly or
indirectly, any action (and does not know of any action by its directors,
officers, shareholders or others) which has constituted or is designed to,
or which might reasonably be expected to, cause or result in stabilization
or manipulation, as defined in the Exchange Act or otherwise, of the price
of any security of the Company to facilitate the sale or resale of the
Units. The Company has not distributed and will not distribute prior to
the later of (A) the First Closing Date or the Second Closing Date, as the
case may be, and (B) completion of the distribution of the Units, any
offering material in connection with the offering and sale of the Units
other than any Preliminary Prospectus, the Prospectus, the Registration
Statement and other materials, if any, permitted by the Securities Act.
Except as is otherwise disclosed in the Registration Statement or
Prospectus, and to the best of the Company's knowledge, no person is
entitled, directly or indirectly, to
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compensation from the Company for services as a "finder" or otherwise in
connection with the transactions contemplated by this Agreement.
(xx) The Company and each Subsidiary maintains insurance,
which is in full force and effect, with insurers of recognized financial
responsibility of the types and in the amounts generally deemed adequate
for their respective businesses and, to the best of the Company's
knowledge, in line with the insurance maintained by similar companies and
businesses; and the Company has no reason to believe that it will not be
able to renew such existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company.
(xxi) Each director and officer of the Company and each holder
of five percent (5%) or more of the shares of Common Stock of the Company
to be outstanding after the sale of the Firm Units has agreed pursuant to
the form of Lock-up Agreement attached hereto as Appendix A (the "Lock-up
Agreement") that such person will not, for a period of 180 days from the
date (the "Effective Date") that the Registration Statement is declared
effective by the SEC (the "Lock-up Period"), without the prior written
consent of the Underwriter, offer to sell, contract to sell, sell, pledge,
hypothecate, transfer or otherwise dispose of, or grant any rights with
respect to (collectively, a "Disposition"), any shares of Common Stock and
options, warrants and other rights to purchase any shares of Common Stock
or any securities convertible into or exchangeable or exercisable for
shares of Common Stock now owned or hereafter acquired by such person
(collectively, "Securities") or with respect to which such person has or
hereafter acquires the power of Disposition, other than as permitted by the
Lock-Up Agreement. The Company has provided to counsel for the Underwriter
("Underwriter's Counsel") true, accurate and complete copies of all of the
Lock-up Agreements. The Company has provided to Underwriter's Counsel a
complete and accurate list of all securityholders of the Company and the
number and type of securities held by each securityholder.
(xxii) Neither the Company nor any Subsidiary has at any time
during the last five (5) years (or, if less, since its inception) made any
unlawful contribution to any candidate for an office or failed to disclose
fully any contribution in violation of law, or made any payment to any
federal or state governmental officer or official, domestic or foreign, or
other person charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States or any
jurisdiction thereof. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that
transactions are executed in accordance with management's general or
specific authorizations, transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, access to
assets is permitted only in accordance with management's general or
specific authorization, and the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(xxiii) Neither the Company nor any of its affiliates is
presently doing business with the government of Cuba or with any person or
affiliate located in Cuba.
(b) Any certificate signed by any officer of the Company and
delivered to you or to Underwriter's Counsel shall be deemed a representation
and warranty by the Company to the Underwriter as to the matters covered
thereby.
2. Purchase, Sale, Delivery and Payment.
(a) On the basis of the representations, warranties and agreements
herein contained, and subject to the terms and conditions herein set forth, the
Company agrees to sell to the Underwriter, and the Underwriter agrees to
purchase from the Company the 1,100,000 Firm Units at a purchase price of $_____
per Unit. The Underwriter will purchase all of the Firm Units if any are
purchased.
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The Firm Units will be delivered by the Company to the Underwriter for
the account of the Underwriter against payment of the purchase price therefor by
wire transfer or other same day funds payable to the order of the Company, at
the offices of Equity Securities Trading Co., Inc., 2820 IDS Center, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (or at such other place as may be
agreed upon by the Underwriter and the Company), at 9:00 a.m., Minneapolis,
Minnesota time, on (i) the third (3rd) full business day following the date
hereof if the Registration Statement is declared effective before 3:30 p.m.,
Minneapolis, Minnesota time on the date hereof, (ii) the fourth (4th) full
business day following the date hereof if the Registration Statement is declared
effective after 3:30 p.m., Minneapolis, Minnesota time on the date hereof, or
(ii) such other time and date as the Underwriter and the Company may determine,
such time and date of payment and delivery being herein called the "First
Closing Date." Delivery of the Firm Units will be made by credit to "full fast"
transfer to the account or accounts at The Depository Trust Company designated
by the Underwriter.
(b) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company hereby grants an option to the Underwriter to purchase an aggregate of
up to 165,000 Option Units, at the same purchase price as the Firm Units, for
use solely in covering any over-allotments made by the Underwriter in the sale
and distribution of the Firm Units. The option granted hereunder may be
exercised by the Underwriter at any time (but not more than once), in whole or
in part, during the period of forty-five (45) days after the date of this
Agreement by giving written notice to the Company and the Company's Counsel,
which notice shall set forth the aggregate number of Option Units as to which
the Underwriter is exercising the option, the names and denominations in which
the certificates for the shares of Common Stock and Redeemable Warrants included
in the Option Units are to be registered, and the date and time, as determined
by the Underwriter, when the Option Units are to be delivered, such time and
date being herein referred to as the "Second Closing Date;" provided, however,
that the Second Closing Date shall not be earlier than the First Closing Date
nor earlier than the second business day after the date on which the option
shall have been exercised. No Option Units shall be sold and delivered unless
the Firm Units previously have been, or simultaneously are, sold and delivered.
The Option Units will be delivered by the Company to the Underwriter
for the account of the Underwriter against payment of the purchase price
therefor by wire transfer or other same day funds payable to the order of the
Company, at the offices of Equity Securities Trading Co., Inc., 2820 IDS Center,
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (or at such other place as
may be agreed upon by the Underwriter and the Company) at 9:00 a.m.,
Minneapolis, Minnesota time, on the Second Closing Date. If the Underwriter so
elects, delivery of the Option Units may be made by credit to "full fast"
transfer to the account or accounts at The Depository Trust Company designated
by the Underwriter.
3. Covenants of the Company. The Company hereby covenants and agrees
with the Underwriter as follows:
(a) If the Registration Statement has not already been declared
effective by the SEC, the Company will use its best efforts to cause the
Registration Statement and any post-effective amendments thereto to become
effective as promptly as possible; the Company will notify the Underwriter
promptly of the time when the Registration Statement or any post-effective
amendment to the Registration Statement has become effective or any supplement
to the Prospectus has been filed and of any request by the SEC for any amendment
or supplement to the Registration Statement or Prospectus or additional
information; if the Company has elected to rely on Rule 430A of the Rules and
Regulations, the Company will file a Prospectus containing the information
omitted therefrom pursuant to such Rule 430A with the SEC within the time period
required by, and otherwise in accordance with the provisions of, Rules 424(b)
and 430A of the Rules and Regulations; the Company will prepare and file with
the SEC, promptly upon your request, any amendments or supplements to the
Registration Statement or Prospectus that, in your opinion, may be necessary or
advisable in connection with the distribution of the Units by the Underwriter;
and the Company will not file any amendment or supplement to the Registration
Statement or Prospectus to which the Underwriter shall reasonably object by
notice to the Company after having been furnished a copy a reasonable time prior
to the filing.
8
(b) The Company will advise the Underwriter, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance by the SEC of any
stop order suspending the effectiveness of the Registration Statement, of the
suspension of the qualification of the Units for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceeding for any such
purpose; and the Company will promptly use its best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such a stop order
should be issued.
(c) Within the time during which a prospectus relating to the Units
is required to be delivered under the Securities Act, the Company will comply as
far as it is able with all requirements imposed upon it by the Securities Act,
as now and hereafter amended, and by the Rules and Regulations, as from time to
time in force, so far as necessary to permit the continuance of sales of or
dealings in the Units as contemplated by the provisions hereof and the
Prospectus. If, during such period, any event occurs as a result of which the
Prospectus would include an untrue statement of a material fact or omit to state
a material fact necessary to make the statements therein, in the light of the
circumstances then existing, not misleading, or if, during such period, it is
necessary to amend the Registration Statement or supplement the Prospectus to
comply with the Securities Act, the Company will promptly notify the Underwriter
and will amend the Registration Statement or supplement the Prospectus (at the
expense of the Company) so as to correct such statement or omission or effect
such compliance.
(d) The Company will use its best efforts to arrange for the
qualification of the Units for offering and sale under the securities laws of
such jurisdictions as the Underwriter may designate and to continue such
qualifications in effect for so long as may be required for purposes of the
distribution of the Units; provided, however, that in no event shall the Company
be obligated to qualify to do business in any jurisdiction where it is not now
so qualified or to take any action which would subject it to the service of
process in suits, other than those arising out of the offering or sale of the
Units, in any jurisdiction where it is not now so subject. In each jurisdiction
in which the Units shall have been qualified as herein provided, the Company
will make and file such statements and reports in each year as are or may be
reasonably required by the laws of such jurisdiction.
(e) The Company will furnish to the Underwriter copies of the
Registration Statement (two of which will be signed and will include all
exhibits), each Preliminary Prospectus, the Prospectus, and all amendments and
supplements to such documents, in each case as soon as available and in such
quantities as the Underwriter may from time to time reasonably request.
(f) For a period of five years from the Effective Date, the Company
will furnish directly to the Underwriter as soon as the same shall be sent to
its shareholders generally copies of all annual or interim shareholder reports
of the Company and will, for the same period, also furnish the Underwriter with
the following:
(i) One copy of any report, application or document (other
than exhibits, which, however, will be furnished on your request) filed by
the Company with the SEC, Nasdaq, the NASD or any securities exchange;
(ii) As soon as the same shall be sent to shareholders
generally, copies of each communication sent to shareholders; and
(iii) From time to time, such other information concerning the
Company as the Underwriter may reasonably and specifically request,
provided that the Company shall not be required to furnish any information
pursuant hereto that is not furnished to its shareholders or not otherwise
made publicly available.
(g) The Company will, for a period of two (2) years from the
Effective Date, furnish directly to the Underwriter quarterly profit and loss
statements, reports of the Company's cash flow, and statements of application of
the proceeds of the offering of the Units by the Company in such reasonable
detail as the Underwriter may request.
(h) The Company will make generally available to its security holders
as soon as practicable, but in any event not later than the fifteen (15) months
after the end of the Company's current fiscal
9
quarter, an earnings statement (which will be in reasonable detail but need not
be audited) complying with the provisions of Section 11(a) of the Securities Act
and Rule 158 of the Rules and Regulations and covering a twelve (12)-month
period beginning after the Effective Date of the Registration Statement.
(i) The Company will prepare and file with the SEC any required
reports on Form SR in accordance with the Securities Act and the Rules and
Regulations.
(j) After completion of the offering of the Units, the Company will
make all filings required to maintain the quotation of the Common Stock and the
Redeemable Warrants on The Nasdaq National Market or any national stock
exchange.
(k) The Company will apply the net proceeds from the sale of the
Units being sold by it substantially in the manner set forth under the caption
"Use of Proceeds" in the Prospectus.
(l) During the Lock-Up Period, the Company will not, without the
prior written consent of the Underwriter, directly or indirectly effect the
Disposition of any securities including, without limitation, any securities that
are convertible into or exchangeable or exercisable for Common Stock, and shall
not accelerate the exercisability of any securities that are convertible into or
exchangeable or exercisable for Common Stock, except for the sale of Units by
the Company pursuant to this Agreement, the issuance and sale of Common Stock
upon exercise of the Redeemable Warrants, the exercise of options granted under
the Company's 1996 Stock Option Plan (the "Plan"), and the grant of options in
the ordinary course under the Plan.
(m) The Company will not take, and will use its best efforts to cause
each of its officers and directors not to take, directly or indirectly, any
action designed to or which might reasonably be expected to cause or result in
the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Units.
(n) The Company will inform the Florida Department of Banking and
Finance at any time prior to the consummation of the distribution of the Units
by the Underwriter if it commences engaging in business with the government of
Cuba or with any person or affiliate located in Cuba. Such information shall be
provided within 90 days after the commencement thereof or after a change occurs
with respect to previously reported information.
4. Expenses.
(a) The Company agrees with the Underwriter that:
(i) Whether or not this Agreement becomes effective or is
terminated or cancelled or the sale of the Units hereunder is consummated,
and regardless of the reason for or cause of any such termination,
cancellation, or failure to consummate, the Company will pay or cause to be
paid (A) all expenses (including any transfer taxes) incurred in connection
with the delivery to the Underwriter of the Units, (B) all expenses and
fees (including, without limitation, fees and expenses of the Company's
accountants and of counsel to the Company, excluding, however, fees of the
Underwriter's Counsel) in connection with the preparation, printing,
filing, delivery, and shipping of the Registration Statement (including the
financial statements therein and all amendments, schedules, and exhibits
thereto), each Preliminary Prospectus, the Prospectus, and any amendment
thereof or supplement thereto, (C) all fees and reasonable expenses,
including all reasonable counsel fees of Underwriter's Counsel incurred in
connection with the qualification of the Units for offering and sale by the
Underwriter or by dealers under the securities or Blue Sky laws of the
states and other jurisdictions which the Underwriter may designate in
accordance with Section 3(a)(iv) hereof, (D) all costs and expenses
incident to qualification with The Nasdaq National Market, (E) postage and
express charges and other expenses in connection with delivery to the
Underwriter of the Preliminary Prospectus and Prospectus, and (F) all other
costs and expenses incident to the performance of its obligations hereunder
that are not otherwise specifically described herein. In addition to and
not in lieu of the foregoing, the Company shall pay to the Underwriter on
each
10
Closing Date for out-of-pocket expenses (including fees of Underwriter's
Counsel, other fees and expenses incurred in connection with Blue sky
qualifications) a non-accountable expense allowance equal to one-and-one-
half percent (1.5%) of the aggregate Price to Public for all the Units sold
to the Underwriter on each Closing Date, including Units sold pursuant to
orders received through the Company. If the Underwriter withdraw from the
sale of the Units as herein proposed for any reason beyond their control
and through no fault of their own, or if the sale of the Units as herein
proposed is abandoned by the Company, the Company will pay to the
Underwriter the amount of all actual accountable expenses (including fees
and disbursements of Underwriter's Counsel) incurred by the Underwriter in
connection with the contemplated purchase, offer, and sale of the Units,
including, without limitation, expenses incurred in its investigation,
preparation to market, and marketing of the Units, and in contemplation of
performing and in performance of its obligations hereunder, up to a maximum
of $50,000.
(ii) In addition to its other obligations under Sections 7(a)
and 8 hereof, the Company agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
described in Section 7(a), it will reimburse the Underwriter on a monthly
basis for all reasonable legal or other expenses incurred in connection
with investigating or defending any such claim, action, investigation,
inquiry or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Company's
obligation to reimburse the Underwriter for such expenses and the
possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Underwriter
shall promptly return such payment to the Company together with interest,
compounded daily, determined on the basis of the prime rate (or other
commercial lending rate for borrowers of the highest credit standing)
listed from time to time in The Wall Street Journal which represents the
base rate on corporate loans posted by a substantial majority of the
nation's thirty (30) largest banks (the "Prime Rate"). Any such interim
reimbursement payments which are not made to the Underwriter within thirty
(30) days of a request for reimbursement shall bear interest at the Prime
Rate from the date of such request.
(b) It is agreed that any controversy rising out of the operation of
the interim reimbursement arrangements set forth in Section 4(a)(ii) hereof,
including the amounts of any requested reimbursement payments and the method of
determining such amounts, shall be settled by arbitration conducted pursuant to
the Code of Arbitration Procedure of the NASD. Any such arbitration must be
commenced by service of a written demand for arbitration or a written notice of
intention to arbitrate, therein electing the arbitration tribunal. If the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Section 4(a)(ii) hereof and
will not resolve the ultimate propriety or enforceability of the obligation to
indemnify for expenses which is created by the provisions of Sections 7(a) and
7(b) hereof or the obligation to contribute to expenses which is created by the
provisions of Section 8(a) hereof.
5. Conditions of the Underwriter's Obligations. The obligation of the
Underwriter to purchase and pay for the Units as provided herein shall be
subject to the accuracy of the representations and warranties of the Company, in
the case of the Firm Units as of the date hereof and the First Closing Date (as
if made on and as of the First Closing Date), and in the case of the Option
Units as of the date hereof and the Second Closing Date (as if made on and as of
the Second Closing Date); to the performance by the Company of its obligations
hereunder; and to the satisfaction of the following additional conditions on or
before the First Closing Date in the case of the Firm Units and on or before the
Second Closing Date in the case of the Option Units:
(a) The Registration Statement shall have become effective not later
than 4:00 p.m. Minneapolis, Minnesota time on the date of this Agreement, or
such later date or time as shall be consented to in writing by you (the
"Effective Date"); and no stop order suspending the effectiveness thereof shall
have been issued and no proceedings for that purpose shall have been initiated
or, to the knowledge of the Company or the Underwriter, threatened by the SEC or
any state securities commission or similar regulatory body; and any request
11
of the SEC for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to the
satisfaction of the Underwriter and Underwriter's Counsel.
(b) The Underwriter shall not have advised the Company that the
Registration Statement or Prospectus, or any amendment thereof or supplement
thereto, contains any untrue statement of a fact which is material or omits to
state a fact which is material and is required to be stated therein or is
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that this Section 5(b) shall not apply to statements in, or omissions from, the
Registration Statement or Prospectus, or any amendment thereof or supplement
thereto, which are based upon and conform to written information furnished to
the Company by the Underwriter specifically for use in the preparation of the
Registration Statement or the Prospectus, or any such amendment or supplement.
(c) Subsequent to the Effective Date and prior to each Closing Date,
there shall not have occurred any change, or any development involving a
prospective change, which materially and adversely affects the Company's
condition (financial or otherwise), earnings, operations, properties, business
or business prospects from that set forth in the Registration Statement or
Prospectus, and which, in the Underwriter's sole judgment, is material and
adverse and that makes it, in the Underwriter's sole judgment, impracticable or
inadvisable to proceed with the public offering of the Units as contemplated by
the Prospectus and this Agreement.
(d) All corporate proceedings and other legal matters in connection
with this Agreement, the form of Registration Statement and the Prospectus, and
the registration, authorization, issue, sale and delivery of the Units, shall
have been reasonably satisfactory to Underwriter's Counsel, and such counsel
shall have been furnished with such papers and information as it may reasonably
have requested to enable it to pass upon the matters referred to in this
Section.
(e) On each Closing Date, the Underwriter shall have received the
opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel for the Company, dated as of such
Closing Date, satisfactory in form and substance to the Underwriter and
Underwriter's Counsel, to the effect that:
(i) Each of the Company and the Subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation and has the
corporate power and authority to own, lease and operate its properties and
to conduct its business as currently being carried on and as described in
the Registration Statement and Prospectus.
(ii) Each of the Company and the Subsidiaries is duly
qualified to do business as a foreign corporation and is in good standing
in each jurisdiction, if any, in which the ownership or leasing of its
properties or the conduct of its business requires such qualification,
except where the failure to be so qualified or be in good standing would
not have a material adverse effect on the condition (financial or
otherwise), earnings, operations or business of the Company and the
Subsidiaries considered as one enterprise. To the best of such counsel's
knowledge, the Company does not own or control, directly or indirectly, any
corporation, association or other entity other than the Subsidiaries.
(iii) The capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus under the
caption "Description of Capital Stock." The issued and outstanding Units
of capital stock of the Company have been duly and validly issued and are
fully paid and non-assessable, and the holders thereof are not subject to
any personal liability by reason of being such holders.
(iv) The Units to be issued by the Company pursuant to the
terms of this Agreement have been duly authorized and, upon issuance and
delivery against payment therefor in accordance with the terms hereof, will
be duly and validly issued and fully paid and non-assessable, and the
holders thereof will not be subject to personal liability by reason of
being such holders. Except as otherwise stated in the Registration
Statement and Prospectus, there are no preemptive rights or other rights to
subscribe for or to purchase, or any restriction upon the voting or
transfer of, any shares of capital stock pursuant to the
12
Company's articles of incorporation, bylaws or any agreement or other
instrument known to such counsel to which the Company is a party or by
which the Company is bound. To the best of such counsel's knowledge, except
as set forth in the Prospectus, neither the filing of the Registration
Statement nor the offering or sale of the Units as contemplated by this
Agreement gives rise to any rights for or relating to the registration of
any shares of capital stock or other securities of the Company and no such
rights exist, other than those rights that have been waived prior to the
date hereof. To the best of such counsel's knowledge, except as described
in the Registration Statement and Prospectus, there are no options,
warrants, agreements, contracts or rights in existence to purchase or
acquire from the Company any shares of capital stock of the Company.
(v) The Redeemable Warrants included in the Units to be sold
by the Company have been duly and validly authorized and, when
authenticated by Norwest Bank Minnesota, National Association (the "Warrant
Agent") and issued, delivered and sold in accordance with this Agreement
and the Warrant Agreement dated as of the date hereof, between the Company
and the Warrant Agent, will have been duly and validly executed,
authenticated, issued and delivered and will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms, except as enforceability may be limited by the
application of bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the rights of creditors generally and by judicial
limitations on the right of specific performance. A sufficient number of
shares of Common Stock of the Company has been reserved for issuance by the
Company upon exercise of the Redeemable Warrants.
(vi) The Underwriter's Warrants and the Warrant Shares have
been duly authorized. The Underwriter's Warrants, when issued and delivered
to the Underwriter, will constitute valid and binding obligations of the
Company in accordance with their terms, except as enforceability may be
limited by the application of bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of creditors
generally and by judicial limitations on the right of specific performance.
The Warrant Shares, when issued in accordance with the terms of this
Agreement and pursuant to the Underwriter's Warrants, will be fully paid
and non-assessable and subject to no preemptive rights or similar rights on
the part of any person or entity. A sufficient number of shares of Common
Stock of the Company has been reserved for issuance by the Company upon
exercise of the Underwriter's Warrants.
(vii) The Company has the requisite corporate power and
authority to enter into this Agreement and to issue, sell and deliver to
the Underwriter the Units to be issued and sold by it hereunder. This
Agreement has been duly authorized by all necessary corporate action on the
part of the Company and has been duly executed and delivered by the Company
and, assuming due authorization, execution and delivery by the Underwriter,
is a valid, legal and binding agreement of the Company, enforceable in
accordance with its terms, except insofar as indemnification and
contribution provisions may be limited by applicable law and except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws relating to or affecting
creditors' rights generally or by general equitable principles.
(viii) The Registration Statement has become effective under the
Securities Act and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose has been instituted or is pending or
threatened under the Securities Act.
(ix) The Registration Statement and the Prospectus, and each
amendment thereof or supplement thereto, (other than the financial
statements, including the notes thereto and the supporting schedules, and
other financial, numerical, statistical and accounting data derived
therefrom, as to which such counsel need express no opinion), comply as to
form in all material respects with the requirements of the Securities Act
and the Rules and Regulations.
(x) The forms of certificates evidencing the Common Stock and
the Redeemable Warrants and filed as exhibits to the Registration Statement
comply with Minnesota law.
13
(xi) The description in the Registration Statement and the
Prospectus of the Company's articles of incorporation and bylaws and of
statutes, legal and governmental proceedings, contracts and other documents
are accurate in all material respects and fairly present the information
required to be presented by the Securities Act and the applicable Rules and
Regulations; and such counsel does not know of any statutes or legal or
governmental proceedings required to be described in the Prospectus that
are not described as required, or of any agreements, contracts, leases or
documents of a character required to be described or referred to in the
Registration Statement or Prospectus or to be filed as an exhibit to the
Registration Statement which are not described or referred to therein or
filed as required.
(xii) The execution, delivery and performance of this Agreement
and the consummation of the transactions herein contemplated (other than
performance of the Company's indemnification and contribution obligations
hereunder, concerning which no opinion need be expressed) do not result in
any violation of the Company's articles of incorporation or bylaws or
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, any bond, debenture, note or other evidence of
indebtedness, or any material lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other material agreement or
instrument known to such counsel to which the Company is a party or by
which its properties are bound, or any applicable statute, rule or
regulation known to such counsel or, to the best of such counsel's
knowledge, any order, writ or decree of any court, government or
governmental agency or body having jurisdiction over the Company or any of
its material properties or operations;
(xiii) No consent, approval, authorization or order of, or
filing with, or qualification with, any court, government or governmental
agency or body is necessary in connection with the execution, delivery and
performance of this Agreement or for the execution, delivery and
performance of this Agreement or for the consummation of the transactions
herein contemplated, except such as have been obtained under the Securities
Act or such as may be required under state or other securities or Blue Sky
laws in connection with the purchase and the distribution of the Units by
the Underwriter;
(xiv) To the best of such counsel's knowledge, there are no
legal or governmental proceedings pending or threatened against the Company
of a character required to be disclosed in the Registration Statement or
the Prospectus by the Securities Act or the Rules and Regulations, other
than those described therein.
(xv) To the best of such counsel's knowledge, the Company is
not presently (A) in material violation of its articles of incorporation or
bylaws, (B) in material breach or violation of any applicable statute, rule
or regulation known to such counsel or any order, writ or decree of any
court or governmental agency or body, or (C) in material breach of or
otherwise in default in the performance of any material obligation,
agreement or condition contained in any bond, debenture, note, loan
agreement or any other material contract, lease or other instrument to
which the Company is subject or by which it may be bound, or to which any
of the material assets or property of the Company is subject.
(xvi) To the best of such counsel's knowledge, the Company
holds, and is operating in compliance in all material respects with, all
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates and orders of any government or self-regulatory body required
for the conduct of its business, and all such franchises, grants,
authorizations, licenses, permits, easements, consents, certifications and
orders are valid and in full force and effect.
(xvii) To the best of such counsel's knowledge, after due
inquiry, the Company has not received any notice of, and has no knowledge
of, any infringement of or conflict with the asserted rights of others with
respect to any patent, patent rights, inventions, trade secrets, know-how,
technology, trade marks, service marks, trade names or copyrights which,
singly or in the aggregate, if the subject of
14
an unfavorable decision, ruling or finding, might have a material adverse
effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company.
(xviii) To the best of such counsel's knowledge, after due
inquiry, the Company owns, or possesses adequate rights to use, all
patents, patent rights, inventions, trade secrets, know-how, technology,
service marks, trade names, copyrights, trademarks and proprietary rights
or information which are necessary for the conduct of its present or
intended business as described in the Registration Statement or Prospectus.
(xix) On the basis of information obtained as a result of
discussions and meetings with officers and other representatives of the
Company, discussions with representatives of the independent public
accountants for the Company in connection with the preparation of the
Registration Statement and the Prospectus, and the examination of other
information and documents requested by such counsel, nothing has come to
such counsel's attention that has caused them to believe that the
Registration Statement and any amendment thereof, at the time it became
effective and at all times subsequent thereto up to and on that Closing
Date, contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make
the statements therein not misleading, or that the Prospectus, and any
amendment or supplement thereto, at the first date of its issuance and up
to and at all times subsequent thereto up to and on that Closing Date,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Such counsel may further state that in making the
foregoing comments, such counsel does not intend them to include or cover
the financial statements and notes thereto and related schedules and other
financial, numerical, statistical and accounting data contained or omitted
from the Registration Statement and any amendment or supplement thereto and
the Prospectus.
Counsel rendering the foregoing opinion may rely as to questions of
law not involving the laws of the United States or the State of Minnesota, upon
opinions of local counsel, and, as to questions of fact, upon representations or
certificates of officers of the Company and of government officials, in which
case their opinion is to state the extent of such reliance. Copies of any
opinion, representation or certificate so relied upon shall be delivered to the
Underwriter and to Underwriter's Counsel.
(f) The Underwriter shall have received from Winthrop & Weinstine,
P.A., Underwriter's Counsel, such opinion or opinions as the Underwriter may
reasonably require, dated as of the First Closing Date and the Second Closing
Date, which are satisfactory in form and substance to the Underwriter, with
respect to the sufficiency of corporate proceedings and other legal matters
relating to this Agreement and the transactions contemplated hereby, and the
Company shall have furnished to Underwriter's Counsel such documents as it may
have requested for the purpose of enabling it to pass upon such matters. In
connection with such opinion, as to matters of fact relevant to conclusions of
law, Underwriter's Counsel may rely, to the extent that it deems proper, upon
representations or certificates of public officials and of responsible officers
of the Company.
(g) At the time of execution of this Agreement, the Underwriter shall
have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP a letter dated the date of such
execution, in form and substance satisfactory to the Underwriter, to the effect
that they are independent accountants with respect to the Company within the
meaning of the Securities Act and the applicable published instructions, and the
Rules and Regulations thereunder, and further stating in effect that:
(i) In their opinion, the audited financial statements
included in the Registration Statement and Prospectus covered by their
report included therein comply as to form in all material respects with the
applicable requirements of the Securities Act, the published instructions
and the Rule and Regulations.
(ii) On the basis of (A) a reading of the minutes of the
shareholders' and directors' meetings of the Company since
_________________, (B) inquiries of certain officials of the Company
15
responsible for financial and accounting matters, (C) a reading of the
Company's monthly operating statements for the _______ periods ended
___________, and (D) other specified procedures and inquiries (but not an
audit in accordance with generally accepted accounting principles), nothing
came to their attention causing them to believe that:
(1) the unaudited consolidated financial statements of
the Company contained in the Prospectus and any amendment thereof or
supplement thereto do not comply as to form, in all material respects,
with the applicable accounting requirements of the Securities Act and
the published Rules and Regulations or were not prepared in conformity
with generally accepted accounting principles and practices applied on
a basis consistent in all material respects with those followed in the
preparation of the audited consolidated financial statements of the
Company included therein; or
(2) the unaudited consolidated amounts of revenues,
income before provision for income taxes, net income and ratio of
earnings to fixed charges of the Company, if any, contained in the
Prospectus, or any amendment thereof or supplement thereto, were not
derived from consolidated financial statements prepared in conformity
with generally accepted accounting principles and practices applied on
a basis consistent in all material respects with those followed in the
preparation of the audited consolidated financial statements of the
Company included therein; or
(3) the unaudited pro forma consolidated financial
statements of the Company and recently-acquired companies, if any,
contained in the Prospectus or any amendment thereof or supplement
thereto, were not properly compiled in accordance with generally
accepted accounting principles or did not provide for all adjustments
necessary for a fair presentation of the information purported to be
shown thereby; or
(4) with respect to the period subsequent to ________,
there were, at a specified date, not more than five (5) business days
prior to the date of the letter, any changes or any material increases
or decreases in capital stock, long-term or short-term debt or
shareholders' equity, decreases in net assets, net current assets, or
net worth or any material decrease, as compared with the corresponding
period of the prior year, in revenues or net income of the Company as
compared with the amounts shown in the consolidated balance sheet
included in the Registration Statement, except as disclosed or
referred to in the Prospectus and Registration Statement.
(iii) Certain information set forth on the cover of the
Prospectus and in the Prospectus under the headings "Prospectus Summary"
(including the subheading "Summary Financial Data"), "Risk Factors," "Use
of Proceeds," "Capitalization," "Dilution," "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," "Management," "Certain Transactions," "Principal
Stockholders," "Description of Securities" and "Units Eligible for Future
Sale" and that are expressed in dollars (or percentages derived from dollar
amounts) or numbers have been compared to accounting records of the Company
which were subject to the internal accounting controls of the Company and
are in agreement with such records or computations made therefrom,
excluding any questions of legal interpretation.
(h) The Underwriter shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP a
letter dated as of each Closing Date to the effect that such accountants
reaffirm, as of such Closing Date, and as though made on such Closing Date, the
statements made in the letter furnished by such accountants pursuant to Section
5(h), except that the specified date referred to in such letter will be a date
not more than five (5) business days prior to such Closing Date.
16
(i) The Underwriter shall have received from the Company a
certificate, dated as of the First Closing Date and the Second Closing Date, of
the principal executive officer and the principal financial or accounting
officer of the Company, to the effect that:
(i) The representations and warranties of the Company in
this Agreement are true and correct as if made on and as of such Closing
Date, and 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 Closing Date;
(ii) No stop order or other order suspending the
effectiveness of the Registration Statement or any amendment thereof or the
qualification of the Units for offering or sale has been issued, and no
proceedings for that purpose has been instituted or, to the best of their
knowledge, is contemplated by the SEC or any state or regulatory body; and
(iii) The signers of said certificate have carefully examined
the Registration Statement and the Prospectus and any amendments thereof or
supplements thereto, and (A) such documents contain all statements and
information required to be included therein; the Registration Statement, or
any amendment thereof, does not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; and the
Prospectus, as amended or supplemented, does not include any untrue
statement of material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading; (B) since the Effective Date of the Registration
Statement, there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been so set forth; (C)
subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, the Company has not incurred any
material liabilities or material obligations, direct or contingent, or
entered into any material transactions, not in the ordinary course of
business consistent with past practice, or declared or paid any dividends
or made any distribution of any kind with respect to its capital stock, and
except as disclosed in the Prospectus, there has not been any change in the
capital stock (other than a change in the number of outstanding shares of
Common Stock due to the issuance of Units upon the exercise of outstanding
options or warrants or pursuant to employee benefit plans described to in
the Registration Statement), or any material increase in the short-term
debt or long-term debt, or in the issuance of options, warrants,
convertible securities or other rights to purchase the capital stock, of
the Company, or any material adverse change or any development involving a
prospective material adverse change (whether or not arising in the ordinary
course of business) in the general affairs, condition (financial or
otherwise), business, key personnel, property, prospects, net worth or
results of operations of the Company, and (D) except as stated in the
Registration Statement and Prospectus, there is not pending or, to their
knowledge, threatened or contemplated, any action, suit or proceeding to
which the Company is a party before or by any court or governmental agency,
authority or body, or any arbitrator, which might result in any material
adverse change of the condition, (financial or otherwise), business,
prospects, or results of operations of the Company.
(j) On each Closing Date, there shall have been furnished to you a
certificate of Secretary of the Company, dated as of such Closing Date, with the
documents listed herein attached, and to the effect and certifying as follows:
(i) Attached thereto are true and correct copies of the
articles of incorporation of the Company, as amended to the date of the
certificate, and stating that there have been no changes or amendments to
the attached articles of incorporation of the Company, and no resolutions
have been adopted by the Board of Directors or shareholders of the Company
relating to (A) the amendment of said articles of incorporation, (B) the
merger, consolidation or dissolution of the Company, or (C) the sale of all
or substantially all of the assets or business of the Company, and that the
Company is in good standing in the State of Minnesota and has paid all of
its corporate franchise taxes due as of the date of such certificate.
17
(ii) Attached thereto is a true and correct copy of the
bylaws of the Company as in effect as of the date of such certificate and
no resolutions have been adopted by the Board of Directors or shareholders
of the Company relating to changes or amendments to the attached Bylaws.
(iii) Attached thereto are true and correct copies of the
resolutions of the Board of Directors of the Company relating to the
preparation and signing of the Registration Statement and this Agreement,
the issuance and sale of the Units and other related matters, and such
resolutions have not been amended, modified or rescinded and are in full
force and effect as of the date of such certificate and are the only
resolutions adopted by the Board of Directors of the Company with respect
to the offering contemplated by the Registration Statement.
(iv) Attached thereto are true and correct copies of all
material correspondence with respect to the Registration Statement and
Prospectus and related matters between the Company, its counsel, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP and the SEC.
(v) This Agreement, as executed and delivered by the
Company, is in the form presented to and approved by officers authorized to
do so by the Board of Directors of the Company.
(vi) Attached thereto are specimens of the certificates for
the Common Stock and Redeemable Warrants in the form authorized and
approved for use by the Board of Directors of the Company.
(vii) The persons who have signed the Registration Statement
and all amendments thereto were duly elected at the respective times of
such signing and duly acting as officers and directors of the Company or as
an attorney-in-fact therefor, as set forth in the Registration Statement.
(k) The Underwriter shall have received from each of the officers and
directors of the Company a written agreement in the form of Appendix A hereto
whereby each such person agrees that during the Lock-up Period such person will
not, without the Underwriter's prior written consent, effect the Disposition of
any Securities now owned or hereafter acquired directly or indirectly by such
person other than by gift to donees who agree to be bound by the same
restriction or by will or the laws of descent.
(l) The Common Stock of the Company shall be included and quoted on
the Nasdaq National Market.
(m) ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, P.A., shall deliver to the Underwriter a
Blue Sky Memorandum reasonably satisfactory to the Underwriter confirming that
all requisite actions for the offer and sale of the Units in all jurisdictions
requested by the Underwriter have been taken.
(n) The Company shall have furnished to the Underwriter and to
Underwriter's Counsel such additional certificates, documents and evidence as
the Underwriter shall reasonably request.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to the Underwriter and Underwriter's Counsel. All statements contained in any
certificate, letter or other document delivered pursuant hereto by, or on behalf
of, the Company shall be deemed to constitute representations and warranties of
the Company.
The Underwriter may waive in writing the performance of any one or
more of the conditions specified in this Section 5 or extend the time for their
performance.
If any of the conditions specified in this Section 5 shall not have
been fulfilled when and as required by this Agreement to be fulfilled and if the
fulfillment of said condition has not been waived by the Underwriter, this
Agreement and all obligations of the Underwriter hereunder may be canceled at,
or at any time
18
prior to, each Closing Date by the Underwriter. Any such cancellation shall be
without liability of the Underwriter to the Company and shall not relieve the
Company of its obligations under Section 4(a) hereof. Notice of such
cancellation shall be given to the Company at the address specified in Section
11 hereof in writing, or by telegraph or telephone confirmed in writing.
6. Underwriter's Warrants. In consideration of the agreement of the
Underwriter to act as the Underwriter, and upon payment of a purchase price of
$100.00, on the First Closing Date the Company will issue and deliver to the
Underwriter, for its account, the Underwriter's Warrants to purchase shares of
Common Stock in an amount equal to ten percent (10%) of the number of Firm Units
sold by the Company and purchased by the Underwriter in the offering. Such
Underwriter's Warrants shall be issued on the First Closing Date and shall be
dated as of the Effective Date. The Underwriter's Warrants shall be exercisable
commencing one year after the Effective Date for a period of three years
thereafter at a price equal to 120% of the Price to Public per Unit set forth on
the cover page of the Prospectus. As to other terms, the Underwriter's Warrants
shall be in form and substance substantially the same as Appendix B hereto. The
Company represents and warrants that the Underwriter's Warrants have been duly
authorized and, when granted and delivered in accordance wit the terms hereof,
will be valid, binding and enforceable obligations of the Company; the
securities issuable upon exercise of the Underwriter's Warrants have been duly
authorized and reserved for issuance upon exercise; and upon receipt by the
Company of the consideration for such securities in accordance with the terms of
the Underwriter's Warrants, the Warrant Shares shall have been duly and validly
issued, fully paid and non-assessable.
7. Indemnification.
(a) The Company hereby agrees to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Securities Act, against any losses, claims, damages
or liabilities, joint or several, to which the Underwriter or each such
controlling person may become subject under the Securities Act, the Exchange
Act, the common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of, or are based upon, (i)
any breach of any representation, warranty, agreement or covenant of the Company
contained in this Agreement, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
amendment thereof or supplement thereto, or the omission or alleged omission to
state in the Registration Statement or any amendment thereof or supplement
thereto a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; (iii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, if used prior to the Effective Date of the Registration
Statement, or in the Prospectus (as amended or as supplemented, if the Company
shall have filed with the SEC any amendment thereof or supplement thereto), or
the omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; or (iv) any untrue statement or alleged untrue
statement of a material fact contained in any application or other statement
executed by the Company or based upon written information furnished by the
Company filed in any jurisdiction in order to qualify the Units under, or exempt
the Units or the sale thereof from qualification under, the securities laws of
such jurisdiction, or the omission or alleged omission to state in such
application or statement a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Company will reimburse the
Underwriter and each such controlling person for any legal or other expenses
reasonably incurred by the Underwriter or such controlling person in connection
with investigating or defending against any such loss, claim, damage, liability
or action; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information relating to the Underwriter furnished to the Company by the
Underwriter specifically for use in the preparation of the Registration
Statement or any such post-effective amendment thereof, any such Preliminary
Prospectus, or the Prospectus, or any such amendment thereof or supplement
thereto, or in any application or other statement executed by the Company or the
Underwriter filed in any jurisdiction in order to qualify the Units under, or
exempt the Units or the sale thereof from qualification under, the securities
laws of such jurisdiction; and provided further that the foregoing indemnity
agreement is subject to the condition that, insofar as it relates to any untrue
statement, alleged untrue statement, omission or alleged omission made in any
Preliminary Prospectus but eliminated or remedied in
19
the Prospectus, such indemnity agreement shall not inure to the benefit of the
Underwriter (or to the benefit of any person who controls the Underwriter) if
the person asserting any loss, claim, damage or liability purchased the Units
from the Underwriter, if a copy of the Prospectus was not sent or given to such
person with, or prior to, the written confirmation of the sale of such Units to
such person. This indemnity agreement is in addition to any liability which the
Company may otherwise have.
(b) The Underwriter agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the
Registration Statement, and each person who controls the Company within the
meaning of Section 15 of the Securities Act, against any losses, claims, damages
or liabilities to which the Company or any such director, officer or controlling
person may become subject under the Securities Act, the Exchange Act, the common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of, or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof or supplement thereto, or the
omission or alleged omission to state in the Registration Statement or any
amendment thereof or supplement thereto, a material fact required to be stated
therein or necessary to make the statements therein not misleading; (ii) any
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, if used prior to the Effective Date of the Registration
Statement, or in the Prospectus (as amended or as supplemented, if the Company
shall have filed with the SEC any amendment thereof or supplement thereto), or
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; or (iii) any
untrue statement or alleged untrue statement of a material fact contained in any
application or other statement executed by the Company or by the Underwriter and
filed in any jurisdiction in order to qualify the Units under, or exempt the
Units or the sale thereof from qualification under, the securities laws of such
jurisdiction, or the omission or alleged omission to state in such application
or statement a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by, or on behalf of, the Underwriter specifically for
use in the preparation of the Registration Statement or any such post-effective
amendment thereof, any such Preliminary Prospectus, or the Prospectus or any
such amendment thereof or supplement thereto, or in any application or other
statement executed by the Company or by the Underwriter and filed in any
jurisdiction; and the Underwriter will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, or controlling
person in connection with investigating or defending against any such loss,
claim, damage, liability or action. This indemnity agreement is in addition to
any liability which the Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
7 of notice of the commencement of any action, such indemnified party shall, if
a claim in respect thereof is to be made against any indemnifying party under
this Section 7, notify in writing the indemnifying party of the commencement
thereof. The omission so to notify the indemnifying party will relieve it from
any liability under this Section 7 as to the particular item for which
indemnification is then being sought, but not from any other liability which it
may have to any indemnified party. 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 the
indemnifying party's election so to assume the defense thereof, the indemnifying
party will not be liable to such indemnified party under this Section 7 for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that if the defendants in any such action
include both the indemnified party and the indemnifying party, and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assume such
legal defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties, in which event the fees and
expenses of such separate counsel shall be
20
borne by the indemnifying party. Any such indemnifying party shall not be liable
to any such indemnified party on account of any settlement of any claim or
action effected without the consent of such indemnifying party.
8. Contribution.
(a) In order to provide for just and equitable contribution in any
action in which the Underwriter or the Company (or any person who controls the
Underwriter or the Company within the meaning of Section 15 of the Securities
Act) makes claim for indemnification pursuant to Section 7 hereof, but such
indemnification is unavailable or insufficient to hold harmless and indemnify a
party under Section 7, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in Section 7 above (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriter on the other from the offering of
the Units hereunder or (ii) if the allocation provided by the foregoing clause
(i) is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in such clause (i) but also
the relative fault of the Company on the one hand and the Underwriter on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriter on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Units (before the deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriter, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriter and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Company and the
Underwriter agree that it would not be just and equitable if contributions
pursuant to this Section 8 were to be determined by pro rata allocation or by
any other method of allocation which does not take into account the equitable
considerations referred to in the first sentence of this Section 8. The amount
paid by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this Section 8 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending against any action or claim
which is the subject of this Section 8. Notwithstanding the provisions of this
Section 8, the Underwriter shall not be required to contribute any amount in
excess of the amount by which the total price at which the Units underwritten by
it and distributed to the public were offered to the public exceeds the amount
of any damages that the 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 Securities Act) shall be entitled to contribution from any person
who is not guilty of such fraudulent misrepresentation.
(b) Promptly after receipt by a party to this Agreement of notice of
the commencement of any action, suit or proceeding, such person will, if a claim
for contribution in respect thereof is to be made against another party (the
"Contributing Party"), notify the Contributing Party of the commencement
thereof; but the omission so to notify the Contributing Party will not relieve
the Contributing Party from any liability which it may have to any party other
than under this Section 8. Any notice given pursuant to Section 7 hereof shall
be deemed to be like notice hereunder. In case any such action, suit or
proceeding is brought against any party, and such person notifies a Contributing
Party of the commencement thereof, the Contributing Party will be entitled to
participate therein with the notifying party and any other Contributing Party
similarly notified.
9. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective at immediately after the
time at which the Registration Statement shall become effective under the
Securities Act upon the Effective Date of the Registration Statement.
(b) Until the First Closing Date, this Agreement may be terminated by
the Underwriter on behalf of the Underwriter, at its option, by giving notice to
the Company, and the option referred to in Section 2(b),
21
if exercised, may be cancelled at any time prior to the Second Closing Date, if
(i) the Company shall have failed, refused, or been unable, at or prior to such
Closing Date, to perform any agreement on its part to be performed hereunder,
(ii) any other condition of the Underwriter's obligations hereunder is not
fulfilled or waived by the Underwriter, (iii) trading in securities generally on
the New York Stock Exchange, the American Stock Exchange or in the over-the-
counter market shall have been suspended, (iv) minimum or maximum prices for
trading shall have been fixed, or maximum ranges for prices for securities shall
be required, on the New York Stock Exchange, the American Stock Exchange, or in
the over-the-counter market, by such Exchange or by Nasdaq or by order of the
SEC or any other governmental authority having jurisdiction, (v) a banking
moratorium shall have been declared by federal, New York, or Minnesota
authorities, (vi) there shall have been such a serious, unusual and material
change in general economic, monetary, political or financial conditions, or the
effect of international conditions on the financial markets in the United States
shall be such as, in the judgment of the Underwriter, makes it inadvisable to
proceed with the delivery of the Units, (vii) the enactment, publication, decree
or other promulgation of any federal or state statute, regulation, rule or order
of any court or other governmental authority which, in the judgment of the
Underwriter, materially and adversely affects or will materially and adversely
affect the business or operations of the Company, or (viii) there shall be a
material outbreak of hostilities or material escalation and deterioration in the
political and military situation between the United States and any foreign
power, or a formal declaration of war by the United States of America shall have
occurred. Any such termination shall be without liability of any party to any
other party, except as provided in Sections 7 and 8 hereof; provided, however,
that the Company shall remain obligated to pay costs and expenses to the extent
provided in Section 4 hereof.
(c) If the Underwriter elects to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 9, it shall
notify the Company and the Company's Counsel promptly by telegram or telephone,
confirmed by letter sent to the address specified in Section 11 hereof. If the
Company shall elect to prevent this Agreement from becoming effective, it shall
notify the Underwriter and the Underwriter's Counsel promptly by telegram or
telephone, confirmed by letter sent to the addresses specified in Section 11
hereof.
10. Survival of Indemnities, Contribution Agreements, Warranties and
Representations. The respective indemnity and contribution agreements of the
Company and the Underwriter contained in Sections 7 and 8, the representations
and warranties of the Company set forth in Section 1 hereof, and the covenants
and agreements of the Company set forth in Section 3 hereof, shall remain
operative and in full force and effect, regardless of any investigation made by,
or on behalf of, the Underwriter, the Company, any of its officers and
directors, or any controlling person referred to in Sections 7 and 8, and shall
survive the delivery of and payment for the Units. The aforesaid indemnity and
contribution agreements shall also survive any termination or cancellation of
this Agreement. Any successor of any party or of any such controlling person,
or any legal representative of such controlling person, as the case may be,
shall be entitled to the benefit of the respective indemnity and contribution
agreements.
11. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be mailed,
delivered or telegraphed, and confirmed, as follows:
If to the Underwriter, to: Equity Securities Trading Co., Inc.
2820 IDS Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to: Winthrop & ▇▇▇▇▇▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to the Company, to: ▇▇▇▇▇▇▇ The Leather Experts Inc.
22
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to: Faegre & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
12. Information Furnished by the Underwriter. The statements relating to
the stabilization activities of the Underwriter and the statements under the
caption "Underwriting" in any Preliminary Prospectus and in the Prospectus
constitute the written information furnished by, or on behalf of, the
Underwriter specifically for use with reference to the Underwriter referred to
in Section 1(a)(ii) and Sections 7(a) and 7(b) hereof.
13. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the Underwriter, the Company and their respective successors
and assigns, and the officers, directors and controlling persons referred to in
Sections 7 and 8. Nothing expressed in this Agreement is intended or shall be
construed to give any person or corporation, other than the parties hereto,
their respective successors and assigns, and the controlling persons, officers
and directors referred to in Sections 7 and 8 any legal or equitable right,
remedy or claim under, or in respect of, this Agreement or any provision herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of the parties
hereto and their respective executors, administrators, successors, assigns and
such controlling persons, officers and directors, and for the benefit of no
other person or corporation. No purchaser of any Units from the Underwriter
shall be construed a successor or assign merely by reason of such purchase.
14. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota.
23
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed counterpart of this
Agreement, whereupon it will become a binding agreement between the Company and
the Underwriter in accordance with its terms.
Very truly yours,
▇▇▇▇▇▇▇ THE LEATHER EXPERTS INC.
By ___________________________________
Signature
Its___________________________________
ACCEPTANCE
The foregoing Underwriting Agreement
is hereby confirmed and accepted by
us as of the date first above written.
EQUITY SECURITIES TRADING CO., INC.
By ___________________________________
Signature
Its___________________________________
MPL1: 89632-3
24
APPENDIX A
Form of "Lock-Up" Agreement for
Directors, Officers and Certain shareholders
LOCK-UP AGREEMENT
Equity Securities Trading Co., Inc.
2820 IDS Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: ▇▇▇▇▇▇▇ The Leather Experts Inc.
Ladies and Gentlemen:
The undersigned, a beneficial owner of common stock, $.01 par value per
Unit (the "Common Stock") of Wilsons The Leather Experts Inc. (the "Company"),
understands and acknowledges that the Company has filed with the Securities and
Exchange Commission a Registration Statement on Form S-1 (the "Registration
Statement") for the registration of the offer and sale of 1,100,000 Units, each
Unit consisting of one share of Common Stock and one Redeemable Warrant (plus up
to an additional 165,000 Units subject to the Underwriter's over-allotment
option) (collectively, the "Units"). The undersigned further understands that
the Company, as issuer, and Equity Securities Trading Co., Inc., as the
underwriter (the "Underwriter") named in that certain proposed underwriting
agreement expected to be entered into in connection with the public offering of
the Units by the Underwriter (the "Underwriting Agreement"), contemplate
entering into such Underwriting Agreement.
In order to induce the Underwriter to proceed with the public offering, the
undersigned agrees, for the benefit of the Company and the Underwriter, that
should such public offering be effectuated, the undersigned will not, without
the prior written consent of the Underwriter, during the 180 day period
commencing on the effective date of the Registration Statement:
(i) offer to sell, contract to sell, sell, pledge, hypothecate,
transfer or otherwise dispose of, grant any rights with respect to
(collectively, a "Disposition"), any shares of Common Stock of the Company,
and options, warrants and other rights to purchase any shares of Common
Stock or any securities convertible into or exchangeable or exercisable for
shares of Common Stock now owned or hereafter acquired by the undersigned
(collectively, "Securities") or with respect to which the undersigned has
or hereafter acquires the power of Disposition; or
(ii) effect any Disposition of any of the Securities
other than by gifts to donees who agree in writing to be bound by the same
restriction, or by will or the laws of descent.
The undersigned ▇▇▇▇▇▇ agrees to the entry of stop transfer instructions with
the Company's transfer agent against the transfer of the Securities except in
compliance with this Agreement.
Dated: ___________, 1997 Very truly yours,
----------------------------------------
Signature
----------------------------------------
Name Typed or Printed
A-1
APPENDIX B
Form of Underwriter's Warrants
COMMON STOCK PURCHASE WARRANT
No. _____ _______ Shares
FOR GOOD AND VALUABLE CONSIDERATION, ▇▇▇▇▇▇▇ The Leather Experts Inc.,
a Minnesota corporation (the "Company"), hereby certifies that Equity Securities
Trading Co., Inc., Minneapolis, Minnesota (the "Underwriter"), or its registered
assigns, is entitled to subscribe for and purchase from the Company at any time
or from time to time after [ONE YEAR FROM EFFECTIVE DATE], to and including
[FOUR YEARS FROM EFFECTIVE DATE], One Hundred Ten Thousand (110,000) fully paid
and non-assessable shares of the Common Stock of the Company at the purchase
price of $_____ per share (the "Warrant Exercise Price"), subject to adjustment
as provided herein.
This Warrant is one of the Underwriter's Warrants referred to in the
Underwriting Agreement dated ___________, 1997 by and between the Company and
the Underwriter.
As used herein, (i) this warrant and all warrants hereafter issued in
exchange or substitution for this warrant are referred to as the "Warrants;"
(ii) the shares which may be acquired upon exercise of the Warrants are referred
to herein as the "Warrant Shares;" (iii) the term "Holder" means the
Underwriter, any party who acquires all or a part of this Warrant as a
registered transferee of the Underwriter, or any record holder or holders of the
Warrant Shares issued upon exercise, whether in whole or in part, of the
Warrant; (iv) the term "Common Stock" means and includes the Company's presently
authorized common stock, no par value, together with any other equity securities
which may be issued by the Company with respect thereto or in substitution
therefor; and (v) the term "Convertible Securities" means any stock or other
securities convertible into, or exchangeable for, Common Stock.
This Warrant is subject to the following provisions, terms and
conditions, to which each Holder hereof consents and agrees:
1. Exercise; Transferability.
(a) The rights represented by this Warrant may be exercised by the
Holder hereof, in whole or in part (but not as to a fractional share of Common
Stock) by written notice of exercise (in the form attached hereto) delivered to
the Company at the principal office of the Company prior to the expiration of
this Warrant and accompanied or preceded by the surrender of this Warrant along
with a check in payment of the Warrant Exercise Price for the Warrant Shares
being acquired upon such exercise.
(b) Until exercisable, this Warrant may not be sold, assigned,
hypothecated, or otherwise transferred (other than by will, pursuant to the
operation of law, or where directed by a court of competent jurisdiction upon
the dissolution or liquidation of a corporate Holder hereof), except to (i) a
person who is both an officer and a shareholder of the Underwriter, (ii) a
successor in interest to the business of the Underwriter, (iii) a person who is
both an officer and a shareholder of a successor, or (iv) a person who is an
employee of the Underwriter or a successor, but only if such employee is also an
officer of the Underwriter or successor; such transfer to be by endorsement (by
the Holder hereof executing the form of assignment attached hereto) and delivery
in the same manner as in the case of a negotiable instrument transferable by
endorsement and delivery. Further, this Warrant may not be sold, transferred,
assigned, hypothecated or divided into two or more Warrants of smaller
denominations, nor may any Warrant Shares issued pursuant to exercise of this
Warrant be transferred, except as provided in Section 7 hereof.
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2. Exchange and Replacement. Subject to Sections 1 and 7 hereof, this
Warrant is exchangeable upon the surrender hereof by the Holder to the Company
at its office for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Warrant Shares purchasable
hereunder, each of such new Warrants to represent the right to purchase such
number of Warrant Shares (not to exceed the aggregate total number purchasable
hereunder) as shall be designated by the Holder at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction, or mutilation of this Warrant, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will make and deliver a new Warrant of like tenor, in lieu of this Warrant;
provided, however, that if the Underwriter shall be such Holder, an agreement of
indemnity by such Holder shall be sufficient for all purposes of this Section 2.
This Warrant shall be promptly canceled by the Company upon the surrender hereof
in connection with any exchange or replacement. The Company shall pay all
expenses, taxes (other than stock transfer taxes), and other charges payable in
connection with the preparation, execution, and delivery of Warrants pursuant to
this Section 2.
3. Issuance of the Warrant Shares.
(a) The Company agrees that the shares of Common Stock purchased upon
exercise of this Warrant shall be and are deemed to be issued to the Holder as
of the close of business on the date on which this Warrant shall have been
surrendered and the payment made for such Warrant Shares as aforesaid. Subject
to the provisions of Section 3(b), the Company shall deliver or cause to be
delivered to the Holder within a reasonable time, not exceeding fifteen (15)
days after the rights represented by this Warrant shall have been so exercised,
certificates for the Warrant Shares so purchased, and, unless this Warrant has
expired, a new Warrant representing the right to purchase the number of Warrant
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be delivered to the Holder within such time.
(b) Notwithstanding the foregoing, the Company shall not be required
to deliver any certificate for Warrant Shares upon exercise of this Warrant
except in accordance with exemptions from the applicable securities registration
requirements or registrations under applicable securities laws. Nothing herein,
however, shall obligate the Company to effect registrations under federal or
state securities laws, except as provided in Section 9. If registrations are
not in effect and if exemptions are not available when the Holder seeks to
exercise the Warrant, the Warrant exercise period will be extended, if need be,
to prevent the Warrant from expiring, until such time as either registrations
become effective or exemptions are available, and the Warrant shall then remain
exercisable for a period of at least 30 calendar days from the date the Company
delivers to the Holder written notice of the availability of such registrations
or exemptions. The Holder agrees to execute such documents and make such
representations, warranties, and agreements as may be reasonably required solely
to comply with the exemptions relied upon by the Company, or the registrations
made, for the issuance of the Warrant Shares.
4. Covenants of the Company. The Company covenants and agrees that all
Warrant Shares will, upon issuance, be duly authorized and issued, fully paid,
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof. The Company further covenants and agrees that during the period
within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved for the purpose of issue
or transfer upon exercise of the subscription rights evidenced by this Warrant a
sufficient number of shares of Common Stock to provide for the exercise of the
rights represented by this Warrant.
5. Anti-dilution Adjustments. The provisions of this Warrant are subject
to adjustment as provided in this Section 5.
(a) The Warrant Exercise Price shall be adjusted from time to time
such that in case the Company shall hereafter:
(i) pay any dividends on any class of stock of the Company
payable in Common Stock or securities convertible into Common Stock;
(ii) subdivide its then outstanding shares of Common Stock
into a greater number of shares; or
(iii) combine outstanding shares of Common Stock, by
reclassification or otherwise;
then, in any such event, the Warrant Exercise Price in effect immediately prior
to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full cent)
determined by dividing (A) the number of shares of Common Stock outstanding
immediately prior to such event, multiplied by the then existing Warrant
Exercise Price, by (B) the total number of shares of Common Stock outstanding
immediately after such event (including in each case the maximum number of
shares of Common Stock issuable in respect of any securities convertible into
Common Stock), and the resulting quotient shall be the adjusted Warrant Exercise
Price per share. An adjustment made pursuant to this subsection shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination, reclassification or other event. If, as
a result of an adjustment made pursuant to this subsection, the Holder of any
Warrant thereafter surrendered for exercise shall become entitled to receive
shares of two or more classes of capital stock or shares of Common Stock and
other capital stock of the Company, the Board of Directors (whose determination
shall be conclusive) shall determine the allocation of the adjusted Warrant
Exercise Price between or among shares of such classes of capital stock or
shares of Common Stock and other capital stock. All calculations under this
subsection shall be made to the nearest cent or to the nearest 1/100 of a share,
as the case may be. In the event that at any time as a result of an adjustment
made pursuant to this subsection, the holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive any shares of the
Company other than shares of Common Stock, thereafter the Warrant Exercise Price
of such other shares so receivable upon exercise of any Warrant shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock contained in this
subsection.
(b) Upon each adjustment of the Warrant Exercise Price pursuant to
Section 5(a) above, the Holder of each Warrant shall thereafter (until another
such adjustment) be entitled to purchase at the adjusted Warrant Exercise Price
the number of shares, calculated to the nearest full share, obtained by
multiplying the number of shares specified in such Warrant (as adjusted as a
result of all adjustments in the Warrant Exercise Price in effect prior to such
adjustment) by the Warrant Exercise Price in effect prior to such adjustment and
dividing the product so obtained by the adjusted Warrant Exercise Price.
(c) In case of any consolidation or merger to which the Company is a
party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of a
third corporation into the Company), there shall be no adjustment under
Subsection (a) of this Section above but the Holder of each Warrant then
outstanding shall have the right thereafter to convert such Warrant into the
kind and amount of shares of stock and other securities and property which he
would have owned or have been entitled to receive immediately after such
consolidation, merger, statutory exchange, sale, or conveyance had such Warrant
been converted immediately prior to the effective date of such consolidation,
merger, statutory exchange, sale, or conveyance and in any such case, if
necessary, appropriate adjustment shall be made in the application of the
provisions set forth in this subsection with respect to the rights and interests
thereafter of any Holders of the Warrant, to the end that the provisions set
forth in this subsection shall thereafter correspondingly be made applicable, as
nearly as may reasonably be, in relation to any shares of stock and other
securities and property thereafter deliverable on the exercise of the Warrant.
The provisions of this subsection shall similarly apply to successive
consolidations, mergers, statutory exchanges, sales or conveyances.
(d) Upon any adjustment of the Warrant Exercise Price, then and in
each such case, the Company shall (i) give written notice thereof, by first-
class mail, postage prepaid, within ten (10) calendar days after the date when
the circumstances giving rise to the adjustment occurred, addressed to the
Holder as shown on the books of the Company, which notice shall state the
Warrant Exercise Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares of Common Stock purchasable at such
price upon the
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exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based; and (ii) prepare
and retain on file a statement describing in reasonable detail the method used
in arriving at the new Warrant Exercise Price.
6. No Voting Rights. This Warrant shall not entitle the Holder to any
voting rights or other rights as a shareholder of the Company.
7. Notice of Transfer of Warrant or Resale of the Warrant Shares.
(a) Subject to the sale, assignment, hypothecation, or other transfer
restrictions set forth in Section 1 hereof, the Holder, by acceptance hereof,
agrees to give written notice to the Company before transferring this Warrant or
transferring any Warrant Shares of such ▇▇▇▇▇▇'s intention to do so, describing
briefly the manner of any proposed transfer. Promptly upon receiving such
written notice, the Company shall present copies thereof to the Company's
counsel and to counsel to the original purchaser of this Warrant. If, in the
opinion of each such counsel, the proposed transfer may be effected without
registration or qualification (under any federal or state securities laws), the
Company, as promptly as practicable, shall notify the Holder of such opinion,
whereupon the Holder shall be entitled to transfer this Warrant or to dispose of
Warrant Shares received upon the previous exercise of this Warrant, all in
accordance with the terms of the notice delivered by the Holder to the Company;
provided that an appropriate legend may be endorsed on this Warrant or the
certificates for such Warrant Shares describing restrictions upon transfer
thereof necessary or advisable in the opinion of counsel and satisfactory to the
Company to prevent further transfers which would be in violation of Section 5 of
the Securities Act of 1933, as amended (the "Securities Act") and applicable
state securities laws; and provided further that the prospective transferee or
purchaser shall execute such documents and make such representations,
warranties, and agreements as may be required solely to comply with the
exemptions relied upon by the Company for the transfer or disposition of the
Warrant or Warrant Shares.
(b) If, in the opinion of either of the counsel referred to in this
Section 7, the proposed transfer or disposition of this Warrant or such Warrant
Shares described in the written notice given pursuant to this Section 7 may not
be effected without registration or qualification of this Warrant or such
Warrant Shares, the Company shall promptly give written notice thereof to the
Holder, and the Holder will limit its activities in respect to such transfer or
disposition as, in the opinion of both such counsel, are permitted by law.
(c) Until this Warrant is duly transferred on the books of the
Company, the Company shall treat the registered Holder of this Warrant as
absolute owner hereof for all purposes without being affected by any notice to
the Company.
8. Fractional shares. Fractional shares shall not be issued upon the
exercise of this Warrant, but in any case where the holder would, except for the
provisions of this Section, be entitled under the terms hereof to receive a
fractional share, the Company shall, upon the exercise of this Warrant for the
largest number of whole shares then called for, pay a sum in cash equal to the
sum of (a) the excess, if any, of the "Fair Market Value" (as defined in Section
10(d) hereof) of such fractional share over the proportional part of the Warrant
Exercise Price represented by such fractional share, plus (b) the proportional
part of the Warrant Exercise Price represented by such fractional share.
9. Registration Rights.
(a) The Company agrees that, if at any time (but on a one-time basis
only) during the period commencing one year from the date of this Warrant and
ending four (4) years from [DATE OF EFFECTIVENESS], the Holder of this Warrant
and/or the Holders of any other Warrants and/or Warrant Shares who collectively
shall hold not less than 50% of the Warrants and/or Warrant Shares outstanding
at such time and not previously sold pursuant to this Section 9, shall request
that the Company file a registration statement covering all or any part of the
Warrant Shares:
B-4
(i) the Company will promptly notify the Holder and all other
registered Holders, if any, of other Warrants and/or Warrant Shares that
such registration statement will be filed and that the Warrant Shares which
are then held and/or which may be acquired upon the exercise of the
Warrants by the Holder and such other Holders will be included in such
registration statement at the Holder's and such Holders' request; and
(ii) the Company will cause such registration statement to
include all Warrant Shares which it has been so requested to include, will
take all necessary steps to register or qualify such Warrant Shares under
the Securities Act and the securities laws of such states as the holders
may reasonably request, and will use its best efforts to cause such
registration statement and qualifications to become effective as soon as
practicable.
The Company shall keep effective and maintain any registration, qualification,
notification, or approval specified in this Section 9(a) for such period as may
be reasonably necessary for such Holder or Holders of such Warrant Shares to
dispose thereof and from time to time shall amend or supplement the prospectus
used in connection therewith to the extent necessary in order to comply with
applicable law; provided, that the Company need not maintain the effectiveness
of any such registration, qualification, notification or approval, whether or
not at the request of the Holders, more than nine (9) months following the
effective date thereof.
(b) The Company agrees that, if at any time and from time to time
during the period commencing one year from the date of this Warrant and ending
two (2) years after complete exercise of this Warrant (but not more than six (6)
years from the date of this Warrant), the Company proposes to file a
registration statement under the Securities Act (other than a Form S-4 or Form
S-8 Registration Statement or any successor forms thereto) or qualify for a
public distribution under Section 3(b) of the Securities Act, any of its
securities in connection with the proposed offer of such securities by the
Company or any of its shareholders:
(i) the Company will promptly notify the Holder and all other
registered Holders, if any, of other Warrants and/or Warrant Shares, at
least thirty (30) days prior to each such filing, that it intends to file
such registration statement or effect such qualification, and that the
Warrant Shares which are then held and/or which may be acquired upon the
exercise of the Warrants by the Holder and such other Holders will be
included in such registration statement or qualification at the Holder's
and such Holders' request; and
(ii) the Company will use its best efforts to cause such
registration statement or qualification to include all Warrant Shares which
it has been so requested to include; provided, however, that if a greater
number of Warrant Shares is offered for participation in the proposed
offering than in the reasonable opinion of the managing underwriter of the
proposed offering can be accommodated without adversely affecting the
proposed offering, then the amount of Warrant Shares proposed to be offered
by such Holders for registration, as well as the number of securities of
any other selling shareholders participating in the registration, shall be
excluded or proportionately reduced to a number deemed satisfactory by the
managing underwriter.
The Holder and such other Holders may request that their Warrant Shares be
included in such registration statement or qualification by making written
request to the Company specifying the number of Warrant Shares to be so
included. Such request shall be made within twenty (20) days after receipt from
the Company of notice of such intended registration or qualification.
(c) With respect to each inclusion of securities in a registration or
qualification pursuant to this Section 9, the Company shall bear all fees,
costs, and expenses thereof, including, without limitation, all filing fees,
fees imposed by the National Association of Securities Dealers, Inc., printing
expenses, fees and disbursements of counsel and accountants for the Company,
fees and disbursements of counsel for the underwriter or Underwriter of such
securities (if the Company is required to bear such fees and disbursements), all
internal expenses, the premiums and other costs of policies of insurance against
liability arising out of the public offering, and legal fees and disbursements
and other expenses of complying with state securities laws of any jurisdictions
in
B-5
which the securities to be offered are to be registered or qualified. Fees
and disbursements of special counsel and accountants for the selling Holders,
underwriting discounts and commissions, and transfer taxes for selling Holders
shall be borne by the selling Holders.
(d) The Company will furnish the Holders whose Warrant Shares are
included in a registration or qualification pursuant to this Section 9 with a
reasonable number of copies of any prospectus and/or other offering materials
included in such filings and will amend or supplement the same as required
during the period of required use thereof. In connection with any registration
filed or qualification made pursuant to this Section 9 in which Warrant Shares
are included, and to the extent permissible under the Securities Act and
controlling precedent thereunder, the Company and each Holder whose Warrant
Shares are so included in such registration or qualification shall provide
cross-indemnification agreements to each other in customary scope covering the
accuracy and completeness of the information furnished by each in connection
therewith.
(e) Each Holder of Warrant Shares included in a registration or
qualification pursuant to this Section 9 agrees to cooperate with the Company in
the preparation and filing of any such registration statement or other offering
materials and in the furnishing of information concerning the Holder for
inclusion therein, or in any efforts by the Company to establish that the
proposed sale is exempt under the Securities Act as to any proposed
distribution.
10. Miscellaneous. The Company shall not, by amendment of its articles of
incorporation or through reorganization, consolidation, merger, dissolution or
sale of assets, or by any other voluntary act or deed, avoid or seek to avoid
the observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by the Company, but will, at
all times in good faith, assist, insofar as it is able, in the carrying out of
all provisions hereof and in the taking of all other action which may be
necessary in order to protect the rights of the Holders against dilution.
Upon written request of the Holder of this Warrant, the Company will
promptly provide such Holder with a then current written list of the names and
addresses of all Holders of warrants originally issued under the terms of, and
concurrent with, this Warrant.
The representations, warranties and agreements herein contained shall
survive the exercise of this Warrant. This Warrant shall be interpreted under
the laws of the State of Minnesota.
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇ The Leather Experts Inc. has caused this
Warrant to be signed by its duly authorized officer and to be dated ___________,
1997.
▇▇▇▇▇▇▇ THE LEATHER EXPERTS INC.
By______________________________________
Signature
Its_____________________________________
B-6
NOTICE OF EXERCISE OF WARRANT
(To be signed upon the exercise of the Warrant for cash or by check)
The undersigned hereby irrevocably elects to exercise the attached Warrant
and to purchase thereunder, for cash, ________________ of the shares of Common
Stock of Wilsons The Leather Experts Inc. issuable upon the exercise of such
Warrant, herewith makes payment of $___________ therefor in cash or by check,
and requests that certificates for such shares (together with a new Warrant to
purchase the number of shares, if any, with respect to which this Warrant is not
exercised) be issued in the name set forth below and be delivered to the address
set forth below.
Dated: ________________
---------------------------------------
(Signature)
---------------------------------------
(Name Typed or Printed)
---------------------------------------
(Address)
---------------------------------------
(Social Security or Tax Ident. No.)
* The signature on the Notice of Exercise of Warrant must exactly correspond
to the name as written upon the face of the Warrant in every particular
without alteration or any change whatsoever. When signing on behalf of a
corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
B-7
ASSIGNMENT OF WARRANT
(To be signed only upon authorized transfer of the Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto _________________________________ the right to purchase _______________
shares of the Common Stock of Wilsons The Leather Experts Inc. to which the
within Warrant relates and appoints _________________________________, as
attorney-in-fact, to transfer said right on the books of ▇▇▇▇▇▇▇ The Leather
Experts Inc. with full power of substitution in the premises.
Dated: ________________
---------------------------------------
(Signature)
---------------------------------------
(Name Typed or Printed)
---------------------------------------
(Address)
---------------------------------------
(Social Security or Tax Ident. No.)
* The signature on the Assignment of Warrant must exactly correspond to the
name as written upon the face of the Warrant in every particular without
alteration or any change whatsoever. When signing on behalf of a
corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
B-8
RESTRICTION ON TRANSFER
The securities evidenced hereby have not been registered under the
Securities Act of 1933 or any state securities laws and may not be sold,
transferred, assigned, offered, pledged or otherwise distributed for value
unless there is an effective registration statement under such act or laws
covering such security or the Company receives an opinion of counsel for the
Company stating that such sale, transfer, assignment, pledge or distribution is
exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933 and all applicable state securities laws.
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